Family and Consumer studies.docx

Family and consumer Studies Negotiating a purchase price for a home usually involves an offer and counteroffers.  TRUE The amount of the down payment will affect the amount of mortgage a person can afford.  TRUE Prepaid interest may be a part of a mortgage agreement.  TRUE When paying a point toward your mortgage it means you are paying 1% of the value of the home. FALSE The largest physical capital investment made by most families is a house. TRUE The percentage of families owning homes over time has decreased. FALSE The definition of a rate cap is how often the lending institution can change the ARM interest rate. FALSE Current interest rates can affect the total price of a home.  TRUE An appraisal refers to the price for which a home has been sold.  FALSE Amortization refers to changes in the monthly payment for a variable rate mortgage.  FALSE Although a borrower pays more interest on a 30-year mortgage than on a 15-year mortgage due to the length of the loan, the 30-year APR is generally lower than a 15-year mortgage APR. FALSE An advantage of fixed rate mortgages is that the tax advantage lessens over time. FALSE Alternative mortgage instruments were created because there were too many homes on the market. FALSE With Adjustable Rate Mortgages the interest rate is variable but the payment stays fixed. FALSE Interest only loans increase a buyer’s equity in the home faster than conventional loans. FALSE Installment credit allows the borrower to use the credit repeatedly. FALSE The most important part of your FICO score is the type of credit you use FALSE Your financial institution can discriminate based on your credit score. TRUE If you find an error on your credit report you should call the credit bureau within 30 days to get it corrected. FALSE The majority of college students do not have a credit card. FALSE Bankruptcy stays on your credit history for 12 years. FALSE Your FICO score has little impact on interest rates you pay. FALSE The three credit bureaus have the same information for each creditor. FALSE If you have a short credit history there is no need to get annual credit reports. FALSE You can receive three credit reports each year. TRUE Budgeting is very simple. TRUE The benefits associated with purchasing a home include: Tax benefit Appreciation Forced savings Reduction in risk of future housing costs All of the above The purpose of a counteroffer is to:  A. negotiate the purchase price. B. reduce mortgage payments. C. lower real estate property taxes. D. avoid paying points at closing. E. avoid paying the real estate agent's commission. Earnest money has the purpose of:  A. paying real estate property taxes. B. reducing the mortgage interest rate. C. serving as good faith by a homebuyer. D. paying the real estate agent's commission. E. being a mortgage application fee. What is prepaid interest charged by a mortgage company?  A. escrow B. points C. origination fee D. title fee E. deed Earnest money is:  A. The value of your home used to calculate property taxes B. The estimated current value of your home in the market C. The price you pay for your home D. The amount of money the buyer deposits when they make an offer on a home E. The cost of home insurance The change in credit card rules will: Limit how often a consumer can use a credit card. Increase the grace period on credit cards. Prevent the user from going over the card limit without authorization. Require credit companies use variable rate interest instead of fixed rate. Change the color of all BYU credit cards to red and white. The least expensive institution to get credit through in the list below is: Sales Finance Companies Credit Cards Pawnshops Banks, Savings and Loans, Credit Unions Consumer Finance Companies Consumers will usually obtain the best overall value of their dollar by having all financial services with the same institution.  FALSE Savers should always attempt to obtain an interest rate that is less than the inflation rate.  FALSE A certificate of deposit is usually considered to be very liquid.  FALSE The more frequent the compounding, the less a person will earn on a savings account. FALSE Joan Zemke expects interest rates to decline over the next few months. To maximize her earnings she should use a(n):  A. regular savings account. B. interest-bearing checking account. C. five-year certificate of deposit. D. six-month certificate of deposit. E. money market fund The purpose of a debit card is to:  A. obtain a discount on consumer purchases. B. make credit card purchases. C. quickly obtain a cash loan. D. make investments with an investment company. E. transfer money electronically What is the difference between a lost debit card and a lost credit card?  A. A credit card carries more risk of loss to the cardholder. B. A debit card carries more risk of loss to the cardholder. C. There is no cardholder liability if either type of card is lost. D. There is no difference in liability A savings account at a credit union is called a ____________ account.  A. share B. NOW C. club D. certificate E. money market A certificate of deposit usually has:  A. high interest-rate risk. B. low safety for savers. C. limited liquidity. D. a variable rate of return. E. no minimum deposit amount Savings compounded ____________ would have the highest effective yield.  A. daily B. annually C. semi-annually D. monthly E. weekly An account at a commercial bank designed for people who want to earn a higher savings rate is a(n) ____________ account.  A. regular savings account B. regular checking C. share draft D. money market account What type of account would be considered the most liquid?  A. A certificate of deposit. B. A checking account C. A money market account D. A brokerage account A pawnshop with a monthly interest rate of 2.75 percent would have an annual interest rate of ____ percent.  A. 33 B. 27.5 C. 20 D. 5.5 E. 2.75 A savings account earns 4 percent. If the saver is in a 28 percent tax bracket, the after-tax savings rate of return would be ____ percent.  A. 28 B. 16.72 C. 4 D. 2.88 E. 1.12 Credit is an arrangement to receive cash, goods, or services now and pay for them in the future. TRUE There are very few valid reasons for using credit.  FALSE Although credit allows more immediate satisfactory of needs and desires, it does not increase total purchasing power. TRUE With an open-end credit, you pay back one-time loans in a specified period of time in equal amounts. FALSE You should sign your new credit cards as soon as they arrive.  TRUE Gasoline companies are good places to obtain your first credit card.  TRUE When you cosign a loan, you are being asked to guarantee this debt.  TRUE Most of the information in your credit file may be reported for only seven years. If you have declared personal bankruptcy, that fact may be reported for 10 years.  TRUE Which of the following agencies can produce for a subscribing creditor, almost instantaneously, a report about your past and present credit activity?  A. the Federal Reserve Bank in your district B. the Audit Bureau of Circulation C. Federal Trade Commission D. Debit Bureau E. Credit Bureau A valuable asset pledged to assure loan payments and subject to seizure upon default is called:  A. capacity. B. character. C. capital. D. collateral. E. conditions. The way to maintain your credit rating is to:  A. use credit sparingly. B. pay cash for your purchases. C. repay your debts on time. D. declare a Chapter 7 bankruptcy. E. use as many credit cards as you can. Paul Carter is applying for a loan from a bank. The bank is concerned because Paul is an airline pilot for United Airlines. The bank thinks that Paul may be laid off in the near future. Which of the 5Cs of credit is the bank concerned with?  A. Character B. Capacity C. Capital D. Collateral E. Conditions Charles Rickman is applying for a loan from the bank. The bank has determined that he has never been late making payments on past loans. Which of the 5Cs of credit is the bank looking at?  A. Character B. Capacity C. Capital D. Collateral E. Conditions The biggest distinction between savings and investing is the yield (return)? True Once you begin investing you can discontinue your savings plan. False Preferred stock is often referred to as a middle investment somewhere between common stock (an ownership position for the stockholder) and corporate bonds (a creditor position for the bondholder). True By using the Internet, it is possible to find market price quotations, but more detailed financial information about a corporation is unavailable to the average investor. False Today, there are more closed-end funds than there are open-end funds.  False If an investor owns cumulative preferred stock, missed or omitted dividends accumulate and must be paid before any cash dividend is paid to common stockholders.  