Question 1

Exhibit 2-1
USE THE TAX TABLE PROVIDED BELOW TO ANSWER THE NEXT 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

Question 2

Exhibit 2-1
USE THE TAX TABLE PROVIDED BELOW TO ANSWER THE NEXT 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

Question 3

In constructing the portfolio, the manager should maximize the investor's risk level.

Accepted Answer

A) True 
 B)False

Question 4

Asset allocation is the process of dividing funds into different classes of assets.

Accepted Answer

A) True 
 B)False

Question 5

____ phase is the stage when investors in their early-to-middle earning years attempt to accumulate assets to satisfy near-term needs,e.g., children's education or down payment on a home

Accepted Answer

A)  Accumulation 
B)  Spending 
C)  Gifting 
D)  Consolidation 
E)  Divestiture

Question 6

A 25 year old individual with $10,000 invested in an RRSP and an average risk tolerance should be concerned about:

Accepted Answer

A)  taxes, and should invest 70% in equities and 30% in bonds. 
B)  taxes, and should invest 30% in equities and 70% in bonds. 
C)  inflation, and should invest 70% in equities and 30% in bonds. 
D)  inflation, and should invest 30% in equities and 70% in bonds. 
E)  taxes and inflation.

Question 7

Exhibit 2-1
USE THE TAX TABLE PROVIDED BELOW TO ANSWER THE NEXT PROBLEM(S) 
-Refer to Exhibit 2-1. What is the marginal tax rate for a single individual with taxable income of $85,000?

Accepted Answer

A)  15% 
B)  25% 
C)  28% 
D)  33% 
E)  35%

Question 8

Calculate the total after tax future value, at the end of 30 years, of the taxable account contribution.

Accepted Answer

A)  $11,833.43 
B)  $12,892.41 
C)  $13,924.65 
D)  $16,317.93 
E)  $19,411.25

Question 9

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

Question 10

Calculate the total after tax future value, at the end of 30 years, of the RRSP contribution and the tax savings.

Accepted Answer

A)  $21,833.43 
B)  $22,836.77 
C)  $22,892.41 
D)  $26,317.93 
E)  $19,411.25

Question 11

____ 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

Question 12

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

Accepted Answer

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

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.

Question 14

The spending phase occurs when investors are relatively young.

Accepted Answer

A) True 
 B)False

Question 15

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 16

Assume that you invest $750 at the end of each quarter for the next 20 years in a mutual fund. The annual rate of interest that you expect to earn in this account is 5.25%. The amount in the account at the end of 20 years is

Accepted Answer

A)  $60,000.00 
B)  $105,039.84 
C)  $37,009.35 
D)  $123,510.52 
E)  $115,637.37

Question 17

It is essential that both the client and the portfolio manager agree on an appropriate benchmark portfolio.

Accepted Answer

A) True 
 B)False

Question 18

In an investment policy statement the objectives of an investor are expressed in terms of

Accepted Answer

A)  risk and return 
B)  risk 
C)  return 
D)  time horizon 
E)  liquidity needs

Question 19

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

Question 20

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

Accepted Answer

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

Exam 2: The Asset Allocation Decision

Exhibit 2-1 USE THE TAX TABLE PROVIDED BELOW TO ANSWER THE NEXT PROBLEM(S) -Refer to Exhibit 2-1. What is the tax liability for a single individual with taxable income of $85,000?

Exhibit 2-1 USE THE TAX TABLE PROVIDED BELOW TO ANSWER THE NEXT PROBLEM(S) -Refer to Exhibit 2-1. What is the tax liability for a married couple filing jointly with taxable income of $125,000?

In constructing the portfolio, the manager should maximize the investor's risk level.

Asset allocation is the process of dividing funds into different classes of assets.

____ phase is the stage when investors in their early-to-middle earning years attempt to accumulate assets to satisfy near-term needs,e.g., children's education or down payment on a home

A 25 year old individual with $10,000 invested in an RRSP and an average risk tolerance should be concerned about:

Exhibit 2-1 USE THE TAX TABLE PROVIDED BELOW TO ANSWER THE NEXT PROBLEM(S) -Refer to Exhibit 2-1. What is the marginal tax rate for a single individual with taxable income of $85,000?

Calculate the total after tax future value, at the end of 30 years, of the taxable account contribution.

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

Calculate the total after tax future value, at the end of 30 years, of the RRSP contribution and the tax savings.

____ 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) .

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

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

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.

Assume that you invest $750 at the end of each quarter for the next 20 years in a mutual fund. The annual rate of interest that you expect to earn in this account is 5.25%. The amount in the account at the end of 20 years is

It is essential that both the client and the portfolio manager agree on an appropriate benchmark portfolio.

In an investment policy statement the objectives of an investor are expressed in terms of

Which of the following is not a life cycle phase?

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