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Question 1 of 10
1. Question
Which statement is true in case of Tenants in Accounts?
I. The deceased’s share of the account will pass to the surviving owner.
II.The deceased’s share is transferred to the person listed as the beneficiary on the account.
III.The decedent’s share of the account will pass to the estate.
IV. The division of ownership under this account does not have to be equal.
Correct
The decedent’s share of the account will instead pass to the estate. The division of ownership of TIC accounts does not have to be equal, but should be stated at the time that the account is established. The deceased’s share of the account will be distributed according to his or her will.
Incorrect
The decedent’s share of the account will instead pass to the estate. The division of ownership of TIC accounts does not have to be equal, but should be stated at the time that the account is established. The deceased’s share of the account will be distributed according to his or her will.
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Question 2 of 10
2. Question
Which of the following statement is true regarding Partnership accounts?
I. Partnership accounts are established to meet the client’s stated goals. These written goals are often referred to as the Investment Policy Statement.
II.Partnership accounts are relatively easy to set up and disband, but do not perform well at raising large amounts of capital.
III.Partnerships accounts are attractive to investors that are trying to manage tax liabilities.
IV. Partnership account is a court order which allots a portion of share to family members, ordinarily to the account holder’s ex-spouse but sometimes also to children or dependents.
Correct
They are relatively easy to set up and disband, but do not perform well at raising large amounts of capital. Partnerships are attractive to investors that are trying to manage tax liabilities.
Incorrect
They are relatively easy to set up and disband, but do not perform well at raising large amounts of capital. Partnerships are attractive to investors that are trying to manage tax liabilities.
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Question 3 of 10
3. Question
What kind of investors most likely need the current income?
I. Investors who have a large amount of capital saved or inherited and need money to meet daily expenses, but who prefer not to spend the principal of the investments.
II.Young investors with longer time horizons that allow them to recover from losses incurred from the use of growth securities
III. Sophisticated investors who are not necessarily a certain demographic, such as age and time horizon.
IV. High risk takers.
Correct
Investors most likely to need current income are investors who have a large amount of capital saved or inherited and need money to meet daily expenses, but who prefer not to spend the principal of the investments. This may range from retirees to disabled persons who are not physically able to earn income.
Incorrect
Investors most likely to need current income are investors who have a large amount of capital saved or inherited and need money to meet daily expenses, but who prefer not to spend the principal of the investments. This may range from retirees to disabled persons who are not physically able to earn income.
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Question 4 of 10
4. Question
What all knowledge should the advisor possess about the prospective client?
I. Risk appetite
II.Financial Status
III. Current Investments
IV. Age
Correct
Incorrect
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Question 5 of 10
5. Question
Which of these statements are true?
I. Advisor can invest anywhere as long as it is generating required return for client.
II. Advisor should know non-financial details about the client.
III. Advisor should guide the investor about all the available investments.
IV. Advisor can invest in any account if he feels it deems fit surpassing investors value.
Correct
This meets the advisor’s fiduciary responsibility by advising the client on the most suitable investment, and respecting the client’s wishes with regard to how their capital is invested.While it is the advisor’s duty to point out the inferiority of the investment, it is also the advisor’s responsibility to invest clients’ capital according to their wishes, which in this case have been affected by their values.The advisor should take care of investor’s values
Incorrect
This meets the advisor’s fiduciary responsibility by advising the client on the most suitable investment, and respecting the client’s wishes with regard to how their capital is invested.While it is the advisor’s duty to point out the inferiority of the investment, it is also the advisor’s responsibility to invest clients’ capital according to their wishes, which in this case have been affected by their values.The advisor should take care of investor’s values
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Question 6 of 10
6. Question
Which theory does not allow us to change the risk-reward payoff?
I. Capital Asset Pricing Model
II. Black Scholes Merton Model
III.Modern Portfolio Theory
IV. Efficient Market HypothesisCorrect
Black Scholes Merton Model is used for calculating option price.
Incorrect
Black Scholes Merton Model is used for calculating option price.
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Question 7 of 10
7. Question
According to semi-strong form efficient market hypothesis, which information is required to determine the price of the security?
I. Price & Trading Volume
II.Insider Information
III.Financial Statement
IV. Economic FactorsCorrect
This information includes companies’ financial statements, announcements of actions taken, economic factors, etc. Fundamental analysts rely on such information to evaluate securities, but proponents of the efficient market hypothesis say this information is worthless in trying to determine future securities pricing, because it is common knowledge to which everyone has access, and the current price of securities already reflect all of this information.
Incorrect
This information includes companies’ financial statements, announcements of actions taken, economic factors, etc. Fundamental analysts rely on such information to evaluate securities, but proponents of the efficient market hypothesis say this information is worthless in trying to determine future securities pricing, because it is common knowledge to which everyone has access, and the current price of securities already reflect all of this information.
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Question 8 of 10
8. Question
According to Strong form efficient market hypothesis, which information is required to determine the price of the security?
I. Price & Trading Volume
II. Insider Information
III. Financial Statement
IV. Public nonpublic dataCorrect
In addition to previous trading volumes and securities prices known in weak form efficient markets, and the fundamental financial information known in the semi-strong form, the strong form of the efficient market hypothesis includes nonpublic, private, and insider information. The efficient market hypothesis states that this information, too, no matter how private, is so quickly reflected in securities’ prices that profits from trading based on that information cannot be certain. The strong form market hypothesis suggests that the market foresees and adjusts contingent on all information, public and nonpublic.
Incorrect
In addition to previous trading volumes and securities prices known in weak form efficient markets, and the fundamental financial information known in the semi-strong form, the strong form of the efficient market hypothesis includes nonpublic, private, and insider information. The efficient market hypothesis states that this information, too, no matter how private, is so quickly reflected in securities’ prices that profits from trading based on that information cannot be certain. The strong form market hypothesis suggests that the market foresees and adjusts contingent on all information, public and nonpublic.
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Question 9 of 10
9. Question
Which of these is a short-term style of portfolio management?
I. Strategic Asset Allocation
II. Buy and Hold Strategy
III. Tactical Asset Allocation
IV. Asset AllocationCorrect
Tactical asset allocation describes a short-term style of portfolio management (as opposed to long-term strategic asset allocation) in which the manager takes a hands-on, active approach to managing the account. The goal of tactical asset allocation is to obtain returns by quickly changing the asset allocation in reaction to changes in market conditions.
Incorrect
Tactical asset allocation describes a short-term style of portfolio management (as opposed to long-term strategic asset allocation) in which the manager takes a hands-on, active approach to managing the account. The goal of tactical asset allocation is to obtain returns by quickly changing the asset allocation in reaction to changes in market conditions.
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Question 10 of 10
10. Question
Which of these statements is false?
I. In Strategic Asset Allocation, the account is never rebalanced
II. In Tactical Asset Allocation, timing of market is important
III. Value stocks should be bought near the lows
IV. Growth stocks are nearly bought at the highsCorrect
Strategic asset allocation attempts to capitalize on modern portfolio theory by holding inversely correlated assets to reduce risk and increase returns. Over the long term, the account is “rebalanced” to make sure the allocation still matches the investor’s goals. Rebalancing is necessary because factors such as market movement, deposits, and withdrawals all work together to change the allocation of the account.
Incorrect
Strategic asset allocation attempts to capitalize on modern portfolio theory by holding inversely correlated assets to reduce risk and increase returns. Over the long term, the account is “rebalanced” to make sure the allocation still matches the investor’s goals. Rebalancing is necessary because factors such as market movement, deposits, and withdrawals all work together to change the allocation of the account.