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Question 1 of 10
1. Question
What are the features of Exchange-traded notes?
I. They are hybrid securities which serve as a mixture of bonds and exchange-traded funds (ETFs).
II. They are traded on an exchange.
III. They also have a maturity date like bonds.
IV. The value of an ETN, also depends on the creditworthiness of the debtor company.
Correct
Exchange-traded notes (ETNs) are hybrid securities which serve as a mixture of bonds and exchange-traded funds (ETFs). As their name implies, they are traded on an exchange, although they also have a maturity date like bonds. But with ETNs, the repayment of principal at the maturity date is modified according to the day’s market index factor. (Further, the repayment is reduced by investing fees.) The value of an ETN, however, is not simply based on the market index, but also depends on the creditworthiness of the debtor company, since ETNs are unsecured debt instruments. Unlike ordinary bonds, ETNs do not have periodic coupon payments.
Incorrect
Exchange-traded notes (ETNs) are hybrid securities which serve as a mixture of bonds and exchange-traded funds (ETFs). As their name implies, they are traded on an exchange, although they also have a maturity date like bonds. But with ETNs, the repayment of principal at the maturity date is modified according to the day’s market index factor. (Further, the repayment is reduced by investing fees.) The value of an ETN, however, is not simply based on the market index, but also depends on the creditworthiness of the debtor company, since ETNs are unsecured debt instruments. Unlike ordinary bonds, ETNs do not have periodic coupon payments.
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Question 2 of 10
2. Question
Which of the following does not fall under Alternative investments?
Correct
Alternative investments
Leveraged funds (also called leveraged exchange-traded funds, or leveraged ETFs) use leverage in the form of debt or derivative securities, such as futures or options contracts, to try to intensify the return of a given stock index.
Inverse funds (also called inverse ETFs) are meant to follow the opposite trajectory of the index (or other package of securities) to which they correspond.
Viatical settlements (also called life settlements) involve the owner of a life insurance contract—usually the same person insured by the contract—selling this contract at a discount in order to receive some of the death benefit in advanceIncorrect
Alternative investments
Leveraged funds (also called leveraged exchange-traded funds, or leveraged ETFs) use leverage in the form of debt or derivative securities, such as futures or options contracts, to try to intensify the return of a given stock index.
Inverse funds (also called inverse ETFs) are meant to follow the opposite trajectory of the index (or other package of securities) to which they correspond.
Viatical settlements (also called life settlements) involve the owner of a life insurance contract—usually the same person insured by the contract—selling this contract at a discount in order to receive some of the death benefit in advance -
Question 3 of 10
3. Question
Which among the following are the uses of derivatives?
I. To produce income for retirees.
II. Hedge investments by locking in guaranteed sell prices.
III. Produce high returns through speculative bets on the volatility of an asset’s price.
IV. They are useful across a broad range of investment goals.
Correct
Derivatives have multiple uses to investors and are useful across a broad range of investment goals. Derivatives may be used to produce income for retirees, hedge investments by locking in guaranteed sell prices, produce high returns through speculative bets on the volatility of an asset’s price, and many more useful activities.
Incorrect
Derivatives have multiple uses to investors and are useful across a broad range of investment goals. Derivatives may be used to produce income for retirees, hedge investments by locking in guaranteed sell prices, produce high returns through speculative bets on the volatility of an asset’s price, and many more useful activities.
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Question 4 of 10
4. Question
What is not true about Limited partnerships?
I. They are a type of alternative investment that usually takes the form of a direct participation program.
II. Limited partnerships allow the investor to participate in the functions of a business while only assuming limited liability.
III. The investors’ liability is limited to their investment in the DPP, but they may share in the cash flows, losses, deductions, and credits associated with the limited partnership.
IV. Investors use DPP to write off their share of the limited partnerships losses.
Correct
Limited partnerships are a type of alternative investment that usually takes the form of a direct participation program, or DPP. Limited partnerships allow the investor to participate in the functions of a business while only assuming limited liability. The investors’ liability is limited to their investment in the DPP, but they may share in the cash flows, losses, deductions, and credits associated with the limited partnership. While return on investment is the most obvious reason investors would invest in a DPP, they also use them to take advantage of the tax benefits of being able to write off their share of the limited partnerships losses, deduct their share of deductions legally allowed to the DPP, and take their share of the tax credits available to the DPP.
