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CFP Coursework > General Financial Planning - FP511 - Module 6 > Flashcards

General Financial Planning - FP511 - Module 6 Flashcards

1
Q

Chapter 7 Bankruptcy

A
  • permitted to keep certain assets, liquidates all others to satisfy debts
  • not required to give up Social Security benefits, pension, unemployment, or alimony
  • typically allowed to keep all or portion of cash value in life insurance
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2
Q

T/F: If state law is different from federal law with regard to property retention, state law generally applies.

A

TRUE

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3
Q

T/F: Upon completion of Chapter 7 bankruptcy, most debts are discharged completely and the debtor is no longer responsible for payments.

A

TRUE

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4
Q

What 2 types of debt are not able to be discharged through Chapter 7 bankruptcy except for in extremely rare situations?

A
  • student loans
  • unpaid taxes
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5
Q

What types of debts are never dischargeable through Chapter 7 bankruptcy?

A
  • child support
  • alimony debts
  • 401(k) loans
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6
Q

Chapter 13 Bankruptcy

A
  • 3-5 year plan to repay debts
  • typically the amount owed is reduced so payment will be manageable
  • available to those with debt under a certain amount with regular income
  • creditors cannot attempt to collect additional payments if the debtor is paying in accordance with the established plan
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7
Q

What provisions were set forth by the Bankruptcy Act of 2005?

A
  • individuals who have the ability to pay debts are required to file Chapter 13
  • Chapter 7 is limited to credit cards or loans not secured by a house or other asset
  • Chapter 7 requires credit counseling
  • lenders must provide info on the danger of only making minimum payments
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8
Q

What protections for retirement accounts are available under the Bankruptcy Act of 2005?

A
  • originally established IRAs up to $1M (adjusted every 3 years)
  • ERISA protected company retirement plans for an unlimited amount
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9
Q

How long must an individual wait between filing for Chapter 7 bankruptcy and filing again?

A

8 years

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10
Q

Any individual, business, or corporate debtor who is eligible for Chapter 7 is also eligible for ____________.

A

Chapter 11

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11
Q

Chapter 11 is also known as?

A

Reorganization

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12
Q

T/F: Child support and other family maintenance responsibilities are given priority when determining creditors’ claims and repayment schedules for Chapter 13 filings.

A

TRUE

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13
Q

What is the AKA for the Consumer Credit Protection Act?

A

Truth in Lending Act

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14
Q

What provisions were set forth by Regulation Z of the Consumer Protection Act?

A
  • APR
  • when payments begin
  • charges for late payments
  • prepayment amount
  • amount financed
  • right of recission
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15
Q

How much liability does a credit card holder have for unauthorized transactions if they report the card as lost or stolen?

A

$50

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16
Q

What major protections were enacted by the Fair Credit Reporting Act?

A

Consumers who are denied credit must be notified about which credit reporting agency was used and they have 30 days to request a free copy of the report.

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17
Q

How long is adverse action entered on a borrower’s maintained? Bankruptcy?

A
  • 7 years
  • up to 10 years
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18
Q

The Fair Credit Billing Act requires consumers to notify creditors of errors within ____ days of the billing statement; creditors have ____ days to respond and ____ days to resolve the complaint.

A
  • 60
  • 30
  • 90
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19
Q

The Equal Credit Opportunity Act prohibits discrimination on the basis of:

A
  • race, color, religion, national origin, gender, marital status, or sexual orientation
  • all/part of income comes from public assistance programs
  • applicant has exercised any right under the act in good faith
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20
Q

How are consumers protected under the Electronic Funds Transfer Act?

A

It provides for recovery by those who suffer from losses due to a financial institution failing to follow the provisions of the act.

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21
Q

What protections were established by the Consumer Credit Reporting Reform Act?

A
  • credit reports must include accurate, relevant, and recent info
  • access restricted to bona fide users
  • applicants denied credit must be advised why and given name/address of credit agency
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22
Q

What protection is offered under the Fair Debt Collection Practices Act?

A
  • collectors cannot call a debtor’s place of work
  • collectors cannot harass or intimidate
  • collectors cannot use false or misleading practices
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23
Q

What act was enacted to establish fair practices and enable consumers to better understand their credit transactions?

A

Credit Card Accountability Responsibility and Disclosure Act of 2009

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24
Q

What is the purpose of the Servicemembers Civil Relief Act?

