Unit 4: Session 2: Client Profile

An individual has just received a bonus of $12,473 and wishes to generate some income without risking loss of capital. Assuming the client is in a low tax bracket, which of the following would be the most suitable choice? A)Insured municipal bonds. B)Growth stocks. C)Public utility stocks. D)Bank insured CDs.

D

Two of the general categories of investment objectives are income and capital growth. An investor primarily seeking income would be least interested in which of the following? A)U.S. treasury bonds B)Interest C)A stock paying a high dividend D)Capital gains

D

Investors who buy shares in state-specific municipal bond funds may be subject to: A)federal income tax. B)no taxation. C)out-of-state property tax. D)capital gains tax.

D - Interest received from municipal bonds and municipal bond funds is generally income tax free on a federal basis, but taxable in states other than the state of issue. State-specific funds avoid that problem. These investments are subject to capital gains taxes if sold at prices above investors' cost.

Jean owns a $1 million life insurance policy on her mother, Clara. Jean is named as sole beneficiary, and so far she has paid $150,000 in premiums. If Clara dies, which of the following will occur? - The proceeds will be exempt from income tax. - $850,000 of the proceeds will be subject to income tax. - The proceeds will be included in Clara's estate for estate tax purposes. - The proceeds will not be included in Clara's estate.

1 & 4