Question 1
Which of the following is NOT an income-driven repayment plan for federal student loans?
Income-based repayment
Pay as you Earn plan
Income deferment plan
Income-contingent plan
Question 2
Which of the following is an option to postpone student loan payments?
Student loan forgiveness
Payment reduction
Deferment
Loan suspension
Question 3
What type of loan starts accruing interest at the time of disbursement?
Subsidized
Pell
Unsubsidized
All federal loans
Question 4
Which of the following is the recommended guideline for the maximum amount to borrow in order to keep your monthly payments manageable?
Average salary for your chosen job
No more than household income
Average starting salary for your chosen job
Average starting salary for your chosen job times 1.25
Question 5
The benefit of a Section 529 plan is
a tax credit.
a tax deduction.
a tax savings on investment earnings.
a reimbursement of tuition costs.
Question 6
Assume that you have estimated your retirement wealth needed to be $1,000,000, based on a 7 percent investment return, 4 percent inflation during retirement, and 20 years of retirement. If inflation turns out to average less than 4 percent per year during retirement, what will be the effect on your retirement wealth needed?
You will need less than estimated.
You will need more than estimated.
You will need the same amount as estimated.
There is not enough information to answer the question.
Question 7
Delaying Social Security benefits is a good strategy for maximizing retirement income. By choosing not to begin receiving benefits at the normal retirement age of 67, a participant’s benefits will increase by ____ percent for each year of delay up to age 70.
1
8
10
15
Question 8
The Lifetime Learning tax credit is a credit of
30 percent of the first $5,000 of college expenses up to a maximum of $1,500 for every eligible dependent who has incurred these expenses during the year.
20 percent of the first $5,000 of college expenses up to a maximum of $1,000 for every eligible dependent who has incurred these expenses during the first two years of college.
30 percent of the first $5,000 of college expenses up to a maximum of $1,500 for every eligible dependent who has incurred these expenses during the first two years of college.
20 percent of the first $10,000 of tuition and fees up to a maximum of $2,000 for every eligible dependent who has incurred these expenses during the year.
Question 9
Jeff, a 56-year-old professor, is subject to a 28% tax rate. He has had a family emergency and must withdraw $5,000 from his IRA to fund it. How much money will he owe the government for this withdrawal?
$140
$1,400
$500
$1,900
Question 10
Travis has purchased an annuity to help offset the cost of retirement and reduce the likelihood that he will outlive his other benefits. He is guaranteed $2,000 per month, which means he has invested in a ________ annuity.
fixed
variable
deferred
joint
Question 11
In order to estimate your retirement income shortfall in the first year of retirement, you need to subtract your expected income from employer DB retirement plans from your before-tax income need in your first year of retirement, and then ________ expected Social Security benefits.
subtract
add
multiply by
divide by
Question 12
Who controls the account for Section 529 plans?
the contributor
the parent or guardian
the student
the government
Question 13
When developing your retirement and education plan, after you have estimated the additional savings needed to achieve your funding goals, what should you do next?
Find tax-efficient strategies for savings.
Implement the funding and savings plan.
Evaluate your progress and revise if needed.
Find any discounts offered by different plans and agencies.
Question 14
To be “fully insured” under the Social Security program,
you must have earned at least a specified minimum dollar amount for 40 three-month periods.
you must be at least age 60.
you must be a naturalized citizen.
all of the above.
Question 15
Which of the following is NOT one of the risks equity investors normally face?
Inflation risk
Reinvestment risk
Maturity risk
Market risk
Question 16
During the period 2008–2010, when the U.S. stock market went through a severe downturn, many people lost their jobs and/or their home values. The “Great Recession,” as it was described by economists, led to an increase in risk aversion of most people due to
the aging of the population.
lowered consumer confidence.
the increase in wealth of average Americans.
the increase of female investors.
Question 17
Portfolio diversification in the real world can be employed to
reduce risk of a portfolio up to a point.
eliminate the risk of a portfolio completely.
primarily increase the return of a portfolio.
primarily reduce the return of a portfolio.
Question 18
Which of the following statements is INCORRECT?
Stocks provide a steady rate of return year after year with minimal fluctuations.
U.S. government-issued securities are some of the safest securities available.
Inflation risk is considered by the market when setting securities prices.
Investors with a high degree of risk aversion will generally invest greater amounts in bonds.
Question 19
An investor interested in a short-term horizon will avoid purchasing real estate, art, and collectibles due to ________ risk.
liquidity
interest rate
maturity
default
Question 20
Which of the following is the most appropriate investment for emergency funds?
Long-term corporate bonds
Stocks
A mix of stocks and long-term bonds
Near-term safer securities with a predominance of money market funds
Question 21
The biggest problem with timing strategies is
it is difficult to correctly predict highs and lows in the market.
transaction costs are higher than with other active investing strategies.
small investors are usually not able to get in and get out during market highs and lows as are institutional investors.
taxes will be higher on your investment returns.
Question 22
Which of the following statements regarding default risk is true?
In a bankruptcy proceeding, the value of an equity investment is likely to be zero.
This risk is greater for short-term securities than for long-term securities.
In a bankruptcy proceeding, the value of a debt investment is likely to be zero.
This risk is greater for long-term securities than for short-term securities.
Question 23
A person is said to be risk averse if he or she
prefers a certain amount of return over an opportunity to receive an equal but uncertain amount of return.
will give up a certain amount of return in exchange for an opportunity to receive an equal amount of return representing expected or average value of an uncertain event.
will give up a certain amount of return in exchange for an opportunity to receive an equal or lower amount of return representing expected or average value of an uncertain event.
will give up a certain amount of return in exchange for an opportunity to receive an equal or greater amount of return representing expected or average value of an uncertain event.
Question 24
Which of the following is not a passive investment strategy?
Timing
Buy and hold
Indexing
Laddering
Question 25
Goodroad Transportation Company has earned a profit of $25 million in the last concluded year. In order to reward its shareholders, it intends to pay a total dividend of $8 million. Goodroad will pay the dividend from
its profits.
the original capital investment of its shareholders.
tax refunds it gets from the taxing authority.
the new sale of equity shares to the public.
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