AAMS Module Quizzes (1-10) -questions and answers, Exams of Nursing

Download AAMS Module Quizzes (1-10) -questions and answers and more Exams Nursing in PDF only on Docsity! AAMS Module Quizzes (1-10) -questions and answers What bbare bbthe bbmajor bbsteps bbin bbthe bbasset bbmanagement bbprocess bb- bbANSWER: bb bb➡ bb1. bbgather bbdata 2. bbestablish bbgoals 3. bbanalyze bbinformation 4. bbmake bband bbimplement bbrecommendations 5. bbmonitor Stefan's bbbusiness bbplan bbincludes bbthe bbfollowing bbgoal: bb"I bbwill bbcontact bb50 bbprospective bbclients bband bbdocument bbthis bbactivity bbin bbthe bbCRM bbfor bbtracking bbpurposes." bbWhich bbprimary bbelement bbof bba bbgood bbgoal bbis bbmissing? bb- bbANSWER: bb bb➡ bbThis bbgoal bbis bbnot bbtime-framed. The bbacronym bbto bbremember bbfor bbgoal bbsetting bbis bbSMART, bbwhich bbstands bbfor bbSpecific, bbMeasurable, bbAchievable, bbRelevant, bband bbTime-Framed. bbThe bbprimary bbflaw bbin bbthis bbgoal bbis bbthat bbit bbis bbnot bbtime- framed. bbBecause bbit bbis bbnot bbtime-framed, bbit bbis bbdifficult bbto bbtell bbif bbthis bbis bbachievable, bbbut bbit bbis bbcertainly bbmeasurable bband bbvery bblikely bbrelevant. Which bbone bbof bbthe bbfollowing bbis bbnot bban bbinvested bbasset? bb- bbANSWER: bb bb➡ bb180-day bbcertificate bbof bbdeposit A bbcertificate bbof bbdeposit bbis bba bbcash bbequivalent bband bbtherefore bbshould bbbe bblisted bbunder bbCash bband bbCash bbEquivalents. Victoria bbGregory's bbfinancial bbsituation bbis bbas bbfollows: Cash/cash bbEquivalentsL bb$15,000 Short bbTerm bbdebts: bb$23,000 LTDs: bb$140,000 Taxes: bb$8000 Invested bbAssets: bb$45,000 Use bbAssets: bb$192,000 What bbis bbher bbnet bbworth? bb- bbANSWER: bb bb➡ bb$89,000 Assets bb= bbCash/cash bbequivalents bb+ bbInvested bbassets bb+ bbUse bbassets bb($15,000 bb+ bb$45,000 bb+ bb$192,000 bb= bb$252,000). bbLiabilities bb= bbShort-term bbdebts bb+ bbLong-term bbdebts bb($23,000 bb+ bb$140,000 bb= bb$163,000). bbAssets bb- bbLiabilities bb= bbNet bbWorth, bbso bb$252,000 bb- bb$163,000 bb= bb$89,000. Which bbone bbof bbthe bbfollowing bbstatements bbbest bbdescribes bbthe bbincome bbstatement bband bbits bbmajor bbcomponents? bb- bbANSWER: bb bb➡ bbThe bbincome bbstatement bbindicates, bbfor bba bbcertain bbperiod bbof bbtime, bban bbindividual's bbcash bbinflows bband bboutflows. bbIts bbcomponents bbinclude bbgross bbincome, bbexpenses, bband bbsurplus bbor bbdeficit. The bbincome bbstatement bbdescribes bbcash bbflow bbfor bba bbperiod bbof bbtime bband bbcontains bbthe bbcomponents bbof bbgross bbincome, bbfrom bbwhich bbexpenses bbare bbsubtracted bbto bbdetermine bbthe bbsurplus bbor bbdeficit. All bbof bbthe bbfollowing bbprovide bba bbclearer bbpicture bbof bbthe bbclient's bbneeds bb- bbANSWER: bb bb➡ bb1. bbanticipated bbretirement bblifestyle 2. bbbad bbexperiences bbw/ bbparticular bbinvestments 3. bbsuccession bbplanning bbin bbplace, bbif bbany, bbfor bba bbclient bbinvolved bbin