True Pure risk means you can either make or lose money. False Dollar cost averaging means buying the same number of stock each time you invest. False. There is no difference between diversification and allocation. False Beta measures the probability that a stock will make money. False Risk and average rate of return are positively correlated. True Municipal bonds are federal tax-free. True In inflationary times the demand for precious metals rises. True Mutual fund’s net asset value is usually calculated and posted throughout the trading day. False In case of a divorce, division of pension benefits generally depends on the length of the marriage. True  If you make a withdrawal from a 401(k) or 403(b) you must pay taxes due plus a 10% penalty. True The use of economic resources to make a profit is the definition of: Saving Investing Diversification Allocation An example of investing by lending is: Owning stocks Owning real estate Owning bonds Leveraging someone else’s money An example of investing by owning is: Owning stocks Owning bonds Leveraging someone else’s money An example of investing by lending is: Owning stocks Owning bonds Leveraging someone else’s money Cindy Scymanski purchased 100 shares of Gleason Systems stock for $42.50 per share. Her commission for this purchase was $35. She sold the stock two years later for $55 per share and a commission of $50. While she held the stock it paid a dividend of $1.50 per share. What was Beverly's total dollar return on this stock?  A. $1,250 B. $1,165 C. $150 D. $1,315 E. $1,400 Patty Hoskins owns 220 shares of General Mills Corporation. For the last calendar quarter, General Mills Corporation paid a dividend of $0.47 a share. What is the total amount she received in her dividend check for this quarter?  A. $0.47 B. $47 C. $94 D. $103.40 E. It is impossible to calculate the total dividend amount with this information. Jo Bower owns 150 shares of Data General stock. She purchased the stock for $24 a share. She sold her stock for $30 a share. The commissions required to buy and sell her stock totaled $120. Assuming that she received no dividends during the time she owned the stock, what is her total return for this transaction?  A. $600 B. $780 C. $900 D. $2,400 E. $3,000 A stock that remains stable during declines in the economy is called a(n) ____________ stock.  A. defensive B. cyclical C. growth D. income E. blue-chip The value of the mutual fund's portfolio minus the mutual fund's liabilities divided by the number of shares outstanding is called the:  A. book value. B. outstanding balance. C. per share value. D. net asset value. E. accounting value. Assume you invest $3,000 in a mutual fund. Also assume the mutual fund pays you $50 dividends this year and that the mutual fun is worth $3,275 at the end of the year. What is your rate of return? 8.4% 9.9% 10.8% 0% A fee that some investment companies charge for advertising and marketing a mutual fund is called a:  A. 14A-1 fee. B. 12b-1 fee. C. 18-2 fee. D. 21-AB fee. E. None of these answers are correct. Earnings from a Roth IRA may be withdrawn after the account is 5 years old and: After the investor is 50 years old. For the down payment on a secondary home. For higher education expenses for yourself, spouse, children or grandchildren. If you want to donate to a charity. All of the above An investor can borrow from his/her 401(k) or 403(b) with the following restrictions: The interest must be repaid. If you change jobs you must pay the repay the loan immediately. If you default you must pay taxes due plus 10% penalty. All of the above In Utah, if property transfer is not specified, the law assumes Joint tenancy with rights of survivorship Tenancy in common Joint tenancy with rights in common Every person for him/herself Financial goals should be specific and measurable? True There is no difference between saving and investing? False You can usually receive a higher yield on a savings account than an investment account? False The biggest distinction between savings and investing is the yield (return)? True Once you begin investing you can discontinue your savings plan. False At maturity , corporations must repay stockholders the money they invested in the company.  FALSE Dividend payments on common stock are guaranteed, but the amount is determined by the board of directors. False Preferred stock is often referred to as a middle investment somewhere between common stock (an ownership position for the stockholder) and corporate bonds (a creditor position for the bondholder). True As the risk taken by an investor goes up the return on that investment ought to go up? True A defensive stock is a stock that typically sells for less than $1. False By using the Internet, it is possible to find market price quotations, but more detailed financial information about a corporation is unavailable to the average investor. False The major reasons why investors purchase mutual funds are professional management and diversification.  True Today, there are more closed-end funds than there are open-end funds.  False In a newspaper quotation, NAV stands for "not accessible value."  False If an investor owns cumulative preferred stock, missed or omitted dividends accumulate and must be paid before any cash dividend is paid to common stockholders.  True Pure risk means you can either make or lose money. False One way to reduce the amount of risk an investor takes is to diversify. True Dollar cost averaging means buying the same number of stock each time you invest. False. There is no difference between diversification and allocation. False Beta measures the probability that a stock will make money. False A bond rating has to do with the default risk of a bond. True Risk and average rate of return are positively correlated. True One of the disadvantages of investing in federal government securities is they are high risk. False Municipal bonds are federal tax-free. True The main reason why investors choose U.S. government securities is the above average interest rates that these securities pay.  False CDs have no liquidity risk. False There is no difference between common and preferred stocks except the risk factor. False A bull market is a time when prices are rising. True A bear market is a time when prices are rising. False Mutual funds disadvantage is they usually are not very diversified. False Open ended mutual funds are the most common. True Mutual fund’s net asset value is usually calculated and posted throughout the trading day. False An investment paying 7% is always a better investment than one paying 6.5%. False In most cases a traditional IRA is a better investment for a student than a Roth IRA. False Most IRAs restrict investors by only offering few investment options. False Full retirement age is 65 years old. False One of the misconceptions about retirement is that your expenses will drop when you retire.  True In case of a divorce, division of pension benefits generally depends on the length of the marriage. True  Although medical expenses vary from person to person, they tend to decrease with age.  False If you make a withdrawal from a 401(k) or 403(b) you must pay taxes due plus a 10% penalty. True Having an estate going to probate is usually the best idea for most families. False Using next year’s income this year is: Saving Investing Borrowing Stupid The use of economic resources to make a profit is the definition of: Saving Investing Diversification Allocation Most people invest to: Achieve financial goals Increase current income Gain wealth and financial security Have funds available for retirement All of the above An example of investing by lending is: Owning stocks Owning real estate Owning bonds Leveraging someone else’s money An example of investing by owning is: Owning stocks Owning bonds Leveraging someone else’s money An example of investing by lending is: Owning stocks Owning bonds Leveraging someone else’s money The type of risk an investor takes of losing a major portion of or all an investment is: Inflation risk Default risk Interest rate risk Marketability risk Of the following which is the safest investment: CDs Corporate bonds Mutual funds Real estate Of the following which is the riskiest investment: CDs Money market Rental property Corporate bonds Commodities If you invest money for shares of a company what type of investment do you own? Stocks Bonds Mutual Funds Real Estate CDs Nancy Cammans just bought the stock of a company. She knows that she will receive a cash payment from the company once a quarter, although the company is not obligated to make this payment. What will he receive?  A. Equity B. Proxy C. Voting Rights D. Dividends E. None of the choices Cindy Scymanski purchased 100 shares of Gleason Systems stock for $42.50 per share. Her commission for this purchase was $35. She sold the stock two years later for $55 per share and a commission of $50. While she held the stock it paid a dividend of $1.50 per share. What was Beverly's total dollar return on this stock?  