Question 1

From a financial viewpoint, it is best to buy a

Accepted Answer

A)  large home in a good neighborhood. 
B)  very large home in a neighborhood where homes are relatively inexpensive. 
C)  medium-sized home in a neighborhood where homes are the least expensive. 
D)  small home in an excellent neighborhood. 
A)  large home in a good neighborhood. 
B)  very large home in a neighborhood where homes are relatively inexpensive. 
C)  medium-sized home in a neighborhood where homes are the least expensive. 
D)  small home in an excellent neighborhood.

Question 2

Unlike whole life policies, a universal life insurance policy typically invests part of the premium in very aggressive, high-risk assets.

Accepted Answer

A) True 
 B)False

Question 3

People who have health insurance seldom need disability insurance.

Accepted Answer

A) True 
 B)False

Question 4

The chances of becoming disabled at an early age are much higher than your chances of dying from an accident.

Accepted Answer

A) True 
 B)False

Question 5

The number of workers paying into Social Security for each retiree receiving Social Security benefits is

Accepted Answer

A)  fixed by law. 
B)  increasing. 
C)  decreasing. 
D)  not fixed by law, but has remained relatively constant for several decades. 
A)  fixed by law. 
B)  increasing. 
C)  decreasing. 
D)  not fixed by law, but has remained relatively constant for several decades.

Question 6

Ricky wants to decrease his current taxable income and save for retirement. He should consider a traditional IRA.

Accepted Answer

A) True 
 B)False

Question 7

Financial planners encourage individuals to borrow only to cover immediate expenses.

Accepted Answer

A) True 
 B)False

Question 8

Whole life insurance premiums provide the insured with both pure insurance and a savings plan.

Accepted Answer

A) True 
 B)False

Question 9

The benefit of opening an IRA while you're young is the compounding of the money invested tax-free over your working lifetime.

Accepted Answer

A) True 
 B)False

Question 10

In preparing an income statement for yourself, the wages from your job would be shown as

Accepted Answer

A)  your revenue. 
B)  an expense. 
C)  an asset. 
D)  your owner's equity. 
A)  your revenue. 
B)  an expense. 
C)  an asset. 
D)  your owner's equity.

Question 11

Keogh plans are most useful for stockholders of major corporations who earn most of their income from dividends rather than wages or salaries.

Accepted Answer

A) True 
 B)False

Question 12

A Keogh retirement plan would be used by a(n)

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

Question 13

Mini-Case
Ira Roth and Penny Weiss met and married in the early 2000s, 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. Ira used his finance degree and extensive knowledge of computers to obtain a high-paying job in banking. 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 electronics, 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 Great Recession hit later in the decade, 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 is likely to have them do would be to

Accepted Answer

A)  open an individual retirement account (IR
A) . 
B)  borrow money to pay for their excess expenses. 
C)  take inventory of their financial position. 
D)  return to school and pursue a graduate degree. 
A)  open an individual retirement account (IR
A) . 
B)  borrow money to pay for their excess expenses. 
C)  take inventory of their financial position. 
D)  return to school and pursue a graduate degree.

Question 14

Dani has prepared her personal balance sheet and found that her total assets are $54,000 and her total liabilities (largely college loans) are $48,000. What does this show for Dani?

Accepted Answer

A)  Her net income is only $6,000. 
B)  Her net worth is $6,000. 
C)  Her cash flow will not be sufficient to repay her college loans. 
D)  Her balance sheet is out of balance. 
A)  Her net income is only $6,000. 
B)  Her net worth is $6,000. 
C)  Her cash flow will not be sufficient to repay her college loans. 
D)  Her balance sheet is out of balance.

Question 15

A traditional IRA affords workers who qualify the opportunity to deduct from their reported income the money they put into a qualified retirement account.

