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Question 1 of 10
1. Question
What are the features of limited partnership?
I. The general partner is responsible for business decisions and overall liabilities of the partnership.
II. Limited partners do not actively participate in the management of the business.
III. Limited partners liabilities are limited to only their investment in the partnership.
IV. The investment policy should be in line with the general partner’s goals.
Correct
The management of an investment account for a general partnership should take into account the investment objectives of all the partners, since the profits and losses flow to the individual partners. In the case of a limited partnership, the general partner is responsible for business decisions and overall liabilities of the partnership. Limited partners do not actively participate in the management of the business and their liabilities are limited to only their investment in the partnership. The investment policy should be in line with the general partner’s goals.
Incorrect
The management of an investment account for a general partnership should take into account the investment objectives of all the partners, since the profits and losses flow to the individual partners. In the case of a limited partnership, the general partner is responsible for business decisions and overall liabilities of the partnership. Limited partners do not actively participate in the management of the business and their liabilities are limited to only their investment in the partnership. The investment policy should be in line with the general partner’s goals.
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Question 2 of 10
2. Question
What are the features of Limited liability company?
I. They companies formed with characteristics of both corporations and partnerships.
II. Investors invest in limited liability companies, or LLCs, to take advantage of the tax benefits characteristic of each type of business.
III. They are similar to partnerships in that the profits and losses of LLCs flow through the company to the investor.
IV. When advisors consider the investment policy of investment accounts registered to LLC, they must consider the suitability of the investments for each of the members of the LLC.
Correct
Limited liability companies are companies formed with characteristics of both corporations and partnerships. Investors invest in limited liability companies, or LLCs, to take advantage of the tax benefits characteristic of each type of business. LLCs are similar to corporations in that the investors have limited liability in the investment. The limit of their liability is their investment in the company, instead of the entirety of debt obligations of the company. LLCs are similar to partnerships in that the profits and losses of LLCs flow through the company to the investor. This may provide the investor with tax deductions in the case of losses, and will prevent double taxation of income that is inherent in corporate structures. When advisors consider the investment policy of investment accounts registered to limited liability companies, they must consider the suitability of the investments for each of the members of the LLC. This management requirement is similar to that of accounts established for partnerships.
Incorrect
Limited liability companies are companies formed with characteristics of both corporations and partnerships. Investors invest in limited liability companies, or LLCs, to take advantage of the tax benefits characteristic of each type of business. LLCs are similar to corporations in that the investors have limited liability in the investment. The limit of their liability is their investment in the company, instead of the entirety of debt obligations of the company. LLCs are similar to partnerships in that the profits and losses of LLCs flow through the company to the investor. This may provide the investor with tax deductions in the case of losses, and will prevent double taxation of income that is inherent in corporate structures. When advisors consider the investment policy of investment accounts registered to limited liability companies, they must consider the suitability of the investments for each of the members of the LLC. This management requirement is similar to that of accounts established for partnerships.
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Question 3 of 10
3. Question
How many shareholders S corporations are limited to?
Correct
Unlike LLCs, S corporations are limited to 100 shareholders, whereas LLCs are not limited with regard to membership. Shareholders of S corporations cannot be nonresident aliens, and may not own more than one class of stock, usually common stock.
Incorrect
Unlike LLCs, S corporations are limited to 100 shareholders, whereas LLCs are not limited with regard to membership. Shareholders of S corporations cannot be nonresident aliens, and may not own more than one class of stock, usually common stock.
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Question 4 of 10
4. Question
What are the feature of S corporations?
I. S corporations describe companies that are incepted as corporations, but avoid the double taxation of traditional C corporations.
II. S corporations are not limited with regard to membership.
III. Shareholders of S corporations cannot be nonresident aliens.
IV. Shareholders of S corporations may not own more than one class of stock, usually common stock.
Correct
S corporations describe companies that are incepted as corporations, but avoid the double taxation of traditional C corporations. Much like limited liability companies (LLCs), S corporations allow the profits and losses of the company to pass through to the investors, while at the same time limiting their liability to their investment of capital into the firm. Unlike LLCs, S corporations are limited to 100 shareholders, whereas LLCs are not limited with regard to membership. Shareholders of S corporations cannot be nonresident aliens, and may not own more than one class of stock, usually common stock.
Incorrect
S corporations describe companies that are incepted as corporations, but avoid the double taxation of traditional C corporations. Much like limited liability companies (LLCs), S corporations allow the profits and losses of the company to pass through to the investors, while at the same time limiting their liability to their investment of capital into the firm. Unlike LLCs, S corporations are limited to 100 shareholders, whereas LLCs are not limited with regard to membership. Shareholders of S corporations cannot be nonresident aliens, and may not own more than one class of stock, usually common stock.
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Question 5 of 10
5. Question
What are the features of C corporations?
I. They are companies that are structured to distinctly separate a company from its owners.
II. Their officers and directors bear no personal liability for a C corporation’s debt and losses.
III. They are subject to income taxation as an entity.
IV. They do not have the tax advantage of income and losses passing through to the shareholders.
Correct
C corporations are companies that are structured to distinctly separate a company from its owners. C corporations’ officers and directors bear no personal liability for a C corporation’s debt and losses, and their personal assets and the assets of the investors in a C corporation may not be sought to satisfy the debts of the corporation. C corporations are subject to income taxation as an entity. Thus, the income realized through C corporations is subject to double taxation, once to the C corporation and once to the shareholder when the income is repaid to shareholders in the form of dividends. While C corporations do benefit from limited liability, they do not have the tax advantage of income and losses passing through to the shareholders.
