FINC 335 and 430 week 1

Quiz 1

NAME ____________________________ Due Date: June 8, 2014 (in assignment folder)

Please provide name above and provide answers in the chart below and submitting homework in MS Word in assignment folder for Quiz 1. (I’ll deduct points if you don’t).

1. Which of the following types of defined contribution plans are commonly used to help employers maximize benefits for older employees?

(1) fixed formula age-weighted

(2) 401(k)

(3) cross-tested

(4) stock bonus

A. (1) and (3) only

B. (2) and (3) only

C. (3) and (4) only

D. (2) (3) and (4)

2. Bob D. Builder, owner of Bob’s Construction, would like to offer a retirement plan that would help reduce turnover. Bob should consider using a(n)

A. 401(k) plan

B. profit sharing plan

C. savings plan

D. age-weighted plan

E. defined benefit plan

3. Looking beyond pure capital accumulation needs, which of the following is a primary capital needs planning objective?

A. determining pension plan income benefits

B. identifying retirement cash flow

C. accounting for income from future savings

D. translating capital into living expense needs

4. Which of the following is not an acceptable method for overcoming a retirement shortfall?

A. cut back on expenses before retirement

B. invest a large portion of a retirement portfolio in a high-risk investment to obtain a higher return

C. increase pre-retirement savings

D. retire later

E. tap into home equity

5. Cathy Atwater is 60, 5 years away from retirement. The most accurate method for her to use in calculating her income needs during retirement is the

A. expense method

B. replacement ratio method

6. What is the name of the basic unit used to determine the amount of each monthly benefit payable under Social Security?

A. Average Indexed Monthly Earnings (AIME)

B. Delayed Retirement Credit (DRC)

C. Fully Insured Amount (FIA)

D. Primary Insurance Amount (PIA)

7. Which one of the following is the minimum age at which an individual is entitled to a Social Security retirement benefit?

A. 62

B. 65

C. 66

D. 67

8. Which of the following is (are) true regarding entitlement to Social Security disability benefits?

A. the worker must be currently or fully insured

B. the worker must have been disabled for at least 18 months or expected to be disabled for 18 months

C. the worker must have completed a 6-month waiting period or be specifically exempted from this requirement

D. all of the above

E. only A and C

9. Employment after retirement will

A. always result in a loss of all Social Security Benefits

B. result in loss of some or all Social Security Benefits only for those under normal retirement age who have earnings above a specified threshold

C. result in loss of $1 of benefits for each $3 of earnings for those at or older than normal retirement age

D. reduce Social Security earnings only if the worker is under normal retirement age and self-employed

E. have no effect on Social Security Benefits

10. Howard Stein is 65 this year and his wife, Gertie, is 62. They got married after high school and their youngest son has graduated from college. Gertie has been a full-time homemaker all of her adult life, but devoted 20 hours a week to volunteer efforts. Howard will begin drawing Social Security retirement benefits this year. Gertie can receive

A. no benefits because she was never employed outside the home

B. a mother’s benefit because she has had children

C. a spouse’s benefit equal to 50% of Howard’s primary insurance amount (PIA)

D. a benefit based on credits earned from her volunteer work

E. a spouse’s benefit equal to less than 50% of Howard’s primary insurance amount (PIA)

11. Workers who continue their employment between normal retirement age and 70 receive an increase in Social Security retirement benefits.

A. True

B. False

12. Juan T. B. and I. B. Cool were married 8 years ago. Their divorce was finalized this week. At age 65, I. B. is eligible for Social Security benefits under Juan’s work record.

A. True

B. False

13. Taking into consideration all of the coverage available under each part, which of the following Medicare parts is (are) primarily financed by payroll taxes?

(1) Part A

(2) Part B

(3) Part C

(4) Part D

A. (1) only

B. (2) and (3) only

C. (2) (3) and (4) only

D. (1) (2) (3) and (4)

14. Which of the following is not included in coverage under Medicare Part B?

A. inpatient hospital care

B. anesthesia

C. diagnostic tests

D. blood transfusions

15. Hospice care is covered under Hospital Insurance (Part A) when the beneficiary meets all of the following requirements, except

A. is eligible for Hospital Insurance benefits

B. is certified by a doctor as terminally ill

C. files a statement electing to waive all other Medicare coverage for hospice care

D. pays the required deductible

16. Elsie and her husband Zeb were married 55 years before he died last year. When Zeb retired at age 65, he began receiving benefits from Social Security and Medicare Part A. As a life-long homemaker, Elsie receives spouse benefits from Social Security. Earlier this year, at age 75, Elsie was in a car accident, breaking her hip and cracking four ribs. After two weeks in the hospital, she was transferred to a skilled nursing facility for 10 more days. After her discharge, a visiting nurse came by her home once a week. Which of the following services are covered under Medicare Part A for Elsie?

A. inpatient hospital care only

B. inpatient hospital care and post-hospital extended care in a skilled nursing facility

C. inpatient hospital care and home health service benefits

D. post-hospital extended care in a skilled nursing facility and home health service benefits

E. inpatient hospital care, post-hospital extended care in a skilled nursing facility, home health service benefits

17. Mary is not eligible for Medicare Part A and therefore has not enrolled. In which of the following Medicare coverages may Mary enroll?

(1) Hospital Insurance

(2) Medical Insurance

(3) Medicare Advantage

(4) Prescription Drug Insurance

A. (1) (2) and (3) only

B. (2) (3) and (4) only

C. all of the above

D. none of the above

18. Which of the following is not true regarding the Survivor Benefit Plan (SBP)?

A. it will pay a monthly annuity to a surviving spouse

B. a retiring service member is automatically enrolled in SBP if he or she has a spouse or dependent children

C. surviving family members can be eligilbe for up to 85% of retired pay

D. SBP coverage may be elected for a former spouse or parent

E. all of the above are true

19. The next of kin of a service member who dies while on active duty will be paid a death gratuity in the amount of

A. $25,000

B. $50,000

C. $75,000

D. $100,000

20. If a service member entered the armed forces after August 1986, he/she would be eligible for which type of military pension?

A. Final Pay Retirement System

B. High-3 System

C. REDUX System

D. Thrift Savings Plan

E. Retirement Savings Contribution Plan

21. A veteran’s eligibility for the Aid and Attendance Pension is predicated upon which of the following?

(1) 90 days of active duty service

(2) at least 1 day of service during a period of war

(3) an honorable discharge

(4) payment of a monthly premium

A. (1) and (3) only

B. (2) and (4) only

C. (1) (2) and (3) only

D. (2) (3) and (4) only