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Question 1

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When an investor purchases financial securities, via an investment bank or other representative, he or she is trading in the __________ market.

primary

secondary

auxiliary

maturity

transaction

  Question 2

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Suppose that yours is a typical family. Your annual income is $50,000. Use the easy method to determine your need for life insurance. Your insurance should be in the amount of

$245,000.

$300,000.

$345,000.

$400,000.

$450,000.

  Question 3

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To improve the return on your investments, you should NOT:

be willing to invest enough time to evaluate investment alternatives.

appreciate the fact that different investment alternatives require different types of evaluation.

realize that there is no need to monitor the value of your investments once an investment alternative is chosen.

keep accurate records in order to spot opportunities to maximize profits or reduce losses.

continue to evaluate your investments after you purchase an investment.

  Question 4

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When an investor purchases shares in a load fund, the average sales charge is usually ____________ percent.

between 0.5 to 2

between 1 and 3

between 3 and 5

between 5 and 7

in excess of 8 1/2

  Question 5

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Which one of the following is not a true statement?

Most mutual funds invest in stocks, bonds, and other securities.

Diversification provided by a mutual fund reduces risk.

The goals of one mutual fund investor may differ from those of another.

Since mutual fund managers are professionals, there is no need to evaluate a mutual fund.

Mutual fund investments range from very conservative to very speculative investments.

  Question 6

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A prime reason for buying an annuity is to

save money for college education.

start a new business.

accumulate funds to invest in stocks.

give you retirement income for the rest of your life.

get rich quick.

  Question 7

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Suppose that yours is a typical family. Your annual income is $35,000. Using the easy method, what should be your need for life insurance?

. $35,000

$110,500

$171,500

$191,500

over $200,000

  Question 8

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The premium for noncancelable and guaranteed renewable disability income insurance is higher,

therefore, younger people should skip these coverages.

hence, the insurance companies enjoy better profit margins.

therefore, very few older workers should carry these coverages.

But the coverages are well worth the extra cost.

  Question 9

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A bond that is backed only by the reputation of the issuing corporation is called a(n) ____________ bond.

debenture

mortgage

indenture

preemptive

treasury

  Question 10

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Which one of the following statements is correct?

A large percentage of people do little or nothing to provide for those who will survive them.

Most people do plan their estates.

Most people think that they will live forever.

Most people don't worry about estate planning until they are 65.

  Question 11

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Medicare medical insurance (Part B) helps pay for

inpatient hospital care

doctors' services and other medical services and supplies not covered by hospital insurance.

home health care.

hospice care.

none of the above.

  Question 12

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Which of the following wills leaves everything to your spouse?

simple will

traditional marital share will

exemption trust will

stated dollar amount will

  Question 13

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A corporation whose stock is owned by relatively few people and is not traded openly in stock markets is called a(n) ____________ corporation.

private

public

equity

debt

preferred

  Question 14

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Which of the following statements is not true?

It is possible to obtain financial information about a corporation that issues stock by using the Internet.

While it is possible to obtain information about a company by accessing the Internet, the information is usually out of date.

You can use an Internet search engine to access company financial information.

Most corporations have a home page that enables investors to access financial information.

By using the Yahoo finance Web site, investors can access financial information about a specific corporation.

  Question 15

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What is the approximate market value for a $1,000 corporate bond that pays 8 percent interest when comparable bonds are paying 9 percent interest?

$80

$90

$889

$1,000

$1,125

  Question 16

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A federal tax levied on the right of a deceased person to transmit his or her property and life insurance at death is called ____________ tax.

estate income

trust income

inheritance

gift

estate

  Question 17

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The type of bond that is not registered in the investor's name is a ___________ bond.

revenue

general obligation

bearer

zero-coupon

tax-exempt

  Question 18

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The first step in stretching your retirement income is to make sure that you are

contributing to Social Security.

covered by an employer pension plan.

contributing to a 401(k) plan.

saving funds in an IRA.

receiving all of the income to which you are entitled.

