Progress 66 Exam 4B

A corporation has the following financial information. $1 million in cash $2 million in accounts receivable $5 million of inventory $10 million of equipment $3 million in short-term debt $50 million in long-term debt $2 million accounts payable What is the corporation's current ratio? A 1.6 B 2 C 2.6 D 3.6

Answer: A

An individual who is bearish would probably: A Buy a put option B Sell a put option C Buy a call option D Buy a defense stock

Answer: A

The fact that it is better to receive $1 today and invest it, as opposed to receiving $1 at some point in the future, reflects the: A Time value of money B Effects of deflation C Multiplier effect D Results of monetary policy

Answer: A

Which of the following statements is TRUE in relation to the buyer of a call option? A The investor has limited risk. B The investor has a limited potential profit. C The investor is entitled to all dividends paid on the underlying stock. D The investor must exercise the option if the underlying stock goes up.

Answer: A

Which of the following statements is TRUE regarding funds of hedge funds? A They are generally illiquid investments. B The parent company invests in a number of mutual funds representing different asset classes. C They have lower expenses than most mutual funds. D They are a good choice for investors who wish to use dollar cost averaging.

Answer: A

XYZ Corporation's common stock has the same beta as ABC Company's common stock. However, XYZ stock, on the average, produces better returns than ABC. Which of the following would explain this difference? A XYZ stock has a higher alpha than ABC stock. B ABC stock is more liquid than XYZ stock. C XYZ Corporation is more highly leveraged than ABC Company. D ABC Company has a smaller market capitalization than XYZ Corporation.

Answer: A

A client has $20,000 to invest, a 10-year time horizon, and a desire to have $50,000 at the end of the investment period. The rate of return that must be earned to arrive at $50,000 is called the: A Expected return B Internal rate of return C Current yield D Future return

Answer: B

A loss from a limited partnership's operations is passed through to a limited partner. On the limited partner's personal tax return, this loss: A Is fully deductible against the individual's income from all sources B Is considered a passive loss and may only be deducted against passive income C May only be deducted with the permission of the general partner D Is only deductible when the individual sells the partnership interest

Answer: B

When reviewing a corporation's financials, an agent would find which of the following items on the balance sheet? 1 Cost of goods sold 2 EBIT (earnings before interest and taxes) 3 Taxes paid 4 Accounts payable A II only B IV only C II and III only D I, II, III, and IV

Answer: B

Which TWO of the following types of insurance have fixed premiums? 1 Whole life insurance 2 Universal life insurance 3 Variable life insurance 4 Variable universal life insurance A I and II B I and III C II and IV D III and IV

Answer: B

Which type of oil and gas program would offer an investor the highest potential return on investment? A Developmental B Exploratory C Balanced D Income

Answer: B

According to the table in Question 5, Which portfolio would be considered the MOST volatile? A Portfolio A B Portfolio B C Portfolio C D Portfolio D

Answer: C

An individual expects the market price of XYZ to go down. This investor might: 1 Buy XYZ call options 2 Write XYZ call options 3 Buy XYZ put options 4 Write XYZ put options A I and III only B I and IV only C II and III only D II and IV only

Answer: C

An investment adviser determined that XYZ stock has the following potential future returns. There is a 20% chance that in a bull market, XYZ stock will return 15%. In a flat market (60% probability), the return should be 2%. The likelihood of a bear market is 20%, and expected returns would be a loss of 5%. What is the expected return for XYZ stock? A 1.20% B 3% C 3.20% D 12%

Answer: C

In the formula Pn = P0(1 + r)n, Pn represents: A The standard deviation B One million dollars in U.S. currency C The future value of money D Excess returns

Answer: C

The market theory, which states that the market price for a stock fully reflects all of the information available on the company, is known as the: A Short-interest theory B Odd-lot theory C Efficient market theory D Supply-side theory

Answer: C

The separate account of the variable life policy that Tom Jones bought is performing poorly. Does this have any influence on his death benefit? A No, the death benefit is fixed over the life of the contract. B Yes, but it could never drop below the highest death benefit attained during the time that the contract began building cash value. C Yes, but it could never drop below the fixed minimum. D No, the cash value can only increase over the life of the contract.

Answer: C

Those investors, who believe markets are perfectly efficient, may use a passive strategy in which the asset mix of a portfolio is altered on a periodic basis. This strategic asset allocation approach is known as: A Tactical asset allocation B Sector rotation C Systematic rebalancing D Buy-and-hold

Answer: C

Under which of the following circumstances will the payout from a variable annuity increase? A The rate of inflation exceeds the AIR. B The performance of the separate account exceeds the rate of inflation. C The performance of the separate account exceeds the AIR. D The performance of the separate account for the current period exceeds the performance of the separate account for the previous period.

Answer: C

When calculating a fixed-income security's discounted cash flow, which of the following statements is TRUE? A A bond trading at a discount to its discounted cash flow value is overvalued. B A bond trading at a premium to its discounted cash flow value is undervalued. C Discounted cash flow calculations can determine fair market values for a fixed-income security. D Discounted cash flow ignores current interest rates of comparably priced bonds.

Answer: C

Which of the following results in the highest inflation-adjusted rate of return? A A bond yields 5% when inflation is at 3%. B A bond yields 22% when inflation is at 18%. C A bond yields 11% when inflation is at 3%. D A bond yields 7% when inflation is at 4%.

Answer: C

Which of the following statements is TRUE regarding the purchaser of a call option? A The yield on the purchaser's portfolio would increase by purchasing the option. B The purchaser would have unlimited losses if the underlying stock declined. C The purchaser would benefit if the underlying stock increased. D The purchaser would exercise the option if the stock declined.

Answer: C

A cash forward contract is different than a futures contract because the cash forward contract is: 1 A personal transaction between the buyer and the seller 2 Not for a standard amount of the commodity, but rather is for a specific amount and quality of the cash commodity 3 Not negotiated by open outcry in the trading pits and is not subject to the rules of a futures exchange A I only B I and II only C II and III only D I, II, and III

Answer: D

A client invested $100,000 in an Equity Indexed Annuity. The participation rate is 90% with a cap rate of 15%. In year one, the index increased by 20%. In year two, the index lost 5%. In year three, the index gained 10%. What is the value of the annuity after year three? A $118,000 B $115,000 C $135,700 D $125,350

Answer: D

Which of the following statements are NOT TRUE regarding a comparison of strategic versus tactical asset allocation? A Strategic asset allocation focuses on the client's investment objectives and risk tolerance, while tactical asset allocation focuses on economic and market conditions. B Strategic asset allocation has a long-term outlook, while tactical asset allocation encompasses short-term decisions. C Unlike strategic asset allocators, tactical asset allocators believe that investors can time the market. D None of the above

Answer: D