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Question 1 of 10
1. Question
The Style applied to different portfolios will differ based on the investor’s needs and risk appetites. Which of the following statements appropriately explains this?
I. A retiree with a goal of capital preservation and current income will best be served with a conservative style.
II. Styles that allocate much of portfolio’s capital to stable, fixed-income securities, would be a proper fit for a young saver with large appetite for risk.
III. A conservative approach is best suited for one seeking capital appreciation.
IV. A young saver seeking capital appreciation with a large appetite for risk would be best suited to a portfolio that is heavily allocated in equities.Correct
The style of a portfolio that participates in strategic asset allocation refers to the method in which the investor’s goals are reached. The style applied to each portfolio will differ based on the investor’s needs and risk appetites. A retiree with a goal of capital preservation and current income will best be served with a conservative style that allocates much of portfolio’s capital to stable, fixed-income securities, such as bonds or bond mutual funds. A young saver, seeking capital appreciation with a large appetite for risk because of his or her ability to absorb and recover risks would be best suited to a portfolio that was heavily allocated in equities with few bonds in the portfolio.
Incorrect
The style of a portfolio that participates in strategic asset allocation refers to the method in which the investor’s goals are reached. The style applied to each portfolio will differ based on the investor’s needs and risk appetites. A retiree with a goal of capital preservation and current income will best be served with a conservative style that allocates much of portfolio’s capital to stable, fixed-income securities, such as bonds or bond mutual funds. A young saver, seeking capital appreciation with a large appetite for risk because of his or her ability to absorb and recover risks would be best suited to a portfolio that was heavily allocated in equities with few bonds in the portfolio.
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Question 2 of 10
2. Question
Which of the following statement is false?
I. Strategic asset allocation is a more active method of portfolio management than tactical asset allocation.
II. More transactions occur in strategic asset allocation that in tactical allocation.
III. Tactical managers seek short-term profits through multiple transactions throughout the year.
IV. Strategic managers limit their transactions to rebalances of accounts.Correct
Tactical asset allocation is a more active method of portfolio management than strategic asset allocation. Tactical asset allocation lacks the buy-and-hold component inherent to strategic asset management. More transactions occur in tactical asset allocation that in strategic allocation.
Incorrect
Tactical asset allocation is a more active method of portfolio management than strategic asset allocation. Tactical asset allocation lacks the buy-and-hold component inherent to strategic asset management. More transactions occur in tactical asset allocation that in strategic allocation.
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Question 3 of 10
3. Question
The following are incorrect except:
I. Strategic asset allocation is an example of passive portfolio management.
II. Passive portfolio management does not value a buy-and-hold strategy
III. Tactical asset allocation is an example of active portfolio management.
IV. Active portfolio management is characterized by multiple transactions within a year to take advantage of short-term market conditions to secure gains.Correct
Active portfolio management, exemplified in tactical asset allocation, is characterized by multiple transactions within a year to take advantage of short-term market conditions to secure gains. Passive portfolio management, exemplified by strategic asset allocation, values a buy-and-hold strategy, which suggests that stocks historically perform well and will continue to grow in the long term regardless of short-term market movements.
Incorrect
Active portfolio management, exemplified in tactical asset allocation, is characterized by multiple transactions within a year to take advantage of short-term market conditions to secure gains. Passive portfolio management, exemplified by strategic asset allocation, values a buy-and-hold strategy, which suggests that stocks historically perform well and will continue to grow in the long term regardless of short-term market movements.
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Question 4 of 10
4. Question
Which of the following is true about growth securities?
I. Companies that fall into this category are usually companies with a mid to small market capitalization.
II. Growth securities are securities of companies that are established and have observable market history.
III. Companies in this category usually fall into the large-market capitalization.
IV. They are stocks and bonds of companies that are relatively young and up and coming.Correct
Growth securities are those stocks and bonds of companies that are relatively young and up and coming. They have not proven themselves in the marketplace, but they have a large potential for growth as their full potential has not yet been seen. Companies that fall into this category are usually companies with a mid- to small-market capitalization.
Value securities are securities of companies that are established and have observable market history.Incorrect
Growth securities are those stocks and bonds of companies that are relatively young and up and coming. They have not proven themselves in the marketplace, but they have a large potential for growth as their full potential has not yet been seen. Companies that fall into this category are usually companies with a mid- to small-market capitalization.
Value securities are securities of companies that are established and have observable market history. -
Question 5 of 10
5. Question
Investors seeking capital appreciation;
I. look to low-risk and stable securities.
II. look to higher-risk and more volatile securities.
III. are limited to investing in bonds.
IV. are usually younger investors with long time horizons.Correct
Investors seeking capital appreciation look to higher-risk and more volatile securities, such as common stock of companies that are of small-market capitalization. These investors are usually younger investors with long time horizons, which allow them to absorb losses and benefit from long-term gains.
Incorrect
Investors seeking capital appreciation look to higher-risk and more volatile securities, such as common stock of companies that are of small-market capitalization. These investors are usually younger investors with long time horizons, which allow them to absorb losses and benefit from long-term gains.
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Question 6 of 10
6. Question
“Estates are not taxable until the death of the person holding the estate”. Which of the following statements best explains the reason for the quoted sentence?
Correct
The estate tax is a tax levied on the transfer of significant assets when the original owner of the assets dies.
Incorrect
The estate tax is a tax levied on the transfer of significant assets when the original owner of the assets dies.
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Question 7 of 10
7. Question
Items that are usually excluded from the gift tax does not include which of the following?
Correct
Items that are usually excluded from the gift tax include gifts to spouses, gifts to political organizations, gifts that fall under the annual gift tax exclusion amount, and payment of medical or educational expenses.
Incorrect
Items that are usually excluded from the gift tax include gifts to spouses, gifts to political organizations, gifts that fall under the annual gift tax exclusion amount, and payment of medical or educational expenses.
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Question 8 of 10
8. Question
Examples of Qualified retirement plans (tax-advantaged savings plans) are these except:
Correct
Qualified retirement plans are tax-advantaged savings plans that are given legislative reprieve from certain taxes.
To prevent abuse of tax-advantaged retirement plans by wealthy individuals, the legislation that allows for the use of retirement plans requires that the contributions to the plans be earned income and not capital gains or interest received. Qualified retirement plans are typically call-defined contribution plans.Incorrect
Qualified retirement plans are tax-advantaged savings plans that are given legislative reprieve from certain taxes.
To prevent abuse of tax-advantaged retirement plans by wealthy individuals, the legislation that allows for the use of retirement plans requires that the contributions to the plans be earned income and not capital gains or interest received. Qualified retirement plans are typically call-defined contribution plans. -
Question 9 of 10
9. Question
What is the maximum annual contribution to a Coverdell education savings account, as of 2018?
Correct
As of 2018, the maximum annual contribution to a Coverdell education savings account is $2,000.
Incorrect
As of 2018, the maximum annual contribution to a Coverdell education savings account is $2,000.
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Question 10 of 10
10. Question
As defined in the Uniform Securities Act (USA), the jurisdiction and authority granted to the administrator apply to the following securities transactions except:
Correct
As clearly defined in the Uniform Securities Act (USA), the jurisdiction and authority granted to the administrator apply only to securities transactions that were initiated in the administrator’s state of authority, directed to that administrator’s state of authority or accepted in that state.
Incorrect
As clearly defined in the Uniform Securities Act (USA), the jurisdiction and authority granted to the administrator apply only to securities transactions that were initiated in the administrator’s state of authority, directed to that administrator’s state of authority or accepted in that state.