Chapter 1 - What You Should Know About Financial Planning Chapter
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1.
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Family financial goals should be
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  Very general in nature.
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Realistically attainable.
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Individually determined.
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Set once for a lifetime.
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2.
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Financial planning can help us to
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Control inflation.
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Control costs.
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Control unemployment rates.
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Maximize rebates.
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3.
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Financial goals need NOT be
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Specific.
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Quantitative.
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Attainable.
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Prioritized.
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4.
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The first step in the financial planning process is to
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Define your current financial situation.
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Develop a strategy to achieve your goals.
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Revise your goals.
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Develop a financial plan.
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5.
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Personal financial planning processes may include all except
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Determine current financial situation.
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Eliminate all personal debt.
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Set goals.
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Identify alternatives and evaluate alternatives.
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6.
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Which of the following statements is FALSE about financial goals?
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Goals should be realistic.
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Financial goals should be specific.
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Financial goals should not have a time frame.
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Financial goals should be stated in measurable terms.
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7.
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An unemployment rate of 8 percent would be indicative of
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An expansion.
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A recession.
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A recovery.
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A depression.
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8.
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Inflation refers to
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Rising prices and cost of living.
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Declining interest rates.
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The opposite of wealth.
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The opposite of stagflation.
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9.
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As the rate of inflation increases,
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The cost of living goes down.
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Interest rates decrease.
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Pay checks decrease.
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Retirement plans have more difficulty meeting their goals.
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10.
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Effects of lowering the discount rate by the Federal Reserve can stimulate all except
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Cause businesses to borrow and grow.
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Stimulate spending.
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Decrease rates on mortgages and auto loans.
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Decrease retail sales.
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11.
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Financial planning for people over sixty should NOT include
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Update their pension plan.
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Invest to generate stable income.
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Invest for long-term appreciation.
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Avoid excessive debt.
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12.
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The least important financial planning for single-adult concerns
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Retirement.
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Career.
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Insurance.
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Savings.
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13.
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Martha is 80 years old. She is most likely concerned with
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Career.
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Taxes.
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Estate.
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Auto insurance.
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Chapter 2 - Basic Time Value Applications
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14.
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You should consider the time value of money as an opportunity cost when you do the following except
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Spend money.
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Outsource.
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Save money.
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Get a mortgage loan.
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15.
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Future value tables are used to determine
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The amount of a loan.
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The premium of an insurance policy.
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The compound amount.
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The discount amount.
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16.
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If you put $1,000 in a saving account and make no further deposits, what type of calculation would provide you with the value of the account in 20 years?
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Future value of a single amount.
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Simple interest.
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Present value of a single amount.
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Present value of a series of deposits.
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17.
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___________________ is a rule of thumb to figure out how long it takes you to double your investment money.
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The Rule of 65.
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The Rule of 78.
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The Rule of 72.
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The Rule of Golden Egg.
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Chapter 3 - Personal Financial Statements And Budgeting
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18.
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The balance sheet describes a family's wealth
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At a certain point in time.
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As an annual summary.
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As a time period less than one year.
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At a future time.
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19.
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The three parts of your balance sheet are
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Income, liabilities, balance.
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Assets, expenditures, balance.
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Assets, liabilities, balance.
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Assets, liabilities, net worth.
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20.
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Which of the flowing is TRUE?
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Assets + Liabilities = Equity.
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Net worth = Assets û Liabilities.
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New worth = Assets.
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Net worth = Assets + Long-term Investments
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21.
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_______________________ is NOT a deferred asset.
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Retirement plans.
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Real estate.
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Trusts.
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Inheritances.
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22.
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An abbreviated personal balance sheet would NOT include
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Cash and marketable securities.
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Certificates of deposit, bonds.
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Taxable income.
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Stocks, mutual funds.
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23.
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Liabilities do NOT include
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Amounts owed on the mortgage of your house.
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Amounts owed for taxes that have not been withheld.
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Credit card loans.
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Savings bonds owned.
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24.
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A budget is a
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Purchase plan.
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Spending plan.
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Line of credit.
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Financial statement.
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25.
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The main purpose of a budget is to
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Develop goals.
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Develop a financial plan.
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Give feedback to the plan.
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Help you reach your financial goals.
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Chapter 4 - Career Planning And Financial Success
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26.
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_______________________ is NOT an important occupational motivator.
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Pay and fringe benefits.
