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Question 1 of 10
1. Question
What all non financial knowledge should the advisor possess about the prospective client?
I. Job security with the client’s current employer.
II. Employment and income of family members.
III. Information regarding health & education.
IV. Number of dependentsCorrect
The following is a list of pertinent nonfinancial information that should be considered to properly advise the client and meet the client’s suitability
• Familial needs pertaining to education and health care
• Employment and income of family members
• Job security with the client’s current employer
• Number of dependentsIncorrect
The following is a list of pertinent nonfinancial information that should be considered to properly advise the client and meet the client’s suitability
• Familial needs pertaining to education and health care
• Employment and income of family members
• Job security with the client’s current employer
• Number of dependents -
Question 2 of 10
2. Question
Which statement is/are true for modern portfolio theory?
I. Theory states that it is possible to control the risk and return of investment portfolios.
II. Possible to identify the relationship of risk and reward in the portfolio as a whole.
III. Identifies the relationship of risk and reward in portfolio through individual investments.
IV. Under this the investors get higher returns but risk ratio is also high.Correct
Modern portfolio theory states that it is possible to control the risk and return of investment portfolios. According to modern portfolio theory, it is possible to identify the relationship of risk and reward in the portfolio as a whole instead of analyzing individual investments.
Incorrect
Modern portfolio theory states that it is possible to control the risk and return of investment portfolios. According to modern portfolio theory, it is possible to identify the relationship of risk and reward in the portfolio as a whole instead of analyzing individual investments.
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Question 3 of 10
3. Question
What are the different forms of efficient market?
I. The weak form
II. The semi-strong form
III.The strong form
IV. The strongest formCorrect
There are three types of efficient markets: the weak form efficient market, the semi-strong form efficient market, and the strong form efficient market.
Incorrect
There are three types of efficient markets: the weak form efficient market, the semi-strong form efficient market, and the strong form efficient market.
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Question 4 of 10
4. Question
Which of the following statement’s is/are false ?
I. Diversification leads to high rate of unnecessary risk.
II. Diversification will reduce market risk and increase returns.
III.Diversification is the practice of spreading one’s assets among a wide selection of investments from different asset classes.
IV. In undiversified portfolios the risk margin is high.Correct
Diversification is a very important concept to most investors. Most investors feel, and rightly so, that an undiversified portfolio can lead to high rates of unnecessary risk.
Incorrect
Diversification is a very important concept to most investors. Most investors feel, and rightly so, that an undiversified portfolio can lead to high rates of unnecessary risk.
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Question 5 of 10
5. Question
Which statements about dollar cost averaging are accurate?
I. More shares are purchased when the price per share is low
II. It involves investing a set amount of money in some security at regular time intervals.
III. This method of investing is not foolproof.
IV. Fewer shares are purchased when the price per share is highCorrect
This is most commonly demonstrated bimonthly in 401(k) contributions withheld from employees’ paychecks. Dollar cost averaging serves to lower the overall price the investor pays for securities by buying less of a security when the price is high and being able to obtain more for the same amount of investment when the price is low.
Incorrect
This is most commonly demonstrated bimonthly in 401(k) contributions withheld from employees’ paychecks. Dollar cost averaging serves to lower the overall price the investor pays for securities by buying less of a security when the price is high and being able to obtain more for the same amount of investment when the price is low.
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Question 6 of 10
6. Question
Which statements about income-producing securities is/are true?
I. Stable investments
II. Regular payment to the investors
III. Volatile prices
IV. No dividenedCorrect
Income-producing securities tend to be very stable investments that provide some sort of regular payment to the investor.
Incorrect
Income-producing securities tend to be very stable investments that provide some sort of regular payment to the investor.
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Question 7 of 10
7. Question
Which technique is used by managers to provide undisruptive income to the investors in need of a current income?
I. Leverage
II. Call
III.Put
IV. Derivative SecurityCorrect
Many managers use this technique to provide risk-free income for retirees and other investors needing current income.
Incorrect
Many managers use this technique to provide risk-free income for retirees and other investors needing current income.
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Question 8 of 10
8. Question
Which statements is/are true in regards of a put contract?
I. They can be traded as derivative securities.
II. Put contracts are often used to reduce the risk of loss of capital.
III. It’s an agreement between two parties in which the seller does not guarantees the buyer the right to sell a security to the seller of the put at a
set price, regardless of the current price of the security.
IV. The investor will suffer no loss even if the price of the security rises.Correct
A put is an options contract between two parties in which the seller guarantees the buyer the right to sell a security to the seller of the put at a set price, regardless of the current price of the security. Put options may be traded as derivative securities, and as demonstrated in the prior sentence, a lowering of the value of the underlying security makes the value of the put higher.
Incorrect
A put is an options contract between two parties in which the seller guarantees the buyer the right to sell a security to the seller of the put at a set price, regardless of the current price of the security. Put options may be traded as derivative securities, and as demonstrated in the prior sentence, a lowering of the value of the underlying security makes the value of the put higher.
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Question 9 of 10
9. Question
Which of the following statement is/are false?
I. Under the regressive taxes the wealthier taxpayer’s have to pay a high percentage of their income.
II. Under the regressive taxes the lower income taxpayer’s spend more and save less.
III. Regressive taxes application is same for all the tax payers irrespective of their income & tax brackets.
IV. Regressive taxes application is not the same for all the tax payers.Correct
Regressive taxes are flat tax rates that apply to all taxpayers regardless of their income and tax brackets. Taxes that fall under this heading include, but are not limited to, sales taxes, payroll taxes, gasoline taxes, etc. The fact that all taxpayers pay the same percentage on a regressive tax means that wealthier taxpayers pay a lower percentage of their income.
Incorrect
Regressive taxes are flat tax rates that apply to all taxpayers regardless of their income and tax brackets. Taxes that fall under this heading include, but are not limited to, sales taxes, payroll taxes, gasoline taxes, etc. The fact that all taxpayers pay the same percentage on a regressive tax means that wealthier taxpayers pay a lower percentage of their income.
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Question 10 of 10
10. Question
Which statement holds true for progressive taxes?
I. Lower income taxpayers have to pay less.
II. Lower income taxpayers have to spend more.
III. It is limited to income & estate taxes.
IV. Wealthier taxpayers pay a lower percentage of their income.Correct
Progressive taxes increase as the taxpayers’ incomes increase. This has the opposite effect of regressive taxes, which tend to be costlier to lower-income taxpayers. Examples of progressive taxes include, but are not limited to, income taxes and estate taxes.
Incorrect
Progressive taxes increase as the taxpayers’ incomes increase. This has the opposite effect of regressive taxes, which tend to be costlier to lower-income taxpayers. Examples of progressive taxes include, but are not limited to, income taxes and estate taxes.