Deck 2: Certified Trust and Financial Advisor

Question 1

Decreasing term policy is:

A) A term insurance policy that maintains a level premium throughout all periods of coverage while the amount of protection decreases
B) A term insurance policy that maintains a level premium throughout all periods of coverage while the amount of protection increases
C) A term insurance policy that maintains a level premium throughout all periods of coverage while the amount of protection remains unchanged
D) None of these

Answer 1

D

Question 2

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:

A) Premium payments contribute towards building an estate
B) One can budget premium payments for a long period
C) It's a low-load life insurance
D) These are sold only by agents

Answer 2

A

Question 3

If you have caused an accident, which type of automobile insurance would cover damage to your own car?

A) Term
B) Collision
C) Comprehensive
D) Liability

Answer 3

B

Question 4

A method of determining the amount of life insurance coverage needed by multiplying gross annual earnings by some selected number is called:

A) Multiple of earnings method
B) Need analysis method
C) Tax saving method
D) Whole life coverage

Question 5

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?

A) Protection from debtors
B) Financial protection from dependents
C) Vehicle for savings
D) Interest benefit

Question 6

____________ is a hybrid form of HMO that allows members to go outside the HMO network for care and reimburses them at a specified percentage of the cost.

A) Individual practice association
B) Preferred provider organization
C) Exclusive provider organization
D) Point-of-service plan

Question 7

It is a term life policy written for a given number of years with coverage remaining unchanged throughout the effective period. What is it?

A) Straight term policy
B) Term life insurance
C) Decreasing term policy
D) Renewability

Question 8

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?

A) Estimate the total economic resources needed if the individual were to die
B) Determine all financial resources that would be available after death, including existing life insurance and pension plan death benefits
C) Subtract available resources from the amount needed to determine how much additional life insurance is required
D) All of these

Question 9

__________ is the accumulated refundable value of an insurance policy; results from the investment earnings on paid-in insurance premiums.

A) Cash value
B) Nonforefeiture right
C) Decreasing term policy
D) Continuous premium

Question 10

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

A) Individual practice association
B) Preferred provider organization
C) Exclusive provider organization
D) Point-of-service plan

Question 11

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:

A) $300,000 and $700,000 life insurance
B) $400,000 and $700,000 life insurance
C) $390,000 and $800,000 life insurance
D) $350,000 and $700,000 life insurance

Question 12

Three major types of whole life policies are available. Which of the following is/are Not out of those?

A) Continuous Premium
B) Limited Premium
C) Single premium
D) None of these

Question 13

It's a managed care plan that is similar to a plan that is similar to a PPO but reimburses members only when affiliated providers are used. What is it?

A) Individual practice association
B) Preferred provider organization
C) Exclusive provider organization
D) Point-of-service plan

Question 14

Many savings programs are protected by the federal government against loss. Which of the following is Not?

A) A bond issued by one of the 50 states
B) A U.S. Treasury bond
C) A U.S. savings bond
D) A certificate of deposit at the bank

Question 15

Insurance that provides only death benefits, for a specified period, and does not provide accumulation of cash value is called:

A) Straight term policy
B) Term life insurance
C) Decreasing term policy
D) Renewability

Question 16

Doug must borrow $12,000 to complete his college education. Which of the following would NOT be likely to reduce the finance charge rate?

A) If his parents took out an additional mortgage on their house for the loan
B) If the loan was insured by the federal government
C) If he went to a state college rather than a private college
D) If his parents co-signed the loan

Question 17

If you had a savings account at a bank, which of the following would be correct concerning the interest that you would earn on this account?

A) Sales tax may be charged on the interest that you earn
B) You cannot earn interest until you pass your 18th birthday
C) Earnings from savings account interest may not be taxed
D) Income tax may be charged on the interest if your income is high enough

Question 18

Which of the following instruments is NOT typically associated with spending?

