BUSI 352 midterm exam complete solutions correct answers key

Liberty University BUSI 352 midterm exam complete solutions correct answers key

Two versions

Version A

Question 1 Which of the following statements is/are correct? 1: The emergency fund ratio metric should be 3 to 6 months of non­discretionary cash flows. 2: When calculating the savings rate for a family, any contributions to retirement made by the employer should be included.

Question 2 For valuation purposes, balance sheet liabilities should be recorded at their:

Question 3 Behavioral investors have been characterized as those who tend to choose portfolios by evaluation and decisions based on expected wealth, desire for security, aspiration levels, and probabilities of aspiration levels.

Question 4 Pat and Marie have the following expenses and account balances. Pat’s annual 401(k) plan contribution $16,500 Pat’s annual salary $100,000 Current liabilities $24,000 Housing costs (P&I&T&I) monthly $2,167 Cash & Cash equivalents $18,000 Monthly nondiscretionary cash flows $6,000 Monthly debt payments other than housing $500 Pat’s employer matches $1 for $1 up to 3% of Pat’s salary in his 401(k) plan. Their savings rate is:

Question 5 Jill would like to plan for her son's college education. She would like for her son, who was born today, to attend college for 5 years, beginning at age 18. Tuition is currently $12,000 per year, and tuition inflation is 6%. Jill can earn an after­tax rate of return of 8%. How much must Jill save at the end of each year if she wants to make the last payment at the beginning of her son's first year of college?

Question 6 Tracy and Brett are married with the following financial situation. Current assets $9,243 Current liabilities $6,921 Monthly nondiscretionary expenses $4,693 Annual combined income $70,000 Annual debt payments (excluding monthly housing costs) $22,084 What is Tracy and Brett’s emergency fund ratio in months?

Question 7 Mrs. Escovido has come to you for advice on financing her son’s college education at a state university. Even though her income exceeds $200,000, she has not saved enough for his college expenses. You advise her that her best opportunity to acquire education funds would be through:

Question 8 Pat and Marie have the following expenses and account balances. Pat’s annual 401(k) plan contribution $16,500 Pat’s annual salary $100,000 Current liabilities $24,000 Housing costs (P&I and T&I) monthly $2,167 Cash & Cash equivalents $18,000 Monthly nondiscretionary cash flows $6,000 Monthly debt payments other than housing $500 Pat’s employer matches $1 for $1 up to 3% of Pat’s salary in his 401(k) plan. Based on the information above, calculate Pat and Marie’s housing ratio 1 in numbers.

Question 9 A rational investor would be considered to be indifferent or uncaring if a profit is realized by a dividend declared by a company versus if the same profit is realized by selling the stock at a gain.

Question 10 Traditional Finance slowed down market analysis and hampered investors and those participating in the market at a time when some may have been intimidated by or felt ignorant of available market information or financial data.

Question 11 Which of the following is NOT true with respect to heuristics in the realm of financial advice?

Question 12 The balance sheet equation is:

Question 13 Which of the following is probably the start of a closed question?

Question 14 The present value approach takes each short, intermediate, and long­term goal, determines each individual present value, and sums these present values together. Then, it reduces them by current resources (investment assets and cash and cash equivalents) and treats the net PV as an obligation to be retired over the remaining work life expectancy at a discount rate equal to the expected portfolio rate of return.

Question 15 Which of the following is most likely not classified as an investment amount on the Statement of Financial Position?

Question 16 Pat and Marie have the following expenses and account balances. Pat’s annual 401(k) plan contribution $16,500 Pat’s annual salary $100,000 Current liabilities $24,000 Housing costs (P&I&T&I) monthly $2,167 Cash & Cash equivalents $18,000 Monthly nondiscretionary cash flows $6,000 Monthly debt payments other than housing $500 Pat’s employer matches $1 for $1 up to 3% of Pat’s salary in his 401(k) plan. Based on the information above, calculate Pat and Marie’s housing ratio 2.

Question 17 Which of the following approaches provides the planner and client with a methodology in order to reach goals by covering risks and short term and long term savings and investments?

