Let's Prepare For Finance Exam

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1. Credit Cards allow you to ...

Explanation

Credit cards allow you to borrow money for a short term. Unlike debit cards, which deduct money directly from your account, credit cards allow you to make purchases on credit and pay back the borrowed amount at a later date. This borrowing period is usually short term, typically within a billing cycle, after which you are required to repay the borrowed amount along with any applicable interest charges.

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About This Quiz
Lets Prepare For Finance Exam - Quiz

This quiz is designed to test knowledge on personal finance management, including topics on credit cards, payment services, investment returns, and banking security.

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2. The most commonly used payment service is an....

Explanation

A checking account is the most commonly used payment service because it allows individuals to easily deposit and withdraw money for everyday transactions. It provides a convenient way to make payments through checks, debit cards, and online transfers. Unlike a savings account or certificate of deposit, a checking account offers frequent access to funds and is specifically designed for day-to-day financial transactions. While a mutual fund is an investment vehicle, it is not primarily used as a payment service like a checking account.

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3. The rate of return on an investment is greatest when the interest is compounded....

Explanation

The rate of return on an investment is greatest when the interest is compounded daily because compounding daily allows for the accumulation of interest on a more frequent basis. This means that the interest earned is added to the principal more frequently, leading to a higher overall return. In contrast, compounding on a weekly, monthly, or yearly basis would result in less frequent interest accumulation and therefore a lower rate of return.

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4. When writing a check, include all of the following EXCEPT

Explanation

When writing a check, it is important to include the current date, your signature on the front, and the name of the payee. However, an endorsement on the back is not necessary when writing a check. Endorsement typically refers to the signature of the payee on the back of the check, which is only required when the payee wants to transfer the funds to someone else. Therefore, including an endorsement on the back is not required when writing a check.

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5. You give up liquidity when you....

Explanation

When you buy a certificate of deposit (CD), you give up liquidity because CDs have a fixed term and withdrawal before the maturity date usually results in a penalty. This means that your money is tied up for a specific period of time, and you cannot access it easily or without consequences.

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6. If a check is stolen, you might ask the bank for....

Explanation

If a check is stolen, asking the bank for a stop-payment order would be the most appropriate action. A stop-payment order is a request made to the bank to cancel the payment of a specific check. This prevents the stolen check from being cashed or deposited by the thief. By placing a stop-payment order, the bank is alerted to the situation and takes necessary measures to ensure that the stolen check is not honored. This helps protect the account holder from financial loss and prevents unauthorized transactions.

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7. Using a debit card to pay for a meal in a restaurant is called....

Explanation

Using a debit card to pay for a meal in a restaurant is referred to as a point-of-sale transaction. This term is commonly used to describe the process of making a payment directly at the location where the goods or services are being purchased, such as a restaurant. It involves the transfer of funds from the customer's bank account to the merchant's account in real-time, typically using electronic payment systems.

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8. A possible drawback to using an ATM for your daily cash needs is....

Explanation

A possible drawback to using an ATM for your daily cash needs is uncertainty about how much you will need. Unlike withdrawing a specific amount from a bank teller, using an ATM may result in withdrawing more or less cash than required. This uncertainty can lead to either carrying excess cash or having to make multiple withdrawals, which may be inconvenient or risky.

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9. An investor can trade a bond for shares of the corporate stock if the bonds is a

Explanation

A convertible bond is a type of bond that can be converted into shares of the corporate stock at a predetermined conversion ratio. This means that the bondholder has the option to exchange their bond for a specified number of shares of the company's stock. Therefore, if an investor holds a convertible bond, they have the ability to trade that bond for shares of the corporate stock.

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10. The investment that offers the highest rate of return is...

Explanation

An agency bond is the correct answer because it typically offers a higher rate of return compared to other investment options listed. Agency bonds are issued by government-sponsored entities or agencies, such as Fannie Mae or Freddie Mac, and they are backed by the full faith and credit of the U.S. government. This backing provides a level of security for investors, allowing agencies to offer higher interest rates on their bonds. Treasury notes and bonds are also backed by the U.S. government but may offer slightly lower rates of return. EE savings bonds, on the other hand, are issued by the U.S. Treasury and have lower interest rates compared to agency bonds.

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11. Which of these Standard & Poor ratings designates the riskiest investment?

