1. The 1st year and 5th year annual salary for a paralegal is shown, along with the corresponding year's CPI.
- Year 1: $70,000 annual income, CPI = 237.0
- Year 5: $80,000 annual income, CPI = 258.8
In which year was the paralegal's salary worth the most, and by how much?
A. Year 5 by $6,738.79
B. Year 5 by $3,261.21
C. Year 1 by $6,738.79
D. Year 1 by $3,261.21
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2. A person is 21 years old and plans on retiring at age 55. This person is going to invest $75 each month into an IRA that is expected to earn 2.5% interest, compounded monthly. How much more money, rounded to the nearest dollar, is needed per month to reach a retirement savings goal of $100,000?
A. $81
B. $156
C. $75
D. $165
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3. A 25-year-old earns an average income and plans to retire in 40 years. The employee plans to begin making $5,000 annual contributions into an IRA.
Which type of IRA is best for the employee, and why?
A. The Roth IRA is the best choice because the employee will pay more in taxes during employment than in retirement.
B. The Traditional IRA is the best choice because the employee will pay more in taxes during employment than in retirement.
C. The Roth IRA is the best choice because the employee will pay less in taxes during employment than in retirement.
D. The Traditional IRA is the best choice because the employee will pay less in taxes during employment than in retirement.
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4. An employee started a new job and must enroll in a new family health insurance plan. One of the plans involves prescription drug coverage. The employee estimates that the entire family will fill 10 prescriptions per month, totaling $1,250. The employee has two options to choose from:
- Option A: $68 monthly premium; 80% coverage for all prescription costs
- Option B: $32 monthly premium; 75% coverage for first $700 in prescription costs, then 85% coverage for all prescription costs over $700
Which option would result in the highest overall cost for the employee, and by how much?
A. Option A has the highest overall cost by $60.50.
B. Option A has the highest overall cost by $28.50.
C. Option B has the highest overall cost by $60.50.
D. Option B has the highest overall cost by $28.50.
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5. A car owner pays an annual premium of $780 for automobile insurance, including liability coverage of up to $100,000. The car owner pays this for nine years without needing to file a single claim. Then the car owner causes an accident for which the other driver is claiming $32,000 in damages. How much more expensive were the costs of the accident than what the car owner paid in premiums?
A. $24,980
B. $100,000
C. $7,020
D. $39,020
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6. Last year, an investor purchased 120 shares of Stock A at $90 per share and 35 shares of Stock B at $145 per share.
- Stock A: High $105.19, Low $103.25, Close $103.38
- Stock B: High $145.18, Low $143.28, Close $144.05
What is the difference in overall loss or gain between selling at the current day's high price or low price?
A. The difference in overall gain is $299.30.
B. The difference in overall loss is $299.30.
C. The difference in overall gain is $293.90.
D. The difference in overall loss is $293.90.
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7. Review the information on FICO score calculations to answer the question:
- Payment History: 35%
- Amount Owed: 30%
- Length of Credit History: 15%
- New Credit and Inquiries: 10%
- Credit Mix: 10%
A borrower has a credit score of 675. How many points come from payment history and length of credit history?
A. 337.5
B. 438.75
C. 335.7
D. 303.75
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8. A restaurant is purchasing a new HVAC system. The purchase includes a 1-year parts and labor warranty for $1,079.88. The extended warranty covers 75% of parts and labor costs, as well as routine maintenance service calls. The HVAC system model averages $2,000 per year in repairs and maintenance fees. Does the restaurant save or lose money using the warranty for one year?
A. The restaurant saves about $420 per year using the warranty.
B. The restaurant loses about $420 per year using the warranty.
C. The restaurant saves about $580 per year using the warranty.
D. The restaurant loses about $580 per year using the warranty.
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9. Investment Portfolios:
- Portfolio 1:
- Stock in Large, Old Corporation: $400
- Stock in Emerging Company: $5,500
- U.S. Treasury Bond: $1,200
- Junk Bond: $3,000
- Certificate of Deposit: $600
- Portfolio 2:
- Stock in Large, Old Corporation: $1,800
- Stock in Emerging Company: $600
- U.S. Treasury Bond: $1,100
- Junk Bond: $500
- Certificate of Deposit: $1,700
- Portfolio 3:
- Stock in Large, Old Corporation: $2,200
- Stock in Emerging Company: $1,200
- U.S. Treasury Bond: $3,500
- Junk Bond: $1,300
- Certificate of Deposit: $4,200
Which of the following shows the portfolios' levels of risk from lowest to highest?
A. Portfolio 1, Portfolio 3, Portfolio 2
B. Portfolio 2, Portfolio 1, Portfolio 3
C. Portfolio 2, Portfolio 3, Portfolio 1
D. Portfolio 3, Portfolio 2, Portfolio 1
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10. Two homebuyers are financing $137,000 to purchase a condominium. They obtained a 15-year, fixed-rate loan with a rate of 5.05%. They have been given the option of purchasing up to three points to lower their rate to 4.87%. How much will the three points cost them?
A. $6,919
B. $6,199
C. $4,110
D. $4,101
