FHCE 3100E Final Exam fully solved & updated.

b. FALSE - answer-TRUE or FALSE: A Roth IRA qualifies for the IRA tax deduction found on the 1040 tax form. a. TRUE b. FALSE a. Universal Transfer to Minors Act - answer-Erin, a good friend of yours, would like to transfer a boat she inherited to her nephew who is 9 years of age. She heard that there is a way to go about doing this but is unsure. What type of custodial account will she need? a. Universal Transfer to Minors Act b. Universal Bequest to Minors Act c. Universal Gift to Minors Act d. Universal Tax Advantaged Trust for Minors a. Real - answer-The ___________ rate of return is calculated by subtracting the rate of inflation from the expected annual percentage yield from an investment. a. Real b. Nominal c. Accurate d. Adjusted b. FALSE - answer-TRUE or FALSE: Subjective risk can be measured using probabilities. a. TRUE b. FALSE c. High - answer-Commodities, collectibles, and speculative investments are categorized _______ risk and return. a. Medium b. Average c. High d. Low b. Pure - answer-An emergency fund is used to cover __________ risk. a. Unexpected b. Pure c. Unavoidable d. Possible b. FALSE - answer-TRUE or FALSE: A household's emergency fund ratio is calculated by dividing long-term assets by monthly living expenses. a. TRUE b. FALSE a. Hospital stays - answer-Which of the following options represents the most common emergency related expense? a. Hospital stays b. Unexpected Job loss c. Car repair d. Toothache c. Opportunity - answer-When a person is considering the benefits of two options, he or she is weighing the ______________ cost of their decision. a. Potential b. Probable c. Opportunity d. Possible a. TRUE - answer-TRUE or FALSE: A dedicated savings account is similar to a CD but allows contributions to the account all the way up to its maturity date. a. TRUE b. FALSE c. Treasury Bond - answer-Which of the following bonds matures in 30 years after its purchase? a. Treasury Bill b. Treasury Inflation Protected Security c. Treasury Bond d. Treasury Note b. 59 ½ - answer-When investing in qualified investment vehicles like a 401K or Traditional IRA, households must wait until what age to withdraw from their account without penalty? a. 60 b. 59 ½ c. 65 d. 60 a. TRUE - answer-TRUE or FALSE: The universal gift to minors act (UGMA) is a custodial account that allows minors to hold shares of stock. a. TRUE b. FALSE b. FALSE - answer-TRUE or FALSE: The real rate of return on an investment is typically higher than the nominal rate of return. a. TRUE b. FALSE b. 9% - answer-The current rate of inflation is 3%. Erin is looking into a mutual fund that has a 9% rate of return. How much should Erin expect as her nominal rate of return? a. 3% b. 9% c. 6.25% d. 5.83% c. Saving and Investing - answer-Which of the following option(s) should an individual consider when accumulating wealth? a. Saving b. Investing c. Saving and Investing d. Avoiding Risk d. Commodities - answer-Which of the following investment options is considered a high risk investment? a. Treasury Bill b. Mutual Fund c. Real Estate d. Commodities a. Gold - answer-Which of the following investment option is NOT considered a medium risk investment? a. Gold b. Mutual Fund c. ETF d. Highly Rated Individual Stock b. 3 - answer-Joe has cash in savings account totaling $7,500, and his monthly expenses are $2,500. What is his emergency fund ratio? 7,5000/2,500 a. .25 b. 3 c. 2 d. 5 a. Credit Karma - answer-Which of the following websites does NOT provide comparative rates on savings accounts? a. Credit Karma b. Magnify Money c. Nerd Wallet d. Smart Asset d. Roth IRA - answer-Telisha wants to invest in an investment vehicle that yields a higher return than a savings account, mutual fund, and CD. She does not want to pay taxes in the future and needs to have access to the principal portion of her investment for an emergency. Which investment vehicle should she consider? a. Traditional IRA b. 401 K c. 757 Fund d. Roth IRA a. TRUE - answer-TRUE or FALSE: Pulling from your traditional IRA for eligible college expenses is considered a qualified early withdrawal. a. TRUE b. FALSE c. $10,000 - answer-Michael has a Roth IRA and is considering withdrawing money from it for a down payment on a home. He has come to you for