question

Inflation reduces the buying power of a dollar

answer

True

question

Career planning is the part of the ____ component of financial planning

answer

obtaining

question

Most financial records should be kept in a safe-deposit box.

answer

False

question

Opportunity cost refers to

answer

trade-offs when a decision is made

question

______ represents amounts owed to others

answer

Liabilities

question

A personal cash flow statement presents

answer

income and payments

question

An example of liquid asset would be a

answer

checking account

question

The financial step in the financial planning process is to

answer

evaluate and revise your actions

question

Personal financial planing starts by creating a plan of action

answer

False

question

Savings and investment programs are the main method for achieving financial goals

answer

True

question

A major purpose of personal financial planning is future economic security

answer

True

question

A budget deficit exists when actual spending exceeds projected spending.

answer

True

question

Assets represent amounts owed to others that must be paid within the next year.

answer

False

question

A personal balance sheet reports the financial position of a person or family on a given date.

answer

True

question

Economics refers to

answer

the study of wealth

question

A financial plan is a list of a family's spending for the next month.

answer

False

question

Definite financial obligations are referred to as

answer

fixed expenses

question

A _____ is a specific plan for spending

answer

budget

question

Financial strategies refer to

answer

courses of action to achieve financial goals

question

Spending less than your income will increase your net worth

answer

True

question

a deduction directly reduces the amount of taxes owed.

answer

False

question

The rate of return on a savings account may also be referred to as

answer

yield

question

An exemption refers to

answer

a reduction from adjusted gross income

question

A credit union usually offers a wider range of financial services than a commercial bank.

answer

False

question

A saving account with daily compounding will have higher earnings than an account with quarterly compounding.

answer

True

question

Demand deposits refer to money deposited in savings accounts

answer

False

question

Enrolled agents are IRS auditors who visit people's homes to verify deductions.

answer

False

question

The savings plan that is likely to have a set rate of return

answer

Certificate of deposit

question

A general sales tax is also referred to as an excise tax

answer

False

question

When an IRS agent visits your hoe or office to verify tax records, this is referred as a(n)

answer

field audit

question

A personal check with guaranteed payment is a

answer

certified check

question

Most people mail the full amount owed in federal income tax each April

answer

False

question

_______ is deductible as an itemized deduction

answer

Mortgage interest

question

The fewest financial services would probably be offered by an

answer

investment company

question

Taxable income refers to the amount deducted from a person's pay

answer

False

question

A _______ endorsement is most useful when depositing checks by mail.

answer

restricitve

question

An example of an adjustment to income is

answer

IRA contributions

question

A CD account is a checking account that earns interest

answer

False

question

An example of tax-exempt income is

answer

interest from municipal bonds

question

A quick source of cash is to liquidate savings

answer

True

question

A _____ warranty covers most repairs of a product

answer

full

question

The highest prices for used cars are usually at a

answer

new car dealer

question

National name products usually cost more than store brands or private label items

answer

True

question

The finance charge is the percentage cost (or relative cost) of credit on a yearly basis

answer

False

question

An express warranty is usually in a written form

answer

True

question

A purchasing decision starts with gathering information

answer

False

question

Credit encourages overspending and ties up future income

answer

True

question

When a simple interest is paid back in more than one payment, the method of computing interest is known as the add-on interest method

answer

False

question

Most customer complaints are resolved with the use of a governmental agency or by taking legal action

answer

False

question

Consumer information from business organizations is usually the most objective type of data available to help in a buying decision

answer

False

question

A legally binding decision by a third party is

answer

arbitration

question

A consumer Credit Counseling Service is a

answer

local, nonprofit organization with thee National Foundation for Consumer Credit

question

Which of the following is not one of the five c's of credit

answer

Climate

question

With closed-end credit, the borrower is permitted to take loans on a continuous basis and is billed for partial payments periodically

answer

False

question

An example of open-end credit is

answer

revolving check credit

question

______ are publically supported community law offices that provide legal assistance to consumers who cannot afford their own attorney

answer

Legal aid societies

question

The most common method of calculating the cost of credit is the

answer

simple interest formula

question

An example of closed-end credit is

answer

installment sales credit

question

When leasing a motor vehicle, the capitalized cost refers to the

answer

price of the vehicle

question

With open-end credit, the borrower pays back a one time loan in a specified period of time and with a specified number of payments

answer

False

question

A _______ allows a person to borrow on the paid-up value of a home

answer

home equity loan

question

The special form of homeowner's insurance includes all risks such as loss or damage from floods or earthquakes

answer

False

question

A common advantage associated with home ownership is

answer

financial benefit

question

Financial risks are associated with the purchase of a home

answer

True

question

Most lending institutions believe that person can afford a monthly payment of about ______ percent of gross income less any long-term debts

answer

35

question

In the event of an accident, bodily injury liability coverage protects both individuals in the driver's car and people in other cars for medical expenses

answer

False

question

Driver classification includes information on a person's ______ and is used to set auto insurance rates

answer

Driving habits

question

A higher deductible will reduce the amount paid for collision and comprehensive physical damage coverage

answer

True

question

Legal responsibility for the financial costs of another person's losses or injuries is called

answer

liability

question

Most natural disasters have not caused catastrophic amounts of property loss in the United States and other parts of the world

answer

False

question

Most real estate professionals believe that the most important factor in selecting a home is

answer

location

question

Cooperative housing involves the purchase of an individual living unit in a multiunit complex or building

answer

False

question

Several financial benefits are associated with renting your place of residence

answer

False

question

Most mortgage rates are established by government agencies

answer

False

question

Renter's property insurance would include coverage for

answer

personal belongings

question

The major factor that affects a person's qualification for a mortgage is

answer

the applicant's credit rating

question

Homeowner's insurance covers the cost of living elsewhere while your home is being repaired from a fire

answer

True

question

A lease is mainly designed to protect the rights of the landlord

answer

False

question

Health insurance includes both medical expense insurance and disability income insurance

answer

False

question

Disability income insurance benefits provide for the full replacement of income lost by employees as the result of an accident, illness, or pregnancy.

