Financial Planning
Benito placed $11,500 in a mutual fund with a 3.5% front-end load. How much money did he actually invest in the fund after accounting for the load?
$11,097.50
The maximum amount of assets (in $) that one person can pass at death with NO federal estate taxes is:
$11.58 million
You just won the lottery and you will receive $30,000/year for the next 5 years. You feel that your opportunity cost of money is 6% (your desired rate of return). What lump sum would you rather have today rather than waiting 5 years to collect all of your winnings? (Beginning of period)
$133,953
Tony has taken out a $15,000 student loan. If the interest rate on this loan is 5%, compounded monthly, the term of the loan is 10 years, how much will be Tony's monthly payments on the student loan?
$159.10
You own a car that is worth $20,000 today. You still owe the bank $4,000 on the auto loan you used to purchase the car. How much "net worth" or "equity" do you have in your car?
$16,000
Which of these insurance deductibles would result in a lower cost insurance policy?
$2,000
What is the present value of an ordinary annuity of $500 a year for 6 years assuming an interest rate of 9%?
$2,242.96
Terrel is considering buying a car for $20,500 that he can finance for 5 years at 6%. How much will Terrel's monthly payment be if he buys the car?
$3.96.32
Toby just accepted a job offer that pays a gross annual salary of $40,000. Using Alex's rule of thumb, what is a good estimate of Toby's take-home pay?
$30,000
You are in the 24% marginal income tax bracket. You have the option of choosing a $1,000 tax deduction on Line 8a (Form 1040) or taking a $300 tax credit on Line 13a (Form 1040). Which option will give you the most tax savings?
$300 tax credit
Millie invested $2,500 in her retirement account today. Her account earns an average rate of return of 7% compounded annually. How much will she have in her account after 15 years? (Beginning of Period)
$6,898
How much will Zeke have at the end of 7 years if he can earn 6% compounded quarterly on his initial $5,000 investment?
$7,586.11
Jose just borrowed $3,500 to buy a used car. His loan is for 4 years with monthly payments. The interest rate on the loan is 6% APR. Calculate his monthly loan payments. (End of Period)
$82.20
What is the value of a bond that never matures that will generate an annual coupon payment of $100 assuming your required return is 12%?
$833.33
What is the market price of a $1,000 face value bond quoted at 97 ½%?
$975.00
Once you have graduated and taken a job you may be able to claim your parents, grandparents, or any other relatives as dependents on your 1040 tax form. However, they must have lived with you for at least 3 months out of the year.
False
Through student loan __________, interest continues to accrue but you do not have to make payments.
Forbearance
Collateralized loans, or secured loans, will __________ interest rate relative to unsecured loans.
Have a lower
All other things equal, a corporation will pay a __________ coupon rate on __________ bonds.
Higher, higher risk
Which of the following health insurances are contained in "major medical" health care insurance?
Hospital insurance and surgical insurance
An investment vehicle that pools money from a number of investors and then invests those funds in stocks, bonds, or some financial asset is known as a(n):
Mutual fund
A description of a specific mutual fund that lists the fund's objectives, risks and other information is known as a(n):
Mutual fund prospectus
If a publicly traded firm's management behaves unethically and the firm is sued and a large legal liability is incurred investors who own common stock in the firm can lose:
Only the amount of their investment
Federal student loans that are subsidized mean that the student does not have to:
Pay loan interest while still in school
A company may elect to set aside money in a sinking fund that will be used to:
Pay off a bond issue at maturity.
What piece of advice might you give to someone for whom the act of saving is an afterthought?
Pay yourself first
Which of these is a decision factor you should use when evaluating different mutual fund investments?
Personal goals
Part D of your personal automobile policy covers:
Physical damage to your automobile
One of the benefits of a buy-and-hold investing strategy is that it:
Postpones capital gains taxes.
The interest rate that banks charge their most creditworthy customers for loans is known as the:
Prime rate
Chris is unable to attend the annual meeting of a corporation in which he is a shareholder. If he wishes to allow someone else to vote for him, he will need to sign a ______.
Proxy
An investment vehicle that pools investor funds and invests the proceeds in real estate or mortgages is known as a(n):
REIT
Which of these factors is not used to determine the cost of your personal automobile policy?
Race
Which of these factors will reduce your PAP insurance costs?
