AAMS All Modules 2025 Solution solved 100% Passed!!, Exams of Manufacturing Systems Design

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AAMS All Modules

An employer plans to use corporate-owned life insurance to informally fund a nonqualified deferred compensation agreement and wants flexibility regarding investment choices. Which one of the following types of life insurance should this employer choose? Answer: Variable life insurance The latest economic reports have been gloomy, and the stock market is in a protracted slump. Most of your regular stock customers are selling out their positions. A new client, Mr. Jones, sees these conditions as a buying opportunity. You would define his investment personality as Answer: contrarian As of December 31, 20X1, Bob Larkin has the following financial data: Bond fund $17, Residence$400, Vested 401(k) plan$95, Auto notes$16, Residence mortgage$285, Auto payments$7, Automobiles$45, Checking account$8, Utilities$4, CD$15, Stock$125, Home equity loan$40,

2024/ What is Bob's net worth? Answer: $364, Assets = $17,000 + $400,000 + $95,000 +$45,000 + $8,000 + $15,000 + $125,000 = $705,000. Liabilities = $16,000 + $285,000 + $40,000 = $341,000, so net worth is $364,000. Notice that auto notes of $16,000 are included in this calculation, but auto payments of $7,000 is a cash flow item and therefore not included. For the year ending December 31, 20X2, Ted Jones has the following financial information: Salaries$70, Auto payments$5, Insurance$3, Food$8, Credit card balance$10, Dividends$1, Utilities$3, Mortgage payments$14, Taxes$13, Clothing$9, Interest income$2, Checking account$4, Vacations$8, Donations$5,

2024/ What is the surplus or (deficit) for Ted? Answer: $2, Income = $70,000 + $1,100 + $2,100 = $73,200. Expenses = $5,000 + $3,800 + $8,000 + $3,500 + $14,000 + $13,000 + $9,000 + $8,400 + $5,800 = $70,500, so there is a surplus of $2, Which one of the following statements comparing the suitability and fiduciary standards is correct? Answer: Legally, suitability disputes are often resolved in arbitration whereas fiduciary disputes are ultimately resolved in the courts. Which one of the following types of distributions from a qualified retirement plan may be subject to mandatory 20% withholding? Answer: indirect rollover Which one of the following statements regarding a qualified plan is correct? Answer: The employer's deduction is available in the year that a contribution is made. All of the following should be agreed upon between the client and the investment professional when making recommendations based on an investment policy statement EXCEPT Answer: specific investments. Which of the following has a direct bearing on which investments are appropriate for achieving a goal? Answer: the investor's time horizon One purpose of an investment policy statement is to Answer: provide guidelines around which the portfolio is to be constructed and managed. Which of the following are elements of any investment policy statement?

2024/ I. the client's investment goal II. suitable and unsuitable investment vehicles III. an acceptable risk level IV. a provision for periodic review Answer: D) I, II, III, and IV As the investment policy statement formulation moves to policy implementation, the Answer: A) investment professional takes a leading role. An investor notices that technology stocks are in a strong bull market and wants to take advantage of it. Even though valuations are at record high levels, he buys a technology stock that a brokerage firm is recommending. Which one of the following is the investor demonstrating? Answer: C) rationalization One change in a client's situation that would require an adjustment in the asset management process would be Answer: a sudden early retirement from employment. Dan has bonds maturing in two weeks. Since he bought the bonds, interest rates have fallen. Dan's bonds are most likely subject to which one of the following risks? Answer: reinvestment risk Jim Wilson has a $20,000 portfolio of four different stocks. The distribution of this capital and the betas of these stocks are shown below.

2024/ % of Portfolio Value/ Beta Stock A 10% 1. Stock B 20% 1. Stock C 30% 1. Stock D 40% 1. What is the weighted-average beta of Jim's stock portfolio? Answer: 1. The risk-free rate is 3%, the market rate of return is 10%, the standard deviation of XYZ stock is 20, and the beta of XYZ stock is 1.40. Given this information, and using the capital asset pricing model, what is the expected return of XYZ stock? Answer: 12.80% Assume the following asset classes have the correlations to long-term corporate bonds shown below: Treasury bills:. Gold: -. Large stocks:. Small stocks:. Which one of the following provides the most diversification benefit to a portfolio consisting of long-term corporate bonds? Answer: Gold Nancy has $10,000 to invest at the beginning of each of five years, at a fixed annual rate of 8%. How much will her money be worth in five years? Answer: $63,

2024/ An investor who would like to know how a portfolio manager performed relative to how the manager was expected to perform on a risk-adjusted basis would use which one of the following indicators? Answer: Jensen's alpha Asset allocation can best be defined as the process of Answer: distributing portfolio investments among various investment categories. Based on historic performance data in the course, which class of assets has provided the greatest pretax total return since 1926? Answer: A) small-cap stocks Investment professional Ted Conway has just received the latest long-term total return data for different asset classes. He sees that common stocks returned 10% compounded with a standard deviation of 14.0; T-bills turned in a 4% return with a standard deviation of 3.0. What is the expected return of a portfolio of 80% stocks and 20% T-bills? Answer: (.80 x .10) + (.20 x .04) = .08 + .008 = 8.8% Which one of the following is a characteristic of mortgage-backed securities? Answer: Quoted yields are based upon anticipated prepayments of the underlying mortgages. According to research reports from your firm, CodeHead Software's earnings for this year are estimated to be $2.00 and next year are estimated to be $2.25 per share. The current P/E ratio of similar software vendors is 15, but CodeHead typically sells at a 10% premium to these other vendors. What stock price would you estimate for CodeHead next year? Answer: It sells at a 10% premium so the P/E of the industry, 15, has to be increased by 10%. 10% of 15 = 1.5, which added to 15 = 16.5. Then taking next year's earnings of $2.25 × 16.5 = $37.125 or $37.13.

2024/ Henry owns a 10-year bond with a coupon rate of 4.85% (paid semiannually). If the comparable yield for this quality bond is currently 5.5%, what should be the intrinsic value of his bond? Answer: A) $930. B) $847. C) $950. D) $929. Which of these correctly lists characteristics of the downturn period of a business cycle? Answer: falling interest rates, increased unemployment, lower lending activities Tactical asset allocation is utilized to Answer: move assets from those that appear overvalued to those that appear undervalued. The relationship between investment strategy and investment policy is one in which Answer: investment strategy is compliant with the investment policy. Susan Benson has adopted a value averaging strategy of increasing her account's value by $5,000 each month. How many shares (rounded to the nearest whole share) should she purchase in the second month, given the information provided below? Answer: 550

2024/ Which of these is NOT one of the three enemies of investment strategy? Answer: A) contrarian sentiment Which one of these is NOT a type of bond strategy? Answer: put-to-call Modern value investors continue to look for all of the following practices from Benjamin Graham, EXCEPT Answer: high price-to-sales ratios. Mark was offered participation in a nonqualified stock option plan. If he were to choose this form of additional compensation over an incentive stock option plan, which one of the following statements would apply to him? Answer: He must recognize ordinary income no later than the date the option is exercised. Equity-based compensation plans may Answer: be established for executives only and do not have to cover rank-and-file employees, and are therefore not generally subject to ERISA requirements. Which of the following is NOT an itemized deduction? Answer: capital losses Which one of the following is a tax preference item or adjustment for purposes of the alternative minimum tax? Answer: tax-exempt interest on private-activity municipal bonds issued in 2007 A self-employed client opens a SEP-IRA on the advice of her investment professional. The most immediate effect on her tax situation for this year is Answer: tax reduction.

2024/ Ms. Arbuckle paid approximately $23,500, or 23.5% of her taxable income of $100,000, to the IRS. What does this percentage represent? Answer: average tax rate Bob received 100 shares of stock from his uncle, Raymond. Raymond purchased the stock eight years ago for $12 per share. Bob received the stock as a gift from uncle Raymond two years ago, when the fair market value of the stock was $ per share. Assume Bob sold the stock this year for $19 per share. What would be Bob's basis in these shares? Answer: $12 per share. In the case of an asset received as a gift, if the fair market value on the date of the gift is greater than the donor's adjusted basis, the recient has a carryover basis. In this case, uncle Raymond had purchased the stock for $12 per share and had gifted it to Bob when the fair market value was $15 per share. Bob subsequently sold the stock for $19 per share. Thus, the carryover basis from uncle Raymond would be $ per share. What is the tax treatment for a shareholder participating in a common stock's dividend reinvestment program? Answer: C) The shareholder is treated as if he received a cash dividend equal to the fair market value of the shares purchased under the plan. Which one of the following must be done in order to exclude the accrued interest on EE bonds used to pay higher-education expenses from income? Answer: The money must always be used to pay the higher-education expenses of the bondholder, the bondholder's spouse, or the bondholder's dependents. Which category of retired persons is the least susceptible to cost-of-living increases than the general population? Answer: Retirees who own their own home

