FP 100T Week 4 WileyPLUS Weekly Exam

In this graded assignment, you are assessed on the content covered in this week’s readings, activities, and assignments. To help you prepare, it is recommended that you first complete this week’s Learning Path and Self-Test Learning Activities prior to completing this exam.

Complete the Week 4 Exam covering this week’s assigned readings:

• “Chapter 10: Saving for Distant Goals: Retirement and Education Funding”
• “Chapter 11: The Fundamentals of Investing”

Note: Work submitted in WileyPLUS does not count toward attendance. Be sure to post at least two times each week in the online classroom to avoid being auto-dropped from the course.

Question 1

Which of the following is NOT an income-driven repayment plan for federal student loans?

Income-based repayment

Pay as you Earn plan

Income deferment plan

Income-contingent plan

Question 2

If you are not working, you can apply with your loan servicer for which of the following to postpone monthly payments.

Forgiveness

Unemployment

Payment reduction

Deferment

Question 3

What type of loan starts accruing interest at the time of disbursement?

Subsidized

Pell

Unsubsidized

All federal loans

Question 4

Which of the following is the recommended guideline for the maximum amount to borrow in order to keep your monthly payments manageable?

Average salary for your chosen job

No more than household income

Average starting salary for your chosen job

Average starting salary for your chosen job times 1.25

Question 5

Your answer is correct.

The American Opportunity tax credit is a tax credit up to a maximum of

$500 for every eligible dependent who has incurred college expenses during the year.

$2,500 for every eligible dependent who has incurred college expenses during the year.

$2,000 per year for eligible college expenses incurred during a child’s first two years of college.

$1,500 per year for eligible expenses incurred during a child’s first two years of college.

Question 6

Your answer is correct.

________ are subject to regulations that resemble those of defined contribution plans offered by employers.

Traditional IRAs

Roth IRAs

Taxable accounts

Annuities

Question 7

Your answer is correct.

When comparing penalties for non qualified withdrawals on the Coverdell Education Savings Account and the two Section 529 plans, which of the following has/have a penalty of earnings subject to income tax plus a 10% penalty?

All three plans

Coverdell Education Savings Account

Section 529 Prepaid Tuition plan

Section 529 Savings plan

Question 8

Your answer is correct.

Which of the three government college savings programs does not tax growth or qualified withdrawals?

Section 529 Prepaid Tuition plan

Section 529 Savings plan

Coverdell Education Savings Account

All of the choices are correct.

Question 9

Your answer is correct.

Carla and Ben have been married for 50 years. During that time, Carla stayed home raising their children and maintaining their household while Ben worked for an engineering firm. When they reach retirement age, together Ben and Carla are eligible to receive

150% of Ben’s Social Security benefits.

half of Ben’s Social Security benefits.

only Ben’s Social Security benefits.

200% of Ben’s Social Security benefits.

Question 10

Your answer is correct.

The Lifetime Learning tax credit is a credit of

30 percent of the first $5,000 of college expenses up to a maximum of $1,500 for every eligible dependent who has incurred these expenses during the year.

20 percent of the first $5,000 of college expenses up to a maximum of $1,000 for every eligible dependent who has incurred these expenses during the first two years of college.

30 percent of the first $5,000 of college expenses up to a maximum of $1,500 for every eligible dependent who has incurred these expenses during the first two years of college.

20 percent of the first $10,000 of tuition and fees up to a maximum of $2,000 for every eligible dependent who has incurred these expenses during the year.

Question 11

In order to estimate your retirement income shortfall in the first year of retirement, you need to subtract your expected income from employer DB retirement plans from your before-tax income need in your first year of retirement, and then ________ expected Social Security benefits.

subtract

add

multiply by

divide by

Question 12

Your answer is correct.

Marnie and John have a joint and survivor annuity. This means that

the annuity pays a benefit until the second spouse dies.

the annuity pays a double benefit for their entire lives.

the annuity pays a benefit until the first spouse dies.

only the beneficiaries receive a benefit after both Marnie and John die.

Question 13

Your answer is correct.

If Jack Miller were to underestimate the effects of inflation on his retirement income, his standard of living in retirement could consistently__________ as he gets older.

increase

decline

stay the same

improve

Question 14

Evan works for an employer that does not provide a retirement plan as a benefit. He earns $175,000 per year. He plans to fund his own retirement account through his local bank. Which of the following would BEST suit Evan?

A traditional IRA

A Roth IRA

A taxable account

An annuity

Question 15

The minimum rate of return is usually called the

nominal risk-free rate.

nominal inflation rate.

expected rate of return.

expected required return.

Question 16

Your answer is correct.

Reinvestment risk is greatest for

short-term debt securities.

long-term debt securities.

bonds.

common stock.

Question 17

Your answer is correct.

A bear market occurs when

the market is generally rising.

the market is generally declining.

the market is very volatile.

the market is fairly stagnant.

Question 18

Your answer is correct.

Portfolio diversification in the real world can be employed to

reduce risk of a portfolio up to a point.

eliminate the risk of a portfolio completely.

primarily increase the return of a portfolio.

primarily reduce the return of a portfolio.

Question 19

Your answer is correct.

________ is a type of investing strategy in which you purchase a collection of bonds with different maturities spread out over your investment horizon.

Laddering

Buy-and-hold

Indexing

DRIP

Question 20

Your answer is correct.

In order to assess the performance of a diversified mutual fund invested in stocks, one would use the ________ because it is a broad benchmark.

S&P 500

Dow Jones Industrial Average

NASDAQ Composite Index

Lehman Brothers US Treasury Index

Question 21

A major advantage of a buy-and-hold strategy is

greater expected return.

buying securities at their lowest price.

lower transaction costs.

lower default risk.

Question 22

If you purchase $100 of stock every month, you are practicing

market timing.

dollar cost averaging.

asset allocation.

diversification.

Question 23

Your answer is correct.

The statement “Don’t put all your eggs in one basket” is recommending

active investing.

market timing.

diversification.

portfolio management.

Question 24

Your answer is correct.

Dollar cost averaging will result in

a smaller return than a buy-and-hold strategy if prices are rising.

a lower average purchase price than the average price over the long term.

a higher average purchase price than the average price over the long term.

a greater return than a buy-and-hold strategy if prices are rising.

Question 25

Your answer is correct.

Which of the following is not one of the strategies for successful investing?

Do your homework.

Hire a full-service broker to make your investment decisions.

Keep accurate records.

Understand and take advantage of tax rules.