FINC355 homework 1 assignment

DIRECTIONS: Here is the Homework #1 Assignment. Use the Homework #1 Answer Sheet for your responses to the questions. When you have completed Homework #1 submit the Answer Sheet to your Homework #1 Assignment Folder.

Please submit your Homework #1 in MS Word format with the following file name: LastNameFirstInitial_Homework01AnswerSheet.docx. For example, if you name is John Smith, the file name of your Answer Sheet should be SmithJ_Homework01AnswerSheet.docx.

Number

Questions

1

Howard Stein is 65 this year and his wife, Gertie, is three years younger. They were married a month after Gertie graduated from high school. She has been a full-time homemaker all of her adult life. After Howard and Gertie’s youngest child graduated from college, Gertie devoted 20 hours a week to volunteer efforts. Howard will begin drawing Social Security retirement benefits this year. Gertie can receive

a. no benefits because she was never employed outside the home

b. a mother’s benefit because she has had children

c. a spouse’s benefit equal to 50% of Howard’s primary insurance amount (PIA)

d. a benefit based on credits earned from her volunteer work

e. a spouse’s benefit equal to less than 50% of Howard’s primary insurance amount (PIA)

2

Which of the following types of health care is not covered under Medicare Part A

a. home health visits

b. hospice care for terminally ill patients

c. physical therapy

d. inpatient hospital care

e. post-hospital extended care

3

Juan T. B. and I. B. Cool were married 8 years ago. Their divorce was finalized this week. At age 65, I. B. is eligible for Social Security benefits under Juan’s work record.

a. true

b. false

4

Which of the following is not an advantage of defined benefit plans?

a. security to participants

b. higher deduction for employer

c. flexibility to offer more in profitable years

d. greater value to older employees

5

Richard Leftin, founder of Leftin Manufacturing, Inc., wants to implement a retirement plan that would allow him and the three managers of his business to set aside up to a fourth of their earnings from the business in a retirement plan. He does not want to fund a retirement plan for any of his 50 line workers. Mr. Leftin should consider a

a. defined contribution plan

b. defined benefit plan

c. money purchase plan

d. profit sharing plan

e. nonqualified plan

6

Alice Compton, owner of Fashion Design, wants to offer a retirement plan that will give her employees an incentive to maximize their performance. Alice should consider

a. a defined benefit plan

b. a money purchase plan

c. a profit sharing plan

d. a and b

e. b and c

7

Mr. Teague is covered under Medicare Part A. He was hospitalized on August 10 and discharged on August 15. Complications set in and he was readmitted to the hospital on August 25. Which of the following is true?

a. Medicare Part A counts both hospitalizations as part of his first benefit period

b. Because both hospitalizations occurred in the same year, Mr. Teague need only pay the deductible for the first hospitalization

c. Medicare Part A will cover only one hospitalization per calendar year, so his second hospitalization is not covered

d. Medicare Part A will cover both hospitalizations, but Mr. Teague must pay a deductible for each one

e. Medicare Part A will cover all costs of the first hospitalization but will require a deductible for the second hospitalization

8

Mrs. Albright is covered under Medicare Part A. She was hospitalized on June 4. She was discharged on June 10. She was hospitalized again in late September for 5 days. Which of the following is true?

a. Medicare Part A will cover all costs of the first hospitalization but will require a deductible for the second hospitalization

b. Because both hospitalizations occurred in the same year, Mrs. Albright need only pay the deductible for the first hospitalization

c. Medicare Part A will cover only one hospitalization per calendar year, so her second hospitalization is not covered

d. Medicare Part A will cover both hospitalizations, but Mrs. Albright must pay a deductible for each one

e. Medicare Part A will cover all costs of both hospitalizations because, taken together, Mrs. Albright did not exceed her 60 days of hospitalization per year

