Question 1

A person in excellent health with a long life expectancy chooses a lifetime annuity.This is an example of _________.

Accepted Answer

A)  moral hazard 
B)  adverse selection 
C)  a Texas hedge 
D)  actuarial error 
A)  moral hazard 
B)  adverse selection 
C)  a Texas hedge 
D)  actuarial error

Question 2

Statistics show that life expectancy at age 65 for males is about ___ years and for females is about ___ years.

Accepted Answer

A)  15; 19 
B)  17; 20 
C)  18; 22 
D)  19; 24 
A)  15; 19 
B)  17; 20 
C)  18; 22 
D)  19; 24

Question 3

What is the value of a $2,500 payment into an IRA,if the investment earns 12% per year for 15 years?

Accepted Answer

A)  $12,174 
B)  $13,684 
C)  $14,652 
D)  $15,523 
A)  $12,174 
B)  $13,684 
C)  $14,652 
D)  $15,523

Question 4

A regular IRA requires taxes be paid at the time the money is removed from the plan.What is the after-tax value of a $5,000 deposit into an IRA today that generates an 8% return for 20 years if the investor is taxed at the 28% level?

Accepted Answer

A)  $16,779 
B)  $20,135 
C)  $21,685 
D)  $23,305 
A)  $16,779 
B)  $20,135 
C)  $21,685 
D)  $23,305

Question 5

The Average Indexed Monthly Income is used to compute ___________.

Accepted Answer

A)  the consumer price index 
B)  your Social Security retirement benefits 
C)  your maximum 401k contribution 
D)  your maximum IRA contribution 
A)  the consumer price index 
B)  your Social Security retirement benefits 
C)  your maximum 401k contribution 
D)  your maximum IRA contribution

Question 6

Under current rules most workers will have ________ of their salary deducted to pay for Social Security.

Accepted Answer

A)  1.45 
B)  6.2% 
C)  7.65% 
D)  15.3% 
A)  1.45 
B)  6.2% 
C)  7.65% 
D)  15.3%

Question 7

You earned 8% on your corporate bond portfolio this year and you are in a 15% federal tax bracket.If over your holding period inflation was 3% your real after-tax rate of return was _____.

Accepted Answer

A)  6.80% 
B)  3.69% 
C)  4.91% 
D)  4.25% 
A)  6.80% 
B)  3.69% 
C)  4.91% 
D)  4.25%

Question 8

The Social Security system _______________.

Accepted Answer

A)  is financed in a regressive way 
B)  is regressive in the way it allocates benefits 
C)  is progressive in the way it is financed 
D)  is fully funded for the foreseeable future 
A)  is financed in a regressive way 
B)  is regressive in the way it allocates benefits 
C)  is progressive in the way it is financed 
D)  is fully funded for the foreseeable future

Question 9

Tax shelters __________________.

Accepted Answer

A)  postpone payment of tax liabilities 
B)  decrease investment risk 
C)  increase the pre-tax rate of return earned 
D)  benefit the government more than the investor 
A)  postpone payment of tax liabilities 
B)  decrease investment risk 
C)  increase the pre-tax rate of return earned 
D)  benefit the government more than the investor

Question 10

As you get older you decide to reduce the risk level of your retirement portfolio because your portfolio is nearing your minimum acceptable level.As the portfolio does better you reallocate funds into higher risk categories.You are practicing a form of ____________.

Accepted Answer

A)  manipulating tax shelters 
B)  involuntary, intergenerational transfers 
C)  excessive savings 
D)  dynamic hedging 
A)  manipulating tax shelters 
B)  involuntary, intergenerational transfers 
C)  excessive savings 
D)  dynamic hedging

Question 11

A person in poor health trying to buy supplemental health insurance is an example of ________.

Accepted Answer

A)  moral hazard 
B)  adverse selection 
C)  a Texas hedge 
D)  actuarial error 
A)  moral hazard 
B)  adverse selection 
C)  a Texas hedge 
D)  actuarial error

Question 12

An investor in the 34% tax bracket would be indifferent between a corporate bond with a before tax yield of 8% and a municipal bond with a yield of _________.

Accepted Answer

A)  3.91% 
B)  6.15% 
C)  5.28% 
D)  10.72% 
A)  3.91% 
B)  6.15% 
C)  5.28% 
D)  10.72%

Question 13

Today most employees receive retirement benefits in the form of ________.

