Deck 11: Personal Finance

Question 1

Long -term care insurance is only needed by the senior citizen population.

Answer 1

False

Question 2

Risk is a term based on the certainty of future outcomes.

Answer 2

False

Question 3

To have an insurable loss, the loss must be accidental.

Answer 3

True

Question 4

As your individual business assets increase, the complexity of determining how to invest and protect these assets also increases.

Question 5

As your individual business assets increase, your ability to borrow funds decreases.

Question 6

In a variable life insurance policy, all investment risk is shared by both the company and the policyholder.

Question 7

The interruption of a business's activities other than fire or theft is insurable.

Question 8

As a small business owner, you are not liable for the debts of your business.

Question 9

Speculative risk is uninsurable.

Question 10

Funds used to start a business are usually the owner's.

Question 11

Pure risk involves only a chance of loss.

Question 12

As your individual business assets increase, your ability to borrow funds increases.

Question 13

Risk is a term based on the uncertainty of future outcomes.

Question 14

To have an insurable loss, the loss should be under the insured's control.

Question 15

Speculative risk involves only a chance of loss.

Question 16

Speculative risk involves a chance of both gain or loss.

Question 17

Funds used to start a business are usually your own and borrowed financial capital.

Question 18

A holder of a U.S. Government bond has a greater certainty of getting back principal and interest than the holder of a corporate bond.

Question 19

As your individual business assets increase, the complexity of determining how to invest and protect these assets normally decreases.

Question 20

A holder of a U.S. Government bond has a greater uncertainty of getting back principal and interest than the holder of a corporate bond.

Question 21

A bond backed by secured debt is a debenture.

Question 22

A term life insurance policy has cash surrender value.

Question 23

Banks only pay compound interest.

Question 24

A whole life insurance policy has cash surrender value.

Question 25

Municipal bonds are issued by government agencies other than the Federal government.

Question 26

Preferred stock may be convertible.

Question 27

A junk bond has a rating of B or less.

Question 28

Insurance policies are examples of risk reduction.

Question 29

A company that requires only cash in dealing with customers is following risk avoidance.

Question 30

T -bills are bonds that mature in ten years or less.

Question 31

The coupon rate of the bond is the effective rate.

Question 32

Balanced funds invest in solid growth stocks only.

Question 33

Insurance policies are examples of risk transfer.

Question 34

General obligation bonds use the income from a project to pay the bondholder.

Question 35

The first step in the financial planning process is to establish goals that are realistic and attainable.

Question 36

The par value and the market value of a stock are the same.

Question 37

Risk assumption occurs when you believe the cost of the loss you might incur is less than the cost of risk avoidance or risk transfer.

Question 38

Income funds are attractive to people who are retired.

Question 39

A company that requires only cash in dealing with customers is following risk reduction.

Question 40

The par value of the bond is the face value of the bond.

Question 41

Profit sharing plans are never included in other types of pension plans.

Question 42

Disability insurance is purchased to replace lost income.

Question 43

Retirement plans may be contribution oriented, benefit oriented, or combined plans.

Question 44

No load funds do charge commission on the amount invested.

Question 45

401k plans are retirement plans established to accept employee contributions.

Question 46

Employers who have more than 100 employees may establish SIMPLE IRA plans after 1996.

Question 47

All long -term care policies return premium paid if one does not file a claim with the insurance company.

Question 48

The income from a Coverdell Education Savings Account is tax free if used before the child turns age 30.

Question 49

Precious metals decrease in value with an increase in inflation.

Question 50

Trusts are legal arrangements that actually divide legal and beneficial interests between two or more people.

Question 51

Section 529 Plans include prepaid tuition and savings plans; only savings plans grow tax free.

Question 52

Wills are written documents that provide instruction to others as to how you want your wishes carried out after death.

Question 53

All trusts are revocable.

Question 54

As a rule, short -term investment strategies are more speculative than long -term investment strategies.

Question 55

The Roth IRA cannot be established if you contribute to an employer -sponsored retirement plan.

Question 56

SEP plans are IRAs funded by employers.

Question 57

IRA contributions may be deductible or nondeductible.

Question 58

All real estate investments are treated the same for tax purposes.

Question 59

Paintings are collectibles.

Question 60

TSAs and 403b plans target employees of not -for -profit organizations.

Question 61

John owns a small department store that issues its own credit cards. He has been considering phasing out his own credit card and accepting Visa or MasterCard. If John chooses to do this he will be going from a position of risk to one of risk .

A) assumption; transfer
B) reduction; transfer
C) assumption; avoidance
D) avoidance; reduction

Question 62

Which of the following holds true for term insurance?

A) Premiums increase with age.
B) Premiums are paid for insurance and savings.
C) Term policies are renewed at a lower rate.
D) Premiums decrease with age.

Question 63

Money purchase plans are Defined Benefit Plans.

Question 64

To have an insurable loss, all of the following criteria apply EXCEPT

A) the potential loss must be reasonably predictable.
B) the loss should be within the control of the insured.
C) the loss should not be catastrophic for the insurance company.
D) the loss must be accidental.

Question 65

Which of the following would involve speculative risk?

A) purchasing a lottery ticket
B) purchasing an extended warranty on your television set
C) purchasing a burglar alarm system for your home
D) purchasing a life insurance policy

Question 66

When a business practices risk management, the installation of a sprinkler system is risk

A) reduction.
B) assumption.
C) avoidance.
D) transfer.

Question 67

Which part of Medicare includes a prescription drug plan?

A) Medicare part A
B) Medicare part B
C) Medicare part C
D) Medicare part D

Question 68

Risk is a term indicating all of the following EXCEPT

A) the probability that an expected outcome will occur.
B) the uncertainty of future outcomes.
C) the variability of the expected outcome.
D) the certainty of future outcomes.

Question 69

Which of the following holds true for whole life insurance?

A) Policies cannot be used as collateral.
B) Premiums are paid for insurance only.
C) All cash value is returned upon death.
D) Premiums paid have cash value.

Question 70

When a business practices risk management, the purchase of an insurance policy is risk

A) transfer.
B) reduction.
C) avoidance.
D) assumption.

Question 71

Which of the following would involve speculative risk?

A) installing a camera to survey the parking lot
B) installing a sprinkler system
C) installing a merchandise display case
D) installing a burglar alarm system

Question 72

When a business practices risk management, the decision NOT to issue credit and deal only in cash -only sales is risk

A) assumption.
B) transfer.
C) reduction.
D) avoidance.

Question 73

The IRS states that 401k plans cannot favor highly compensated employees over lower paid workers.

Question 74

John owns a small department store that issues its own credit cards. He has been considering phasing out his own credit card and accepting only cash. If John chooses to do this he will be going from a position of risk _ to one of risk _.

A) reduction; transfer
B) avoidance; reduction
C) assumption; avoidance
D) assumption; transfer

Question 75

To have an insurable loss, all of the following criteria apply EXCEPT

A) the potential loss cannot be reasonably predictable.
B) the loss must be accidental.
C) the loss should not be catastrophic for the insurance company.
D) the loss should be beyond the control of the insured.

Question 76

Which of the following is NOT involved in the function of life insurance?

A) creation of an estate
B) maintenance of an estate
C) distribution of an estate
D) all of the above

Question 77

Which of the following holds true for whole life insurance?

A) Policies can be used as collateral.
B) Premiums are paid for insurance only.
C) All cash value is returned upon death.
D) Premiums paid have no cash value.

Question 78

To have an insurable loss, all of the following criteria apply EXCEPT

A) the potential loss must be reasonably predictable.
B) the loss should be beyond the control of the insured.
C) the loss should be catastrophic for the insurance company.
D) the loss must be accidental.

Question 79

Which of the following holds true for Medicare?

A) II, III & IV
B) I, II, & III
C) I, III, & IV
D) I & IV

Question 80

A Roth 401k is funded with before -tax dollars.