CPCU 556 Practice Exam 2


Page 1 of 5

1. Edward has a 3-year-old daughter that he hopes will attend college at the age of 18. When constructing an investment portfolio for the accumulated education savings, Edward would be wise to:

2. Janet converted her traditional IRA to a Roth IRA. Which one of the following statements is correct regarding the income tax treatment of this conversion?

3. Although many expenses decline during retirement, certain types of expenses may increase. Which one of the following expenses is most likely to increase during retirement?

4. Which one of the following is generally an eligibility requirement for Medicare?

5. Dollar cost averaging represents what type of personal financial planning strategy?

6. Stan and Cindi, a married couple, retired several years ago. They fund their annual expenses with a combination of Social Security benefits, employer-sponsored retirement plan benefits, and an annuity. They want to take an expensive vacation and are wondering which account to withdraw the money. Their goal is to minimize the income taxes associated with the withdrawal, since they are currently in a high income tax bracket. From which of the following accounts should they take the needed funds?

7. Jamie, age 25, is interested in saving for her retirement. She currently earns a salary of $50,000 and is willing to set aside $5,000 per year to fund her retirement. Her employer offers a Section 401(k) plan, with a dollar-for-dollar match up to 5% of compensation. Which of the following retirement savings vehicles should Jamie first consider when saving for her retirement?

8. ABC Corporation wants to establish a retirement plan that closely resembles an IRA. The company would like to make all the contributions to the plan and would like to make higher annual contributions each year than those permitted under a traditional IRA or Roth IRA. Which of the following would be the most appropriate plan for ABC Corporation?

9. At the time of his death, Stan bequeathed shares of ExTell stock worth $500,000 to his daughter Susan via his Will. Assuming this was the only bequest to Susan from her father, what is Susan’s primary concern?

10. Which one of the following individuals would be eligible to make a $5,000 contribution to a traditional IRA?