Final Exam 321

Question 1 (1 point)

The financial decision-making process is complicated by all of the following factors EXCEPT

Question 1 options:

A) 

uncertainty and risk.

B) 

the use of information in planning.

C) 

the relative importance of consequences.

D) 

the number of factors to consider.

E) 

the complexity of relationships among factors.

Question 2 (1 point)

If you are risk averse, then you do not have enough

Question 2 options:

A) 

wealth or surplus to invest.

B) 

knowledge to invest with confidence.

C) 

time before you need your money for expenses.

D) 

a. and b.

E) 

a., b., and c.

Question 3 (1 point)

A good credit rating would be based on all the following criteria EXCEPT

Question 3 options:

A) 

you depend on credit for regular expenses.

B) 

you have used credit appropriately in the past.

C) 

you can afford to take on more credit.

D) 

you have little or no current debt.

E) 

you have a record of paying what you owe on time.

Question 4 (1 point)

The percentage of fund assets that are replaced in a year is the fund’s trading activity expressed as

Question 4 options:

A) 

the expense ratio.

B) 

the turnover ratio.

C) 

the 12b-1 fee.

D) 

the dividend distribution.

E) 

the capital gains distribution.

Question 5 (1 point)

Your time horizon for financial planning is

Question 5 options:

A) 

lifelong.

B) 

the five-year plan.

C) 

the time it takes to set goals.

D) 

approximately 65 years.

E) 

the time it takes to realize goals.

Question 6 (1 point)

When you invest in an exchange-traded fund you invest in

Question 6 options:

A) 

a mutual fund.

B) 

a fund traded like a share of stock.

C) 

an index fund.

D) 

a. and b.

E) 

a., b., and c.

Question 7 (1 point)

Perhaps the most critical information to have about an investment is its

Question 7 options:

A) 

potential return.

B) 

susceptibility to types of risk.

C) 

asset value.

D) 

a. and b.

E) 

a., b., and c.

Question 8 (1 point)

The costs of car ownership include

Question 8 options:

A) 

the down payment.

B) 

financing costs.

C) 

opportunity and liquidity costs.

D) 

a. and b.

E) 

a., b., and c.       

Question 9 (1 point)

To estimate required savings, you need to estimate

Question 9 options:

A) 

the return on your savings in retirement.

B) 

how long you will be retired before you die.

C) 

what your expenses will be in retirement.

D) 

a. and b.

E) 

a., b., and c.

Question 10 (1 point)

Which of the following measures is a way to avoid becoming the victim of an unscrupulous vendor or scam artist?

Question 10 options:

A) 

Second opinions

B) 

Verification of identity or certification

C) 

Written estimates

D) 

a. and b.

E) 

a., b., and c.

Question 11 (1 point)

By buying shares in mutual funds, you

Question 11 options:

A) 

achieve diversification at lower transaction cost.

B) 

receive the benefit of professional expertise.

C) 

opt for passive portfolio management.

D) 

a. and b.

E) 

a., b., and c.

Question 12 (1 point)

Examples of price advantages include all the following EXCEPT

Question 12 options:

A) 

seasonal or expiration date discounts.

B) 

brand or label discounts.

C) 

price discrimination.

D) 

discounts on excess inventory.

E) 

volume or quantity discounts.

Question 13 (1 point)

In financial planning, analyzing costs, benefits, and risks

Question 13 options:

A) 

helps you to choose alternatives.

B) 

allows you to establish a budget.

C) 

prevents you from making bad decisions.

D) 

reveals shortcuts to reaching your goals.

E) 

forces you to defer some goals.

Question 14 (1 point)

With a line of credit you can

Question 14 options:

A) 

borrow money as needed, up to a limit.

B) 

pay down each loan as desired.

C) 

pay interest only on the outstanding balance.

D) 

a. and b.

E) 

a., b., and c.

Question 15 (1 point)

A health insurance policy that covers physician expense, surgical expense, and hospital expense is called

Question 15 options:

A) 

major medical insurance.

B) 

basic insurance.

C) 

a formulary.

D) 

dental and vision insurance.         

E) 

group health insurance.

Question 16 (1 point)

Retirement planning involves

Question 16 options:

A) 

defining your goals.

B) 

saving for the time when you will not have income from employment.

C) 

estimating how much savings you will need to retire when you want.

D) 

a. and b.

E) 

a., b., and c.

Question 17 (1 point)

Future incomes and expenses can be projected for quantity and price on the basis of

Question 17 options:

A) 

probability.

B) 

volatility.

C) 

predictability.

D) 

a. and b.

E) 

a., b., and c.

Question 18 (1 point)

Factors that lenders look at to evaluate borrowers include

Question 18 options:

A) 

your current debts and PITI calculation.

B) 

your income and employment.

C) 

your credit history and credit score.

D) 

a. and b.

E) 

a., b., and c.

Question 19 (1 point)

Derivative contracts

Question 19 options:

A) 

include future and forward contracts.

B) 

are time-sensitive with an expiration date.

C) 

depend on the value of commodities.

D) 

a. and b.

E) 

a., b., and c.       

Question 20 (1 point)

Lenders determine their risk by assessing

Question 20 options:

A) 

the five C’s.

B) 

your credit score.

C) 

the prime rate.

D) 

a. and b.

E) 

a., b., and c.

Question 21 (1 point)

Your auto insurance premium may be reduced if

Question 21 options:

A) 

you pass a driver education course.

B) 

you live in an accident-prone or high crime area.

C) 

you have had an accident in the past three years.

D) 

a. and b.

E) 

a., b., and c.

Question 22 (1 point)

The U. S. government’s retirement account, Social Security, is funded by

Question 22 options:

A) 

a mandatory payroll tax.

B) 

both employers and employees.

C) 

your income taxes.

D) 

a. and b.

E) 

a., b., and c.

Question 23 (1 point)

Your PITI plus other debt should be what percent of your gross annual income?

Question 23 options:

A) 

38%

B) 

33%

C) 

25%

D) 

50%

E) 

15%

Question 24 (1 point)

Mortgage-backed securities are not good real estate investments for individual investors because they are

Question 24 options:

A) 

difficult to price.

B) 

vulnerable to economic cycles and default risk.

C) 

in real estate financing rather than real estate.

D) 

a. and b.

E) 

a., b., and c.

Question 25 (1 point)

Your prime directive as a consumer is to

Question 25 options:

A) 

live within your means.

B) 

avoid buyer’s remorse.

C) 

shop for bargains.

D) 

a. and b.

E) 

a., b., and c.

Question 26 (1 point)

Financial management is significantly influenced by

Question 26 options:

A) 

microeconomic factors.

B) 

macroeconomic factors.

C) 

personal factors.

D) 

a. and b.

E) 

a., b., and c.

Question 27 (1 point)

The most common uses of debt by consumers are

Question 27 options:

A) 

college loans.

B) 

car loans and home mortgages.

C) 

personal loans.

D) 

a. and b.

E) 

a., b., and c.

Question 28 (1 point)

As a car owner you can maximize the benefits you enjoy by

Question 28 options:

A) 

following the owner’s manual.

B) 

maintaining a valid driver’s license.

C) 

registering and insuring the car.

D) 

a. and b.

E) 

a., b., and c.

Question 29 (1 point)

You  decide you want to have a million dollars in the bank when you retire.  Your bank pays 3% interest per year. If you start when you are 28, how  much would you need to save each year to reach your goal by the time you  are 68, assuming the interest rate stays the same?

Question 29 options:

A) 

Between $24,000 and $26,000 a year.

B) 

Between $15,000 and $16,000 a year.

C) 

Between $19,000 and $20,000 a year.

D) 

Between $10,000 and $11,000 a year.

E) 

Between $13,000 and $14,000 a year.     

Question 30 (1 point)

The Consumer Price Index is a measure of

Question 30 options:

A) 

recession.

B) 

consumption.

C) 

inflation.

D) 

GDP.

E) 

purchasing power.

Question 31 (1 point)

A 401k plan

Question 31 options:

A) 

has a maximum contribution limit.

B) 

is a tax-deferred plan.

C) 

is a portable plan.

D) 

a. and b.

E) 

a., b., and c.      

Question 32 (1 point)

Property factors that determine the amount of property insurance premiums include

Question 32 options:

A) 

the age and size of the house.

B) 

the location and proximity to a hydrant.

C) 

the number of occupants.

D) 

a. and b.

E) 

a., b., and c.

Question 33 (1 point)

Optional enhancements that lower risks and reduce premiums include all the following EXCEPT

Question 33 options:

A) 

burglar alarms.

B) 

electrical upgrades.

C) 

fire extinguishers.

D) 

deadbolt locks.

E) 

smoke detectors.

Question 34 (1 point)

The cash budget’s greatest value is in clarifying

Question 34 options:

A) 

recurring incomes and expenses.

B) 

free cash flows for capital expenditures.

C) 

risks and choices in the timing of cash flows.

D) 

attainable short-term goals and lifestyle goals.

E) 

the importance of cash management tools.

Question 35 (1 point)

Your credit score is determined primarily on the basis of

Question 35 options:

A) 

how long you have been using credit.

B) 

the types of credit issued to you.

C) 

your credit history.

D) 

your current debt.

E) 

your character.

Question 36 (1 point)

The future value of an annuity increases when

Question 36 options:

A) 

the present value increases.

B) 

the time value increases

C) 

the rate of compounding increases

D) 

a. and b.

E) 

a., b., and c.       

Question 37 (1 point)

Investor constraints include all the following EXCEPT

Question 37 options:

A) 

legal requirements.

B) 

tax obligations.

C) 

time horizon.

D) 

liquidity needs.

E) 

level of debt.

Question 38 (1 point)

When you invest in an index fund you invest in

Question 38 options:

a mutual fund.

a fund reflecting the performance of similar securities.

a fund managed by a company, brokerage, or bank.

a. and b.

a., b., and c.

Question 39 (1 point)

The  Joneses believe it is important to try to reduce poverty and hunger  globally by aiding local communities. They invest internationally in  local businesses and nonprofit organizations that are effectively  addressing the problem. Their strategy is an example of

Question 39 options:

A) 

divestment.

B) 

legal constraints.

C) 

unique circumstances.

D) 

risk tolerance.

E) 

social investment.

Question 40 (1 point)

Future capital expenditures can be projected on the basis of

Question 40 options:

A) 

financial history.

B) 

recurring incomes.

C) 

the time value of money.

D) 

a. and b.

E) 

a., b., and c.

Question 41 (1 point)

When you invest in bonds you

Question 41 options:

A) 

loan money and receive interest

B) 

receive repayment of principal at maturity.

C) 

borrow money and pay interest.

D) 

a. and b.

E) 

a., b., and c.

Question 42 (1 point)

The study of risk and prediction of outcomes is based on 

Question 42 options:

A) 

the dynamics of probability.

B) 

the study of behavioral finance.

C) 

the uncertainty of independent events.

D) 

a. and b.

E) 

a., b., and c.

Question 43 (1 point)

When you invest in stocks you

Question 43 options:

A) 

pay dividends.

B) 

sell equity for liquidity.

C) 

buy a share of a corporation.

D) 

a. and b.

E) 

a., b., and c.

Question 44 (1 point)

Alex  realizes from his balance sheet that he could be facing personal  bankruptcy within the year. He can prevent this from happening by

Question 44 options:

A) 

liquidating assets to pay creditors.

B) 

achieving positive net worth.

C) 

refinancing debt on different terms.

D) 

a. and b.

E) 

a., b., and c.

Question 45 (1 point)

The higher the lender’s risk, then

Question 45 options:

A) 

the lower your cost of debt.

B) 

the lower your interest rate risk.

C) 

the higher your cost of debt.

D) 

the higher your interest rate risk.

E) 

the lower your default risk.

Question 46 (1 point)

Electronic options for withdrawals or payments include

Question 46 options:

A) 

automatic payments.

B) 

debit and ATM cards

C) 

direct deposits.

D) 

a. and b.

E) 

a., b., and c.

Question 47 (1 point)

You can negotiate all the following factors with car dealers, affecting the value of your purchase, EXCEPT

Question 47 options:

A) 

the price.

B) 

the manufacturer’s rebate.

C) 

service discounts on maintenance.

D) 

the dealer’s warranty terms.

E) 

the trade-in value of your old car.

Question 48 (1 point)

Mutual funds provide investors with

Question 48 options:

A) 

diversification.

B) 

security selection.

C) 

asset allocation.

D) 

a. and b.

E) 

a., b., and c.

Question 49 (1 point)

Returns from a mutual fund are returns on the securities it owns, including distributions of

Question 49 options:

A) 

interest.

B) 

dividends.

C) 

capital gains.

D) 

a. and b.

E) 

a., b., and c.