  Question 19

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Which one of the following is the most widely used source of retirement income?

IRAs

Keogh plans

Social Security

company pension plans

union pension plans

  Question 20

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Which of the following is not a true statement?

It is estimated that there are over 100 million Internet users worldwide.

There is a wealth of investment information available, but most small investors cannot afford to use it.

You can obtain current price information for stocks, bonds, and mutual funds by using the Internet.

A search engine is a research tool that helps you find the investment information you want.

Both government and businesses provide individuals with investment information.

  Question 21

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If you want a risk-proof real estate investment, invest in

real estate investment trusts.

real estate limited partnerships.

participation certificates (PCs. .

real estate syndicates.

post office buildings.

  Question 22

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Which health care program is administered by the Centers for Medicare and Medicaid, Services a federal agency?

Blue Cross

Blue Shield

Medicare

Medicaid

HMO

  Question 23

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Which of the following publications does not provide readers with an annual survey of mutual funds?

Business Week

Current Business Survey

Forbes

Kiplinger's Personal Finance Magazine

Money

  Question 24

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The value of the mutual fund's portfolio minus the mutual fund's liabilities divided by the number of shares outstanding is called the

book value.

outstanding balance.

per share value.

net asset value.

accounting value.

  Question 25

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A Series EE savings bond purchased after May 1997 provides

at least an 8 percent return.

a guaranteed return that is based on the yield paid on 5-year Treasury notes.

a guaranteed minimum of 5 percent.

a guaranteed minimum of 6 percent.

a guaranteed maximum return of 10 percent.

  Question 26

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Equity capital is money

obtained from the owners of the business.

borrowed through banks.

obtained by employee benefit programs.

that has to be repaid.

that has been allocated to a retirement program.

  Question 27

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The maximum tax rate on estates and gifts

is gradually declining.

is gradually increasing.

has remained constant.

has increased sharply.

  Question 28

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On small gold bars, dealers and banks add ____________ percent premium over the pure gold bullion value.

1 to 2

3 to 5

5 to 8

9 to 12

  Question 29

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Which document explains, adds, or deletes provisions in your existing will?

codicil

tracer

addendum

rider

  Question 30

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What is the approximate market value for a $1,000 corporate bond that pays 9 percent interest when comparable bonds are paying 8 percent?

$800

$900

$1,000

$1,125

$1,600

  Question 31

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Assume that you purchased 100 shares of Exxon stock for $55 a share, that you received an annual dividend of $2.00 a share, and that you sold your Exxon stock for $65 a share at the end of one year. What is the total return for your investment? (Ignore commission amounts for this question.)

$200

$1,000

$1,200

$1,500

$2,200

  Question 32

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If a bond was quoted in the newspaper at 88 3/4, the price in dollars was

$75

$88

$88.75

$887.50

$1,000

  Question 33

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A method of evaluating the cost of life insurance by taking into account the time value of money is called

double indemnity.

guaranteed insurability.

an interest-adjusted index.

the consumer price index.

a present value index.

  Question 34

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The grace period allows ____________ days to elapse, during which time the premium may be paid on an insurance policy.

1 to 10

10 to 20

28 to 30

30 to 60

60 to 90

  Question 35

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Which plan provides benefits for surgical and medical services performed by physicians?

Blue Cross

Blue Shield

home health agencies

home health associations

  Question 36

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When a bondholder loses money because interest rates in the economy increase, it is an example of ____________ risk.

market

interest rate

inflation

business failure

current

  Question 37

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A type of investment that combines and invests the funds of many investors and manages it with a professional manager is called a(n)

NOW account.

securities exchange.

certificate of deposit.

mutual fund.

option fund.

  Question 38

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If overall interest rates in the economy rise, a corporate bond with a fixed interest rate will generally

increase in value.

decrease in value.

remain unchanged.

become worthless.

be returned to the corporation.

