Liberty
University BUSI 352 midterm exam solutions answers right
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Question 1 Which of the following
statements is/are correct? 1: The emergency fund ratio metric should be 3 to 6
months of nondiscretionary cash flows. 2: When calculating the savings rate
for a family, any contributions to retirement made by the employer should be
included.
Question 2 For valuation purposes,
balance sheet liabilities should be recorded at their:
Question 3 Behavioral investors have been
characterized as those who tend to choose portfolios by evaluation and decisions
based on expected wealth, desire for security, aspiration levels, and
probabilities of aspiration levels.
Question 4 Pat and Marie have the
following expenses and account balances. Pat’s annual 401(k) plan contribution
$16,500 Pat’s annual salary $100,000 Current liabilities $24,000 Housing costs
(P&I&T&I) monthly $2,167 Cash & Cash equivalents $18,000
Monthly nondiscretionary cash flows $6,000 Monthly debt payments other than
housing $500 Pat’s employer matches $1 for $1 up to 3% of Pat’s salary in his
401(k) plan. Their savings rate is:
Question 5 Jill would like to plan for
her son's college education. She would like for her son, who was born today, to
attend college for 5 years, beginning at age 18. Tuition is currently $12,000
per year, and tuition inflation is 6%. Jill can earn an aftertax rate of
return of 8%. How much must Jill save at the end of each year if she wants to
make the last payment at the beginning of her son's first year of college?
Question 6 Tracy and Brett are married
with the following financial situation. Current assets $9,243 Current
liabilities $6,921 Monthly nondiscretionary expenses $4,693 Annual combined
income $70,000 Annual debt payments (excluding monthly housing costs) $22,084
What is Tracy and Brett’s emergency fund ratio in months?
Question 7 Mrs. Escovido has come to you
for advice on financing her son’s college education at a state university. Even
though her income exceeds $200,000, she has not saved enough for his college
expenses. You advise her that her best opportunity to acquire education funds
would be through:
Question 8 Pat and Marie have the
following expenses and account balances. Pat’s annual 401(k) plan contribution
$16,500 Pat’s annual salary $100,000 Current liabilities $24,000 Housing costs
(P&I and T&I) monthly $2,167 Cash & Cash equivalents $18,000
Monthly nondiscretionary cash flows $6,000 Monthly debt payments other than
housing $500 Pat’s employer matches $1 for $1 up to 3% of Pat’s salary in his
401(k) plan. Based on the information above, calculate Pat and Marie’s housing
ratio 1 in numbers.
Question 9 A rational investor would be
considered to be indifferent or uncaring if a profit is realized by a dividend
declared by a company versus if the same profit is realized by selling the
stock at a gain.
Question 10 Traditional Finance slowed
down market analysis and hampered investors and those participating in the
market at a time when some may have been intimidated by or felt ignorant of
available market information or financial data.
Question 11 Which of the following is NOT
true with respect to heuristics in the realm of financial advice?
Question 12 The balance sheet equation
is:
Question 13 Which of the following is
probably the start of a closed question?
Question 14 The present value approach takes
each short, intermediate, and longterm goal, determines each individual
present value, and sums these present values together. Then, it reduces them by
current resources (investment assets and cash and cash equivalents) and treats
the net PV as an obligation to be retired over the remaining work life
expectancy at a discount rate equal to the expected portfolio rate of return.
Question 15 Which of the following is
most likely not classified as an investment amount on the Statement of
Financial Position?
Question 16 Pat and Marie have the
following expenses and account balances. Pat’s annual 401(k) plan contribution
$16,500 Pat’s annual salary $100,000 Current liabilities $24,000 Housing costs
(P&I&T&I) monthly $2,167 Cash & Cash equivalents $18,000 Monthly
nondiscretionary cash flows $6,000 Monthly debt payments other than housing
$500 Pat’s employer matches $1 for $1 up to 3% of Pat’s salary in his 401(k)
plan. Based on the information above, calculate Pat and Marie’s housing ratio
2.
Question 17 Which of the following
approaches provides the planner and client with a methodology in order to reach
goals by covering risks and short term and long term savings and investments?
Question 18 If your financial planning
client uses phrases like “see what I mean” or “imagine that,” your client’s
learning style is most likely…
Question 19 Betty earns $100,000 working
as a parttime lawyer in New Orleans. The company provides a matching
contribution in the 401(k) plan of 50% up to a maximum contribution of 4% of compensation.
