Certified Trust and Financial Advisor Questions + Answers Part 1

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QUESTION 1
If the following are balance sheet changes:
$5,005 decrease in accounts receivable
$7,000 decrease in cash
$12,012 decrease in notes payable
$10,001 increase in accounts payablea "use" of funds would be the:
A. $7,000decreaseincash
B. $5,005decreaseinaccountsreceivable C. $10,001 increase in accounts payable D. $12,012 decrease in notes payable
Correct Answer: D Section: (none) Explanation
Explanation/Reference: QUESTION 2
The concept that dollar today is worth more than a dollar received in future. It is:

A. Timevalueofmoney B. Compounding
C. Timeline
D. Future value
Correct Answer: A Section: (none) Explanation


Explanation/Reference: QUESTION 3
Rule 72 is:
A. Ausefulformulaforestimatinghowlongitwilltaketodoubleasumatagiveninterestrate
B. Ausefulformulaforestimatinghowlongitwilltaketotripleasumatagiveninterestrate
C. A useful formula for estimating how long it will take to graphically represent the time value of money D. A useful formula for estimating how long it will take to make the future value of deposited money
Correct Answer: A Section: (none) Explanation
Explanation/Reference: QUESTION 4
On an accounting statement of cash flows an "increase(decrease) in cash and cash equivalents" appears as:
A. Acashflowfromoperatingactivities B. Acashflowfrominvestingactivities C. A cash flow from financing activities D. None of the above
Correct Answer: D Section: (none) Explanation
Explanation/Reference: QUESTION 5
Uses of funds include a (an):
A. Decreaseincash
B. Increaseinanyliability C. Increase in fixed assets


D. Tax refund
Correct Answer: A Section: (none) Explanation
Explanation/Reference: QUESTION 6
A tax structure in which the larger the amount of taxable income, the higher the rate at which it is taxed is:
A. Marginaltaxrate
B. Progressivetaxstructure C. Tax bracket
D. Immovable tax structure
Correct Answer: B Section: (none) Explanation
Explanation/Reference: QUESTION 7
Average tax rate:
A. Istherateatwhicheachdollaroftaxableincomeistaxedonaverage;calculatedbydividingthetaxliabilitybytaxableincome
B. Istherateatwhicheachdollaroftaxableincomeistaxedannually;calculatedbydividingthetaxliabilitybytaxableincome.
C. Is the rate at which each dollar of taxable income is taxed on average; calculated by dividing the tax liability by non-taxable income D. Is the rate at which each dollar of taxable income is taxed on average; calculated by dividing the tax liability by expenses
Correct Answer: A Section: (none) Explanation
Explanation/Reference:


QUESTION 8
Which of the following would be included in a cash budget?
A. Depreciationcharges B. Dividends
C. Patents
D. Amortization
Correct Answer: B Section: (none) Explanation
Explanation/Reference: QUESTION 9
It is the deduction of AGI based on the number of persons supported by the taxpayer’s income
A. Exemption B. Dependence C. Tax payment D. Adjustment
Correct Answer: A Section: (none) Explanation
Explanation/Reference: QUESTION 10
Exemptions are phased out and eliminated altogether for taxpayers with high levels of AGI. After adjusting for inflation it applies to single taxpayers with 2008 AGI:



A. Under$159,950 B. Over$159,950
C. Equal to $179,950 D. Over $189,950
Correct Answer: B Section: (none) Explanation
Explanation/Reference: QUESTION 11
The illegal act failing to accurately report income or deductions and in extreme cases, failing to pay taxes altogether is:
A. T ax avoidance
B. T ax Invasion
C. Tax Evasion
D. None of these
Correct Answer: C Section: (none) Explanation
Explanation/Reference: QUESTION 12
It is a technique used to reduce taxes in which a taxpayer shifts a portion of income to relatives in lower tax brackets. What is it?
A. Incomeshifting
B. Deductionsmaximization C. Tax deference
D. Tax evasion
Correct Answer: A Section: (none) Explanation


Explanation/Reference: QUESTION 13
A good way to keep your spending in line is to make all household transactions (even fun money or weekly cash allowances) using a tightly controlled:
A. Checkingaccount B. Balancesheet
C. Budget
D. Savings account
Correct Answer: A Section: (none) Explanation
Explanation/Reference: QUESTION 14
An account offered by credit unions that is similar to interest paying checking accounts offered by the other financial institutions is:
A. Depositinsurance
B. Sharedraftaccount
C. Internet bank
D. Checking and saving accounts
Correct Answer: B Section: (none) Explanation
Explanation/Reference: QUESTION 15
It is a type of insurance account that protects funds on deposit against failure of the institution; can be insured by FDIC and the NCUA.
A. Depositinsurance B. Sharedraftaccount


C. Internet bank
D. Checking and saving accounts
Correct Answer: A Section: (none) Explanation
Explanation/Reference: QUESTION 16
_____________ are a popular offering at bank and other depository institutions and competes for deposits with money market and mutual funds.
A. Moneymarketdepositaccounts B. Moneymarketmutualfunds
C. Time deposit
D. Asset management account
Correct Answer: A Section: (none) Explanation
Explanation/Reference: QUESTION 17
________________ pools the funds f many small investors to purchase high return, short term marketable securities offered by the U. S treasury.
A. Moneymarketdepositaccounts B. Moneymarketmutualfunds
C. Time deposit
D. Asset management account
Correct Answer: B Section: (none) Explanation
Explanation/Reference:


QUESTION 18
It is a formal, legal commitment to extend credit up to some maximum amount over a stated period of time.
A. Letterofcredit
B. Revolvingcreditagreement C. Line of credit
D. Trade credit
Correct Answer: B Section: (none) Explanation
Explanation/Reference: QUESTION 19
The type(s) of collateral generally used for a secured short-term loan is(are):
A. Inventoryand/orreceivables B. CommonStocksandbonds C. Real estate
D. Machinery
Correct Answer: A Section: (none) Explanation
Explanation/Reference: QUESTION 20
The investment proposal with the greatest relative risk would have:



A. Thehigheststandarddeviationofnetpresentvalue
B. Thehighestcoefficientofvariationofnetpresentvalue C. The highest expected value of net present value
D. The lowest opportunity loss likelihood
Correct Answer: B Section: (none) Explanation
Explanation/Reference: QUESTION 21
A safe-deposit box is a rented drawer in a bank’s vault. Boxes can be rented for:
A. $40
B. $30
C. $40-$85 D. $90
Correct Answer: C Section: (none) Explanation
Explanation/Reference: QUESTION 22
Probability-tree analysis is best used when cash flows are expected to be:
A. Independentovertime
B. Risk-free
C. Related to the cash flows in previous periods D. Known with certainty
Correct Answer: C Section: (none)


