Wealth Building Second Part of Class

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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


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