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Exam 24: Appendix: Managing Personal Finances

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Question 21

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Recent college graduates, Jason and Elizabeth, are newlyweds. Although they acquired a significant amount of debt during college, both recently got good-paying jobs and appear to have promising careers. Given their situation, down the road Jason and Elizabeth

A) are almost certain to be able to retire comfortably when the time comes, given the high level of income they are likely to earn.
B) could be able to retire comfortably, but doing so will take planning and discipline on their part.
C) have little chance of enjoying a comfortable retirement because the college debts will take years to repay and become a major burden.
D) will probably find that Social Security will provide an adequate retirement, but that they may need to supplement this with a modest pension if they really want to enjoy the fine life in their golden years.

E) A) and B)
F) B) and D)

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Question 22

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The value of education is often exaggerated when searching for a good job.

A) True
B) False

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Question 23

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Buying an attached home and living in one side, while renting the other side, generally turns out to be more trouble than it is worth, since you have to satisfy not only your own needs, but also the needs of the renters.

The best financial planners are actually insurance salespeople.

A retirement plan where employers often match part of an employee's contribution is known as a

Mike is young and newly married. He and his wife plan to have children in the near future, and Mike 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.

Serena is attending her local community college with the goal of getting a good job someday. She knows that financial planning begins first with making money.

Earnings from traditional IRA investments are taxable at the time they are earned.

The money a worker invests in a 401(k) retirement account reduces that worker's present taxable income.

The earnings on a traditional IRA are

If you use a credit card to make purchases, you should make a strong effort to pay off the balance in full each month.

Borrowing money for ordinary expenses is a necessary part of life.

An annuity is a contract to make regular payments to a person for life or for a fixed period.

In order to accumulate enough wealth to get started toward achieving their goals, many people have to make significant sacrifices in their standard of living for several years.

Multiyear level-premium insurance is a form of term insurance with fixed premiums for the life of the policy.

Earnings of Keogh plans are not taxed until the funds are withdrawn from the retirement account.

One of the keys to financial success is never to apply for a credit card.

One danger of a credit card is that consumers often buy items they wouldn't normally buy if they had to pay cash.

Even though they are in debt, most of today's college graduates are capital-rich.

Financial planners encourage individuals to borrow only to cover immediate expenses.