1
CONCEPT
→ Property Ownership and Trusts
12/17 that's 71% RETAKE
12 questions were answered .correctly
5 questions were answered incorrectly.
Which of the following statements is true of a testamentary
trust?
RATIONALE
A testamentary trust is established after the death of the grantor
through a person’s will. All testamentary trusts are irrevocable.
●
●
It is revocable.
It is established through a
grantor's will.
●
It is established while the grantor
is still alive.
●
The grantor of the trust is also the
trustee.
UNIT 4 — MILESTONE 4
SCORE
12/17
2
CONCEPT
→ Disability Insurance
Which of the following is true of long-term disability insurance?
RATIONALE
Long-term disability insurance usually kicks in after you cannot
work for six to 12 months. Most policies extend from a few years up
until age 65 (at age 65, you can then enroll in Medicare). Higher
premiums are associated with increased incomes and duration of
coverage.
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●
●
The cost of the premium
decreases with the extension of
the coverage period.
●
It comes into effect after the
insured has reachedage 65.
●
It will replace a portion of a
person's salary for three to 12
months after an injury.
It becomes effective after you
cannot work for six to 12 months.
UNIT 4 — MILESTONE 4
SCORE
12/17
CONCEPT
→ Protecting Your Investments
4
RATIONALE
Federal and state regulators constantly monitor the investment and
insurance marketplace for wrongdoing on the part of companies
and individuals. Regulations are in place to make sure that a
baseline level of safety exists in the event of a firm or system-wide
failure that could result in the loss of cash or securities.
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●
The brokerage account
associated with the investment is
covered through the SIPC.
●
The brokerage account is insured
through the FDIC.
●
Individuals buy insurance
separately using the same agent
for their home, life, and auto.
●
Individuals are insured by the
company they buy the bonds
from.
UNIT 4 — MILESTONE 4
SCORE
12/17
CONCEPT
→ Homeowner's and Renter's Insurance
5
RATIONALE
The renter's insurance coverage is similar to an HO policy except
that it is designed to provide you with property replacement and
liability coverage rather than insurance to replace your residence.
Renter’s insurance is inexpensive and unrelated to your earnings or
income.
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●
It provides coverage of any
liability that arises if the
policyholder's rental property is
damaged.
●
It reimburses the policyholder for
loss of personal income
associated with filing an
insurance claim.
●
It provides coverage to restore
the residence of the policyholder
if any peril occurs.
●
It is an expensive policy because
it charges renters a high
insurance premium.
UNIT 4 — MILESTONE 4
SCORE
12/17
CONCEPT
→ Planning for Retirement
6
RATIONALE
Savings are accumulated over your working life and eventually
distributed during your retirement years. The later a person begins
saving for retirement, the higher the required savings rate in
orderto reach their retirement goals.
Report an issue with this question
●
●
Celina, who earns $44,000 a year
and starts saving for retirement at
age 36
George, who earns $50,000 a
year and starts saving for
retirement at age 45
●
Vanessa, who earns $33,000 a
year and starts saving for
retirement at age 28
●
Bernard, who earns $15,000 a
year and starts saving for
retirement at age 20
UNIT 4 — MILESTONE 4
SCORE
12/17
CONCEPT
→ Auto Insurance
7
RATIONALE
Auto insurance policyholders should be cautiouswhen making any
claims against their policy. Those with more frequent claims tend to
pay higher premiums. A good credit score and a good driving
record result in a decreased premium on auto insurance.
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Eli is a 24-year-old freelance writer. He experiences periods of
unemployment and lives on a tight budget. He recently bought
term life insurance and declared his parents as the beneficiaries.
Which of the following is true about Eli's situation?
●
●
The policyholder sees a
decrease in theirdeductible
amount.
●
The policyholder's credit score
increases.
●
The policyholder's driving record
shows markedimprovement.
The policyholder begins topay a
higher premium.
UNIT 4 — MILESTONE 4
SCORE
12/17
CONCEPT
→ Life Insurance
8
RATIONALE
Term life insurance provides only a death benefit if the insured
individual dies before reaching a predetermined age. Term life
insurance is usually recommended by consumer advocates
because of its low cost, which allows a policy owner to buy ample
coverage.
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In which of the following medical conditions does a living will
dictate thetype ofmedical treatment to be administered to a
patient?
●
●
His annual insurance premium
will stay the same over the life of
the insurance policy.
●
He will be required to renew the
policy every month because of
his fluctuating employment.
●
His parents will have to pay taxes
on the death benefits at the time
of payout.
UNIT 4 — MILESTONE 4
SCORE
12/17
CONCEPT
→ Living Wills and Power of Attorney
9
RATIONALE
A living will is a legal document that is used to inform and direct a
physician or hospital about the types of medical treatment
someone wants or does not want in case the person becomes
incapacitated. A living will states whether or not medical
procedures should be used that will artificially prolong life. A living
will does not give medical guidance if the patient is suffering from
the flu, has a heart condition, or needs CPR.
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James is a 60-year-old retired veteran who recently suffered a
broken hip and needs skilled home care. Instead of filing a claim
on his long-term care insurance, he chose to use money from his
savings and extend the elimination period on his insurance.
What is one outcome of James' decision?
●
●
A patient is suffering from a
chronic heart condition.
●
A patient is surviving on a life
support system.
●
A patient is suffering from the flu.
UNIT 4 — MILESTONE 4
SCORE
12/17
CONCEPT
→ Long-Term Care Insurance
10
RATIONALE
An elimination period is the waiting phase between the time the
insured individual qualifies for benefits and when the insurance
carrier begins providing benefits. One way to reduce long-term
care insurance premiums is to extend the elimination period for as
long as possible.
