5. La cooperación externa y el proceso de la estrategia
5.1 La cooperación externa 1995–2006
2. The correct answer is: c
a. Errors and omissions insurance is generally purchased by professionals who are in a position to cause their clients fiscal harm. Financial planners may cause fiscal harm if they are not diligent in their work.
b. Accountants are likely to purchase errors and omissions policies due to the high possibility of causing their clients fiscal harm.
c. Physicians generally purchase malpractice insurance rather than errors and omissions insurance.
d. Attorneys are excellent candidates for errors and omissions policies. A lack of diligence on their part immediately exposes their clients to fiscal harm.
Financial Planning Process and Insurance
Final Review
Final Review Questions
1. The second stage of the financial planning process involves gathering data. Which of the following are functions of this stage?
I. constructing a personal financial plan
II. obtaining qualitative information about the client III. establishing goals and objectives
IV. identifying potential barriers to achieving goals a. I and II only
b. I and III only c. I and IV only d. II and III only e. III and IV only
2. If a planner identifies existing or potential problems that can negatively affect a client's ability to achieve objectives, which one of the following actions taken to prevent such a problem is most likely to require immediate attention? a. establishing an adequate emergency fund
b. retitling of assets for estate tax purposes c. reallocating long-term investments
3. Bill and Karen Stapher have the following financial information. Total monthly expenses: $4,000
Checking account balance: $3,900 Money market fund balance: $9,500 Current value of 12-month CD: $5,000 Life insurance cash value: $4,000
Based on this information, how much is reasonably available for their emergency fund?
a. $ 9,500 b. $13,400 c. $14,500 d. $22,400
4. Margaret is in the market for a new automobile. An automobile dealer has suggested that she lease a vehicle. The proposed lease terms include making 36 monthly payments of $325 and returning the vehicle to the dealer at the end of the lease period. Margaret may owe the lease company additional money if the car’s actual value is less than the projected value. What type of lease agreement is the dealer proposing to Margaret?
a. closed-end lease b. fixed-cost lease c. finance lease d. operating lease
5. Renee and Alonzo want to create a college tuition fund for their child, Elysa. They want Elysa to be able to get income from the trust, but do not want her to have access to the principal when she reaches age 21.
To meet their objectives, Renee and Alonzo should establish a a. UGMA account.
b. UTMA account. c. 2503(c) (minors) trust. d. Crummey (demand) trust.
6. Jayne Rand is a financial services professional who does not do comprehensive financial planning. Jayne sells mutual funds, listed stocks, and bonds to her clients, but does not specifically hold herself out as an investment adviser. Jane earns commissions on the products she sells to clients, who all live in her home state. Is Jane considered an investment adviser?
a. No, because she does not qualify under any part of the three-pronged test. b. No, because all of Jayne's clients reside in the state in which she has her
principal office.
c. Yes, because she is indirectly compensated for giving advice.
d. Yes, because she does not fall under one of the exceptions or exemptions to the registration requirement.
7. Alex Reyner, a college finance professor, recently began publishing an independent monthly newsletter that provides information about business and investments to paid subscribers. Alex advertises his newsletter in all
newspapers in his state to attract subscribers of which he now has 3,200. The publication discusses, among other things, general characteristics of investment vehicles and advice regarding the purchase of various investment vehicles. Alex does not provide any personal financial advice to individuals other than through the newsletter.
Is Alex required to register with the SEC? Consider the supporting rationale in selecting your answer.
a. yes, because he issues investment advice
b. yes, because he receives compensation from the subscribers
c. no, because he is considered to be an investment adviser, but he fits under one of the exemptions from registration
d. no, because he is not considered to be an adviser, and he is excepted from registration
8. Bill Stout, CFP®, is a registered investment adviser. As a normal part of his practice, Bill invests his clients' money in a predetermined mix of five stocks, a government bond, and two unit investment trusts. Bill decided to use these investments after reading their advertising literature in a trade magazine. He has not read any prospectuses, nor does he adjust the investment mix for any client. However, his clients believe Bill has made the investment choices after careful evaluation. Bill knows almost nothing about unit investment trusts, but he is afraid to ask his peers or make referrals for fear of losing some clients. Bill does try to follow the current performance of these investments, and he reads articles related to them.
