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the future.You know the health insurance policy doesn’t cover

such expenses and that Medicare coverage is limited.You

should consider

A.disability insurance.

B.extended HMO.

C.group senior health care coverage.

D.long-term care insurance.

2. You’re the sole source of income for your family and your job

requires you to be in good physical condition.You’re concerned

that an injury could prevent you from performing your work.You

should consider

A.long-term care insurance.

B.extended HMO.

C.disability income insurance.

D.Medicare.

3. You’re reviewing your homeowner’s insurance policy to identify perils. Which one of the

following might be listed in that section of the policy?

A.Liability exposure C.Indemnity principle

B.Insurable interest D.Fire and smoke

4. You’ve elected to purchase a participating policy and will therefore have the potential to

receive

A.cash value. C.group rates.

B.extended benefits. D.policy dividends.

5. The settlement option chosen by most beneficiaries is

A.lump sum. C.fixed amount.

B.interest only. D.fixed time.

6. The least expensive form of permanent insurance protection is

A.term. C.limited payment.

B.straight life. D.universal.

7. Commonly, surgical expenses are covered on the basis of

A.actual surgical expense.

B.listed benefit schedules.

C.specific percentage of surgical expense.

D.average national cost of the surgery.

8. Even though your insurance company issued you a policy after reviewing your application

for insurance, it can still withdraw the policy for certain reasons if the _______ clause is in

the policy.

A.incontestability C.loss prevention

B.underwriting D.risk assumption

9. The best way to determine if you need life insurance and how much you need is to use the

_______ approach.

A.multiple earnings C.future value

B.needs D.financial security

10. After the insurance company reimbursed you for the loss related to property you insured, it

made a request from the negligent party to recover its payment. It has the right to do this

under the policy because of the right of

A.subrogation. C.indemnity.

B.coinsurance. D.negligent action

11. To obtain insurance for any property, whether a home, an automobile, or other property,

you must have a(n)

A.broker. C.insurable interest.

B.premium. D.liability.

12. In the United States, the right to continue a health insurance policy is provided by an act

known as

A.UCR. C.HMO.

B.SMI. D.COBRA.

13. Government-sponsored programs can complement private health insurance programs. If

you’re injured on the job, you would be eligible for which government mandated program?

A.Social Security Medicare

B.Workers’ Compensation Insurance

C.Supplementary Medical Insurance

D.Blue Cross/Blue Shield Worker Plan

14. A liability suit could result when

A.lightning strikes your home.

B.your son falls down the stairs of your home.

C.your auto is stolen.

D.a delivery person slips on the steps of your home.

15. Collision protection pays for damage to

A.non-auto property of insured. C.all autos in accident.

B.auto of insured. D.auto of other party in accident.

16. Auto insurance is needed primarily because of

A.potential damage to auto. C.lender’s requirements.

B.potential liability claims. D.state law.

17. Universal life insurance is designed to offer advantages to the policyholder beyond life

insurance “protection.” It also provides

A.very cheap rates and cancellation privileges.

B.short-term coverage and low rates.

C.investment or savings and tax advantages.

D.whole life and low rates.

18. If you want to be able to decide how the savings component of your whole life insurance

policy is invested, you should elect

A.straight life insurance. C.group life insurance.

B.continuous premium coverage. D.variable life insurance.

19. You have a very old car and you know that you need collision insurance and liability

coverage.You don’t want to insure your car for any other damage. Therefore, you wouldn’t

elect to take out _______ coverage.

A.uninsured motorist C.medical payments

B.comprehensive D.bodily injury

20. You have homeowner’s insurance and auto insurance, but due to your high net worth

you’re very worried about liability beyond the amounts covered in those policies.You

should explore

A.an umbrella personal liability policy.

B.an endorsement of loss policy.

C.supplemental liability to the two policies.

D.professional liability coverage.

1. You noticed from the prospectus that the fund you’re considering

is advertised as a no-load investment company, but there are

fees to cover marketing and distribution expenses. These fees

are known as

A.loads. C.commissions.

B.fund expenses. D.12(b)-1 fees.

