Yarareceivesacallstatingthattherehasbeensomeunusualactivityinhercreditreport andthattheywouldliketohelpYaraverifytheaccount. What should Yara do next in the given situation?
• Yarashouldprovidethecallerwithhercreditcarddetailsandrequestthecaller toemailheracopyoftheirfindings.
• Yara should refrain from providing her account details and freeze her credit.
• YarashoulddiscloseonlyherSocialSecuritynumbertothecallerandaskthem toverifytheaccountdetails.
• Yarashouldstopusinghercreditanddebitcardsuntilsheobtainsmore information.
RATIONALE
Ifthereseemstobeunusualactivityinyourcreditreport,youshouldfirstperformacredit freeze.Freezingyourcreditsealsyourcreditreportssothatnonewaccountscanbe openedunlessyouunfreezetheaccountusingapersonalidentificationnumber(PIN).Also, youshouldrefrainfromprovidingpersonaldetailsoveracall.
CONCEPT
IdentityTheft
2
In which of the following scenarios is the individual paying an insurance deductible?
• Sampays20%ofhisinsurancecostsandhisemployerpaystheremaining80%.
• Raul pays $3,500 to repair damages to his house before his insurance begins to cover the costs.
• Alinapays$200towardherfireinsuranceeverymonth.
• Simonpaysastandardrateof$25everytimehehasadoctor'sappointment, whilehisinsurancepaystheremainingamount.
RATIONALE
Adeductibleistheamountthatyoumustpayonaclaimbeforeinsurancecomesintoplay.
CONCEPT
WhatIsInsurance?
3
Rachel,28,asoftwareengineer,decidestooptforatraditionalIRAinsteadofaRothIRA forherretirementplan.Herplanincludes75%stockwhichishigh risk,high reward.
Is this a productive choice of plans for Rachel? Why or why not?
This study was downloaded by 100000852952242 from CourseHero.com on 09-22-2022 15:43:46 GMT -05:00
• ItisproductivebecauseRachelcanwithdrawmoneyfromtheaccountatany timewithoutpenalty.
• ItisproductivebecauseRachel'swithdrawalsfromtheaccountafterretirement willbetaxexempt.
• ItisnotproductivebecauseRachelcannotclaimtaxdeductionsonher contributionstowardherretirementaccount.
• It is not productive because as Rachel's earnings grow over time, she'll likely reach a higher marginal tax rate during retirement.
RATIONALE
Rachelisyoungandwillmostlikelyhaveahighermarginaltaxrateatthetimeofher retirementasherinvestmentsgrow.Therefore,investinginatraditionalIRAwouldmean thatRachelwouldpaymuchmoreintaxesthanshewouldifshehadchosenaRothIRAas herretirementplan.
CONCEPT
4
Which of the following actions could result in an individual becoming a victim of a financial fraud?
• Trusting a stranger and transferring money to them over the internet
• Sendingmoneytoarelativewholivesoverseasusingonlineservices
• Refrainingfrompayinganyprocessingfeesrequiredtogainpossessionofa prize
• Lookingintothedetailsofaninvestmentschemebeforeinvestingmoney
RATIONALE
Therearethousandsoffinancialfrauds,rip offs,andscamsoperatinginthemarketplace today.Tostaysafeandkeepmoneyworkingforyou,youshouldneversendmoney overseastosomeoneyoudonotknow.Youshouldneverbuysomethingfromanunfamiliar personorbusinessoverthephoneorinternet.Youshouldalsoneverpayaprocessingfee toreceiveaprizeorinvestinsomethingthatyoudonotunderstand.
CONCEPT
FinancialFraud
5
Theadsforaninsurancecompanyshowhowapersoncouldpotentiallypayahigherprice formedicaltreatmentsfromtheirownpocketthantheywouldpayiftheyhadinsurance. Which of the following are the insurance companies using to build their customer base?
• Statusquobias by 100000852952242 from CourseHero.com on 09-22-2022 15:43:46 GMT -05:00
• Loss aversion
• Optimismbias
• Hyperbolicdiscounting
RATIONALE
Lossaversereferstoageneraldislikeoflosses.Insurancecompaniesusuallyusethetactic oflossaversiontobuildtheircustomerbase.Thethoughtofhavingtopaymorerather thanaloweramountencouragesindividualstooptforinsurance.
CONCEPT
YourFinancialWell Being
6
Rachelhaschosenapointofservice(POS)planthroughheremployerforherhealth insuranceneeds.
How does Rachel benefit from the POS plan?
• Shecangettreatmentatanyhospitalwithoutpriorpermissionandobtain insurancecoverage.
• Herhealthinsurancecoveragecontinuesindefinitelyshouldsheloseherjob.
• She will have lower out of pocket expenses if she uses the services within the network.