Question 18 If your financial planning client uses phrases like “see what I mean” or “imagine that,” your client’s learning style is most likely…

Question 19 Betty earns $100,000 working as a part­time lawyer in New Orleans. The company provides a matching contribution in the 401(k) plan of 50% up to a maximum contribution of 4% of compensation. Her 401(k) plan account had $60,000 in it at the beginning of the year. She contributed $15,000 to the plan this year, and the employer made the matching contribution before year­end. The ending balance of the account is $100,000. What is her return on investments this year?

Question 20 Joe has a financial plan prepared by a professional financial planner. What is the order of steps that the planner took? 1: Establish client goals 2: Gather data 3: Define relationship 4: Develop and present alternatives 5: Analyze client’s financial status 6: Implement chosen alternative recommendations 7: Monitor plan

Question 21 One of the most reported interruptions or disruptions in passive listening is when:

Question 22 If your financial planning client talks about situations, expresses emotions verbally, enjoys listening (but cannot wait to talk), and tends to move lips or sub­vocalize when reading, then, their learning style is most likely …

Question 23 The first two steps in the financial planning process are:

Question 24 According to the cash flow approach, each of the following recommendations should have a positive cash flow impact except:

Question 25 Which of the following statements is/are correct? 1: The Statement of Cash Flows includes monthly recurring cash flows from income and expenses. 2: The Statement of Net Worth explains changes to net worth between two Statements of Financial Position that are not reported elsewhere on other financial statements.

Question 26 Which of the following is not one of the five general categories that make up a client’s internal data?

Question 27 Which of the following factors is critical in determining the appropriate benchmark for the investment assets to gross pay ratio?

Question 28 Which of the following is/are true regarding the ownership of life insurance? 1: A policy can only be issued to the insured. 2: Generally, assigning a policy requires proof that the insured is still “insurable,” meaning still in good health. 3: Only a person with an insurable interest, generally a relative, a business associate, or lender, can be named as beneficiary. 4: The owner of a life insurance policy can assign (transfer) the policy to whomever he or she chooses, even if the assignee has no insurable interest.

Question 29 Holly’s salary is $100,000 per year. She contributes 12% of her salary to her 401(k) plan. Her employer contributes 5% of her salary to a profit share plan. She also contributes $2,500 per year to an IRA. What is Holly’s savings rate?

Question 30 Fred and Louise are 40 years old, plan on retiring at age 67, and expect to live until age 95. Fred currently earns $150,000, and they expect to need $100,000 in retirement. Louise is a stay­at­home mom. They also expect that Social Security will provide $30,000 of benefits in today’s dollars at age 67. Fred has been saving $17,000 annually in his 401(k) plan. Their daughter, Ann, was just born and is expected to go to college in 18 years. They want to save for Ann’s college education, which they expect will cost $20,000 in today’s dollars per year, and they are willing to fund 5 years of college. They were told that college costs are increasing at 7% per year, while general inflation is 3%. They currently have $400,000 saved in total, and they are averaging a 7% rate of return and expect to continue to earn the same return over time. Based on this information, what should they do?

Question 31 The rational investor is deemed to know that when a stock value goes down, even though a sale is not made, the value is lost.

Question 32 All of the following statements concerning educational funding are correct EXCEPT:

Question 33 The account balance method of education funding uses real dollars and the annuity due funding plan to calculate the present value of the cost of education.

Question 34 Pat and Marie have the following expenses and account balances. Pat’s annual 401(k) plan contribution $16,500 Pat’s annual salary $100,000 Current liabilities $24,000 Housing costs (P&I and T&I) monthly $2,167 Cash & Cash equivalents $18,000 Monthly nondiscretionary cash flows $6,000 Monthly debt payments other than housing $500 Pat’s employer matches $1 for $1 up to 3% of Pat’s salary in his 401(k) plan. Based on the information above, calculate Pat and Marie’s current ratio in numbers.

Question 35 Jeff recently purchased a house for $350,000. He made a down payment of $50,000 and financed the balance over 30 years at 7%. If Jeff's first payment is due on March 1st of the current year, how much interest expense will Jeff pay in the current year?

Question 36 William owns 1 share of Park stock. He purchased the stock three years ago for $17.50. The stock is currently trading for $40 per share. The stock has paid the following dividends over the past three years. Year 1: $1.00 Year 2: $2.00 Year 3: $3.00 What is the compounded rate of return (IRR) that Williams has earned on this investment?