Explanation

The correct answer is B. The B rating from Standard & Poor's designates the riskiest investment. Standard & Poor's uses a letter grading system to assess the creditworthiness and risk of investments. The B rating indicates a higher level of risk compared to other ratings such as A or AA. This suggests that investments with a B rating have a higher likelihood of default or not being able to meet their financial obligations.

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12. Only a fixed number of shares are issued for....

Explanation

A closed-end fund is a type of investment fund where a fixed number of shares are issued. Unlike open-end funds, which continuously issue and redeem shares based on investor demand, closed-end funds have a fixed number of shares that are traded on the stock exchange. This means that the number of shares available for purchase or sale is limited, and investors can only buy or sell existing shares on the secondary market.

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13. Diversification is a key reason for buying a

Explanation

Investors buy Treasury notes as a means of diversification. Treasury notes are considered safe investments because they are backed by the U.S. government. By investing in Treasury notes, investors can spread their risk across different asset classes and reduce the impact of any one investment performing poorly. This diversification helps to protect their overall investment portfolio and potentially generate more stable returns.

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14. Municipal bonds are offered by all the following levels of government EXCEPT

Explanation

Municipal bonds are offered by all levels of government except for the federal government. Municipal bonds are debt securities issued by state and local governments, including counties and cities, to finance public projects such as infrastructure development, schools, and hospitals. The federal government, on the other hand, issues Treasury bonds and other types of federal debt securities to finance its own operations and projects. Therefore, federal government is not included in the list of levels of government that offer municipal bonds.

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15. Standard and Poor's rating for an investment-grade bond is

Explanation

The correct answer is BBB, which is a rating given by Standard and Poor's for an investment-grade bond. This rating indicates that the bond has a moderate level of risk and is considered to have a good credit quality. It suggests that the issuer of the bond has a relatively low risk of defaulting on their payments. This rating is one step above BB, indicating a higher level of creditworthiness.

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16. Only the bond owner can collect interest from a

Explanation

A registered coupon bond is a type of bond where the bondholder's information is recorded with the issuer. This means that only the registered bond owner, whose details are on record, can collect the interest payments from the bond. This provides security and ensures that the rightful owner receives the interest income. In contrast, bearer bonds can be transferred from one person to another, allowing anyone who holds the physical bond to collect the interest. Zero-coupon bonds do not pay periodic interest, while registered bonds without coupons may not pay any interest at all.

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17. A lender may ask a buyer to deposit money in an escrow account for paying

Explanation

When a lender asks a buyer to deposit money in an escrow account for paying property taxes, it means that the lender wants to ensure that the property taxes are paid on time. By requiring the buyer to deposit money into an escrow account, the lender can use those funds to pay the property taxes when they become due. This helps protect the lender's interest in the property and ensures that the property taxes are paid in a timely manner.

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18. The most popular type of housing in the United States is

Explanation

Single family homes are the most popular type of housing in the United States because they offer privacy, space, and a sense of ownership. They are typically preferred by families who desire a yard, more rooms, and the ability to customize their living space. Single family homes also provide a greater level of independence compared to multiunit homes or condominiums, where residents may have to share walls or common spaces. Mobile homes are less popular due to their transient nature and limited appreciation value.

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19. In the first years of a mortgage, most of the monthly payment goes toward paying off the

Explanation

In the first years of a mortgage, most of the monthly payment goes toward paying off the interest. This is because the interest is calculated based on the outstanding loan balance, which is highest at the beginning of the mortgage term. As the borrower makes monthly payments, a larger portion of the payment is allocated towards interest payments, gradually reducing the outstanding balance. Over time, as the principal balance decreases, a larger portion of the monthly payment will go towards paying off the principal.

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20. A disadvantage of renting is

Explanation

Renting typically comes with more responsibilities compared to other housing options such as owning a home. As a renter, you may have to take care of maintenance and repairs, which can be time-consuming and costly. Additionally, you may have to follow certain rules and regulations set by the landlord or property management, limiting your freedom to make changes or personalize the living space. These added responsibilities can be considered a disadvantage of renting.

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21. Your biggest monthly expense as a tenant is the

Explanation

The correct answer is utilities. As a tenant, your biggest monthly expense is likely to be the cost of utilities such as electricity, water, and gas. These expenses can vary based on your usage and the rates charged by the utility providers. Rent is typically a fixed monthly expense, while the security deposit is a one-time payment made at the beginning of the lease. Renter's insurance is also an important expense but is usually lower in cost compared to utilities. Therefore, utilities are likely to be the largest recurring expense for a tenant.

