Question 1

A good way to save money is to spend all of your regular income, but have a strict rule to put any money from unexpected or unusual sources (such as overtime pay, bonuses, gifts, gambling payouts, or contest prizes) into a savings account.

Accepted Answer

A) True 
 B)False

Question 2

In order to accumulate capital, young adults are likely to have to:

Accepted Answer

A)   accept a lifestyle that sacrifices some amenities.
B)   live beyond their means.
C)   rely on credit cards for basic purchases in order to conserve on cash.
D)   borrow funds from a bank.E) B) and D)
F) A) and D)

Question 3

Slobo is an immigrant to the United States from a formerly communist country. He is searching for advice to help him succeed in a capitalist system. He would be well advised to:

Accepted Answer

A)   find a job and live frugally in order to save money to invest.
B)   rely heavily on government assistance programs to maintain a relatively comfortable life style.
C)   get a credit card, even if it has a very low credit limit, and use it to establish a good credit rating.
D)   follow the buy now, pay later rule of personal finance.E) B) and C)
F) A) and D)

Question 4

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 a(n) :

Accepted Answer

A)   simple 401(k)  plan.
B)   simple IRA plan.
C)   automated trust account.
D)   Keogh plan.E) A) and D)
F) All of the above

Question 5

Investors who desire a very stable and predictable income from their investments (such as people who are nearing retirement) would be reluctant to invest heavily in the stock market.

Accepted Answer

A) True 
 B)False

Question 6

A(n)  ________ can be added to a homeowner's insurance policy that provides for coverage at a reasonable cost for items that the policy otherwise would not cover.

Accepted Answer

A)   rider
B)   opener
C)   extender
D)   modifierE) B) and D)
F) C) and D)

Question 7

The key to generating enough capital for investment for many individuals is to:

Accepted Answer

A)   obtain as many credit cards as possible in order to maximize spending power.
B)   live frugally.
C)   borrow money from friends and family.
D)   buy only high-quality consumer goods.E) None of the above
F) C) and D)

Question 8

The federal government discourages home ownership through high tax rates.

Accepted Answer

A) True 
 B)False

Question 9

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) B) and C)
F) All of the above

Question 10

An annuity is a contract to make regular payments to a person for life or for a fixed period.

Accepted Answer

A) True 
 B)False

Question 11

The new simple IRA plans allow employees of ________ companies to contribute larger amounts than the traditional IRA.

Accepted Answer

A)   nonprofit
B)   small
C)   big
D)   internationalE) B) and C)
F) None of the above

Question 12

Excessive debt is as much a problem of young consumers as it is of other age groups.

Accepted Answer

A) True 
 B)False

Question 13

On your personal balance sheet, your assets should include anything of value that you own.

Accepted Answer

A) True 
 B)False

Question 14

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) A) and C)

Question 15

Credit cards can be used to categorize and track your purchases.

Accepted Answer

A) True 
 B)False

Question 16

LaTasha is attending her local community college so she can get a good job. She knows that financial planning begins first with making money.

Accepted Answer

A) True 
 B)False

Question 17

One drawback to buying a home compared to renting is that your monthly mortgage payments will increase, while rental payments are fixed.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is a benefit of buying a home rather than renting?

Accepted Answer

A)   Real estate taxes and utilities will be fixed.
B)   It reduces the need to carry insurance.
C)   Paying for a home is a good way to force yourself to save.
D)   The entire purchase price of the home can be deducted from taxable income, but this deduction must be spread over at least 15 years.E) None of the above
F) B) and C)

Question 19

Purchasing ________ insurance is a relatively low cost way of protecting yourself from lost income due to an accident or prolonged illness.

Accepted Answer

A)   flexible term
B)   health
C)   contingent annuity
D)   disabilityE) B) and C)
F) A) and D)

Question 20

The factor likely to have the greatest impact on how fast the value of a home appreciates over time is the:

Accepted Answer

A)   interest rate on the mortgage.
B)   style and design features built into the home.
C)   location of the home.
D)   size of the home.E) B) and D)
F) C) and D)

Exam 25: Extension: Managing Personal Finances

Investors who desire a very stable and predictable income from their investments (such as people who are nearing retirement) would be reluctant to invest heavily in the stock market.

Correct AnswerverifiedShow Answer

The federal government discourages home ownership through high tax rates.

Correct AnswerverifiedShow Answer

A good way to save money is to spend all of your regular income, but have a strict rule to put any money from unexpected or unusual sources (such as overtime pay, bonuses, gifts, gambling payouts, or contest prizes) into a savings account.

Correct AnswerverifiedShow Answer

Purchasing ________ insurance is a relatively low cost way of protecting yourself from lost income due to an accident or prolonged illness.

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 a(n) :

Correct AnswerverifiedShow Answer

LaTasha is attending her local community college so she can get a good job. She knows that financial planning begins first with making money.

Correct AnswerverifiedShow Answer

Credit cards can be used to categorize and track your purchases.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

One drawback to buying a home compared to renting is that your monthly mortgage payments will increase, while rental payments are fixed.

Correct AnswerverifiedShow Answer

The key to generating enough capital for investment for many individuals is to:

Correct AnswerverifiedShow Answer

Excessive debt is as much a problem of young consumers as it is of other age groups.

Correct AnswerverifiedShow Answer

On your personal balance sheet, your assets should include anything of value that you own.

Correct AnswerverifiedShow Answer

Which of the following is a benefit of buying a home rather than renting?

Correct AnswerverifiedShow Answer

Slobo is an immigrant to the United States from a formerly communist country. He is searching for advice to help him succeed in a capitalist system. He would be well advised to:

Correct AnswerverifiedShow Answer

The new simple IRA plans allow employees of ________ companies to contribute larger amounts than the traditional IRA.

Correct AnswerverifiedShow Answer

The factor likely to have the greatest impact on how fast the value of a home appreciates over time is the:

Correct AnswerverifiedShow Answer

An annuity is a contract to make regular payments to a person for life or for a fixed period.

Correct AnswerverifiedShow Answer

A(n) ________ can be added to a homeowner's insurance policy that provides for coverage at a reasonable cost for items that the policy otherwise would not cover.

Correct AnswerverifiedShow Answer

In order to accumulate capital, young adults are likely to have to:

Correct AnswerverifiedShow Answer

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