Section 3 Quiz

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mrinout
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198918
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Section 3 Quiz
Updated:
2013-02-11 15:42:44
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Pass 65
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40 Questions
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  1. Which TWO  of the following represent accurate statements concerning growth and value investing?

    1) growth investors are willing to pay high valuation ratios
    2) growth investors prefer stocks trading close to their book value
    3) value investors are willing to pay high valuation ratios
    4) value investors prefer stocks trading close to their book value

    A) 1,3
    B) 2,3
    C) 2,4
    D) 1,4
    D) 1,4
    (this multiple choice question has been scrambled)
  2. Which of the following represents a valuation ratio?

    A) cash flow
    B) EBITDA
    C) price-to-book
    D) interest coverage
    C) price-to-book
    (this multiple choice question has been scrambled)
  3. Which of the following would typically interest a value investor?

    1) stock trading at its book value
    2) stock trading below its book value
    3) stock trading at a high multiple to earnings
    4) stock trading at a low multiple to earnings

    A) 1,2,4
    B) 2,4
    C) 1
    D) 3
    A) 1,2,4
    (this multiple choice question has been scrambled)
  4. Which of the following represent(s) (an) accurate statement(s) concerning equity mutual funds?

    A) an equity income fund tends to have a lower beta coefficient than a growth fund
    B) a growth and income fund tends to have a lower beta coefficient than a growth fund
    C) the portfolio manager for a growth fund would not use dividend payout ratios to select investments
    D) all choices listed
    D) all choices listed
    (this multiple choice question has been scrambled)
  5. Which of the following is/are related to a belief in efficient markets?

    1) strategic asset allocation
    2) tactical asset allocation
    3) indexing
    4) market timing

    A) 1,3
    B) 2
    C) 3
    D) 1,2,3,4
    A) 1,3
    (this multiple choice question has been scrambled)
  6. Which TWO of the following are considered the most important in determinig investment results?

    1) timing
    2) investment manager's skill and experience
    3) time horizon
    4) asset allocation

    A) 1,4
    B) 3,4
    C) 1,2
    D) 2,3
    B) 3,4
    (this multiple choice question has been scrambled)
  7. Use the followingt information to determine an investor's capital gains liability for Tax Year 2010:
    --Bought 1,000 shares ORCL January 5, 2009 @15
    --Sold 1,000 shares ORCL January 6 2010 @21
    --Bought 1,000 shares MSFTJanuary 4 2009 @27
    --Sold 1,000 shares MSFT January 4, 2010 @25

    A) $4,000 long-term capital gain
    B) $4,000 short-term loss
    C) $6,000 long-term capital gain
    D) $6,000 short-term capital loss
    A) $4,000 long-term capital gain
    (this multiple choice question has been scrambled)
  8. One of your investing clients is a married couple interested in gifting various relatives as much as possible without incurring tax liability.  In 2010 the husband gave his nephew, Jason, $18,000, and the wife gave her niece, Jennifer, $19,000.  Therefore, which of the following accurately addresses the tax ramifications?

    A) the couple can make a one-tme gift of $39,000 without reporting
    B) the couple can choose to split the gifts without incurring gift tax liability, but must file a return
    C)the excess of $13,000 will be taxable at gift tax rates
    D) the couple can choose to split the gifts, without filing a return
    B) the couple can choose to split the gifts without incurring gift tax liability, but must file a return
    (this multiple choice question has been scrambled)
  9. Which of the following features do CESA (Coverdell Educational Savings Accounts) and 529 Savings Plans have in common?

    1. qualified withdrawals are exempt from federal taxation
    2. may be used to cover middle school expenses
    3. become the property of the beneficiary at the age of majority
    4. may be used to cover college tuition, books, room & board

    A) 3 only
    B) 1 only
    C) 2,3,4 only
    D) 1,4 only
    D) 1,4 only
    (this multiple choice question has been scrambled)
  10. Which of the following represent(s) taxable withdrawals from a Traditional IRA?