2. You know that mutual funds can emphasize various investment

styles or approaches.You’re looking for a diversified portfolio of

investment that generates significant capital appreciation and

provides current income form interest and dividends. The type

of fund you seek is a(n) _______ fund.

A.money market mutual C.balanced

B.growth-and-income D.bond

3. You’re seeking a fund that mirrors the returns and risks of the Standard & Poor’s 500.You

should consider a(n)

A.growth fund. C.balanced mutual fund.

B.stock unit investment trust. D.index fund.

4. You’re young and have an investment plan that emphasizes growth.You have a high

tolerance for risk. A high percentage of your savings for retirement should be invested in

A.money market accounts. C.stocks.

B.bonds. D.U.S. Treasury securities.

5. You’re close to retirement and very adverse to risk.You should invest a high percentage of

your assets in

A.stocks. C.commodities.

B.real estate. D.bonds.

6. You’re seeking a diversified portfolio to cope with the various types of investment risks.

You’re particularly concerned that the value of your securities may be influenced by the

performances of other investors. This risk is referred to as _______ risk.

A.market C.interest rate

B.business D.liquidity

7. You learned that if you take more risk you should require a higher rate of return. In

evaluating how much extra return you get for taking risk, you compare the return form

the investment under consideration to

A.risk-free rate of return.

B.the compound rate of return.

C.the after-tax adjusted rate of return.

D.yield to maturity.

8. You’re concerned with the after-tax return from your investments. The lowest tax

consequence to a dividend or distribution will be from

A.ordinary dividends. C.stock dividends.

B.short-term gain distribution. D.long-term gain distribution.

9. The performance ratio that best measures the relative value of your investment in stock is

A.return on equity. C.net profit margin.

B.price/earnings ratio. D.earnings per share

You don’t want to invest in a limited partnership that isn’t listed on an organized exchange

because it won’t be easy to sell if you need cash. The risk that best describes this problem

is _______ risk.

A.event C.financial

B.purchasing power D.liquidity

11. You’re concerned with maintaining your standard of living even after the effects of inflation.

The risk that best describes this issue is _______ risk.

A.event C.market

B.purchasing power D.liquidity

12. You’ve purchased stock in a company from the underwriter of the company’s stock after

reviewing the prospectus for this initial public offering. Therefore, you purchase the stock in

which market?

A.Over-the-counter market C.The New York Stock Exchange

B.The secondary market D.The primary market

13. The price of the majority of stocks has generally been rising steadily for the past year.

This situation is an example of what kind of market?

A.Bull market C.Growth market

B.Pig market D.Bear market

14. Care should be exercised in selecting a securities brokerage firm even though such firms

are subject to enforcement regulations at the federal level from the

A.National Association of Securities Dealers.

B.Securities Investor Protection Corporation.

C.Securities and Exchange Commission.

D.Securities National Fraud Commission.

15. Which of the following is an advantage of investing in mutual funds?

A.Mutual funds offer a high level of convenience.

B.Mutual funds allow you to target your investment onto one security.

C.Individual investors personally manage the investment decisions.

D.Mutual funds require a large investment from their investors.

16. Bonds issued without coupons are called _______ coupon bonds.

A.no C.negative

B.zero D.unsecured

17. With respect to the return on your portfolio of securities, what factor will have the most

significant impact?

A.Security selection C.Average rating

B.Average maturity D.Asset allocation

18. A no-load fund has no _______ charges.

A.transaction C.management

B.administrative D.tax

19. Investment company earnings come from

A.capital gains.

B.dividend from stocks.

C.interest from bonds.

D.interest, dividends, and capital gains.

20. You’ve invested in a fund that holds commercial office buildings and apartments. The fund

must distribute its earning to its shareholders.You own shares in a(n)

A.real estate investment trust.

B.closed-end investment company.

C.unit investment trust.

D.open-end investment company

1. You’re interested in a retirement plan for employees that allows

them to invest before tax dollars in a tax deferred saving plan.

You should consider a

A.guaranteed investment contract.

B.401(k) plan.

C.profit-sharing plan.

D.qualified pension plan.

2. Which of the following is a correct statement about a will?

A.If there’s no tax clause in a will, no taxes need be paid.

