Using a brokerage firm, an investor buys 1000 shares of a stock at $50 a share on 50% margin.

The brokerage firm is lending 50% of the money to investor.

Claire got a new credit card & cancel an OLD credit card. She should dispose of her OLD card by

Cut card, parts in many trash bags & call company to cancel

Why might rising interest rates depress stock prices:

Rising interest rates can result in lower business profits

5 years you've had a $20k whole life insurance policy with $ value. You decide to cancel,

you get an amount of $ = to the premiums paid and interest.

The interest earned on United States Series EE Savings Bonds is

exempt from state and local taxes.

Julian is a single & recent graduate who just got his 1st job. What should be his 1st $$ goal?

establishing a fund for emergencies

Benefit of holding an investment over a year rather than selling it in less than a year is

capital gains on investment will be taxed at a lower rate.

A stock pays a $2.00 a share dividend. If the person reinvests the dividend, this mean the 2.00

will buy more of the same stock.

What is meant by an uncollateralized loan?

A personal loan without assets to cover the loan amount.

If you are being charged too high a rate of interest for a loan by a lender? You should

Notify the lending institution about state usury laws

Own a flat screen TV & have homeowner's insurance. Why do you add a personal property floater?

To replace the tv if it's get damaged or stolen.

Company offers a defined-contribution pension plan it means that at retirement the employee

gets total amount of $ contributed plus earnings.

Before the Kiss Corporation can issue stocks or bonds, it must register the issue with:

The Securities and Exchange Commission (SEC)

S. gave M. her debit card, so M. can take $25 at her bank. M. got $100. Can S. get $75 back?

No one has to pay Susan, she let Marie use ATM card/PIN

40 shares of Apple stock cost $80/share. Later, Apple has issued a 2-for-1 stock split. You own

80 shares of the stock and the price of each share is $40.

A person's debt ratio shows the relationship between debt & net worth. The lower the ratio the:

better off financially the person is.

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WISE TEST QUESTIONS

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Review for credit and investing