    1. first-time purchase of a primary residence, to $10,000
    2. withdrawals as a result of disability
    withdrawals after age 59 1/2

    A) 1,2
    B) 3
    C) 2
    D) 1, 2, 3
    D) 1, 2, 3
    (this multiple choice question has been scrambled)
  11. Use the following information to determine an investor's capital gains liability for Tax Year 2010:

    --Bought 1,000 shares ORCL January 5, 2009 @15
    --Sold 1,000 shares ORCL January 6, 2010 @12
    --Bought 1,000 shares MSFT January 4, 2009 @27
    --Sold 1,000 shares MSFT January 4, 2010 @36

    A) $12,000 long-term capital gain
    B) $3,000 short-term capital loss
    C) $9,000 long-term capital gain
    D) $6,000 short-term capital gain
    D) $6,000 short-term capital gain
    (this multiple choice question has been scrambled)
  12. A client would expect to take federally tax-free withdrawals from which of the following plans in most cases?

    1. SEP-IRA
    2. Roth IRA
    3. Health Savings Account
    4. 529 Plan

    A) 2
    B) 1,2,3,4
    C) 1,3
    D) 2,3,4
    D) 2,3,4
    (this multiple choice question has been scrambled)
  13. One of your investing clients purchased 1,000 shares of GE @ 22, paying a $50 commission. Which of the following accurately describes the tax implications?

    A) long-term capital gain of $10,900
    B) long-term capital gain of $11,000
    C) short-term capital gain of $10,900
    D) short-term capital gain of $33,000
    C) short-term capital gain of $10,900
    (this multiple choice question has been scrambled)
  14. Which of the following is/are subject to state taxation?

    1. municipal bond interest
    2. interest on U.S. Treasury obligations
    3. capital gains on U.S Treasury obligations
    4. GNMA interest

    A) 4
    B) 1,3,4
    C) 1
    D) 2,3,4
    B) 1,3,4
    (this multiple choice question has been scrambled)
  15. One of your investing clients has inquired about methods of increasing personal financial net worth.  Which of the following would increase net worth for the client?

    1. paying down a mortgage balance with a personal check
    2. capital appreciation on stock held within a 401 (k) account
    3. market value appreciation on a home with a small mortgage balance
    D) market value appreciation on a home with no mortgage balance

    A) 1,2,3,4
    B) 2,4
    C) 2,3,4
    D) 3 only
    C) 2,3,4
    (this multiple choice question has been scrambled)
  16. Eileen resides in Richmond, Va.  If Eileen purchases a tax-exempt municipal bond mutual fund from Rory, an associated sales agent of a FINRA member firm, which of the following accurately describes the tax implications?

    A) when Eileen receives dividend distributions, they will be from Virginia state taxes
    B) when Eileen receives dividend distributions, they will likely be exempt from federal income taxes
    C) when Eileen receives capital gains distributions, they will likely be exempt from federal taxes
    D) if Rory is licensed in Va., Eileen will pay no state income taxes on the investment
    B) when Eileen receives dividend distributions, they will likely be exempt from federal income taxes
    (this multiple choice question has been scrambled)
  17. Aunt Myrna purchased 392 shares of the XLT Value Fund in 1983, with the NAV  at $9.92 and the POP at $10.  Aunt Myrna dies and wills all shares to you.  On the date of death the NAV is $12.  If you redeem the shares 4 months later with the NAV at $13 and the POP at $13.25, your capital gain will be:

    A) short-term gain of $3.33 per share
    B) Short-term gain of $1.00 per share
    C) short-term gain of $3.00 per share
    D) long-term gain of $1.00 per share
    D) long-term gain of $1.00 per share
    (this multiple choice question has been scrambled)
  18. Mason Meyer purchased 1,000 shares o MMM on January 1st, 2009.  On December 31st, 2009, Mason sold the shares for a $300 capital gain.  If the trade settled on January 4th, 2010, which of the following accurately describes the tax consequences?

    A) Mason will report the gain or loss for tax year 2007
    B) the gain will be treated as dividend income
    C) the gain will be considered short-term
    D) the gain will be considered long-term
    C) the gain will be considered short-term
    (this multiple choice question has been scrambled)
  19. If an investor elects to receive dividend and capital gains distribution from a mutual fund in cash, rather than reinvesting into new shares, within a 401 (k) or Traditional IRA plan, which of the following best describes the tax ramifications of this decision?

