1. The term most closely associated with quality of life is a. wealth. b. consum

Question

1. The term most closely associated with quality of life is
a. wealth.
b. consumption.
c. education.
d. standard of living.
e. money.


____ 2. A ____ is an example of a real asset.
a. stock
b. bond
c. mutual fund.
d. savings account
e. stamp collection


____ 3. Utility refers to
a. the satisfaction you receive from purchasing something.
b. how much money you receive during the year.
c. the total of your spending for the year.
d. the value of your investments at any given time.
e. none of these.


____ 4. The three key groups in the economic environment are
a. government, regulation, and business.
b. government, consultants, and business.
c. consumers, economists, and business.
d. consumers, business, and managers.
e. government, consumers, and business.


____ 5. Your income is directly related to your
a. geographic location.
b. age.
c. education.
d. all of these
e. none of these


____ 6. Typically people with the lowest incomes tend to be
a. educated.
b. very old.
c. very young or very old.
d. middle aged.
e. childless.


____ 7. Professional financial planners
a. help by establishing personal financial goals.
b. are only for wealthy investors.
c. are skilled at offering simple solutions to complex financial problems.
d. make financial decisions for investors.
e. are best utilized during retirement years.


____ 8. Your ____ is an example of a liquid asset.
a. home
b. car
c. checking account
d. charge account
e. life insurance cash value


____ 9. A budget is a
a. purchase plan.
b. line of credit.
c. financial statement.
d. detailed financial forecast.
e. set of personal financial objectives.


____ 10. ____ would not be a long-term financial goal.
a. Purchasing a new car
b. Providing adequate life insurance
c. Reducing income taxes
d. Paying your phone bill
e. Planning for retirement


____ 11. On the balance sheet, a mortgage loan is recorded as the
a. interest only.
b. sum of interest paid and the outstanding balance.
c. sum of interest due and the outstanding balance.
d. principal portion only.
e. none of the above.


____ 12. Sonny and Cher have a net worth of $35,000 and total assets of $200,000. If their revolving credit and unpaid bills total $2,200, what are their long-term liabilities?
a. $115,000
b. $140,000
c. $142,200
d. $162,800
e. $165,000


____ 13. You are solvent if your
a. total liabilities exceed total assets.
b. total assets exceed total liabilities.
c. total assets exceed net worth.
d. total liabilities exceed net worth.
e. none of these.


____ 14. If your statement of income and expenditures shows a deficit, you may have
a. increased your debts.
b. increased your assets.
c. added to savings.
d. bought additional insurance.
e. paid off some of your debts.


____ 15. If your total assets equal $87,000 and your total liabilities equal $10,000; your solvency ratio is
a. 11.5%.
b. 13.0%.
c. 77.0%.
d. 87.0%.
e. 88.5%.


____ 16. In order to minimize the difficulty associated with meeting monthly loan payments, the debt service ratio should be
a. above 50%.
b. below 50%.
c. at 35%.
d. below 35%.
e. above 20%.


____ 17. The expenditure categories for your budget should be determined by
a. the BLS Urban Family Budget categories.
b. purchased budget book headings.
c. those used in previous years.
d. current and expected future spending.
e. itemized tax deductions.


____ 18. The need for budget adjustments is indicated when
a. income is stable.
b. account deficits and surpluses balance out.
c. account deficits are more than surpluses.
d. a new calendar year begins.
e. short-term financial goals are achieved.


____ 19. Theresa invested $5,000 in an account she expects will earn 7% annually. Approximately how many years will it take for the account to double in value?
a. 8
b. 9
c. 10
d. 11
e. 12


____ 20. Jamil invested $9,500 in an account he expects will earn 5% annually. Approximately how many years will it take for the account to double in value?
a. 8.8
b. 9.7
c. 10.8
d. 11.4
e. 14.4


____ 21. Michael and Sandy purchased a home for $100,000 five years ago. If it appreciated 6% annually, what is it worth today?
a. $100,000
b. $106,000
c. $130,000
d. $133,823
e. $135,603


____ 22. Insurance is a tool that can lessen ____ risk.
a. social
b. mental
c. economic
d. accident
e. exposure


____ 23. Phil, who has enjoyed perfect health throughout his life, has determined that he needs a $1,000,000 30-year level term life insurance policy and is trying to choose the insurance company from which to purchase the policy. He predicts that his family will need the coverage for about 30 years. What should be the most important factor is Phil's decision of which insurance company to use?
a. price
b. cash value build up
c. underwriting service
d. claim service
e. financial strength


