personal finance multiple choice

Expanding your comfort zone is part of the "continuous self-improvement" you should embrace throughout your life. Persons who possess larger comfort zones have been shown to be, on average, more financially successful in life. ______ TRUE ______ FALSE

true

When purchasing a home (which we assume you will finance with a mortgage), which of the following should you and/or your bank obtain, in preparation to "closing" on the home purchase? I. General home inspection report (covering roof, appliances, electrical systems, looking for anything broken or which is a safety issue, etc.) 2. Wood-destroying organisms inspection report (i.e., termite inspection report) 3. Radon gas inspection report 4. Survey 5. Agreement to limit brokerage fees to 6% total 6. Commitment for an owner's policy of title insurance FOR YOUR ANSWER, CHOOSE ONE OF THE FOLLOWING: ______ I, II, IV, and V only ______ I, II, III, IV and VI only ______ I, III, IV, and V only ______ I, III, IV, V and VI only ______ I, II, III, IV, V and VI

1, 2, 3, 4, 6

While many younger persons have been told that debit cards are better, as you cannot overspend using them, what are two reasons credit cards might be better?

1. More rewards programs exist with credit cards 2. If an unauthorized use occurs, federal consumer protection laws are a bit stronger for credit cards. With debit cards, it can take weeks or months to get the money back into your account. With credit cards, the transaction is usually just cancelled, provide you report it right away?

You and your spouse have decided to start a family (i.e., you will have children). You go to see an estate planning attorney. Name the five documents, in the space below, that you should you obtain as part of a comprehensive estate plan.

1. REVOCABLE LIVING TRUST 2. POUROVER WILL 3. DURABLE (FINANCIAL) POWER OF ATTORNEY 4. LIVING WILL 5. DESIGNATION OF HEALTH CARE SURROGATE (A.K.A. DURABLE POWER OF ATTORNEY FOR HEALTH CARE)

The financial costs of raising a child from birth to age 18, including housing ($66,000 estimated total), food, transportation, clothing, health care, child care, education, and misc. expenses, is estimated at: ____ $120,000 ____ $230,000 ____ $350,000 ____ $420,000

230,000

The fixed interest rate (for the entire term of a loan), for federal student loans (undergraduate loans) taken out in the 2021-2022 academic year, is: _____ 2.75% _____ 3.73% _____ 6.52% _____ 7.99%

3.73

A "very good" FICO score ranges from (select one): ____ 300 to 580 ____ 580 to 670 ____ 670 to 740 ____ 740 to 800 ____ 800 to 850

740-800

$2 million of personal umbrella insurance is often recommended to persons that possess significant assets, in order to guard against: (CHOOSE THE BEST ANSWER) ______ (A) liability claims against you, should you be at fault due to a guest in your home slipping and falling on a wet floor ______ (B) liability claims against you from accidents involving umbrellas, which are quite common ______ (C) liability claims against you, should your business file bankruptcy ______ (D) liability claims, should you fall down stairs at your own home

A

In the above example (in question 6), and assuming as a result of future raises (in 2026 and later years) that within five years you will be making $140,000 in salary each year, if you choose to contribute to a 401(k) account during 2025, your employee contribution should be placed in: ______ (A) a Roth 401(k) account ______ (B) a traditional 401(k) account

A

The three major tax benefits of Health Savings Accounts are: (CHOOSE THE BEST ANSWER) _____ (A) contributions to the account by you are tax-deductible, earnings grow tax-deferred within the account, and if used for medical expenses then the distributions from the account are tax-free _____ (B) contributions to the account by you are tax-deductible, earnings grow tax-deferred within the account, and if the funds in the account are then used for any purpose relating to health care or to pay the expenses of child care then the distributions from the account are tax-free _____ (C) contributions to the account by your employer (but not by you) are tax-deductible, earnings grow tax-deferred within the account, and if used for medical expenses then the distributions from the account are tax-free _____ (D) contributions to the account by your employer (but not by you) are tax-deductible, earnings grow tax-deferred within the account, and if the funds in the account are then used for any purpose relating to health care or to pay the expenses of child care then the distributions from the account are tax-free

A

What does "annual percentage yield" mean, and why is this important to utilize when comparing different rates quoted to you on savings accounts or certificates of deposit?

APY takes into account the effect of compound interest - i.e., whether the interest is compounded daily, weekly, monthly, or annually. APY is used to compare the rates on savings accounts, CDs, etc.