A) Cash
B) Credit card
C) Debit card
D) Certificate of deposit

Question 19

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?

A) Traditional indemnity and PPO
B) Traditional indemnity and managed care plans
C) Fee-for-service indemnity and managed care plans
D) Both B and C

Question 20

It is a term life policy provision allowing the insured to renew the policy at the end of its term without having to show evidence of insurability

A) Straight term policy
B) Term life insurance
C) Decreasing term policy
D) Renewability

Question 21

Under which of the following circumstances would it be financially beneficial to you to borrow money to buy something now and repay it with future income?

A) When some clothes you like go on sale
B) When the interest on the loan is greater than the interest you get on your savings
C) When you need to buy a car to get a much better paying job
D) When you really need a weeklong vacation

Question 22

It is the initial amount not covered by an insurance policy and thus the insured's responsibility; it's usually determined on a calendar-year basis or on a per-illness or eraccident basis. We may call it as:

A) Participation clause
B) Deductible
C) Internal limits
D) Co-insurance

Question 23

Many people put aside money to take care of unexpected expenses. If John and Jenny have money put aside for emergencies, in which of the following forms would it be of LEAST benefit to them if they needed it right away?

A) Stocks
B) Saving account
C) Invested in a down payment in the house
D) Checking account

Question 24

The delivery of medical and personal care, other than hospital care, to persons with chronic medical conditions resulting from either illness or frailty is called:

A) Short-term care
B) Basic care
C) Long-term care
D) Guaranteed renewability

Question 25

It is an insurance plan designed to supplement the basic coverage of hospitalization, surgical and physician expenses; used to finance more catastrophic medical costs. What is it?

A) Major medical plan
B) Covered medical services
C) Comprehensive major medical insurance
D) None of these

Question 26

___________ is a policy provision ensuring continued insurance coverage for the insured's lifetime as long as premiums continue to be paid.

A) Waiting period
B) Guaranteed Renewability
C) Optional renewability
D) None of these

Question 27

Retirement income paid by a company is called:

A) Rents and Profits
B) Social security
C) 401(k)
D) Pension

Question 28

Many young people receive health insurance benefits through their parents. Which of the following statements is true about health insurance coverage?

A) Young people don't need health insurance because they are so healthy
B) You continue to be covered by your parents' insurance as long as you live at home, regardless of your age
C) You are covered by your parents' insurance until you marry, regardless of your age
D) If your parents become unemployed, your insurance coverage may stop, regardless of your age

Question 29

______________ is a health insurance plan that combines into a single policy the coverage for basic hospitalization, surgical, and physician expenses along with major medical protection.

A) Major medical plan
B) Covered medical services
C) Comprehensive major medical insurance
D) None of these

Question 30

Several insurance provisions affect a health insurance plan's value to you. Some important provisions address:

A) The persons and places covered
B) Cancellation
C) Re-existing conditions
D) Rehabilitation coverage

Question 31

Maria worked her way through college earning $20,000 per year. After graduation, her first job pays $40,000. The total dollar amount Maria will have to pay in federal income taxes in her new job will:

A) Stay the same as when she was in college
B) Be lower than when she was in college
C) Double, at least, from when she was in college
D) Go up a little from when she was in college

Question 32

Kelly and Pete just had a baby. They received money as baby gifts and want to put it away for the baby's education. Which of the following tends to have the highest growth over periods of time as long as 18 years?

A) A U.S. government savings bond
B) A savings account
C) A checking account
D) Stocks

Question 33

Most of the major types of health plans are sufficient to meet the protection needs of most individuals and families. But, insurance companies offer other options that provide limited protection against certain types of perils. Which one of the following is the example of those limited types of protections?

