Question 1

Funds invested in savings accounts and certificates of deposit CDs)have traditionally outperformed stocks as a means of generating long-term financial gains.

Accepted Answer

A) True 
 B)False

Question 2

John is considering starting his degree in business this semester at State University.John will likely find that:

Accepted Answer

A)  his time would be better spent pursing a career after high school.
B)  he will have more fun and excitement than his friends that don't attend college.
C)  his choice of a business major will virtually guarantee him a comfortable retirement income if he sticks with it.
D)  he will likely earn about $1.6 million more during his lifetime than his friends with only a high school degree.E) None of the above
F) All of the above

Question 3

Financial planners regularly suggest that you borrow money to pay for large purchases.

Accepted Answer

A) True 
 B)False

Question 4

The increase in the number of retirement plans approved by the federal government likely indicates that:

Accepted Answer

A)  the government budget is approaching a surplus.
B)  most people have faith in the troubled Social Security system.
C)  Social Security cannot be counted on to provide an individual with ample funds for retirement.
D)  as a nation our values have shifted so that we now enjoy the value of saving more and consuming less.E) A) and B)
F) C) and D)

Question 5

After marriage,one great financial strategy is to live on one income and to save the other.

Accepted Answer

A) True 
 B)False

Question 6

One benefit of a simple IRA is that it allows:

Accepted Answer

A)  employees of small companies to save more than a regular IRA.
B)  employees to invest in the corporate bonds of their employers.
C)  business owners to use employee retirement funds to help finance their small business.
D)  employees to withdraw funds from the IRA prior to retirement without penalty.E) A) and C)
F) A) and B)

Question 7

Leonardo is in the habit of using his credit card for expenditures made on business trips.The most likely reason he does this is to:

Accepted Answer

A)  lower his business expenses.
B)  take a deduction on the interest he pays on his credit card balance.
C)  pad his expense account.
D)  keep track of his purchases.E) B) and C)
F) A) and B)

Question 8

Although he has a good health insurance policy,Ken is concerned that a serious accident or lengthy illness would still be devastating to his family because of the lost income and other expenses not covered by his policy.Ken would probably be interested in obtaining:

Accepted Answer

A)  disability insurance.
B)  a premium waiver provision.
C)  health extension coverage.
D)  a rider on his homeowner's policy.E) B) and C)
F) C) and D)

Question 9

On average,a person with a college education earns _________ over the course of his or her career.

Accepted Answer

A)  about $300,000 more than a high school graduate
B)  barely enough to justify the additional cost of going to college
C)  more in dividends and interest income than in salaries
D)  about $1.6 million more than a high school graduateE) B) and C)
F) B) and D)

Question 10

Zach quit his job to open his own Internet consulting business.He now realizes that he no longer has the benefit of a corporate retirement system.He should consider investing in an) :

Accepted Answer

A)  simple 401k) plan.
B)  simple IRA plan.
C)  automated trust account.
D)  Keogh plan.E) A) and B)
F) C) and D)

Question 11

Many small-business owners invest in 401k)plans for their retirement.

Accepted Answer

A) True 
 B)False

Question 12

A Keogh retirement plan would be used by an)

Accepted Answer

A)  self-employed engineering consultant.
B)  employee at a small manufacturing firm.
C)  CEO of a major corporation.
D)  librarian at a city library.E) A) and D)
F) A) and C)

Question 13

An individual retirement account IRA)is a tax-deferred investment plan designed to encourage workers to save for retirement.

Accepted Answer

A) True 
 B)False

Question 14

Variable annuities offer investment choices identical to mutual funds.

Accepted Answer

A) True 
 B)False

Question 15

For workers who qualify,the earnings from income invested in a traditional IRA are:

Accepted Answer

A)  not taxed until the funds are withdrawn.
B)  never taxed.
C)  taxed,at the time they are earned,but at the lowest individual rate.
D)  taxed both at the time the money is earned and at the time the earnings are withdrawn.E) A) and D)
F) A) and C)

Question 16

It is usually better to use any money left after paying monthly bills to pay off debts that carry high interest rates rather than putting that money into a savings account.

Accepted Answer

A) True 
 B)False

Question 17

The younger you are when you buy term life insurance,the lower the premiums tend to be.

Accepted Answer

A) True 
 B)False

Question 18

A comparison of variable life insurance to a standard whole life plan would reveal that:

Accepted Answer

A)  they are essentially identical.
B)  variable life offers only pure insurance but does so at a very low cost,while a standard whole life plan costs more but offers both insurance and a savings plan.
C)  both a standard whole life and variable life insurance offer both life insurance and savings,but variable life invests the savings more aggressively than whole life.
D)  variable life is only available to people who want at least $1 million in coverage-and are willing to pay for it.E) B) and D)
F) C) and D)

Question 19

Most financial experts believe that the stock market is likely to grow more slowly in the future than it did in the last 50 years.

Accepted Answer

A) True 
 B)False

Question 20

Due to the high cost of the insurance premiums,many people have found that it makes financial sense to carry medical insurance only if their employer provides it.

Accepted Answer

A) True 
 B)False

Exam 25: Managing Personal Finances

It is usually better to use any money left after paying monthly bills to pay off debts that carry high interest rates rather than putting that money into a savings account.

Correct AnswerverifiedShow Answer

The increase in the number of retirement plans approved by the federal government likely indicates that:

Correct AnswerverifiedShow Answer

Leonardo is in the habit of using his credit card for expenditures made on business trips.The most likely reason he does this is to:

Correct AnswerverifiedShow Answer

Due to the high cost of the insurance premiums,many people have found that it makes financial sense to carry medical insurance only if their employer provides it.

Correct AnswerverifiedShow Answer

For workers who qualify,the earnings from income invested in a traditional IRA are:

Correct AnswerverifiedShow Answer

Funds invested in savings accounts and certificates of deposit CDs)have traditionally outperformed stocks as a means of generating long-term financial gains.

Correct AnswerverifiedShow Answer

A comparison of variable life insurance to a standard whole life plan would reveal that:

Correct AnswerverifiedShow Answer

Many small-business owners invest in 401k)plans for their retirement.

Correct AnswerverifiedShow Answer

Although he has a good health insurance policy,Ken is concerned that a serious accident or lengthy illness would still be devastating to his family because of the lost income and other expenses not covered by his policy.Ken would probably be interested in obtaining:

Correct AnswerverifiedShow Answer

John is considering starting his degree in business this semester at State University.John will likely find that:

Correct AnswerverifiedShow Answer

One benefit of a simple IRA is that it allows:

Correct AnswerverifiedShow Answer

The younger you are when you buy term life insurance,the lower the premiums tend to be.

Correct AnswerverifiedShow Answer

A Keogh retirement plan would be used by an)

Correct AnswerverifiedShow Answer

On average,a person with a college education earns _________ over the course of his or her career.

Correct AnswerverifiedShow Answer

Financial planners regularly suggest that you borrow money to pay for large purchases.

Correct AnswerverifiedShow Answer

Zach quit his job to open his own Internet consulting business.He now realizes that he no longer has the benefit of a corporate retirement system.He should consider investing in an) :

Correct AnswerverifiedShow Answer

Most financial experts believe that the stock market is likely to grow more slowly in the future than it did in the last 50 years.

Correct AnswerverifiedShow Answer

Variable annuities offer investment choices identical to mutual funds.

Correct AnswerverifiedShow Answer

An individual retirement account IRA)is a tax-deferred investment plan designed to encourage workers to save for retirement.

Correct AnswerverifiedShow Answer

After marriage,one great financial strategy is to live on one income and to save the other.

Correct AnswerverifiedShow Answer

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