Multiple Choice
Identify the choice that best completes the statement or
answers the question.
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1.
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Which investment type allows for indirect investing?
a. | A mutual fund. | c. | A SEP account. | b. | A certificate of deposit. | d. | A Keogh
account. |
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2.
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Many retirement accounts are portable. What does it mean to the owner of the
retirement account?
a. | It means that you can invest your money in anything you like. | c. | It means that you
can cash in your retirement fund for a vacation. | b. | It means that you can take the account with you
when you leave a job. | d. | It
means that you can withdraw all of the interest your account has
earned. |
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3.
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If a homeowner who is single sells his/her home and has a gain of $300,000. What
portion of that gain would be tax exempt?
a. | The entire gain would be tax exempt. | c. | $250,000 of the gain would be tax
exempt. | b. | $45,000 of the gain would be tax exempt. | d. | None of the gain would be tax
exempt. |
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4.
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What are the conditions that a married couple must meet to have their gain from
selling a home be tax exempt?
a. | They need to have a gain of less than $500,000 and lived in the house for at least 2
years. | c. | They need to have a gain of less than 15 percent and lived in the house for at least
5 years. | b. | They need to have a gain of less than $250,000 and lived in the house for at least 1
year. | d. | They need to have a
gain of less $400,000 and lived in the house for at least 3 years. |
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5.
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When a person purchases a mutual funds and selects the type of funds to be
included in that mutual fund, what have they exercised?
a. | They have exercised indirect investing. | c. | They have exercised market
timing. | b. | They have exercised a zero coupon bond. | d. | They have exercised asset
allocation. |
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6.
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What is the purpose of an IRA (individual retirement account)?
a. | It is an account that allows for money to be pooled together for
purchases. | c. | It is an account that allows for money to be pledged for CDS. | b. | It is an account
that allows for money to be saved for travel. | d. | It is an account that allows for money to grow
and be used in retirement. |
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7.
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Which type of retirement account is used by self-employed professionals?
a. | SEP | c. | Roth | b. | Keogh | d. | 403(b) |
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8.
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Which of the following is NOT true about a Traditional IRA?
a. | The contributions to this account are taxed. | c. | The withdrawals from this account
must begin by age 70 1/2. | b. | The earnings are not taxed when
withdrawn. | d. | The
contributions are pretax to this account. |
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9.
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Which of the following is NOT true about a Roth IRA?
a. | The contributions for this account are taxed. | c. | The account allows an investor to
select investments. | b. | The earnings for this account are not
taxed. | d. | The withdrawals from
this account have a set minimum. |
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10.
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Which of the following is NOT true about a 401(k) plan?
a. | The plan is for employees of profit-seeking businesses. | c. | The plan allows for
investment choices. | b. | The plan limits the amount of
contributions. | d. | There
aren’t any early withdrawal penalties. |
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11.
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Which retirement plan would be used for employees of a nonprofit organization,
such as teachers, nurses and ministers?
a. | 401(k) | c. | 403 (b) | b. | Roth IRA | d. | Keogh |
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12.
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What does it mean when an individual does a rollover with his/her
retirement account from a previous employer?
a. | He/she is going to close the account and pay a tax penalty. | c. | He/she is going to
give the money to charity and nonprofits. | b. | He/she is going to spend the cash in the
account and forfeit the interest. | d. | He/she is going to move his/her account to another qualified
account. |
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13.
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What is a defined-benefit plan?
a. | A tax-deferred retirement plan for employees of nonprofit
organizations. | c. | A tax-deferred retirement plan for employees of profit-seeking
businesses. | b. | An employer-sponsored retirement plan for retired workers. | d. | A pre-tax retirement plan for an individual.
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14.
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What is a pension plan?
a. | It is a retirement plan that is funded solely by an employer and its income is based
on an employees last wages and years of service. | c. | It is a retirement plan for
self-employed professionals that allows up to $195,000 contribution. | b. | It is a retirement
plan for small business owners that allows for contributions up to 25% of a person’s
wages. | d. | It is a pretax
retirement plan for government employees with a contribution limit for the
employee. |
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Matching
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a. | 401(k) plan | f. | mutual fund | b. | 403(b) plan | g. | rollover | c. | asset
allocation | h. | Roth
IRA | d. | indirect investing | i. | spousal IRA | e. | Keogh account | j. | traditional
IRA
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15.
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A tax-deferred retirement plan funded by employees of profit-seeking
businesses.
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16.
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An individual retirement account in which contributions are taxed but earning
are not.
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17.
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The process of moving a retirement account balance to another qualified account
without incurring a tax penalty.
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18.
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A professionally managed group of investments bought using a pool of money from
many investors.
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19.
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A tax-deferred retirement plan for self-employed professionals.
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20.
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Buying shares of a mutual fund instead of buying individual shares of stock in
various companies.
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21.
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An individual retirement account set up to benefit a spouse who has no
income.
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22.
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An individual retirement account that allows individuals to contribute pretax
income to an account that grows tax-deferred.
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23.
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Choosing a combination of funds within a mutual fund company.
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24.
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A tax-deferred retirement plan funded by employees of government and nonprofit
organizations.
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