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Question 1 (Worth 4 points)
(02.04 MC)
If an investor possesses a portfolio heavily concentrated in bank checking accounts, a financial advisor would most likely suggest which of the following aggressive investments to diversify the portfolio?
A money market account
An Individual Retirement Account
Certificates of Deposit
Stocks
Points earned on this question: 0
Question 2 (Worth 4 points)
(02.07 MC)
Johann maintains a $75,000 insurance policy on his boat. He pays $50 per month in premiums and his deductible is $2,500. If he is involved in an accident that does $2,000 worth of damage to the boat, how much will he have to pay?
$2,000
$2,500
$3,000
$5,500
Points earned on this question: 4
Question 3 (Worth 4 points)
(02.05 MC)
Gerald usually buys name brand pain relievers to treat his headaches, but he recently noticed the generic store brand is two dollars cheaper. Upon trying the product, he discovers it works equally as well as the name brand. This example shows how Gerald
allowed his preferences to continually cost him more money
compared the price of alternatives and saved money
failed to take advantage of a better offer at another store
switched product loyalty because his income changed
Points earned on this question: 4
Question 4 (Worth 4 points)
(02.08 MC)
Jonah has a high-paying job and would like to start saving for retirement. He has evaluated his budget in order to add savings to his expenses. He has a moderate amount of debt, and he spends a great deal on housing. His utilities, transportation, and health, expenses are fixed, and he spends little on recreation or eating out. Which action is he most likely to take?
Consider less costly housing options
Pay off his debt
Reduce his recreation expenses
Search for a job with a higher salary
Points earned on this question: 4
Question 5 (Worth 4 points)
(02.02 LC)
Compared to earning a four-year degree, a technical certification allows you to
increase lifetime earning potential
increase opportunities for advancement
have unlimited career choices
start earning sooner
Points earned on this question: 4
Question 6 (Worth 4 points)
(02.06 MC)
What is likely to happen if a borrower is late on a payment for a credit card account?
The credit card company requires the entire balance be paid in full immediately.
The credit card company cancels the card after the first tardy payment.
The credit card company doubles the credit limit.
The credit card company applies a penalty rate, increasing the card’s interest rate.
Points earned on this question: 4
Question 7 (Worth 4 points)
(02.06 LC)
Samuel needs to decrease his expenses. To which category should he make cuts first?
Entertainment
Housing
Transportation
Utilities
Points earned on this question: 4
Question 8 (Worth 4 points)
(02.04 MC)
Which of the following investment plans best reflects diversification?
Ben has an investment portfolio with numerous stocks and futures.
Kenya invests in stocks, bonds, and mutual funds.
Jeremiah takes out a CD and keeps the rest of his money in a savings account.
Molly splits her investment between mutual funds and a money market account.
Points earned on this question: 4
Question 9 (Worth 4 points)
(02.06 LC)
Making a down payment reduces the
desire of a lender to loan money
creditworthiness of a buyer
sale price of a house
loan principle amount
Points earned on this question: 4
Question 10 (Worth 4 points)
(02.04 LC)
Which of these are loans to businesses or governments?
Bonds
IRAs
Mutual funds
Stocks
Points earned on this question: 0
Question 11 (Worth 4 points)
(02.08 MC)
Your friend’s job pays $5.00 per hour, and he works 20 hours per week. His tax rate is 20 percent. Assuming he works 50 weeks of the year, his yearly gross income is
$1,000
$4,000
$5,000
$10,000
Points earned on this question: 4
Question 12 (Worth 4 points)
(02.07 MC)
Which of the following actions would likely raise homeowner’s insurance premiums?
