AFC Retirement & Investment Planning 4

Question 1

A 58-year-old client wants to withdraw from her traditional IRA due to a financial hardship. What is the federal penalty tax for early withdrawal?

Accepted Answer

10%

Answer

5%

Answer

15%

Answer

20%

Question 2

Which of the following investment strategies involves systematically investing a fixed dollar amount at regular intervals regardless of market price?

Accepted Answer

Dollar-cost averaging

Answer

Value averaging

Answer

Tactical asset allocation

Answer

Market timing

Question 3

A client has a defined benefit pension plan. Which factor primarily determines the monthly benefit at retirement?

Accepted Answer

Years of service and final salary

Answer

Account balance at retirement

Answer

Employee contribution rate

Answer

Investment fund selection

Question 4

What is the primary tax advantage of a Health Savings Account (HSA) when used as a retirement savings tool after age 65?

Accepted Answer

Withdrawals for any purpose are penalty-free and taxed as ordinary income

Answer

Contributions are tax-free and withdrawals are always tax-free

Answer

Withdrawals are tax-free and penalty-free for all expenses

Answer

Contributions are doubled by the government after age 65

Question 5

A client's portfolio has a standard deviation of 15% and an expected return of 10%. The risk-free rate is 3%. What does the Sharpe ratio measure?

Accepted Answer

Excess return earned per unit of total risk

Answer

Total portfolio return adjusted for inflation

Answer

Beta relative to a benchmark index

Answer

Maximum drawdown relative to peak value

Question 6

Which type of annuity guarantees payments for a specified number of years regardless of whether the annuitant is living?

Accepted Answer

Period-certain annuity

Answer

Life-only annuity

Answer

Joint and survivor annuity

Answer

Variable immediate annuity

Question 7

Under the Rule of 72, approximately how many years will it take for an investment earning 6% annually to double?

Accepted Answer

12 years

Answer

8 years

Answer

10 years

Answer

15 years