In an NPV sensitivity graph, a steep sensitivity line for a particular input variable means that a in that variable results in a in NPV.

Small percentage change; large change

Large percentage change; small change

Large percentage change; large change

Small percentage change; small change

A bond issue may be retired by:

calling the bonds if there is a call feature

converting the bonds (if convertible) into common stock

making a single-sum payment at final maturity

Protective covenants are:

To protect the interest of the company

A company refunds its bonds for any of the following reasons Except for:

To issue new bonds at higher rate of interest

To eliminate restrictive covenants

To show higher reported profits

To issue new bonds at higher rate of interest

The call-option value of a callable bond is likely to be high when:

Interest rates are low and expected to remain low

Interest rate are high and expected to remain high

Common stock that has been repurchased and is being held by the issuing company

Common stock issued by the U.S. government

Preferred stock issued by the U.S. government

Common stock that has been repurchased and is being held by the issuing company

A corporation's common stock outstanding

A call provision, a sinking fund, and/or conversion are used to retire:

Preferred stock and common stock

Dual classes of are common in new ventures where promotional usually goes to the founders.

Preferred stock; preferred stock

Palo Alto Industries has a debt-to-equity ratio of 1.6 compared with the industry average of 1.4. This means that the company:

Has greater than average financial risk when compared to other firms in its industry

Will not experience any difficulty with its creditors

Has less liquidity than other firms in the industry

Will be viewed as having high creditworthiness

Has greater than average financial risk when compared to other firms in its industry

A universal life insurance policy provides two types of death protection. The first type, known as Option A, provides a level death benefit. As the cash value increases:

The amount of pure insurance protection decreases

The amount of pure insurance protection increases

The amount of pure insurance protection remains same

The amount of pure insurance protection start vary

Credit life or disability insurance is:

A type of insurance in which the coverage decreases at the same rate as the loan balance

A type of insurance in which the coverage increases at the same rate as the loan balance

A type of insurance in which the coverage decreases at an inverse rate as the loan balance

A type of insurance in which the coverage decreases at the half rate as the loan balance

Sometimes, as a condition of receiving an installment loan, a borrower is required to buy credit life insurance. From borrower's perspective, credit life insurance not a good deal because:

It does little more than give lenders a lucrative source of income

It increases market interest charges

Loss control is an activity that:

Lessens the severity of loss once it occurs

Avoid the act that would create loss

Lessens the severity of loss once it occurs

Lessens the severity of loss after its occurrence

Just as with other aspects of personal financial planning, life insurance decision can be made easier by following a step-by-step approach. You will need to answer some questions. Which of the following is/are Not out of those questions?

What risk factor can affect the final decision?

If so, how much life insurance do you need?

Which type of life insurance is best?

What risk factor can affect the final decision?

Life insurance is intangible. You can't see, smell, touch or taste its benefits and those benefits mainly happen when someone is died. However, life insurance does have some important benefits that should not be ignored in the financial planning process. Which of the following is out of those benefits?

Financial protection from dependents

According to multiple of earnings method, the rule of thumb used by many insurance agents is that your insurance coverage should be equal to 5 to 10 times your current income. For example, if you currently earn $70,000 a year, using the multiple of earning method then you need between:

$350,000 and $700,000 life insurance

$300,000 and $700,000 life insurance

$400,000 and $700,000 life insurance

$390,000 and $800,000 life insurance

$350,000 and $700,000 life insurance

Need analysis method is a more detailed approach than multiple-of-earnings method. This method considers both financial obligations and financial resources of the insured and his or her dependents. Which of the following steps is/are involved in this method?

Estimate the total economic resources needed if the individual were to die

Determine all financial resources that would be available after death, including existing life insurance and pension plan death benefits

Subtract available resources from the amount needed to determine how much additional life insurance is required

Decreasing term policy is:

A term insurance policy that maintains a level premium throughout all periods of coverage while the amount of protection decreases

A term insurance policy that maintains a level premium throughout all periods of coverage while the amount of protection increases

A term insurance policy that maintains a level premium throughout all periods of coverage while the amount of protection remains unchanged

Whole life insurance is a life insurance designed to offer ongoing insurance coverage over the course of an insured's entire life. The noteworthy advantage of whole life insurance is:

Premium payments contribute towards building an estate

One can budget premium payments for a long period

Group health insurance is the health insurance consisting of contracts written between a group, (employer, union, etc.) and the health care provider. Most health insurance plans fall into one of two categories. Which one of the following set represents those two categories?

Traditional indemnity and managed care plans

Fee-for-service indemnity and managed care plans

A form of HMO in which subscribers receive services from physicians practicing from their own offices and from community hospitals affiliated with the IPA.

Individual practice association

Preferred provider organization

Exclusive provider organization

ABA CTFA Practice Test 9 - Free Online Exam Questions 321-360

Two mutually exclusive investment proposals have 'scale differences' (i.e., the cost of the projects differ). Ranking these projects on the basis of IRR, NPV, and PI methods give contradictory results.

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ABA CTFA Practice Test 9

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