____ 24. From the standpoint of the person buying insurance, the central purpose of insurance should be:
a. to collect for all accidental losses
b. to transfer risks of serious losses
c. to support the prevention of losses
d. to accumulate savings
e. to reduce payments for the most frequently occurring losses


____ 25. The most valuable single technique in personal risk management to assist an individual in determining how much life insurance is needed is:
a. Computing the Human Life Value.
b. Using the probability of death each year, prevailing interest rates and assumed inflation rates to find the discounted present value of a future income stream.
c. Assessing the family's total economic needs and subtracting financial resources available to meet those needs.
d. Estimating the sum of money which, when paid in installments, will produce the same income as the person would have earned, after deducting assumed amounts for taxes and personal maintenance expenses.
e. Using a multiple of earnings adjusted for occupation.


____ 26. The probability of a loss occurring can be reduced by
a. risk observance.
b. loss prevention.
c. risk assumption.
d. risk retention.
e. insurance.


____ 27. The settlement option chosen by most beneficiaries is
a. lump sum.
b. interest only.
c. fixed amount.
d. fixed time.
e. life income.


____ 28. ____ is a common provision in many term policies.
a. A reward clause
b. A renewable clause
c. Cash value
d. A limited clause
e. An arbitration clause


____ 29. Which of the following is not characteristic of universal life insurance?
a. flexible premiums
b. choice of how the accumulation account is invested
c. option A provides a level death benefit
d. option B provides a stated amount of insurance plus the accumulated cash value
e. the death protection and the savings portion are identified separately


____ 30. Which of the following is not true about survivorship insurance?
a. It is needed by most dual-earner families.
b. It is also know as last-to-die insurance.
c. It is used primarily to help pay estate taxes.
d. It is less expensive than two separate policies.
e. It covers the lives of two people.


____ 31. Group life insurance is
a. provided by lenders.
b. now called home service life.
c. generally a decreasing term policy.
d. often more expensive than private coverage.
e. All of the above


____ 32. ____ and ____ are both relatively expensive types of decreasing-term life insurance.
a. Group life; credit life
b. Credit life; mortgage life
c. Mortgage life; industrial life
d. Industrial life; special-purpose policies
e. Special-purpose policies; group life


____ 33. A grace period permits the policy holder to retain insurance even though the premium has not been paid for
a. a year.
b. 6 months.
c. 3 months.
d. 2 months.
e. 30 days


____ 34. If Mary Lou Thompson selected a life income settlement option with 10 years certain when her husband died, which of the following is(are) true?
a. Mary Lou will receive benefits for the rest of her life.
b. Mary Lou's beneficiaries will receive benefits for 10 years after her death.
c. At least 10 years of benefits will be paid to Mary Lou and perhaps her beneficiaries.
d. a and b
e. a and c


____ 35. A participating policy
a. has no incontestability clause.
b. is a form of endowment insurance.
c. may pay dividends.
d. requires a savings function.
e. contains no tax benefits.


____ 36. The major financial benefit of beginning your retirement funding early is related to
a. increased cost of living.
b. compound interest.
c. reduced anxiety.
d. inflation.
e. investment returns.


____ 37. The first step in retirement planning is to
a. determine how large a nest egg is required.
b. consider your longevity.
c. define your investment program.
d. determine your income-earning assets.
e. set retirement goals


____ 38. When setting retirement goals you should consider
a. what you want to do in retirement.
b. your expected standard of living.
c. your proposed level of income.
d. special retirement activities and projects.
e. all of these.


____ 39. The major mistake(s) people make in retirement planning is(are)
a. starting too early.
b. saving too little.
c. investing too aggressively.
d. a and b
e. a, b, and c


____ 40. The major mistake(s) people make in retirement planning is(are)
a. starting too late.
b. saving too little.
c. investing too conservatively.
d. a and b
e. a, b, and c


____ 41. A $3,000 annual contribution to a retirement account earning 6% will be worth ____ in 20 years.
a. $ 60,000
b. $ 96,780
c. $100,000
d. $110,340
e. $192,600


____ 42. Gordon and Lisa estimate that they will need $1,875,000 in 40 years for their retirement years. If they can earn 8 percent annually on their funds, how much do they need to save annually?
a. $7,238
b. $7,987
c. $8,103
d. $9,234
e. $9,875


____ 43. ____ do not have to be covered by Social Security coverage.
a. Farmers and ministers
b. Federal civilian employees hired before 1984 and employees of state and local governments
c. Federal employees and ministers.
d. Teachers and employees of universities.
e. Ministers and professional athletes


