Deck 19: Personal Finance

Question 1

All of the items listed are factors in the development of credit scores EXCEPT:

A) amounts owed.
B) types of credit you use.
C) payment history.
D) how many accounts you open.
E) your level of education.

Answer 1

your level of education.

Question 2

Your continuing record of credit usage is called your credit:

A) history.
B) score.
C) rating.
D) pattern.
E) status.

Answer 2

history.

Question 3

A loan to purchase real estate in which the real estate itself serves as collateral is a(n)________ loan.

A) mortgage
B) property
C) real estate
D) homeowner's
E) escrow

Answer 3

mortgage

Question 4

The changing cost of using money is referred to as ________ risk. 

A) interest rate
B) inflation
C) economic
D) trade-off
E) personal

Question 5

The maximum amount of credit you are allowed by a creditor is called ________ credit.

A) revolving
B) line of
C) convenience
D) installment cash
E) single lump-sum

Question 6

Which one of the following is a disadvantage of using credit?

A) receiving advance notice of sales
B) ease of overspending
C) avoiding the necessity of carrying cash
D) ease of returning merchandise
E) having a record of all purchases

Question 7

Private firms that accept deposits and extend loans are known as:

A) bonds.
B) banks.
C) stocks.
D) financials.
E) securities.

Question 8

Kareem is notified by his credit card company that his credit limit has just been increased to $10,000.This is one example of a change related to: 

A) incidental credit.
B) closed-end credit.
C) a line of credit.
D) installment sales credit.
E) overdraft protection.

Question 9

In determining your credit capacity,you should provide for basic necessities first.An example is:

A) furniture.
B) home furnishings.
C) mortgage or rent.
D) your automobile.
E) durable goods.

Question 10

Which of the following is an example of opportunity cost?

A) renting an apartment near school
B) saving money instead of taking a vacation
C) setting aside money for paying income tax
D) purchasing automobile insurance
E) using a computer for financial planning

Question 11

The uncertainty associated with decision-making is referred to as: 

A) opportunity cost.
B) selection of alternatives.
C) financial goals.
D) personal values.
E) risk.

Question 12

The study of finance involves all of the aspects listed about people and their financial resources EXCEPT:

A) spend.
B) save.
C) invest.
D) manage.
E) store.

Question 13

Which one of the following is an advantage of using credit?

A) potential bankruptcy
B) spending beyond your budget
C) funding an emergency expense
D) committing future income to pay for current purchases
E) incurring interest charges

Question 14

Financial objectives are rarely achieved without restraining:

A) current consumption.
B) savings.
C) investment.
D) future earnings.
E) employment opportunities.

Question 15

Kari Birch has decided to put $25 more per week in her savings account.She knows this will reduce her ability to go out to eat each week but thinks building her savings is important.This would be an example of a(n): 

A) budget variance.
B) opportunity cost.
C) balance sheet.
D) accounting error.
E) budget anomaly.

Question 16

Opportunity cost refers to: 

A) money needed for major consumer purchases.
B) what a person gives up by making a choice.
C) the amount paid for taxes when a purchase is made.
D) current interest rates.
E) evaluating different alternatives for financial decisions.

Question 17

Opportunity cost refers to:

A) current spending habits.
B) changing economic conditions that affect a person's cost of living.
C) storage facilities to make financial documents easily available.
D) trade-offs associated with financial decisions.
E) avoiding the use of consumer credit.

Question 18

Which of the following would increase the risk of a loan? 

A) rising consumer prices
B) a short time to maturity
C) lower consumer prices
D) constant interest rates
E) a good credit rating

Question 19

Your aunt gives you some money for your birthday and you decide to put it into your savings account instead of spending it.The trade-off of not being able to spend the money now is this decision's ________ cost.

A) fixed
B) opportunity
C) variable
D) transaction
E) total

Question 20

If you have a savings account at a bank,you participate in the financial market as a:

A) borrower.
B) buyer.
C) borrower and a lender.
D) buyer and a seller.
E) lender.

Question 21

What do credit bureaus (companies)do?