Incorrect
Limited partnerships are a type of alternative investment that usually takes the form of a direct participation program, or DPP. Limited partnerships allow the investor to participate in the functions of a business while only assuming limited liability. The investors’ liability is limited to their investment in the DPP, but they may share in the cash flows, losses, deductions, and credits associated with the limited partnership. While return on investment is the most obvious reason investors would invest in a DPP, they also use them to take advantage of the tax benefits of being able to write off their share of the limited partnerships losses, deduct their share of deductions legally allowed to the DPP, and take their share of the tax credits available to the DPP.
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Question 5 of 10
5. Question
What are Equity indexed annuities?
Correct
Equity indexed annuities, also called equity linked annuities, are contracts between investors and insurance companies in which the investors provide the insurers with premiums in exchange for guaranteed income at a later date, usually retirement. Equity indexed annuities differ from fixed annuities in that their rate of return is not constant, although they may have a minimum rate of return guaranteed, since the return is linked to an index like the S&P 500.
Incorrect
Equity indexed annuities, also called equity linked annuities, are contracts between investors and insurance companies in which the investors provide the insurers with premiums in exchange for guaranteed income at a later date, usually retirement. Equity indexed annuities differ from fixed annuities in that their rate of return is not constant, although they may have a minimum rate of return guaranteed, since the return is linked to an index like the S&P 500.
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Question 6 of 10
6. Question
Which is not a type of life insurance?
Correct
There are multiple types of life insurance products that are tailored to meet specific needs at different times in investors’ lives.
Term life insurance : Life insurance is a contract between an insurance company and an investor in which the insurance company guarantees a payment to the beneficiaries of the insured upon the death of the insured in exchange for premiums paid.
Universal life insurance: Life insurance is a contract between an insurance company and an investor in which the insurance company guarantees a payment to the beneficiaries of the insured upon the death of the insured in exchange for premiums paid.
Variable life insurance: Life insurance is a contract between an insurance company and an investor in which the insurance company guarantees a payment to the beneficiaries of the insured upon the death of the insured in exchange for premiums paid.Incorrect
There are multiple types of life insurance products that are tailored to meet specific needs at different times in investors’ lives.
Term life insurance : Life insurance is a contract between an insurance company and an investor in which the insurance company guarantees a payment to the beneficiaries of the insured upon the death of the insured in exchange for premiums paid.
Universal life insurance: Life insurance is a contract between an insurance company and an investor in which the insurance company guarantees a payment to the beneficiaries of the insured upon the death of the insured in exchange for premiums paid.
Variable life insurance: Life insurance is a contract between an insurance company and an investor in which the insurance company guarantees a payment to the beneficiaries of the insured upon the death of the insured in exchange for premiums paid. -
Question 7 of 10
7. Question
What are the features of Term life insurance?
I. It is a contract between an insurance company and an investor in which the insurance company guarantees a payment to the beneficiaries of the insured upon the death of the insured in exchange for premiums paid.
II. Term life insurance describes life insurance that is valid only for a “term” or defined period of time.
III. Term life insurance protects the insured against death, and the death benefit is the only benefit taken from term insurance.
IV. Term insurance does not accrue a cash value and is not guaranteed to exist for the entirety of the insured’s life.
Correct
Life insurance is a contract between an insurance company and an investor in which the insurance company guarantees a payment to the beneficiaries of the insured upon the death of the insured in exchange for premiums paid. Term life insurance describes life insurance that is valid only for a “term” or defined period of time. Term life insurance protects the insured against death, and the death benefit is the only benefit taken from term insurance. Unlike permanent forms of life insurance (whole, universal, variable), term insurance does not accrue a cash value and is not guaranteed to exist for the entirety of the insured’s life.
