FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 22: Appendix B: Managing Risk

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 71

True/False

Review LaterAdd Note

Review Later

An annuity is a contract to make regular payments to a person for life or for a fixed period.

A) True
B) False

Correct Answer

verified

Show Answer

Question 72

True/False

Review LaterAdd Note

Review Later

Financial planners encourage individuals to borrow only to cover immediate expenses.

A) True
B) False

Correct Answer

verified

Show Answer

Question 73

Multiple Choice

Review LaterAdd Note

Real estate taxes and mortgage interest payments are both:

Many financial experts advise that you set up a contingency fund equal to about ________ of your earnings and keep these funds in highly liquid accounts.

Mini-Case Ira Roth and Penny Weiss met and married in the early 1990s,during their days at State University.Both came from families with limited financial resources.They had to work at part-time jobs during school,and still needed student loans to help pay for their college education.Ira and Penny shared a strong work ethic and had a great desire to succeed financially and enjoy the good life. Penny and Ira quickly experienced financial success in the latter half of the booming 1990s.Ira used his marketing major and extensive knowledge of computers to obtain a high-paying job in a successful dot-com business.Penny,who cleaned homes to earn money during college,used her experience to start her own business.Her entrepreneurial spirit surprised Ira and their friends,and she built a successful cleaning business with a growing base of residential clients and even a few commercial customers.She soon had to hire several part-time employees to keep up with demand.With money rolling in,Ira and Penny began to live the good life,buying an expensive new car,a state-of-the-art home entertainment center,and expensive wardrobes.As busy as they were,and as hard as they both worked,they often found it easier to dine at a nice restaurant rather than fix meals at home. When the dot-com bubble burst in the early 2000s,Ira was lucky enough to keep his job,but was forced to take a significant pay cut.The economic downturn forced some of the households and businesses that used Penny's company to cut back on professional cleanings,so her business suffered too.Soon the couple was struggling to pay the rent on their upscale apartment.They began relying on credit cards to cover expenses,but after a few months the credit limits on their cards had been reached.They fell behind in paying off their student loans and started getting some unpleasant calls from bill collectors.The stress and frustration led to arguments that began to threaten their personal relationship.With their personal finances out of control,Ira and Penny knew that they had to make changes to save not only their financial dreams,but also their marriage.However,they were at a loss as to where to start.Family members encouraged them to seek the advice of a financial planner.The couple reluctantly agreed that this was something they needed to do. -In saving for retirement,Penny could take advantage of the unique tax shelter offered only to small-business owners in a:

As an employee of New Hampshire Industries,Kathleen has an opportunity to invest pre-tax income in an employer-sponsored retirement plan.Her employer will contribute 50 cents for every dollar that Kathleen contributes to this fund.This is an example of a(n) :

One step toward the goal of taking control of your finances is to keep track of all your expenses.

Stan and Heidi are married and both have careers in business.If one of the two were to die,there would be a sudden drop in income.To provide protection from this risk the couple should purchase:

As a recent college graduate just starting out on his own,Greg needs health,disability,car,and auto insurance.He may be able to save money by obtaining an umbrella policy.

If you have minor children,the first step in estate planning is to select their guardian.

Funds invested in savings accounts and certificates of deposit (CDs)have traditionally outperformed stocks as a means of generating long-term financial gains.

Hillary and Bill are married and have a young child.Both work,but Hillary earns a higher salary than Bill.Insurance experts suggest that:

Though stock prices do sometimes go down,investing in the stock market has generally provided very attractive returns over the long run.

Young married couples that find themselves running out of money at the end of the month,might be well advised to:

The best way to invest in a 401(k)plan is to use all of the money to buy stock in the company where you work.

LaTasha is attending her local community college so she can get a good job.She knows that financial planning begins first with making money.

Keogh plans are most useful for stockholders of major corporations who earn most of their income from dividends rather than wages or salaries.

A(n) ________ can be added to a homeowner's insurance policy that provides for coverage at a reasonable cost for items that the policy otherwise would not cover.

Budgets are:

It is usually better to use any money left after paying monthly bills to pay off debts that carry high interest rates rather than putting that money into a savings account.