UGBA 135 FINAL EXAM FULL
QUESTIONS AND ANSWERS
◉ Which of the following is usually the most important type of debt
to focus on paying off quickly: Answer: Credit card balances
◉ Which types of debt "steal from your future"? Answer: 1. paycheck
advances
2. credit card balances
◉ Why is Social Security called a PAYGO system? Answer: Because
the payroll taxes paid by current workers are used to pay current
retirement benefits.
◉ Medicare Part A, Hospital Insurance is free; people must pay for
Medicare Parts B, C, and D if they want them. Answer: TRUE
◉ If you buy a company's bond Answer: you have lent money to the
company
◉ Holding a diversified portfolio of stocks rather than an
undiversified portfolio Answer: 1. increases the variance (variation
in outcomes) of the portfolio
,2. increases the likelihood that you will own at least one stock that
performs poorly
◉ Actively trading common stocks is the best long-term investment
strategy for most investors. Answer: False
◉ The potential advantages of index funds are Answer: 1. many have
low fees
2. many are well-diversified
◉ When buying a mutual fund, which of the following is most
important? Answer: The fees the fund charges
◉ The fees charged by index funds vary with the types of assets the
funds invest in. Answer: TRUE
◉ Exchange Traded Funds (ETFs) sometimes charge high fees, but
they are always well diversified. Answer: False
◉ Investments with higher risk always have higher expected
returns. Answer: False
, ◉ Common ways for financial advisors to be compensated are:
Answer: 1. An annual percentage of the client's assets under
management.
2. Commissions
3. By the hour or a flat fee for specific services.
◉ Typical annual financial advisor fees when charged as a
percentage of assets under management often exceed what you can
earn today in a one year certificate of deposit. Answer: True
◉ Landlords can require tenants to have renters insurance. Answer:
True
◉ All risks homeowners policies cover all risks. Answer: False
◉ If a policy has guaranteed replacement cost for your home then it
will always have guaranteed replacement cost for your property.
Answer: False
◉ Suppose your roommate slips on the rug in your apartment, falls,
and breaks her arm. She has medical costs and she losses two weeks
wages because she can't work. What will renters insurance pay for
(if you have it)? Answer: Will pay nothing.
QUESTIONS AND ANSWERS
◉ Which of the following is usually the most important type of debt
to focus on paying off quickly: Answer: Credit card balances
◉ Which types of debt "steal from your future"? Answer: 1. paycheck
advances
2. credit card balances
◉ Why is Social Security called a PAYGO system? Answer: Because
the payroll taxes paid by current workers are used to pay current
retirement benefits.
◉ Medicare Part A, Hospital Insurance is free; people must pay for
Medicare Parts B, C, and D if they want them. Answer: TRUE
◉ If you buy a company's bond Answer: you have lent money to the
company
◉ Holding a diversified portfolio of stocks rather than an
undiversified portfolio Answer: 1. increases the variance (variation
in outcomes) of the portfolio
,2. increases the likelihood that you will own at least one stock that
performs poorly
◉ Actively trading common stocks is the best long-term investment
strategy for most investors. Answer: False
◉ The potential advantages of index funds are Answer: 1. many have
low fees
2. many are well-diversified
◉ When buying a mutual fund, which of the following is most
important? Answer: The fees the fund charges
◉ The fees charged by index funds vary with the types of assets the
funds invest in. Answer: TRUE
◉ Exchange Traded Funds (ETFs) sometimes charge high fees, but
they are always well diversified. Answer: False
◉ Investments with higher risk always have higher expected
returns. Answer: False
, ◉ Common ways for financial advisors to be compensated are:
Answer: 1. An annual percentage of the client's assets under
management.
2. Commissions
3. By the hour or a flat fee for specific services.
◉ Typical annual financial advisor fees when charged as a
percentage of assets under management often exceed what you can
earn today in a one year certificate of deposit. Answer: True
◉ Landlords can require tenants to have renters insurance. Answer:
True
◉ All risks homeowners policies cover all risks. Answer: False
◉ If a policy has guaranteed replacement cost for your home then it
will always have guaranteed replacement cost for your property.
Answer: False
◉ Suppose your roommate slips on the rug in your apartment, falls,
and breaks her arm. She has medical costs and she losses two weeks
wages because she can't work. What will renters insurance pay for
(if you have it)? Answer: Will pay nothing.
