Module 6 - Comprehensive Exterior Financial Planning Skill Development Concept Quiz

In the scenario above, if the painting had been purchased in January, 2015, what is the maximum charitable deduction that Mariah may claim in 2015?

$10,000

If Lucy's grandmother had gifted the stock to Lucy the day before she died (the stock price was $70/share), what would be Lucy's basis in the GE stock?

$10/share

Kiran purchased a plot of land for $10,000. Two years later, it was valued at $25,000, and he gifted it to his son. He also paid a gift tax of $4,900 as he had used up his unified credit. The tax basis of the property in the hands of his son will be:

$12,940

Tony's son, Mark is 12 years old and Tony expects him to start college in 6 years. Tuition costs $20,000 today, increasing at an annual rate of 7%. Tony wants to earn 10% annually on his investments. If he makes an initial investment one year from now, and annual additions at the end of each year until Mark starts college, what is the size of the annual (level) investments he must make to fund 4 years of Mark's college education?

$14,935.39

What is a reasonable purchase price for an investment that offers the following cash inflows at the end of each period? Assume an interest rate of 7%. Year 1$2,000Year 2$2,200Year 3$1,700Year 4$2,000Year 5$1,500Year 6$2,000Year 7$1,400Year 8$14,000

$18,126

What will be the future cash value of an account that has the following cash flow where the deposits are made at the end of the period and the annual investment rate of return is 7%? Year 1$2,000 depositYear 2$2,500Year 3$1,200Year 4$2,400Year 5$1,500Year 6$1,700Year 7$1,400Year 8$1,100

$18,174

Rahul and Miranda want to make a lump-sum investment for their newborn's college education, and their goal is to accumulate $80,000 in 18 years. What is the amount they must invest today to reach their goal if the annual rate of return is 8%?

$20,020

Keith purchased a home with $20,000 down payment and a $180,000 mortgage. What is his basis in the home?

$200,000

Samantha just won a settlement with an insurance company, which entitles her to receive payments of $20,000 at the beginning of each year for the next 20 years. Her financial advisor recommended to her that she consider accepting a lump-sum payment now, using a discount rate of 7%. What is the amount that she should accept in this scenario?

$226,712

Mariah purchased a painting in 1996 for $10,000. In December 2015, it was valued at $30,000 and she donated it to the local art museum. What is the maximum charitable deduction that Mariah may claim in 2015 if her AGI was $80,000?

$24,000

Curly manages all the affairs of a rental real estate business that he owns. In 2015, his share of the losses amounted to $40,000. Curly and his wife expect to have an AGI about $80,000. How much of the losses are deductible on their 2015 income tax return?

$25,000

Ramon and Mia want to invest $2,500 at the end of this year into an investment account. They plan to invest 10% more next year, and will continue to increase their contributions 10% from each year to the next. Assuming the annual investment rate of return is 8%, what will be the value of the investment at the end of 20 years?

$258,318

Lena's AGI for 2015 was $60,000. She donated to the Red Cross a $75,000 bank CD when it matured during the year. The maximum amount that she can deduct on her 2015 federal income tax return is:

$30,000

Lucy's grandmother purchased 100 shares of GE stock priced at $10/share in 1970. Lucy inherited the stock when her grandmother passed away this year. On the date of death, the stock was valued at $70/share. Lucy sold the stock 3 months later for $73/share. What is the amount of the gain must Lucy report on her tax return (ignoring trading costs)?

$300

If Lucy had received the stock by gift as described above, and Lucy had sold the stock 3 months later for $73/share, what is the amount of the gain Lucy must report on her income tax return?

$6,300

Lucy's grandmother purchased 100 shares of GE stock priced at $10/share in 1970. Lucy inherited the stock when her grandmother passed away this year. On the date of death, the stock was valued at $70/share. Lucy sold the stock 3 months later for $73/share. What is Lucy's basis in the inherited stock?

$70/share

Omar wants to make a gift of $10,000 in today's dollars to his parents at the end of each of the next 10 years. If the annual rate of return is 8% and inflation is 3%, what is the value of the funds he must have in hand today to meet this need for the 10-year period?

$77,766

Teresa's employer offers a retirement plan which includes a 401(k) plan and a profit sharing plan. Employer contributions have a 5-year cliff vesting schedule. Teresa starts participating in the plan this year. If Teresa leaves the company's employment in 4 years, what percentage of the total employer contributions is she vested in, and thus can withdraw and roll over into her own IRA?

