Question

Q1. Which of the following will likely increase the premium of long-term care insurance?

Select one:

a. Choosing to receive benefits for a limited period

b. Having a co-insurance provision

c. Waiting until you are retired to obtain the insurance

d. Having a longer waiting period before the policy goes into effect

Question 2

The disadvantage of leasing a vehicle is

Select one:

a. the consideration of the resale value at the end of the lease.

b. there is no equity in the car.

c. the responsibility for maintenance costs.

d. the cost of finding a buyer for the car at the termination of the lease.

Question 3

Which of the following is not a cash outflow?

Select one:

a. Telephone bill

b. Rent

c. Car payment

d. Salary

Question 4

Which of the following is true about management expense ratios (MERs)?

Select one:

a. You need to subtract the MER from the posted return to figure out performance.

b. All types of mutual finds have similar MERs.

c. MERs only include manager and sales expenses.

d. Mutual funds with lower MERs tend to outperform those with higher.

Q5.

You wish to own stock while keeping your risk as low as possible. Which of the following actions would accomplish this goal?

Select one:

a. Purchasing U.S. Treasury securities

b. Purchasing shares of Exxon and GM

c. Purchasing a stock mutual fund

d. Purchasing shares of Exxon and GM on margin

Answer 1

Answer to Q1: Option C - Waiting until you are retired to obtain long term care insurance. All other options will reduce the premium.

Answer to Q2: Option B - there is no equity in the car. All other options are actually the benefit of leasing.

Answer to Q3: Option D - Salary is not a cash outflow its a cash inflow.

Answer to Q4: Option B - All types of mutual funds have similar MER's. MER's is subtracted daily to post return and therefore, option A is incorrect. Option C is incorrect as MER's includes not only manager and sales expense but also administrative expenses of the fund. Option D is incorrect because lower MER does not guarantee a good performance.

Answer to Q5: Option C - Purchasing a stock mutual fund. Purchasing the stock on margin is risky as you have to pay interest on the margin money. Owning directly shares of company would not provide diversification and therefore, will not lower the risk. US treasury securities not considered as wish is to own stock.