  Question 39

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Which of the following is a possible disadvantage of real estate investments?

financial leverage

hedge against inflation

illiquidity

easy entry

limited financial liability

  Question 40

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Which one of the following expenditures for retirees is likely to increase?

state income taxes

federal income taxes

medical expenses

housing expenses

clothing expenses

  Question 41

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A 1 to 5 percent fee that investors pay when they withdraw their investment from a mutual fund is called a(n)

withdrawal fee.

sales fee.

contingent deferred sales load.

unload fee.

load fee.

  Question 42

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The second part of estate planning consists of

building your estate through savings.

transferring your estate in the manner you have specified.

deciding who should be your attorney.

evaluating your assets and liabilities.

  Question 43

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Subject to certain minimums, which life insurance is designed to let you pay premiums at any time in virtually any amount?

whole life

ordinary life

universal life

adjustable life

variable life

  Question 44

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A good rule of thumb is to limit installment payments to ____________ percent of your net monthly income.

20

30

40

50

60

  Question 45

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A mutual fund in which no sales charge is paid by the individual investor is called a(n) ____________ fund.

closed-end

open-end

load

no-load

convertible fund.

  Question 46

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To calculate current yield, the annual income amount is divided by

market value.

original value.

future return.

current return.

total return.

  Question 47

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You can avoid storage and assaying problems by investing in

gold.

gold wafers.

gold bars.

gold bullion.

gold bullion coins.

  Question 48

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A legal arrangement through which your assets are held by a trustee for your benefit or that of your beneficiaries is called a

codicil.

power of attorney.

proxy.

rider.

trust.

  Question 49

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All of the following statements are considered to be good advice for the potential investor before starting his or her personal investment program except:

Work to balance your budget.

Increase credit purchases and make installment payments in order to increase cash available for investing.

Provide adequate insurance protection.

Start an emergency fund.

Establish a line of credit.

  Question 50

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A state tax levied on the right of an heir to receive all or part of the estate and life insurance proceeds of a deceased person is called ____________ tax.

estate income

trust income

inheritance

gift

estate

  Question 51

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A bond that can be exchanged, at the owner's option, for a specified number of shares of the corporation's stock is called a(n) ____________ bond.

debenture

mortgage

indenture

convertible

subordinated

  Question 52

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Earnings that are reinvested in a corporation are called

retained earnings.

surplus earnings.

retention capital.

additional capital.

collected capital.

  Question 53

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Fundamentally, group insurance is ____________ insurance.

term

whole life

ordinary life

permanent

universal life

  Question 54

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In 1911, the first state law regulating securities transactions was passed in

New York.

Illinois.

Texas.

Kansas.

Oklahoma.

  Question 55

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A special form of the limited payment plan is the ____________ premium policy.

double

simple

single

compound

equitable

  Question 56

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Insurance experts have estimated that extra costs of up to $____________ a year may be required to replace the services of a homemaker in a family with small children.

3,000

6,000

10,000

12,000

15,000

  Question 57

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Standard & Poor's rates municipal bonds that mature in three years or less. According to Standard & Poor's their highest rating is

SP-1.

SP-2.

SP-3.

Excellent, Questionable, or Too Risky.

Without Risk, Moderate Risk, or Speculative.

  Question 58

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In what type of ownership is each individual considered to own a proportionate share for tax purposes with only your share being included in your estate?

tenancy by default

tenancy by the entirety

tenancy in common

JT/WROS

  Question 59

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Perhaps the most common settlement options in a life insurance program are

lump-sum payment.

limited installment payment.

life income option.

proceeds left with the company.

All are common options.

  Question 60

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A request that an order be executed at the next available opportunity after the market price of the stock reaches a specified price is called a ____________ order.

market

limit

stop

round

discretionary

  Question 61

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An individual who helps investors decide when to switch their investment from one fund to another fund is called a(n)

financial planner

fund evaluator.

opportunity timer.

market timer.

fund consultant.

  Question 62

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Which type of insurance protects against the large expenses of a serious injury or a long illness?

