Chapter Bonus D – Managing Personal Finances
242. The increase in the number of retirement plans approved by the federal government
likely indicates that:
A. the government budget is approaching a surplus.
B. most people have faith in the troubled Social Security system.
C. Social Security cannot be counted on to provide an individual with ample funds for
retirement.
D. as a nation our values have shifted so that we now enjoy the value of saving more and
consuming less.
Feedback: The government has established incentives for you to save money now for
retirement because of the problems foreseen in the Social Security system.
243. For workers who qualify, the earnings from income invested in a traditional IRA are:
A. not taxed until the funds are withdrawn.
B. never taxed.
C. taxed, at the time they are earned, but at the lowest individual rate.
D. taxed both at the time the money is earned and at the time the earnings are withdrawn.
Feedback: Neither the money invested nor the earnings of an IRA are taxable for qualified
employees until the funds are withdrawn. Part of the tax advantage is that when workers
retire, they will likely then be taxed at a lower rate.
BonusD-83
254. What advice might a personal financial advisor offer a recent college graduate desiring
to become financially secure?
255. What are the advantages of investing in a home?
BonusD-84
256. Identify and discuss the six steps that individuals can take to gain control of their
personal finances.
257.
Chapter Bonus D – Managing Personal Finances
BonusD-85
Compare the basic features of the traditional IRA and Roth IRA.
258.
Chapter Bonus D – Managing Personal Finances
BonusD-86
How does term insurance differ from whole life insurance? Describe the newer types of
life insurance that have been offered in recent years.
259.
Chapter Bonus D – Managing Personal Finances
Describe the major steps involved in estate planning.
BonusD-88
260.
Chapter Bonus D – Managing Personal Finances
One of the first things the financial planner was likely to have them do would be to:
A. open an individual retirement account (IRA).
B. borrow money to pay for their excess expenses.
C. take inventory of their financial position.
D. return to school and pursue a graduate degree.
Feedback: Preparing a personal balance sheet and income statement will allow the couple, as
well as the financial planner, to gain better insights into the couple’s financial situation.
261. 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
Feedback: Saving and investing money is certainly a desirable goal, but before doing so Ira
and Penny should pay off any debts, especially those with high interest rates, such as credit
cards. Many credit cards charge interest rates in double digits. Paying off a credit card that
charges 12 percent is essentially like earning a 12 percent tax-free return on an investment. In
recent years few bonds, much less bank savings accounts, have come close to matching that
sort of return.
