personal finance exam 3

¡Supera tus tareas y exámenes ahora con Quizwiz!

what are the 3 kinds of advisors/brokers that you could use when buying a stock

1. online (by yourself) 2. discount 3. full price

what are the two kinds of disability insurance

1. own occupation (you cannot perform your OWN occupation) 2. any occupation (you cannot perform ANY occupation)

what are the 4 characteristics of a actively managed mutual fund

1. portfolio manager makes decisions 2. large/mid/small cap (size of companies in the fund) 3. considers growth vs value investing 4. socially responsible

what are the 3 types of managed care plans

1. preferred provider organization (PPO) 2. point of service plan (POS) 3. health maintenance organization (HMO)

what are the two types of insurance that you can have

1. property and casualty 2. life and health

homeowner's insurance protects against what 4 things?

1. property damage 2. theft 3. personal liability 4. personal property

what are the 3 steps to buying stock

1. select the stock 2. select an advisor/broker 3. place the trade

what are the risks from investing in a stock mutual fund? bond mutual fund?

1. stock funds have a market risk 2. bond funds have a default risk and interest rate risk

what are the 2 types of life insurance

1. term 2. cash value

when placing the trade for buying stock, you need to know what 3 things

1. ticker symbol for the stock 2. share quantity 3. order type

what are the 3 types of cash value life insurance policies

1. whole life insurance 2. universal life insurance 3. variable life insurance

Medical Payments coverage for auto insurance is coverage (A/B/C/D)

B

what are the 7 types of stock mutual funds in order from HIGH risk HIGH return to LOW risk LOW return

HIGH risk HIGH return 1. sector 2. international 3. capital appreciation 4. growth 5. growth and income 6. income 7. balanced

what are the types of bond mutual funds in order from HIGH risk HIGH return to LOW risk LOW return

HIGH risk HIGH return 1. international bonds 2. high-yield junk bonds 3. corporate bonds 4. municipal bonds 5. government bonds

what is an indemnity plan

a rare type of health care plan where your insurance pays for the cost of any service as long as it is in reason -can go wherever you want to be treated (MAX CHOICE, MAX COST)

when selecting a mutual fund, find out if it has ___ or ___ management strategies

active passive

select asset classes that (are/are not) exposed to the same risk in order to diversify efficiently

are not

a mix of asset classes in a portfolio is called

asset allocation

investors nearing retirement should _______ bonds and ____ stock allocations

add more decrease

in asset allocation, be sure to diversify across ____ and _____

asset classes countries

younger investors who can afford to should invest more ____ for _____ term goals

aggressively long

which type of stock mutual fund combines stocks and bonds into one portfolio

balanced

life insurance provides benefit to

beneficiaries at the time of death

true or false: all homeowners insurance packages have the same perils defined in the same amounts

false: different packages, different perils, different amounts

insurance provides compensation for a ______ ______ that occurs as a result of an ________ ______

financial loss uncertain event

in a bond, the insurer pays a (fixed/variable) rate of interest until maturity

fixed

advisors suggest that you invest ______% of your stocks internationally

greater than or equal to 20%

which type of stock mutual fund is oriented around growth potential stocks

growth

what is COBRA

an act that ensures continued health insurance coverage for 18 months after you lose your job

what is a independent agent and what is a benefit to using one

an agent who can offer policies form a variety of insurance companies --benefit: more options, can find you the best deal

what is a captive agent and what is a benefit to using one

an agent who represents ONE insurance company --benefit: knows the company's products very well

what is the difference between growth and value investing in a mutual fund

growth investing: investing in a highly priced stocks with the assumption that the growth will be high value investing: deciding to not buy products that are priced unfairly high

"whole life insurance" is a type of cash value life insurance policy that

has FIXED premiums and death benefits

"variable life insurance" is a type of cash value life insurance policy that

has FIXED premiums and death benefits AND cash value is invested in a stock account

"universal life insurance" is a type of cash value life insurance policy that

has FLEXIBLE premiums and death benefits

what is medicare and what must you qualify for in order to be eligible to receive it?