Raise your deductible
The final step of your financial planning process is what Alex referred to as "post mortem" or "autopsy". This is the stage where you:
Review your progress and revise your plans to reach your goals
A call provision gives the bond issuer the:
Right to force investors to sell the bond back to the firm
A local investment company is offering an investment that is supposed to earn an annual return of 20%. They claim there is a "significant possibility" of losing your money with this investment. This is an example of which Key Financial Principle?
Risk-return tradeoff
The __________ can be a useful rule of thumb when trying to determine how long it takes for some amount to double.
Rule of 72
One framework used to evaluate a firm by looking at opportunities, threats, weaknesses and strengths is known as:
SWOT analysis
Which statement best describes the principle of "pay yourself first"?
Save or invest 5 - 10% of your paycheck (or as much as you can afford) as soon as you receive it
Which of these is an example of an intermediate -term goal for a person that is 22 years old?
Saving for a down payment on a house you intend to buy in 8 years
Mutual funds that typically invest at least 2/3rds of their assets in a specific industry are known as:
Sector funds
Retirees in the lowest income brackets receive the majority of their retirement income from:
Social security
Auto liability insurance that allows for separate coverage limits for bodily injury and property damage is known as:
Split-limit coverage
Which of the following is one of the top bond rating firms?
Standard and Poor's
A firm's management may elect to enter the stock market and buy shares of its own stock. This buyback is also known as a:
Stock repurchase
Filing for bankruptcy does not eliminate:
Student loan debt
Maiko lost her job and she was forced to sell a rental property because she did not have other funds (liquid, emergency, etc) available to meet her financial obligations. What financial principle best applies to this situation?
Stuff happens, the importance of liquidity
Social Security is designed to:
Supplement your retirement income
After determining your goals a financial planner would recommend your first investing step should be to:
Take full advantage of employer matches to retirement accounts.
The most attractive feature of a municipal bond is:
Tax exempt status
Adjustable-rate preferred stock is a type of preferred stock:
That pays dividends that vary with the market rate of interest
The behavioral tendency to consider previous costs or cash outlays when making a decision about whether to incur additional costs is called:
The sunk cost effect
The concept that a dollar received today is worth more than a dollar received at some point in the future is known as:
The time value of money
Two of the main reasons to have a will are:
To name the executor of your estate and the guardian(s) of your minor children
While each person's financial plan is different, the following factors should be incorporated into all sound financial plans: flexibility, liquidity, protection, and maximizing what is left of your earnings after you pay your taxes.
True
Which of these is a primary component of a personal automobile policy?
Uninsured motorist coverage
Which of following is a legal and suggested method of reducing the annual federal income taxes for a married couple?
Using the larger of your standard deduction or itemized deduction
A financial advisor will typically ask you 4 main questions to help measure your current financial condition. Which of the following are important questions to help measure your financial condition?
What do you own and what do you owe?
Jose and Katia have a Debt Payment/Gross Income ratio of 38%. Using Doc White's red, yellow, & green rating system, how would you rate their Debt Payment/Gross Income ratio?
Yellow - it's not bad, but could be better
Which of these groups pays the most for automobile insurance?
Young single males
Your financial situation is insolvent when
Your assets are less than your liabilities.
Cousin Brucie has a classic car (1963 Corvette) that is currently worth $60,000. Brucie expects the car to increase in value by 10% annually. How much should this car be worth after 15 years? (beginning of period)
$250,000-$255,000
Your taxable income (line 11b of the form 1040) is $45,000. Your filing status is Married Filing Jointly. Using the 2019 Income Tax Rate Schedule, please calculate the amount of income taxes you will owe for the year. (use your 2019 Income Tax Rate Schedule to answer this question)
$5,012.00
What are the main reasons that people choose to purchase life insurance?
-to provide living income for their survivors to help get them through the transition period -To pay off their debts so their survivors won't have to continue making loan payments -To pay for their financial expenses (burial,etc)
Walmart Stores Inc. just declared a 2-for-1 stock split. Assuming you own 800 shares of Walmart stock that are currently selling for $76 a share, how many shares will you own after the split and how much should the shares be selling for in the secondary market?