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22. Generally mortgage insurance is required when the buyers' down payment is

Explanation

Mortgage insurance is typically required when the buyers' down payment is less than 20% of the purchase price. This is because a down payment of less than 20% represents a higher risk for the lender, as the buyer has less equity in the property. Therefore, the lender requires mortgage insurance to protect themselves in case the buyer defaults on the loan. In this case, the correct answer is 10%, indicating that mortgage insurance would be required if the down payment is less than 10%.

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23. The portion of the purchase price that a buyer pays the seller when signing a purcahse agreement is called the

Explanation

A down payment is the portion of the purchase price that a buyer pays the seller when signing a purchase agreement. It is a form of upfront payment made by the buyer to show their commitment and seriousness in purchasing the property. The down payment is typically a percentage of the total purchase price and is deducted from the overall amount that the buyer will need to finance through a mortgage or other means. It helps reduce the loan amount and demonstrates the buyer's financial capability to lenders.

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24. What might a buyer do to get a low interest rate?

Explanation

To get a low interest rate, a buyer can choose to pay points. Points are upfront fees paid to the lender at closing in exchange for a lower interest rate. Each point typically costs 1% of the total loan amount and can reduce the interest rate by a certain percentage. By paying points, the buyer effectively reduces their interest rate, resulting in lower monthly mortgage payments over the life of the loan.

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25. A bank pays the full amount of the mortgage to

Explanation

The correct answer is "the seller". In a mortgage transaction, the bank pays the full amount of the mortgage directly to the seller of the property. This is because the seller is the one who owns the property and is selling it to the buyer. The bank acts as the intermediary, providing the funds to facilitate the purchase. The buyer then becomes responsible for repaying the mortgage to the bank over a period of time.

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26. The listing price is the amount that the

Explanation

The correct answer is "owner asks for the house". The listing price refers to the initial amount set by the owner of the house as the asking price. This is the price at which the owner is willing to sell the house, and potential buyers can negotiate from this starting point.

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27. The central banking organization of the United States is called the

Explanation

The correct answer is the Federal Reserve System. The Federal Reserve System is the central banking organization of the United States. It was established in 1913 and is responsible for conducting monetary policy, supervising and regulating banks, and providing financial services to depository institutions. The Federal Reserve System plays a crucial role in maintaining the stability and integrity of the U.S. financial system.

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28. A series of equal regular deposits is called

Explanation

An annuity refers to a series of equal regular deposits made over a specific period of time. This financial arrangement allows individuals to save or invest money on a consistent basis, typically for retirement purposes. An annuity provides a steady stream of income in the future, often in the form of regular payments, which can help individuals achieve their long-term financial goals.

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29. The way in which people make, distribute, and use their goods and services is called

Explanation

Economics refers to the study of how individuals, businesses, and societies make choices regarding the allocation of limited resources to fulfill their unlimited wants and needs. It encompasses the production, distribution, and consumption of goods and services, as well as the factors influencing these decisions. Therefore, economics is the appropriate term to describe the way in which people make, distribute, and use their goods and services.

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30. Inflation refers to

Explanation

Inflation refers to a general rise in prices of goods and services. This means that over time, the overall cost of goods and services increases, leading to a decrease in the purchasing power of money. Inflation can be caused by various factors such as increased demand, higher production costs, or changes in government policies. It is an important economic indicator that affects individuals, businesses, and the overall economy.

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31. An example of a long term liability

Explanation

A car loan is an example of a long-term liability because it represents a financial obligation that extends beyond the current accounting period. Unlike taxes, insurance, and medical bills which are typically short-term liabilities, a car loan involves a contractual agreement to make regular payments over an extended period of time, usually several years. Therefore, it qualifies as a long-term liability on the balance sheet of an individual or a company.

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32. A disadvantage of using a safe deposit box for keeping financial documents is that it

Explanation

A disadvantage of using a safe deposit box for keeping financial documents is that it can cost $100 a year to rent. This means that there is an ongoing expense associated with using a safe deposit box, which may not be feasible for everyone. It is important to consider the cost factor when deciding whether to use a safe deposit box for storing financial documents.

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33. One use of discretionary funds is spending on

Explanation

Discretionary funds refer to money that is available to be spent at one's own discretion. In this context, the correct answer is "videos" because it is an optional expense that can be chosen to be purchased with discretionary funds. Groceries, transportation, and medication are essential needs that usually come under necessary expenses rather than discretionary ones.

