Orion Series 65 exam 5
A limited liability company is
a company with tax consequences similar to a partnership
Followers of the efficient market hypothesis believe that
an efficient market is one that produces random results
In the field of portfolio management, there are a number of different management styles. One of those styles involves committing additional capital to the market when others are reducing their exposure, or eliminating positions while others are increasing theirs. This style is generally referred to as:
contrarian
As compared to value investors, growth investors tend to:
look for companies whose sales, earnings, or market share are increasing at an above- average rate
The concept of creating a model portfolio, through asset allocation principles, that both increases return and reduces risk is known as:
portfolio optimization
An investor purchases 500 shares of stock on January 10th at $50 per share and sells it on August 4th of the following year for $40 per share. As a result, the investor has realized a:
short-term capital loss
The management style that is most similar to buy and hold is:
strategic management.
A business organized as a sole proprietorship wished to open an advisory account. When preparing an investment policy statement, the IA would have to consider the objectives of
the sole proprietor
If a husband makes a gift of $100,000 to his wife, a U.S. citizen, how muchof the gift is subject to gift taxes?
$0.00
An investor purchases 100 shares of a stock at $100 per share on January 1st. On the following July 1st, the shares are sold for $120 per share. The tax consequences are:
$2,000 short-term gain
For which of the following types of clients would the suitability requirements be somewhat more relaxed?
A high net worth individual
Several investors open account in joint tenancy. Financial information is required on which of the following investors?
All of the investors
Which of the following market analysts is using the efficient market theory?
An analyst picks company names out of a hat
An 83-year-old widower explains to you that he is risk averse and wished to fins an investment that will provide him with preservation of capital. Which of the following might you recommend?
Bank-insured CDs
Investors wishing to employ a passive strategy for their bond portfolios would most likely elect which of the following?
Buy and Hold
A professional tennis player comes to you seeking advice on setting up a trust. She is interested in giving to charity and also wants discretion as to when income is distributed to the beneficiaries, her parents. Which trust do you advise she use?
Complex trust
The Jones family has scheduled an initial visit with a financial planner. Mr. Jones has an annual salary of $70,000 and this is their first attempt at financial planning. Which of the following should be the first step taken by the financial planner?
Establish an emergency fund
An investment strategy where a higher price is paid for a stock based on expected returns is:
Growth investing
Constructing a portfolio of companies that are outperforming most other stocks in that industry
Growth investing
An investor can choose between four portfolios with the following expected returns and standard deviations. Expected Return Standard Deviation I. 8% 20% II. 6% 21% III. 8% 21% IV. 7% 22% Based on Modern Portfolio Theory (MPT), which portfolio should the investor choose?
I
Constructing a portfolio to mirror the performance of the S&P 500
Indexing
Most new business operate at a loss for a period of time. If several of your clients were forming a group to fund a start-up enterprise but wished to limit their liability and, at the same time, be able to receive favorable tax treatment for the expected losses, you would suggest forming which of the following
LLC
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 usuing
Monte Carlo simulations
A married couple is 55 and 57 years old. The older of the 2 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?
More than 20 Years
Which of the following is federally tax exempt for a corporation?
Municipal bond interest
An investor who would like to increase current income from investment and, at the same time, pay taxes on that income at less than his marginal tax rate, would probably find which of the following to be most suitable?
Public utility stock
Which of the following is a characteristic of the passive investment style?
Rebalancing
In designing an investment portfolio for a new client, one of the first things to do is determine the client's
Risk Tolerance
In most cases, the tax filing status that results in the highest income tax is
Single
selecting companies currently out of favor on the basis of earnings prospects
Value investing
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.
16.4% (found by: 8% + 1.2(15%-8%))
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?
Current income and cash flow requirements
Buying stocks with high PE ratios normally reflects which of the following investment styles?
Growth
Which of the following are possible sources of taxable income to an individual? I. Owing a sole proprietorship II. Being a shareholder in a subchapter S corporation III. Owning stocks and bonds IV. Proceeds paid on a life insurance policy
I, II, and III
Sam 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 Jone's daughter is the beneficiary
I, III, IV
Assets that might be found on a family balance sheet include: I. car loan. II. gold watch. III. Keogh plan. IV. salary.
II and III
3 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?
S Corporation
Balancing portfolio assets for the long term
Strategic asset allocation
A client has an account where, upon her death, she desires that her only son will receive 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
TOD
Involves short-term adjustments to portfolio asset class mix
Tactical asset allocation
The most appropriate term to use when referring to a trust that is established upon the death of the grantor is
Testamentary Trust
An individual's net worth is
The difference between the individual's assets and the individual's liability
In a trust account, the person who makes the account management decisions is the:
Trustee
