ARE 142 FINALS
About how much does a 20 year term life insurance policy with a face value of $500,000 cost for a very healthy 30 year old male with average weight and height?
$250 per year
FICA tax rate
7.65%
30 Year old S/B ratio
80S/20B
T/F: An employee's social security contributions are invested in a general fund account that will be made available for the employee at retirement
False
T/F: If you are in a 25 percent tax bracket then every dollar of your adjusted gross income will be taxed at 25 percent
False
T/F: In the short run, investing in stocks outperforms most other investments
False
T/F: Normally, you can avoid repaying your Federally subsidized Student Loan by declaring Bankruptcy
False
T/F: One of the best things about retirement is that retirees don't have to pay income taxes once they retire.
False
T/F: One way to lower the premiums you pay on your insurance is to have a lower deductible
False
T/F:The main difference between a defined-benefit plan and a defined-contribution retirement plan is the tax deduction for the defined-contribution plan
False
Married Social Security Benefits
The one which larger benefits should be taken, and the other one should take half of the larger benefits.
Social Security is a system in which current workers pay taxes that are used to pay current retriees' benefits. How is Social Security funded?
payroll taxes up to a salary cap
real return formula
real return = nominal return - inflation rate
To determine your estate's net worth, you would
subtract the amount of your estate's liabilities from the amount of your estate's assets
save income formula
tax bracket x income amount
When it comes to actively managed mutual funds, Sethi believes that professional fund managers
tend to underperform the market
Earnings multiple approach
annuity PMT = (0.7 - 1 family member living + 0.04 for additional family members living) x Income of deceased use PV formula
Maximum amount of tax-free gift from estate
14000
Renter's insurance policy from Allstate covers
A stolen laptop from car, apartment (after paying the deductible). Medical bills of injured that your pet was liable for
Finance charges (interest charges) formula
APR/12 * average daily balance
Is moral hazard more likely to be an issue with life insurance or auto insurance?
Auto insurance
Why do Life Insurance Agents recommend cash value insurance policies for everyone?
Because they pay a higher commission
Relationship between various interest rates
Interest rate < Bank's APR < Effective APR
Which of the following statements is true regarding Social Security retirement benefits?
It attempts to replace 42% of your average earnings Once you start collecting Social Security Benefits, your payments are adjusted for inflation Some people's benefits may be taxed.
How is the size of a person's Social Security retirement benefits determined?
It depends on the number of credits earned in a person's lifetime, the average level of earning over a person's lifetime, the number of years a person has paid Social Security taxes.
What strategy should you use to maximize your after-tax income in the future?
Maximize the contribution to your Roth IRA and put the rest in a regular investment account with no tax advantages
Estate tax liability on death
No estate taxes owed ( assuming no money or gifts)
PPO formula
Pay deductible, split the coinsurance provision between insurance company and you.
Which factor carries the most weight in your FICO scores?
Payment History ( whether you have made late payments)
Patient Protection and Afforadble Care Act
Requires individuals to pay a fine if they do not health coverage. Allows children under age of 26 to be covered by their parent's plan. Requires insurance companies on the exchange sites to cover pre-existing medical conditions.
Flexible spending formula
Save income + Fica taxes
For a new car such as a Honda Civic, about what price should you expect to pay?
The dealer's invoice price
T/F: A key disadvantage of a flexible spending plan is that you may lose any money not spent
True
T/F: Life insurance agents receive a higher commission from selling a cash value policy than they do from selling a term policy
True
T/F: One way to lower the premiums you pay on your insurance is to have a higher deductible
True
T/F: Trusts are much more difficult to challenge in court than are wills which is one thing that makes them more attractive
True
T/F: With a PPO, it is much more expensive to go to out of network healthcare providers
True
T/F:A person may have a 401k and a Roth IRA plan open at the same time
True
In California, what characteristics will affect the cost of your car insurance?
Your driving record, the make and model of your car, where you live, and number of miles you drive per year.
future price formula
future price = current price x (1+inflation rate) ^ years
The benefits of an HMO are that
less expensive than PPOs encourage a relationship with a primary care provider
point
one percent of the amount financed with the mortgage
Life cycle funds
try to tailor their holdings to the investor's individual age and risk tolerance.