Accepted Answer

A)  SEPs 
B)  defined benefit plans 
C)  defined annuity plans 
D)  defined contribution plans 
A)  SEPs 
B)  defined benefit plans 
C)  defined annuity plans 
D)  defined contribution plans

A person in excellent health with a long life expectancy chooses a lifetime annuity.This is an example of _________.

Statistics show that life expectancy at age 65 for males is about _ years and for females is about _ years.

What is the value of a $2,500 payment into an IRA,if the investment earns 12% per year for 15 years?

A regular IRA requires taxes be paid at the time the money is removed from the plan.What is the after-tax value of a $5,000 deposit into an IRA today that generates an 8% return for 20 years if the investor is taxed at the 28% level?

The Average Indexed Monthly Income is used to compute ___________.

Under current rules most workers will have ________ of their salary deducted to pay for Social Security.

You earned 8% on your corporate bond portfolio this year and you are in a 15% federal tax bracket.If over your holding period inflation was 3% your real after-tax rate of return was _____.

The Social Security system _______________.

Tax shelters __________________.

As you get older you decide to reduce the risk level of your retirement portfolio because your portfolio is nearing your minimum acceptable level.As the portfolio does better you reallocate funds into higher risk categories.You are practicing a form of ____________.

A person in poor health trying to buy supplemental health insurance is an example of ________.

An investor in the 34% tax bracket would be indifferent between a corporate bond with a before tax yield of 8% and a municipal bond with a yield of _________.

Today most employees receive retirement benefits in the form of ________.

Investments: Background and Issues

Asset Classes and Financial Instruments

Securities Markets

Mutual Funds and Other Investment Companies

Risk and Return: Past and Prologue

Efficient Diversification

Capital Asset Pricing and Arbitrage Pricing Theory

The Efficient Market Hypothesis

Behavioral Finance and Technical Analysis

Bond Prices and Yields

Managing Bond Portfolios

Macroeconomic and Industry Analysis

Equity Valuation

Financial Statement Analysis

Options Markets

Option Valuation

Futures Markets and Risk Management

Portfolio Performance Evaluation

Globalization and International Investing

Hedge Funds

Investors and the Investment Process

Filters

Exam 21: Taxes,inflation,and Investment Strategy

A person in excellent health with a long life expectancy chooses a lifetime annuity.This is an example of _________.

Statistics show that life expectancy at age 65 for males is about ___ years and for females is about ___ years.

What is the value of a $2,500 payment into an IRA,if the investment earns 12% per year for 15 years?

A regular IRA requires taxes be paid at the time the money is removed from the plan.What is the after-tax value of a $5,000 deposit into an IRA today that generates an 8% return for 20 years if the investor is taxed at the 28% level?

The Average Indexed Monthly Income is used to compute ___________.

Under current rules most workers will have ________ of their salary deducted to pay for Social Security.

You earned 8% on your corporate bond portfolio this year and you are in a 15% federal tax bracket.If over your holding period inflation was 3% your real after-tax rate of return was _____.

The Social Security system _______________.

Tax shelters __________________.

As you get older you decide to reduce the risk level of your retirement portfolio because your portfolio is nearing your minimum acceptable level.As the portfolio does better you reallocate funds into higher risk categories.You are practicing a form of ____________.

A person in poor health trying to buy supplemental health insurance is an example of ________.

An investor in the 34% tax bracket would be indifferent between a corporate bond with a before tax yield of 8% and a municipal bond with a yield of _________.

Today most employees receive retirement benefits in the form of ________.

Investments: Background and Issues

Asset Classes and Financial Instruments

Securities Markets

Mutual Funds and Other Investment Companies

Risk and Return: Past and Prologue

Efficient Diversification

Capital Asset Pricing and Arbitrage Pricing Theory

The Efficient Market Hypothesis

Behavioral Finance and Technical Analysis

Bond Prices and Yields

Managing Bond Portfolios

Macroeconomic and Industry Analysis

Equity Valuation

Financial Statement Analysis

Options Markets

Option Valuation

Futures Markets and Risk Management

Portfolio Performance Evaluation

Globalization and International Investing

Hedge Funds

Investors and the Investment Process

Filters

Statistics show that life expectancy at age 65 for males is about _ years and for females is about _ years.