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Questions 31

Answers

1
Using a brokerage firm, an investor buys 1000 shares of a stock at $50 a share on 50% margin.
the investor is buying 2000 shares.
the investor will pay only $5000 for the shares.
The brokerage firm is lending 50% of the money to investor.
the brokerage firm owns 50% of the 1000 shares purchased.
2
Claire got a new credit card & cancel an OLD credit card. She should dispose of her OLD card by
doesn't matter if she tells company to close the account
Trash: they will know account is closed when card not used
Cut up the card and put parts in different garbage bags
Cut card, parts in many trash bags & call company to cancel
3
Why might rising interest rates depress stock prices:
Rising interest rates can result in higher business profits
investor is lured away from interest-paying bonds to stocks
Rising interest rates can result in lower business profits
Rising interest rates usually means the economy has less
4
5 years you've had a $20k whole life insurance policy with $ value. You decide to cancel,
you'll get an amount of $ to be spent on a term life policy.
you will receive $20,000 less the premiums paid
you get an amount of $ = to the premiums paid and interest.
you will receive one-fifth of the $20,000 face value.
5
"The Fed" is short for:
FBI
The Federal Reserve System
Congress
Federal Deposit Insurance Corporation
6
What is the largest equities market in the world?
Over-the-counter (OTC) market
American Stock Exchange (AMEX)
New York Stock Exchange (NYSE)
NASDAQ market
7
When a person declares bankruptcy that fact will appear on the person's credit report
for a 10 year period.
for a 3 year period.
until the person is able to receive a new credit card
until the person repays all debts owed.
8
Describes the ease and speed with which you can convert savings or an investment to cash is:
B Principal
D Rate of return
C Liquidity
A Convertibility
9
5 years of owning a Roth IRA, the person can buy his 1st home by withdrawing money from the IRA
and must pay a set penalty at the time of withdrawal.
and have penalties deferred until retirement
the owed taxes are deferred until retirement.
tax and penalty free.
10
Mortgage company offers a loan with unusually high costs and without regard to how to repay is:
Low-income lending
Consumer lending
Redlining
Predatory lending
11
The interest earned on United States Series EE Savings Bonds is
equal to the money paid to purchase it.
deducted at the time of the bond's purchase.
exempt from state and local taxes.
paid in a lump sum when the face value on bond is reached.
12
When a person brings an item to a pawnshop to obtain cash, the transaction is considered
a collateralized loan.
a custodial payment.
an unsecured loan.
a sales agreement.
13
Julian is a single & recent graduate who just got his 1st job. What should be his 1st $$ goal?
buying a life insurance policy
buying a house
creating a stock portfolio
establishing a fund for emergencies
14
Benefit of holding an investment over a year rather than selling it in less than a year is
profits can be averaged over the time the investment is held
fees will not be charged by brokers for selling
capital gains on investment will be taxed at a lower rate.
money earned on the investment will be considered tax-free.
15
A stock pays a $2.00 a share dividend. If the person reinvests the dividend, this mean the 2.00
will buy stocks that are similar to those already owned.
will buy more of the same stock.
will buy preferred stock in the corporation.
will buy bonds in the corporation.
16
What is meant by an uncollateralized loan?
A loan taken on a life insurance policy
A home equity loan
A mortage loan
A personal loan without assets to cover the loan amount.
17
If you are being charged too high a rate of interest for a loan by a lender? You should
Notify the local Better Business Bureau.
Accept the loan but pay it off early.
Ask the lending institution to lower its rates.
Notify the lending institution about state usury laws
18
Need health care & have to see your primary doctor paying $10. You can see a specialist. This:
is Fee-for-service health plan
is Medicaid health plan
is Managed care health plan
is Comprehensive health plan
19
A pharmacy is to drugs as the American Stock Exchange is to:
Mutual funds
Securities
Stock advisors
Interest
20
Which financial product has the most predictable income?
Option/future contract
Stock
Certificate of deposit
Real estate
21
Own a flat screen TV & have homeowner's insurance. Why do you add a personal property floater?
to reduce the premium on the homeowner's insurance.
To protect you from liability for damages.
To replace the tv if it's get damaged or stolen.
Shows the insurance company a good investment has been made.
22
A creditor may deny credit because of:
Bad credit history
Marital status
Age
Race
23
Company offers a defined-contribution pension plan it means that at retirement the employee
get a specified amount of $ based on company profits earned
gets one-half of the employee's last year's salary.
gets $ based on how long employee worked for the company.
gets total amount of $ contributed plus earnings.
24
Use someone else's money, with a promise to repay later & paying a fee for using the money is:
Credit
Investing
Interest
Taxation
25
Before the Kiss Corporation can issue stocks or bonds, it must register the issue with:
The Securities and Exchange Commission (SEC)
The Federal Reserve
It's Board of Directors
The World Bank
26
S. gave M. her debit card, so M. can take $25 at her bank. M. got $100. Can S. get $75 back?
No one has to pay Susan, she let Marie use ATM card/PIN
Ask Federal Reserve to pay Marie's unauthorized transaction
Ask Susan's bank pay for Marie's unauthorized transaction
Ask Marie's bank pay for Marie's unauthorized transaction
27
40 shares of Apple stock cost $80/share. Later, Apple has issued a 2-for-1 stock split. You own
80 shares of the stock and the price of each share is $40.
80 shares of the stock and the price of each share is $80.
40 shares of the stock and the price of each share is $40
20 shares of the stock and the price of each share is $80.
28
Which of the following is considered to be open-end credit?
Installment loans
A mortgage.
Department store charge cards
A car loan.
29
Which investment would you choose today if you believe interest rates will go up?
Long-term bonds
Variable-rate loans
Short-term savings instruments
Stocks
30
A person's debt ratio shows the relationship between debt & net worth. The lower the ratio the:
less liquid assets the person has.
better off financially the person is.
worse off financially the person is.
more liquid assets the person has.
31
Buying a treasury bill (T-bill) is best for investors who are looking for
an investment that matures in 10-30 years.
a higher yield on investment than corporate bonds offer.
place to invest between $100-$500.
a secure, low risk investment.

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