Explanation Explanation/Reference:
QUESTION 23
You are considering two mutually exclusive investment proposals, project A and project B B's expected value of net present value is $1,000 less than that for A and A has less dispersion. On the basis of risk and return, you would say that
A. Project A dominates project B
B. ProjectBdominatesprojectA
C. Project A is more risky and should offer greater expected value
D. Each project is high on one variable, so the two are basically equal
Correct Answer: A Section: (none) Explanation
Explanation/Reference: QUESTION 24
If two projects are completely independent (or unrelated), the measure of correlation between them is:
A. 0 B. 0.5 C. 1 D. -1
Correct Answer: A Section: (none) Explanation
Explanation/Reference:
QUESTION 25
Managerial options can be viewed as:


A. Methodsforreducingagencyriskthroughtheuseofincentives B. Methodsforreducingtotalfirmriskthroughdiversification
C. Strategies for increasing management compensation
D. Opportunities for altering management decisions in the future
Correct Answer: D Section: (none) Explanation
Explanation/Reference: QUESTION 26
Checkbook ledger:
A. Isforinformaluse
B. Isabookletprovidedwithasupplyofcheck C. Used to maintain accurate record
D. Both B and C are correct
Correct Answer: D Section: (none) Explanation
Explanation/Reference:
QUESTION 27
Assume that you purchase a car for $20,000 in September. You make a down payment of $3000 and finance the remaining amount $17000 with a 4-year, 5.5% installment loan payable monthly. Your September 30 income statement would show a cash expenditure of $3000, and each subsequent monthly income statement would your monthly loan payment of:
A. $395 B. $495 C. $795 D. $295
Correct Answer: A Section: (none)


Explanation Explanation/Reference:
QUESTION 28
Calculating certain financial ratios can help you evaluate your financial performance over time. What’s more, if you apply for a loan, the lender probably will look at the ratios to judge your ability to carry additional debt. Four important money management ratios are all of the following Except:
A. Solvencyratio
B. Liquidityratio
C. Savings account ratio D. Debt service ratio
Correct Answer: C Section: (none) Explanation
Explanation/Reference: QUESTION 29
The amount of liquid funds will vary with your personal circumstances and comfort level. Another useful liquidity guideline is to have a reserve fund equal to:
A. 3to6monthsofincome
B. 3to6monthsofaftertaxincome C. 4 to 8 months of after tax income D. 6 to 12 months of income
Correct Answer: B Section: (none) Explanation
Explanation/Reference:
QUESTION 30
Even if, the annual balances, in certain months’ expenses may exceed income, causing a monthly budget deficit. Likewise, a surplus occurs when income in some months exceed expenses. It remedy may be:


A. Shiftexpensesfrommonthswhichbudget,deficitstomonthswithsurplusesfor,(oralternatively,transferincome,ifpossible,frommonthswithsurplusesto those with deficit)
B. Usesavings,investments,orborrowingtocovertemporarydeficits
C. Estimate genuine expenses
D. Pay off your credit card
Correct Answer: AB Section: (none) Explanation
Explanation/Reference:
QUESTION 31
It is the value today of an amount to be received in future; it is the amount that would have to be invested today at a given interest rate over a specified period of time to accumulate the future amount. What is it?
A. Presentvalue
B. Discountedvalue C. Compounded value D. Lump-sum value
Correct Answer: A Section: (none) Explanation
Explanation/Reference: QUESTION 32
The dues paid for membership in our society; the cost of living in this country may be referred as:
A. Incomedeficit B. Expenses
C. Taxes
D. Filing surplus
Correct Answer: C


Section: (none) Explanation
Explanation/Reference: QUESTION 33
Taxable income is:
A. Theamountofincomesubjecttotaxes;itiscalculatedbysubtractingexpenses,thelargerofitemizedorstandarddeductions,andexemptionsfromgross income
B. Theamountofincomesubjecttotaxes;itiscalculatedbysubtractingadjustments,thelargerofitemizedorstandarddepreciations,andexemptionsfromgross income
C. The amount of income subject to taxes; it is calculated by subtracting adjustments, the larger of itemized or standard deductions, and exemptions from gross income
D. The amount of income subject to taxes; it is calculated by subtracting adjustments, the larger of itemized or standard deductions, and exemptions from earned income
Correct Answer: C Section: (none) Explanation
Explanation/Reference: QUESTION 34
Gross income essentially includes any and all income subject to federal taxes. Here are some common forms of gross income Except:
A. W ages and salaries
B. Bonuses,commissions,andtips
C. Interest and dividends received
D. Alimonypaid
Correct Answer: D Section: (none) Explanation
Explanation/Reference:


QUESTION 35
An adoption tax credit of up to $11650 is available for the qualifying costs of adopting child under age 18. Only taxpayers with AGI under $17,730 are eligible for the adoption tax credit. Here are some other common tax credits. Which of the following is/are Not out of those?
A. Creditfortheelderlyorthedisabled B. Nationaltaxcredit
C. Credit for prior year minimum tax D. Credit for qualified electric vehicle
Correct Answer: B Section: (none) Explanation
Explanation/Reference: QUESTION 36
An extension of time beyond the April 15 deadline during which taxpayers, with the approval of the IRS, can file their returns without incurring penalties.
A. Filingextension
B. Amendedreturn C. Estimated taxes D. None of the above
Correct Answer: A Section: (none) Explanation
Explanation/Reference: QUESTION 37
A technique used to reduce taxes in which a taxpayer shifts a portion of income to relatives in lower tax brackets.



A. Incomeshifting
B. T ax deferred
C. Tax avoidance
D. Tax Evasion
Correct Answer: A Section: (none) Explanation
Explanation/Reference: QUESTION 38
When using a probability tree approach, we discount the various cash flows to their present value at:
A. Thefirm'sweighted-averagecostofcapital B. Theproject'srequiredrateofreturn
C. The risk-free rate
D. The after-tax cost of the firm's long-term debt
Correct Answer: C Section: (none) Explanation
Explanation/Reference: QUESTION 39
A managerial option, in effect:
A. Limitstheflexibilityofmanagement'sdecision-making B. Limitsthedownsideriskofaninvestmentproject
C. Limits the profit potential of a proposed project
D. Appliesonlytonewprojects
Correct Answer: B Section: (none)


Explanation Explanation/Reference:
QUESTION 40
The presence of managerial, or real, options the worth of an investment project.
A. Increases
B. Decreases
C. Does not affect
D. Increases or decrease
Correct Answer: A Section: (none) Explanation
Explanation/Reference: QUESTION 41
A firm's degree of operating leverage (DOL) depends primarily upon its:
A. Salesvariability
B. Leveloffixedoperatingcosts
C. Closeness to its operating break-even point D. Debt-to-equityratio
Correct Answer: C Section: (none) Explanation
Explanation/Reference: QUESTION 42
EBIT is usually the same thing as: A. Fundsprovidedbyoperations


