Question 1

Which of the following is not a life cycle phase?

Accepted Answer

A) Discovery phase 
B) Accumulation phase 
C) Consolidation phase 
D) Spending phase 
E) Gifting phase 
A) Discovery phase 
B) Accumulation phase 
C) Consolidation phase 
D) Spending phase 
E) Gifting phase

Question 2

Exhibit 2.1
USE THE TAX TABLE PROVIDED BELOW FOR THE FOLLOWING PROBLEM(S)
  
-Refer to Exhibit 2.1. What is the tax liability for a single individual with taxable income of $85,000?

Accepted Answer

A) $23,800 
B) $18,427 
C) $24,958 
D) $16,867 
E) $19,650 
A) $23,800 
B) $18,427 
C) $24,958 
D) $16,867 
E) $19,650

Question 3

Asset allocation is

Accepted Answer

A) The process of dividing funds into asset classes. 
B) Concerned with returns variability. 
C) Concerned with the risk associated with different assets. 
D) Concerned with the relationship among investments' returns. 
E) All of the above. 
A) The process of dividing funds into asset classes. 
B) Concerned with returns variability. 
C) Concerned with the risk associated with different assets. 
D) Concerned with the relationship among investments' returns. 
E) All of the above.

Question 4

Once the portfolio is constructed, it must be continuously

Accepted Answer

A) Rebalanced. 
B) Recycled 
C) Reinvested 
D) Monitored. 
E) Manipulated. 
A) Rebalanced. 
B) Recycled 
C) Reinvested 
D) Monitored. 
E) Manipulated.

Question 5

For an investor with a time horizon of 12 years and higher risk tolerance, an appropriate asset allocation strategy would be

Accepted Answer

A) 100% stocks 
B) 30% cash, 50% bonds, and 20% stocks 
C) 10% cash, 30% bonds, and 60% stocks 
D) 50% bonds and 50% stocks 
E) 100% bonds 
A) 100% stocks 
B) 30% cash, 50% bonds, and 20% stocks 
C) 10% cash, 30% bonds, and 60% stocks 
D) 50% bonds and 50% stocks 
E) 100% bonds

Question 6

____ gains are taxable and occur when an asset is sold for more than its basis (the value of the asset when it was purchased by the original owner, or inherited by the heirs of the original owner).

Accepted Answer

A) Realized capital 
B) Income 
C) Portfolio 
D) Nominal 
E) Real 
A) Realized capital 
B) Income 
C) Portfolio 
D) Nominal 
E) Real

Question 7

For an investor with a time horizon of 6 to 10 years and lower risk tolerance, an appropriate asset allocation strategy would be

Accepted Answer

A) 100% stocks 
B) 100% cash 
C) 30% cash, 50% bonds, and 20% stocks 
D) 10% cash, 30% bonds, and 60% stocks 
E) 100% bonds 
A) 100% stocks 
B) 100% cash 
C) 30% cash, 50% bonds, and 20% stocks 
D) 10% cash, 30% bonds, and 60% stocks 
E) 100% bonds

Question 8

The ability to retire at a certain age is a typical example of a long-term, lower-priority goal.

Accepted Answer

A) True 
 B)False

Question 9

Experts suggest life insurance coverage should be seven to ten times an individual's annual salary.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following strategies seeks to increase the portfolio value by reinvesting current income in addition to capital gains?

Accepted Answer

A) Capital appreciation 
B) Capital preservation 
C) Return preservation 
D) Current income 
E) Total return 
A) Capital appreciation 
B) Capital preservation 
C) Return preservation 
D) Current income 
E) Total return

Question 11

Banks must compete for funds (savings deposits, CD's, etc.) in order to make loans and other types of investments.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is not a typical portfolio constraint?

Accepted Answer

A) Liquidity needs 
B) Risk tolerance 
C) Time horizon 
D) Tax concerns 
E) Legal factors 
A) Liquidity needs 
B) Risk tolerance 
C) Time horizon 
D) Tax concerns 
E) Legal factors

Question 13

Investing 30 to 40 percent of your retirement funds in the company you work for is reasonable when they match funds.

