Missed Questions
Which of the following statements regarding the properties of duration is NOT true? A) Duration is a weighted-average term to maturity of a bond's cash flows. B) Duration measures the holding period return on a bond. C) Duration measures the effect of an interest rate change on the price of a bond or bond portfolio. D) Duration measures a bond's price volatility by weighting the length of time it takes for a bond to pay for itself.
B - Duration measures the holding period return on a bond
An employee wishing to obtain long-term capital gain treatment would prefer the employer to offer
*incentive stock options Assuming the time limit conditions are met, exercise of an ISO can result in long-term capital gains while non-qualified options are always treated as ordinary income.
In order for an individual to receive Social Security benefits based on the earnings of the ex-spouse, the couple must have been married for at least
10 years
Under the USA, what fines/jail time can result in a violation?
5,000/3years
To qualify as a REIT, a company must have the bulk of its assets and income connected to real estate investment and must distribute at least what percent of its taxable income to shareholders annually in the form of dividends?
90% of income note: 75% of the assets must be invested in real estate
In a scheduled premium variable life insurance policy, which of the following are guaranteed?
A minimum death benefit
One of the likely consequences of a rating downgrade on a bond is
A reduction in the market price of the bond.
If a company successfully gets the owners of its long-term bond issue paying 7% annual interest to exchange them on a dollar-for-dollar basis with the company's preferred stock paying a 7% annual dividend, what is the effect on EPS?
Decreases - Conversion is moved from a pre-tax deduction to an after-tax dividend payment, increasing the amount of taxable income, with an increased tax burder and everything else remains the same, EPS will decrease.
Banks borrowing from another rate, the bank will be charged
Federal funds rate
Which of the following might be used by an analyst to approximate a reasonable price for a common stock?
For equities, Dividend Discount Mondel For debt, Discount cashflow model
Which of the following is a motivation for creating structured products? Structured products
Improve market completeness
Earnings per share calculation
Net income/outstanding shares
Can REITs pass through losses it its investors?
No. - They are also not a limited partnership
Which of the following is least likely to be considered an investment constraint when preparing an investment policy statement?
Risk Tolerance The commonly tested investment constraints are: liquidity needs, time horizon, taxes, legal and regulatory factors, and unique needs and preferences. Risk tolerance is used to help determine what investment objectives will best meet the investor's goals.
Which of the following statements regarding the Sharpe ratio is TRUE?
The Sharpe ratio is often used to measure risk-adjusted return of an entire portfolio.
Selling exempt securities from a B/D
When a security is exempt from registration, agents of B/Ds are still required to register if they plan on selling an exempt security. . An exclusion from the definition of agent is given to those who represent issuers of certain exempt securities.
Can agents choose time and price of a trade?
Yes, as along as the client has determined the asset, the action and the amount.
A basic difference between a Section 457 plan established on behalf of a governmental entity and one established by a private tax-exempt organization is that
a governmental plan must hold its assets in trust or custodial accounts for the benefit of individual participants
In general, a broker-dealer will disclose its fee schedule
at the time of the account opening
A research analyst studying the performance of ABC Industries compares that with reports from other analysts reviewing other companies in other industries. This is known as
bottom-up analysis
When an agent submits an order ticket to purchase securities for a client, all of the following would appear EXCEPT
current market price market price is always moving
An agent making a sales presentation to a client about a mutual fund's historical returns is required to explain to the client the difference between the fund's
current yield and total return.
When a bank's reserve account is running low, it might choose to borrow from the Fed. When doing so, the bank will be charged
discount rate
The Sharpe ratio measures a stock's
excess return earned compared to its total risk.
single premium deferred annuity
is a lump sum investment, with payment of benefits deferred until the annuitant elects to receive them.
real interest rate of a fixed income investment
it's the interest received minus the inflation rate
One would look at the average maturities when doing a cash flow analysis for
mortgage-backed pass-through securities
Issuing callable bonds is advantageous to the issuer because it allows the company to
replace a high, fixed-rate issue with a lower issue after the call date.
A bond analyst reports that there is currently an inverted yield curve. That would mean
the closer the bond is to its maturity date, the higher the yield
If you were using the discounted cash flow method to determine the appropriate value of a security, you would want to purchase that security when
the current market price is below the PV
The value of a variable annuity during the accumulation period is determined by...
the number of accumulation units owned multiplied by the value of each unit
A buy stop order may be used for all of the following EXCEPT
to protect a profit in a long posistion
Which of the following is not a characteristic of expansionary monetary policy? A) More funds are available for banks to lend to borrowers. B) Interest rates may decline. C) The reserve requirement will be increased. D) The money supply will increase.
C The reserve requirement will be increased.
An investor invests $25,000 into the KAPCO Balanced fund. It would be unlikely for this investor to be required to pay a CDSC when redeeming
Class A Shares Class B shares are known for their back-end load. Class C shares usually only have one for 1 year; but, if the investor redeems within that period, there will be a CDSC. Class A shares do not carry a back-end load, except under conditions that are beyond the scope of this exam.
Asset-based sales charges will generally be lowest when holding which of the following mutual fund share classes
Class A shares Class A shares have a front-end load, but a low- or no asset-based sales charge. Class B and C shares don't have a front-end load, but do have a higher asset-based sales charge. Class T shares always have a 12b-1 charge
Which of those documents discloses the interest rate charged by the broker-dealer, including the method of interest computation and situations under which interest rates may change
Credit agreement
An economic indicator that has turning points which tend to occur after the turning points in the business cycle is classified as a
Lagging indicator Lagging indicators have turning points that occur after business cycle turning points. That is why they are called lagging indicators. Leading indicators are ahead of the cycle and coincident indicators parallel the cycle.
One measure of a corporation's liquidation value is its book value per share. When performing this computation, the value of which of the following would normally be subtracted from the corporation's net worth?
Patents and Preferred stock Book value per share is net tangible worth per share of common stock.
Expansionary Monetary Policy
They are decreasing the reserve requirement. Think accelerates the rate of inflation. banks are required to keep less cash on hand and are able to make more loans. Money Supply down Interest rates up Value of currency up Exports down
Contractionary Monetary Policy
They are increasing the reserve requirement. Think deflation. They are requiring banks to keep more on hand and are not able to make as many loans. Money Supply Up Interest rates down value of currency down Exports Up
An advisory client of yours discusses a business project she is involved with where the partnership is using accelerated depreciation to maximize losses in the early years. It would be prudent of you to inform the client that
accelerated depreciation could trigger the alternative minimum tax.
A periodic payment deferred annuity
allows a person to make periodic payments over time; the contract holder can invest money on a monthly, quarterly, or annual basis.
immediate annuity
allows an investor to deposit a lump sum with the insurance company; payout of the annuitant's benefits starts immediately (usually within 60 days)
What rate (discount, prime, fed funds rate) is changed by the banks?
prime rate
A REIT and a direct participation program are similar because they both
professional management