1,600; $38
The financial principle of "waste not, want not" can be explained as (all of the above)
1. The fastest method of improving your financial condition is to reduce your spending 2. Use your money and assets wisely, make them last, and you will save yourself money over time 3. Comparison shop (go to at least 3 stores) to make the wisest purchase decision
You have the opportunity to invest $5,000 today in a fund that you hope will be worth $10,000 after 6 years. What approximate annual rate of return are you earning on this investment? (Beginning of Period)
12%
Kavita and Raj use the married, filing jointly tax status. Their combined taxable income is $180,000. What is the appropriate marginal tax bracket (%) for them to use when they are trying to determine the after-tax returns on their investments? (Use the 2019 Income Tax Rate Schedule to answer this question)
24%
Company X pays a dividend of $3 per share and it is currently trading at $80.50 per share. What is the dividend yield for Company X?
3.7%
Rafael borrowed money using a home equity loan with an interest rate of 6.5%. What is the after-tax cost of this loan if he is in a 28% marginal tax bracket?
4.68%
A type of tax-deferred retirement plan offered by many large employers that allows employees to manage their own retirement plan is known as a:
401(k) plan
What percent of your gross income does Doc White recommend that you try to save and/or invest each pay period?
5 - 10%
What percent of your gross income does Doc White recommend that you try to save and/or invest each pay period?
5-10%
If you can invest $1,000 today and it will grow to be worth $1,350 over the next 6 years, what is the compound annual return you will earn on this investment?
5.1289%
For Americans born after 1960 the Social Security retirement age to receive full benefits is:
67
Individuals that are not self-employed will have a total of __________ withheld from the first $127,200 of gross salary in 2017.
7.65%
Mutual fund loads, or sales fees, can be as high as:
8.5%
How many years will it take you to accumulate $30,000 for a down payment on a house if you deposit $12,000 today and you expect to earn a 10% annual return on your investment?
9.6 years
Approximately __________ of all Americans are covered by Social Security.
95%
Which of these is considered to be a direct investment in real estate?
A rental house
A __________ is an investment plan that allows you to purchase additional shares in the same firm instead of receiving the dividend distribution.
DRIP
As the number of retirement savings options increases the participation rate:
Decreases
A traditional pension plan that pays a specific amount at retirement based on a formula payout is known as a:
Defined-benefit plan.
Which of the following types of health insurance are not typically paid for by your employer?
Dental and eye (vision) insurance
The first step in retirement planning is to
Determine what you want to do in retirement
The cost of your homeowner's policy can vary from region to region due to:
Differences in regional perils
Rasheed can afford a monthly car payment of $700 for 5 years at an annual interest rate of 6 percent. Which of the following is closest to the amount he will be able to borrow for a new car? Remember, loans are END of period.
$36,208
A(n) __________ fund will hold stocks, bonds and also preferred stock.
Balanced
Which of these is a leading cause of bankruptcy?
A major illness
Marcos invests $100 every month in an equity mutual fund. Some months his $100 buys more shares than others. This practice of purchasing a fixed dollar amount of some asset at equal intervals is known as:
Dollar cost averaging.
Old Doc White says that there are a couple of estate planning tools that everyone over the age of 18 should have. These two tools are:
Durable power of attorney & advance medical directive
ETFs can be bought and sold:
During normal trading hours just like a stock
How should Roth IRA or a 401(k) be listed on your balance sheet?
Retirement investment asset
Which of the following is can NOT be listed as an itemized expense on Schedule A?
Traditional IRA contributions made during the year
Current liabilities are those that can typically be paid off in full within 12 months.
True
One measure of a mutual fund's trading activity is the:
Turnover ratio
Which of these investments is an appropriate asset for a money market mutual fund to hold in its portfolio?
U.S. Treasury bills
In general, a dollar received today:
is worth more than a dollar received tomorrow.
Most states have for people who die without a will.
Intestacy laws
A mutual fund that does not charge any sales commission is called a:
No-load fund
How should a brokerage account that contains stocks and mutual funds be listed on your balance sheet?
Non-retirement investment asset
Most defined benefit plans are
Not adjusted for inflation
Under some __________ clause agreements, a lender can garnish your wages to satisfy the debt obligation.
Recourse
Diversifying your investments into different industries will __________ your overall level of portfolio risk.
Reduce
According to Doc White, what is the fastest way to improve your current financial planning?
Reduce your spending without hurting your lifestyle too much
How should a Roth IRA or a 401(k) account be listed on your balance sheet?
Retirement Investment Asset
Doc White gave you the "Babe Ruth Rule" for making better decisions. How does the Babe Ruth Rule apply to Step 3 of the Financial Planning Process?
