unit 3&4 pt 2`

For an individual earning $150,000 per year, which of the following would be the highest rate? A) The effective tax rate B) The median tax rate C) The marginal tax rate D) The qualifying dividend tax rate

Because we have a progressive income tax system (the higher the taxable income, the higher the tax rate), the marginal tax rate, which represents the tax on the last dollar received, is the highest rate one will pay.

Which of the following is considered to be a security? A) Section 529 plan B) Section 457 plan C) Coverdell ESA D) Section 403(b) plan

529 The definition of security specifically excludes retirement plans (the Coverdell was originally known as the Education IRA). Section 529 plans are technically considered municipal fund securities.

growth companies PE and dividends

High PE and low dividend

The statistical measurement that indicates how much an investment's returns have fluctuated, compared to its average return, over a period of time is known as:

Standard deviation is the statistic that indicates how much an investment's returns have fluctuated, compared to its average returns, over a given period of time. An investment with a high standard deviation tends to have a higher level of risk than an investment with a low standard deviation.

efficient market hypothesis

The efficient market hypothesis argues that analysis itself has little, if any, value.

who can open an ira

anyone with earned income

industrial production is a

coincident indicator

A "margin account" is a type of brokerage account in which the broker-dealer lends the investor cash to purchase securities using marginable securities in the account as collateral. Which of the account documents authorizes the use of those securities as collateral for that loan? A) The credit agreement B) The loan consent agreement C) The hypothecation agreement D) The secured agreement

credit

sharpe

expected pf return - rf rate divided by sd

Technical analysis

focuses on price patterns.

A retired woman whose sole income comes from a portfolio of investments with a fixed rate of return is most affected by: A) bearish market conditions. B) high income taxes. C) high inflation. D) volatile interest rates.

inflation

stock indices and manufacturing orders are

leading indicators

When investors tend to increase their investments in debt securities into those on the short end of the spectrum, it generally leads to what kind of yield

normal (positive) yield

Fundamental analysi

ocuses on economic, industry, and business conditions

monte carlo analysis

onte Carlo analysis uses simulations to predict the probability of portfolio performance in light of multiple and uncertain variable conditions.

In order to compute a client's realized holding period return, it is not necessary to know A) original investment B) value at the end of the holding period C) paper profits D) income received during the holding period

paper profits

One major difference between the customer identification program (CIP) and the new account opening rules of the regulatory bodies is that

the CIP requires date of birth while the regulators only require proof of legal age

A portfolio manager is attempting to select securities for one of her clients. Company A has a beta of 0.9 and returned 13% for the year. Company B has a beta of 1.3 and returned 18% for the year. The market return for the year was 14%. Based on alpha, the portfolio manager would likely select

Company A has a slightly positive alpha, while company B's is slightly negative. Because this question does not include the risk-free rate, the alpha is simply reflecting how the company's return compared with what one would have expected based on its beta. Company A should have returned 90% of the market return of 14%. That would be 12.6%, and its actual return was 13%, giving it a 0.4% alpha. Company B should have returned 1.3 times the market, or 18.2%. With an 18% return, B had a negative alpha of 0.2%.

who can participate in 403b plans

Only employees of schools, church organizations, and nonprofit organizations are eligible to participate in 403(b) plans.

An investor purchases 1,000 shares of ABC at $42 per share. One year later, the stock is trading at $50 per share and the investor receives 50 shares of ABC as a stock dividend. How will this dividend be currently taxed?

Shares received per a stock dividend are not currently taxable. Instead, shareholders who receive stock dividends must adjust their cost basis in the shares downward. The total number of new shares, multiplied by their new adjusted basis, must equal the shareholder's total interest before the stock dividend was received.

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) Growth stocks. B) Bank insured CDs. C) Insured municipal bonds. D) Public utility stocks.

The only choice here with no risk to capital is the bank insured CD. Although the insured municipal bond is guaranteed to repay principal at maturity, the bond will still be subject to interest rate risk and, with the client in a low tax bracket, municipal bonds are generally unsuitable investments.

The goal of modern portfolio theory (MPT) is to construct the most efficient portfolio. An efficient portfolio is one that offers

Under MPT, an efficient portfolio is one that manages risk to provide the optimum return. That is, for any given amount of return, the portfolio achieves that return with the lowest possible risk. Conversely, it can be stated that you receive the highest possible return with the lowest possible risk. Analysts using MPT are seeking a high Sharpe ratio.

how much money can Maria give to her spouse, a Canadian citizen, in 2014 without incurring gift tax consequences?

a lmited amount (more than 14k)

All of the following ratios are measures of the liquidity of a corporation EXCEPT: A) current ratio. B) acid-test ratio. C) quick ratio. D) debt/equity ratio.

debt/equity

Current assets divided by current liabilities is the current ratio, a ratio that measures

liquidity

UGMA accounts may never be opened as

margin accounts

LMN Manufacturing Company, listed on the NYSE, is an SEC reporting company. Each of the following would require the filing of a Form 8-K EXCEPt a) relocation of wholly owned subsidiary B) a change in top management C) a change in external CPA firm engaged to perform the annual audit D) acquisition of a major asset

relocation of wholly owned subsidiary

when will our foreign accounts balance be credited

whenever "foreign" money comes in rather than going out. Interest received from foreigners represents money coming into the U.S. while the other choices represent money going out.