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Sample Exams 1 and 2
Sample Exam 1
Financial Planning Process, Financial Statement Analysis, Taxation
Financial Valuation, Mortgage and Installment Loans, Property and Casualty Insurance,
Life Insurance Products and Investments
Directions:
Please answer the following 33 questions designed to test your knowledge
of the financial planning process, taxation, time value of money,
insurance decision making, investing in stocks, bonds and mutual
funds, retirement and estate planning.
1.
The
amount of money we set aside for future consumption will be determined
by:(a)
our
level of current wealth (b)
how much we currently earn and spend
(c) the number of college degrees we have
(d) the current needs and wants of our family
(e) the cost of life’s necessities
2.
Tax
planning is most commonly done to:
(a) avoid tax payments and IRS audits (b)
change
income patterns to avoid taxes (c)
minimize taxes (d) pay
extra taxes (e) learn the entire tax laws so you can explain
them to your children
3.
Which
of the following statements are true or false?
(1)
Insurance
company underwriting determines whom to insure and what premiums
to charge.
(2)
The
need for additional life insurance can be determined by looking at the
Difference between available resources and family
economic needs.
(3)
Annual
term insurance premiums increase as you get older while whole life
insurance premiums remain constant from the time the
policy is issued.
(a) TTT (b) TFT (c)
FTT (d) TTF
(e) FTF
4.
If
life insurance is convertible, the policy can be:
(a)
transferred
to the life of another person within the same family
(b)
exchanged
for cash on demand
(c)
changed
to another type of life insurance
(d)
changed
to health or disability protection before age 65
(e)
revised
as needed to fit the insured’s need for more insurance at lower cost
5.
A
financial balance sheet presents a family’s wealth:
(a) at a certain point in time (b)
as an annual summary (c) as
a time period less a year (d)
at a future period in time (e)
None of the above
6.
Jackie
is 40 years old and earns $35,000 a year.
The multiple earnings approach to determine the amount of life insurance needed shows
that she should have 8.4 times her earnings.
How much life insurance should Jackie have using the multiple
earnings approach:
(a)
$35,000
(b) $70,000 (c)
$105,000 (d) $294,000
(e) $ 335,000
7.
The
three parts of your balance sheet are:
(a) income, debits and assets
(b) assets,expenditures, credits (c) assets, liabilities, contraban-assets
(d) assets, liabilities, net worth
(e) income, reserves and liabilities
8.
Your
______is an example of a liquid asset.
(a) home (b) car
(c) checking account (d)
ticket to the upcoming WWF contest in the UNI Dome
(d) pet gold fish
9.
Major
medical plans are characterized by deductibles, internal benefit limits,
and:
(a)
coverage
for pre-existing disability (b)
benefit amounts for non-elective surgery
10.
Disability
income insurance provides benefits that are designed to:
(a)
pay
for hospital care costs from injuries regardless of fault
(b)
substitute
for lost income
(c)
cover
hospital care costs from serious illness
(d)
substitute
for social security benefits to dependent children
(e)
pay
life insurance proceeds when disability occurs to life insurance
policyholders
11.
Which
of the following statements are true or false?
(1)
Property
inventories are important to identify insurance needs and to
substantiate
claims.
(2)
Losses
caused by earthquake are not covered in most homeowner policies.
(3)
A
house with a replacement value of $120,000 is currently insured for
$80,000. the house has
suffered a $15,000 loss from fire.
The insurance company will not
pay the full $15,000 in settlement of the loss.
(a) TTT (b)
TFT (c) TFF (d) FTF (e) FFT
12.
Which
of the following statements are true or false?
(1)
The
Federal personal income tax is a progressive tax.
(2)
If
you have earned income, you are required to file a tax return.
(3)
There
is no limit on the amount of Social Security tax withheld from wage
earners.
(a)
TTT
(b) TFT (c) TTF
(d) TFF (e) FTF
13.
You
are depositing $2,000 in a Roth IRA this year.
The $2,000:
(a)
will
be treated as an adjustment to wage income for federal income tax
purposes
(b)
will
result in a $1,000 increase in the alternative minimum tax on gross
income
(c)
must
be withdrawn before you are 59 ½
(d)
will
accumulate tax free prior to retirement
(e)
is
subject to federal income tax withholding in the year of the
contribution
14.
Your
average tax rate is your: (a) adjusted gross income divided by tax
withheld
15.