B. Earningsbeforetaxes C. Net income
D. Operating income
Correct Answer: D Section: (none) Explanation
Explanation/Reference:
QUESTION 43
In the context of operating leverage break-even analysis, if selling price per unit rises and all other variables remain constant, the operating break-even point in units will:
A. Fall
B. Rise
C. Staythesame
D. Still be indeterminate until interest and preferred dividends paid are known
Correct Answer: A Section: (none) Explanation
Explanation/Reference: QUESTION 44
This statistic can be used as a quantitative measure of relative "financial risk."
A. Coefficientofvariationofearningspershare(CVEPS) B. Coefficientofvariationofoperatingincome(CVEBIT) C. (CVEPS - CVEBIT)
D. (CVEPS + CVEBIT)
Correct Answer: C Section: (none) Explanation


Explanation/Reference:
QUESTION 45
Espinosa Coffee & Trading, Inc.'s common stock measured beta is calculated to be 0.75. The market beta is, of course, 1.00 and the beta of the industry of which the company is a part is 1.10. If Merrill Lych were to calculate an "adjusted beta" for Espinosa's common stock, that adjusted beta would most likely be:
A. lessthan0.75
B. morethan0.75,butlessthan1.10
C. equal to 1.10
D. equal to 0.95 {i.e., (1/3) x (0.75 + 1.00 + 1.10)}
Correct Answer: B Section: (none) Explanation
Explanation/Reference: QUESTION 46
What's the value to you of a $1,000 face-value bond with an 8% coupon rate when your required rate of return is 15 percent?
A. Morethanitsfacevalue B. Lessthanitsfacevalue C. $1000
D. True
Correct Answer: B Section: (none) Explanation
Explanation/Reference: QUESTION 47
If the intrinsic value of a stock is greater than its market value, which of the following is a reasonable conclusion?
A. Thestockhasalowlevelofrisk
B. Thestockoffersahighdividendpayoutratio


C. The market is undervaluing the stock D. The market is overvaluing the stock
Correct Answer: C Section: (none) Explanation
Explanation/Reference: QUESTION 48
When the market's required rate of return for a particular bond is much less than its coupon rate, the bond is selling at:
A. Apremium
B. Adiscount
C. cannot be determined without more information D. Face value
Correct Answer: A Section: (none) Explanation
Explanation/Reference:
QUESTION 49
Virgo Airlines will pay a $4 dividend next year on its common stock, which is currently selling at $100 per share. What is the market's required return on this investment if the dividend is expected to grow at 5% forever?
A. 4Percent B. 5Percent C. 7 Percent D. 9 Percent
Correct Answer: D Section: (none) Explanation
Explanation/Reference:


QUESTION 50
Interest rates and bond prices:
A. Moveinthesamedirection
B. Moveinoppositedirections
C. Sometimes move in the same direction, sometimes in opposite directions D. Have no relationship with each other (i.e., they are independent)
Correct Answer: B Section: (none) Explanation
Explanation/Reference: QUESTION 51
The expected rate of return on a bond if bought at its current market price and held to maturity.
A. Yieldtomaturity B. Currentyield
C. Coupon Yield
D. Capital gains yield
Correct Answer: A Section: (none) Explanation
Explanation/Reference: QUESTION 52
___________ is a type of insurance that protects funds on deposit against failure of the institution; can be insured by the FDIC and the NCUA.
A. DepositInsurance
B. Demanddeposit
C. Time deposit
D. Money market mutual fund


Correct Answer: A Section: (none) Explanation
Explanation/Reference: QUESTION 53
A checking account on which the financial institution pays interest; it have no legal minimum balance is called:
A. Moneymarketdepositaccount
B. Negotiableorderofwithdrawalaccount C. Money market mutual funds
D. Asset management account
Correct Answer: B Section: (none) Explanation
Explanation/Reference: QUESTION 54
Which one of the followings is a mutual fund that pools the funds of many small investors and purchases high-return, short-term marketable securities?
A. Moneymarketdepositaccount
B. Negotiableorderofwithdrawalaccount C. Money market mutual funds
D. Asset management account
Correct Answer: C Section: (none) Explanation
Explanation/Reference: QUESTION 55


It is a federally insured savings account, offered by banks and other depository institutions, that competes with money market mutual funds. What is it?
A. Moneymarketdepositaccount
B. Negotiableorderofwithdrawalaccount C. Money market mutual funds
D. Asset management account
Correct Answer: A Section: (none) Explanation
Explanation/Reference: QUESTION 56
A comprehensive deposit account, offered primarily by brokerage houses and mutual funds is a/an:
A. Moneymarketdepositaccount
B. Negotiableorderofwithdrawalaccount C. Money market mutual funds
D. Asset management account
Correct Answer: D Section: (none) Explanation
Explanation/Reference:
QUESTION 57
Money market deposit account is a federally insured savings account, offered by banks and other depository institutions, that competes with money market mutual funds. Depositors can check-writing privileges or ATM to access MMDA accounts. A major problem with the growing popularity of interest-paying checking accounts has been:
A. Aslumpinmonthlybankcharges,whichcaneasilyamounttomorethantheinterestearnedonallbutthehighestaccountbalances B. Afallinmonthlybankcharges,whichcaneasilyamounttomorethantheinterestearnedonallbutthehighestaccountbalances
C. Ariseinmonthlybankcharges,whichcaneasilyamounttomorethantheinterestearnedonallbutthehighestaccountbalances D. A rise in monthly bank charges, which can easily amount less than the interest earned on all but the highest account balances


Correct Answer: C Section: (none) Explanation
Explanation/Reference: QUESTION 58
An order made by an account holder instructing the depository institution to refuse payment on an already issued check.
A. Overdraft
B. Stoppayment
C. Overdraft protection D. Checkbook ledger
Correct Answer: B Section: (none) Explanation
Explanation/Reference: QUESTION 59
It is a check payable to a third party that is drawn by a bank on itself in exchange for the amount specified plus, in most cases, a service fee (of about $5).
A. Cashier’scheck B. Traveler’scheck C. Certified check D. None of these
Correct Answer: A Section: (none) Explanation
Explanation/Reference: QUESTION 60
Short-term interest rates generally fluctuate ______ long-term rates, so it pays to monitor interest rate movements, shop around for the best rates, and place your


funds in savings vehicles consistent with your needs. A. Morethan

B. Lessthan
C. Equal to
D. None of the above
Correct Answer: A Section: (none) Explanation
Explanation/Reference:
QUESTION 61
Many financial planning experts recommend keeping a minimum of ____ to _____ of your investment portfolio in savings-type instruments in addition t the 3 to 6 months of liquid reserves noted earlier. Someone with $50,000 in investment should probably have a minimum of $5000 to $12500.
A. 10%to15% B. 20%to30% C. 10% to 25% D. 20%-25%
Correct Answer: C Section: (none) Explanation
Explanation/Reference: QUESTION 62
This is a saving bond issued by various denominations by the U.S Treasury. These are backed by the U.S government and can be replaced without charge in case

of loss theft or destruction.
A. SeriesEE
B. ISavingbond
C. U.S. Treasury Bills D. CPI-U
Correct Answer: A Section: (none) Explanation
Explanation/Reference:
QUESTION 63
A systematic approach to selecting and financing a vehicle can mean significant savings. Before making any major purchase-whether it’s a car, house, or large appliance-consider some basic guidelines to wise purchasing decisions.
A. Researchyourpurchasethoroughly,consideringnotonlythemarketbutalsoyourpersonalneeds B. Buytheitemforyourneeds
C. Do not purchase and make necessary repairs promptly
D. BothAandB
Correct Answer: D Section: (none) Explanation
Explanation/Reference:
QUESTION 64
The loss in the value of an asset, such as an automobile, that occurs over its period of ownership; calculated as the difference between the price initially paid and the subsequent sale price.
A. Depreciation
B. Franchisedealerships
C. Independent dealership car lots D. Private individuals


Correct Answer: A Section: (none) Explanation
Explanation/Reference: QUESTION 65
_____________ offers the latest-model used cars, provide financing, and will negotiation on price. Be sure to research values for shipping.
A. Dependentcarlots
B. Franchisedealership
C. Independent used car lots D. Private individuals
Correct Answer: B Section: (none) Explanation
Explanation/Reference: QUESTION 66
__________ have great impact on bond prices.
A. Stock options
B. Interestrate
C. Weather conditions D. Consumer prices
Correct Answer: B Section: (none) Explanation
Explanation/Reference:
QUESTION 67
Bond interest rate is called:


A. Acquisitionrate B. Couponrate
C. Accumulation rate D. Amortization rate
Correct Answer: B Section: (none) Explanation
Explanation/Reference: QUESTION 68
Bonds usually pay interest _________ per year.
A. Once
B. Twelvetimes C. Twice
D. Four times
Correct Answer: C Section: (none) Explanation
Explanation/Reference: QUESTION 69
Coupon rate is paid until the bond ____________.
A. Matures
B. Expires
C. Is sold
D. Reach to its half life to maturity
Correct Answer: A Section: (none)


Explanation Explanation/Reference:
QUESTION 70
Bond’s par value is known as __________ value.
A. Call
B. Maturity C. Face
D. Coupon
Correct Answer: C Section: (none) Explanation
Explanation/Reference: QUESTION 71
Time consumed in clearing a check through the banking system.
A. Processingfloat B. Depositfloat
C. Collection float D. Availabilityfloat
Correct Answer: D Section: (none) Explanation
Explanation/Reference: QUESTION 72
Commercial paper is essentially: A. Anotherformofjunkbond


B. Ashort-termunsecuredcorporateIOU
C. An intermediate-term corporate bond
D. A certificate that may be exchanged for a share of common stock at a specified future date
Correct Answer: B Section: (none) Explanation
Explanation/Reference: QUESTION 73
Concentration banking:
A. Increasesidlebalances
B. Movesexcessfundsfromaconcentrationbanktoregionalbanks C. Is less important during periods of rising interest rates
D. improves control over corporate cash
Correct Answer: D Section: (none) Explanation
Explanation/Reference: QUESTION 74
Which would be an appropriate investment for temporarily idle cash that will be used to pay quarterly dividends three months from now?
A. Along-termAaa-ratedcorporatebondwithacurrentannualyieldof9.4percent
B. A30-yearTreasurybondwithacurrentannualyieldof8.7percent
C. Ninety-day commercial paper with a current annual yield of 6.2 percent
D. Common stock that has been appreciating in price 8 percent annually, on average, and paying a quarterly dividend that is the equivalent of a 5 percent annual yield
Correct Answer: C Section: (none) Explanation


Explanation/Reference: QUESTION 75
According to the Bond Equivalent Yield (BEY) method, the yield on a $1,000, 13-week US Treasury bill purchased for $960 would be closest to:
A. 16Percent B. 16.7Percent C. 17 Percent D. 17.8 Percent
Correct Answer: B Section: (none) Explanation
Explanation/Reference: QUESTION 76
Accounts receivable conversion (a.k.a., check conversion) is the conversion of a paper check to
A. Anelectroniccheckimage B. A"substitutecheck"
C. An ACH debit transaction D. A foreign currency
Correct Answer: C Section: (none) Explanation
Explanation/Reference: QUESTION 77
It is a type of flexible mortgage where the payments increase for a specified period of time and then level off. What is it?
A. Flexiblepaymentmortgage
B. Graduatedpaymentmortgage C. Constant payment mortgage


D. Variable payment mortgage
Correct Answer: B Section: (none) Explanation
Explanation/Reference: QUESTION 78
___________ is a claim upon a piece of property for the payment or satisfaction of a debt or obligation.
A. Escrow
B. Lien
C. Callable debt
D. Balloon payment mortgage
Correct Answer: B Section: (none) Explanation
Explanation/Reference: QUESTION 79
First mortgage is:
A. Flexiblepaymentmortgage
B. Amortgagescorewhichisinfirstlienposition, C. Taking priority over all other liens
D. Graduated payment mortgage
Correct Answer: BC Section: (none) Explanation
Explanation/Reference:


QUESTION 80
The mortgage interest rate will remain the same on these mortgages throughout the term of the mortgage.
A. Adjustabletermmortgage
B. Graduatedpaymentmortgage C. Adjustable rate mortgage
D. Fixed rate mortgage
Correct Answer: D Section: (none) Explanation
Explanation/Reference: QUESTION 81
_____________ is the money paid to insure the mortgage when the down payment is less than 20 percent
A. Originationfee
B. Points
C. Down payment
D. Mortgage Insurance
Correct Answer: D Section: (none) Explanation
Explanation/Reference: QUESTION 82
What can be a short term interim loan to pay for the construction of buildings and homes?
A. Adjustableratemortgage B. Appraisal
C. Construction loan
D. Conventional loan


Correct Answer: C Section: (none) Explanation
Explanation/Reference: QUESTION 83
The amount of debt, not counting interest, on a loan.
A. Principle
B. Appraisal
C. Down payment D. Commitment
Correct Answer: A Section: (none) Explanation
Explanation/Reference: QUESTION 84
Money given by a buyer to a seller, as part of the purchase price to bind a transaction or assure payment.
A. DownPayment B. Escrow
C. Earnest money

D. Deed of trust
Correct Answer: C Section: (none)


Explanation Explanation/Reference:
QUESTION 85
A legal by which a lender or a seller forces a sale of a mortgaged property.
A. Foreclosure B. Callabledebt C. Escrow
D. Default
Correct Answer: B Section: (none) Explanation
Explanation/Reference: QUESTION 86
A construction loan made during completion of a building or a project.
A. Interim Financing B. Firstmortgage
C. Conventional loan D. Blanket Mortgage
Correct Answer: A Section: (none) Explanation
Explanation/Reference: QUESTION 87
A mortgage which is in first lien position, taking priority over all other liens. A. Firstmortgage


