FINANCE 1000 MIZZOU FINAL EXAM
CORRECT QUESTIONS & ANSWERS
Two advantages of carrying cash are that it's easy to spend and many times you can
even recall where you spent it. - ANSWER False
One way to think of liquid assets is as a reservoir, with money moving in as wages are
received and moving out as living expenses are paid. - ANSWER True
When you automate your savings you are less likely to spend those dollars because
they never become part of the funds in your checking account. - ANSWER True
Nondepositminus−type financial institutions are commonly referred to as mutual funds
and brokerage firms. - ANSWER True
What is the name of an investment company that raises funds from investors, pools the
money, and invests in stocks or bonds?
A. Securities fund firm
B. Bond brokerage firm
C. Mutual fund firm
D. Stockbrokerage firm - ANSWER C
What is the name for comprehensive financial services packages offered by brokerage
firms?
A. Platinum management accounts
B. Consolidated management accounts
C. Asset management accounts
D. Comprehensive management accounts - ANSWER C
A tax free investment will always have a higher afterminus−tax return than a taxable
investment. - ANSWER False
Many banks offer free checking accounts. What may be the opportunity costs
associated with free checking?
A. Low interest rates
B. Overdraft protection
C. High minimum balance requirements
D. Both A and C are correct answers. - ANSWER D
One of the unpleasant secrets of using your credit card for a cash advance is that the
APR on the cash advance is typically lower than the APR for normal purchases. -
ANSWER False
, There is no cash advance fee when you use your credit card at an ATM machine. -
ANSWER False
Sometimes retailers will give you up to a 5% discount if you pay cash for their products
instead of using your credit card. Why?
A. Its much less paper work to process cash transactions.
B. They are saving on the merchants discount fee so they pass the savings on to you.
C. They are getting close to their monthly charge limit and don't want to go over it.
D. It is just good customer service, especially for repeat customers. - ANSWER B
Your credit score may affect how much you pay for health insurance. - ANSWER False
All of the following are advantages of renting versus buying a home except
A. mobility.
B. no property taxes.
C. not responsible for home repairs or maintenance.
D. no risk of falling housing prices.
E. control over remodeling and decorating decisions. - ANSWER E
What questions should you answer before deciding to purchase a house?
A. Do I understand the responsibilities of home ownership?
B. Will my life be stable or in transition in the next few years?
C. Is my job and the company I work for stable and secure?
D. All of the above are correct. - ANSWER D
As a rule of thumb, your PITI costs shouldn't exceed ________ of your pretax monthly
income.
A. 48 percent
B. 8 percent
C. 28 percent
D. 18 percent - ANSWER C
From a borrower's perspective, you're better off with an ARM if interest rates rise. -
ANSWER False
An assumable loan is one that can be transferred to a new buyer who simply takes over
the loan obligations. - ANSWER True
A mortgage loan in which the interest rate charged fluctuates with the level of current
interest rates is called a(n)
A. MRA.
B. RAM.
C. MAR.
D. ARM.
E. none of the above. - ANSWER D
CORRECT QUESTIONS & ANSWERS
Two advantages of carrying cash are that it's easy to spend and many times you can
even recall where you spent it. - ANSWER False
One way to think of liquid assets is as a reservoir, with money moving in as wages are
received and moving out as living expenses are paid. - ANSWER True
When you automate your savings you are less likely to spend those dollars because
they never become part of the funds in your checking account. - ANSWER True
Nondepositminus−type financial institutions are commonly referred to as mutual funds
and brokerage firms. - ANSWER True
What is the name of an investment company that raises funds from investors, pools the
money, and invests in stocks or bonds?
A. Securities fund firm
B. Bond brokerage firm
C. Mutual fund firm
D. Stockbrokerage firm - ANSWER C
What is the name for comprehensive financial services packages offered by brokerage
firms?
A. Platinum management accounts
B. Consolidated management accounts
C. Asset management accounts
D. Comprehensive management accounts - ANSWER C
A tax free investment will always have a higher afterminus−tax return than a taxable
investment. - ANSWER False
Many banks offer free checking accounts. What may be the opportunity costs
associated with free checking?
A. Low interest rates
B. Overdraft protection
C. High minimum balance requirements
D. Both A and C are correct answers. - ANSWER D
One of the unpleasant secrets of using your credit card for a cash advance is that the
APR on the cash advance is typically lower than the APR for normal purchases. -
ANSWER False
, There is no cash advance fee when you use your credit card at an ATM machine. -
ANSWER False
Sometimes retailers will give you up to a 5% discount if you pay cash for their products
instead of using your credit card. Why?
A. Its much less paper work to process cash transactions.
B. They are saving on the merchants discount fee so they pass the savings on to you.
C. They are getting close to their monthly charge limit and don't want to go over it.
D. It is just good customer service, especially for repeat customers. - ANSWER B
Your credit score may affect how much you pay for health insurance. - ANSWER False
All of the following are advantages of renting versus buying a home except
A. mobility.
B. no property taxes.
C. not responsible for home repairs or maintenance.
D. no risk of falling housing prices.
E. control over remodeling and decorating decisions. - ANSWER E
What questions should you answer before deciding to purchase a house?
A. Do I understand the responsibilities of home ownership?
B. Will my life be stable or in transition in the next few years?
C. Is my job and the company I work for stable and secure?
D. All of the above are correct. - ANSWER D
As a rule of thumb, your PITI costs shouldn't exceed ________ of your pretax monthly
income.
A. 48 percent
B. 8 percent
C. 28 percent
D. 18 percent - ANSWER C
From a borrower's perspective, you're better off with an ARM if interest rates rise. -
ANSWER False
An assumable loan is one that can be transferred to a new buyer who simply takes over
the loan obligations. - ANSWER True
A mortgage loan in which the interest rate charged fluctuates with the level of current
interest rates is called a(n)
A. MRA.
B. RAM.
C. MAR.
D. ARM.
E. none of the above. - ANSWER D
