Finance Exam 3

Taxes are collected on a pay-as-you-go basis. True
Adjusted gross income is your total gross income adjusted for inflation. False
The impact of taxes are an important consideration in most of the financial decisions that you will make. True
What is an income tax filing status? Married filing jointly and surviving spouses
The amount of income taxes that you actually pay is based upon your… Taxable income
The Federal Insurance Contributions Act​ (FICA) tax deducted from your salary goes to pay for unemployment insurance. False
FICA deductions from your paycheck are for which mandatory federal insurance​ programs? – Social Security- Medicare
Tax credits reduce your taxes on a dollar for dollar basis. True
Passive income from activities in which the taxpayer does NOT actively participate
advantage of filing electronically – quick conformation- more accurate returns- faster refunds
Gross income is another name for… Total income
Social Security is a voluntary insurance program administered by the federal government that provides for you and your family in the event of​ death, disability, health​ problems, or retirement. False
Standard deductions need yearlong recordminus−keeping and thorough and accurate documentation. False
Offset your tax liability in a direct dollar for dollar manner Tax credit
Paying taxes on prize won on game show are based on… Fair market value
Personal liability insurance protects you from financial losses incurred if someone is injured on your property or as a result of your actions. True
Fire, theft, and windstorm damage are examples of… Perils
A lower insurance credit score generally results in lower​ homeowner’s insurance rates. False
What determines cost of homeowner’s insurance? – level of coverage and policy type- type of structure- location
Since there were no witnesses to the robbery at your​ apartment, there is no reason to contact the police. False
​Felix’s $2,000 TV was stolen. He has no record of its​ purchase, however, he knows his insurance company will reimburse him the full value of the TV. False
To effectively collect on a loss when filing a​ homeowner’s claim, the first step should be Report your loss to insurance agent, and the police if applicable
In​ 2014, at least 26 percent of all auto collisions involved cell phones. True
Each automobile policy contains both liability and property damage coverage. True
Uninsured​ motorist’s protection coverage provides coverage for injuries caused by an uninsured​ motorist, a negligent driver whose insurance company is not​ solvent, or a hit-and-run driver. True
Two of the determinants of the cost of your automobile insurance are the use and type of your automobile. True
Real estate investments are more liquid than stocks most of the time. False
Stocks represent a legal obligation for the issuing company to pay​ dividends, whether the company has made a profit or not. False
A lending type​ investment, such as a corporate​ bond, represents a legal obligation for the issuer to pay its creditors back. True
The difference between an investment and speculation is that an investment​ ________ while speculation depends solely on​ ________ to produce results. Generates a return; supply and demand
The real rate of return is the rate of return earned on an investment without any adjustment for inflation. False
The higher your marginal tax bracket, the less attractive tax-free investments become. False
One of the most important types of risk associated with real estate is the liquidity risk True
​Typically, the closer you get to​ retirement, the smaller the proportion of your retirement funds that should be invested in common stocks. True
The more efficient the market, the faster prices react to new information True
An individual selling previously issued shares to another individual is a transaction that would be traded in the primary maket False
An initial public offering is the first time the company’s stock is traded publicly True
As the owner of a corporate bond this means I hold an ownership position within that corporation False
Investing in bonds is generally less risky than investing in stocks True
An option gives you the right to buy or sell the underlying asset at a set price on or before the option’s maturity date True
A company that doesn’t make a dividend payment is insolvent and may be forced into bankruptcy by the stockholders False
Stocks and income-producing real estate are examples of what types of investments… Ownership
Jennifer has money in stocks. She earns a return on her investments, which is a portion of the company’s profits called… Dividends
If you earned a negative​ 5% return on your investments while the overall stock market was down​ 9% then you have outperformed the market. True
When a stock price reflects all relevant information about the​ stock, the market is said to be Efficient
A primary market is a market in which​ new, as opposed to previously​ issued, securities are traded. True
Limited liability associated with stock ownership means that shareholders can only lose the amount of money they have invested in the company. True
Some companies distribute earnings per share in the form of dividends and some retain these earnings for future investment in the firm. True
Stock splits increase the number of the shares you​ own, but decrease the value of your total holdings with the company. False
You cannot benefit from capital appreciation until you actually sell your stock. True
Both capital gains and dividends are guaranteed with common stock. False
Microsoft is an example of a company whose common stock is considered to be a growth stock. True
Dividends a company’s distribution of its profits in the form of cash or stock to its owners
A stock market index is a measure of the performance of a group of stocks that represent the market or a sector of the market. True
The only time to buy stocks is in a bull market and the only times to sell stocks is during a bear market. False
The letters or characters that represent a stock is known as the​ stock’s Ticker
The​ P/E ratio approach is a type of fundamental analysis. True
A stock currently selling for​ $105 with estimated earnings per share of​ $5.25 would have a​ P/E ratio of 20
The ratio of the annual dividend to the market price of the stock is called the Dividend yield

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