Money Matters: 5th 6wks Test Review (Ch. 16-20) - Modified
Multiple Choice
Identify the
choice that best completes the statement or answers the question.
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Ch 18. Investing In Bonds
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1.
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Bond prices
a. | tend to remain steadier than stock prices | b. | are by law always
lower than stock prices. | c. | can never change once you’ve purchased a
bond. |
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2.
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When a bond issuer cannot meet the interest and/or principal payments, what has
occurred?
a. | short selling | c. | bond default | b. | bond redemption |
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3.
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One main distinction between stocks and bonds is that
a. | unlike stock dividends, a bond’s interest does not go up and
down. | b. | bonds are shares of ownership in a corporation, not loans. | c. | corporations are
required to pay dividends on stocks but not bonds. |
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4.
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Which of the following types of bonds cannot be purchased through
TreasuryDirect?
a. | Treasury securities | c. | Series EE savings bonds | b. | corporate
bonds |
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5.
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The amount a bondholder will be paid at maturity is called
a. | yield. | c. | face value | b. | dividend. |
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6.
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An investment-grade bond
a. | is considered the highest-quality, lowest-risk bond. | b. | is highly
speculative | c. | offers the highest possible yield |
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7.
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A type of corporate bond based on the general creditworthiness of the company is
called a(n)
a. | debenture | c. | mortgage bond. | b. | secured bond |
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8.
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Corporations usually agree not to call bonds for the first ___ years after
issuance.
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9.
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When bonds sell for more than their face value, they are selling at a
a. | discount | c. | cut rate. | b. | premium |
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10.
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A revenue bond is a type of municipal bond that
a. | is backed by specific assets that serve as security to assure repayment of the
debt. | b. | finances public-works projects such as airports and hospitals. | c. | is backed by the
power of the issuing government to levy taxes to pay back the debt. |
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Ch. 17 - Investing in Stocks
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11.
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Which of the following is not a securities exchange?
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12.
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An increase in the value of a stock over time is called a(n)
a. | investment | c. | capital gain | b. | dividend |
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13.
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A common stock
a. | has no voting rights. | b. | pays a fixed dividend. | c. | allows stockholders
to influence corporate policy. |
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14.
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Current Profit on Stock ÷ Purchase Price + Commission =
a. | Interest Rate | c. | Return on Investment | b. | Earnings per
Share |
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15.
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Stocks in young, often small corporations that have higher overall risk than
stocks of successful, long-established companies are called
a. | defensive stocks | c. | emerging stocks | b. | blue chip
stocks |
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16.
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The price of a share of stock divided by the corporation’s earnings over
the past 12 months is the
a. | earnings per share | c. | P/E ratio | b. | percent yield |
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17.
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Using dividends previously earned on a stock to buy more shares is called
a. | direct investment | c. | dividend reinvestment | b. | preferred
reinvestment |
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18.
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Which of the following would be considered an odd lot of stocks?
a. | 100 shares | c. | 200 shares | b. | 50 shares |
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19.
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Which of the following investment techniques would more likely be used by a day
trader?
a. | buying and holding | c. | buying on margin | b. | dollar-cost
averaging |
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20.
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The price for which a stock is bought and sold in the marketplace is called
the
a. | dividend | c. | market value | b. | yield |
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Ch 16 - Investing for the
Future
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21.
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Professional investment planners who are trained to give investment advice based
on your goals, age, lifestyle, and other factors are called
a. | certified public accountants | c. | discount
brokers | b. | certified financial planners |
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22.
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This type of risk is caused by the business cycle.
a. | market risk | c. | industry risk | b. | political risk |
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23.
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The right, but not the obligation, to buy or sell a commodity or stock for a
specified price within a specified time period is called a(n)
a. | annuity | c. | future | b. | option |
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24.
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All of the following are wise investment practices except
a. | make your decisions quickly to take advantage of the market | b. | keep good financial
records | c. | seek good investment advice |
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25.
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The use of long-term savings to earn a financial reward is called
a. | diversifying | c. | speculating | b. | investing |
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26.
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Which of the following is typically the first stage of investing?
a. | systematic investing | c. | a put-and-take account | b. | strategic
investing |
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27.
