Final Exam Flashcards
(105 cards)
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
2
Q
Retirement annual income should be ___% to ___% of pre retirement annual income
A
70% to 80%
3
Q
Retirement savings should be ___ to ___ times pre retirement income
A
10 to 12 times
4
Q
A defined benefit is also called a ______
A
Pension
5
Q
What is a defined benefit
A
It “guarantees” income during retirement
6
Q
Who makes all contributions to defined benefit plan
A
Employer
7
Q
Defined contribution
A
Amount put into the retirement account is determined
8
Q
Who contributes to defined contribution
A
Both employer and employee
9
Q
In a defined contribution plan, income at retirement is dependent on what?
A
Upon choice of investment and performance of that investment
10
Q
In a defined contribution plan, who is the investment type left up to?
A
The employee
11
Q
True or false: In a defined contribution plan, regular changes can be made AND employer match will vary.
A
True
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.
13
Q
Responsibility on employer to create and manage funds to meet promised benefit.
A
Defined benefit
14
Q
Employers have shifted responsibility to employees to plan their own retirement
A
Defined contribution
15
Q
Qualify for special tax benefits according to IRS rules.
A
Qualified plans
16
Q
Most common defined contribution plans
A
- 401K
- 403(b)
- Roth 401(k)
17
Q
Offered by for profit companies
A
401k
18
Q
Offered by not for profit companies
A
403(b)
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)
20
Q
A claim to the retirement account created for you
A
Vesting
21
Q
Who are vested amounts determined by
A
Employer
22
Q
Variations of vesting accounts
A
- 0 until 5 years of service, then 100%
- 20% each year, 100% after 50(or 5?) years
23
Q
True or False: Your contributions are only partly vested
A
False, Your contributions are always 100% vested
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
25
Tax is applied at withdrawal
Tax deferred
26
True of False: Contributions to both kinds of plans are made post-tax
False, they are made pre tax
27
Retirement plans for self employed
Individual plans, such as SEP
28
IRA where....
- Tax deduction at contribution
- Tax applied at withdrawal
(You pay taxes at the end)
Traditional IRA
29
IRA where....
- Tax applied at contribution
- Tax free at withdrawal
(You pay taxes at the beginning)
Roth IRA
30
If the tax rate is lower at retirement, choose __________
Traditional IRA
31
If the tax rate is lower now, choose ________
Roth IRA
32
Can you contribute to an IRA if you also have a pension?
- Yes, w/ limits
- Single tax payers covered by a workplace retirement plan, phase out range is $65,000-$75,000
33
The risk return relationship means
The higher the risk, the higher the return
34
If you prefer less risk, purchase a _____ issued by a successful and established firm
Bond
35
True or false?
One of the factors impacting the risks of investment is the time period you have available to keep your money invested.
True
36
True of False?
Before you start an investment program, you should ensure liquidity by having money in financial institutions or in money market securities.
True
37
True or False?
Investors measure risk to determine the degree of uncertainty surrounding their future returns.
True
38
True or False?
The returns from the previous three years on an investment are the best indicator of future price changes.
False (I think it's either 5 or 10 years)
39
NASDAQ is a key part of the ________ where dealers conduct stock trades over a computer network.
OTC (Over the Counter) market
40
If you want recommendations for investing you should?
Open an account at a full service brokerage firm
41
Income stocks tend to pay ________ dividends and have ________ appreciation of stock prices.
higher dividends
lower appreciation
42
True or False
Most individual investors who buy and sell stock do so on the secondary market through brokers or investment companies.
True
43
True or False
You can currently borrow up to 75% of stock transactions under today's margin rules.
False (It's 80% or something?)
44
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.
True
45
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.
False
46
Convertible bonds tend to offer a ________ return than nonconvertible bonds.
lower
47
Bonds that may be exchanged for common stock when the stock reaches a specified price are called
Convertible bonds
48
True or False
Municipal bonds are most beneficial for investors who reside in a different location from the city that issued the bonds.
False
49
What are municipal bonds
Bonds issued by state and local governments
50
True or False
Interest rate fluctuations will create larger value changes for bonds with long maturities.
True
51
True or False
Municipal bonds are the least risky of all bonds and, therefore, pay a lower rate of interest.
False
52
True or False
To completely avoid the risk of default, investors can invest in Treasury bonds or A-rated corporate bonds.