A) They collect and provide credit information.
B) They lend money to people who are members of the credit bureau.
C) They make decisions regarding who should get credit.
D) They share information with each other.
E) They intervene in mortgage applications.

Question 22

When you pay cash to buy something,you:

A) give up the opportunity to keep the cash in an interest-bearing account.
B) always get a cash discount.
C) can build a better credit rating.
D) get better personal service from store employees.
E) have a better selection of goods than if you use credit.

Question 23

Excessive indebtedness can result in all of the items listed EXCEPT:

A) heavy drinking.
B) a neglect of children.
C) marital problems.
D) drug abuse.
E) increased savings.

Question 24

How much interest would be paid on a credit card at the end of the second 30-day month on a one-year $1,000 loan at a 12.99% annual rate? Assume you pay nothing at the end of the first 30-day month.

A) $10.92
B) $108.10
C) $10.91
D) $10.80
E) $109.10

Question 25

A borrower with an excellent credit history would be most likely to receive credit with:

A) higher credit limits.
B) lower interest rates.
C) variable interest rates.
D) average credit limits and interest rates.
E) both higher credit limits and lower interest rates.

Question 26

What are some repayment options of student loans?

A) pay a fixed amount each month, or pay-as-you-earn up to 10% of discretionary income
B) pay increasing amounts, or pay-as-you-earn up to 15% of discretionary income
C) pay a fixed amount each month, or pay in decreasing amounts over time
D) pay in decreasing amounts, or pay when you can, but interest accumulates
E) pay-as-you-earn up to 15% of discretionary income, or pay increasing amounts

Question 27

Credit bureaus compile information from all of the sources listed EXCEPT:

A) banks.
B) creditors.
C) merchants.
D) court records.
E) school transcripts.

Question 28

A person applying for a mortgage who anticipated increasing interest rates would be most interested in:

A) a settlement statement.
B) refinancing a mortgage.
C) locking in an interest rate.
D) higher escrow fees.
E) postponing closing until rates fall.

Question 29

Which method of payment is likely to be the LEAST expensive in the long run?

A) bank credit card
B) check written on a home equity line of credit
C) cash
D) store credit card
E) cash advance on a Visa credit card

Question 30

Savings compounded ________ would have the highest return on investment.

A) daily
B) annually
C) semi-annually
D) monthly
E) weekly

Question 31

An investment account that increases from $1,000 to $1,005 in a month is earning approximately ________ annual interest.

A) 0.5%
B) 5.0%
C) 0.05%
D) 10.0%
E) 6.0%

Question 32

The amount of interest is determined by multiplying the amount of savings by the:

A) annual interest rate.
B) time period.
C) number of months in a year.
D) time period and number of months.
E) annual interest rate and the time period.

Question 33

An investment account that increases from $3,000 to $3,271 in one year is earning approximately ________ annual interest.

A) 3%
B) 5%
C) 7%
D) 9%
E) 11%

Question 34

Which of the following is a credit bureau?

A) Federal Reserve
B) Federal Trade Commission
C) Better Business Bureau
D) Experian
E) FICO

Question 35

Student loans are:

A) typically only available for the poor.
B) sponsored by large businesses who subsidize the interest rates.
C) backed by the government at lower-than-market rates of interest.
D) provided by the university, who pays part of the interest cost.
E) available for any student, as long as he or she passes every course.

Question 36

A person borrows $200 from a payday loan company and pays $10 interest for two weeks.This would result in an annual interest rate of approximately ________.Ignore compounding.

A) 260%
B) 130%
C) 40%
D) 20%
E) 5%

Question 37

If Marjorie Wilcox borrows $200 for one year with an APR of 12% and an annual service fee of $10,what is her total cost of credit?

A) $10
B) $12
C) $24
D) $34
E) $42

Question 38

If you want to improve your credit score you should:

A) get copies of your credit report.
B) pay your bills on time.
C) make sure you understand how your credit score is determined.
D) beware of credit-repair scams.
E) do all of the options listed here.

Question 39

The outstanding balance owed on a debt is the:

A) APR.
B) principal.
C) finance charge.
D) equity.
E) amortization.

