WSE Review Make yourself marter Question To qualify

W!SE Review Make yourself $marter

Question : To qualify for a Federal Housing Administration (FHA) loan, a person must generally A: have at least a high school diploma. B: have one-quarter of the cost of the home for a down-payment. C: fulfill income guidelines. D: provide two individuals to co-sign the loan.

C: fulfill income guidelines. Reason : The Federal Housing Administration (FHA) insures lenders who make mortgage loans that are riskier than regular bank loans because FHA loans are made to individuals who usually would not qualify for regular low-cost mortgages from banks (usually firsttime home buyers with lower income and a weaker credit score). The objective of this federal agency is to encourage home ownership while helping to protect the lenders at the same time.

A high school student has begun to investigate the field of finance as a career choice. In deciding about the field, the student should focus on which question first? A: Will I find a balance between financial rewards and personal satisfaction from work? B: How many people do I know who work in this field? C: Once I train for this area, how long before I will be at the top of the field? D: Are there people in this field who are dissatisfied with their jobs?

A: Will I find a balance between financial rewards and personal satisfaction from work? Reason : It is important to investigate a career with the idea of not only getting a sense of earning potential, types of positions available and the training necessary to acquire these positions but what are the chances that the individual will enjoy working in this field.

A type of electronic funds transfer (EFT) is: A: B: C: D: A transaction made with a check A deposit made with a bank teller Not widely used by consumers An ATM transaction

D: An ATM transaction Reason : According to the Electronic Funds Transfer Act, Electronic funds transfers (EFTs) are any transfers of funds, other than a transaction originated by check, draft, or other paper instrument, initiated through electronic terminal, telephone, or computer, to authorize a financial institution to debit or credit an account. EFT's can be used to carry out many financial transactions, for example, to pay utility bills, make installment loan payments, and transfer funds from a savings account to a checking account or vice versa.

A company offers a defined-contribution pension plan which means that upon retirement the employee will receive A: one-half of the employee’s last year’s salary. B: the total amount of money contributed plus investment earnings. C: an amount of money based only on the length of time the employee worked for the company. D: a specified amount of money based totally on the profit earned by the company while the employee worked there.

B: the total amount of money contributed plus investment earnings. Reason : A defined-contribution plan has an individual account for each employee. The document that explains the plan indicates how much the employer will contribute and does not promise any particular benefit. On retirement, or when the individual becomes eligible for benefits, the benefit is the total amount in the participant’s account, including investment earnings on the funds in the account.

The interest earned on United States Series EE Savings Bonds is A: exempt from state and local taxes. B: paid in a lump sum at the time the face value on the bond is reached. C: equal to the money paid to purchase it.

A: exempt from state and local taxes. Reason : The interest rate on US savings bonds is exempt from state and local taxes.

Buying a treasury bill (T-bill) is best for investors who are looking for A: a place to invest between $100 -$500. B: a secure, low risk investment. C: a higher yield on their investment than corporate bonds offer. D: an investment that matures in 10 -30 years.

B: a secure, low risk investment. Reason : These bills are backed by the full faith and credit of the US government, therefore considered relatively risk free.

Using a brokerage firm, a qualified investor buys 1000 shares of a common stock at $50 a share on 50% margin. This means that the A: investor will pay only $5000 for the shares. B: investor is buying 2000 shares. C: brokerage firm is lending the investor 50% of the money. D: brokerage firm will own 50% of the 1000 shares of stock that were purchased.

C: brokerage firm is lending the investor 50% of the money. Reason : Margin is a speculative method whereby an investor borrows up to 50% of the money needed from a brokerage firm in order to buy a wanted stock and pays a fee for the privilege.

To determine the time value of depositing $100 in a savings account, a person needs to know the interest rate and A: B: C: D: her total income. the rate of inflation. whether the account is FDIC protected. whether the bank offers overdraft protection.

B: the rate of inflation. Reason : The “time value of money? ” is a way of looking at how much a saving or investment is worth at the end of a period of time when it is compared to the rate of inflation during that period and the person’s earning power. For example, it may not seem as though depositing $100 a month in a retirement account when someone is 23 makes a whole lot of sense; why not wait until age 40 when it will probably be a lot easier to deposit $250 or $300 a month in the account. However, because of the miracle of compounding interest, that $100 will be worth a lot more when the person is older than the money that is deposited at age 40. However, the other factor to consider in making deposits to a regular savings account is the rate of interest as compared to the rate of inflation. If the annual rate of inflation is 03% and the interest earned on money is 01%, the deposit is actually going to have less purchasing power at the end of the year than it did at the start.

The amount a lender charges to borrow money is called the: A: B: C: D: Principal Annual Percentage Rate (APR) Loan balance Finance charge

The amount a lender charges to borrow money is called the: Correct Answer : D: Finance charge Reason : The finance charge is the amount charged by the lender for any kind of credit. Finance charge = principal x stated interest rate x time (in years). The finance charge is used to calculate the annual percentage rate (APR).

