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 Chapter 10: Protecting Your Property

Sample Chapter Questions

Q1) The federal government has introduced a subsidized flood insurance program for
homeowners and tenants living in designated communities.

Q2) It pays to comparison shop for insurance policies because of the:

A)subsidized deductible options.
B)different educational qualifications of the captive agents.
C)large variations in premiums and services.
D)different legal liabilities of insurance agents.
E)high cost of insurance.

Q3) The federal government has introduced a subsidized flood insurance program for
homeowners and tenants living in designated communities.

Q4) A personal property floater and a personal liability umbrella policy offer similar
coverage.

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Page 2
 Chapter 1: Understanding the Financial Process

Sample Chapter Questions

Q1) Living costs are constant throughout the country.

Q2) _____ is equal to the net total value of all the items that an individual owns.
A)Wealth
B)Propensity to consume
C)Consumer price index
D)Purchasing power
E)Credit debt

Q3) Financial planning helps us:

A)control inflation.
B)have flexibility to handle job loss.
C)control unemployment rates.
D)obtain a Social Security number.
E)decrease national debt.

Q4) Two persons with significantly different income can have equal average
propensities to consume because of differences in their standards of living.

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 Chapter 12: Investing in Stocks and Bonds

Sample Chapter Questions

Q1) An investment that earns interest on interest is said to be earning a:

A)discounted rate of return.
B)fully compounded rate of return.
C)consolidated rate of return.
D)risk-free rate of return.
E)tax-free rate of return.

Q2) When the market interest rate decreases, the bond:

A)price increases.
B)maturity period decreases.
C)coupon rate decreases.
D)current yield increases.
E)yield to maturity increases.

Q3) Market risk considers the possibility that a firm may fail.

Q4) A lower expected return means a higher risk will have to be accepted.

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 Chapter 5: Making Automobile and Housing Decisions

Sample Chapter Questions

Q1) The property listing in a local Multiple Listing Service (MLS)cannot be accessed by all
buyers and sellers.

Q2) The purchase price of the house you are buying is $140,000. A loan-to-value ratio of
80% will require a down payment of:
A)$34,000.
B)$28,000.
C)$108,000.
D)$112,000.
E)$20,000.

Q3) Which of the following is the biggest fixed auto ownership cost?
A)The cost of fuel
B)The cost of oil
C)The cost of installment loan payments
D)The cost of maintenance and repair
E)The cost of tires

Q4) In a co-op, the buyer receives title to a unit and joint ownership of the common
areas.

Page 5

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 Chapter 7: Using Consumer Loans

Sample Chapter Questions

Q1) Fixed-rate loans are desirable if interest rates are expected to fall over the course of
the loan.

Q2) Loans obtained by life insurance policyholders from their insurance companies are
to be repaid on the date established by the loan documents.

Q3) Most loans made by savings and loan associations are:

A)home improvement loans.
B)auto loans.
C)mortgage loans.
D)education loans.
E)consolidation loans.

Q4) Rebates are always more cost effective than the 0% annual percentage rate
(APR)loans offered on automobile loans.

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 Chapter 3: Preparing Your Taxes

Sample Chapter Questions

Q1) In 2018, the total FICA tax rate was:

A)6.0%.
B)6.75 %.
C)7.25 %.
D)13.4 %.
E)15.3 %.

Q2) Pete and Pam are married with four dependent children. Which of the following filing
statuses can Pete and Pam use if they want to legally file one tax return?
A)Married filing separately
B)Married filing jointly
C)Head of household
D)Single
E)Qualifying widow or widower with dependent child

Q3) Tax preparers must be licensed by either the state or the federal government.

Q4) The alternative minimum tax (AMT)is applicable to taxpayers with moderate levels
of income only.

Page 7

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 Chapter 14: Planning for Retirement

Sample Chapter Questions

Q1) Jamie has worked for ABC Printing for 5 years. During this period, ABC Printing has
contributed $25,000 to her noncontributory retirement plan. Assuming ABC uses cliff
vesting, the longest period allowed, how much will Jamie be able to roll into an individual
retirement account (IRA)if she leaves ABC Printing?
A)$0
B)$5,000
C)$10,000
D)$20,000
E)$25,000

Q2) In the year 2027, a person will have to be a minimum of _____ years to be able to
retire with full social benefits.
A)59
B)62
C)64
D)67
E)72

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 Chapter 13: Investing in Mutual Funds, Etfs, and Real Estate

Sample Chapter Questions

Q1) In the online quotes from The Wall Street Journal 's listing of mutual funds, an "r" after
the mutual fund name means that particular mutual fund has a _____ associated with
it.
A)front-end load
B)back-end load
C)12b-1 fee
D)management fee
E)distribution load

Q2) A fund that invests in only one or more industries that are associated with each
other is a _____ fund.
A)money market
B)maximum capital
C)sector
D)balanced
E)bond

Q3) Mutual funds typically offer more diversification and less risk than purchasing one or
two individual securities.