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Low interest loans.
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Potential for advancement.
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Recognition.
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27.
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Employee benefits may NOT include
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Fringe benefits.
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Stock option plans.
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Low interest loans.
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Overtime.
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28.
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The cost savings of working at home do NOT include
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No commuting costs.
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No dental, medical or life insurance.
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No child care fees.
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No personal expenses, restaurant lunches.
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29.
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_________________________ is NOT a website for job hunting.
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www.monster.com.
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www.careerbuilder.com.
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www.careershop.com.
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www.dol.gov.
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30.
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__________________ may NOT be an example of college-related costs.
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Tuition.
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Smartphones.
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PCs.
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Books.
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Chapter 5 - Planning For Your Children'S College Education
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31.
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Your child wants to go to college for the next 4 years. The annual cost is $6,000 and will increase at the rate of 8 percent per year. What is the cost of the education?
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$27,036
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$24,000
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$48,000
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$6,000
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32.
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Top strategies to maximize aid eligibility do NOT include
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Save money in parents' name, not in child's name.
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Spend down student assets and income first.
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Pay off consumer debt, such as credit cards and auto loans.
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Minimize contributions to your retirement plan.
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33.
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To qualify for a Stafford loan, you must
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Demonstrate your assets.
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Have a good credit rating.
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Make satisfactory academic progress.
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Have a part time job.
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34.
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_______________________ is a non-needed-basis loan.
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Stafford.
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PLUS.
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Perkins.
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MINUS.
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35.
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____________ loans do NOT have to be repaid until after you graduate from college.
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Stafford and Perkins
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Stafford and Plus
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Perkins and Plus
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Plus and Signature Student Loans
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36.
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Federal government programs do NOT include:
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Basic Educational Opportunity Grants
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Family planning grants
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Supplemental Educational Opportunity Grant
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College work-study programs
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Chapter 6 - The Return And Riskiness Of Your Investments
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37.
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Holding Period Return (HPR) is
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(Current Income / Purchase Price)
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(Capital gain or loss) / (Purchase price)
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(Current income + Capital gain or loss) / (Purchase price)
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Current Income + Capital Gain (or loss)
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38.
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To be successful as an investor, you need an understanding of
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Investment risk and lofty expectations of reward.
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Risk-return tradeoff.
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Speculation.
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Hedging.
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39.
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The returns you would expect from your investments could be
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Risk.
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Current investment value.
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Current income.
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Disposal gains.
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40.
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In deciding your risk tolerance you should NOT consider
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Family status.
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Age.
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Personality.
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Intuition.
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41.
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The investment vehicle with the highest risk and highest rate of return is
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Futures.
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T-bills.
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Savings and CD's.
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Corporate bonds.
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42.
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Security investors incur varying degrees of risk. Business risk is related to
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Price level changes in the economy.
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The debt-to-equity ratio of the firm.
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The potential success or failure of the firm.
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Security price fluctuations.
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43.
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Companies with a great deal of long-term debt would rate fairly high in ____________ risk.
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Market.
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Event.
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Business.
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Financial.
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44.
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Risk and return are ___________ related.
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Inversely.
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Directly.
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Slightly.
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Oppositely.
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45.
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Beta is a security’s volatility compared to an average security. A beta reading of zero (0) means
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The security is twice as risky as the market.
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The security's return is independent of the market.
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The security equals the beta value of the market portfolio.
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The security is half as volatile as the market.
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Chapter 7 - Banking And Cash Management
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46.
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Which of the following statements is NOT true about check writing?
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It is very costly to write a bad check.
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It would be a good practice to send out a check, and then make a later deposit to cover it before the check clears.
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Too many bounced checks can have your account closed.
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Too many bounced checks can create a bad credit rating.
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47.
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Which of the following statements is NOT true about a home equity line of credit?
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Easier to get, based on your home's equity and ability to pay.
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The only type of credit line available to most consumers in sizable dollar amounts for long time periods.
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The interest charged is generally higher than on unsecured lines of credit.
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Interest is tax deductible when incurred on a home loan.
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48.
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Commercial banks are insured by the
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Financial Deposit Insurance Association.
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Federal Depositors Assurance Corporation.
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Federal Deposit Insurance Corporation.
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Financial Deposit Insurance Company.
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49.
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The Emergency Economic Stabilization Act of 2008 increased the insurance coverage on all accounts up to ______________.