Incorrect
C corporations are companies that are structured to distinctly separate a company from its owners. C corporations’ officers and directors bear no personal liability for a C corporation’s debt and losses, and their personal assets and the assets of the investors in a C corporation may not be sought to satisfy the debts of the corporation. C corporations are subject to income taxation as an entity. Thus, the income realized through C corporations is subject to double taxation, once to the C corporation and once to the shareholder when the income is repaid to shareholders in the form of dividends. While C corporations do benefit from limited liability, they do not have the tax advantage of income and losses passing through to the shareholders.
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Question 6 of 10
6. Question
Current income is the income that is provided to investors from their investments via?
I. Dividends
II. Interest
III. Capital Gains
IV. Policy Returns
Correct
Current income is the income that is provided to investors from their investments via dividends, interest, and capital gains received. Securities best suited to provide current income are those securities in the fixed-income markets, such as government debt issues, corporate debt issues, preferred stock, stocks of utility companies, and mutual funds that comprise some singularity or combination of the aforementioned securities.
Incorrect
Current income is the income that is provided to investors from their investments via dividends, interest, and capital gains received. Securities best suited to provide current income are those securities in the fixed-income markets, such as government debt issues, corporate debt issues, preferred stock, stocks of utility companies, and mutual funds that comprise some singularity or combination of the aforementioned securities.
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Question 7 of 10
7. Question
What are the features of capital growth?
I. It describes the appreciation of principal that occurs in securities accounts when the value of the holdings in the accounts increases to help combat loss of purchasing power by inflation.
II. The risks associated with capital growth may be untenable for some investors.
III. Strategies for obtaining capital growth are inherently riskier than fixed-income assets, and most do not provide income.
IV. Capital growth strategies also help young investors combat the loss of purchasing power due to inflation over long periods of time.
Correct
Capital growth describes the appreciation of principal that occurs in securities accounts when the value of the holdings in the accounts increases to help combat loss of purchasing power by inflation. While this sounds like an attractive goal for all investors, the risks associated with capital growth may be untenable for some investors. Strategies for obtaining capital growth are inherently riskier than fixed-income assets, and most do not provide income. This makes many securities that provide capital growth unsuitable or investors seeking capital preservation and current income. Young investors with longer time horizons that allow them to recover from losses incurred from the use of growth securities will be most likely to have capital growth as an investment objective. Capital growth strategies also help young investors combat the loss of purchasing power due to inflation over long periods of time.
Incorrect
Capital growth describes the appreciation of principal that occurs in securities accounts when the value of the holdings in the accounts increases to help combat loss of purchasing power by inflation. While this sounds like an attractive goal for all investors, the risks associated with capital growth may be untenable for some investors. Strategies for obtaining capital growth are inherently riskier than fixed-income assets, and most do not provide income. This makes many securities that provide capital growth unsuitable or investors seeking capital preservation and current income. Young investors with longer time horizons that allow them to recover from losses incurred from the use of growth securities will be most likely to have capital growth as an investment objective. Capital growth strategies also help young investors combat the loss of purchasing power due to inflation over long periods of time.
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Question 8 of 10
8. Question
What kind of investments are Speculative investments?
Correct
Speculative investments are high-risk investments that have the potential to result in high returns. Such risky investments include, but are not limited to, highly unstable stocks, high- yield bonds (or “junk” bonds), options, and commodities futures.
Incorrect
Speculative investments are high-risk investments that have the potential to result in high returns. Such risky investments include, but are not limited to, highly unstable stocks, high- yield bonds (or “junk” bonds), options, and commodities futures.
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Question 9 of 10
9. Question
What are the most suitable investments for investors seeking current income?
I. Government debt issues.
II. Corporate debt issues.
III. Preferred stock.
IV. Stock of utility companies.
Correct
The most suitable investments for investors seeking current income are fixed-income securities such as government debt issues, corporate debt issues, preferred stock, stock of utility companies, and mutual funds that comprise some singularity or combination of the before-mentioned securities
Incorrect
The most suitable investments for investors seeking current income are fixed-income securities such as government debt issues, corporate debt issues, preferred stock, stock of utility companies, and mutual funds that comprise some singularity or combination of the before-mentioned securities
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Question 10 of 10
10. Question
What is not true about Life insurance?
Correct
The main risk that death brings to the survivors of an investor is the risk that the income the investor provided will no longer be available to help them meet their everyday liquidity needs. Life insurance is very helpful to the investor in planning for such eventualities. Depending on the contract, life insurance will provide a payment to the investor’s beneficiaries on the investor’s death. Term life insurance provides the highest benefit for the least premium, and is ideal for young people with children. Over the age of 60, however, term life tends to become prohibitively expensive. After investor pass, their assets generally become part of their estate.
Incorrect
The main risk that death brings to the survivors of an investor is the risk that the income the investor provided will no longer be available to help them meet their everyday liquidity needs. Life insurance is very helpful to the investor in planning for such eventualities. Depending on the contract, life insurance will provide a payment to the investor’s beneficiaries on the investor’s death. Term life insurance provides the highest benefit for the least premium, and is ideal for young people with children. Over the age of 60, however, term life tends to become prohibitively expensive. After investor pass, their assets generally become part of their estate.