Question 60 (0.8 points) Is it always best to pay down your debt as fast as possible? a) Yes, there are no exceptions. b) No, for example, you may have so much debt, at such high interest, that no matter how hard you try, even for the rest of your life, you will never pay it off. The balance will grow faster than you can pay it down, even if you live on nothing, because of the high amount owed and high interest rate. In this case, it is financially best to waste no further money, and start over as soon as possible with bankruptcy, and try to be smarter and better next time. c) No, for example, some debt is on very advantageous terms, like government student loans when you've qualified for public service loan forgiveness, so that effectively the interest is very low, and much of your balance will be forgiven anyway in ten years, sometimes less. In this case, you will be better off with regard to wealth generation paying off as little as is required, and putting the rest of your money into a relatively better return investment like the Wilshire 5000, or other highly diversified total stock market fund. d) This is, more or less, generally good advice, but there are certainly exceptions. e) a and b above. Of) b and c above. g) b, c, and d above. h) a, b, c, and d above. Question 63 (0.8 points) When we say that stocks have a very good risk-adjusted average return, we mean that: a) Although there is risk in investing in a well-diversified stock portfolio, even over the long run, that risk is not that high in exchange for the high average return. b) The average return is very good given the level of risk, making stocks the main long term investment. c) There is little or no risk, even in the short run. d) a and b above. e) a, b, and c above. f) None of the above. Question 64 (0.8 points) According to Professor Serlin, one of the most powerful things you can do for your family's financial security is to pay your mortgage down to zero, and become completely debt free, from the credit card to the car loans - everything. Debt is not sexy or savvy. Sometimes it's unavoidable, but less often than most people think. An example is buying a used car for cash instead of taking out a big loan to buy a new one (or two). The bottom line is you can really improve your family's financial security and decrease your stress in life by trying hard and smart to bring your debt to zero. This includes things like buying a less prestige-related and large home and vehicles, and being proud of instead the security you provide for your family. True False Question 65 (0.8 points) With regard to mortgages: a) Professor Serlin usually likes best the 15-year fixed. b) Professor Serlin usually likes best the 30-year variable. c) With the 15-year fixed mortgage, you own your home free and clear twice as fast as with the 30-year (assuming you don't make the grievous mistake of taking out home equity loans), yet the payments are not twice as high. Typically, they're only about 30-40% higher. This is due to a lower interest rate, and the math of exponential interest rate growth over time, which you truncate with 15 years instead of 30. And it is due to the fact that there are fixed costs in your monthly house payment that are the same whether your mortgage is 15 years or 30. These include property taxes and insurance. d) a and c above. e) b and c above. O f) None of the above. Question 67 (0.8 points) Professor Serlin believes that a key significance of the new Handle robot is: a) If a robot can do these kinds of things already, then we aren't far from robots doing the vast majority of unskilled labor, making a college degree from a well-respected university even much more important than it's ever been. b) Robots like these will only be important to the toy and entertainment industry. c) The robot failed to achieve even rudimentary mobility and balance. It will be a very long time before low-skilled jobs like those in the fast food and grocery industries are threatened. Od) None of the above
