Final Exam 321

A) 

uncertainty and risk.

B) 

the use of information in planning.

C) 

the relative importance of consequences.

D) 

the number of factors to consider.

E) 

the complexity of relationships among factors.

A) 

wealth or surplus to invest.

B) 

knowledge to invest with confidence.

C) 

time before you need your money for expenses.

D) 

a. and b.

E) 

a., b., and c.

A) 

you depend on credit for regular expenses.

B) 

you have used credit appropriately in the past.

C) 

you can afford to take on more credit.

D) 

you have little or no current debt.

E) 

you have a record of paying what you owe on time.

A) 

the expense ratio.

B) 

the turnover ratio.

C) 

the 12b-1 fee.

D) 

the dividend distribution.

E) 

the capital gains distribution.

A) 

lifelong.

B) 

the five-year plan.

C) 

the time it takes to set goals.

D) 

approximately 65 years.

E) 

the time it takes to realize goals.

A) 

a mutual fund.

B) 

a fund traded like a share of stock.

C) 

an index fund.

D) 

a. and b.

E) 

a., b., and c.

A) 

potential return.

B) 

susceptibility to types of risk.

C) 

asset value.

D) 

a. and b.

E) 

a., b., and c.

A) 

the down payment.

B) 

financing costs.

C) 

opportunity and liquidity costs.

D) 

a. and b.

E) 

a., b., and c.       

A) 

the return on your savings in retirement.

B) 

how long you will be retired before you die.

C) 

what your expenses will be in retirement.

D) 

a. and b.

E) 

a., b., and c.

A) 

Second opinions

B) 

Verification of identity or certification

C) 

Written estimates

D) 

a. and b.

E) 

a., b., and c.

A) 

achieve diversification at lower transaction cost.

B) 

receive the benefit of professional expertise.

C) 

opt for passive portfolio management.

D) 

a. and b.

E) 

a., b., and c.

A) 

seasonal or expiration date discounts.

B) 

brand or label discounts.

C) 

price discrimination.

D) 

discounts on excess inventory.

E) 

volume or quantity discounts.

A) 

helps you to choose alternatives.

B) 

allows you to establish a budget.

C) 

prevents you from making bad decisions.

D) 

reveals shortcuts to reaching your goals.

E) 

forces you to defer some goals.

A) 

borrow money as needed, up to a limit.

B) 

pay down each loan as desired.

C) 

pay interest only on the outstanding balance.

D) 

a. and b.

E) 

a., b., and c.

A) 

major medical insurance.

B) 

basic insurance.

C) 

a formulary.

D) 

dental and vision insurance.         

E) 

group health insurance.

A) 

defining your goals.

B) 

saving for the time when you will not have income from employment.

C) 

estimating how much savings you will need to retire when you want.

D) 

a. and b.

E) 

a., b., and c.

A) 

probability.

B) 

volatility.

C) 

predictability.

D) 

a. and b.

E) 

a., b., and c.

A) 

your current debts and PITI calculation.

B) 

your income and employment.

C) 

your credit history and credit score.

D) 

a. and b.

E) 

a., b., and c.

A) 

include future and forward contracts.

B) 

are time-sensitive with an expiration date.

C) 

depend on the value of commodities.

D) 

a. and b.

E) 

a., b., and c.       

A) 

the five C’s.

B) 

your credit score.

C) 

the prime rate.

D) 

a. and b.

E) 

a., b., and c.

A) 

you pass a driver education course.

B) 

you live in an accident-prone or high crime area.

C) 

you have had an accident in the past three years.

D) 

a. and b.

E) 

a., b., and c.

A) 

a mandatory payroll tax.

B) 

both employers and employees.

C) 

your income taxes.

D) 

a. and b.

E) 

a., b., and c.

A) 

38%

B) 

33%

C) 

25%

D) 

50%

E) 

15%

A) 

difficult to price.

B) 

vulnerable to economic cycles and default risk.

C) 

in real estate financing rather than real estate.

D) 

a. and b.

E) 

a., b., and c.