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$100,000.00
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$200,000.00
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$250,000.00
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$500,000.00
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50.
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Banking regulators include all except
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The board of governors of the Federal Reserve System.
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The state senate committee.
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The Federal Deposit Insurance Corporation.
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The office of the controller of the currency.
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51.
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Banking tools (services) do NOT include
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Interest free loans.
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Overdraft protection.
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ATM and debit cards.
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Smart cards.
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Chapter 8 - How To Take On And Manage Debt
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52.
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Fair Credit Reporting affects your credit by releasing all the information except
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Where you live and work.
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How you pay your bills.
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Whether you have been sued or arrested.
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Whether you are healthy or sick.
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53.
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The elements of credit do NOT include
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Character (willingness to pay).
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Circumstances (single, married, other).
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Capacity (cash flow).
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Capital (wealth).
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54.
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A FICO Score or credit score that is computer generated and predicts a lenders risk, includes some of the following factors except for
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Payment history.
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Assets and income.
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Outstanding debt.
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Credit history.
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55.
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Most of the information in your credit file may be reported for only ______ years.
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56.
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If you have a problem with your creditor, the best solution is to
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File a lawsuit against the creditor.
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Solve your problem directly with the creditor.
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Complain to the Federal Reserve System.
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Complain to the Board of Governors.
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57.
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A good rule of thumb is to limit consumer debt payments to
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10 percent of your net monthly income.
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15 percent of your disposable monthly income.
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25 percent of your disposable monthly income.
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30 percent of your disposable monthly income.
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58.
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Your debt/equity ratio
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A.Is dangerous if it is greater than 1.
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B.Is acceptable if it stays below 30%.
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C.Need not be calculated for consumer loans.
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D.Is calculated only for credit card debt.
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59.
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Vantage Score, a credit scoring model, was launched in 2005 by
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Equifax.
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Dun & Bradstreet.
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Value Line.
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FICO.
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60.
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The 2005 bankruptcy law
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Exempts all of child's education savings.
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Exempts all of home equity.
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Requires mandatory credit counseling.
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Protects a car.
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Chapter 9 - How To Determine And Save On The Costs Of Living
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61.
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One of the ways to reduce automotive expenses is to buy a small hybrid car, since it
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Uses less gas.
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Involves smaller payments.
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Involves lower insurance premiums.
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Uses a car pool lane.
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62.
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Which of the following is NOT one of the four basic leasing rules:
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The term of the lease (usually 24 to 48 months).
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The capitalization cost of the car (sales price).
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The residual or worth of the car at the end of the term.
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The manufacturer's cost.
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Chapter 10 - Where And How You Choose To Live
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63.
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_________ is NOT an advantage of owning your own home.
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Pride of ownership
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A sense of stability
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A tax shelter
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Usually owning being more costly than renting
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64.
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Closing costs do NOT include
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Title search and insurance.
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Management and advertising fees.
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Lender's review fees and buyers loan points.
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Reappraisal fees and credit report.
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65.
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Which of the following is false about an adjustable rate mortgage (ARM)?
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Monthly payments can go up if interest rates rise.
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There is always a prepayment penalty.
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Negative amortization can occur (monthly payment does not cover interest cost).
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Initial interest rates last only until first adjustment.
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Chapter 11 - Life, Health, And Property And Liability Insurance
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66.
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_____________________ is NOT one of the most common risks a consumer must address.
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Personal risks.
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Systematic risks.
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Property risks.
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Liability risks.
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67.
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The features of term insurance can include all except
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Your dependents get dividends and interest if you serve the term.
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Protection for a specific period of time.
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Low initial premium.
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May be renewable and or convertible.
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68.
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Aspects of whole-life insurance do not include
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Protection for life.
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Fixed premiums.
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Growing cash value.
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Lower initial premium than term.
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69.
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_______________________________ is NOT professional designation that life insurance agents may earn.
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Chartered Life Underwriter (CLU).
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Certified Life Planner (CLP).
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Life Underwriter Training Council Fellow (LUTCF).
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Chartered Financial Consultant (ChFC).
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70.
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A ratings guide to the financial stability of the nation's insurers is published by
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Dow Jones & Company.
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Standard & Poor's.
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Moody's Rating Service.
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A. M. Best Company.
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71.
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The fastest growing segment of the health care industry is
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Fee for service plans.
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Medicaid.
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Managed care plans.
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Medicare.
