Fin 324 Quiz 30 Finance Multiple Choice Questions 1

Question 1

If a bond is purchased at a price below the face value, the yield to maturity is:

greater than the stated interest rate.

the same as the stated interest rate.

less than the stated interest rate.


of no significance.

Question 2

A long-term technique used by investors who purchase an equal dollar amount of the same stock at equal intervals in time is called:

dollar cost averaging.

dividend reinvestment plan.

buy and hold technique.

regulated transaction.

secured transaction.

Question 3

A stock that sells for less than $1 per share is called a:

fractional stock.

penny stock.

dollar stock.

ten-dollar stock.

bad investment.

Question 4

Which one of the following expenditures for retirees is likely to decrease?

clothing expenses

insurance expenses

medical expenses

expenses for leisure activities

gifts and contributions

Question 5

During your retirement, your employer’s health insurance plan and Medicare will cover your medical expenses.



Question 6

What is likely to be an individual’s single biggest asset?

Their automobile

Their jewelry

Their bank account

Their home

None of the choices

Question 7

With an open-end credit, you pay back one-time loans in a specified period of time in equal amounts.



Question 8

Which of the following is most likely not a valid reason for using credit?

Borrowing for a stay in a hospital because of appendicitis

Borrowing to purchase a car so that you can go to work full time

Borrowing to buy a printer for your home office now because you now it will be twice as expensive in two years

Borrowing to pay for your expensive dinner and movie every week

All of the choices are valid reasons for using credit

Question 9

Gordon Carey uses his Visa card to purchase a new digital camera and lens. What type of credit did Gordon use?

Installment sales credit

Installment cash credit

Single lump sum credit

Revolving credit

Incidental credit

Question 10

For most mutual funds, the net asset value is calculated:





whenever an investor calls and requests a price quote.

Question 11

Which of the following is an advantage of an exchange traded fund (EFT)?

No minimum investment amount

Shares can be bought and sold through a broker at any time at the current price

Management fees are often lower

Can use limit orders to purchase EFTs

All of the choices are advantages of EFTs

Question 12

For a mutual fund, the turnover ratio measures:

the length of time a manager has been in charge of the fund.

the amount of profit the fund earns from one investment period to the next.

the number of months the average investor holds the fund before selling.

the percentage of a fund’s holdings that have changed during a 12-month period.

the percentage of institutional investors who own the fund.

Question 13

Grady Perdue has assets worth $1,500,000 and has written a legal document that specifies that all of his money go to his children. After he dies, there is a legal process to determine whether his document specifying how his assets be divided is valid. This is also the legal process by which his executor manages and distributes his property. What is this legal process called?

An estate

A will

A trust


None of the choices

Question 14

A trust established by your will that becomes effective upon your death is called a(n) ____________ trust.






Question 15

A legal document authorizing someone to act on your behalf is called a:



power of attorney.



Question 16

A prime reason for buying an annuity is to:

save money for college education

start a new business

accumulate funds to invest in stocks

give you retirement income for the rest of your life

get rich quick

Question 17

Who has the greatest need for life insurance?

households with small children

singles living alone

singles living with parents

dual income couple


Question 18

Jerry Lewis is thinking about purchasing some life insurance. He goes to a company that is owned by shareholders. What type of life insurance company has he gone to?

A stock life insurance company

A debt life insurance company

A mutual life insurance company

An exclusionary life insurance company

None of the choices

Question 19

Automobile liability insurance covers the insured when he or she is held responsible for losses suffered by others.



Question 20

In times of high inflation, personal incomes generally keep up with the rate of inflation.



Question 21

Similar to corporate shareholders, holders of mutual funds have a say in running the company, since they have equity interest in the pool of assets and a residual claim on the profits.



Question 22

Savings is the accumulation of excess funds by intentionally spending less than you earn.



Question 23

A business cycle is a pattern of economic activity that includes an expansion, peak, contraction, and trough.



Question 24

High-demand occupations tend to pay low salaries.



Question 25

The most expensive loans are available from:




finance companies.

credit unions.

Question 26

Frank Wert wants to get a lower interest rate on his loan for the purchase of a new boat. He uses the boat as collateral for the loan. In which way is Frank reducing his lender’s risk?

He is sharing the interest rate risk with his lender

He is pledging valuable assets that can be seized if the loan is not repaid

He is taking a larger stake in the asset he is purchasing

He is repaying the loan over a faster period of time

None of the choices

Question 27

There are no costs involved in filing for a bankruptcy.



Question 28

Kevin Brown rides his bicycle to work so that he doesn’t have to worry about getting in a car accident. How is Kevin managing his risk?

Risk Avoidance

Risk Reduction

Risk Assumption

Risk Shifting

Risk Creation

Question 29

Negligence refers to:

failure to take ordinary and reasonable care.

cancellation of insurance.

property damage.

high risk insurance coverage.

common hazards in our society.

Question 30

Using a home security system is an example of ____________ risk.






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