A

To ease financial burdens on servicemembers during periods of military service of more than 30 days.

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25
Q

The ________________ established a code of fair information practices that regulates the types of information the federal government can collect and how the information may be used.

A

Privacy Act of 1974

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26
Q

What act allows for consumers to obtain a free credit report from each of the 3 national credit reporting agencies every 12 months?

A

Fair and Accurate Credit Transaction Act of 2003

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27
Q

Define: Phising

A

Posing as a financial institution or company and sending spam over the internet to entice an individual to provide personal info.

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28
Q

Define: Skimming

A

Involves the stealing of credit and debit card information by using a special storage device when processing transactions with these cards.

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29
Q

How can someone protect themselves against ID theft?

A
  • confidential personal info should be safeguarded at all times
  • routine monitoring of accounts and statements
  • closing accounts and placing fraud alerts if any suspicious activity is detected
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30
Q

_____________ is the study of how individuals and companies make decisions to allocate scarce resources, which helps in understanding how individuals and companies prioritize their wants.

A

Microeconomics

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31
Q

_____________ is the study of an economy as a whole.

A

Macroeconomics

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32
Q

T/F: Microeconomic analyses affect decisions made by investment firms.

A

FALSE
Macroeconomic analyses affect decisions made by investment firms.

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33
Q

Much of economic theory is base on the relationship between _____________ and _____________.

A

supply
demand

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34
Q

Define: Equilibrium

A

The price of a good or service and how much will be produced is indicated at the intersection of the supply and demand curves. The intersection is known as equilibrium.

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35
Q

Define: Price Elasticity

A

The responsiveness of the quantity of a good demanded to changes in price, all other economic forces remaining constant.

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36
Q

List examples of inelastic goods.

A
  • gasoline
  • food
  • medicine
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37
Q

List examples of elastic good.

A
  • luxury items
  • new cars
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38
Q

What are you trying to determine with elasticity?

A

How many units of quantity are changed for every unit of price change.

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39
Q

What is the formula for determining GDP?

A

GDP =
consumption +
investment +
government +
net exports

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40
Q

_____________________ is the total monetary value of all goods and services produced within the domestic US over the course of a given year, including income generated domestically by a foreign firm.

A

Gross Domestic Product

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41
Q

What is the largest component of the GDP of the US, representing about two-thirds of that number?

A

Consumption

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42
Q

Who are the responsible parties for making fiscal policy decisions?

A

Congress and the president

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43
Q

Who is the responsible party for making monetary policy decisions?

A

Federal Reserve Board

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44
Q

What tools are used in exercising fiscal policy?

A
  • the power to tax
  • the power to spend
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45
Q

The Fed uses 3 major tools to enact monetary policy. They are:

A

1- reserve requirements
2- discount rate
3- open market operations

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46
Q

Among the 3 monetary policy tools used by the Fed, which is the most important and most frequently practiced?

A

open-market operations

47
Q

If the Fed wants to expand economic activity it will __________ government securities.

A

buy

48
Q

If the Fed wants to contract economic activity it will __________ government securities.

A

sell

49
Q

What is the only rate directly controlled by the Fed?

A

the discount rate

50
Q

Define: Discount Rate

A

The rate at which banks can borrow from any of the Federal Reserve Banks

51
Q

The Fed will __________ the discount rate to contract the money supply.

A

raise

52
Q

The Fed will __________ the discount rate to increase the money supply.

A

lower

53
Q

What rates does the Fed have great influence over?

A
  • federal funds rate
  • prime rate
54
Q

Define: Federal Funds Rate

A

The interest rate charged on short-term borrowing between banks.

55
Q

Define: Prime Rate

A

The rate of interest charged by commercial banks to their best business and personal customers.

56
Q

What is the typical difference between the federal funds rate and the prime rate?

A

the prime rate is typically 3% higher

57
Q

What has historically been the required reserve rate?

A

10%

58
Q

The _____________ reflects movements in economic activity and illustrates the concepts of supply and demand.