Based only on this information, which of the following duties has Bill failed to fulfill?
I. diagnosis II. consultation III. keeping current IV. disclosure
a. I and II only b. III and IV only c. I, II, and IV only d. II, III, and IV only
9. Juanita has just discovered that her wallet is missing from her purse. She immediately calls her credit card companies and learns that the following charges have been applied to her accounts:
Account Charges Account Charges
VISA $500 Master Card $1,250
American Express $1,500 Conoco $45 Sears $225
What is the total amount of these charges that Juanita is required to pay? a. $0
b. $245 c. $250 d. $3,520
10. Which one of the following terms is used to describe a Chapter 13 bankruptcy? a. a Title 9 plan
b. a wage-earner plan c. a Regulation Z plan d. a liquidation-recovery plan
11. Rhonda Conley wants to establish a fund that will provide $8,000 interest per year that she can give to her favorite causes. She expects to earn 6% per year. How much does she need to put into the fund today so that she can give away the $8,000 each year, starting next year at this time?
a. $97,625 b. $126,095 c. $133,333 d. $140,892
12. Jean deposited $2,000 into her IRA yesterday. If she puts nothing else into the account, about how many years will it take to grow to $15,000, assuming it earns interest at an annual rate of 8%, compounded quarterly?
a. 25 years b. 26 years c. 27 years d. 104 years
13. Your client invested $15,000 in a certificate of deposit (CD) 7 years ago. The CD matures today at a value of $36,825. If interest was compounded
semiannually over the 7-year period, what annual compounded rate of return did he realize on his investment?
a. 6.21% b. 6.63% c. 13.25%
14. Alonso Garcia wants to open a business in five years. He will need an
additional $200,000 (stated in today's dollars) at that time. Alonso plans to fund this goal using a serial payment. He assumes that inflation will average 4% and that he can earn a 10% compound after-tax return on investments. What serial payment should he invest at the end of the first year (i.e., one year from today) to attain this goal? (Round your answer to the nearest dollar.)
a. $33,699 b. $34,810 c. $35,047 d. $35,643 e. $37,069
15. An investor wants to accumulate $16,000 by the end of seven years to achieve a financial goal. He plans to invest a sum of $4,000 in a mutual fund today toward the goal. In addition, he plans to invest a fixed sum each month, beginning one month from today, for the next seven years. If the investor can earn a 9% annual return, compounded monthly, over the term of the
investment, how much must he invest each month to achieve his goal? a. $72.53
b. $73.07 c. $201.78 d. $223.07
16. Which of the following are examples of risk avoidance? I. participating only in non-contact sports or hobbies II. installing burglar alarms in a residence
III. using public transportation instead of owning a car IV. increasing the deductible on a homeowners policy
a. I and III only b. II and IV only c. I, II, and III only d. I, II, III, and IV
17. Which of the following are disadvantages of a funded self-insurance program to a business?
I. The relationship between employer and employee may influence claim settlement.
II. Contributions to the self-insurance fund are nondeductible. III. Premium taxes must be paid on fund contributions. IV. Losses incurred are not deductible.
a. I and II only b. III and IV only c. I, II, and IV only
18. From the insurance company's point of view, all of the following are elements of an insurable risk except
a. the insurable interest must be clear and continuous.
b. the loss produced by the risk must be definite and measurable. c. the loss must not be catastrophic.
d. there must be a sufficiently large number of homogeneous exposure units to make the losses reasonably predictable.
e. the loss must be fortuitous or accidental.
19. Last week, a postal carrier was injured on Jacob's driveway when he slipped on a skateboard left there by Jacob's daughter. Which one of the following legal bases may influence Jacob's liability?
a. trespass
b. strict liability per se c. vicarious liability d. negligence
20. Bill Johnson's son, Johnny, goes over to a neighbor's house where, after a disagreement, he punches his neighbor's son in the stomach. The neighbor sues and obtains a judgment for $50,000. Bill consults his insurance agent to see if his comprehensive personal liability policy will pay the judgment. Will Bill's insurance provide coverage, and why?
a. Yes; the policy covers Bill because he is vicariously liable for Johnny's action.
b. Yes; the policy covers Johnny because, as a family member, he comes under the definition of a covered insured.
c. No; the policy does not cover intentional torts.
d. Yes; the policy covers the incident because it occurred in an adjacent house. e. No; the policy only covers liability arising out of use of the home and the lot
on which it is situated.
21. Which one of the following does not describe a life insurance contract? a. an aleatory contract
b. a contract of utmost good faith c. a contract of adhesion
d. a bilateral contract e. a personal contract
22. An insurance company is prohibited from using a right given to it in a policy if, by its own actions, it gave up the right to the policyowner under which one of the following? a. doctrine of equity b. doctrine of estoppel c. doctrine of rescission d. doctrine of reformation e. doctrine of waiver
23. Susan Williams is a broker for a casualty insurance company. She solicited an auto insurance policy for your client, Howard Jones. Howard had a history of traffic violations, but he did not disclose this to Susan when she took his application. The company issued a policy to Howard. Two weeks later, Howard had a car accident. What is the company's obligation to your client in this situation?
a. The company is required to pay because Susan had express authority to bind the company.
b. The company is not required to pay because Susan failed to disclose full knowledge of the situation.
c. The company is required to pay because Susan had the implied authority to do what the public reasonably believes she can do.
d. The company is not required to pay because Howard failed to disclose relevant information.
24. As part of the process of evaluating insurance companies for a client, you see the following facts about A+ Life Company:
a mutual company,
rated only by A.M. Best,
assets of $205 million,
in business for 100 years,
3% lapse ratio,
not on the NAIC Watchlist, and
high risk-based capital (RBC) ratio numbers.
Would you consider doing business with this company, and why?
a. No, because mutual companies are always rated by several rating agencies. b. No, because they have a low lapse ratio and high RBC numbers.
c. Yes, because mutual insurers with high RBC numbers are always good companies.
d. Yes, because they have a solid financial status and a low lapse ratio.
25. Ann Gables can save $100 per month toward retirement. Which one of the following types of contracts would be most appropriate for Ann?
a. variable life insurance b. universal life insurance
c. participating whole life insurance d. single premium deferred annuity e. flexible premium deferred annuity
26. Natalie Gregson named her brother, David, irrevocable beneficiary of a life insurance policy she owns on her life. Now Natalie would like to borrow from the policy's cash value. What right does David have to the cash value?
a. David has a conditionally vested interest in the policy and can deny her permission to borrow from the cash value.
b. Even though David has a vested interest in the policy, he must allow Natalie to borrow from the cash value.
c. Because David has an insurable interest in the policy he can deny Natalie permission to borrow from the cash value.
d. Because David has no legal claim to the policy, he must allow Natalie to borrow from the cash value.
27. Which of the following dividend options, used in combination, generally provides the greatest total death benefit and tax-deferred growth in a participating whole life insurance policy?
I. accumulation at interest II. fifth dividend option III. reduced premium IV. paid-up additions option
a. I and II only b. I and III only c. II and IV only d. III and IV only
28. Which one of the following is not a nonforfeiture option available on a participating whole life insurance policy?
a. surrender of cash value b. extended term insurance c. reduced paid-up insurance d. accumulate at interest
29. Which one of the following statements regarding annuities is false?
a. A single premium variable deferred annuity generally permits additions to the invested amount once each year.
b. A joint and full survivor annuity guarantees a level payment as long as either annuitant is alive.
c. A flexible premium variable annuity generally limits changes in the investment mix to some extent.
d. A life annuity with 10 years certain and continuous will pay benefits for at least 10 years if the annuitant dies 6 years after the initial distribution is made.
30. Adam and Liz Driscoll have just had their first child, Jennifer. The Driscolls want to purchase life insurance that will ensure that funds will be available for Jennifer's college education in the event that one or both of them die
prematurely. They want a policy that is flexible, and also want the insurance to build some cash value. Their budget is tight right now, and the couple's approach to risk management decisions is conservative.