advice because you recently took a personal finance class. What is the maximum amount he can withdraw from his account? a. $5,000 b. $7,5000 c. $10,000 d. $12,500 d. All of the items - answer-Which of the following investment options can be accessed in a Roth IRA? a. Money Market Accounts b. Bonds c. Exchange Traded Funds d. All of the items b. FALSE - answer-TRUE or FALSE: Interest on a savings bond is reinvested and compounded annually. SEMIANNUALLY a. TRUE b. FALSE b. FALSE - answer-TRUE or FALSE: A stock represents a debt instrument by which a company pays an investor a coupon rate over the length of contractual agreement. a. TRUE b. FALSE d. Secondary - answer-Stocks, for the vast majority of the population, are bought and sold in the __________ market. a. Perilous b. Open c. Primary d. Secondary a. IPO - answer-The ________ process occurs when a company makes the choice to go from being privately held to being publicly traded. a. IPO b. IPU c. IPA d. IPP b. FALSE - answer-TRUE or FALSE: Companies must have their prospectus approved by the U.S. Treasury in order to become a publicly traded company. a. TRUE b. FALSE a. Spread - answer-The difference between the bid price and asking price of a stock is called the ___________. a. Spread b. Gap c. Difference d. Margin a. Stock exchange - answer-A __________ is an organized market where buyers and sellers conduct stock transactions. a. Stock exchange b. Stock gathering c. Stock exhibition d. Stock pit b. FALSE - answer-TRUE or FALSE: As an owner of a stock, I am guaranteed a dividend every year. a. TRUE b. FALSE a. Growth stocks - answer-________________ are stocks that provide value to investors by focusing on stock price appreciation. a. Growth stocks b. Value stocks c. Income stocks d. Growth and income stocks c. Small capitalization - answer-A friend of yours desires to invest in a company that has a market capitalization less than 2 billion dollars. Which of the following types of stocks best represents what your friend is looking forward? a. Ultra capitalization b. Medium capitalization c. Small capitalization d. Large capitalization b. FALSE - answer-TRUE or FALSE: The NASDAQ stock exchange is the largest stock exchange in the U.S. a. TRUE b. FALSE c. Moody's - answer-Bonds are rated based on their ability to pay their debts. Which of the following companies provides bond rating information to consumers? a. Fisk b. Transunion c. Moody's d. Capital One b. FALSE - answer-TRUE or FALSE: Companies choose to take on more debt when interest rates are low with the hope of receiving favorable tax treatment when filing their taxes, a. TRUE b. FALSE d. Exchange Traded Fund - answer-A good friend of yours wants to start investing. She is a little anxious when it comes to the process but is hoping you can point her in the right direction. Your friend desires to invest in a diversified portfolio that has low fees, Google as a holding and can be traded during regular market hours. Which of the following investment vehicles delivers on her request? a. Short selling b. Mutual fund c. Futures trading d. Exchange Traded Fund c. Diversification - answer-_____________ is the process where individuals spread their investments across different types of assets to avoid risk. a. Spread b. Grouping c. Diversification d. Allocating a. TRUE - answer-TRUE or FALSE: The coupon rate for a bond is similar to the interest rate on a stock. a. TRUE b. FALSE d. Treasury Bond - answer-Your friend is looking to invest into a safe investment with the longest maturity date. Which of the following treasury options would you recommend to your friend? a. Treasury Bill b. Treasury Note c. Municipal Bond d. Treasury Bond c. Tax exempt interest - answer-What advantage does a municipal bond have over other bonds? a. Higher yields b. Tax advantaged deferred growth c. Tax exempt interest d. Low liquidity risk b. Have a low probability of repaying their debts - answer-Companies with a bond rating of C means that they..... a. Have an above average change of repaying their debts b. Have a low probability of repaying their debts c. Are unable to pay their debts d. Are above average when it comes to likelihood of debt repayment d. Target Date - answer-A ____________ fund is a special type of asset allocation fund