Fin 450 7,8,9,10

Matching a. accumulation unit b. joint and last survivor annuity c. deferred annuity d. variable annuity 1. delays distribution until the owner elects to receive them 2. Determines an annuitant's interest in the insurer's separate account before distribution from the annuity begins 3. Performance of a separate account determines value 4. Annuity payouts continue as king as one of the annuitants is alive

1. C 2. A 3. D 4. B

A sector fund is one where the assets are a. concentrated in particular industry or geo area b. invested in emerging growth companies c. invested in special solutions d. invested In other mutual funds

A. concentrated in particular industry or geo area

According to the investment company act of 1940, an open-end investment company must compute its NAV A. no less than once per day B. weekly C. monthly D. annually

A. once per day

Which term best describes the following situation: A customer has the right to sell 100 shares of MNO at 60 any time between July and October. a. long call b. long put c. short call d. short put

B

A 30-year old client indicates that he needs $500,000 of life insurance coverage for the next 20 years. The lowest out-of-pocket cost would be if he purchased a A. 20-pay life policy B. 20-year life term policy C. whole life policy D. Variable annuity with an extended death benefit

B. 20-year life term policy

It would be improper to use the term derivative to describe a. a call option b. a closed-end investment company c. a futures contact d. a warrant

B. a closed-end investment company

On of your clients sells 100 shares of XYZ stock short at $50 per share. Although the client is quite bearish on the stock, she realizes that it possible that good news in the overall economy could cause a surge in XYZ's price. Which of the following would you recommend to best protect her position? a. Buy an XYZ 50 put b. Buy an XYZ 50 call c. Sell an XYZ 50 put d. Sell an XYZ 50 call

B. buy an XYZ 50 call

Commonly traded on a regulated exchange would be any of the following EXCEPT: a. ETFs b. forward contacts c. futures d. warrants

B. forwards contracts

Your customer is long 10 ABC Jul 50 call at 4.50. What is the name of the underlying instrument? a. call options b. common stock c. ABC calls d. ABC common stock

D. ABC common stock

If ABC Fund pays regular dividends, offers a high degree of safety of principal, and appeals especially to investors seeking tax advantages, ABC is a(n): A) corporate bond fund. B) money market fund. C) aggressive growth fund. D) municipal bond fund.

D. municipal bond fund

Options are best described as? a. derivatives b. substitutes c. swaps d. futures

a. derivatives

The prospectus for a fund states that the minimum initial investment is $500,000. This is most likely what type of fund? a. balanced b. hedge c. small-cap growth d. specialized

b. hedge

"A" for Open/ "B" for Closed-end company 1. Trades in secondary market 2. investors may purchase fractional shares 3. can issue common, preferred and bonds 4. issues a fixed number of shares 5. does not trade in secondary market, trades must be redeemed 6. price is set by supply and demand 7. usually called mutual funds

1. B 2. A 3. B 4. B 5. A 6. B 7. A

Matching a. assumed interest rate b. immediate annuity c. life income with period certain d. separate account 1. Contracts starts to pay the annuitant approximately one month after it issuance 2. The basis for projected annuity payouts, but not guaranteed 3. Holds funds paid by variable annuity contract holders 4. If the annuitant dies before a specified time expires, payouts go to the annuitant's named beneficiary

1. B 2. A 3. D 4. C

Matching: each has two answers A. Long call b. short call c. long put d. short put 1. Which options positions are bearish? 2. Which options positions are bullish? 3. Which positions buy stock at exercise? 4. Which position sell stock at exercise? 5. Which positions have rights? 6. Which positions have obligations?

1. B and C 2. A and D 3. A and D 4. B and C 5. A and C 6. B and D

Matching (may have more than one answer) a. long call b. short call c. long put d. short put 1. Used to fully protect a long stock position 2. Used to fully protect a short stock position 3. Obligations to buy stock at the price if exercised 4. Right to sell stock at the strike price if exercised 5. Used to speculate on the upward movement of a stocks price 6. Used to speculate on the downward movement of a stocks price 7. If uncovered, subject an investor to unlimited risk 8. The maximum loss is the premium 9. Used to generate income when an investor owns the underlying stock 10. Requires investors to buy stock at a net cost reduced by the amount of premium received, if exercised

1. C 2. A 3. D 4. C 5. A and D 6. B and C 7. B 8. A and C 9. B 10. D

Match each of the follower numbers A. 9 B. 24 C. 75 1. Minimum percent of cash value that must be available for a policy loan after 3 years 2. Number of months contract exchange provision must be in place 3. Maximum sales charge allowed ove life of a variable life policy

1. C 2. B 3. A

Match the objective with the type of fund A. Government bond fund B. Large-cap fund C. Asset allocation fund 1. Capital gains/income/lower risk 2. Growth/low risk 3. Income/low risk

1. C 2. B 3. A

Match the objective with the type of fund A. Ginnie Mae Fund B. Special Situation Fund C. Asset Allocation Fund D. Index Fund 1. Purchase different classes of investments to achieve capital gains, income and diversification 2. Mimic stock market indexes to achieve performance comparable the market overall 3. Achieve safety of principal with yields slightly higher than government bond fund 4. Seek investments in companies with unusual opportunities

1. C 2. D 3. A 4. B

Match the objective with the type of fund A. Conservative growth fund B. Money Market Fund C. Small-cap fund D. balanced fund 1. capital gains/income/lower risk 2. Capital games/moderate risk 3. Liquidity/low risk 4. capital gains/higher risk

1. D 2. A 3. B 4. C

Match the objective with the type of fund A. Balanced Fund B. Aggressive growth fund C. Specialized Fund D. Large Cap Stock Fund 1. Pursues capital growth with less than average risk 2. Invests to maximize capital gains quickly with high risk tolerance 3. Invests to diversify 4. Invests in medical technology and is not risk averse

1. D 2. B 3. A 4. C

True or false? 1. An investor who purchases a limited partnership is generally required to provide a statement of net worth 2. One of the greatest advantages of limited partnership investments is that they are readily traded in the secondary market 3. DPP investors may deduct passive losses from ordinary income 4. The general partner is fully liable for all partnership losses and debts 5. Limited partners have limited liability and take an active role in the management of partnership 6. Tax deductions, capital gains, and cash distributions are potential rewards for limited partnership investors.