Question 37 Which of the following approaches provide the planner and client with a methodology in order to reach goals by covering risks, short term and long term savings, and investments?

Question 38 Cindy invests $20,000 in a limited partnership today. At the end of years 1 and 5, she will receive the after­tax cash flows shown below. The partnership will be liquidated at the end of the fifth year. Cindy is in the 35% federal income bracket. Year 0 ­$20,000 CF0 Year 1 0 CF1 Year 2 $4,000 CF2 Year 3 $6,000 CF3 Year 4 $8,000 CF4 Year 5 $10,000 CF5 The after­tax IRR on this investment is:

Question 39 Which of the following ratios is not used in a typical financial statement approach?

Question 40 A savings rate between 10 and 13 percent of one’s gross pay is almost always sufficient to meet most financial goals.

Question 41 Financial counselors or advisors must establish and maintain the advisor­client relationship based on their ability to:

Question 42 Which of the following are heuristics or cognitive biases about which an advisor should be knowledgeable?

Question 43 Which of the following statements, if any, is/are correct? 1: Prepaid Tuition plans are plans whereby the prepayment of college tuition is at current tuition prices for future enrollment. 2: A disadvantage of a QTP (qualified tuition plan) is that the owner/contributor must relinquish control of the account and share control of the funds with the student/beneficiary.

Question 44 Which of the following best completes this sentence: There has been a movement in recent times for the financial industry to be more in touch with _____________ due to their effect and persuasiveness in financial matters. 1: Capital Asset pricing 2: Beta 3: Psychology and sociology

Question 45 Which of the following is inconsistent with the Disposition Effect?

Question 46 All of the following statements concerning educational funding are correct EXCEPT:

Question 47 A client in the asset accumulation phase is characterized by which of the following?

Question 48 Tracy and Brett are married with the following financial situation. Current assets $9,243 Current liabilities $6,921 Monthly nondiscretionary expenses $4,693 Annual combined income $70,000 Annual debt payments (excluding monthly housing costs) $22,084 What is Tracy and Brett’s current ratio?

Question 49 The benefits that accrue to a client from using a financial professional to prepare a financial plan include all of the following except:

Question 50 Which of the following does not describe “anchoring?”

Question 51 Seven years ago, Stan purchased 10 shares of an aggressive growth mutual fund at $90 per share for a total of $900. Today, he sold all 10 shares for $4,500. What was his average annual rate of return on this investment before tax?

Question 52 Beth earns $100,000 working as a part­time lawyer in New Orleans. The company provides a matching contribution to the 401(k) plan of 50% of her contribution up to a maximum contribution of 4% of compensation. Her 401(k) plan account had $60,000 in it at the beginning of the year. She contributed $15,000 to the plan this year, and the employer made the matching contribution before year­end. The ending balance of the account is $100,000. What is her savings rate this year?

Question 53 Samantha has the following transactions: She purchases $5,000 worth of a mutual fund with cash from her savings account. She spends $6,000 on a vacation with cash from her money market account She spends $10,000 on new furniture and uses her credit card to make the purchase. What is the combined impact of these transactions on her net worth?

Question 54 During which step of the financial planning process would a planner prepare and analyze financial statements?

Question 55 Which of the following are premises in Traditional Finance?

Question 56 Risk tolerance and asset allocation are a separate issue from retirement planning and are not required to be integrated into a retirement plan.

Question 57 Which of the following is not necessary to identify a client’s life cycle position?

Question 58 According to the cash flow approach, all of the following recommendations may have a positive impact to cash flow except:

Question 59 Which of the following is true with respect to the gambler’s fallacy?

Question 60 A client in the asset accumulation phase is characterized by:

Question 61 Communication is the key factor in the financial advisor­client relationship.

Question 62 Holly would like to plan for her daughter's college education. She would like for her daughter, who was born today, to attend college for 4 years beginning at age 18. Tuition is currently $10,000 per year, and tuition inflation is 7%. Holly can earn an after­tax rate of return of 10%. How much must Holly save at the end of each year if she wants to make the last payment at the beginning of her daughter's first year of college?

Question 63 Which of the following is NOT consistent with the Humanistic Paradigm?

