Wealthmanagement Quiz N Answers

Financial Planning and Wealth Management

A z ero coupon bond: a. b. c. d.

is sold at a discount to face value. is worthless. matures immediately. always has a call feature.

A z ero coupon bond: – – – –

is sold a t a di sco unt t o f ace va lue. is worthless. matures immediately. always has a call feature.

Sto cks whose retu rn s are ti ed closel y to th e over all nat ional ec onomy are typi call y call ed: a. b. c. d.

Blue Chip stocks. Defensive stocks. Speculative stocks. Cyclical stocks.

Sto cks whose retu rn s are ti ed closel y to th e over all nat ional ec onomy are typi call y call ed: – – – –

Blue Chip stocks. Defensive stocks. Speculative stocks. Cycli ca l s tocks.

Mo rt gage pa yment s: a. Can be completely deducted from income for tax purposes. b. Vary from month to month on a fixed rate loan. c. Represent high principal payments early in the term of the loan. d. Are typically tax deductible to the extent that they represent payment of interest.

Mo rt gage pa yment s: – Can be completely deducted from income for tax purposes. – Vary from month to month on a fixed rate loan. – Represent high principal payments early in the term of the loan. – Ar e typica ll y ta x deduct ib le t o t he ex tent t ha t t hey r epr ese nt pa yment of in terest .

For tax p urpos es, a capit al ga in is conside red lo ng term if the inves tm ent was held more tha n: a. b. c. d.

6 month 1 year 5 years 10 years

For tax p urpos es, a capit al ga in is conside red lo ng term if the inves tm ent was held more tha n: – – – –

6 month 1 yea r 5 years 10 years

A 35 -ye ar old indi vidual wit h 4 yo ung chi ldren and a spo use who do esn’ t work should pr oba bly conside r p urchasing whic h of the fol lo wing type s of insura nc e: a. b. c. d.

Long-term care insurance. Disability insurance. Life insurance. (b) and (c).

A 35 -ye ar old indi vidual wit h 4 yo ung chi ldren and a spo use who do esn’ t work should pr oba bly conside r p urchasing whic h of the fol lo wing type s of insura nc e: – – – –

Long-term care insurance. Disability insurance. Life insurance. (b ) and (c).

Inv estmen ts i n CDs : a. are riskier than investments in stocks. b. are inferior to investments in 8-tracks and vinyl records. c. are always tax deferred. d. are insured by the FDIC, but have generally underperformed stock investments over the long run.

Inv estmen ts i n CDs : – are riskier than investments in stocks. – are inferior to investments in 8-tracks and vinyl records. – are always tax deferred. – are i ns ured by the FDIC, but ha ve genera lly und erperfor me d stock inve stment s ove r t he l ong run .

The ne t as set va lue (NA V) of a bo nd f und: a. cannot be determined. b. changes as interest rates change. c. is determined by the average coupon rates of the bonds in the fund. d. will not change as bonds in the fund are bought or sold.

The ne t as set va lue (NA V) of a bo nd f und: – cannot be determined. – changes as int erest r at es cha ng e. – is determined by the average coupon rates of the bonds in the fund. – will not change as bonds in the fund are bought or sold.

Disabi li ty i ncome i nsu ra nc e: a. Can cover part of your lost income while you are disabled. b. Pays medical expenses associated with a disability. c. Should only be purchased by star athletes. d. Is primarily for the unemployed.

Disabi li ty i ncome i nsu ra nc e: – Ca n cover pa rt of y our l ost inco me whi le you are di sab led. – Pays medical expenses associated with a disability. – Should only be purchased by star athletes. – Is primarily for the unemployed.

If yo u cal l yo ur bro ke r to purc ha se a "ro un d lot " yo u ar e: a. Buying a mutual fund of 100 different stocks. b. Authorizing him/her to decide how many shares to buy. c. Negotiating commissions on future purchases and sales. d. Purchasing 100 shares of a specific stock.

If yo u cal l yo ur bro ke r to purc ha se a "ro un d lot " yo u ar e: – Buying a mutual fund of 100 different stocks. – Authorizing him/her to decide how many shares to buy. – Negotiating commissions on future purchases and sales. – Purcha si ng 100 sh ar es of a s pec ific st oc k.

Va ri abl e life insu ra nce: a. Offers tax deferral. b. May provide higher return potential and greater risk than a whole life policy. c. Allows you to invest a portion of the premium in various subaccounts. d. All of the above.

Va ri abl e life insu ra nce: – Offers tax deferral. – May provide higher return potential and greater risk than a whole life policy. – Allows you to invest a portion of the premium in various subaccounts. – Al l of th e above .

Und er the pro vis io ns of Inc om e Ta x Act, 19 61 , "T rans po rt All ow anc e" is exe mpt upt o a. b. c. d.

Rs. 800 per month Rs.400 per month Rs. 500 per month Rs. 9000 per year lump sum

Und er the pro vis io ns of Inc om e Ta x Act, 19 61 , "T rans po rt All ow anc e" is exe mpt upt o – – – –

Rs . 80 0 p er m ont h Rs.400 per month Rs. 500 per month Rs. 9000 per year lump sum

Divi den ds ar e taxed : a. b. c. d.

At the investor’s marginal income tax rate. At a maximum rate of 15%. Only when the stock is sold. Dividends are never taxed.

Divi den ds ar e taxed : – – – –

At the investor’s marginal income tax rate. At a max imum r at e of 15%. Only when the stock is sold. Dividends are never taxed.