Her 401(k) plan account had $60,000 in it at the beginning of the year. She
contributed $15,000 to the plan this year, and the employer made the matching
contribution before yearend. The ending balance of the account is $100,000.
What is her return on investments this year?
Question 20 Joe has a financial plan
prepared by a professional financial planner. What is the order of steps that
the planner took? 1: Establish client goals 2: Gather data 3: Define
relationship 4: Develop and present alternatives 5: Analyze client’s financial
status 6: Implement chosen alternative recommendations 7: Monitor plan
Question 21 One of the most reported
interruptions or disruptions in passive listening is when:
Question 22 If your financial planning
client talks about situations, expresses emotions verbally, enjoys listening
(but cannot wait to talk), and tends to move lips or subvocalize when reading,
then, their learning style is most likely …
Question 23 The first two steps in the
financial planning process are:
Question 24 According to the cash flow
approach, each of the following recommendations should have a positive cash
flow impact except:
Question 25 Which of the following
statements is/are correct? 1: The Statement of Cash Flows includes monthly
recurring cash flows from income and expenses. 2: The Statement of Net Worth
explains changes to net worth between two Statements of Financial Position that
are not reported elsewhere on other financial statements.
Question 26 Which of the following is not
one of the five general categories that make up a client’s internal data?
Question 27 Which of the following
factors is critical in determining the appropriate benchmark for the investment
assets to gross pay ratio?
Question 28 Which of the following is/are
true regarding the ownership of life insurance? 1: A policy can only be issued
to the insured. 2: Generally, assigning a policy requires proof that the
insured is still “insurable,” meaning still in good health. 3: Only a person
with an insurable interest, generally a relative, a business associate, or
lender, can be named as beneficiary. 4: The owner of a life insurance policy
can assign (transfer) the policy to whomever he or she chooses, even if the
assignee has no insurable interest.
Question 29 Holly’s salary is $100,000
per year. She contributes 12% of her salary to her 401(k) plan. Her employer
contributes 5% of her salary to a profit share plan. She also contributes
$2,500 per year to an IRA. What is Holly’s savings rate?
Question 30 Fred and Louise are 40 years
old, plan on retiring at age 67, and expect to live until age 95. Fred
currently earns $150,000, and they expect to need $100,000 in retirement.
Louise is a stayathome mom. They also expect that Social Security will
provide $30,000 of benefits in today’s dollars at age 67. Fred has been saving
$17,000 annually in his 401(k) plan. Their daughter, Ann, was just born and is
expected to go to college in 18 years. They want to save for Ann’s college
education, which they expect will cost $20,000 in today’s dollars per year, and
they are willing to fund 5 years of college. They were told that college costs
are increasing at 7% per year, while general inflation is 3%. They currently
have $400,000 saved in total, and they are averaging a 7% rate of return and
expect to continue to earn the same return over time. Based on this
information, what should they do?
Question 31 The rational investor is
deemed to know that when a stock value goes down, even though a sale is not
made, the value is lost.
Question 32 All of the following
statements concerning educational funding are correct EXCEPT:
Question 33 The account balance method of
education funding uses real dollars and the annuity due funding plan to
calculate the present value of the cost of education.
Question 34 Pat and Marie have the
following expenses and account balances. Pat’s annual 401(k) plan contribution
$16,500 Pat’s annual salary $100,000 Current liabilities $24,000 Housing costs
(P&I and T&I) monthly $2,167 Cash & Cash equivalents $18,000 Monthly
nondiscretionary cash flows $6,000 Monthly debt payments other than housing
$500 Pat’s employer matches $1 for $1 up to 3% of Pat’s salary in his 401(k)
plan. Based on the information above, calculate Pat and Marie’s current ratio
in numbers.
Question 35 Jeff recently purchased a
house for $350,000. He made a down payment of $50,000 and financed the balance
over 30 years at 7%. If Jeff's first payment is due on March 1st of the current
year, how much interest expense will Jeff pay in the current year?
Question 36 William owns 1 share of Park
stock. He purchased the stock three years ago for $17.50. The stock is
currently trading for $40 per share. The stock has paid the following dividends
over the past three years. Year 1: $1.00 Year 2: $2.00 Year 3: $3.00 What is
the compounded rate of return (IRR) that Williams has earned on this
investment?
