EPF - Competition 3

Which type of banking institution is nonprofit and caters to specific groups of people who become members of the institution?

• Commercial bank

• Savings and loan association

• Credit union

• Investment bank

Mary wants to have a level of ownership in her financial institution. Likewise, she wants it to help her local community. What type of institution is best for Mary?

• Commercial bank

• Community bank

• Investment bank

• Savings and loan association

Which one of the following is an activity in which a savings and loan association engages?

• Lending money to businesses

• Lending money for buying a house

• Non-depository investments

• Underwriting IPOs

Why might a business choose an investment bank over the other forms of banks?

• They would choose an investment bank because they help corporations raise money by offering securities for sale. They also help companies structure mergers and acquisitions.

• Investment banks have all of the services available including loans for small purchases such as a new sign for a business.

• They would choose an investment bank because they are locally owned and operated and therefore people have stronger relationships with their bankers.

• Often Investment banks are easier to deal with due to fewer rules and regulations on their not-for-profit business model.

Which one of the following institutions funds IPOs?

• Investment bank

• Commercial banking

• Savings and loan association

• Credit union

Which type of retirement benefit plan allows employees to contribute with money that's already been taxed?

• Traditional 401(k)

• Roth 401(k)

• Pension plan

• All of the answers are correct.

What type of pension plan guarantees that the employee will receive a particular amount of benefit once he or she retires, even if the employer's investments don't do well?

• Defined-contribution plan

• Defined-benefit plan

• Income benefit deposit

• Retirement benefit amount

Alex wants to retire but is not vested. Why is this a bad idea?

• Alex wouldn't have any access to the funds the employer has contributed on his behalf.

• Alex must stay at the company for a specific amount of years before he can leave the company.

• He must make contributions to the funds to receive the income.

• Vesting is the retirement age that a person must reach so Alex is too young to retire.

Justin makes $1000 per paycheck. He has a 401(k) plan and his employer has a 3% matching program. Justin decides he'd like to be more aggressive with his contributions, so he decides he's going to contribute 5% per paycheck. How much does this mean his employer will contribute per paycheck?

• 5%, or $50

• 6%, or $60

• 3%, or $30

• 8%, or $80

What is a key difference between pension plans and 401(k) plans?

• 401(k)s were popular starting in the 1940s, but by the 1980s many companies were using pension plans.

• A 401(k) can't be rolled-over into an IRA, but pension plans usually can.

• Employee contributions to pension plans are considered tax-exempt, but not to Traditional 401(k)s.

• Employees can increase the contributions in their 401(k)s, but not usually in pension plans.