B. Callabledebt
C. Fixed rate mortgage
D. Graduated payment mortgage
Correct Answer: A Section: (none) Explanation
Explanation/Reference: QUESTION 88
__________ refers to failure to meet legal obligations in a contract, specifically, failure to make the monthly payments on the mortgage.
A. Foreclosure B. Default
C. Amortization D. Callable debt
Correct Answer: A Section: (none) Explanation
Explanation/Reference: QUESTION 89
The difference between fair market value and current indebtedness is called:
A. Downpayment
B. Amortization
C. Equity
D. Fixed rate mortgage
Correct Answer: A Section: (none) Explanation
Explanation/Reference:


QUESTION 90
An account held by the lender into which the home buyer pays money for tax or insurance payments.
A. Entitlement
B. Deedoftrust C. Escrow
D. Earnest money
Correct Answer: C Section: (none) Explanation
Explanation/Reference: QUESTION 91
It is a document that gives evidence of an individual’s ownership of property. What is it?
A. Title
B. Lien
C. Deed of trust D. Escrow
Correct Answer: A Section: (none) Explanation
Explanation/Reference: QUESTION 92
Mutual funds let you invest_________.
A. Investriskfree
B. Avoidtaxes
C. Profit in any market
D. Invest in many stocks with relatively little money


Correct Answer: D Section: (none) Explanation
Explanation/Reference: QUESTION 93
The fund’s investment objective can be found in:
A. Theprospectus
B. Statementofomittedinformation C. Letter from the president
D. Statement of additional information
Correct Answer: A Section: (none) Explanation
Explanation/Reference: QUESTION 94
Large- value funds own__________.
A. Largecompanystocksconsideredovervalued B. Largeamountsofvaluecompanies
C. Large company stocks considered under valued D. Largelyovervaluedstocks
Correct Answer: C Section: (none) Explanation
Explanation/Reference: QUESTION 95


___________ specializes in low cost index funds.
A. Vanguard
B. Fidelity
C. T. Rowe Price D. Tocqueville
Correct Answer: A Section: (none) Explanation
Explanation/Reference: QUESTION 96
Small-value funds own__________:
A. Smallcompanystockconsideredundervalued B. Stocksofsmallvalue
C. Small amounts of value companies
D. Small company stocks considered overvalued
Correct Answer: A Section: (none) Explanation
Explanation/Reference: QUESTION 97
Loan funds_________:
A. Chargeextrafeestobuyorsellshares
B. Don’tperformaswellasnoloadfunds
C. Invest only in foreign securities
D. Can’t be bought through fund supermarkets
Correct Answer: A


Section: (none) Explanation
Explanation/Reference: QUESTION 98
Dollar cost averaging __________:
A. Isthebestwaytobeatthemarket
B. Requires minimum paperwork
C. Means investing based on the dollar value D. Means investing a fixed amount periodically
Correct Answer: D Section: (none) Explanation
Explanation/Reference: QUESTION 99
Large growth funds own:
A. Largecompanystocksthathavegrownrecently B. Largecompanystocksexpectedtogrowfast
C. Large amount of growing companies
D. Growing amounts of large companies
Correct Answer: B Section: (none) Explanation
Explanation/Reference:
QUESTION 100
Small growth funds own_______:


A. Smallcompanystocksthathavegrownrecently B. Smallcompanystocksexpectedtogrowfast
C. Small amount of growing companies
D. Small amounts of large companies
Correct Answer: B Section: (none) Explanation
Explanation/Reference: QUESTION 101
Which turnover rate suggests a more tax efficient funds?
A. 10% B. 100% C. 5% D. 200%
Correct Answer: C Section: (none) Explanation
Explanation/Reference: QUESTION 102
A typical mutual fund doesn’t generally:
A. Investcommercialpapers
B. Investinsmallgrowthcompanies C. Invest in large growth companies D. Invest in stocks
Correct Answer: D Section: (none) Explanation


Explanation/Reference: QUESTION 103
The number of mutual funds is:
A. Under10thousand B. Under5thousand C. Over 100 thousand D. Over 15 thousand
Correct Answer: D Section: (none) Explanation
Explanation/Reference: QUESTION 104
Bond funds offer_________:
A. Zerovolatility
B. Relativelystableincome
C. Superior capital appreciation D. No-risk investment
Correct Answer: B Section: (none) Explanation
Explanation/Reference: QUESTION 105
Mutual funds make you money through:
A. Currencyappreciation B. Tax deductions


C. income and capital appreciation D. Yield
Correct Answer: C Section: (none) Explanation
Explanation/Reference: QUESTION 106
The 12b-1 fee covers_____________:
A. Fund’sdistributionandadvertisingcost B. Investoreducation
C. Fund manager’s travel expenses
D. Brokerage expenses
Correct Answer: A Section: (none) Explanation
Explanation/Reference: QUESTION 107
A________ is the time to pay your credit card bill without incurring finance charges.
A. Timeline
B. Graceperiod C. Overtime pay D. Extension
Correct Answer: B Section: (none) Explanation
Explanation/Reference:


QUESTION 108
An informal term for credit card is:
A. ATM
B. Discountcard C. Plastic
D. Playmoney
Correct Answer: C Section: (none) Explanation
Explanation/Reference: QUESTION 109
The total amount that you have to pay on a certain billing is:
A. Monthlymembershipfees B. Minimum payment
C. Outstanding balance
D. Balancing act
Correct Answer: C Section: (none) Explanation
Explanation/Reference: QUESTION 110
____________ is the term used for the monthly report of all the accumulated charges.
A. Savingsaccount
B. Balance
C. Purchase breakdown D. Billing statement


Correct Answer: D Section: (none) Explanation
Explanation/Reference: QUESTION 111
It occurs when you don’t make full payment on your previous bill.
A. Discount
B. Rewardpoints C. Finance charge D. Membership fee
Correct Answer: C Section: (none) Explanation
Explanation/Reference: QUESTION 112
The least amount of money that you should pay on or before your due date is called:
A. Interestcharge
B. Minimum payment C. Total payment
D. Monthlyfee
Correct Answer: B Section: (none) Explanation
Explanation/Reference: QUESTION 113
You can earn a ___________ when you continuously use your credit card for purchasing stuff.