Question 37 Which of the following
approaches provide the planner and client with a methodology in order to reach
goals by covering risks, short term and long term savings, and investments?
Question 38 Cindy invests $20,000 in a
limited partnership today. At the end of years 1 and 5, she will receive the
aftertax cash flows shown below. The partnership will be liquidated at the end
of the fifth year. Cindy is in the 35% federal income bracket. Year 0 $20,000
CF0 Year 1 0 CF1 Year 2 $4,000 CF2 Year 3 $6,000 CF3 Year 4 $8,000 CF4 Year 5
$10,000 CF5 The aftertax IRR on this investment is:
Question 39 Which of the following ratios
is not used in a typical financial statement approach?
Question 40 A savings rate between 10 and
13 percent of one’s gross pay is almost always sufficient to meet most
financial goals.
Question 41 Financial counselors or
advisors must establish and maintain the advisorclient relationship based on
their ability to:
Question 42 Which of the following are
heuristics or cognitive biases about which an advisor should be knowledgeable?
Question 43 Which of the following
statements, if any, is/are correct? 1: Prepaid Tuition plans are plans whereby the
prepayment of college tuition is at current tuition prices for future
enrollment. 2: A disadvantage of a QTP (qualified tuition plan) is that the
owner/contributor must relinquish control of the account and share control of
the funds with the student/beneficiary.
Question 44 Which of the following best
completes this sentence: There has been a movement in recent times for the
financial industry to be more in touch with _____________ due to their effect
and persuasiveness in financial matters. 1: Capital Asset pricing 2: Beta 3:
Psychology and sociology
Question 45 Which of the following is
inconsistent with the Disposition Effect?
Question 46 All of the following
statements concerning educational funding are correct EXCEPT:
Question 47 A client in the asset
accumulation phase is characterized by which of the following?
Question 48 Tracy and Brett are married
with the following financial situation. Current assets $9,243 Current
liabilities $6,921 Monthly nondiscretionary expenses $4,693 Annual combined income
$70,000 Annual debt payments (excluding monthly housing costs) $22,084 What is
Tracy and Brett’s current ratio?
Question 49 The benefits that accrue to a
client from using a financial professional to prepare a financial plan include
all of the following except:
Question 50 Which of the following does
not describe “anchoring?”
Question 51 Seven years ago, Stan
purchased 10 shares of an aggressive growth mutual fund at $90 per share for a
total of $900. Today, he sold all 10 shares for $4,500. What was his average
annual rate of return on this investment before tax?
Question 52 Beth earns $100,000 working
as a parttime lawyer in New Orleans. The company provides a matching
contribution to the 401(k) plan of 50% of her contribution up to a maximum
contribution of 4% of compensation. Her 401(k) plan account had $60,000 in it
at the beginning of the year. She contributed $15,000 to the plan this year,
and the employer made the matching contribution before yearend. The ending
balance of the account is $100,000. What is her savings rate this year?
Question 53 Samantha has the following
transactions: She purchases $5,000 worth of a mutual fund with cash from her
savings account. She spends $6,000 on a vacation with cash from her money
market account She spends $10,000 on new furniture and uses her credit card to
make the purchase. What is the combined impact of these transactions on her net
worth?
Question 54 During which step of the
financial planning process would a planner prepare and analyze financial
statements?
Question 55 Which of the following are
premises in Traditional Finance?
Question 56 Risk tolerance and asset
allocation are a separate issue from retirement planning and are not required
to be integrated into a retirement plan.
Question 57 Which of the following is not
necessary to identify a client’s life cycle position?
Question 58 According to the cash flow
approach, all of the following recommendations may have a positive impact to
cash flow except:
Question 59 Which of the following is
true with respect to the gambler’s fallacy?
Question 60 A client in the asset
accumulation phase is characterized by:
Question 61 Communication is the key
factor in the financial advisorclient relationship.
Question 62 Holly would like to plan for
her daughter's college education. She would like for her daughter, who was born
today, to attend college for 4 years beginning at age 18. Tuition is currently
$10,000 per year, and tuition inflation is 7%. Holly can earn an aftertax rate
of return of 10%. How much must Holly save at the end of each year if she wants
to make the last payment at the beginning of her daughter's first year of
college?
Question 63 Which of the following is NOT
consistent with the Humanistic Paradigm?