Which type of life insurance policy would best meet the Driscoll's current needs?
a. universal life insurance policy b. variable life insurance policy
c. second-to-die whole life insurance policy d. variable universal life insurance policy
31. Darren and Susan Starr want to provide funding for their daughter Jerri, age 10, to attend four years of college, starting at age 18. The current annual cost of tuition is $9,000. Assume inflation of 4% and after-tax earnings of 5%. If Darren wants to have enough life insurance to assure adequate funds for Jerri when she begins college (should he die today), approximately how much insurance should he purchase for this need alone? (Round your answer to the nearest dollar.)
a. $32,530 b. $32,560 c. $32,855 d. $32,874
32. Which of the following are accurate statements related to Mary Smith’s rights and responsibilities related to health care. Mary left her job 45 days ago. Mary had been covered under her former employer's plan for 18 months. She is pregnant.
I. Mary can still sign up under COBRA. II. Mary can sign up under the exchanges.
III. If she purchases a policy outside of the exchanges or COBRA, the pregnancy could be a preexisting condition.
IV. Mary must notify the insurance company within 60 days of the birth of the child to have the child covered.
a. I and II only b. II and IV only c. I, II, and III only d. I, II, III, and IV
33. Under the maximum out-of-pocket (MOOP) provision in medical expense insurance,
a. benefits are based on a schedule of specified maximum amounts per service. b. unreimbursed covered expenses are limited to a maximum amount per year. c. all risks are covered except those specifically excluded under the policy. d. benefits are paid only to a specified limit.
34. Juan Blanco has a choice of several medical insurance plans through his employer. They include an HMO, a PPO, and an indemnity plan. He has brought you the benefit descriptions for each plan and asked for your assistance in sorting them out. Which one of the following statements correctly matches the description with the type of plan?
a. One plan states that it uses gatekeeper physicians. We know, therefore, that this must be a PPO plan.
b. One plan states that it has internal policy limits for mental and nervous conditions. We know, therefore, that this must be an HMO plan.
c. One plan states that it has a $5,000 MOOP provision. We know, therefore, that this must be a HMO plan.
d. One plan states that it has a list of independent physicians that the employee must use if he or she is to obtain the lowest possible out-of-pocket cost. We know, therefore, that this is likely to be a PPO plan.
35. Walter Wimmer's first medical expenses for the year were incurred for an operation costing $23,250 in covered expenses. Walter has a comprehensive major medical plan with a $2,500 deductible, a 20% coinsurance provision, and a $5,000 MOOP.
How much will Walter's insurer have to pay? a. $16,600
b. $18,250 c. $18,600 d. $23,250
36. Which of the following are true statements related to disability?
I. Group coverage benefits are almost always received income tax free. II. Individual policies purchased with after tax income are received income
tax free.
III. Group coverage covers all income including pretax medical contributions, bonuses, and stock grants.
IV. Benefits from individual policies purchased on a pretax basis are received income tax free.
a. II only b. IV only c. II and III only d. II, III, and IV only
37. Which one of the following listings of groups that are commonly underwritten for disability income insurance are ranked in ascending order of desirability, as perceived by the insurer?
a. professionals, white collar workers, and blue collar workers b. white collar workers, professionals, and blue collar workers c. blue collar workers, professionals, and white collar workers d. blue collar workers, white collar workers, and professionals
38. Which of the following statements about disability income concepts are correct?
I. A disability policy with a provision that allows the company to increase premiums but does not allow the company to terminate the policy is said to be guaranteed renewable.
II. The elimination period is the time period the insurance company has to cancel a policy if incorrect information was put in the application. III. A residual benefit is normally paid when there is a loss of income due to a
disability, even if the insured is still able to work, following a period of total disability.
IV. The probation period in a disability policy is the time between submission of the application and its approval or rejection.
a. I only b. I and III only c. III and IV only d. I, II, and III only e. I, III, and IV only
39. Wade Casslin, age 68, is interested in obtaining long-term care insurance. He is a widower, is in good health, and wants to make sure he is taken care of if he is incapacitated. He also wants his estate of a few hundred thousand dollars left to his children. Which one of the following considerations should Wade want to apply to his decision?
a. He should definitely not have a plan that provides home care.
b. A policy that lasts a year or so would give him time to qualify for Medicaid. c. A policy with a hospitalization requirement is a sound way to save on
premium.
40. A person who wants to use Medicaid to pay for long-term care expenses may