Bus 17 Quiz (13-19+bonuses)

Which legal document authorizes someone to act on your behalf?

Power of attorney

An investor who thinks the market price of a stock will increase during a short period of time may decide to use the ____________ technique to borrow money to purchase more shares of stock than they can currently afford.

margin

A request that a stock be purchased or sold at the current price is called a ___________ order.

market

Which bond will likely provide interest that is not taxed by the Federal Government.

municipal bond.

A municipal bond that is repaid from the income generated by the project financed by the bond is called a:

revenue bond

A trust established by your will that becomes effective upon your death is called:

testamentary trust

A government security issued in minimum units of $100 with maturities that may be as long as one year is called a

treasury bill.

At what age will a typical college student retire and collect full Social Security Benefits?

67

Janine is 25 and has a good job at a biotechnology company. She currently has $5,000 in an IRA, an important part of her retirement nest egg. She believes her IRA will grow at an annual rate of 8 percent, and she plans to leave it untouched until she retires at age 65. Janine estimates that she will need $875,000 in her total retirement nest egg by the time she is 65 in order to have retirement income of $20,000 a year (she expects that Social Security will pay her an additional $15,000 a year). How much will the $5,000 in Janine's IRA be worth when she needs to start withdrawing money from it when she retires?

$108,625 FV factor for 8% 49 years is 21.725 21.725*5,000= 108,625

Barry and his wife Mary have accumulated over $4 million during their 45 years of marriage. They have 3 children and 5 grandchildren. How much could they give in 2019 to their children and grandchildren without paying any gift taxes (assuming they don't want to give any money to their children's spouses)

$240,000 = [(3*15,000) + (5*15,000)] x 2

Assume you invested $2,000 each year into an investment which earned an average 5% annual rate of return. In 10 years, how much would the investment be worth?

$25,155.79 Use Future Value of Annuity = 2000*[(1.05^10 - 1)/0.05] https://financeformulas.net/Future_Value_of_Annuity.html

In 1978 Juan bought 50 ounces of gold for $25,000 as protection against rising inflation. He sold 40% of the gold in 1980 at a price of $800 an ounce. Juan sold the rest in 1982 when the price was $400 an ounce. What was Juan's profit or loss on the gold (total dollar profit) (If a loss, remember to write in the - sign)

$3,000 20oz*800=16,000 30oz*400=12,000 = 28,000 - 25,000 = 3,000

Assume that you purchased a corporate bond with a face value of $1,000. The interest rate is 4.10 percent. What is the dollar amount of annual interest you will receive each year?

$41 =1000*0.041

Three years ago you purchased a Heinz corporate bond that pays 3.125% annual interest. The face value of the bond is $1,000. What is the total dollar amount of interest that you received from your bond investment over the three-year period? Write your answer to 2 decimal places

$93.75 =3*[1000*0.03125]

Joel and Rachel are both retired. Married for 50 years, they've amassed an estate worth $240 million. The couple has no trusts or other types of tax-sheltered assets. If Joel or Rachel dies this year, what is the minimum amount of federal estate tax that would have to be paid, assuming that the estate is taxed at 45 percent rate?

0 Because of unlimited marital deduction, interspousal transfer of assets aren't subject to estate taxes regardless of amount

Gene and Dixie, husband and wife (ages 35 and 32), both work. They have an adjusted gross income of $50,000, and they are filing a joint income tax return. What is the maximum in IRA contributions they can make?

12,000 (6,000 per person in 2020)

Assume your home is assessed at $200,000. You have a $150,000 loan for 30 years at 6 percent. Your property tax rate is 1.5 percent of the assessed value. You are in the 28% tax bracket. How much will owning this home lower your federal income taxes by?

12,000*0.28 = $3,360

As a stockholder in Bozo Oil Company, you receive its annual report. In the financial statements, the firm has reported assets of $9 million, liabilities of $5 million, after-tax earnings of $2 million, and 750,000 outstanding shares of common stock. What is the Earnings Per Share for your stock?

