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Exam 23: Bonus C: Managing Your Personal Finances

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Question 71

Multiple Choice

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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:

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

E) A) and B)
F) A) and C)

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Question 72

Multiple Choice

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Over the long-run,investing in __________ has proven to be a good strategy for obtaining a high rate of return.

A) U.S.government bonds
B) certificates of deposits
C) corporate bonds
D) stocks

E) A) and B)
F) All of the above

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Question 73

True/False

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The value of education is often exaggerated when searching for a good job.

From a financial viewpoint,it is best to buy a:

About half of the U.S.population accumulates enough money to afford a comfortable retirement.

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.

Preparing and living with a personal budget is:

A Roth IRA allows workers who qualify to get an up-front deduction for any money they invest in the plan.

Mini-Case Ira Roth and Penny Weiss met and married in the early 1990s,during their days at State University.Both came from families with limited financial resources.They had to work at part-time jobs during school,and still needed student loans to help pay for their college education.Ira and Penny shared a strong work ethic and had a great desire to succeed financially and enjoy the good life. Penny and Ira quickly experienced financial success in the latter half of the booming 1990s.Ira used his marketing major and extensive knowledge of computers to obtain a high-paying job in a successful dot-com business.Penny,who cleaned homes to earn money during college,used her experience to start her own business.Her entrepreneurial spirit surprised Ira and their friends,and she built a successful cleaning business with a growing base of residential clients and even a few commercial customers.She soon had to hire several part-time employees to keep up with demand.With money rolling in,Ira and Penny began to live the good life,buying an expensive new car,a state-of-the-art home entertainment center,and expensive wardrobes.As busy as they were,and as hard as they both worked,they often found it easier to dine at a nice restaurant rather than fix meals at home. When the dot-com bubble burst in the early 2000s,Ira was lucky enough to keep his job,but was forced to take a significant pay cut.The economic downturn forced some of the households and businesses that used Penny's company to cut back on professional cleanings,so her business suffered too.Soon the couple was struggling to pay the rent on their upscale apartment.They began relying on credit cards to cover expenses,but after a few months the credit limits on their cards had been reached.They fell behind in paying off their student loans and started getting some unpleasant calls from bill collectors.The stress and frustration led to arguments that began to threaten their personal relationship.With their personal finances out of control,Ira and Penny knew that they had to make changes to save not only their financial dreams,but also their marriage.However,they were at a loss as to where to start.Family members encouraged them to seek the advice of a financial planner.The couple reluctantly agreed that this was something they needed to do. -One of the first things the financial planner was likely to have them do would be to:

Over 35% of U.S.households do not have a retirement account.

A variable life insurance policy is considered riskier than a traditional whole life policy because it:

The Social Security program was established in:

The total cost of purchasing a stereo or television with cash is ________ the cost when using credit cards to finance the same assets.

Fixed annuities have become much more popular than variable annuities.

Personal financial planners often encourage their clients to write down every single penny they spend each day.The main purpose of this is to:

One strategy used to lower car insurance premiums is to choose a policy with a large deductible.

The biggest advantage of the new Roth IRA is that:

Once you have evaluated your current financial situation and know your sources of income and expenses,you have reached the point where you can establish a personal budget.

A person in the 25 percent tax bracket who invests $1,000 in a traditional IRA immediately postpones $250 in taxes.

Many employers offer health insurance coverage for their full-time employees.