Wealth Building Second Part of Class
Which of the following is (are) a unique advantage(s) of investing in a family of funds?
Exchange privileges
A company with a price/earnings ratio of 10 should probably be avoided.
False
Aggressive-growth mutual funds are at the very top of the investment risk pyramid.
False
All insurance policies list the perils that will be covered by the policy.
False
All of a company's profit is available to pay dividends or retain to support the growth of the company.
False
An HRA is a tax-deductible savings account into which individuals and/or their employers can deposit tax-sheltered funds for use to pay medical bills including the deductibles and other out-of-pocket costs required by a high-deductible plan. True
False
An any-occupation policy will cost more than an own-occupation policy, everything else being equal.
False
Being risk averse means that you focus primarily on preservation of capital with little desire for current income from your investments.
False
Business-cycle and market-volatility risks are essentially the same.
False
Buying cyclical stocks is a defensive investment move
False
Common stock and bond investments are suitable for only speculative investors.
False
Conservative investors are fairly comfortable during rising and falling market conditions.
False
Diversification reduces all risk.
False
Dividends are distributions of profits an investor receives for depositing funds in a bank or savings and loan association.
False
Historically, both common stock and corporate bonds have performed well in times of inflation.
False
If you have an insurance policy with a $300 deductible and 30 percent coinsurance, you would pay 30 percent of your insured loss plus $300.
False
In general, stocks that are expected to grow rapidly have low price/earnings ratios.
False
In the case of noncumulative preferred stock, the preferred stockholders would have a claim to previously skipped dividends.
False
Insurance can be purchased for a speculative risk but not for a pure risk.
False
Insurance is designed to help people be better off after a loss than before the loss.
False
Lending investments are also called equities.
False
Life insurance is the best way to address the "living-too-long" problem.
False
Life insurance provides protection against dying too soon, and cash-value life insurance does this best.
False
Limited-pay whole life insurance is whole-life insurance that allows premium payments to cease before you reach the age of 65.
False
Long-term care insurance that provides coverage if a lower number of activities of daily living are unperformable will cost less.
False
Married couples should integrate their life insurance plans and combine their life insurance needs in one policy on the life of one of the spouses.
False
Members of your family are covered for small bodily injury losses under your homeowner's policy.
False
Most investors nearing retirement are aggressive in investment philosophy.
False
New stock offerings are called ground floor opportunities.
False
Owning a motorcycle is an example of a peril.
False
Rapidly growing companies tend to have P/E ratios above those of speculative companies.
False
Readjustment-period needs typically last about one month.
False
Since homemakers do not have money income, no financial loss results from the premature death of a homemaker.
False
The claims procedures for nearly all health care plans include patient payment for the health service with the insurance reimbursing the patient after the appropriate forms are filed.
False
The hospitalization portion of Medicare (Part A) requires a monthly premium from the insured.
False
The large-loss principle recommends that you insure the losses you can afford to suffer and assume the losses that you cannot afford to suffer.
False
The most obvious health related financial loss is the need for income replacement when one is unable to work.
False
The purpose of life insurance is to protect the person on whose life an insurance policy is issued.
False
The returns on common stocks have historically been half as high as the returns on cash savings.
False
The term securities refers to the ownership instruments of common stock and preferred stock only.
False
Young adults may stay on a parent's health care plans until age 22 or graduating from college whichever comes first.
False
Young parents should focus on cash-value life insurance to meet their life insurance needs.
False
A certificate of insurance, rather than an insurance policy, is received by those with group health care coverage.
True
A copayment differs from a deductible in that the copayment typically requires you to pay a specific dollar amount each time you have a specific covered expense item.
True
A portfolio is a collection of investments assembled to meet your investment goals.
True
A residual clause will allow a reduced level of disability income benefits when partial, rather than full, disability strikes.
True
A shareholder is also called a stockholder.
True
A single-premium life insurance policy is an extreme form of a limited-pay life policy.
True
A young, healthy person may be able to buy term life insurance privately at lower premiums than through a group policy.
