FP100T Week 4 Few questions

Question 4

Which of the following is the recommended guideline for the maximum amount to borrow in order to keep your monthly payments manageable?

Average salary for your chosen job
No more than household income
Average starting salary for your chosen job
Average starting salary for your chosen job times 1.25


Question 5
If you opt for a joint and survivor annuity, you are entitled to receive a series of equal payments to

you and your spouse until the first one dies.
you and your spouse until the last one dies.
you and your spouse during the life of both, with the remainder going to your children.
you, your spouse, and your children until the last person dies.


Question 7
What happens when the total payroll taxes collected for Social Security exceed the total being paid out in benefits to current retirees?

The SSA invests the excess in special-issue government bonds.
The SSA distributes the excess to the lowest-earning beneficiaries.
The SSA returns the excess as tax refunds.
The SSA uses the funds to invest in austerity programs.


Question 8
The term used by economists to describe the tendency of people to overemphasize short-term goals and outcomes is called

myopia.
short ethos.
average focus.
avoidance.

Question 10
As with other types of financial planning, the last step in retirement and education planning is to


monitor your progress and revise your plan as needed.
implement your plan.
decide on the best plan.
identify your needs.


Question 11
If Jack Miller were to underestimate the effects of inflation on his retirement income, his standard of living in retirement could consistently__________ as he gets older.

increase
decline
stay the same
improve

Question 12
In comparing qualified expenses across the three government programs to help fund education expenses, which of the following should you choose if you needed to pay education costs for K–12, in addition to higher education costs?

Coverdell Education Savings Account
Section 529 Prepaid Tuition plan
Section 529 Savings plan
All of the choices are correct.


Question 14

To be "fully insured" under the Social Security program,

you must have earned at least a specified minimum dollar amount for 40 three-month periods.
you must be at least age 60.
you must be a naturalized citizen.
all of the above.


Question 15
Dollar cost averaging will result in

a lower average purchase price than the average price over the long term.
a higher average purchase price than the average price over the long term.
a smaller return than a buy-and-hold strategy if prices are rising.
a greater return than a buy-and-hold strategy if prices are rising.

Question 16
Which of the following is NOT one of the risks equity investors normally face?

Inflation risk
Reinvestment risk
Maturity risk
Market risk

Question 17
Debt investments pay lower returns compared to equities in general. This is because debt investments are ________ equities.

less risky than
more risky than
as risky as
a subgroup of

Question 18
An investor interested in a short-term horizon will avoid purchasing real estate, art, and collectibles due to ________ risk.

liquidity
interest rate
maturity
default

Question 19
A 10-year government bond is likely to offer a higher yield than a 5-year government security because of

interest rate risk.
default risk.
the real risk-free rate.
taxation.

Question 21
An investment of $1 each in two different securities led to a value of $10 (Security A) and $20 (Security B), respectively, after 15 years. When comparing the rate of return earned by the two securities, it can be said that

Security B earned a higher average annual rate of return.
Security A earned a higher average annual rate of return.
both securities earned the same average annual rate of return.
it is impossible to calculate the securities rates of return based on this information.


Question 22
Which asset class is least risky?

Corporate bonds
Treasury bonds
Derivative securities
Large company stocks


Question 23
Which of the following is not one of the steps in the investment planning process?

Select appropriate investments.
Estimate how much can apply to your investment program.
Sign up for your employer's FSA (flexible spending account).
Monitor your investment planning.

Question 24
Which of the following would be considered a commodity?

raw materials
an option
real estate
a government bond

Question 25
Your accountant has just told you that one of your investments had a capital gain over the year. This would mean that

the value of the investment appreciated.
the investment paid a large dividend.
the investment made a large interest payment.
you received a tax refund related to the investment.