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Exam 25: Managing Personal Finances

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Question 101

Multiple Choice

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By using the financial planner's advice,Penny and Ira were able to find ways to cut back on their spending and began to live more modestly.They began to have a few hundred dollars left over each month after handling their normal expenses.Which of the following is the first thing they should do with their extra money?

A) buy one nice household item that they will both enjoy as a reward for their thriftiness
B) pay off their debts,starting with the ones that have the highest finance costs
C) start a savings account at a local bank
D) buy bonds in a major corporation

E) B) and C)
F) A) and B)

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Question 102

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One problem with the Social Security system is that the number of people retiring and living longer is declining dramatically.

A) True
B) False

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Question 103

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IRAs,401k),and Keogh plans all include incentives to encourage saving for retirement.

From a financial viewpoint,it is best to buy a:

James is in the 30% tax bracket.What is the after-tax cost of a $3,000 contribution to his traditional IRA account?

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

________ insurance provides protection from losses of furniture,appliances,and clothes.

Funds deposited into an IRA cannot be withdrawn until you retire.

Which of the following is the best advice about the use of credit cards?

During the most recent drop in stock prices,Homer took the opportunity to buy a wide variety of stocks even though many of his friends and relatives were selling.Homer's investment strategy appears to be consistent with contrarian views.

According to contrarians,the big decline in the stock market during the early 2000s was:

Compare the basic features of the traditional IRA and Roth IR A.

Historically,the best place to invest has been in U.S.government savings bonds.

Interest paid on a home loan is deductible from taxable income.

During her sophomore year in college Melody received a letter indicating she was eligible for a credit card along with a free gift from Metro State Bank.Melody was really excited until she remembered that any cash she has usually "burns a hole" in her pocket.Melody would likely not be successful with a credit card because:

Trends in the number of workers contributing to the Social Security system and the number of workers drawing benefits from the system suggest that future generations will:

Petulia has been following the stock market,and has noticed that it has generally been declining for the last several weeks.Many of her friends have sold stock,but Petulia looks at this situation as a good opportunity to buy.Petulia's views are consistent with the ___________ approach to investing in the stock market.

Don is young and newly married.He and his wife plan to have children in the near future and Don wants to get a significant amount of life insurance coverage at as low a cost as possible.He would be well advised to purchase a term insurance policy.

An IRA individual retirement account)is a tax-deferred investment plan that encourages workers to save for retirement.

A simple IRA,which allows workers to contribute larger amounts than a regular IRA,is available to employees who work for firms with fewer than 100 employees.