Jill has taxable income of $40,000.
She is a 25 year old, single mother, and her tax rates are 15% of
the first $24,650 of taxable income and 28% on the remainder.
What is Jill’s tax liability?
(a)
$0
since she is a single mother
(b)
$5,000.25
(c)
$7,995.50
(d)
$8,235.42
(e)
$6,000
16.
A
homeowner’s policy does not provide protection for the personal
property of: (a)
family
members at home (b) family
members while attending college (b)
guests
staying in the home (d)
renters occupying the home (e)
family
17.
Automobile
insurance is needed primarily because of:
18.
Jesse
Ventura has checking and savings accounts in a federally insured
financial institution. The
maximum amount of his insurance coverage is: (a)
$50,000
per account (b) $100,000 (c)
$100,000 per account
19.
If
you invest $1,000 per year at the end of each year for 5 years at a 10%
rate of
20.
Which of the following statements are true or false?
(1) Two prerequisites to investing are adequate
insurance and liquidity
(2)
Owning
common stock represents an equity investment in a company.
(3)
A
higher expected return on an investment usually means there will be
higher risk.
(a)
TTT
(b) TFT (c) TTF
(d) FTT (e) FFF
21.John
Wayne is in the 28% tax bracket. If
he were to purchase a $1,000 Municipal Bond that had a stated interest rate of 6.9%, the
taxable equivalent yield would be: (a)
4.968%
(b) 6.9% (c) 8.261%
(d) 9.583% (e)
12.105%
22,
A bond selling above par value (e.g. above $1,000) is selling at:
23.The
Securities and Exchange Commission (SEC) requires corporations that
issue new
common stock to provide a ________describing the firm and the security
issue it wishes to sell. (a) an advertisement (b)
a prospectus (c) a blue
herring explanation (d)
an
underwriting journal (e) a
dealer/broker newsletter
24.Investment company earnings come from:
(a) capital gains (b) dividends from stock
(c) the Easter Bunny (d)
interest and dividends (e)
interest, dividends and capital gains from investment
25.The Employee Retirement Income Security Act (ERISA)
provides: (a)
funding
for your retirement
26. Life insurance could alleviate estate problems associated with: (a) deflation (b) improper management of marital assets (c) disabilities (d) incorrect transfer of aid to dependent children (e) lack of liquidity
27. A will is a legal document outlining the plan
for: (a)
your
funeral (b) disposition of
your assets (c)
graduating from college (d)
management
of your assets (e)
survivors’ goals
28. In the absence of a valid will, the heir most
generally favored in court proceedings would be: (a)
your spouse (b) your
children (c) your
grandparents (d) your best
friend (e) All of the above
would be treated equally
29. Requirements for a valid will
DO NOT include: (a)
the
testator must be of sound mind (b)
the testator must no be unduly influenced in drawing up the will (c) the will must be properly executed (d) there must be no fraud in the execution of the will
(e) the will must be drawn up by an attorney
30. The federal government regulates securities
markets through the: (a)
Dept.
of Commerce (b) American
Stock Exchange (c) Federal
Reserve System (d)
Securities
and Exchange Commission (e)
National Securities Trust Agency
31.Purchasing stocks on margin in a brokerage account is buying:
(a)
marginal
securities with stock prices below $10 a share
(b)
at
the lowest possible price
(c)
with
borrowed funds
(d)
with
a short sale process
(e)
against
the box
32. Consumers whose debt burden has become very heavy
might apply for a(n):
(a)
personal
loan (b) single payment
loan (c) revolving charge
account (d) buy down loan (e)
consolidation loan
- Janice
wants to buy a new car. The
cost will be $17,000. At
the end of 4 years, the car is expected to be worth 30% of the
original price. What
will the car value be in 4 years?
(a) $0 (b)
$5,100 (c) $12,000
(d) $14,000 (e)
$11,000
Answer Key:
1. B 2. C
3. A 4. C
5. A 6. D
7. D 8. C
9. D 10. B
11. A 12.
C 13. D 14. C 15. C
16. D 17. B
18. B 19. D
20 A.
21. D 22.
E 23. B 24. E 25. D
26. E 27. B
28. A 29. E
30 D.
31. C 32.
E 33. B 30% x $17,000 = $5, 100
Another Sample Exam for Ambitious Students
1.