bbownership bbof bbsmall bbbusiness Which bbone bbof bbthe bbfollowing bbis bbconsidered bba bb"foundation" bbgoal? bb- bbANSWER: bb bb➡ bbemergency bbfund An bbemergency bbfund bbis bba bb"foundation" bbgoal bbbecause bbit bbis bban bbessential bbgoal bbfor bbsurvival bbin bbthe bbevent bbof bba bbdramatic bblife bbevent. Which bbone bbof bbthe bbfollowing bbis bbthe bbbetter bbwritten bbfinancial bbgoal? bb- bbANSWER: bb bb➡ bbto bbaccumulate bb$15,000 bbfor bba bbboat bbpurchase bbin bbtwo bbyears This bbgoal bbis bbwell bbwritten bbbecause bbit bbcontains bba bbspecific bbdollar bbamount bband bba bbspecific bbtime bbframe. When bbanalyzing bbinformation bbgathered bbfrom bba bbclient, bbwhich bbof bbthe bbfollowing bbare bbimportant bbfactors bbto bblook bbfor? bb- bbANSWER: bb bb➡ bb1. bbmismatches bbbetween bbthe bbcurrent bbinvestment bbposition bbor bbresources bband bbstated bbgoals. This bbis bban bbimportant bbfactor bbin bbthe bbanalysis bbstep. bbAny bbmismatches bbbetween bbthe bbclient's bbgoals bband bbthe bbinvestment bbvehicles bbused bbto bbattain bbthose bbgoals bbshould bbbe bbhighlighted. 2. bbthe bbvalidity bbof bbthe bbclient's bbstated bbgoals. A bbkey bbattribute bbof bban bbinvestment bbpolicy bbstatement bbis bbthat bbit bbshould bbbe bbcreated bbwith bba bblong- term bbperspective bbto bbuse bbthe bbpositive bbbias bbin bbthe bbmarkets bbthat bboccurs bbwith bbthe bbpassage bbof bbtime. Time bbis bbof bbcritical bbimportance bbin bban bbinvestment bbpolicy bbstatement bbbecause bb- bbANSWER: bb bb➡ bbit bbdetermines bbthe bbfeasibility bbof bbthe bbinvestment bbprofessional bbmaking bbrecommendations bbthat bbmeet bbthe bbclient's bbgoals. The bbamount bbof bbtime bbavailable bbfor bba bbfinancial bbgoal bbdetermines bbif bbthe bbinvestment bbprofessional bbcan bbmake bbrecommendations bbthat bbwill bbachieve bbthat bbgoal. Which bbof bbthe bbfollowing bbis bba bbkey bbelement bbthat bball bbinvestment bbpolicy bbstatements bbshould bbcontain? bb- bbANSWER: bb bb➡ bbAn bbinvestment bbpolicy bbstatement bbshould bbinclude bbstatements bbregarding bbacceptable bbinvestment bbvehicles, bbthe bbportfolio's bbasset bballocation, bband bbthe bbclient's bbrisk bbtolerance bblevel. The bbasset bbmanagement bbprocess bbcan bbbe bbused bbto bbadjust bbto bbchanges bbin bba bbclient's bbfinancial bbsituation bbby bb- bbANSWER: bb bb➡ bbhelping bbthe bbclient bbto bbignore bbmarket bb"noise." The bbasset bbmanagement bbprocess bbis bbdesigned bbto bbhelp bbthe bbclient bbignore bbmarket bbnoise bband bbrespond bbonly bbto bbsignificant bbevents bb(major bbchanges bbin bbpersonal bbsituations bband bbdiscontinuous bbchanges bbin bbthe bbmarkets). Sara bbWhite bbbought bba bbstock bbthat bbhas bbsubsequently bbdropped bb50%. bbShe bbplans bbto bbhold bbon bbto bbthe bbstock bbin bbthe bbhopes bbof bbgetting bbback bbto bbeven. bbWhat bbinvestor bbmistake bbis bbSara bbmost bblikely bbmaking? bb- bbANSWER: bb bb➡ bbloss bbaversion Loss bbaversion bbis