final - finance chapter 10

Which of the following refers to owning property equally with another person and each of you has the rights of survivorship? a) Community property. b) Joint tenancy with right of survivorship. c) Fee simple. d) Tenancy by the entirety.

b) Joint tenancy with right of survivorship.

Which of the following refers to legal documents that allow a named person, often an agent, to act on your behalf? a) Will. b) Power of attorney (POA). c) Living will. d) DNR.

b) Power of attorney (POA).

Why do some dislike the probate process? a) Because probate is public and difficult to maintain privacy for the deceased person and his or her heirs. b) The court caps the amount a personal representative can earn to $25 per day. c) The probate process makes it difficult to execute a will efficiently. d) All of these answer choices are correct.

a) Because probate is public and difficult to maintain privacy for the deceased person and his or her heirs.

Roger is currently age 68. He is creating a retirement income plan. As such, he needs to estimate his future required distributions from his retirement plans. Help Roger by telling him when he must begin taking distributions from his Roth IRA. a) He never needs to take a distribution. b) He must begin minimum distributions when he turns age 70½. c) He should already be taking distributions because he is older than age 59½. d) He can wait until he begins taking Social Security benefits, which is currently age 70.

a) He never needs to take a distribution.

Scenario: Lane, age 43, is self-employed and started saving for retirement 8 years ago using a Roth IRA. He liked the idea of someday taking distributions on a tax-free basis. Unfortunately, he has recently run into some business troubles and needs to raise cash quickly. He would like to take a distribution from his Roth IRA immediately. Question: As long as he only takes out his contributions -- not the account earnings -- the distribution will be tax- and penalty-free. a) true b) false

a) true

A legal document that dictates your desire to distribute your property after death is called a: a) will. b) clause. c) gift. d) title.

a) will.

Which of the following requires financial professionals to act in the best interest of the client at all times and to fully disclose any and all conflicts of interests? a) Suitability standard. b) Fiduciary standard. c) Commission. d) Conflict of interest.

b) Fiduciary standard.

Xavier recently graduated from college with a degree in mechanical engineering. He currently makes $87,000 per year. He has aspirations to move up with his firm and eventually earn much more. If his plan works out, he will be paying more taxes sometime in the future. Which of the following retirement plan options should Xavier choose today? a) Treasury Direct IRA. b) Roth IRA. c) Rollover IRA. d) Traditional IRA.

b) Roth IRA.

Scotty and Kirk own a speedboat together. They are not related but have been friends since childhood. They own equal shares of the boat. When thinking about the future, Kirk would like to pass his share of ownership to his son, Leonard. How must Scotty and Kirk title the boat? a) JTWROS. b) Tenancy in common. c) Community property. d) Fee simple.

b) Tenancy in common.

In what ways are 401(k) plans, 403(b) plans, and 457 plans similar? a) They are identical except for the type of employer who may sponsor them. b) They each provide employees tax-advantaged opportunities to save for retirement. c) They are each primarily funded by employer contributions. d) They are all considered pension plans.

b) They each provide employees tax-advantaged opportunities to save for retirement.

Somerset, age 43, is self-employed and started saving for retirement 8 years ago using a Roth IRA. He liked the idea of someday taking distributions on a tax-free basis. Unfortunately, he has recently run into some business troubles and needs to raise cash quickly. He would like to take a distribution from his Roth IRA immediately. Which of the following statements is true for Somerset? a) The distribution is not allowed, unless he is purchasing a new home or paying for a child's education, before age 59½. b) Any distribution will be deemed a return of earnings and principal; this means that his contributions will be subject to tax, while the earnings will be subject to a 10% penalty. c) As long as he only takes out his contributions—not the account earnings—the distribution will be tax- and penalty-free. d) Because he is younger than age 59½, any distribution will be subject to a 10% early withdrawal penalty.

c) As long as he only takes out his contributions—not the account earnings—the distribution will be tax- and penalty-free.

What is the difference between defined benefit plans and defined contribution plans? a) Defined contribution plans require employees to save less for retirement, whereas defined benefit plans require employees to save more. b) Defined benefit plans and defined contribution plans are both pension plans. c) Defined benefit plans guarantee payments to retirees, whereas defined contribution plans make contributions to retiree accounts without making guarantees. d) Defined contribution plans are pensions and defined benefit plans are not.

c) Defined benefit plans guarantee payments to retirees, whereas defined contribution plans make contributions to retiree accounts without making guarantees.

Which of the following refers to someone who died without a will? a) Testate. b) Contract. c) Intestate. d) Title.

c) Intestate.

Which of the following refers to the court-supervised process of distributing assets and paying debts after someone's death? a) Transfer on death. b) Payable upon death. c) Probate. d) Title.

c) Probate.

Mark, age 56, is a single man and died intestate. In addition to household and personal items, he had $450,000 in 401(k) retirement assets. Who will receive the 401(k) plan? a) Whomever Mark noted in his will. b) His brothers and sisters, in equal shares, or his parents. c) Whomever Mark listed as the account beneficiary. d) Whomever the state where he died indicates through probate statute.

c) Whomever Mark listed as the account beneficiary.

Which of the following is true regarding 401(k) plans? I. 401(k) plans are primarily funded by employees. II. 401(k) plans are primarily funded by employers. III. Investments grow tax-deferred in 401(k) plans. IV. Employers may provide matching contributions to 401(k) plans. a) I, II, and IV only b) I and II only c) I, II, and III only d) I, III, and IV only

d) I, III, and IV only