37.
The optimal portfolio on the efficient frontier for a given investor does not depend on
38.
Target-date retirement funds are not
39.
A ___________ is established when an individual confers legal title to property to another
person or institution to manage the property for one or more beneficiaries.
40.
Professional financial planners should
41.
Deferral of capital gains tax
I) means that the investor doesn’t need to pay taxes until the investment is sold.
II) allows the investment to grow at a faster rate.
III) means that you might escape the capital gains tax if you live long enough.
IV) provides a tax shelter for investors.
42.
Deferral of capital gains tax does not
I) mean that the investor doesn’t need to pay taxes until the investment is sold.
II) allow the investment to grow at a faster rate.
III) mean that you might escape the capital gains tax if you live long enough.
IV) provide a tax shelter for investors.
43.
Which of the following investments does not allow the investor to choose how to allocate
assets?
44.
Which of the following investments allows the investor to choose how to allocate assets?
45.
Pension funds
I) accept contributions from employers, which are tax deductible.
II) pay distributions that are taxed as ordinary income.
III) pay benefits only from the income component of the fund.
IV) accept contributions from employees, which are not tax deductible.
46.
Pension funds do not
I) accept contributions from employers, which are tax deductible.
II) pay distributions that are taxed as ordinary income.
III) pay benefits only from the income component of the fund.
IV) accept contributions from employees, which are not tax deductible.
47.
Stephanie Watson is 23 years old and has accumulated $4,000 in her self-directed defined
contribution pension plan. Each year she contributes $2,000 to the plan and her employer
contributes an equal amount. Stephanie thinks she will retire at age 67 and figures she will
live to age 81. The plan allows for two types of investments. One offers a 3.5% risk-free
real rate of return. The other offers an expected return of 10% and has a standard
deviation of 23%. Stephanie now has 5% of her money in the risk-free investment and 95%
in the risky investment. She plans to continue saving at the same rate and keep the same
proportions invested in each of the investments. Her salary will grow at the same rate as
inflation.
How much does Stephanie currently have in the safe account; how much in the risky
account?
48.
Stephanie Watson is 23 years old and has accumulated $4,000 in her self-directed defined
contribution pension plan. Each year she contributes $2,000 to the plan and her employer
contributes an equal amount. Stephanie thinks she will retire at age 67 and figures she will
live to age 81. The plan allows for two types of investments. One offers a 3.5% risk-free
real rate of return. The other offers an expected return of 10% and has a standard
deviation of 23%. Stephanie now has 5% of her money in the risk-free investment and 95%
in the risky investment. She plans to continue saving at the same rate and keep the same
proportions invested in each of the investments. Her salary will grow at the same rate as
inflation.
Of the total amount of new funds that will be invested by Stephanie and by her employer
on her behalf, how much will she put into the safe account each year; how much into the
risky account?
49.
Stephanie Watson is 23 years old and has accumulated $4,000 in her self-directed defined
contribution pension plan. Each year she contributes $2,000 to the plan and her employer
contributes an equal amount. Stephanie thinks she will retire at age 67 and figures she will
live to age 81. The plan allows for two types of investments. One offers a 3.5% risk-free
real rate of return. The other offers an expected return of 10% and has a standard
deviation of 23%. Stephanie now has 5% of her money in the risk-free investment and 95%
in the risky investment. She plans to continue saving at the same rate and keep the same
proportions invested in each of the investments. Her salary will grow at the same rate as
inflation.
How much can Stephanie be sure of having in the safe account at retirement?
50.
Stephanie Watson is 23 years old and has accumulated $4,000 in her self-directed defined
contribution pension plan. Each year she contributes $2,000 to the plan and her employer
contributes an equal amount. Stephanie thinks she will retire at age 67 and figures she will
live to age 81. The plan allows for two types of investments. One offers a 3.5% risk-free
real rate of return. The other offers an expected return of 10% and has a standard
deviation of 23%. Stephanie now has 5% of her money in the risk-free investment and 95%
in the risky investment. She plans to continue saving at the same rate and keep the same
proportions invested in each of the investments. Her salary will grow at the same rate as
inflation.
How much can Stephanie expect to have in her risky account at retirement?
51.
Genny Webb is 27 years old and has accumulated $7,500 in her self-directed defined
contribution pension plan. Each year she contributes $2,000 to the plan and her employer
contributes an equal amount. Genny thinks she will retire at age 63 and figures she will
live to age 90. The plan allows for two types of investments. One offers a 3% risk-free real
rate of return. The other offers an expected return of 12% and has a standard deviation of
39%. Genny now has 20% of her money in the risk-free investment and 80% in the risky
investment. She plans to continue saving at the same rate and keep the same proportions
invested in each of the investments. Her salary will grow at the same rate as inflation.