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Which of the following would be considered the lowest risk
investment?
a. | a corporate bond | c. | real estate | b. | a stock |
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28.
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Maximization of return in the next five to ten years is the goal of which
investment strategy?
a. | strategic investing | c. | systematic investing | b. | initial
investing |
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29.
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A daily newspaper that provides detailed coverage of the business and financial
world is
a. | The Wall Street Journal | c. | Kiplinger’s Personal
Finance. | b. | The Economist |
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30.
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According to the Rule of 72, if an investment of $5,000 is yielding an average
of 6 percent, it will take ___ years for that investment to be worth $10,000.
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Ch 19 - Mutual Funds, Real Estate, and Other
Choices
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31.
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An investment in a pool of mortgages that have been purchased by a government
agency is a
a. | derivative mortgage | c. | certificate of participation | b. | real estate
syndicate |
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32.
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A professionally managed group of investments bought using a pool of money from
many investors is called a
a. | savings bond | c. | mutual fund | b. | Ponzi scheme |
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33.
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Which of the following tells you the market price for a share of a mutual
fund?
a. | par value | c. | net asset value | b. | face value |
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34.
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To reduce risk, you should choose a mutual fund company with all of the
following characteristics except
a. | it exists both in brick-and-mortar and in cyberspace | b. | it has been in
business for a minimum of five years | c. | it is a large company that manages investments
for millions of investors |
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35.
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What is the goal of an income fund?
a. | to earn returns from capital gains alone | b. | to earn returns from
both dividends and capital gains | c. | to produce current income in the form of
interest or dividends |
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36.
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Which of the following is a sales charge paid when you sell an
investment?
a. | dividend | c. | back-end load | b. | capital gain |
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37.
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Which of the following is the most risky investment?
a. | money market fund | c. | income fund | b. | growth fund |
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38.
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A building with two separate living quarters is called a
a. | condo | c. | quad | b. | triplex | d. | duplex |
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39.
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Advantages of investing in mutual funds include all of the following
except
a. | a guaranteed rate of return | c. | professional
management | b. | diversification |
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40.
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Farm products (such as wheat, corn, and cattle) and metals (such as gold and
silver) are called
a. | commodities | c. | collectibles | b. | futures |
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Ch. 20 Retirement and Estate
Planning
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41.
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A will written in a person’s own handwriting is called a
a. | holographic will | c. | codicil | b. | trust will. |
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42.
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In addition to safeguarding retirement plans from employer mismanagement, the
Employee Retirement Income Security Act does all of the following except
a. | penalize employers who do not provide retirement plans for their
employees | b. | guarantee payment of certain benefits if a defined-benefit plan is
terminated | c. | require employers to provide participants with information about the plan's
features and funding |
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43.
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In 2014, Deborah gave Richard a gift of $12,000. What are the tax
implications?
a. | Deborah would have to pay a gift tax. | b. | No one would have to pay tax because the amount
of the gift is too small to be taxable. | c. | Richard would have to pay a gift
tax. |
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44.
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Because of inflation,
a. | the cost of living goes down over time for seniors. | b. | retired individuals
sometimes find it difficult to maintain their standard of living. | c. | price increases
boost buying power. |
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45.
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Social Security replaces about ____ percent of an average wage earner's
income after retiring.
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46.
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The amount for which you could sell your home now is its
a. | current market value | c. | assessed value | b. | true value |
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47.
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A tax-deferred retirement plan available to small businesses is a
a. | Keogh plan | b. | Simplified Employee Pension (SEP)
plan | c. | money market plan |
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48.
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A Roth IRA differs from a traditional IRA in that
a. | there is no penalty for early withdrawal. | b. | earnings as well as
contributions are taxed when you withdraw the money at retirement. | c. | contributions are
taxed but earnings are not. |
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49.
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A legal document authorizing someone to act on your behalf is called a
a. | codicil. | c. | power of attorney | b. | joint tenancy
agreement |
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50.
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Many financial advisers suggest that you will need between __________ percent of
your preretirement income to live comfortably
a. | 50 and 60 | c. | 75 and 85 | b. | 95 and 100 |
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