question

The basic purpose of insurance is to protect you from the results of accidental losses.

answer

true

question

Deciding to sell a motorcycle would be an example of risk sharing.

answer

false

question

Spreading risk among a large number of people is a major principle of insurance.

answer

true

question

Risk avoidance means asking an insurance company to take over the risk for a small payment (the premium).

answer

false

question

Underwriters can predict whether or not you will suffer a loss this year.

answer

false

question

Generally, the primary purpose of life insurance is to provide a tax-advantaged investment plan.

answer

false

question

The multiple of earnings approach to evaluating life insurance needs is simplistic but can be unreliable.

answer

true

question

The needs approach can determine your life insurance requirements with a single step.

answer

false

question

The life insurance needs of beneficiaries are secondary since most proceeds are paid to living policyholders.

answer

false

question

Life insurance needs change dramatically over one's lifetime.

answer

true

question

The basic purpose of insurance is to

answer

protect you from losses.

question

Insurance is a tool that can lessen ____ risk.

answer

economic

question

From the standpoint of the person buying insurance, the central purpose of insurance should be:

answer

to transfer risks of serious losses.

question

Which of the following types of policies is most likely to allow you to switch investments?

answer

variable life

question

Which of the following forms of life insurance requires the lowest premium per dollar of initial death benefits?

answer

term life

question

Which of the following companies does NOT rate the financial strength of life insurance companies?

answer

Welch's

question

If a life insurance policy pays dividends, it is called:

answer

participating

question

The probability of a loss occurring can be reduced by

answer

loss prevention

question

Underwriting is

answer

the determination of which exposures to insure.

question

The underwriting function is designed to be sure that premiums are based on

answer

the chance of loss

question

Millions of Americans are not covered by health insurance.

answer

true

question

Advances in medical technology, prescriptions drugs and treatments have substantially reduced the costs health care in recent decades.

answer

false

question

You would have a better chance to choose your own doctor with a PPO rather than an HMO.

answer

true

question

Health Maintenance Organizations (HMOs) provide pre-paid health care to participants.

answer

true

question

Large employers are less likely to offer health insurance to their employees than small employers.

answer

false

question

If you lose your job, COBRA permits you to continue your group health insurance coverage permanently as long as you pay the premium within 36 months of the termination of employment.

answer

false

question

Hospital insurance will pay daily room and board charges up to a specified number of days and reimbursement for ancillary charges up to a specified dollar amount.

answer

true

question

Hospital insurance policies will pay for all hospital expenditures most of the time.

answer

false

question

Hospital expense coverage is adequate for long-term or catastrophic medical needs of most people.

answer

false

question

Disability occurs only when someone is completely incapable of returning to work.

answer

false

question

The fastest growing segment of the health care industry is

answer

managed care plans

question

Jackie pays $20 every time she visits her doctor. She is covered by a(n)

answer

could be any of these except indemnity plan

question

The "O" in COBRA stands for which of the following words?

answer

omnibus

question

Most employees select ____ for their health insurance needs.

answer

preferred provider organizations

question

Medicare is a government-sponsored health care plan composed of Part A and Part B. Part B covers

answer

doctor's bills

question

Hospital indemnity policies would make payment for

answer

per day hospital charges

question

Surgical expenses now generally are reimbursed on the basis of

answer

usual, reasonable and customary expenses.

question

Miscellaneous sources of health care coverage include

answer

all of the above

question

Terms of payment under your health insurance are governed by

answer

all of the above

question

Your right to continue a health insurance policy if you choose is known as

answer

renewablility

question

Property insurance is meant to protect property owners from two basic types of exposures, physical loss of property and loss through depreciation

answer

false

question

A peril is a cause of loss.

answer

true

question

Property inventories are important to identify insurance needs and to substantiate claims.

answer

true

question

A written inventory of personal property is required by insurance companies for property insured under the unscheduled general contents coverage.

answer

false

question

Floods are specifically defined in homeowner's policies

answer

true

question

Floods are specifically defined in homeowner's policies

answer

true

question

The HO-3 form is a good policy for first-time buyer owners because it is a named perils policy.

answer

false

question

As a tenant, you would purchase a HO-3 policy.

answer

false

question

While you were away on your summer vacation, raccoons took up residence in your attic. They did $5,000 damage. Your H0-2 policy will cover this loss.

answer

false

question

Covered liability perils do not include claims for libel, slander, or character defamation.

