personal finance

a Which one of the following investments offers the greatest liquidity? A. savings accountB. common stockC. corporate bondD. real estateE. collectibles
e What is the primary goal of asset allocation? A. investment incomeB. growthC. liquidityD. returnE. risk reduction
c Which one of the following individuals should have a higher tolerance for risk? A. Joan Cummings who is a single mother with two small childrenB. Darren Carter who works for American Airlines and is worried that he is going to be laid off soonC. Barry Parks, a 26-year old investment banker who earns over $200,000 per year and is saving for retirementD. Michael Clark who is 74 years old and has been retired for 6 yearsE. Fred Funderbunk who is a pizza delivery person and makes about $15,000 per year
c Based on historical performance, which one of the following investments is most apt to provide an average return of 10 percent a year between now and the year 2025? A. U.S. Treasury billsB. corporate bondsC. stocksD. optionsE. zero-coupon bonds
a Which one of the following investments would rank the highest with regard to safety? A. government bondB. common stockC. preferred stockD. corporate bondE. real estate
a The money obtained by a company from selling corporate bonds: A. is obtained from lenders.B. is obtained from the owners of the business.C. is obtained from employee stock option programs.D. does not have to be repaid.E. must be allocated to retirement programs.
d Which one of the following is false? A. Most mutual funds invest in stocks, bonds, and other securities.B. Diversification provided by a mutual fund reduces risk.C. The goals of one mutual fund investor may differ from those of another.D. Since mutual fund managers are professionals, there is no need to evaluate a mutual fund.E. Mutual fund investments range from very conservative to very speculative investments.
e Jeff Goldblum has just purchased a security which has no maturity date and no promised payments. He can recoup his investment by either selling the security to another individual or to the issuer, if the issuer ever makes an offer to buy it. What type of security did Jeff purchase? A. stock optionB. corporate bondC. government bondD. preferred stockE. common stock
d James Green just bought a security which he expects will provide him with a quarterly cash payment, although that payment is not guaranteed. In fact, he expects the amount of the payment to vary over time. What type of payment is he expecting to receive? A. option premiumB. interestC. capital gainD. dividendE. rebate
b Equity financing is a popular choice to provide long-term financing for a corporation because: A. a lender is always available to provide this type of financing.B. it does not have to be repaid.C. repayment doesn’t have to be made for ten years or more.D. only interest must be paid for the first five years.E. it does not cost anything to sell in the primary market.
d If the board of directors approves a two-for-one stock split, an investor who owns 150 shares before the split will own ____________ shares after the split. A. 75B. 150C. 225D. 300E. 450
a Which one of the following statements is true? A. It is possible to obtain financial information about a corporation that issues stock by using the Internet.B. While it is possible to obtain information about a company by accessing the Internet, the information is usually out of date.C. You can use an Internet search engine to only access a company’s price information.D. Corporations have web pages but do not provide any financial information on them.E. By using the Yahoo! Finance web site, investors can access financial information only about the economy as a whole
b Assume that you purchase a $1,000 corporate bond at par value that has a 9.25 percent coupon rate of interest. What is the amount of interest income that you would receive each year? A. $1,000.00B. $92.50C. $92.00D. $90.00E. $9.25
b A corporate bond that is secured by various assets of the issuing firm is called a(n) ____________ bond. A. debentureB. mortgageC. indentureD. preemptiveE. treasury
c A call feature: A. allows bondholders to convert their bond to a specified number of shares of common stock.B. is not available on corporate bonds.C. allows the corporation to buy outstanding bonds from current bondholders before the maturity date.D. is only available with government securities.E. is guaranteed by the corporation.
b If overall interest rates in the economy rise, a corporate bond with a fixed interest rate will generally: A. increase in value.B. decrease in value.C. remain unchanged.D. become worthless.E. be returned to the corporation.
c What is the approximate market value of a $1,000 corporate bond that pays 8 percent interest when comparable bonds are paying 9 percent interest? A. $80B. $90C. $889D. $1,000E. $1,125
a When investors build a portfolio of bonds that mature at regular intervals in order to increase liquidity and raise portfolio return, they are creating a: A. laddered bond portfolio.B. staggered investment program.C. incremental investment program.D. step-up allocation program.E. guaranteed investment program.
c You are a taxpayer in the 30 percent tax bracket and you own a tax-exempt bond that pays 5 percent. What is your taxable equivalent yield? A. 4.00 percentB. 5.00 percentC. 7.14 percentD. 9.20 percentE. 14.40 percent
d Which one of the following statements is false? A. An exchange-traded fund invests in the stocks or securities contained in a stock or securities index.B. With an exchange-traded fund, an investor can purchase as little as one share.C. The return on shares in an exchange-traded fund tends to mirror the performance of the index.D. A passively-managed exchange-traded fund manager needs to make more decisions than an actively-managed mutual fund manager.E. Exchange-traded funds are increasing in popularity.
b A mutual fund in which shares are issued and outstanding and trade without direct relation to the assets in the fund is called a(n) ____________ fund. A. closed-endB. open-endC. loadD. no-loadE. convertible
c A mutual fund in which investors pay a commission every time they purchase shares is called a(n) ____________ fund. A. closed-endB. open-endC. loadD. no-loadE. convertible
b All the different fees and fund operating costs are often referred to as a(n): A. investment ratio.B. expense ratio.C. financial ratio.D. expense turnover.E. management ratio.
