Unit 17 Series 65

Question #11 of 11 (Exam) If a new client has $200,000 to invest and wants to retire in 15 years, which of the following client information is least necessary for an adviser to recommend a suitable investment program? A) The projected annual income needed during those retirement years B) Tolerance toward risk C) The age of the client D) Current income and cash flow requirements

D) Current income and cash flow requirements Although current income and cash flow requirements are ordinarily important considerations, in this question we are being asked about the investment of a lump sum, not periodic additional investments. The amount of income required will determine the types of investments and how they must be structured in order to achieve the retirement income desired. The client's age is necessary to determine the time horizon. That is, if the client is currently 35 and wishes to retire at age 50, the money will have to last a lot longer than if we are dealing with a 55-year-old who wishes to retire in 15 years at age 70. A client's tolerance toward risk is among the most important nonfinancial considerations in determining investment suitability.

Question #8 of 12 (Q Bank Quiz 2) When preparing a client profile, the least important concern would be: A) disability coverage. B) current income. C) retirement plans. D) educational background. Of the four choices shown, educational background has the least relevance to formulating a financial plan for a client.

D) educational background. Of the four choices shown, educational background has the least relevance to formulating a financial plan for a client.

Question #2 of 11 (Exam) Otto and Lucy set up a 529 plan to save funds for the college education of their daughter, Marangue, who is 14. What is the most suitable investment for the largest portion of their contribution? A) An intermediate-term bond fund B) A long-term bond fund C) A large-cap stock fund D) A growth stock fund

A) An intermediate-term bond fund This is a straight suitability question. Match the time horizon to the investment offered, and an intermediate-term bond fund is the only logical answer.

Question #11 of 12 (Q Bank Quiz 2) In determining an investor's risk tolerance, an investment adviser representative must consider I. level of tolerance toward market volatility II. investment time horizon, long term or short term III. liquidity requirements IV. investment temperament A) I, II, III and IV B) I only C) I, II and III D I and II

A) I, II, III and IV The investment adviser representative must consider a client's volatility tolerance, investment time frame, liquidity needs, and comfort with different types of investments. These are all elements in the understanding of a customer's attitude toward risk.

Question #11 of 12 (Q Bank Quiz 1) One of your prospective clients is considered a key employee at his place of business. This individual has a net worth of almost $6 million, currently earns in excess of $500,000 per year, and is married with 2 teenage children. He currently has a little over $1 million in his 401(k), more than half of which is invested in his employer's common stock. The company is the beneficiary of a $1.5 million key person life insurance policy on his life. Given these facts, what is your greatest concern as his adviser? A) Too high a percentage of the retirement plan invested in the company's stock B) Inadequate funding for college savings C) Inadequate life insurance coverage D) Alternative minimum tax

C) Inadequate life insurance coverage Because the client's only life insurance seems to be that with the company as beneficiary, it does not appear that he has adequately planned for his premature death and the potential estate taxes.

Question #9 of 11 (Exam) A 45-year-old investor wants the greatest possible monthly income with the preservation and stability of capital as secondary objectives. Which of the following investments would you recommend? A) Growth mutual fund B) Growth and income fund C) Long-term bond fund D) Money market mutual fund

C) Long-term bond fund The only choice that provides stability of capital is the money market fund, but that is not the investor's primary objective and the monthly income is quite low. Although the two other funds don't offer stability, they certainly don't provide a high income (even the growth and income fund). If you want income, you invest in bonds, especially those with longer maturities.