Personal Financial Planning Exam 2
Even if you do have money, you may still be better off using an installment loan for a big-ticket purchase. (T/F)
True
From a financial planning perspective when considering a consumer loan, you should ask yourself how the purchase fits into long-term financial plans.
True
Gasoline is a variable cost of automobile ownership (T/F)
True
Group life insurance is often provided as a fringe benefit by employers. (T/F)
True
Guaranteed renewable term insurance allows you to renew the policy for another term without qualifying medically. (T/F)
True
If lenders specify a loan-to-value ratio of 80 percent, then a buyer must make a 20% down payment on the purchase of a home (T/F)
True
In insurance terminology, "participation" and "co-insurance" mean the same thing. (T/F)
True
Less rapid depreciation is one advantage of buying a used car rather than a new car. (T/F)
True
Life insurance needs change dramatically over one's lifetime (T/F)
True
Living a healthy lifestyle is an example of loss prevention and control.
True
Loans against a life insurance policy do not have to be paid back. (T/F)
True
Long-term care insurance can cover both nursing home and home health care.(T/F)
True
Lowballing is a sales technique where the salesperson quotes a low price for a car to get you to make an offer, and negotiates the price upward prior to signing the sales agreement. (T/F)
True
Most surgical expense plans fully reimburse the cost of second opinions. (T/F)
True
One should typically name both primary and contingent beneficiaries for life insurance policies. (T/F)
True
Open account credit is a form of credit extended to a consumer in advance of any transaction. (T/F)
True
Paying a loan off much quicker than scheduled is one way to build a good credit rating. (T/F)
True
Saving is the preferred way to provide for financial emergencies.
True
Social security benefits are often available resources to the family after the death of a family member. (T/F)
True
Spreading risk among a large number of people is a major principle of insurance. (T/F)
True
Supplementary medical insurance (SMI) is a voluntary participatory program, commonly known as Medicare Part B.
True
Term insurance is generally the most economical form of life insurance for young families. (T/F)
True
The basic purpose of insurance is to protect you from the financial consequences of losing assets or income due to accident, illness, or death. (T/F)
True
The cost of a title search and title insurance are typically part of the closing costs on a housing transaction. (T/F)
True
The need for additional life insurance can be determined by looking at the difference between available resources and family monetary needs. (T/F)
True
The needs analysis method is the most accurate approach to determining the proper amount of life insurance to buy. (T/F)
True
The purpose of a credit report is to evaluate the kind of risk you pose to the lender. (T/F)
True
To make a legally binding offer on a car, you must sign a sales contract that specifies the offering price and all the conditions of your offer. (T/F)
True
Variable-rate loans are desirable if interest rates are expected to fall in the future. (T/F)
True
When comparing two installment loans with the same principal and APR, the loan with the longer maturity will have the lower monthly payment and the higher total costs. (T/F)
True
When loaning money to a friend or family member, it is advisable to lend only the amount that you can afford to give away. (T/F)
True
When the market interest rate goes up, the rate on variable-rate loans goes up.
True
When you take out a loan against the cash value of your life insurance policy, you're really borrowing from yourself. (T/F)
True
With a COLA (Cost of Living Adjustment) provision, the monthly long-term disability benefit is adjusted upward each year, often in line with the CPI.
True
Your health insurance has an 80% co-insurance clause. Once the deductible is satisfied, your insurance company will pay 80% of your covered losses up to the stated limits.
True
529 Plans are the newest type of student loans.
False
Advances in medical technology, prescriptions drugs, and treatments have substantially reduced health care costs in recent decades. (T/F)
False
All disability occurs only when someone is completely incapable of doing any type of work. (T/F)
False
Always paying cash is helpful in establishing a high level of creditworthiness.
False
Auto loans are an example of open account credit since you can add to the debt when you purchase another vehicle. (T/F)
False
Because no written contract is usually required, borrowing from friends and relatives is advisable. (T/F)
False
Condominium and single-family home owners can deduct real estate taxes and mortgage interest on their federal income taxes but co-op owners cannot take these deductions. (T/F)
False
Depreciation is not an important consideration since it is not a recurring out-of-pocket cost. (T/F)
False
Disability benefits are almost always taxable, so you typically need to purchase coverage that will replace gross pay. (T/F)
False
Generally speaking, the interest rates on credit cards are lower than any other form of credit. (T/F)
False
Health insurance policies automatically cover all family members.
False
It is safe, and often required, to give your Social Security number as a form of identification when using a credit card. (T/F)
False
Loans are available from term life insurance policies. (T/F)
False
Paying only the minimum payment each time on a credit card usually enables one to pay off the balance fairly quickly. (T/F)
False
The greatest fixed cost involved with owning an automobile is usually the auto insurance payments. (T/F)
False
The key to creditworthiness is to keep your debt safety ratio as high as possible.
False
The returns on term life insurance policies receive favorable tax treatment. (T/F)
False
The waiver-of-premium benefit excuses premium payment while the insured is experiencing short-term illness. (T/F)
False
Typically group health insurance plans provide substantially less comprehensive coverage than the average individually underwritten policy. (T/F)
False
Using credit is the ideal way to provide for financial emergencies. (T/F)
False
When comparing two installment loans with the same principal and APR, the loan with the shorter maturity will have the lower monthly payment and the lower total costs. (T/F)
False
When you are hospitalized for surgical care, surgical expense coverage will pay the hospital bill. (T/F)
False
When you stop making premium payments on a whole life policy, the policy's cash value is forfeited. (T/F)
False
Whole life policies typically provide a high investment rate of return. (T/F)
False
Condominiums are generally less costly than single-family, detached homes. (T/F)
True
Credit card users can often avoid finance charges entirely by paying their total balances by the stated due date.
True
Earnings on 529 college savings plans can be tax free when used for qualifying college education expenses.
True
A good rule to remember when considering the use of credit is that the product purchased on credit should outlive the amount of time it takes to pay it off. (T/F)
True
A group HMO employs a group of doctors to provide healthcare services to members in a central facility. (T/F)
True
A life insurance policy's cash value may be collected by terminating the policy. (T/F)
True
A preferred provider organization has characteristics of both an IPA and an indemnity plan. (T/F)
True
An elimination period is the number of days that must pass before disability policies pay proceeds. (T/F)
True
Annual term insurance premiums increase as you get older while whole life insurance premiums remain constant. (T/F)
True
Bank credit cards represent the most common kind of open account credit. (T/F)
True
Being late on credit payments only 2-3 times per year may label you a "late payer" in your credit file.
True
College costs have been escalating faster than the overall rate of inflation. (T/F)
True
Commercial banks are generally more selective in granting loans than finance companies. (T/F)
True
Comprehensive major medical insurance provides the most complete coverage available. (T/F)
True