2024/ Earned income usually ceases when a person retires. From what sources will a retired person typically receive income? I. Personal savings and investments II. Borrowing against their home equity III. Social Security IV. Employer-sponsored retirement plans Answer: I, III, and IV Which choice best explains a fundamental investment strategy for accumulating funds to be used during retirement? Answer: You should begin investing many years before retirement to take advantage of compounding returns. A client, age 55, takes a $3,000 distribution from his rollover IRA to pay for a semester of his 21-year-old son's college tuition. Which one of the following correctly explains the tax consequences for the father? The entire distribution is Answer: subject to income tax, but it is free from the 10% early withdrawal penalty. Joan Allen recently terminated from the Carson County School District. She plans to roll her 403(b) plan account into her traditional IRA (account number 235472) at Mega Mutual Funds and wants to avoid the 20% withholding. Which one of the following statements correctly instructs her on the procedure? Answer: Instruct the plan administrator to make the distribution check to "Mega Mutual Funds, account #235472, for the benefit of Joan Allen." George Billups recently retired. Prior to his retirement, he and his wife agreed that she should sign the required waiver to allow the money purchase plan to pay George's retirement income as a single life annuity with no period certain. Which one of the following statements best explains why George and his wife would select the single life annuity distribution option from his retirement plan?

2024/ Answer: to maximize the periodic payment because George and his wife have no need or desire to have any portion of the plan benefits left after his death Which of these options explains an investment planning consideration during retirement that is related to the length of the retirement period? Answer: Because the retirement period can be long, clients should consider taking greater risk for greater return to keep up with inflation. Which one of the following provides a means by which a person who has accumulated a large amount of her company's stock can convert that stock into a cash flow stream for retirement (without her selling the stock)? Answer: a charitable remainder trust Which of these choices generally represents the tax consequences to an employer and employee under a nonqualified deferred compensation plan? An employer will Answer: receive a deduction when the employee recognizes income. Which one of the following is a correct statement of a tax consequence of an off- shore rabbi trust? Answer: developing rules and regulations for its members. An investment professional is assessing the life insurance needs of the Johnson family. As it stands, Mr. Johnson has determined that the family's immediate cash flow requirements in the event of his death are $65,000. The amount needed to meet all future funding requirements (net of Mrs. Johnson's income and Social Security and pension benefits) is estimated to be $550,000. The family owns a home in which their equity interest is $200,000. Based upon these figures, the investment professional would recommend life insurance with a face amount of Answer: $615,

2024/ $65,000 + $550,000 = $650,000; the $200,000 equity in the home does not represent a truly liquid asset to offset these expenses (though it could possibly be tapped with a home equity loan). A major responsibility of FINRA is Answer: insuring customer accounts in the event of the liquidation of brokerage firms. Hi-Tech Solutions Inc. is a small publicly traded corporation. The company wants to provide an incentive to its vice president, Tom Salazar, to continue with the company; however, the company needs to avoid any withdrawal from its much- needed cash account. Based on these characteristics, Hi-Tech Solutions Inc. should establish Answer: a restricted stock plan. Which one of the following is the most appropriate use of life insurance by a business? Answer: Provide money to help continue the business at the death of a partner or other owner As described in this course, many individuals and households overlook the potential needs for Answer: disability income and long-term care insurance. Mrs. Jennings purchased a life insurance policy that will pay $100,000 to her beneficiary should she die anytime during the next year. She is guaranteed the right to renew this policy every year for the next five years. The policy is not expected to have any cash value. Mrs. Jennings has purchased a Answer: term life insurance policy. Which one of the following types of brokerage clients has been identified as a good prospect for cash value life insurance? Answer: clients who prefer the discipline of regular, periodic investments

2024/ With respect to cash value life policies, what part of the policy value, if any, is subject to income taxation when the policy is surrendered? Answer: the amount of the surrender value that exceeds basis Brenda is the owner of a whole life insurance policy on her husband, Rolf. Their daughter, Vera, is named as the contingent beneficiary. In issuing the policy, the insurance company has asked that a settlement option be selected. Which one of the following individuals is currently empowered to make the selection? Answer: Brenda, the policy owner Your client, Ben Parsons, age 45, received a $500,000 legal settlement. Ben does not currently need additional income. He would like to invest this money in a safe place, where it will grow in value until he reaches age 65. Based only on these facts, which one of the following would be the most logical choice for Ben? Answer: a single-premium deferred annuity June O'Leary purchased a deferred annuity 15 years ago. Now, at age 65, she wants to begin receiving annuity payments for the rest of her life, but she is concerned about taxation of the payments. You explain that she will Answer: be taxed on any amount representing investment gains Traditional community property is a form of property ownership that Answer: will require probate upon the death of an owner. The role of the investment professional who is not also a licensed attorney in the estate planning process includes all of the following EXCEPT Answer: drafting various estate planning documents.

2024/ Which one of the following statements best describes the term "estate tax base"? Answer: the taxable estate plus the decedent's adjusted taxable gifts All of the following are permissible deductions for the federal estate tax EXCEPT Answer: the annual exclusion. One goal of marital deduction and bypass planning is to Answer: fully use a person's applicable credit amount. Which of the following will avoid probate at the owner's death? I. POD account II. Tenancy by entirety III. Funded inter vivos trust IV. Joint tenancy with right of survivorship Answer: I, II, III, and IV Which statement regarding a Section 2503(b) trust is CORRECT? Answer: The beneficiary's right to trust income is a present interest that qualifies for the annual exclusion. Which one of the following is a characteristic of probate? Answer: Often a costly and complex process A nonspringing durable power of attorney Answer: remains effective after the principal becomes incapacitated.

2024/ The Investment Company Act of 1940 addresses which one of the following? Answer: the requirement that mutual funds must send semiannual and annual reports to shareholders If a taxpayer is in a 24% marginal and 20% average tax bracket, making an additional $100 charitable contribution will result in a Answer: $24 decrease in taxes. Which one of the following is a source of ethical conflict in the securities industry? Answer: unrealistic client expectations For purposes of the generation-skipping transfer tax, a skip person is Answer: someone two or more generations younger than the person who made the transfer. You have just sold one of your customers some speculative stocks without knowing her risk tolerance level. In which one of the following ethical duties may you have failed your customer? Answer: duty to diagnose Which of the following estate planning tools would allow an attorney-in-fact to expedite the principal's Medicaid eligibility, arrange for in-home or nursing home care, hire necessary health care personnel, or employ companions? Answer: Durable power of attorney A trust that is created by a decedent's will and made effective at death is a(n) Answer: testamentary trust. Which of the following ethical duties are applicable in the asset management process step of establishing financial goals?

2024/ I. Diagnose II. Professionalism III. Keep current IV. Diligence Answer: I and IV The provision that certain mutual fund policies cannot be changed without shareholder approval is addressed in the Answer: Investment Company Act of

A major responsibility of FINRA is Answer: developing rules and regulations for its members. Which of these are provisions of the Sarbanes-Oxley Act of 2002? I. Requires an anti-money-laundering compliance program to be in effect. II. Requires chief executive officers of public corporations to certify financial information in the quarterly and annual reports. III. Makes unlawful the extending of credit to any director or executive officer. IV. Requires investment companies to verify the identity of any person opening an account. Answer: II and III Which act repealed a prohibition that had been in place preventing financial institutions from offering a combination of commercial banking, investment banking, and insurance services? Answer: Gramm-Leach-Bliley Act of 1999 The Employee Retirement Income Security Act (ERISA) was primarily passed because of concern regarding the integrity and safety of Answer: employer- sponsored retirement plans.

2024/ An investment professional who reads investment journals is complying with the Answer: duty to keep current. You sell your client a GNMA based on your explanation that they are "safe" because they are guaranteed by the U.S. government. In which one of these ethical duties may you have failed your customer? Answer: Duty to disclose The SEC commissioned the RAND study, which found that there was a great deal of confusion for investors as far as understanding the differences between Answer: broker-dealers and investment advisers. Amy, a financial services professional, implies to Ross that she is an expert in option trading and strategies but, in fact, knows only the basic elements. Looking solely at Amy's lack of competency in this area, which fiduciary duty has NOT been met? Answer: duty of care The fundamental duty of a fiduciary adviser is to look out for the client's best interest. Which fiduciary duty is most directly tied to making sure all actions are being made solely for the benefit of the client? Answer: Duty of loyalty Which one of these is least likely to lead to ethical conflicts? Answer: Reasonable compensation Which one of these statements comparing the suitability standard and the fiduciary standard is CORRECT? Answer: Verbal disclosure may be adequate under the suitability but not the fiduciary standard.

