Name: __________________________ Date: _____________
CH 18 Practice Exam - FIN 2100 -



1.
Which one(s) of the following is(are) misconceptions about retirement planning?
A.
My expenses will drop when I retire.
B.
My retirement will last only 15 years.
C.
I can depend on Social Security income.
D.
I can depend on my company pension.
E.
All of the above are misconceptions.


2.
Which one of the following is a true statement about retirement planning?
A.
Saving just a little bit won't help.
B.
My pension benefits will increase to keep pace with inflation.
C.
I should update my retirement plan periodically.
D.
My employer's health insurance plan will cover my medical expenses.
E.
Medicare will cover my medical expenses.


3.
Which one(s) of the following is(are) true statement(s) about retirement planning?
A.
You can expect to spend about 16 to 25 years in retirement.
B.
It's never too early to begin planning for retirement.
C.
Don't let your 45th birthday roll by without a comprehensive retirement plan.
D.
Retirement planning is both emotional and financial.
E.
All of the above are true statements.


4.
Which statement is correct about retirement planning?
A.
Social Security will cover most of your expenses.
B.
Private pension will cover most of your expenses.
C.
Most retirees don't worry about inflation in future years.
D.
You can expect to spend about 16 to 25 years in retirement.


5.
How many years can you expect to spend in retirement?
A.
1 to 5 years
B.
6 to 10 years
C.
10 to 12 years
D.
12 to 16 years
E.
from 16 to 25 years


6.
Be certain you don't let your ____________ birthday roll by without a comprehensive retirement plan.
A.
25th
B.
35th
C.
45th
D.
55th
E.
65th


7.
At age 65, what is the average life expectancy of a man?
A.
4 years
B.
7 years
C.
9 years
D.
12 years
E.
14 years


8.
At age 65, what is the average life expectancy of a woman?
A.
19 years
B.
16 years
C.
13 years
D.
11 years
E.
9 years


9.
Your first step in retirement planning is to
A.
estimate your spending needs.
B.
analyze your current assets and liabilities.
C.
adjust your spending needs for inflation.
D.
evaluate your planned retirement income.
E.
determine if you'll have to work during retirement.


10.
The people who are in the best position to save are
A.
teenagers.
B.
young adults in their 20s.
C.
people in their 30s.
D.
middle-aged.
E.
elderly.


11.
Some retirement planning experts suggest that you start retirement planning while you are
A.
in school.
B.
in college.
C.
in graduate school.
D.
middle-aged.
E.
still employed.


12.
Why is financial planning for retirement vitally important?
A.
You can expect to live in retirement for many years.
B.
Social Security and private pension may be insufficient to cover the cost of living.
C.
Inflation may diminish the purchasing power of your retirement savings.
D.
All of the above factors are vitally important.


13.
You can determine your net worth by
A.
subtracting your assets from your liabilities.
B.
subtracting the value of your home from the mortgage balance.
C.
adding your liabilities and assets.
D.
subtracting your liabilities from your assets.


14.
When a lender uses your house as collateral to buy an annuity for you from a life insurance company, it is called
A.
an obverse annuity mortgage.
B.
a reverse mortgage annuity.
C.
mortgage life insurance.
D.
a fixed annuity with level premium.
E.
whole life insurance.


15.
You can get a reverse mortgage annuity if
A.
you are at least 55 years old.
B.
you are five years from retirement.
C.
your mortgage is largely or completely paid off.
D.
you are recently retired.


16.
Reverse annuity mortgages are
A.
possible when your mortgage is largely or completely paid off.
B.
available all over the United States.
C.
available on the West Coast.
D.
more popular in the East than in the West.
E.
regulated by local laws.


17.
When you are nearing retirement, it is a good idea to
A.
increase the face value of your life insurance.
B.
increase your property insurance coverage.
C.
keep your life insurance intact.
D.
decrease the face value of your life insurance.
E.
swap your old life insurance policy with a new one.


18.
During a divorce, division of pensions generally depends on the
A.
length of the divorce period.
B.
husband's generosity.
C.
length of marriage.
D.
judge's decision.


19.
In a marriage that lasts more than 15 years, there's generally a ____________ split of the marital assets.
A.
10-90
B.
30-70
C.
40-60
D.
50-50
E.
60-40


20.
Which statement is correct regarding retirement living expenses?
A.
It is impossible to estimate your spending needs.
B.
Your spending patterns will probably not change.
C.
You'll use a smaller amount of money for food, housing, and medical care.
D.
The exact amount of money you'll need is impossible to predict.
E.
The exact amount of money you'll need can be accurately predicted.