b A mutual fund that invests in common stocks of rapidly growing corporations with higher-than-average revenue and earnings growth is called a(n) ____________ fund. A. balancedB. growthC. industryD. incomeE. money market
d Which one of the following statements is false? A. The responsibility for choosing the right mutual fund rests with the individual investor.B. Professional fund managers do make mistakes.C. Although investing in mutual funds provides professional management, individual investors should continually evaluate their mutual fund investments.D. There is no need to evaluate mutual fund investments because investment companies hire the best professional managers they can to manage their funds.E. Individual investors should be involved in choosing a mutual fund because they know how the objectives of a mutual fund match their own investment objectives.
e Which of the following is an advantage of an exchange traded fund (ETF)? A. no minimum investment amountB. buying and selling shares through a broker at any time at the current market priceC. low management feesD. using limit orders to both buy and sellE. all of the other answers
d Real estate investments are classified as: A. participating or nonparticipating.B. common or preferred.C. cumulative or noncumulative.D. direct or indirect.E. none of the other answers.
b An example of a direct real estate investment is a: A. limited partnership.B. commercial office building.C. real estate syndicate.D. real estate investment trust.E. mortgage pool.
a The prices of single-family houses: A. tend to rise over time, the rate of inflation is a good estimate for the rate of increase, thereby acting as a hedge against inflation.B. rise less than the Consumer Price Index.C. always increase in value.D. tend to be countercyclical, thereby acting as a hedge against the business cycle.E. remain constant over time.
c An example of an indirect real estate investment is: A. a single-family home.B. a duplex.C. a real estate investment trust (REIT).D. land.E. an apartment building
b Andrea Mitchell has joined a real estate syndicate. The syndicate she belongs to was formed by one individual who sold participation units to Andrea and several others. The individual who sold the participation units has unlimited liability and manages the property. Andrea and the others can only lose their initial investment. What type of real estate syndicate has Andrea joined? A. one organized as a corporationB. limited partnershipC. trustD. REITE. real estate mutual fund
e For the average individual, which one of the following statements is most likely correct regarding retirement? A. My costs of daily living will decrease significantly once I retire.B. I can only expect to live about ten years in retirement, so I don’t need to save all that much money.C. Once I retire, all my medical bills will be paid by Medicare.D. My employer’s pension plan will provide sufficient income to meet all my retirement needs.E. I should be aware to save what I can, even if it’s a small amount, to help cover my retirement costs.
e Which of the following is a true statement about retirement planning? A. You can expect to spend about 16 to 30 years in retirement.B. It’s never too early to begin planning for retirement.C. You should not let your 45th birthday roll by without a comprehensive retirement plan.D. Retirement planning has both emotional and financial components.E. All of the other statements are true
d Which statement is most likely correct about retirement planning? A. Social Security will cover most of your expenses.B. Your employer’s pension combined with your Social Security will cover your retirement expenses.C. Most retirees don’t need to worry about inflation.D. Your pension may remain constant even in an inflationary environment.E. Your living costs will remain constant once you retire.
e Why is financial planning for retirement vitally important? A. You can expect to live in retirement for many years.B. Social Security and your private pension may be insufficient to cover the cost of living.C. Inflation may diminish the purchasing power of your retirement savings.D. Knowing that you are financially prepared for retirement gives you peace of mind.E. All of the listed factors are vitally important.
a Which one of the following expenditures for retirees is most likely to increase? A. health careB. federal income taxesC. clothing expensesD. work-related expensesE. state income taxes
e Which employer retirement plan specifies the benefits promised to the employee at the normal retirement age? A. defined-contribution planB. SEP IRAC. 401(k)D. Roth IRAE. defined-benefit plan
e Possible sources of income for many retirees include: A. Social Security.B. other public pension plans.C. employer pension plans.D. personal retirement plans and annuities.E. all of the sources listed in the other answers.
e Estate planning involves which of the following? A. managing your property while you are aliveB. dealing with what happens to your property after your deathC. your family’s financial security in the event of your deathD. your family’s financial security in the event of your spouse’s deathE. all of the activities listed in the other answers
a Estate planning has two parts. The first part consists of: A. building your estate through savings, investments, and insurance.B. transferring your estate to heirs in the manner you have specified.C. deciding who is going to get what.D. evaluating your assets and liabilities.E. planning for the period right after you die.
b Estate planning has two parts. The second part of estate planning consists of: A. building your estate through savings.B. transferring your estate in the manner you have specified.C. deciding who should be your attorney.D. evaluating your assets and liabilities.E. buying life insurance.
a A will is: A. the legal declaration of a person’s wishes as to the disposition of his or her property after his or her death.B. a synonym for a prenuptial agreement.C. a legal document authorizing someone to act on your behalf.D. a synonym for a letter of last instruction.E. a legal arrangement through which your assets are held by someone else.
e If you die without a valid will (intestate): A. the IRS confiscates your property.B. a federal court decides how your property will be distributed.C. your closest relative will receive all your property according to federal law.D. your letter of instruction becomes your will.E. your state’s law of descent and distribution becomes your will and determines distribution of your assets.
a Which one of the following wills is called an “I love you” will and leaves everything to your spouse? A. simple willB. traditional marital shareC. exemption trustD. stated dollar amountE. living
e Which of the following would be a benefit of establishing a trust? A. It can reduce or provide payment for estate taxes.B. It can allow you to avoid probate and transfer assets immediately to beneficiaries.C. It can free you from managing your assets, while providing you a regular income.D. It can ensure that your property serves a desired purpose after you die.E. A trust can do everything listed in the other answers.
e A federal tax levied on a deceased person’s property being transmitted to his or her heirs at death is called a(n) ____________ tax. A. exemption B. trust incomeC. inheritanceD. giftE. estate

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