Multiple-Choice

1. A factor that affects the cost of a life insurance policy is

a) the seasons.

b) federal laws.

c) state laws.

d) the mortality rate.

e) local custom.

2. A financial contract written by an insurance company to provide you with a regular monthly income for as long as you live is called

a) whole life insurance.

b) term life insurance.

c) modified life insurance.

d) an annuity.

e) single-premium insurance.

3. A prime reason for buying an annuity is to

a) save money for college education.

b) start a new business.

c) accumulate funds to invest in stocks.

d) give you retirement income for the rest of your life.

e) get rich quick.

4. A beneficiary is a person who

a) acts as a trustee of your insurance policy.

b) is a guardian of your children.

c) acts on your behalf.

d) is designated to receive life insurance proceeds.

e) takes your money and runs.

5. Typical examples of uses of life insurance proceeds are

a) paying off a home mortgage.

b) endowment to children.

c) making charitable bequests.

d) paying estate taxes.

e) all of the above are typical examples.

TRUE/FALSE

6. The amount of the premium (cost) is determined by the insurers risk the higher the

risk, the higher the premium.

7. Added protection can be acquired with an umbrella policy which is a supplement

attached to a basic personal liability homeowners policy.

8. A Term life insurance policy insures ones life for a certain period of time, such as

ten, fifteen or twenty years.

9. Long-term care insurance provides coverage for the care, if someone should become

in need of assistance with daily living activities either at home, in an assisted

living facility, or a nursing home.

10. A benefit for investing in an annuity is income for life.

11. A traditional IRA is tax deductible the year it is contributed.

12. Tax exempt and tax deferred mean the same thing.

13. Every homeowner must have homeowners insurance.

14. A family member could be an Executor of a Trust.

15. Trusts are prepared for tax purposes only.

16. Trusts are only revocable.

17. Quick source of cash is to liquidate savings.

18. A savings account with daily compounding will have higher earnings than an account with quarterly compounding.

19. A CD account is a checking account that earns interest.

20. The price-earning (PE) ratio is the price of a share of stock divided by the corporations earnings per share of stock.

21. Dollar-cost averaging involves consistently investing in a certain amount of money at regular intervals.

22. A family of funds exists when one investment company manages a group of mutual funds.

23. A stock represents debt to the issuing company.

24. A managed fund is managed by the stockholder.

25. Index mutual funds have lower fees and lower management costs.