9

Dr. I. L. Pullem, Dr. Ben Shur, and Dr. Jana Whitebite, are dentists. They have two full-time and one part-time office staff as the only employees in a professional corporation. The doctors want to maximize tax-favored benefits for themselves and lessen benefits for their employees. They should consider a

a. profit sharing plan

b. defined benefit plan

c. Section 401(K) plan

d. money purchase plan

e. cash balance plan

10

Which of the following is the last step when using the seven-step planner to determine the required current monthly savings that will meet a future retirement income objective?

a. calculate retirement cash flow (shortfall or surplus)

b. identify income from current assets

c. calculate required savings to fund shortfall

d. adjust income sources for inflation

e. identify fixed income and amounts payable at retirement

11

Which of the following is (are) true regarding entitlement to Social Security retirement benefits?

a. an individual must be fully insured to receive Social Security retirement benefits

b. reduced Social Security benefits are available at age 60

c. age for receiving full Social Security benefits is gradually being increased to 67

d. a and b

e. a and c

12

April Storm had earned 40 quarters of Social Security coverage before she was seriously injured in an auto accident. April was in the hospital for a month, but then she began working again at her former place of employment part time. April is entitled to Social Security disability benefits.

a. true

b. false

13

Hospice care is covered under Hospital Insurance (Part A) when the beneficiary meets all of the following requirements, except

a. is eligible for Hospital Insurance benefits

b. is certified by a doctor as terminally ill

c. files a statement electing to waive all other Medicare coverage for hospice care

d. pays the required deductible

14

Which of the following is not an acceptable method for overcoming a retirement shortfall?

a. cut back on expenses before retirement

b. invest a large portion of a retirement portfolio in a high-risk investment to obtain a higher return

c. increase pre-retirement savings

d. retire later

e. tap into home equity

15

Which of the following cannot be accomplished with a qualified retirement plan?

a. Help employees save for retirement

b. Defer taxes for owners and highly compensated employees

c. Customize benefits for selected executives

d. Help retire employees

e. Create an incentive for employees to be more productive

16

When selecting your assumptions for the retirement needs analysis, what type of data is relevant and source is valid?

a. stock market returns supplied by your local stock broker

b. price of gold listed on the commodities exchanges

c. historical inflation figures from the Bureau of Labor Statistics

d. retirement plan expenses provided by the plan administrator

e. Municiapal bond pricing data provided by the MSRB

17

Which of the following would not be included in a retirement “fact finder”?

a. balance in profit sharing plan

b. expected Social Security income

c. amounts invested in mutual funds

d. amount of last year’s tax refund

e. client goals and objectives in retirement

18

Dr. Curt N. Short practiced medicine in a general partnership for 15 years prior to his retirement this year at age 55. Is he eligible for Medicare benefits this year?

a. yes

b. no

19

Elsie and her husband Zeb were married 55 years before he died last year. When Zeb retired at age 65, he began receiving benefits from Social Security and Medicare Part A. As a life-long homemaker, Elsie receives spouse benefits from Social Security. Earlier this year, at age 75, Elsie was in a car accident, breaking her hip and cracking four ribs. After two weeks in the hospital, she was transferred to a skilled nursing facility for 10 more days. After her discharge, a visiting nurse came by her home once a week. Which of the following services are covered under Medicare Part A for Elsie?

a. inpatient hospital care only

b. inpatient hospital care and post-hospital extended care in a skilled nursing facility

c. inpatient hospital care and home health service benefits

d. post-hospital extended care in a skilled nursing facility and home health service benefits

e. inpatient hospital care, post-hospital extended care in a skilled nursing facility, home health service benefits

20

Employment after retirement will

a. always result in a loss of all Social Security Benefits

b. result in loss of some or all Social Security Benefits only for those under normal retirement age who have earnings above a specified threshold

c. result in loss of $1 of benefits for each $3 of earnings for those at or older than normal retirement age

d. reduce Social Security earnings only if the worker is under normal retirement age and self-employed

e. have no effect on Social Security Benefits