A. $1,250 B. $1,165 C. $150 D. $1,315 E. $1,400 Loni Smith owns 220 shares of General Mills Corporation. For the last calendar quarter, General Mills Corporation paid a dividend of $0.47 a share. What is the total amount she received in her dividend check for this quarter?  A. $0.47 B. $47 C. $94 D. $103.40 E. It is impossible to calculate the total dividend amount with this information. Jo Bower owns 150 shares of Data General stock. She purchased the stock for $24 a share. She sold her stock for $30 a share. The commissions required to buy and sell her stock totaled $120. Assuming that she received no dividends during the time she owned the stock, what is her total return for this transaction?  A. $600 B. $780 C. $900 D. $2,400 E. $3,000 A stock that remains stable during declines in the economy is called a(n) ____________ stock.  A. defensive Cyclical  Growth  Income  blue-chip Assume that you purchased a $1,000 Exxon bond that pays 9.5 percent interest. What is the amount of interest you would receive each six months?  A. $4.75 B. $9.50 C. $95 D. $47.50 E. $1,000 Generally, interest on corporate bonds is paid every:  A. month. B. three months. C. six months. D. nine months. E. year. An investment in which you loan a corporation, the federal government, or a municipality money to be paid back in semi-annual interest payments what type of investment do you own? Stocks Bonds Mutual Funds Real Estate CDs An investment in which money is pooled together and invested by a professional fund manager is what type of investment? Stocks Bonds Mutual Funds Real Estate CDs The value of the mutual fund's portfolio minus the mutual fund's liabilities divided by the number of shares outstanding is called the:  A. book value. B. outstanding balance. C. per share value. D. net asset value. E. accounting value. Assume you invest $3,000 in a mutual fund. Also assume the mutual fund pays you $50 dividends this year and that the mutual fun is worth $3,275 at the end of the year. What is your rate of return? 8.4% 9.9% 10.8% 0% A fee that some investment companies charge for advertising and marketing a mutual fund is called a:  A. 14A-1 fee. B. 12b-1 fee. C. 18-2 fee. D. 21-AB fee. E. None of these answers are correct. Committing a set amount per month, and always purchasing securities with that money is an example of: Allocation Diversification Dollar Cost Averaging Buying on Margin A stock that is expected to have higher rates of return (appreciation) and no dividends is: Value Stock Growth Stock Defensive Stock Index Stock Earnings from a Roth IRA may be withdrawn after the account is 5 years old and: After the investor is 50 years old. For the down payment on a secondary home. For higher education expenses for yourself, spouse, children or grandchildren. If you want to donate to a charity. All of the above 401(k)s, Roth IRAs, Roth 401(k)s are examples of Tax Deferred Programs Defined Contribution Plans Social Security Retirement Plans Pre-tax Retirement Plans An investor can borrow from his/her 401(k) or 403(b) with the following restrictions: The interest must be repaid. If you change jobs you must pay the repay the loan immediately. If you default you must pay taxes due plus 10% penalty. All of the above True / False Questions   1. The purpose of insurance is to help protect you and your family against financial hardship due to hazard, accident, death, and similar risks. TRUE  2. Personal risks, property risks, and liability risks are types of speculative risks.  FALSE   3. The most common method of dealing with pure risk is to shift, or transfer it to an insurance company or some other organization. TRUE 4. Self-insurance is the process of establishing a monetary fund that can be used to cover the cost of a loss.  TRUE 5. Homeowner's insurance refers to coverage also available to renters.  TRUE 6. The purpose of a household inventory is to provide evidence of items covered by home insurance.  TRUE 7. Medical payments coverage in a home insurance policy is designed to pay for legal action taken against a homeowner who may be legally responsible for injury or property damage of others.  FALSE 8. Replacement cost for settling property insurance claims is less costly than the actual cash value method.  FALSE 9. Collision coverage pays for damage to your vehicle for such hazards as fire, theft, or wind damage.  FALSE 10. Property damage liability coverage would pay for damage to another vehicle for which you were at fault.  TRUE 11. The driver classification category is based on automobile style, model, and value of the vehicle.  FALSE   Multiple Choice Questions 12. Using a home security system is an example of ____________ risk.  A. shifting B. accepting C. reducing D. sharing E. transferring 13. The purpose of a household inventory is to:  A. reduce insurance costs. B. document owned property. C. obtain personal property floater coverage. D. increase liability coverage. E. lower the chance of negligence. 14. Renter's insurance would include coverage for:  A. flood damage. B. personal property. C. building and other structures. D. umbrella liability. E. earthquake damage. 15. Which of the following are covered by renter's insurance?  A. medical expenses for injuries to visitors B. fire damage of the building's roof C. additional living expenses D. accidental damage to the property of others E. cost of legal action due to personal liability 16. Your home insurance provides for replacement value for personal property losses. A microwave is stolen. It cost $300 two years ago and has an expected life of six years. A comparable microwave costs $400 today. What amount will the insurance company pay?  A. $100 B. $150 C. $200 D. $350 E. $400 17. Which of the following insurance policy provisions requires that the insured must pay for part of the loss of a claim if the property is not insured for the specified percentage of replacement value?  A. personal property floater B. an endorsement C. coinsurance clause D. umbrella coverage E. assigned risk clause 18. The ____________ method to settle claims is based on the current replacement cost of a damaged or lost item less depreciation.  A. replacement value B. actual cash value C. umbrella D. endorsement E. personal property floater 19. Your home insurance policy has a $250 deductible. If a small fire causes $600 damage to your home, what amount of the claim would the insurance company pay?  A. $250 B. $350 C. $450 D. $600 E. not able to determine from this information 20. The 100 in 100/300/50 refers to:  A. property damage liability coverage. B. the amount of the deductible. C. collision coverage. D. the total coverage for an accident. E. the limit for bodily injury claims that can be paid to one person. 21. Henry Edwards was injured in an accident caused by another driver who did not have insurance. Henry's medical expenses would be covered by:  A. medical payments. B. collision. C. bodily injury liability. D. uninsured motorists protection. E. no-fault coverage.   . Which of the following is a system in which drivers involved in an accident collect medical expenses, lost wages, and related injury costs from their own insurance company?  A. assigned risk pool B. financial responsibility coverage C. comprehensive system D. no-fault insurance E. uninsured motorists protection 23. The 25 in 50/100/25 refers to ____________ coverage.  A. collision B. bodily injury liability C. comprehensive physical damage D. medical payments E. property damage liability 24. Which of the following types of coverage would pay for damage to your automobile in an accident for which you were at fault?  A. property damage liability B. collision C. comprehensive physical damage D. no-fault insurance E. assigned risk pool coverage 25. Comprehensive coverage would cover financial losses due to:  A. injuries caused by a driver without insurance. B. damage to your car in an accident for which you were at fault. C. damage to your car caused by wind or hail. D. legal action against you for an accident. E. damage to a neighbor's tree with your car. 26. Thad Joslin was judged at fault in an automobile accident. Three others were awarded damages of $150,000, $75,000, and $75,000 due to injuries. Thad has 100/300 bodily injury liability coverage. What amount, if any, would not be covered by his insurance?  A. $150,000 B. $100,000 C. $50,000 D. None. The total amount would be covered by insurance 27. Which of the following refers to a category based on age, sex, marital status, and driving habits that is used to set automobile insurance premiums?  