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Personal Finance
The Consumer Price Index is a measure of:
Select one:
- a. recession.
- b. inflation.
- c. purchasing power.
- d. GDP.
- e. consumption.
Automobile insurance coverage for financial losses of people in the other car injured in an accident you cause is called:
Select one:
- a. property damage liability.
- b. bodily injury liability.
- c. comprehensive physical damage.
- d. medical payments coverage.
- e. uninsured motorists protection.
The longer the time you have to save until you retire:
Select one:
- a. the more you need to save.
- b. the longer the retirement duration.
- c. the less you need to save each year.
- d. A and B.
- e. A, B, and C.
Market considerations in making a purchase include availability, price, convenience, and all the following EXCEPT:
Select one:
- a. brand names and product attributes.
- b. new or used markets.
- c. in-store, catalog, or online sources.
- d. vendor or broker competition.
- e. wholesale or auction markets.
Serena wants to see how her money from all sources came in and went out for all uses during each month of the past year. Which kind of financial statement does she need?
Select one:
- a. Balance sheet.
- b. Income statement.
- c. Net worth statement.
- d. Cash flow statement.
- e. Budget.
Stock whose value rises and falls as the market rises and falls is called:
Select one:
- a. widow-and-orphan stock.
- b. wallpaper stock.
- c. penny stock.
- d. cyclical stock.
- e. defensive stock.
The ability to delay payment for different items from different vendors, up to an amount limit, during a period of time is called:
Select one:
- a. revolving credit.
- b. installment credit.
- c. a credit cycle.
- d. a charge card.
- e. a credit card.
To avoid unwelcome adjustments, you should:
Select one:
- a. be conservative in your expectations.
- b. stick with long-term goals.
- c. redo your budget each week.
- d. switch to less desirable choices.
- e. avoid emotional attachment to goals.
The budget process begins with a thorough understanding of your:
Select one:
- a. current financial condition.
- b. financial statements.
- c. desires and choices.
- d. A and B.
- e. A, B, and C.
Erin needs additional memory and an external back-up drive for her computer but her resources are limited. Because there is a special price for the brand she wants, she decides to get the memory. What is her opportunity cost?
Select one:
- a. The cost of the memory.
- b. Not getting the brand she wants.
- c. The special price.
- d. Her limited resources.
- e. Not having the back-up drive.
In financial planning, the numbers expressed in an income statement, balance sheet, and cash flow statement are assessments of:
Select one:
- a. short-term and long-term goals.
- b. net worth.
- c. alternatives.
- d. timing.
- e. the current situation.
Before you trust any online source of information, the most important evaluation to make is:
Select one:
- a. the objectivity of the articles and features.
- b. the credibility of the website.
- c. the use of multimedia and social networking.
- d. A and B.
- e. A, B, and C.
You can estimate your length of retirement by estimating:
Select one:
- a. the number of years until you retire.
- b. your life expectancy.
- c. how many years you can afford to be retired.
- d. how much you need to retire.
- e. your anticipated expenses in retirement.
Your PITI plus other debt should be what percent of your gross annual income?
Select one:
- a. 50%
- b. 38%
- c. 33%
- d. 25%
- e. 15%
Advantages of renting a home include all the following EXCEPT:
Select one:
- a. creating a store of value.
- b. limited financial obligation.
- c. more liquidity.
- d. more mobility.
- e. limited maintenance expenses.
In financial planning, understanding your current financial situation by analyzing your assets, debts, income, and expenses:
Select one:
- a. helps you set personal goals.
- b. reveals ways of achieving your goals.
- c. lets you reach your goals sooner.
- d. prevents you from clinging to unrealistic goals.
- e. suggests new goals.
Periods of contraction in the economy often lead to:
Select one:
- a. reduced returns on investment.
- b. an increase in the employment rate.
- c. growth in job creation.
- d. greater consumption.
- e. greater participation in the capital markets.
The different markets that may affect price and convenience include:
Select one:
- a. new versus used.
- b. local versus catalog or online.
- c. direct versus value-adding brokers.
- d. A and B.
- e. A, B, and C.
The U.S. government issues Treasury:
Select one:
- a. bills for short-term borrowing.
- b. notes for intermediate-term borrowing.
- c. bonds for long-term borrowing.
