Question 1

For someone with a family that includes young children, the first step in estate planning should be to

Accepted Answer

A)  establish a will. 
B)  set up a trust fund for each child. 
C)  select a guardian for the children. 
D)  give each child his or her own savings account. 
A)  establish a will. 
B)  set up a trust fund for each child. 
C)  select a guardian for the children. 
D)  give each child his or her own savings account.

Question 2

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. 
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.

Question 3

As an employee of Marshall Manufacturing, Sherry has an opportunity to invest pre-tax income in an employer-sponsored retirement plan. Her employer will contribute 50 cents for every dollar that Sherry contributes to this fund. What is this an example of?

Accepted Answer

A)  individual retirement account (IR
A)  plan 
B)  401(k) plan 
C)  Keogh plan 
D)  restricted private investment (RPI) plan 
A)  individual retirement account (IR
A)  plan 
B)  401(k) plan 
C)  Keogh plan 
D)  restricted private investment (RPI) plan

Question 4

Interest paid on a home loan is deductible from taxable income.

Accepted Answer

A) True 
 B)False

Question 5

In order to qualify as a tax shelter, IRA saving plans must be invested in mutual funds.

Accepted Answer

A) True 
 B)False

Question 6

Earnings of Keogh plans are not taxed until the funds are withdrawn from the retirement account.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is an advantage of home ownership?

Accepted Answer

A)  Home ownership is a good way to control the costs of utilities, maintenance, and insurance. 
B)  Mortgage interest and real estate taxes are tax deductible. 
C)  Money invested in a house is a highly liquid investment. 
D)  Home ownership provides a guaranteed rate of return that is more stable than the return earned by investing in the stock market. 
A)  Home ownership is a good way to control the costs of utilities, maintenance, and insurance. 
B)  Mortgage interest and real estate taxes are tax deductible. 
C)  Money invested in a house is a highly liquid investment. 
D)  Home ownership provides a guaranteed rate of return that is more stable than the return earned by investing in the stock market.

Question 8

Cynthia is trying to find a way to reduce her car insurance premium. She would be well advised to decrease her insurance policy's deductible.

Accepted Answer

A) True 
 B)False

Question 9

Claire has contributed to a Roth IRA for the last several years. She is now in her late sixties and has just retired. She plans to withdraw $3,000 this year from her Roth IRA. If she is in the 25 percent tax bracket, how much tax will she have to pay on her withdrawal?

Accepted Answer

A)  $ 750 
B)  $1,000 
C)  $2,250 
D)  She will not owe any taxes on this withdrawal. 
A)  $ 750 
B)  $1,000 
C)  $2,250 
D)  She will not owe any taxes on this withdrawal.

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

Your personal balance sheet will reflect the same fundamental accounting equation as the balance sheet for a business: assets = liabilities + owners' equity.

Accepted Answer

A) True 
 B)False

Question 12

The reason you would prepare a durable power of attorney is to make sure that someone was named to take over your finances if you become incapacitated.

Accepted Answer

A) True 
 B)False

Question 13

Recent demographic trends suggest that the financial condition of the Social Security program soon will begin to improve.

Accepted Answer

A) True 
 B)False

Question 14

________ life insurance offers pure insurance protection for a given period of time.

Accepted Answer

A)  Term 
B)  Temporary 
C)  Managed premium 
D)  Equity-based 
A)  Term 
B)  Temporary 
C)  Managed premium 
D)  Equity-based

Question 15

Patrick 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. 
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.

Question 16

Mateo and Maya have decided to take out an umbrella policy from an insurance company. The main reason they would probably want to do this would be to

Accepted Answer

A)  protect against major disasters, which are known as "rainy days." 
B)  ensure that any children they have will be guaranteed the right to buy insurance at some future date. 
C)  save money by having one company provide a variety of different types of coverage. 
D)  take out one life insurance policy that covers both of them. 
A)  protect against major disasters, which are known as "rainy days." 
B)  ensure that any children they have will be guaranteed the right to buy insurance at some future date. 
C)  save money by having one company provide a variety of different types of coverage. 
D)  take out one life insurance policy that covers both of them.

Question 17

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. 
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.

Question 18

One strategy to lower the cost of automobile insurance is to purchase a policy with a

Accepted Answer

A)  low deductible. 
B)  high deductible. 
C)  liability coverage rider. 
D)  health coverage rider. 
A)  low deductible. 
B)  high deductible. 
C)  liability coverage rider. 
D)  health coverage rider.

Question 19

Your big-screen HDTV would be listed as an asset on your personal balance sheet. However, the loan you took out to buy the TV would be listed as a personal liability.

Accepted Answer

A) True 
 B)False

Question 20

John is thinking about preparing a durable power of attorney. This indicates that he wants to

Accepted Answer

A)  ensure that a single lawyer will be able to handle all of his legal needs. 
B)  declare that his current will is invalid. 
C)  eliminate the taxes on his estate when he dies. 
D)  appoint someone to take over his finances if he should become incapacitated. 
A)  ensure that a single lawyer will be able to handle all of his legal needs. 
B)  declare that his current will is invalid. 
C)  eliminate the taxes on his estate when he dies. 
D)  appoint someone to take over his finances if he should become incapacitated.

Exam 24: Managing Personal Finances

For someone with a family that includes young children, the first step in estate planning should be to

One benefit of a simple IRA is that it allows

As an employee of Marshall Manufacturing, Sherry has an opportunity to invest pre-tax income in an employer-sponsored retirement plan. Her employer will contribute 50 cents for every dollar that Sherry contributes to this fund. What is this an example of?

Interest paid on a home loan is deductible from taxable income.

In order to qualify as a tax shelter, IRA saving plans must be invested in mutual funds.

Earnings of Keogh plans are not taxed until the funds are withdrawn from the retirement account.

Which of the following is an advantage of home ownership?

Cynthia is trying to find a way to reduce her car insurance premium. She would be well advised to decrease her insurance policy's deductible.

Claire has contributed to a Roth IRA for the last several years. She is now in her late sixties and has just retired. She plans to withdraw $3,000 this year from her Roth IRA. If she is in the 25 percent tax bracket, how much tax will she have to pay on her withdrawal?

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

Your personal balance sheet will reflect the same fundamental accounting equation as the balance sheet for a business: assets = liabilities + owners' equity.

The reason you would prepare a durable power of attorney is to make sure that someone was named to take over your finances if you become incapacitated.

Recent demographic trends suggest that the financial condition of the Social Security program soon will begin to improve.

________ life insurance offers pure insurance protection for a given period of time.

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

Mateo and Maya have decided to take out an umbrella policy from an insurance company. The main reason they would probably want to do this would be to

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

One strategy to lower the cost of automobile insurance is to purchase a policy with a

Your big-screen HDTV would be listed as an asset on your personal balance sheet. However, the loan you took out to buy the TV would be listed as a personal liability.

John is thinking about preparing a durable power of attorney. This indicates that he wants to

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