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34. Your net worth goes up when you

Explanation

Paying off previous debts increases your net worth because it reduces your liabilities. When you have fewer debts, you have more assets relative to your liabilities, resulting in a higher net worth. This is because your net worth is calculated by subtracting your liabilities from your assets. Therefore, paying off previous debts is a positive financial action that can improve your overall financial health and increase your net worth.

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35. The first step in planning a budget is

Explanation

Setting financial goals is the first step in planning a budget because it helps individuals determine their priorities and what they want to achieve financially. By setting clear goals, such as saving for a down payment on a house or paying off debt, individuals can then work backwards to determine how much income they need, what fixed expenses they have, and how much they can allocate towards savings. Setting financial goals provides a roadmap for budgeting and ensures that individuals are aligning their spending and saving habits with their long-term objectives.

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36. An example of a fixed expense is

Explanation

A fixed expense is a recurring cost that remains constant and does not fluctuate. Cable TV bills are an example of a fixed expense because they are typically billed at a fixed rate each month. Unlike variable expenses such as electric bills, gas bills, and water bills, which can vary depending on usage, cable TV bills remain the same regardless of how much cable is watched. Therefore, cable TV bills can be considered a fixed expense.

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37. After a corporation fails, who has first rights to its remaining assets?

Explanation

Preferred stockholders have first rights to a corporation's remaining assets after it fails. Preferred stock represents ownership in a company and gives shareholders a higher claim on assets and earnings compared to common stockholders. In the event of bankruptcy or liquidation, preferred stockholders are entitled to receive their investment back before common stockholders. This is because preferred stock is considered a hybrid security, combining features of both debt and equity, and is typically issued with a fixed dividend rate.

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38. In an investment program "pyramid", investing in baseball cards would be a possible investment for,

Explanation

In a pyramid investment program, the higher levels typically involve higher risk and potential returns. Level 4 is the highest level in this program, indicating that it is the riskiest and potentially most profitable level. Therefore, investing in baseball cards, which can have high value and returns, would be a possible investment for Level 4.

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39. Which investment is the safest source of income?

Explanation

U.S treasury bills are considered the safest source of income among the given options. This is because they are backed by the U.S government, which is considered to have a very low risk of defaulting on its debt. Treasury bills are short-term debt instruments that are issued by the U.S Department of the Treasury to finance the government's operations and pay off its debts. They are highly liquid and have a fixed maturity date, making them a reliable and secure investment option for individuals seeking a safe source of income.

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40. A major goal when investing a real estate is to

Explanation

When investing in real estate, the ultimate goal is typically to sell the property at a profit. This means that the investor aims to purchase the property at a lower price and sell it at a higher price in the future, making a profit from the appreciation in value. This is a common objective for real estate investors as it allows them to maximize their return on investment and generate substantial profits.

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41. A person risks losing most or all of his or her money in

Explanation

A speculative investment carries a high level of risk and uncertainty. It involves investing in assets or ventures that have the potential for significant gains but also a high chance of loss. Unlike a savings account or a conservative investment, which typically offer lower returns but are considered safer, a speculative investment involves taking a gamble with one's money. Therefore, there is a greater likelihood of losing most or all of the invested funds in a speculative investment compared to the other options provided.

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42. Of the following investments, the one with the most predictable income is

Explanation

U.S savings bonds are considered the investment with the most predictable income. This is because they are backed by the U.S government, making them low risk. The interest rate on savings bonds is fixed and guaranteed, providing a stable and consistent income. In contrast, gold and commodities can be highly volatile, with their prices fluctuating based on market conditions. Real estate income can vary depending on factors such as rental demand and property value appreciation. Therefore, U.S savings bonds offer a more reliable and predictable income compared to the other investment options.

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43. "Growth" companies typically reinvest their profits rather than

Explanation

"Growth" companies focus on expanding their operations and investing in research and development to fuel their growth. Instead of distributing their profits to shareholders as dividends, they reinvest the earnings back into the company to fund future growth opportunities. This strategy allows the company to allocate more resources towards innovation, acquisitions, and other initiatives that can help drive long-term growth and increase shareholder value.

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44. Short term capital gains are

Explanation

Short term capital gains are taxed as regular income because they are profits made from the sale of an asset that has been held for less than a year. These gains are treated as ordinary income and are subject to the individual's applicable income tax rate. Unlike long term capital gains, which may qualify for lower tax rates, short term gains do not receive any special tax treatment and are taxed at the same rate as other forms of income.

