Review

Question 1

The two sections included in all homeowners policies are?

Answer 1

property losses and liability losses

Question 2

The three main categories of auto-related losses covered by the standard personal automobile policy (PAP) include which of the following?

Answer 2

damage to or loss of the automobile
injury to the insured or other family member
legal liability

Question 3

Traditional Whole life characteristics

Answer 3

considered “permanent” coverage
has higher initial premiums than term life
offers the potential to build cash value
offers level premiums throughout the life of the insured

Question 4

Annuities

Answer 4

variable deferred annuities generally have earnings that vary during the accumulation and annuity periods.

Earnings and payments are both variable

Question 5

Systematic risk

Answer 5

interest rate

market

Question 6

Advantages of investing in mutual funds?

Answer 6

pooling of investors’ funds
diversification
access to professional money managers
detailed record keeping of shareholder investments and transactions

Question 7

Standard deviation generally tells the investor?

Answer 7

“the bumpiness of the ride” of an investment.
Measure of risk - tells how much variability there is in a return compared to the average of the return. We refer to this as the “bumpiness of the ride”

Question 8

Funds that should be held in an emergency fund.

Answer 8

liquid

Question 9

SWOT analysis

Answer 9

Strengths Weaknesses Opportunities Threats

Question 10

A small-business owner who is paid $200,000 each year by his company wants to establish a retirement plan. He only wants to include full-time employees (and not part-time employees). The profits and cash flow of the business fluctuate from year to year, and the owner wants the flexibility of having up to 20% of his compensation contributed to a retirement plan for his benefit each year.

Answer 10

profit sharing

Question 11

403(b)

Question 12

Simple IRA

Question 13

SEP-IRA

Question 14

What are requirements to receive Social Security?

Answer 14

at least age 62
must be fully insured
must have at least 40 credits of coverage

Question 15

Alan makes $60,000 per year and is contributing 4% of his salary to his 401(K) plan. His company provides a 50% match on up to 10% of compensation. How much is the company match for Alan’s contribution?

Answer 15

$3,000

Question 16

Which education credits or contributions do not have any phaseouts because of income being too high?

Answer 16

Section 529 contributions

Question 17

During the current tax year, George sold several securities that resulted in the following types of gains and losses:

• long-term capital gain: $6,700
• short-term capital gain: $7,000
• long-term capital loss: $1,900
• short-term capital loss: $9,200

What is the net capital gain or loss on George’s security sales?

Answer 17

net long-term gain of $2,600

net long term $6,700 - $19,00 = $4,800
net short-term $7000 - $9,200 = -$2,200

net long-term gain $4,800 - $2,200 = $2,600

Question 18

Roth IRA characteristics

Answer 18

funded with after-tax dollars
must have earned income to contribute
qualified distributions are tax-free

Question 19

Will can name

Answer 19

personal representative
guardian for dependent children
avoid intestacy laws
cannot transfer property held in joint title

Question 20

longer elimination period will

Answer 20

reduce the premium for a long-term care policy