Deck 11: Personal Finance

Question 1

Probate costs

A)are a percent of the gross estate.
B)are a percent of yearly retirement income.
C)are a set fee.
D)are a percent of the net estate.

Answer 1

are a percent of the gross estate.

Question 2

Which of the following holds true for retirement contribution policies?

A)Interruption of one's contributions to a 401k retirement program is paid by the employer.
B)Interruption of one's contributions to a 401k retirement program is paid by the employee.
C)Interruption of one's contributions to a 401k retirement program is paid by the insurance company.
D)If you are disabled there is no method of getting contributions to your 401k retirement program.

Answer 2

Interruption of one's contributions to a 401k retirement program is paid by the insurance company.

Question 3

In the SIMPLE (Savings Incentive Match Plan for Employees)Plan,

A)employers must contribute a match for all eligible employees.
B)it is easy to set up and maintain for employees who received 10,000 in compensation for the preceding year.
C)the plan is available for fewer than 50 employees.
D)there are 3 types of simple plans

Answer 3

employers must contribute a match for all eligible employees.

Question 4

401k plans

A)are separate from profit sharing plans.
B)are employer contribution plans only.
C)are based on salary reduction.
D)allow contributions of up to 25 percent of salary by the employer.

Question 5

Bonds sold at a value below par are sold at a and bonds sold at a value above par are sold at a .

A)premium;discount
B)discount;premium
C)discount;markup
D)markup;discount

Question 6

Joe Dough buys $300 worth of ABC mutual fund every month.In June Joe pays $30 per share,in July he pays $25 per share and in August he pays $50 per share.How many shares of ABC mutual fund will Joe have at the end of August?

A)10
B)22
C)28
D)18

Question 7

Which of the following holds true for Medicare?
I.Medicare covers all expenses if medically necessary.
II.Medicare part B helps cover doctor services,outpatient care and other items that part A does not cover.
III.Medicare supplemental insurance plans fill in the gaps that the original Part A and Part B do not pay for.
IV.Medicare is paid to peoples under 65 if they have a disability for at least 24 months.

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

Question 8

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

A)the potential loss must 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 within the control of the insured.

Question 9

The coupon rate on a bond is the

A)rate of interest the lender agrees to pay the issuer on an annual basis.
B)rate of interest everyone else receives on bonds of a similar nature.
C)rate of interest the issuer agrees to pay to the lender on an annual basis.
D)rate of interest the issuer agrees to pay the lender on a semi- annual basis.

Question 10

Trusts

A)can be established at death.
B)can have the trustor and grantor as one.
C)are legal arrangements.
D)all of the above

Question 11

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

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

Question 12

Roth 401k plans

A)are an after tax elective contribution to a 401k plan.
B)force you to take a minimum distribution at age 70 and ¹ . 2
C)have contributions which are deductible.
D)tax your contributions and your earnings.

Question 13

Joe Cool installs air conditioners.He is a private contractor and usually works five days a week for approximately 48 weeks.Joe is 50 years old and occasionally his back gets dislocated.What types of insurance policies that manage risk would you recommend to Joe?

A)health,liability,life,disability
B)health,errors and omissions,life
C)health,liability,life,accident
D)health,fire,theft,and life

Question 14

A primary residence and one additional vacation home qualifies as

A)non- owner occupied residential real estate for the vacation home and owner occupied residential real estate for the primary residence.
B)owner occupied residential real estate.
C)commercial real estate for the vacation home and owner occupied residential real estate for the primary residence.
D)none of the above.

Question 15

Balanced mutual funds

A)appeal to the investor who has a moderate tolerance for risk.
B)provide capital growth through bond coupon payments.
C)invest only in stocks.
D)invest only in bonds.

Question 16

Joe Dough buys $300 worth of ABC mutual fund every month.In June Joe pays $30 per share,in July he pays $25 per share and in August he pays $50 per share.What is Joe's average price per share?

A)$27.50
B)$37.50
C)$35.00
D)$32.14

Question 17

The Roth Ira

A)is tax free to one's heirs.
B)allows one to contribute while he or she is retired.
C)allows for a maximum contribution amount if you are age 50 and above.
D)all of the above.

Question 18

Which of the following would involve speculative risk?

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

Question 19

Which of the following is true about a Roth IRA?

A)The amount invested is not taxed and the gain is taxed.
B)The amount invested and the gain are both taxed.
C)Neither the investment or the gain are taxed.
D)The amount invested is taxed and the gain is not taxed.