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45. Durable gooods are purchases that made and used up quickly

Explanation

Durable goods are not purchases that are made and used up quickly. Instead, they are goods that are intended to last for a significant period of time, such as appliances, furniture, or vehicles. These items are typically more expensive and are expected to provide long-term value and use to the consumer.

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46. Your financial goals should be realistic and specific

Explanation

Setting realistic and specific financial goals is important because it allows you to have a clear vision of what you want to achieve and helps you create a plan to reach those goals. Realistic goals are attainable and can be accomplished within a reasonable timeframe, while specific goals provide clarity and direction. By setting realistic and specific financial goals, you are more likely to stay motivated, make better financial decisions, and track your progress effectively.

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47. The easiest way to accomplish goals is to plan for them ahead of time

Explanation

Planning ahead of time allows individuals to set clear objectives, break them down into smaller tasks, and allocate resources effectively. By doing so, they can identify potential obstacles and develop strategies to overcome them, increasing their chances of achieving their goals. Planning also helps individuals stay organized, focused, and motivated, as they have a clear roadmap to follow. Therefore, the statement that the easiest way to accomplish goals is to plan for them ahead of time is true.

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48. Needs and wants are basically the same things

Explanation

The statement is false because needs and wants are not the same things. Needs are essential for survival, such as food, water, and shelter, while wants are desires or preferences that are not necessary for survival, such as luxury items or entertainment.

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49. Personal financial planning means different things to different people

Explanation

Personal financial planning does not mean different things to different people. It refers to the process of managing one's finances, setting financial goals, creating a budget, saving, investing, and managing debt. While the specific goals and strategies may vary from person to person, the concept of personal financial planning remains the same.

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50. Intangible items are items that can be touched

Explanation

The given statement is false. Intangible items are items that cannot be touched or physically felt. They are abstract in nature and include things like ideas, concepts, intellectual property, and emotions.

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51. Being in different life situations can be an influence on your personal financial planning

Explanation

Being in different life situations can be an influence on your personal financial planning. This means that factors such as age, marital status, employment status, and financial goals can all impact how you plan and manage your finances. For example, someone who is young and single may have different financial priorities and strategies compared to someone who is married with children. Additionally, someone who is employed may have a more stable income compared to someone who is self-employed or unemployed. Therefore, it is important to consider your unique life situation when creating a financial plan.

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52. The principal is the total amount of money borrowed or deposited

Explanation

The explanation for the given correct answer is that the principal refers to the initial amount of money that is borrowed or deposited. It is the total sum of money that is involved in a financial transaction, before any interest or additional fees are added. The principal amount is important because it determines the total amount that will need to be repaid or earned in interest.

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53. When in doubt trying to estimate variable expenses, you should always guess low

Explanation

Estimating variable expenses by guessing low is not always the best approach. It is important to consider that underestimating variable expenses could lead to financial difficulties or inadequate budgeting. It is advisable to make a realistic estimation based on past experiences, market trends, and careful analysis.

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54. Starting a college fund is an example of budgeting for unexpected expenses and savings

Explanation

Starting a college fund can be considered as an example of budgeting for unexpected expenses and savings because it involves setting aside money regularly for a future expense that may not be anticipated or planned for in the present. By budgeting for this expense, individuals can ensure that they have enough savings to cover the cost of college when the time comes, thus avoiding financial stress and potential debt. Additionally, starting a college fund also promotes the habit of saving, which is an essential aspect of budgeting and financial planning.

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55. When trying to determine reasonable expense levels, asking your friends and relatives is a good idea

Explanation

Asking friends and relatives can be a good idea when trying to determine reasonable expense levels because they can provide insight based on their own experiences and knowledge. They may have similar lifestyles or financial situations, which can make their advice more relevant and helpful. Additionally, friends and relatives may have access to information or resources that can assist in making informed decisions about expenses. However, it is important to consider that everyone's financial circumstances and priorities are different, so it is crucial to take their suggestions as guidance rather than absolute truths.

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56. A current liability is a short term debt that must be paid in year or less

Explanation

A current liability refers to a debt or obligation that is expected to be settled within a year or the operating cycle of a business, whichever is longer. It includes obligations such as accounts payable, short-term loans, and accrued expenses that are due within a year. Therefore, the statement that a current liability is a short-term debt that must be paid in a year or less is correct.