A) Accident protection
B) Home income policies
C) Comprehensive medical insurance
D) Both A and B

Question 34

A voluntary program under Medicare that provides payments for services not covered under basic hospital insurance is called:

A) Supplementary medical insurance
B) Medicare
C) National health care
D) Blue cross

Question 35

Prescription drug coverage is:

A) A voluntary program
B) A state-run public assisted program
C) Needs co-payments and co-insurances
D) Both A and C are correct

Question 36

Many health insurance plans omit or offer only reduced benefits for treatment of mental disorders. For example, a health insurance policy may offer hospitalization benefits that continue to pay as long as you are hospitalized except for mental illness. It may restrict payment for mental illness to one-half of the normally provided payment amounts and for a period not to exceed:

A) 15 days
B) 20 days
C) 30 days
D) 25 days

Question 37

A universal life insurance provides two types of death protections, i.e. Type A and B. As with any insurance policy, universal life insurance has its own pros and cons. There are two principle advantages. Which of the followings is/are out of those advantages?

A) Flexibility
B) Flexibility and savings feature
C) Flexibility and variability
D) Variability and savings feature

Question 38

A participation or co-insurance clause stipulates that the company will pay some portion of the covered loss in excess of the deductible rather than the entire amount. How much portion of the covered loss may be paid by the company?

A) 60%-70%
B) 70%- 90%
C) 80%-90%
D) Any one of these

Question 39

If your credit card is stolen and the thief runs up a total debt of $1,000, but you notify the issuer of the card as soon as you discover it is missing, what is the maximum amount that you can be forced to pay according to federal law?

A) Nothing
B) $50
C) $500
D) $1000

Question 40

There is a feature which is commonly found in health insurance policies that limit the amount that will be paid for certain specified expenses, even if the claim does not exceed overall policy limit. What is that feature?

A) Internal limits
B) External limits
C) Credit limits
D) Insurance limits

Question 41

Even if the policy's requirements are met, the insured must pay long-term care expenses during waiting, or elimination period. Typical waiting periods are:

A) 90 to 100 days
B) 80 to 90 days
C) 60 to 70 days
D) 70 to 100 days

Question 42

The amount of insurance coverage you receive depends on the type of homeowner's policy you buy. You can also obtain coverage if you're a renter or a condominium owner. The basic form(HO-1) covers perils like:

A) Smoke and Hail
B) Theft vandalism
C) Civil commotion
D) All of the above

Question 43

What is that form of investing in which future value and expected returns are highly uncertain?

A) Hedging
B) Speculating
C) Short-term investment
D) Long-term investment

Question 44

An insurance policy providing excess liability coverage for homeowner's and automobile insurance as well as additional coverage not provided by either policy is referred as:

A) Personal liability umbrella policy
B) Captive agent
C) Independent agent
D) Claims adjuster

Question 45

Co-insurance is:

A) A provision in property insurance
B) A provision in actual cash value
C) A provision in liability insurance
D) A provision in health insurance

Question 46

It is a contractual clause allowing the insured to continue insurance only at the insurer's option. What is it?

A) Waiting period
B) Guaranteed Renewability
C) Optional renewability
D) ADL

Question 47

Negligence is:

A) Failing to act in a reasonable manner
B) Failing to take necessary steps to protect others from harm
C) Causing a loss
D) Losing the judgment

Question 48

What can be the possible strategy to avoid liability?

A) Understand what causes liability
B) Develop you own safety program
C) Carry adequate liability insurance
D) None of these

Question 49

_____________ is an insurance specialist who works for the insurance company as an independent adjustor or for an adjustment bureau, to investigate claims.