21.
Which one of the following expenditures for retirees is likely to increase?
A.
health insurance
B.
federal income taxes
C.
clothing expenses
D.
work-related expenses
E.
state income taxes


22.
Which one of the following expenditures for retirees is likely to increase?
A.
state income taxes
B.
federal income taxes
C.
medical expenses
D.
housing expenses
E.
clothing expenses


23.
Which one of the following expenditures for retirees is likely to decrease?
A.
clothing expenses
B.
insurance expenses
C.
medical expenses
D.
expenses for leisure activities
E.
gifts and contributions


24.
Which one of the following expenditures for retirees is likely to decrease?
A.
food and medical care
B.
insurance
C.
expenses for leisure activities
D.
medical expenses
E.
federal income taxes


25.
Which housing alternative is preferred by most persons who are approaching retirement?
A.
housesharing
B.
present home
C.
accessory apartment
D.
ECHO unit
E.
boardinghouse/rooming house


26.
Which type of housing is designed to allow people to stay in their homes as they grow older?
A.
accessory apartment
B.
ECHO unit
C.
rooming house
D.
universal design
E.
professional companionship arrangement


27.
Many people make the move into retirement housing without
A.
considering seasonal factors.
B.
experiencing many obstacles.
C.
a spouse or companion.
D.
doing enough research.
E.
the proper accommodations.


28.
A(n) ____________ is appealing because it allows people to stay in their homes as they grow older and frail.
A.
accessory apartment
B.
caretaker arrangement
C.
universal design home
D.
commercial rental
E.
congregate housing


29.
Generally, retrofitting an existing house, as opposed to building universal design homes from scratch is that it is
A.
more expensive.
B.
less expensive.
C.
more accommodating.
D.
less accommodating.
E.
more sensible.


30.
Which one(s) of the following is(are) tips from retirement specialists on how to uncover hidden taxes and other costs of a retirement area?
A.
Contact the local Chamber of Commerce to get an economic profile.
B.
Contact the state's tax department to find out state, sales, and inheritance taxes.
C.
Call a local CPA to find out which taxes are rising.
D.
Rent for a while instead of buying immediately.
E.
All of the above are correct.


31.
Which housing alternative might you consider if you want to be more self-sufficient?
A.
universal design home
B.
housesharing
C.
accessory apartment
D.
boardinghouse
E.
rooming house


32.
Which one of the following is the most widely used source of retirement income?
A.
IRAs
B.
Keogh plans
C.
Social Security
D.
company pension plans
E.
union pension plans


33.
Which employer pension plan has an individual account for each employee?
A.
undefined-contribution plan
B.
defined-contribution plan
C.
defined-benefit plan
D.
undefined-benefit plan


34.
Stock bonus plans, profit sharing plans, and 401(k) pension plans are examples of a(n)
A.
undefined-contribution plan.
B.
defined-contribution plan.
C.
defined-benefit plan.
D.
undefined-benefit plan.


35.
Which employer retirement plan specifies the benefits promised to the employee at the normal retirement age?
A.
defined-contribution plan
B.
undefined-contribution plan
C.
undefined-benefit plan
D.
defined-benefit plan


36.
Which federal law sets minimum standards for pension plans in private industry and protects more than 50 million workers?
A.
Employee Retirement Income Security Act
B.
Tax Reform Act
C.
Early Retirement Act
D.
Income Protection and Guarantee Act
E.
Civil Rights Act


37.
What are the two most popular personal retirement plans?
A.
Keogh account and Social Security
B.
Social Security and Roth IRA Plus
C.
Personal retirement plans and individual retirement accounts
D.
401(k) and Social Security
E.
403(b) and 401(k)


38.
Possible sources of income for many retirees include
A.
Social Security.
B.
other public pension plans.
C.
employer pension plans.
D.
personal retirement plans and annuities.
E.
All are possible sources of income.


39.
Which retirement plan is specifically designed for self-employed individuals and their employees?
A.
SEP-IRA
B.
IRA
C.
defined-contribution plan
D.
Keogh plan
E.
defined-benefit plan


40.
What type of annuity is purchased by people of retirement age?
A.
deferred annuity
B.
immediate annuity
C.
single-premium deferred annuity
D.
flexible-premium deferred annuity


41.
An annuity in which you receive an income for the rest of your life, but no payments are made to anyone after your death is called
A.
straight life annuity.
B.
life annuity with installment certain.
C.
installment refund annuity.
D.
impure annuity.


42.
Which type of annuity gives more income per dollar of outlay than any other type?
A.
installment refund annuity
B.
life annuity with installment certain
C.
straight life annuity
D.
impure annuity


43.
The first step in stretching your retirement income is to make sure that you are
A.
contributing to Social Security.
B.
covered by an employer pension plan.
C.
contributing to a 401(k) plan.
D.
saving funds in an IRA.
E.
receiving all of the income to which you are entitled.


44.
To stretch your income during retirement, you could
A.
skip leisure activities.
B.
cut your food expenditures.
C.
cancel your life and property insurance.
D.
use your skills and time instead of your money.


45.
Regarding your federal income tax liability during retirement,
A.
you don't have to worry about them any more.
B.
you have to file income taxes in April of every year.
C.
you may need to file income tax returns twice every year.
D.
you may need to file a quarterly estimated income tax return.
E.
you may have to file a tax return every two years.


46.
One of the following is not an advantage of the Social Security retirement income:
A.
earned income partially offsets benefits.
B.
forced savings.
C.
portable from job to job.
D.
cost shared with employer.
E.
inflation-adjusted survivorship rights.


CH 18 Practice Exam - FIN 2100 -

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