1. T 2. F 3. F 4. T 5. F 6. T

Choose W for whole life, V for variable life, and U for universal variable life. More than one may apply to each choice. 1. Features a stated premium 2. Always has some guaranteed death benefit 3. Features a guaranteed cash value 4. Cash value not guaranteed 5. Policy loans available

1. Whole Life, Variable 2. Whole Life, Variable, Universal variable life 3. Whole Life 4. Variable, Universal variable life 5. Whole Life, Variable, Universal variable life

Your customer is long 10 ABC Jul 50 call at 4.50. How many shares of stock will change hands if he exercises his options? a. 10 b. 100 c. 1000 d. 10,000

C. 1,000

Your customer is long 10 ABC Jul 50 call at 4.50. He owns how many options? a. 1 b. 4.50 c. 10 d. 100

C. 10

An open-end investment management company is also referred to as A. exchange traded fund B. Face amount certificate company C. Mutual fund D. Unit investment trust

C. MF

An investor looking for an open-end investment company with an objective of providing current income to its shareholders, would most likely choose a a. common stock fund b. growth fund c. income fund d. venture capital fund

C. income fund

The difference between a fixed annuity and a variable annuity is that the variable annuity I. offers a guaranteed return II. offers a payment that may vary in amount III. will always pay out more money than the fixed annuity IV. attempts to offer protection to the annuitant from inflation

IV. attempts to offer protection to the annuitant from inflation

Which of the following is considered to be an advantage of annuitization? a. It guarantees income that will last for the clients lifetime b. once annuitized, the clients draw from the annuity is limited to the annuity payment c. A fixed, level periodic payments trends to lose buying power over time due to inflation d. payments under a variable annuity could be reduced if there is a declining market

a. It guarantees income that will last for the clients lifetime

A couple in their early 30s had been married for 4 years, their disposable income is high, and they are planning to buy a condo. If they need a safe place to invest their down payment for about 6 months, which of the following mutual funds is the most suitable for these customers? a. LMN cash reserves money market fund b. ATF capital appreciation fund c. ABC growth and income fund d. XYZ investment-grade bond fund

a. LMN cash reserves money market fund

In the context of purchasing shares in a mutual fund, the term "breakpoint" refers to the point at which the a. dollar amount of shares being purchased qualifies the investor for a lower sales charge b. mutual fund company stops offering new shares to the public c. investor is assured of making a profit on shares d. shares are selling for less than the net asset value (NAV)

a. dollar amount of shares being purchased qualifies the investor for a lower sales charge

Among the reasons for investors to consider investing in real estate would be all of the following EXCEPT a. the ability to increase returns through leverage b. a high correlation with stock market returns c. possible tax advantages d. potential appreciation

b. a high correlation with stock market returns

An investor has a portfolio diversified among many different asset classes. If there was an immediate need for cash, which of the following would probably be the most liquid? a. cash value from a universal life insurance policy b. CDL common stock mutual fund c. QRS money market mutual fund d. XYZ international stock mutual fund

c QRS money market mutual fund

A 49-year old customer purchases a single premium deferred variable annuity. Shae selects a subcontract of the separate account that is composed largely of equity securities. She is assuming all of the following risk EXCEPT: a. she is not assured of the return of her invested principal b. the underlying portfolio is primarily common stock, which have no guaranteed return c. As an investor, she can be held liable for the debts incurred by the insurance company d. if she needs to withdraw a portion of her investment prior to age 59 1/2, she may incur a 10% penalty

c. As an investor, she can be held liable for the debts incurred by the insurance company

An investor is reading a report that industrial demand for copper is expected to double in the next 5 years. This might lead the investor to a. buy corn futures b. sell copper futures c. invest in several copper mining companies d. modify the investors portfolio to take a larger cash position

c. invest in several copper mining companies

An investor who initially makes a small investment in a mutual fund may have the advantage of a lower sales charge on investments made over a 13-month period through a a. breakpoint letter b. class A letter c. letter of intent d. sponsor's letter

c. letter of intent

One of your clients wishes to invest in a hedge fund. You should explain which of the following? a. shares of these funds are easy to redeem b. the fund can be expected to generate a profit whether. the markets trend up or down c. these funds purchase a large amount of preferred stock d. One of your clients wishes to invest in a hedge fund. You should explain which of the following? Expenses for these funds tend to be higher than those for traditional mutual funds

d. One of your clients wishes to invest in a hedge fund. You should explain which of the following? Expenses for these funds tend to be higher than those for traditional mutual funds

The term derivative could be used to apply to any of the following EXCEPT a. forward contracts b. futures c. options d. REITs

d. REITs

A review of prospectus of an open-end investment company reveals that its portfolio consists entirely of CDs , treasury bills, and repurchase agreements. This is probably a a. balanced fund b. exchange-traded fund c. index fund d. money market fund

d. money market fund