| 1. | A question associated with the saving component of financial planning is: | a.Do you have an adequate emergency fund? | | b.Is your will current? | | c.Is your investment program appropriate to your income and tax situation? | | d.Do you have a realistic budget for your current financial situation? | |
| 2. | Eric Peltz earns $80,000 a year. His monthly expenses total $4,300. What is the minimum amount of money that Mr. Peltz should set aside in an emergency fund? | a.$2,150 | | b.$4,300 | | c.$8,600 | | d.$12,900 | |
| 3. | Small claims courts: | a.hear only class-action suits. | | b.are located in every state. | | c.have no minimum dollar limit on claims. | | d.require the use of an attorney. | |
| 4. | An example of an economic buying influence would be: | a.family size. | | b.inflation. | | c.advertising. | | d.hobbies. | |
| 5. | Some retirement planning experts suggest that you start retirement planning while you are: | a.in school. | | b.married. | | c.divorced. | | d.middle-aged. | |
| 6. | James Green just bought a security which he expects will provide him with a quarterly cash payment, although that payment is not guaranteed. In fact, he expects the amount of the payment to vary over time. What type of payment is he expecting to receive? | a.Option premium | | b.Dividend | | c.Capital gain | | d.Rebate | |
| 7. | Who is most likely to benefit from inflation? | a.Retired people | | b.Lenders | | c.Borrowers | | d.Low-income consumers | |
| 8. | A person's net worth would increase as a result of: | a.reduced amounts owed to others. | | b.reduced earnings. | | c.increased spending for current living expenses. | | d.decreased value of personal possessions. | |
| 9. | A good health insurance plan should: | a.provide at least one year's hospital room and board in full. | | b.provide at least a $2 million lifetime maximum for each family member. | | c.pay 100 percent for out-of-hospital expenses. | | d.offer basic coverage for hospital and doctor bills. | |
| 10. | Which type of health insurance is simply a bad buy? | a.Individual health | | b.Group health | | c.Dread disease | | d.Dental | |
| 11. | Which federal law regulates the use of credit reports, requires the deletion of obsolete information, and gives you access to your file? | a.Truth in Lending Act of 1969 | | b.Fair Credit Billing Act of 1975 | | c.Equal Credit Opportunity Act of 1975 | | d.Fair Credit Reporting Act of 1971 | |
| 12. | The value of a mutual fund's portfolio, minus the mutual fund's liabilities, divided by the number of shares outstanding is called the: | a.book value. | | b.outstanding balance. | | c.libor rate. | | d.net asset value. | |
| 13. | If overall interest rates in the economy rise, a corporate bond with a fixed interest rate will generally: | a.increase in value. | | b.decrease in value. | | c.remain unchanged. | | d.be returned to the corporation. | |
| 14. | A good example of open-end credit is: | a.the use of a bank credit card to make a purchase. | | b.a mortgage loan from a savings and loan institution. | | c.an automobile loan from a credit union. | | d.an installment loan from a furniture store. | |
| 15. | Health insurance includes: | a.life insurance. | | b.disability insurance. | | c.personal liability insurance. | | d.an annuity. | |
| 16. | The life expectancy of a female at the age of 30 is 47.65 years. This means that: | a.a 30-year-old female has the highest probability of dying. | | b.a 30-year-old female has the highest probability of living. | | c.females alive at 30 years of age have an average number of 47.65 years still left to live. | | d.47.65 is the average age at which all females, age 30, will die. | |
| 17. | Which of the following would be an example of a personal and employment document? | a.Budget | | b.Passbook | | c.Social Security card | | d.Property tax bill | |
| 18. | The stages that an individual goes through based on age, financial needs, and family situation is called the: | a.financial planning process. | | b.budgeting procedure. | | c.personal economic cycle. | | d.adult life cycle. | |
| 19. | Generally, interest on corporate bonds is paid every: | a.month. | | b.three months. | | c.six months. | | d.nine months. | |
| 20. | The people who are in the best position to save are: | a.teenagers. | | b.middle-aged. | | c.elderly. | | d.people in their 30s. | |
| 21. | Float can be defined as: | a.the interest charged during one billing period. | | b.the principal balance due on a loan. | | c.a home equity loan. | | d.a period of time during which on interest is charged. | |
| 22. | What type of warranty indicates that the seller has the right to sell a product? | a.Express warranty | | b.Implied warranty | | c.Warranty of title | | d.Warranty of merchantability | |
