Question 1

As a college graduate, Allen can expect:
A) to earn more during his lifetime than his friend who only earned a high school diploma.
B) to always have a professional job.
C) to accumulate a lot of wealth and be respected.
D) that his path to financial independence will be easy.

Accepted Answer

Studies have shown that college graduates earn significantly more over their lifetime than high school graduates. While a college degree does not guarantee a professional job or financial independence, it does increase the likelihood of achieving these goals.

Question 2

All contributions to a Roth IRA are:
A) tax­free but earnings are taxable.
B) taxable but earnings are tax­free.
C) passive but withdrawals are tax­free.
D) tax­free but withdrawals are subject only to state taxes.

Accepted Answer

Contributions to a Roth IRA are made with after-tax dollars, meaning they are taxable in the year they are earned. However, any earnings on those contributions grow tax-free and withdrawals from a Roth IRA in retirement are also tax-free.

Question 3

Alleciana has a 457 retirement plan. What does this mean?
A) She receives a 50 percent tax deduction on the income she invests in the plan.
B) She has to pay higher taxes on the earnings received from these investments.
C) She is vested in her company.
D) She likely works for state government.

Accepted Answer

The number "457" typically refers to a type of retirement plan that is only available to employees of state and local governments or certain non-profit organizations.

Question 4

Discuss the traditional ways to wealth accumulation.

Accepted Answer

The answer of Discuss the traditional ways to wealth accumulation....

Question 5

Evaluate strategies to help build a sufficient savings and emergency fund.

Accepted Answer

The answer of Evaluate strategies to help build a sufficient...

Question 6

One advantage of participating in a company­sponsored retirement plan is:
A) you pay taxes on these contributions only during the year you contribute.
B) you are allowed to contribute only half as much as you would contribute to an IRA, so you get to keep more of your earnings.
C) time value of money does not apply.
D) companies will often participate in a matching process, where they will contribute a percentage of the amount you contribute.

Accepted Answer

Participating in a company-sponsored retirement plan can be beneficial because companies will often contribute a percentage of the amount you contribute, known as a matching program. This is essentially free money for your retirement savings, making it a very favorable option. The other answer choices are incorrect as they do not accurately describe the advantages of participating in a retirement plan.

Question 7

Karen wants to begin building her retirement fund, but she is very apprehensive about the stock market and wants nothing to do with it. She wants something that, historically, has been very stable. Which of the following would you recommend that she invest in?
A) Mutual funds
B) Corporate bonds
C) Government securities
D) Exchange traded funds

Accepted Answer

Government securities, such as treasury bonds, have a history of being very stable investments. They are backed by the full faith and credit of the government, making them a low-risk option for Karen's retirement fund. Mutual funds and exchange-traded funds invest in the stock market, which Karen wants to avoid. Corporate bonds can be riskier than government securities, as they depend on the financial stability and success of the issuing company.

Question 8

Evaluate various options for investing to build wealth.

Accepted Answer

The answer of Evaluate various options for investing to build...

Question 9

List and describe the main conditions to consider when using a credit card.

Accepted Answer

The answer of List and describe the main conditions to...

Question 10

_____ are professionally­managed funds that pool the contributions of thousands of investors.
A) Mutual funds
B) Exchange Traded Notes (ETN)
C) T­bills
D) Certificates of deposit funds

Accepted Answer

Mutual funds are the only option listed that fit the description of pooling contributions from multiple investors and being professionally managed. 
Exchange Traded Notes (ETN) are not funds, but rather debt instruments. T-bills are short-term government securities, and certificates of deposit funds involve individual investors purchasing their own certificates of deposit.

Question 11

As a small investor, Bernie has decided to invest in the Alpha Fund. This mutual fund only invests in the common stock of companies located in the United States. One benefit of investing in mutual funds is:
A) all capital gains are guaranteed tax free.
B) they usually offer more diversification.
C) these funds are passive investments.
D) they are guaranteed by the SEC.

Accepted Answer

One benefit of investing in mutual funds is that they usually offer more diversification compared to investing in individual stocks. This is because mutual funds invest in a portfolio of different securities, which helps spread out the risk among various companies and industries.