health insurance for people over 65 years old -social security

what is medicaid and is it administered at a national or state level

health insurance for those with little income state level

which type of health care plan requires that you go through a PCP "gatekeeper" to get to a specialist

health maintenance organization (HMO)

the interest rate risk is greater for bonds with (low/high) coupons and (short/long) term to maturity

high coupons long term

life insurance premiums are: (lower/higher) for older policy holders (lower/higher) for females (lower/higher) for smokers (lower/higher) those with medical problems

higher lower higher higher

active management strategies of a mutual fund will have (lower/ higher) return and (lower/higher) costs

higher return higher cost

adding a ____ ___ correlated asset may ____ overall return

highly negative reduce

in order to have your personal property covered by homeowner's insurance, it is important to make a

home inventory list

one way to reduce homeowner's insurance premiums is to improve _______ _______

home protection ex) sprinklers, alarm system

which type of stock mutual fund is oriented around high dividend paying stocks

income

stock ______ represent the stock market as a whole

indices

stock is offered to the public through _____ ____ ____ to raise money for the company

initial public offering (IPO)

what is long-term care insurance

insurance that covers expenses associated with the inability to perform "activities of daily living"

returns on annuities come from ___ or ____

interest or stock based returns

what is a coupon rate of a bond

interest paid on a bond

which one is more risky? U.S. stocks international stocks

international stocks

there is a (direct/inverse) relationship between interest rates and bond prices

inverse

what is dollar cost averaging

investing equal increments of money each month instead of a lump sum per year

how are investments taxed? how are dividends taxed?

investments=taxed as ordinary income dividends= taxed at dividend rates

who is a Federal agency bond issued by

issued by US government agencies

corporate bonds are also called

junk bonds

short term goals allow for (less/more) risk and (less/more) liquidity

less risk more liquidity

health insurance is a type of (property and casualty / life and health) insurance

life and health insurance

insurance that may cover care in a nursing home or at a assisted living facility is called

long term care insurance

short term bond mutual funds have (lower/higher) risk and (lower/higher) return than long term bond mutual funds

lower risk lower return

which type of private health care plans uses a NETWORK of providers (indemnity plans/ managed care plans)

managed care plans

there are (few/many) different ways to select investments

many

all stocks are subject to _____ risks

market

how could insurance be beneficial even if no benefits are paid

peace of mind of protection allows you to use your discretionary income on other things

what is an expense ratio fee when investing in a mutual fund

percentage deducted annually from the fund balance (around 1%)

what is cash value life insurance

permanent coverage that remains in effect as long as the premiums are paid

what is a ticker symbol

short symbol to represent a company

how are short term capital gains taxed? how are long term capital gains taxed?

short term: taxed as ordinary income long term: taxed at capital gains rate

which one is more risky? small company stocks large company stocks

small company stocks (can fluctuate more)

stop loss provisions:

specify the max amount that the insured will pay out of pocket

______ _____ provide benchmark comparison to portfolio performance of investments

stock indices

even investors in retirement should consider some allocation to ____

stocks

cash value grows (taxed/tax deferred) in a cash value life insurance policy

tax deferred

what is term life insurance

temporary coverage that is provided for a specified amount of time

what is an insurance deductible

the amount you pay before insurance will pay anything

what is an insurance premium

the cost of buying insurance

what is an insurance copay

the flat amount you pay per visit

insurance allows the insured person to transfer the ____ to the insurance company

the insurance company

what is an insurance benefit

the maximum reimbursement amount

coverage B of auto insurance covers damage when (you/the other driver) is at fault and covers medical care and damage costs for (yourself and your car/the other driver and their car)

the other driver yourself and your car

what is an elimination period

the period of time between eligibility and when you actually receive benefits

what are the two health care programs offered by the government

1. medicare 2. medicaid

long term care insurance premiums are (cheap/expensive)

expensive

what is a "risk"

exposure to an event that may result in a financial loss

what are the two methods to decide how much life insurance coverage you need

1. income method 2. budget method

what are two types of passive management strategies when it comes to mutual funds

1. index funds 5. life-cycle funds

what are the 6 things to remember when selecting a mutual fund

1. investment objective/strategy 2. minimum initial investment 3. past performance 4. risk 5. fees and expenses 6. tenure of manager (how long they have been there)

what are the two types of mutual fund fees

1. load / "commission fee" 2. expense ratio fee

what are the 2 purposes of life insurance

1. maintain financial support to dependents 2. leave money for heirs

what is the split policy limits for coverage A of auto insurance

(100/300/50) $100,000 per person $300,000 aggregate bodily injury $50,000 property damage

what is the budget method of calculating how much life insurance coverage you need

-based on current and expected expenses

what is health maintenance organization (HMO)

