Finance 101 Test 2

Investing and speculating are two entirely different activities. True
The term “investment’ refers to money placed in some medium where value and level of return are totally unpredictable. False
Common stock pays interest payments on a quarterly basis. False
Brokers charge a commission on security purchases as well as on security sales. True
A market order to sell would be filled at the highest price available that day. False
____ is a short-term investment activity. a. Buying life insurance b. Saving c. Investing in common stock d. Buying bonds e. Speculating in common stock Speculating in common stock
During a bull market a. prices go down b. investments are pessimistic c. prices go up d. cattle futures perform well e. prices remain stable prices go up
The most common reason given for investing is a. sheltering earnings from taxes. b. enhancing current income. c. paying for an expensive vacation. d. saving for college education. e. saving for retirement. saving for retirement.
You have been offered an opportunity to buy shares of a diversified collection of securities. You will be investing in a. bonds. b. mutual funds. c. real estate. d. stock opt ions. e. common stock. mutual funds.
The SIPC provides protection to the investor from a. low or missing dividend payments. b. declining security prices. c. brokerage firm failure. d. using margin requirements. e. none of these. brokerage firm failure.
Interest rate risk is greater for long-term bonds than for short-term bonds. True
The returns you expect from securities are income and growth. True
Bondholders will receive interest payments after the stockholders receive dividends. False
You received a stock dividend this year instead of cash. This is taxable income. False
You received a cash dividend from your stock investment this year. This is taxable income. True
In which of the following type of investment is the most liquidity risk? a. Mutual fund shares b. Land c. Corporate bonds d. Common stock e. Treasury bonds Land
The Smith family owns 200 shares of Elta stock. The company declared a 5% stock dividend. The Smiths now own a. 420 shares. b. 205 shares. c. 410 shares. d. 210 shares. e. 200 shares. 210 shares
Cash dividends on common stock are most often paid a. weekly b. semi-annually c. monthly d. quarterly e. annually quarterly
U-Need-This has $12 million liabilities, $12 million preferred stock, 10 million shares of common stock outstanding, and $39 million in total assets. The book value is a. $4.10 per share. b. $1.50 per share. c. $4.30 per share. d. $2.00 per share. e. none of the above. $1.50 per share
The ____ of a stock reflects stockholder confidence. a. par value b. face value c. dividend yield d. price/earnings ratio e. book value price/earnings ratio
A mutual fund allows investors to a. Trade stocks on the NASDAQ b. Instruct the purchase of specific securities c. Become owners of a widely diversified portfolio of securities d. Deduct unrealized losses from their taxes e. All of the above Become owners of a widely diversified portfolio of securities
The current market value of all the securities a mutual fund owns is called the a. book value. b. market value. c. liquidation value. d. net asset value. e. par value. net asset value.
An annual fee charged by some mutual funds to cover marketing and distribution expenses is the a. transaction fee. b. back-end load. c. 12(b)-1 fee. d. low-load. e. management fee. 12(b)-1 fee.
Both load and no-load funds will always charge a a. management fee. b. redemption fee. c. fee on the sale of the shares. d. 12(b)-1 fee. e. transaction fee. management fee.
The NAV of an open-ended mutual fund priced at $10 be if the load is 4%? a. $10.00 b. $9.20 c. $9.60 d. $9.40 e. $10.40 $9.60
To be a true no-load fund, there can be a maximum ____ load and a maximum ____ 12(b)-1 fee. a. 0%; 0.25% b. 0%; 1.00% c. 0%; 0.00% d. 3%; 1.00% e. 3%; 0.25% 0%; 0.25%
A(n) ____ fund is quite speculative. a. growth b. money market c. aggressive growth d. balanced e. equity income aggressive growth
Which of the following bond mutual funds would provide tax-free income? a. government bond fund b. mortgage-backed bond fund c. municipal bond fund d. convertible bond fund e. all of the above municipal bond fund
Most mutual funds allow investors to participate in a. Automatic reinvestment plans b. Automatic investment plans c. DRIP plans d. a and b above e. a and c above a and b above
Future fund performance is the real key to investment success with mutual funds. One important element to examine when attempting to predict a fund’s future performance is the a. fund’s past performance. b. future course of the market. c. performance of other funds. d. nature of the fund being considered. e. all of the above. future course of the market.
The basic purpose of insurance is to protect you from the results of accidental losses. True
Risk avoidance means asking an insurance company to take over the risk for a small payment (the premium). False
Avoiding alcoholic beverage while driving is an example of risk reduction. True
Guaranteed renewable term insurance allows you to renew the policy for another term without qualifying medically. True
Annual term insurance premiums increase as you get older while whole life insurance premiums remain constant. True
Social security benefits are often available resources to the family after the death of a family member. True
Credit life insurance is often a legal requirement when you buy something on credit. False
Which of the following forms of life insurance requires the lowest premium per dollar of initial death benefits? a. whole life b. adjustable whole life c. universal life d. term life e. variable life term life
The needs approach to determining the amount of life insurance considers a. special financial needs. b. paying off debts. c. liquidity. d. family income. e. all of these. all of these.
Marilyn Simms died with a $200,000 life insurance policy. Her husband, Jack, was the primary beneficiary and their children, Mimi (age 24) and Ann (age 30), were the contingent beneficiaries. All three survived Marilyn. How would the policy proceeds be distributed? a. $100,000 to Jack and $50,000 each to Mimi and Ann b. $66,666 each to Jack, Mimi, and Ann c. $200,000 to Jack d. $100,000 each to Mimi and Ann e. $150,000 to Jack and $25,000 each to Mimi and Ann $200,000 to Jack
Group health insurance premiums are usually lower than individual health insurance premiums. True
When you are hospitalized for surgical care, surgical expense coverage will pay the hospital bill. False
In insurance terminology, “participation” and “coinsurance” mean the same thing. True
Comprehensive major medical simply increases the policy limits of major medical insurance without changing the coverage. False
Hospital expense coverage is adequate for long-term or catastrophic medical needs of most people. False
Workers’ compensation is a state program that provides benefits for a. unemployed workers. b. workers suffering injury or illness on the job. c. any injury suffered by a worker at any time. d. injuries resulting from employer’s negligence. e. only b and d. only b and d.
Ben’s health coverage charges a low ($15) deductible each time he visits the doctor or hospital. Other than the low per-service deductible, there is very little cost sharing. However, Ben must go to the health care providers listed by the provider of the health coverage. If he goes to a provider that is not on the list, there is very little coverage. Which of the following types of entity most likely provides Abe’s health coverage? a. commercial insurer (major medical) b. HMO c. PPO d. fee-for-service indemnity plan e. Blue Cross/Blue Shield association HMO
Suppose a person has a health insurance policy with a $500 calendar year deductible, a $2,000 out-of-pocket cap, and an 80% coinsurance provision. If this person suffers a $600 covered loss, how much will the insurance company pay? (Assume no previous losses have occurred.) a. $100 b. $ 80 c. $600 d. $480 e. some other amount $80 (600 – 500 = 100 x 0.80 = 80)
Nick has a comprehensive health care policy with a $250 per calendar year deductible and 80%-20% with a maximum $1,000 copayment cap per calendar year. In January, Nick had a $600 claim which the insurance company paid $280. Nick experiences another unrelated claim in October resulting in total bills of $5,000. How much will Nick have to pay for the second claim? a. $3,930. b. $1,800. c. $5,000. d. $ 930. e. none of the above. $930
A characteristic of dental insurance is a. lack of orthodontic coverage. b. high deductible limits. c. low maximum limits. d. high cost. e. dentist financing. low maximum limits.

Leave a Reply

Your email address will not be published. Required fields are marked *