Disability income

major medical expense

hospital indemnity

physician's expense

interim medical

  Question 63

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The prices of life insurance policies

vary considerably.

are relatively the same.

are higher for females.

have remained constant.

are higher in the Midwest than in the Northeast.

  Question 64

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To safeguard investments, stock owners who believe that the price of their stock will go down during an option period will purchase a

futures contract.

short contract.

call option.

put option.

margin contract.

  Question 65

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Which type of REIT invests directly in properties?

compound REIT

equity REIT

mortgage REIT

hybrid REIT

simple REIT

  Question 66

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Under what type of will does everything pass to your spouse, with the exception of an amount equal to the exemption, which passes into trust?

simple will

traditional marital share will

exemption trust will

stated dollar amount will

  Question 67

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A legal document authorizing someone to act on your behalf is called a

codicil.

rider.

power of attorney.

trustor.

proxy.

  Question 68

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Aside from a home, the real property investment most widely favored by the small investor is

a post office building.

land.

a building with 20 apartments.

a condominium.

the duplex, four-plex, or small apartment building.

  Question 69

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The life expectancy of a female at the age of 30 is 47.65 years. It means that

a 30-year-old female has the highest probability of dying.

a 30-year-old female has the highest probability of living.

47.65 is the average number of years that all females alive at 30 years of age will still live.

47.65 is the average age at which all females, age 30, will die.

  Question 70

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In choosing health insurance, ideally, you should

get a basic plan and a major supplementary plan.

get dental and vision plans.

buy dread disease and cancer insurance plans.

purchase nursing home insurance.

purchase accident insurance.

  Question 71

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Which of the following is the most readily available source of current price information for an investment in stocks or bonds?

the daily newspaper

government publications

corporate reports

investor newsletters

business periodicals

  Question 72

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Over many years, index funds have outperformed almost _____ percent of all managed funds.

100

85

70

50

40

  Question 73

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Your life insurance policy is valuable only if it

meets your objectives.

makes you rich.

makes your beneficiaries rich.

serves as a collateral on loans.

pays you at least 7.5 percent interest.

  Question 74

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A(n) ____________ trust is a property management arrangement that you establish while you are alive.

guardian

trustee

living

power of attorney

estate

  Question 75

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Which type of will involves serious risks of invalidity and may not reflect the provisions of current law?

holographic law

statutory will

informal will

letter of last instruction

living will

  Question 76

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Illiquidity in real estate means that

you can quickly sell the property.

you don't have a water well on the property.

you cannot quickly sell the property.

you don't have financial leverage.

there is an efficient market for the property.

  Question 77

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A request that a stock be bought or sold at the current market price is called a ____________ order.

market

limit

stop

round

discretionary

  Question 78

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Individuals and families purchase life insurance to

get rich quick.

fill financial needs created by the loss of the breadwinner.

defraud the insurance companies.

keep up with people with a similar financial situation.

  Question 79

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Generally, U.S. government securities issued by the Treasury Department

are not graded because they are risk free for practical purposes.

receive the Standard & Poor's AAA rating.

receive the Moody's Aaa rating.

receive The Wall Street Journal's U.S. Government rating.

receive the Treasury Department's "risk-free" rating.

  Question 80

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Twenty years ago, you began investing $2,000 a year. Because your investments earned an average of 8 percent a year, your investment portfolio has a current dollar value of $92,000. How much did you earn on your investments over the 20-year period of time?

$2,000

$40,000

$52,000

$92,000

$132,000

  Question 81

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A beneficiary is a person who

acts as a trustee of your insurance policy.

is a guardian of your children.

acts on your behalf.

is designated to receive life insurance proceeds.

takes your money and runs.

  Question 82

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General Electric has a current market price of $75. The corporation has paid a dividend of $3.75 over the last 12 months. What is the current yield?

2 percent

4 percent

5 percent

10 percent

20 percent

  Question 83

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Investors purchase corporate bonds for

interest income.

possible increase in value.

repayment at maturity.

All of the above.