Always develop 3 plans for achieving your financial goals
After you have evaluated your current financial position the second step in the personal financial planning process is to:
Establish some realistic goals
The first step in the personal financial planning process is to:
Evaluate your financial health
The only people who can be claimed as dependents on a 1040 tax form are spouses and children who have lived in your house for more than half of that tax year.
False
The "Death Tax" is an unfair estate tax that adversely impacts 98% of American families (Decedents).
False
True or False. You are in the 24% marginal tax bracket. You make a Roth IRA contribution of $5,000 for that tax year. This contribution will reduce your income taxes by $1,200 for the tax year.
False
True or False. Your goal for income tax management should be to minimize the amount of income taxes you pay each year.
False
You should try to minimize the amount of income taxes you pay rather than trying to maximize how much money you have left after you pay your income taxes.
False
You are trying to decide whether to use the $12,200 standard deduction or your itemized deductions (Schedule A) on your Form 1040, Line 9. Here is your information: Adjusted Gross Income $40,000 Medical Expenses $15,000 Interest on Student Loan $2,000 Interest on Home Mortgage $3,000 State and Local Income Taxes Paid $1,500 Charitable Gifts (in total) $1,000 Which deduction should you choose?
Itemized Deduction of $17,500
Rank the bonds from lowest risk to highest risk.
U.S. Treasury bonds, municipal bonds, corporate bonds
Sarah has $15,000 in monetary assets, $4000 in monthly living expenses, a $20,000 balance on her car loan, and $60,000 of equity in her house. What is her month's living expenses covered ratio?
3.75 months
The Dow Jones Industrial Average is a stock index that is based on the price movements of:
30 large industrial firms
How much will your monthly payment be if you purchase a home for $221,000 and you finance $200,000 for 30 years at 4.8%?
$1,049.33
Doc white told you to set a goal for your personal savings by the time you graduate. Your current monthly living expenses are $1,500 per month. What amount of money did Doc advise you to have in your savings account on the day you graduate?
$1,500 - $3,000
What it the present value of $2,000 that you expect to receive in 3 years assuming you could invest the money today and earn a 5% annual return?
$1,727.68
Elizabeth wants to have $500,000 saved for retirement in 20 years. Assuming she can earn an 8% annual return on her investments, how much will she need to save at the end of each of the next 20 years to accomplish her goal?
$10,926.10
Randy just invested $10,000 in a 5-year certificate of deposit (CD) that earns a return of 4% compounded quarterly. How much will he have in this CD at the end of 5 years? (beginning of period)
$12,200 - 12,300
Inflation represents a rise in prices over time - and that means your dollars won't buy as much in the future. As an example, assume that the average annual inflation rate is 3%. Your family currently has an annual living expense of $50,000. How much money will you need in 30 years to have the equivalent lifestyle that costs $50,000 today? (End of Period)
$121,363
Jana's home was recently appraised for $315,000 and she currently owes $161,000 on her mortgage. How much can Jana borrow using a home equity loan if the bank indicated they would loan up to 80% of the value of her equity?
$123,200
What is the future value of $2,000 in three years if you deposit it today in an account earning 4% per year?
$2,249.73
Your adjusted gross income (line 8b of the form 1040) is $150,000. Your filing status is Single. Your standard deduction (Line 9) is $12,200. Using the 2019 Income Tax Rate Schedule, please calculate the amount of income taxes you will owe for the year. (use your 2019 Income Tax Rate Schedule that we used in class to answer this question)
$27,246.50
D'Wayne wants to have $40,000 available in 5 years for a down payment on a house. His account will earn 7% compounded annually. How much money does D'Wayne need to deposit into his account today to reach his goal? (Beginning of Period)
$28,519
Your taxable income (Line 11b, Form 1040) is $170 comma 000170,000. Your filing status is Married Filing Jointly. Calculate the amount of federal income taxes you will owe for 2019.
$29,149
How much will you accumulate in an account where you deposit $800 a year at the end of the next 4 years if you can earn 3% annually?
$3,346.90
What is the present value of $4,000 that you expect to receive in two years assuming a discount rate of 8%?
$3,429.36
What is the value three years from now of $3,200 deposited today that will earn an annual return of 7%?