Question 64 Which one of the following
statements in wrong?
Question 65 Mike Smith has the following
financial data. Investment Assets at Year End $475,000 Investment Assets at
Beginning of the Year $392,000 Savings Made During the Year by Mike $27,000
Employer Match to Mike’s 401(k) Plan $5,000 Total Assets on Ending Statement of
Financial Position $700,000 Gross Income on Income Statement $100,000 Total
Assets on Beginning Statement of Financial Position $600,000 Total Liabilities
at Beginning of the Year $200,000 Total Liabilities at Year End $180,000 What
was Mike’s Return on Net Worth for the year?
Question 66 Proper and practical
communication skills and techniques in financial counseling can aid the
financial planning advisor to understand:
Question 67 Which one of the following
statements is wrong?
Question 68 Financial advisors must
respect the client’s position, hold the client’s interest above that of the
advisor, and try to communicate effectively to realize the client’s goals and
achieve the desired result.
Question 69 Which of the following
statements is/are correct? 1: Net worth represents the personal equity that the
individual has in his assets and can never be less than zero. 2: If Lisa
purchased a car using 30% cash and 70% debt, her net worth would increase by
30%.
Question 70 Your client invested $10,000
in an interest bearing promissory note earning an 11% annual rate of interest,
compounded monthly. How much will the note be worth at the end of 7 years,
assuming that all interest is reinvested at the 11% rate?
Question 71 Ted has been dollar cost
averaging in a mutual fund by investing $1,500 at the beginning of every
quarter for the past 5 years. He has been earning an average annual compound
return of 9% compounded quarterly on this investment. How much is the fund
worth today?
Question 72 All of the following
statements concerning financial aid programs for education funding are correct
except:
Question 73 Which of the following do NOT
apply to the use of questionnaires?
Question 74 Calculate the NPV of a
machine that is purchased for $5,000, sold at the end of year 4 for $2,500, and
produces the following cash flows. Year 1: $700 Year 2: $800 Year 3: $900 Year
4: $1,000 Assuming that the appropriate discount rate is 6%, what is the NPV?
Question 75 All of the following
statements concerning educational fund 529 Savings Plans is correct except:
Question 1 As a visual aid, a balance
sheet may be portrayed in three pie charts: one for assets, one for
liabilities, and one for net worth.
Question 2 One of the most reported
interruptions or disruptions in passive listening is when:
Question 3 Which of the following does
not describe “anchoring?”
Question 4 Which one of the following
statements is wrong?
Question 5 Tracy and Brett are married
with the following financial situation. Current assets $9,243 Current
liabilities $6,921 Monthly nondiscretionary expenses $4,693 Annual combined
income $70,000 Annual debt payments (excluding monthly housing costs) $22,084
What is Tracy and Brett’s emergency fund ratio in months?
Question 6 Holly would like to plan for
her daughter's college education. She would like for her daughter, who was born
today, to attend college for 4 years beginning at age 18. Tuition is currently
$10,000 per year, and tuition inflation is 7%. Holly can earn an aftertax rate
of return of 10%. How much must Holly save at the end of each year if she wants
to make the last payment at the beginning of her daughter's first year of
college?
Question 7 Which of the following
statements, if any, is/are correct? 1: Aside from risk tolerance, the time
horizon is one of the most important factors to consider when deciding in which
securities to invest and how much and when to invest. 2: QTPs generally require
a decrease in the risk level of investments the closer the student/beneficiary
gets to the beginning of college.
Question 8 A contract for variable life
insurance may be characterized as a/an: 1: Unilateral contract. 2: Aleatory
contract. 3: Conditional contract. 4: Contract of adhesion.
Question 9 Samantha has the following
transactions: She purchases $5,000 worth of a mutual fund with cash from her
savings account. She spends $6,000 on a vacation with cash from her money
market account She spends $10,000 on new furniture and uses her credit card to
make the purchase. What is the combined impact of these transactions on her net
worth?
Question 10 Jill would like to plan for
her son's college education. She would like for her son, who was born today, to
attend college for 5 years, beginning at age 18. Tuition is currently $12,000
per year, and tuition inflation is 6%. Jill can earn an aftertax rate of
return of 8%. How much must Jill save at the end of each year if she wants to
make the last payment at the beginning of her son's first year of college?