Which
of the following statements are true or false?
(1)
There
is a high correlation between the standard of living and the quality of
life
(2)
Defining
your consumption means planning how you spend your money
(3)
Setting
financial goals is not really important in personal money management
(a) TTT (b)
FTT (c) TFT (d) TTF (e) TFF
2.
The
amount of money we set aside for future consumption will be determined
by:
(a)
our
level of current wealth (b)
how much we currently earn and spend
(c) the
number
of college degrees we have (d)
the current needs and wants of our family
(e) the type of car we drive and the prestige of the university
we graduate from
3.
Money
is: (a) only of value when
tied to the gold standard (b)
a unit of value which
remains the same over time and does not change with inflation
(c) a medium of exchange (d)
a measure of the propensity to consume
(e) a medium of consumption
4.
Tax
planning is most commonly done to:
(a) avoid tax payments and audits from the IRS
(b) change income patterns to avoid taxes (c) minimize taxes (d)
pay extra taxes (e) learn the entire tax laws so you can explain them to
your children
5.
An
unemployment rate of 10% would be indicative of: (a) a booming economy
(b) a
recession (c)
an economic recovery is in progress
(d) a democratic president must have been recently elected
(e) a republican president must have been recently elected
6.
A
financial balance sheet presents a family’s wealth:
(a) at a certain point in
Time (b)
as an annual summary (c) as
a time period less a year (d)
at a future period in time (e)
based on the book value of assets and liabilities
7.
The
three parts of your balance sheet are:
(a) income, debits and assets
(b) assets,
expenditures, credits (c) assets, liabilities, contra-assets (d) assets, liabilities, net worth (e) income, reserves and liabilities
8.
Your
______is an example of a liquid asset.
(a) home (b) car
(c) checking account (d)
ticket to the upcoming Bill Cosby Show
(d) pet gold fish
9.
The
main purpose of a financial budget is: (a) to develop goals
(b) develop a financial plan (c) give feedback to the financial
plan and revise goals (d) monitor and control financial outcomes
(e) to develop a burial plan and create a will
10.
The
first step in a financial planning process is to: (a) define your goals (b)
develop
strategy for achieving your goals consistent with
maximizing taxes (c) revise
you goals (d) invest all
disposable income in securities with the highest returns possible (e) monitor your progress
11.
Bill
and Mindy have a net worth of $12,000, total assets of $140,000 and
unpaid bills
of
$2,200. According to their
financial balance sheet, what are their total liabilities?
(a)
$125,000
(b) $128,000 (c) $142,000 (d)
$162,000 (e) $200,000
12.
Which
of the following statements are true or false?
(1)
The
Federal personal income tax is a progressive tax.
(2)
If
you have $20,000 in earned income, you are required to file a tax
return.
(3)
There
is no limit on the amount of Social Security tax withheld from wage
earners.
(a)
TTT
(b) TFT (c) TTF
(d) TFF (e) FTF
13.
You
are depositing $2,000 in a Roth IRA this year.
The $2,000:
(a)
will
be treated as an adjustment to wage income for federal income tax
purposes
(b)
will
result in a $1,000 increase in the alternative minimum tax on gross
income
(c)
must
be withdrawn before you are 59 ½
(d)
will
accumulate tax free prior to retirement
(e)
is
subject to a 10% federal income tax penalty in the year of withdrawal
14.
Your
average tax rate is your: (a) adjusted gross income divided by tax
withheld
(b)
adjusted
gross income divided by your tax liability
(c) your tax liability divided by taxable income
(d) rate on the last dollar of taxable income
(e) gross income divided by tax refund
15.
Interest
Income is listed on Schedule: (a) A
(b) B (c) C (d) D (e) EZ
16.
Jill has taxable income of $40,000.
She is a 25 year old, single mother, and her tax rates are 15% of
the first $24,650 of taxable income and 28% on the remainder.
What is Jill’s tax liability?
(a)
$0
since she is a single mother
(b)
$5,000.25
(c)
$7,995.50
(d)
$8,235.42
(e)
$6,000
(b)
a
passbook savings account (d)
a Rolex watch (e) a money
market mutual fund
18.
Commercial
banks are insured by the:
(a)
Federal
Deposit Insurance Corporation (FDIC)
(b)
Federal
Saving and Loan Insurance Corporation (FSLIC)
(c)
Thrift
and Bank Insurance Corporation (TBIC)
(d)
National
Demand Deposit Insurance Corporation (NDDIC)
(e)
National
Assurance Trust (NAT)
19.