The cost to use someone else's money for a period of time is called the: A: B: C: D: Interest rate expressed as a percentage Opportunity cost Minimum payment Inflation rate

A: Interest rate expressed as a percentage Reason : Consumers usually pay a price for the goods and services they buy. The cost to buy the right to use someone else's money for a period of time is called the interest rate.

Interest earned on interest is known as: A: B: C: D: Simple interest True interest Compounded interest Variable interest

C: Compounded interest Reason : Compound interest enables the saver to earn interest on the interest that was earned earlier.

Money received today is worth more than the same amount of money received sometime in the future is: A: B: C: D: The Rule of 72 The time value of money Not true Investing

B: The time value of money Reason : The time value of money is the concept that money received today is worth more than the same amount of money received in the future. If you receive $100 today, you can put it to work immediately through savings or investing immediately.

A person buys a flat screen, plasma, theater-like television. The person has homeowner’s insurance. Why would it be appropriate to add a personal property floater to that insurance? A: To reduce the premium on the homeowner’s insurance. B: To protect the person who owns the television from liability for damages. C: To show the insurance company a good faith investment has been made. D: To cover the cost of replacement should the television get damaged or stolen.

D: To cover the cost of replacement should the television get damaged or stolen. Reason : An extremely expensive item such as furs or jewelry or, in this case, theater -like television, would usually not be covered in a standard insurance policy. As a result, policy holders often opt to attach a rider or “floater”to the policy to cover replacement or repair of these items. The policy holder also must pay an additional premium for the “floater” coverage.

For the past five years, a person has had a $20, 000 whole life insurance policy that has a cash value clause. The person decides to surrender the policy. At the time of surrender, the person will receive A: one-fifth of the $20, 000 face value. B: $20, 000 less the premiums paid. C: a calculated amount of money which includes the premiums paid as well as the interest on that money. D: a calculated amount of money that must be converted to a term life insurance policy.

C: a calculated amount of money which includes the premiums paid as well as the interest on that money. Reason : The cash value of a whole life insurance policy is based on premiums paid plus some of the interest earned.

If a person makes a deposit of $10, 000 or more into a bank account, the bank must notify the A: B: C: D: US Treasury Department. Federal Deposit Insurance Corporation. (FDIC). State Banking Commission. Federal Reserve Board.

A: US Treasury Department. Reason : In order to track large deposits, the federal government requires that deposits of $10, 000 or more be reported to the Treasury Department. Some concerns may be that a person might be trying to avoid paying taxes on game winnings or perhaps illegal gains.

Employees prefer direct deposits because: A: There is a small fee for the service B: The danger of losing a paycheck is slightly reduced C: The money is generally deposited in their checking account sooner than it would be if they had to deposit it in person D: Direct deposits earn a higher rate of interest

C: The money is generally deposited in their checking account sooner than it would be if they had to deposit it in person Reason : Instead of a negotiable check, the wage earner receives a pay stub which lists the amount that was directly deposited and the amounts withheld for taxes, health insurance, etc. Through direct deposit, earnings are transferred electronically into the recipient's bank account. Direct deposit is more convenient, safer, and usually faster than receiving and manually depositing a paycheck.

Which documents should be stored in a safedeposit box? A: B: C: D: Checkbook statements. Copies of current and past budgets. Current paycheck stubs. Mortgage loan papers.

D: Mortgage loan papers. Reason : The purpose of having a safe deposit box is to have a fireproof, secure place to store valuables and irreplaceable items including legal documents such as a birth certificate and precious jewelry.

A person has three credit cards with very large outstanding balances and is unable to make payments on any of them. Which action should the person take? A: Notify a credit reporting agency in order to avoid a late fee. B: File for bankruptcy in order to maintain ones current credit score. C: Notify the credit card companies in order to negotiate a new payment plan. D: Contact the Internal Revenue Service in order to avoid paying income tax this year.

C: Notify the credit card companies in order to negotiate a new payment plan. Reason : When experiencing financial difficulties, the first action to take is to notify creditors, in this case three credit card companies. Quite often the company will assist in negotiating new terms.

Which statement best describes the relationship between a person's educational level and that person's potential earning power? A: Education has no effect on a person's potential earning power B: A person with a professional degree is likely to earn at least four times as much per year as a person who did not complete high school C: Attaining a higher educational level affects the earning potential only for people over 40 years old D: Attaining a higher educational level decreases potential earning power

Which statement best describes the relationship between a person's educational level and that person's potential earning power? B: A person with a professional degree is likely to earn at least four times as much per year as a person who did not complete high school Reason: There is a direct relationship between educational level and potential earning power. A person with a professional degree, for example, is likely to earn at least four times as much per year as a person who never completed high school.

