Question 1

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 2

The policy statement may include a ____ against which a portfolio's or portfolio manager's performance can be measured.

Accepted Answer

A)  milestone 
B)  benchmark 
C)  landmark 
D)  reference point 
E)  market pair 
A)  milestone 
B)  benchmark 
C)  landmark 
D)  reference point 
E)  market pair

Question 3

What would the after-tax yield be on an investment that offers a 6 percent fully taxable yield? Assume a marginal tax rate of 31 percent.

Accepted Answer

A)  2.79 percent 
B)  6.48 percent 
C)  4.14 percent 
D)  7.20 percent 
E)  12.50 percent 
A)  2.79 percent 
B)  6.48 percent 
C)  4.14 percent 
D)  7.20 percent 
E)  12.50 percent

Question 4

For an investor with a time horizon of 15 years and moderate risk tolerance, an appropriate asset allocation strategy would be

Accepted Answer

A)  100 percent stocks. 
B)  40 percent cash and 60 percent stocks. 
C)  30 percent cash, 50 percent bonds, and 20 percent stocks. 
D)  50 percent bonds, and 50 percent stocks. 
E)  20 percent bonds and 80 percent stocks. 
A)  100 percent stocks. 
B)  40 percent cash and 60 percent stocks. 
C)  30 percent cash, 50 percent bonds, and 20 percent stocks. 
D)  50 percent bonds, and 50 percent stocks. 
E)  20 percent bonds and 80 percent stocks.

Question 5

USE THE TAX TABLE PROVIDED BELOW FOR THE FOLLOWING PROBLEM(S)
  
-Refer to Exhibit 2.1. What is the tax liability for a married couple filing jointly with taxable income of $125,000?

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 6

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

Question 7

Which of the following is NOT considered to be an investment objective?

Accepted Answer

A)  capital preservation 
B)  capital appreciation 
C)  current income 
D)  total return 
E)  nominal preservation 
A)  capital preservation 
B)  capital appreciation 
C)  current income 
D)  total return 
E)  nominal preservation

Question 8

Most art and antiques are _____, and the transaction costs are ____ compared to those of financial assets.

Accepted Answer

A)  illiquid; low 
B)  illiquid; high 
C)  liquid; low 
D)  liquid; high 
E)  correlated to bonds; high 
A)  illiquid; low 
B)  illiquid; high 
C)  liquid; low 
D)  liquid; high 
E)  correlated to bonds; high

Question 9

An individual in the 36 percent 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 10

Term life insurance provides both a death benefit and a savings plan.

Accepted Answer

A) True 
 B)False

Question 11

The asset allocation decision must involve a consideration of

Accepted Answer

A)  cultural differences. 
B)  the objectives stated in the investor's policy statement. 
C)  the types of assets that are appropriate for the investor. 
D)  the risk associated with different investments. 
E)  All of these are correct. 
A)  cultural differences. 
B)  the objectives stated in the investor's policy statement. 
C)  the types of assets that are appropriate for the investor. 
D)  the risk associated with different investments. 
E)  All of these are correct.

Question 12

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

Accepted Answer

A)  13.57% 
B)  15.68% 
C)  21.68% 
D)  25.74% 
E)  29.55% 
A)  13.57% 
B)  15.68% 
C)  21.68% 
D)  25.74% 
E)  29.55%

Question 13

The first step in the investment process is the development of a(n)

Accepted Answer

A)  objective statement. 
B)  policy statement. 
C)  financial statement. 
D)  statement of cash needs. 
E)  statement of cash flows. 
A)  objective statement. 
B)  policy statement. 
C)  financial statement. 
D)  statement of cash needs. 
E)  statement of cash flows.

Question 14

The spending phase occurs when investors are relatively young.

Accepted Answer

A) True 
 B)False

Question 15

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 16

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

Question 17

Arts and antiques are inferior inflation hedges compared to long-term bonds and common stocks.

