Personal Financial Management (Final_ Chapter 8-15)
Jenny's adjusted gross income (AGI) is $120,000 a year and she owns a real estate property that generates a rental income of $10,000 annually. If she pays a mortgage interest of $4,000 on her property per year, she can write off up to _____ in depreciation.
$6,000
The return on a _____ is an appropriate measure of the risk-free rate of return.
90-day Treasury bill
Which of the following statements regarding bonds is true?
Bonds are liabilities of the issuer.
_____ is a process of choosing securities in order to create a portfolio that provides an acceptable level of return and an acceptable exposure to risk.
Diversification
Advances in medical technology, drug prescriptions, and treatments have substantially reduced the cost of health care in recent decades.
False
Diversification of investment securities increases risk.
False
It really makes little difference whether you start retirement savings at age 25 or at age 45.
False
Premiums for workers' compensation insurance are paid by the employees.
False
Uninsured motorists protection usually provides protection to the insured's car if a hit-and-run incident occurs.
False
_____ risk results from the behavior of investors in the securities market.
Market
Which of the following is a public assistance program that provides health insurance benefits only to those who are unable to pay for health care?
Medicaid
Which of the following bond mutual funds invest in tax-exempt securities?
Municipal bond funds
Which of the following is a reason to invest in mutual funds?
Mutual funds provide diversification of invested funds.
The federal government regulates the disclosure of information about securities through the:
Securities and Exchange Commission.
Workers who elect to retire early-at age 62-will receive reduced Social Security retirement benefits.
True
Estate planning is designed to:
minimize the taxes involved in the transfer of assets.
The basic purpose of insurance is to _____.
protect yourself from economic losses
Changes in the general level of prices within an economy produce:
purchasing power risk.
A ___________ covers the cost of visits to a doctor's office or for a doctor's hospital visits, including consultation with a specialist.
regular medical expense insurance
The purchase of insurance is a common form of _____ by the insured.
risk transfer
A common mistake people tend to make in retirement planning is:
saving too little.
A fund that invests in only one or more industries that are associated with each other is a _____ fund.
sector
A fund that invests only in a particular industry would be a _____ fund.
sector
A "grantor" is also called the:
settlor.
A(n) _____ sells fund shares either directly to the public or through certain authorized dealers.
distributor
A higher home insurance cost may result from:
a low credit score of the insured.
The period during which premiums are paid for the purchase of an annuity is called the _____.
accumulation period
Insurance is a tool that can reduce one's _____ risk.
economic
Negligence occurs when someone:
fails to act in a reasonable manner.
Exchange traded funds (ETFs) invest __________.
in narrow market segments
A document that precisely states the treatments a person wants if he or she becomes terminally ill is called a _____.
living will
Leverage means:
using borrowed money to magnify returns.
A(n) _____ actually runs the portfolio and makes the buy and sell decisions.
investment advisor
A bull market is characterized by:
investor optimism.
Investment in real estate is attractive to investors because:
it permits a high degree of financial leverage.
A _____ gives the rights of survivorship to the other owner of a property.
joint tenancy
Which of the following statements is true of medical insurance costs in the U.S.?
A poor demand-and-supply distribution of health care facilities and services has increased the health care costs.
Which of the following is a difference between an exchange traded fund (ETF) and a mutual fund?
An ETF provides more favorable tax treatment than a mutual fund.
Speculating in raw land is highly risky.
True
_____ would be a first-level death-related cost.
Funeral expenses
_____ funds are balanced funds that automatically change the asset allocation from more to less equity exposure as an investor ages.
Life
___________ is any activity that lessens the severity of loss once it occurs.
Loss control
__________ is the process of analyzing the performance of the securities held by an investor.
Portfolio tracking
Which of the following is true of real estate investments?
Real estate investments lead to lower taxes due to tax shelter.
_____ is a short-term investment activity.
Speculating in common stock
The primary purpose of life insurance is to protect family members of the insured from financial loss in the event of his or her untimely death.
True
The value of a stock at any time depends on its expected stream of future earnings.
True
Reviewing the amounts of income that you can realistically expect to receive from Social Security and your employee pension helps you to decide whether they'll be adequate to meet your needs.
True
Risk avoidance is attractive when the cost of avoidance is less than the cost of handling it some other way.
True
Which of the following is true of a securities exchange?
The traded securities change hands right there on the floor of the securities exchange.
The first step in retirement planning is to identify retirement goals.
True
A fund's objective must be stated in its prospectus.
True
Common stockholders are considered to be the residual owners of a company.
True
Insufficient capital can cause problems in the payment of estate taxes.
True
Millions of Americans are not covered by health insurance.
True
Mutual funds and exchange traded funds (ETFs) always provide professional investment management.
True
Mutual funds provide professional management and diversification that individual investors-especially those with limited resources-can rarely obtain on their own.
True
People planning means providing sustenance and resources for family members by anticipating their future needs.
True
The most important advantage of a mutual fund is pooled diversification.
True
The principle of indemnity will prevent:
an insured from collecting more than what he or she has lost.
A(n) _____ is a service offered by mutual funds that helps an investor earn compound interest on their investments.
automatic reinvestment plan
In the online quotes from The Wall Street Journal's listing of mutual funds, an "r" after the mutual fund name means that the particular mutual fund has a _____ associated with it.
back-end load
One of the biggest financial benefits of starting early to save for your retirement fund is related to:
compound interest.
Social Security benefits (cash benefits) are funded by:
compulsory contributions from employees, employers, and self-employed people.
The average level of Social Security benefits for retirees aged 67 and above is adjusted upward each year with subsequent increases in the:
cost of living.
The fund that is structured to match the performance of a certain market segment is known as a(n) _____ fund.
index
Medicare is a government-sponsored health care plan composed of Part A and Part B. Part A provides ___________.
inpatient hospital services
A captive agent is a(n):
insurance agent who represents only one insurance company
The easiest way to invest in foreign markets is through:
international mutual funds.
The most accurate way to determine how much life insurance you need is to use the ___________ method.
needs analysis
One of the advantages of common stock investments is:
potential capital gains.
The transfer of an estate (after death) by an individual to the _____ of the individual will result in the most favorable tax treatments.
spouse
You could give an unlimited amount of assets to your __________ without incurring any gift taxes.
spouse
A trust that comes into existence only after the will is probated is known as a__________ trust.
testamentary
A stock's dividend yield is calculated as _____.
the annual dividend received per share divided by the market price per share of stock
An insured does not get the right to arbitration when:
the insurance company denies responsibility for the loss.