| | commercial bank (TCO 3) When Sarah went through a loan approval process for a car, she decided to accept a loan term of 48 months instead of 60. In terms of reducing lender risk, this is an example of | | sharing the interest rate risk with the lender. | | | pledging valuable assets that can be seized if the loan is not repaid. | | | taking a larger stake in the asset she is purchasing. | | | repaying the loan over a faster period of time. | | | None of the above (TCO 5) All of the following statements are true except which? | | You can obtain recommendations to buy or sell stocks and other securities by accessing Internet sites. | | | There is a wealth of investment information available, but most small investors cannot afford to use it. | | | You can obtain current price information for stocks, bonds, and mutual funds by using the Internet. | | | A search engine is a research tool that helps you find the investment information you want. | | | Both government and businesses provide individuals with investment information. (TCO 5) All of the following statements are false except | | investors should put all of their eggs in one basket. | | | individuals can ignore their tolerance for risk when selecting specific investments. | | | diversification is one way to lessen systematic risk. | | | the amount of time a specific investment has to work is an important consideration when developing an investment portfolio. | | | younger investors should invest a large percentage of their portfolio in income-producing securities. (TCO 5) _____ involves the analysis of future earnings in order to make investment decisions. | | Plot (TCO 5) All of the following statements are false except | | an investment bank is a financial firm that assists organizations in raising funds. | | | a corporation often deposits excess cash in an investment bank. | | | an investment bank provides checking services for large corporations. | | | most investment banks help investors buy and sell a corporation's stock. | | | under current laws, an investment bank provides services to individuals but cannot provide banking services to corporations. (TCO 5) Dave Harris has just purchased a bond with a face value of $1,000 that pays 6%. The purchase price of the bond was $900, and the bond will mature in 5 years. What is the yield to maturity for this bond? | | 9.8% (TCO 5) A characteristic of serial bonds is that they | | will pay no interest payments. | | | will have varying issue dates. | | | will have a series of maturity dates. | | | will all mature 10 years from the date of issue. (TCO 3) All of the following are disadvantages of leasing a vehicle except | | automatic ownership interest in the car. | | | unlimited mileage on the car. | | | no need to meet credit requirements. | | | lease payments are likely to be lower than loan payments. | | | All of the other answers are advantages. (TCO 4) John Brown owns a home in Oakland, California and because of the risk of earthquakes, he decides to purchase _____ to cover potential losses. | | building and other structures | | | additional living expenses | | | specialized coverage (TCO 4) If Mark Wright obtains a permanent disability as a result of an injury on the job, most likely he will receive _____ as a source of disability income. | | an individual insurance policy | | | his health insurance policy (TCO 4) A(n) _____ is a document attached to an insurance policy that modifies coverage by adding or deleting a specified condition. | | incontestability clause (TCO 6) The Capitalist Mutual Fund's net asset value is $28.25. The fund has liabilities of $3 million and 1,600,000 shares have been issued. What is the value of the fund's portfolio? | | $3 million (TCO 6) A benefit associated with an investment in a real estate limited partnership is that the investor | | does not have to worry about capital gains tax. | | | does not have to pay federal income tax. | | | does not have to pay state income tax. | | | can invest in a shopping center or large building by investing as little as $5,000. | | | faces an investment that is very liquid. (TCO 6) Chuck owns a home worth $140,000, a car valued at $30,000, and miscellaneous assets worth $7,500. He owes $75,000 on the home and $12,000 on the car, and has no other debts. His retirement account, in which he is fully vested, contains $17,500 in mutual funds. He is insured with a $250,000 term life insurance policy. What is his net worth? | | $445,000 (TCO 7) Brenda wants to leave a message of encouragement to her grandchildren just in case something happens to her in the near future. She would be interested in preparing a(n) | | durable power of attorney. | | | letter of last instruction. | | | formal will. (TCO 7) Marion would be acting in the capacity of a(n) _____ if she is selected to manage the assets of her 16-year-old niece until the niece reaches the age of 21. | | | | | | | | | | | | | | | |
