26) A very safe investment that generally attracts conservative investors is called a(n) ____________ stock.
A. Blue-chip
B. Small-cap
C. Penny
D. Cyclical
E. Growth
27) Which of the following investments had the best return since 1926?
A. Corporate bonds
B. Common stocks
C. Certificates of deposit
D. U.S. Treasury bills
E. Long-term government bonds
28) Your friend lends you $2,500 at 5 percent simple interest and you agree to repay the loan at the end of one year. How much interest will you pay for the year?
You pay for the year?
A. $175
B. $150
C. $75
D. $100
E. $125
29) The future value of $1,000 deposited a year for 5 years earning 4 percent would be approximately
A. $8,200
B. $6,500
C. $5,000
D. $5,250
E. $5,400
30) A Pawnshop with a monthly interest rate of 2.75 percent would have an annual interest rate of ____ percent.
A. 2.75
B. 5.5
C. 33
D. 27.5
E. 20
31) The purpose of a rate cap with an adjustable rate mortgage is to
A. Minimize interest costs
B. Lower the escrow account
C. Restrict the amount by which the interest rate can increase
D. Prevent changes in the amount of the monthly payment
E. Increase negative amortization
32) Which of the following would increase the speed of equity growth for a homebuyer?
A. Making a down payment of 10 percent instead of 20 percent
B. Making larger deposits to the escrow account
C. Obtaining a 15-year mortgage instead of a 30-year mortgage
D. Obtaining a mortgage interest rate of 9 percent instead of 8 percent
33) If overall interest rates in the economy rise, a corporate bond with a fixed interest rate will generally
A. Increase in value
B. Be returned to the corporation
C. Become worthless
D. Decrease in value
E. Remain unchanged
34) How much would you have in 3 years if you saved $2,000 a year at an annual interest rate of 10 percent?
A. $6,000
B. $8,005
C. $7,500
D. $6,380
E. $7,282
35) Twenty years ago, you began investing $2,000 a year. Because your investments earned an average of 8 percent a year, your investment portfolio has a current dollar value of portfolio has a current dollar value of $92,000. How much did you earn on your investments over the 20-year period of time?
A. $2,000
B. $132,000
C. $92,000
D. $40,000
E. $52,000
36) Assume that you purchased a $1,000 Exxon/Mobil bond that pays 6 1/2 percent interest. What is the amount of interest you would receive each year?
Each year
A. $3.25
B. $1,000
C. $32.50
D. $6.50
E. $65
37) Who has the greatest need for life insurance?
A. Households with small children
B. Dual income couple
C. Singles living alone
D. Singles living with parents
E. Children
38) Suppose that yours is a typical family. Your annual income is $50,000. Use the easy method to determine your need for life insurance. Your insurance should be in the amount
Insurance should be in the amount of
A. $245,000
B. $400,000
C. $300,000
D. $345,000
E. $450,000
39) The purpose of financial responsibility laws is to
A. Reduce auto insurance costs
B. Require uninsured motorists coverage
C. Assist poor drivers in getting insurance coverage
D. Protect the public from financial losses due to auto accidents
E. Pay for high medical costs of auto accident victims
40) Last month Nellie Jacobson's divorce became final. As part of the settlement, she received $150,000. She would like to invest in mutual funds, but since she is 62 years old, she is concerned with the safety of her "nest egg." Which of the following mutual funds would you recommend?
A. Growth fund
B. International fund
C. Small cap fund
D. High-yield bond fund
E. Intermediate U. S. bond fund
41) A mutual fund that will not invest in companies that produce tobacco, nuclear energy, or weapons or in companies that have a history of discrimination is called a history of discrimination is called a(n)
A. Lifecycle fund
B. Defensive fund
C. Lifestyle fund
D. Balanced fund
E. Socially-responsible fund
42) A mutual fund that invests in common stocks and bonds with the primary objectives of conserving principal, providing
Income, and long-term growth is called _________ fund
A. Balanced
B. Income
C. Growth
D. Industry
E. Money market
43) Changes in income, values, and family situation make it necessary to
A. Evaluate and revise your actions
B. Analyze your current personal and financial situation
C. Implement the financial plan
D. Develop financial goals
E. Create a financial plan of action
44) All of the following statements are considered to be good advice for the potential investor before starting his or her personal investment program except:
investment
A. Work to balance your budget
B. Start an emergency fund
C. Increase credit purchases and make installment payments in order to increase cash available for investing
D. Provide adequate insurance protection
E. Establish a line of credit
45) The financial planning process concludes with efforts to
A. Create a financial plan of action
B. Implement the financial plan
C. Review and revise your actions
D. Develop financial goals
E. Analyze your current personal and financial situation
FIN420 Qs 26-45