0%

Donovan bought a painting 5 years ago for $10,000. Two years ago, he spent $1500 to have it restored. This year, he sold it for $18,000. What is the internal rate of return on his investment?

10.10%

13. An investment that Kevin is considering offers the following cash flows. What is the internal rate of return (IRR) that this investment offers if all cash flows occur at the end of each period? Year 1Initial investment of $10,000Year 2Inflow of $2,000Year 3Inflow of $1,500Year 4Additional investment of $5,000Year 5Inflow of $1,200Year 6Inflow of $2,200Year 7Inflow of 1,500Year 8Inflow of $1,000Year 9Inflow of $1,200Year 10Sale proceeds of $17,000

10.87%

In the above example, if Teresa was contributing 10% of her salary to the 401(k) plan, what percentage of her total contributions is she vested in, and thus can roll over into her own IRA?

100%

Sharda bought a $1000 corporate bond this year at a discount for $975. The bond pays $80 of interest at the end of each of the next 5 years, at which time it will mature at its face value. If her required rate of return is 8.25%, what is the net present value of the investment?

15.08

Troy wants to accumulate $40,000 in 10 years to purchase a vacation home. What is the annual investment rate of return that Troy must obtain if he deposits $250 at the end of every month for 10 years?

5.56%

Which of the following is true regarding sole proprietorships?

A sole proprietorship has one owner

Which of the following is the maximum amount that will be paid to indemnify the insured?

Actual Cash Value

Jim took out a 30 year, $200,000 mortgage on his home with an annual interest rate of 5.5%, compounded monthly. The following statements are true EXCEPT:

After 12th pmt the mortgage balance will be $194,360

Which of the following statements apply to S-Corporations?

All of the above

Which of the following is simply diversification among different assets classes to take advantage of different correlations among the classes to reduce risk?

Asset Allocation

The following statements about joint tenancy with rights of survivorship (JTWROS) are true EXCEPT:

At the death of the first owner, the entire property

A contract entered into between a charity and donor where the charity agrees to pay the donor a specific amount in exchange for an amount transferred to the charity is which of the following?

Charitable Gift Annuity

National banks are regulated by:

Comptroller of the currency

The official source of the index of leading, lagging, and coincident indicators is:

Conference Board

Hector wants his business to continue for generations. Which of the following has infinite life?

Corporation

Which of the following is the term to describe the degree to which two items move in a predictable way?

Covariance

Chris is helping an ailing client decide whether to accept a viatical settlement on a life insurance policy. Which federal Act established guidelines on the tax-free treatment of viatical settlements?

Health Insurance Portability and Accountability Act of 1996

Which of the following statements about sole ownership of property is INCORRECT?

If the owner shifts income from the property to another person, the owner can reduce his own income taxes

Which of the following forms of ownership allow property transfer at death without the probate process?

Joint tenancy with right of survivorship

The following statements about joint tenancy with rights of survivorship (JTWROS) are true EXCEPT:

Marital deduction for estate tax is not allowed when one spouse's interest passes exclusively to the other

Marcus purchased 100 shares of Yahoo for $200/share a few years ago. He transferred the stocks to his nephew Tony as a gift when the stock was priced at $25/share. If Tony sells the stock for $35/share, what is the gain (or loss) that he must report on his income tax return?

No gain or loss

Jenny purchased 100 shares of WinCo for $30/share on January 10, 2014. She sold the stock on Dec 20, 2014 for $22/share. On January 5, 2015, she repurchased 100 shares of WinCo at $24/share based on positive news about the company. What is the amount of loss she can claim on her 2005 income tax return?

None

The following are the essential elements of a contract EXCEPT:

Offer and acceptance

Which of the following is a health care delivery system that contracts with medical care providers to offer services at discounted fees to its members?

PPO preferred provider organization

The three retirement income sources that form the basis of traditional views of retirement security are the following EXCEPT:

Part-time employment

An investment company that invests in a managed portfolio of real estate or mortgages and contructions loans is which of the following?

REIT

Ramon, 62 and Julia, 61 are planning to retire when Ramon turns 65. They are worried about outliving their retirement funds. Which of the following methods of calculating longevity would you advise them to use?

Ramon's and Julia's joint life expectancy

Which of the following is NOT a benefit of a Viatical Settlement?

Settlement income is always income-tax free

The following entities protect the business owner from personal liability in actions by creditors of the business EXCEPT:

Sole Proprietorship

Which of the flowing is true regarding lump sum distributions from a qualified plan?

