Liberty University BUSI352 quiz 2 complete solutions correct answers key
Question 1 Utilizing investment assets to gross pay benchmarks, which of the following individuals is likely on target with their investment assets?
Question 2 Your new client, Kerri, age 35, came into your office today. She provided you with the following information for the year. Income $100,000 Taxes $18,000 Rent $14,000 Living Expenses $40,000 Credit Card Debt $12,000 Savings $5,000 Student Loan Payments $5,000 Car Payment $6,000 After receiving this information, you created a pie chart to visually depict where her income was spent. Utilizing targeted benchmarks, which of the following statements are you most likely to make during you next meeting?
Question 3 Which of the following statements concerning the valuation of assets on the balance sheet is correct?
Question 4 Curtis is 60 years old. He plans to retire in five years. He has amassed a net worth of $1,500,000 which he expects will sustain him during retirement. He is divorced with two adult independent children. Which phase of the life cycle is Curtis most likely in?
Question 5 Jack and Jill are 41 years old and plan on retiring at age 65 and expect to live until age 95. They currently earn $200,000 and expect to need $100,000 in retirement. They also expect that Social Security will provide $24,000 of benefits in today’s dollars at age 65. They are saving $20,000 each in their 401(k) plans and IRAs. Their son, Parker, is expected to go to college in 10 years. They want to save for Parker’s college education, which they expect will cost $25,000 in today’s dollars, and they are willing to fund 4 years of college. They were told that college costs are increasing at 6% per year, while general inflation is 3%. They currently have $500,000 saved in total, and they are averaging an 8% rate of return and expect to continue to earn the same return over time. Based on this information, what should they do?
Question 6 Lori is an assistant to a patent lawyer and earns $40,000. She pays $500 per month on her mortgage, her homeowners insurance is $2,000 per year, her taxes are $2,000, her utilities are $5,000 per year and she pays $4,000 in credit card bills each year. Her housing ratio 1 is equal to 37.5%.
Question 7 Mark and Caren are 36 years old; they plan on retiring at age 62 and expect to live until age 95. They currently earn $250,000 and expect to need $200,000 in retirement. They also expect that Social Security will provide $40,000 of benefits in today’s dollars at age 62. They are saving $15,000 each in their 401(k) plans and just had a baby boy they named Albert Rufus or AR for short. They want to save for AR’s college education, which they expect will cost $20,000 in today’s dollars, and they are willing to fund 4 years of college. They were told that college costs are increasing at 7% per year, while general inflation is 3%. They currently have $150,000 saved in each of their 401(k) plans, and they are averaging a 9% rate of return and expect to continue to earn the same return over time. Based on this information, what should they do?
Question 8 Utilizing the three panel approach, which of the following would be evaluated in Panel 1 – Risk Management?
Question 9 CJ bought the following assets this year. Which of these purchases would be considered “bad debt?”
Question 10 Robin met with you recently to make some changes to her insurance needs. You have made several recommendations. Which of these recommendations will have a positive cash flow impact from an insurance perspective?
Question 11 Your client, Tom, asked you to prepare his financial statements. He believes that his wife is the root of all of their financial problems because of her spending habits. His wife, on the other hand, believes that most of their money goes to pay routine expenses like, house, auto, etc. Which financial statement will help them resolve this disagreement?
Question 12 Craig’s financial planner is preparing his balance sheet. Which of the following would be considered an “investment asset?”
Question 13 Adriana is an analyst at High Tech Hedge (HTH) where she earns $150,000 base salary with a bonus of $50,000. HTH sponsors a profitsharing plan with a 401(k) feature and provides for a dollar for dollar match up to 3% of compensation. Her account had $10,000 of capital gains this year and dividends of $5,000. She defers $15,000 into the 401(k) plan. The employer made no additional contribution to the profit sharing plan. What is her savings rate this year?
Question 14 David, 33 years of age, and Kristina, 34 years of age, are married with no children. They anticipate having children within the next five years. David and Kristina each have a graduate degree and student loans. They both have good jobs and earn about $110,000 together. They have mortgage debt of $190,000 on their home that is valued at $210,000. They have one car that they share that is not yet paid for, and they anticipate buying a second car in the next year. They have no credit card debt. Which of the following is a likely current goal of the couple?
Question 15 A client, Marie, age 35, came into a financial planner’s office today. She provides the planner with the following information for the upcoming year: Income $100,000 Principal and Interest payments on home mortgage $14,000 Homeowners insurance $1,000 Property taxes $5,000 Living Expenses $40,000 Credit Card Debt Payments $12,000 Savings $5,000 Student Loan Payments $5,000 Car Payment $6,000 When considering the targeted benchmarks, which of the following statements is the planner most likely to make during the next meeting?
Lisa Cooper recently came to your office for her second appointment after receiving her engagement letter. What is the next step?
Your client, Jed, engaged you to help him with his financial situation. You sold a life insurance policy- what part of planning are you in?