A. rating territory B. assigned risk pool C. no-fault system D. driver classification  . Nick Rodr owns a home in Edmond, Oklahoma and pays $665 per year in insurance on the home. The $665 is an example of:  A. A peril B. A hazard C. A risk D. A premium E. A liability 29. Kevin Brown rides his bicycle to work so that he doesn't have to worry about getting in a car accident. How is Kevin managing his risk?  A. Risk Avoidance B. Risk Reduction C. Risk Assumption D. Risk Shifting E. Risk Creation 30. Larry Foster has bought a car with front and side airbags and antilock brakes. How is Larry managing his risk?  A. Risk Avoidance B. Risk Reduction C. Risk Assumption D. Risk Shifting E. Risk Development 31. Peter Jacobs has set aside $5000 in case he has an accident in his 1980 Honda Civic. He does not have collision insurance on this car. How is Peter managing his risk?  A. Risk Avoidance B. Risk Reduction C. Risk Assumption D. Risk Shifting E. Risk Creation 32. Robert Plant pays a premium each month to State Farm Insurance for automobile insurance on his 2003 Dodge Ram pick up truck. How is Robert managing his risk?  A. Risk Avoidance B. Risk Reduction C. Risk Assumption D. Risk Shifting E. Risk Assessment 33. The 500 in 200/500/50 refers to:  A. property damage liability coverage. B. the amount of the deductible. C. collision coverage. D. the total coverage for an accident. E. the limit for bodily injury claims that can be paid in total.  True / False Questions   34 The best way to avoid the high cost of illness is to stay well.  TRUE 35 Group health insurance plans comprise the majority of all health insurance issued by health and life insurance companies.  TRUE 36 Very few group health policy contracts have a coordination of benefits provision.  FALSE 37  A stop-loss provision (out of pocket maximum) requires the policyholder to pay up to a certain amount, after which the insurance company pays 100 percent of all remaining covered expenses.  TRUE 38. Dread disease and cancer policies are usually very good values.  FALSE Multiple Choice Questions 39. Nathanial Drummond has three different insurance policies. He has been injured in an accident and has incurred $30,000 in medical bills. There is a clause in all of his insurance contracts the makes sure that he receives no more than $30,000 in payments from his insurance companies. This clause is called:  A. Coordination of benefits B. Deductible C. Coinsurance D. Stop-Loss provisions E. Major medical expense insurance 40. Sophie Bennett must pay $500 in doctor's visits before her insurance company will make any payments for doctors visits. This is called:  A. Coordination of benefits B. Deductible C. Coinsurance D. Stop-Loss provision E. Major medical expense insurance 41. Sophie Bennett has met the deductible for her doctor's visits. However, her insurance company requires her to pay 20% of all expenses above this deductible amount. This clause is called:  A. Coordination of benefits B. Add on expenses C. Coinsurance D. Stop-Loss provision E. Major medical expense insurance   42. Sophie Bennett has met the deductible for her doctor's visits. She has also paid out 20% of all expenses above this deductible amount. She has paid a total of $5000 in doctor's visits. At this point there is a clause in her insurance contract that make her insurance company pay for 100% of all expenses. What clause is this likely to be?  A. Coordination of benefits B. Add on expenses C. Coinsurance D. Stop-Loss provision E. Major medical expense insurance 43. Dean Thomas has an insurance policy that cannot be cancelled unless he fails to pay his premium. What provision in his insurance policy would specify this?  A. Eligibility B. Assigned Benefits C. Benefit Limits D. Guaranteed Renewable E. Exclusions and Limitations 44. Which one of the following provisions requires that the policyholder pay a basic amount before the policy benefits begin?  A. Coinsurance B. stop loss C. Deductible D. self insurance E. incontestable     True / False Questions   45. Most people buy life insurance to protect someone who depends on them from financial losses caused by their death. TRUE 46. Single persons living alone have need for less life insurance than persons that have dependents. TRUE 47. Households with small children most often have the greatest need for life insurance.  TRUE  48. The easy method of determining life insurance is based on the rule of thumb that a "typical family" will need about 70 percent of wage-earner's salary for seven years.  TRUE   49. The DINK (Duel Income No Kids) method of determining life insurance needs assumes that the spouse will continue to work after husband's/wife's death.  TRUE 50. The premium for the permanent life policy increases with your age. FALSE 51. Two basic types of life insurance are temporary and permanent insurance.  TRUE 52. Term life insurance premiums decrease as you get older.  FALSE 53. One important feature of term life policy is its cash value.  FALSE 54. A beneficiary is a person designated to receive something such as life insurance proceeds, from the insured. TRUE Multiple Choice Questions 55. Individuals and families purchase life insurance to:  A. get rich quick B. fill financial needs created by the loss of the breadwinner C. defraud the insurance companies D. keep up with people with a similar financial situation 56. You probably have little or no need for life insurance if you are:  A. a single person living alone or with parents B. divorced and have two children C. married and your spouse works D. gainfully employed E. a household with several children 57. Suppose that yours is a typical family. Your annual income is $50,000. Use the easy method to determine your need for life insurance. Your insurance should be in the amount of:  A. $245,000 B. $300,000 C. $345,000 D. $400,000 E. $450,000 58. Which method of determining life insurance requirements is suited for a working couple with no dependents?  A. hard method B. easy method C. "nonworking" spouse method D. thorough method E. DINK method 59. The method of determining life insurance requirements that does not ignore such important factors as social security and your liquid assets is called the:  A. easy method B. hard method C. DINK method D. "nonworking" spouse method E. "family need" method 60. Using the "nonworking" spouse method, what should be the life insurance needs for a family whose youngest child is 7 years old?  A. $50,000 B. $70,000 C. $90,000 D. $110,000 E. $140,000 Negotiating a purchase price for a home usually involves an offer and counteroffers.  TRUE The largest physical capital investment made by a family is a house. TRUE Current interest rates can affect the price of a home.  TRUE An easy way to decrease the amount you owe on a mortgage is to make your monthly payment in two semi-monthly payments. TRUE The majority of US consumers have a delinquent payment on their credit history. TRUE The majority of college students do not have a credit card. FALSE Utah has the highest bankruptcy in the nation. FALSE Your FICO score has little impact on interest rates you pay. FALSE The three credit bureaus have the same information for each creditor. FALSE If you have a short credit history there is no need to get annual credit reports. FALSE Budgeting is very simple. TRUE The typical down payment on a house is 10%. TRUE The benefits associated with purchasing a home include: Tax benefit Appreciation Forced savings Reduction in risk of future housing costs All of the above The purpose of a counteroffer is to:  A. negotiate the purchase price. B. reduce mortgage payments. C. lower real estate property taxes. D. avoid paying points at closing. E. avoid paying the real estate agent's commission.   True / False Questions   1. Overspending is a common cause of financial difficulties. True 2. The first phase in the buying process involves information gathering. True 3.The most consistent quality is usually found with nationally known, brand-name products. True  4. Store-brand products are usually inferior in quality compared to national and store-brand items. False  5.An implied warranty is usually in written form.  False  6. Service contracts are usually included in the cost of appliances and other high-priced items.   False 7.Representation by a lawyer is usually required in small claims court.  False 8.A class action suit allows many people with the same complaint to take action as a group. True9.Unit pricing uses a standard unit of measurement to compare prices of packages of different sizes.  True 10.A limited warranty covers all aspects of the product and does not require the buyer to incur any of the costs for shipping and repairs. False  Multiple Choice Questions 11. The main purpose of Consumers Union is to:  A. evaluate the quality of products and services. B. reduce fire hazards of home appliances. C. handle consumer complaints from government workers. D. represent the government in consumer complaint hearings. E. provide environmental information on automobiles. 