Question 40

All of the following are signals of potential debt problems EXCEPT:

A) paying only the minimum balance each month.
B) missing payments or paying late.
C) using savings to pay normal bills.
D) depending on overtime to meet normal expenses.
E) an employment contract.

Question 41

Refinancing a mortgage is recommended when:

A) interest rates rise.
B) interest rates fall.
C) the escrow account balance declines.
D) two or more points are required by the lender at the time of closing.
E) the escrow account balance increases.

Question 42

What is most likely to be an individual's single biggest asset?

A) automobile
B) jewelry
C) bank account
D) home
E) furniture

Question 43

Jillian wants to rent an apartment that has monthly rent payments of $850 and requires a $400 security deposit and a $500 damage deposit.In order to move in,Jillian will probably be required to pay:

A) $850.
B) $1,250.
C) $1,750.
D) $2,100.
E) $1,350.

Question 44

When comparing buying versus renting comparable housing,renting requires a ________ annual cash flow,while buying typically ________ one's tax liability.

A) lower; increases
B) lower; decreases
C) higher; increases
D) higher; decreases
E) lower; does not change

Question 45

All of the following are part of the monthly house payment EXCEPT:

A) principal.
B) real estate property taxes.
C) homeowner's insurance.
D) interest.
E) equity.

Question 46

Which one of the following is an advantage of buying?

A) mobility
B) tax benefits
C) fewer responsibilities
D) minimal financial commitment
E) declining equity

Question 47

Which of the following represent the use of credit?

A) demand deposits
B) mortgages
C) ATM withdrawals
D) time deposits
E) debit cards

Question 48

Which of the following would NOT cause a person to prefer renting over buying housing?

A) a large amount of funds needed for front-end expenses
B) unknown job stability in the geographical area
C) the responsibilities of home maintenance
D) the future aspect of selling the home
E) low mortgage interest rates

Question 49

Renting is more advantageous than buying a home when you are seeking:

A) lower short-term living costs.
B) a place to remodel.
C) a long-term investment.
D) tax benefits.
E) a permanent residence.

Question 50

Renting would be most appropriate for people who:

A) want to reduce their taxes.
B) have difficulty establishing credit.
C) have limited funds currently available.
D) enjoy remodeling their residences.
E) desire the financial benefits of increased equity.

Question 51

Which one of the following is an advantage of renting? 

A) unrestricted lifestyle
B) tax benefits
C) fewer responsibilities
D) an ability to build equity
E) increased equity

Question 52

Ken plans to rent instead of buy a house.Which advantage of renting will he realize?

A) tax deductions
B) lower initial costs
C) property value appreciation
D) restricted lifestyle
E) home improvement flexibility

Question 53

Which of the following institutions is organized primarily to provide loans to purchase homes?

A) life insurance company
B) finance company
C) mortgage company
D) pawnshop
E) investment company

Question 54

The income received in return for someone's use of your property is called:

A) interest.
B) a capital gain.
C) a dividend.
D) rent.
E) a coupon payment.

Question 55

A valuable asset pledged to assure loan payments and which can be seized upon default is called: 

A) capacity.
B) character.
C) capital.
D) collateral.
E) conditions.

Question 56

What is the rate an individual will pay for borrowing to purchase a new home called? 

A) prime
B) discount
C) mortgage
D) Treasury bond
E) corporate bond

Question 57

The tax deductible expense related to home ownership is/are:

A) public utilities.
B) homeowner's insurance.
C) home improvements.
D) mortgage interest.
E) mortgage principal.

Question 58

A cost associated with home buying would be:

A) renter's insurance.
B) the security deposit.
C) annual appreciation of the property.
D) property taxes.
E) interest lost on the security deposit.

Question 59

Which of the following would be considered a fixed expense?

A) electric bill
B) cellphone bill on a plan with limited minutes
C) mortgage payment
D) gas bill
E) medical expenses

Question 60

Carl has found an apartment that has monthly rent payment of $950 and requires a one month's rent security deposit and a $500 damage deposit.In order to move in,Carl will probably be required to pay:

A) $950.
B) $1,450.
C) $1,900.
D) $2,400.
E) $3,350.