- d. A and B.
- e. A, B, and C.
Bonds rated below BBB or Baa are:
Select one:
- a. speculative grade bonds.
- b. junk bonds.
- c. high yield bonds.
- d. A and B.
- e. A, B, and C.
If your broker provides advice and guidance but leaves all investment decisions up to you, the level of service is called:
Select one:
- a. discretionary trading.
- b. advisory dealing.
- c. execution-only service.
- d. A and B.
- e. A, B, and C.
How much savings you need at retirement varies by the expected rate of return on:
Select one:
- a. your savings before retirement.
- b. your savings during retirement.
- c. your asset value after retirement.
- d. A and B.
- e. A, B, and C.
By buying shares in mutual funds, you:
Select one:
- 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.
The usefulness of a currency is based on:
Select one:
- a. its supply.
- b. its demand.
- c. what it can buy.
- d. how it is priced.
- e. how it is allocated.
Return ratios such as earnings per share (EPS) let you:
Select one:
- a. track earnings growth.
- b. directly compare returns of different stocks.
- c. account for outstanding shares.
- d. A and B.
- e. A, B, and C.
The present value of your wealth decreases proportionately to:
Select one:
- a. the distance in time to its liquidity.
- b. projected cash flows in the future.
- c. the costs and risks of delayed liquidity.
- d. A and C.
- e. A, B, and C.
In its EDGAR database, the Securities and Exchange Commission keeps:
Select one:
- a. annual and quarterly financial reports of companies.
- b. professional analyses of industry and company data.
- c. audited financial statements of brokerage houses.
- d. A and B.
- e. A, B, and C.
The information you write on an application for consumer credit is used to determine your:
Select one:
- a. Experian or Equifax rating.
- b. FICO or credit score.
- c. VISA or MasterCard credit limit.
- d. default risk.
- e. interest rate.
Taxable entities in the federal tax system include all of the following EXCEPT:
Select one:
- a. individuals.
- b. tax-exempt entities.
- c. non-profit organizations.
- d. trusts.
- e. corporations.
Obtaining liquidity for your wealth creates:
Select one:
- a. risk.
- b. opportunity costs.
- c. transaction costs.
- d. A and C.
- e. A, B, and C.
Dylan earns $24,500 a year as an office worker. He pays $1,000 a month for rent, $300 a month toward his car, and his other expenses come to around $1,200 a month. Dylan:
Select one:
- a. has a budget deficit.
- b. has a budget surplus.
- c. should reduce expenses.
- d. A and C.
- e. B and C.
Property damage liability covers other people’s property for damage you cause, while damage to your own property is covered by:
Select one:
- a. no-fault insurance.
- b. comprehensive physical damage.
- c. collision insurance.
- d. an umbrella policy.
- e.
endorsements.
Marlene owns a stock that will hold its value during a market decline and will also provide stable returns with a steady dividend. In what type of stock is she investing?
Select one:
- a. Widow-and-orphan stock.
- b. Wallpaper stock.
- c. Penny stock.
- d. Cyclical stock.
- e. Defensive stock.
Robin uses her checkbook register to record and balance each cash flow, in and out, as it occurs. This activity is called:
Select one:
- a. bookkeeping.
- b. cash accounting.
- c. accrual accounting.
- d. A and B.
- e. A and C.
U.S. Treasury bonds are issued to the primary bond market through:
Select one:
- a. auctions.
- b. brokers and dealers.
- c. private placement.
- d. ratings agencies.
- e. bond exchanges.
In job seeking, more education usually confers:
Select one:
- a. higher compensation, including benefits.
- b. greater job mobility.
- c. more career choices and shorter hours.
- d. A and B.
- e. A, B, and C.
A summary of income and expenses over a period of time is called:
Select one:
- a. a balance sheet.
- b. an income statement.
- c. net worth.
- d. a cash flow statement.
- e. a budget.
Leveraged funds are riskier than funds that do not use leverage because they:
Select one:
- a. use borrowing.
- b. are unsecured.
- c. depend on a target date.
- d. increase in value when the market declines.
- e. perform contrary to an index.
The relationship between the passage of time and the value of assets is called:
Select one:
- a. the time value of money.
- b. liquidity.
- c. present value.
- d. future value.