Such a distribution may allow for more control over the underlying investments

The following statements about joint tenancy w/ rights of survivorship (JTWROS) and tenancy in the entirety (TIE) are true EXCEPT:

TIE property is a probate asset, but JTWROS property is not

Sheila's client has asked her advice on a possible life settlement of a life insurance policy. Which of the following is NOT a typical requirement for a life settlement?

The insured must generally be in good health

Ralph has several traditional IRAs containing both pre-tax and after-tax contributions. When he withdraws the funds after reaching age 59½, the income taxation of the distribution will be as follows:

The non-taxable portion is proportional to the ratio of the total after-tax contributions to the total value of the IRAs

When a contract is drafted by one party (such as an insurance company) and signed by the other party (such as a client), matters of ambiguity in the contract will be judged in favor of:

The party that signed the contract

Which of the following statements about property owned in a community property state is TRUE?

The will of the decendent will dictate how his or her half

Limited liability companies offer business owners all of the following advantages EXCEPT:

They can be set up without filing any paperwork with the state

All of the following statements about tenancy in common are true EXCEPT:

Transfer at death occurs without the probate process

A planning technique used to leave property to children in place of money given to charity is called what?

Wealth Replacement Trust

All of the following descriptions apply to torts EXCEPT:

a public wrong which is a violation of the laws that govern an individual's relationship with the rest of society

Which of the following is true about Agency relationships?

agency and independent contractor relationships are different

The peak to contraction phase of the business cycle is likely to be affected by which factors?

all of the above

Inflation is measured by Consumer Price Index, Producer Price Index, and the GDP implicit price deflator. Which of the statements about inflation are CORRECT?

all the above

Which of the following statements is true about Negotiable Instruments?

among the requirements of a holder in due course is to give adequate value for the instrument

Ricardo owns an apartment complex that generates $10,000 of monthly rents. He wants to shift some of the income to his son Ricky, 16, who is in a low tax bracket. He has directed some of his clients to pay the rent directly to Ricky. Each month, $3,000 of rental income is being shifted to Ricky. What are the tax implications of the shift of income?

entire rental income will be taxable to ricardo, he is also making a taxable gift to ricky

Which of the following leads to higher bank reserves, increased money supply, and expansion of the economy?

fed buys us gov securities

The independence of the Federal Reserve is assured through the following EXCEPT:

fed chairman chosen by regional fed directors

Which of the following asset classes include life insurance cash values and long debt?

fixed-income assets

The Index of Leading Economic Indicators (LEI) consists of the following indicators, EXCEPT:

inventories to sales ratio

The following are all considered depository institutions EXCEPT:

investment banks

Lucy's grandmother purchased 100 shares of GE stock priced at $10/share in 1970. Lucy inherited the stock when her grandmother passed away this year. On the date of death, the stock was valued at $70/share. Lucy sold the stock 3 months later for $73/share. What is the nature of the gain reported by Lucy?

long-term cap gain

Decisions made by the Federal Reserve are part of:

monetary policy

Choose the policy description that best fits Keynesian philosophy:

monetary policy, in addition to fiscal policy, should be used to influence the economy by stimulating demand

A rise in the index of Leading Economic Indicators can be a predictor of all EXCEPT:

more fav mortgage rates in the immediate future

Regarding life insurance, which of the following is the amount of funds required to fund reserves needed to pay death benefits?

mortality costs

Which of the following is NOT a valid defense against negligence?

negligence per se

Jim and Mary live in a community property state, and purchased a home for $100,000 in 1991, which was valued at $300,000 immediately prior to Jim's death in 2015. If Mary sells the home for $300,000, what is the taxable gain that she must declare for income tax purposes?

none, since the entire home

Regarding Life-Cycles, a person who is generally at the peak of his or her career and is in the period of maximum ability to accumulate wealth is in which stage?

peak accumulation

Which of the following is true regarding Trust Companies?

practically anyone can establish, own, and operate a trust company

The measure of how much any particular observation of a randomly distributed variable will differ from the average is which of the following?

standard deviation

Vicky is helping a client decide whether to receive a personal injury settlement in a lump sum or as a structured series of periodic installments. Which of the following is a reason to choose a structured settlement?

the full amount of qualified structured settlement pmts, including implicit earnings, is tax-free

Which of the following life insurance is the traditional cash value policy with level premium payments designed to remain in force over the entire life of the insured?

whole life insurance