Blog
Impact of Market Risk Premium on Price of Common Stock
Course: Investment Planning Lesson 14: Evaluating Portfolio Performance Student Question: I’ve seen this question come up a couple times, but can’t seem to grasp the answer. “If the Market Risk Premium were to increase, all other things being equal, the value of common stock would…” The answer is “decrease”, but that makes no sense to…
Read More
Homeowner’s Insurance
Frank carries an H0-3 policy with $400,000 of coverage and a $1,000 deductible. It would cost $600,000 to rebuild Frank’s house. How much will his insurance company pay on a $100,000 claim related to a fire that started in Frank’s kitchen? $79,000 $82,333 $83,333 $99,000 CLICK TO REVEAL ANSWER B is the answer. Frank should…
Read More
Reverse Stock Splits
Course: Investment Planning Lesson 14: Evaluating Portfolio Performance Student Question: Hello! Re: Reverse Splits: When companies decide to do a reverse stock split, does the company always take in the outstanding shares as “treasury stock”? If not, what happens to the outstanding stock that has been taken away? Where does it go on the balance…
Read More
Risk Exposure
Olivia is a 25-year-old single mother with twin girls who just turned three. Olivia has worked for the last 5 years as an administrative assistant for a local law firm. Olivia’s firm provides her with a basic medical insurance policy and a split definition disability. Which of the following is the biggest risk exposure for…
Read More
Good to Know: Tricks, Traps and Opportunities in the 20% Qualified Business Income Deduction
Today, we conclude our 4-part series with insights into tricks, traps and planning opportunities in the 20% Qualified Business Income Deduction (QBID) under Internal Revenue Code Section 199A, brought to us courtesy of the Tax Cuts and Jobs Act. But first, here’s an uber quick refresher of key concepts from the previous three QBID blogs:…
Read More
When to Use Negative Entries
Course: Fundamentals of Financial Planning Lesson 5: Using the HP12-C Calculator Student Question: Hi, how do i know when to use CHS in the calculator, I’m a little unclear about that. Instructor Response: Hi Julio- Good to hear from you. Hope all is going well thus far. Yeah, this can certainly be confusing. There are some…
Read More
Insurance Contracts
Which of the following statements concerning insurance contracts is NOT correct? An insurance contract is bilateral because both the insurer and the insured make legally enforceable promises. In an insurance contract, the insurer has made legally enforceable promises for which it can be sued for breach of contract. Because property insurance contracts are personal, it…
Read More
Determining Margin Calls
Course: Investment Planning Lesson 3: Equity Securities Student Question: I’m having trouble following the math on the example (shown below) at the bottom of the page. Could you please walk through the calculations? I understand how the initial margin with cash amount is calculated, but it gets a bit fuzzy for me after that. Example…
Read More
529 Plan – Lump Sum Educational Funding
Nancy recently received $250,000 from her mother’s life insurance policy. She wants to use a portion of the money to fund her son’s college education that currently costs $10,000 a year and she anticipates an 8% yearly increase. Nancy can earn 7% on her investments and the overall inflation rate is 3%. Nancy’s son will…
Read More