Question 1

Connor is worried that his health may soon deteriorate to the point where he will no longer be able to take care of his own finances. One way he could ease his mind would be to

Accepted Answer

A)   name an executor to his will.
B)   prepare a durable power of attorney.
C)   transfer title to all of his real estate and financial assets to a relative he trusts.
D)   invest all of his financial assets into a Keogh plan.E) B) and D)
F) B) and C)

Question 2

Trends in the number of workers contributing to the Social Security system and the number of workers drawing benefits from the system suggest that future generations will

Accepted Answer

A)   have more frequent cost-of-living adjustments.
B)   see significant improvements in the level of benefits.
C)   face a later retirement age in order to qualify for full Social Security benefits.
D)   not be allowed to invest in private pension plans.E) C) and D)
F) None of the above

Question 3

IRAs, 401(k), and Keogh plans all include incentives to encourage saving for retirement.

Accepted Answer

A) True 
 B)False

Question 4

Most people find it relatively easy to live frugally.

Accepted Answer

A) True 
 B)False

Question 5

The best way to invest in a 401(k) plan is to use all of the money to buy stock in the company where you work.

Accepted Answer

A) True 
 B)False

Question 6

Terrence is in the 30% tax bracket. What is the after-tax cost of a $3,000 contribution to his traditional IRA account?

Accepted Answer

A)   $900
B)   $1,440
C)   $2,100
D)   zeroE) A) and C)
F) C) and D)

Question 7

The key to generating enough capital for investment for many individuals is to

Accepted Answer

A)   obtain as many credit cards as possible in order to maximize spending power.
B)   live frugally.
C)   borrow money from friends and family.
D)   buy only high-quality consumer goods.E) B) and C)
F) A) and B)

Question 8

Once they've accumulated enough money, buying a low-priced home is often a good investment for young adults.

Accepted Answer

A) True 
 B)False

Question 9

One step toward the goal of taking control of your finances is to keep track of all your expenses.

Accepted Answer

A) True 
 B)False

Question 10

The greatest return over a period of several years is likely to be earned by investing in a

Accepted Answer

A)   small home in a great location.
B)   savings account in a bank.
C)   large home in a deteriorating neighborhood.
D)   moderate size home in a rural setting.E) All of the above
F) None of the above

Question 11

Investors who desire a very stable and predictable income from their investments (such as people who are nearing retirement) would be reluctant to invest heavily in the stock market.

Accepted Answer

A) True 
 B)False

Question 12

Withdrawals from a traditional IRA prior to the age of 59½ are

Accepted Answer

A)   tax deferred until you reach 65 years of age.
B)   tax-free.
C)   normally subject to a penalty and taxes on the income that is withdrawn from the IRA.
D)   subject to a possible denial after review by the Internal Revenue Service.E) B) and C)
F) A) and B)

Question 13

An individual retirement account (IRA) is a tax-deferred investment plan that encourages workers to save for retirement.

Accepted Answer

A) True 
 B)False

Question 14

A Roth IRA offers employees an incentive to save for their retirement by

Accepted Answer

A)   deferring taxes on income contributed to the IRA.
B)   eliminating taxes on the withdrawals from the IRA.
C)   eliminating taxes on the income contributed to the IRA.
D)   allowing employers to match the employee's contribution to the IRA.E) All of the above
F) None of the above

Question 15

Fixed annuities have become much more popular than variable annuities.

Accepted Answer

A) True 
 B)False

Question 16

After marriage, one great financial strategy is to live on one income and to save the other.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is a form of term insurance that guarantees fixed premiums for the life of the policy?

Accepted Answer

A)   universal life insurance
B)   planned annuity life insurance
C)   declining coverage, fixed payment insurance
D)   multiyear level-premium insuranceE) A) and B)
F) B) and D)

Question 18

The death benefits of a variable life insurance policy vary depending upon the performance of the investment.

Accepted Answer

A) True 
 B)False

Question 19

A contract that calls for regular payments to an individual for life or for a fixed period of time is called a(n)

Accepted Answer

A)   annuity.
B)   fixed dividend plan.
C)   mutual fund.
D)   level premium agreement.E) All of the above
F) A) and B)

Question 20

Everything else constant, the higher the deductible on your car insurance policy, the higher the premium for your car insurance.

Accepted Answer

A) True 
 B)False

Exam 24: Managing Personal Finances

One step toward the goal of taking control of your finances is to keep track of all your expenses.

Correct AnswerverifiedShow Answer

Terrence is in the 30% tax bracket. What is the after-tax cost of a $3,000 contribution to his traditional IRA account?

Correct AnswerverifiedShow Answer

Fixed annuities have become much more popular than variable annuities.

Correct AnswerverifiedShow Answer

Trends in the number of workers contributing to the Social Security system and the number of workers drawing benefits from the system suggest that future generations will

Correct AnswerverifiedShow Answer

The best way to invest in a 401(k) plan is to use all of the money to buy stock in the company where you work.

Correct AnswerverifiedShow Answer

IRAs, 401(k), and Keogh plans all include incentives to encourage saving for retirement.

Correct AnswerverifiedShow Answer

A contract that calls for regular payments to an individual for life or for a fixed period of time is called a(n)

Correct AnswerverifiedShow Answer

Which of the following is a form of term insurance that guarantees fixed premiums for the life of the policy?

Correct AnswerverifiedShow Answer

Everything else constant, the higher the deductible on your car insurance policy, the higher the premium for your car insurance.

Correct AnswerverifiedShow Answer

Once they've accumulated enough money, buying a low-priced home is often a good investment for young adults.

Correct AnswerverifiedShow Answer

The key to generating enough capital for investment for many individuals is to

Correct AnswerverifiedShow Answer

Investors who desire a very stable and predictable income from their investments (such as people who are nearing retirement) would be reluctant to invest heavily in the stock market.

Correct AnswerverifiedShow Answer

An individual retirement account (IRA) is a tax-deferred investment plan that encourages workers to save for retirement.

Correct AnswerverifiedShow Answer

The death benefits of a variable life insurance policy vary depending upon the performance of the investment.

Correct AnswerverifiedShow Answer

The greatest return over a period of several years is likely to be earned by investing in a

Correct AnswerverifiedShow Answer

A Roth IRA offers employees an incentive to save for their retirement by

Correct AnswerverifiedShow Answer

Withdrawals from a traditional IRA prior to the age of 59½ are

Correct AnswerverifiedShow Answer

After marriage, one great financial strategy is to live on one income and to save the other.

Correct AnswerverifiedShow Answer

Most people find it relatively easy to live frugally.

Correct AnswerverifiedShow Answer

Connor is worried that his health may soon deteriorate to the point where he will no longer be able to take care of his own finances. One way he could ease his mind would be to

Correct AnswerverifiedShow Answer

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