1. When money earns interest on interest, it is said to be compounding.

2. True

3. Since real estate brokers are licensed and bonded, they are required to give you unbiased information about real estate purchases

4. False

5. A personal loan is different from a credit card in that it is normally used to finance one large purchase

6. True

7. On an amortization schedule, more interest and less principle is paid each month as the loan matures.

8. False

9. Before you start an investment program, you should ensure liquidity by having money in financial institutions or in money market securities.

10. True

11. Long term liabilities are debts that will be paid at least three years into the future.

12. False

13. Goals with a time frame five or more years into the future are called intermediate-term goals

14. False

15. The traditional IRA allows tax-deductible 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.

16. True

17. Defined contribution employer- sponsored retirement plans provide you a specific amount of income when you retire, based on factors such as your salary and years of employment.

18. False

19. In order to be valid, a will must be dated, signed, and witnessed.

20. True

21. 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.

22. True

23. The most important element in FICO credit scoring is your payment history.

24. True

25. If no one else relies on your income, life insurance may not be necessary.

26. True

27. 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.

28. True

29. A _________________ is established to transfer assets tax-free from a company retirement plan.

30. Rollover IRA

31. 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

32. Roth IRA

33. The bond par value or face value is the amount the investor will get paid when the bond matures.

34. True

35. A personal balance sheet summarizes

36. Assets, liabilities, and net worth

37. Another term for your wealth calculated by deducting money that you owe from the value of the things you own is

38. Net worth

39. Compounding is the process of obtaining present values; discounting is the process of obtaining future values.

40. False

41. Employers have an option of wheter or not to match an employees Social Security and Medicare taxes

42. False

43. 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

44. True

45. One of the disadvantages of credit cards is that they allow you to spend beyond your means

46. True

47. The term ARM stands for

48. Adjustable rate mortgage

49. 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

50. True

51. An example of a depository financial institution is an insurance company

52. False

53. 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.

54. False

55. On the purchase of a home, one “point” is equal to

56. 1 percent of the amount being financed

57. An ordinary annuity can be defined as

58. A series of equal payments at the end of each period

59. The selection of a home’s school system is only applicable if you have or are likely to have school-aged children

60. False

61. The stock exchange with the most stringent listing requirements is the

62. NYSE (New York Stock Exchange)

63. In negotiating a price for the purchase of a home, you should do all except which of the following?

64. Offer the highest price you can afford first to get it settled quickly

65. Which is not a factor in the FICO credit scoring

66. Marital status

67. Social Security provides sufficient income to support the lifestyles of most individuals.

68. False

69. Your asset allocation should not be influenced by

70. religion

71. All of the following gains from investments are taxed as ordinary income except

72. Long-term capital gains

73. A ___________ is a document that provides financial information about a mutual fund, including expenses and past performance

74. Prospectus

75. The schedule that shows your monthly home payment and the amounts applied to principle an interest each month is called a depreciation table.

76. False

77. During the time the policy is in effect, term life insurance has a good savings and investment component.

78. False

79. Buying health insurance through employer-sponsored plans is somewhat more expensive than buying your own policy individually.

80. False

81. ____________ bonds are the least risky of all bonds, and, therefore, pay a lower rate of interest.

82. Treasury

83. 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.

84. False

85. Two advantages of investing in mutual funds are diversification and professional management

86. True

87. 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.

88. False

89. Which of the following can be deducted from your taxes even if you do not itemize.

90. Student loan interest

91. Budgeting helps set goals by estimating __________ on a monthly basis to determine how much to save and spend.

92. Income and expense

93. The annual percentage rate (APR) is useful because it allows you to easily compare financing costs among various possible creditors.

94. True

95. Bonds are certificates representing partial ownership of a firm.

96. False

97. 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.

98. True

99. Life insurance proceeds are generally not taxable to the

100. Beneficiary

101. A ___________ order is an order to execute a transaction to buy or sell a stock at its prevailing price.

102. Market

103. 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.

104. False

105. 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.

106. 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

107. 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

108. 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

109. 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