12.A cooperative is designed to:  A. solve consumer complaints. B. test consumer products for quality. C. sell products or services to members at reduced prices. D. obtain brand-name items for less than wholesale. E. lobby for changes in consumer protection laws. 13. Cooperatives are commonly organized to sell:  A. service contracts. B. furniture. C. auto repair service. D. food. E. information processing service.   Open dating provides information on:  A. freshness. B. pricing. C. nutrition. D. common product use. E. government inspection. A 32-ounce package selling for $1.60 would have a unit price of:  A. $1.60. B. $2.00 a pound. C. 5¢ an ounce. D. 80¢ a quart. E. 12¢ an ounce. The major criticism of service contracts is:  A. poor service from repair companies. B. limited coverage of repairs. C. weak government regulation of service contract companies. D. high costs and a low chance of need. E. that few places are available for repairs. The purpose of a service contract is to:  A. prevent legal action due to a defective product. B. protect a product owner from expensive repairs. C. reduce the chance of repairs of an appliance. D. obtain regular maintenance on a product. E. have legal assistance for consumer complaints. ____________ is the settlement of a difference by a third party whose decision is legally binding.  A. A legal aid society B. Mediation C. Arbitration D. A consumer action panel E. Cooperative action The purpose of small claims court is to:  A. regulate fair business activities. B. provide hearing on proposed consumer protection laws. C. allow consumers with similar complaints to take action as a group. D. resolve minor consumer complaints. E. assist low-income consumers who need legal help. 20. Small claims court requires a person to have:  A. written testimony. B. a case involving less than a set amount. C. representation by an attorney. D. evidence screened in advance of the hearing   21. Recently, Jim Dahl was on a bus tour in a mountain area. The bus broke down forcing the group to stay overnight. Group members had to pay for their own hotel bills. Jim believes that the hotel cost for the group should be paid by the tour company. Which legal action would be most appropriate?  A. small claims court B. mediation C. legal aid society D. arbitration E. class action suit 22. Most cars bought from private parties have:  A. no implied warranties. B. a 30-day return privilege. C. a limited warranty. D. no express warranty. E. a government-supported repair guarantee.  23. The purpose of the is to:  A. monitor safety problems of existing vehicles. B. provide price data. C. reduce sales of stolen vehicles. D. list cars available for sale from government agencies. 24. Hector Ramirez's car broke down on the way to work and his mechanic has told him that the car cannot be fixed. Hector drives 30 miles one way to work each day. There is no reliable bus or train transportation that goes anywhere near his work. Hector decides he needs a car for reliable transportation to work. What step in the purchasing process is Hector carrying out?  A. Problem identification B. Information gathering C. Evaluating alternatives D. Determining the purchase price E. Post purchase activities  25.An online buying club requires an annual fee of $60 in order to qualify for a 15 percent on purchases. What amount would a person have to buy in order to save enough to cover the cost of the membership?  A. $15 B. $60 C. $165 D. $400 E. $600   True / False Questions 26 Ease of mobility is an advantage of renting.  True 27.Current interest rates can affect the price of a home. True  28.Negotiating a purchase price for a home usually involves an offer and counteroffers. True  Prepaid interest may be a part of a mortgage agreement.  True 30. Amortization refers to changes in the monthly payment for a variable rate mortgage. False  31.Adjustable rate mortgages with a payment cap can result in a situation of negative amortization. True  32. An escrow account is designed to reduce the cost of a mortgage. False 33.An appraisal refers to the price for which a home has been sold.  False Multiple Choice Questions   34.Renting is more advantageous than buying a home for:  A. lower short-term living costs. B. financial benefits. C. long-term investment purposes. D. receiving tax benefits. E. permanence of residence.   35.The main financial benefit of renting is:  A. tax deductions. B. increased equity. C. investment value growth. D. lower initial costs. 36.Prefabricated housing refers to:  A. nonprofit ownership. B. government leasing of living units. C. rental units available to government employees. D. ownership available to low-income individuals. E. housing partially assembled in factories. 37.Lonette and Al received a statement reporting that they paid $8,000 in mortgage interest during the past year. If they are in a 28 percent tax bracket, this deduction may reduce their by:  A. $1,000. B. $2,240. C. $3,000. D. $4,000. E. $8,000. 38.Earnest money has the purpose of:  A. paying real estate property taxes. B. reducing the mortgage interest rate. C. serving as good faith by a homebuyer. D. paying the real estate agent's commission. E. being a mortgage application fee. 39.What is prepaid interest charged by a mortgage company?  A. escrow B. points C. origination fee D. title fee E. deed 40.Todd Foley is applying for a $100,000 mortgage. He can get a $600 monthly payment for principal and interest and no points, or a $520 monthly payment with 2 points? How many months will it take Todd to cover the cost of the discount points if he takes the lower monthly payment?  A. 6 B. 10 C. 18 D. 25 E. 48   41.The purpose of a rate cap with an adjustable rate mortgage is to:  A. minimize interest costs. B. prevent changes in the amount of the monthly payment. C. increase negative amortization. D. restrict the amount by which the interest rate can increase. E. lower the escrow account. 42. A home equity loan may also be referred to as a ____________ mortgage.  A. shared appreciation B. graduated payment C. growing equity D. second E. buy down 43.Refinancing of a mortgage is recommended when:  A. interest rates rise. B. interest rates fall. C. the escrow account balance declines. D. two or more points are required by the lender at the time of closing. 44.The purpose of an appraisal is to:  A. estimate the current value of a home. B. reduce the amount paid for property taxes. C. qualify for a reduced mortgage rate. D. eliminate the need for home insurance. 45.The assessed value of your home is:  A. The value of your home used to calculate property taxes B. The estimated current value of your home in the market C. The price you pay for your home D. The amount of money the buyer pays when they make an offer on a home E. The cost of home insurance  46.Earnest money is:  A. The value of your home used to calculate property taxes B. The estimated current value of your home in the market C. The price you pay for your home D. The amount of money the buyer deposits when they make an offer on a home E. The cost of home insurance     True / False Questions   1. Personal risks, property risks, and liability risks are types of speculative risks.  FALSE 2. The most common method of dealing with risk is to shift, or transfer it to an insurance company or some other organization. TRUE 3. Self-insurance is the process of establishing a monetary fund that can be used to cover the cost of a loss.  TRUE 4. Vicarious liability refers to the failure to take ordinary or reasonable care in a situation.  FALSE 5. Personal property refers to building and other structures covered by homeowner's insurance.  FALSE 6. Personal belongings that have a high value require coverage with a personal property floater.  TRUE 7. The purpose of a household inventory is to provide evidence of items covered by home insurance.  TRUE 8. Increased liability insurance is available with an umbrella policy. TRUE 9. Replacement cost for settling property insurance claims is less costly than the actual cash value method.  FALSE 10. A home made of wood is more expensive to insure than a comparable brick structure.  TRUE 11. The 100/300 amounts for bodily injury liability insurance refer to the costs of insurance coverage.  FALSE 12. Medical payments automobile insurance coverage pays for the costs of injuries to persons in the driver's vehicle.  TRUE 13. Collision coverage pays for damage to your vehicle for such hazards as fire, theft, or wind damage.  FALSE  14. Property damage liability coverage would pay for damage to another vehicle for which you were at fault.  TRUE   Multiple Choice Questions 15. Peril is defined as:  A. the refusal by an insurance company to pay for the covered loss. B. the cause of risk. C. the cause of a possible loss. D. an uncertainty as to loss. 16. Defective house wiring is an example of a:  A. hazard. B. peril. C. risk. D. speculation. 