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Question 1 of 10
1. Question
The problem of illiquid cash can be averted if the advisor motions the client:
Correct
Cash flows are a very important part of the client’s investment profile. The client’s need for cash should be regularly discussed to ensure that current needs are being met and future needs will be met. This discussion takes many forms, whether it is advising a client against a specific investment because it will be illiquid and tie up funds that are needed for regular expenses or advising a client to invest in income-paying investments to ensure future cash flows.
Incorrect
Cash flows are a very important part of the client’s investment profile. The client’s need for cash should be regularly discussed to ensure that current needs are being met and future needs will be met. This discussion takes many forms, whether it is advising a client against a specific investment because it will be illiquid and tie up funds that are needed for regular expenses or advising a client to invest in income-paying investments to ensure future cash flows.
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Question 2 of 10
2. Question
The advisor can determine the solvency of the investor and make a suitable judgment as to their needs involving investing and financial planning, from:
Correct
From the balance sheet, the advisor can determine the solvency of the investor and make a suitable judgment as to their needs involving investing and financial planning.
Incorrect
From the balance sheet, the advisor can determine the solvency of the investor and make a suitable judgment as to their needs involving investing and financial planning.
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Question 3 of 10
3. Question
An investment advisor can gather client data through which of the following means:
Correct
Data gathering can take the form of questionnaires and interviews to learn relevant facts which the client is best able to answer, as well as other demographic research to learn relevant facts of which the client may be less aware.
Incorrect
Data gathering can take the form of questionnaires and interviews to learn relevant facts which the client is best able to answer, as well as other demographic research to learn relevant facts of which the client may be less aware.
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Question 4 of 10
4. Question
Which of the following statement is false?
Correct
The metric target that applies to the greater wording of the CAPM is the expected return of risk-free securities, usually United States Treasuries.
Incorrect
The metric target that applies to the greater wording of the CAPM is the expected return of risk-free securities, usually United States Treasuries.
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Question 5 of 10
5. Question
Modern portfolio Theory states that a portfolio may be constructed that:
Correct
Modern portfolio theory states that a portfolio may be constructed that maximize returns while minimizing risk.
Incorrect
Modern portfolio theory states that a portfolio may be constructed that maximize returns while minimizing risk.
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Question 6 of 10
6. Question
Efficient markets are viewed as these types, except:
Correct
Currently, efficient markets are viewed as three types; semistrong, strong, and weak. The above are the three market types concerning the efficient market hypothesis.
Incorrect
Currently, efficient markets are viewed as three types; semistrong, strong, and weak. The above are the three market types concerning the efficient market hypothesis.
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Question 7 of 10
7. Question
A market type that leaves room for fundamental analysts to find undervalued securities and profit from them is a:
Correct
Weak form market efficiency asserts that today’s price of a security contains information of all of the past prices of the stock. While this theory negates technical analysis, it leaves room for fundamental analysts to find undervalued securities and profit from them.
Incorrect
Weak form market efficiency asserts that today’s price of a security contains information of all of the past prices of the stock. While this theory negates technical analysis, it leaves room for fundamental analysts to find undervalued securities and profit from them.
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Question 8 of 10
8. Question
In determining asset classes, which of the following statement is false?
Correct
Classes of assets include but are not limited to stocks (or equities), bonds (or fixed income), real estate, and cash.
Incorrect
Classes of assets include but are not limited to stocks (or equities), bonds (or fixed income), real estate, and cash.
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Question 9 of 10
9. Question
The process whereby the investor sells the gains in the highly performing securities and buys more of the underperforming securities to maintain the allocation, is called?
Correct
The investor will sell the gains in the highly performing securities and buy more of the underperforming securities to maintain the allocation. This process is called rebalancing, so called because it maintains the balance of the allocation.
Incorrect
The investor will sell the gains in the highly performing securities and buy more of the underperforming securities to maintain the allocation. This process is called rebalancing, so called because it maintains the balance of the allocation.
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Question 10 of 10
10. Question
Issues may crop up if the same investor invests in:
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. If the same investor also invests in non-qualified taxable investment accounts, those same capital gains and interests paid become issues.
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. If the same investor also invests in non-qualified taxable investment accounts, those same capital gains and interests paid become issues.