bbthe bbreluctance bbto bbtake bblosses bband bbis bbassociated bbwith bba bb"get-even-itis" bbmentality. The bbinvestment bbpolicy bbstatement bbwould bbmost bblikely bbneed bbto bbbe bbchanged bbif bbwhich bbof bbthe bbfollowing bboccurred? bb- bbANSWER: bb bb➡ bbThe bbinvestment bbpolicy bbstatement bbwould bbmost bblikely bbneed bbto bbbe bbchanged bbif bba bbclient bbexperienced bba bbmajor bbevent bbin bbhis bbor bbher bblife. bbExamples bbof bbsuch bbchanges bbwould bbinclude bbinheriting bba bblarge bbamount bbof bbmoney, bbdivorcing bba bbspouse, bband bbtaking bban bbearly bbretirement bbfrom bbhis bbor bbher bbcompany. Who bbbears bbthe bbmain bbresponsibility bbfor bbdecision bbmaking bbin bban bbinvestment bbpolicy bbstatement? bb- bbANSWER: bb bb➡ bbthe bbclient Which bbbehavioral bbmistake bbis bbdefined bbas bba bbmisunderstanding bbthat bban bbinvestor bbhas bbin bbrelating bbnominal bbrates bbof bbreturn bbto bbreal bb(inflation-adjusted) bbrates bbof bbreturn? bb- bbANSWER: bb bb➡ bbmoney bbillusion Money bbillusion bbis bba bbmisunderstanding bbthat bban bbinvestor bbhas bbin bbrelating bbnominal bbrates bbof bbreturn bbto bbreal bb(inflation-adjusted) bbrates bbof bbreturn. Which bbof bbthe bbfollowing bbis bbnot bban bbexample bbof bba bbdiscontinuous bbchange? bb- bbANSWER: bb bb➡ bbreceiving bba bb10% bbraise bbat bbwork Discontinuous bbchanges bbrepresent bba bbsignificant bbdeparture bbfrom bba bbtrend bbor bbpattern. Bonds bbfell bbin bbprice bbon bbnews bbof bbhigher bbinterest bbrates. bbTo bbwhich bbone bbof bbthe bbfollowing bbrisks bbare bbthe bbbonds bbmost bblikely bbto bbbe bbsubject? bb- bbANSWER: bb bb➡ bbinterest bbrate bbrisk Interest bbrate bbrisk bbcenters bbon bbthe bbinverse bbrelationship bbof bbinterest bbrate bbchanges bband bbbond bbprices, bbso, bbin bbthis bbsituation, bbif bbinterest bbrates bbgo bbup, bbthe bbprice bbof bbGeorge's bbbonds bbgo bbdown. If bbinternational bbstocks bbwere bbadded bbto bba bbportfolio bbof bbU.S. bbstocks, bbwhich bbone bbof bbthe bbfollowing bbrisks bbwould bbspecifically bbbe bbadded bbto bbthe bbportfolio? bb- bbANSWER: bb bb➡ bbexchange bbrate bbrisk International bbstocks bbspecifically bbadd bbexchange bbrate bbrisk bbto bba bbportfolio bbsince bbtheir bbvalue bbis bbaffected bbby bbchanges bbin bbthe bbvalues bbof bbforeign bbcurrencies bbrelative bbto bbthat bbof bbthe bbU.S. bbdollar. Which bbof bbthe bbfollowing bbare bbcharacteristics bbof bbthe bbSharpe bbratio? bb- bbANSWER: bb bb➡ bbIt bbadjusts bbthe bbreturn bbfor bbvariability bbby bbusing bbstandard bbdeviation bbas bbthe bbmeasure bbof bbrisk Jensen's bbAlpha bb- bbANSWER: bb bb➡ bb1. bbit bbassumes bbthat bbthe bbportfolio bbbeing bbevaluated bbis bbwell bbdiversified 2. bbboth bbalpha bband bbbeta bbappear bbin bbthe bbformula bbfor bbthe bbratio 3. bbit bbindicates bbby bbhow bbmuch bbthe bbrealized bbreturn bbdiffers bbfrom bbthe bbreturn bbrequired bbby bbthe bbcapital bbasset bbpricing bbmodel bb(CAPM) Treynor