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Sample Story Questions

Read the following story questions and determine what the actual test item, or question, is. Write that question in your notebook.

Question 1

Bill has been attempting to sell Paul some life insurance. He has tried every closing technique he knows, but Paul is reluctant to sign the application and buy the insurance. Finally, Bill offers Paul one-half of the commission if Paul will sign the application at once. This offer is an example of what?

Question 2

Karen works for Acme Inc. and is not a participant in the company pension plan. Karen maintains an Individual Retirement Account (IRA) and has made the maximum $2,000 annual contribution permitted by law to the account for many years. This year, she made a contribution of $2,500. This is an excess contribution subject to a penalty by the IRS. How much will she be penalized?

Question 3

An investor purchased a bond from the Acme Corp. many years ago. The bond has paid 10 percent interest for the past 20 years, but will mature in two weeks. The investor has decided to reinvest in another Acme bond at maturity. However, the interest rate to be paid on the new bond is only 6 percent. Since interest rates have fallen, the price of the new bond will be ________.

Question 4

Jack is concerned about his potential federal estate tax liabilities. He is considering making gifts to his minor grandchildren to reduce the size of his estate. He has four grandchildren, to whom he will make gifts of $25,000 each. This will reduce the size of his estate by $100,000. How much will his gift tax liability be?

Question 5

Mary is a senior citizen who wishes to maintain her personal and financial independence. In recent years, her health has begun to deteriorate, and she is concerned about confinement to a nursing home and the expense that would be incurred. Should Mary be confined to a nursing home, what choices does she have to maintain her financial independence?