Question 64 Which one of the following statements in wrong?

Question 65 Mike Smith has the following financial data. Investment Assets at Year End $475,000 Investment Assets at Beginning of the Year $392,000 Savings Made During the Year by Mike $27,000 Employer Match to Mike’s 401(k) Plan $5,000 Total Assets on Ending Statement of Financial Position $700,000 Gross Income on Income Statement $100,000 Total Assets on Beginning Statement of Financial Position $600,000 Total Liabilities at Beginning of the Year $200,000 Total Liabilities at Year End $180,000 What was Mike’s Return on Net Worth for the year?

Question 66 Proper and practical communication skills and techniques in financial counseling can aid the financial planning advisor to understand:

Question 67 Which one of the following statements is wrong?

Question 68 Financial advisors must respect the client’s position, hold the client’s interest above that of the advisor, and try to communicate effectively to realize the client’s goals and achieve the desired result.

Question 69 Which of the following statements is/are correct? 1: Net worth represents the personal equity that the individual has in his assets and can never be less than zero. 2: If Lisa purchased a car using 30% cash and 70% debt, her net worth would increase by 30%.

Question 70 Your client invested $10,000 in an interest bearing promissory note earning an 11% annual rate of interest, compounded monthly. How much will the note be worth at the end of 7 years, assuming that all interest is reinvested at the 11% rate?

Question 71 Ted has been dollar cost averaging in a mutual fund by investing $1,500 at the beginning of every quarter for the past 5 years. He has been earning an average annual compound return of 9% compounded quarterly on this investment. How much is the fund worth today?

Question 72 All of the following statements concerning financial aid programs for education funding are correct except:

Question 73 Which of the following do NOT apply to the use of questionnaires?

Question 74 Calculate the NPV of a machine that is purchased for $5,000, sold at the end of year 4 for $2,500, and produces the following cash flows. Year 1: $700 Year 2: $800 Year 3: $900 Year 4: $1,000 Assuming that the appropriate discount rate is 6%, what is the NPV?

Question 75 All of the following statements concerning educational fund 529 Savings Plans is correct except:

Version B

Question 1 As a visual aid, a balance sheet may be portrayed in three pie charts: one for assets, one for liabilities, and one for net worth.

Question 2 One of the most reported interruptions or disruptions in passive listening is when:

Question 3 Which of the following does not describe “anchoring?”

Question 4 Which one of the following statements is wrong?

Question 5 Tracy and Brett are married with the following financial situation. Current assets $9,243 Current liabilities $6,921 Monthly nondiscretionary expenses $4,693 Annual combined income $70,000 Annual debt payments (excluding monthly housing costs) $22,084 What is Tracy and Brett’s emergency fund ratio in months?

Question 6 Holly would like to plan for her daughter's college education. She would like for her daughter, who was born today, to attend college for 4 years beginning at age 18. Tuition is currently $10,000 per year, and tuition inflation is 7%. Holly can earn an after­tax rate of return of 10%. How much must Holly save at the end of each year if she wants to make the last payment at the beginning of her daughter's first year of college?

Question 7 Which of the following statements, if any, is/are correct? 1: Aside from risk tolerance, the time horizon is one of the most important factors to consider when deciding in which securities to invest and how much and when to invest. 2: QTPs generally require a decrease in the risk level of investments the closer the student/beneficiary gets to the beginning of college.

Question 8 A contract for variable life insurance may be characterized as a/an: 1: Unilateral contract. 2: Aleatory contract. 3: Conditional contract. 4: Contract of adhesion.

Question 9 Samantha has the following transactions: She purchases $5,000 worth of a mutual fund with cash from her savings account. She spends $6,000 on a vacation with cash from her money market account She spends $10,000 on new furniture and uses her credit card to make the purchase. What is the combined impact of these transactions on her net worth?

Question 10 Jill would like to plan for her son's college education. She would like for her son, who was born today, to attend college for 5 years, beginning at age 18. Tuition is currently $12,000 per year, and tuition inflation is 6%. Jill can earn an after­tax rate of return of 8%. How much must Jill save at the end of each year if she wants to make the last payment at the beginning of her son's first year of college?

