FP 120 Week 4 Individual Assignment Week 4 Quiz


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FP 120 Week 4 Individual Assignment Week 4 Quiz

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FP 120 Week 4 Individual Assignment Week 4 Quiz
 
 
Complete the Week 4 Quiz.
 
 
Essential of Personal Finance
Week Four Quiz
 
 
 
 
 
 
Please answer the following multiple choice questions. When done please post to your individual Grade Book tab or into your individual class e-mail account. You have until the end of this class week (Monday mid-night Arizona time to complete this quiz and have it posted for grading). Good luck to all of you I am sure you will all do a great job on this.
 
 
1. Life insurance is meant to:
a.       Be the most cost-effective way to protect you and your loved ones for your entire life and after your death.
b.      Provide a vehicle for investing, in addition to insuring your life and protecting those who are financially dependent on you.
c.       Protect those who are financially dependent on you should you pass away before you have had time to build your assets.
d.      Be a cost effective-way to pay money to your beneficiaries without having to pay any income tax on the death benefit.
 
2. You do not need to purchase life insurance if:
a.       You are a stay-at-home mom.
b.      Your loved ones would be able to take care of themselves if you died tomorrow.
c.       You have free coverage as part of your benefits plan at work.
d.      You are married and your spouse works.
 
3. What is the main benefit of term insurance over other types of life insurance?
a.       It builds cash value.
b.      It is inexpensive, which means you can afford to purchase coverage adequate to your needs.
c.       It protects you and your family for the most vulnerable term or years of your life.
d.      It covers you for your entire life.
 
4. When purchasing life insurance, you should look for a death benefit that is:
a.       Equal to 20- to 25- times your annual financial needs.
b.      Equal to 8 months of living expenses.
c.       Equal to $1 million times the number of beneficiaries.
d.      Equal to the value of your house and car loans and all outstanding debts so they can be paid off in full should you pass away.
 
5. When purchasing homeowner's insurance, you should look for a policy that:
a.       Will cover the actual cash value of your house and possessions.
b.      Will cover two times the actual cash value of your house and possessions.
c.       Will cover the replacement value of your house and possessions.
d.      Does not adjust your coverage based on inflation, since this could end up costing you more in annual premiums.
 
6. When it comes to insurance, if you rent your house or apartment, you should:
a.       Purchase insurance that covers both the physical building and your possessions, just as you would if you were a homeowner.
b.      Purchase insurance that covers the actual cost of your possessions but does not cover the building structure.
c.       Make sure that your landlord has insurance that covers the building and your possessions.
d.      Purchase insurance that covers the replacement cost of your possessions but does not cover the building structure.
 
7. If you own a condominium, co-op or townhouse, your owners’ association insurance generally covers:
a.       The entire building, including your unit, but not your possessions.
b.      The entire building, including your unit, as well as your possessions.
c.       Only the common areas of your building, such as the stairway, elevators and roof.
d.      Only the possessions that are in jointly shared areas.
 
8. Which of the following is a good way to save on your homeowner’s or renter's insurance?
a.       Bundle your auto and homeowner's or renter's policies with the same insurer.
b.      Reduce coverage on your home, but continue to cover close to its cash value.
c.       Reduce coverage on your possessions, since they generally depreciate in value every year.
d.      Reduce your coverage to the minimum and increase your emergency savings to 12 months of living expenses.
 
9. Which of the following types of insurance protects you if you are sued for accidentally damaging someone's property or hurting another person?
a.       Term life insurance.
b.      Accidental death insurance.
c.       Universal life insurance.
d.      Personal liability insurance or an umbrella policy.
 
10.   To reduce the cost of your auto insurance, you should:
a.       Purchase only the minimum, mandatory coverage.
b.      Purchase a new car every three years, since older cars cost more to insure and maintain.
c.       Raise your deductible to $1,000, as long as you have emergency savings to cover you.
d.      Lease a car, since leased cars cost less to insure.
 
 
11. What is the most important contributor to successful retirement planning?
a.       Time: the sooner you start the better.
b.      The kind of retirement account that you use—i.e., tax free versus tax deferred.
c.       A company match.
d.      The professional you hire to manage your money.
 
12. A retirement plan that allows you to withdraw the money that you originally put in at any time regardless of age without incurring taxes or a tax penalty is:
a.       A 401(k) plan.
b.      A Roth IRA.
c.       A 403(b) plan.
d.      A deductible IRA.
 
13. With a Roth IRA, at what age are you are required to begin withdrawing money?
a.       At age 70 1/2.
b.      Never. You can die without ever having withdrawn a penny from it and pass it income tax free to your heirs.
c.       When you begin receiving Social Security payments.
d.      At age 59 1/2.
 
14. If you leave your job and you have a 401(k) plan with your old employer, you should:
a.       Leave it where it is as long as you have under $5000 in the plan and are comfortable with the investments.
b.      Cash out the account and use the money to pay down credit card debt.
c.       Have the money sent directly to you and then put that money in an IRA rollover.
d.      Have the money transferred directly from your old plan custodian to a new IRA rollover custodian.
 
15. What happens to the money in your retirement account if you re-marry and forget to change the beneficiary before you die?
a.       It will go to your new spouse as long as you have designated him as you primary beneficiary in your will and/or trust.
b.      It will pass directly to your children unless you have named your new spouse in your will or trust as the primary beneficiary.
c.       It will go to the beneficiary named on the account, even if it is your ex-spouse.
d.      It will be divided equally between your new spouse and the named beneficiary. 
 
16. What does the term "matching contribution" refer to?
a.       The percentage of your pay that you put into a workplace retirement plan.
b.      A contribution an employer makes to an employee's defined-contribution plan that is based on the employee's own contributions to the plan.
c.       A contribution an employer makes to an employee's retirement plan that is based on the length of time the employee has been with the company.
d.      An end-of-year bonus an employer makes to an employee's defined-benefit plan.
 
17.If you don't have enough money today to begin investing in your company’s matching 401(k) plan, (you have student loan and credit card debt and no emergency fund) what should you do?
a.       Wait until your next raise and then begin investing the amount of your raise in your 401(k) while you are paying off your debt.
b.      Wait 5 or 10 years until you have paid off student loans and other debts and then begin saving twice as much for retirement.
c.       Find ways to trim your expenses to free up money that you can begin paying into your 401(k) now.
d.      Plan to work into your 80s or later.
 
18. The stock market has been declining steadily. What should you do?
a.       Stay the course and continue to invest in your retirement plan.
b.      Cease investing in your retirement plan until the market stabilizes.
c.       Cash out your account before you lose everything.
d.      Reduce your retirement contributions and use your extra money to build your emergency savings.
 
19. Which of the following accurately defines the term "compound growth"?
a.       A fee paid for the use of another person's money.
b.      A process in which interest is added both to the principal and to any interest already earned.
c.       A strategy whereby an investor seeks out stocks with strong growth potential.
d.      Growth measured in terms of inflation.
 
20. If your employer offers a matching contribution in the company retirement plan, what action should you take?
a.       Save as much as the company is willing to match, even if the investment choices in the plan are weak.
b.      Review the plan's investment choices and if they are strong, save as much as the company will match.
c.       None—your employer will automatically enroll you in the retirement savings plan.
d.      Save at least half of what the employer will match in your retirement plan.
 
 

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