Recently
you received a 1950 D nickel from your grandfather which can be sold
today for $350. However, if
you hold on to the coin for 3 years, it could be sold for $425.
If interest rates remain at 4.5% for the next three years, which
of the following options will provide the greatest value to you?
(a) sell the coin today for $350, and put the money under your
mattress that way you won’t lose any money by investing
(b) Sell the coin today for $350 and invest the money
at 4.5% for 3 years
(c)
Sell
the coin in 3 years for $425, good things happen to those who wait
20.
If
you invest $1,000 per year at the end of each year for 5 years at a 10%
rate of
Interest you will have accumulated:
(a) $1,610 (b)
$5,100 (c) $5,105
(d) $6,105
(e) $6,710
21.
An
Asset Management Account provides a:
(a)
checking
account
(b)
money
market deposit account
(c)
brokerage
account
(d)
line
of credit
(e)
All
of the above
22.
The
seller of a house will pay the: (a) loan closing costs of the buyer
(b) real estate
Agent’s commission
(c) appraisal, inspection and title insurance on the property
(d) points charged at the time of closing
(e) fees for title search and insurance
23.
Generally,
renting would be preferred to buying a home when:
(a)
you
have no money for a down payment
(b)
you
know your job will be temporary
(c)
you
have just gone through a divorce
(d)
All
of the above
(e)
Only
(a) and (c)
24.
Ernest
money is the sum of money that the home buyer deposits with
(a)
the
realtor to view homes
(b)
the
realtor for finding a desired home
(c)
the
lender to originate a first or second mortgage on the home
(d)
the
seller to indicate intent of purchase
(e)
abstract
company to pay for the title search
25.
Which
of the following statements are true or false?
(1)
Using
credit is the ideal way to provide for financial emergency funding.
(2)
Paying
only the minimum payment each time on a credit card enables you to pay
off the balance fairly quickly.
(3)
The
willingness of lenders to extend credit depends upon their assessment of
a person’s creditworthiness
(a) TTT (b)
FFT (c) TFT (d) FTT (e)
FFF
26.
In
order to establish her won credit history a woman should:
(a)
use
her legal name (b) use her
husband’s name (c) file a
credit report with her
husband
(d) use a social title, such as Ms. Jennifer Aniston
(e) none of these
27.
To
establish creditworthiness you probably should first:
(a)
go
to a pawn shop and take out a loan
(b)
use
credit extensively
(c)
open
savings and checking accounts
(d)
pay
cash for all purchases
(e)
arrange
a large loan from close relatives that don’t know you
28.
Interest
will begin to accrue immediately when you use a bank credit card to:
(a)
make
purchases (b) send payments
(c) compute finance charges
(d)
get
cash advances (e) pay down
debt
29.
A
__________is an agency (i.e. business) that provides credit information
to lenders
about individual borrowers. (a) credit bureau
(b) consumer protection agency (c) credit statement facility (d)
bank (e) credit scoring
house
30.
You
have a $1,250 balance on your credit card account. The minimum payment on
your account is 5% of the latest balance or $10,
which ever is greater. What
will be the minimum payment this month?(round to nearest dollar)
(a) $10 (b)
$25 (c) $56 (d) $63 (e) $75
31.
Because
of the Tax Reform Act of 1986, ____% of your consumer loan interest is
now tax deductible.
(a)
40
(b) 30 (c) 20
(d) 15 (e) 0
32.
Credit
unions lend money to qualified people who are: (a) full-time employees
(b)
members
(c) previous borrowers with a good credit history
(d) policyholders
(e)
stockholders
with options to borrow
33.
A
loan from the cash value on your permanent life insurance policy would
be characterized by:
(a)
the
size of the face amount of coverage and age of beneficiary
(b)
increased
premiums based on the riskiness of the loan
(c)
a
loan rate substantially higher than other finance company loans
(d)
no
specific repayment date
(e)
an
increase in dividend payments to lower the financing costs of the loan
Answer
Key:
1.
D
2. B 3. C
4. C 5. B
6. A 7. D
8. C 9. D
10. A
11.
B 12. C 13. D 14. C
15. B 16. C
17. D 18. A
19.C 20. D
21.