A) 

live within your means.

B) 

avoid buyer’s remorse.

C) 

shop for bargains.

D) 

a. and b.

E) 

a., b., and c.

A) 

microeconomic factors.

B) 

macroeconomic factors.

C) 

personal factors.

D) 

a. and b.

E) 

a., b., and c.

A) 

college loans.

B) 

car loans and home mortgages.

C) 

personal loans.

D) 

a. and b.

E) 

a., b., and c.

A) 

following the owner’s manual.

B) 

maintaining a valid driver’s license.

C) 

registering and insuring the car.

D) 

a. and b.

E) 

a., b., and c.

A) 

Between $24,000 and $26,000 a year.

B) 

Between $15,000 and $16,000 a year.

C) 

Between $19,000 and $20,000 a year.

D) 

Between $10,000 and $11,000 a year.

E) 

Between $13,000 and $14,000 a year.     

A) 

recession.

B) 

consumption.

C) 

inflation.

D) 

GDP.

E) 

purchasing power.

A) 

has a maximum contribution limit.

B) 

is a tax-deferred plan.

C) 

is a portable plan.

D) 

a. and b.

E) 

a., b., and c.      

A) 

the age and size of the house.

B) 

the location and proximity to a hydrant.

C) 

the number of occupants.

D) 

a. and b.

E) 

a., b., and c.

A) 

burglar alarms.

B) 

electrical upgrades.

C) 

fire extinguishers.

D) 

deadbolt locks.

E) 

smoke detectors.

A) 

recurring incomes and expenses.

B) 

free cash flows for capital expenditures.

C) 

risks and choices in the timing of cash flows.

D) 

attainable short-term goals and lifestyle goals.

E) 

the importance of cash management tools.

A) 

how long you have been using credit.

B) 

the types of credit issued to you.

C) 

your credit history.

D) 

your current debt.

E) 

your character.

A) 

the present value increases.

B) 

the time value increases

C) 

the rate of compounding increases

D) 

a. and b.

E) 

a., b., and c.       

A) 

legal requirements.

B) 

tax obligations.

C) 

time horizon.

D) 

liquidity needs.

E) 

level of debt.

a mutual fund.

a fund reflecting the performance of similar securities.

a fund managed by a company, brokerage, or bank.

a. and b.

a., b., and c.

A) 

divestment.

B) 

legal constraints.

C) 

unique circumstances.

D) 

risk tolerance.

E) 

social investment.

A) 

financial history.

B) 

recurring incomes.

C) 

the time value of money.

D) 

a. and b.

E) 

a., b., and c.

A) 

loan money and receive interest

B) 

receive repayment of principal at maturity.

C) 

borrow money and pay interest.

D) 

a. and b.

E) 

a., b., and c.

A) 

the dynamics of probability.

B) 

the study of behavioral finance.

C) 

the uncertainty of independent events.

D) 

a. and b.

E) 

a., b., and c.

A) 

pay dividends.

B) 

sell equity for liquidity.

C) 

buy a share of a corporation.

D) 

a. and b.

E) 

a., b., and c.

A) 

liquidating assets to pay creditors.

B) 

achieving positive net worth.

C) 

refinancing debt on different terms.

D) 

a. and b.

E) 

a., b., and c.

A) 

the lower your cost of debt.

B) 

the lower your interest rate risk.

C) 

the higher your cost of debt.

D) 

the higher your interest rate risk.

E) 

the lower your default risk.

A) 

automatic payments.

B) 

debit and ATM cards

C) 

direct deposits.

D) 

a. and b.

E) 

a., b., and c.

A) 

the price.

B) 

the manufacturer’s rebate.

C) 

service discounts on maintenance.

D) 

the dealer’s warranty terms.

E) 

the trade-in value of your old car.

A) 

diversification.

B) 

security selection.

C) 

asset allocation.

D) 

a. and b.

E) 

a., b., and c.

A) 

interest.

B) 

dividends.

C) 

capital gains.

D) 

a. and b.

E) 

a., b., and c.