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Tim used his problem solving skill to compare health insurance
plans. He decided to pick a fee-for-service plan to meet his
needs.
Which of the following is true regarding Tim's choice?
●
●
His benefit period will decrease.
●
The cost of his insurance
premium will decrease.
His insurance payout will
increase.
UNIT 4 — MILESTONE 4
SCORE
12/17
CONCEPT
→ Health Insurance
11
RATIONALE
A fee-for-service plan is the most flexible, and costly, type of health
insurance coverage available; it allows the insured to use the
services of different hospitals, clinics, and doctors without prior
permission.
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In which of the following scenarios is the individual paying an
insurance copayment?
●
●
He can get medical treatment at
any hospital without prior
permission.
●
He can only use doctors,
specialists, clinics, and hospitals
in the plan’s network, unless it is
an emergency.
His out-of-pocket expenses will
be the same in network hospitals
and non-network hospitals.
UNIT 4 — MILESTONE 4
SCORE
12/17
CONCEPT
→ What Is Insurance?
12
RATIONALE
A copayment is a cost-sharing amount with the insurance company.
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In which of the following scenarios should the individual opt for
a financial advisor rather than a financial counselor to be most
productive?
●
●
Eddie pays $400 a month for his
insurance coverage.
Dina pays $30 for every doctor's
appointment and her insurance
company pays the rest.
●
Ralph has to pay $6,000 before
his insurance will begin to cover
the costs of damage to his
property.
●
Ali makes minimum wage from a
part-time job and needs basic
UNIT 4 — MILESTONE 4
SCORE
12/17
CONCEPT
→ Financial Advisors
13
RATIONALE
A financial advisor helps their clients deal with one or just a few
issues, such as insurance planning, investment management, or
education planning. A financial counselor helps people resolve
past financial difficulties or helps those with fewer assets and lower
incomes establish a plan for the future.
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Marina wants to protect herself from financial loss as a result of
identity theft.
What advice should you give her?
●
●
Amy needs to buy three types of
insurance: health, life, and long-
term care.
●
Grey needs to create a plan to
clear her overdue credit card
payments.
Maya wants to reopen her
clothing boutique which closed
its doors due to nonpayment of
its suppliers.
UNIT 4 — MILESTONE 4
SCORE
12/17
CONCEPT
→ Identity Theft
14
RATIONALE
One way to verify that you are not a victim of identity theft is to
always reconcile your bank accounts monthly and report any
problems to your bank or creditor immediately. Further, keep a list
of all your credit cards, debit cards, and each account’s contact
information somewhere secure, such as a safe deposit box.
Report an issue with this question
Which of the following actions could result in an individual
becoming a victim of a financial fraud?
●
●
She should never hesitate to
respond to calls that ask her to
confirm her personal details.
●
She should use the same
password for her credit card,
debit card, and bank accounts.
●
She should carry her Social
Security number and credit card
details wherever she goes.
UNIT 4 — MILESTONE 4
SCORE
12/17
CONCEPT
→ Financial Fraud
15
RATIONALE
There are thousands of financial frauds, rip-offs, and scams
operating in the marketplace today. To stay safe and keep money
working for you, you should never send money overseas to
someone you do not know. You should never buy something from
an unfamiliar person or business over the phone or internet. You
should also never pay a processing fee to receive a prize or invest
in something that you do not understand.
Report an issue with this question
In which of the following events should an individual use his or
her agility skill and execute a new will?
●
●
Sending money to a relative who
lives overseas using online
services
●
Refraining from paying any
processing fees required to gain
possession of a prize
●
Looking into the details of an
investment scheme before
investing money
UNIT 4 — MILESTONE 4
SCORE
12/17
CONCEPT
→ Wills
16
RATIONALE
Completely new wills are often written upon marriage, upon the
birth of children, or after any other major life event. However,
starting a college education, purchasing a new vehicle, or going on
vacation does not require a new will to be executed. As soon as a
new will is drafted and executed, any old wills become obsolete
and non-enforceable.
Report an issue with this question
Rachel, 28, a software engineer, decides to opt for a traditional
IRA instead of a Roth IRA for her retirement plan. Her plan
includes 75% stock which is high-risk, high-reward.
Is this a productive choice of plans for Rachel? Why or why not?
●
On becoming a parent of a child
●
On taking their first international
vacation trip
●
On purchasing a new luxury
vehicle
It is not productive because as
Rachel's earnings grow over time,
UNIT 4 — MILESTONE 4
SCORE
12/17
CONCEPT
→ Individual Retirement Accounts
17
RATIONALE
Rachel is young and will most likely have a higher marginal tax rate
at the time of her retirement as her investments grow. Therefore,
investing in a traditional IRA would mean that Rachel would pay
much more in taxes than she would if she had chosen a Roth IRA
as her retirement plan.
Report an issue with this question
Joseph invested in a series of stocks that performed well and
produced high returns. Soon after, he started making hasty
investment choices without the research to back them up.
●
●
It is productive because Rachel's
withdrawals from the account
after retirement will be tax
exempt.
●
It is productive because Rachel
can withdraw money from the
account at any time without
penalty.
●
It is not productive because
Rachel cannot claim tax
deductions on her contributions
toward her retirement account.
UNIT 4 — MILESTONE 4
SCORE
12/17
CONCEPT
→ Your Financial Well-Being
RATIONALE
Confirmatory bias is attributing one's success solely to one's skills
and talents rather than recognizing the success came from an
outside source, such as luck. In finances, confirmatory bias can
lead to overconfidence with one's investment choices in the
absence of facts or research.
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●
Hyperbolic discounting
●
Confirmatory bias
Status quo bias
●
Loss aversion
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UNIT 4 — MILESTONE 4
SCORE
12/17