managed based on an individual's expected year of retirement. a. Smart Beta b. Exchange Traded c. Mutual d. Target Date d. Gross Domestic Product and Consumer Pricing Index - answer-Which of the following economic measures are used to measure economic growth and inflation? a. Gross Domestic Value and Treasury Inflation Protection Metric b. Treasury Inflation Protection Metric and Gross Domestic Product c. Gross Domestic Value and Consumer Pricing Index d. Gross Domestic Product and Consumer Pricing Index b. Market Order - answer-The following type of order instructs the brokerage firm to buy (or sell) at the current ask or bid value: a. Stop Loss Limit Order b. Market Order c. Limit Order d. Stop Order d. Real Estate Investment Trusts - answer-Investing in _______________ is a way to invest in real estate without having to take on the risk of owning actual property. a. Real Estate Mutual Shares b. Real Estate Exchange Traded Funds c. Real Estate Diversified Funds d. Real Estate Investment Trusts b. FALSE - answer-TRUE or FALSE: If you purchase an ETF, you relinquish control over when you will recognize capital gains on your investment. a. TRUE b. FALSE b. Exchange Traded Fund - answer-Which of the following investment options should theoretically have the lowest expense ratio? a. Actively Managed Mutual Fund b. Exchange Traded Fund c. Indexed Mutual Fund d. Edward Jones - answer-Which of the following types of investment platforms is considered a full service brokerage firm? a. Robinhood b. Motif c. Acorns d. Edward Jones d. A limit order - answer-If you, as an investor, wanted to guarantee purchasing a stock at a specific price or better, which type of order would you use? a. A market order b. A buy stop order c. A sell limit order d. A limit order d. Funds can be traded throughout the day. - answer-Which of the following investment features is typically associated with ETFs but not mutual funds? a. Funds provide investors with immediate diversification. b. Funds can be purchased that match a market index. c. Funds are often actively managed. d. Funds can be traded throughout the day. c. Even though there is federal insurance in place, you still face inflation risk. - answer-Which of the following statements is true when you invest in a federally insured bank account? a. Given the federal insurance, you are taking no risk. b. Although there is federal insurance, you are faced with liquidity risk. c. Even though there is federal insurance in place, you still face inflation risk. d. Given the federal insurance, you are taking significant business risk. d. Preferred Provider Organization - answer-Which of the following insurance plans is the most expensive? a. Health Management Organization b. Point of Service Plan c. High Deductible Plan d. Preferred Provider Organization b. FALSE - answer-TRUE or FALSE: I do not have to pay a deductible for medical expenses if I am paying my monthly premium. a. TRUE b. FALSE b. High Deductible Plan - answer-Which of the following healthcare plans is the least expensive? a. Preferred Provider Plan (PPO) b. High Deductible Plan c. Health Management Organization Plan (HMO) d. Point of Service Plan (POS) a. TRUE - answer-TRUE or FALSE: Insurance companies provide the insured with a cap on the maximum out-of-pocket expense they can incur. a. TRUE b. FALSE b. Severity, probability - answer-The risk matrix assess the ___________, and the ____________ associated with an activity. a. Type, severity b. Severity, probability c. Frequency, type d. Severity, type a. TRUE - answer-TRUE or FALSE: Not wearing a helmet is considered a medium risk with medium severity on the risk matrix. a. TRUE b. FALSE c. They invest that money in real estate, bonds, and stocks. - answer-What do insurance companies do with premiums they receive from the insured? a. They do not invest any of the money. b. They place that money in money market accounts. c. They invest that money in real estate, bonds, and stocks. d. They hold that money treasury bonds. d. All of the answer choices are correct - answer-When an individual considers the consequences of certain actions, he or she can ____________ their risk. a. Manage b. Avoid c. Transfer d. All of the answer choices are correct b. FALSE - answer-TRUE or FALSE: Coinsurance is defined