Question 11 Lori wants to give her
daughter $25,000 in 8 years to start her own business. How much should Lori
invest today, at an annual interest rate of 8%, compounded annually, to have
$25,000 in 8 years?
Question 12 To obtain a loan, either the
housing ratio 1 or the housing ratio 2 must be okay, but not both.
Question 13 Which of the following
statements is/are correct? 1: The emergency fund ratio metric should be 3 to 6
months of nondiscretionary cash flows. 2: When calculating the savings rate
for a family, any contributions to retirement made by the employer should be
included.
Question 14 The blackout period refers to
the period of time immediately following the death of the breadwinner.
Question 15 Which of the following is NOT
true about the Humanistic Paradigm?
Question 16 Financial advisors are in
positions of trust and must be cautious not to inadvertently misuse their power
and refrain from wielding a disproportionate amount of the power in
interactions with clients.
Question 17 Which of the following
factors is critical in determining the appropriate benchmark for the investment
assets to gross pay ratio?
Question 18 Which of the following
options best completes this sentence: “In the event that a client is trying to
communicate a message that is not clear, then the advisor will want to …”?
Question 19 The estimated value of a real
estate asset in a financial statement should be based upon the:
Question 20 Behavioral investors have
been characterized as those who tend to choose portfolios by evaluation and
decisions based on expected wealth, desire for security, aspiration levels, and
probabilities of aspiration levels.
Question 21 The balance sheet equation
is:
Question 22 In an efficient market,
intrinsic values are determined by an analysis of reasonable expected cash flows
and of the risk of those cash flows along with investor heuristics and
tendencies.
Question 23 Judy recently purchased her
first home for $220,000. She made a down payment of $20,000 and financed the
balance over 15 years at 6% interest. If Judy’s first payment is due on October
1 of this year, approximately how much of this year’s payments will be applied
to the outstanding principal?
Question 24 Which of the following are
premises in Traditional Finance?
Question 25 Which of the following
approaches provides the planner and client with a methodology in order to reach
goals by covering risks and short term and long term savings and investments?
Question 26 The present value approach
takes each short, intermediate, and longterm goal, determines each individual
present value, and sums these present values together. Then, it reduces them by
current resources (investment assets and cash and cash equivalents) and treats
the net PV as an obligation to be retired over the remaining work life
expectancy at a discount rate equal to the expected portfolio rate of return.
Question 27 Billy owns one share of
Disney stock. He purchased the share 3 years ago for $15. Disney stock is
currently trading for $25 per share. The stock has paid the following dividends
over the past three years: year 1, $1.00; year 2, $2.00; year 3, $3.00. What is
the compounded rate of return (IRR) that Billy has earned on his investment?
Question 28 During which step of the
financial planning process would a planner prepare and analyze financial
statements?
Question 29 Holly’s salary is $100,000
per year. She contributes 12% of her salary to her 401(k) plan. Her employer
contributes 5% of her salary to a profit share plan. She also contributes
$2,500 per year to an IRA. What is Holly’s savings rate?
Question 30 Financial counselors or
advisors must establish and maintain the advisorclient relationship based on
their ability to:
Question 31 The present value approach
takes each short, intermediate, and longterm goal, determines each individual
present value, and sums these present values together. Then, it reduces them by
current resources (investment assets and cash and cash equivalents) and treats
the net PV as an obligation to be retired over the remaining life expectancy at
a discount rate equal to the expected portfolio rate of return.
Question 32 Communication is the key
factor in the financial advisorclient relationship.
Question 33 Financial advisors must
respect the client’s position, hold the client’s interest above that of the advisor,
and try to communicate effectively to realize the client’s goals and achieve
the desired result.
Question 34 Behavioral Finance rejects
Traditional Finance’s views or methods.
Question 35 Your client invested $10,000
in an interest bearing promissory note earning an 11% annual rate of interest,
compounded monthly. How much will the note be worth at the end of 7 years,
assuming that all interest is reinvested at the 11% rate?
Question 36 Pat and Marie have the
following expenses and account balances. Pat’s annual 401(k) plan contribution
$16,500 Pat’s annual salary $100,000 Current liabilities $24,000 Housing costs
(P&I and T&I) monthly $2,167 Cash & Cash equivalents $18,000
Monthly nondiscretionary cash flows $6,000 Monthly debt payments other than housing
$500 Pat’s employer matches $1 for $1 up to 3% of Pat’s salary in his 401(k)
plan. Based on the information above, calculate Pat and Marie’s emergency fund
ratio in numbers.
Question 37 Traditional Finance slowed
down market analysis and hampered investors and those participating in the
market at a time when some may have been intimidated by or felt ignorant of
available market information or financial data.
Question 38 Kevin owns one share of Acme,
Inc. stock. He purchased the stock three years ago for $25. The stock is
currently trading for $29.50 per share. The stock has paid the following
dividends over the past three years. Year 1: $1.50 Year 2: $2.00 Year 3: $2.50
What is the compounded rate of return (IRR) that Kevin has earned on this
investment?
Question 39 Joe has a financial plan
prepared by a professional financial planner. What is the order of steps that
the planner took? 1: Establish client goals 2: Gather data 3: Define
relationship 4: Develop and present alternatives 5: Analyze client’s financial
status 6: Implement chosen alternative recommendations 7: Monitor plan
Question 40 Tracy purchased a car for
$19,500. She is financing the purchase at an 11% annual interest rate
compounded monthly for 3 years. What is the payment that Tracy is required to
make at the end of each month?
Question 41 Which of the following
statements, if any, is/are correct? 1: Prepaid Tuition plans are plans whereby
the prepayment of college tuition is at current tuition prices for future
enrollment. 2: A disadvantage of a QTP (qualified tuition plan) is that the
owner/contributor must relinquish control of the account and share control of
the funds with the student/beneficiary.
Question 42 The first two steps in the
financial planning process are:
Question 43 A client in the asset
accumulation phase is characterized by which of the following?
Question 44 Which of the following
statements is/are correct? 1: Property titled Joint Tenants with Rights of
Survivorship (JTWROS) can only be owned by married couples. 2: Property titled
Tenants by the Entirety can only be owned by married couples.
Question 45 Which of the following is
most likely not classified as an investment amount on the Statement of
Financial Position?
Question 46 Which of the following
approaches provide the planner and client with a methodology in order to reach
goals by covering risks, short term and long term savings, and investments?
Question 47 Which of the following
statements is/are correct? 1: The Statement of Cash Flows includes monthly
recurring cash flows from income and expenses. 2: The Statement of Net Worth
explains changes to net worth between two Statements of Financial Position that
are not reported elsewhere on other financial statements.
Question 48 All of the following
statements concerning educational funding are correct EXCEPT:
Question 49 In what order should the
steps in the financial planning process occur? 1: Gathering client data. 2:
Establishing and defining the planner/client relationship. 3: Developing and
presenting financial plan recommendations. 4: Analyzing and evaluating client’s
financial status. 5: Monitoring the plan. 6: Implementing financial plan
recommendations.
Question 50 Which of the following ratios
is not used in a typical financial statement approach?
Question 51 All of the following
statements concerning educational fund 529 Savings Plans is correct except:
Question 52 External data collected in
phase 2 of the financial planning process includes all of the following except:
Question 53 Regarding the characteristics
of insurance, which of the following is/are fundamental? 1: Probability
(possibility and predictability of a loss). 2: Law of large numbers. 3:
Transfer of risk from individual to group. 4: Only pure risk is insurable.
Question 54 Which of the following best
completes this sentence: There has been a movement in recent times for the
financial industry to be more in touch with _____________ due to their effect
and persuasiveness in financial matters. 1: Capital Asset pricing 2: Beta 3:
Psychology and sociology
Question 55 Which of the following do NOT
apply to the use of questionnaires?
Question 56 The three panel approach
includes all of the following except:
Question 57 Michael has been dollar cost
averaging in a mutual fund by investing $2,000 at the beginning of every
quarter for the past 7 years. He earns an average annual compound return of 11%
on this investment, compounded quarterly. How much is the fund worth today?
Question 58 Calculate the NPV of a
machine that is purchased for $5,000, sold at the end of year 4 for $2,500, and
produces the following cash flows. Year 1: $700 Year 2: $800 Year 3: $900 Year
4: $1,000 Assuming that the appropriate discount rate is 6%, what is the NPV?
Question 59 Which of the following is NOT
consistent with the Humanistic Paradigm?
