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Exam 22: Appendix B: Managing Risk

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Question 41

Multiple Choice

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The earnings of a traditional individual retirement account (IRA) are:

A) taxed at the time they are earned.
B) not taxed.
C) taxed when the funds are withdrawn.
D) subject to the double taxation of all dividends.

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Question 42

Multiple Choice

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Hernando and Margarita have decided to take out an umbrella policy from an insurance company.The main reason they would probably want to do this would be to:

A) protect against major disasters,which are known as "rainy days."
B) ensure that any children they have will be guaranteed the right to buy insurance at some future date.
C) save money by having one company provide a variety of different types of coverage.
D) take out one life insurance policy that covers both of them.

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Question 43

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A person in the 25 percent tax bracket who invests $1,000 in a traditional IRA immediately postpones $250 in taxes.

Don is young and newly married.He and his wife plan to have children in the near future and Don wants to get a significant amount of life insurance coverage at as low a cost as possible.He would be well advised to purchase a term insurance policy.

Financial planning begins with:

In order to get in the habit of saving,personal financial advisors suggest that you save first and wait to pay off any debts until you've accumulated at least $10,000 in cash,savings accounts,CDs and other liquid assets.

The total cost of purchasing a stereo or television with cash is ________ the cost when using credit cards to finance the same assets.

One strategy to lower the cost of automobile insurance is to purchase a policy with a:

About half of the U.S.population accumulates enough money to afford a comfortable retirement.

Multiyear level-premium insurance is a form of term insurance with fixed premiums for the life of the policy.

The three factors that have the greatest influence on how the value of your home increases over time are: (1)size (square feet), (2)age,and (3)design features.

Social Security is the term used to describe the Old Age,Survivors,and Disability Insurance Program.

In order to accumulate capital,young adults are likely to have to:

One danger of a credit card is that consumers often buy items they wouldn't normally buy if they had to pay cash.

Investors who desire a very stable and predictable income from their investments (such as people who are nearing retirement)would be reluctant to invest heavily in the stock market.

________ insurance provides protection from losses of furniture,appliances,and clothes.

For someone with a family that includes young children,the first step in estate planning should be to:

How does term insurance differ from whole life insurance? Describe the newer types of life insurance that have been offered in recent years.

According to Newsweek magazine,a young couple with a new baby should have life insurance coverage equal to:

Annette and Ron just got married.They received some very expensive wedding gifts including some beautiful silverware and jewelry.Their homeowner's policy: