Sessions 14, 15 & 16 Quizzes

A client has an account where, upon her death she desires that her only son will received 50% of account value and her 4 daughters will receive 12.5% each. The easiest way to accomplish this would be to title the account A. TOD B. JTROS C. Tenants in common D. In trust for the children

A.

Tenants in common, Full power of attorney, OR Discretionary authorization? Legal document that authorizes someone other than the customer to have all privileges in an account

Full power of attorney

Indexing, Growth investing, Value investing, Tactical asset allocation OR Strategic asset allocation? Constructing a portfolio of companies that are outperforming most other stocks in that industry

Growth Investing

A business organized as a sole proprietorship wishes to open an advisory account. When preparing an investment policy statement, the IA would have to consider the objectives of A. the sole proprietor B. the partners C. the stockholders D. the members

A.

An individual's net worth is A. the difference between the individual's assets and the individual's liabilities B. best determined by examining the individual's personal income statement C. largely irrelevant in identifying the individual's investment objectives D. another term for discretionary income

A.

For which of the following types of clients would the suitability requirements be somewhat more relaxed? A. A high net worth individual B. A charity C. A foundation D. An exector

A.

Same Jones has been a successful businessman and is concerned that his youngest daughter will not be able to live within her means. To protect this from happening Mr. Jones places a certain sum of money into a trust for the benefit of the daughter. Because Mr. Jones knows he won't live forever, he arranges for the Fidelity Bank and Trust Company to have control over the assets. In this case: I. Sam Jones is the grantor II. Sam Jones is the trustee III. Fidelity Bank and Trust Company is the trustee IV. Sam Jones's daughter is the beneficiary A. I, III, and IV B. I and III C. II and III D. II, III, and IV

A.

An 83 year old widower explains to you that he is risk averse and wishes to find an investment that will provide him with preservation of capital. Which of the following might you recommend? A. an index fund B. bank-insured CDs C. long-term US gov't bonds D. preferred stock

B.

Three friends plan to start a new business. It is anticipated it will be several years before the business turns a profit. Which of the following types of business organization would be best if they wish to limit their liability while, at the same time, being able to receive favorable tax treatment for the expected losses? A. C corporation B. S corporation C. General partnership D. Sole proprietorship

B.

You have a client who has recently retired. A pressing question is, "How much can be withdrawn without running out of money?" One of the popular techniques for approximating an answer is by using A. the random walk hypothesis B. Monte Carlo simulations C. LIBOR approximations D. portfolio rebalancing

B.

In designing an investment portfolio of a new client, one of the first things to do is determine the client's A. home address B. Social Security or tax ID number C. risk tolerance D. beneficiary

C.

The expected return on the market is 15%, the risk-free rate is 8%, and the beta for Stock A is 1.2. Compute the rate of return that would be expected (required) on this stock. A. 7% B. 8.4% C. 16.4% D. 18%

C.

A married couple is 55 and 57 years old. The older of the two plans to retire at 62 and the younger at 65, and both are healthy. What is the most appropriate estimate of the time horizon for their retirement portfolio? A. 5 years B. 7 years C. 8 years D. more than 20 years

D.

Followers of the efficient market hypothesis believe that A. following the business cycle is the best way to maximize returns B. concentration rather than diversification will produce superior returns C. by following the pundits on TV, you'll wind up rich D. an efficient market is one that produces random results

D.

Several investors open an account in joint tenancy. Financial information is required on which of the following investors? A. The majority of the investors B. the largest investor only C. only the one authorized to trade the account D. All of the investors

D.

The most appropriate term to use when referring to a trust that is established upon the death of the grantor is A. revocable trust B. irrevocable trust C. living trust D. testamentary trust

D.

Tenants in common, Full power of attorney, OR Discretionary authorization? Enables the investment adviser representative to make investment decisions in a client's account

Discretionary authorization

Executor, Irrevocable Trust OR Fiduciary? Person authorized by law to manage the estate of a decendent

Executor

Executor, Irrevocable Trust OR Fiduciary? Person legally appointed to manage and/or hold assets for the benefit of another person

Fiduciary

Indexing, Growth investing, Value investing, Tactical asset allocation OR Strategic asset allocation? Constructing a portfolio to mirror the performance of the S&P 500

Indexing

Executor, Irrevocable Trust OR Fiduciary? Once established, changes may not be made

Irrevocable Trust

Partnership account, TOD, TIC, OR JTWROS? Parties share an undivided interest in the account. If one party dies, his interest passes to the other owner(s) of the account

JTWROS

Partnership account, TOD, TIC, OR JTWROS? An unincorporated interest of two or more individuals. A written agreement specifies which individuals can trade the account

Partnership account

Indexing, Growth investing, Value investing, Tactical asset allocation OR Strategic asset allocation? Balancing portfolio assets for the long term

Strategic asset allocation

Partnership account, TOD, TIC, OR JTWROS? Each party specifies a percentage interest in the account. If one party dies, her interest in the account passes her estate

TIC

Partnership account, TOD, TIC, OR JTWROS? The assets in the account become the property of the beneficiary on the death of the account owner without passing through probate

TOD

Indexing, Growth investing, Value investing, Tactical asset allocation OR Strategic asset allocation? Involves short-term adjustments to portfolio asset class mix

Tactical asset allocation

Tenants in common, Full power of attorney, OR Discretionary authorization? A deceased's fractional interest in an account is retained by his estate

Tenants in common

Indexing, Growth investing, Value investing, Tactical asset allocation OR Strategic asset allocation? Selecting companies currently out of favor on the basis of earnings prospects

Value investing