Incorrect
Life insurance is a contract between an insurance company and an investor in which the insurance company guarantees a payment to the beneficiaries of the insured upon the death of the insured in exchange for premiums paid. Term life insurance describes life insurance that is valid only for a “term” or defined period of time. Term life insurance protects the insured against death, and the death benefit is the only benefit taken from term insurance. Unlike permanent forms of life insurance (whole, universal, variable), term insurance does not accrue a cash value and is not guaranteed to exist for the entirety of the insured’s life.
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Question 8 of 10
8. Question
Which is not a feature of Universal life insurance?
I. It is a contract between an insurance company and an investor in which the insurance company guarantees a payment to the beneficiaries of the insured upon the death of the insured in exchange for premiums paid.
II. It is a permanent life insurance policy that grows a cash value, but at a variable rate to help investors combat inflation. Premiums paid are also variable.
III. They may be raised by the investor who wants to grow the cash value.
IV. It is very attractive to investors that prefer multiple options that may be changed to suit their current situation.
Correct
Life insurance is a contract between an insurance company and an investor in which the insurance company guarantees a payment to the beneficiaries of the insured upon the death of the insured in exchange for premiums paid. Universal life insurance is a permanent life insurance policy that grows a cash value, but at a variable rate to help investors combat inflation. Premiums paid are also variable. They may be raised by the investor who wants to grow the cash value (the cash value will be raised by premiums only after the insurance portion has been paid), or lowered by the investor that wants lower premiums (as long as enough premium is paid to keep the insurance policy in force). The insured may also choose to raise or lower his or her death benefit dependent on the amount of premium paid, and whether or not they would like to keep paying premiums. Universal life insurance is very attractive to investors that prefer multiple options that may be changed to suit their current situation.
Incorrect
Life insurance is a contract between an insurance company and an investor in which the insurance company guarantees a payment to the beneficiaries of the insured upon the death of the insured in exchange for premiums paid. Universal life insurance is a permanent life insurance policy that grows a cash value, but at a variable rate to help investors combat inflation. Premiums paid are also variable. They may be raised by the investor who wants to grow the cash value (the cash value will be raised by premiums only after the insurance portion has been paid), or lowered by the investor that wants lower premiums (as long as enough premium is paid to keep the insurance policy in force). The insured may also choose to raise or lower his or her death benefit dependent on the amount of premium paid, and whether or not they would like to keep paying premiums. Universal life insurance is very attractive to investors that prefer multiple options that may be changed to suit their current situation.
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Question 9 of 10
9. Question
Which is not an example of Commodities?
Correct
Commodities are basic goods extracted from natural resources with minimal processing. These can include animal flesh like beef or pork; crops like wheat, rice, or beans; raw materials like iron ore, natural gas, or lumber; and precious metals like gold, silver, or platinum. Because of their minimal processing, commodities are broadly interchangeable no matter the producer providing them on the market, and thus demand the same price even if some producers’ commodities might vary slightly in value compared to others.
Incorrect
Commodities are basic goods extracted from natural resources with minimal processing. These can include animal flesh like beef or pork; crops like wheat, rice, or beans; raw materials like iron ore, natural gas, or lumber; and precious metals like gold, silver, or platinum. Because of their minimal processing, commodities are broadly interchangeable no matter the producer providing them on the market, and thus demand the same price even if some producers’ commodities might vary slightly in value compared to others.
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Question 10 of 10
10. Question
What does not stand true for Hedge funds?
Correct
Hedge funds are alternative investments that seek high returns through the use of sophisticated investment management strategies. They tend to be very aggressively managed and use some combination of leverage, long/short strategies, and derivative contracts to generate the highest returns possible. This strategy also leads to higher-than- normal risk, and limits their investor pool to high-net-worth individuals and institutional investors. Since those who invest in hedge funds are typically sophisticated and experienced investors, there is little regulation of hedge funds.
Incorrect
Hedge funds are alternative investments that seek high returns through the use of sophisticated investment management strategies. They tend to be very aggressively managed and use some combination of leverage, long/short strategies, and derivative contracts to generate the highest returns possible. This strategy also leads to higher-than- normal risk, and limits their investor pool to high-net-worth individuals and institutional investors. Since those who invest in hedge funds are typically sophisticated and experienced investors, there is little regulation of hedge funds.