Question 1.1. (TCO 1) Which aspect of financial planning deals with the purchase of long-term growth funds such as stocks? (Points : 4)  Borrowing         Spending         Managing risk         Investing         Retirement and estate planning Question 2.2. (TCO 1) Jack Johnson is interested in purchasing new furniture that currently costs $2,000. He is not sure if he can afford the furniture now, but is afraid the cost of the furniture will increase to $3,000 in 6 months. Which type of risk is Jack worried about? (Points : 4)  Inflation risk         Interest rate risk         Income risk         Personal risk         Liquidity risk Question 3.3. (TCO 1) Which step in the financial planning process is demonstrated by a situation in which Royanne partially retires and travels to Europe using less costly transportation in order to save more money for the trip? (Points : 4)  Developing her financial goals         Identifying alternative courses of action         Evaluating her alternatives         Implementing her financial plan         Reviewing and revising her financial plan Question 4.4. (TCO 1) When retirement contributions made on your behalf where you work fully belong to you even if you leave the company, this is called the point of (Points : 4)  networking.         vesting.         a tax-deferred benefit.         a tax-exempt benefit.         break even. Question 5.5. (TCO 1) When you take the time to review a variety of job search websites and find 10 potential employment opportunities that fit your skills and abilities, which step in the career planning process have you completed? (Points : 4)  Assess and research personal goals and abilities.         Evaluate the employment market to identify specific employment opportunities.         Develop a resume and cover letter to apply for specific positions.         Interview for specific positions and assess the interview performance.         Evaluate financial and other factors of positions offered. Question 6.6. (TCO 1) This month, Ken Grossman has cash inflows of $3,500 and cash outflows of $2,350, resulting in a (Points : 4)  balanced budget.         surplus of $1,150.         deficit of $1,150.         surplus of $3,500.         deficit of $2,350. Question 7.7. (TCO 1) The best example of a current liability would be which of the following? (Points : 4)  Monthly balance due on a credit card         Total amount of a mortgage         Balance of a student loan         Total of a home improvement loan         Balance of an auto loan Question 8.8. (TCO 1) An example of _____ is a situation in which you would use a software program to help track your spending each week. (Points : 4)  money management         an opportunity cost         a balance sheet         creative accounting         electronic analysis Question 9.9. (TCO 2) The _____ tax is an additional tax that many taxpayers with high incomes and high amounts of deductions must pay. (Points : 4)  deferred      ...

1. Question 1.1. (TCO 1) Which aspect of financial planning deals
with the purchase of long-term growth funds such as
stocks? (Points : 4)
Borrowing
Spending
Managing risk
Investing
Retirement and estate planning
Question 2.2. (TCO 1) Jack Johnson is interested in purchasing
new furniture that currently costs $2,000. He is not sure if he
can afford the furniture now, but is afraid the cost of the
furniture will increase to $3,000 in 6 months. Which type of
risk is Jack worried about? (Points : 4)
Inflation risk
Interest rate risk
Income risk
Personal risk
Liquidity risk
Question 3.3. (TCO 1) Which step in the financial planning
process is demonstrated by a situation in which Royanne
partially retires and travels to Europe using less costly
transportation in order to save more money for the trip? (Points
: 4)
Developing her financial goals
Identifying alternative courses of action
Evaluating her alternatives
Implementing her financial plan
Reviewing and revising her financial plan

2. Question 4.4. (TCO 1) When retirement contributions made on
your behalf where you work fully belong to you even if you
leave the company, this is called the point of (Points : 4)
networking.
vesting.
a tax-deferred benefit.
a tax-exempt benefit.
break even.
Question 5.5. (TCO 1) When you take the time to review a
variety of job search websites and find 10 potential employment
opportunities that fit your skills and abilities, which step in the
career planning process have you completed? (Points : 4)
Assess and research personal goals and abilities.
Evaluate the employment market to identify specific
employment opportunities.
Develop a resume and cover letter to apply for specific
positions.
Interview for specific positions and assess the interview
performance.
Evaluate financial and other factors of positions offered.
Question 6.6. (TCO 1) This month, Ken Grossman has cash
inflows of $3,500 and cash outflows of $2,350, resulting in
a (Points : 4)
balanced budget.
surplus of $1,150.
deficit of $1,150.
surplus of $3,500.
deficit of $2,350.
Question 7.7. (TCO 1) The best example of a current liability
would be which of the following? (Points : 4)

