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Question 1 of 10
1. Question
A series of bonds that have their maturity dates spread out over a period of time are called?
Correct
A bond ladder is a series of bonds that have their maturity dates spread out over a period of time. This reduces interest rate risk and makes cash available more often.
Incorrect
A bond ladder is a series of bonds that have their maturity dates spread out over a period of time. This reduces interest rate risk and makes cash available more often.
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Question 2 of 10
2. Question
Identify the process wherein securities are purchased over a period of time through periodic investments at a predetermined amount:
Correct
Dollar cost averaging is the process wherein securities are purchased over a period of time through periodic investments at a predetermined amount. This is done to reduce risks caused by changes in the market.
Incorrect
Dollar cost averaging is the process wherein securities are purchased over a period of time through periodic investments at a predetermined amount. This is done to reduce risks caused by changes in the market.
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Question 3 of 10
3. Question
How is the reinvested dividend treated with respect to tax purposes?
Correct
Dividend reinvestment plans (DRIP) are those in which, for little or no cost, dividends are used to purchase more shares of a firm’s common stock. For tax purposes, these reinvested dividends are treated the same as cash.
Incorrect
Dividend reinvestment plans (DRIP) are those in which, for little or no cost, dividends are used to purchase more shares of a firm’s common stock. For tax purposes, these reinvested dividends are treated the same as cash.
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Question 4 of 10
4. Question
In which strategy, investments are based on an evaluation of the financial strength of the firm in question?
Correct
In the strategy known as fundamental analysis, investments are based on an evaluation of the financial strength of the firm in question. Investors making use of fundamental analysis will try to pick the best firms in the most promising industries.
Incorrect
In the strategy known as fundamental analysis, investments are based on an evaluation of the financial strength of the firm in question. Investors making use of fundamental analysis will try to pick the best firms in the most promising industries.
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Question 5 of 10
5. Question
In which type of strategy, investors buy stocks and keep them because they believe that active management only drives up transaction costs without really contributing to a portfolio?
Correct
In the investment strategy known as buy and hold, investors buy stocks and keep them because they believe that active management only drives up transaction costs without really contributing to a portfolio. Unlike a passive investing strategy, in which asset allocation percentages are maintained by rebalancing the portfolio, the buy and hold strategy does not include periodically rebalancing the portfolio.
Incorrect
In the investment strategy known as buy and hold, investors buy stocks and keep them because they believe that active management only drives up transaction costs without really contributing to a portfolio. Unlike a passive investing strategy, in which asset allocation percentages are maintained by rebalancing the portfolio, the buy and hold strategy does not include periodically rebalancing the portfolio.
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Question 6 of 10
6. Question
Identify the technique in which bonds are sold and different bonds are purchased with the proceeds:
Correct
A swap is an investment technique in which bonds are sold and different bonds are purchased with the proceeds. A swap is conducted for the purposes of deriving advantageous tax treatment, yields, maturity structure, or trading profits.
Incorrect
A swap is an investment technique in which bonds are sold and different bonds are purchased with the proceeds. A swap is conducted for the purposes of deriving advantageous tax treatment, yields, maturity structure, or trading profits.
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Question 7 of 10
7. Question
Identify the types of swaps:
I. Substitution swap
II. Intermarket spread swap
III. Pure yield pick-up swap
IV. Intra-market spread swapCorrect
In a substitution swap, bonds with virtually identical characteristics but different yields are swapped. When the difference in yields between the bonds is huge, it is called an intermarket spread swap. When a low-yield bond is sold and a high-yield bond is purchased (typically because it has a longer maturity), it is known as a pure-yield pickup swap. A swap that is designed to handle an expected interest rate change is called a rate anticipation swap. When an investor seeks to lock into a loss, he or she may execute a tax swap, selling a bond only to then buy a similar bond.
Incorrect
In a substitution swap, bonds with virtually identical characteristics but different yields are swapped. When the difference in yields between the bonds is huge, it is called an intermarket spread swap. When a low-yield bond is sold and a high-yield bond is purchased (typically because it has a longer maturity), it is known as a pure-yield pickup swap. A swap that is designed to handle an expected interest rate change is called a rate anticipation swap. When an investor seeks to lock into a loss, he or she may execute a tax swap, selling a bond only to then buy a similar bond.
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Question 8 of 10
8. Question
Identify what do the contrarians use for technical analysis:
I. Margin debit balance
II. Mutual fund cash positions
III. Investment advisory opinion
IV. OTC vs NYSE volumeCorrect
Contrarians are those that assert that investors should do the opposite of the general investor, as the general investor is wrong most of the time. Contrarians will make use of mutual fund cash positions, the investor credit balances in brokerage accounts, investment advisory opinion, and OTC vs. NYSE volume, whereas smart money traders will make use of the Confidence Index, T-bill yields, Eurodollar rates, short sales by specialists, and the margin debit balances in brokerage accounts.
Incorrect
Contrarians are those that assert that investors should do the opposite of the general investor, as the general investor is wrong most of the time. Contrarians will make use of mutual fund cash positions, the investor credit balances in brokerage accounts, investment advisory opinion, and OTC vs. NYSE volume, whereas smart money traders will make use of the Confidence Index, T-bill yields, Eurodollar rates, short sales by specialists, and the margin debit balances in brokerage accounts.
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Question 9 of 10
9. Question
Which of these do the smart money traders use for technical analysis?
I. Margin debit balance
II. OTC vs NYSE volume
III. Eurodollar rates
IV. Confidence IndexCorrect
Contrarians will make use of mutual fund cash positions, the investor credit balances in brokerage accounts, investment advisory opinion, and OTC vs. NYSE volume, whereas smart money traders will make use of the Confidence Index, T-bill yields, Eurodollar rates, short sales by specialists, and the margin debit balances in brokerage accounts.
Incorrect
Contrarians will make use of mutual fund cash positions, the investor credit balances in brokerage accounts, investment advisory opinion, and OTC vs. NYSE volume, whereas smart money traders will make use of the Confidence Index, T-bill yields, Eurodollar rates, short sales by specialists, and the margin debit balances in brokerage accounts.
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Question 10 of 10
10. Question
Identify the ways asset allocation programmes are usually marketed:
I. Aggressive growth
II. Unstable income
III. Fixed income
IV. Growth and incomeCorrect
Asset allocation programs are usually marketed in one of five ways: aggressive growth, growth, growth and income, balanced, and fixed income; these are listed above in descending order of return and risk level.
Incorrect
Asset allocation programs are usually marketed in one of five ways: aggressive growth, growth, growth and income, balanced, and fixed income; these are listed above in descending order of return and risk level.