Question 20

Bonds sold at a value above par are sold at a and bonds sold at a value below par are sold at a .

A)discount;markup
B)premium;discount
C)discount;premium
D)markup;discount

Question 21

Coverdell Education Savings Accounts

A)can be transferred between family members.
B)have no penalties for premature withdrawal of funds.
C)pay for all education costs.
D)allow for deductible contributions.

Question 22

Preferred stockholders

A)have a residual claim on assets.
B)must receive a dividend.
C)have original selling prices and par value the same.
D)have voting rights.

Question 23

Long Term Care insurance plans

A)do not provide coverage for people with chronic illnesses.
B)do provide coverage in a nursing home and for home care.
C)do require that you be above a certain age in order to sign up.
D)do not increase premiums with respect to risk.

Question 24

Which of the following holds true for term insurance?

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

Question 25

As the number of shares of common stock increases,the book value of each share will if equity does not change.

A)decrease
B)remain the same
C)increase
D)none of the above

Question 26

No load mutual funds

A)are preferred by investors who do their own research.
B)are preferred by most brokers.
C)are not part of a mutual fund family.
D)charge a commission on the initial investment.

Question 27

ABC corporation declares a $2 million dividend.It had issued one million shares of common stock and 500 thousand shares of preferred stock.If preferred shares have a par value of $50 and a preferred dividend of 4 percent,what is the preferred dividend?

A)$1,250,000
B)$200,000
C)$1,000,000
D)$2,000,000

Question 28

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

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

Question 29

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

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

Question 30

Section 529 plans

A)have withdrawals which are taxed.
B)have tax free withdrawals if the money is used to buy a first home.
C)include prepaid tuition plans only.
D)have tax free withdrawals if the money is used for qualified expenses.

Question 31

Which of the following is the least liquid of all investments?

A)real estate
B)certificates of deposit
C)bonds
D)cash

Question 32

Which of the following is an example of a collectible?

A)an old share of McDonald's Stock
B)a photograph of uncle Joe
C)a Mickey Mantle rookie baseball card
D)All of the above are collectibles.

Question 33

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 certainty of future outcomes.
D)the variability of the expected outcome.

Question 34

TSA's and 403b plans

A)make contributions on an after tax basis.
B)make contributions on a before tax basis.
C)target employees of for profit organizations.
D)none of the above

Question 35

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

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

Question 36

Convertible preferred stock

A)has a maximum time frame for the holder to exercise the option.
B)may be exchanged for bonds.
C)has a minimal time frame for the holder to exercise the option.
D)is subordinate to common stock.

Question 37

Money market funds do not invest in

A)short term futures.
B)certificates of deposit.
C)commercial paper.
D)repurchase agreements.

Question 38

Mutual funds

A)are coexisting funds in a bank savings account.
B)generally charge an up- front load fee.
C)collect funds of investors and use these funds to purchase large blocks of stocks,bonds,or investment vehicles.
D)have one investment objective.

Question 39

Wills

A)require the court to appoint an administrator.
B)are not vital for single business owners.
C)describe the disposition of business assets.
D)are written documents that provide direction to others as to how you want your wishes carried out after death.

Question 40

The book value per share of common stock is computed as follows:

A)liabilities/number of shares outstanding.
B)total common stockholders' equity/number of shares outstanding.
C)value of the company's assets/price of the book it's listed in.
D)assets/number of shares outstanding.

Question 41

According to Moody's Corporate Bond Ratings,bonds which are rated are judged to have speculative elements.

A)A
B)Aa
C)Baa
D)Ba

Question 42

The maximum annual contribution to an Educational IRA is

A)$2,000.
B)$500.
C)$1,000.
D)unlimited as long as the parents establish the IRA.

Question 43

Which of the following are not synonyms for the value of a bond?

A)par
B)coupon
C)face
D)principal

Question 44

Which of the following is true for Universal life insurance policies?

A)Premiums never need to be increased to maintain the policy in force.
B)Premiums are set higher than whole- life policies.
C)Premiums are set lower than whole- life policies.
D)none of the above

Question 45

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

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

Question 46

Which of the following factors are subject to change due to company sales?

A)retained earnings
B)number of shares of common stock authorized
C)stock at par
D)additional paid in capital

Question 47

Non- deductible IRAs

A)allow you to contribute before tax dollars.
B)allow you to contribute different amounts than deductible IRAs.
C)allow you to begin taking distributions at age 59½.
D)have returns that are taxed each year.