A) Personal liability umbrella
B) Captive agent
C) Independent agent
D) Claims adjuster

Question 50

Uninsured motorists insurance is fairly low in cost. Because, the cost of the coverage is low compared to the amount of protection it provides, drivers should purchase at least:

A) The maximum available limit
B) The minimum available limit
C) The equality limit
D) None of these

Question 51

Insurance coverage that protects real and personal property from catastrophic losses caused by a variety of perils, such as fire, theft, vandalism, and windstorm is referred as:

A) Property insurance
B) Insurance premium
C) Liability insurance
D) Peril

Question 52

People often put money aside, sometimes for years, to save up enough to make just one major expenditure. Here are some common ones. Which of the following is Not out of those expenditures:

A) The down payment on a home
B) An regular vacation
C) Some capital for going into business
D) Funds for retirement

Question 53

When a family member becomes sick for an extended period, the effect on the family goes beyond medical bills. The average chance of a person age 35 becoming disabled for 90 days or longer before 65 is about:

A) 30%
B) 40%
C) 50%
D) 55%

Question 54

________ is an endorsement or policy providing either blanket or scheduled coverage of expensive personal property not adequately covered in a standard homeowner's policy.

A) Personal property floater
B) Peril
C) Condominium
D) Co-insurance

Question 55

__________ is a statement, preferably written, that specifies how investment capital will be invested to achieve a specific goal.

A) Investment Line
B) Investment plan
C) Investment direction
D) Investment goal

Question 56

A comprehensive automobile insurance policy designed to be easily understood by the "typical" insurance purchaser is called:

A) Personal automobile policy
B) Bodily injury liability
C) Property damage
D) Auto insurance coverage

Question 57

Many types of properties are covered by homeowner's policies. These policies also define the types of losses they cover and the persons and the locations covered. There are three types of property-related losses when misfortune occurs. Which one of the following is Not out of those losses?

A) Direct loss of property
B) Indirect loss occurring due to damaged property
C) Additional expenses occurring due to direct and indirect losses
D) Replacement cost

Question 58

Assume that fire destroys two rooms of furniture that were 6 years old and had an estimated useful life of 10 years. The replacement cost is $5,000. Therefore at the time of loss, the furniture was subject to an assumed physical depreciation of 60%, i.e., 3,000 in this case. Because the actual cash value is estimated at $2,000. So, the maximum insurer would have to pay is:

A) $2,200
B) $2,000
C) $3,000
D) $5,000

Question 59

What is that principle which states that an insured may not be compensated by the insurance company in an amount exceeding the insured's economic loss?

A) Principle of cash value
B) Principle of indemnity
C) Right of subrogation
D) Co-insurance

Question 60

It is an automobile insurance that reimburses the parties involved in an accident without regard to negligence.

A) No-fault automobile insurance
B) Comprehensive automobile insurance
C) Collision insurance
D) Automobile accidental damage coverage

Question 61

Which of the following statements concerning remote disbursement and controlled disbursement is correct?

A) These two terms mean the same thing--just like working capital means the same thing as current assets
B) Remote disbursement is viewed as an ethical disbursement procedure, whereas controlled disbursement is often viewed as an unethical disbursement procedure
C) Both remote and controlled disbursement are generally perceived as unethical practices and, therefore, their use is in decline
D) Remote disbursement is often viewed as an unethical disbursement procedure, whereas controlled disbursement is not viewed in such a negative light

Question 62

The field of Electronic Commerce (EC) is awash with acronyms (i.e., a word formed from the initial letter or letters of a series of successive words). Which of the following acronyms does not belong with the other Electronic Commerce-related acronyms?

A) SWIFT
B) CHIPS
C) SPECTRE
D) EDI

Question 63

A portfolio manager is evaluating investments in mortgage securities as part of a portfolio to fund long term liabilities. If she wants to minimize prepayment risk in her portfolio she is most likely to invest in:

A) Mortgage loans
B) Mortgage pass through securities
C) Collateralized mortgage obligations
D) Investment evaluation

Question 64

The joint probability of events A and B is 32 percent with the probability of event A being 60 percent and the probability of event B being 50 percent. Based on this information, the conditional probability of event A given event B has occurred is closest to:

A) 30.0%
B) 53.3%
C) 64.0%
D) 56.6%

Question 65

Eurodollars are best described as __________.