3. Monthly balance due on a credit card
Total amount of a mortgage
Balance of a student loan
Total of a home improvement loan
Balance of an auto loan
Question 8.8. (TCO 1) An example of _____ is a situation in
which you would use a software program to help track your
spending each week. (Points : 4)
money management
an opportunity cost
a balance sheet
creative accounting
electronic analysis
Question 9.9. (TCO 2) The _____ tax is an additional tax that
many taxpayers with high incomes and high amounts of
deductions must pay. (Points : 4)
deferred
bonus
excess
capital gains
alternative minimum
Question 10.10. (TCO 2) A _____ is an employer-sponsored
program that allows a taxpayer to cover medical and child care
costs. (Points : 4)
tax credit
tax deduction
flexible spending account
tax-deferred investment
tax-exempt investment

4. Question 11.11. (TCO 2) A savings account earns 3.5%. If the
saver is in a 28% tax bracket, the after-tax savings rate of return
would be _____. (Points : 4)
3.5%
2.52%
4.00%
.98%
2.25%
Question 12.12. (TCO 2) A drawback of a money market fund
from an investment company is that there is (Points : 4)
a penalty if money is withdrawn early.
a lower rate of interest if redeemed within the first 5
years.
a minimum required holding period.
a lack of FDIC insurance.
a higher rate of taxation than other alternative
investments.
Question 13.13. (TCO 3) All of the following are examples of
closed-end credit except a(n) (Points : 4)
home mortgage.
installment loan to purchase new furniture.
line of credit from your bank.
automobile loan.
single lump sum credit loan due in 90 days.
Question 14.14. (TCO 3) If a bank is attempting to evaluate the
trade-in value of a 2006 SUV when Anna McFarland is applying
for a used car loan, the bank is examining which of the
five Cs? (Points : 4)
Character

5. Capacity
Capital
Collateral
Conditions
Question 15.15. (TCO 3) An example of a credit bureau would
be (Points : 4)
Equitron.
Transexpress.
the Better Business Bureau.
Experian.
FICO.
Question 16.16. (TCO 3) A _____ would require that Jessica
writes a check for $125 in order to obtain a loan for
$100. (Points : 4)
credit union
payday advance company
finance company
department store
commercial bank
Question 17.17. (TCO 3) Newton Jones made a 20% down
payment of $15,000 on a new car. This is an example of _____
in order to reduce lender risk.(Points : 4)
sharing the interest rate risk with his lender
pledging valuable assets that can be seized if the loan is
not repaid
taking a larger stake in the asset he is purchasing
repaying the loan over a faster period of time
None of the above

6. Question 18.18. (TCO 3) If Terry White would default on his
loan that he was approved for in order to purchase a Chevrolet,
then (Points : 4)
an advance notice would be required before his car was
repossessed.
no advance notice would be required before repossession.
the federal consumer credit laws would give him
protection from his car being repossessed.
he wouldn't have to pay the full balance due on his
automobile loan.
he would pay 50% of the balance due on his automobile
loan.
Question 19.19. (TCO 5) When researching current price
information for a bond or stock investment, the most readily
available source of information for most consumers can be
found within (Points : 4)
the daily newspaper.
government publications.
corporate reports.
investor newsletters.
business periodicals.
Question 20.20. (TCO 5) If Hugh is considering a risky
investment that can provide him with a large profit in a short
amount of time, most likely, he is interested in investing
in (Points : 4)
U.S. Treasury bills.
certificates of deposit.
low-growth stocks.
speculative stocks.
low-risk bonds.