Accepted Answer

A) True 
 B)False

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

The policy statement may include a ____ against which a portfolio's or portfolio manager's performance can be measured.

What would the after-tax yield be on an investment that offers a 6 percent fully taxable yield? Assume a marginal tax rate of 31 percent.

For an investor with a time horizon of 15 years and moderate risk tolerance, an appropriate asset allocation strategy would be

USE THE TAX TABLE PROVIDED BELOW FOR THE FOLLOWING PROBLEM(S) -Refer to Exhibit 2.1. What is the tax liability for a married couple filing jointly with taxable income of $125,000?

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

Which of the following is NOT considered to be an investment objective?

Most art and antiques are _, and the transaction costs are compared to those of financial assets.

An individual in the 36 percent 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?

Term life insurance provides both a death benefit and a savings plan.

The asset allocation decision must involve a consideration of

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

The first step in the investment process is the development of a(n)

The spending phase occurs when investors are relatively young.

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

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

Arts and antiques are inferior inflation hedges compared to long-term bonds and common stocks.

The Investment Setting

The Investment Setting: Part A

Asset Allocation and Security Selection: Part A

Organization and Functioning of Securities Markets

Security Market Indexes and Index Funds

Efficient Capital Markets, Behavioral Finance, and Technical Analysis

An Introduction to Portfolio Management

An Introduction to Portfolio Management: Part A

An Introduction to Portfolio Management: Part B

Asset Pricing Models

Equity Valuation

The Top-Down Approach to Market, Industry, and Company Analysis

The Practice of Fundamental Investing

Equity Portfolio Management Strategies

Bond Fundamentals and Valuation

Bond Analysis and Portfolio Management Strategies

An Introduction to Derivative Markets and Securities

Forward, Futures, and Swap Contracts

Option Contracts

Professional Money Management, Alternative Assets, and Industry Ethics

Evaluation of Portfolio Performance

Filters

Exam 2: Asset Allocation and Security Selection

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

The policy statement may include a ____ against which a portfolio's or portfolio manager's performance can be measured.

What would the after-tax yield be on an investment that offers a 6 percent fully taxable yield? Assume a marginal tax rate of 31 percent.

For an investor with a time horizon of 15 years and moderate risk tolerance, an appropriate asset allocation strategy would be

USE THE TAX TABLE PROVIDED BELOW FOR THE FOLLOWING PROBLEM(S) -Refer to Exhibit 2.1. What is the tax liability for a married couple filing jointly with taxable income of $125,000?

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

Which of the following is NOT considered to be an investment objective?

Most art and antiques are _____, and the transaction costs are ____ compared to those of financial assets.

An individual in the 36 percent 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?

Term life insurance provides both a death benefit and a savings plan.

The asset allocation decision must involve a consideration of

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

The first step in the investment process is the development of a(n)

The spending phase occurs when investors are relatively young.

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

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

Arts and antiques are inferior inflation hedges compared to long-term bonds and common stocks.

The Investment Setting

The Investment Setting: Part A

Asset Allocation and Security Selection: Part A

Organization and Functioning of Securities Markets

Security Market Indexes and Index Funds

Efficient Capital Markets, Behavioral Finance, and Technical Analysis

An Introduction to Portfolio Management

An Introduction to Portfolio Management: Part A

An Introduction to Portfolio Management: Part B

Asset Pricing Models

Equity Valuation

The Top-Down Approach to Market, Industry, and Company Analysis

The Practice of Fundamental Investing

Equity Portfolio Management Strategies

Bond Fundamentals and Valuation

Bond Analysis and Portfolio Management Strategies

An Introduction to Derivative Markets and Securities

Forward, Futures, and Swap Contracts

Option Contracts

Professional Money Management, Alternative Assets, and Industry Ethics

Evaluation of Portfolio Performance

Filters

Most art and antiques are _, and the transaction costs are compared to those of financial assets.