2004 Banking & Financial ServicesPage 1

Indicate whether the sentence or statement is True or False. Mark “A” if the answer is True or “B” if the answer is False.
  1. An example of service credit would be an automobile repair bill. A V
/ a. True / b. False
  1. There are no commissions on stock purchased over the Internet. B CP
/ a. True / b. False
  1. Daily stock listings in the newspaper usually show the lowest price for which the stock sold that day. A CP
/ a. True / b. False
  1. "Blue-sky laws" are state regulations of the securities industry. A G
/ a. True / b. False
  1. Purchasers of insurance need to know if an insurance company has the resources to pay any claims its customers might have. To do this, you can obtain information from such ratings service companies as A. M. Best, Moody's, or Weiss Research. A DI
/ a. True / b. False
  1. The dividend yield on stocks is determined by dividing the current market price of the stock by the current annual dividend (usually the amount paid in the previous 12 months). B CP
/ a. True / b. False
  1. The duties of a bank trust officer would include managing funds for an elderly person in such a way as to maximize return on the principal--even if that means taking great risks. B C/E
/ a. True / b. False
  1. It is possible for people interested in purchasing residential or commercial real estate to get information online about properties and view those properties’ real estate web sites. A T
/ a. True / b. False
  1. The people who investigate insurance claims for potential fraud are known as "actuaries." B C
/ a. True / b. False
  1. U. S. Savings Bonds are non-marketable securities and can only be purchased from the U.S. Treasury Department or one of its approved agents. A G DI
/ a. True / b. False
  1. Real estate brokers have obligations to the sellers who employ them. However, they have no obligation to disclose property defects, such as termites infesting a house, to the buyers. B E
/ a. True / b. False
  1. The operations manager of an investment brokerage is responsible for supervising the activities of those selling stocks and bonds. B C
/ a. True / b. False
  1. The Federal Reserve might want to loosen monetary policy is if it believes that the inflation rate is too high. B G
/ a. True / b. False
  1. Progressive.com provides automobile insurance customers with rates for both competitors' products and their own. A T
/ a. True / b. False
  1. Certified Financial Planners (those who have a "CFP" designation) must pass a series of examinations to earn that credential. A C
/ a. True / b. False
  1. Regulatory authorities would not likely question an insurance agent who sells a $5,000,000 life insurance policy to a 95-year-old man with no dependents. B E
/ a. True / b. False
  1. Max Dipwad has $80,000 on deposit in Bank A, $75,000 in Bank B, and $31,000 in Bank C. The Federal Deposit Insurance Corporation will insure his total deposits up to $100,000 because that is the maximum deposit insurance coverage for any individual. B G
/ a. True / b. False
  1. Electronic communications networks, such as the Island ECN, are useful to securities investors who want to trade outside of normal stock exchange hours. A T
/ a. True / b. False
  1. "Chartered Financial Consultant" is another term for a Certified Public Accountant. B C
/ a. True / b. False
  1. Insurance companies are a low-cost source of funds for life insurance policyholders that have accrued cash values, because the policyholders are, in effect, borrowing their own money. A DI
/ a. True / b. False
Mark the correct answer on your Scantron sheet for each of the following questions.
  1. "Collateral" refers to A V
/ a. something of value given by a borrower to a lender to back up the borrower's promise to repay the loan. / b. the borrower's annual income less expenses. / c. the borrower's assets minus his/her liabilities. / d. an amount not yet paid on a loan.
  1. Fred has four $20 bills, six $10 bills, three $5 bills, seven quarters, twelve dimes, and four nickels. How much money does Fred have? D CP
/ a. $183.15 / b. $ 56.20 / c. $157.45 / d. $158.15
  1. To assume a "short" position on a stock, you would C V
/ a. purchase a stock and sell it the next day. / b. buy a stock you never owned before. / c. sell a stock you don't own. / d. purchase a stock you owned before, but sold within the past year.
  1. Another term for a "demand deposit" is a(n) D V
/ a. savings account. / b. revolving credit account. / c. ATM withdrawal. / d. checking account.
  1. Medicare and Medicaid are examples of D G
/ a. private health insurance. / b. employer-sponsored health and income protection insurance benefits. / c. programs which benefit people of all ages and income levels. / d. social insurance programs overseen by the Department of Health and Human Services.
