ARE 142 FINALS – Flashcards
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T/F: If you are in a 25 percent tax bracket then every dollar of your adjusted gross income will be taxed at 25 percent
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False
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Which factor carries the most weight in your FICO scores?
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Payment History ( whether you have made late payments)
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Flexible spending formula
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Save income + Fica taxes
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save income formula
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tax bracket x income amount
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FICA tax rate
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7.65%
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real return formula
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real return = nominal return - inflation rate
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Finance charges (interest charges) formula
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APR/12 * average daily balance
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T/F: Normally, you can avoid repaying your Federally subsidized Student Loan by declaring Bankruptcy
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False
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For a new car such as a Honda Civic, about what price should you expect to pay?
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The dealer's invoice price
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T/F:The main difference between a defined-benefit plan and a defined-contribution retirement plan is the tax deduction for the defined-contribution plan
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False
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What strategy should you use to maximize your after-tax income in the future?
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Maximize the contribution to your Roth IRA and put the rest in a regular investment account with no tax advantages
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30 Year old S/B ratio
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80S/20B
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Life cycle funds
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try to tailor their holdings to the investor's individual age and risk tolerance.
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T/F: An employee's social security contributions are invested in a general fund account that will be made available for the employee at retirement
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False
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Which of the following statements is true regarding Social Security retirement benefits?
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It attempts to replace 42% of your average earnings Once you start collecting Social Security Benefits, your payments are adjusted for inflation Some people's benefits may be taxed.
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Married Social Security Benefits
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The one which larger benefits should be taken, and the other one should take half of the larger benefits.
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T/F: Life insurance agents receive a higher commission from selling a cash value policy than they do from selling a term policy
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True
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Is moral hazard more likely to be an issue with life insurance or auto insurance?
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Auto insurance
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Earnings multiple approach
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annuity PMT = (0.7 - 1 family member living + 0.04 for additional family members living) x Income of deceased use PV formula
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About how much does a 20 year term life insurance policy with a face value of $500,000 cost for a very healthy 30 year old male with average weight and height?
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$250 per year
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In California, what characteristics will affect the cost of your car insurance?
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Your driving record, the make and model of your car, where you live, and number of miles you drive per year.
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Renter's insurance policy from Allstate covers
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A stolen laptop from car, apartment (after paying the deductible). Medical bills of injured that your pet was liable for
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T/F: One way to lower the premiums you pay on your insurance is to have a higher deductible
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True
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Patient Protection and Afforadble Care Act
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Requires individuals to pay a fine if they do not health coverage. Allows children under age of 26 to be covered by their parent's plan. Requires insurance companies on the exchange sites to cover pre-existing medical conditions.
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T/F: With a PPO, it is much more expensive to go to out of network healthcare providers
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True
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PPO formula
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Pay deductible, split the coinsurance provision between insurance company and you.
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Estate tax liability on death
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No estate taxes owed ( assuming no money or gifts)
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future price formula
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future price = current price x (1+inflation rate) ^ years
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Why do Life Insurance Agents recommend cash value insurance policies for everyone?
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Because they pay a higher commission
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T/F: A key disadvantage of a flexible spending plan is that you may lose any money not spent
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True
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The benefits of an HMO are that
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less expensive than PPOs encourage a relationship with a primary care provider
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To determine your estate's net worth, you would
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subtract the amount of your estate's liabilities from the amount of your estate's assets
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T/F: Trusts are much more difficult to challenge in court than are wills which is one thing that makes them more attractive
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True
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Maximum amount of tax-free gift from estate
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14000
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Social Security is a system in which current workers pay taxes that are used to pay current retriees' benefits. How is Social Security funded?
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payroll taxes up to a salary cap
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How is the size of a person's Social Security retirement benefits determined?
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It depends on the number of credits earned in a person's lifetime, the average level of earning over a person's lifetime, the number of years a person has paid Social Security taxes.
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T/F: One of the best things about retirement is that retirees don't have to pay income taxes once they retire.
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False
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Relationship between various interest rates
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Interest rate < Bank's APR < Effective APR
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T/F:A person may have a 401k and a Roth IRA plan open at the same time
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True
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T/F: In the short run, investing in stocks outperforms most other investments
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False
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When it comes to actively managed mutual funds, Sethi believes that professional fund managers
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tend to underperform the market
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T/F: One way to lower the premiums you pay on your insurance is to have a lower deductible
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False
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point
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one percent of the amount financed with the mortgage