$3,920.14
Most students graduate from college with an average of $35,000 in student loans. Assume the interest rate on student loans is 7% and the loan will be paid back over a 10-year period. Calculate the monthly payment on a $35,000 student loan at 7% for 10 years. (End of period)
$350-450
Toby just accepted a job offer that pays a gross annual salary of $50,000. Using Alex's rule of thumb, what is a good estimate of Toby's take-home pay?
$37,500
Your parents want to place money in an account so that you can withdraw $200 a week for the next four years while you finish college and graduate school. If they place the money in an account that earns 4% interest, compounded weekly, how much do they need to place in the account so that the funds will be depleted in four years? (Assume that you will make the first withdrawal one week from today.)
$38,429
Jim is considering buying a car that costs $20,000 that can be financed for 5 years at 6% interest with no down payment. How much will Jim's payment be per month?
$386.65
Suppose that Jacob's assets include a motorcycle worth $12,000 and a checking account with a $3,000 balance, while his liabilities include a credit card balance of $4,000 and a motorcycle loan balance of $7,000. What is his net worth?
$4,000
Kai invested $2,500 in her investment account today. Her account earns an average rate of return of 7% compounded 4 time(s) per year. She is in the 20% marginal tax bracket. How much will she have in her account after 10 years after she accounts for income taxes? (Beginning of Period)
$4,360
Frances invested $3,500 in her retirement account today. Her account earns an average rate of return of 7% compounded 6 time(s) per year. How much will she have in her account after 5 years? (Beginning of Period)
$4,957
You want to invest $4,000/year into an account that earns 7% compounded annually. How much will you have in your account in 30 years? (Beginning of Period)
$404,292
You have assets (monetary, investment, and tangible) of $60,000. Your total liabilities (current & non current) are $15,000. Please calculate your net worth (or owners equity)
$45,000
You have total assets (monetary, investment, and tangible) of $40,000. Your total liabilities (current and non-current) are $35,000. Please calculate your Net Worth (or Owners Equity).
$5,000
If a firm's most recent earnings were $4.32 a share and the firm's P/E ratio is 12, how much is the firm's stock price?
$51.84
Candi is saving for retirement by placing $1000 in a savings account twice a year. The savings account pays 12% interest compounded semiannually. If Candi continues to do this for 30 years, how much will she have saved?
$533,128
There are five basic steps to personal financial planning and their related tasks. Arrange these steps and examples of related tasks in the order of their presence during the financial planning process.
(B, D, A, E, C) B. Evaluate your financial health. Record all expenses for a month to compare income and expenses. D. Define your financial goals. Pay off credit card(s) by the end of this school term. A. Develop a plan of action (or 3). Develop a budget matching income and projected expenses for the remainder of this academic year. E. Implement the plan. Reduce expenses in problem areas so amounts do not exceed budgeted projections. C. Review progress on the plan (post-mortem), reevaluate the plan, and revise the plan or start over with a new one. Based on this year, develop a revised budget for next year based on projected income and expenses.
Disability insurance provides you with income while you are unable to work, as determined by a doctor. What is the maximum disability benefit you might receive if your normal salary is $40,000 per year?
*Multiply by 65%
Doc White gave you a rough "rule of thumb" for determining your life insurance needs, based on your annual salary. Assume that Pete has an annual salary of $50,000. What is the rough range of life insurance coverage that Pete should have according to this rule?
*Multiply salary by 5-10
The financial principle of "waste not, want not" can be explained as:
-Comparison shop (go to at least 3 stores) to make the wisest purchase decision. -Use your money and assets wisely, make them last, and you will save yourself money over time. -The fastest method of improving your financial condition is to reduce your spending .
Doc White preaches about having an accurate monthly budget. What are the main uses of a monthly budget?
-Determining how much money you will be able to save & invest each month -Estimating the maximum monthly car loan payment you will be able to afford -Figuring out how to reduce your spending without hurting your lifestyle too much
You may not need Long Term Care Insurance at the moment, but your parents probably should consider getting it. Long Term Care Insurance is useful for:
-Providing in-home care as well as in-facility care for those who aren't able to take care of themselves -Protecting your family from having to pay $70-100,000/year in nursing home expenses -Minimizing the tension between family members related to estate planning
People always ask if they should purchase a life insurance policy for their infants or children. Doc White's advice about this is that "the parents do not need a life insurance policy on an infant or child, but if you have extra cash available it is not a bad idea." What is the reasoning behind Doc's advice?
