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web.groovymark@gmail.com
- December 17, 2024
Question 41
Which of the following is true about umbrella liability insurance?
a) It replaces standard homeowner’s insurance
b) It covers liability losses beyond the limits of standard insurance policies
c) It covers only personal injury claims
d) It is required for all homeowners
Answer: b) It covers liability losses beyond the limits of standard insurance policies
Explanation: Umbrella liability insurance provides additional coverage above the limits of underlying policies such as homeowner’s or automobile insurance, offering protection from large claims.
Question 42
What is an “open-enrollment period” in health insurance?
a) A time period where anyone can enroll in health insurance without needing to prove income
b) A time period during which an individual can make changes to their health insurance coverage or switch plans
c) A period where health insurance companies increase premiums
d) The period during which pre-existing conditions are excluded from coverage
Answer: b) A time period during which an individual can make changes to their health insurance coverage or switch plans
Explanation: The open-enrollment period is the time when individuals can make changes to their health insurance plan or switch between different plans.
Question 43
What is the primary advantage of a Roth IRA over a traditional IRA?
a) Contributions are made with pre-tax money
b) Withdrawals are tax-free
c) You must start taking distributions at age 72
d) The contribution limit is higher
Answer: b) Withdrawals are tax-free
Explanation: A key advantage of a Roth IRA is that contributions are made with after-tax money, and withdrawals in retirement are tax-free, provided certain conditions are met.
Question 44
Which of the following is an advantage of the Employee Retirement Income Security Act (ERISA)?
a) It increases an employer’s ability to reduce retirement benefits
b) It sets minimum standards for retirement plans and requires proper reporting
c) It allows employers to withhold contributions during financial hardship
d) It eliminates taxes on retirement distributions
Answer: b) It sets minimum standards for retirement plans and requires proper reporting
Explanation: ERISA sets minimum standards to protect employees participating in retirement plans by requiring reporting, disclosure, and fiduciary responsibilities from employers.
Question 45
What is the maximum age at which required minimum distributions (RMDs) must begin from a qualified retirement account?
a) 60
b) 65
c) 72
d) 80
Answer: c) 72
Explanation: Required minimum distributions (RMDs) must begin by age 72 for most qualified retirement accounts, ensuring that individuals start withdrawing and paying taxes on their retirement savings.
Question 46
What is the primary purpose of the Fair Credit Reporting Act (FCRA)?
a) To prevent credit bureaus from collecting personal information
b) To allow consumers to access their credit scores for free
c) To ensure that credit reports contain only accurate and relevant information
d) To allow banks to determine interest rates for credit cards
Answer: c) To ensure that credit reports contain only accurate and relevant information
Explanation: The Fair Credit Reporting Act (FCRA) requires credit reports to contain accurate and relevant information and gives consumers the right to challenge errors in their credit reports.
Question 47
What does the term “vesting” ensure in the context of employer-sponsored retirement plans?
a) That employees receive their employer’s contributions after a certain period of time
b) That employees receive tax-free contributions
c) That employees receive higher interest rates on their retirement accounts
d) That employees can withdraw their entire retirement savings at any time
Answer: a) That employees receive their employer’s contributions after a certain period of time
Explanation: Vesting ensures that employees earn the right to keep the employer’s contributions to their retirement accounts, typically after meeting service requirements.
Question 48
Which of the following is an example of a fiduciary standard in financial advising?
a) A financial advisor recommends investments based on the employer’s best interests
b) A financial advisor recommends investments that generate the highest commissions
c) A financial advisor acts in the best interest of the client, even if it results in lower commissions
d) A financial advisor only recommends products from their own company
Answer: c) A financial advisor acts in the best interest of the client, even if it results in lower commissions
Explanation: The fiduciary standard requires financial advisors to act in the best interest of their clients, even if it means recommending products that generate lower commissions for the advisor.
Question 49
What does the term “risk premium” refer to in investing?
a) The difference between the expected return on a riskier investment and the risk-free return
b) The interest rate charged on a loan
c) The amount of insurance coverage an investor has
d) The amount of taxes owed on investment income
Answer: a) The difference between the expected return on a riskier investment and the risk-free return
Explanation: The risk premium is the additional return expected from an investment that carries higher risk, compared to a risk-free investment like a T-bill.
Question 50
What is the Consumer Price Index (CPI) used to measure?
a) The overall health of the stock market
b) The rate of unemployment in the country
c) The average change in prices paid by urban consumers for goods and services over time
d) The total output of the economy
Answer: c) The average change in prices paid by urban consumers for goods and services over time
Explanation: The Consumer Price Index (CPI) measures inflation by tracking changes in the price of a fixed basket of goods and services commonly purchased by households.