Building the home in the floodplain of a river
Installing a monitored alarm system
Living in a safe neighborhood with little crime
Choosing not to install a swimming pool
Points earned on this question: 4
Question 13 (Worth 4 points)
(02.04 MC)
Principal Interest Year 1 Interest Year 10 Interest Year 20 Total Savings After 20 Years
$12,000 in Simple Interest Account $12,000 x 5%
= $600
= $12,600 $12,000 x 5%
= $6000
= $18,000 $12,000 x 5%
= $12000
= $24,000 $12,000 + 20 years of simple interest
= $24,000
$12,000 in Compound Interest Account $12,000 x 5%
= $600
= $12,600 ($12,000 + $6,615.94)
$18,615.94 x 5%
= $19546.74 ($12,000 + $18,323.40)
$30,323.40 x 5%
= $31,839.57 $12,000 + $20 years of compound interest
$31,839.57
Laurent saves money from his lawn service to buy a new $20,000 mower and trailer. He would like to buy the new equipment as soon as possible but only has $12,000 in his simple interest savings account. To reach his goal sooner, Laurent should
keep his money where it is and be patient
move his money to an IRA or Certificate of Deposit
Move his money to a compound interest account
Move his money to a business checking account
Points earned on this question: 4
Question 14 (Worth 4 points)
(02.04 MC)
If the Federal Reserve lowers the federal funds rate, what will happen to bank savings accounts?
The interest rate offered will decrease
The interest rate offered will increase
The interest rate will automatically be set to zero
The interest rate will remain the same
Points earned on this question: 4
Question 15 (Worth 4 points)
(02.05 LC)
A common marketing strategy used by retailers to make products appear more attractive is to list a $100 item for
$99.99
$100.00
$100.01
$100.10
Points earned on this question: 4
Question 16 (Worth 4 points)
(02.06 LC)
Which type of credit is usually used for cars, mortgages, and student loans?
Consumption credit
Installment credit
Secured credit cards
Service credit
Points earned on this question: 4
Question 17 (Worth 4 points)
(02.03 MC)
Austin earns $18,000 per year. His earnings put him in the 15% tax rate. What is his tax owed?
$2,700
$15,300
$18,700
$22,000
Points earned on this question: 4
Question 18 (Worth 4 points)
(02.04 MC)
A young investor would be best served by which kind of portfolio?
Diverse and aggressive
Diverse and conservative
Uniform and aggressive
Uniform and conservative
Points earned on this question: 4
Question 19 (Worth 4 points)
(02.03 LC)
Which tax uses the same rate for all income levels?
Corporate
Proportional
Progressive
Regressive
Points earned on this question: 4
Question 20 (Worth 4 points)
(02.07 MC)
Edward paid an annual premium of $2,000 in total coverage for his homeowner’s insurance, including $250,000 in damage coverage and $250,000 in liability coverage. Six years into his policy, a tree fell on Edward’s home and caused $50,000 worth of damage. Edward’s insurance company paid the claim.
Did the cost of the annual premiums outweigh the benefit of transferring the risk to the insurance company?
No, the cost of the annual premium for six years was more than the accident claims
Yes, the cost of the annual premium for six years was the same as the accident claims
Yes, the cost of the annual premium for six years was more than the accident claims
No, the cost of the annual premium for six years was less than the accident claims
Points earned on this question: 4
Question 21 (Worth 4 points)
(02.04 MC)
The purple section (C) for a nearly-retired investor would most likely represent
a money-market account
bonds
an IRA
stocks
Points earned on this question: 0
Question 22 (Worth 4 points)
(02.03 MC)
Your congresswoman supports wealthy Americans paying a greater percentage of their income in taxes than those who are less wealthy. She would most likely support
the current federal income tax system
the Fair Tax proposal
a national flat tax
a more regressive income tax system
Points earned on this question: 4
Question 23 (Worth 4 points)
(02.03 MC)
“Tax bracket” is a term associated with which type of taxation?
Corporate
Proportional
Progressive
Flat
Points earned on this question: 0
Question 24 (Worth 4 points)
(02.06 MC)
Chloe’s history of non-payment of monthly utility bills will probably cause a lender to
deny her a line of credit
extend more credit to her
improve her credit score
offer her a large loan
Points earned on this question: 0
Question 25 (Worth 4 points)
(02.03 MC)
Anna’s job pays $10 per hour, and she works 40 hours per week. Her tax rate is 20 percent. Assuming she works 50 weeks per year, the amount she will pay in taxes is
$4,000
$14,000
$20,000
$30,000