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Question 1.1. (TCO 1) Which aspect of financial planning deals with the purchase of long-term growth funds such as stocks? (Points : 4)

        Borrowing         Spending         Managing risk         Investing         Retirement and estate planning

Question 2.2. (TCO 1) Jack Johnson is interested in purchasing new furniture that currently costs $2,000. He is not sure if he can afford the furniture now, but is afraid the cost of the furniture will increase to $3,000 in 6 months. Which type of risk is Jack worried about? (Points : 4)

        Inflation risk         Interest rate risk         Income risk         Personal risk         Liquidity risk

Question 3.3. (TCO 1) Which step in the financial planning process is demonstrated by a situation in which Royanne partially retires and travels to Europe using less costly transportation in order to save more money for the trip? (Points : 4)

        Developing her financial goals         Identifying alternative courses of action         Evaluating her alternatives         Implementing her financial plan         Reviewing and revising her financial plan

Question 4.4. (TCO 1) When retirement contributions made on your behalf where you work fully belong to you even if you leave the company, this is called the point of (Points : 4)

        networking.         vesting.         a tax-deferred benefit.         a tax-exempt benefit.         break even.

Question 5.5. (TCO 1) When you take the time to review a variety of job search websites and find 10 potential employment opportunities that fit your skills and abilities, which step in the career planning process have you completed? (Points : 4)

        Assess and research personal goals and abilities.         Evaluate the employment market to identify specific employment opportunities.         Develop a resume and cover letter to apply for specific positions.         Interview for specific positions and assess the interview performance.         Evaluate financial and other factors of positions offered.

Question 6.6. (TCO 1) This month, Ken Grossman has cash inflows of $3,500 and cash outflows of $2,350, resulting in a (Points : 4)

        balanced budget.         surplus of $1,150.         deficit of $1,150.         surplus of $3,500.         deficit of $2,350.

Question 7.7. (TCO 1) The best example of a current liability would be which of the following? (Points : 4)

        Monthly balance due on a credit card         Total amount of a mortgage         Balance of a student loan         Total of a home improvement loan         Balance of an auto loan

Question 8.8. (TCO 1) An example of _____ is a situation in which you would use a software program to help track your spending each week. (Points : 4)

        money management         an opportunity cost         a balance sheet         creative accounting         electronic analysis

Question 9.9. (TCO 2) The _____ tax is an additional tax that many taxpayers with high incomes and high amounts of deductions must pay. (Points : 4)

        deferred         bonus         excess         capital gains         alternative minimum

Question 10.10. (TCO 2) A _____ is an employer-sponsored program that allows a taxpayer to cover medical and child care costs. (Points : 4)

        tax credit         tax deduction         flexible spending account         tax-deferred investment         tax-exempt investment

Question 11.11. (TCO 2) A savings account earns 3.5%. If the saver is in a 28% tax bracket, the after-tax savings rate of return would be _____. (Points : 4)

        3.5%         2.52%         4.00%         .98%         2.25%

Question 12.12. (TCO 2) A drawback of a money market fund from an investment company is that there is (Points : 4)

        a penalty if money is withdrawn early.         a lower rate of interest if redeemed within the first 5 years.         a minimum required holding period.         a lack of FDIC insurance.         a higher rate of taxation than other alternative investments.

Question 13.13. (TCO 3) All of the following are examples of closed-end credit except a(n) (Points : 4)

        home mortgage.         installment loan to purchase new furniture.         line of credit from your bank.         automobile loan.         single lump sum credit loan due in 90 days.

Question 14.14. (TCO 3) If a bank is attempting to evaluate the trade-in value of a 2006 SUV when Anna McFarland is applying for a used car loan, the bank is examining which of the five Cs? (Points : 4)

        Character         Capacity         Capital         Collateral         Conditions

Question 15.15. (TCO 3) An example of a credit bureau would be (Points : 4)

        Equitron.         Transexpress.         the Better Business Bureau.         Experian.         FICO.

Question 16.16. (TCO 3) A _____ would require that Jessica writes a check for $125 in order to obtain a loan for $100. (Points : 4)

        credit union         payday advance company         finance company         department store         commercial bank

Question 17.17. (TCO 3) Newton Jones made a 20% down payment of $15,000 on a new car. This is an example of _____ in order to reduce lender risk.(Points : 4)

        sharing the interest rate risk with his lender         pledging valuable assets that can be seized if the loan is not repaid         taking a larger stake in the asset he is purchasing         repaying the loan over a faster period of time         None of the above

Question 18.18. (TCO 3) If Terry White would default on his loan that he was approved for in order to purchase a Chevrolet, then (Points : 4)

        an advance notice would be required before his car was repossessed.         no advance notice would be required before repossession.         the federal consumer credit laws would give him protection from his car being repossessed.         he wouldn't have to pay the full balance due on his automobile loan.         he would pay 50% of the balance due on his automobile loan.

Question 19.19. (TCO 5) When researching current price information for a bond or stock investment, the most readily available source of information for most consumers can be found within (Points : 4)

        the daily newspaper.         government publications.         corporate reports.         investor newsletters.         business periodicals.

Question 20.20. (TCO 5) If Hugh is considering a risky investment that can provide him with a large profit in a short amount of time, most likely, he is interested in investing in (Points : 4)

        U.S. Treasury bills.         certificates of deposit.         low-growth stocks.         speculative stocks.         low-risk bonds.

Question 21.21. (TCO 5) The purpose of asset allocation is to (Points : 4)

        reduce risk.         increase growth.         lower liquidity.         provide a high return.         increase income.

Question 22.22. (TCO 5) _____ involves the analysis of charts and historical data in order to make stock purchasing decisions. (Points : 4)

        Fundamental         Technical         Efficient market         Chart         Plot

Question 23.23. (TCO 5) A(n) _____ market is one in which previously issued financial securities are traded among investors. (Points : 4)

        technical         fundamental         efficient         secondary         primary

Question 24.24. (TCO 5) ABC Corporation has assets that total $15 million and liabilities that total $4 million. It also has 500,000 shares of stock outstanding. What is ABC's book value per share? (Points : 4)

        $8         $38         $22         $8         $30

Question 25.25. (TCO 5) Scott Turner has a bond with 10 years to maturity, a face value of $1,000, a 7% interest rate, and a market price of $800. What is the yield to maturity on this bond? (Points : 4)

        8.00%         11.00%         7.00%         10.00%         11.11%

Question 26.26. (TCO 5) A _____ is created when bonds are issued, and it allows the issuer to set aside money periodically for the purpose of redemption. (Points : 4)

        serial         default         sinking fund         low coupon         convertible

Question 27.27. (TCO 5) What is the current yield for a $1,000 corporate bond that pays 9% and has a current market value of $825? (Points : 4)

        9.0%         10.9%         10.0%         8.25%         8.0%

Question 28.28. (TCO 3) All of the following are disadvantages of leasing a vehicle except (Points : 4)

        automatic ownership interest in the car.         unlimited mileage on the car.         no need to meet credit requirements.         lease payments are likely to be lower than loan payments.         All of the other answers are advantages.

Question 29.29. (TCO 1) Melba Anderson has a document that allows her new microwave to be repaired or replaced within a certain time frame if it stops working. She has a (Points : 4)

        coupon.         rebate.         warranty.         rain check.         class action suit.

Question 30.30. (TCO 3) A credit purchase with 24 monthly payments of $80 and a down payment of $125 would have a total cost of (Points : 4)

        $2,000.         $1,795.         $2,045.         $1,920.         $1,085.

Question 31.31. (TCO 3) When a loan is made based on the equity value of a home and the loan provides a homeowner with tax-free income until the home is sold (to pay back the loan), this is called a(n) (Points : 4)

        conventional mortgage.         growing equity mortgage.         second mortgage.         reverse mortgage.         adjustable-rate mortgage.

Question 32.32. (TCO 4) Your home insurance policy has a $250 deductible. If hail causes $1,500 damage to your home, what amount of the claim would the insurance company pay? (Points : 4)

        $1,750         $1,250         $1,500         $250         $0

Question 33.33. (TCO 4) John Brown owns a home in Oakland, California and because of the risk of earthquakes, he decides to purchase _____ to cover potential losses. (Points : 4)

        building and other structures         additional living expenses         personal property         personal liability         specialized coverage

Question 34.34. (TCO 4) Angela has a policy that includes a $250 deductible and a coinsurance provision requiring her to pay 20% thereafter. Her medical bills total $5,500. What amount is she required to pay personally? (Points : 4)

        $1,050         $300         $5,500         $5,500         $1,300

Question 35.35. (TCO 4) Medigap insurance is sold and serviced by (Points : 4)

        the federal government.         state governments.         both federal and state governments.         private insurance companies.         both the government and private insurance companies.

Question 36.36. (TCO 4) A(n) _____ is an addendum to a life insurance policy that can add additional benefits, such as an accidental death benefit payable to a beneficiary. (Points : 4)

        accelerated benefits clause         policy dividend         guaranteed insurability clause         second-to-die rider         double indemnity rider

Question 37.37. (TCO 4) If Franseca has a term life insurance policy that is _____, this means that she can exchange the policy into a whole life policy without the need for a medical examination. (Points : 4)

        straight         renewable         convertible         decreasing         accelerated

Question 38.38. (TCO 6) The Capitalist Mutual Fund's net asset value is $28.25. The fund has liabilities of $3 million and 1,600,000 shares have been issued. What is the value of the fund's portfolio? (Points : 4)

        $42 million         $45.2 million         $48 million         $48.2 million         $3 million

Question 39.39. (TCO 6) Mickey Thomas plans to invest in a(n) _____ because he is interested in a fund that invests in European companies. (Points : 4)

        aggressive growth fund         equity income fund         global fund         international fund         regional fund

Question 40.40. (TCO 6) One disadvantage associated with real estate investments is that an investor must  face (Points : 4)

        lack of involvement in property maintenance.         a hedge against inflation.         illiquidity.         lack of financial risk.         possible high capital requirements for total venture.

Question 41.41. (TCO 6) If Wilson Fischer has purchased 10 rare silver coins from a broker, he is investing in (Points : 4)

        direct investment in real estate.         indirect investment in real estate.         precious metals.         ceramics.         gems.

Question 42.42. (TCO 6) If Jeremiah's employer makes nontaxable contributions to a plan in his name and his salary is reduced by the same amount, Jeremiah has a (Points : 4)

        money-purchase pension plan.         stock bonus plan.         profit-sharing plan.         defined benefit plan.         403(b) plan.

Question 43.43. (TCO 6) Randall owns a condo worth $240,000, a car valued at $25,000, and miscellaneous assets worth $7,500. He owes $185,000 on the condo and $15,000 on the car and has no other debts. His retirement account, in which he is fully vested, contains $27,500 in mutual funds. He is insured with a $500,000 term life insurance policy. What is his net worth? (Points : 4)

        $92,500         $115,000         $100,000         $592,500         $600,000

Question 44.44. (TCO 7) Brenda wants to leave a message of encouragement to her grandchildren just in case something happens to her in the near future. She would be interested in preparing a(n) (Points : 4)

        ethical will.         durable power of attorney.         letter of last instruction.         codicil.         formal will.

Question 45.45. (TCO 7) Samantha has been designated as the recipient of her sister's assets in the event of her death. This means that Samantha is her sister's (Points : 4)

        executor.         trustee.         guardian.         beneficiary.         agent.

Question 1.1. (TCO 1) Your brother-in-law has come to you in confidence expressing a concern with managing his finances. Your initial recommendation is that he consider using a budget. How would you explain the purpose of a budget and what would you suggest that he take into consideration in order for the budgeting process to be successful? (Points : 10)

             

Question 2.2. (TCO 2) What are the advantages of a Roth IRA? (Points : 10)

             

Question 3.3. (TCO 3) Kelly Manchester wants to know what price home she can afford. Her annual gross income is $45,000. She owes $750 per month on other debts and expects her property taxes and homeowners insurance to cost $250 per month. She knows she can get a 7.0%, 30-year mortgage, so her mortgage payment factor is 6.65. She expects to make a 20% down payment. What is Michelle's affordable home purchase price? Assume a lender will use a 38% monthly gross income guideline. Round your answer to the nearest $100. (Points : 10)

             

Question 4.4. (TCO 3) Identify two or three sources of consumer credit and discuss the advantages and  disadvantages of each type selected. (Points : 10)

             

Question 5.5. (TCO 5) Clayton and Barbara Patterson were married immediately after graduating from college and have been married for 20 years. They both started investments early in life, but the majority of their funds were placed in speculative stock funds. Their portfolios performed well until the last few years, when they faced losses due to an economic downturn. Explain how asset allocation could have helped the Pattersons.(Points : 10)

             

Question 6.6. (TCO 7) What is the difference between retirement and estate planning? (Points : 10)