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57. A car title is an example of a day-to-day personal financial document

Explanation

A car title is not an example of a day-to-day personal financial document. A car title is a legal document that establishes ownership of a vehicle, but it is not directly related to personal finances. Day-to-day personal financial documents may include bank statements, credit card statements, or receipts for expenses.

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58. When you use a safe deposit box in your bank, you have to pay rent

Explanation

When you use a safe deposit box in your bank, you are required to pay rent. This is because the bank is providing a secure space for you to store your valuable items, and they charge a fee for this service. The rent amount may vary depending on the size of the box and the duration of usage.

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59. Many people are now keeping their fiancial documents on their home computer

Explanation

The statement suggests that a lot of individuals are currently storing their financial documents on their personal computers at home. This implies that people are opting for digital storage solutions rather than traditional physical methods like paper documents or external hard drives. The answer "T" indicates that the statement is true.

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60. Direct deposit is a type of electronic banking service

Explanation

Direct deposit is a type of electronic banking service where funds are electronically transferred directly into an individual's bank account. This eliminates the need for physical checks or cash and allows for quick and convenient access to funds. With direct deposit, individuals can receive their paychecks, government benefits, or other payments directly into their bank account, making it a convenient and secure way to manage finances.

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61. Check clearing usually takes no more than 5 business days

Explanation

The statement suggests that check clearing usually takes no more than 5 business days, meaning that the process of transferring funds from the check writer's account to the recipient's account is typically completed within this timeframe.

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62. Fees and charges for checking accounts have greatly increased in recent years

Explanation

The given statement states that fees and charges for checking accounts have greatly increased in recent years. The answer "T" indicates that the statement is true. This means that there has been a noticeable rise in the fees and charges associated with checking accounts over the past few years.

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63. A corpoaration DOES NOT have to pay a stockholder dividends

Explanation

A corporation does not have to pay dividends to its stockholders because dividends are not mandatory. The decision to pay dividends is made by the corporation's board of directors, who consider various factors such as the company's financial performance, cash flow, and future investment opportunities. While many corporations choose to distribute dividends as a way to reward shareholders, they are not legally obligated to do so. Therefore, the statement that a corporation does not have to pay dividends to a stockholder is true.

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64. A corporation DOES have to repay a stockholder what they paid for the stock

Explanation

A corporation does not have to repay a stockholder what they paid for the stock. When an individual buys stock in a corporation, they become a partial owner of the company and assume the risk associated with the investment. The value of the stock can fluctuate, and there is no guarantee that the stockholder will be able to sell the stock for the same price they paid. Therefore, it is not a requirement for a corporation to repay the stockholder the original purchase price of the stock.

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65. It is risky to keep your investments diversified

Explanation

Keeping your investments diversified is not risky, but rather a recommended strategy. Diversification helps to spread the risk across different asset classes or investments, reducing the impact of any single investment's poor performance on your overall portfolio. By diversifying, you can potentially minimize losses and increase the chances of achieving better returns.

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66. One of the 4 steps you should look at when choosing an investment, is investment growth

Explanation

When choosing an investment, it is important to consider investment growth as one of the steps. This means evaluating the potential for the investment to grow in value over time. By looking at factors such as historical performance, market trends, and the company's financial health, investors can assess the growth potential of an investment. Considering investment growth helps investors make informed decisions and maximize their returns.

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67. Financial planners offer specific financial help and advice to their clients

Explanation

Financial planners are professionals who provide specialized assistance and guidance to individuals or businesses regarding their financial matters. They analyze their clients' financial situation, goals, and objectives to create personalized financial plans. These plans may include strategies for budgeting, saving, investing, retirement planning, tax planning, and risk management. By offering specific financial help and advice, financial planners aim to help their clients make informed decisions and achieve their financial goals. Therefore, the statement "Financial planners offer specific financial help and advice to their clients" is true.

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68. When a person closes on a mortgag, their house is considered the collateral for the loan

Explanation

When a person closes on a mortgage, their house is considered the collateral for the loan. This means that if the person fails to repay the loan, the lender has the right to take possession of the house and sell it to recover the amount owed. The house serves as security for the loan, providing assurance to the lender that they will be able to recoup their investment. Therefore, the statement is true.

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69. When making payments on a mortgage the amount of your payment is applied to the prinicpal first and then towards the interest

Explanation

When making payments on a mortgage, the amount of your payment is typically applied towards the interest first and then towards the principal. This is because the interest is calculated based on the remaining principal balance, so it is important to pay off the interest first before reducing the principal. By doing so, the borrower is able to reduce the overall interest paid over the life of the mortgage. Therefore, the correct answer is False.

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70. The two things included in an escrow account are usually homeowner's insurance and property taxes

Explanation

An escrow account is a separate account where funds are held by a third party to pay for expenses related to a property. Homeowner's insurance and property taxes are commonly included in an escrow account. This ensures that these expenses are paid on time and in full. By including these two things in an escrow account, the lender can ensure that the property is protected by insurance and that property taxes are paid, reducing the risk of financial loss.

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71. An example of an intangible item would be your health

Explanation

An example of an intangible item would be your health because it cannot be physically touched or seen. Health is a concept that relates to the overall well-being of a person, including their physical, mental, and emotional state. It is not a tangible object that can be measured or observed directly, but rather a subjective experience that is felt and experienced by individuals.

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72. The most important step in creating and maintaining a budget is reviewing sepnding and savings patterns.

Explanation

The given statement is false. While reviewing spending and savings patterns is an important step in creating and maintaining a budget, it is not the most important step. The most important step in creating and maintaining a budget is setting financial goals and priorities. This involves identifying and prioritizing expenses, determining saving targets, and aligning spending habits with financial objectives. By setting clear goals and priorities, individuals can better allocate their resources and make informed decisions about their spending and saving habits.

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73. You should always endorse a check as soon as you recieve it

Explanation

Endorsing a check means signing the back of it, which allows the check to be deposited or cashed by someone other than the original recipient. The statement is false because endorsing a check immediately upon receiving it can be risky. If the check gets lost or stolen before it is deposited, the person who finds or steals it could potentially cash or deposit it themselves. It is advisable to wait until you are ready to deposit or cash the check before endorsing it, reducing the risk of unauthorized use.

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74. When writing the amount on a check, you should always start as far to the right on the check as possible.

Explanation

Starting as far to the right on a check as possible is not correct. When writing the amount on a check, you should start on the far left side to prevent any fraudulent alterations. This ensures that no additional digits or amounts can be added before the intended amount. Therefore, the correct answer is False.

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75. A speculative investment is a very safe type of investment

Explanation

This statement is false. A speculative investment is actually a high-risk type of investment. Speculative investments typically involve a high degree of uncertainty and potential for loss, as they are based on speculation and predictions rather than concrete data or historical performance. Investors who engage in speculative investments are often willing to take on higher levels of risk in the hopes of achieving higher returns.

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76. Private Mortgage Insurance or PMI is usually required for buyers with a down payment less than 30 %

Explanation

Private Mortgage Insurance (PMI) is not usually required for buyers with a down payment less than 30%. PMI is typically required for buyers who have a down payment less than 20% of the home's purchase price. It is an insurance policy that protects the lender in case the borrower defaults on the loan. However, if the buyer can make a down payment of at least 20%, they can avoid the requirement of PMI. Therefore, the statement is false.

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77. An example of cooperative housing is a prefabricated home

Explanation

Cooperative housing refers to a type of housing where residents collectively own and manage the property. It involves a group of individuals who come together to form a cooperative and share the responsibilities and benefits of owning the property. On the other hand, a prefabricated home is a type of house that is built off-site and then transported to the desired location for assembly. While prefabricated homes can be part of cooperative housing, they are not an example of cooperative housing in themselves. Therefore, the correct answer is F (False).

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78. The FDIC pays taxes for all accounts in financial institutions

Explanation

The FDIC does not pay taxes for all accounts in financial institutions. The FDIC is a government agency that provides insurance for deposits in banks and savings associations. It does not pay taxes on behalf of account holders. Instead, it collects premiums from the insured financial institutions to fund its operations and cover potential losses. Therefore, the statement is false.

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79. To reach maturity, treasury bills take between

Explanation

Treasury bills are short-term debt securities issued by the government to finance its short-term borrowing needs. They are typically issued with maturities ranging from 13 to 52 weeks, making them a popular choice for investors looking for short-term investments. This allows the government to raise funds quickly and efficiently, while investors can earn a fixed return over a shorter time period compared to other longer-term investments. Therefore, the correct answer is 13 to 52 weeks.

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80. Investors pay penalty fees if they fail to make regular purchases of shares when ivesting in a mutual fund under a

Explanation

In a contractual savings plan, investors agree to make regular purchases of shares over a specified period of time. If they fail to make these regular purchases, they may be subject to penalty fees. This type of plan is typically used for long-term savings goals and encourages investors to consistently contribute to their mutual fund investment.

