Question 1

Many financial experts advise that you set up a contingency fund equal to about ________ of your earnings and keep these funds in highly liquid accounts.

Accepted Answer

A)  two months 
B)  six months 
C)  one year 
D)  three years 
A)  two months 
B)  six months 
C)  one year 
D)  three years

Question 2

One step toward the goal of taking control of your finances is to keep track of all your expenses.

Accepted Answer

A) True 
 B)False

Question 3

Keogh plans are most useful for stockholders of major corporations who earn most of their income from dividends rather than wages or salaries.

Accepted Answer

A) True 
 B)False

Question 4

Young married couples that find themselves running out of money at the end of the month,might be well advised to:

Accepted Answer

A)  keep track of all of their expenses. 
B)  keep track of cash spent on major purchases. 
C)  prepare a balance sheet. 
D)  apply for additional credit cards. 
A)  keep track of all of their expenses. 
B)  keep track of cash spent on major purchases. 
C)  prepare a balance sheet. 
D)  apply for additional credit cards.

Question 5

The best way to invest in a 401(k)plan is to use all of the money to buy stock in the company where you work.

Accepted Answer

A) True 
 B)False

Question 6

A(n)________ can be added to a homeowner's insurance policy that provides for coverage at a reasonable cost for items that the policy otherwise would not cover.

Accepted Answer

A)  rider 
B)  opener 
C)  extender 
D)  modifier 
A)  rider 
B)  opener 
C)  extender 
D)  modifier

Question 7

Hillary and Bill are married and have a young child.Both work,but Hillary earns a higher salary than Bill.Insurance experts suggest that:

Accepted Answer

A)  there is no real need for this couple to have life insurance,since they both are employed. 
B)  the couple should take out equal amounts of life insurance for both Bill and Hillary. 
C)  the couple should take out life insurance on both Hillary and Bill,but coverage on Hillary should be greater than coverage on Bill. 
D)  the couple should take out a life insurance policy on their child,but do not need one on themselves. 
A)  there is no real need for this couple to have life insurance,since they both are employed. 
B)  the couple should take out equal amounts of life insurance for both Bill and Hillary. 
C)  the couple should take out life insurance on both Hillary and Bill,but coverage on Hillary should be greater than coverage on Bill. 
D)  the couple should take out a life insurance policy on their child,but do not need one on themselves.

Question 8

Mini-Case
Ira Roth and Penny Weiss met and married in the early 1990s,during their days at State University.Both came from families with limited financial resources.They had to work at part-time jobs during school,and still needed student loans to help pay for their college education.Ira and Penny shared a strong work ethic and had a great desire to succeed financially and enjoy the good life.
Penny and Ira quickly experienced financial success in the latter half of the booming 1990s.Ira used his marketing major and extensive knowledge of computers to obtain a high-paying job in a successful dot-com business.Penny,who cleaned homes to earn money during college,used her experience to start her own business.Her entrepreneurial spirit surprised Ira and their friends,and she built a successful cleaning business with a growing base of residential clients and even a few commercial customers.She soon had to hire several part-time employees to keep up with demand.With money rolling in,Ira and Penny began to live the good life,buying an expensive new car,a state-of-the-art home entertainment center,and expensive wardrobes.As busy as they were,and as hard as they both worked,they often found it easier to dine at a nice restaurant rather than fix meals at home.
When the dot-com bubble burst in the early 2000s,Ira was lucky enough to keep his job,but was forced to take a significant pay cut.The economic downturn forced some of the households and businesses that used Penny's company to cut back on professional cleanings,so her business suffered too.Soon the couple was struggling to pay the rent on their upscale apartment.They began relying on credit cards to cover expenses,but after a few months the credit limits on their cards had been reached.They fell behind in paying off their student loans and started getting some unpleasant calls from bill collectors.The stress and frustration led to arguments that began to threaten their personal relationship.With their personal finances out of control,Ira and Penny knew that they had to make changes to save not only their financial dreams,but also their marriage.However,they were at a loss as to where to start.Family members encouraged them to seek the advice of a financial planner.The couple reluctantly agreed that this was something they needed to do.
-In saving for retirement,Penny could take advantage of the unique tax shelter offered only to small-business owners in a:

Accepted Answer

A)  401(k)plan. 
B)  simple IRA plan. 
C)  Roth plan. 
D)  Keogh plan. 
A)  401(k)plan. 
B)  simple IRA plan. 
C)  Roth plan. 
D)  Keogh plan.

Question 9

LaTasha is attending her local community college so she can get a good job.She knows that financial planning begins first with making money.

Accepted Answer

A) True 
 B)False

Question 10

Real estate taxes and mortgage interest payments are both:

Accepted Answer

A)  expenses of home ownership on which the government levies a tax. 
B)  tax deductible for renters. 
C)  tax deductible for homeowners. 
D)  taxable income for renters and homeowners. 
A)  expenses of home ownership on which the government levies a tax. 
B)  tax deductible for renters. 
C)  tax deductible for homeowners. 
D)  taxable income for renters and homeowners.