A. Credit
B. Interest
C. Reward
D. Punishment
Correct Answer: C Section: (none) Explanation
Explanation/Reference: QUESTION 114
Credit cards offer ________ so you can withdraw money instantly.
A. Cashreward B. Creditcash
C. Mortgage
D. Cash advance
Correct Answer: D Section: (none) Explanation
Explanation/Reference: QUESTION 115
In credit card payments, late payment charges occur when you only pay the minimum payment.
A. True
B. False
C. It depends
D. There are no such charges
Correct Answer: B Section: (none)


Explanation Explanation/Reference:
QUESTION 116
__________ is concerned with the acquisition, financing, and management of assets with some overall goal in mind. A. Financialmanagement

B. Profitmaximization C. Agencytheory
D. Social responsibility
Correct Answer: A Section: (none) Explanation
Explanation/Reference:
QUESTION 117
Jensen and Meckling showed that __________ can assure themselves that the __________ will make optimal decisions only if appropriate incentives are given and only if the __________ are monitored.
A. Principals;agents;agents B. Agents;principals;principals C. Principals; agents; principals D. Agents; principals; agents
Correct Answer: A Section: (none) Explanation


Explanation/Reference: QUESTION 118
Which of the following statements is not correct regarding earnings per share (EPS) maximization as the primary goal of the firm?
A. EPSmaximizationignoresthefirm'srisklevel
B. EPSmaximizationdoesnotspecifythetimingordurationofexpectedEPS C. EPS maximization naturally requires all earnings to be retained
D. EPS maximization is concerned with maximizing net income
Correct Answer: D Section: (none) Explanation
Explanation/Reference: QUESTION 119
Which of the following is not a perquisite (perk)?
A. Company-providedautomobile B. Expensiveoffice
C. Salary
D. Countryclubmembership
Correct Answer: C Section: (none) Explanation
Explanation/Reference: QUESTION 120
What is the most important of the three financial management decisions?
A. Assetmanagementdecision B. Financingdecision


C. Investment decision D. Accounting decision
Correct Answer: C Section: (none) Explanation
Explanation/Reference: QUESTION 121
How are earnings per share calculated?
A. Usetheincomestatementtodetermineearningsaftertaxes(netincome)anddividebythepreviousperiod'searningsaftertaxes.Thensubtract1fromthe previously calculated value
B. Usetheincomestatementtodetermineearningsaftertaxes(netincome)anddividebythenumberofcommonsharesoutstanding
C. Use the income statement to determine earnings after taxes (net income) and divide by the number of common and preferred shares outstanding
D. Use the income statement to determine earnings after taxes (net income) and divide by the forecasted period's earnings after taxes. Then subtract 1 from the previously calculated value
Correct Answer: B Section: (none) Explanation
Explanation/Reference:
QUESTION 122
The __________ decision involves a determination of the total amount of assets needed, the composition of the assets, and whether any assets need to be reduced, eliminated, or replaced.
A. assetmanagement B. Financing
C. Investment
D. Accounting
Correct Answer: C Section: (none) Explanation


Explanation/Reference:
QUESTION 123
You need to understand financial management even if you have no intention of becoming a financial manager. One reason is that the successful manager of the not-too-distant future will need to be much more of a __________ who has the knowledge and ability to move not just vertically within an organization but horizontally as well. Developing __________ will be the rule, not the exception.
A. Specialist;specialties
B. Generalist;generalbusinessskills
C. Technician; quantitative skills
D. Team player; cross-functional capabilities
Correct Answer: D Section: (none) Explanation
Explanation/Reference: QUESTION 124
The __________ decision involves determining the appropriate make-up of the righthand side of the balance sheet.
A. assetmanagement B. Financing
C. Investment
D. Capital budgeting
Correct Answer: B Section: (none) Explanation
Explanation/Reference: QUESTION 125
Which of the following statements is correct regarding profit maximization as the primary goal?


A. Profitmaximizationconsiderstherisklevel
B. Profitmaximizationwillnotleadtoincreasingshort-termprofitsattheexpenseofloweringexpectedfutureprofits. C. Profit maximization does consider the impact on individual shareholder's EPS
D. Profit maximization is concerned more with maximizing net income than the stock price
Correct Answer: D Section: (none) Explanation
Explanation/Reference:
QUESTION 126
In negotiating car prices, choosing among various makes, models, and options can make comparison difficult. You can check one of the popular price guides to research used car prices. What is that guide?
A. National Automobile Dealers Association
B. National Automobile manufacturer Association C. National Automobile vendor Association
D. None of these
Correct Answer: A Section: (none) Explanation
Explanation/Reference:
QUESTION 127
It is an agreement to purchase an automobile that states the offering price and all conditions of the offer; when signed by the buyer and seller, the contract legally binds them to its terms.
A. FinancingContract
B. SalesContract
C. Car Financing Agreement D. Dealer’s Agreement
Correct Answer: B Section: (none)


Explanation Explanation/Reference:
QUESTION 128
Once the dealer accepts your offer, you complete the purchase transaction and take the delivery of the car. If you are not paying cash for the car, you can arrange financing:
A. Throughaconsumerfinancecompany B. Atyourbank
C. A credit union
D. All of these
Correct Answer: D Section: (none) Explanation
Explanation/Reference: QUESTION 129
Lease is:
A. Anarrangementinwhichthelesseereceivestheuseofacar(ortheasset)inexchangeformakingmonthlyleasepaymentsoveraspecifiedperiod B. Anarrangementinwhichthelesseereceivestheuseofacar(ortheasset)inexchangeformakingweeklyleasepayments
C. An arrangement in which the lessee receives the use of a car (or the asset) in exchange for making Quarterly lease payments over a specified period D. An arrangement in which the lessee receives the use of a car (or the asset) in exchange for making monthly lease payments
Correct Answer: A Section: (none) Explanation
Explanation/Reference:
QUESTION 130
The most popular form of automobile lease is the one in which at the end of its term the lessee simply turns in the car (assuming the preset mileage limit has not been exceeded and the car hasn’t abused)


A. Close-endlease B. Open-endlease C. Walk away lease D. BothAandC
Correct Answer: D Section: (none) Explanation
Explanation/Reference: QUESTION 131
Open-end lease is:
A. Anautomobileleaseunderwhichtheestimatedactualvalueofthecarisusedtodetermineleasepayments B. Ifthecarisworthlessthanthisvalueattheendofthelease,thelesseemustpaythedifference
C. If the car is worth less than this value at the end of the lease, the lesser must pay the difference
D. An automobile lease under which the estimated residual value of the car is used to determine lease payments
Correct Answer: BD Section: (none) Explanation
Explanation/Reference:
QUESTION 132
A commonly sited benefit of leasing is absence of down payment. However, today most leases require a “capital cost reduction” which is the down payment that lowers the potential depreciation and therefore your monthly lease payments. You may be able to negotiate a lower capital cost reduction or find a lease that doesn’t require one. The lease payment calculation is based on four variables. Which one of the following:
A. Capitalizedcost
B. Forecastresidualvalue C. Moneyfactor
D. Lease date
Correct Answer: D