| 23. | If you are married, your estate planning involves: | a.the interest of at least two people. | | b.fewer legal requirements. | | c.fewer financial responsibilities. | | d.seeking the services of a securities broker. | |
| 24. | Equity financing is a popular choice to provide long-term financing for a corporation because: | a.a lender is always available to provide this type of financing. | | b.it does not have to be repaid. | | c.repayment does not have to be made for ten years or more. | | d.only interest must be paid for the first five years. | |
| 25. | Items that you own with a monetary worth are referred to as: | a.liabilities. | | b.variable expenses. | | c.net worth. | | d.assets. | |
| 26. | Opportunity costs refer to: | a.current spending habits. | | b.changing economic conditions that affect a person's cost of living. | | c.storage facilities to make financial documents easily available. | | d.trade-offs associated with financial decisions. | |
| 27. | Which one of the following is a true statement? | a.When choosing an investment, it is not necessary to consider the risk factor. | | b.During inflationary times, there is a risk that the financial return on an investment will not keep pace with the rate of inflation. | | c.The interest rate risk associated with investments in bonds is the result of changes in business conditions faced by companies. | | d.The risk of business failure deals with changes in the value of stocks and bonds due to changes in interest rates in the market. | |
| 28. | Which retirement plan is specifically designed for self-employed individuals and their employees? | a.Roth IRA | | b.Traditional IRA | | c.Keogh plan | | d.Defined-benefit plan | |
| 29. | Which organization specializes in the testing of products for electrical and fire safety? | a.Consumers Union | | b.Better Business Bureau | | c.Consumer Product Safety Commission | | d.Underwriters Laboratories | |
| 30. | The debt-to-equity ratio is: | a.calculated by dividing total liabilities by net worth. | | b.calculated by dividing monthly debt payments by net monthly income. | | c.determined by dividing your assets by your liabilities. | | d.a useless ratio for determining your credit capacity. | |
| 31. | You can get a reverse mortgage annuity if: | a.you are willing to sell your house immediately. | | b.you buy a new home and pay only a minimal down payment. | | c.you owe more in monthly mortgage interest than the annuity amount. | | d.your mortgage is largely or completely paid off. | |
| 32. | Assume that you purchase a $1,000 corporate bond that pays 9.25 percent interest. What is the amount of interest that you receive each year? | a.$1,000.00 | | b.$92.50 | | c.$92.00 | | d.$90.00 | |
| 33. | __________ goals relate to personal relationships, health, and education. | a.Durable-product | | b.Short-term | | c.Consumable-product | | d.Intangible purchase | |
| 34. | A cash flow statement reports a person's or a family's: | a.net worth. | | b.current income and payments. | | c.plan for spending. | | d.value of investments. | |
| 35. | Which of the following is a true statement? | a.The first order of business for an investor is acquiring the money needed to begin investing. | | b.To be useful, investment objectives must be very general. | | c.Investment goals are the same for each individual. | | d.A long-term investment objective involves a time period of five years or less. | |
| 36. | A credit arrangement that has no extra costs and no specific repayment plan is called: | a.installment sales credit. | | b.single lump-sum credit. | | c.line of credit. | | d.incidental credit. | |
| 37. | Which one of the following statements is false? | a.Investors purchase mutual funds for diversification. | | b.Investors purchase mutual funds because of their professional management. | | c.Investors who purchase mutual funds are guaranteed a higher rate of return than if they were to purchase comparable stocks and bonds directly. | | d.Professional mutual fund managers work for an investment company. | |
| 38. | Higher prices are likely to result from: | a.lower demand by consumers. | | b.increased production by business. | | c.lower interest rates. | | d.increased spending by consumers without increased production. | |
| 39. | Individuals and families purchase life insurance primarily to: | a.pay liability claims resulting from accidents. | | b.fill financial needs created by the loss of the breadwinner. | | c.fund lavish retirement vacations. | | d.keep up with people with a similar financial situation. | |
| 40. | The main goal of personal financial planning is: | a.saving and investing for future needs. | | b.reducing a person's tax liability. | | c.achieving personal economic satisfaction. | | d. spending to achieve financial objectives. | |