    A) the dividends will be taxed as long-term capital gains
    B) dividends will grow tax-deferred, but capital gains will be taxed annually
    C) the decision will have no ramifications
    D) the long-term capital gains will be taxed as long-term capital gains
    C) the decision will have no ramifications
    (this multiple choice question has been scrambled)
  20. Which of the following orders could best be used to protect capital appreciation on a stock position?

    A) buy-stop
    B) buy-stop limit
    C) sell-limit
    D) sell-stop
    D) sell-stop
    (this multiple choice question has been scrambled)
  21. Heather is a college student.  She earned $1,000 last year waiting tables and also earned $500 modeling for art-school classes.  If Heather also received $1,400 in T-note interest, she may contribute how much to her Roth IRA?

    A) $1,600
    B) $1,100
    C) $5,000
    D) $3,000
    A) $1,600
    (this multiple choice question has been scrambled)
  22. You have contributed to your Traditional IRA for each of the past four years.  You recently took a job with an employer paying you $27,000 per year.  If you participate in the employer's defined benefit pension plan, what is true of your IRA?

    A) it must be closed
    B) you may make only after-tax contributions to your IRA
    C) you may continue to make pre-tax contributions to your IRA
    D) it may remain open, but no contributions are allowed for five years
    C) you may continue to make pre-tax contributions to your IRA
    (this multiple choice question has been scrambled)
  23. Which of the following would be associated with a 50% insufficient withdrawal penalty?

    A) Non-qualified premature distribution
    B) Substantially Equal Periodic Payments
    C) Internal Rate of Return
    D) Required Minimum Distribution
    D) Required Minimum Distribution
    (this multiple choice question has been scrambled)
  24. Julianne held 1,000 shares of ABC for 13 months before selling them for a loss of $1,000.  If Julianne repurchases shares of ABC  23 days later, which of the following accurately describes the tax implications?

    A) the loss is disallowed
    B) Julianne can be sued for tax fraud by the IRS and/or FINRA
    C) Julianne can be fined by FINRA
    D) the loss is disallowed but is added to the cost basis of the new phone
    D) the loss is disallowed but is added to the cost basis of the new phone
    (this multiple choice question has been scrambled)
  25. Which of the following risks is reduced through dollar-cost averaging?

    A) inflation
    B) market
    C) political
    D) timing
    D) timing
    (this multiple choice question has been scrambled)
  26. To which of the following investors should a registered representative most likely recommend an aggressive growth fund?

    A) 45-year-old investor with a 16-year-old daughter hoping to attend private college
    B) 45-year-old investor whose primary objective is income and secondary objective is growth
    C) 47-year-old investor whose insurance needs are adequately met and who participates in a defined benefit pension plan
    D) investor with a short time horizon
    C) 47-year-old investor whose insurance needs are adequately met and who participates in a defined benefit pension plan
    (this multiple choice question has been scrambled)
  27. An investor is convinced that the asset allocation of his portfolio is underweighted toward equities, even though he plans to retire in two years.  He would like to increase the equity allocation but has only $3,000 to invest.  Which of the following best addresses suitability in this example?

    A) an investor should never invest in equities--even a small percentage--for a period of less than 10 years
    B) Treasury bonds are the most suitable investment for the entire portfolio
    C) C-shares of a conservative equity income fund might be suitable
    D) ETFs would not be suitable, due to the high management fees
    C) C-shares of a conservative equity income fund might be suitable
    (this multiple choice question has been scrambled)
  28. Barb is 53 and plans to retire at age 65.  She is fully vested in a defined-benefit pension plan but is concerned about purchasing power.  Her mortgage will be paid off over the next two years, and her husband has a life insurance policy with a $500,000 death benefit.  Which of the following statements best addresses suitability for this investor?

