Personal Finance 4th Canadian Edition Jeffry Madura, Hardeep Gill - Solutions

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True or False? You should continuously re-evaluate your financial plan.
True or False? To lower your overall portfolio risk and improve your liquidity, you could sell shares from a stock portfolio and invest the proceeds in a money market fund.
True or False? As time passes, your financial goals should remain the same.
True or False? Without exception, any money withdrawn early from a retirement account is subject to a penalty.
True or False? The more money you contribute to your retirement account now, the more money you will have when you reach retirement age.
True or False? You should make investments only after you have sufficient liquidity and sufficient insurance to protect your existing assets.
True or False? Your investment needs should be given priority before insurance.
True or False? Financing can increase the amount of your assets.
True or False? The liquidity trade-off refers to the idea that you should maintain as much money as possible in an emergency fund to satisfy your liquidity needs.
True or False? Budgeting allows you to determine whether your expenses will exceed your income so that you can forecast any shortages in that month.
To pay off a car loan, you have decided to reduce the value of one or more of your assets. Which of the following actions is most likely to have the greatest negative impact on your net worth over a period of time?a. Withdrawing funds from a GIC.b. Withdrawing funds from a retirement account
Which of the following is a consequence of reducing your liquidity position by transferring money from a GIC to a growth mutual fund?a. You will earn a higher return on your assets.b. You may have a smaller amount of liquid funds to cover unanticipated expenses.c. You may have a smaller amount of
With respect to your investments, which of the following documents should be stored in a safe at home or in a safety deposit box?a. Stock certificatesb. Willc. Personal loan (such as car loan) agreementsd. Insurance policies
All of the following would be concerns with respect to investing money in the stocks of smaller firms, except which one?a. An investment in stocks of smaller firms will require you to forgo some liquidity.b. An investment in stocks of smaller firms is more likely to result in large losses than
You would like to build a portfolio that will provide periodic income. Which of the following investments may not be appropriate for the portfolio you are trying to create?a. An investment in stocks that pay dividendsb. The stocks of large, well-known firmsc. An investment in bondsd. An investment
While playing tennis with a friend, you suffer a debilitating stroke. After three weeks, you are discharged from the hospital.Which of the following types of insurance would have been of the least benefit to you and your family?a. Life insuranceb. Disability insurancec. Long-term care insuranced.
Which of the following statements with respect to the financing trade-off is incorrect?a. An excessive amount of financing can prevent you from achieving your financial goals.b. It is easier to cover the monthly loan payment if you select financing with a relatively short maturity.c. You may want
Which of the following would not be considered a liquid asset?a. Savings accountb. Stock mutual fundc. Term depositd. Money market fund
Which of the following statements regarding the budgeting tradeoff are true?a. The more you spend, the more money you will have available for liquidity purposes, investments, or retirement saving.b. Your budgeting decisions involve a trade-off between spending today and allocating funds for the
The six main components of the financial plan include:a. Budgeting, managing liquidity, financing, protecting your assets and income, personal investing, and retirement and estate planning.b. Budgeting, managing liquidity, financing, protecting your assets, personal investing, and retirement and
True or False? A durable medical power of attorney is similar to a living will in that it ensures that the person you identify has the power to make specific decisions regarding your health care in the event that you become incapacitated.
True or False? A living will, also known as a personal care directive or a health care directive, is a simple legal document in which individuals specify their preferences if they become mentally or physically disabled.th
True or False? Assets transferred to an alter ego trust are subject to a deemed disposition.
True or False? An irrevocable inter vivos trust will be treated as a revocable inter vivos trust if the settlor is one of the beneficiaries of the assets of the trust.
True or False? An inter vivos trust is a trust in which you assign the management of your assets to a trustee while you are living.
True or False? A spousal rollover does not eliminate or reduce the amount of tax payable by the taxpayer; it only delays the payment of tax until the surviving spouse dies.
True or False? Under normal circumstances, a deemed disposition means that a deceased taxpayer has to sell his or her assets and pay any tax owing once the assets are sold.
True or False? A final tax return is normally filed within six months of the date of death or on April 30 of the following year.
True or False? The purpose of the probate process is for the court to declare a will valid, make any necessary changes to ensure the validity of the will, and ensure the orderly distribution of assets.
True or False? In Alberta, the act of marriage will automatically cancel all wills dated prior to the date of marriage.
True or False? A guardian appointed through a will may choose someone else to provide custodial care.
True or False? To avoid confusion, a standard will contains a clause revoking all other wills and declaring this latest will to be the last will.
True or False? In order to create a valid will, you must be mentally competent and should not be subject to undue influence from others.
True or False? If you die intestate in Canada, your surviving spouse will receive a preferential share of estate assets before assets are distributed among all beneficiaries.
True or False? An estate represents a deceased person’s assets, including any debts that are outstanding.
A(n) is a legal document that grants a person the immediate power to make any decisions or commitments for you, even when you are mentally incapacitated.a. general power of attorneyb. limited (non-continuing) power of attorneyc. durable power of attorney for health cared. enduring (continuing)
If John is going to have his first child, which of the following should he do for his estate planning?a. Add a codicil to his will.b. Review his will.c. Update his will.d. Review his power of attorney.