E 22. B 23. D 24. D
25. B 26. A
27. C 28. D
29. A 30
D
31.
E 32. B 33. D
for
question 11: 140,000 – 12,000 = 128,000
for
question 16: .15(24,650) + .28(40,000 – 24,650) = 7,995.50
for
question 30 Answer is $1,250 x .05 = 62.50
or approx. $63.
Directions:
Please answer the following 40 questions designed to test your knowledge
of insurance decision
making, investing in stocks, bonds and mutual funds, retirement and
estate planning. Each
question is worth 2.5 points. Choose
the best possible answer from the responses provided.
1.
Which
of the following statements are true or false?
(1)
Insurance
company underwriting determines whom to insure and what premiums
to charge.
(2)
One
should typically name both primary and contingent beneficiaries of life
insurance policies.
(3)
Annual
term insurance premiums increase as you get older while whole life
insurance premiums remain constant from the time the
policy is issued.
(a) TTT (b) TFT (c)
FTT (d) TTF
(e) FTF
2.
Which
of the following is/are methods for handling personal risks:
(a)
risk
assumption (b) risk
avoidance (c) risk transfer
or insurance
(d) all of the above (e) only (b) and (c)
3.
Underwriting
is: (a) calculating
insurance premiums in such a way as to maximize insurer profits while
meeting the requirements of insurance regulation. (b) reducing costs by
denying claims (c) a method
for developing policy wording (d)
the determination of which exposures to insure
(e) a process of creating policies that will sell in
the market
4.
If
life insurance is convertible, the policy can be:
(a)
transferred
to the life of another person within the same family
(b)
converted
into cash on demand
(c)
changed
to another type of life insurance
(d)
changed
to health or disability protection before age 65
(e)
revised
as needed to fit the insured’s need for more insurance at lower cost
5.
Universal
life insurance is:
(a)
a
deferred premium payment policy (b)
primarily sold to college students
universally at all ages regardless of race, sex or
national origin (c) a
combined investment and insurance policy
(d) a provision for a secondary beneficiary
(e) a policy that covers all members of the same household for a
fixed amount of coverage
6.
Jackie
is 40 years old and earns $35,000 a year.
The multiple earnings approach to
determine the amount of life insurance needed shows
that she should have 8.4 times her earnings.
How much life insurance should Jackie have using the multiple
earnings approach:
(a)
$35,000
(b) $70,000 (c)
$105,000 (d) $294,000
(e) $ 335,000
7.
Commonly
surgical expenses are covered on the basis of:
(a) actual surgical expense less a co-insurance payment (b)listed benefit
schedules (c) a specific
percentage of surgical expense plus subrogation benefits
(d) average national cost of surgery plus cost of living
adjustment (e) the average
of low cost versus high cost surgery costs in a the region
8.
Nonforfeiture
rights for life insurance policyholders guarantee a: (a) policy face
value (b) death benefits for survivors
(c) cash value (d)
premium refund (e) premium reductions should the policyholder become ill
or disabled
9.
Major
medical plans are characterized by deductibles, internal benefit limits,
and:
(a)
Post
claim underwriting to rule out major loss when someone is seriously ill
(b) benefit amounts for non-elective surgery (c)
illness or injury frequency limits
(d) participation or coinsurance
(e) decreasing premiums with the age of the policyholder
10.
Disability
income insurance provides benefits that are designed to:
(a)
pay
for costs due to injuries sustained in the hospital
(b)
substitute
for lost income
(c)
cover
hospital care costs from serious illness
(d)
substitute
for social security benefits to dependent children
(e)
pay
life insurance proceeds when disability occurs for life insurance
policyholders
prior to death
11.
I.M.
Rich (a professional baseball player) severely injured his hamstring
while taking his pet bull dog for a walk and will be unable to play
baseball for 9 months. I.M
has a college degree in accounting and sustained his injury while
thinking about an auditing problem on the CPA exam.
Assuming he accumulated enough “quarters of coverage” to be
eligible for social security, how many months will he receive social
security disability income insurance?
(a) 0 (b) 3 (c) 4 (d) 6
(e) 9
12.
The
right of _________ gives the insurance company the right to recover its
costs
from a negligent third party after the company has
paid a claim to the insured.
(a)
subrogation
(b) adverse selection (c)
indemnity (d) coinsurance
(e) in domino sunt recoverora
13.
Within
the insurance contract, actual cash value is defined as:
(a)
replacement
cost (b) market cost plus
improvement expenses
(c) market value less original cost
(d) purchase cost minus depreciation plus
improvement expenses (e) replacement cost minus depreciation
14.
Coinsurance
is a policy provision to discourage the policyholder from being:
(a)
overinsured
(b) underinsured (c) insured by two insurers at the same time
(d)
insured
with a lender for more than the value of the house (e) insured by the
co-trustee to the medical insurance plan
15.
Section
II of the homeowner’s insurance contract covers:
(a)
the
home only (b) the home and
its contents (c) losses due
to negligence of
the named insured
(d) medical for the insured’s family anywhere in the world
(e)
liability
from household businesses such as an arc welding shop in the garage.
16. The form of homeowner’s insurance that is INCORRECTLY paired with the insured is: (a) HO-1, homeowner
(b)
HO-2, homeowner (c) HO-8
homeowner (d) HO-3, renter (e)
HO-6, condominium owner
17.
Automobile
insurance is needed primarily because of:
(a)
potential
damage to the insured auto (b)
potential liability claims arising from the
car being driven
(c) the lender’s requirements
(d) federal law
(e) the automobile responsibility law that requires
that you have it
18.
In
order for you to collect under uninsured motorists coverage, three
specific conditions must be in effect.
They are:
(a)
another
motorist was at fault, this motorist has no available insurance
coverage; and damages were incurred to your car.
(b)
another
motorist was at fault, this motorist has a limited amount of insurance
coverage; and damages were incurred.
(c)
you
were at fault; the other motorist has insurance coverage; and damages
were incurred by both parties to the accident
(d)
you
were at fault; the motorist has no available insurance coverage; and
damages were sustained by both parties to the accident
(e)
you
were at fault; neither you nor the other motorist has enough insurance
coverage to pay for the accident; and damages were sustained by both
parities to the accident
19.
Auto
insurance premiums will be highest for:
(a)
Jack,
27 years old living in
Cedar Falls, no accidents, 15 UNI parking tickets
(b)
Amanda,
35 years old living in Hudson, no accidents or tickets
(c)
Alex,
30 years old, one minor accident 6 years ago
(d)
Cindy,
21 years old, clean driving record, going to Hawkeye Community College
with a 3.5 GPA
(e)
Willis,
20 years old, one accident in the last year, one DUI conviction a year
ago, 2 speeding tickets in the last five years
20.
Your
car is damaged by fire while parked in the new UNI parking garage on 1st
street in Waterloo.
Protection would be provided by:
(a)
UNI
(b) the City of Waterloo (c)
comprehensive auto coverage in your
personal auto policy (d) the fire coverage on your homeowner’s personal property
insurance (e) the auto fire
coverage issued by Public Safety with your UNI Parking sticker
21.
Which
of the following statements are true or false?
(1) Two prerequisites to investing are adequate
insurance and liquidity
(2)
Owning
common stock represents an equity investment in a company.
(3)
A
higher expected return on an investment usually means there will be
higher risk.
(a)
TTT
(b) TFT (c) TTF
(d) FTT (e) FFF
22.
If
you have been offered an opportunity to buy shares of a diversified
collection of
securities by a local broker.
You will be investing in:
(a) a convertible bond (b) common stock
(c) a mutual fund (d)
a charitable remainder trust (e) fixed income convertible trust
certificate
23.
Lucky
Jones owns 200 shares of Texas Oil and Drilling Company stock.
The
Company declared a 10% stock dividend.
Luck now owns:
(a)
200
shares of Texas Oil and Drilling stock plus $20
(b)
205
shares of Texas Oil and Drilling stock plus $5
(c)
220
shares of Texas Oil and Drilling stock
(d)
420
shares of Texas Oil and Drilling stock
(e)
190
shares of Texas Oil and Drilling stock
24.
Texas
Instruments has a beta of 1.0; if
the market goes up by 6% this year, on
average, the value of this company’s stock should:
(a)
decline
by 6% (b) increase by 6%
(c) decrease by 1% (d) stay the same
(e) increase by 16%
25.
John
Wayne is in the 28% tax bracket. If
he were to purchase a $1,000 municipal
Bond that had a stated interest rate of 6.9%, the
taxable equivalent yield would be:
(a)
4.968%
(b) 6.9% (c) 8.261%
(d) 9.583% (e)
12.105%
26.