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 Chapter 2: Using Financial Statements and Budgets

Sample Chapter Questions

Q1) A cash budget will have value only if it is actually used and:
A)records of actual income and expenses are kept.
B)spending never deviates from the budgeted amount.
C)it reflects actual financial position.
D)it takes into account only credit transactions.
E)all liabilities are paid.

Q2) Jean and Jim have liquid assets of $3,600 and other assets of $42,800. Their total
liabilities equal $26,000. What is their net worth? (Show all work.)

Q3) ______ is the most preferred way for one to deal with budget deficits.
A)Liquidating savings and investments
B)Borrowing money from relatives
C)Cutting low-priority expenses
D)Increasing income
E)Paying all short-term liabilities

Q4) Financial planning is necessary only if an individual earns a lot of money.

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 Chapter 15: Preserving Your Estate

Sample Chapter Questions

Q1) A document that legally modifies a will without revoking it is called a(n):
A)codicil.
B)letter of last instructions.
C)living will.
D)ethical will.
E)memorandum.

Q2) You could give an unlimited amount of assets to your _____ without incurring any
gift taxes.
A)children
B)spouse
C)friends
D)charity trust
E)relatives

Q3) A credit shelter trust produced the same effect as the portability rule.

Q4) The primary purpose of life insurance is to replace lost income upon the death of the
insured or to provide cash to pay a transfer tax at death and for other end of life
expenses.

Page 11

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 Chapter 6: Using Credit

Sample Chapter Questions

Q1) If you are expecting difficulties in making your payments, it is recommended that
you:
A)talk to the creditors.
B)declare bankruptcy.
C)file a legal complaint.
D)obtain more credit.
E)transfer your debt to another creditor.

Q2) A credit card user's credit rating will be hampered if he or she pays only the
minimum monthly payment on a credit card.

Q3) The purpose of a credit investigation is to evaluate the kind of risk you pose to the
lender.

Q4) An individual can be overusing credit even if he or she can afford to make the
minimum monthly payments on time.

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Page 12
 Chapter 4: Managing Your Cash and Savings

Sample Chapter Questions

Q1) Which of the following statements regarding safe-deposit boxes offered by banks is
true?
A)They can be opened only by the banker.
B)They may increase a homeowner's insurance premiums.
C)They are owned by the customers of the bank.
D)They can be used to manage mutual funds.
E)They can be used as a storage place for important documents.

Q2) You had $800 in your checking account when your EFTS card and PIN were stolen.
You didn't report the theft for two months after your periodic statement was mailed. How
much could you lose?
A)$0
B)$50
C)$400
D)$800
E)$800 plus a fee

Q3) One can hold a credit card issued by a stock brokerage firm.

Q4) Debit cards are a form of electronic funds transfer system (EFTS).

Page 13

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 Chapter 11: Investment Planning

Sample Chapter Questions

Q1) Which of the following is a difference between an exchange traded fund (ETF)and a
mutual fund?
A)An ETF is a fixed income instrument, whereas a mutual fund is a variable income
instrument.
B)An ETF can only be traded at the end of the day, whereas a mutual fund can be
bought or sold throughout the trading day.
C)An ETF provides more favorable tax treatment than a mutual fund.
D)An ETF is a convertible security, whereas a mutual fund is a nonconvertible security.
E)An ETF is a hybrid security, whereas a mutual fund is not a hybrid security.

Q2) Mutual funds provide professional management and diversification that individual
investors-especially those with limited resources-can rarely obtain on their own.

Q3) The over-the-counter market is a primary market.

Q4) Reallocation of the assets in a portfolio is called rebalancing.

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Page 14
 Chapter 8: Insuring Your Life

Sample Chapter Questions

Q1) While using the needs analysis approach to determine how much life insurance to
purchase, you should:
A)add available resources to your family's total economic needs.
B)multiply your gross annual earnings by the size of your family.
C)purchase the equivalent of your current annual income.
D)divide your gross annual earnings by the size of your family.
E)deduct available resources from your family's total economic needs.

Q2) The availability of group coverage through employee benefit programs should be
considered when developing a life insurance program.

Q3) If a term life insurance is convertible, the policy can be:

A)transferred to the life of another person.
B)exchanged for cash.
C)changed to health or disability protection.
D)changed to a comparable whole life policy.
E)revised as needed by the insurer.

Q4) Avoiding alcoholic beverages while driving is an example of loss prevention.

Page 15

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 Chapter 9: Insuring Your Health

Sample Chapter Questions

Q1) Disability income insurance will provide income to a disabled or ill person:
A)without a waiting period.
B)with unlimited funds for years.
C)with a waiting period before income is received.
D)with payments made to the recipient up to age 70.
E)only if the insured is unable to work any job.

Q2) A(n)_____ covers the cost of visits to a doctor's office or for a doctor's hospital
visits, including consultation with a specialist.
A)surgical expense insurance
B)hospitalization insurance policy
C)elective surgery insurance
D)regular medical expense insurance
E)hospital income policy

Q3) Long-term-care insurance provides protection against the cost of extended hospital
stays.

Q4) More than 15% of the working-age population are not covered by health insurance.

Page 16

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