Question 1: If a bond is purchased at a price below 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.
• zero.
• of no significance.

Question 2: A long-term technique used by investors who purchase an equal dollar amount of the same stock at equal intervals in time is called:

• dollar cost averaging.
• dividend reinvestment plan.
• buy and hold technique.
• regulated transaction.
• secured transaction.

Question 3: A stock that sells for less than $1 per share is called a:

• fractional stock.
• penny stock.
• dollar stock.
• ten-dollar stock.
• bad investment.

Question 4: Which one of the following expenditures for retirees is likely to decrease?

• clothing expenses
• insurance expenses
• medical expenses
• expenses for leisure activities
• gifts and contributions

Question 5: During your retirement, your employer's health insurance plan and Medicare will cover your medical expenses.

false

true

Question 6: What is likely to be an individual's single biggest asset?

• Their automobile
• Their jewelry
• Their bank account
• Their home
• None of the choices

Question 7: With an open-end credit, you pay back one-time loans in a specified period of time in equal amounts.

false
true

Question 8: Which of the following is most likely not a valid reason for using credit?

• Borrowing for a stay in a hospital because of appendicitis
• Borrowing to purchase a car so that you can go to work full time
• Borrowing to buy a printer for your home office now because you now it will be twice as expensive in two years
• Borrowing to pay for your expensive dinner and movie every week
• All of the choices are valid reasons for using credit

Question 9: Gordon Carey uses his Visa card to purchase a new digital camera and lens. What type of credit did Gordon use?

• Installment sales credit
• Installment cash credit
• Single lump sum credit
• Revolving credit
• Incidental credit

Question 10: For most mutual funds, the net asset value is calculated:

• yearly.
• quarterly.
• weekly.
• daily.
• whenever an investor calls and requests a price quote.

Question 11: Which of the following is an advantage of an exchange traded fund (EFT)?

• No minimum investment amount
• Shares can be bought and sold through a broker at any time at the current price
• Management fees are often lower
• Can use limit orders to purchase EFTs
• All of the choices are advantages of EFTs

Question 12: For a mutual fund, the turnover ratio measures:

• the length of time a manager has been in charge of the fund.
• the amount of profit the fund earns from one investment period to the next.
• the number of months the average investor holds the fund before selling.
• the percentage of a fund's holdings that have changed during a 12-month period.
• the percentage of institutional investors who own the fund.

Question 13: Grady Perdue has assets worth $1,500,000 and has written a legal document that specifies that all of his money go to his children. After he dies, there is a legal process to determine whether his document specifying how his assets be divided is valid. This is also the legal process by which his executor manages and distributes his property. What is this legal process called?

• An estate
• A will
• A trust
• Probate
• None of the choices

Question 14: A trust established by your will that becomes effective upon your death is called a(n) ____________ trust.

• testamentary
• living
• revocable
• irrevocable
• insurance

Question 15: A legal document authorizing someone to act on your behalf is called a:

• codicil.
• rider.
• power of attorney.
• trustor.
• proxy.

Question 16: A prime reason for buying an annuity is to:

• save money for college education
• start a new business
• accumulate funds to invest in stocks
• give you retirement income for the rest of your life
• get rich quick

Question 17: Who has the greatest need for life insurance?

• households with small children
• singles living alone
• singles living with parents
• dual income couple
• children

Question 18: Jerry Lewis is thinking about purchasing some life insurance. He goes to a company that is owned by shareholders. What type of life insurance company has he gone to?

• A stock life insurance company
• A debt life insurance company
• A mutual life insurance company
• An exclusionary life insurance company
• None of the choices

Question 19: Automobile liability insurance covers the insured when he or she is held responsible for losses suffered by others.

True
False

Question 20: In times of high inflation, personal incomes generally keep up with the rate of inflation.

True
False

Question 21: Similar to corporate shareholders, holders of mutual funds have a say in running the company, since they have equity interest in the pool of assets and a residual claim on the profits.

True
False

Question 22: Savings is the accumulation of excess funds by intentionally spending less than you earn.

True
False

Question 23: A business cycle is a pattern of economic activity that includes an expansion, peak, contraction, and trough.

True
False

Question 24: High-demand occupations tend to pay low salaries.

True
False

Question 25: The most expensive loans are available from:

• parents.
• friends.
• banks.
• finance companies.
• credit unions.

Question 26: Frank Wert wants to get a lower interest rate on his loan for the purchase of a new boat. He uses the boat as collateral for the loan. In which way is Frank reducing his lender's risk?

• He is sharing the interest rate risk with his lender
• He is pledging valuable assets that can be seized if the loan is not repaid
• He is taking a larger stake in the asset he is purchasing
• He is repaying the loan over a faster period of time
• None of the choices

Question 27: There are no costs involved in filing for a bankruptcy.

false
true

Question 28: Kevin Brown rides his bicycle to work so that he doesn't have to worry about getting in a car accident. How is Kevin managing his risk?

• Risk Avoidance
• Risk Reduction
• Risk Assumption
• Risk Shifting
• Risk Creation

Question 29: Negligence refers to:

• failure to take ordinary and reasonable care.
• cancellation of insurance.
• property damage.
• high risk insurance coverage.
• common hazards in our society.

Question 30: Using a home security system is an example of ____________ risk.

• shifting
• accepting
• reducing
• sharing
• transferring