- e. nominative value.
When you invest in stocks you:
Select one:
- a. pay dividends.
- b. sell equity for liquidity.
- c. buy a share of a corporation.
- d. A and B.
- e. A, B, and C.
To invest and trade knowledgeably, you need to know:
Select one:
- a. the differences among investment agents.
- b. the types of investment services, accounts, and fees.
- c. the kinds of trading orders to use or request.
- d. A and B.
- e. A, B, and C.
Bonds are traded in the secondary markets through:
Select one:
- b. brokers and dealers.
- a. auctions.
- c. private placement.
- d. ratings agencies.
- e. bond exchanges.
A bond secured by collateral, such as property or equipment, is called a:
Select one:
- a. convertible bond.
- b. mortgage bond.
- c. debenture.
- d. deferred coupon bond.
- e. zero-coupon bond.
The amount of your premium is determined by the insurer’s risk, which depends on all the following factors EXCEPT:
Select one:
- a. your personal circumstances and history.
- b. the nature of the property.
- c. the amount of coverage.
- d. your personal liability.
- e. the value of safety features and upgrades.
To evaluate the credibility of a website you should check its:
Select one:
- a. currency.
- b. factual accuracy.
- c. authority or sources.
- d. A and B.
- e. A, B, and C.
Kinds of credit include all the following EXCEPT:
Select one:
- a. charge cards.
- b. credit cards.
- c. debit cards.
- d. revolving credit.
- e. installment credit.
High stock dividends:
Select one:
- b. can be a sign of company weakness.
- a. can be a sign of company strength.
- c. is always good for shareholders.
- d. A and B.
- e. A, B, and C.
Funds structured to achieve specific investment goals include:
Select one:
- a. lifestyle funds.
- b. leveraged funds.
- c. inverse funds.
- d. A and B.
- e. A, B, and C.
Your spending decisions as a consumer are framed by your:
Select one:
- a. personal tastes.
- b. lifestyle choices.
- d. A and B.
- e. A, B, and C.
Ryan has a choice of paying cash or over time for a smartphone. What would be his opportunity cost of paying cash?
Select one:
- a. He would lose liquidity.
- b. He would lose income from savings.
- c. He would ultimately pay more.
- d. A and B.
- e. A, B, and C.
Passively managed funds designed to mirror the performance of a representative asset class are called:
Select one:
- a. index funds.
- b. funds of funds.
- c. closed-end funds.
- d. open-end funds.
- e. exchange-traded funds.
Taxation that discriminates against the less affluent by decreasing the tax rate as the amount to be taxed increases is called:
Select one:
- b. regressive.
- a. progressive.
- c. non-discretionary.
- d. value-added.
- e. defined.
If your monthly PITI plus other debt, interest, and taxes comes to $850 and your gross monthly income is $5,200, about how much can you afford for a monthly mortgage payment?
Select one:
- a. $323.
- b. $850.
- c. $1126.
- d. $1653.
- e. $1976.
An effect of deflation is that your money:
Select one:
- a. is worth more and buys more.
- b. is worth less and buys less.
- c. has less purchasing power.
- d. is less useful as a medium of exchange.
- e. is more stable.
The coupon, usually paid to the investor twice yearly, is calculated as a percentage of:
Select one:
- a. the face value.
- b. the amount borrowed.
- c. $1000 per bond.
- d. A and B.
- e. A, B, and C.
Diversifying your savings in a series of instruments with different maturities is a strategy known as:
Select one:
- a. direct deposit.
- b. segregated savings.
- c. laddering.
- d. reinvesting.
- e. time deposit.
Time affects value by:
Select one:
- a. discounting value.
- b. decreasing distance to liquidity.
- c. reducing risk.
- d. delaying opportunity costs.
- e. postponing choice.
Issuers of stock:
Select one:
- a. promise returns.
- b. must trade in a public stock exchange.
- c. expect investors to share in profits and losses.
- d. pay dividends whether or not there is a profit.
- e. also issue bonds.
Markets for consumer goods to compare include all the following EXCEPT:
Select one:
- a. boutiques and cooperative stores.
- b. online auctions and stores.
- c. malls and manufacturers’ catalogs.
- d. A and B.
- e. A, B, and C.