  1. Ditech, Lending Tree.com, and E-Loan.com are Internet sites that help consumers B T
/ a. get copies of their credit bureau files. / b. compare loan rates. / c. calculate their "credit score." / d. review and understand credit laws.
  1. Major medical insurance is intended to cover C DI
/ a. small amounts charged by the insured's physician for office visits. / b. such items as vision care/dental expenses. / c. the costs of surgery, hospitalization, and other large expenses arising from injuries and lengthy illnesses. / d. medical bills incurred by passengers in the insured's car in the event of an automobile accident where the insured is at fault.
  1. The Lubiceks sold property to Mr. and Mrs. Volkov. The property taxes for the current fiscal year were $1,945.75. As of the date of sale, there were 146 days remaining in the fiscal year. Of the total property taxes, the Volkovs will be responsible for B CP
/ a. $1,167.45. / b. $ 778.30. / c. $ 811.66. / d. $ 972.88.
  1. Your bank might make an automatic debit to your checking account for the purpose of D T
/ a. getting a reimbursement from you for an NSF check. / b. adding monthly interest on a qualifying account balance. / c. processing a monthly funds transfer from your investment accounts into the checking account. / d. transmitting a monthly insurance premium to your insurance company.
  1. Giorgiana Brusconini deposited her paycheck in her checking account, which carries ATM privileges. A week later, she is unable to withdraw funds at the ATM. She called the bank and the bank's customer service representative found that the bank had not yet processed her paycheck. The bank did not notify her that the paycheck had been held. The law that sets forth the rights and responsibilities of Giorgiana and her bank in this case is the C G/T
/ a. Electronic Funds Transfer Act. / b. Automated Teller Use Protection Act. / c. Expedited Funds Availability Act. / d. Fair Electronic Banking Act.
  1. BT & T, a national telecommunications company, recently completed a 1-for-5 reverse stock split. D'anee owned 500 shares of BT & T before the reverse split. Each share was worth $12. She now has B CP
/ a. 2,500 shares worth $2.40 a share. / b. 100 shares worth $60 a share. / c. 2,500 shares worth $60 a share. / d. 400 shares worth $14.40 a share.
  1. People wanting to sell stocks and bonds need to B C
/ a. take at least 15 semester hours of college courses in finance and investments. / b. have a sponsor before they can take licensing examinations. / c. participate in a nine-week internship before taking pre-licensing courses, in order to determine if they have potential for success in the investment brokerage field. / d. have an acceptable score on the Scholastic Aptitude Test or the ACT before qualifying to take pre-licensing courses.
  1. A court order placing a lien on a debtor's property as security for a debt owed to a creditor is known as A V
/ a. a judgment. / b. bankruptcy. / c. a tax assessment. / d. a civil lien.
  1. If the Suzukis want to buy insurance that will pay off their mortgage in the event of the death of one spouse, they could purchase a credit life policy covering the mortgage. They might accomplish the same thing, often at less cost, by purchasing a(n) C DI
/ a. whole life policy for the initial amount of the mortgage. / b. level term life insurance policy. / c. decreasing term life insurance policy. / d. annuity that will grow over a 30-year period until its value reaches the initial amount of the mortgage.
  1. A type of financial institution created for the purpose of promoting home ownership and which must make a majority of its loans for housing-related purposes is a(n) A DI
/ a. savings and loan association. / b. commercial bank. / c. credit union. / d. equity bank.
  1. When someone wants to sell property through a real estate broker, they sign a document allowing that firm to market the property. This document is known as a(n) A CP
/ a. listing agreement. / b. real estate sales contract. / c. earnest money agreement. / d. agency marketing commitment.
  1. When a brokerage holds its clients' stock certificates, the stock is said to be held in B DI
/ a. irrevocable trust. / b. street name. / c. administrative escrow. / d. receivership.
  1. The Securities Act of 1933 was enacted for the purpose of A G
/ a. providing full and fair disclosure about the sale of most stocks, bonds, and other securities. / b. ensuring that those who provide investment advice are not the same people receiving commissions for buying and selling stocks. / c. separating investment banking operations from research about stocks and bonds provided to the firm's customers. / d. creating the National Association of Securities Dealers and giving it state control over securities trading.
  1. Which two parties to a check are generally the same person or institution? A V
/ a. Payor and drawer. / b. Payee and drawee. / c. Payor and endorsee. / d. Drawee and endorsee.
  1. Little Horse Kennewick purchased 4700 shares of Xytech stock. His broker, Beane Kwitter Kennells, charges $29.95 the first 1000 shares bought or sold and $10.95 for each 500 shares (or any fraction thereof) after the first thousand shares. Little Horse's commission for this purchase is A CP
/ a. $117.55. / b. $106.80. / c. $130.75 / d. $ 84.70.
  1. One of the benefits of renting (as opposed to buying) a home is that D DI
/ a. young people can build equity if they rent, but they cannot build equity if they buy. / b. there is no need for renters to insure the possessions kept in their apartments, because the landlord's property insurance covers the renter's personal property. / c. rent amounts cannot change, whereas home payments generally increase each year. / d. renters are not responsible for making insurance or property tax payments.
  1. Holton has a 401(k) plan with Consolidated Industries. He plans to leave this employer to work for another firm. Holton wants to take the money from his account with Consolidated and put it in an Individual Retirement Account. To do this, he will have to make a(n) A DI
/ a. rollover. / b. balance adjustment. / c. retirement withdrawal. / d. taxable distribution.
  1. "Hawkie" Tone owns a skateboard manufacturing company. He wants to take the company public by selling stock on one of the major stock exchanges based in New York City. Which of the following is not one of those exchanges? B DI
/ a. The New York Stock Exchange / b. The National Stock Exchange / c. The American Stock Exchange / d. The NASDAQ Stock Exchange
  1. Gottrocks Inc. pays a dividend of ten cents per share per quarter. Camilla owns 300 shares of Gottrocks stock. How much does she receive annually in dividends from this stock? D CP
/ a. $ 30.00 / b. $300.00 / c. $ 90.00 / d. $120.00
  1. The term "IRA" refers to an C DI
/ a. Investment Return Annuity. / b. Increasing Reserve Account. / c. Individual Retirement Account. d. Interest Rate Adjustment.
  1. One characteristic of money is that it must be divisible. This means that it must be D CP
/ a. easy for citizens to reproduce in quantity. / b. easy to carry around. / c. made of something people agree is worth something. / d. possible for recipients to give money back.
  1. Fashara Al-Ahmoud has always done well with her investments. However, she recently received a promotion to a new position requiring a great deal of time. Because of this new time commitment, Fashara simply does not have time to do the necessary research to manage her own stock portfolio. She placed $200,000 with Dewey, Cheatum, and Howe, a local investment firm, and directed them to invest very conservatively. Her broker never consulted with her and made a number of very risky investments, which lost about $40,000. It is very likely that Dewey, Cheatum, and Howe D E
/ a. is not responsible for any losses, since Fashara is an experienced investor. / b. will have to refund the commissions on any stock trades determined by the SEC to be inappropriate, but is not at fault for any losses because of declines in stock prices. / c. cannot be required to consult with clients before investing clients' funds. / d. violated the security industry's "suitability" rule.
  1. Josh started last month with a savings account balance of $211.64. He made three deposits last month: $42.50; 28.75; and $88.23. He made one withdrawal. His ending balance was $306.20. The withdrawal Josh made was for C CP
/ a. $ 94.56. / b. $159.48. / c. $ 64.92. / d. $ 22.42.
  1. A "bond indenture" is B V
/ a. an agreement whereby the borrower agrees to work for the lender for only a very small wage if borrowed funds are not repaid on time. / b. a legal contract between the borrower and creditor bondholders with details about the bond issue and any security involved. / c. a debenture bond that amortizes over a period of many years. / d. any type of bond repaid with the income generated by assets purchased with the proceeds received when the bonds are sold.
  1. A "prepayment clause" in a mortgage loan agreement would enable the A CP
/ a. borrower to pay off the principal balance of the loan without paying a penalty. / b. lender to declare the balance of the loan due in full if the borrower is late with any payment. / c. borrower to make monthly payments at least one month ahead. / d. borrower's creditors to assume the loan, if necessary, so they can more easily collect debts the borrower owes them.
  1. Y Corporation is a "spin-off" of XYZ, Inc. XYZ Corporation stock sells for $55 a share. XYZ shareholders get one share of Y Corporation stock for each five shares of XYZ. Morton has 250 shares of XYZ stock. The spin-off has been approved by the Internal Revenue Service as one that meets their rules for non-taxable stock distributions. After the spin off is completed, C CP
/ a. Morton will own 200 shares of XYZ stock, worth $44 a share. / b. Y Corporation stock will be worth $11 a share. / c. XYZ shareholders will have their 250 shares of XYZ stock and 50 shares of Y Corporation stock. / d. Morton will have to include the value of the new Y Corporation stock in her taxable income.
  1. In a "bear market" D D
/ a. the Down Jones Industrial Average would fall at least twenty percent, but other market averages (such as the NASDAQ) would rise. / b. there would be a shortage of stock sellers and an excess of stock buyers. / c. one would generally find optimism about stock price movements. / d. there is a substantial and prolonged overall decline in major market averages.
  1. Silicon Microchip produces a variety of computer memory and processing chips. A list of the duties performed by their risk manager would likely be all of the following except B C
/ a. inspecting manufacturing and administrative facilities for physical hazards. / b. analyzing Silicon's competitive strengths, weaknesses, opportunities, and threats. / c. advising management of ways to reduce repetitive motion injuries. / d. reviewing a list of chemicals used in the firm's production processes for potential harm to workers.
  1. Property damage liability insurance protects those who have it against C CP
/ a. losses caused by others to the insured's own property. / b. claims by others for reimbursement of medical expenses incurred because of damage caused by the insured. / c. losses suffered by others whose property is damaged by the insured. / d. damage to property suffered by the insured because of negligence by someone who is uninsured.
  1. Life insurance premiums would be lowest for a B
/ a. single person, age 45. / b. 25-year-old athlete who is married and the father of two children. / c. 65-year-old widow. / d. 22-year-old single race car driver.
  1. The Bradburys purchased furniture on a 12-month installment contract. The furniture cost $4,188. Interest for the 12 months was $312, and installment payments were $375 per month. The Bradburys paid off the loan in only eight months. Based on the "Rule of 78," they will receive a rebate of interest not owed in the amount of D CP
/ a. $78. / b. $88. / c. $28. / d. $40.
  1. Bonnie Bryce stopped by the family's insurance agency, Feelsafe Insurance, to pay the auto insurance premium on their policy with Redline Casualty. A month later, she received a cancellation notice from Redline. When she called Redline, she was told that Feelsafe had never forwarded her premium payments. An investigation revealed that Feelsafe's principal owner had used the funds to pay his own bills. It is likely that A E
/ a. the Bryces will be able to bring about a civil suit against Feelsafe and that one or more people at Feelsafe Insurance will lose their license to sell insurance. / b. regulatory authorities will have no interest in this case, since it is a matter for the local law enforcement. / c. any criminal action against Feelsafe and its owners will have to be tried in a federal court, since insurance is regulated at the national level. / d. Feelsafe's actions are neither unethical nor illegal.
  1. The monetary unit known as the "Euro" is an official unit of currency in each of the following countries except B DI
/ a. Spain. / b. England. / c. France. / d. Greece.
  1. Most purchasers need to borrow the money necessary to buy a home. The buyer will most likely want to obtain a
/ a. mortgage. / b. listing agreement. / c. balloon payment agreement. / d. revolving credit loan.
  1. Corn futures contracts, put options, and forward agreements are all examples of A V
/ a. derivatives. / b. international debt instruments. / c. arbitrage. / d. stock index transactions.
  1. One difference between the "old" $10 bill and the newly designed $10 bill is that C CP
/ a. the signature of the Secretary of the Treasury appears on the left side of the front of the old bill; it is on the right side on the new bill. / b. the U. S. Treasury building appears on the back (reverse) side of the new bill; the Lincoln Memorial is on the back of the old bill. / c. the words "The United States of America" are on two lines on the new bill; they are on one line on the old bill. / d. there are no serial numbers on the new bill, while the serial number appears twice on the front of the old bill.
  1. The tangible evidence of ownership in real property is the C CP
/ a. title. / b. mortgage contract. / c. deed. / d. bill of sale.