A(n) is a legal document that grants a person the power to make specific decisions for you in the event that you are temporarily incapacitated.a. general power of attorneyb. limited (non-continuing) power of attorneyc. durable power of attorney for health cared. enduring (continuing) power of
Contributions to charitable organizations in the year that a taxpayer dies are provided special tax incentives. Which of the following statements most accurately reflects the tax treatment of charitable contributions in the year of death?a. In the year of death, the amount of charitable
If Mary is not sure her primary beneficiary will survive her, she should:a. Name a contingent beneficiary.b. Name joint beneficiaries.c. Change her beneficiary.d. Name her estate as beneficiary.
Which of the following is not a characteristic of a testamentary trust?a. It is a type of trust that is created by a will.b. The income earned on the assets inside it is taxed in a manner similar to that of an individual taxpayer at that same level of income.c. The income earned on the assets
The amount of tax that Canadians pay upon death is relatively low. This statement can be supported because:a. The increase in value of your summer cottage is not subject to tax.b. RRSPs are only subject to tax when a taxpayer is alive and withdrawing money from them.c. Most Canadians would count
The purpose of probate is to ensure:a. The will is valid to and for orderly distribution of assets.b. Payment of liabilities are prioritized accurately.c. Provinces collect the requisite probate fees.d. Fair jurisprudence of all financial matters.
A document that specifies changes to an existing will is:a. A letter of instruction.b. A codicil.c. An amendment.d. An addendum.
In choosing a guardian for your children, you should:a. Ensure he or she is also prepared to be the custodian.b. Be sure to include this in the last letter of instruction.c. Ensure that the person you select is willing to serve in this capacity.d. Authorize this in a power of attorney.
Which clause in a will ensures that all remaining assets of the deceased are accounted for and distributed?a. Administration of the estateb. Letter of last instructionc. Distribution of residued. Authorization to distribute remainder
Which of the following statements best describes the role of an executor?a. An executor may be required to collect any money owed to the estate, personally pay off any debts owed by the estate, sell specific assets (such as a home) that are part of the estate, and then distribute the proceeds as
What is the primary problem with dying intestate?a. An administrator will be appointed to distribute the estate according to law.b. Any children will become wards of the state.c. Medical personnel will be responsible for decisions about your care.d. Your estate will flow to the government.
Which of the following is necessary for an English form will to be valid?a. It must be written in the testator’s handwriting.b. It must be dated within 10 years of death.c. It must be signed by the testator and two witnesses.d. The person writing the will must be over age 21 at the time the will
The reasons for having a will may include the following:a. A will helps to ensure that your estate is distributed in the manner you desire.b. You can use a will to specify the persons you want to receive your estate, referred to as your beneficiaries (or heirs).c. A will can be used to specify the
True or False? The income generated inside a retirement account is not taxed until you withdraw the funds.
True or False? The longer annual savings are invested, the more they may be worth at retirement.
True or False? The need to take out a reverse mortgage is reduced if you actively participate in sound financial planning.
True or False? The main advantage of a registered annuity over a RRIF is that you are no longer exposed to the risk that your investments may decrease in value.
True or False? Money withdrawn from a TFSA cannot be recontributed.
True or False? TFSAs can be used for short-term and long-term goals.
True or False? The amount that you can contribute to your RRSP is 18 percent of your previous year’s income less your previous year’s pension adjustment.
True or False? A self-directed RRSP is sufficient for the needs of investors who are opening their first account or have all of their RRSP assets in the mutual funds of a single company.
True or False? If you are young and far from retirement, you are in a position to take more risk with your investments.
True or False? A pension adjustment will reduce the amount that you can contribute to individual retirement savings plans.
True or False? In a defined-benefit pension plan, the contribution rate is based on a specific formula.
True or False? Your CPP benefits are based on all of your contributions from age 18 to age 65.
True or False? Olga expects to live to age 100 and would like to maximize the amount she will receive from the CPP. Assuming that her retirement income needs are being met by other sources, she should apply for CPP benefits at age 65.
True or False? The only qualifying criteria for OAS benefits are age and residency.
True or False? A “means test” refers to the concept that if your income exceeds a certain amount, the amount you will receive from any of the OAS program benefits will be reduced.
If you qualify, the maximum withdrawal allowed under the Home Buyers’ Plan (HBP) is:a. $20 000 per person.b. $25 000 per person.c. $25 000 per couple.d. $40 000 per couple.
Which is a key difference between RRSPs and TFSAs?a. TFSA withdrawals are taxed.b. RRSPs’ contribution limit accumulates.c. TFSAs give tax deductions on contributions.d. RRSP withdrawals are taxed.
If you invested $10 000 in an RRSP 30 years ago and it has a value today of $100 000, what amount will you pay tax on when you withdraw it during your retirement years?a. Only on the initial $10 000.b. Only on the $90 000 growth.c. On all $100 000 as it is withdrawn.d. There is no tax to be paid in
When you leave an employer prior to retirement age, your options with your vested defined-benefit plan are all of the following, except:a. Leave it with your former employer.b. Transfer it to your new employer’s pension plan.c. Transfer it to a LIRA.d. Transfer it to your RRSP within 30 days.
Which of the following is true regarding employer-sponsored pension plans?a. A defined contribution pension plan is the same as an RRSP.b. A defined-contribution plan guarantees you a specific amount of income when you retire.c. In a defined-benefit plan, the risk of a shortfall in benefit payments
Which of the following is true about RRSPs?a. You can withdraw funds tax free once you are over age 71.b. There is no limit on the dollar amount you can contribute.c. Your investment income is tax-sheltered in the plan.d. You can transfer the funds to your children tax-sheltered.
Which of the following is an important factor to consider in deciding between saving in a TFSA account or an RRSP account?a. Your tax bracketb. The appropriate risk levelc. Tax sheltering of investment incomed. The types of investment vehicles
Calculate the amount of annual pension income she has earned based on her 2017 income.a. $1007.50b. $1000.00c. $1105.00d. $910.00
Serena belongs to a defined-benefit pension plan. For each year of service, she earns an annual pension income of 1.4 percent on her first $35 000 of annual income and 1.7 percent on any remaining income for the year. In 2017, Serena earned income of$65
The retirement benefit you receive from a money purchase defined-contribution plan will be based on:a. A certain percentage of your income in the later years of employment.b. A formula that guarantees a set amount to support a modest retirement lifestyle.c. The performance of the funds contributed
Determine the amount of CPP contribution he would make for the year. The year’s maximum pensionable earnings (YMPE) and employee contribution rate for 2017 are $55 300 and 4.95 percent, respectively.a. $2737.35b. $2574.00c. $1905.75d. $2336.40
Francis is an employee of Hybrid Pipeline. His income for 2017 was $52
For retirees, the most important difference between CPP and OAS is that:a. Only OAS is indexed for inflation.b. Only OAS is based on income earned each year relative to the YMPE.c. Only CPP can be taken early at a reduced amount.d. Only CPP can be deferred to receive an increased monthly amount.
For each resident of Canada, their CPP entitlement is calculated based on the:a. Number of years they were a working adult resident of Canada with income under $70 000.b. Dollar value of their contributions and the number of years they contributed to the plan.c. Number of years up to age 65 they
Eleanor is a 63-year-old pensioner who has asked for advice with respect to what government benefits she may be eligible to apply for. Given no further information, which of the following government benefits is Eleanor not eligible to apply for?a. Allowance benefitb. Canada Pension Plan (CPP)c.
Old Age Security benefits:a. Can be deferred five years, which would increase your benefit by 36 percent.b. Are not subject to a “means test.”c. Can be claimed at age 60, but at a reduced amount.d. Are a nontaxable benefit.
Which of the following benefits is not subject to a clawback?a. Old Age Security (OAS)b. Canada Pension Plan (CPP)c. Guaranteed Income Supplement (GIS)d. Allowance for the survivor benefit
True or False? With respect to segregated funds, thedetermination of the value of the death benefitguarantee is similar to that of the maturity guarantee.
True or False? Similar to a mutual fund, ETFs are purchased in real time.
True or False? Diversification among bond funds is not an effective means of reducing exposure to interest rate risk.
True or False? When investors want to assess the performance of a mutual fund, one technique is to compare the return on that mutual fund to the average return for the same type of mutual fund.
True or False? The most important expense statistic mentioned in the Fund Facts document is the back-end load.
True or False? Equity mutual funds that have a lower expected return are also likely to have lower expected risk.
True or False? Short-term bonds are more sensitive to changes in interest rates than long-term bonds.
True or False? Exchange rate risk is the result of a decrease in the value of a foreign bond because the currency denominating the bond weakens against the Canadian dollar.
True or False? Index funds have become more popular because of very low transaction costs.
True or False? Mutual funds with relatively lower expenses tend to outperform other funds.
True or False? Recent studies on mutual funds have found that no-load funds outperform load funds on average, even when ignoring the fees paid on a load fund.
True or False? A declining redemption schedule is associated with a back-end load mutual fund.
True or False? Unlike an open-end fund, shares of a closed-end fund are purchased and sold on stock exchanges.
True or False? The NAVPS is determined by dividing the number of shares outstanding by the NAV.
True or False? One disadvantage of mutual funds is that you could invest in a well-diversified mutual fund that is invested in a group of poorly performing companies rather than good ones.
The potential benefits of investing in a segregated fund include all of the following, except:a. Segregated funds offer a guarantee on your deposits when the contract matures.b. Segregated funds offer a guarantee on your deposits when the policy owner dies.c. Segregated fund contracts are normally
What is the most important difference between an index mutual fund and an exchange traded fund (ETF)?a. ETFs are better managed.b. ETFs trade like stocks.c. There are more types of ETFs.d. ETFs have higher MERs.
Your return from investing in is primarily affected by .a. a Canadian equity fund; Canadian interest ratesb. an Australian bond fund; Australian interest rates and the value of the Australian dollarc. a European equity fund; European stock markets and the value of the Canadian dollard. a Canadian

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Personal Finance 4th Canadian Edition Jeffry Madura, Hardeep Gill - Solutions

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