____ 44. Mandy and Michael Tombs are retiring soon. Their projected month Social Security benefits are $800 and $1,800, respectively. Assuming they are married and they select the best benefit alternative for them, how much will they receive monthly?
a. $ 800
b. $1,200
c. $1,800
d. $2,600
e. $2,700


____ 45. One can maximize the monthly Social Security benefit amount by delaying taking retirement benefits until age
a. 62
b. 65
c. 67
d. 70
e. 75


____ 46. Fully insured status requires 40 ____ of employment covered by social security.
a. weeks
b. months
c. quarters
d. periods
e. years


____ 47. Of the following survivors of a fully insured worker, ____ would not be eligible for social security benefits.
a. dependent children
b. spouse age 47, no children
c. spouse age 65, with dependent children
d. spouse age 65, no children
e. spouse age 26, with dependent children


____ 48. The Personal Earnings and Benefit Estimate Statement from Social Security would contain information about
a. year-by-year social security earnings credits.
b. benefits at age 62.
c. benefits at age 65 to 67.
d. benefits at age 70.
e. all of these.


____ 49. Jamie has worked for ABC Printing for 5 years. During this period ABC Printing has contributed $25,000 to her non-contributory retirement plan. Assuming ABC uses cliff vesting, the longest period allowed, how much will Jamie be able to roll into an IRA if she left ABC Printing?
a. $ 0
b. $ 5,000
c. $10,000
d. $20,000
e. $25,000


____ 50. Bill has worked for White Drywall for 4 years. During this period White Drywall has contributed $25,000 to his retirement plan. Assuming the company uses graded vesting, how much will Bill be able to roll into an IRA if he left White Drywall at the end of 3 years?
a. $ 0
b. $ 5,000
c. $10,000
d. $15,000
e. $20,000


____ 51. The amount of money in your defined contribution retirement portfolio will depend on
a. the age at which you begin contributing.
b. the amount of money you deposit each month.
c. the rate of return on your savings.
d. all of these.
e. none of these really make much difference.


____ 52. Lillian has a defined benefit plan that promises an annual retirement benefit based on the average of her last three years of salary times 2 times years of service. At retirement Lillian has 15 years of service and an average salary over the last 3 years of $65,000. What will her annual benefit be?
a. $65,000
b. $50,500
c. $35,400
d. $19,500
e. cannot determine


____ 53. Employee contributions to ____ plans do not reduce taxable income.
a. 403(b)
b. Thrift and savings
c. 457
d. 401(k)
e. a, b, and c


____ 54. If you work nine years under the social security system, you are
a. fully insured.
b. partially insured.
c. privately insured.
d. currently insured.
e. uninsured.


____ 55. Employer matching contributions are common with ____ plans.
a. 401(k)
b. 403(b)
c. 457
d. a and b
e. a and c


____ 56. Jacque Solis (age 38) is leaving her current job and would like to take a long vacation before starting new employment. She has $58,000 in a qualified plan that she would like to live on during this period. If she is in a 25 percent marginal tax bracket, how much will she have left after paying taxes and penalties?
a. $58,000
b. $43,500
c. $37,700
d. $29,000
e. $14,500


____ 57. Sally and Patrick are married with 4 young children. Patrick stays at home with the kids while Sally works as CEO of a small manufacturing firm earning $105,000 annually. Sally is covered by a 401(k) plan at work, but they would like to maximize their IRA contributions as well. Which of the following are true assuming their AGI is $105,897?
a. Sally and Patrick could each contribute $3,000 to a Roth IRA.
b. Sally and Patrick could each contribute $3,000 to a deductible traditional IRA.
c. Only Sally can contribute to any type of IRA. Patrick has no earned income.
d. Patrick could contribute $3,000 to either a deductible tradition IRA or a Roth IRA.
e. a and d


____ 58. An investment vehicle that systematically pays out benefits over an extended period of time is a(n)
a. common stock.
b. bonds.
c. mutual funds.
d. annuity.
e. money market securities.


____ 59. The two ways to buy annuities are single premium and
a. multi-premium.
b. future premium.
c. installment premium.
d. guaranteed premium.
e. lateral premium.


____ 60. You will receive the largest monthly payment under an annuity contract when the selected payment option is the
a. life annuity with no refund.
b. life annuity, period certain.
c. refund annuity.
d. annuity certain.
e. temporary life annuity.

Explanation / Answer

1. d. standard of living. 2. d. savings account 3. a. the satisfaction you receive from purchasing something. 4. d. consumers, business, and managers. 5. d. all of these 6. c. very young or very old. 7. d. make financial decisions for investors. 8. d. charge account 9. b. line of credit. 10 . d. Paying your phone bill please rate appreciated

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