• Shewillhavethesameout of pocketexpensesifshereceivestreatmentin networkhospitalsorinnon networkhospitals.
RATIONALE
IfyouhaveaPOSplan,youwillhavelowerout of pocketexpensesifyouusetheservices ofnetworkproviders.Togooutsidethenetwork,youmustfirstreceiveareferralfroma networkprovidertoreceivecoverage.
CONCEPT
HealthInsurance
7
Aninvestmentschemepromisestoincreasetheamountinvestedby10timesoveraperiod offiveyears. What should an investor do before investing in such a scheme?
• The investor should look into the terms and conditions of the investment scheme.
• Theinvestorshouldcheckwithandonlytrusttheownerofthescheme.
• Theinvestorshouldsolelydependonthereviewsprovidedbytheprevious investorsofthescheme.
• Theinvestorshoulddecidebasedontheinvestment'sexposuretomarketrisk.
RATIONALE by 100000852952242 from CourseHero.com on 09-22-2022 15:43:46 GMT -05:00
Aninvestorcannotaffordtobecomplacentabouthisorhermoneyorinvestments.Itis importanttotakestepstobeawareofpossiblefrauds,misrepresentations,andconsumer rip offs.Aninvestorshouldalwaysbeskepticalofunrealisticpromises,neverrelysolelyon reputationorword of mouthreferrals,andverifydetailsofinvestmentproposals.
CONCEPT
ProtectingYourInvestments
8
Which of the following statements is true of a testamentary trust?
• Itisestablishedwhilethegrantorisstillalive.
• It is established through a grantor's will.
• Itisrevocable.
• Thegrantorofthetrustisalsothetrustee.
RATIONALE
Atestamentarytrustisestablishedafterthedeathofthegrantorthroughaperson’swill. Alltestamentarytrustsareirrevocable.
CONCEPT
PropertyOwnershipandTrusts
9
Riausesherproblemsolvingskillsanddecidestopayfortherepairsaroundthehouseout ofherownpocketinsteadoffilingforaninsuranceclaim. Which of the following statements is most likely the reason behind Ria's decision to pay for repairs herself?
• Claiming insurance for repairs will increase her insurance premium, which Ria cannot afford to pay.
• ClaiminginsuranceforrepairswillincreasetheamountofdeductiblethatRia owestowardthepolicy.
• Bypayingfortherepairs,Ria'screditscorewillimprove,whichinturnwill decreaseherinsurancepremium.
• Bypayingfortherepairs,theamountofcoverageRiareceiveswillincrease underthepolicy.
RATIONALE
Strongproblemsolvingskillscanhelpyoudetermineifmakingaclaimisawisedecision. Youcancontactyourinsurancecarriertohelpyouunderstandifitmightbeabetter financialchoicetopayout of pocket.Yourinsurancecompanywilltrackhowmanyclaims youmakeagainstyourpolicy.Ifyouhaveahighnumberofclaims,yourpolicypremium willincrease.Thefilingofmoreclaimsalsobringsdownthecreditscoreofpolicyholders. -05:00
Which of the following expenses is covered by a split limit personal automobile policy (PAP)?
• Thecosttorepairdamagetotheinsuredvehiclecausedbyanaturaldisaster
• The cost to repair damage to someone else's property caused by the policyholder
• Thecosttorepairanydamagescausedtotheinsuredvehicle
• Aportionofthemonthlypaymentsforleasedautomobiles
RATIONALE
Asplitlimitisatypeofpersonalautomobileliabilityinsuranceinwhichthesplitlimits describethelevelofcoverageinthepolicy.Itreferstothefunctionsofthepolicy:paying formedicalandphysicaldamagewhenpolicyholdersareatfaultinanaccident.
CONCEPT
AutoInsurance
11
Which of the following people is likely to have the highest required retirement savings rate, if each plans to retire at age 65?
• Vanessa,whoearns$33,000ayearandstartssavingforretirementatage28
• George, who earns $50,000 a year and starts saving for retirement at age 45
• Celina,whoearns$44,000ayearandstartssavingforretirementatage36
• Bernard,whoearns$15,000ayearandstartssavingforretirementatage20
RATIONALE
Savingsareaccumulatedoveryourworkinglifeandeventuallydistributedduringyour retirementyears.Thelaterapersonbeginssavingforretirement,thehighertherequired savingsrateinordertoreachtheirretirementgoals.
CONCEPT
PlanningforRetirement
12
In which of the following scenarios should the individual opt for a financial counselor rather than a financial planner to be most productive?
• Aishwaryawantstoensurethatshehasenoughsavedforretirement.
• Dre is in financial difficulties and needs to clear his credit card dues as early as possible.