B.If there’s no tax clause in a will, the apportionment

statues apply.

C.If there’s no tax clause in a will, an attorney will calculate them.

D.If there’s no tax clause in a will, the disposition provision

applies.

3. Which of the following is a correct statement regarding a deferred annuity?

A.It’s an excellent savings and retirement vehicle even though it has no tax advantages.

B.It has a limitation in that you must pay for the entire annuity with a single up front

payment.

C.It can’t be used very well with an estate plan because it has no survivorship benefit.

D.It’s the opposite of life insurance since it provides for the systematic liquidation of

savings.

4. The aging of Americans will have an economic impact on social security trust funds and

private pensions based on projections during the next twenty years. What best describes

the aging demographics in terms of the percentage of the population over age 65?

A.Stable C.Slight increase

B.Declining D.Substantial increase

5. With respect to social security benefits, which statement is true?

A.Benefits are calculated solely based on payments to the trust fund.

B.Benefits are based solely on need.

C.If you retire at age 62, your benefits will be reduced.

D.You can receive full benefits with twenty quarters of wages subject to FICA.

6. The government has passed an important law that protects employees who participate in a

private pension plan. This law is known as the

A.Employee Pension Protection Act.

B.Employee Retirement Income Act.

C.Pension Benefit Guaranty Act.

D.Pension and Retirement Income Act.

7. Who needs to develop an estate plan?

A.Children who may inherit wealth in future

B.Only very wealthy people

C.Only married couples

D.Anyone that wants to control the disposition of assets upon death

8. Your real and personal property that can be transferred according to the terms of a will is

called your

1. A.gross estate. C.net estate
2. B.Probate estate. D. estate.

9. Your probate estate includes

A.assets held in revocable trusts out of your control.

B.all assets, real and personal, that are owned in the name of the decedent.

C.all assets in which the decedent had any direct or indirect beneficial interest.

D.only intestate assets.

10. Life insurance could alleviate estate problems caused by

A.inflation. C.disabilities.

B.improper management. D.lack of liquidity.

11. You’re in a pension plan that requires the company to fund the pension benefits and

therefore bear the pension costs. This pension plan is considered a _______ plan.

A.noncontributory C.contributory

B.vested rights D.defined contributory

12. You’re a participant in a pension plan that offers a specific payment formula of benefits

when you retire. What kind of plan is this?

A.Defined contribution plan C.Vested rights plan

B.Noncontributory plan D.Defined benefit plan

13. Your company wants to deduct its contributions to the pension plan as a tax deductible

expense and has applied to the Internal Revenue Service to treat the plan as a _______

plan.

A.IRS approved pension C.qualified pension

B.ERISA pension D.funded pension

14. You want to start planning for retirement and you learned about the mistakes that people

often make. Which of the following is a retirement planning mistake?

A.Saving too much C.Starting to invest too late

B.Investing in an IRA D.Investing for the long-term

15. A key factor in setting your retirement goals in relation to the amount of money you must

have to retire is

A.where you want to live.

B.your hobbies.

C.your planned age at retirement.

D.the types of retirement plan you have.

16. After you’ve completed a detailed projection of your living expenses requirements at

retirement, you must apply an expense factor to account for

A.uncertainty. C.mortality.

B.investment results. D.inflation.

17. You’re 95 years old and under the care of a trusted grandson.You decide that you want to

give all your assets away to your relatives to avoid having a will and trust so that there will

be little in your estate to probate. A significant flaw of such a plan is

A.you don’t know how to divide it up C.gift taxes

B.state law requirements to have a witness D.inheritance

18. Which of the following is true?

A.A will can never be revoked.

B.A will doesn’t need to be in writing or have a witness.

C.The testator of the will is also the executor.

D.An order to change a will is a codicil.

19. A provision that will determine what type of health care you receive in a terminal illness is

A.a living will. C.power of attorney.

B.joint tenancy. D.a living trust.

20. You aren’t married. Which form of property ownership can’t exist in your estate?

A.Joint tenancy with right of survivorship C.Single ownership

B.Tenancy by the entirety D.Beneficial ownership in trust