Assuming you are age 22 and saving for your future retirement (in 30 years or longer), then the best method of investing for this purpose is to: (Choose the best answer) ______ (A) invest in Bitcoin, other cypto-currencies, and "meme" stocks (such as Gamestop) ______ (B) invest in low-cost multi-factor stock mutual funds or ETFs, with an allocation to U.S. stock markets, foreign stock markets, and foreign emerging markets, and with a small allocation (if any) to real estate and to a short-term, high-quality bond fund ______ (C) invest in a diversified portfolio consisting of 40% publicly traded REITs, 30% hedge funds that have limited their fees to not greater than "1.5% and 15," and 30% to a low-cost commodities index fund ______ (D) buy well-researched individual growth stocks, such as Tesla, Apple, Microsoft, and Facebook common stock, and hold onto them until retirement ______ (E) invest in higher-fee stock mutual funds, given that the greater the fees, the greater the expertise applied in picking stocks_ _____ (F) invest in Bear's "Magical Mystery Investment Company" (Note - this is not the correct answer!)

B

You have graduated, and you are saving in your retirement account at work $500 per month. Which of the following is most appropriate for you to invest in, and why? Note that the funds you are saving are intended to be utilized during your retirement, which is 40 years from now. A. Shares of Apple common stock B. A stock mutual fund, owning 3,000 different stocks of publicly traded companies from across the United States PREFERABLY, A MULTI-FACTOR STOCK MUTUAL FUND OR ETF C. A bond issued by Ford Motor Company, paying 5% annual interest, and having a maturity date of June 2045 D. A bond mutual fund, owning very safe U.S. Treasury bonds, which have an average yield (interest rate) of 0.4%.

B

Assume you graduate from WKU and earn $70,000 a year. What percentage will be withheld from your paycheck for FICA taxes (Social Security and Medicare taxes, combined)? (CHOOSE THE SINGLE RIGHT ANSWER:) _____ A) 5.4% _____ B) 2.4% _____ C) 7.65% _____ D) 5.65% _____ E) 5.35% _____ F) 0.00%

C

Which of the following statements is most true? __________ (A) If you graduate with federal student loans, you should quickly consolidate them into a private debt consolidation loan, in order to lower your payments __________ (B) If you graduate with federal student loans, the federal government permits you to refinance the loans with the federal government; you will also be able to secure for yourself a lower interest rate - if the interest rate then charged to new student loans by the federal government is lower __________ (C) If you graduate with federal student loans, you should avoid any attempts by private banks or other private lenders to consolidate your federal student loans __________ (D) all federal student loans taken out prior to May 1, 2022 have now been forgiven, by President Biden __________ (E) a federal unsubsidized loan is better than a federal subsidized loan __________ (F) the public student loan forgiveness program is available to borrowers of both private student loans and public student loans

C

Assume you make $60,000 annually at your job, and that your marginal combined federal/state/local income tax rate is 18%. Assume further that you expect to be in a higher combined marginal tax bracket in later years, including during your retirement years. Assume you have contributed $4,000 to a Roth 401(k) account. Assume your employer has already matched your 401(k) employee contribution, up to the maximum amount of the employer match, and has placed $4,000 into your traditional 401(k) account. Assume that you desire to save an additional $3,000 a year, for purposes of your future retirement. Which is the best type of account for this additional $3,000 you desire to save and invest? (CHOOSE THE BEST ANSWER) ______ (A) traditional 401(k) account ______ (B) Roth 401(k) account ______ (C) traditional IRA account ______ (D) Roth IRA account

D

Einstein called this concept the "Eighth Wonder of the Modern World." In essence, the application of this concept demonstrates that those who save and invest earlier in life (such as when starting a full-time job, at age 23) will likely accumulate a great deal more than those persons who don't begin to save until they are age 35. What is this concept that Albert Einstein referred to?(CHOOSE THE BEST ANSWER) __________ (A) crystal ball __________ (B) diversification __________ (C) stock market investing __________ (D) compounding __________ (E) slippery slope

D

INDIVIDUAL OR GROUP HEALTH INSURANCE? Assume: You are hired to work in a corporation, following graduation from WKU. Your annual salary is $60,000 a year. You will reside in, and work within, the State of Kentucky. You are age 23 and your health is excellent. You possess a $3,000 personal cash reserve. You are single. Your employer offers you a choice of four group health insurance plans. Which is the best health insurance plan or other choice for you? (CHOOSE THE BEST ANSWER) ______ (A) A low-deductible Medicare Part A, B and D plan, with a $230 per month combined monthly premium, and a $1,100 out-of-pocket deductible, $25 co-pays thereafter, for a maximum annual out-of-pocket expense each year of $2,500 ______ (B) a low-deductible group health insurance plan with a $1,000 annual deductible, with co- pays and co-insurance amounts after the deductible is met, with a maximum out-of-pocket of $3,600 per year; the employee portion of the monthly group health insurance premium is $140 per month ______ (C) a low-deductible group health insurance plan with a $1,000 annual deductible, with co- pays and co-insurance amounts after the deductible is met, with a maximum out-of-pocket of $3,600 per year; the employee portion of the monthly group health insurance premium of $140 per month; with the ability for you (the employee) to contribute to a Health Savings Account up to $3,650 per year year ______ (D) a high-deductible group health insurance plan with a $2,800 annual deductible, with co- pays and co-insurance amounts after the deductible is met, with a maximum out-of-pocket of $4,700 per year; the employee portion of the monthly group health insurance premium of $45 per month; with the ability for you (the employee) to contribute to a Health Savings Account up to $3,650 per

