personal finance Exam #2

Which of the following statements most accurately evaluates the structural differences between these two advisory models

RIAs may better align with client objectives because their compensation (e.g. AUM based fees) is tied to portfolio performance, whereas broker-dealers may face incentives to reccomend higher commission products that are not necessicarily optimal for the client

The primary regulator for all securities offered in interstate commerce in the United States is:

Securities and Exchange Commission (SEC)

Which of the following apply to Behavioral Finance and not to the Efficent Market Hypothesis

Both B and D

An investor only reads analyst reports that support their belief that a stock is undervalued while ignoring negative reports suggesting stock is overvalued. This behavior best illustrates:

Confirmation bias

Which of the following best captures the Illusion of Knowledge?

Investors believe they are well-informed despite relying on biased sources

An investor refuses to sell a stock that has declined significantly in value, hoping it will recover. This behavior us best explained by:

Loss aversion

Following the crowd (aka Herd Mentality) is most likely to contribute to:

Asset bubbles and speculative manias

After winning money in a casino, an individual begins making riskier bets because they view the money as "extra" or money recieved as a gift is managed differently than money earned via a job. This behavior is best explained by:

House money effect

The legal document that defines who, either you or your appointees, is legally able to make any and all healthcare descions on your behalf in the event you become mental unable (as defined) or unable to communicate (as defined) is

Healthcare power of attorney

The legal document that notifies healthcare professionals of the person(s) you have leagally designated as having access to your private/ sensitive healthcare information is:

HIPAA release form

The legal document that defines who, either you or your appointees, is legally able to many any and all legal/business /financial decisions on your behalf in the the event you become mentally unable (as defined) or unable to communicate (as defined)

Durable power of attorney

Everyone over the age of 18 should have a properly executed HIPAA release form, durable power of attorney, healthcare power of attorney, and last will and testament in place

True

Power if attorney document and health care power of attorney document are governed by state law and should be updated whenever your primary residence changes. HIPAA document is governed by federal law and only need tos be updated periodically to keep up with this changes in applicable laws and/or as your personal situation changes

true

You are involved in an accident. You are unable to communicate when you reach the emergency room. You do not have a properly executed HCPOA, thats not a big deal as _____[famil member or friend] will be able to legally step in and make medical decisions on your behalf, especially if ______[family member or friend] can be legally identified as a caregiver, BFF, or shares a common permanent address with you.

False

It is strongly recommended to have a co-appointees on all legal documents. Having. a primary appointee and a secondary apointee on all legal documents is not necessary as the probate court will assign a secondary appointee in accordance with state probate law if necessary.

False

To access a safe deposit box

your full legal name must be on the signature card file with the financial institution housing the safe deposit box prior to our arrival. you must present acceptable picture id to identify yourself, and you must have the customer key to the safe deposit box.

All financial records and tax returns, along with all supporting documents, should be kept for a period of 5 years

true

You need to borrow money. The type of lender that carries the lowest cost and fees and is therefore your preference for obtaining the needed financing is:

None of the above

For open end credit, the time period between the date of the end of the loan billing cycle and the payment due date during which interest is not charged and the loan is not considered to be in default is called

grace period

Debt to income ration

(DIT) is

calculated by dividing monthly debt payments by gross monthly income

Your front-end ratio is deined as

monthly rent payments or mortgage payments (as defined)/ gross monthly income

Your back end ratio is defined as

Total recurring debt payments + Payments required via a court order/ gross monthly income

Conventional mortgage loans limit the front-end ratio and back-end ratio maximums at

28/36

Rent and rent related costs and fees such as trash fees, parking fees, pest control fees and cam fees + renters insurance premium should not exceed ___% of your gross monthly income

30

The information in your credit report is used to

all of the above

Per federal statute of limitation laws, adverse information on your credit bureau report, such as defaulted loans, bankruptcy, unpaid medical bills, etc. will remain on the credit bureau report, and thus negatively impact your ability (i) to obtain future credit and/or (ii) to obtain the most advantageous financing costs for how long on average?

7 years

A good FICO/ beacon credit score is anything above ____.

670

You should have a credit freeze on your credit report at all times.

True

When comparing simple interest and annual percentage rate

annual percentage rate will always be greater than simple interest rate due to the inclusion of fees and other borrowing costs in calculating APR. aPR represents the true cost of borrowing

Which federal law makes it unlawful for any creditor to discriminate against any applicant with respect to any aspect of a credit transaction

Equal credit opportunity act

Which federal law requires clear disclosures of the key terms of the lending arraignment and of all costs associated with a loan transaction to include disclosure of the annual percentage rate

truth in lending act

A type of mutual fund/ etf having the investment objective of matching the risk and return of a broad-based index is called a(n)

index mutual fund/ ETF

A type of mutual fund having the investment objective of investing only in cash or other highly liquid short tem securities with the primary objective being the preservation of capital (loss avoidance) is called a(n)

money market mutual fund/ ETF