2024/ The Uniform Prudent Investor Act identified five fundamental changes in the former criteria for prudent investing. All of these statements are correctly stated except Answer: the standard of prudence is applied to each investment individually. The administration of ERISA is divided among all of these government entities except the Answer: Securities and Exchange Commission. What was the approximate dollar amount of U.S. retirement assets held in IRA accounts at the end of 2019? Answer: $11.0 trillion Which of these statements regarding the level of trust in the financial services industry is CORRECT? Answer: Despite the overall stock market recovery since the market meltdown in 2008, trust levels of financial services remain low. In the administration of a qualified retirement plan, which of these individuals is considered to be a fiduciary? Answer: A financial adviser handling the investment of plan assets Which of these is the most important area of concern that was addressed in the Dodd-Frank Wall Street Reform Act? Answer: Systemic risk Roger Jones is considering recommending one of two mutual funds for a client. Although both funds are generally appropriate for the client, one is a proprietary fund that pays Roger a higher commission and the other has a better risk/return profile. Roger decides to recommend the latter fund to the client. With which of these fiduciary duties has Roger complied? Answer: Loyalty

2024/ Which of the following statements regarding the fiduciary standard is CORRECT? Answer: It is considered a higher standard than the suitability standard. What is the primary function of central clearing counterparties (CCPs) that have been set up as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010? Answer: To facilitate the netting of swap contracts Assume Tom's area of expertise is in annuities and insurance products. One of Tom's clients, Mary, comes to him with specific questions regarding the taxation of her 401(k) contributions based on new tax legislation that was passed earlier in the year. Tom doesn't know the answer to help Mary. What duty should Tom adhere to in order to fulfill the duties owed to his client? Answer: Duty to consult The obligation to "know your customer" is specifically covered in the Answer: duty to diagnose. Which of these statements comparing the suitability standard and the fiduciary standard is CORRECT? Answer: legal recourse under the suitability standard is normally through arbitration and not the public courts. Which of these statements regarding the prudent investor rule is the most accurate? Answer: Prudent investing requires that fiduciaries must diversify their investments. Which one of these statements is CORRECT regarding recent trends in the financial services industry? Answer: Risk taking by financial firms increased as private partnerships became publicly traded companies.

2024/ Which of these statements regarding disclosure is most accurate? Answer: In general, research has shown that more information and disclosure is not very effective in improving decisions. The Securities Investor Protection Act of 1970 insures customers' accounts up to Answer: $500,000. The trend of consolidations within the securities industry has created larger firms, resulting in Answer: more difficulty for top management to impart their ethical standards to their employees. Which one of these is a "best practice" for complying with the fiduciary standard? Answer: Focus on "advice" and not "sales" Tenancy in common is a form of property ownership that Answer: will require probate upon the death of a tenant. An investment professional who is NOT an attorney is engaged in the unauthorized practice of law when he or she counsels a client regarding the Answer: validity of a living will. All of the following assets would be included in a decedent's gross estate except Answer: the decedent's vested interest in a single life annuity on the decedent's life. A type of trust that is often used in incapacity planning is known as a(n) Answer: contingent (standby) trust.

2024/2025 If the executor of a decedent's estate elects the alternate valuation date, most of the estate assets will be valued as of how many months after the decedent's death? Answer: 6 The largest and most complete interest in property that one can own is Answer: fee simple. Which of the following is an irrevocable trust in which the grantor retains a right to receive fixed payments payable at least annually for his or her life or for a term of years? Answer: Grantor retained annuity trust All of the following assets in a decedent's estate require probate except Answer: the decedent's interest in property held in joint tenancy with right of survivorship that the decedent left to his son in his will. A person who dies testate Answer: has a valid will. Which of these is a characteristic of probate? Answer: Often a costly and complex process Which statement regarding gift splitting is NOT correct? Answer: Gift splitting does not require the filing of a gift tax return. Which of these is NOT a deduction from the total gross estate in arriving at the adjusted gross estate? Answer: Gift tax paid on prior taxable gifts The marital deduction for a recipient spouse who is a U.S. citizen is Answer: unlimited

