When money earns interest on
interest, it is said to be compounding.
• True
Since real estate brokers are licensed
and bonded, they are required to give
you unbiased information about real
estate purchases
• False
A personal loan is different from a
credit card in that it is normally used
to finance one large purchase
• True
On an amortization schedule, more
interest and less principle is paid each
month as the loan matures.
• False
Before you start an investment
program, you should ensure liquidity
by having money in financial
institutions or in money market
securities.
• True
Long term liabilities are debts that will
be paid at least three years into the
future.
• False
Goals with a time frame five or more
years into the future are called
intermediate-term goals
• False
The traditional IRA allows taxdeductible contributions of up to
$4000 for individual who are not
covered by employer-sponsored
retirement plans or meet income
qualifications if they have an employer
plan.
• True
Defined contribution employersponsored retirement plans provide
you a specific amount of income when
you retire, based on factors such as
your salary and years of employment.
• False
• In order to be valid, a will must be dated,
signed, and witnessed.
• True
• The amount of income that you receive from
Social Security when you retire is dependent
on the number of years you earned income
and your average level of income.
• True
• The most important element in FICO credit
scoring is your payment history.
• True
• If no one else relies on your income, life
insurance may not be necessary.
• True
• Advantages of whole life insurance policies are
that they provide long-term coverage, the
rates are fixed, and they have a savings or cash
value feature.
• True
• A _________________ is established to
transfer assets tax-free from a company
retirement plan.
• Rollover IRA
• If you are about to invest in a stock that has
excellent growth potential over the next few
years and the investment is to be part of your
retirement, the best place to do this would be
in
• Roth IRA
• The bond par value or face value is the
amount the investor will get paid when the
bond matures.
• True
• A personal balance sheet summarizes
• Assets, liabilities, and net worth
• Another term for your wealth calculated by
deducting money that you owe from the value
of the things you own is
• Net worth
• Compounding is the process of obtaining
present values; discounting is the process of
obtaining future values.
• False
• Employers have an option of wheter or not to
match an employees Social Security and
Medicare taxes
• False
• Cash advances on credit cards normally cost
you interest from the date of the advance and
also a transaction fee of 1 to 2 percent
• True
• One of the disadvantages of credit cards is
that they allow you to spend beyond your
means
• True
• The term ARM stands for
• Adjustable rate mortgage
• Capital gains from mutual funds can be
received if the mutual fund makes a profit on
the shares it sells or if an individual investor
realizes a gain on the sale of mutual fund
shares
• True
• An example of a depository financial
institution is an insurance company
• False
• Because interest is tax deductible and
payments are deferred until you graduate, it is
good advice to take out the maximum student
loan for which you can qualify.
• False
• On the purchase of a home, one “point” is
equal to
• 1 percent of the amount being financed
• An ordinary annuity can be defined as
• A series of equal payments at the end of each
period
• The selection of a home’s school system is
only applicable if you have or are likely to have
school-aged children
• False
• The stock exchange with the most stringent
listing requirements is the
• NYSE (New York Stock Exchange)
• In negotiating a price for the purchase of a
home, you should do all except which of the
following?
• Offer the highest price you can afford first to
get it settled quickly
• Which is not a factor in the FICO credit scoring
• Marital status
• Social Security provides sufficient income to
support the lifestyles of most individuals.
• False
• Your asset allocation should not be influenced
by
• religion
• All of the following gains from investments are
taxed as ordinary income except
• Long-term capital gains
• A ___________ is a document that provides
financial information about a mutual fund,
including expenses and past performance
• Prospectus
• The schedule that shows your monthly home
payment and the amounts applied to principle
an interest each month is called a depreciation
table.
• False
• During the time the policy is in effect, term life
insurance has a good savings and investment
component.
• False
• Buying health insurance through employersponsored plans is somewhat more expensive
than buying your own policy individually.
• False
• ____________ bonds are the least risky of all
bonds, and, therefore, pay a lower rate of
interest.
• Treasury
• It is good financial planning to pay only the
minimum credit card payment and thus
maintain a balance since interest rates are low
on credit cards.
• False
• Two advantages of investing in mutual funds
are diversification and professional
management
• True
• Asset allocation is the process of allocating
money across financial assets, such as stocks,
bonds, and mutual funds, with the objective
of eliminating risk altogether.
• False
• Which of the following can be deducted from
your taxes even if you do not itemize.
• Student loan interest
• Budgeting helps set goals by estimating
__________ on a monthly basis to determine
how much to save and spend.
• Income and expense
• The annual percentage rate (APR) is useful
because it allows you to easily compare
financing costs among various possible
creditors.
• True
• Bonds are certificates representing partial
ownership of a firm.
• False
• Collision and comprehensive coverage is
optional in most states except if you are
financing your car in which case you must
have this coverage to protect the lender.
• True
• Life insurance proceeds are generally not
taxable to the
• Beneficiary
• A ___________ order is an order to execute a
transaction to buy or sell a stock at its
prevailing price.
• Market
• Since most workers have employer-sponsored
disability coverage and are also eligible for
Social Security and worker’s compensation,
there is very little demands or need for
individual disability insurance.
• False
Definitions to know
• Mutual Fund- an investment in which people pool
their money to buy stocks, bonds, real-estate, or
other assets selected by professional managers
• Liability- something that is owed or the
borrowing of money
• Asset-what you own
• Net worth- a measure of the level of your wealth.
It is determined by subtracting the level of your
debt or borrowing from the value or your assets.
• Income statement- a statement that tells you
where your money has come from and where
it has gone over some period of time.
• Annuity- an investment that guarantees
regular payments to the holder, usually
beginning at retirement and continuing for a
fixed number of years or until death
• Beneficiary- a person named to receive the
benefits from an insurance policy
• Capital gain- the profit from the sale of assets
such as stocks, bonds, or real estate
• Cash flow statement- a summary of receipts and
payments for a given period of time; also called
an income and expense statement
• Common stock- a stock whose owner has voting
rights and receives dividends based on company
profits
• 401(k) plan- a tax deferred retirement plan
funded by regular contributions from the
employee
• IRA- individual retirement account; a personal
retirement plan that permits individuals to set
aside money; with the contributions and earnings
not taxed until the funds are withdrawn
– Roth IRA- a personal retirement plan in which the
original contributions are not tax-deductible, but the
earning are tax- free
• Liquidity- the ability of an asset to be quickly
and easily converted into cash
• Opportunity cost- the cost of giving up one
thing to get something else
• Social Security- the federal program that
people pay into while they are working, that
pays disability, retirement, and life insurance
benefits to eligible recipients