D363 Assesment

An individual wants to build up an emergency fund in a savings account. Monthly expenses for this individual total $4,000 per month, while monthly income is $5,000.

How much can be saved if the individual wants to build up two months’ worth of income savings?

• $1,000

• $2,000

• $4,000

• $5,000

An individual wants to make a large purchase that will take two years to pay off. The individual owns a home, earns an income of $75,000, and has no other debt aside from a $900 mortgage payment with five years left at 3%. The individual will retire within one year and will be required to take minimum distributions from a traditional retirement account.

Which financing option is appropriate for this individual’s financing objective?

• A one-time credit card purchase

• A home equity line of credit

• An early distribution from retirement accounts

• A consumer finance company loan

An individual's net earnings are $60,000 per year, with living expenses for housing, food, and transportation amounting to $3,200 per month. The individual wants to save $30,000 for a home down payment and plans to travel once a year, with the trip costing $3,000.

How long until the individual can fund both goals for the same year if income and expenses stay consistent?

• 1 year and 8 months

• 2 years and 9 months

• 3 years and 2 months

• 3 years and 4 months

A cost-sensitive individual utilizes an advisory firm for financial planning and investment management with a conservative risk profile. The client pays $1,000 per year for a financial plan and $100 per year in investment product expenses.

Which possible outcome can complicate this individual’s expectations based on the risk profile and needs?

• Firm’s allocation projecting a short investment time horizon

• Firm recommendations not meeting investment risk appetite

• Firm’s fees exceeding overall investment returns

• Firm’s product offering increasing in cost annually

Jack is a freelance technical writer receiving a 1099 form from every client paying over $600, and Jack earns between $60,000 and $65,000 per year. Jack also has increased monthly expenses to $4,000 per month, as spending needs have increased after Jack quit a job last year that paid $55,000 in W-2 wages.

How should Jack modify financial planning around this employment change?

• Fund an investment account to increase money available for future tax payments

• Maximize business deductions and aggregate savings for higher tax obligations

• Maintain deductible expense spending to have the highest possible tax write-offs

• Make large cash donations to charitable causes to deduct against taxable income

An individual earns $75,000 annually. Monthly rent is $2,200, and 20% of monthly cash income is spent on utilities, groceries, and transportation. To pay off a credit card in six months, the client agrees to monthly payments of $1,650.

What is the monthly debt-to-income ratio?

• 25.6

• 26.4

• 32.5

• 33.2

An individual has monthly expenses of $1,800 for rent and $1,000 for groceries, transportation, and other necessary expenses.

Which average return should the individual expect to match 25% of yearly expenses on a $100,000 investment?

• 8.2%

• 8.4%

• 9.6%

• 9.8%

A student is working part-time while going to university. The student is making $18,000 per year and saves $3,000 per year, as $15,000 of the student’s yearly living expenses are currently subsidized by grants. Grant funding will run out when the student has one year left of schooling.

How much of a deficit will the student have to finance if the student saves each year for three years?

• $3,000

• $6,000

• $9,000

• $12,000

An individual’s financial goal is to pay off debt, including $15,000 with an APR of 12%, $20,000 with an APR of 8%, and $15,000 with an APR of 6%.

How should the individual distribute debt payments?

• Make at least minimum payments to all, with extra funds towards $15,000 with an APR of 12%

• Pay off the highest amount of debt of $20,000 with an APR of 8% first, then other debts

• Satisfy the lowest interest debt of $15,000 with an APR of 6% first before paying other debts

• Proportionally distribute payments to all debts, paying off $7,500 for average APR of 10% earliest

An individual wants to allocate $600 per month into an emergency savings account. The individual plans on not using the funds and wants to accumulate a return to offset the effects of inflation, but the individual also prioritizes liquidity and price stability, as the individual has low risk tolerance.

Which option will be appropriate for this goal?

• A ladder of short-term certificates of deposit at a bank

• A diversified municipal bond fund in class C shares

• A money market account with yields close to the 10-year treasury note

• A variable annuity with 10% yearly permitted disbursements