answer

true

question

All property insurance companies require you to show the following when making a claim:

answer

all of the above

question

The basic principles of property and liability insurance pertain to:

answer

all of the above

question

Your standard HO policy will not include coverage for damage done by

answer

flood

question

Which Homeowners' policy is best suited for a resident of a rented apartment to cover that person's personal property?

answer

HO-4

question

Negligence results when a person

answer

fails to act as a "reasonable person."

question

The principle of ____ states that an insured should not be compensated by an insurance company in an amount exceeding the economic loss.

answer

indemnity

question

The condominium owner would choose a ____ policy.

answer

HO-6

question

Homeowner's property insurance does not provide protection on the

answer

vacant lot

question

Common types of property that are subject to internal limits on homeowner's policies include

answer

jewelry

question

Liability coverage provides payment to the

answer

non-family members involved in the accident

question

Investing is considered a short-term activity that involves the buying and selling of securities.

answer

false

question

Investing and speculating are two entirely different activities.

answer

true

question

Mutual funds provide professional management and diversification that individual investors - especially those with limited resources - can rarely obtain on their own.

answer

true

question

The term "investment' refers to money placed in some medium where value and level of return are totally unpredictable

answer

false

question

A statement specifying how investment capital will be invested in order to reach targeted goals is called a marketing plan.

answer

false

question

Your goals tend to set the tone for your investment program, and they play a major role in determining how conservative or aggressive you're likely to be in making investment decisions.

answer

true

question

Listed securities are traded on organized exchanges.

answer

true

question

Preferred stock combines the fixed income features of bonds with the same price appreciation potential as common stocks.

answer

false

question

A retail stockbroker buys and sells securities on behalf of clients.

answer

true

question

NASDAQ is now the second largest securities market in the U.S.

answer

true

question

____ is a short-term investment activity.

answer

Speculating in common stock

question

Which of the following is not a securities market

answer

capital market

question

During a bull market

answer

prices go up

question

You have been offered an opportunity to buy shares of a diversified collection of securities. You will be investing in

answer

mutual funds

question

Securities sold in the primary markets are usually handled by a(n)

answer

investment banker

question

The SEC requires corporations to issue ____ describing the firm and the security issue it wishes to sell.

answer

a prospectus

question

The ____ is not an organized security exchange

answer

Over-The-Counter Exchange

question

Unlisted securities are traded on the

answer

OTC market

question

Instructing your broker to buy or sell a stock at a particular price is a

answer

limit order

question

A collection of investments is called

answer

a portfolio

question

Market risk considers the possibility that the firm may fail.

answer

false

question

Changes in the value of securities due to social, political, or economic factors are referred to as market risk.

answer

true

question

Event risk occurs when something substantial happens to a company that has an immediate impact on its financial condition.

answer

true

question

The returns you expect from securities are income and growth.

answer

true

question

Compound interest is a very important concept when evaluating the return on an investment you plan to hold for a long time.

answer

true

question

A lower expected return will mean a higher risk will have to be accepted.

answer

false

question

All securities involve risk of some kind.

answer

true

question

Bondholders will receive interest payments after the stockholders receive dividends.

answer

false

question

You received a cash dividend from your stock investment this year. This is taxable income.

answer

true

question

A stocks beta is an indication of its relationship to the general market.

answer

true

question

In which of the following type of investment is the most liquidity risk?

answer

land

question

Which of the following types of risk affect owners of fixed income securities more than owners of equity securities

answer

purchasing power risk

question

Companies with a great deal of long-term debt would rate fairly high in ____ risk.

answer

financial

question

Bond prices and current interest rates are ____ related.

answer

inversely

question

Corporate ownership is evidenced by

answer

common stock

question

The ____ of a stock reflects stockholder confidence.

answer

price/earning ratio

question

Market risk is often measured using

answer

beta

question

Only the strongest, most stable and safe-return companies can be called

answer

blue chips stocks

question

A bond selling below par value is selling at

answer

a discount

question

Bonds issued by subdivisions of the U.S. government but not guaranteed by the government are called

answer

agency bonds.

question

Closed-ended mutual funds are guaranteed, they cannot lose value.

answer

false

question

Investors select and purchase securities held within mutual funds.

answer

false

question

Exchange traded mutual funds are known as closed-end mutual funds

answer

true

question

Exchange traded funds can create new shares to meet demand.

answer

true

question

Exchange-traded funds have characteristics of both closed-end and open-end funds.

answer

true

question

Mutual funds may be classified by the types of securities they purchase.

answer

true

question

Growth funds are mutual funds designed for short term investing.

answer

false

question

Aggressive growth funds typically buy stocks with high PE ratios and stocks with volatile price fluctuations.

