Final Exam 11/1 Flashcards
Two bonds each have a coupon rate of 3.5%, but one has a five-year maturity and the other has a 10-year maturity. If interest rates increase by 1%:
QID: 2100443Mark For Review
A
The price of the 10-year bond depreciates more than the price of the five-year bond.
B
The price of the 10-year bond appreciates more than the price of the five-year bond.
C
Since both bonds have the same coupon rate, their prices will be the same.
D
The duration on the five-year bond will be larger than the duration on the 10-year bond.
The price of the 10-year bond depreciates more than the price of the five-year bond.
A mother creates a trust and deposits funds that will be used to pay for her children’s college educations. The IAR managing the assets will NOT take into consideration:
QID: 1507386Mark For Review
A
The amount of money that the grantor makes.
B
When each beneficiary will be going to college.
C
Market conditions that are expected over the life of the trust.
D
Expected college tuition levels at the time of withdrawal.
The amount of money that the grantor makes.
Ten years ago, a person invested $1,000. Today, the original investment is worth $4,000. What is the rate of the annual compounding interest? QID: 1507383Mark For Review A 75% B 300% C 7.2% D 14.4%
14.4%
The easiest way to determine the answer is by using the Rule of 72.
For a new issuance of securities, when is a prospectus required to be delivered to purchasers? QID: 2100431Mark For Review A For primary market transactions only B For secondary market transactions only C For primary and, potentially, secondary market transactions D Only the summary prospectus is required
For primary and, potentially, secondary market transactions
What's the formula for calculating working capital? QID: 2100449Mark For Review A Total Debt/Total Equity B Assets - Liabilities C Current Assets - Current Liabilities D Current Assets/Current Liabilities
Current Assets - Current Liabilities
Which of the following actions will require an adviser to register under the USA? QID: 2100436Mark For Review A Selling fixed annuities B Selling mutual funds C Selling equity-indexed annuities D Selling investment management services
Selling investment management services
Jack purchased 100 shares of XTRO at $20. After nine years, he gave the shares to his nephew Sam when the fair market value of XTRO was $16 per share. Sam held the stock for seven months and then sold the shares for $23 per share. What's the tax consequence for Sam? QID: 1507382Mark For Review A Short-term capital gain of $300 B Long-term capital gain of $300 C Short-term capital gain of $700 D Long-term capital gain of $700
Long-term capital gain of $300
A broker-dealer is registered in both State A (where it has an office) and State B (where it doesn’t have an office). If the Administrator of State B determines that the broker-dealer is insolvent, what action can it take?
QID: 2100442Mark For Review
A
None. It must defer to the Administrator in State A.
B
It can revoke the registration of the broker-dealer in State B.
C
It can request that the broker-dealer post a surety bond.
D
It can revoke the broker-dealer’s registration in all states, since the Administrator has broad enforcement powers.
It can revoke the registration of the broker-dealer in State B.
What is an investor's internal rate of return if she invested $1,000 and it has grown to $4,000 in 10 years? QID: 2101127Mark For Review A 14.4% B 7.2% C 300% D 30%
14.4%
An investor purchased a 6%, A-rated, corporate bond at par value. After one year, the bond’s total return is actually 6.50%. The most likely reason for this is:
QID: 1507060Mark For Review
A
The credit rating of the bond was lowered, which increased the bond’s yield
B
Market interest rates increased to 6.50% for A-rated issues
C
The investor’s payment of accrued interest at the time of purchase lowered his effective return
D
Interest rates have decreased
Interest rates have decreased
Which of the following distribution methods will ensure that each branch of family receives an equal share of an estate? QID: 2100456Mark For Review A Per capita B Per stirpes C Inter vivos D Testamentary
Per stirpes
Per stirpes distributions are done per branch of a family and, in some instances, members of the same generation of a family will receive different amounts from an estate. A per capita distribution of an estate ensures that each member of a generation will receive the same amount as any other.
`If a corporation's convertible bondholders convert their bonds into the common stock, the effect on the corporation's balance sheet does NOT include: An increase in current assets A decrease in total liabilities A decrease in stockholders' equity An increase in stockholders' equity QID: 1507052Mark For Review A I and II only B I and III only C II and III only D II and IV only
I and III only
Which of the following is TRUE if the price of a discount bond falls?
QID: 1507369Mark For Review
A
The spread between the yield-to-maturity and yield-to-call will increase and the yield-to-call will rise.
B
The spread between the yield-to-maturity and yield-to-call will increase and the yield-to-call will fall.
C
The spread between the yield-to-maturity and yield-to-call will decrease and the yield-to-maturity will rise.
D
The spread between the yield-to-maturity and yield-to-call will decrease and the yield-to-maturity will fall.
The spread between the yield-to-maturity and yield-to-call will increase and the yield-to-call will rise.
An adviser was a fiduciary for a client who has recently died. What’s the first thing that an IAR should do when she meets with the person who has power of attorney for the estate?
QID: 2100435Mark For Review
A
Verify the identities of the beneficiaries
B
Verify the type of trust the client had established
C
Determine the distribution of the assets in the estate to the heirs
D
Verify the identity of the fiduciary
Verify the identity of the fiduciary