D

When you begin efforts to start a family, and before getting pregnant, you and your spouse have both decided to obtain life insurance. Your gross salary is $50,000 per year, and your spouse's gross salary is $50,000 per year. Which of the following statements is most true? ______ (A) you should obtain a cash value life insurance policy, such as a whole life insurance policy, so that you can not only have a death benefit but also so that you can accumulate a cash value within the life insurance policy over time ______ (B) the amount of life insurance you possess, which insures against the loss of your own life, should be no more than five times your annual salary ______ (C) since the Federal Government provides social security payments to children under the age of 18, if one or both parents should die there is no need for life insurance ______ (D) you should obtain term life insurance, for a term of either 25 or 30 years

D

In the above example (in question 6), your marginal income tax rate is: _______ (A) 0.00% _______ (B) 5.63% _______ (C) 10.00% _______ (D) 11.27% _______ (E) 12.00%

E

While a "debit card" is often recommended to college freshmen, in order to avoid improper use of credit cards (i.e., not paying it off in full each month), credit cards are better in which ways? I. Credit cards have a little bit better protection under federal law, should someone use your credit card without authorization, compared to debit cards. II. Credit cards have more and better "rewards" (earning of points, or cash rebates, for each dollar spent) III. Credit cards don't "block off" an amount in your bank account, when you go to use them for certain services (such as registering at a hotel, or purchasing gas); when you use a debit card can often "block off" an amount in your bank account for many hours, or several days. IV. Credit cards permit you to obtain loans (in the form of cash advances on the credit card) at very low interest rates Credit cards permit you to not pay off the balance each month, and you are only charged a very low interest rate on the balance carried over to the next month V. Credit cards permit you to obtain loans (in the form of cash advances on the credit card) at very low interest rates Credit cards permit you to not pay off the balance each month, and you are only charged a very low interest rate on the balance carried over to the next month

I, II, III

Your credit score (the most common type of which is called a "FICO score") affects which of the following: I. Your ability to secure certain types of jobs II. The interest rate charged to you on new car loans III. The interest rate charged to you on your federal student loan IV. The interest rate charged to you on a mortgage for the purchase of a home V. The amount of your car insurance premiums

I, II, IV, V

Traveler's checks have largely been replaced by

credit cards

What percent of your gross income should you save in order to achieve financial freedom at a reasonable age (i.e., permitting you retire, should you choose to do so, between ages 55 and 65)? _______ (A) 4% to 5% _______ (B) 5% to 8% _______ (C) 12% to 18% _______ (D) 20% to 26% _______ (E) 23% to 29% _______ (F) 30% to 35%

c. preferably 18

Most persons negotiate the purchase price of the car they desire to buy. Some persons (as we witnessed in class) are very good at negotiation. But most persons don't enjoy it. If you desire to avoid negotiating yourself, what alternatives exist relating to the purchase of a new car?

car buying service

Your first full-time job after college provides you with the opportunity to contribute to a 401(k) plan. If you place into the 401(k) account, as an "employee elective contribution," 6% of your income, your employer will match it (1% employer contribution for each 2% of the employee elective contribution). Which of the following is most true: _______ (A) you should contribute 6% of your gross income to the 401(k) account, which will secure for you a match from the employer of 3% _______ (B) you should only contribute 3% of your gross income to the 401(k) account, which will secure for you a match from the employer of 6% _______ (C) you should contribute 8% of your gross income to the 401(k) account, which will secure for you a match from the employer of 4% _______ (D) you should contribute 4% of your gross income to the 401(k) account, which will secure for you a match from the employer of 8% _______ (E) you should contribute 8% of your gross income to the 401(k) account, which will secure for you a match from the employer of 16%

a

Dr. Bear's favorite FOUR words in investing are: (CHOOSE ONE) _____ buy low, sell high _____ no crystal balls work _____ diversification is what matters _____ speculate, gamble when young _____ mutual and exchange-traded funds

a. buy low sell high

What is the most important single word investors should know?

diversification

To better achieve and maintain long-term memory formation and recall, a combination of learning techniques has been shown to be more effective, including: spaced interval learning, interleaving, and retrieval practice - along with both the proper amount of sleep and consistent sleep times. ______ TRUE ______ FALSE

true

Difficult to earn. When betrayed, difficult to impossible to fully restore, in both business and personal relationships: (CHOOSE THE BEST ANSWER) _____ diversification _____ sleep _____ 9 hours 15 minutes _____ trust

trust

Money orders have largely been replaced by

venmo