Question : Before the Kiss Corporation can issue stocks or bonds, it must register the issue with: A: B: C: D: Its Board of Directors The Federal Reserve The World Bank The Securities and Exchange Commission (SEC)

D: The Securities and Exchange Commission (SEC) SEC

Question : An investor bought 40 shares of ABC corporation's stock at $80 a share. Two weeks later, the investor receives notice that the corporation has approved a 2 -for-1 stock split. Based on this information, the investor would own at the moment of the split A: B: C: D: 20 shares of the stock and the price of each share is $80. 40 shares of the stock and the price of each share is $40. 80 shares of the stock and the price of each share is $80.

C: 80 shares of the stock and the price of each share is $40. • The 2 – for -1 tells you what you need to know. A $100 stock, you would get 2 $50 shares instead of 1 $100 share. THE VALUE OF YOUR STOCK DOES NOT CHANGE WITH A SPLIT! When Apple had a 7 - for – 1 split, seven $100 shares were given for every one $700 a share Apple stock. It makes the stock more affordable and easily tradeable.

Question : prices: Why might rising interest rates depress stock A: Stock investors are lured away from interest-paying investments to stocks B: Rising interest rates can result in lower business profits C: Rising interest rates usually means the economy has less D: Rising interest rates can result in higher business profits

Question 24 : Why might rising interest rates depress stock prices: Correct Answer : B: Rising interest rates can result in lower business profits Reason : Rising interest rates might depress stock prices if investors move their money from stocks to the fixed rate instruments with higher interest rates. This movement reduces the demand for stocks, causing their prices to go down.

Question : A person is convinced that a lending institution is charging too much interest for a loan. This person should be aware that A: B: C: D: there are state usury laws. lending institutions all have their rates of interest set by the SEC. interest rates depend entirely on the borrower’s ability to pay back the loan. the Federal Trade Commission has laws against intimidating borrowers.

Q: A person is convinced that a lending institution is charging too much interest for a loan. This person should be aware that Correct Answer A: there are state usury laws. Reason: Charging excessive interest rates on loans is known as “usury” and that practice is prohibited by law.

Question : Mr. Akon's wife died. The money he received as the beneficiary on her life insurance is called the: A: B: C: D: Cash value Death benefit or face value Separate value Premium or annuity value

Question 29 : Mr. Akon's wife died. The money he received as the beneficiary on her life insurance is called the: Correct Answer : B: Death benefit or face value Reason : The face value, face amount, or death benefit is the amount of money that a life insurance policy will pay to the beneficiary on the death of the insured person. Any outstanding policy loans will reduce the death benefit by an amount equal to the unpaid loan balance. $250, 000 policy = $250, 000 death benefit or face value $1, 000 policy = $1, 000 death benefit or face value $50, 000 policy = $50, 000 death benefit or face value $125, 000 policy = $125, 000 death benefit or face value

Question : Which statement does NOT accurately describe a characteristic of cash value for whole life insurance? A: Cash value grows gradually over time B: If the policy is cancelled, you may be entitled to some or all of the accrued cash value C: Policy that accumulates cash value is less expensive than a policy that does not accumulate cash value D: When an insured person dies, the beneficiary will receive the death benefit but the insurance company keeps the cash value

Question: Which statement does NOT accurately describe a characteristic of cash value for whole life insurance? Correct Answer C: Policy that accumulates cash value is less expensive than a policy that does not accumulate cash value Reason : Cash value is a dollar amount that increases over the years. The cash value is erroneously called the "policyholder's savings. " The policyholder receives the cash surrender value (cash value less the surrender fee and less the loan balance) if he/she surrenders the policy. With almost all life insurance policies, if the insured dies, the beneficiary receives the death benefit, but not the cash value. Cash value = $$$$ No cash value (term) = $

Question : Consumer finance companies, which are often advertised on TV, are also known as: A: B: C: D: Banks Savings and loan associations Small loan companies Purchase loan lenders

C: Small Loan Companies

Question : A person is depositing $20 in cash and a check for $50. On the checking account deposit slip, the person should A: include the reason that both cash and a check are being deposited. B: indicate what bank issued the check that is being deposited. C: indicate the amount of money that is currently in the checking account as well as in a savings account to cover the check. D: list the cash deposit separately from the check as well as the total of the deposit.

D: list the cash deposit separately from the check as well as the total of the deposit.

Question : Pat has a savings account and a car loan from a not-for-profit financial institution owned by its members. She is probably a member of what type of financial institution? A: B: C: D: Credit union Commercial bank Savings and loan association Investment club

Credit Union • These are non-profit and member owned

Question : Scott just got an ATM card to use and must choose a PIN (Personal Identification Number). How should he select a PIN that will give him maximum protection against anyone else being able to find out what the PIN is? A: Use his birth date as his personal identification number B: Use a random selection of letters and numbers C: Use his first initial and last name as his personal identification number D: Use the name of a friend, family member, or pet

Question 8 : Scott just got an ATM card to use and must choose a PIN (Personal Identification Number). How should he select a PIN that will give him maximum protection against anyone else being able to find out what the PIN is? Correct Answer : B: Use a random selection of letters and numbers Reason : A PIN (personal identification number) is a secret code that protects the privacy of your accounts and allows only you to access them. The numbers should not be composed of numbers easily associated with the person choosing the PIN such as birth date, telephone number, or street number address. It should be a random series of numbers and letters that would be hard for unauthorized users to guess. Also, never write your PIN on your ATM or debit card or in your check book because then a thief would you? re your confidential information needed to make purchases or withdraw all the money out of your account.

Question : When money is not used and goods and services are exchanged for other goods and services, this system is called: A: B: C: D: Credit Money Barter Checks

Question 7 : When money is not used and goods and services are exchanged for other goods and services, this system is called: Correct Answer : C: Barter Reason : Bartering means exchanging goods and services with another person and makes it possible to satisfy needs and wants without spending money. Bartering cannot be used for many transactions including the purchase of investments or insurance.

Question : Who benefits the most from inflation? A: B: C: D: Long-term fixed rate borrowers Lenders Persons on fixed incomes The government

Question 23 : Who benefits the most from inflation? Correct Answer A: Long-term fixed rate borrowers Reason : Inflation reduces the purchasing power of money, so every dollar you spend in the future has less value than it has now. Since the payments on long-term fixed rate loans, like 30 -year mortgages remain the same for the term of the loan, future payments will take place with dollars that have less purchasing power. Inflation also raises long-term interest rates, so if you are already locked into a fixed rate loan. your interest rate looks more and more favorable.

Question : Which of the following is the federal law that requires the cost of credit be disclosed to consumers in bold print on loan agreement? A: B: C: D: Fair Credit Reporting Act Equal Credit Opportunity Act Truth in Lending Act Fair Debt Collection Practices Act

Q: Which of the following is the federal law that requires the cost of credit be disclosed to consumers in bold print on loan agreement? Correct Answer C: Truth in Lending Act Reason : The Truth in Lending Act requires that the finance charge and annual percentage rate be disclosed to the consumer in advance and specifies how the annual percentage rate must be calculated. Disclose = TELL the TRUTH!

Question : Troy has $50 a month transferred electronically from his checking account to his savings account. This is an example of: A: B: C: D: An installment payment A savings plan An ATM transaction A debit card transaction

Question 32 : Troy has $50 a month transferred electronically from his checking account to his savings account. This is an example of: Correct Answer : B: A savings plan Reason : When a consumer requests that his or her bank or credit union electronically transfer money from a checking account to a savings account every month, it is a (forced) savings plan. If you manage your checking account so there always enough funds to cover the transfer, a forced savings plan is a good option because you avoid the problem of not making regular deposits in your savings account and spending the money instead. Starting a (forced) savings plan with automatic deposits is one way to do what is known as "paying yourself first. "

Question : Patty is selling her car through a newspaper advertisement. When she finds a buyer, she wants a form of payment which is guaranteed to be good. Which form of payment should she avoid? A: B: C: D: Cash Certified check Cashiers check A check

Question 33 : Patty is selling her car through a newspaper advertisement. When she finds a buyer, she wants a form of payment which is guaranteed to be good. Which form of payment should she avoid? Correct Answer : D: A check Reason : A certified check is a check for which the bank guarantees payment. It is stamped by the bank as certified and becomes an obligation of the bank, and the funds to cover it are immediately withdrawn from the depositor's account.

Question : The financial institution where Ms. Sanchez has her checking account will continue to pay out money for the checks she writes as long as: A: She uses checks from her checkbook B: The financial institution has sufficient funds C: There is enough money in Ms. Sanchez’s account to cover the amount of the checks D: She maintains a good record of deposits and handles her account responsibly

Question 35 : The financial institution where Ms. Sanchez has her checking account will continue to pay out money for the checks she writes as long as: Correct Answer : C: There is enough money in Ms. Sanchez’s account to cover the amount of the checks Reason : The financial institution is not obligated to honor a check if it is written for more money than the current checking account balance. The customer will be charged an insufficient funds penalty for each check not covered by a sufficient balance in the account.

Question : A person owns a stock that pays a $2. 00 a share dividend. If the person chooses to reinvest that dividend, this means that the $2. 00 will go toward buying A: B: C: D: more of the same stocks that are similar to those already owned. preferred stock in the corporation. bonds in the corporation.

