UGBA 135 MIDTERM 1 EXAM QUESTIONS WITH VERIFIED SOLUTIONS LATEST UPDATE 2026
ALL Bankruptcy are handled in federal court - Answers TRUE
Should you always try to contribute enough to your 401K to get the employer match? - Answers Yes
Are community property laws established by the IRS or states? - Answers States
What is a notary public? - Answers A public officer constituted by law to witness the execution of
certain classes of documents like mortgage documents, wills, trusts, deeds
What is a prenup agreement? - Answers A prenuptial agreement is entered into before marriage. This
agreement can set forth what will happen to your and your spouse's assets and income in the
unfortunate event of divorce, separation or death.
By filing for bankruptcy, do you get rid of all of your debts? - Answers All debts EXCEPT taxes,
alimony, child support, student loans
Who said compound interest is the greatest discovery of mankind? - Answers Albert Einstein
Times of inflation, what happens to the interest rate? (up or down) - Answers Higher interest rates
What's the definition of compound interest? - Answers Interest paid on both the principal and
accumulated interest
Does it take a dollar of wages to pay back $1 of debt? - Answers No, it takes more than a dollar due
to taxes
What is the concept of the time value of money? - Answers Money is worth different amounts at
different times
What is the biggest reason to start saving ASAP? - Answers Compounding interest
As people get closer to retirement, how should they adjust their portfolio? - Answers Adjust portfolio
to be less risky, more bonds less stocks
What is APR? Is that higher than the annual interest rate? - Answers Annual Percentage Rate, higher
than the interest rate because APR includes fees
According to the nightingale survey, What % of the people who people who start working at 25
become financial independence by 65? - Answers 5%
What types of accounts does the FDIC insure up to $250,000 - Answers CD, checking accounts,
savings accounts, IRA (Individual Retirement Accounts) and certain other retirement and trust
accounts
Everytime you get a paycheck, our goal is to save what percent? - Answers 15% of total income
The RULE OF FRED!!!!!!!!!!!! - Answers I GET PAID FIRST
What's the first step in saving money? - Answers Creating a budget or spending plan
What's our definition of being frugal? - Answers Not cheap but value oriented, working toward their
goals, budgeting, and controlling expenses
What is the rule of 72? - Answers Estimate how long it takes a sum of money to double, 72/interest
rate
If you have different types of debt, which is your first priority? (CC) - Answers Pay off the loan with
the highest interest
How do we define a millionaire in this class? - Answers Financially independent, living the life they
want to lead, and able to take care of themselves without financial help from government sources
What's the purpose of an emergency fund (security fund)? - Answers Cover 3-6 months of living
expenses in the event of illness, job loss, or other emergency.
What's the biggest reason that an investor in bonds would determine whether it is better to buy a
corporate bond or municipal? - Answers Municipal bonds are exempt from federal income taxes, may
be free from some state income taxes, compare after tax net return
Are bonds issued by our govt considered risky? - Answers No
Interest rates rise.... - Answers Bonds Prices go down
Bond prices up.... - Answers interest rates down (inverse relationship)
In some states, some bonds are free from taxes on a federal and state level. - Answers TRUE
How do we define what a bond is? - Answers Bonds are like loans that obligate the issuer to pay a
specified amount of interest for a specified period of time and then repay the bond holder the face
amount of the bond
What happens when a bond is in default? - Answers A bond default occurs when the bond issuer fails
to make an interest or principal payment within the specified period. Defaults typically occur when
the bond issuer has run out of cash to pay its bondholders.
What is the current yield? - Answers Annual Coupon Payments / Price
, What is Coupon Yield? - Answers fixed % rate of interest based upon the PAR (face value or principle
amount) value of the bond
What is yield to maturity? - Answers YTM: Expressed as an annual percentage rate, it is the sum of all
cash flows from both coupon payments and repayment of the face value
If bond was purchased for a premium, more than face value, yield to maturity will be lower than the
coupon
If the bond was purchased at a discount, less than face value, the yield to maturity will be higher than
the coupon
When they are granted, how much are stock options? - Answers Free or require purchasing shares at
bargain prices
Trends pg. 117-118 - Answers Emerging market growth
Rising inflation and rising interest rates
The world is getting older
Raw materials are in more remote and hard to reach areas.