False
53
True or False
An advantage of investing in corporate bonds is that they hold their value and pay predictable interest (coupon) payments periodically.
False
54
________ mutual funds invest in both foreign bonds and U.S. bonds.
Global
55
Existing shares of closed-end mutual fund companies are purchased from
Other investors in the stock market
56
True or False
Studies on mutual funds have found that load funds perform better than no-load funds.
False
57
True or False
Studies on mutual funds have found that load funds perform better than no-load funds.
False
58
True or False
In assessing different mutual funds, the returns vary, but the expenses are fixed.
False
59
True or False
Mutual funds that receive dividends and capital gains must distribute these to investors in the same year.
True
60
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.
True
61
When the Fed conducts restrictive monetary policy, interest rates will ________ and money supply will ________.
- Interest rates will rise
- Money supply fill fall
62
True or False
Time value of money computations relate to the future value of lump-sum cash flows only.
False
63
As the lump sum amount increases, the present value of the amount at a fixed interest rate
Increases
64
True or False
Certificates of deposit (CDs) with shorter maturity dates tend to pay higher interest rates than those with longer maturity dates.
False
65
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.
True
66
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.
True
67
True or False
Private health insurance plans contain hospital insurance, physician insurance, and surgical insurance
True
68
Life insurance premiums are based on all of the following except
The age of your children when the policy is taken out
69
True or False
You should determine your auto purchase based upon the monthly payment you can afford each month.
False
70
True or False
If you think interest rates will rise in the near future, you should seek an adjustable rate mortgage (ARM).
False
71
Free credit reports are accessible to all U.S. consumers at
www.annualcreditreport.com
72
True or False
Credit cards are an example of revolving open-end credit.
True
73
By reviewing your credit card statement, you can determine all of the following except
Total purchases made to date
74
True or False
If you have credit problems, you should contact a credit repair service instead of trying to resolve the issues yourself.
False
75
Where do insurance companies get their revenue from?
- Receiving payments for policies
- Investing the proceeds of premiums until the funds are needed to cover losses
76
True or False
Insurance should be considered even when there is a high likelihood than an event will cause a small financial loss.
False
77
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
Term insurance
78
True or False
Whole life policies are the least expensive way to meet your life insurance needs.
False
79
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.
True
80
True or False
If your calculated tax is greater than your withholding tax, you will receive a tax refund.
False
81
True or False
If your calculated tax is less than your withholding tax, you will receive a tax refund.
True
82
Reductions of gross income for such items as individual retirement accounts (IRAs), moving expenses, and student loan interest payments will result in
Adjusted gross income
83
True or False
Gross income consists of all reportable income from any source.
True
84
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.
False
85
True or False
Interest income would come from earnings on the sale of mutual funds.
False
86
True or False
Income earned from the sale of an asset for more than you paid for it is classified as an income gain.
False
87
True or False
You should claim the standard deduction if itemized deductions exceed the standard deduction.
False
88
True or False
One of the six components of your financial plan should be maximizing your tax liability.
False
89
True or False
For your graduate degree, where you earn the degree is not as important as the degree itself.
False
90
True or False
For a direct subsidized federal loan, you do not pay interest on the loan amount while in school.
True
91
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.
True
92
True or False
Your utility bill, which varies each month, is an example of an annuity.
False
93
The larger the number of payments in an annuity used in determining a future value...
The greater the future value at the end of the period
94
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.
True
95
As the interest rate decreases, the present value of the amount...
Increases
96
True or False
The present value becomes higher as the number of years increases.
False
97
To determine how long it would take an investment to double at 10% interest, which interest rate calculation would you use?
Future value of lump sum
98
What is an example of a non depository institution
Insurance companies
99
What are depository institutions
- Commercial Banks
- Credit Unions
- Savings institution
100
True or False
Nondepository institutions are financial institutions that provide various financial services, but their deposits are not federally insured.
True
101
True or False
Deposits in commercial banks that are members of the FDIC, are insured up to a maximum of $50,000 per account.
False
102
A one-year CD has a ________ return and ________ liquidity than a checking account.
- Higher return
- Lower liquidity
103
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....
Overdraft protection
104
True or False
One alternative to payday loans is to avoid borrowing until you have the funds to spend.
True
105
True or False
Money management is a series of decisions made over a short-term period regarding cash inflows and outflows.
True