Question 48

The current market interest rate on a bond is the

A)rate of interest the issuer agrees to pay the lender on a semi- annual basis.
B)rate of interest the issuer agrees to pay to the lender on an annual basis.
C)rate of interest the lender agrees to pay the issuer on an annual basis.
D)rate of interest everyone else receives on bonds of a similar nature.

Question 49

Which part of Medicare includes and prescription drug plan?

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

Question 50

In a SEP (Simplified Employee Pension)plan

A)contributions can be made after the plan year and up to the tax filing date.
B)contributions are not deductible to the employer.
C)contributions cannot exceed the lesser of 40,000 or 25% in 2005.
D)only the employer can open up the plan.

Question 51

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 52

Precious metals

A)are as good an investment as stocks and bonds over time.
B)can be purchased via mutual funds dealing in bullion.
C)fall into the area of commodity trading.
D)are a hedge against deflation.

Question 53

Money purchase plans

A)Mandates that the employer contribute each year even if the company made no money.
B)Allow for employee contributions.
C)Are defined benefit plans
D)none of the above

Question 54

An irrevocable grantor trusts which is established by the employer for key employees is

A)Not considered income for the employee.
B)A trust which can be change at any time during the life of the trust.
C)Is also known as a Rabbi trust.
D)A & B above
E)A & C above

Question 55

According to Moody's Corporate Bond Ratings,bonds which are rated are judged to be of the best quality?

A)A
B)Aaa
C)Baa
D)Ba

Question 56

All of the following would require liability insurance except

A)A certified public accountant.
B)A physician.
C)A plumber installing a water heater.
D)All of the above require liability insurance.

Question 57

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

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

Question 58

Which of the following would involve speculative risk?

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

Question 59

Who can participate in a tax sheltered annuity?

A)a college professor who is employed by a for profit university
B)a public school teacher
C)a self employed plumber
D)an employee of a public corporation

Question 60

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 61

If your adjusted gross income is $30,000 and you contribute $3,000 to a retirement plan in pre- tax dollars,then you will pay income tax on a re- computed adjusted gross income of

A)$33,000.
B)$30,000.
C)$27,000.
D)none of the above

Question 62

Which of the following is the most liquid of all investments?

A)bonds
B)cash
C)certificates of deposit
D)real estate

Question 63

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

Question 64

Keogh plans

A)are for the self employed.
B)usually are combinations of profit sharing and 401k's.
C)usually have additional costs due to payroll taxes that have to be factored in.
D)all of the above

Question 65

A bond backed by secured debt is a debenture.

Question 66

Which of the following is true for dollar cost averaging?

A)It allows us to purchase an unequal dollar amount of a different stock at equal time intervals.
B)It allows us to purchase an equal dollar amount of the same stock at equal time intervals.
C)It allows us to purchase an unequal dollar amount of the same stock at equal time intervals.
D)It allows us to purchase an equal dollar amount of a different stock at equal time intervals.

Question 67

Which of the following holds true for whole life insurance?

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

Question 68

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

Question 69

Which of the following holds true for Disability insurance plans?

A)Disability is expected to last for at least 2 years.
B)They are purchased to replace lost income.
C)They are purchased in order to supplement income.
D)Benefits are employer focused.

Question 70

Disability insurance is purchased to replace lost income.

Question 71

Which of the following is not true for SIMPLE IRA plans?

A)Participants are vested immediately.
B)Employee contribution limit is $10,000.
C)Company matches dollar for dollar up to three percent of the employee's salary.
D)Each employee should have received at least $16,000 in employee compensation for each of the past two years.

Question 72

IRA contributions may be deductible or non- deductible.

Question 73

All of the following are factors that affect the market value of a share of common stock except

A)authorized,but not issued,shares.
B)excess demand for shares.
C)product liability suit.
D)anticipated company earnings.

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

Question 75

A Roth 401k is funded with before tax dollars.

Question 76

Companies normally call back preferred stock when

A)the prime rate increases.
B)market interest rates are high.
C)market interest rates are low.
D)common stock prices are low.

Question 77

A Roth 401k allows your assets to be passed on to your heirs tax free.

Question 78

Which of the following is a feature of cumulative preferred stock?

A)Dividends in arrears are paid to common stockholders.
B)Dividends in arrears are paid to both preferred and common stockholders.
C)Dividends accumulate and must be paid each year.
D)Dividends in arrears are paid to preferred stockholders whenever a dividend is declared by the corporation.

Question 79

Insurance policies are examples of risk reduction.

Question 80

Capital accumulated over one's life is distributed through retirement income only.