More people have higher income
Environmental trends
Keep more cash on hand if the economy is weak. - Answers yes
Financial advisors are paid to outperform the index - Answers no
If you place a market order to sell.... - Answers you expect to sell at the bid price
If you place a market order to buy... - Answers you expect to buy at the ask price.
If you place a limit order to sell..... - Answers you set the lowest price you're willing to sell
If you place a limit order to buy.... - Answers you expect to buy at the ask price
How often should you reallocate your portfolio? - Answers At least once a year, review the allocation
of assets in your portfolio
When buying and selling stocks what is the bid? - Answers the highest price a buyer is willing to pay
at the very instant in time
When buying and selling stocks What is the ask/offer? - Answers the lowest price a seller is willing to
sell at that very instant in time
What's the difference between a growth investor, a value investor, and a dividend investor? -
Answers Growth investor: This is an investor looking for strong companies to grow their sales and
earnings, what usually means sales and earnings could grow 15% or more from one year to the next
Value Investor: this is an investor looking for stocks which have stumbled and who shares are at
bargain prices
Dividend Investor: This is an investor wanting income more than growth. the focus is on stocks that
pay above-average dividends
If stock options are not exercised by the expiration date what happens to them? - Answers the option
has no value and basically expires worthless and ceases to exist.
Are ETFs always diverse? - Answers no
Are profits from stock options and stock units subject to taxes? - Answers yes
What is the size or the market cap of a company? - Answers Market cap is the total value investors
are placing on the company at the moment in time
What are restricted stock units and how are they priced? - Answers A restricted stock unit (RSU) is
compensation issued by an employer to an employee in the form of company stock
The restricted stock units are assigned a fair market value when they vest. Upon vesting, they are
considered income, and a portion of the shares is withheld to pay income taxes.
Is reinvesting dividends a way of compounding growth? - Answers yes
Do we recommend selling short or using stop order? - Answers No
When is a financial advisor acting as a fiduciary? - Answers They are not financially incentivized to sell
you one product over the other. Putting the best interests of the client first
What is a Closed end fund? - Answers Pooled investment portfolios which raise money by issuing and
selling a set number of shares in an IPO.
What is dollar cost averaging? - Answers Investing a set amount of money in shares of stock on a
regular time schedule, regardless of the price of the shares at the time
ALL Bankruptcy are handled in federal court - Answers TRUE
Should you always try to contribute enough to your 401K to get the employer match? - Answers Yes
Are community property laws established by the IRS or states? - Answers States
What is a notary public? - Answers A public officer constituted by law to witness the execution of
certain classes of documents like mortgage documents, wills, trusts, deeds
What is a prenup agreement? - Answers A prenuptial agreement is entered into before marriage. This
agreement can set forth what will happen to your and your spouse's assets and income in the
unfortunate event of divorce, separation or death.
By filing for bankruptcy, do you get rid of all of your debts? - Answers All debts EXCEPT taxes,
alimony, child support, student loans
Who said compound interest is the greatest discovery of mankind? - Answers Albert Einstein
Times of inflation, what happens to the interest rate? (up or down) - Answers Higher interest rates
What's the definition of compound interest? - Answers Interest paid on both the principal and
accumulated interest
Does it take a dollar of wages to pay back $1 of debt? - Answers No, it takes more than a dollar due
to taxes
What is the concept of the time value of money? - Answers Money is worth different amounts at
different times
What is the biggest reason to start saving ASAP? - Answers Compounding interest
As people get closer to retirement, how should they adjust their portfolio? - Answers Adjust portfolio
to be less risky, more bonds less stocks
What is APR? Is that higher than the annual interest rate? - Answers Annual Percentage Rate, higher
than the interest rate because APR includes fees
According to the nightingale survey, What % of the people who people who start working at 25
become financial independence by 65? - Answers 5%
What types of accounts does the FDIC insure up to $250,000 - Answers CD, checking accounts,
savings accounts, IRA (Individual Retirement Accounts) and certain other retirement and trust
accounts
Everytime you get a paycheck, our goal is to save what percent? - Answers 15% of total income
The RULE OF FRED!!!!!!!!!!!! - Answers I GET PAID FIRST
What's the first step in saving money? - Answers Creating a budget or spending plan
What's our definition of being frugal? - Answers Not cheap but value oriented, working toward their
goals, budgeting, and controlling expenses
What is the rule of 72? - Answers Estimate how long it takes a sum of money to double, 72/interest
rate
If you have different types of debt, which is your first priority? (CC) - Answers Pay off the loan with
the highest interest
How do we define a millionaire in this class? - Answers Financially independent, living the life they
want to lead, and able to take care of themselves without financial help from government sources
What's the purpose of an emergency fund (security fund)? - Answers Cover 3-6 months of living
expenses in the event of illness, job loss, or other emergency.
What's the biggest reason that an investor in bonds would determine whether it is better to buy a
corporate bond or municipal? - Answers Municipal bonds are exempt from federal income taxes, may
be free from some state income taxes, compare after tax net return
Are bonds issued by our govt considered risky? - Answers No
Interest rates rise.... - Answers Bonds Prices go down
Bond prices up.... - Answers interest rates down (inverse relationship)
In some states, some bonds are free from taxes on a federal and state level. - Answers TRUE
How do we define what a bond is? - Answers Bonds are like loans that obligate the issuer to pay a
specified amount of interest for a specified period of time and then repay the bond holder the face
amount of the bond
What happens when a bond is in default? - Answers A bond default occurs when the bond issuer fails
to make an interest or principal payment within the specified period. Defaults typically occur when
the bond issuer has run out of cash to pay its bondholders.
What is the current yield? - Answers Annual Coupon Payments / Price
, What is Coupon Yield? - Answers fixed % rate of interest based upon the PAR (face value or principle
amount) value of the bond
What is yield to maturity? - Answers YTM: Expressed as an annual percentage rate, it is the sum of all
cash flows from both coupon payments and repayment of the face value
If bond was purchased for a premium, more than face value, yield to maturity will be lower than the
coupon
If the bond was purchased at a discount, less than face value, the yield to maturity will be higher than
the coupon
When they are granted, how much are stock options? - Answers Free or require purchasing shares at
bargain prices
Trends pg. 117-118 - Answers Emerging market growth
Rising inflation and rising interest rates
The world is getting older
Raw materials are in more remote and hard to reach areas.
More people have higher income
Environmental trends
Keep more cash on hand if the economy is weak. - Answers yes
Financial advisors are paid to outperform the index - Answers no
If you place a market order to sell.... - Answers you expect to sell at the bid price
If you place a market order to buy... - Answers you expect to buy at the ask price.
If you place a limit order to sell..... - Answers you set the lowest price you're willing to sell
If you place a limit order to buy.... - Answers you expect to buy at the ask price
How often should you reallocate your portfolio? - Answers At least once a year, review the allocation
of assets in your portfolio
When buying and selling stocks what is the bid? - Answers the highest price a buyer is willing to pay
at the very instant in time
When buying and selling stocks What is the ask/offer? - Answers the lowest price a seller is willing to
sell at that very instant in time
What's the difference between a growth investor, a value investor, and a dividend investor? -
Answers Growth investor: This is an investor looking for strong companies to grow their sales and
earnings, what usually means sales and earnings could grow 15% or more from one year to the next
Value Investor: this is an investor looking for stocks which have stumbled and who shares are at
bargain prices
Dividend Investor: This is an investor wanting income more than growth. the focus is on stocks that
pay above-average dividends
If stock options are not exercised by the expiration date what happens to them? - Answers the option
has no value and basically expires worthless and ceases to exist.
Are ETFs always diverse? - Answers no
Are profits from stock options and stock units subject to taxes? - Answers yes
What is the size or the market cap of a company? - Answers Market cap is the total value investors
are placing on the company at the moment in time
What are restricted stock units and how are they priced? - Answers A restricted stock unit (RSU) is
compensation issued by an employer to an employee in the form of company stock
The restricted stock units are assigned a fair market value when they vest. Upon vesting, they are
considered income, and a portion of the shares is withheld to pay income taxes.
Is reinvesting dividends a way of compounding growth? - Answers yes
Do we recommend selling short or using stop order? - Answers No
When is a financial advisor acting as a fiduciary? - Answers They are not financially incentivized to sell
you one product over the other. Putting the best interests of the client first
What is a Closed end fund? - Answers Pooled investment portfolios which raise money by issuing and
selling a set number of shares in an IPO.
What is dollar cost averaging? - Answers Investing a set amount of money in shares of stock on a
regular time schedule, regardless of the price of the shares at the time