• Karenisconsideringoptionstosaveforherchildren'seducation. 100000852952242 from CourseHero.com on 09-22-2022 15:43:46 GMT -05:00
• Ashleywantstoexpandhercookingbusinesstoseveraldifferentstates.
RATIONALE
Financialcounselingismosteffectiveinhelpingpeoplerespondtoshort termcrisesand challenges.Ontheotherhand,financialplanningisaproactiveprocessthatseeksto addresslong-termissuesandchallengeslongbeforetheybecomeanimmediateissue.
CONCEPT
FinancialAdvisors
13
Jamesisa60 year oldretiredveteranwhorecentlysufferedabrokenhipandneedsskilled homecare.Insteadoffilingaclaimonhislong-termcareinsurance,hechosetousemoney fromhissavingsandextendtheeliminationperiodonhisinsurance. What is one outcome of James' decision?
• HewillqualifyforMedicaid.
• The cost of his insurance premium will decrease.
• Hisinsurancepayoutwillincrease.
• Hisbenefitperiodwilldecrease.
RATIONALE
Aneliminationperiodisthewaitingphasebetweenthetimetheinsuredindividual qualifiesforbenefitsandwhentheinsurancecarrierbeginsprovidingbenefits.Onewayto reducelong termcareinsurancepremiumsistoextendtheeliminationperiodforaslong aspossible.
CONCEPT
Long TermCareInsurance 14
How does a limited power of attorney (POA) differ from a durable power of attorney (POA)?
• AlimitedPOAcomesintoeffectafterthemakerbecomesincapacitated,whereas thedurablePOAterminatesoncethemakerbecomesincapacitated.
• AlimitedPOAauthorizesanagenttomakeemergencymedicaldecisions, whereasadurablePOAdoesnotauthorizetheagenttomakemedicaldecisions.
• A limited POA terminates when the maker becomes incapacitated, whereas the durable POA remains effective even if the maker becomes incapacitated.
• AlimitedPOAremainsvaliduntilthemaker'sdeath,whereasadurablePOAis validonlyforashortspecifiedtime.
RATIONALE CourseHero.com on 09-22-2022 15:43:46 GMT -05:00
AdurablePOAprovidesspecificpowerstotheagentandremainsinforcethroughoutthe durationspelledoutinthedocument,regardlessofanydisabilityorincapacitationthatthe persondraftingitmightendure.AlimitedPOAendswhensomeeventhappens,suchas becomingincapacitatedorwhenmedicalassistanceisrequired.
Which of the following should be included in an individual's will?
• Thewillshouldcontaintheconditionsthatshouldbefulfilledbythe beneficiariestoobtainaccesstotheproperty.
• Thewillshouldprovidedetailsabouthowthepropertycanbeusedbythe beneficiary.
• Thewillshouldlisttheconditionsunderwhichthepropertycanbetakenback fromthebeneficiary.
• The will should appoint an executor who has the power and directions to dispose of the property.
RATIONALE
Awillshouldnameanexecutororpersonalrepresentativeandprovideguidelines regardingthatperson’spowers.Abequestisanirrevocableandvoluntarytransferof propertytoanotherperson,afterdeath,throughawill.Sinceabequestismadeafterthe giver'sdeath,thepropertyisnotcontrolledbythegiver.
Which of the following is true of long-term disability insurance?
• Thepersonmustbeover65yearsofagetobeeligible.
• Most policies extend up to age 65.
• Policiesreplacesalaryforthree,six,or12months.
• Itonlypaysbenefitsiftheinjurywasincurredonthejob.
RATIONALE
Long termdisabilityinsuranceusuallykicksinafteryoucannotworkforsixto12months. Mostpoliciesextendfromafewyearsupuntilage65(atage65,youcanthenenrollin Medicare).Higherpremiumsareassociatedwithincreasedincomesanddurationof coverage. 15:43:46 GMT -05:00
Colehaszerosavingsasmostofhisearningsareusedtopayforallhismonthlyexpenses. Hehaspermanentlifeinsuranceandpaysa$350premiumeverymonth. Which of the following is a feature of permanent life insurance that could also benefit Cole's financial situation?
• InCole'spolicy,thecostofthepremiums,althoughhighinthebeginning, decreasesastheyearsprogress.
• Theinterestgeneratedbytheinsurance'scashreserveispaidtoColeevery month.
• Cole'shealthisalsoinsuredunderthistypeofpolicy,anditreduceshis expensesonhismedicalbills.
• In this policy, a portion of the premium is stored as cash reserves that can be withdrawn or borrowed by Cole.
RATIONALE
Cash valueinsuranceisalsotermedpermanentinsurance.Acash valuepolicyoften appealstoindividualswhoneedtoforcethemselvestosavemoney.Itispossibletoborrow thecashvaluewithoutacreditcheck. CourseHero.com on 09-22-2022 15:43:46 GMT -05:00