Accepted Answer

A) True 
 B)False

Question 16

Mini-Case
Ira Roth and Penny Weiss met and married in the early 2000s, 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. Ira used his finance degree and extensive knowledge of computers to obtain a high-paying job in banking. 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 electronics, 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 Great Recession hit later in the decade, 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.
-Once Ira and Penny achieved a more solid financial foundation, they began to consider the purchase of a home. From a financial standpoint, a sound strategy for them to consider would be to

Accepted Answer

A)  buy a large house in a modest neighborhood. 
B)  buy a house in one of the best areas of town, even if they can afford only a relatively small house. 
C)  buy a house that will minimize their total real estate taxes. 
D)  make sure that their house payments are less than the rent they were paying on their old apartment. 
A)  buy a large house in a modest neighborhood. 
B)  buy a house in one of the best areas of town, even if they can afford only a relatively small house. 
C)  buy a house that will minimize their total real estate taxes. 
D)  make sure that their house payments are less than the rent they were paying on their old apartment.

Question 17

Social Security is the term used to describe the Old Age, Survivors, and Disability Insurance Program.

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

The best way to save money is to pay yourself first.

Accepted Answer

A) True 
 B)False

Question 20

The biggest advantage of the Roth IRA is that

Accepted Answer

A)  income contributed to the retirement plan is tax-free. 
B)  withdrawals from the retirement plan are tax-free. 
C)  taxes on the income contributed to the retirement plan are deferred until the funds are withdrawn. 
D)  withdrawals from the retirement plan are tax-deferred until the individual reaches 59½ years of age. 
A)  income contributed to the retirement plan is tax-free. 
B)  withdrawals from the retirement plan are tax-free. 
C)  taxes on the income contributed to the retirement plan are deferred until the funds are withdrawn. 
D)  withdrawals from the retirement plan are tax-deferred until the individual reaches 59½ years of age.

Exam 24: Managing Personal Finances

From a financial viewpoint, it is best to buy a

Unlike whole life policies, a universal life insurance policy typically invests part of the premium in very aggressive, high-risk assets.

People who have health insurance seldom need disability insurance.

The chances of becoming disabled at an early age are much higher than your chances of dying from an accident.

The number of workers paying into Social Security for each retiree receiving Social Security benefits is

Ricky wants to decrease his current taxable income and save for retirement. He should consider a traditional IRA.

Financial planners encourage individuals to borrow only to cover immediate expenses.

Whole life insurance premiums provide the insured with both pure insurance and a savings plan.

The benefit of opening an IRA while you're young is the compounding of the money invested tax-free over your working lifetime.

In preparing an income statement for yourself, the wages from your job would be shown as

Keogh plans are most useful for stockholders of major corporations who earn most of their income from dividends rather than wages or salaries.

A Keogh retirement plan would be used by a(n)

Dani has prepared her personal balance sheet and found that her total assets are $54,000 and her total liabilities (largely college loans) are $48,000. What does this show for Dani?

A traditional IRA affords workers who qualify the opportunity to deduct from their reported income the money they put into a qualified retirement account.

Social Security is the term used to describe the Old Age, Survivors, and Disability Insurance Program.

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

The best way to save money is to pay yourself first.

The biggest advantage of the Roth IRA is that

Taking Risks and Making Profits Within the Dynamic Business Environment

Understanding Economics and How It Affects Business

Doing Business in Global Markets

Demanding Ethical and Socially Responsible Behavior

How to Form a Business

Entrepreneurship and Starting a Small Business

Management and Leadership

Structuring Organizations for Todays Challenges

Production and Operations Management

Motivating Employees

Human Resource Management: Finding and Keeping the Best Employees

Dealing With Employeemanagement Issues

Marketing: Helping Buyers Buy

Developing and Pricing Goods and Services

Distributing Products

Using Effective Promotions

Understanding Accounting and Financial Information

Financial Management

Using Securities Markets for Financing and Investing Opportunities

Money, Financial Institutions, and the Federal Reserve

Working Within the Legal Environment

Using Technology to Manage Information

Managing Risk

Filters