Question 11 Lori wants to give her daughter $25,000 in 8 years to start her own business. How much should Lori invest today, at an annual interest rate of 8%, compounded annually, to have $25,000 in 8 years?

Question 12 To obtain a loan, either the housing ratio 1 or the housing ratio 2 must be okay, but not both.

Question 13 Which of the following statements is/are correct? 1: The emergency fund ratio metric should be 3 to 6 months of non­discretionary cash flows. 2: When calculating the savings rate for a family, any contributions to retirement made by the employer should be included.

Question 14 The blackout period refers to the period of time immediately following the death of the breadwinner.

Question 15 Which of the following is NOT true about the Humanistic Paradigm?

Question 16 Financial advisors are in positions of trust and must be cautious not to inadvertently misuse their power and refrain from wielding a disproportionate amount of the power in interactions with clients.

Question 17 Which of the following factors is critical in determining the appropriate benchmark for the investment assets to gross pay ratio?

Question 18 Which of the following options best completes this sentence: “In the event that a client is trying to communicate a message that is not clear, then the advisor will want to …”?

Question 19 The estimated value of a real estate asset in a financial statement should be based upon the:

Question 20 Behavioral investors have been characterized as those who tend to choose portfolios by evaluation and decisions based on expected wealth, desire for security, aspiration levels, and probabilities of aspiration levels.

Question 21 The balance sheet equation is:

Question 22 In an efficient market, intrinsic values are determined by an analysis of reasonable expected cash flows and of the risk of those cash flows along with investor heuristics and tendencies.

Question 23 Judy recently purchased her first home for $220,000. She made a down payment of $20,000 and financed the balance over 15 years at 6% interest. If Judy’s first payment is due on October 1 of this year, approximately how much of this year’s payments will be applied to the outstanding principal?

Question 24 Which of the following are premises in Traditional Finance?

Question 25 Which of the following approaches provides the planner and client with a methodology in order to reach goals by covering risks and short term and long term savings and investments?

Question 26 The present value approach takes each short, intermediate, and long­term goal, determines each individual present value, and sums these present values together. Then, it reduces them by current resources (investment assets and cash and cash equivalents) and treats the net PV as an obligation to be retired over the remaining work life expectancy at a discount rate equal to the expected portfolio rate of return.

Question 27 Billy owns one share of Disney stock. He purchased the share 3 years ago for $15. Disney stock is currently trading for $25 per share. The stock has paid the following dividends over the past three years: year 1, $1.00; year 2, $2.00; year 3, $3.00. What is the compounded rate of return (IRR) that Billy has earned on his investment?

Question 28 During which step of the financial planning process would a planner prepare and analyze financial statements?

Question 29 Holly’s salary is $100,000 per year. She contributes 12% of her salary to her 401(k) plan. Her employer contributes 5% of her salary to a profit share plan. She also contributes $2,500 per year to an IRA. What is Holly’s savings rate?

Question 30 Financial counselors or advisors must establish and maintain the advisor­client relationship based on their ability to:

Question 31 The present value approach takes each short, intermediate, and long­term goal, determines each individual present value, and sums these present values together. Then, it reduces them by current resources (investment assets and cash and cash equivalents) and treats the net PV as an obligation to be retired over the remaining life expectancy at a discount rate equal to the expected portfolio rate of return.

Question 32 Communication is the key factor in the financial advisor­client relationship.

Question 33 Financial advisors must respect the client’s position, hold the client’s interest above that of the advisor, and try to communicate effectively to realize the client’s goals and achieve the desired result.

Question 34 Behavioral Finance rejects Traditional Finance’s views or methods.

Question 35 Your client invested $10,000 in an interest bearing promissory note earning an 11% annual rate of interest, compounded monthly. How much will the note be worth at the end of 7 years, assuming that all interest is reinvested at the 11% rate?

Question 36 Pat and Marie have the following expenses and account balances. Pat’s annual 401(k) plan contribution $16,500 Pat’s annual salary $100,000 Current liabilities $24,000 Housing costs (P&I and T&I) monthly $2,167 Cash & Cash equivalents $18,000 Monthly nondiscretionary cash flows $6,000 Monthly debt payments other than housing $500 Pat’s employer matches $1 for $1 up to 3% of Pat’s salary in his 401(k) plan. Based on the information above, calculate Pat and Marie’s emergency fund ratio in numbers.