Question 16 : A person owns a stock that pays a $2. 00 a share dividend. If the person chooses to reinvest that dividend, this means that the $2. 00 will go toward buying Correct Answer : A: more of the same stock. Reason : A dividend reinvestment plan is designed to help the shareholder acquire additional shares (or partial shares if there is not enough money) of the stock by immediately reinvesting the dividend in the same company’s stock as soon as the dividend is declared. The shareholder is still responsible for paying taxes on the dividends earned. OR REINVEST (You pay CAPITAL GAINS taxes either way!

Question : A pharmacy is to drugs as the American Stock Exchange is to: A: B: C: D: Interest Stock advisors Securities Mutual funds

Question 18 A pharmacy is to drugs as the American Stock Exchange is to: Correct Answer C: Securities Reason : A pharmacy, run by a licensed pharmacist, is authorized by a state government to fill prescription orders. A stock or bond exchange is where registered stockbrokers buy and sell securities such as stocks or bonds (fill orders) for investors. Exchanges are similar to other marketplaces in that the prices of the goods (equities) change based upon the basic laws of supply and demand. YOU GET PRESCRIPTON DRUGS FROM A PHARMACY just like YOU GET SECURITIES from a STOCK EXCHANGE

Question : The annual percentage rate (APR) is: A: The true cost of credit that must be disclosed on a loan agreement B: Always expressed in dollars C: Required by the Securities Exchange Commission D: Required by the Comptroller of the Currency

Question 25 : The annual percentage rate (APR) is: Correct Answer : A: The true cost of credit that must be disclosed on a loan agreement Reason : The annual percentage rate (APR) is the true cost of credit because it takes into account all the costs of borrowing. The federal Truth in Lending Act requires that every consumer loan agreement disclose the APR in large, bold print

Question : Debbie owns a clothing store. She is concerned that a customer who is injured in the store will sue. Which type of insurance should Debbie purchase? A: B: C: D: Social insurance Life insurance Surety bonds Liability insurance

Question 29 : Debbie owns a clothing store. She is concerned that a customer who is injured in the store will sue. Which type of insurance should Debbie purchase? Correct Answer : D: Liability insurance Reason : A liability is legal responsibility for the financial cost of another person's losses or injuries. Despite taking great care, a person may still be held liable in a situation. Most basic property insurance covers liability up to a specific dollar amount. Additional amounts are frequently recommended.

Question : Margaret wants to store a valuable coin collection and important papers. Generally, consumers should: A: B: C: D: Store valuables in a cabinet at home Rent a safe deposit box for their valuables Hand valuables over to their attorney Store valuables in locked drawer

Question 33 : Margaret wants to store a valuable coin collection and important papers. Generally, consumers should: Correct Answer : B: Rent a safe deposit box for their valuables Reason : Bank customers can rent safe deposit boxes from the bank. They are metal boxes kept in the bank vault where customers often keep valuable papers, financial records, jewelry, and collections.

Question : Before a person borrows money from a bank to make a major purchase, which question is considered most important for the person to answer? A: Will I ever have to borrow money again from this bank? B: Will this item every go on sale or will it increase in value? C: Can I just pay for the item on a credit card and pay off the amount due each month? D: Do the benefits of making the purchase outweigh the costs of borrowing the money?

Question 1 : Before a person borrows money from a bank to make a major purchase, which question is considered most important for the person to answer? Correct Answer : D: Do the benefits of making the purchase outweigh the costs of borrowing the money? Reason : In making a major purchase that requires a person to borrow money, the individual needs to take into consideration the opportunity costs (what is the trade off in making this purchase) involved with borrowing money in addition to the actual cost of the item. For example, if someone has saved $2000 to buy a used car, is he or she better off buying the older car that may need some work or is the person better off taking out a loan for an additional $5000, paying the interest on the loan as well as the principal, and having a newer, hopefully more reliable car. Or, is the person just borrowing the money to purchase a car with more extras and glitz and would be just fine with the $2000 car.

Question : An example of closed-end credit is a A: B: C: D: major credit card. debit card. mortgage. cash card.

Question 2 : An example of closed-end credit is a Correct Answer : C: mortgage. Reason : Open-end credit is a revolving line of credit that is offered by banks and other lenders to consumers. There is a limit set on the line of credit and the funds are accessed using a credit or debit card or a check or cash advance. Consumers pay interest on the outstanding balance. There are closed -end mortgages which cannot be repaid in total before maturity without the permission of the mortgage holder. YOU CAN CLOSE THE DOOR on MOST things purchased with CLOSED-END Credit!

Question : A consumer is having a dispute regarding an unfulfilled building contract. It is decided that the case will go to mediation, which means that A: a neutral third party will hear both sides and then try to resolve the conflict. B: the judge and jury will decide who is right in court. C: each party involved must agree ahead of time to accept the outcome of the case. D: the dispute will be handled in small claims court.