Which part of financial planning do you prepare financial statements?
Reverend Lola Pack, came in to your office. How do you greet her?
Steve Stein, a CFP... which of his actions are inappropriate?
Which of the following is least likely to be obtained from your client?
The most important quality a CPF brings to the relationship is:
Which credential is the oldest and best known?
Which of the following is considered to be a counseling paradigm or school of thought?
Which are consistent with the Humanistic paradigm?
Which of the following is NOT a premise in traditional finance?
Which of the following are important in nonverbal communication and behavior?
Which of the following is not true is communicating with a client?
Which of the following are components are passive listening?
Which of the following are NOT components of active listening?
Which of the following theories or equations are used in traditional finance?
Which of the following investors would apply in the realm of behavioral finance?
Which of the following is NOT a basic premise in behavioral finance?
Which of the following are NOT heuristics or cognitive biases discussed?
Which is true?
Which schools of thought for counseling could an advisor combine?
Which of the following choices are false as to open or closed questions?
Which of the following are true about "why " questions?
1: tempting and may help understand the client's motives, the why question may be ill-advised because it could have limited benefit for the client
2: a why question could place the client in a position of having to justify what was done, and that could put the client in a defensive posture
Which of the following is the best choice for behavioral finance?
You have been working with Brenda for 3 months. You have developed a mission statement, goals and objective and now you're constructing a plan. Which approach to financial planning are you using?
During your work with your new client, you created picture representations of how he spends his money. Which approach are you using?
Rachel is 30 and single. She is healthy, has no children and works earning $40k. All of the following are likely insurance coverage needs, except?
David, 33, and Kristine, 34 are married. Which of the following is a likely goal?
Paul & Lucy Martin (65)- which of the following is their most important need/goal?
Curtis is 60. Which phase of the life cycle is he in?
Your new client, Kari, age 35 came into today. What are you likely to say?
Darrin and Kathi are 44. What statement are you likely to make during your next meeting?
Which of the following is true?
Ronnie is 55, divorced with 2 kids. Which is true?
Natalie & Brian visited your office today. They are in their early 30's with 2 kids and one on the way. Which is true?
Utilizing investment assets to gross pay benchmarks, which of the following individuals is likely on target with their investment assets?
You currently manage Cody's investment portfolio. Which is correct?
Utilizing the three panel approach, which of the following would be evaluated in Panel 1- Risk management?
Robin met with you recently to make changes to her insurance needs. Which of these recommendations will have a positive cash flow impact from an insurance perspective?
CJ bought the following assets this year- which would be considered "bad debt"?
Adriana is an analyst at High Tech Hedge, where she earns $150k with a bonus of $50k. What is her savings rate this year?
Candice/Janice earns $85k working as an admin assistant in NY. What is her savings rate?
Mark and Caren are 36 years old and plan on retiring at age 62. The currently earn $250,000 a year and expect to need $200,000 in retirement. What should they do?
Jack and Jill are 41 and plan on retiring at 65 and living until 95. What should they do?
Your client, Tom, asked you to prepare his financial statements. Him & his wife have a disagreement- which statement will help them resolve this?
Your client, Meg, asked you several questions about her balance sheet. Which is true?
Craig's financial planner is preparing his balance sheet. Which would not be considered "cash and cash equivalent"?
Craig's financial planner is preparing his balance sheet. Which would be considered an investment asset?
Which of the following statements concerning the valuation of assets on the balance sheet is correct?
Which of the following would not generally be considered a short-term liability?
Jay purchased a new home for $100,000. He put $20,000 down and financed $80,000 balance. What is the impact on his net worth?
Nathan & Evan (brothers) are joint property owners. Nathan owns 60, Evan owns 40. How is this property owned?
Which of the following property ownership regimes has right of survivorship feature?
Which of the following statements concerning income and expenses listed on the income statement is correct?
A financial planner is currently preparing a client's cash flow statements. Which of the following would be classified as a financing activity?
A client, Marie, age 35 came in today. When considering the targeted benchmarks, which of the following statements is the planner most likely to make?
Roget and Julie are married. Roger is a police officer and earns $50k. What is their total savings rate?
While meeting with your new client about retirement needs, you have made several assumptions. You engage is the process of changing some to see the impact on the plan. What is this process called?
Steve and his wife Christine recently opened an investment account with the intention of saving enough to purchase a house. How much do they need to put in to reach their goal?
Jordan invested $12,500 to help her friend Dylan start his own cooking school 5 years ago. What is the amount of the check Dylan has for Jordan today?
Colleen's grandfather set up a savings account for her with a $25,000 gift when she was first bone. To date, how much has accumulated?
DRI Enterprises needs to have a lump-sum deposit of $200,000 for the purchase of a surety bond in 6 months. How much will they need to deposit?