2024/2025 Dorothy, age 73, is single. She has one granddaughter who is 16 years old. Dorothy wants to help fund the granddaughter's college education. If Dorothy decides to open a Section 529 plan for her granddaughter, what is the maximum amount Dorothy can contribute to the plan in 2022 without making a taxable gift, assuming she has made no prior gifts to the granddaughter? Answer: $80,000 Which of these is a characteristic of a living will? Answer: Allows an individual to specify, in advance, his wishes about medical treatment and artificial life support under specific circumstances The gross estate is best defined as all property Answer: subject to the federal estate tax. Which one of the following is NOT a federal transfer tax? Answer: Income tax Which of these is the valuation date for gifts? Answer: The date on which the transfer is completed Which type of trust is one from which the grantor receives all income earned by the trust? Answer: Grantor retained income trust (GRIT) Which form of property ownership is only available for spouses? Answer: Tenancy by the entirety Which term describes the process to be followed if a person dies without a will? Answer: Intestate

2024/2025 Which of these powers of attorney enables a principal to grant powers that remain in effect throughout the principal's incapacity? Answer: Durable power of attorney Kurt is establishing a trust for the benefit of his nephew, Lloyd, age 26. Lloyd has a history of financial irresponsibility and has run up significant amounts of debt since he got out of college. Kurt wants to ensure that Lloyd is not able to assign his interest in the trust to a creditor and that Lloyd's creditors cannot demand that the trustee pay Lloyd's debts. Which of the following trust provisions will accomplish Kurt's objective? Answer: Spendthrift provision Two sisters plan to purchase an office building together. One sister will contribute 80% of the purchase price, and the other will contribute 20%. The sisters want title to the property to reflect their respective ownership shares of 80% and 20%, and they want the ability to leave their interests to whomever they choose under their wills. Which of the following forms of property ownership will meet the sisters' objectives? Answer: Tenancy in common Carmen is considering estate-planning options and wants to gift assets to her loved ones. All of the following are advantages to Carmen when gifting her assets, except Answer: she can take advantage of the annual exclusion for gifts of future interests. A trust that is created by a decedent's will and made effective at death is a(n) Answer: testamentary trust. In which of the following types of ownership is property acquired during a marriage considered to belong one-half to the wife and one-half to the husband, regardless of whose name is on the title? Answer: Community property

2024/2025 When the owner-grantor transfers property and has the right to have all or part of the transferred property returned after an intervening interest, the owner- grantor's interest is known as a Answer: reversion Custodial accounts (UGMA or UTMA accounts) have all of the following attributes, except Answer: they are revocable Which of these options would result in the inclusion of life insurance policy proceeds in the insured's gross estate? Answer: The insured is permitted to borrow against the policy. Which of these statements is most accurate with respect to the life insurance needs of the typical family? Answer: Total life insurance requirements may decrease as an individual approaches retirement. Assume a client has $30,000 in a money market fund, $2,000 in a checking account, a mortgage balance of $110,000 (not to be paid off, as it will be transferred to the spouse), an auto loan of $20,000, and credit card balances of $5,000. Assuming he died, final expenses would be $15,000. What would be the cash requirements for this client? Answer: $8,000 The cash requirements would be debt of $25,000 ($20,000 + $5,000 -- the mortgage is excluded because it will not be paid off), + expenses of $15,000 - liquid assets of $32,000 ($30,000 + $2,000) = $8,000. An investment professional is assessing the life insurance needs of the Robinson family. Mr. Robinson has determined that the family's immediate cash flow requirements in the event of his death are $65,000. The amount needed to meet all future funding requirements (net of Mrs. Robinson's income and Social

2024/2025 Security and pension benefits) is estimated to be $550,000. The family owns a home in which their equity interest is $200,000. Based upon these figures, the investment professional would recommend life insurance with a face amount of Answer: $615,000. $65,000 + $550,000 = $615,000 the $200,000 equity in the home does not represent a truly liquid asset to offset these expenses. With regard to financial planning, many individuals and households overlook the potential needs for Answer: disability income and long-term-care insurance. Mrs. Bartlett purchased a life insurance policy that will pay $100,000 to her beneficiary should she die at any time during the next year. The policy guarantees the right to renew every year for the next five years, and builds no cash value. Mrs. Bartlett has purchased a Answer: term life insurance policy. Which types of clients would be identified as the best prospect for cash value life insurance? Answer: Clients who prefer the discipline of regular, periodic investments With respect to cash value life policies, what part of the policy value, if any, is subject to income taxation when the policy is surrendered? Answer: The amount of the cash value that exceeds the investment in the contract Brenda Bradford is the owner of a whole life policy on her husband, Rolf. Their daughter, Vera, is named in the policy as the contingent beneficiary. In issuing the policy, the insurance company has asked that a settlement option be selected.