A: a neutral third party will hear both sides and then try to resolve the conflict. • Just like a MEDIAN has two streets on either side, a Mediator listens to both sides and tries to work through the problem to resolve it for both parties. • It avoids court costs and lawyer fees.

Question : When securities are traded in the secondary market, who makes or loses money? A: B: C: D: Small businesses Creditors The SEC Investors

Question 7 : When securities are traded in the secondary market, who makes or loses money? Correct Answer : D: Investors Reason : After a share or bond is bought upon its initial issue, it is traded on the secondary market, and the company that issued the stock or bond receives no further profit. Most stocks and bonds are bought and sold by investors on the secondary market. A bond or a share of stock can be sold many times in the secondary market. The New York Stock Exchange, the American Stock Exchange, the NASDAQ, and the over-the-counter market are all part of the secondary market. INVESTORS MAKE or LOSE $$$$ on the Secondary Market! The company issuing stock or bond makes it the first time around ONLY!

Question : In terms of taxes, when stock dividends are reinvested, the owner of the stock A: does not have to pay income taxes on the dividends. B: still has to pay income taxes on the dividends. C: pays income taxes on the dividends only when the stock is sold. D: does not pay income taxes on the dividends unless there is a capital gain on the stock.

Question 8 : In terms of taxes, when stock dividends are reinvested, the owner of the stock Correct Answer : B: still has to pay income taxes on the dividends. Reason : When stock dividends are reinvested, the individual now has more stock in the company. However, the dividends are still taxed as income for the year since it is the money earned in the form of the dividend that is used to pay for the additional shares of stock.

Question : When an investor buys a zero-coupon bond, the investor A: receives the interest in a lump sum when the bond matures. B: agrees to obtaining a bond with a variable interest rate. C: purchases the bond at a discount from the face value of the bond. D: is buying a series of bonds that mature at different times.

Question 9 When an investor buys a zerocoupon bond, the investor Correct Answer C: purchases the bond at a discount from the face value of the bond. Reason : A zero-coupon bond is sold at a value far below its face value, makes no annual or semi-annual interest payments and is redeemed for its face value at maturity. The investor makes money by buying the bonds at the low price and redeeming the bonds at their higher face value at maturity. ZERO COUPON = DEEP DISCOUNT BONDS! Waaaay below face value—hold ‘em to redeem for $$ when they mature!

Question : A student’s grandmother has decided to buy a long term health care insurance policy. The student’s grandmother's decision is most likely related to the fact that this type of coverage A: B: C: D: is not offered by Medicare. pays for prescription drugs. allows extension of in-hospital acute care days. provides life-insurance benefits to heirs.

Question 11 : A student’s grandmother has decided to buy a long term health care insurance policy. The student’s grandmother's decision is most likely related to the fact that this type of coverage Correct Answer A: is not offered by Medicare. Reason : Medicare may not cover care in skilled nursing facilities beyond 100 days or nursing or custodial care at home. Long-term care insurance usually covers day-in, day-out assistance that elders may need as they age. Medicare doesn’t cover it—so I’m going to get my own long term health care insurance policy…JUST IN CASE! GRANDMOTHER’S MOTTO: ALWAYS BE PREPARED!

Question : A 60 -year-old makes a withdrawal from his Roth Individual Retirement Account (IRA). The money withdrawn will be A: B: C: D: tax free. taxed based on the interest earned. taxed at lower rate than regular earnings. looked upon as Social Security income.

Question: A 60 -year-old makes a withdrawal from his Roth Individual Retirement Account (IRA). The money withdrawn will be Correct Answer A: tax free. Reason : A Roth IRA (Individual Retirement Account) does not have immediate benefits, but the investment grows on a taxfree basis and when withdrawals are made, after the age of 59’s years of age, the withdrawals are exempt from federal and state taxes.

Question : In which situation is a corporation most likely to call (buy back) a bond? A: Its stock prices has fallen from $52 to $20 a share. B: It issued bonds at a 7. 5% interest rate, but its current corporate bonds are now being issued at a 5% rate. C: It is planning to issue more stock. D: It wants to diversify its public offerings.

Question 9 : In which situation is a corporation most likely to call (buy back) a bond? Correct Answer B: It issued bonds at a 7. 5% interest rate, but its current corporate bonds are now being issued at a 5% rate. Reason : A corporation is most likely to buy back a bond when the rate it was issued at is greater than the current rate that the corporation is issuing its bonds. This saves the company from paying a lot of extra in interest payments. Hey, Joe – call back those EXPENSIVE BONDS that PAY TOO MUCH INTEREST to the people we BORROWED from. If we give them a little incentive, they might sell us back these, so we only have cheaper bonds at a lower interest rate outstanding!