bbRatio bb- bbANSWER: bb bb➡ bbit bbassumes bbthat bbthe bbportfolio bbbeing bbevaluated bbis bbwell bbdiversified A bbmeasure bbof bba bbsecurity's bbsystematic bbrisk bbis bb- bbANSWER: bb bb➡ bbbeta. Beta bbmeasures bbthe bbdegree bbto bbwhich bba bbsecurity bbmoves bbwith bbthe bbmarket bbor bbsystematic bbrisk. Measurement bbof bbtotal bbrisk bb- bbANSWER: bb bb➡ bbstandard bbdeviation Assume bba bbgrowth bbstock bbmutual bbfund bbhas bba bbbeta bbof bb1.3. bbIf bbthe bbstock bbmarket bbincreases bbby bb9%, bbyou bbwould bbexpect bbthis bbmutual bbfund bbto bb- bbANSWER: bb bb➡ bbincrease bbby bb11.7%. You bbwould bbexpect bbany bbfund bbwith bba bbbeta bbof bb1.3 bbto bbincrease bbby bb11.7% bb(1.3 bb× bb9%). The bbrisk-free bbrate bbis bb1.25%, bbthe bbmarket bbrate bbof bbreturn bbis bb8%, bbthe bbstandard bbdeviation bbof bbXYZ bbstock bbis bb20, bband bbthe bbbeta bbof bbXYZ bbstock bbis bb1.10. bbUsing bbthe bbcapital bbasset bbpricing bbmodel bbin bbconjunction bbwith bbthis bbinformation, bbwhat bbis bbthe bbexpected bbreturn bbof bbXYZ bbstock? bb- bbANSWER: bb bb➡ bb8.68% CAPM bbis bbthe bbrisk-free bbrate bbplus bbbeta bbtimes bbexcess bbreturn, bbor bbRs bb= bb1.25% bb+ bb(8% bb- bb1.25%) bb1.1 bb= bb8.68%. Which bbone bbof bbthe bbfollowing bblists bbthe bbinvestments bbin bborder bbof bbleast bbrisk bbto bbmost bbrisk? bb- bbANSWER: bb bb➡ bbTreasury bbsecurities, bbhigh-grade bbconvertibles, bbREITs, bbcollectibles Ranked bbfrom bbleast bbrisk bbto bbmost bbrisk bbin bbthe bbinvestment bbpyramid bbare bbTreasury bbsecurities, bbhigh- grade bbconvertibles, bbREITs, bband bbcollectibles. Which bbone bbof bbthe bbfollowing bbstatements bbis bbcorrect? bb- bbANSWER: bb bb➡ bbJensen's bbalpha bbmay bbbe bbused bbby bbitself bbto bbjudge bban bbinvestment. Beta bbis bbthe bbrisk bbmeasure bbfor bbthe bbJensen's bbalpha, bbbut bbthe bbSharpe bbratio bbuses bbstandard bbdeviation bbas bbits bbrisk bbmeasure. bbTherefore, bbthe bbreliability bbof bbbeta bbis bbrelevant bbfor bbJensen's bbalpha. bbJensen's bbalpha bbcan bbbe bbused bbby bbitself bbto bbjudge bban bbinvestment; bbthe bbSharpe bbratio bbmust bbbe bbused bbin bbcomparison bbwith bbanother bbSharpe bbratio bbin bbjudging bban bbinvestment. bbA bbnegative bbreading bbfor bbJensen's bbalpha bbindicates bbthe bbinvestment bbdid bbnot bbperform bbas bbwell bbas bbexpected bbgiven bbthe bbrisk bbtaken. bbFor bbexample, bban bbalpha bbreading bbof bb-1 bbmeans bbthe bbinvestment bbunderperformed bbby bb1% bbcompared bbto bbwhat bbit bbwas bbexpected bbto bbreturn. bbAccordingly, bba bbnegative bbalpha bbdoes bbnot bbnecessarily bbmean bbthe bbinvestment bblost bbmoney. bbThe bbTreynor bbratio bbuses bbbeta bbas bbits bbmeasure bbof bbrisk. Several bbindividual bbinvestments bbeach bbhave bbhigh bbstandard bbdeviations. bbWhich bbof bbthe bbfollowing bbare bbtrue bbabout bbthe bbstandard bbdeviation bbfor bba bbportfolio bbof bbthese bbsame bbinvestments? I. bbhas bbto bbbe bbhigh bbsince bbthe bbstandard bbdeviations bbare bbhigh II. bbhas bbto bbbe bblow bbsince bbthe bbstandard bbdeviations bbare bbhighI II. bbcan bbbe bblow bbif bbthere bbis bba bblow bbcorrelation bbof bbreturns bbbetween bbthe bbinvestments IV. bbcan bbbe bbhigh bbif bbthere bbis bba bbhigh bbcorrelation bbof bbreturns bbbetween bbthe bbinvestments bb- bbANSWER: bb bb➡ bbIII bband bbIV bbonly If bbthe bbinvestments bbhave bba bblow bbcorrelation bbcoefficient bbbetween bbthem, bbthey bbwill bbreduce bbinvestment bbrisk, bbwhich bbcan bbresult bbin bba bbportfolio bbwith bba bblow bbstandard bbdeviation. bbIf bbthe bbinvestments bbhave bba bbhigh bbcorrelation bbof bbreturns bbbetween bbthem, bbthen bbthey bbwill bbnot bbreduce bbinvestment bbrisk, bband bbthe bbportfolio bbwill bbcontinue bbto bbhave bbhigh bbsystematic bbrisk, bbhence bba bbhigh bbstandard bbdeviation bbfor bbthe bbportfolio. Which bbone bbof bbthe bbfollowing bbhas bba bbdirect bbbearing bbon bbwhich bbinvestments bbare bbappropriate bbfor bbachieving bba bbgoal? bb- bbANSWER: bb bb➡ bbthe bbinvestor's bbtime bbhorizon The bbtime bbhorizon bbhas bba bbdirect bbbearing; bbnet bbworth bbdoes bbnot, bband bbbeta bband bbalpha bbare bbmeasures bbof bbvolatility bband bbperformance, bbrespectively. If bban bbinvestor bbwere bblooking bbto bbadd bbanother bbinvestment bbto bbhis bbor bbher bbportfolio, bbwhich bbof bbthe bbfollowing bbcorrelation bbcoefficients bbwould bbprovide bbthe bbgreatest bbrisk bbreduction? bb- bbANSWER: bb bb➡ bba bbmanaged bbfutures bbfund bbwith bba bbcorrelation bbof bb-0.25 The bbscale bbfor bbcorrelation bbcoefficients bbgoes bbfrom bb-1.0 bb(perfectly bbnegatively bbcorrelated) bbto bb1.0 bb(perfectly bbpositively bbcorrelated). bbThe bbfurther bbto bbthe bbleft bbyou bbgo bbon bbthe bbscale, bbthe bblower bbthe bbcorrelation bband bbthe bbgreater bbthe bbrisk bbreduction. With bbrespect bbto bbthe bbinvestment bbpyramid bbdiscussed bbin bbthe bbmodule bbtext, bbwhich bbone bbof bbthe bbfollowing bbwould bbprovide bbthe bbgreatest bbpotential bbfor bbcapital bbappreciation? bb- bbANSWER: bb bb➡ bbfutures bbcontracts As bbyou bbmove bbup bbthe bbinvestment bbpyramid, bbyou bbincrease bbpotential bbfor bbcapital bbgain, bband bbfutures bbcontracts bbare bbat bbthe bbtop bbof bbthe bbpyramid, bblargely bbdue bbto bbthe bbhigh bbdegree bbof bbleverage bbused bbin bbtrading bbfutures bbcontracts. Stock bbABC bbhas bban bbaverage bbreturn bbof bb9.0% bbwith bba bbstandard bbdeviation bbof bb7.0%. bbWhat bbis bbthe bbrange bbof bbexpected bbreturns bbfor bbABC bb68% bbof bbthe bbtime? bb- bbANSWER: bb bb➡ bb+2.0% bbto bb16.0% 68% bbof bbthe bbtime bbthe bbreturns bbwill bbfall bbwith bbone bbstandard bbdeviation bbof bbthe bbaverage bbreturn. bbOne bbstandard bbdeviation bbbelow bbthe bbmean bbis bb9% bb- bb7% bb= bb2% bbwhile bbone bbstandard bbdeviation bbabove bbthe bbmean bbis bb9% bb+ bb7% bb= bb16%. If bban bbinvestor bbcontributes bb$5,000 bbto bbher bbIRA bbat bbthe bbbeginning