7. Question 21.21. (TCO 5) The purpose of asset allocation is
to (Points : 4)
reduce risk.
increase growth.
lower liquidity.
provide a high return.
increase income.
Question 22.22. (TCO 5) _____ involves the analysis of charts
and historical data in order to make stock purchasing
decisions. (Points : 4)
Fundamental
Technical
Efficient market
Chart
Plot
Question 23.23. (TCO 5) A(n) _____ market is one in which
previously issued financial securities are traded among
investors. (Points : 4)
technical
fundamental
efficient
secondary
primary
Question 24.24. (TCO 5) ABC Corporation has assets that total
$15 million and liabilities that total $4 million. It also has
500,000 shares of stock outstanding. What is ABC's book value
per share? (Points : 4)
$8
$38
$22

8. $8
$30
Question 25.25. (TCO 5) Scott Turner has a bond with 10 years
to maturity, a face value of $1,000, a 7% interest rate, and a
market price of $800. What is the yield to maturity on this
bond? (Points : 4)
8.00%
11.00%
7.00%
10.00%
11.11%
Question 26.26. (TCO 5) A _____ is created when bonds are
issued, and it allows the issuer to set aside money periodically
for the purpose of redemption. (Points : 4)
serial
default
sinking fund
low coupon
convertible
Question 27.27. (TCO 5) What is the current yield for a $1,000
corporate bond that pays 9% and has a current market value of
$825? (Points : 4)
9.0%
10.9%
10.0%
8.25%
8.0%
Question 28.28. (TCO 3) All of the following are disadvantages

9. of leasing a vehicle except (Points : 4)
automatic ownership interest in the car.
unlimited mileage on the car.
no need to meet credit requirements.
lease payments are likely to be lower than loan payments.
All of the other answers are advantages.
Question 29.29. (TCO 1) Melba Anderson has a document that
allows her new microwave to be repaired or replaced within a
certain time frame if it stops working. She has a (Points : 4)
coupon.
rebate.
warranty.
rain check.
class action suit.
Question 30.30. (TCO 3) A credit purchase with 24 monthly
payments of $80 and a down payment of $125 would have a
total cost of (Points : 4)
$2,000.
$1,795.
$2,045.
$1,920.
$1,085.
Question 31.31. (TCO 3) When a loan is made based on the
equity value of a home and the loan provides a homeowner with
tax-free income until the home is sold (to pay back the loan),
this is called a(n) (Points : 4)
conventional mortgage.
growing equity mortgage.
second mortgage.
reverse mortgage.

10. adjustable-rate mortgage.
Question 32.32. (TCO 4) Your home insurance policy has a
$250 deductible. If hail causes $1,500 damage to your home,
what amount of the claim would the insurance company
pay? (Points : 4)
$1,750
$1,250
$1,500
$250
$0
Question 33.33. (TCO 4) John Brown owns a home in Oakland,
California and because of the risk of earthquakes, he decides to
purchase _____ to cover potential losses. (Points : 4)
building and other structures
additional living expenses
personal property
personal liability
specialized coverage
Question 34.34. (TCO 4) Angela has a policy that includes a
$250 deductible and a coinsurance provision requiring her to
pay 20% thereafter. Her medical bills total $5,500. What
amount is she required to pay personally? (Points : 4)
$1,050
$300
$5,500
$5,500
$1,300
Question 35.35. (TCO 4) Medigap insurance is sold and

11. serviced by (Points : 4)
the federal government.
state governments.
both federal and state governments.
private insurance companies.
both the government and private insurance companies.
Question 36.36. (TCO 4) A(n) _____ is an addendum to a life
insurance policy that can add additional benefits, such as an
accidental death benefit payable to a beneficiary. (Points : 4)
accelerated benefits clause
policy dividend
guaranteed insurability clause
second-to-die rider
double indemnity rider
Question 37.37. (TCO 4) If Franseca has a term life insurance
policy that is _____, this means that she can exchange the
policy into a whole life policy without the need for a medical
examination. (Points : 4)
straight
renewable
convertible
decreasing
accelerated
Question 38.38. (TCO 6) The Capitalist Mutual Fund's net asset
value is $28.25. The fund has liabilities of $3 million and
1,600,000 shares have been issued. What is the value of the
fund's portfolio? (Points : 4)
$42 million
$45.2 million
$48 million