Question : A cash card generally: A: Can be used in the same way that someone uses a check to pay bills by mail B: Is purchased with a specific amount of money that can be used to pay for goods or services C: Is the same as a credit card which means you can use it to pay the minimum on a bill D: Is the same as a debit card and is always linked to a specific checking account

Question : Which of the following statements is usually true about individuals who are financially literate? A: They have high debt and low savings B: They understand the basics of personal finance and money management C: They almost always choose stocks and bonds that increase in value D: They achieve all of their financial goals

B. They understand the basics of personal finance and money management

Question : Nora needed to make a long-distance call from a pay phone and did not have the cash. She was able to make the call by using her: A: B: C: D: Credit card Identification card Cash card Traveler's check

Question 5 : Nora needed to make a long-distance call from a pay phone and did not have the cash. She was able to make the call by using her: Correct Answer : C: Cash card Reason : Consumers purchase cash cards for a specific amount of money. The amount paid is stored in the card's memory, and the card can be used to pay for goods or services specific to a particular store or action until the amount stored, or "loaded" on the card, has been spent. The type of cash card Nora used is called a phone card. Some retail chain stores sell cash cards which can be used to pay for their products. Cash cards are either disposable or re-loadable. Disposable cash cards cannot be replenished (loaded again). With reloadable cash cards, the consumer can return to the merchant and pay to have the balance on the card replenished.

Question : Which statement is FALSE about most ATM (Automated Teller Machine) cards? A: You must have an account with a financial institution to have an ATM card. B: You can always get cash anywhere in the world with no fee. C: You can generally obtain information concerning your account balance(s) at an ATM machine. D: You can generally get cash 24 hours a day, seven days a week.

Which statement is FALSE about most ATM (Automated Teller Machine) cards? Correct Answer : B: You can always get cash anywhere in the world with no fee. Reason : You must have a bank account to have an ATM card because the ATM card is used to electronically make deposits into, withdrawals from, or get information concerning your bank balance at an ATM 24 hours a day, seven days a week. If you use an ATM that is not in your bank? s ATM network, you will likely be charged a fee by the network that owns that ATM. In addition, your own bank may add a fee to your monthly statement for using an ATM outside their ATM network.

Question : Jami lost her debit card. She did not report it missing for 3 months. If an unauthorized person used her debit card, her maximum liability is: A: $50 B: $500 C: Unlimited liability D: No liability because she notified the financial institution

C. Unlimited DEBIT CARDS • Before anyone uses it -- $0 • Within 2 business days -- $50 • After 2 business days but within 60 days -- $500 • More than 60 days---unlimited

Question : Which of the following is a disadvantage of using phone cards, debit cards, electronic transfers, and ATM cards? A: Consumers can make purchases without of writing check B: They expose consumers to greater likelihood of identity theft C: They slow down the economy's recovery D: They decrease availability of currency in the economy

Question 3 : Which of the following is a disadvantage of using phone cards, debit cards, electronic transfers, and ATM cards? Correct Answer : B: They expose consumers to greater likelihood of identity theft Reason : The growing number of transactions that can be carried out without cash increases convenience for consumers who have credit cards, phone cards, debit cards, etc. , but also exposes consumers to greater likelihood of fraud and/or identity theft.

Question : Purchases made with your debit card are usually: A: Deducted immediately from your checking account B: Deducted from your credit card balance C: Added to your credit card balance D: Put on your credit card bill as a cash advance

Question 4 : Purchases made with your debit card are usually: Correct Answer : A: Deducted immediately from your checking account Reason : Debit card purchases are immediately deducted from your checking account balance while credit card purchases are added to your credit card balance. You have about 20 days after receiving a credit card bill to pay it without being charged interest. Through the use of a credit card, you get use of goods or services before they are paid for.

Question : Money in the United States includes: A: Gold B: Checking account balances on which checks can be drawn C: Barter D: Diamonds

Money in the United States includes: Correct Answer : B: Checking account balances on which checks can be drawn Reason : The total amount of money in the United States, termed the money supply, consists of coins, paper currency, checking account balances on which checks can be drawn, savings deposits, and time deposits such as CDs and money market funds. This measure of money, known as M 2, is followed by the Federal Reserve as a key indicator of economic well being.

Question : The primary sources of income for most people between the ages of 20 and 35 who are not living on a pension or social security are: A: B: C: D: Profits from business Dividends and interest Rents Salaries, wages, and tips

Question 9 : The primary sources of income for most people between the ages of 20 and 35 who are not living on a pension or social security are: Correct Answer : D: Salaries, wages, and tips Reason : The primary sources of income for most people between the ages of 20 and 35 are salaries, wages, and tips from their employment, also known as earned income. Earned income is also the primary source of income for most other age groups. Very few people have sufficient unearned income dividends, interest, rents, or profits - to live on without holding a job or running a business.

e to s u e v r e al Res r e d e F ply? p e u h t s s y e e o 's mon n What d o i t a n the regulate

Question 1 : Which of the following does the Federal Reserve use to regulate the nation's money supply? Correct Answer : C: Monetary policy Reason : The Federal Reserve uses monetary policy to regulate the nation's money supply. Monetary policy is directed at expanding or contracting the supply of money and credit in the U. S. economy. In theory, if there is too little money in circulation, consumers will spend less, interest rates will be high, and unemployment will rise. In this situation, the Fed can deliberately increase the amount of money in circulation, leading to lower interest rates, increases in consumer spending, and higher employment rates. If there is too much money in circulation, however, prices rise and the value of the dollar decreases (inflation).