2.67 = Net earnings / outstanding shares = 2,000,000 / 750,000

In March, stockholders of 3D Systems Corporation approved a two for one stock split. After the split, how many shares of 3D Systems stock will an investor have if she or he owned 230 shares before the split?

2/1 = 2 (ratio) 2*230 = 460 460

Jackson Metals, Inc. issued a $1,000 convertible corporate bond. Each bond is convertible to 40 shares of the firm's common stock. What price must the common stock reach before investors would consider converting their bond to common stock?

25

Assume that you are in the 30 percent tax bracket and you purchase a 3.35 percent tax-exempt municipal bond. Use the formula presented in this chapter to calculate the taxable equivalent yield for this investment.

4.79

Probate and administration costs of your estate may run between __________ percent of your estate.

5 to 8

Betty and John Martinez own 220 shares of ExxonMobil common stock. ExxonMobil's annual dividend is $2.28 per share. What is the amount of the dividend check that the Martinez couple will receive for this year?

501.6 = 220*$2.28

Assume that at the beginning of the year, you purchase an investment for $7,100 that pays $80 annual income. Also assume that the investment's value has increased to $7,590 at the end of the year. What is your rate of return?

8% 7590-7100=490 490+80=570 570/7100=0.080 - Subtract the investments initial value from the investment appreciated value - Add the investment income to the amount calculated above - Divide the net investment income and change in value by theinvestment's initial value

Felice bought a DUPLEX apartment at a cost of $150,000. Her mortgage payments on the property are $940 per month. Her real estate taxes total $1,440 per year, and insurance costs $900 per year. She estimates that she will spend $3,400 each year PER apartment for maintenance and repairs. The tenants will pay for all utilities. What monthly rent must she charge for each apartment to break even?

940+(1440/12) +(900/12) + ([3400*2]/12) =940+120+75+566.67 =$850.83 per month

Which of the following statements is false? Once an investment plan is set, your investments should still change periodically. Your age is a factor that should be considered when establishing an investment program. Asset allocation is the process of spreading your assets among several different types of investments. How long of a time you have to invest is a major factor to consider when choosing investment alternatives Asset allocation eliminates the risk associated with an investment program

Asset allocation eliminates the risk associated with an investment program

Which one of the following investments would offer the greatest potential for growth? Preferred stock Common stock Government bonds Line of credit Corporate bonds

Common stock

In which of the following employer pension plans must the employer set up an individual account for each employee?

Defined-contribution

Which one of the following investments would offer the greatest potential for predictable income? Government bonds Negotiable accounts Antique collectibles Mutual funds Stocks

Government bonds

Which of the following expenses will most likely be lower during your retirement?

Savings

What is the most widely used source of retirement income?

Social Security

Which type of investment would have the most risk?

Speculative investment

Which of the following provides inflation protection?

TIPS

A handwritten will that you prepare yourself is called a(n):

holographic will.

In what type of annuity is the money you pay invested in common stocks or other equities, and the income you receive dependent on the investment results?

Variable annuity

A stock that follows the business cycle of advances and declines in the economy is called a(n) ____________ stock.

cyclical

Diversification in direct real estate investments is:

difficult and expensive.

Jane Calvert owns a condominium at the beach which she rents out to vacationers most weekends. What type of investment does she hold?

direct investment in real estate

When you purchase an equal dollar amount of the same stock at equal intervals, you are using

dollar-cost averaging

In general, the price of gold:

fluctuates daily.

Which one of these properties that Stuart owns would be considered commercial real estate? a. fourplex that he rents to college students b. all of the other answers c. 100 acres of land in the mountains that he hopes to subdivide and sell as residential lots d. 4 bedroom home that he lives in

fourplex that he rents to college students --Because commercial is defined by the tenant or occupation, all others are either vacant or primary residence

A person who assumes the responsibilities of providing the children with personal care and of managing an estate for them is called a(n)

guardian

A serial bonds will:

have multiple maturity dates