Categories for housing structures with different attributes include:
Select one:
- a. multiple-unit dwelling.
- b. mobile home.
- c. condominium.
- d. A and B.
- e. A, B, and C.
Your PITI, a calculation lenders use to determine how much of a mortgage you can afford, includes all the following housing costs EXCEPT:
Select one:
- a. maintenance.
- b. taxes.
- c. insurance.
- d. principal.
- e. interest.
Ryan has a choice of paying cash or over time for a smartphone. What would be his opportunity cost of paying over time?
Select one:
- b. He would lose income from savings.
- a. He would lose liquidity.
- c. He would ultimately pay more.
- d. A and B.
- e. A, B, and C.
Budgets can be prepared conservatively by:
Select one:
- a. underestimating costs.
- b. underestimating earnings.
- c. overestimating goals.
- d. overestimating results.
- e. reconciling behaviors and goals.
If you pay proportionally more taxes due to the less income you have, then you are paying a:
Select one:
- b. regressive tax.
- a. consumption tax.
- c. progressive tax.
- d. excise tax.
- e. estate tax.
A corporation issuing a bond to raise $100 million would have to issue 100,000 individual bonds (100,000,000 divided by 1,000). If those bonds pay a 4% coupon, a bondholder who owns one of those bonds would receive a coupon of:
Select one:
- b. $20 every six months.
- a. $40 every six months.
- c. $20 a year.
- d. $60 a year.
- e. $1000 at maturity.
Advantages of owning a home include all the following EXCEPT:
Select one:
- a. lifestyle choices.
- b. less liquidity.
- c. predictable housing expenses.
- d. equity growth.
- e. tax deduction for mortgage interest.
Sharon is confident in middle age and very outgoing, has excellent communication skills, enjoys problem-solving challenges, and isn’t in it for the money. Sharon’s career decisions are influenced by these:
Select one:
- a. macroeconomic changes.
- b. microeconomic factors.
- c. employment opportunities.
- d. relationships between education and earnings.
- e. opportunity costs.
Microeconomic factors that influence your job and career decisions include:
Select one:
- a. your age.
- b. your stage of life.
- c. your income needs.
- d. A and B.
- e. A, B, and C.
The value of a currency is based on:
Select one:
- b. its stability.
- a. the cost of production.
- c. the value of other currencies.
- d. the price of gold.
- e. its usefulness in trade.
The idea of using the predictability of returns to manage portfolios of investments:
Select one:
- c. has led to an explosion in financial engineering.
- a. is based on an infinite time horizon.
- b. is more suitable for institutional versus individual investors.
- d. A and B.
- e. A, B, and C.
Funds structured to increase return through active management with the expectation of a down market are called:
Select one:
- c. inverse funds.
- a. lifestyle funds.
- b. leveraged funds.
- d. open-end funds.
- e. closed-end funds.
The appropriate time period for the budget process is based on:
Select one:
- a. being conservative in your expectations.
- b. reaching your financial goals.
- c. getting manageable and meaningful data.
- d. A and B.
- e. A, B, and C.
Marissa wants to work in other parts of the country in more urban and culturally exciting environments. Her career decisions and job choices will be influenced by these:
Select one:
- a. macroeconomic factors.
- b. lifecycle changes.
- c. lifestyle choices.
- d. A and B.
- e. A, B, and C.
A bias that can affect investment decisions is based on:
Select one:
- a. aversion to ambiguity.
- b. a tendency to stick with what you know.
- d. A and B.
- e. A, B, and C.
Your lifestyle choices and life stage affect:
Select one:
- a. the amount of income you will need.
- b. the time you spend earning income.
- c. opportunities in the labor market.
- d. A and B.
- e. A, B, and C.
Credit cards have all the following benefits EXCEPT:
Select one:
- a. low transaction costs.
- b. convenience.
- c. security.
- d. universal acceptance.
- e. reliance on cash.
Mutual fund costs may include all the following EXCEPT:
Select one:
- a. front-end load.
- b. back-end load.
- d. no-load fees.
- e. distribution (12b-1) fees.
In performing an attribute analysis, you compare products in terms of:
Select one:
- b. the characteristics most important to you.
- a. their demand or popularity and resale value.
- c. price and the cost of maintenance or repair.
- d. the transaction costs in relation to quality.
