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General Principals Flashcards

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1
Q

If the Dow is falling, housing is on a downward trend, consumer confidence is down, and unemployment is rising.. what would the fed want to do?

A

The fed is going to loosen the money supply

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2
Q

What does the IAA of 1940 require?

A

Persons or firms advising others about securities investments must register with the SEC

Defines the role and responsibilities of an investment advisor

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3
Q

What is the American Opportunity Credit

A

Covers 4 years post secondary education

CANNOT have felony drug conviction

Tax credit for max of $2500

Does NOT cover room/board

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4
Q

What is the lifetime learning credit?

A

Per credit, NOT per student

20% of first 10k of qualified expenses

*max credit of 2k

Undergrad and graduate

Does NOT cover room/board

Unlimited period

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5
Q

PLUS loans

A

Not need based

Parents can borrow for entire cost of college

Must meet federal standard of credit worthiness

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6
Q

Subsidized Staford loans

A

Available to students who show financial need AFTER EFC, pell grant, and other aid has been subtracted from cost

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7
Q

Pell Grant

A

Max is 6k

Undergrad only

Eligibility determined by EFC formula

Based on need. Eligible AGI below 60k

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8
Q

What is the financial need formula

A

Financial need= cost of attendance - EFC

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9
Q

Who is public service loan forgiveness available to?

A

Government and nonprofit employees with federal student loans

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10
Q

What industries are typically more affected by a recession?

A

Capital goods

Consumer durable goods

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11
Q

Do credit unions do business loans?

A

No

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12
Q

Securities investors protection act of 1970

A

Established SIPC

insured against failure of brokerage firm

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13
Q

Can you put EE bonds in a UTMA/UGMA

A

No, because parents own the bonds

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14
Q

PooriSh

A

Pell Grants
Supplemental Education Opportunity Grant
Subsidized Stanford Student loans

Use for less than 60k income cap

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15
Q

Wealthy

A

Parent loan
Undergrad Students
Wealthy parents are a PLUS

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16
Q

What are the options for funding for graduate years?

A

Fulbright scholarship
Stafford loan
529 distribution or coverdell
Lifetime learning credit

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17
Q

What another name for a 529

A

Qualified Tuition Plan (QTP)

Will refer to it as a QTP on exam

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18
Q

Does the federal reserve control the fed funds rate?

A

No!!

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19
Q

Does GDP include inflation?

A

No

It counts economic activity without regard to yearly price fluctuations

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20
Q

What do you need to sell variable contracts

A

Series 6 or 7

And variable state life insurance license

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21
Q

Are home equity loans deductible?

A

Only if used for home equity

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22
Q

How will taking out a home equity loan for 25k to make a home improvement affect net worth?

A

Loan decreases 25k
Improvements increase 25k
*it is a wash

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23
Q

Can a checking account always be used for an emergency fund?

A

Not it is not always available because it’s balance may be used for regular expenses

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24
Q

Chapter 13 bankruptcy

A

Reorganization/repayment plan

Payments to creditors are reduced

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25
What is disinflation
Slowing down of price increases
26
Chapter 7 bankruptcy
Straight bankruptcy-allows you to walk away from debt Permits debtor to claim either federal or state exemptions Examples of exempt property: homestead, personal property, equity in a motor vehicle, wages due to head of family, ERISA plans, cash value of LI/annuities Must satisfy means test Net inc 60M >10k = not an option Net inc 60M <10k = allowed Net inc between 6-10k = can file if net inc is <25% of all non priority unsecured debt
27
Repo
Fed gives the dealer funds in return for a temporary pledge of gov securities Buy bonds
28
Reverse repo
Fed gives the dealer a temporary pledge of gov securities in return for cash Sells bonds
29
What is the producer price index
Index of price of various items such a farm products and industrial commodities This is the leading indicator of inflation trends
30
What does compliance within the rules of the insurance company fall under
Law of agency
31
Discount rate
Rate the federal bank charges its member banks to borrow to meet reserve requirements
32
What is implied authority
Actual authority the agent to carry out business That in which THE PUBLIC believes
33
Prime rate
Interest rate that commercial banks charge its most creditworthy corporate customers This is often an option for exam questions about monetary policy and is WRONG
34
What effect does paying down mortgage principal have on net worth
Increases net worth
35
What is a time deposit
CD
36
Express authority
Written, explicit direction from the insurance company to the agent
37
Apparent authority
Arises out of negligence to principal Allows the agent to appear to have authority due to past actions
38
Common coincident economic indicator
Industrial production
39
What does GDP measure
Dollar value of all goods and services newly produced within a countries boarder
40
Difference between durable and non durable goods
Durable-items that don’t wear out quickly Cars, appliances, home furnishings, electronics No durable-items that are used up quickly or have a short life span Makeup, food, paper products, fuel, clothing
41
List of a few leading economic indicators
``` Initial claims of unemployment insurance New manufacturing orders New private housing units Stock prices, 500 common stocks Index of consumer expectations ```
42
Chapter 11 bankruptcy
For individuals who do not qualify under chapter 13 bc they exceeded debt limit or don’t have regular source of income
43
What nouns MUST follow CFP
``` Certificant Practitioner Professional Certification Mark Exam ```
44
Who regulates the requirements for form ADV?
Sec
45
Debts not cancelable by bankruptcy
``` Student loans Child support Taxes Gov loans Alimony ```
46
Is money in a coverdell or 529 creditor protected?
Only if it has been in the account for 2 years or more
47
What happens when an insurance broker writes an application and it is submitted with misinformation
Actions of brokers authority to not extend to insurers Insurer is not obligated to pay claim and the carrier would refund the premium
48
Difference between agent and broker
Agent-acts on behalf of the insurer Broker- represents policy owner
49
Who controls the monetary policy for the US
FOMC
50
What age brackets match up with investments for education accounts?
Age 12 and below- can add stocks Age 13-16- less risk, bonds with time horizon Age 17 and up-cash
51
Can 529 plans be taken during a bankruptcy?
Yes, if the plans have not been established for 2 years
52
In what stage of the financial planning process are unrealistic goals addressed?
Identifying and selecting goals
53
What does fiscal policy promote
Federal taxation and spending designed to level out business cycle, achieve full employment, price stability and sustained growth in economy
54
Do monetary and fiscal policy have the same objective
Yes-stable domestic economy
55
Is the federal reserve over fiscal or monetary policy?
Monetary policy
56
What are the 4 ways the fed can ease the money supply
Reduce reserve requirement Lower discount rate Buy bonds Decrease margin percentage required
57
What are the 4 ways the fed tightens the money supply?
Increase reserve requirement Raise discount rate Sell bonds Increase margin percentage requirement
58
What is the federal funds rate and how is it set?
Is excess reserves maintained at the fed by member banks Is the charge for overnight loans from one bank to another Set by auction
59
Is a contribution to a coverdell deductible?
No
60
Is a contribution to a coverdell present or future interest?
Present interest
61
What balance of a students UTMA will impact the EFC?
20%
62
What percentage of unprotected assets would be counted in the EFC?
Colleges expect 5.64% of “unprotected” assets toward EFC
63
Is there a protected amount of student income that is not counted toward EFC?
6k
64
What is the parent protection allowance for EFC?
17k-37k
65
How does having more family members in college affect EFC?
Lowers EFC the lower it is the more aid a family can apply for
66
Are books or room and board a qualified expense for EE bonds?
No. Only tuition
67
How much of the AOTC can be a refundable credit?
40% up to $1,000
68
To use the AOTC how does a taxpayer need to document their payments of tuition and fees?
Form 1098-T

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