Question 37 Traditional Finance slowed down market analysis and hampered investors and those participating in the market at a time when some may have been intimidated by or felt ignorant of available market information or financial data.

Question 38 Kevin owns one share of Acme, Inc. stock. He purchased the stock three years ago for $25. The stock is currently trading for $29.50 per share. The stock has paid the following dividends over the past three years. Year 1: $1.50 Year 2: $2.00 Year 3: $2.50 What is the compounded rate of return (IRR) that Kevin has earned on this investment?

Question 39 Joe has a financial plan prepared by a professional financial planner. What is the order of steps that the planner took? 1: Establish client goals 2: Gather data 3: Define relationship 4: Develop and present alternatives 5: Analyze client’s financial status 6: Implement chosen alternative recommendations 7: Monitor plan

Question 40 Tracy purchased a car for $19,500. She is financing the purchase at an 11% annual interest rate compounded monthly for 3 years. What is the payment that Tracy is required to make at the end of each month?

Question 41 Which of the following statements, if any, is/are correct? 1: Prepaid Tuition plans are plans whereby the prepayment of college tuition is at current tuition prices for future enrollment. 2: A disadvantage of a QTP (qualified tuition plan) is that the owner/contributor must relinquish control of the account and share control of the funds with the student/beneficiary.

Question 42 The first two steps in the financial planning process are:

Question 43 A client in the asset accumulation phase is characterized by which of the following?

Question 44 Which of the following statements is/are correct? 1: Property titled Joint Tenants with Rights of Survivorship (JTWROS) can only be owned by married couples. 2: Property titled Tenants by the Entirety can only be owned by married couples.

Question 45 Which of the following is most likely not classified as an investment amount on the Statement of Financial Position?

Question 46 Which of the following approaches provide the planner and client with a methodology in order to reach goals by covering risks, short term and long term savings, and investments?

Question 47 Which of the following statements is/are correct? 1: The Statement of Cash Flows includes monthly recurring cash flows from income and expenses. 2: The Statement of Net Worth explains changes to net worth between two Statements of Financial Position that are not reported elsewhere on other financial statements.

Question 48 All of the following statements concerning educational funding are correct EXCEPT:

Question 49 In what order should the steps in the financial planning process occur? 1: Gathering client data. 2: Establishing and defining the planner/client relationship. 3: Developing and presenting financial plan recommendations. 4: Analyzing and evaluating client’s financial status. 5: Monitoring the plan. 6: Implementing financial plan recommendations.

Question 50 Which of the following ratios is not used in a typical financial statement approach?

Question 51 All of the following statements concerning educational fund 529 Savings Plans is correct except:

Question 52 External data collected in phase 2 of the financial planning process includes all of the following except:

Question 53 Regarding the characteristics of insurance, which of the following is/are fundamental? 1: Probability (possibility and predictability of a loss). 2: Law of large numbers. 3: Transfer of risk from individual to group. 4: Only pure risk is insurable.

Question 54 Which of the following best completes this sentence: There has been a movement in recent times for the financial industry to be more in touch with _____________ due to their effect and persuasiveness in financial matters. 1: Capital Asset pricing 2: Beta 3: Psychology and sociology

Question 55 Which of the following do NOT apply to the use of questionnaires?

Question 56 The three panel approach includes all of the following except:

Question 57 Michael has been dollar cost averaging in a mutual fund by investing $2,000 at the beginning of every quarter for the past 7 years. He earns an average annual compound return of 11% on this investment, compounded quarterly. How much is the fund worth today?

Question 58 Calculate the NPV of a machine that is purchased for $5,000, sold at the end of year 4 for $2,500, and produces the following cash flows. Year 1: $700 Year 2: $800 Year 3: $900 Year 4: $1,000 Assuming that the appropriate discount rate is 6%, what is the NPV?

Question 59 Which of the following is NOT consistent with the Humanistic Paradigm?