-least choice -least cost MUST HAVE REFERRAL FROM PCP TO GET TO A SPECIALIST -treatments at out of network is significantly lowered/none

what is a preferred provider organization (PPO) health insurance policy

-more choice of provider -more expensive -coverage percentage based on if you are treated at in-network or out-of-network facility

what is a common share

-most common -voting rights on who is on the board of directors

what is the income method of calculating how much life insurance coverage you need

-multiply income by 7 or 10 -simple BUT ignores personal circumstances

what are the 3 stock indices that we know

1. Dow Jones Industrial Average 2. S & P 500 3. NASDAQ

what are the 4 types of bonds

1. US treasury bonds 2. federal agency bonds 3. municipal bonds 4. corporate bonds (junk bonds)

what are the 4 risk management techniques

1. avoidance 2. reduction 3. acceptance 4. transfer

split policy limits for car insurance define 3 separate limits. (__/__/__) what are they, in order

1. bodily injury per person 2. max aggregate bodily injury 3. property damage

what are the two types of insurance agents

1. captive agent 2. independent agent

what are the two kinds of shares

1. common 2. preferred

what are the steps to filing a claim to homeowner's insurance

1. contact insurance company 2. "claim's adjuster" comes to your property to assess damage 3. present your home inventory if applicable 4. you are given a quote (you may want independent estimate if you think you are being hoed by the insurance guy)

what are the 3 risks that come with investing in bonds

1. default risk- issuer doesn't pay you back 2. interest rate risk- 3. call (prepayment) risk- issuer may repay bond early if rates fall

what are the 5 benefits of mutual funds

1. diversification 2. professional management 3. low initial investment 4. alignment with specific goal/ time horizon 5. dollar cost averaging

what 3 questions do you need to ask when considering life insurance

1. do you need it? 2. how much do you need? 3. what type do you need?

when selecting a stock to buy, you need to consider what 3 things

1. economy 2. industry 3. the company

disability insurance can be available through what 3 sources

1. employer 2. insurer 3. social security

health insurance can be offered through what 3 entities?

1. employers 2. insurance companies 3. government (medicare, medicaid)

what are the 3 things that are important to consider when investing

1. financial goals 2. risk tolerance 3. time horizon

the benefit received from social security is often ____ of your salary

2/3

stocks are only appropriate for goals that are ____ to ___ years away

3 to 5

what stocks does the DOW summarize

30 large company stocks combined (most popular and oldest index used)

what stocks does the S & P 500 summarize

500 stocks combined (MOST REPRESENTATIVE)

Liability coverage for auto insurance is coverage (A/B/C/D)

A

auto insurance coverage C is good when the other driver does not carry coverage ___

A

specify which is best: correlation coefficient of (-1/0/1) for A) the best risk-adjusted return and B) the maximum risk reduction

A) the best risk-adjusted return = 0 and B) the maximum risk reduction = -1

Uninsured/underinsured motorist coverage is coverage (A/B/C/D)

C

Collision and comprehensive coverage is coverage (A/B/C/D)

D

rank the 4 types of bonds in order from MOST SECURE (least return& least risk) to least secure (most return & most risk)

MOST SECURE----- (least return& least risk) 1. US treasury bonds 2. federal agency bonds 3. municipal bonds 4. corporate bonds LEAST SECURE--------(most return & most risk)

what is "medigap"

Medicare Supplemental Insurance to pay for medical services and items not covered by Medicare

a good way to diversify across different asset classes is to use _____ to add real estate exposure

REITS: real estate investment trusts (similar to mutual funds)

the most secure type of bond is

US treasury bond

what is a bond

a debt instrument sold by an issuer to an investor (usually sold by bank, government, or company)

what is a load/ commission fee

a fee paid on the front end or back end when investing in a mutual fund

what is a stock

a financial asset that represents ownership in a company

what is a point of service plan (POS)

a hybrid of PPO and HMO

if you expect a strong economy, (buy/sell) ______ if you expect interest rates to fall, (buy/sell) ______

buy stocks buy long term bonds

returns from a bond mutual fund comes from ___ and __

capital gains and bond funds

which premiums are more expensive (term/ cash value) life insurance

cash value

when selecting private health care plans, you are deciding between ____ and ___

choice and cost

who issues municipal bonds and what is a perk of them

cities and states --investment is exempt from federal/state income tax

when the insurer and the insured share the cost of a loss, it is called

coinsurance

younger investors should maintain a more ____ allocation for _____ term goals

conservative short

returns on a bond come from ____ and _____

coupon (interest) rates and capital gains

which auto insurance coverage type is required by law in most states

coverage A

agencies that evaluate financial stability of insurance companies are called

credit ratings agencies

coverage D of auto insurance covers:

damage to your own car

adding bonds to your asset allocation (decreases/increases) market risks and (decreases/increases) interest rate risks

decreases increases

to BEST WAY to reduce insurance premiums, increase _______

deductible

which type of insurance provides a benefit in the event that the policy holder cannot work

disability insurance

a way to manage risk when investing is

diversification

investing in a variety of asset classes is called

diversification

returns from investments come from ____ and ______

dividends capital gains (price of stock increases so you can profit if you sell it)

returns from a stock mutual fund comes from ___ and __

dividends and capital gains

term life insurance (does/ does not) build cash value

does not

before receiving disability insurance, you may be required to wait an ________ period of _______ or longer

elimination period 6 months or longer

what are credit ratings agencies

evaluate financial stability of insurance companies

health insurance covers

expenses related to medical care of the policy holder

a managed care plan has (less/more) control over where you can go and the care you receive when compared to an indemnity plan

more

foreign stocks are typically (less/more) volatile than U. S. ones

more

in private health care plans, more choice means (less/more) cost

more

rank according to riskiness: treasury bonds corporate bonds

most risky: corporate bonds least risky: treasury bonds

rank according to riskiness: money market securities stocks bonds

most risky: stocks bonds least risk: money market securities

by far the most dominant type of investment in the US is

mutual funds

are stock indices investment products

no

what is a US treasury bond

offered by U.S. treasury -backed by "full faith and credit" of the US government

one way to reduce premiums is to use (a variety of insurance companies/one insurance companies) for each type of insurance that you need

one insurance (bundle to save)

stocks represent a type of (debt/ownership) while bonds represent a type of (debt/ownership)

ownership debt

there is a (negative/positive) relationship between risk and expected return

positive (risk increase=return increase)

long-term care insurance is provided by ____ insurance companies

private

Homeowner's insurance is a type of (property and casualty / life and health) insurance

property and casualty

auto insurance is a type of (property and casualty / life and health) insurance

property and casualty

what is rental insurance

protects your possessions within a rented home, condo, or apartment

what is the role of life insurance companies

provide coverage in exchange for premiums

what is an umbrella liability coverage

provides additional personal liability coverage for auto and homeowner's insurance

what is the goal of diversification when investing

reduce portfolio volatility risk

returns on real estate come from _____ and _____

rent payments and capital gains

what is an annutiy

retirement product offered by insurance firms that grow TAX DEFERRED

cash value life insurance includes life insurance plus

savings (cash value)

what is the goal of insurance

to preserve your existing level of wealth

true or false: one way to reduce premiums is to stay with the same insurance company for a long time

true

look for ______ assets or asset classes

uncorrelated

adding an ______ asset helps reduce ____ without eliminating _____

uncorrelated risk returns

make sure that you invest in something that you ______

understand

which kind of cash value life insurance policy has flexible premiums and death benefits

universal life insurance

which kind of cash value life insurance policy invests cash value in a stock account

variable life insurance

if someone breaks their nose jumping on the trampoline on your property, is that covered by homeowner's insurance

ya: personal liability

coverage A of auto insurance covers damage when (you/the other driver) is at fault and covers the damages for (yourself and your car/the other driver and their car)

you the other driver

coverage D of auto insurance covers damage when (you/the other driver) is at fault and covers VEHICLE DAMAGE for (your car/the other car)

you your car

coverage B of auto insurance covers damage when (you/the other driver) is at fault and covers MEDICAL CARE for (yourself and your passengers/the other driver and their passengers)

you yourself and your passengers

what is a preferred share

you get paid dividends first -no voting rights tho

Coverage C of auto insurance covers

your property and health if someone else causes an accident and they cannot pay


Conjuntos de estudio relacionados

Chapter 7 Prioritizing Client Care; Leadership, Delegation, and Emergency Response Planning

View Set

Professional Military Knowledge Eligibility Exam (PMK-EE) for E-4: Naval Heritage

View Set

Chapter 15: the spleen (practice test)

View Set

Limiting reactant abd percent yield

View Set

Internal Med Topic List Rosh Questions

View Set

CH 57 Drugs for Attention Deficit Hyperactivity and Narcolepsy (E4)

View Set