Question : The Truth in Lending Act of 1968 requires creditors to: A: State the monthly finance charge and the Annual Percentage Rate on the monthly statement B: Adhere to federal fixed interest rates and state the monthly finance charge C: Have a clean record of services to credit card holders D: Limit the amount of money charged for credit

The Truth in Lending Act of 1968 requires creditors to: Correct Answer : A: State the monthly finance charge and the Annual Percentage Rate on the monthly statement Reason : The total finance charge for a billing period and the Annual Percentage Rate (APR) used to calculate the finance charge must be stated on the monthly credit card statement. There are no federally mandated interest rates or limits on the amount charged to customers for credit. —STATES ESTABLISH USURY LAWS!

Question : When Mary bought a DVD player, she charged it on her credit card. Her purchase created a(an): A: B: C: D: Reserve Debt Savings Investment

When Mary bought a DVD player, she charged it on her credit card. Her purchase created a(an): Correct Answer : B: Debt Reason : A debt is created when one person owes another person, company, organization, or government money. A credit debt may be created by making a purchase with a credit card, buying large items like a car or house using a credit contract, or getting a cash loan.

Question : A government report indicated that the use of Pax's aspirin-free painkiller resulted in 100 cases of stomach poisoning. A large number of Pax's stockholders are likely to: A: Buy shares causing the price of the stock to increase B: Sell shares causing the price of the stock to decline C: Not react, causing the price of the stock to remain about the same D: Buy Pax corporate bonds

A government report indicated that the use of Pax's aspirin-free painkiller resulted in 100 cases of stomach poisoning. A large number of Pax's stockholders are likely to: Correct Answer : B: Sell shares causing the price of the stock to decline Reason : The share price is likely to decrease because of the negative publicity and the costs associated with potential lawsuits and expenses the company will likely incur. If the company's other products are safe and they handle this problem responsibly, the problem may have only a temporary negative impact on its share price.

Question : If a business wants to raise capital but not create debt, it can: A: B: C: D: Float a bond issue Issue common stock Borrow money from a commercial bank Borrow money from the government

If a business wants to raise capital but not create debt, it can: Correct Answer : B: Issue common stock Reason : A company raises capital (money) when it issues stock. Since the corporation has not obligation to pay stockholders back the price of the stock, issuing stock does not create a debt, as does issuing bonds or borrowing money from a financial institution or the government.

Question : Gwen receives a bill from her auto insurance company, and she sends a check to the company to make sure her policy is not cancelled. The cost of her policy is called the: A: B: C: D: Co-insurance clause Premium Deductible Exclusion

Gwen receives a bill from her auto insurance company, and she sends a check to the company to make sure her policy is not cancelled. The cost of her policy is called the: Correct Answer : B: Premium Reason : The periodic payment made by a policy owner to keep the policy in force is called the premium. People can choose to pay the premium once a year (annually), semiannually, quarterly, or monthly. Paying a premium annually will cost the least.

Question : When Jessie needs health care, she must first go to her primary care physician who coordinates her care and decides whether Jessie should see a specialist. Jessie pays $10 as the co-pay when she sees her primary care doctor. Jessie has which type of health insurance? A: B: C: D: Fee-for-service health plan Managed care health plan Medicaid health plan Comprehensive health plan

When Jessie needs health care, she must first go to her primary care physician who coordinates her care and decides whether Jessie should see a specialist. Jessie pays $10 as the co-pay when she sees her primary care doctor. Jessie has which type of health insurance? Correct Answer : B: Managed care health plan Reason : A managed care health plan refers to prepaid health plans that provide comprehensive health care to members. They are offered by health maintenance organizations, preferred provider organizations, exclusive provider organizations, point-of-service plans, and traditional health insurance companies. While differing from one another, almost all managed care plans require the meeting with the primary care physician first, referral by the primary care physician to specialists, and co-payments.

What tax form will you probably fill out the first time you file taxes?

Question : the world? A: B: C: D: What is the largest equities market in American Stock Exchange (AMEX) NASDAQ market New York Stock Exchange (NYSE) Over-the-counter (OTC) market

The New York Stock Exchange NYSE Big Apple, Biggest Stock Exchange!

RULE of 72: HOW LONG IT WILL TAKE TO DOUBLE YOUR MONEY at a given INTEREST RATE= 72/r