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81. The amount of goods and services available for sale is called

Explanation

The correct answer is supply. Supply refers to the quantity of goods and services that producers are willing to offer for sale at a given price and time. It represents the availability of products in the market. The concept of supply is crucial in understanding the dynamics of the economy and how it impacts prices and consumer demand.

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82. The final step in the home buying process is called the closing

Explanation

The statement is true. The closing is the final step in the home buying process. It is the meeting where the buyer and seller sign all the necessary documents and complete the transfer of ownership. During the closing, the buyer pays the remaining balance of the purchase price, as well as any closing costs and fees. The closing is typically conducted by a title company or an attorney, and once it is completed, the buyer officially becomes the new owner of the home.

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Credit Cards allow you to ...
The most commonly used payment service is an....
The rate of return on an investment is greatest when the interest is...
When writing a check, include all of the following EXCEPT
You give up liquidity when you....
If a check is stolen, you might ask the bank for....
Using a debit card to pay for a meal in a restaurant is called....
A possible drawback to using an ATM for your daily cash needs is....
An investor can trade a bond for shares of the corporate stock if the...
The investment that offers the highest rate of return is...
Which of these Standard & Poor ratings designates the riskiest...
Only a fixed number of shares are issued for....
Diversification is a key reason for buying a
Municipal bonds are offered by all the following levels of government...
Standard and Poor's rating for an investment-grade bond is
Only the bond owner can collect interest from a
A lender may ask a buyer to deposit money in an escrow account for...
The most popular type of housing in the United States is
In the first years of a mortgage, most of the monthly payment goes...
A disadvantage of renting is
Your biggest monthly expense as a tenant is the
Generally mortgage insurance is required when the buyers' down payment...
The portion of the purchase price that a buyer pays the seller when...
What might a buyer do to get a low interest rate?
A bank pays the full amount of the mortgage to
The listing price is the amount that the
The central banking organization of the United States is called the
A series of equal regular deposits is called
The way in which people make, distribute, and use their goods and...
Inflation refers to
An example of a long term liability
A disadvantage of using a safe deposit box for keeping financial...
One use of discretionary funds is spending on
Your net worth goes up when you
The first step in planning a budget is
An example of a fixed expense is
After a corporation fails, who has first rights to its remaining...
In an investment program "pyramid", investing in baseball cards would...
Which investment is the safest source of income?
A major goal when investing a real estate is to
A person risks losing most or all of his or her money in
Of the following investments, the one with the most predictable income...
"Growth" companies typically reinvest their profits rather than
Short term capital gains are
Durable gooods are purchases that made and used up quickly
Your financial goals should be realistic and specific
The easiest way to accomplish goals is to plan for them ahead of time
Needs and wants are basically the same things
Personal financial planning means different things to different people
Intangible items are items that can be touched
Being in different life situations can be an influence on your...
The principal is the total amount of money borrowed or deposited
When in doubt trying to estimate variable expenses, you should always...
Starting a college fund is an example of budgeting for unexpected...
When trying to determine reasonable expense levels, asking your...
A current liability is a short term debt that must be paid in year or...
A car title is an example of a day-to-day personal financial document
When you use a safe deposit box in your bank, you have to pay rent
Many people are now keeping their fiancial documents on their home...
Direct deposit is a type of electronic banking service
Check clearing usually takes no more than 5 business days
Fees and charges for checking accounts have greatly increased in...
A corpoaration DOES NOT have to pay a stockholder dividends
A corporation DOES have to repay a stockholder what they paid for the...
It is risky to keep your investments diversified
One of the 4 steps you should look at when choosing an investment, is...
Financial planners offer specific financial help and advice to their...
When a person closes on a mortgag, their house is considered the...
When making payments on a mortgage the amount of your payment is...
The two things included in an escrow account are usually homeowner's...
An example of an intangible item would be your health
The most important step in creating and maintaining a budget is...
You should always endorse a check as soon as you recieve it
When writing the amount on a check, you should always start as far to...
A speculative investment is a very safe type of investment
Private Mortgage Insurance or PMI is usually required for buyers with...
An example of cooperative housing is a prefabricated home
The FDIC pays taxes for all accounts in financial institutions
To reach maturity, treasury bills take between
Investors pay penalty fees if they fail to make regular purchases of...
The amount of goods and services available for sale is called
The final step in the home buying process is called the closing
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