Question 1

Genelia holds shares in a motorcycle manufacturing company. Genelia gets a stated amount of dividend from the company only if the board of directors declares it. In this case, Genelia is a(n) _____.
A)exchange trader
B)preferred stockholder
C)full-service stock broker
D)trade union partner

Accepted Answer

Preferred stockholders are entitled to receive a fixed amount of dividend from the company, which is declared by the board of directors, before any dividends are paid to common stockholders. As Genelia is getting a stated amount of dividend from the company only if the board of directors declares it, she is a preferred stockholder.

Question 2

Robin is a bondholder in Nacron Corporation, a software company. He receives an interest payment on the bond every year. When the bond reaches maturity, Robin will also receive an additional amount of money. In this case, the money that will be received by Robin when the bond matures is known as the _____.
A)capital gain
B)dividend
C)principal
D)interest income

Accepted Answer

The additional amount of money that Robin will receive when the bond reaches maturity is known as the principal. A capital gain refers to an increase in the value of an investment, a dividend is a payment made by a company to its shareholders, and interest income refers to the money earned from the interest on the bond.

Question 3

Thomas is a bondholder in the municipal corporation of Oklahoma. Not being much of a risk-taker, Thomas prefers these kinds of bonds as they are usually viewed as safe investments and interest income earned on these bonds is exempt from federal income taxes. Given this information, one can conclude that Thomas holds _____.
A)corporate stocks
B)government securities
C)capital assets
D)deferred shares

Accepted Answer

Municipal corporation bonds are a type of government security, making option B the correct choice. Corporate stocks (option A), capital assets (option C), and deferred shares (option D) are not relevant to the scenario described.

Question 4

Which of the following is a similarity between stockholders and bondholders?
A)Both can experience capital gains or losses.
B)Both are legally entitled to receive annual interest payments from the issuing corporation.
C)Both are creditors of a corporation.
D)Both are owners of a corporation.

Accepted Answer

Both stockholders and bondholders can experience capital gains or losses, depending on the performance of the corporation. However, bondholders are creditors of the corporation and receive fixed interest payments, while stockholders own a portion of the corporation and receive dividends (which are not guaranteed). Therefore, choices B, C, and D are incorrect.

Question 5

Patricia, a senior employee working in a state museum, retires from her job. She, however, does not receive the full benefits of her retirement plan as she did not fulfill the requirement laid down by the government. The government policies state that an employee of any government organization has to work in the same organization for at least 30 years for him or her to receive the retirement benefits. In this case, Patricia has failed to receive the benefits because she did not complete the _____.
A)grace period
B)benefit period
C)vesting period
D)upliftment period

Accepted Answer

The vesting period refers to the length of time an employee has to work for an organization in order to be eligible for the retirement benefits promised by the employer. In this case, the government policy requires employees to work for 30 years in order to become fully vested in the retirement plan and receive benefits. As Patricia did not complete the vesting period of 30 years, she did not receive the full benefits of her retirement plan. A grace period refers to a period of time after a payment is due in which a late fee is not assessed. Benefit period and upliftment period are not relevant terms in this context.

Question 6

On the Fair, Isaac and Company (FICO) scale, Donald falls in the poor to below average category of creditworthiness. Based on the FICO scale, Donald is most likely to have a credit score between:
A)400 and 499.
B)500 and 599.
C)600 and 699.
D)700 and 799.

Accepted Answer

According to the FICO scale, poor credit scores fall between 300-579, and below average credit scores fall between 580-669. Therefore, Donald's credit score is most likely to fall between 500-599, which is the range for poor credit.

Question 7

Unlike his friend who has a credit score of 450, Rashid has a credit score of 688, which lets him purchase more goods on credit than his friend. In the context of the Fair, Isaac and Company (FICO) scale, Rashid falls under the _____ category of creditworthiness.
A)excellent
B)poor to below average
C)fair to good
D)below average to fair

Accepted Answer

The answer of Unlike his friend who has a credit...

Question 8

To supplement his income, Billy has invested in a financial instrument. Each year, he receives an interest payment on his investment. He will also receive an amount known as the principal on the maturity of the investment. Based on the given information, Billy has most likely invested in a(n) _____.
A)common stock
B)corporate bond
C)individual retirement account
D)free-service fund

Accepted Answer

The fact that Billy receives an interest payment each year and will also receive the principal on the maturity of the investment suggests he has invested in a corporate bond. Common stocks do not typically pay interest and do not have a maturity date. An individual retirement account is a type of account and not a specific investment. A free-service fund is not a commonly used financial term.

Question 9

Which of the following is a condition included in a credit card agreement?
A)A charge is levied just for the privilege of having a credit card.
B)Transfer of balance from one credit card to another is not charged.
C)A late fee is not assessed if a payment is not received within the grace period.
D)An annual fee is charged only if your charges exceed your credit limit.

Accepted Answer

The answer of Which of the following is a condition...

Question 10

Karen is the sole breadwinner of her family. Every month, Karen has to pay electricity bills, water bills, and house rent. In this scenario, Karen's fixed monthly expenses are referred to as _____.
A)obligatory payments
B)statutory payments
C)nondiscretionary payments
D)compulsory payments

Accepted Answer

Karen's fixed monthly expenses are referred to as nondiscretionary payments because they are essential and cannot be easily avoided or reduced.

Question 11

Hans has an account in Grancore Bank and uses a credit card issued by the bank. He uses the credit card for various forms of transactions. In the context of credit card usage, when Hans has unpaid balances, Grancore Bank will charge him a(n) _____ on the due amount.
A)annual percentage rate
B)nominal interest rate
C)monthly surcharge rate
D)floating interest rate

Accepted Answer

The Annual Percentage Rate (APR) is the interest rate charged by the bank on the unpaid balances of the credit card. It is expressed as a percentage of the outstanding balance and is charged on a yearly basis. This is the most common form of interest rate charged by credit card issuers.

Question 12

Christopher is a music teacher at St. Lucius School, an educational institution run by a charitable trust. Based on the nature of his organization, Christopher is eligible for the _____ employee-contribution retirement plan.
A)403(b)
B)457
C)HR10
D)401(k)

Accepted Answer

Since Christopher is working at an educational institution run by a charitable trust, he is eligible for a 403(b) employee-contribution retirement plan. The 403(b) plan is designed especially for employees of public schools, tax-exempt organizations, and certain non-profit organizations such as charities. Hence, this retirement plan is the best fit for Christopher's employment.

Question 13

After working for 52 years as an accountant in a government agency in the state of Virginia, Angela retires from her job. On retirement, she receives a sum of $63,000, which had been accumulated over the entire period of her service. In this case, the employee-contribution retirement plan that Angela benefits from is the _____.
A)403(b) plan
B)457 plan
C)HR10 plan
D)401(k) plan

Accepted Answer

The 457 plan is a deferred compensation plan for state and local government employees, which allows them to save for retirement with pre-tax dollars. It is a common retirement plan for government employees, like Angela, and is known for its flexibility and accessibility to funds.

Question 14

In the context of investing in your career, securing an internship during your college years:
A)reduces the chances of receiving monetary compensation from firms.
B)allows you to gain first-hand experience that supplements what you learn in the classroom.
C)reduces your prospective starting salary as internships are not valued by firms.
D)leads to a cut in your college grades as internships require you to miss classes.

Accepted Answer

Securing an internship during college allows you to gain first-hand experience that supplements what you learn in the classroom. This can be valuable for your career and make you a more competitive candidate for future job opportunities. It is also common for internships to offer monetary compensation, although it may not be as high as a full-time position. Internships should not have a negative impact on your grades as many colleges offer academic credit for internship experiences.

Question 15

Max wants to invest in the stock market. Although he has expert knowledge in trading in the stock market, he does not have the time needed to engage in these transactions and hence needs someone to buy and sell stocks on his behalf. In this case, Max should hire a(n) _____ to fulfill his requirement.
A)angel investor
B)discount broker
C)securities dealer
D)investment banker

Accepted Answer

A discount broker acts as an intermediary between the investor and the stock market. They execute trades on behalf of the investor and charge lower fees compared to full-service brokers. Since Max has knowledge about trading in the stock market, he doesn't need the advisory services of an investment banker or securities dealer. An angel investor typically provides funding to startups in exchange for equity, which is not relevant to the scenario.

Question 16

Which of the following statements is true of an annual percentage rate (APR)?
A)The higher the APR, the greater the interest expense on unpaid balances.
B)All credit card companies charge the same APR for all transactions.
C)Credit card companies do not charge the APR on discounted products.
D)The lower the APR, the lower the cardholder's credit score.

Accepted Answer

An APR represents the yearly interest rate charged on an outstanding credit card balance. Therefore, the higher the APR, the greater the interest expense on unpaid balances.

Option B is incorrect because credit card companies charge different APRs based on the type of transaction, creditworthiness of the cardholder, and other factors.

Option C is incorrect because the APR applies to all purchases and balances, regardless of whether they were discounted or full-price products.

Option D is incorrect because a lower APR does not necessarily relate to a cardholder's credit score, and vice versa. A credit score is just one of several factors used to determine the APR.

Question 17

Roderick has made an investment in a credit union for a fixed term of four years. He receives a high interest rate on it. However, because of unexpected financial difficulties, Roderick is forced to cash in before the investment reaches its maturity and ends up incurring a heavy penalty. In the context of financial securities, Roderick has most likely invested in:
A)corporate stocks.
B)government securities.
C)certificates of deposit.
D)corporate bonds.

Accepted Answer

Roderick has most likely invested in certificates of deposit (CDs). CDs are a type of financial security that offer a fixed interest rate for a fixed term, usually ranging from a few months to several years. They are issued by banks and credit unions, and unlike stocks or bonds, they are considered low-risk investments. However, if an investor needs to withdraw money before the CD matures, they may incur a penalty, which is likely what happened to Roderick. Corporate stocks, government securities, and corporate bonds do not typically have penalties for early withdrawal.

Question 18

__________sell shares to investors and pool the resulting funds to invest in financial instruments such as corporate stocks, corporate bonds, or other assets.
A)Exchange Traded Funds
B)Certificates of deposit
C)Government securities
D)Mutual funds

Accepted Answer

Mutual funds are designed specifically to pool the funds of multiple investors and invest in a diversified portfolio of financial instruments such as corporate stocks, bonds, or other assets. This allows investors to gain exposure to a variety of assets with a lower initial investment and without needing to make individual investment decisions.

Question 19

Which of the following statements is true of government securities?
A)They pay their holders a stated rate of interest after the securities mature.
B)The interest income earned on municipal bonds is subject to federal income taxes.
C)The biggest single issuer of government securities is the federal government.
D)They are IOUs issued to government entities when corporate entities borrow money.

Accepted Answer

The federal government is the largest issuer of government securities, which include Treasury bills, notes, and bonds. These securities are used as a way for the government to borrow money from investors and pay them back with interest after a specified time period. These securities are considered very safe investments because they are backed by the full faith and credit of the U.S. government. A) is incorrect because the interest rate on government securities is determined at the time of issuance and does not change over time. B) is incorrect because interest income earned on municipal bonds is typically exempt from federal income taxes. D) is incorrect because government securities are issued by the government, not by corporations.

Question 20

Pablo has purchased several items from a gadget store. As the storekeeper bills the items, Pablo realizes that he does not have enough money in his bank account to make the payment. In these circumstances, Pablo can use his _____, which would allow him to make the purchase now and clear the balance later.
A)debit card
B)loyalty card
C)fleet card
D)credit card

Accepted Answer

A credit card allows Pablo to make purchases now and pay off the balance later, while a debit card deducts the funds immediately from his bank account. A loyalty card and a fleet card are not applicable in this situation.

Quiz 18: Appendix: Personal Finance

Genelia holds shares in a motorcycle manufacturing company. Genelia gets a stated amount of dividend from the company only if the board of directors declares it. In this case, Genelia is a(n) _____.

Which of the following is a similarity between stockholders and bondholders?

On the Fair, Isaac and Company (FICO) scale, Donald falls in the poor to below average category of creditworthiness. Based on the FICO scale, Donald is most likely to have a credit score between:

Unlike his friend who has a credit score of 450, Rashid has a credit score of 688, which lets him purchase more goods on credit than his friend. In the context of the Fair, Isaac and Company (FICO) scale, Rashid falls under the _____ category of creditworthiness.

To supplement his income, Billy has invested in a financial instrument. Each year, he receives an interest payment on his investment. He will also receive an amount known as the principal on the maturity of the investment. Based on the given information, Billy has most likely invested in a(n) _____.

Which of the following is a condition included in a credit card agreement?

Karen is the sole breadwinner of her family. Every month, Karen has to pay electricity bills, water bills, and house rent. In this scenario, Karen's fixed monthly expenses are referred to as _____.

Hans has an account in Grancore Bank and uses a credit card issued by the bank. He uses the credit card for various forms of transactions. In the context of credit card usage, when Hans has unpaid balances, Grancore Bank will charge him a(n) _____ on the due amount.

Christopher is a music teacher at St. Lucius School, an educational institution run by a charitable trust. Based on the nature of his organization, Christopher is eligible for the _____ employee-contribution retirement plan.

In the context of investing in your career, securing an internship during your college years:

Which of the following statements is true of an annual percentage rate (APR) ?

__________sell shares to investors and pool the resulting funds to invest in financial instruments such as corporate stocks, corporate bonds, or other assets.

Which of the following statements is true of government securities?