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72.
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When you have to file a homeowner’s claim you should NOT
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Report any theft or vandalism to the police.
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Immediately call your insurance agent.
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Protect your property from further damage.
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Settle for the first offer made without a policy review.
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73.
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A HO-1 policy covers damage from property damage perils except
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Fire.
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Windstorms.
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Earthquakes.
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Vandalism.
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74.
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_________________ is another insurance credit scoring company along with FICO.
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Smartmoney.
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ChoicePoint.
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CheckPoint.
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GEICO.
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Chapter 12 - What You Should Know About Investments And Planning
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75.
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Before getting started as an investor you should do all of the following except
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Evaluate your present financial condition.
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Consider your income.
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Invest your disposable income (prior to paying bills).
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Review future prospects for higher earnings.
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76.
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Sources of financing your investment choices do NOT include
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Discretionary income.
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Funds owed to the IRS.
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Home equity.
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Life insurance.
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77.
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An asset that is considered both highly marketable and highly liquid is
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Short-term U.S. government securities.
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Real estate.
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Common stock.
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Long-term U.S. government securities.
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78.
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Buying on margin is buying
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At the lowest price.
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At the market price.
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|
With borrowed funds.
|
|
|
By trading currently-owned stock.
|
|
|
|
|
79.
|
_________ is NOT an investment at risk with changing interest rates
|
|
|
Notes.
|
|
|
Gold and silver.
|
|
|
Mortgages.
|
|
|
Stocks.
|
|
|
|
|
80.
|
Investments NOT vulnerable to a changing economy are
|
|
|
Bonds.
|
|
|
Stocks.
|
|
|
Mortgages.
|
|
|
CDs.
|
|
|
|
|
Chapter 13 - Should You Invest In Common Stock?
|
81.
|
Corporate ownership is evidenced by
|
|
|
Preferred stock.
|
|
|
Common stock.
|
|
|
Bonds.
|
|
|
Capital gain.
|
|
|
|
|
82.
|
Types of stock can NOT include
|
|
|
Blue chip stocks.
|
|
|
Miter stocks.
|
|
|
Growth stocks.
|
|
|
Income stocks.
|
|
|
|
|
83.
|
___________ is NOT the type of orders you may place for stock transactions
|
|
|
Out-of-orders.
|
|
|
Market orders.
|
|
|
Open orders.
|
|
|
Day orders.
|
|
|
|
|
84.
|
What is your return on a stock if you buy a stock for $30 and sell it for $36, and the annual cash dividend is $2. Your return per share is
|
|
|
|
|
85.
|
If you invested $80 in a stock which you sold 3 months later for $100 and a $2 dividend was received, then the quarterly return is ________.
|
|
|
|
|
86.
|
Patsy Banz owns 220 shares of General Mills Corporation. For the last calendar quarter, General Mills Corporation paid $0.47 a share. What is the total amount she received in her dividend check for this quarter?
|
|
|
$0.47.
|
|
|
$47.00
|
|
|
$94.00
|
|
|
$103.40.
|
|
|
|
|
87.
|
Price-earnings ratio is NOT affected by
|
|
|
Growth rate of earnings.
|
|
|
Size of the firm.
|
|
|
Cash flow from operations.
|
|
|
Expected dividends.
|
|
|
|
|
88.
|
____________________ is NOT a rule of thumb used for stock valuation.
|
|
|
Present value ratio.
|
|
|
Price-earnings ratio.
|
|
|
Price-free cash flow ratio.
|
|
|
Price-sales ratio.
|
|
|
|
|
89.
|
Market risk is often measured using
|
|
|
The price/earnings ratio.
|
|
|
The dividend yield.
|
|
|
Alpha.
|
|
|
Beta.
|
|
|
|
|
90.
|
Good monetary indicators include
|
|
|
Dow Jones 20-Bond Index.
|
|
|
CPI.
|
|
|
Volatility index
|
|
|
Goldman Sachs index
|
|
|
|
|
Chapter 14 - Should You Invest In Fixed-Income Securities?
|
91.
|
Examples of fixed income securities do NOT include
|
|
|
Corporate bonds.
|
|
|
Silver certificates.
|
|
|
Government bonds.
|
|
|
Municipal bonds.
|
|
|
|
|
92.
|
Bonds have the following advantages except for
|
|
|
Fixed interest income each year.
|
|
|
Safer than equity securities.
