1. A young couple (both age 30) come to a financial planner with the desire for assistance inimproving their familys financial position. They have two healthy children, ages three and six. The husband is a foreman for a manufacturer of auto parts. His current salary is $30,000 per year. The wife is a marketing professor for a state university. Her current sal- ary is $40,000 per year. The couple recently purchased a riverfront home for $100,000 using their entire savings of $20,000 as a down payment. In addition to an $80,000 mort- gage, the couples only debt is an automobile loan having the balance of $12,000. Both husband and wife have very good family health insurance from their employers. The wife has employer-paid life insurance equal to two times her annual salary.
A. The couple wants to start an investment program as soon as possible. To correct the weak- ness in their financial planning before beginning the investment program, they should
1. Establish an emergency fund with stock mutual funds.
2. Start a college savings fund for the children.
3. Purchase disability insurance for the wife and the husband.
4. Prepare wills for the wife and the husband.
5. Secure credit life insurance for the auto loan.
a. (5) only
b. (1) and (2) only
c. (1) and (3) only
d. (3) and (4) only
B. When the couple are able to begin an investment program, they want to begin making investments for their retirement and their childrens education. All of the following ac- tions will help accomplish their goals in a tax-efficient manner except
1. Investing in individual Roth IRAs.
2. Investing through a 403(b) program for the wife.
3. Investing in a growth and income mutual fund.
4. Investing in education IRAs for each child.