- e. their appearance and performance.
Levels of brokerage service define an agent’s role as:
Select one:
- a. an active manager doing discretionary trading.
- b. an advisor doing advisory dealing.
- c. a trader doing execution-only trades.
- d. A and B.
- e. A, B, and C.
Time affects liquidity through:
Select one:
- a. cash flows.
- b. opportunity costs.
- d. A and B.
- e. A, B, and C.
A bond that is issued below par and pays no interest for a specified period, followed by higher-than-normal interest payments until maturity, is called a:
Select one:
- b. step-up bond.
- a. zero-coupon bond.
- c. split-coupon bond.
- d. convertible bond.
- e. mortgage bond.
Employer-sponsored retirement accounts include:
Select one:
- a. IRAs.
- b. Social Security.
- c. pension plans.
- d. Keogh plans.
- e. SEP plans.
A comprehensive budget includes projections of:
Select one:
- a. recurring incomes and expenses.
- b. non-recurring expenditures.
- c. non-recurring income.
- d. A and B.
- e. A, B, and C.
Cash flows in the future are:
Select one:
- d. illiquid.
- a. sunk.
- b. opportunity costs.
- c. transaction costs.
- e. liquid.
Macroeconomic factors that affect job markets include:
Select one:
- a. economic and business cycles.
- b. changes in laws and regulations.
- c. labor supply and demand.
- d. A and B.
- e. A, B, and C.
To calculate the relationships between time, risk, opportunity cost, and value, you need to know all of the following variables EXCEPT:
Select one:
- a. what the future cash flows will be.
- b. when the future cash flows will be.
- c. where the future cash flows will go.
- d. the effect of time on value.
- e. the rate at which time affects value.
Your lifecycle career development pattern changes:
Select one:
- a. as you age.
- b. as your personal circumstances change.
- c. as your income needs change.
- d. A and B.
- e. A, B, and C.
The budget process begins with:
Select one:
- a. creating the budget.
- c. defining goals and gathering data.
- b. reconciling goals and data.
- d. monitoring outcomes and analyzing variances.
- e. adjusting expectations.
The best way to eliminate a deficit is:
Select one:
- a. to increase income.
- b. to reduce expenses.
- c. to borrow.
- d. A and B.
- e. A, B, and C.
The U.S. Treasury issues:
Select one:
- a. inflation-protected TIPS.
- b. municipal bonds or munis.
- c. corporate bonds.
- d. A and B.
- e. A, B, and C.
If you pay proportionally more taxes due to the more income, you have then you are paying a:
Select one:
- c. progressive tax.
- a. consumption tax.
- b. regressive tax.
- d. excise tax.
- e. estate tax.
Diluted earnings per share means that the company’s profit is divided by a greater number of shares outstanding, owned by those who contributed capital, including, for example, convertible shares. High diluted EPS can mean:
Select one:
- d. reduced earnings per share for the shareholder.
- a. increased earnings per share.
- b. increased profits for the company.
- c. gain or loss in contributed capital.
- e. reduced profits for the company.
The tendency to act on the basis of only limited information is called:
Select one:
- a. availability bias.
- b. anchoring.
- c. representativeness.
- d. ambiguity aversion.
- e. overconfidence.
Brokerage accounts may be:
Select one:
- a. cash accounts.
- b. margin accounts.
- c. custodial accounts.
- d. A and B.
- e. A, B, and C.
Dividend yield calculates:
Select one:
- d. the dividend as a percentage of the stock price.
- a. the dividend per share.
- b. the company’s ability and willingness to pay a dividend.
- c. the portion of a company’s profit allocated to each share.
- e. the dividend as a percentage of earnings.
When you invest in commodities you:
Select one:
- a. invest in derivatives.
- b. reduce volatility by locking in prices over a long term.
- c. buy things that do not yet exist.
- d. A and B.
- e. A, B, and C.
The cost of auto insurance is determined by:
Select one:
- a. the model, style, and age of the car.
- b. the cost of replacement and repair.
- c. your risk characteristics and habits as a driver.
- d. A and B.
- e. A, B, and C.
You must save more for retirement if:
Select one:
- e. A, B, and C.
- a. expenses are higher.
- b. retirement is longer.
- c. returns are lower.
- d. A and B.