answer

True

question

Which life insurance provision allows you not to forfeit all accrued benefits?

answer

Non-forfeiture clause

question

What is a method of evaluating the cost of life insurance by taking into account the time value of money?

answer

Interest adjusted index

question

A term insurance policy pays a benefit only if you die during the period that the policy covers.

answer

True

question

Which type of health insurance pays part or all of the surgeon's fee for an operation?

answer

Surgical expense

question

A beneficiary is a person named to receive the benefits from an insurance company.

answer

True

question

Blue Cross and Blue Shield are statewide organizations similar to commercial health insurance companies.

answer

True

question

One of the following is not a method of estimating your life insurance requirements.

answer

Hard

question

A settlement option that provides for payment of life-insurance proceeds in equal periodic installments for a specified number of years after your death is called

answer

Limited installment payment

question

Dread disease and cancer insurance policies are usually good values for most individuals.

answer

False

question

There is a rule of thumb that a good target is life insurance totaling nine to ten times your annual income.

answer

False

question

What form of insurance provides day-in, day-out care for long-term illness or disability?

answer

Long-term care

question

A participating policy has somewhat lower premiums than a nonparticipating policy.

answer

False

question

Hospital expense insurance pays part or all of hospital bills for room, board, and other charges.

answer

True

question

Health insurance plans can be purchased through

answer

Group health insurance, individual health insurance, COBRA

question

Which document is attached to the policy that modifies the coverage?

answer

Rider

question

Which health insurance plan is administered by each state within certain broad federal requirements and guidelines?

answer

Medicaid

question

Universal life insurance is essentially a term policy with a cash value

answer

True

question

Which health program is perhaps the best-known government health program?

answer

Medicare

question

There is no relationship between safety and risk when choosing an investment

answer

False

question

An emergency fund is an amount of money that can be obtained quickly in case of immediate needs

answer

True

question

The record date is the date when a stockholder must be registered on the corporation's books in order to receive dividend payments

answer

True

question

Which of the following investments would have the greatest potential for safety?

answer

Government bonds

question

When stocks are traded between investors, they are traded in the _____________ market.

answer

?

question

Who elects a corporation's board of directors?

answer

Common stockholders

question

A government security issued in minimum units of $100 with 4-week, 13-week, 26-week, or 52-week maturities is called a

answer

Treasury bill

question

Corporations sell common stock to finance their business start-up costs and help pay for expansion and their ongoing business activities.

answer

True

question

Which of the following statements is false?

answer

Asset allocation eliminates the risk associated with an investment program. Correct

question

A stock that follows the business cycle of advances and declines in the economy is called a(n) ______________ stock

answer

Cyclical

question

A corporation must pay dividends to stockholders.

answer

False

question

A feature that enables preferred stock investors to receive omitted dividends is called a _____________ feature.

answer

Cumulative

question

A bond that may provide tax-free interest income is called a

answer

municipal bond

question

A line of credit is a long-term loan that is approved before the money is actually needed.

answer

False

question

Churning occurs when the stockholder converts preferred stock to common stock.

answer

False

question

The book value for a share of stock is determined by deducting all liabilities from the corporation's assets and dividing the remainder by the number of outstanding shares of common stock.

answer

True

question

A stock split

answer

enables management to bring a stock's price into an "ideal" price range.

question

Long-term objectives are defined as objectives that can be accomplished within one year.

answer

False

question

A mortgage bond is sometimes referred to as a secured bond.

answer

True

question

The current yield for a bond

answer

is determined by dividing the annual interest amount by a bond's current market price

question

A handwritten will that you prepare yourself is called a ___________ will.

answer

holographic

question

A living trust is a trust established by your will that becomes effective upon your death.

answer

false

question

Some mutual funds charge 12b-1 fees to defray the cost of

answer

advertising and marketing of the mutual fund

question

A family of funds exists when one investment company manages a group of mutual funds.

answer

true

question

Under what retirement plan does your employer make nontaxable contributions to the plan for your benefit and reduce your salary by the same amount?

answer

401(k)

question

You can't predict exactly how much money you will need when you retire.

answer

True

question

Payments made to a fund's shareholders that result from the sale of securities in the fund's portfolio are called

answer

capital gains distributions

question

Generally, there are a number of purchase options for fund investors.

answer

true

question

An investor who wants a tax-free investment would choose a(n) __________fund.

answer

municipal bond

question

A document that prospective mutual fund investors receive is called a(n)

answer

prospectus

question

A defined-contribution plan does not guarantee any particular benefit at retirement.

answer

true

question

Shares in a close-end mutual fund are issued by the investment company only when the fund is organized.

answer

true

question

The major reasons why investors purchase mutual funds are professional management and diversification.

answer

true

question

Which type of trust is appropriate for couples who do not yet have enough assets to need a credit-shelter trust?

answer

Disclaimer

question

An executor cannot be a family member or a friend.

answer

false

question

A mutual fund in which new shares are issued and redeemed by the investment company at the request of investors is called a(n) ___________ fund.

answer

Open-end

question

Trusts can be

answer

revocable or irrevocable

question

Typically, a management fee for a mutual fund ranges between 3 and 5 percent of the total dollar amount invested.

answer

false

question

Social Security is an important source of retirement income for most Americans.

answer

true

question

The first step in retirement planning is to

answer

analyze your current assets and liabilities

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