17. Using a home security system is an example of ____________ risk.  A. shifting B. accepting C. reducing D. sharing E. transferring 18. The legal responsibility for the financial cost of another person's losses or injuries is referred to as:  A. theft. B. robbery. C. liability. D. assigned risk. E. collusion. 19. If a homeowner leaves toys on stairs that results in injury to a delivery person, this may be ruled as:  A. vicarious liability. B. negligence. C. assigned risk. D. umbrella coverage. E. coinsurance. 20. The additional living expenses component of a home insurance policy is designed to:  A. pay for temporary housing while your home is repaired. B. cover damage to property while away from home. C. reimburse a homeowner for damage done by a visitor. D. pay for medical expenses of people injured on your property. E. pay for repairs caused by fire or other hazards. 21. An umbrella policy is designed to cover:  A. expensive personal property. B. additional buildings on your property. C. property when traveling away from home. D. major personal liability suits. E. flood damage. 22. Most home insurance policies provide coverage for:  A. earthquake damage. B. flood damage. C. an umbrella liability. D. personal property floaters. E. medical payments. 23. Renter's insurance would include coverage for:  A. flood damage. B. personal property. C. building and other structures. D. umbrella liability. E. earthquake damage. 24. Which of the following are covered by renter's insurance?  A. medical expenses for injuries to visitors B. fire damage of the building's roof C. additional living expenses D. accidental damage to the property of others E. cost of legal action due to personal liability 25. Your home insurance provides for replacement value for personal property losses. A microwave is stolen. It cost $300 two years ago and has an expected life of six years. A comparable microwave costs $400 today. What amount will the insurance company pay?  A. $100 B. $150 C. $200 D. $350 E. $400   26. The ____________ method to settle claims is based on the current replacement cost of a damaged or lost item less depreciation.  A. replacement value B. actual cash value C. umbrella D. endorsement E. personal property floater 27. Your home insurance policy has a $250 deductible. If a small fire causes $600 damage to your home, what amount of the claim would the insurance company pay?  A. $250 B. $350 C. $450 D. $600 E. not able to determine from this information 28. The 100 in 100/300/50 refers to:  A. property damage liability coverage. B. the amount of the deductible. C. collision coverage. D. the total coverage for an accident. E. the limit for bodily injury claims that can be paid to one person.   29. Henry Edwards was injured in an accident caused by another driver who did not have insurance. Henry's medical expenses would be covered by:  A. medical payments. B. collision. C. bodily injury liability. D. uninsured motorists protection. E. no-fault coverage. 30. The 25 in 50/100/25 refers to ____________ coverage.  A. collision B. bodily injury liability C. comprehensive physical damage D. medical payments E. property damage liability 31. Comprehensive coverage would cover financial losses due to:  A. injuries caused by a driver without insurance. B. damage to your car in an accident for which you were at fault. C. damage to your car caused by wind or hail. D. legal action against you for an accident. E. damage to a neighbor's tree with your car. 32. Thad Joslin was judged at fault in an automobile accident. Three others were awarded damages of $150,000, $75,000, and $75,000. Thad has 100/300 bodily injury liability coverage. What amount, if any, would not be covered by his insurance?  A. $150,000 B. $100,000 C. $50,000 D. None. The total amount would be covered by insurance 33. Wind damage occurs to your car costing $800 to repair. If you have a $100 deductible for collision and full coverage for comprehensive, what portion of the claim will the insurance company pay?  A. $100 B. $200 C. $500 D. $700 E. $800 34. Which of the following refers to a category based on age, sex, marital status, and driving habits that is used to set automobile insurance premiums?  A. rating territory B. assigned risk pool C. no-fault system D. driver classification 35. Susan Bize owns a home in Edmond, Oklahoma. She has a coffee maker in the home that has been recalled because it is likely to start fires. The coffee maker is an example of:  A. A peril B. A hazard C. A risk D. A premium E. A deductible 36. Larry Foster has bought a car with front and side airbags and antilock brakes. How is Larry managing his risk?  A. Risk Avoidance B. Risk Reduction C. Risk Assumption D. Risk Shifting E. Risk Development 37. Georgia Owen has been responsible for an accident and her car has been totaled. What part of Georgia's automobile insurance would cover the damage to her car?  A. Bodily Injury Liability B. Medical Payments Coverage C. Property Damage Liability D. Collision E. Comprehensive Physical Damage 38. Which of the following would be an example of the driver classification category that determines insurance rates?  A. John Brown has a 2005 Mazda Miata Convertible B. Harry Anderson lives in Boca Raton, Florida C. Charlie Purciful is 22 years old D. Charlotte Webb has her vehicle in a locked garage 39. Your home insurance policy has a $500 deductible. If a windstorm causes $2,000 damage to your home, what amount of the claim would the insurance company pay?  A. $2,000 B. $1,000 C. $1,500 D. $500 E. not able to determine from this information 40. The 500 in 200/500/50 refers to:  A. property damage liability coverage. B. the amount of the deductible. C. collision coverage. D. the total coverage for an accident. E. the limit for bodily injury claims that can be paid in total. True / False Questions   41. The United States has the lowest per capita medical expenditures of any industrialized country in the world.  FALSE 42. Group health insurance plans comprise about 90 percent of all health insurance issued by health and life insurance companies.  TRUE 43. Very few group health policy contracts have a coordination of benefits provision.  FALSE 44. Basic health insurance coverage includes hospital expense insurance, surgical expense insurance, and physician expense insurance.  TRUE 45. A deductible provision requires the policyholder to pay a basic amount before the policy benefits begin.  TRUE 46. A coinsurance provision requires the policyholder to share the expenses beyond the deductible amount.  TRUE 47. A hospital indemnity policy pays benefits only when you are hospitalized and only to the hospital where the care was provided.  FALSE 48. Dread disease and cancer policies are usually very good values.  FALSE 49. Public opinion polls consistently show that Americans are happy with the nation's health care system.  FALSE Multiple Choice Questions   50. Which country has the highest per capita medical expenditures of any industrialized country in the world?  A. Australia B. Britain C. Canada D. Denmark E. U.S.A. 51. Most health insurance policies in the United States are sold to:  A. victims of communicable diseases. B. individuals with families. C. single individuals with no dependents. D. Employees and their dependents. E. Employers, who in turn offer the benefits to employees. 52. Nathanial Drummond has three different insurance policies. He has been injured in an accident and has incurred $30,000 in medical bills. There is a clause in all of his insurance contracts the makes sure that he receives no more than $30,000 in payments from his insurance companies. This clause is called:  A. Coordination of benefits B. Deductible C. Coinsurance D. Stop-Loss provisions E. Major medical expense insurance 53. Sophie Bennett must pay $500 in doctor's visits before her insurance company will make any payments for doctors visits. This is called:  A. Coordination of benefits B. Deductible C. Coinsurance D. Stop-Loss provision E. Major medical expense insurance  54. Sophie Bennett has met the deductible for her doctor's visits. However, her insurance company requires her to pay 20% of all expenses above this deductible amount. This clause is called:  A. Coordination of benefits B. Add on expenses C. Coinsurance D. Stop-Loss provision E. Major medical expense insurance 55. Sophie Bennett has met the deductible for her doctor's visits. She has also paid out 20% of all expenses above this deductible amount. She has paid a total of $5000 in doctor's visits. At this point there is a clause in her insurance contract that make her insurance company pay for 100% of all expenses. What clause is this likely to be?  A. Coordination of benefits B. Add on expenses C. Coinsurance D. Stop-Loss provision E. Major medical expense insurance True / False Questions   56. Most people buy life insurance to protect someone who depends on them from financial losses caused by their death.  TRUE 57. Life insurance proceeds may provide a retirement income.  TRUE 58. The easy method of determining life insurance is based on the rule of thumb that a "typical family" will need about 70 percent of wage-earner's salary for seven years.  TRUE 59. The DINK (Duel Income No Kids) method of determining life insurance needs assumes that the spouse will continue to work after husband's/wife's death.  TRUE 60. A term insurance policy pays a benefit only if you die during the period that the policy covers.  TRUE 61. The premium for permanent life insurance increases with your age.  FALSE 62. Two basic types of life insurance are temporary (term) and permanent insurance.  TRUE 63. Term life insurance premiums decrease as you get older.  FALSE 64. One important feature of term life policy is its cash value.  FALSE 65. A beneficiary is a person designated to receive something such as life insurance proceeds, from the insured.  TRUE 66. Usually, there is no time limit on reinstatement of a lapsed life insurance policy.  FALSE 67. The second-to-die option is paid when the first spouse dies.  FALSE Multiple Choice Questions   68. You probably have little or no need for life insurance if you are:  A. a single person living alone or with parents B. divorced and have two children C. married and your spouse works D. gainfully employed E. a household with several children  69. Who has the greatest need for life insurance?  A. households with small children B. singles living alone C. singles living with parents D. dual income couple E. children   70. Suppose that yours is a typical family. Your annual income is $50,000. Use the easy method to determine your need for life insurance. Your insurance should be in the amount of:  A. $245,000 B. $300,000 C. $345,000 D. $400,000 E. $450,000 71. Using the "non-working" spouse method, how much life insurance is needed to cover the loss of a non-working spouse whose younger of two children is 3 years old?  A. $50,000 B. $150,000 C. $300,000 D. None of the choices 72. Which type of insurance is sometimes called temporary insurance?  A. whole life insurance B. term insurance C. straight life D. ordinary life E. modified life True / False Questions   1. The purpose of insurance is to help protect you and your family against financial hardship due to hazard, accident, death, and similar risks.  TRUE 2. Personal risks, property risks, and liability risks are types of speculative risks.   FALSE 3. The most common method of dealing with risk is to shift, or transfer it to an insurance company or some other organization. TRUE 4. Self-insurance is the process of establishing a monetary fund that can be used to cover the cost of a loss.  TRUE 5 . Homeowner's insurance refers to coverage also available to condominium owners.  TRUE   6. Personal belongings that have a high value require coverage with a personal property floater.  TRUE  7. The purpose of a household inventory is to provide evidence of items covered by home insurance.  TRUE   8. Medical payments coverage in a home insurance policy is designed to pay for legal action taken against a homeowner who may be legally responsible for injury or property damage of others. FALSE  9. Replacement cost for settling property insurance claims is less costly than the actual cash value method.  FALSE   10. A home made of wood is more expensive to insure than a comparable brick structure.  TRUE 11. The 100/300 amounts for bodily injury liability insurance refer to the costs of insurance coverage.  FALSE   12. Medical payments automobile insurance coverage pays for the costs of injuries to persons in the driver's vehicle.  TRUE  13. Collision coverage pays for damage to your vehicle for such hazards as fire, theft, or wind damage.  FALSE   14. Property damage liability coverage would pay for damage to another vehicle for which you were at fault.  TRUE  15. The driver classification category is based on automobile style, model, and value of the vehicle.  FALSE   16. The purpose of an assigned risk pool is to assist people with poor driving records in obtaining automobile insurance coverage.  TRUE   Multiple Choice Questions   17. Peril is defined as:  A. the refusal by an insurance company to pay for the covered loss. B. the cause of risk. C. the cause of a possible loss. D. an uncertainty as to loss.  18. Defective house wiring is an example of a:  A. hazard. B. peril. C. risk. D. speculation.   19. Starting a small business that may or may not succeed is an example of ___________ risk.  A. speculative B. pure C. commercial D. personal E. liability  20. Using a home security system is an example of ____________ risk.  A. shifting B. accepting C. reducing D. sharing E. transferring   21. The legal responsibility for the financial cost of another person's losses or injuries is referred to as:  A. theft. B. robbery. C. liability. D. assigned risk. E. collusion. 22. If a homeowner leaves toys on stairs that results in injury to a delivery person, this may be ruled as:  A. vicarious liability. B. negligence. C. assigned risk. D. umbrella coverage. E. coinsurance. 23. High winds cause damage to trees, shrubs, and other plants. This insurance claim would be covered under the ____________ component of homeowner's insurance.  A. additional living expenses B. personal property C. building and other structures D. personal liability E. property damage 24. The additional living expenses component of a home insurance policy is designed to:  A. pay for temporary housing while your home is repaired. B. cover damage to property while away from home. C. reimburse a homeowner for damage done by a visitor. D. pay for medical expenses of people injured on your property. E. pay for repairs caused by fire or other hazards.   25. Which of the following is considered personal property for home insurance coverage?  A. an automobile B. a garage C. furniture D. a house E. trees and shrubs 26. Most home insurance policies provide coverage for:  A. earthquake damage. B. flood damage. C. an umbrella liability. D. personal property floaters. E. medical payments.  27. Renter's insurance would include coverage for:  A. flood damage. B. personal property. C. building and other structures. D. umbrella liability. E. earthquake damage.   28. Which of the following are covered by renter's insurance?  A. medical expenses for injuries to visitors B. fire damage of the building's roof C. additional living expenses D. accidental damage to the property of others E. cost of legal action due to personal liability  29. Your home insurance provides for replacement value for personal property losses. A microwave is stolen. It cost $300 two years ago and has an expected life of six years. A comparable microwave costs $400 today. What amount will the insurance company pay?  A. $100 B. $150 C. $200 D. $350 E. $400   30. Which of the following insurance policy provisions requires that the insured must pay for part of the loss of a claim if the property is not insured for the specified percentage of replacement value?  A. personal property floater B. an endorsement C. coinsurance clause D. umbrella coverage E. assigned risk clause 31. The ____________ method to settle claims is based on the current replacement cost of a damaged or lost item less depreciation.  A. replacement value B. actual cash value C. umbrella D. endorsement E. personal property floater 32. The 100 in 100/300/50 refers to:  A. property damage liability coverage. B. the amount of the deductible. C. collision coverage. D. the total coverage for an accident. E. the limit for bodily injury claims that can be paid to one person. 33. Which of the following is a system in which drivers involved in an accident collect medical expenses, lost wages, and related injury costs from their own insurance company?  A. assigned risk pool B. financial responsibility coverage C. comprehensive system D. no-fault insurance E. uninsured motorists protection 34. The 25 in 50/100/25 refers to ____________ coverage.  A. collision B. bodily injury liability C. comprehensive physical damage D. medical payments E. property damage liability   35. Which of the following types of coverage would pay for damage to your automobile in an accident for which you were at fault?  A. property damage liability B. collision C. comprehensive physical damage D. no-fault insurance E. assigned risk pool coverage 36. Comprehensive coverage would cover financial losses due to:  A. injuries caused by a driver without insurance. B. damage to your car in an accident for which you were at fault. C. damage to your car caused by wind or hail. D. legal action against you for an accident. E. damage to a neighbor's tree with your car.  37. Thad Joslin was judged at fault in an automobile accident. Three others were awarded damages of $150,000, $75,000, and $75,000. Thad has 100/300 bodily injury liability coverage. What amount, if any, would not be covered by his insurance?  