Accepted Answer

A) True 
 B)False

Question 14

An individual in the 36% tax bracket invests $5,000 in a tax-exempt IRA. If the investment earns 10% annually, what will be the value of the IRA after five years?

Accepted Answer

A) $6,600 
B) $6,818 
C) $7,500 
D) $8,053 
E) $10,879 
A) $6,600 
B) $6,818 
C) $7,500 
D) $8,053 
E) $10,879

Question 15

The spending phase occurs when investors are relatively young.

Accepted Answer

A) True 
 B)False

Question 16

An example of a unique need in an investment policy statement is related to the legal responsibilities of a fiduciary or trustee.

Accepted Answer

A) True 
 B)False

Question 17

Average tax rate is defined as total tax payment divided by total income.

Accepted Answer

A) True 
 B)False

Question 18

An appropriate investment objective for a typical 25-year-old investor is a low-risk strategy, such as capital preservation or current income.

Accepted Answer

A) True 
 B)False

Question 19

Banks face regulatory constraints at both the state and federal level.

Accepted Answer

A) True 
 B)False

Question 20

The current outlay of money to guard against a potentially large future loss is commonly known as

Accepted Answer

A) Asset management. 
B) Portfolio management. 
C) Minimizing risk. 
D) Loss control. 
E) Insurance. 
A) Asset management. 
B) Portfolio management. 
C) Minimizing risk. 
D) Loss control. 
E) Insurance.

Exam 2: The Asset Allocation Decision

Which of the following is not a life cycle phase?

Exhibit 2.1 USE THE TAX TABLE PROVIDED BELOW FOR THE FOLLOWING PROBLEM(S) -Refer to Exhibit 2.1. What is the tax liability for a single individual with taxable income of $85,000?

Asset allocation is

Once the portfolio is constructed, it must be continuously

For an investor with a time horizon of 12 years and higher risk tolerance, an appropriate asset allocation strategy would be

____ gains are taxable and occur when an asset is sold for more than its basis (the value of the asset when it was purchased by the original owner, or inherited by the heirs of the original owner).

For an investor with a time horizon of 6 to 10 years and lower risk tolerance, an appropriate asset allocation strategy would be

The ability to retire at a certain age is a typical example of a long-term, lower-priority goal.

Experts suggest life insurance coverage should be seven to ten times an individual's annual salary.

Which of the following strategies seeks to increase the portfolio value by reinvesting current income in addition to capital gains?

Banks must compete for funds (savings deposits, CD's, etc.) in order to make loans and other types of investments.

Which of the following is not a typical portfolio constraint?

Investing 30 to 40 percent of your retirement funds in the company you work for is reasonable when they match funds.

An individual in the 36% tax bracket invests $5,000 in a tax-exempt IRA. If the investment earns 10% annually, what will be the value of the IRA after five years?

The spending phase occurs when investors are relatively young.

An example of a unique need in an investment policy statement is related to the legal responsibilities of a fiduciary or trustee.

Average tax rate is defined as total tax payment divided by total income.

An appropriate investment objective for a typical 25-year-old investor is a low-risk strategy, such as capital preservation or current income.

Banks face regulatory constraints at both the state and federal level.

The current outlay of money to guard against a potentially large future loss is commonly known as

The Investment Setting

Selecting Investments in a Global Market

Organization and Functioning of Securities Markets

Security-Market Indexes

Efficient Capital Markets

An Introduction to Portfolio Management

An Introduction to Asset Pricing Models

Multifactor Models of Risk and Return

Analysis of Financial Statements

Introduction to Security Valuation

Macroanalysis and Microvaluation of the Stock Market

Industry Analysis

Company Analysis and Stock Valuation

Technical Analysis

Equity Portfolio Management Strategies

Bond Fundamentals

The Analysis and Valuation of Bonds

Bond Portfolio Management Strategies

An Introduction to Derivative Markets and Securities

Forward and Futures Contracts

Option Contracts

Swap Contracts, Convertible Securities, and Other Embedded Derivatives

Professional Money Management, Alternative Assets, and Industry Ethics

Evaluation of Portfolio Performance

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