Section: (none) Explanation
Explanation/Reference: QUESTION 133
A good lease contract should clearly define what is considered unreasonable. In addition, most leases requires the lessee to pay a disposition fee:
A. Ofabout$50to$250whenthecarisreturned B. Ofabout$200to$250whenthecarisreturned C. Of about $150 to $250 when the car is returned D. Of about $1500 to $250 when the car is returned
Correct Answer: C Section: (none) Explanation
Explanation/Reference: QUESTION 134
Most auto leases include a purchase option. The annual mileage allowance is another consideration of lease term. Mileage allowance typically about:
A. 10,000to25,000 B. 10,000to15,000 C. 10,000 to 20,000 D. 7,000 to 10,000
Correct Answer: B Section: (none) Explanation
Explanation/Reference:
QUESTION 135
Advantages of leasing are all of the following EXCEPT:


A. Bettercarforlessmoney
B. Anewcareveryfewyears
C. No trade in hassle at the end of the lease D. No mileage penalty
Correct Answer: D Section: (none) Explanation
Explanation/Reference: QUESTION 136
Disadvantages of leasing are all of the following EXCEPT:
A. Wheninterestratesarelow,owningmakesmorefinancialsensethanleasing B. Nomileagepenalty
C. Increased flexibility
D. No trade
Correct Answer: D Section: (none) Explanation
Explanation/Reference:
QUESTION 137
A form of direct ownership f an individual unit in a multi-unit project in which lobbies, swimming pools, and other common areas are jointly owned by all property owners in t project.
A. Condominium
B. Singlefamilyhomes C. Cooperative apartment D. Rental units
Correct Answer: A Section: (none)


Explanation Explanation/Reference:
QUESTION 138
An apartment in a building in which each tenant owns a share of nonprofit cooperation that owns the building.
A. Cooperative Apartment B. Rentalcontract
C. Rent-or-buy
D. None of these
Correct Answer: A Section: (none) Explanation
Explanation/Reference: QUESTION 139
A rental contract:
A. Alegalinstrumentthatprotectsboththelesserandthelesseefromanadverseactionbytheotherparty B. Itspecifiestheamountofmonthlypayment
C. It specifies the length of the lease agreement
D. All of these
Correct Answer: D Section: (none) Explanation
Explanation/Reference: QUESTION 140
The maximum percentage of the value of a property that the lender is willing to loan is called: A. Loantovalueratio


B. Privatemortgage C. Price earnings ratio D. Mortgage points
Correct Answer: A Section: (none) Explanation
Explanation/Reference:
QUESTION 141
An insurance policy that protects the mortgage lender from loss in the event the borrower defaults on the loan; typically required by lenders when the down payment is less than 20%.
A. Privatemortgageinsurance B. Publicmortgageinsurance C. Down payment
D. Loan to value ratio
Correct Answer: A Section: (none) Explanation
Explanation/Reference: QUESTION 142
_________ acronym is that refers to a mortgage payment including stipulated portions of principal, interest, property, taxes and homeowner’s insurance.
A. PITI
B. Homeownerinsurance C. ABI
D. DITI
Correct Answer: A Section: (none) Explanation


Explanation/Reference: QUESTION 143
The principal reason for the existence of leasing is that:
A. Intermediate-termloansaredifficulttoobtain
B. Thisisatypeoffinancingunaffectedbychangesintaxlaw
C. Companies, financial institutions, and individuals derive different benefits from owning D. Leasing is a renewable source of intermediate-term funds
Correct Answer: C Section: (none) Explanation
Explanation/Reference: QUESTION 144
A way to analyze whether debt or lease financing would be preferable is to:
A. Comparethenetpresentvaluesundereachalternative,usingthecostofcapitalasthediscountrate
B. Comparethenetpresentvaluesundereachalternative,usingtheafter-taxcostofborrowingasthediscountrate C. Compare the payback periods for each alternative
D. Compare the effective interest costs involved for each alternative
Correct Answer: B Section: (none) Explanation
Explanation/Reference: QUESTION 145
A conventional revolving credit agreement allows:
A. Toborrowafixedamountfortheentirecommitmentperiod
B. Toborrowforashort-periodwitharighttorenewtheloanduringthecommitmentperiod
C. To possibly include a provision to convert the credit agreement into a term loan contract at maturity


D. All of the above
Correct Answer: D Section: (none) Explanation
Explanation/Reference: QUESTION 146
The type of lease that includes a third party, a lender, is called a(n):
A. Saleandleaseback
B. Directleasingarrangement C. Leveraged lease
D. Operating lease
Correct Answer: C Section: (none) Explanation
Explanation/Reference: QUESTION 147
One advantage of a financial lease is that:
A. Ithasashortermaturitythantermloans
B. Itneverappearsasaliabilityonthebalancesheet C. It eliminate the needs to make periodic payments D. It provides a way to indirectly depreciate land
Correct Answer: D Section: (none) Explanation
Explanation/Reference:


QUESTION 148
Medium-term notes (MTNs) have maturities that range up to:
A. Oneyear(Butnomore) B. Twoyears(butnomore) C. Ten years (but no more) D. Thirty years (or more)
Correct Answer: D Section: (none) Explanation
Explanation/Reference: QUESTION 149
A direct lease, a sale and leaseback, and a leveraged lease are all examples of:
A. Operatingleases B. Financialleases

C. Full-service leases
D. "off-balance sheet" methods of financing
Correct Answer: B Section: (none) Explanation
Explanation/Reference: QUESTION 150
One of the components of monthly mortgage insurance is homeowner’s insurance. Its cost varies with factor/s as:

A. Ageofthehouse
B. Location
C. Material used in construction D. AandBOnly
Correct Answer: ABC Section: (none) Explanation
Explanation/Reference: QUESTION 151
Sale of real estate property in which the proceeds are less than the balance owed on loan secured by property sold.
A. Foreclosure
B. Realestateshortsale C. Multiple listing service D. None of these
Correct Answer: B Section: (none) Explanation
Explanation/Reference:
QUESTION 152
Real estate commissions generally range _______ for new homes and ________ for previously occupied homes or resales. It may be possible to negotiate a lower decision with your broker or to find or one who charges a flat fee.
A. From5%-6%fornewandfrom6%-7% B. From4%-6%fornewandfrom6%-9% C. From 4%-6% for new and from 8%-9% D. From 4%-6% for new and from 6%-7%
Correct Answer: A


Section: (none) Explanation
Explanation/Reference:
QUESTION 153
It is the process of arranging with a mortgage lender, in advance of buying a home, to obtain the amount of mortgage financing the lender deems affordable to home buyer.
A. Multiplelistingservice B. Prequalification
C. Earnestmoneydeposit D. Contingencyclause
Correct Answer: B Section: (none) Explanation
Explanation/Reference: QUESTION 154
Prequalification provides estimates of required down payment and closing costs of different types of mortgages. It identifies in advance any problems such as:
A. Creditreporterrors
B. Bargainingpowerwiththesellerofahouse C. Mortgage loans
D. Earnestmoneydeposit
Correct Answer: A Section: (none) Explanation
Explanation/Reference: QUESTION 155
Michael Cohn is a "member" (a type of owner) of a marine supply business. Michael's business is:


A. Asoleproprietorship
B. Acorporation
C. Alimitedliabilitycompany D. A general partnership
Correct Answer: C Section: (none) Explanation
Explanation/Reference:
QUESTION 156
The Counting House, Inc., purchased 5-year property class equipment for $60,000. It uses the MACRS method of depreciation. What is tax depreciation for the second year of the asset's life?
A. $12,000 B. $19,200 C. $20,000 D. $24,000
Correct Answer: B Section: (none) Explanation
Explanation/Reference: QUESTION 157
A 30-year bond issued by Gary's Plaid Pants Warehouse, Inc., in 1997 would now trade in the:
A. Primarymoneymarket
B. Secondarymoneymarket C. Primarycapitalmarket
D. Secondarycapitalmarket
Correct Answer: D


Section: (none) Explanation
Explanation/Reference: QUESTION 158
A corporation in which you are a shareholder has just gone bankrupt. Its liabilities are far in excess of its assets. You will be called on to pay:
A. Aproportionateshareofbondholderclaimsbasedonthenumberofcommonsharesthatyouown.
B. Aproportionalshareofallcreditorclaimsbasedonthenumberofcommonsharesthatyouown.
C. An amount that could, at most, equal what you originally paid for the shares of common stock in the corporation. D. None of these
Correct Answer: D Section: (none) Explanation
Explanation/Reference: QUESTION 159
Contingency clause:
A. Istheclauseinarealestatesalescontractthatmakestheagreementconditionalonsuchfactorsastheavailabilityoffinancing,propertyinspections,or obtaining expert advice
B. Istheclauseinarealestatepurchasecontractthatmakestheagreementconditionalonsuchfactorsastheavailabilityoffinancing,propertyinspections,or obtaining expert advice
C. Is the clause in a automobile sales contract that makes the agreement conditional on such factors as the availability of financing, property inspections, or obtaining expert advice
D. Is the clause in a prequalification that makes the agreement conditional on such factors as the availability of financing, property inspections, or obtaining expert advice
Correct Answer: A Section: (none) Explanation
Explanation/Reference:


QUESTION 160
A federal law requiring mortgage lenders to give potential borrowers a government publication describing the closing process and providing clear, advance disclosure of all closing costs to home buyers is called:
A. Multiplelistingservice
B. RealEstatesettlementprocedureAct C. Title check
D. Closing statement
Correct Answer: B Section: (none) Explanation
Explanation/Reference: QUESTION 161
Money market mutual funds:
A. Enableindividualsandsmallbusinessestoinvestindirectlyinmoney-marketinstruments B. Areavailableonlytohighnet-worthindividuals
C. Are involved in acquiring and placing mortgages
D. Are also known as finance companies
Correct Answer: A Section: (none) Explanation
Explanation/Reference: QUESTION 162
The purpose of financial markets is to:
A. Increasethepriceofcommonstocks B. Lowertheyieldonbonds
C. Allocate savings efficiently
D. Control inflation


Correct Answer: C Section: (none) Explanation
Explanation/Reference: QUESTION 163
Which of the following is NOT an example of a financial intermediary?
A. InternationalBusinessMachines,Inc.(IBM) B. VanguardMutualFund
C. El Dorado Savings and Loan Association D. Bank of America
Correct Answer: A Section: (none) Explanation
Explanation/Reference: QUESTION 164
How are funds allocated efficiently in a market economy?
A. Themostpowerfuleconomicunitreceivesthefunds
B. Theeconomicunitthatiswillingtopaythehighestexpectedreturnreceivesthefunds C. The economic unit that considers itself most in need of funds receives them
D. Receipt of the funds is rotated so that each economic unit can receive them in turn
Correct Answer: B Section: (none) Explanation
Explanation/Reference: QUESTION 165
Assume that a "temporary" additional (US federal tax related) first-year bonus depreciation of 50 percent applies to a new, $100,000 piece of equipment purchased


by Bellemans Chocolatier, Inc. The asset has a $10,000 estimated final salvage value. If this asset is fully depreciated for tax purposes over its useful life, the overall amount that Bellemans will have depreciated for tax purposes is .
A. $90,000 B. $100,000 C. $135,000 D. $150,000
Correct Answer: B Section: (none) Explanation
Explanation/Reference: QUESTION 166
_______ is a mortgage with a single large principal payment due at a specified future date.
A. Fixedratemortgage
B. Balloonpaymentmortgage C. Adjustable rate mortgage D. Marginal rate mortgage
Correct Answer: B Section: (none) Explanation
Explanation/Reference:
QUESTION 167
Margin on an adjustable rate mortgage is the percentage point a lender adds to the index rate to determine the rate of interest. It is important for home buyers to understand all of the following basic features of an ARM Except:
A. Adjustmentperiod
B. Indexrate
C. Payment caps
D. Marginal rate of return


Correct Answer: D Section: (none) Explanation
Explanation/Reference:
QUESTION 168
It occurs when a principal balance on a mortgage loan increases because the monthly loan payment is lower than the amount of monthly interest being charged. What is it?
A. Negativeamortization B. Positiveamortization C. Amortization imbalance D. Payment gap
Correct Answer: A Section: (none) Explanation
Explanation/Reference:
QUESTION 169
Two-step ARM is an adjustable rate mortgage with just two interest rates. One for the first ________ years of the loan and the higher one for the remaining term of the loan:
A. 5years
B. 6years
C. 5to7years D. 3 years
Correct Answer: C Section: (none) Explanation
Explanation/Reference:


QUESTION 170
It is a bank credit card that combines features of a traditional bank credit card with an additional incentive, such as rebates and air mileage.
A. Rewardcreditcard
B. Co-brandedcreditcard
C. Merchandise rebates
D. BothAandBareoneandthesame
Correct Answer: D Section: (none) Explanation
Explanation/Reference:
QUESTION 171
About half of the credit cards are rebate cards, and new cards are introduced every day. In one credit card incentive program card holder earn free frequent flyer miles for each dollar charged on his/her credit card. These frequent flyer miles can then be used with airline-affiliated programs for free tickets, first –class upgrades, and other travel related benefits. This program is a/an:
A. Automobilerebateprogram B. Frequentflyerprogram
C. Merchandise program
D. Balance transfer program
Correct Answer: B Section: (none) Explanation
Explanation/Reference:
QUESTION 172
About half of the credit cards are rebate cards, and new cards are introduced every day. In one credit card incentive program, a number of credit cards allow cardholder to earn annual rebates of up to 5% for new car purchases or leases and gas and auto maintenance purchases up to specified limits.
A. Automobilerebateprogram B. Frequentflyerprogram
C. Other merchandise program
D. Balance transfer program
Correct Answer: A Section: (none) Explanation
Explanation/Reference: