Question 1
Maya owns a house valued at $267,900. She still owes $134,762 on her mortgage. How much
equity does she have in the house?
$67,381
$133,138
$133,950
$161,462
Question 2
Use the table to answer the question that follows.
ROR Portfolio 1 Portfolio 2 Portfolio 3
–0.4% $2,400
$840
$1,550
2.6% $1,570
$1,870
$395
9.4% $3,340
$2,180
$130
–2.8% $1,250
$1,410
$1,180
14.8% $690
$975
$5,020
Calculate the weighted mean of the RORs for each portfolio. Based on the results, which list shows
a comparison of the overall performance of the portfolios, from best to worst?
Portfolio 1, Portfolio 2, Portfolio 3
Portfolio 1, Portfolio 2
Portfolio 2, Portfolio 3, Portfolio 1
Portfolio 3,
Portfolio 3, Portfolio 2, Portfolio 1
Question 3
Kathy is financing $218,675 to purchase a house. She obtained a 30/10 balloon mortgage at 3.35%.
What will her balloon payment be?
$174,042.89
$152,249.65
$168,871.56
$168,401.44
Question 4
Madeline and Jonathan want to purchase a home in seven years. They will contribute $720 each
month to a savings account with 6.35% interest, compounded twice a year. What is the future value
of this investment, when Madeline and Jonathan need to make a down payment?
$77,065.89
$12,449.06
$6,108.44
$74,694.35
Question 5
Jiao is a Chinese student visiting family in the United States. She spent $76 on dinner for her family
one evening. If the exchange rate that day is USD to CNY = 6.51, approximately how much did Jiao
spend in Chinese Yuan?
12
125
495
857
Question 6
Brooke bought a condominium for $199,600. She made an 11% down payment and financed the
remaining amount using a 15-year fixed-rate mortgage at 6.2%. The monthly payment is $1,706.
Brooke will pay for one discount point, a 0.75% origination fee, the brokerage fee, state documentary
taxes on the deed and the mortgage, and the intangible tax.
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Discount points equal 1% of the mortgage amount.
Documentary stamp tax on deed is $0.70 per $100 or portion thereof.
Documentary stamp tax on mortgage is $0.35 per $100 or portion thereof.
Mortgage broker fee is $250 plus 7% of the mortgage amount.
Intangible tax is 0.2% of the mortgage amount.
What is the total amount of the principal, interest, down payment, and fees described for Brooke’s
condominium?
$524,848.09
$349,246.00
$347,204.09
$217,768.09
Question 7
Parker is an older man who has been in the workforce for many years. He began making personal
investments for retirement when he was young and is now just a few years away from retiring. At this
stage, when he would like to greatly reduce risk, in which investment vehicle should he concentrate
his money?
junk bond
company
US government bond
stock in a small company
stock in a large
Question 8
Last year, Norris purchased 56 shares of Stock A at $77 per share, 64 shares of Stock B at $45 per
share, and a four-year $7500 bond with a 12.47% coupon for $6350. Norris sold both stocks today.
Stock A is worth $83 per share and Stock B has a value of $49 per share. Assuming neither stock
paid a dividend, which investment has the highest rate of return?
Stock A
Stock B
Bond
Stock A and Stock B
Question 9
List the following stocks and bonds in order from highest default risk to lowest default risk:
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
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A municipal bond in a city with a population of 150,000
A common stock in a company under federal investigation
A preferred stock in a 150-year old firm with good business practices
municipal bond, common stock, preferred stock
municipal bond, preferred stock,
common stock
common stock, preferred stock, municipal bond
municipal bond, preferred stock
common stock,
Question 10
Ian invested $1,315 in a savings account which earns 2.86% interest compounded quarterly. What
will the account be worth in nine years?
$1,402.08
$1,699.48
$3,629.11
$15,799.53
Question 11
Chris and Justine are purchasing a townhouse and finance $112,900 with a 25-year 6/3 ARM at
4.85% with a 2/12 cap structure. What will their payments be at the beginning of the seventh year
assuming they are charged the maximum interest rate for that year?
$759.70
$557.09
$674.48
$650.17
Question 12
Arianna purchased a house for $156,000 and obtained a mortgage for $147,700. She purchased 2
discount points and 3 origination points. What is the cost for each?
discount: $2,954; origination: $4,431
discount: $3,120; origination: $4,680
discount: $4,431; origination: $2,954
discount: $4,680; origination: $3,120
Question 13
Every month, Tristan deposits $488 into an interest-bearing account to save for a down payment on
a house. The interest rate on the account is 5.27% compounding annually. What is the present value
of the investment if Tristan purchases a house in 15 years?
$4,974.08
$5,236.22
$59,689.00
$62,834.61
Question 14
Mariah is buying a house for $416,000. She is financing $375,500 and obtained a 20-year, fixed-rate
mortgage with a 4.325% interest rate. How much are her monthly payments?
$31,497.37
$28,430.92
$2,340.27
$2,592.69
Question 15
Use the table to answer the question that follows.
Day
Stock
Ticker High Close
1
Ferber Inc FER
24.76 19.25
2
Ferber Inc FER
25.16 19.87
3
Ferber Inc FER
26.81 20.19
4
Ferber Inc FER
25.90 21.17
5
Ferber Inc FER
26.05 22.43
Suppose you purchased 87 shares of Ferber stock on Day 1 at the high price. What is the return on
your investment, if you sold the stock on Day 5 at the high price?
4.95%
5.21%
16.52%
35.32%
Question 16
Lauren will make annual contributions in the amount of $4,500, on average, to a 401(k) over the next
36 years. Her employer will match 75% of her contributions. She is currently being taxed at 35%, but
anticipates being taxed at 28% upon retirement. If her account grows at an average rate of 6.2%
annually, what is the value of Lauren’s 401(k) upon retirement?
$403,396.71
$637,310.77
$705,944.24
$923,778.11
Question 17
Alice is closing on a house on August 13. The buyer owns the property on the day of the closing.
The selling price of the home is $350,700. Alice was accepted for a 20-year fixed-rate mortgage for
$324,900 at 5.25% interest. The seller has paid $4,478.51 in property taxes for the coming year.
How much will Alice owe in prorated taxes and interest?
$2,617.94
$887.87
$2,748.48
$1,730.07
Question 18
Conan and Gabriella are deciding between two loans.
Loan A
Loan B
$232,800
15-year fixed
6.13%
0 discount points
M = $1,980.89
$232,800
15-year fixed
5.81%
1 discount point
M = $1,940.68
They have calculated all of the associated fees as well as any other expenses. They have $5,000
available to purchase the points, and plan to stay in the house for three years.
Which statement represents the best financial decision?
They should not purchase the discount points because they do not have enough available
cash.
They should purchase the discount points because available cash should always be
used to buy points.
They should purchase the discount points because they will be in the
house long enough to justify the purchase.
They should not purchase the discount points
because they will not be in the house long enough to justify the purchase.
Question 19
Victoria has a health care plan with a prescription benefit that offers four different options.
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


Option A: $55 monthly premium and $20 co-pay per prescription
Option B: $60 monthly premium and $15 co-pay per prescription
Option C: $65 monthly premium and $25 co-pay per prescription
Option D: $50 monthly premium and $30 co-pay per prescription
If Victoria fills an average of five prescriptions each month, which option is the least expensive?
Option A
Option B
Option C
Option D
Question 20
Zachary’s assets and liabilities are shown below. What is his net worth?
Home Value
$189,400
Credit Card Balance
$9,236
Personal Loan
$6,521
Furniture
$8,339
Electronic Equipment
$6,544
Car Loan
$15,432
Savings Account Balance
$3,550
Mortgage
$152,346
Investments
$4,400
Car Value
$61,887
$20,147
$32,167
$67,317
$48,845
Question 21
Which breakdown of investments for retirement savings would a financial advisor most likely suggest
for someone who is 35 years old?
5% high-risk; 15% medium-risk; 80% low-risk
10% high-risk; 80% medium-risk; 10%
low-risk
35% high-risk; 30% medium-risk; 35% low-risk
risk; 55% low-risk
50% high-risk; 5% medium-
Question 22
Answer each of the following questions using complete sentences.
Part I: Harper is shopping for a home and a mortgage for $175,800 with which to purchase this
home. In her search, she was eligible for three different mortgages:
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

a 30-year, fixed-rate mortgage at 6.15%
a 30-year, 6/1 adjustable-rate mortgage at 5.89% with a 2/9 cap
a 30/6 balloon mortgage at 5.1%
Which mortgage has the least expensive initial monthly payment? How do you know?
Part II: Which mortgage is likely to have the lowest total cost? Why?
Part III: What are the advantages and disadvantages of a fixed-rate mortgage, an adjustable-rate
mortgage, and a balloon mortgage?
Question 23
Suppose your instructor asked you to write an essay comparing and contrasting an adjustable rate
mortgage to a balloon mortgage. Describe, using complete sentences, two prewriting strategies you
would use before writing this essay.
Question 24
Respond to each part using complete sentences.
Part I: Describe an example of a very diverse portfolio. You must include at least three investments
and the percentage of distribution for each.
Part II: Explain why this portfolio is very diverse.
Part III: Explain whether this portfolio is an aggressive, conservative, or moderate portfolio and why.
Question 25
Austin is a single 26-year-old male attending Blackfeet Community College in a rural town in
Montana. He has a 100-mile commute every day. He is accident-free, has good grades, and just
bought a fancy new Mercedes due to his recent full-time employment at a local restaurant. The
following is a list of the types of coverage Austin may include on his insurance policy:
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Bodily Injury Liability
Property Damage Liability
Collision
Comprehensive
Medical Coverage
Uninsured/Underinsured Motorist
Rental Reimbursement
GAP Insurance
Part I: Explain, using complete sentences, what types of coverage you would advise Austin to
purchase and which he should not. (Assume he can afford all of them.) What was the reasoning
behind your advice?
Part II: What personal factors will cause Austin’s insurance rate to be higher than his counterparts?
Part III: What personal factors will allow Austin to receive a discount?