How much does Genny currently have in the safe account; how much in the risky
account?
52.
Genny Webb is 27 years old and has accumulated $7,500 in her self-directed defined
contribution pension plan. Each year she contributes $2,000 to the plan and her employer
contributes an equal amount. Genny thinks she will retire at age 63 and figures she will
live to age 90. The plan allows for two types of investments. One offers a 3% risk-free real
rate of return. The other offers an expected return of 12% and has a standard deviation of
39%. Genny now has 20% of her money in the risk-free investment and 80% in the risky
investment. She plans to continue saving at the same rate and keep the same proportions
invested in each of the investments. Her salary will grow at the same rate as inflation.
Of the total amount of new funds that will be invested by Genny and by her employer on
her behalf, how much will Genny put into the safe account each year; how much into the
risky account?
53.
Genny Webb is 27 years old and has accumulated $7,500 in her self-directed defined
contribution pension plan. Each year she contributes $2,000 to the plan and her employer
contributes an equal amount. Genny thinks she will retire at age 63 and figures she will
live to age 90. The plan allows for two types of investments. One offers a 3% risk-free real
rate of return. The other offers an expected return of 12% and has a standard deviation of
39%. Genny now has 20% of her money in the risk-free investment and 80% in the risky
investment. She plans to continue saving at the same rate and keep the same proportions
invested in each of the investments. Her salary will grow at the same rate as inflation.
How much can Genny be sure of having in the safe account at retirement?
54.
Genny Webb is 27 years old and has accumulated $7,500 in her self-directed defined
contribution pension plan. Each year she contributes $2,000 to the plan and her employer
contributes an equal amount. Genny thinks she will retire at age 63 and figures she will
live to age 90. The plan allows for two types of investments. One offers a 3% risk-free real
rate of return. The other offers an expected return of 12% and has a standard deviation of
39%. Genny now has 20% of her money in the risk-free investment and 80% in the risky
investment. She plans to continue saving at the same rate and keep the same proportions
invested in each of the investments. Her salary will grow at the same rate as inflation.
How much can Genny expect to have in her risky account at retirement?
55.
Alex Goh is 39 years old and has accumulated $128,000 in his self-directed defined
contribution pension plan. Each year he contributes $2,500 to the plan and his employer
contributes an equal amount. Alex thinks he will retire at age 62 and figures he will live to
age 86. The plan allows for two types of investments. One offers a 4% risk-free real rate of
return. The other offers an expected return of 11% and has a standard deviation of 37%.
Alex now has 25% of his money in the risk-free investment and 75% in the risky
investment. He plans to continue saving at the same rate and keep the same proportions
invested in each of the investments. His salary will grow at the same rate as inflation.
How much does Alex currently have in the safe account; how much in the risky account?
56.
Alex Goh is 39 years old and has accumulated $128,000 in his self-directed defined
contribution pension plan. Each year he contributes $2,500 to the plan and his employer
contributes an equal amount. Alex thinks he will retire at age 62 and figures he will live to
age 86. The plan allows for two types of investments. One offers a 4% risk-free real rate of
return. The other offers an expected return of 11% and has a standard deviation of 37%.
Alex now has 25% of his money in the risk-free investment and 75% in the risky
investment. He plans to continue saving at the same rate and keep the same proportions
invested in each of the investments. His salary will grow at the same rate as inflation.
Of the total amount of new funds that will be invested by Alex and by his employer on his
behalf, how much will Alex put into the safe account each year; how much into the risky
account?
57.
Alex Goh is 39 years old and has accumulated $128,000 in his self-directed defined
contribution pension plan. Each year he contributes $2,500 to the plan and his employer
contributes an equal amount. Alex thinks he will retire at age 62 and figures he will live to
age 86. The plan allows for two types of investments. One offers a 4% risk-free real rate of
return. The other offers an expected return of 11% and has a standard deviation of 37%.
Alex now has 25% of his money in the risk-free investment and 75% in the risky
investment. He plans to continue saving at the same rate and keep the same proportions
invested in each of the investments. His salary will grow at the same rate as inflation.
How much can Alex be sure of having in the safe account at retirement?
58.
Alex Goh is 39 years old and has accumulated $128,000 in his self-directed defined
contribution pension plan. Each year he contributes $2,500 to the plan and his employer
contributes an equal amount. Alex thinks he will retire at age 62 and figures he will live to
age 86. The plan allows for two types of investments. One offers a 4% risk-free real rate of
return. The other offers an expected return of 11% and has a standard deviation of 37%.
Alex now has 25% of his money in the risk-free investment and 75% in the risky
investment. He plans to continue saving at the same rate and keep the same proportions
invested in each of the investments. His salary will grow at the same rate as inflation.
How much can Alex expect to have in his risky account at retirement?