Kaczor & Associates Ltd.

If an investment averages a 10% annual return, your money will double in about how many years?

1. 7 years
   Correct:
   Use the “Rule of 72”, a simple formula that tells you how long it will take to double your money with annual compounding at various rates of return. Divide 72 by your rate of return, or 72 : 10 = 7.2 years.
2. 10 years
   Incorrect
3. 15 years
   Incorrect

The most important factor in building a retirement fund is diversification of investments.

1. True
   Incorrect
2. False
   Correct:
   Saving regularly is more important then any other investment factor. Aim to save at least 10% of your pretax earnings,and save regularly.

In investing, it’s wiser to put your money in an absolutely safe investment rather then risk losing anything.

1. True
   Incorrect

2. False
   Correct:
   If you’re too conservative in your investing, you run another risk – the risk of inflation. If your investments earn less then the rate of inflation, they are actually declining in value.

Loading up on your employer’s stock in your 401 (k) plan is a smart investment.

1. True
   Incorrect
2. False
   Correct:
   As general rule, you should avoid being too heavily invested in any one company’s stock. When that company is also your employer, your risk of loss increases. A downturn for your company will not only diminish your portfolio, it could adversely affect your next raise or bonus. It might even cost you your job.

Life insurance is more important then disability insurance.

1. True
   Incorrect
2. False
   Correct:
   You are four times more likely to become disabled then to die before age 65.To provide for your family’s financial security, you should consider disability insurance as important as life insurance.

Municipal bonds are not a smart investment choice for:

1. anyone
   Incorrect
2. your IRA account
   Correct:
   Never put tax-deferred investments such as tax-free municipal bonds in a tax-sheltered IRA. Not only are you duplicating the tax-deferral, but with tax-exempt bonds you’ll earn a lower return and convert what would be tax-free income into taxable distribution when you withdraw your IRA funds.
3. your regular brokerage account
   Incorrect

Dollar cost averaging is a technique for buying stocks on the Internet.

1. True
   Incorrect
2. False
   Correct:In dollar-cost averaging, a fixed sum is invested in the same stock or mutual fund on a regular basis without a concern for price on a given day. Instead of trying to identify the low point for the stock and buying it then, you simply buy whatever number of shares your fixed amount will purchase on the same day each month. When market is down, you get more shares. Assuming that the share price of your stock increase over long term, your average cost per share will be lower then the current market value.

You may have to pay income taxes on your mutual funds even if you don’t sell them.

1. True
   Correct:
   At year-end, most mutual funds distribute their taxable dividends and capital gains for entire year. As a shareholder, you need to report this taxable income on your tax return.
2. False
   Incorrect

Holding property jointly with right of survivorship means that if you die, the other owner automatically gets the property, no matter what your will says.

1. True
   Correct:
   Generally True
   Check with your attorney.
2. False
   Incorrect

A Roth IRA is different from regular IRA in that:

1. contributions are not deductible
   Incorrect
2. withdrawals after five years are not taxable once you’re 59 1/2
   Incorrect
3. both A and B
   Correct:both A and B

In a divorce one spouse gets the $100,000 bank account, and the other gets stock portfolio worth $100,000. This means:

1. They’re getting equal value.
   Incorrect
2. The one getting the bank account is getting more.
   Correct:
   Though both assets appear equal in value, the spouse getting the stock may have capital gains taxes to pay when the socks are sold. Dividing assets in a divorce should be done with consideration paid to tax consequances.
3. The one getting the stocks is getting more.
   Incorrect

Net worth refers to:

1. everything you own minus everything you owe
   Correct
2. the total of your investment accounts plus your pension plan accounts
   Incorrect
3. the amount of cash you could convert your assets to in an emergency
   Incorrect

Refinancing your home mortgage should be done whenever current rates are two points lower then your existing mortgage rate.

1. True
   Incorrect
2. False
   Correct
   Refinancing should be considered when you will own the home long enough to recover the cost of refinancing through the lower monthly payments refinancing gives you.

If you need money to purchase your first home, you can withdraw up to $10,000 tax-free from IRA.

1. True
   Incorrect
2. False
   Correct:You can withdraw up to $10,000 without being assessed the 10% early withdrawal penalty, but the money will be subject to income tax.

If you can’t pay the income tax you owe, there’s no point in filling a tax return.

1. True
   Incorrect
2. False
   Correct:
   Filing a return, even if you can’t pay the tax you owe, will prevent being assessed a late filing penalty of 5% a month, up to 25% of the tax due.

The life insurance that is pure insurance with no investment feature is called:

1. cash value
   Incorrect
2. whole life
   Incorrect
3. term
   Correct
4. variable life
   Incorrect

Drawing up a will is vital once you reach age 40.

1. True
   Incorrect
2. False
   Correct:
   Age has little to do with the need for a will. At whatever point in your life you have assets you wish to go to heirs of your choosing or dependents you wish to provide for, you need a will.