-The infant or child doesn't provide income to the household, so the survivors are not dependent on the earnings of this child if he/she were to die -If the child is covered by a policy and then develops a health issue later in life, the child will still be able to have some level of life insurance
Juan wants to use a life insurance policy to pay off his mortgage and his child's college tuition in the event of Juan's death. The mortgage should be paid in full within the next 13 years. His child should be graduated from college within 15 years. Which type of life insurance policy will best meet Juan's goals?
15-year term life policy
How long does old Doc White suggest that you keep your federal and state income tax records?
3-7 years
One recent survey found that more than __________ of working Americans have less than $10,000 saved for retirement.
50%
You want your money to double within the next 10 years. Using the Rule of 72, what approximate annual rate of return do you need to earn each year for your money to double in 10 years?
7.2%
The interest rate that factors in true cost of a loan including most of the up-front fees is called the:
APR
__________ are loans that have an interest rate that is tied to some market rate of interest such as T-bill rates.
Adjustable-interest-rate loans
Which of the following statements about amortizing a loan is true?
Although the payment is the same each month, the interest that accrues each month decreases.
"Knowledge is power" is one of the main financial principles. Which of the following is a method of incorporating this principle into your financial life?
Always use at least 3 sources of trustworthy information so that you get the "big picture"
One of the easiest methods of determining if an asset is a tangible asset is by answering which question?
Do i use it in everyday life?
Income-based repayment plans set payments based on a percentage of your discretionary income:
And not the amount owed
To collect a claim using your uninsured motorist coverage the other driver cannot have auto insurance:
And the uninsured driver must be at fault
You are not covered under your personal automobile policy if you:
Are driving your own car that is not listed on the policy.
Another name for a single-payment loan is a(n):
Balloon loan
One measure of a stock's price sensitivity to the overall market is:
Beta
A __________ fund invests primarily in long-term debt.
Bond
A long-term debt instrument issued by a business or government to raise capital is known as a:
Bond
A __________ market is characterized by rising stock prices and a __________ market is characterized by falling stock prices.
Bull;bear
The type of bankruptcy that is known as a wage earner's plan is:
Chapter 13
A(n) __________ cannot issue new shares in response to investor demand.
Closed-end fund
Which of the following is NOT considered an investment?
Collectibles
Which of the following is NOT a form of open credit?
Consumer loan
If you find that you are having difficulty paying your bills your first step should be to:
Contact your creditors and try to work out a different payment plan.
Most retirement plans are tax-deferred which means:
Contributions and earnings are not taxed until you withdraw them at retirement.
The present value of a bond's __________ determines the value of the bond.
Coupon payment and maturity value
Insurance companies are using your __________ to price insurance since it appears to be linked to your insurance loss ratio.
Credit score
A common trait of preferred stock is__________.
Cumulative dividends
An annuity refers to a series of:
Equal cash flows occurring at equal intervals for a finite period
Which of the following financial statements did Doc White say was the most powerful piece of paper you'll ever use. He said it is like a "piece if cardboard" that helps you see where money is "leaking out of your wallet"
Daily expense tracker
As market interest rates increase, the value of a bond will __________ all other things equal.
Decrease
The interest rate used to bring future money back to the present is referred to as the ______.
Discount rate
The phrase "Don't put all your eggs in one basket" illustrates the financial principle of:
Diversification
Compounding is the process of:
Finding the future value of some amount when interest is reinvested
Hector's month's living expenses covered ratio is 0.25 months. He just broke his leg and will not be able to work for six weeks. Without a paycheck for six weeks, what will Hector most likely experience?
He may have to borrow some money to keep current on his monthly bills AND he may have to liquidate some of his tangible or investment assets to keep current on his monthly bills
Financial planners have several ways of charging for their services. Kendall, a financial planner, will charge you an "Assets Under Management" fee for managing your money. Which of the following is a good description of how he might charge you for his financial services?
He will charge you an annual fee equal to 1.5% of the money you have invested with him
A high risk, largely unregulated investment fund for wealthy investors is called a:
Hedge fund
An investor that was convinced the stock market was rising should invest in a portfolio of:
High beta stocks
A diversified stock mutual fund will help you eliminate the risk associated with:
Holding individual assets.
A secured loan that uses the accumulated equity in your home as collateral is known as a:
Home equity loan
For most Americans the single largest investment they make is in:
Home ownership
Which one of the following is the "enemy" of compound interest and makes it very difficult to reach your financial goals?
