FCS 340 FINAL EXAM QUESTIONS WITH CORRECT ANSWERS LATEST UPDATE 2026

FCS 340 FINAL EXAM QUESTIONS WITH CORRECT ANSWERS LATEST UPDATE 2026 What is a closed-end mutual fund? What is an open-end mutual fund? - Answers Closed- shares issued by an investment company only when fund is organized Open- shares issued and redeemed by the investment company at the request of investors What is the net asset value? When is the net asset value calculates? - Answers value of a mutual fund / at the end of every day What is a load fund? What is a no-load fund? - Answers Load- a mutual fund where investors pay commission every time they buy shares No-load- individual investors pay no sales charge What is a contingent deferred sales load? - Answers 1-5% charge that shareholders pay when they sell shares in a mutual fund How much can you expect to pay in management fees for most mutual funds? - Answers Between .25-1.5% of the fund's net asset value What is a 12b-1 fee? - Answers Fee that an investment company pays to avoid the costs of advertising and marketing a mutual fund What is expense ratio? - Answers Amount investors pay for all of a mutual fund's management fees and operating fees Why do investors purchase mutual funds? - Answers diversification and professional management Is there any significant differences between the performance of a load fund and a no-load fund? Explain. - Answers No. Up to you if you want to pay the cost of sales commission that comes with the load fund. What do experts recommend investors look for in an expense ratio? - Answers Less than 1% What is an equity income fund? - Answers Invest in stocks issued by company with long history of paying dividends (provides income to shareholders) What type of mutual fund for an elderly person concerned about safety of his money or investment? - Answers Intermediate US bond fund What is a growth fund? - Answers investment in company expecting higher than average revenue and earn growth (tend to invest in large) What is an asset allocation fund? - Answers investment in different types of investments (stocks, bonds, fixed-income securities, money market) What are index funds? How do their performance compare to managed funds? - Answers - invest in the same companies included in an index - index funds outperform managed funds 80% of the time How can an investor make money with mutual funds? - Answers shares in a fund are sold; the profit from the increase in value is called capital gain What is a "family of funds"? - Answers Group of mutual funds managed by an investment company How can you get information about various mutual funds? - Answers internet, mutual fund websites, and advisory services (but you have to pay for those) What mutual fund earnings are considered taxable income? - Answers income dividends What is the most popular method of purchasing open-end mutual funds? - Answers through a regular account transaction What are the misconceptions about retirement planning? - Answers plenty of time, saving a little won't help, you'll spend less after retirement What is a contractual savings plan? What is a voluntary savings plan? - Answers Contractual- investor makes set purchases over certain period of time Voluntary- money deducted from savings voluntarily How do will and trusts help in planning your estate? - Answers Wills- keep you from dying intestate Trusts- help prevent probate court and helps taxes What is the first step in retirement planning? - Answers analyze assets and liabilities What are defined-contribution plans? What are defined-benefit plans? - Answers - Defined- contribution: contribute set amount (Stock bonus, 401k, profit sharing) - Defined- benefit: get set amount at retirement What is a will? - Answers Legal declaration of a person's wish to the department of their property after death Define the following wills: simple, traditional marriage share, exemption trust, stated amount, formal will, holographic, statutory. - Answers - Simple: Everything goes to spouse - Traditional: 1/2 spouse and 1/2 to children - Exemption: Goes to spouse except for what goes to the trust - Stated amount: Money goes to spouse to cover financial needs - Formal will: Involves an attorney, 2 witnesses, and a beneficiary - Holographic: Make it on their own - Statutory: Formal will on pre-made form What does it mean to be intestate? - Answers To die without a will and the state decides what to do What is a codicil? - Answers Document that explains, adds/deletes provisions in existing will What does the term liquidity mean? - Answers easily accessible (cash) How do you compute net worth? - Answers assets - liabilities = net worth What is a cash flow statement? - Answers A personal income and expenditure report What is the difference between a fixed expense and a variable expense? - Answers - Fixed: set costs each month - Variable: varying costs Itemized deductions - Answers Expenses you can deduct from income What is open-ended credit? What is closed-ended credit? - Answers - Open: keep charging until maxed out (credit card) - Closed: borrow set amount each month (mortgage) What are some examples of common tax-deferred retirement plans? - Answers 401k, IRA, Keogh (pay taxes later) What should you do if your identity is stolen? - Answers Contact your credit bureau What should be your first step if you have trouble paying your bills? - Answers Contact you creditor Why do most financial advisers recommend avoiding service contracts? - Answers Higher costs, low necessity What are common financial benefits of home ownership? - Answers Building equity, property values increase What is earnest money? - Answers Putting down money to show you're in good faith How can you increase the speed in which you build up equity in your home? - Answers Take out a shorter mortgage (15 instead of 30) When should you consider refinancing a mortgage? - Answers When interest rates are falling What is typically covered by a home insurance policy? - Answers Land property, personal property, etc. What type of insurance should you purchase to protect your boat and skiing equipment? - Answers Personal Property Floater Ideally, according to financial experts, what type of health insurance should you purchase? - Answers basic with "major" in the title Review the various life insurance needs. Easy, DINK, Nonworking spouse - Answers - Easy: gross income x 7yrs x 70% - Dual Income No Kids: assumes spouse will work after death of spouse - Nonworking Spouse: # yrs until youngest turns 18 x $10,000 What are the major differences between term insurance and whole life insurance? - Answers Whole has higher premium at first, but remains the same with no fluctuation What is an annuity? When should you consider purchasing annuities? - Answers - Annuity: financial contract from insurance company that gives you regular income - Consider after fully financing other retirement funds Why is equity financing a popular choice for long term financing for corporations? - Answers You don't have to pay it back (like having stock) True or False: Because investment objectives deal with the future, it is useless to make long term goals - Answers false A good rule of thumb is to limit installment payments to ______ percent of your net income. - Answers 20 How long will a bankruptcy stay on your credit report? - Answers 10 years A ________ is an employer-sponsored retirement account. - Answers 401k What type of investments would be considered speculative investments? - Answers commodities In approaching retirement, what approach to investing are most people likely to take? - Answers Using income to help cover living expenses instead of reinvesting The potential return on any investment should be directly related to the ________ the investor assumes. - Answers risk The four primary risk components in investing are - Answers inflation risk, interest rate risk, business failure risk, and market risk ____________ risks reduces your buying power. - Answers Inflation ______________ risk is associated with preferred stocks or government or corporate bonds is a result of changes - Answers Interest Rate Market risk is associated with fluctuations in the market due to _________ - Answers the business cycle (expansion/growth and recession) If your primary investment objective is to receive income, what types of investments would be appropriate for your portfolio? - Answers Conservative investments (savings accounts, CDs, bonds) If your main focus is to have your investments increase in value, you are most concerned with _________. - Answers growth If your main focus is to be able to buy or sell an investment quickly without substantially affecting the investment's value, you are most concerned with __________. - Answers liquidity An __________________ account is probably the most liquid investment. - Answers interest bearing checking and savings The process of spreading your assets among several different types of investments to lessen risk is called _______________. - Answers asset allocation ________ investments typically has the largest potential investment return. - Answers Stock _______ investments typically has the most risk. - Answers Stock A portfolio that is 100 percent invested in stock would be indicative of a ______________ portfolio. - Answers very aggessive After you purchase an investment, you should ________ it's value. - Answers monitor What are examples of U.S. Treasury securities? - Answers Treasury bills, notes, bonds, and inflation-protected securities A security issued by the U.S. Treasury that protects the investor from inflation is called a ______. - Answers TIPS A bond backed by the full faith, credit, and unlimited taxing power of the government that issued it is called a ______________ bond. - Answers general obligation A bond that is repaid from the income generated by the project it is designed to finance is called a _________ bond. - Answers revenue A debt security issued by a state or local government is known as a _________ bond. - Answers municipal Generally, interest on corporate bonds is paid every ____ months. - Answers 6 Interest paid to corporate bond holders is tax deductible for the _____________. - Answers corporation's taxes to federal and state government A bond that is backed only by the reputation of the issuing corporation is called a __________ bond. - Answers debenture What is a call feature? - Answers corporation wants to pay off bonds A fund to which annual or semiannual deposits are made for the purpose of redeeming a bond issue is called a _________ fund. - Answers sinking If your monthly expenses total $2,200, you should save at least _________ in an emergency fund before focusing completely on your investment portfolio. - Answers $6,600 (3 month expenses) According to Suze Orman, how much of an investment portfolio should a 30-year old have in growth investments? - Answers 110 - 30(age) = $80 in growth investments