Question 60 Cindy invests $20,000 in a
limited partnership today. At the end of years 1 and 5, she will receive the
aftertax cash flows shown below. The partnership will be liquidated at the end
of the fifth year. Cindy is in the 35% federal income bracket. Year 0 $20,000
CF0 Year 1 0 CF1 Year 2 $4,000 CF2 Year 3 $6,000 CF3 Year 4 $8,000 CF4 Year 5
$10,000 CF5 Which of the following is/are correct? 1: The IRR is the discount
rate which equates the present value of an investment’s expected costs to the
present value of the expected cash inflows. 2: If the cost of capital for this
investment is 9%, the investment should be rejected because its net present
value will be negative.
Question 61 Fred and Louise are 40 years
old, plan on retiring at age 67, and expect to live until age 95. Fred
currently earns $150,000, and they expect to need $100,000 in retirement.
Louise is a stayathome mom. They also expect that Social Security will
provide $30,000 of benefits in today’s dollars at age 67. Fred has been saving
$17,000 annually in his 401(k) plan. Their daughter, Ann, was just born and is
expected to go to college in 18 years. They want to save for Ann’s college
education, which they expect will cost $20,000 in today’s dollars per year, and
they are willing to fund 5 years of college. They were told that college costs
are increasing at 7% per year, while general inflation is 3%. They currently
have $400,000 saved in total, and they are averaging a 7% rate of return and
expect to continue to earn the same return over time. Based on this
information, what should they do?
Question 62 Which one of the following
statements in wrong?
Question 63 Which of the following are
consistent with the Developmental Paradigm? 1: The majority of humanistic
theories view clients as experts on themselves. 2: Much of the Developmental
approach has its origin in and was influenced by Freudian psychoanalytic
theory. 3: Counseling in the Developmental Paradigm has an overall aspiration
to recount or correct earlier, disrupted development to foster change in the
client or the client’s behavior.
Question 64 The Kellers determined that
they can reduce their mortgage interest rate from 10% to 4%. The value of homes
in their neighborhood has been increasing at the rate of 5% annually. If the
Kellers were to refinance their house with $3,000 in closing costs added to the
mortgage balance ($277,000) over a period of time which coincides with their
chosen retirement age in 20 years, what would be the monthly payment for
principal and interest?
Question 65 All of the following
statements regarding NPV are true except:
Question 66 An example of internal data
is
Question 67 Cindy invests $20,000 in a
limited partnership today. At the end of years 1 and 5, she will receive the
aftertax cash flows shown below. The partnership will be liquidated at the end
of the fifth year. Cindy is in the 35% federal income bracket. Year 0 $20,000
CF0 Year 1 0 CF1 Year 2 $4,000 CF2 Year 3 $6,000 CF3 Year 4 $8,000 CF4 Year 5
$10,000 CF5 The aftertax IRR on this investment is:
Question 68 Which of the following is not
necessary to identify a client’s life cycle position?
Question 69 Pat and Marie have the
following expenses and account balances. Pat’s annual 401(k) plan contribution
$16,500 Pat’s annual salary $100,000 Current liabilities $24,000 Housing costs
(P&I and T&I) monthly $2,167 Cash & Cash equivalents $18,000
Monthly nondiscretionary cash flows $6,000 Monthly debt payments other than
housing $500 Pat’s employer matches $1 for $1 up to 3% of Pat’s salary in his
401(k) plan. Based on the information above, calculate Pat and Marie’s housing
ratio 1 in numbers.
Question 70 According to the cash flow
approach, all of the following recommendations may have a positive impact to
cash flow except:
Question 71 Beth earns $100,000 working
as a parttime lawyer in New Orleans. The company provides a matching
contribution to the 401(k) plan of 50% of her contribution up to a maximum
contribution of 4% of compensation. Her 401(k) plan account had $60,000 in it
at the beginning of the year. She contributed $15,000 to the plan this year,
and the employer made the matching contribution before yearend. The ending
balance of the account is $100,000. What is her savings rate this year?
Question 72 A rational investor would be
considered to be indifferent or uncaring if a profit is realized by a dividend
declared by a company versus if the same profit is realized by selling the
stock at a gain.
Question 73 If your financial planning
client talks about situations, expresses emotions verbally, enjoys listening
(but cannot wait to talk), and tends to move lips or subvocalize when reading,
then, their learning style is most likely …
Question 74 Which of the following are
consistent with the CognitiveBehavioral school of thought?
Question 75 If your financial planning
client uses phrases like “see what I mean” or “imagine that,” your client’s
learning style is most likely…
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