A. $150,000 B. $100,000 C. $50,000 D. None. The total amount would be covered by insurance   38. Which of the following refers to a category based on age, sex, marital status, and driving habits that is used to set automobile insurance premiums?  A. rating territory B. assigned risk pool C. no-fault system D. driver classification 39. Nick Rodr owns a home in Edmond, Oklahoma and pays $665 per year in insurance on the home. The $665 is an example of:  A. A peril B. A hazard C. A risk D. A premium E. A liability   40. Kevin Brown rides his bicycle to work so that he doesn't have to worry about getting in a car accident. How is Kevin managing his risk?  A. Risk Avoidance B. Risk Reduction C. Risk Assumption D. Risk Shifting E. Risk Creation 41. Larry Foster has bought a car with front and side airbags and antilock brakes. How is Larry managing his risk?  A. Risk Avoidance B. Risk Reduction C. Risk Assumption D. Risk Shifting E. Risk Development  . Peter Jacobs has set aside $5000 in case he has an accident in his 1980 Honda Civic. He does not have collision insurance on this car. How is Peter managing his risk?  A. Risk Avoidance B. Risk Reduction C. Risk Assumption D. Risk Shifting E. Risk Creation   43. Georgia Owen has been responsible for an accident and her car has been totaled. What part of Georgia's automobile insurance would cover the damage to her car?  A. Bodily Injury Liability B. Medical Payments Coverage C. Property Damage Liability D. Collision E. Comprehensive Physical Damage 44. The 500 in 200/500/50 refers to:  A. property damage liability coverage. B. the amount of the deductible. C. collision coverage. D. the total coverage for an accident. E. the limit for bodily injury claims that can be paid in total.    True / False Questions   45. The best way to avoid the high cost of illness is to stay well.  TRUE  46. Group health insurance plans comprise over 80 percent of all health insurance issued by health and life insurance companies.  TRUE   47. Group health insurance will cover you but not your immediate family.  FALSE  48. Very few group health policy contracts have a coordination of benefits provision.  FALSE 49. A deductible provision requires the policyholder to pay a basic amount before the policy benefits begin.  TRUE 50. A coinsurance provision requires the policyholder to share the expenses beyond the deductible amount.  TRUE 51. A stop-loss provision requires the policyholder to pay up to a certain amount, after which the insurance company pays 100 percent of all remaining covered expenses.  TRUE 52. Dread disease and cancer policies are usually very good values.  FALSE 53. Public opinion polls consistently show that Americans are happy with the nation's health care system.  FALSE  54. Just about every worker is covered by disability income insurance.  FALSE   55. Most people are more likely to lose their income due to death than due to disability.  FALSE Multiple Choice Questions 56. Most health insurance policies in the United States are sold to:  A. victims of communicable diseases. B. individuals with families. C. single individuals with no dependents. D. Employees and their dependents. E. Employers, who in turn offer the benefits to employees. 57. Nathanial Drummond has three different insurance policies. He has been injured in an accident and has incurred $30,000 in medical bills. There is a clause in all of his insurance contracts the makes sure that he receives no more than $30,000 in payments from his insurance companies. This clause is called:  A. Coordination of benefits B. Deductible C. Coinsurance D. Stop-Loss provisions E. Major medical expense insurance 58. Sophie Bennett must pay $500 in doctor's visits before her insurance company will make any payments for doctors visits. This is called:  A. Coordination of benefits B. Deductible C. Coinsurance D. Stop-Loss provision E. Major medical expense insurance 59. Sophie Bennett has met the deductible for her doctor's visits. However, her insurance company requires her to pay 20% of all expenses above this deductible amount. This clause is called:  A. Coordination of benefits B. Add on expenses C. Coinsurance D. Stop-Loss provision E. Major medical expense insurance 60. Sophie Bennett has met the deductible for her doctor's visits. She has also paid out 20% of all expenses above this deductible amount. She has paid a total of $5000 in doctor's visits. At this point there is a clause in her insurance contract that make her insurance company pay for 100% of all expenses. What clause is this likely to be?  A. Coordination of benefits B. Add on expenses C. Coinsurance D. Stop-Loss provision E. Major medical expense insurance   61. Joan Wilder receives a phone call from a salesman who tries to sell her an insurance policy by scaring her about her high risk of death from this disease. She knows that this type of insurance policy has a notoriously poor value so she politely declines. What type of insurance policy did this salesman likely try to sell her?  A. Comprehensive Major Medical Insurance B. Hospital Indemnity Policy C. Long Term Care Insurance D. Cancer Insurance Policy E. None of the choices 62. Benjamin Northcutt has an insurance policy that does not cover cosmetic surgery like the nose job he would like to have. What provision in his insurance policy would specify this?  A. Eligibility B. Assigned Benefits C. Benefit Limits D. Guaranteed Renewable E. Exclusions and Limitations  63. Which one of the following provisions requires that the policyholder pay a basic amount before the policy benefits begin?  A. Coinsurance B. stop loss C. Deductible D. self insurance E. incontestable   64. Which type of insurance provides for the partial replacement of income lost by employees as a result of an accident, illness, etc.?  A. Comprehensive major medical B. major medical expense C. physician's expense D. Disability income E. surgical expense     True / False Questions   65. Life insurance proceeds may be used to provide an education or income for children.  TRUE 66. Life insurance proceeds may provide a retirement income.  TRUE   67. The easy method of determining life insurance is based on the rule of thumb that a "typical family" will need about 70 percent of wage-earner's salary for seven years.  TRUE 68. The DINK (Duel Income No Kids) method of determining life insurance needs assumes that the spouse will continue to work after husband's/wife's death.  TRUE  69. A term insurance policy pays a benefit only if you die during the period that the policy covers.  TRUE   70. The premium for a permanent life policy increases with your age.  FALSE 71. Two basic types of life insurance are term and permanent insurance.  TRUE 72. Term insurance is protection for a specified period of time, usually 1, 5, 10, or 20 years.  TRUE 73. Term life insurance premiums decrease as you get older.  FALSE 74. Even though it is expensive, you should consider the accidental death benefit in a life insurance policy.  FALSE  Multiple Choice Questions   75. Life insurance premiums are determined basically by the:  A. forces of supply B. forces of demand C. forces of competition D. use of mortality tables. E. guesswork of insurance executives  76. You probably have little or no need for life insurance if you are:  A. a single person living alone or with parents B. divorced and have two children C. married and your spouse works D. gainfully employed E. a household with several children   77. Suppose that yours is a typical family. Your annual income is $50,000. Use the easy method to determine your need for life insurance. Your insurance should be in the amount of:  A. $245,000 B. $300,000 C. $345,000 D. $400,000 E. $450,000 78. Suppose that yours is a typical family. Your annual income is $35,000. Using the easy method, what should be your need for life insurance?  A. $35,000 B. $110,500 C. $171,500 D. $191,500 E. over $200,000 79. You are a dual income, no kids family. You and your spouse have the following debts (total): mortgage, $180,000; auto loan, $10,000; credit card balance, $2,000; and other debts of $6,000. Further, you estimate that your funeral will cost $4,000. Your spouse expects to continue to work after your death. Using the DINK method, what should be your need for life insurance?  A. $103,000 B. $206,000 C. $226,000 D. $233,000 E. over $233,000 80. A plan that insures a large number of persons under the terms of a single policy without a medical examination is called a(n) ____________ life insurance policy plan.  A. individual B. whole C. large number D. permanent E. group