|
|
|
Safer than common stock.
|
|
|
There are no voting rights.
|
|
|
|
|
93.
|
Types of bonds do NOT include
|
|
|
Mortgage bonds.
|
|
|
Debentures.
|
|
|
Classified mint bonds.
|
|
|
Convertible bonds.
|
|
|
|
|
94.
|
________ is NOT one of basic factors to consider in selecting a bond
|
|
|
Length of maturity.
|
|
|
Features (call or conversion).
|
|
|
Tax status.
|
|
|
Treasury bill markings.
|
|
|
|
|
95.
|
If a bond is purchased at a price above the face value, the yield to maturity is
|
|
|
Greater than the stated interest rate.
|
|
|
The same as the stated interest rate.
|
|
|
Less than the stated interest rate.
|
|
|
Is zero.
|
|
|
|
|
96.
|
John Smith is in the 28 percent tax bracket. If he were to purchase a $1,000 municipal bond that had a stated interest rate of 6.9%, the taxable equivalent yield would be
|
|
|
6.90%.
|
|
|
8.261%.
|
|
|
9.583%.
|
|
|
12.105%.
|
|
|
|
|
97.
|
Preferred stock, like a corporate bond, has the following features except that
|
|
|
It provides prior claims on earnings and assets.
|
|
|
Its dividend is fixed for the life of the issue.
|
|
|
It can carry call and convertible features.
|
|
|
It pays interest.
|
|
|
|
|
98.
|
Other fixed income securities, often called short-term parking lots, include
|
|
|
Certificates of deposit.
|
|
|
Income bond.
|
|
|
Treasury bond.
|
|
|
Hedge fund.
|
|
|
|
|
Chapter 15 - Investing In Tangibles: Real Estate And Other Real Assets
|
99.
|
Which of the following statements is FALSE about real estate investing?
|
|
|
It provides some tax shelters to many investors.
|
|
|
It is a good hedge against inflation because property values and the income from properties rise to keep pace with inflation.
|
|
|
It can help can maximize return with other people's money (OPM).
|
|
|
You may find less personal satisfaction in owning property than stock certificates.
|
|
|
|
|
100.
|
Limited partnerships have the following disadvantages except for
|
|
|
IRS rulings disallow certain real estate losses.
|
|
|
Tax deductible expenses.
|
|
|
High management charges and costs.
|
|
|
High risk.
|
|
|
|
|
101.
|
Before investing in Real Estate Investment Trusts (REITs) you must consider all the following EXCEPT
|
|
|
Prior owners.
|
|
|
Profitability.
|
|
|
Annual cash flow.
|
|
|
Condition of property.
|
|
|
|
|
102.
|
When choosing a REIT you should NOT consider
|
|
|
Profitability.
|
|
|
Annual cash flow.
|
|
|
Pride of ownership.
|
|
|
Condition of properties.
|
|
|
|
|
103.
|
Federal law requires REITs to
|
|
|
Distribute at least 95 percent of their earnings to shareholders.
|
|
|
Engage in short-term holdings of real estate.
|
|
|
Register with the u.s. department of housing & Urban development.
|
|
|
Reinvest at least 50 percent of their income in rental properties.
|
|
|
|
|
104.
|
One of the possible advantages of investing in a real estate limited partnership is that you
|
|
|
Don't have to worry about capital gains tax.
|
|
|
Don't have to pay federal income tax.
|
|
|
Don't have to pay state income tax.
|
|
|
Gain entry to a shopping center or large building by investing a small amount of money.
|
|
|
|
|
105.
|
What type of REIT is the safest?
|
|
|
Equity.
|
|
|
Mortgage.
|
|
|
Hybrid.
|
|
|
Unit trust.
|
|
|
|
|
106.
|
Mortgage backed securities do NOT include
|
|
|
Sally-bills.
|
|
|
Ginnie Mae.
|
|
|
Freddie Macs.
|
|
|
Fannie Mae.
|
|
|
|
|
107.
|
Investments in tangible assets such as gold and silver offer the following benefits
|
|
|
A hedge against inflation.
|
|
|
Collection piece.
|
|
|
Stability.
|
|
|
May only be bought in bullions.
|
|
|
|
|
Chapter 16 - Mutual Funds And Diversification
|
108.
|
A mutual fund has $10 million in assets and $1 million in liabilities. There are 400,000 fund shares outstanding. What is the net asset value (NAV) of this fund?
