NAB Personal Finance Planning 5

Question 1

What is the primary purpose of an estate plan?

Accepted Answer

To specify how assets are distributed after death and designate decision-makers

Answer

To minimize monthly living expenses

Answer

To maximize Social Security benefits during retirement

Answer

To avoid paying income taxes during one's lifetime

Question 2

Which document grants someone legal authority to make financial decisions on your behalf if you become incapacitated?

Accepted Answer

Durable power of attorney

Answer

Last will and testament

Answer

Revocable living trust

Answer

Beneficiary designation form

Question 3

What is a 'net worth' statement used for in personal financial planning?

Accepted Answer

Measuring total assets minus total liabilities to show financial position

Answer

Calculating monthly cash flow from employment

Answer

Estimating annual tax liability

Answer

Determining eligibility for government benefits

Question 4

Which of the following is a FIXED expense in a household budget?

Accepted Answer

Monthly mortgage payment

Answer

Grocery spending

Answer

Electricity bill

Answer

Entertainment costs

Question 5

Dollar-cost averaging (DCA) is best described as:

Accepted Answer

Investing a fixed dollar amount at regular intervals regardless of price

Answer

Investing a lump sum at market lows to maximize returns

Answer

Selling assets only when they reach a predetermined profit target

Answer

Rebalancing a portfolio to its original allocation quarterly

Question 6

What is the recommended maximum debt-to-income (DTI) ratio for qualifying for a mortgage in the US?

Accepted Answer

43%

Answer

20%

Answer

36%

Answer

60%

Question 7

Which term describes the process of periodically restoring a portfolio to its original target asset allocation?

Accepted Answer

Rebalancing

Answer

Diversification

Answer

Dollar-cost averaging

Answer

Laddering