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Final Exam Flashcards

1
Q

Factors you need to know for deciding how much you need in your retirement account

A
  • Current age and retirement age
  • Inflation and cost of living
  • Taxes
  • Family obligations
  • Health issues
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2
Q

Retirement annual income should be ___% to ___% of pre retirement annual income

A

70% to 80%

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3
Q

Retirement savings should be ___ to ___ times pre retirement income

A

10 to 12 times

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4
Q

A defined benefit is also called a ______

A

Pension

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5
Q

What is a defined benefit

A

It “guarantees” income during retirement

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6
Q

Who makes all contributions to defined benefit plan

A

Employer

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7
Q

Defined contribution

A

Amount put into the retirement account is determined

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8
Q

Who contributes to defined contribution

A

Both employer and employee

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9
Q

In a defined contribution plan, income at retirement is dependent on what?

A

Upon choice of investment and performance of that investment

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10
Q

In a defined contribution plan, who is the investment type left up to?

A

The employee

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11
Q

True or false: In a defined contribution plan, regular changes can be made AND employer match will vary.

A

True

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12
Q

Whats a common rule as an employee for a defined contribution plan when choosing your investment type?

A

You contribute AT LEAST as much to get full match by employer. Always match what your employer is willing to contribute.

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13
Q

Responsibility on employer to create and manage funds to meet promised benefit.

A

Defined benefit

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14
Q

Employers have shifted responsibility to employees to plan their own retirement

A

Defined contribution

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15
Q

Qualify for special tax benefits according to IRS rules.

A

Qualified plans

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16
Q

Most common defined contribution plans

A
  • 401K
  • 403(b)
  • Roth 401(k)
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17
Q

Offered by for profit companies

A

401k

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18
Q

Offered by not for profit companies

A

403(b)

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19
Q
  • Slightly different tax rules
  • Savings incentive match plan for employees
  • Simplified Employee Pension (SEP) Plan
  • Employee stock ownership plan
A

Roth 401(k)

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20
Q

A claim to the retirement account created for you

A

Vesting

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21
Q

Who are vested amounts determined by

A

Employer

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22
Q

Variations of vesting accounts

A
  • 0 until 5 years of service, then 100%
  • 20% each year, 100% after 50(or 5?) years
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23
Q

True or False: Your contributions are only partly vested

A

False, Your contributions are always 100% vested

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24
Q

What does it mean when you say your contributions are always 100% vested

A
  • You can take 100% of your contributions
  • You can simply roll them into another company or into an IRA
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25
Q

Tax is applied at withdrawal

A

Tax deferred

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26
Q

True of False: Contributions to both kinds of plans are made post-tax

A

False, they are made pre tax

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27
Q

Retirement plans for self employed

A

Individual plans, such as SEP

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28
Q

IRA where….
- Tax deduction at contribution
- Tax applied at withdrawal
(You pay taxes at the end)

A

Traditional IRA

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29
Q

IRA where….
- Tax applied at contribution
- Tax free at withdrawal
(You pay taxes at the beginning)

A

Roth IRA

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30
Q

If the tax rate is lower at retirement, choose __________

A

Traditional IRA

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31
Q

If the tax rate is lower now, choose ________

A

Roth IRA

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32
Q

Can you contribute to an IRA if you also have a pension?

A
  • Yes, w/ limits
  • Single tax payers covered by a workplace retirement plan, phase out range is $65,000-$75,000
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33
Q

The risk return relationship means

A

The higher the risk, the higher the return

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34
Q

If you prefer less risk, purchase a _____ issued by a successful and established firm

A

Bond

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35
Q

True or false?

One of the factors impacting the risks of investment is the time period you have available to keep your money invested.

A

True

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36
Q

True of False?

Before you start an investment program, you should ensure liquidity by having money in financial institutions or in money market securities.

A

True

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37
Q

True or False?

Investors measure risk to determine the degree of uncertainty surrounding their future returns.

A

True

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38
Q

True or False?

The returns from the previous three years on an investment are the best indicator of future price changes.

A

False (I think it’s either 5 or 10 years)

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39
Q

NASDAQ is a key part of the ________ where dealers conduct stock trades over a computer network.

A

OTC (Over the Counter) market

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40
Q

If you want recommendations for investing you should?

A

Open an account at a full service brokerage firm

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41
Q

Income stocks tend to pay ________ dividends and have ________ appreciation of stock prices.

A

higher dividends
lower appreciation

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42
Q

True or False

Most individual investors who buy and sell stock do so on the secondary market through brokers or investment companies.

A

True

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43
Q

True or False

You can currently borrow up to 75% of stock transactions under today’s margin rules.

A

False (It’s 80% or something?)

44
Q

True or False

Fiscal policy, the means by which the U.S. government imposes taxes on individuals and corporations and spends its money, has an impact on spending and thus an impact on the stock of some companies.

45
Q

True or False

The income statement for a company is like a budget in that it shows how much money the company would like to have made in a given accounting period.

46
Q

Convertible bonds tend to offer a ________ return than nonconvertible bonds.

47
Q

Bonds that may be exchanged for common stock when the stock reaches a specified price are called

A

Convertible bonds

48
Q

True or False

Municipal bonds are most beneficial for investors who reside in a different location from the city that issued the bonds.

49
Q

What are municipal bonds

A

Bonds issued by state and local governments

50
Q

True or False

Interest rate fluctuations will create larger value changes for bonds with long maturities.

51
Q

True or False

Municipal bonds are the least risky of all bonds and, therefore, pay a lower rate of interest.