as the cost of having access to insurance. a. TRUE b. FALSE b. FALSE - answer-TRUE or FALSE: My monthly insurance premium is not impacted by the amount of my deductible. a. TRUE b. FALSE c. Hospital Stay - answer-Which of the following medical scenarios is most costly to households without insurance? a. Dr.'s Visit b. Ambulance Ride c. Hospital Stay d. Prescription b. Out-of-pocket maximum - answer-To protect individuals from potential catastrophic financial outcomes, the total amount of deductibles and coinsurance a person must pay is typically capped. This cap is referred to as an __________________. a. Out-of-pocket exemption b. Out-of-pocket maximum c. Out-of-pocket subsidy d. Out-of-pocket deduction b. Preferred Provider Plan - answer-Which of the following health care plans is considered the most flexible and costly? a. Point of Service Plan b. Preferred Provider Plan c. Health Management Organization Plan d. High Deductible Plan b. High Deductible Plan - answer-Which of the following health care plans is associated with a health savings plan account? a. Point of Service Plan b. High Deductible Plan c. Health Management Organization Plan d. Preferred Provider Plan b. FALSE - answer-TRUE or FALSE: A household's health savings account balance cannot be rolled over from one year to the next. a. TRUE b. FALSE c. Disability - answer-The inability to perform a task that you were able to perform before an accident or illness is characterizing a(n) ____________. a. Circumstance b. Risk c. Disability d. Injury d. 13.30% / 5.60% - answer-The probability of a disability is __________ and _________ for death individuals who are 55 years of age. a. 17.60% / 11.03% b. 10% / 15% c. 4.65% / 1.05% d. 13.30% / 5.60% b. 3 to 6 months - answer-What period of time is usually covered by a short-term liability policy? a. 1 to 3 months b. 3 to 6 months c. 2 to 12 months d. 6 to 12 months b. 4% - answer-If I am unhealthy and working in a high risk environment, I should expect to multiply my insurance needs by what percent of my income? a. 3% b. 4% c. 5% d. 1% d. Base Plan - answer-Which of the following is not a type of health insurance plan that can be purchased through the federal market place? a. Silver Plan b. Catastrophic Plan c. Bronze Plan d. Base Plan c. You cannot operate a vehicle. - answer-Which of the following is not a characterization of someone with a disability as defined by the Social Security Administration? a. You cannot readjust your skills because of your medical condition. b. Your disability has or is expected to last for at least one year or until death. c. You cannot operate a vehicle. d. You cannot do the work you did before an accident or illness. c. Copayment - answer-_________ is the cost you share with your insurance company regardless of your deductible being met or not. a. Deductible b. Premium c. Copayment d. Joint payment d. Health Savings Account - answer-A _______________ is a tax-advantaged savings account that can be set up to pay for out-of-pocket eligible healthcare expenses. This plan can also be rolled over from year to year. a. Flexible Spending Account b. High Deductible Plan c. Liquid Savings Account d. Health Savings Account c. $1,040 - answer-Domingo has a health insurance policy with the following provisions: $500 deductible, $50 copay, and 80/20 coinsurance provision. If Domingo has an accident that costs $3,000 in medical expenses, how much will he have to pay out of pocket? a. $490 b. $550 c. $1,040 d. $2,450 d. 65% - answer-Based on research, what percentage of people file for bankruptcy due to medical debt? a. 50% b. 70% c. 55% d. 65% b. 6 months - answer-A short-term disability insurance policy is designed to pay benefits for a maximum of ... a. 3 months b. 6 months c. 9 months d. 12months c. $450,000 - answer-Using the income multiplier estimation method, how much life insurance would you need if your current income is $45,000? a. $500,000 b. $250,000 c. $450,000 d. $900,000 d. medical coverage for one person in the other car - answer-The 50 in a 50/100/25 split limit policy refers to the maximum amount the policy will pay in: a. property damage b. medical coverage for those in your car c. medical coverage for everyone in the other car d. medical coverage for one person in the other car