A

business cycle

59
Q

During times of expansion, income is:

A

up

60
Q

During times of expansion, demand is:

A

up

61
Q

During times of expansion, sentiment is:

A

up

62
Q

During times of expansion, consumer credit is:

A

up

63
Q

During times of expansion, retail sales are:

A

up

64
Q

During times of expansion, auto sales are:

A

up

65
Q

During times of expansion, mortgage debit is:

A

up

66
Q

During times of expansion, housing starts are:

A

up

67
Q

During times of expansion, inflation is:

A

down

68
Q

During times of expansion, unemployment is:

A

down

69
Q

During times of expansion, the CPI is:

A

down

70
Q

During times of contraction, income is:

A

down

71
Q

During times of contraction, demand is:

A

down

72
Q

During times of contraction, sentiment is:

A

down

73
Q

During times of contraction, consumer credit is:

A

down

74
Q

During times of contraction, retail sales are:

A

down

75
Q

During times of contraction, auto sales are:

A

down

76
Q

During times of contraction, mortgage debt is:

A

down

77
Q

During times of contraction, housing starts are:

A

down

78
Q

During times of contraction, inflation is:

A

up

79
Q

During times of contraction, unemployment is:

A

up

80
Q

During times of contraction, the CPI is:

A

up

81
Q

During the peak phase of the business cycle, the GDP is:

A

up

82
Q

During the peak phase of the business cycle, the Producer Price Index is:

A

up

83
Q

During the peak phase of the business cycle, inflation is:

A

up

84
Q

During the peak phase of the business cycle, output is:

A

up

85
Q

During the peak phase of the business cycle, output is:

A

up

86
Q

During the peak phase of the business cycle, industrial production is:

A

up

87
Q

During the peak phase of the business cycle, capacity utilization is:

A

up

88
Q

During the peak phase of the business cycle, labor productivity is:

A

down

89
Q

During the peak phase of the business cycle, efficiency is:

A

down

90
Q

During the trough phase of the business cycle, the GDP is:

A

down

91
Q

During the trough phase of the business cycle, the Producer Price Index is:

A

down

92
Q

During the trough phase of the business cycle, inflation is:

A

down

93
Q

During the trough phase of the business cycle, output is:

A

down

94
Q

During the trough phase of the business cycle, industrial production is:

A

down

95
Q

During the trough phase of the business cycle, capacity utilization is:

A

down

96
Q

During the trough phase of the business cycle, labor productivity is:

A

up

97
Q

During the trough phase of the business cycle, efficiency is:

A

up

98
Q

A recession occurs when the GDP has experienced a decrease in real terms for _____ consecutive quarters or a minimum of _____ months from a baseline of zero.

A

2
6

99
Q

A depression occurs when the GDP has experienced a decrease in real terms for _____ consecutive quarters or a minimum of _____ months from a baseline of zero.

A

6
18

100
Q

What are examples of leading indicators of economic change?

A
  • housing starts
  • new claims for unemployment
  • bond yields
  • indexes of stock prices
  • orders for durable goods
  • changes in investor sentiment
101
Q

What are examples of coincident indicators of economic change?

A
  • industrial production
  • levels of personal income
  • amount of corporate profits
102
Q

What are examples of lagging indicators of economic change:

A
  • prime interest rates
  • changes in CPI, especially for services
  • amount of loans outstanding
  • average duration of unemployment
103
Q

Define: Inflation

A

A rise in the average level of prices for goods and services.

104
Q

What are the 2 most common measures of inflation?

A
  • Consumer Price Index
  • Producer Price Index
105
Q

T/F: The CPI program produces quarterly data on changes in the prices paid by urban consumers for a representative basket of goods and services.

A

FALSE
The report is produced monthly

106
Q

When prices are still rising but at a slower rate, ____________ exists.

A

disinflation

107
Q

When prices are falling in absolute terms, _____________ exists.

A

deflation

108
Q

A deflationary period is one where _____________ should be of primary concern.

A

preservation of capital

109
Q

During times of deflation, what types of investments should be sought? Avoided?

A
  • seek very high-quality debt instruments
  • avoid lower-quality bonds
  • if deflation is severe, avoid stocks
110
Q

T/F: Stagflation is the combination increased unemployment, rising prices of goods, high inflation, decreases in spending, and a reduction in productive output.

A

TRUE

111
Q

Inflation typically begins increasing during which phase of the business cycle?

A

Expansion to peak
Inflation is growing most rapidly as the business cycle approaches its peak. Inflation typically begins decreasing as the business cycle moves from peak to trough.

112
Q

How often can the investment plan be changed on a 529 plan?

A

twice per year

113
Q
A

CFP Coursework (12 decks)

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