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| 1 | |
An emergency fund should be at least as much as: |
| | A) | Your annual income |
| | B) | One month's income |
| | C) | Three times your monthly expenses |
| | D) | Three times your monthly income |
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| 2 | |
Which of the following is NOT a step in surviving a financial crisis? |
| | A) | Establish a larger than usual emergency fund |
| | B) | Pay only the minimum due on your credit cards |
| | C) | Apply for a line of credit with your bank |
| | D) | Monitor the value of your retirement accounts |
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| 3 | |
"The potential return on any investment should be directly related to the risk the investor assumes" means that: |
| | A) | Lower risk investments have potentially larger pay-offs |
| | B) | An investor that assumes too much risk will loose everything |
| | C) | Risky investments should be avoided |
| | D) | Investments with greater risk also have potentially higher pay-offs. |
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| 4 | |
Investments in stocks and bonds has a risk component called: |
| | A) | Inflation risk |
| | B) | Interest rate risk |
| | C) | Business failure risk |
| | D) | Liquidity risk |
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| 5 | |
Another term for diversifying your investments is: |
| | A) | Asset allocation |
| | B) | Market allocation |
| | C) | Risk allocation |
| | D) | Portfolio allocation |
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| 6 | |
How can you determine how much to invest in growth oriented investments? |
| | A) | Invest three times your monthly expenses. |
| | B) | Subtract your age from 110, this is the percent that should be invested. |
| | C) | Subtract your age from your retirement age, this is the percent that should be invested. |
| | D) | Divide your age by your retirement age and invest this proportion. |
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| 7 | |
What is the taxable equivalent yield for a tax-exempt municipal bond with a 3.25% interest rate for a person in the 25% tax bracket? |
| | A) | 0.0433% |
| | B) | 13% |
| | C) | 0.13% |
| | D) | 4.33% |
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| 8 | |
Calculating the taxable equivalent yield allows you to: |
| | A) | Figure out how much you will have to pay in taxes when the bond matures |
| | B) | Figure out how much you will have to pay in taxes when you buy the bond. |
| | C) | Compare the return on tax-exempt bonds with taxable investments. |
| | D) | Is not an important calculation because all investments are taxable. |
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| 9 | |
Bond holders receive interest payments: |
| | A) | Every 6 months |
| | B) | Every month |
| | C) | At the time of maturity |
| | D) | Once a year |
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| 10 | |
The approximate market value of a corporate bond with a face value of $1,000, an interest rate of 6.85%, and new bond issues of comparable quality with interest rates of 7.2% is: |
| | A) | $1,951.39 |
| | B) | $951.39 |
| | C) | $1051.09 |
| | D) | $105.11 |
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| 11 | |
You should avoid purchasing corporate bonds that have ratings in the: |
| | A) | AAA category |
| | B) | Baa category |
| | C) | BBB category |
| | D) | C category |
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| 12 | |
The current yield for a bond with a current market price of $1,230, an annual interest rate of 4.5%, and a face value of $1,000 is: |
| | A) | 0.037% |
| | B) | 195.65% |
| | C) | 3.7% |
| | D) | 8.2% |
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