Unit 19
Several investors open an account in joint tenancy. Financial information is required on which of the following investors?
All the investors
A client profile is not complete without a family income statement. A typical one would include I. dividends II. credit card debt III. autos IV. mortgage interest
I and IV
Which of the following statements about investment constraints is least accurate?
Investors with short time horizons are not likely to worry about liquidity
An investor has just received an inheritance of $100,000 and has decided to use the money to buy a new home. Because it will take time to decide where to buy, it is expected that the purchase will not be made for another 6-9 months. If this investor placed the money into a broad market index ETF, the primary risk taken would be
Market risk
An investor is in a low tax bracket and wishes to invest a moderate sum in an investment that will provide some protection from inflation. Which of the following should you recommend?
Mid-cap common stock mutual fund
Pemberton bought a stock share at $50 and wants to earn a profit, so he decided he will never sell it below $52. The company has now underperformed for multiple quarters as per street analysts, and the stock is down to $48. Pemberton continues to hold the stock in line with his original plan. In this case, Pemberton may be exhibiting
anchoring bias
A customer has a financial commitment of $200,000 that will come due in 2 years. In the interim, the customer wishes to invest the $200,000 to maximize income and have the money available for the obligation in 2 years. You should recommend investments in
government securities with two year maturities
Tamika is an investment adviser representative with Financial Engineers, LLC, a covered investment adviser. The firm uses an investment policy statement to help design financial plans for their clients. One of Tamika's current clients plans to purchase a new boat 7 months from now. When using the IPS, this would be considered
investment constraint
An adviser always inquires into her clients' investment objectives, financial situations, and needs. The investment adviser is
obtaining the information required to fulfill her professional obligation regarding suitability
An individual's net worth is
the difference between the individual's assets and the individual's liabilities
A client is risk averse and is planning on retiring in 16 years. As the client's investment adviser, which of the following would you recommend?
50% in an S&P 500 index fund; 50% in a portfolio of high-quality bonds
Your 30-year-old client has $100,000 to invest and willing to assume a moderate amount of risk, but she would also like to have $10,000 available for a down payment on a home in 6 months. Which of the following asset allocation strategies would best suit her situation?
70% large-cap stock fund, 20% balanced fund, 10% money market fund
An investment adviser representative prepares a detailed portfolio restructuring for a new client. The client is not impressed with the recommendation, and at least to the IAR, it appears that the rejection is more due to a lack of understanding than a valid dislike. What should be the first step taken by the IAR?
Attempt to educate the client as to what this portfolio is trying to accomplish for the client while at the same time recognizing that the final decision is clearly in the hands of the client.
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
If a 65-year-old woman of substantial means is seeking income and preservation of capital, which of the following should you recommend?
Government bond fund, corporate bond fund, municipal bond fund
Which of the following would be most suitable for a young couple investing the assets of their IRAs?
Growth Mutual Funds
An elderly widow with no independent income wishes to invest the proceeds from her recently deceased husband's life insurance. Which of the following would be the most suitable recommendation?
High-Grade corporate bond mutual fund
You are onboarding a new client. Which of the following is the least important indicator of the client's risk tolerance?
Highest education level
If an investor has $20,000 to invest, but requires $500 per month to pay for her mother's nursing home care, which of the following funds should you recommend?
Money Market
When interviewing a new client, the discussion leads to the damage done to the environment by oil spills. The client mentions the names of some large petroleum companies and says that she does not want stocks like that in her portfolio. In so doing, she is expressing
Nonfinancial consideration; her values
