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Question 1 of 10
1. Question
Which of the following is correct?
I. FNMA: Federal National Mortgage Association
II. TIPS: Treasury Inflation Protected Securities
III. ABSs: Asset-backed securities
IV. CDs: Certificates of depositCorrect
FNMA stands for Federal National Mortgage Association.
TIPS stands for Treasury Inflation Protected Securities.
ABSs stand for Asset-backed securities.
CDs stand for Certificates of deposits.Incorrect
FNMA stands for Federal National Mortgage Association.
TIPS stands for Treasury Inflation Protected Securities.
ABSs stand for Asset-backed securities.
CDs stand for Certificates of deposits. -
Question 2 of 10
2. Question
Which of the following is true about FNMA?
I. It makes house ownership possible for lower-income earners.
II. It is sponsored by the private sector.
III. FNMA was established in 1938.
IV. It was established to create a primary mortgage market.Correct
FNMA stands for Federal National Mortgage Association. It is a government-sponsored, publicly traded company whose goal it is to make homeownership possible for lower-income families. The FNMA was founded in 1938 to create a secondary mortgage market. FNMA buys and guarantees mortgages that meet its underwriting criteria, thus creating mortgage-backed securities.
Incorrect
FNMA stands for Federal National Mortgage Association. It is a government-sponsored, publicly traded company whose goal it is to make homeownership possible for lower-income families. The FNMA was founded in 1938 to create a secondary mortgage market. FNMA buys and guarantees mortgages that meet its underwriting criteria, thus creating mortgage-backed securities.
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Question 3 of 10
3. Question
Regarding TIPS, Choose the false statements.
I. They are inflation protected.
II. TIPS have a directly proportional relationship to CPI.
III. It is regulated by the FNMA.
IV. They are indexed to the CPI.Correct
Treasury Inflation Protected Securities, or TIPS, are debt securities that are issued by the United States government. TIPS are inflation protected in that they are indexed to the current consumer price index (CPI) to prevent loss of purchasing power due to inflation.
The par value of TIPS increases each time the CPI rises, while the fixed interest remains constant.Incorrect
Treasury Inflation Protected Securities, or TIPS, are debt securities that are issued by the United States government. TIPS are inflation protected in that they are indexed to the current consumer price index (CPI) to prevent loss of purchasing power due to inflation.
The par value of TIPS increases each time the CPI rises, while the fixed interest remains constant. -
Question 4 of 10
4. Question
The following statements are true, except:
I. ABSs require a collateral
II. Royalties are not accepted as collateral in ABSs.
III. Government agency bonds are the same as U.S. Treasury or municipal bonds.
IV. TIPS fall in the fixed income sector of the market.Correct
Asset-backed securities (ABSs) are securities which are backed with some sort of asset as collateral. The collateralized asset may be loans, leases, receivables, royalties, and other things. Government agency bonds are not the same as U.S. Treasury or municipal bonds, but pertain to agencies of the federal government.
Incorrect
Asset-backed securities (ABSs) are securities which are backed with some sort of asset as collateral. The collateralized asset may be loans, leases, receivables, royalties, and other things. Government agency bonds are not the same as U.S. Treasury or municipal bonds, but pertain to agencies of the federal government.
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Question 5 of 10
5. Question
Quasi-governmental agencies authorized to issue debt securities do not include which of the following:
I. Federal National Mortgage Association
II. Federal Home Loan Mortgage Corporation
III. Farm Credit Administration
IV. Government National Mortgage AssociationCorrect
Quasi-governmental agencies authorized to issue debt securities are: Federal Home Loan Mortgage Corporation (FHLMC, or Freddie Mac), Federal National Mortgage Association (FNMA, or Fannie Mae), and Student Loan Marketing Association (SLMA, or Sallie Mae).
Farm Credit Administration and Government National Mortgage Association are not Quasi-governmental agencies.Incorrect
Quasi-governmental agencies authorized to issue debt securities are: Federal Home Loan Mortgage Corporation (FHLMC, or Freddie Mac), Federal National Mortgage Association (FNMA, or Fannie Mae), and Student Loan Marketing Association (SLMA, or Sallie Mae).
