STC Series 66 Exam 04B

Which of the following is TRUE regarding management companies?

Investors will liquidate open-end fund shares at their NAV, but closed-end fund shares may be liquidated below their NAV

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:

Time value of money

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:

Systematic Rebalancing

For a single parent who has a low income and wants to protect her child in the event of her death, what's the best policy?

Term Life

Under which of the following circumstances will the payout from a variable annuity increase?

The performance of the separate account exceeds the AIR

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?

$125,350 1.09 (90%/10% + 1) * 115,000 (1.15 (15% cap +1) * 100,000)

Which of the following results in the highest inflation-adjusted rate of return?

A bond yields 11% when inflation is at 3%

The NAV of an ETF is calculated

At the close of each trading day

An individual who is bearish would probably:

Buy a put option

When calculating a fixed-income security's discounted cash flow, which of the following statements is TRUE?

Discounted cash flow calculations can determine fair market values for a fixed-income security

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:

Efficient market theory

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:

Internal Rate of Return

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:

Is considered a passive loss and may only be deducted against passive income

In the formula Pn = Po(1+r)^n, Pn represents:

The future value of money

Which of the following statements is TRUE in relation to the buyer of a call option?

The investor has limited risk

The separate account of the variable life policy that Tom Jones bought is performing poorly. Does this have any influence on his death benefit?

Yes, but it could never drop below the fixed minimum