answer

true

question

Conversion privileges allow investors to exchange one fund's shares for that of another, as long as the funds are in the same fund family.

answer

true

question

An investor with a small amount of money should stick to using loaded-funds instead of no-load funds.

answer

false

question

Investors tend to use mutual funds for which of the following reasons

answer

all of the above

question

A(n) ____ sells fund shares, either directly to the public or through certain authorized dealers

answer

distributor

question

A(n) ____ actually runs the portfolio and makes the buy and sell decisions

answer

money manager

question

What type of REIT is most attractive to income oriented investors?

answer

mortgage

question

Redeeming your mutual fund shares might result in a charge called

answer

back end load

question

The fund whose main objective is growth is known as a(n) ____ fund.

answer

none of these

question

The fund whose main objective is to simply match the market known as a(n) ____ fund

answer

none of these

question

A(n) ____ fund is quite speculative.

answer

aggressive growth

question

Asset allocation funds invest money in

answer

all of the above

question

Which of the following is not a source of mutual fund returns

answer

changes in IDB.

question

Most people are too conservative when investing their retirement funds.

answer

true

question

It really makes little difference whether you start retirement savings at age 25 or at age 45.

answer

false

question

Starting later in life and being too conservative when investing are both common retirement planning mistakes.

answer

true

question

Having an accurate current income and expenditures statement would be very useful when calculating retirement needs.

answer

true

question

Self-employed workers pay twice as much for Social Security coverage compared to employed workers.

answer

true

question

More than 50 percent of all wage earners and salaried workers today are covered by some type of employer-sponsored retirement or profit-sharing plan.

answer

true

question

With a non-contributory pension plan, the employer makes no financial contribution to the account.

answer

false

question

The current trend in retirement plans is towards contributory plans.

answer

true

question

A company using cliff vesting would legally have to give you vesting rights if you worked at a company 3 or more years.

answer

true

question

Payments from a defined benefits plan will be determined by the investment performance of the retirement funds.

answer

false

question

The need for retirement planning is increased by the uncertainties of

answer

all of these.

question

The major financial benefit of beginning your retirement funding early is related to

answer

compound interest

question

The biggest unknown factor that retirees have when estimating their retirement needs and income is

answer

inflation

question

The major mistake(s) people make in retirement planning is(are)

answer

saving too little

question

Dr. Johnson is surgeon at University Hospital. She will pay ____ taxes on all of her $170,000 salary.

answer

Medicare

question

Fully insured status requires 40 ____ of employment covered by social security.

answer

quarters

question

Annual increases in the social security benefit check are related to the

answer

current cost of living

question

Social security benefits for retirees less than 65 years of age may be reduced if

answer

wages and salaries exceed certain limits

question

Earnings limitations on social security benefits cease at age

answer

65

question

If you are gradually vested in a retirement plan over a 4-year period, the plan is a

answer

graded plan

question

The main objective of estate planning is to save attorney's fees.

answer

false

question

Estate planning requires knowledge of wills, trusts, and investments.

answer

false

question

A potential estate planning problem is improper distribution of assets.

answer

true

question

Insufficient capital can cause problems paying estate taxes.

answer

true

question

Custodial accounts are used to protect the property of minor children.

answer

true

question

The intestate process is federally mandated, and is similar from state to state.

answer

false

question

The appointment clause affirms that the will in question was really made out by the deceased.

answer

false

question

A trust is a means of transferring property.

answer

true

question

The unlimited marital deduction requires the filing of a separate tax return.

answer

false

question

The gift tax law allows a person to give gifts up to $10,000 tax free.

answer

false

question

Estate planning is closely related to

answer

retirement and insurance planning

question

The goal of estate planning is to:

answer

all of the above

question

Estate planning us designed to:

answer

all of the above

question

____ would be a first-level death-related cost.

answer

funeral expenses

question

Your real and personal property that can be transferred according to the terms of a will is called your

answer

probate estate

question

When writing a will, you should seek the professional services of

answer

attorneys

question

A "trustee" is also called the

answer

none of the above

question

Which of the following qualities are essential in a trustee

answer

Possess sound business knowledge and judgment

question

A trust designed to provide liquidity for an estate without increasing the size of the estate is a(n) ____.

answer

irrevocable life insurance

question

The unified rate schedule applies to federal ____ taxes.

answer

gift and estate

PFIN FINAL – Flashcards

Unlock all answers in this set

Haven't found what you were looking for?

Search for samples, answers to your questions and flashcards