52
Q

True or False

To completely avoid the risk of default, investors can invest in Treasury bonds or A-rated corporate bonds.

53
Q

True or False

An advantage of investing in corporate bonds is that they hold their value and pay predictable interest (coupon) payments periodically.

54
Q

________ mutual funds invest in both foreign bonds and U.S. bonds.

55
Q

Existing shares of closed-end mutual fund companies are purchased from

A

Other investors in the stock market

56
Q

True or False

Studies on mutual funds have found that load funds perform better than no-load funds.

57
Q

True or False

Studies on mutual funds have found that load funds perform better than no-load funds.

58
Q

True or False

In assessing different mutual funds, the returns vary, but the expenses are fixed.

59
Q

True or False

Mutual funds that receive dividends and capital gains must distribute these to investors in the same year.

60
Q

True or False

Federal direct unsubsidized student loans are made to eligible undergraduate, graduate, and professional students, but eligibility is not based on financial need.

61
Q

When the Fed conducts restrictive monetary policy, interest rates will ________ and money supply will ________.

A
  • Interest rates will rise
  • Money supply fill fall
62
Q

True or False

Time value of money computations relate to the future value of lump-sum cash flows only.

63
Q

As the lump sum amount increases, the present value of the amount at a fixed interest rate

64
Q

True or False

Certificates of deposit (CDs) with shorter maturity dates tend to pay higher interest rates than those with longer maturity dates.

65
Q

True or False

If you find that you will not be able to make credit payments on time, the best course of action is to immediately notify the creditor.

66
Q

True or False

In general, insurance companies generate their revenue from the payments received for policies and from the return earned from investing the payments until the funds are needed to cover claims.

67
Q

True or False

Private health insurance plans contain hospital insurance, physician insurance, and surgical insurance

68
Q

Life insurance premiums are based on all of the following except

A

The age of your children when the policy is taken out

69
Q

True or False

You should determine your auto purchase based upon the monthly payment you can afford each month.

70
Q

True or False

If you think interest rates will rise in the near future, you should seek an adjustable rate mortgage (ARM).

71
Q

Free credit reports are accessible to all U.S. consumers at

A

www.annualcreditreport.com

72
Q

True or False

Credit cards are an example of revolving open-end credit.

73
Q

By reviewing your credit card statement, you can determine all of the following except

A

Total purchases made to date

74
Q

True or False

If you have credit problems, you should contact a credit repair service instead of trying to resolve the issues yourself.

75
Q

Where do insurance companies get their revenue from?

A
  • Receiving payments for policies
  • Investing the proceeds of premiums until the funds are needed to cover losses
76
Q

True or False

Insurance should be considered even when there is a high likelihood than an event will cause a small financial loss.

77
Q

If your financial plan objective is to provide your family with the most insurance benefit in the event of your untimely death, you should purchase

A

Term insurance

78
Q

True or False

Whole life policies are the least expensive way to meet your life insurance needs.

79
Q

True or False

Universal life insurance is similar to whole life, but allows the policyholder more choices of how the savings portion of the premiums is invested.

80
Q

True or False

If your calculated tax is greater than your withholding tax, you will receive a tax refund.

81
Q

True or False

If your calculated tax is less than your withholding tax, you will receive a tax refund.

82
Q

Reductions of gross income for such items as individual retirement accounts (IRAs), moving expenses, and student loan interest payments will result in

A

Adjusted gross income

83
Q

True or False

Gross income consists of all reportable income from any source.

84
Q

True or False

The timing on the sale of an investment asset earning a capital gain makes little or no difference in the amount of taxes that are owed.

85
Q

True or False

Interest income would come from earnings on the sale of mutual funds.

86
Q

True or False

Income earned from the sale of an asset for more than you paid for it is classified as an income gain.

87
Q

True or False

You should claim the standard deduction if itemized deductions exceed the standard deduction.

88
Q

True or False

One of the six components of your financial plan should be maximizing your tax liability.

89
Q

True or False

For your graduate degree, where you earn the degree is not as important as the degree itself.

90
Q

True or False

For a direct subsidized federal loan, you do not pay interest on the loan amount while in school.

91
Q

True or False

A risk premium is the amount of interest you might receive over and above the risk-free return insured by the federal government.

92
Q

True or False

Your utility bill, which varies each month, is an example of an annuity.

93
Q

The larger the number of payments in an annuity used in determining a future value…

A

The greater the future value at the end of the period

94
Q

True or False

The longer the time period used in determining a future value, the greater the future value at the end of the period.

95
Q

As the interest rate decreases, the present value of the amount…

96
Q

True or False

The present value becomes higher as the number of years increases.

97
Q

To determine how long it would take an investment to double at 10% interest, which interest rate calculation would you use?

A

Future value of lump sum

98
Q

What is an example of a non depository institution

A

Insurance companies

99
Q

What are depository institutions

A
  • Commercial Banks
  • Credit Unions
  • Savings institution
100
Q

True or False

Nondepository institutions are financial institutions that provide various financial services, but their deposits are not federally insured.

101
Q

True or False

Deposits in commercial banks that are members of the FDIC, are insured up to a maximum of $50,000 per account.

102
Q

A one-year CD has a ________ return and ________ liquidity than a checking account.

A
  • Higher return
  • Lower liquidity
103
Q

An arrangement that protects a customer who writes a check or uses a debit card for an amount that exceeds the checking account balance is called….

A

Overdraft protection

104
Q

True or False

One alternative to payday loans is to avoid borrowing until you have the funds to spend.

105
Q

True or False

Money management is a series of decisions made over a short-term period regarding cash inflows and outflows.

Personal finance (3 decks)

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