12. $48.2 million
$3 million
Question 39.39. (TCO 6) Mickey Thomas plans to invest in a(n)
_____ because he is interested in a fund that invests in
European companies. (Points : 4)
aggressive growth fund
equity income fund
global fund
international fund
regional fund
Question 40.40. (TCO 6) One disadvantage associated with real
estate investments is that an investor must
face (Points : 4)
lack of involvement in property maintenance.
a hedge against inflation.
illiquidity.
lack of financial risk.
possible high capital requirements for total venture.
Question 41.41. (TCO 6) If Wilson Fischer has purchased 10
rare silver coins from a broker, he is investing in (Points : 4)
direct investment in real estate.
indirect investment in real estate.
precious metals.
ceramics.
gems.
Question 42.42. (TCO 6) If Jeremiah's employer makes
nontaxable contributions to a plan in his name and his salary is
reduced by the same amount, Jeremiah has a (Points : 4)

13. money-purchase pension plan.
stock bonus plan.
profit-sharing plan.
defined benefit plan.
403(b) plan.
Question 43.43. (TCO 6) Randall owns a condo worth $240,000,
a car valued at $25,000, and miscellaneous assets worth $7,500.
He owes $185,000 on the condo and $15,000 on the car and has
no other debts. His retirement account, in which he is fully
vested, contains $27,500 in mutual funds. He is insured with a
$500,000 term life insurance policy. What is his net
worth? (Points : 4)
$92,500
$115,000
$100,000
$592,500
$600,000
Question 44.44. (TCO 7) Brenda wants to leave a message of
encouragement to her grandchildren just in case something
happens to her in the near future. She would be interested in
preparing a(n) (Points : 4)
ethical will.
durable power of attorney.
letter of last instruction.
codicil.
formal will.
Question 45.45. (TCO 7) Samantha has been designated as the
recipient of her sister's assets in the event of her death. This
means that Samantha is her sister's (Points : 4)
executor.

14. trustee.
guardian.
beneficiary.
agent.
Question 1.1. (TCO 1) Your brother-in-law has come to you in
confidence expressing a concern with managing his finances.
Your initial recommendation is that he consider using a budget.
How would you explain the purpose of a budget and what would
you suggest that he take into consideration in order for the
budgeting process to be successful? (Points : 10)
Question 2.2. (TCO 2) What are the advantages of a Roth
IRA? (Points : 10)
Question 3.3. (TCO 3) Kelly Manchester wants to know what
price home she can afford. Her annual gross income is $45,000.
She owes $750 per month on other debts and expects her
property taxes and homeowners insurance to cost $250 per
month. She knows she can get a 7.0%, 30-year mortgage, so her
mortgage payment factor is 6.65. She expects to make a 20%
down payment. What is Michelle's affordable home purchase
price? Assume a lender will use a 38% monthly gross income
guideline. Round your answer to the nearest $100. (Points : 10)
Question 4.4. (TCO 3) Identify two or three sources of
consumer credit and discuss the advantages and
disadvantages of each type selected. (Points : 10)
Question 5.5. (TCO 5) Clayton and Barbara Patterson were
married immediately after graduating from college and have
been married for 20 years. They both started investments early
in life, but the majority of their funds were placed in

15. speculative stock funds. Their portfolios performed well until
the last few years, when they faced losses due to an economic
downturn. Explain how asset allocation could have helped the
Pattersons.(Points : 10)
Question 6.6. (TCO 7) What is the difference between
retirement and estate planning? (Points : 10)