QUESTION 26

Question

A company that provides substantial dividends and opportunities for capital appreciation is considered to be
a. good for both income and growth.
b. a good growth stock.
c. a poor income stock.
d. a portfolio stock.
e. a good income stock.
2 points

QUESTION 27
After preparing a personal balance sheet, you find that your net worth is negative. Therefore, your top priority should be to
a. reduce your income taxes.
b. change your financial goal.
c. pay off some debts.
d. buy some valuable appreciating assets.
e. better diversify your investments.
2 points

QUESTION 28
A typical person needs how much life insurance?
a. Enough to cover six months’ salary
b. Enough to cover one months’ salary
c. Enough to cover one to two years’ salary
d. Enough to cover five to 10 years’ salary
e. Enough to cover a lifetime of salary
2 points

QUESTION 29
An envelope budgeting system works because
a. it’s safer to have the money physically present with you rather than in the bank.
b. individuals don’t switch money between envelopes.
c. all the money is in one place so you feel wealthier.
d. spending can continue after the envelope is empty.
e. the empty envelope is a powerful reminder to stop spending.
2 points

QUESTION 30
Connie wants to collect interest on her initial payment and then receive back the initial amount when the security matures. Connie should invest in
a. a savings account.
b. real estate.
c. fixed income investments such as bonds.
d. a mutual fund.
e. the stock market.
2 points

QUESTION 31
Disability insurance will provide
a. replacement income if you are disabled and cannot work.
b. coverage for major medical expenses and doctor’s visits.
c. a pension for you when you are past retirement age.
d. coverage to your disabled dependents if you should die.
e. compensation if you cannot get a job due to a handicap.
2 points

QUESTION 32
Effective checkbook management includes all of the following except
a. entering checks and deposits monthly.
b. updating the balance periodically.
c. checking that the bank statement balance is correct.
d. monthly reconciliations.
e. adjusting for items such as bank charges and fees.
2 points

QUESTION 33
Failure to pay the correct amount of taxes promptly is
a. unethical but legal.
b. unethical and illegal.
c. ethical but illegal.
d. not a matter of ethics or legality.
e. ethical and legal.
2 points

QUESTION 34
In addition to an emergency savings account, __________ is your best defense against financial disasters.
a. insurance
b. online advice
c. a financial planner
d. a cash flow budget
e. checkbook reconciliation
2 points

QUESTION 35
In a personal balance sheet, assets are listed in order of
a. liquidity.
b. claim.
c. depreciation.
d. value.
e. age.
2 points

QUESTION 36
Heath’s automobile insurance policy states that, in the event of a claim, the policy will pay up to $50,000 for property damages and $50,000 for medical care, provided Heath pays the first $500 of the claim himself. The deductible on Heath’s auto policy is
a. $50,000.
b. $100,500.
c. $500.
d. $100,000.
e. $45,000.
2 points

QUESTION 37
Leyla says, “I am saving for my two-year-old son’s college education.” This statement reveals Leyla’s
a. time horizon.
b. asset allocation.
c. risk position.
d. liabilities.
e. insurance.
2 points

QUESTION 38
The law requires a taxpayer to maintain records to support his or her tax returns, but in most cases does not specify the exact form of the records.
True

False

2 points

QUESTION 39
To aid in personal financial planning, Chad prepares a personal balance sheet. The personal balance sheet can do all of the following except
a. list items on which Chad still owes money, such as a car that is not fully paid for.
b. describe Chad’s net worth.
c. tell Chad how much he should be spending.
d. list the value of things that Chad owns.
e. show how much cash Chad has.
2 points

QUESTION 40
To minimize risk, investments in equities should be
a. the most substantial part of an investment strategy.
b. checked daily for price movement.
c. maintained in the investor’s employer company only.
d. concentrated in profitable industries.
e. diversified into many different industries.
2 points

QUESTION 41
U.S. Treasury bonds have virtually no _______ risk but they do have __________ risk.
a. fixed; variable
b. default; interest rate
c. trust; corporate
d. inflation; fixed-income
e. real; market
2 points

QUESTION 42
Vanessa says, “I would like to invest in the stock market but I only have a few thousand dollars and with that, I won’t be able to diversify my portfolio.” What would you recommend to Vanessa?
a. A unit investment trust
b. A non-diversified account
c. A real-estate investment trust
d. An account concentrated in a single industry
e. A mutual fund
2 points

QUESTION 43
Social Security provides sufficient income to cover all living expenses after retirement.
True

False

2 points

QUESTION 44
Tetsuko prepares a personal balance sheet. On it she lists cash she has in various checking and savings accounts. Tetsuko should include these items under the heading of
a. long-term assets.
b. liquid assets.
c. appreciating assets.
d. short-term liabilities.
e. unpaid liabilities.

Answer 1

Here are the answers to your questions:

QUESTION 26: A company that provides substantial dividends and opportunities for capital appreciation is considered to be
Answer: a. good for both income and growth.

QUESTION 27: After preparing a personal balance sheet, you find that your net worth is negative. Therefore, your top priority should be to
Answer: c. pay off some debts.

QUESTION 28: A typical person needs how much life insurance?
Answer: d. Enough to cover five to 10 years’ salary.

QUESTION 29: An envelope budgeting system works because
Answer: e. the empty envelope is a powerful reminder to stop spending.

QUESTION 30: Connie wants to collect interest on her initial payment and then receive back the initial amount when the security matures. Connie should invest in
Answer: c. fixed income investments such as bonds.

QUESTION 31: Disability insurance will provide
Answer: a. replacement income if you are disabled and cannot work.

QUESTION 32: Effective checkbook management includes all of the following except
Answer: a. entering checks and deposits monthly.

QUESTION 33: Failure to pay the correct amount of taxes promptly is
Answer: b. unethical and illegal.

QUESTION 34: In addition to an emergency savings account, __________ is your best defense against financial disasters.
Answer: a. insurance

QUESTION 35: In a personal balance sheet, assets are listed in order of
Answer: a. liquidity.

QUESTION 36: Heath’s automobile insurance policy states that, in the event of a claim, the policy will pay up to $50,000 for property damages and $50,000 for medical care, provided Heath pays the first $500 of the claim himself. The deductible on Heath’s auto policy is
Answer: c. $500.

QUESTION 37: Leyla says, “I am saving for my two-year-old son’s college education.” This statement reveals Leyla’s
Answer: a. time horizon.

QUESTION 38: The law requires a taxpayer to maintain records to support his or her tax returns, but in most cases does not specify the exact form of the records.
Answer: True

QUESTION 39: To aid in personal financial planning, Chad prepares a personal balance sheet. The personal balance sheet can do all of the following except
Answer: c. tell Chad how much he should be spending.

QUESTION 40: To minimize risk, investments in equities should be
Answer: e. diversified into many different industries.

QUESTION 41: U.S. Treasury bonds have virtually no _______ risk but they do have __________ risk.
Answer: b. default; interest rate

QUESTION 42: Vanessa says, “I would like to invest in the stock market but I only have a few thousand dollars and with that, I won’t be able to diversify my portfolio.” What would you recommend to Vanessa?
Answer: e. A mutual fund

QUESTION 43: Social Security provides sufficient income to cover all living expenses after retirement.
Answer: False

QUESTION 44: Tetsuko prepares a personal balance sheet. On it she lists cash she has in various checking and savings accounts. Tetsuko should include these items under the heading of
Answer: b. liquid assets.