Question 60 Cindy invests $20,000 in a limited partnership today. At the end of years 1 and 5, she will receive the after­tax cash flows shown below. The partnership will be liquidated at the end of the fifth year. Cindy is in the 35% federal income bracket. Year 0 ­$20,000 CF0 Year 1 0 CF1 Year 2 $4,000 CF2 Year 3 $6,000 CF3 Year 4 $8,000 CF4 Year 5 $10,000 CF5 Which of the following is/are correct? 1: The IRR is the discount rate which equates the present value of an investment’s expected costs to the present value of the expected cash inflows. 2: If the cost of capital for this investment is 9%, the investment should be rejected because its net present value will be negative.

Question 61 Fred and Louise are 40 years old, plan on retiring at age 67, and expect to live until age 95. Fred currently earns $150,000, and they expect to need $100,000 in retirement. Louise is a stay­at­home mom. They also expect that Social Security will provide $30,000 of benefits in today’s dollars at age 67. Fred has been saving $17,000 annually in his 401(k) plan. Their daughter, Ann, was just born and is expected to go to college in 18 years. They want to save for Ann’s college education, which they expect will cost $20,000 in today’s dollars per year, and they are willing to fund 5 years of college. They were told that college costs are increasing at 7% per year, while general inflation is 3%. They currently have $400,000 saved in total, and they are averaging a 7% rate of return and expect to continue to earn the same return over time. Based on this information, what should they do?

Question 62 Which one of the following statements in wrong?

Question 63 Which of the following are consistent with the Developmental Paradigm? 1: The majority of humanistic theories view clients as experts on themselves. 2: Much of the Developmental approach has its origin in and was influenced by Freudian psychoanalytic theory. 3: Counseling in the Developmental Paradigm has an overall aspiration to recount or correct earlier, disrupted development to foster change in the client or the client’s behavior.

Question 64 The Kellers determined that they can reduce their mortgage interest rate from 10% to 4%. The value of homes in their neighborhood has been increasing at the rate of 5% annually. If the Kellers were to refinance their house with $3,000 in closing costs added to the mortgage balance ($277,000) over a period of time which coincides with their chosen retirement age in 20 years, what would be the monthly payment for principal and interest?

Question 65 All of the following statements regarding NPV are true except:

Question 66 An example of internal data is

Question 67 Cindy invests $20,000 in a limited partnership today. At the end of years 1 and 5, she will receive the after­tax cash flows shown below. The partnership will be liquidated at the end of the fifth year. Cindy is in the 35% federal income bracket. Year 0 ­$20,000 CF0 Year 1 0 CF1 Year 2 $4,000 CF2 Year 3 $6,000 CF3 Year 4 $8,000 CF4 Year 5 $10,000 CF5 The after­tax IRR on this investment is:

Question 68 Which of the following is not necessary to identify a client’s life cycle position?

Question 69 Pat and Marie have the following expenses and account balances. Pat’s annual 401(k) plan contribution $16,500 Pat’s annual salary $100,000 Current liabilities $24,000 Housing costs (P&I and T&I) monthly $2,167 Cash & Cash equivalents $18,000 Monthly nondiscretionary cash flows $6,000 Monthly debt payments other than housing $500 Pat’s employer matches $1 for $1 up to 3% of Pat’s salary in his 401(k) plan. Based on the information above, calculate Pat and Marie’s housing ratio 1 in numbers.

Question 70 According to the cash flow approach, all of the following recommendations may have a positive impact to cash flow except:

Question 71 Beth earns $100,000 working as a part­time lawyer in New Orleans. The company provides a matching contribution to the 401(k) plan of 50% of her contribution up to a maximum contribution of 4% of compensation. Her 401(k) plan account had $60,000 in it at the beginning of the year. She contributed $15,000 to the plan this year, and the employer made the matching contribution before year­end. The ending balance of the account is $100,000. What is her savings rate this year?

Question 72 A rational investor would be considered to be indifferent or uncaring if a profit is realized by a dividend declared by a company versus if the same profit is realized by selling the stock at a gain.

Question 73 If your financial planning client talks about situations, expresses emotions verbally, enjoys listening (but cannot wait to talk), and tends to move lips or sub­vocalize when reading, then, their learning style is most likely …

Question 74 Which of the following are consistent with the Cognitive­Behavioral school of thought?

Question 75 If your financial planning client uses phrases like “see what I mean” or “imagine that,” your client’s learning style is most likely…