Week 8

Question 1

What is associated with a bear market condition:

a. investor optimism.
b economic recovery.
c. increased tax rate.
d. high returns.
e. declining securities prices

Answer 1

e. declining securities prices

Question 2

An appropriate measure of the risk-free rate of return is the return on:

a. 90-day Treasury bill
b. certificate of deposit
c. long-term corporate bond
d. common stock

Answer 2

a. 90-day Treasury bill

Question 3

An annual fee charged by some mutual funds to cover marketing and selling expenses is called the:

a.12b-1 fee
b. low - load fee
c. management fee

Answer 3

a.12b-1 fee

Question 4

You will receive the largest monthly payment under an annuity contract when the annuity disbursement option is the _____.

a. Refund annuity
b. life annuity with no refund
c. life annuity for a certain period

Answer 4

b. life annuity with no refund

Question 5

Molly and Justin are considering contributing $7,000 to a tax-deductible charity. This contribution will bring their total itemized deductions to $25,000. Assuming they are in the 25% marginal tax bracket, how much will they save in taxes by contributing the $7,000 to charity? .25 x 7000

a. 6250
b. 1,750
c. 1,825
d. 1,750

Answer 5

b. 1,750

Question 6

The primary purpose of life insurance is to provide:

a. financial security for dependents in the event of death.
b. protection from creditors and lawsuits.
c. tax-advantaged investments.

Answer 6

a. financial security for dependents in the event of death.

Question 7

If you lender charges 2.5 points on a home selling for $150,000 on which there is a $120,000 loan the points would cost : 2.5/100 x the loan $120,000

a. 2,500
b. 3,750
c. 3,000
d. 3,200

Answer 7

c. 3,000