None of the above.

  Question 84

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Which one of the following statements is true about estate planning?

Estate planning is for the rich only.

It is always easy to plan for your family's financial security in the event of your death.

Most people do a lot to provide for those who will survive them.

Most people give meticulous attention to estate planning.

Many people don't give a single thought to preparing for death.

  Question 85

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According to Ibbotson Associates, which of the following investments is projected to earn the largest return between now and the year 2025?

U.S. Treasury bills

corporate bonds.

stocks

options

zero-coupons

  Question 86

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Typical examples of uses of life insurance proceeds are

paying off a home mortgage.

endowment to children.

making charitable bequests.

paying estate taxes.

All of the above are typical examples.

  Question 87

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Which one(s) of the following is(are) true statement(s) about retirement planning?

You can expect to spend about 16 to 25 years in retirement.

It's never too early to begin planning for retirement.

Don't let your 45th birthday roll by without a comprehensive retirement plan.

Retirement planning is both emotional and financial.

All of the above are true statements.

  Question 88

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A very safe investment that generally attracts conservative investors is called a(n) ____________ stock.

penny

cyclical

growth

small-cap

blue-chip

  Question 89

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Which one of the following investments in real estate does not provide diversification?

REITs

Ginnie Maes

Freddie Macs

land

PCs

  Question 90

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Which of the following statements does not accurately describe a line of credit?

A line of credit is already approved before the money is actually needed.

A line of credit is available immediately when needed.

A line of credit can be obtained at a credit union, savings and loan association, or bank.

A line of credit provides an alternative source of funds if an emergency does develop.

A line of credit is a long-term loan.

  Question 91

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The Tax Reform Act of 1986 dictates that for commercial property, the following depreciation method must be used:

sum-of-the-digits.

straight line.

declining balance.

the rule of 78s.

  Question 92

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Becky Martinez owns stock in GBX Corporation. The GBX stock has a market value of $50 a share. If Becky receives $4.50 a year in dividends, what is the current yield?

7 percent

8 percent

9 percent

11.1 percent

It is impossible to calculate the current yield with the above information.

  Question 93

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You can get a reverse mortgage annuity if

you are at least 55 years old.

you are five years from retirement.

your mortgage is largely or completely paid off.

you are recently retired.

  Question 94

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Suicide clause means that the insurance company

can cancel the policy if age has been misstated.

will pay the death benefit equal to the amount of the premium paid, if the insured dies during the first two years that the policy is in force.

allows the insured to pay premiums in installments.

automatically pays the premium out of the policy's cash value.

  Question 95

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Reverse annuity mortgages are

possible when your mortgage is largely or completely paid off.

available all over the United States.

available on the West Coast.

more popular in the East than in the West.

regulated by local laws.

  Question 96

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Which of the following statements is correct?

Stock is a form of debt capital.

Stock must be repaid at maturity.

Bonds are a form of debt capital.

Bonds do not have to be repaid at maturity.

Interest payments to bondholders are at the discretion of the corporation.

  Question 97

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A stock that follows the business cycle of advances and declines in the economy is called a(n) ____________ stock.

defensive

cyclical

growth

income

blue-chip

  Question 98

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Which type of health insurance is simply a bad buy?

Individual health insurance

Group health insurance

Dread disease and cancer policy

Dental insurance

Vision insurance

  Question 99

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Why is financial planning for retirement vitally important?

You can expect to live in retirement for many years.

Social Security and private pension may be insufficient to cover the cost of living.

Inflation may diminish the purchasing power of your retirement savings.

All of the above factors are vitally important.

  Question 100

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In order to be listed on the New York Stock Exchange, a corporation must do all except one of the following. Which of the statements below is incorrect?

A corporation's annual earnings before federal taxes must be at least $2.5 million.

A corporation's stock must be approved for listing on the NYSE.

The market value of its publicly held stock must equal or exceed $25 million.

A corporation must have a total of at least 1.1 million shares of its common stock publicly owned.