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

• True

Since real estate brokers are licensed and bonded, they are required to give you

unbiased information about real estate purchases

• False

A personal loan is different from a credit card in that it is normally used to finance

one large purchase

• True

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

loan matures.

• False

Before you start an investment program, you should ensure liquidity by

having money in financial institutions or in money market securities.

• True

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

future.

• False

Goals with a time frame five or more years into the future are called

intermediate-term goals

• False

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.

• True

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.

• False

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

• True

• 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.

• True

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

• True

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

• True

• 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.

• True

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

• Rollover IRA

• 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

• Roth IRA

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

• True

• A personal balance sheet summarizes

• Assets, liabilities, and net worth

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

• Net worth

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

• False

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

• False

• 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

• True

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

• True

• The term ARM stands for

• Adjustable rate mortgage

• 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

• True

• An example of a depository financial institution is an insurance company

• False

• 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.

• False

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

• 1 percent of the amount being financed

• An ordinary annuity can be defined as

• A series of equal payments at the end of each period

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

• False

• The stock exchange with the most stringent listing requirements is the

• NYSE (New York Stock Exchange)

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

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

• Which is not a factor in the FICO credit scoring

• Marital status

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

• False

• Your asset allocation should not be influenced by

• religion

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

• Long-term capital gains

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

• Prospectus

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

• False

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

• False

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

• False

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

• Treasury

• 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.

• False

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

• True

• 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.

• False

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

• Student loan interest

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

• Income and expense

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

• True

• Bonds are certificates representing partial ownership of a firm.

• False

• 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.

• True

• Life insurance proceeds are generally not taxable to the

• Beneficiary

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

• Market

• 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.

• False

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.

• 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

• 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

• 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

• 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