A) The new currency of the European Union
B) A U.S. dollar-denominated deposit -- generally in a bank located outside the United States -- that is not subject to U.S. banking regulations
C) A currency deposited outside its country of origin
D) A foreign-denominated deposit subject to U.S. banking regulations

Question 66

Securities market is a market place in which stocks, bonds, and other financial instruments are traded. Such markets can be:

A) Physical businesses
B) Electronic businesses
C) Having outstanding securities
D) All of these

Question 67

Which of the following is not a standard method of transferring funds when using concentration banking?

A) Depository transfer check
B) Automated clearinghouse electronic transfer
C) Wire transfer
D) Payable through draft (PTD)

Question 68

A document made available to prospective security buyers that describes the firm and a new security issue. ___________ are responsible for ensuring that all the information in the prospectus accurately represents the facts.

A) Federal agencies
B) Private parties
C) Local governments
D) State government

Question 69

Which of the following marketable securities is issued by the U.S. federal government?

A) Commercial papers
B) Negotiable certificates of deposit
C) Repurchase agreement
D) T-bills

Question 70

An equity analyst working for a growth oriented mutual fund has a tendency to misvalue the stocks of popular companies that she has previously recommended and the fund already owns. Her behavior is most likely consistent with which of the following biases?

A) Escalation bias
B) Prospect theory
C) Confirmation bias
D) Probability bias

Question 71

The optimal balance of marketable securities held to take care of probable deficiencies in the firm's cash account is referred to as the __________ segment in the one's portfolio of short-term marketable securities.

A) Ready cash
B) Controlled cash
C) Free cash
D) Cash and cash equivalent

Question 72

Availability float is the __________.

A) Total time between the mailing of the check by the customer and the availability of cash to the receiving firm
B) Time consumed in clearing the check through the banking system
C) Time the check is in the mail
D) Time during which the check received by the firm remains uncollected

Question 73

Under which measurement scale is data categorized, but not ranked?

A) An ordinal scale.
B) A nominal scale.
C) An interval scale.
D) None of these

Question 74

Which of the following statements most accurately describes the modern approach to cash management?

A) Cash management involves the efficient disbursement of cash
B) Cash management involves the efficient collection and disbursement of cash
C) Cash management involves the efficient processing, collection, and depositing of cash
D) Cash management involves the efficient processing and depositing of cash

Question 75

Deposit float is the __________.

A) Total time between the mailing of the check by the customer and the availability of cash to the receiving firm
B) Time consumed in clearing the check through the banking system
C) Time the check is in the mail
D) Time during which the check received by the firm remains uncollected

Question 76

The marketable securities available for unassigned purposes at the current time is referred to as the __________ segment in the one's portfolio of short-term marketable securities.

A) Ready cash
B) Controlled cash
C) Free cash
D) Cash and cash equivalent

Question 77

An analyst is developing net present value (NPV) profiles for two investment projects. The only difference between the two projects is that Project 1 is expected to receive larger cash flows early in the life of the project, while Project 2 is expected to receive larger cash flows late in the life of the project. The slope of the NPV profile for Project 1 when compared to the slope of the NPV profile for Project 2 is most likely:

A) Equal
B) Flatter
C) Steeper
D) Unequal

Question 78

Which of the following was not suggested by John Maynard Keynes as a reason for holding cash?

A) Speculative motive
B) Investment motive
C) Precautionary motive
D) Transaction motive

Question 79

Which of the following is least likely to be considered a short-term marketable security?

A) An original issue 30-year corporate bond with one-year remaining until final maturity
B) An original issue 30-year government bond with one-year remaining until final maturity
C) A 90-day Treasury bill
D) Short-term corporate debt instruments with a 9-month original maturity

Question 80

Collection float is the __________.

A) Total time between the mailing of the check by the customer and the availability of cash to the receiving firm
B) Time consumed in clearing the check through the banking system
C) Time the check is in the mail
D) Time during which the check received by the firm remains uncollected