|
|
|
$25.00
|
|
|
$22.50
|
|
|
$12.50
|
|
|
$11.25
|
|
|
|
|
109.
|
Mutual fund investing is characterized by all except
|
|
|
Diversification.
|
|
|
Large minimum investments.
|
|
|
Automatic reinvestment.
|
|
|
Automatic withdrawal.
|
|
|
|
|
110.
|
The value of the mutual fund's portfolio minus the mutual fund's liabilities divided by the number of shares outstanding is called the
|
|
|
Book value.
|
|
|
Outstanding balance.
|
|
|
Per share value.
|
|
|
Net asset value.
|
|
|
|
|
111.
|
Another name for a mutual fund is
|
|
|
A closed-end investment company.
|
|
|
An open-end investment company.
|
|
|
A mutual investment company.
|
|
|
An open investment company.
|
|
|
|
|
112.
|
Redeeming your mutual fund shares might result in a charge called a
|
|
|
A back-end load.
|
|
|
A front-end load.
|
|
|
A redemption tax.
|
|
|
A management fee.
|
|
|
|
|
113.
|
A no-load fund has no
|
|
|
Transaction (sales) fees.
|
|
|
Administrative charges.
|
|
|
Management charges.
|
|
|
Tax charges.
|
|
|
|
|
114.
|
Mutual funds may NOT include
|
|
|
Estate funds.
|
|
|
Money market funds.
|
|
|
Growth funds.
|
|
|
Aggressive growth funds.
|
|
|
|
|
115.
|
In picking a “muni” (municipal) fund you should NOT consider
|
|
|
Portfolio composition.
|
|
|
Credit quality.
|
|
|
Duration.
|
|
|
Pro-rata.
|
|
|
|
|
116.
|
Proven risk-reducing strategies for making money in mutual funds do NOT include
|
|
|
Shoot for low-cost funds.
|
|
|
Build a well-balanced, diversified portfolio.
|
|
|
Keep all you investments in one secure fund.
|
|
|
Use the dollar-cost average method.
|
|
|
|
|
Chapter 17 - How To Have Enough Money In Your Pension Plan When You Retire
|
117.
|
___________________ is NOT an excellent investment vehicle for retirement planning.
|
|
|
Limited partnerships.
|
|
|
Social security.
|
|
|
Individual Retirement Accounts (IRAs).
|
|
|
Annuities.
|
|
|
|
|
118.
|
Which one of the following is the most widely used source of retirement income?
|
|
|
IRAs.
|
|
|
Keogh plans.
|
|
|
Social security.
|
|
|
Company pension plans.
|
|
|
|
|
119.
|
The first step in retirement planning is to
|
|
|
Determine how large a nest egg is required.
|
|
|
Set retirement needs.
|
|
|
Define your investment program.
|
|
|
Determine your income-earning assets.
|
|
|
|
|
120.
|
Ideally, retirement planning should begin
|
|
|
During the year before retirement.
|
|
|
When the last child has left home.
|
|
|
As soon as the mortgage is paid off.
|
|
|
As soon as possible.
|
|
|
|
|
121.
|
An individual retirement account is an example of a(n) ______________ asset.
|
|
|
Liquid.
|
|
|
Common.
|
|
|
Investment.
|
|
|
Household.
|
|
|
|
|
122.
|
________________________ is an option for retirement planning.
|
|
|
Conventional mortgage.
|
|
|
Reverse mortgage.
|
|
|
No-doc mortgage.
|
|
|
Interest-only loan.
|
|
|
|
|
Chapter 18 - Estate Planning: Preserving Your Estate
|
123.
|
The primary purpose of estate planning is to
|
|
|
Avoid excessive taxation.
|
|
|
Distribute your assets according to your wishes after your death.
|
|
|
Plan for retirement.
|
|
|
Maximize inheritances.
|
|
|
|
|
124.
|
Estate planning involves
|
|
|
Considering how your wealth can be most effectively passed on to heirs.
|
|
|
Dissolution of all privately held corporations.
|
|
|
Valuation and auctioning of your valuables.
|
|
|
Planning retirements.
|
|
|
|
|
125.
|
A will is a legal document outlining the plan for
|
|
|
Your funeral.
|
|
|
Disposition of your assets.
|
|
|
Management of your assets.
|
|
|
Survivor's goals.
|
|
|
|
|