Inflation
Assets that you purchase for the purpose of accumulating wealth to satisfy your financial goals are called
Investment assets
The secondary market for stocks:
Is well developed and easy to access
Any bond that has a bond rating that is below investment grade is known as a speculative bond or:
Junk bond
Installment loans require periodic payments of principal and interest at equal intervals and are commonly used to finance:
Large purchases such as cars and boats.
__________ insurance protects a policyholder in the event someone gets injured on the insured property and elects to sue for damages.
Liability
A type of mutual fund that attempts to tailor its holdings to an investor's age and tolerance for risk is known as a(n):
Life cycle fund
The term that considers having money readily available when you need it is the concept of
Liquidity
A sales commission charge on a mutual fund is referred to as a(n):
Load
The tendency for an investor to keep losing stocks and sell winning stocks can be attributed to:
Loss aversion
If you elect to receive all your retirement benefits in a single payment it is known as a:
Lump-sum option
Which of the following is not a valid method of reducing your federal income taxes for this tax year?
Making contributions to your Roth 401(k)
Mutual fund advisors are compensated by:
Management fees
Kendra and Keyshawn are married with 2 children - Kyle and Kassandra. They live and work in northern Virginia. Their salaries are similar to each other - Kendra earns $65,000, Keyshawn earns $60,000. Which filing status on the Form 1040 will give them the most tax advantages?
Married filing jointly
How should a checking or savings account be listed on your balance sheet?
Monetary asset
How should a checking or savings account be listed on your balance sheet?
Monetary asset
Your ________ include cash, checking and savings account balances, and money market funds.
Monetary assets
A stock with a beta of 1.3 indicates that it has:
More risk than the overall market
If the inflation rate increases by 2%, the __________ of a Treasury Inflation-Protected Security will increase by 2%.
Par value
Which of these is an example of a basic coverage for most HO policies?
Personal property
According to old Doc White, what is the biggest enemy that most people have when it comes to improving their financial condition?
Procrastination in their financial planning
Which of these is an advantage of mutual funds?
Professional management
The final step of the financial planning process is what Alex referred to as a "post mortem" or "autopsy". This is the stage where you:
Review your progress and revise your plans to reach your goals
An individual retirement account (IRA) where contributions are made with after-tax income but earnings and withdrawals are tax free is known as a:
Roth IRA
Which statement best describes the principle of "Pay Yourself First"?
Save or invest 5-10% of your paycheck (or as much as you can afford) as soon as you receive it
When an investor wants to sell shares in an open-end mutual fund they:
Sell them back to the mutual fund at net asset value
When you are hired at a new job you will have to fill out several employment forms. One of these forms is called the W-4 Form. This form is used to:
Specify the amount of your salary you want to have withheld for federal income tax each pay period.
Which of the following types of life insurance will have the lowest premium payments for young folks and is great for insurance goals that have a specific time limit?
Term-life insurance
Payday loans are a predatory lending practice that commonly have APRs:
That are several hundred percent.
What is the opportunity cost associated with not receiving a lump sum of money today, but instead receiving it one year from now?
The amount of interest you could have earned placing the money in a savings account.
The primary difference between a health savings account (HSA) and a flexible spending account (FSA) is:
The funds in an HSA can "roll over" to the following years if you do not use them this year, but the unused funds in an FSA are usually forfeited at the end of the year.
The present value is equivalent to:
The value of a cash flow today
If you have worked at a firm long enough to be eligible for a pension you are considered to be:
Vested
Most insurance agents recommend __________ to be able to provide proof of ownership in the event of loss.
Videotaping your possessions
A financial advisor will typically ask you 4 main questions to help measure your current financial condition. Which of the following are important questions to help you measure your financial condition?
What do you own and what do you owe?
We use a balance sheet to measure your financial condition on a given day. It will be a required part of most loan applications once you graduate. What does a balance sheet tell you about your financial condition?
What you own (assets) and how you have paid for it (liabilities and net worth)
There are two main education tax credits available to students - the American Opportunities Credit and the Lifetime Education Credit. Which of the following situations will allow the person to claim the American Opportunities Credit?
Joachim, age 30, in his 4th year of his Bachelor's Degree after serving in the US Army, no one claims him as a dependent.
Alex says that there are 3 main reasons you would like to have money in your hands today rather than waiting to hopefully receive money in the future. What causes money to have this "time value"?
Risk, Inflation, Opportunity Cost