The term gene ra ll y used to de scribe the marke t in which pr ic es full y refl ect al l ava ila ble inform at ion is : a. b. c. d.

The greater fool hypothesis. Random walk hypothesis. The size-effect hypothesis. Efficient markets hypothesis.

The term gene ra ll y used to de scribe the marke t in which pr ic es full y refl ect al l ava ila ble inform at ion is : – – – –

The greater fool hypothesis. Random walk hypothesis. The size-effect hypothesis. Eff icient m ar kets hyp othesi s.

If a mut ual fund manage r increases his /he r cash po sit io n, it can be sai d: a. The manager is anticipating a bear market. b. The manager is anticipating a bull market. c. The manager is trying to reduce the fund’s taxable gains. d. The manager is aggressive.

If a mut ual fund manage r increases his /he r cash po sit io n, it can be sai d: – The ma nag er i s anti cip ati ng a b ear ma rket . – The manager is anticipating a bull market. – The manager is trying to reduce the fund’s taxable gains. – The manager is aggressive.

Determi ning tot al ret urn t ypi cal ly ut ili ze s the : a. Inflation-adjusted annual performance of all mutual-funds. b. Annual capital gain plus dividend payout of a stock or fund. c. Math skills learned in college-level calculus courses. d. Dividend yield on the Dow Jones Industrial Average.

Determi ning tot al ret urn t ypi cal ly ut ili ze s the : – Inflation-adjusted annual performance of all mutual-funds. – Annu al capi tal ga in p lu s di vid end pa yout of a st ock or f und . – Math skills learned in college-level calculus courses. – Dividend yield on the Dow Jones Industrial Average.

A mutu al fun d i s… a. A share of a company’s stock b. A pool of money managed by an investment company c. An insurance policy d. A brokerage account

A mutu al fun d i s… – A share of a company’s stock – A pool of mone y ma na ged by an inve stment compa ny – An insurance policy – A brokerage account

The be st way to re sear ch a stoc k is to lo ok at: a. The company’s management team and its track record b. The outlook for the industry and the company’s position in it c. The price/earnings ratio d. All of the above

The be st way to re sear ch a stoc k is to lo ok at: – The company’s management team and its track record – The outlook for the industry and the company’s position in it – The price/earnings ratio – Al l of th e above

Being yo ur ow n fina ncial pla nner en tail s… a. A fair amount of time b. A willingness to research money and business topics c. Knowing how much risk you’re comfortable with d. All of the above

Being yo ur ow n fina ncial pla nner en tail s… – A fair amount of time – A willingness to research money and business topics – Knowing how much risk you’re comfortable with – Al l of th e above

If a stoc k ha s a high pr ic e/earnings ra tio it can mean… a. The outlook for the stock is rosy—you should buy b. The stock is considered cheap compared to others in the industry c. The stock is considered pricey and may be trading at its high d. The stock is trading at the same price as the overall market

If a stoc k ha s a high pr ic e/earnings ra tio it can mean… – The outlook for the stock is rosy—you should buy – The stock is considered cheap compared to others in the industry – The s tock i s co nsi dered pri ce y and ma y b e tra di ng a t it s hi gh – The stock is trading at the same price as the overall market

Tre as ur y bo nds a re… a. Issued by the government and carry no credit risk b. Issued by local governments and can vary in quality c. Bonds that pay the highest interest rate of all bond types d. Issued by corporations to finance acquisitions and expansions

Tre as ur y bo nds a re… – Is sued by t he g ove rnment and car ry no cred it r is k – Issued by local governments and can vary in quality – Bonds that pay the highest interest rate of all bond types – Issued by corporations to finance acquisitions and expansions

Bind ing Aut hor it y of an insur anc e br oker means ____ _. a. the authority of brokers to accept risks within certain limits and term as set out by the Insurers b. the contract by which a broker is bound to the insurance companies c. the contract by which a broker is bound to the clients d. the regulatory authority that binds brokers to the regulations

Bind ing Aut hor it y of an insur anc e br oker means ____ _. – the aut hori ty of br ok ers t o acc ept risk s wi thin ce rta in l imit s and ter m as set out b y the Ins ur ers – the contract by which a broker is bound to the insurance companies – the contract by which a broker is bound to the clients – the regulatory authority that binds brokers to the regulations

If a Co mpany de cla res and pa ys di vide nd, this tra ns ac tio n wil l_ __ _. – – – –

reduce stockholders equity increase liabilities decrease net income not affect total assets

If a Co mpany de cla res and pa ys di vide nd, this tra ns ac tio n wil l_ __ _. – – – –

reduc e st ockhol de rs equi ty increase liabilities decrease net income not affect total assets

A re cognis ed Pro vident Fund acquires its stat us on re cognit io n by __ __ ___ _. a. b. c. d.

SEBI Income Tax authorities PF Commissioner Labor Ministry

A re cognis ed Pro vident Fund acquires its stat us on re cognit io n by __ __ ___ _. – – – –

SEBI Income Tax a uthori ties PF Commissioner Labour Ministry

A typ e of ris k wit h high fr eque nc y but lo w seve rit y is pro ba bly be st handl ed by: a. b. c. d.

Transfer Coinsurance Reinsurance Self Insurance

A typ e of ris k wit h high fr eque nc y but lo w seve rit y is pro ba bly be st handl ed by: – – – –

Transfer Coinsurance Reinsurance Self In sura nce