Question 11

Stan and Heidi are married and both have careers in business.If one of the two were to die,there would be a sudden drop in income.To provide protection from this risk the couple should purchase:

Accepted Answer

A)  disability insurance. 
B)  life insurance. 
C)  health insurance. 
D)  car insurance. 
A)  disability insurance. 
B)  life insurance. 
C)  health insurance. 
D)  car insurance.

Question 12

As an employee of New Hampshire Industries,Kathleen has an opportunity to invest pre-tax income in an employer-sponsored retirement plan.Her employer will contribute 50 cents for every dollar that Kathleen contributes to this fund.This is an example of a(n):

Accepted Answer

A)  individual retirement account (IR
A) plan. 
B)  401(k)plan. 
C)  Keogh plan. 
D)  restricted private investment (RPI)plan. 
A)  individual retirement account (IR
A) plan. 
B)  401(k)plan. 
C)  Keogh plan. 
D)  restricted private investment (RPI)plan.

Question 13

Funds invested in savings accounts and certificates of deposit (CDs)have traditionally outperformed stocks as a means of generating long-term financial gains.

Accepted Answer

A) True 
 B)False

Question 14

Budgets are:

Accepted Answer

A)  useful for businesses,but too restrictive to be used by individuals or households. 
B)  a financial plan of projected revenues and expenses. 
C)  just another name for cash flow statements. 
D)  only helpful to people who earn more than $50,000 per year. 
A)  useful for businesses,but too restrictive to be used by individuals or households. 
B)  a financial plan of projected revenues and expenses. 
C)  just another name for cash flow statements. 
D)  only helpful to people who earn more than $50,000 per year.

Question 15

It is usually better to use any money left after paying monthly bills to pay off debts that carry high interest rates rather than putting that money into a savings account.

Accepted Answer

A) True 
 B)False

Question 16

If you have minor children,the first step in estate planning is to select their guardian.

Accepted Answer

A) True 
 B)False

Question 17

As a recent college graduate just starting out on his own,Greg needs health,disability,car,and auto insurance.He may be able to save money by obtaining an umbrella policy.

Accepted Answer

A) True 
 B)False

Question 18

Though stock prices do sometimes go down,investing in the stock market has generally provided very attractive returns over the long run.

Accepted Answer

A) True 
 B)False

Question 19

An annuity is a contract to make regular payments to a person for life or for a fixed period.

Accepted Answer

A) True 
 B)False

Question 20

Financial planners encourage individuals to borrow only to cover immediate expenses.

Accepted Answer

A) True 
 B)False

Exam 22: Appendix B: Managing Risk

Many financial experts advise that you set up a contingency fund equal to about ________ of your earnings and keep these funds in highly liquid accounts.

One step toward the goal of taking control of your finances is to keep track of all your expenses.

Keogh plans are most useful for stockholders of major corporations who earn most of their income from dividends rather than wages or salaries.

Young married couples that find themselves running out of money at the end of the month,might be well advised to:

The best way to invest in a 401(k)plan is to use all of the money to buy stock in the company where you work.

A(n)________ can be added to a homeowner's insurance policy that provides for coverage at a reasonable cost for items that the policy otherwise would not cover.

Hillary and Bill are married and have a young child.Both work,but Hillary earns a higher salary than Bill.Insurance experts suggest that:

LaTasha is attending her local community college so she can get a good job.She knows that financial planning begins first with making money.

Real estate taxes and mortgage interest payments are both:

Stan and Heidi are married and both have careers in business.If one of the two were to die,there would be a sudden drop in income.To provide protection from this risk the couple should purchase:

As an employee of New Hampshire Industries,Kathleen has an opportunity to invest pre-tax income in an employer-sponsored retirement plan.Her employer will contribute 50 cents for every dollar that Kathleen contributes to this fund.This is an example of a(n):

Funds invested in savings accounts and certificates of deposit (CDs)have traditionally outperformed stocks as a means of generating long-term financial gains.

Budgets are:

It is usually better to use any money left after paying monthly bills to pay off debts that carry high interest rates rather than putting that money into a savings account.

If you have minor children,the first step in estate planning is to select their guardian.

As a recent college graduate just starting out on his own,Greg needs health,disability,car,and auto insurance.He may be able to save money by obtaining an umbrella policy.

Though stock prices do sometimes go down,investing in the stock market has generally provided very attractive returns over the long run.

An annuity is a contract to make regular payments to a person for life or for a fixed period.

Financial planners encourage individuals to borrow only to cover immediate expenses.

Taking Risks and Making Profits Within the Dynamic Business Environment

Understanding How Economics Affects Business

Doing Business in Global Markets

Demanding Ethical and Socially Responsible Behavior

How to Form a Business

Entrepreneurship and Starting a Small Business

Management and Leadership

Adapting Organizations to Todays Markets

Production and Operations Management

Motivating Employees

Human Resource Management: Finding and Keeping the Best Employees

Dealing With Employee-Management Issues and Relationships

Marketing: Helping Buyers Buy

Developing and Pricing Goods and Services

Distributing Products

Using Effective Promotions

Understanding Accounting and Financial Information

Financial Management

Using Securities Markets for Financing and Investing Opportunities

Money, Financial Institutions, and the Federal Reserve

Appendix A: Using Technology to Manage Information

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