A
bond selling below par value (e.g. above $1,000) is selling at:
(a)
a
premium (b) a convertible
rate above par (c) its
coupon value
(a)
maturity
(e) a discount
27.
The
Securities and Exchange Commission (SEC) requires corporations that
issue new
common stock to provide a ________describing the firm
and the security issue it wishes to sell.
(a) an advertisement (b)
a prospectus (c) a red tuna
explanation
(b)
an
underwriting journal (e) a
dealer/broker advertisement
28.
When
you sell a security on the over-the-counter market (OTC, such as
NASDAQ),
you will receive: (a) an offering price
(b) a free book on public accounting
(c) a market price plus commission
(d) the bid price (e) the put price
29.The
current market value of all securities a mutual fund owns is called the:
(a)
market
value (b) par value
(c) net asset value (d)
resale value less
commission (e)
liquidation value
30.
Investment
company earnings come from: (a)
capital gains (b) dividends
from
stock (c)
the Easter Bunny (d)
interest and dividends (e)
interest, dividends and capital gains from investment
31.
The
amount of money in your retirement portfolio will depend on:
(a)
the
age at which you begin contributing
(b)
the
amount of money you deposit periodically before retirement
(c)
the
rate of return on your retirement funds
(d)
all
of the above
(e)
only
(b) and (c)
32.
The
Employee Retirement Income Security Act (ERISA) provides:
(a)
funding
for your retirement
(b)
health
insurance for retirement plan participants
(c)
mandatory
defined contribution retirement
(d)
minimum
standards for retirement plans
(e)
trust
funds for Social Security
33.
Life
insurance could alleviate estate problems associated with:
(a)
inflation
(b) improper management of marital assets
(c) disabilities
(d) incorrect transfer of aid to dependent children
(e) lack of liquidity
34.
You
son left his skateboard at the bottom of the basement stairs.
While going downstairs to do his laundry, you step on the
skateboard and break your ankle during the fall.
Medical damages total $1,455.
How much will your $140,000 homeowner’s insurance policy pay
for this accident? The
policy has $100,000 comprehensive liability coverage and medical
payments of $1,000/person. (a)
$ 0 (b) $250
(c) $500 (d) $1,000
(e) $1,455
35.
The
Wright’s house burned to the ground!
They felt they were adequately covered (see coverage below).
Their car (market value $10,000) was in the garage and totally
destroyed in the fire. How
much will they be reimbursed for their auto from their HO-3 policy?
Replacement Value of the House: $80,000
Coverage on the House:
$60,000
Deductible:
$ 300
(a)
$
0 (b) $9,700 (c) $6,000 (d) $5,700 (e)
$8,000
36.
Who
is covered under the medical payments coverage of your automobile
policy?
(a)
Your
daughter riding with friends in a friend’s car
(b)
Your
son who is hit while crossing an intersection at UNI
(c)
Your
spouse while driving your car
(d)
All
of the above
(e)
A
and C
37.
Auto
insurance premiums would be affected by:
(a)
auto
body type (b) auto engine
size (c) driving record of
the insured
(c)
All
of the above
(d)
A
and C
38.
A(n)
______agent represents multiple insurance companies.
(a) captive (b)
business (c) good neighbor (d) independent (e) enrolled
39.
Negligence
results when a person: (a) is not insured
(b) acts as a “reasonable person” (c) fails to act as a
“reasonable person” (d)
admits to it (e) is 21 years or less
40.
A liability suit could result when: (a) lightning strikes your home in
the middle of the night (b)
a delivery person slips on the steps of your home
(c) muffy, your pet dog eats your canary (d) smoke from the fireplace fills your house
(e) your angry son paints your home purple just to spite you
Personal Financial Planning and Asset Management
Exam 2
Answer Key:
1. A 2.
D 3.
D 4. C 5. C 6. D
35,000 x 8.4 = $294,000
7. B 8. C
9. D
10. B 11.
A 12. A 13. E 14. B
15. C 16. D
17. B 18. A
19. E 20. C
21. A 22.
C 23. C 200 x (1.05) = 210 24.
B 25. D
X(1 - .28) = 6.9 26. E
27 B 28.
D 29. C 30. E
31. D 32.
D 33. E 34. A 35.
A 36. D
37. D 38. D 39. C 40. B