Farm Credit Administration and Government National Mortgage Association are not Quasi-governmental agencies. -
Question 6 of 10
6. Question
An insurance policy that helps the insured, injured party, usually for a specific period of time;
I. Provides relief to the injured party to cope with his injury.
II. Provides payment to the injured party, to cope with the loss of income.
III. Provides payment to the injured, based on the extent of his injury.
IV. Provides payment to the injured, based on his present income.Correct
Disability insurance is an insurance policy that helps the insured cope with the loss of income resulting from disability by providing payments to the injured party, usually for a specific period of time. Needs for disability insurance vary from client to client. The main and most obvious need for compensation is replacement of current income. A client with a high income will require a higher disability income. Also of consideration is the client’s occupation.
Incorrect
Disability insurance is an insurance policy that helps the insured cope with the loss of income resulting from disability by providing payments to the injured party, usually for a specific period of time. Needs for disability insurance vary from client to client. The main and most obvious need for compensation is replacement of current income. A client with a high income will require a higher disability income. Also of consideration is the client’s occupation.
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Question 7 of 10
7. Question
Which of the following is true?
I. Awareness of the client existing investment is essential to making informed suggestions to the client
II. There are special financial benefits for the investor, if the advisor knows the quantity & types of client’s investment
III. An advisor is better equipped to make sound financial suggestions if he knows every facet of the client’s financial status.
IV. Certain investment do not provide investors with break points even when investor reaches some certain levels of investment.Correct
Awareness of the client’s existing investments is key to making informed suggestions to the client. If the client’s current holdings are suitable to the client’s needs, then the advisor need not acquire those holdings again. If they are not suitable to the client’s needs, then the advisor should inform the client thereof. There are also special financial benefits for the investor, should the advisor know the quantity and types of existing investments. Certain investments, such as mutual funds, provide investors with discounts known as break points when the investor reaches certain levels of investment.
Incorrect
Awareness of the client’s existing investments is key to making informed suggestions to the client. If the client’s current holdings are suitable to the client’s needs, then the advisor need not acquire those holdings again. If they are not suitable to the client’s needs, then the advisor should inform the client thereof. There are also special financial benefits for the investor, should the advisor know the quantity and types of existing investments. Certain investments, such as mutual funds, provide investors with discounts known as break points when the investor reaches certain levels of investment.
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Question 8 of 10
8. Question
The following statement are true except:
I. It is important for an investor to know which types of investments are tax advantaged and which are not.
II. Knowing a client’s adjusted gross income and their respective tax brackets also helps the advisor make informed suggestions
III. The investor would benefit from the losses from the sale of a toxic asset and the effect it may have on the investor’s adjusted gross income.
IV. Investors investing in tax-deferred retirement accounts are affected by tax implications from capital gains or interest received in the deferred account.Correct
Investors investing in tax-deferred retirement accounts do not need to be worried about tax implications from capital gains or interest received in the deferred account.
Incorrect
Investors investing in tax-deferred retirement accounts do not need to be worried about tax implications from capital gains or interest received in the deferred account.
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Question 9 of 10
9. Question
A young worker is looking to save for the future; investing in bonds would be appropriate to meet which of the following needs?
I. Retirement
II. His children’s college tuition
III. Purchase of a house
IV. The lease of a business factory.Correct
Bonds may not be the best investment for a young worker who is saving for retirement, as they provide little growth, but if that same worker is saving for his children’s college tuition or to buy a house, bonds may be the appropriate investment vehicle.
Incorrect
Bonds may not be the best investment for a young worker who is saving for retirement, as they provide little growth, but if that same worker is saving for his children’s college tuition or to buy a house, bonds may be the appropriate investment vehicle.
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Question 10 of 10
10. Question
Which of the following statement(s) is/are true?
I. Stock market efficiency results in share prices that always reflect all current and relevant information.
II. Efficient Market Hypothesis claims that it is impossible for investors to receive returns in deficit of normal market returns
III. Efficient Market Hypothesis makes it impossible to purchase undervalued shares or sell shares for inflated amounts.
IV. A Strong form market efficiency suggests that, not all information, public and nonpublic, is calculated into the current value of the security.Correct
The Efficient Market Hypothesis claims that it is impossible for investors to receive returns in excess of normal market returns. The reason for this statement is that stock market efficiency results in share prices that always reflect all current and relevant information.
Strong form market efficiency suggests that all information, public and non-public, is calculated into the current value of the security.Incorrect
The Efficient Market Hypothesis claims that it is impossible for investors to receive returns in excess of normal market returns. The reason for this statement is that stock market efficiency results in share prices that always reflect all current and relevant information.
Strong form market efficiency suggests that all information, public and non-public, is calculated into the current value of the security.