Question 61

Investing is different from saving because it:

A) requires that less be spent than you earn.
B) involves increased risk.
C) ignores current income.
D) is something only few people should do.
E) is almost always guaranteed to provide income.

Question 62

Financial instruments consist of all of the following EXCEPT:

A) stocks.
B) bonds.
C) mutual funds.
D) T-notes.
E) capital assets.

Question 63

All EXCEPT which one of the following are good ways to acquire money for starting an investment program?

A) pay bills first, and then save for investment
B) participate in an employer-sponsored elective savings program
C) make a special savings effort one month per year
D) borrow money for investment purposes
E) take advantage of gifts and inheritances

Question 64

Ownership shares in a firm are known as:

A) bonds.
B) stocks.
C) treasuries.
D) mortgages.
E) chips.

Question 65

Ken Bowers wants to diversify his portfolio by investing in a firm that has the potential to earn higher profits compared to other firms.What type of stock is Ken thinking about adding to his portfolio? 

A) defensive
B) cyclical
C) small cap
D) blue-chip
E) growth

Question 66

In financial markets,savers looking for opportunities to earn a return on their savings would be the:

A) banks.
B) buyers and sellers.
C) financial middlemen.
D) buyers.
E) sellers.

Question 67

________ typically have voting rights.

A) Bondholders
B) Stockholders
C) Neither stockholders nor bondholders
D) Both stockholders and bondholders
E) All corporate executives

Question 68

Financial risk relates to the probability that the investment:

A) will fail to pay a return to the investor.
B) is subject to sharp price changes.
C) will fall in value.
D) is illiquid.
E) will be subject to government subsidy.

Question 69

Which of the following statements is true about stocks?

A) Owners of stock securities are guaranteed a return on their investments.
B) Stocks have a maturity date.
C) Stocks represent a debt to be paid.
D) Owners of stock securities are actual owners of the firm.
E) Only institutional investors can own stock securities.

Question 70

Stockholders elect the:

A) corporation's president.
B) corporation's board of directors.
C) top management of the corporation.
D) CEO of the company.
E) CFO of the company.

Question 71

Which one of the following investments would provide the most predictable source of income?

A) commodities
B) junk bonds
C) precious metals
D) stock
E) government bonds

Question 72

Shares in the ownership of a corporation are called:

A) stocks.
B) bonds.
C) mutual funds.
D) a portfolio.
E) certificates.

Question 73

Which one of the following investments is likely to have the highest return (and highest risk)between now and the year 2025?

A) U.S.Treasury bills
B) corporate bonds
C) stocks
D) municipal bonds
E) zero-coupon bonds

Question 74

________ is/are an example of an ownership investment.

A) T-bills
B) Mortgage-backed bonds
C) Stock
D) Corporate bonds
E) Mutual funds

Question 75

Which of the following would NOT be considered a financial instrument?

A) stocks
B) real estate
C) mutual funds
D) bonds
E) T-notes

Question 76

Stocks are:

A) ownership shares in a firm.
B) securities that represent a debt to be paid.
C) markets in which securities are bought and sold.
D) contracts that represent a guaranteed payment.
E) not available for individual investors.

Question 77

A stock issued by a corporation that has the potential of higher profits when compared to other firms is called a(n)________ stock.

A) defensive
B) cyclical
C) growth
D) income
E) blue-chip

Question 78

Which type of financial records includes stock and bond reports?

A) investment
B) insurance
C) estate planning
D) tax
E) consumer purchase

Question 79

People seeking high (and risky)returns would likely invest in any of the following EXCEPT:

A) growth stocks.
B) junk bonds.
C) commodity futures, such as oil.
D) precious metals.
E) T-bonds.

Question 80

A stock:

A) represents a share of ownership in a corporation.
B) represents a debt owed by a business or organization.
C) is a portfolio.
D) is an example of leverage.
E) bypasses voting by the board of directors.