True
All bonds have a maturity date by which the principal of the debt must be paid.
True
All insurance is sold and serviced through insurance agents.
True
An HSA is a tax-deductible savings account into which individuals and/or their employers can deposit tax-sheltered funds for use to pay medical bills including the deductibles and other out-of-pocket costs required by a high-deductible plan.
True
An insurance policy is a contract between the person buying insurance and the insurance company.
True
An insurance policy will pay the actual loss suffered not to exceed the policy limits.
True
An investment that faces high marketability risk also has high liquidity risk.
True
As a family matures, savings and investments may exceed potential losses from premature death and reduce or eliminate the need for life insurance.
True
Both trailing and projected P/E ratios are of interest to investors.
True
Buying an insurance policy with a deductible is one way to assume risks that are affordable.
True
Buying cash-value life insurance is a method of forced savings.
True
Capital gains (losses) are not realized until one actually sells the investment.
True
Combining a health savings account with a high deductible health care plan is a way to save money on the cost of a health care plan.
True
Deductibles are requirements that the insured pay an initial portion of any loss.
True
Driving under the influence of alcohol is an example of a hazard.
True
Financial risk relates to the possibility that the investment will fail to pay a return to the investor.
True
HMOs have dollar limits on their coverage
True
Health care plan is a generic name for any program that pays for or provides reimbursement for direct health care expenditures.
True
In making a common stock investment, the investor becomes an owner of the assets and earnings of a business corporation.
True
Installing a smoke detector in your home is an example of loss control.
True
Insurance coverage may be denied if policy conditions are not met.
True
Insurance covering the costs of major illness and injury would typically be considered necessary insurance.
True
Investment risk represents the uncertainty that the yield on an investment will deviate from what is expected.
True
It may take several years for a new corporation to begin paying dividends.
True
Life insurance proceeds are nontaxable to the beneficiary.
True
Long-term care insurance policies can be written to cover in-home care.
True
Long-term disability income insurance is probably the type of insurance most often overlooked by individuals and families
True
Long-term investors are usually willing to give up current income in favor of earning substantial future capital gains.
True
Medicaid pays for the costs of custodial nursing home care.
True
One should assume risks that are affordable and insure against losses that would be unaffordable.
True
Ownership investments are more vulnerable to deflation risk than lending investments.
True
Policy limits are the maximum dollar amounts that will be paid under the policy.
True
Research indicates that an investor can cut random risk in half by diversifying in as few as five stocks and bonds.
True
Term life insurance is often described as pure protection because it pays benefits only if the insured person dies within the time period of the policy.
True
The PEG ratio adjusts the P/E ratio to allow for the fact that a company may be experiencing rapid growth.
True
The cost of replacing the household labor of a stay-at-home spouse should be included in life insurance planning.
True
The dividends promised to preferred stockholders must be paid before the common stockholders are paid.
True
The face amount of a bond is the principal.
True
The fee charged for insurance protection is called a premium.
True
The health benefits provided under Medicaid differ from state to state.
True
The largest potential financial loss resulting from premature death is lost income.
True
The market price of bonds are sensitive to interest rates.
True
The premium for a term insurance policy can increase with each renewal of the contract.
True
The premiums for a $100,000, 20-year, decreasing term policy would be less than the premiums for a $100,000, 20-year policy with a fixed face value, other things being equal.
True
Total risk comprises random risk and market risk.
True
Traditional health insurance plans are often referred to as basic indemnity plans.
True
Traditional health insurance provides protection against financial loss resulting from the perils of illness and injury.
True
When shopping for insurance, your goal should be to "buy" what you need and not be "sold" more or less coverage.
True
With cash-value life insurance the actual amount of insurance goes down over time while the amount of investment value goes up with the two components adding up to the face amount of the policy.
True
Younger families should be wary of using retirement money for living expenses after the death of an income provider.
True
Your goals and the time it will take to reach them dictate the investment strategies you follow and the investment alternatives you choose.
True
Your risk tolerance is your ability to weather changes in the values of your investments.
True
