Introduction to Business - 2nd Semester Test Review (Chapters 22-44)

Name:

Multiple Choice
Identify the choice that best completes the statement or answers the question.

A debt security represents

a.	ownership in a company.	c.	profits of a company.
b.	borrowing by a company.	d.	taxes paid by a company.

An example of an equity security is a

a.	type of debt.	c.	share of stock.
b.	bond.	d.	municipal bond.

A municipal bond represents

a.	ownership in a company.
b.	an investment in a foreign corporation.
c.	a corporate debt.
d.	borrowing by a state or local government.

A Series EE savings bond purchased for $50 would have a maturity value of

a.	$100	c.	$75
b.	$50	d.	none of the above.

The market value of a stock can be affected by

a.	how well a business is doing.
b.	the state of the economy.
c.	the current phase of the business cycle.
d.	all of the above.

For their first residence, many people rent

a.	a townhouse	c.	a mobile home.
b.	a condominium.	d.	an apartment.

A mortgage is used to

a.	rent a apartment.	c.	borrow money to buy a home.
b.	insure property.	d.	invest in stocks and bonds.

Julie is concerned about changing interest rates in the future. Which mortgage would be the best recommendation?

a.	adjustable rate	c.	condominium
b.	fixed rate	d.	equity

A professional trained to assist people with buying or selling a home is

a.	a real estate agent.	c.	a lawyer.
b.	an appraiser.	d.	an assessor.

10.

An appraiser helps a home buyer by

a.	estimating the value of a home that is being considered.
b.	reducing the taxes owed on a home.
c.	providing current information on mortgage rates.
d.	showing various homes available for sale.

11.

The assessed value of a home is used to determine a homeowner’s

a.	insurance bill.	c.	mortgage payments.
b.	maintenance expenses.	d.	property tax.

12.

Items of personal interest that can decrease in value in the future are called

a.	commodities.	c.	essentials.
b.	futures.	d.	collectibles.

13.

Examples of products that consumers buy include

a.	food	c.	appliances
b.	clothing	d.	all of the above.

14.

Consumers pay for services each time they go to

a.	a movie.	c.	a car wash.
b.	a dentist.	d.	all of the above.

15.

Underwriters Laboratories, Inc., which concerns itself with fire and electrical safety, is an example of

a.	a product-testing organization.	c.	a broadcast organization.
b.	a print publisher.	d.	all of the above

16.

Useful advertisements often tell you what the product is, how it is made, and

a.	what the product defects are.	c.	how much it cost to make.
b.	what it will do.	d.	none of the above.

17.

A type of advertising that originates with the consumer is

a.	labels.	c.	word-of-mouth.
b.	customer service departments.	d.	none of the above.

18.

Sales used to clear merchandise that stores no longer wish to carry in stock are

a.	promotional sales.	c.	special purchase sales.
b.	clearance sales.	d.	holiday sales.

19.

A name given to a product or service that is intended to distinguish it from other similar and/or competitive products or services is

a.	brand name.	c.	a convenience store.
b.	a price index.	d.	none of the above.

20.

An example of a store brand is

a.	Craftsman.	c.	Sony.
b.	Green Giant.	d.	Timex.

21.

Stores that emphasize lower prices on their products are

a.	convenience stores.	c.	discount stores.
b.	full-service stores.	d.	specialty stores.

22.

Stores that have a special line or products for sale are

a.	convenience stores.	c.	discount stores.
b.	full-service stores.	d.	specialty stores.

23.

The Consumer Bill of Rights was presented by

a.	Gerald Ford.	c.	John F. Kennedy.
b.	Bill Clinton.	d.	Richard Nixon.

24.

The agency that has the authority to set safety standards is the

a.	Food and Drug Administration.
b.	Consumer Product Safety Commission
c.	US Department of Agriculture.
d.	Federal Trade Commission.

25.

Consumer responsibilities include

a.	being honest and reasonable.	c.	being informed and involved.
b.	reporting unethical practices.	d.	all of the above.

26.

The person to whom a check is written is the

a.	drawer	c.	payee
b.	drawee	d.	forger

27.

“Drawee” refers to the

a.	owner of a checking account
b.	bank or other financial institution
c.	person to whom a check is written
d.	person who endorses a check

28.

Writing another person’s signature on a check without his or her permission is

a.	forgery	c.	postdating
b.	overdrawing	d.	scaling

29.

Writing checks for more than the amount deposited in an account is called

a.	stopping payment	c.	postdating
b.	forgery	d.	overdrawing

30.

A postdated check refers to a check that is

a.	dated later than the date on which it is written
b.	written illegally
c.	written by someone not authorized on the account
d.	void after a certain number of days

31.

If a check is lost, you should consider completing

a.	a signature card	c.	an overdraft request
b.	a stop-payment order	d.	a forged check

32.

A person without a checking account who needs to send money to a company in another state would probably use a

a.	certified check	c.	personal check
b.	money order	d.	traveler’s check

33.

The process of returning and paying checks within the banking system is called

a.	reconciliation	c.	clearing
b.	forgery	d.	overdrawing

34.

A bank statement has the purpose of

a.	insuring a savings account
b.	reporting transactions for a checking account
c.	reporting errors for electronic banking transactions
d.	assisting a person to open a checking account

35.

Canceled checks are those that have

a.	not cleared the banking system
b.	been issued illegally
c.	cleared the banking system
d.	stop-order payments issued for them

36.

The document prepared to show agreement between the bank balance and the customer’s checkbook balance is

a.	bank statement	c.	canceled check report
b.	bank reconciliation	d.	check register

37.

Which check is one that has not yet been presented for payment?

a.	overdrawn	c.	forged
b.	canceled	d.	outstanding

38.

Anyone who buys on credit or receives a loan is known as the

a.	lender	c.	creditor
b.	debtor	d.	obligator

39.

A business that receives an invoice with the terms 2/10, n/30

a.	must pay the entire amount right away
b.	must pay $10 now and $30 later
c.	can deduct 2% from the amount owed if payment is made within ten days
d.	does not have any time limit on the amount to be paid

40.

Which of the following are typical uses of credit by American consumers?

a.	buying fairly expensive products	c.	borrowing to pay taxes
b.	paying for medical care	d.	all of the above

41.

Which of the following is NOT true about credit references?

a.	They are important to creditors.
b.	They are usually ignored by creditors.
c.	They may be asked to verify a credit record.
d.	They may be asked about a bill payment record.

42.

Your honesty and willingness to pay your debits is called

a.	capacity	c.	capital
b.	character	d.	none of the above

43.

Which of the following is a benefit of credit?

a.	establishing a credit rating
b.	buying larger quantities of things you want
c.	not having to shop around
d.	getting lower prices for merchandise

44.

Which of the following is NOT a disadvantage of credit?

a.	careless buying	c.	overuse
b.	overbuying	d.	savings

45.

Which of the following would make it possible for a teenager to get a credit card in his or her name?

a.	if she or he had a part-time job
b.	if she or he had good grades in school
c.	if she or he got a parent or guardian to cosign the agreement
d.	none of the above

46.

A partial payment of the purchase price is called

a.	a finance charge	c.	a regular payment
b.	a down payment	d.	none of the above

47.

A two-month loan made on March 10 would be due on

a.	April 10	c.	May 10
b.	April 11	d.	May 11

48.

Special insurance that repays the balance owed if the borrower dies or becomes disabled is

a.	Credit Insurance	c.	Lenders’ Insurance
b.	Borrower’s Guaranty	d.	Financial Insurance

49.

What is the major purpose of having the APR stated?

a.	To increase the cost of lending money.
b.	To make it easier to compare the cost of credit.
c.	To make it easier for consumers to get loans.
d.	None of the above.

50.

Which of the following should be checked when getting a loan?

a.	The annual percentage rate.
b.	The amount of the monthly payments.
c.	The finance charge.
d.	All of the above.

51.

Which of the following can be used as credit references?

a.	Banks where you have checking and/or savings accounts.
b.	Former employers.
c.	Other creditors where you have account balances.
d.	All of the above.

52.

A credit bureau is

a.	a credit reporting agency.	c.	a credit granting agency.
b.	a credit rating agency.	d.	all of the above.

53.

A record of your transactions completed during a billing period is called a

a.	statement of account.	c.	credit memorandum.
b.	receipt.	d.	credit check.

54.

An agreement developed cooperatively by a creditor and a debtor to reduce monthly payments to a more manageable level is called

a.	a truth-in-lending plan.	c.	a debtor ripoff plan.
b.	a debt-repayment plan.	d.	none of the above.

55.

Investing commonly refers to

a.	opening a savings account.
b.	using your savings to earn more money.
c.	putting money in a safe place in your home.
d.	storing important documents in a safe-deposit box.

56.

Savings grow over the years as a result of

a.	dividends received.	c.	interest earned.
b.	depreciation.	d.	higher tax rates.

57.

A person’s savings would grow faster if the money was compounded

a.	annually.	c.	monthly.
b.	quarterly.	d.	daily.

58.

Liquidity refers to an investment that

a.	has no risk.
b.	is easily changed into cash.
c.	is insured by a federal government agency.
d.	pays a high rate of return.

59.

Which of the following has the lowest liquidity?

a.	a savings account	c.	a checking account
b.	government savings bonds	d.	real estate

60.

A savings plan with a low or zero minimum balance is

a.	a regular savings account.	c.	a money market account.
b.	an EFT account.	d.	a retirement account.

61.

A savings account statement presents

a.	the names of new depositors.
b.	a customer’s record of recnet deposits.
c.	a summary of deposits, withdrawals, and interest earned.
d.	a list of current interest rates paid on various savings accounts.

62.

To take money out of a savings account, a depositor must prepare a

a.	savings account register.	c.	signature card.
b.	savings account statement.	d.	withdrawal slip.

63.

A long-term deposit that pays a higher interest rate than other types of accounts is

a.	a regular savings account.
b.	a money market account.
c.	a certificate of deposit (CD).
d.	an interest-earning checking account.

64.

An individual retirement account (IRA) is designed to

a.	provide money for workrs who are on strike.
b.	earn higher interest based on current government bonds.
c.	encourage workers to save for future financial needs.
d.	increase tax revenues received by the federal government.

65.

The risk of damage to or loss of property due to theft, wind, fire, flood, or some other hazard is

a.	accidents.	c.	property risk.
b.	liability risk.	d.	personal risk.

66.

The risk of potential losses to others as a result of injury or damage you may have caused is

a.	insurance.	c.	property risk.
b.	liability risk.	d.	personal risk.

67.

The planned protection provided by sharing economic losses is

a.	insurance.	c.	property risk.
b.	liability risk.	d.	economic risk.

68.

The money a policy holder must pay for insurance coverage is

a.	a premium.	c.	self-insurance.
b.	a claim.	d.	a deductible.

69.

An amount you must pay before the insurance company pays a claim is

a.	a premium.	c.	self-insurance.
b.	a claim.	d.	a deductible.

70.

When an individual or business assumes the total risk of economic loss, the type of insurance is

a.	liability insurance.	c.	self insurance.
b.	property insurance.	d.	coinsurance.

71.

An insurance agent that sells insurance policies from a variety of different companies is

a.	an insurance broker.
b.	a self-insured insurance agent.
c.	a single company insurance agent.
d.	an independent insurance agent.

72.

Insurance is important because

a.	it provides economic security.
b.	it helps our economy.
c.	premiums collected are used to make loans that help our economy grow.
d.	all of the above.

73.

The general term used to describe insurance that you buy to protect yourself against financial loss if you injure someone else or damage someone else’s property in an automobile accident is

a.	personal injury and property damage coverage.
b.	medical payments and collision insurance coverage.
c.	no-fault and assigned-risk insurance.
d.	automobile liability insurance.

74.

The two major categories of automobile insurance are

a.	personal injury and property damage coverage.
b.	medical payments and collision insurance coverage.
c.	no-fault and assigned-risk insurance.
d.	automobile liability insurance.

75.

Insurance coverage that protects you from claims resulting from injuries or deaths for which you are found to be at fault is

a.	personal injury and property damage coverage.
b.	medical payments and collision insurance coverage.
c.	bodily injury liability insurance.
d.	automobile liability insurance.

76.

Medical payments protection provides medical coverage for

a.	policyholders while riding in their own car.
b.	policyholders while riding in someone else’s car.
c.	guests riding in the insured’s car.
d.	all of the above.

77.

Automobile coverage that protects you against claims if your car damages someone else’s property and you are at fault is

a.	collision insurance coverage.
b.	property damage liability coverage.
c.	medical payments protection coverage.
d.	comprehensive physical damage coverage.

78.

Collision coverage provides for payment of damages up to

a.	the current value of the car.
b.	the purchase price of the car when you bought it.
c.	the price of a new car similar to the car damaged.
d.	All the above are true; the method chosen depends on the insurance company.

79.

Laws that require you to carry certain types of automobile insurance before your car can be licensed are

a.	compulsory insurance laws.	c.	insurance laws.
b.	financial responsibility laws.	d.	assigned-risk plans.

80.

Auto insurance that provides coverage to high risk drivers who are unable to purchase insurance in the normal fashion is

a.	compulsory insurance laws.	c.	insurance laws.
b.	financial responsibility laws.	d.	assigned-risk plan.

81.

Property insurance is designed to protect you from financial loss if your property is lost or destroyed as a result of

a.	theft.	c.	windstorm.
b.	floods.	d.	all of the above.

82.

Causes of loss are

a.	claims.	c.	economic risk.
b.	perils.	d.	coverage.

83.

Property permanently attached to land, such as a house or garage, is

a.	insured property.	c.	real property.
b.	personal property.	d.	attached property.

84.

A basic type of property insurance that protects against losses caused by fire or lightning is

a.	personal liability coverage.	c.	homeowners policy.
b.	standard fire policy.	d.	extended coverage.

85.

Additional protection of property that covers damage caused by perils such as wind, hail, smoke, and falling aircraft, among other things, is

a.	personal liability coverage.	c.	homeowner’s policy.
b.	standard fire policy.	d.	extended coverage.

86.

The decrease in value of property is

a.	appreciation.	c.	valuation.
b.	recession.	d.	depreciation.

87.

The person who acts as the insurance company’s representative and looks at your damaged property to determine the extent of loss is

a.	an insurer.	c.	an adjuster.
b.	a policyholder.	d.	a sales representative.

88.

The widest range of financial services is offered by

a.	a mutual savings bank.	c.	a commercial bank.
b.	a check-cashing outlet.	d.	an investment company.

89.

A credit union differs from other financial institutions in that it is

a.	chartered by the federal government.
b.	owned by foreign investors.
c.	taxed at a different rate.
d.	organized as not-for-profit organization.

90.

A check-cashing outlet is commonly used by

a.	people who do not have a bank account.
b.	consumers who want to buy homes.
c.	people who have life insurance.
d.	investors who desire a high rate of return.

91.

Automatic teller machines (ATMs)

a.	provide automatic teller services quickly and easily.
b.	provide automobile loans.
c.	accept applications for credit cards.
d.	report the current value of investments.

92.

The items most likely to be stored in a safe-deposit box are

a.	cash
b.	checkbooks
c.	bond & stock certificates
d.	deposit slips for a savings account

93.

A common advantage of a checking account is that

a.	every checking account earns interest
b.	lost checks are insured by the federal government
c.	banks automatically tell you when payments are due
d.	canceled checks can serve as proof of payment.

94.

The fee a bank charges for handling a checking account is a

a.	credit transaction.	c.	service charge.
b.	deposit.	d.	minimum balance.

95.

The purpose of a signature card is to

a.	serve as identification when cashing a check
b.	allow a bank customer to obtain cash by just signing a special form.
c.	allow customers to make deposits quickly.
d.	serve as the bank’s official record of a depositor’s signature.

96.

Which account is an account opened by two or more people together?

a.	a joint account	c.	a business account
b.	an EFT account	d.	an interest-earning account

97.

When adding money to a checking account, a bank customer prepares a

a.	bank statement	c.	deposit slip
b.	signature card	d.	sharedraft

98.

The purpose of an endorsement is to

a.	open a checking account with direct deposit.
b.	provide written evidence that payment has been received.
c.	convert US currency to the currency of another country.
d.	instruct the bank to automatically put an amount each month in your savings account.

99.

A restrictive endorsement commonly uses which of the following words?

a.	“Pay to the order of.”
b.	“For deposit only.”
c.	“Void if not cashed within 60 days.”
d.	“No words are necessary.”

100.

The primary purpose of life insurance is

a.	to provide income if the insured is disabled.
b.	a means of investing.
c.	a means of saving.
d.	protection against financial loss associated with dying.

101.

A life insurance policy that provides financial protection from losses resulting from loss of life during a definite period of time is

a.	term life insurance	c.	level term insurance
b.	decreasing term insurance	d.	renewable insurance

102.

Insurance which allows the policyholder to continue his or her insurance for one or more terms without taking a physical examination is

a.	permanent term insurance.	c.	level term insurance.
b.	decreasing term insurance.	d.	a renewable policy.

103.

Term life insurance on which the amount of protection gradually becomes smaller but the premiums remain the same during the term is

a.	permanent term insurance.	c.	level term insurance.
b.	decreasing term insurance.	d.	a renewable policy.

104.

Permanent insurance that extends over the lifetime of the insured is

a.	whole life insurance.	c.	level term insurance.
b.	decreasing term insurance.	d.	a renewable policy.

105.

Protection provided by regular medicine, hospital, and surgical coverages is

a.	surgical insurance.	c.	major medical insurance.
b.	hospital insurance.	d.	basic health insurance.

106.

Insurance which provides protection against the high costs of serious illnesses or injuries is

a.	surgical insurance.	c.	major medical insurance.
b.	hospital insurance.	d.	basic health insurance.

107.

State governments support a health insurance program designed to provide medical benefits to employees who are injured on the job. This program is

a.	worker’s compensation.	c.	Medicaid.
b.	supplementary insurance.	d.	Medicare.

108.

The day-to-day financial activities associated with using limited income to satisfy your unlimited needs and wants is

a.	discretionary income.	c.	expenditures.
b.	net income.	d.	money management.

109.

The two common financial statements used in money management are

a.	the budget & income statement.
b.	the balance sheet & income statement.
c.	the balance sheet & cash flow statement.
d.	the budget & balance sheet.

110.

A type of financial statement which reports what a person or family owns as well as owes is

a.	a cash flow statement.	c.	a balance sheet.
b.	a capital statement.	d.	an income statement.

111.

Items of value are

a.	owner’s equity.	c.	assets.
b.	liabilities.	d.	net worth.

112.

A statement that reports net wages and other income along with spending for a given period of time, such as for a month, is

a.	a cash flow statement.	c.	a balance sheet.
b.	a capital statement.	d.	an income statement.

113.

The first component that should be planned for in a budget is

a.	variable expenses.	c.	savings.
b.	fixed expenses.	d.	living expenses.

114.

A good budget

a.	must be realistic.	c.	should have a simple format.
b.	should be flexible.	d.	all the above.

115.

A report that summarizes current financial condition, acknowledges financial needs, and sets a direction for future financial activities is

a.	an income statement.	c.	a balance sheet.
b.	a financial plan.	d.	an owner’s equity statement.

116.

Evaluating one’s financial position, setting financial goals, and guiding activities and resources toward reaching those goals is

a.	an income statement.	c.	financial planning.
b.	estate planning.	d.	an owner’s equity statement.

117.

The accumulation and management of property during one’s lifetime and the distribution of one’s property at death is

a.	an income statement.	c.	financial planning.
b.	estate planning.	d.	an owner’s equity statement.

118.

The part of the Social Security insurance system that provides pensions to retired workers and their families, death benefits to dependents of workers who die, and benefits to disabled workers and their families is

a.	retirement, survivors, and disability insurance.
b.	unemployment insurance.
c.	a pension.
d.	an annuity.