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Question 1 of 10
1. Question
Which of the following is incorrect?
I. FNMA: Federal National Mortgage Association
II. TIPS: Treasury Inflation Projected 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 false 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 true 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
According to the SEC, an Investment Advisor Representative has the following functions except:
I. The individual must have less than five clients who are considered natural persons.
II. The individual must communicate with the clients of the investment advisor.
III. The individual must function beyond the limitations of and investment advisor.
IV. The individual cannot provide impersonal investment advice.Correct
According to the SEC, an investment advisor representative (IAR for short) is an individual who is under the supervision of an investment advisor. In order to qualify as an investment advisor representative, rather than fall into the category of an investment advisor, certain limitations on the capacity of the individual must be in effect, including the following:
– The individual must have more than five clients who are considered natural persons (i.e. not businesses, trusts, or other entities which do not qualify for natural person status). In addition, the clients that fall into this category must make up at least 10% of the IAR’s client base.
– The individual must communicate with the clients of the investment advisor.
– The individual cannot provide impersonal investment advice, meaning that the individual may only provide recommendations if they meet the underlying objective of the specific client.Incorrect
According to the SEC, an investment advisor representative (IAR for short) is an individual who is under the supervision of an investment advisor. In order to qualify as an investment advisor representative, rather than fall into the category of an investment advisor, certain limitations on the capacity of the individual must be in effect, including the following:
– The individual must have more than five clients who are considered natural persons (i.e. not businesses, trusts, or other entities which do not qualify for natural person status). In addition, the clients that fall into this category must make up at least 10% of the IAR’s client base.
– The individual must communicate with the clients of the investment advisor.
– The individual cannot provide impersonal investment advice, meaning that the individual may only provide recommendations if they meet the underlying objective of the specific client. -
Question 7 of 10
7. Question
The following are true concerning brokers except:
I. A broker acts as a middleman between the buyer of a security and the seller of a security.
II. A broker sells its own inventory to buyers.
III. Brokers own the products for which they arrange transactions.
IV. A broker has different functions from a dealer.Correct
A broker is a person or institution which acts as a middleman between the buyer of a security and the seller of a security. The broker makes his profit by charging a sales charge, or commission, for arranging the transaction. Brokers do not own any products for which they arrange transactions, but simply facilitate the transferral of ownership from a seller to a buyer.
Incorrect
A broker is a person or institution which acts as a middleman between the buyer of a security and the seller of a security. The broker makes his profit by charging a sales charge, or commission, for arranging the transaction. Brokers do not own any products for which they arrange transactions, but simply facilitate the transferral of ownership from a seller to a buyer.
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Question 8 of 10
8. Question
Which of the following is false concerning quantitative methods of valuation?
I. They consist of intricate mathematical and statistical modeling.
II. Quantitative methods are also known as technical analysis.
III. They can be used to measure performance of a company based on several factors.
IV. Time value of money concept summarises the importance of using using technical analysis.Correct
Quantitative methods are methods used to better understand a company’s or sector’s behavior. These methods consist of intricate mathematical and statistical modeling. It can be used to measure performance of a company based on several factors or in the valuation of a firm based on those or other factors. Quantitative methods are also known as technical analysis.
Incorrect
Quantitative methods are methods used to better understand a company’s or sector’s behavior. These methods consist of intricate mathematical and statistical modeling. It can be used to measure performance of a company based on several factors or in the valuation of a firm based on those or other factors. Quantitative methods are also known as technical analysis.
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Question 9 of 10
9. Question
Which of the following statements is true?
I. The internal rate of return (IRR) is the rate of expected growth.
II. The time value of money concept is the assumption that money held today is worth less than money received tomorrow.
III. Net present value (NPV) calculations show the value of a dollar today compared to the value of the same dollar in the future.
IV. If the NPV is positive, the investment being analyzed in not worth being pursued.Correct
Net present value (NPV) calculations show the value of a dollar today compared to the value of the same dollar in the future, accounting for inflation and returns (subtracting inflation from returns). If the NPV is negative, the investment being analyzed in not worth being pursued.
The time value of money concept is the assumption that money held today is worth more than money received tomorrow.Incorrect
Net present value (NPV) calculations show the value of a dollar today compared to the value of the same dollar in the future, accounting for inflation and returns (subtracting inflation from returns). If the NPV is negative, the investment being analyzed in not worth being pursued.
The time value of money concept is the assumption that money held today is worth more than money received tomorrow. -
Question 10 of 10
10. Question
The following statements are not true, except:
I. To find IRR, the investor sets the time value of money equation equal to zero.
II. A higher IRR indicates a higher probability of negative returns.
III. If the NPV is negative, the investment being analyzed in not worth being pursue.
IV. NPV is calculated as a function of the time value of money by applying a discount rate to expected future values within the time value of money equation.Correct
The internal rate of return (IRR) is the rate of expected growth. To find IRR, the investor sets the time value of money equation equal to zero. Generally, a higher IRR indicates a higher probability of positive returns.
Net present value (NPV) calculations show the value of a dollar today compared to the value of the same dollar in the future, accounting for inflation and returns (subtracting inflation from returns). If the NPV is negative, the investment being analyzed in not worth being pursued. NPV is calculated as a function of the time value of money by applying a discount rate to expected future values within the time value of money equation.Incorrect
The internal rate of return (IRR) is the rate of expected growth. To find IRR, the investor sets the time value of money equation equal to zero. Generally, a higher IRR indicates a higher probability of positive returns.
Net present value (NPV) calculations show the value of a dollar today compared to the value of the same dollar in the future, accounting for inflation and returns (subtracting inflation from returns). If the NPV is negative, the investment being analyzed in not worth being pursued. NPV is calculated as a function of the time value of money by applying a discount rate to expected future values within the time value of money equation.