Question 12

The benefit of a(n) _____ is that the contributions you make reduce your taxable income in the same tax year, and the earnings on your contributions are tax deferred, allowing them to grow more rapidly.
A) mutual fund
B) Roth IRA
C) exchange traded fund
D) traditional IRA

Accepted Answer

The benefit described is specific to a traditional IRA. Contributions to a traditional IRA reduce taxable income in the same tax year, and earnings on contributions are tax-deferred. Mutual funds and exchange-traded funds are investment options, but they do not offer tax benefits in the same way that IRAs do. Roth IRAs offer tax-free earnings on contributions, but contributions are not tax deductible in the same year.

Question 13

An example of an employee­contribution retirement plan is a:
A) Roth IRA.
B) 401(k).
C) traditional IRA.
D) mutual fund.

Accepted Answer

A 401(k) is a type of employee-contribution retirement plan, where the employee can contribute a portion of their salary and the employer may match a percentage of those contributions. This is a popular option for retirement savings due to the potential for employer matching and the tax benefits of contributions. A Roth IRA and traditional IRA are individual retirement accounts, not employer-sponsored plans. A mutual fund is a type of investment, not a retirement plan.

Question 14

A full­service broker:
A) provides financial planning services exclusively.
B) provides only tax advice.
C) charges a flat fee per trade.
D) identifies good investment opportunities.

Accepted Answer

A full-service broker is an investment professional who provides a wide range of services to clients, including identifying good investment opportunities. They may also provide financial planning services and tax advice, but they typically charge higher fees than other types of brokers. Therefore, the most appropriate choice is D - identifies good investment opportunities.

Question 15

What is a budget? How can you apply the principles of budgeting to your own finances?

Accepted Answer

The answer of What is a budget? How can you...

Quiz 18: Appendix Studentinstructor Review Cards

As a college graduate, Allen can expect:

All contributions to a Roth IRA are:

Alleciana has a 457 retirement plan. What does this mean?

Discuss the traditional ways to wealth accumulation.

Evaluate strategies to help build a sufficient savings and emergency fund.

One advantage of participating in a companysponsored retirement plan is:

Karen wants to begin building her retirement fund, but she is very apprehensive about the stock market and wants nothing to do with it. She wants something that, historically, has been very stable. Which of the following would you recommend that she invest in?

Evaluate various options for investing to build wealth.

List and describe the main conditions to consider when using a credit card.

_____ are professionallymanaged funds that pool the contributions of thousands of investors.

As a small investor, Bernie has decided to invest in the Alpha Fund. This mutual fund only invests in the common stock of companies located in the United States. One benefit of investing in mutual funds is:

The benefit of a(n) _____ is that the contributions you make reduce your taxable income in the same tax year, and the earnings on your contributions are tax deferred, allowing them to grow more rapidly.

An example of an employeecontribution retirement plan is a:

A fullservice broker:

What is a budget? How can you apply the principles of budgeting to your own finances?

Quiz 18: Appendix Studentinstructor Review Cards

As a college graduate, Allen can expect:

All contributions to a Roth IRA are:

Alleciana has a 457 retirement plan. What does this mean?

Discuss the traditional ways to wealth accumulation.

Evaluate strategies to help build a sufficient savings and emergency fund.

One advantage of participating in a company­sponsored retirement plan is:

Karen wants to begin building her retirement fund, but she is very apprehensive about the stock market and wants nothing to do with it. She wants something that, historically, has been very stable. Which of the following would you recommend that she invest in?

Evaluate various options for investing to build wealth.

List and describe the main conditions to consider when using a credit card.

_____ are professionally­managed funds that pool the contributions of thousands of investors.

As a small investor, Bernie has decided to invest in the Alpha Fund. This mutual fund only invests in the common stock of companies located in the United States. One benefit of investing in mutual funds is:

The benefit of a(n) _____ is that the contributions you make reduce your taxable income in the same tax year, and the earnings on your contributions are tax deferred, allowing them to grow more rapidly.

An example of an employee­contribution retirement plan is a:

A full­service broker:

What is a budget? How can you apply the principles of budgeting to your own finances?

One advantage of participating in a companysponsored retirement plan is:

_____ are professionallymanaged funds that pool the contributions of thousands of investors.

An example of an employeecontribution retirement plan is a:

A fullservice broker: