Question 1

Which of the following statements is true about retirement plans?

Accepted Answer

A)  Only employers are able to contribute to 401(k) plans. 
B)  You must pay taxes on Roth IRA contributions. 
C)  All employers match some or all of an employee's contributions to a 401(k) plan. 
D)  Contributions to traditional IRAs are not tax-deductible. 
E)  Some nonprofit and government agencies offer 401(k) plans. 
A)  Only employers are able to contribute to 401(k) plans. 
B)  You must pay taxes on Roth IRA contributions. 
C)  All employers match some or all of an employee's contributions to a 401(k) plan. 
D)  Contributions to traditional IRAs are not tax-deductible. 
E)  Some nonprofit and government agencies offer 401(k) plans.

Question 2

Index funds are often referred to as

Accepted Answer

A)  active funds. 
B)  passive funds. 
C)  deceptive funds. 
D)  socially responsible funds. 
E)  bad investments. 
A)  active funds. 
B)  passive funds. 
C)  deceptive funds. 
D)  socially responsible funds. 
E)  bad investments.

Question 3

Pro-future, Inc.
Sandy is a personal financial planner at Pro-future, Inc. Pro-future is a financial company that focuses on personal and business financing. When potential customers come to Sandy for financial advice, she first determines their investment goals in order to create a financial plan that fits their needs. Once she has created a suitable financial plan for a customer, Sandy gives her clients a pamphlet with suggestions for helping to accumulate the amount of money that they need.
Advice about risk is given to all of Sandy's clients. Sandy also makes strategic financial plans for each of her customers, which helps them to track and achieve their financial goals.
-Refer to Pro-future, Inc. Which of the following best describes a financial planner like Sandy?

Accepted Answer

A)  A person who has had at least two years of training in investments, insurance, taxation, retirement planning, and estate planning and has passed a rigorous examination 
B)  A person who has passed a national but not state examination 
C)  A person who has had at least six months of training in investments, insurance, taxation, retirement planning, and estate planning 
D)  A person who has had at least five years of training in investments, insurance, taxation, retirement planning, and estate planning, and has graduated from high school 
E)  A person who has a college degree in planning 
A)  A person who has had at least two years of training in investments, insurance, taxation, retirement planning, and estate planning and has passed a rigorous examination 
B)  A person who has passed a national but not state examination 
C)  A person who has had at least six months of training in investments, insurance, taxation, retirement planning, and estate planning 
D)  A person who has had at least five years of training in investments, insurance, taxation, retirement planning, and estate planning, and has graduated from high school 
E)  A person who has a college degree in planning

Question 4

Most investment counselors recommend that an individual establish an emergency fund equal to at least

Accepted Answer

A)  one month's living expenses. 
B)  one month's gross salary. 
C)  two times the take-home salary. 
D)  three months' living expenses. 
E)  nine months' living expenses. 
A)  one month's living expenses. 
B)  one month's gross salary. 
C)  two times the take-home salary. 
D)  three months' living expenses. 
E)  nine months' living expenses.

Question 5

Give at least three sources of information that investors could use to evaluate an investment. Why might investors want this information about an investment?

Accepted Answer

1. Financial statements and annual repor

Question 6

The type of stock in which stockholders are assured that omitted dividends will be paid to them before other individuals will be paid is ____ stock.

Accepted Answer

A)  common 
B)  convertible preferred 
C)  preferred 
D)  participating preferred 
E)  cumulative preferred 
A)  common 
B)  convertible preferred 
C)  preferred 
D)  participating preferred 
E)  cumulative preferred

Question 7

Pro-future, Inc.
Sandy is a personal financial planner at Pro-future, Inc. Pro-future is a financial company that focuses on personal and business financing. When potential customers come to Sandy for financial advice, she first determines their investment goals in order to create a financial plan that fits their needs. Once she has created a suitable financial plan for a customer, Sandy gives her clients a pamphlet with suggestions for helping to accumulate the amount of money that they need.
Advice about risk is given to all of Sandy's clients. Sandy also makes strategic financial plans for each of her customers, which helps them to track and achieve their financial goals.
-Refer to Pro-future, Inc. If Sandy were to create a personal budget for her clients, what would be her first step?

Accepted Answer

A)  Estimate their expected amount of money to be allocated to their investments 
B)  Determine the amount of income needed to cover their expenses 
C)  Calculate their long-term debt 
D)  Estimate their income for a specific period 
E)  Estimate their expenses for a specific period 
A)  Estimate their expected amount of money to be allocated to their investments 
B)  Determine the amount of income needed to cover their expenses 
C)  Calculate their long-term debt 
D)  Estimate their income for a specific period 
E)  Estimate their expenses for a specific period

Question 8

Anne Martinez owns a convertible bond that allows her to convert her $1,000 bond to 50 shares of the corporation's common stock. What is the lowest stock price that would allow her to convert her bond to shares of common stock?

Accepted Answer

A)  $10 
B)  $15 
C)  $20 
D)  $25 
E)  $30 
A)  $10 
B)  $15 
C)  $20 
D)  $25 
E)  $30

Question 9

If you place a limit order to sell American Express stock at $56 per share, your broker's representative will

Accepted Answer

A)  sell your stock if the price reaches $56 or more per share. 
B)  buy American Express stock when it reaches exactly $56 per share, and then resell it to you. 
C)  sell your stock at exactly $56 per share. 
D)  buy American Express when it goes below $56 per share. 
E)  sell your stock when the price goes below $56 per share. 
A)  sell your stock if the price reaches $56 or more per share. 
B)  buy American Express stock when it reaches exactly $56 per share, and then resell it to you. 
C)  sell your stock at exactly $56 per share. 
D)  buy American Express when it goes below $56 per share. 
E)  sell your stock when the price goes below $56 per share.

Question 10

Selling stock that an investor does not own and must replace later is called

Accepted Answer

A)  speculating. 
B)  optioning. 
C)  selling short. 
D)  selling long. 
E)  spot trading. 
A)  speculating. 
B)  optioning. 
C)  selling short. 
D)  selling long. 
E)  spot trading.

Question 11

Which of the following is true about using the services of an account executive?

Accepted Answer

A)  Goals should be clearly communicated to an account executive. 
B)  Account executives do not using churning practices. 
C)  Account executives are usually liable for client losses. 
D)  All account executives are full-service brokers. 
E)  A full service account executive does not provide research materials to clients. 
A)  Goals should be clearly communicated to an account executive. 
B)  Account executives do not using churning practices. 
C)  Account executives are usually liable for client losses. 
D)  All account executives are full-service brokers. 
E)  A full service account executive does not provide research materials to clients.

Question 12

Most brokerage firms have a minimum commission rate ranging from ___ for buying and selling stock through their company.

Accepted Answer

A)  $1-$5 
B)  $2-$20 
C)  $7-$35 
D)  $25-$50 
E)  $35-$75 
A)  $1-$5 
B)  $2-$20 
C)  $7-$35 
D)  $25-$50 
E)  $35-$75

Question 13

Briefly describe the differences between closed-end funds, open-end funds, and exchange-traded funds.

Accepted Answer

Closed-end funds, open-end funds, and ex

Question 14

What is buying stock on margin? Why is it considered a high-risk investment?

Accepted Answer

Buying stock on margin refers to the pra

Question 15

Brian and Nancy both use the same brokerage firm. On the same day, Brian puts in a market order to buy 150 shares of Ford stock and Nancy requests to sell 150 shares of Ford stock. The brokerage firm completes this trade by taking the shares from Nancy and giving them to Brian. This exchange is not completed through a security exchange and is called a

Accepted Answer

A)  security transaction. 
B)  full buy order. 
C)  short order. 
D)  market order. 
E)  matched order. 
A)  security transaction. 
B)  full buy order. 
C)  short order. 
D)  market order. 
E)  matched order.

Question 16

The price of one share of stock at a particular time is known as

Accepted Answer

A)  the par value. 
B)  a stock dividend. 
C)  the market value. 
D)  the current yield. 
E)  the current ratio. 
A)  the par value. 
B)  a stock dividend. 
C)  the market value. 
D)  the current yield. 
E)  the current ratio.

Question 17

Investments can provide income, growth, and liquidity. Which factor is more important to you? Why?

Accepted Answer

As an investor, all three factors - inco

Question 18

Paul purchases a government bond for $1,000, and it matures in thirty years. Paul purchased a

Accepted Answer

A)  Treasury bond. 
B)  savings bond. 
C)  Treasury bill. 
D)  Treasury note. 
E)  general obligation bond. 
A)  Treasury bond. 
B)  savings bond. 
C)  Treasury bill. 
D)  Treasury note. 
E)  general obligation bond.

Question 19

Which of the following is not one of the types of bonds issued by the U.S. federal government?

Accepted Answer

A)  Treasury notes 
B)  Savings bonds 
C)  Treasury municipals 
D)  Treasury bonds 
E)  Treasury bills 
A)  Treasury notes 
B)  Savings bonds 
C)  Treasury municipals 
D)  Treasury bonds 
E)  Treasury bills

Question 20

Which of the following describes why exchange-traded funds have less need for a portfolio manager than closed-end funds?

Accepted Answer

A)  ETFs normally invest in stocks, bonds, or securities within a specific index. 
B)  ETFs are actively managed. 
C)  ETFs have portfolio managers that actively select stocks and other securities on a regular basis. 
D)  ETF fees are generally higher. 
E)  ETFs usually hold investments in a minimum of three indexes. 
A)  ETFs normally invest in stocks, bonds, or securities within a specific index. 
B)  ETFs are actively managed. 
C)  ETFs have portfolio managers that actively select stocks and other securities on a regular basis. 
D)  ETF fees are generally higher. 
E)  ETFs usually hold investments in a minimum of three indexes.

Exam 20: A: Understanding Personal Finances and Investments

Which of the following statements is true about retirement plans?

Index funds are often referred to as

Most investment counselors recommend that an individual establish an emergency fund equal to at least

Give at least three sources of information that investors could use to evaluate an investment. Why might investors want this information about an investment?

The type of stock in which stockholders are assured that omitted dividends will be paid to them before other individuals will be paid is ____ stock.

Anne Martinez owns a convertible bond that allows her to convert her $1,000 bond to 50 shares of the corporation's common stock. What is the lowest stock price that would allow her to convert her bond to shares of common stock?

If you place a limit order to sell American Express stock at $56 per share, your broker's representative will

Selling stock that an investor does not own and must replace later is called

Which of the following is true about using the services of an account executive?

Most brokerage firms have a minimum commission rate ranging from ___ for buying and selling stock through their company.

Briefly describe the differences between closed-end funds, open-end funds, and exchange-traded funds.

What is buying stock on margin? Why is it considered a high-risk investment?

The price of one share of stock at a particular time is known as

Investments can provide income, growth, and liquidity. Which factor is more important to you? Why?

Paul purchases a government bond for $1,000, and it matures in thirty years. Paul purchased a

Which of the following is not one of the types of bonds issued by the U.S. federal government?

Which of the following describes why exchange-traded funds have less need for a portfolio manager than closed-end funds?

Exploring the World of Business and Economics

A: Being Ethical and Socially Responsible

B: Being Ethical and Socially Responsible

A: Exploring Global Business

B: Exploring Global Business

Choosing a Form of Business Ownership

Small Business, Entrepreneurship, and Franchises

Understanding the Management Process

Creating a Flexible Organization

Producing Quality Goods and Services

Attracting and Retaining the Best Employees

Motivating and Satisfying Employees and Teams

Enhancing Union-Management Relations

Building Customer Relationships Through Effective Marketing

A: Creating and Pricing Products That Satisfy Customers

B: Creating and Pricing Products That Satisfy Customers

Wholesaling, Retailing, and Physical Distribution

Developing Integrated Marketing Communications

Social Media, E-Business, and Accounting

Using Management and Accounting Information

Understanding Money, Banking, and Credit

Mastering Financial Management

B: Understanding Personal Finances and Investments

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