Claire just won the lottery and has been told that she can either accept annual payments at the beginning of each year for 20 years of a lump sum. What amount would the lump-sum be?
Mark and Sonya would like to have the opportunity to buy a home in the next five years. What amount can you tell them that they will have for a down payment when they are ready?
Alberto saved enough tip money from working at the casino to place $125,500 in an investment account. How many months will Alberto have this income coming to him?
David purchased stock 15 years ago for $325.75 and sold the stock today for $2,500. What is the average annual compound rate of return that David realized on this stock?
Kelly has asked her accountant, Darla, to determine whether her company, Gaggin Industries, should purchase a new machine for $155,000 that can be sold for $125,000 in 5 years. What will Darla tell her?
Donna plans to save for a vacation to Costa Rica in 18 months. She will be putting money into a short-term investment account. How much will she have to put away each month?
Liam bought a piece of equipment for $10,000. He paid $3,000 for upgrades during year 1... what is his IRR?
With interest rates at 4.875% for a 30-year fixed mortgage, Dan, age 48, plans to buy a house for $825,000. What will his monthly mortgage payment be for principal and interest?
Bobby bought a house for $275,000 by putting 15% down and borrowing the balance. How much interest will he pay this year?
Bobby bought a house for $275,000 by putting 15% down and borrowing the balance. How much principal did he pay in the current year?
Cindy won the california lottery. She can take single lump-sum payments or payments for 25 years. What rate of return would Cindy need to break even?
Danny buys a house for $500,000 putting 20% down. His loan is for 30 months. How much is his normal payment?
Frank and Stephanie have an 18 year old son who is going to college this year. What lump-sum amount must they deposit today to pay for his education?
In 5 years, Joe wants to buy a boat that costs $75,000 in today's dollars. What will his serial payment at the end of the second year be?
Which of the following statements concerning educational tax credits and savings opportunities is correct?
Mitch and Jennifer have AGI of $125,000 and have not planned for children's education. Which is the most appropriate recommendation?
Tan & Chia are contemplating making a contribution to their grandchildren's education fund. They are both retired. Which technique would you recommend?
Al of the following statements are true, except?
Which of the following types of aid are not needs based?
The following type of financial aid is rewarded to students with a low EFC, and funds are guaranteed to be available if a student qualifies.
Roshan is a freshman at Florida State University where tuition is $4,000. His sister is a graduate student at another university where tuition is $25,000. What is the maximum tax credit his parents can take?
What is one of the primary differences between a Coverdell ESA and a 529 savings plan?
Reba has a son, Chad, a freshman at Tulane with tuition of $30,000. Her AGI is $45,000. Which of the following would you recommend?
Peter wants to save some money for his daughter Gwen's education. How much must he save at the end of each year?
Kim and Nick are planning to save for their daughter Chloe's college education. How much must they save at the end of each year, if they want to make their last savings payment at the beginning her her first year of college?
What is the PV of all college education for 5 children if the cost today is $17,000 per year?
What is the PV of the cost of college education for 4 children if the current cost is $25,000?
Using previous information, how much do the parents have to save annually at year-end through the education of the youngest child?
Lanie is a single Mom who has 3 children. How much must she save?
George has been in academia his whole career. How much should he set aside today to fund his goal for his grandchildren if he can earn a rate of 9%?
CJ is 40 and wants to retire in 25 years. How much does Edward need to save each year?
Which of the following expenditures will most likely increase during retirement?
Margaret, a 35 year old client, who earns $45,000 a year. Calculate wage-replacement ratio.
Danny would like to determine his financial needs during retirement. All of the following are expenditures he might eliminate except:
Which expenditure would you expect to decrease during Susie's retirement?
Tiffany, a self-employed dentist, currently earns $100,000 each year. What do you expect her wage replacement ratio to be at retirement?
Which factors may affect an individual's retirement plan?
Contributing $1,500 to his retirement fund at the end of each year beginning at age 18 through 50, how much does Juan have in his retirement account?
When Steve and Roslyn retire together, they wish to receive $40,000 additional income at the beginning of each year. How much will they need to have in their fund at the time of retirement?
Tyrone, Age 25, expects to retire at age 60. He expects to live until 90. How much must he save to meet his goal?
Roy & Barbara are near retirement. They have a joint life expectancy of 25 years in retirement. Calculate the total amount that needs to be in place when the begin retirement.
Cathy and her twin sister Carley, both age 25, each believe they have the superior savings plan. Which is correct?
Shelley saves $3,000 per year for 10 years. Kevin saves $3,000 a year between ages 36-65. What is the value of their accounts at 65?
Kwame and Omarosa. What is the monthly benefit amount they will receive during retirement?
Charlie would like to retire in 11 years at age 66. If he currently earns $150,000 how much does he need at retirement?
Bowie, age 52, has come to you for help in planning for retirement. How much will Bowie need to have accumulated to provide for retirement lifestyle?
Which of the following statements is false?
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