    A) Barb should invest exclusively in money market funds
    B) Barb should open an IRA and purchase a variable annuity to put in it
    C) U.S. Treasury securities are suitable for investors in Barb's age bracket
    D) a growth and income fund with a conservative investment approach may be suitable
    D) a growth and income fund with a conservative investment approach may be suitable
    (this multiple choice question has been scrambled)
  29. If and investor were reading a prospectus profiling all of the mutual funds offered within a mutual fund complex, she would expect to see which of the following categorized as having the highest price volatility?

    A) value
    B) balanced
    C) growth
    D) growth and income
    C) growth
    (this multiple choice question has been scrambled)
  30. One of ABCs equity funds focuses on investing in the stocks of companies with long track records of suffering temporary setbacks.  This fund is a

    A) growth fund
    B) value fund
    C) specialty fund
    D) sector fund
    B) value fund
    (this multiple choice question has been scrambled)
  31. Which of the following represent accurate statements concerning variable annuity contracts?

    1. number of accumulation units is fixed
    2. number of accumulation units varies
    3. number of annuity units is fixed
    4. number of annuity units varies

    A) 1,4
    B) 2,3
    C) 2,4
    D) 1,3
    B) 2,3
    (this multiple choice question has been scrambled)
  32. An investment in which of the following equity mutual funds is generally associated with the highest standard deviation?

    A) large-cap growth
    B) large-cap value
    C) mid-cap value
    D) small-cap growth
    D) small-cap growth
    (this multiple choice question has been scrambled)
  33. Which of the following statements is/are accurate of both variable annuities and variable life insurance?

    1. The insurance company bears all investment risk
    2. Net payments are allocated to the separate account
    3. The main advantage over fixed contracts is the potential protection from inflation
    4. They must be registered as securities with the SEC

    A) 3 only
    B) 1,2,3, and 4
    C) 1 only
    D) 2,3,4
    D) 2,3,4
    (this multiple choice question has been scrambled)
  34. Which of the following would protect an investor against missing assets due to the failure of her broker-dealer firm?

    A) SIPC
    B) CBOE
    C) FDIC
    D) FINRA
    A) SIPC
    (this multiple choice question has been scrambled)
  35. Which of the following represents an accurate statement concerning hedge funds?

    A) non-accredited investors may invest indirectly through "funds of hedge funds," given certain requirements
    B) they are generally illiquid
    C) non accredited investors may not invest directly in hedge funds
    D) all choices listed
    D) all choices listed
    (this multiple choice question has been scrambled)
  36. A small business with 15 employees has just established a SIMPLE IRA.  Therefore, participants will be fully vested

    A) after three work years
    B) after three calendar years
    C) immediately
    D) after working 1,000 hours
    C) immediately
    (this multiple choice question has been scrambled)
  37. XYZ Equity Income Fund reports net income of $1,000,000 and distributes $880,000 directly to investors.  Therefore, the fund will be taxed on what amount?

    A) $1,000,000
    B) $20,000
    C) as stipulated in the prospectus
    D) $120,000
    A) $1,000,000
    (this multiple choice question has been scrambled)
  38. Which of the following represent(s) (an) accurate statement(s) concerning 529 Savings Plans?

    A) distributions used for education expenses are exempt from federal taxation
    B) all choices listed
    C) distributions may be taxable at the state level
    D) a gift can be made for the current gift tax exclusion times five years without triggering gift taxes
    B) all choices listed
    (this multiple choice question has been scrambled)
  39. Which of the following orders would be activated in a bull market?

    1. sell-stop
    2. sell-limit
    3. buy-stop
    4. buy-limit

    A) 1,3,4
    B) 1
    C) 2,3
    D) 2
    C) 2,3
    (this multiple choice question has been scrambled)
  40. Damien Smith has a cash account with securities valued at $120,000 and a cash position of $380,000.  He and his wife have a joint account with $400,000 in securities and $90,000 in cash.  What is the SIPC coverage for their accounts?

    A) $220,000 covered for cash account; $490,000 for joint account
    B) $480,000 covered for cash account; $500,000 for joint account
    C) $500,000 covered for cash account; $500,000 for joint account
    D) $500,000 total for both accounts combined if at same broker-dealership
    A) $220,000 covered for cash account; $490,000 for joint account
    (this multiple choice question has been scrambled)

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