bbof bbeach bbyear bbfor bb20 bbyears, bband bbearns bb8% bbannually, bbhow bbmuch bbwill bbshe bbhave bbaccumulated? bb- bbANSWER: bb bb➡ bb$247,114.61 Using bbthe bbHP bb10bII+, bbset bbthe bbcalculator bbto bbbegin bbmode bband bbone bbcompounding bbperiod bbper bbyear. bbThen bb5,000 bb+/- bbPMT, bb8 bbI/YR, bb20 bbSHIFT bbN, bbFV bb= bb$247,114.61. Cindy bbDawson bbjust bbpaid bb$9,750 bbfor bba bb7%, bb$10,000 bbpar bbvalue bbbond bbwith bb15 bbyears bbto bbmaturity. bbWhat bbis bbthe bbyield bbto bbmaturity bb(YTM) bbof bbthis bbbond? bbUsing bbthe bbtime bbvalue bbof bbmoney bbfunctions bbon bbthe bbfinancial bbcalculator, bbuse bbthe bbfollowing bbassumptions bbon bba bbsemiannual bbbasis: FV bb= bb10,000 PV bb= bb-9,750 N bb= bb15 bb(x2) PMT bb= bb3507.28% bb- bbANSWER: bb bb➡ bb7.28% bb(USE bbONLINE bbCALCULATOR) HP bb10bII+: bbSet bbcalculator bbto bbend bbmode bband bbtwo bbcompounding bbperiods bbper bbyear. bbThen bb9,750 bb+/- bbPV, bb10,000 bbFV, bb350 bbPMT, bb15 bbSHIFT bbN, bbI/YR bb= bb7.28%. Carol bbTaylor bbhas bb$10,000 bbto bbinvest bbat bbthe bbend bbof bbeach bbyear bbfor bbfive bbyears, bband bbshe bbcan bbearn bba bbfixed bbrate bbof bb8%. bb"How bbmuch," bbshe bbasks, bb"will bbmy bbmoney bbbe bbworth bbin bbfive bbyears?" bb- bbANSWER: bb bb➡ bb$58,666 This bbis bban bbordinary bbannuity bbproblem bbwith bbn bb= bb5, bbi bb= bb8, bband bbPMT bb= bb10,000, bbthen bbFVOA bb= bb$58,666. Assume bbthat bbthe bbstandard bbdeviation bbof bba bbstock bbis bb30, bbthe bbstandard bbdeviation bbof bbthe bbmarket bbindex bbis bb18, bband bbthat bbthe bbcorrelation bbcoefficient bbbetween bbthe bbstock bband bbthe bbmarket bbis bb.68. bbWhat bbis bbthe bbbeta bbof bbthe bbstock? bb- bbANSWER: bb bb➡ bb1.13 Beta bb= bb(30 bb/ bb18) bbx bb0.68 bb= bb1.13 Which bbone bbof bbthe bbfollowing bbis bba bbbetter bbmeasure bbof bba bbmutual bbfund bbportfolio bbmanager's bbperformance? bb- bbANSWER: bb bb➡ bbTime bbweighted bbreturns bbbecause bbcash bbflows bbare bbnot bbtaken bbinto bbconsideration Time bbweighted bbreturns bbnegate bbthe bbeffects bbof bbcontributions bband bbwithdrawals bbmade bbby bbinvestors bband bbare bbtherefore bba bbbetter bbmeasure bbof bba bbmanager's bbperformance. bbDollar bbweighted bbreturns bbtake bbcash bbflows bbinto bbconsideration bbbut bbare bba bbbetter bbmeasure bbof bbperformance bbfor bba bbclient. One bbimplication bbof bbthe bbBrinson bbstudy bbis bbthat bbinvestors bbshould bb- bbANSWER: bb bb➡ bbconcentrate bbon bbasset bballocation bbwith bbless bbattention bbgiven bbto bbsecurities bbselection bband bbmarket bbtiming. The bbimplication bbfrom bbthe bbBrinson bbstudy bbis bbto bbgive bbconsiderable bbattention bbto bbasset bballocation bband bbless bbattention bbto bbsecurities bbselection bband bbmarket bbtiming. A bbU.S. bbdollar-denominated bbinstrument bbthat bbis bba bbCD bbissued bbby bbforeign bbbranches bbof bbmajor bbAmerican bband bbforeign bbcommercial bbbanks bbis bba bb- bbANSWER: bb bb➡ bbEurodollar bbcertificate bbof bbdeposit. A bbEurodollar bbCD bbis bba bbU.S. bbdollar-denominated bbCD bbissued bbby bbforeign bbbranches bbof bbmajor bbU.S. bband bbforeign bbcommercial bbbanks. Yankee bbCertificate bbof bbDeposit bb- bbANSWER: bb bb➡ bbA bbYankee bbCD bbis bba bbU.S. bbdollar-denominated bbCD bbissued bbby bbforeign bbbanks bbfrom bbtheir bbU.S. bbbranches. Banker's bbAcceptance bb- bbANSWER: bb bb➡ bbA bbBA bbis bba bbtime bbdraft bbthat, bbwhen bbaccepted bbby bbthe bbbank, bbhas bbthe bbpromise bbof bbpayment bbfrom bbthat bbbank. The bbrelative bbperformance bbof bbdifferent bbasset bbclasses bbis bbdependent bbon bbthe bbholding bbperiod bbselected. bbBased bbon bbhistorical bbperformance bbdata, bbwhich bbclass bbof bbassets bbwould bbbe bblikely bbto bbprovide bbthe bbgreatest bbpretax bbtotal bbreturn bbover bbthe bblong bbterm? bb- bbANSWER: bb bb➡ bbsmall bbcompany bbstocks Small bbcompany bbstocks bbhave bbgenerally bboutperformed bball bbother bbasset bbclasses bbover bbthe bblong bbterm bbaccording bbto bbIbbotson bband bbother bbmajor bbtracking bbdata. According bbto bbIbbotson bbdata, bbwhich bbone bbof bbthe bbfollowing bbhad bbthe bbsmallest bbstandard bbdeviation bbsince bb1926? bb- bbANSWER: bb bb➡ bbT-bills Which bbone bbis bba bbdebt bbratio? bb- bbANSWER: bb bb➡ bbdebt-to-equity bbratio A bbcorrelation bbof bb0.0 bbbetween bbtwo bbsecurities bbmeans bbthat bbthe bbreturns bbof bbthe bbtwo bbmove bb- bbANSWER: bb bb➡ bbindependently—there bbis bbno bbrelationship bbbetween bbthe bbtwo. A bbcorrelation bbof bb0.0 bbmeans bbthere bbis bbno bbrelationship bbbetween bbthe bbreturns bbof bbthe bbtwo bbsecurities. bbPerfectly bbpositively bbcorrelated bbsecurities bb(1.0) bbmove bbin bbthe bbsame bbdirection bband bbperfectly bbnegatively bbcorrelated bbsecurities bb(-1.0) bbmove bbin bbopposite bbdirections. Which bbone bbof bbthe bbfollowing bbapproaches bbto bbasset bballocation bbtries bbto bbidentify bbthe bbasset bbmix bbthat bbprovides bban bboptimal bbbalance bbof bbrisk bband bbreturn bbfor bba bblong bbinvestment bbhorizon? bb- bbANSWER: bb bb➡ bbstrategic bbasset bballocation Strategic bbasset bballocation bbtries bbto bbidentify bbthe bbasset bbmix bbthat bbprovides bban bboptimal bbbalance bbof bbrisk bband bbreturn bbfor bba bblong bbinvestment bbhorizon. The bbquick bbratio bbsubtracts bb__________ bbin bbits bbnumerator. bb- bbANSWER: bb bb➡ bbinventory The bbformula bbfor bbthe bbquick bbratio bbis bb(current bbassets bb- bbinventory) bb/ bbcurrent bbliabilities bband bbis bba bbmeasure bbof bbliquidity. Which bbone bbof bbthe bbfollowing bbrisks bbdoes bbnot bbapply bbto bbpreferred bbstock? bb- bbANSWER: bb bb➡ bbdefault bbrisk While bbpreferred bbstock bbis bba bbhybrid bbsecurity bbthat bbacts bblike bba bbbond, bbthere bbis bbno bbindenture bb(like bba bbbond bbhas) bbthat bblegally bbrequires bbpreferred bbstock bbto bbpay bbdividends. bbIf bba bbcompany bbwas bbto bbgo bbunder, bbbonds bbwould bbdefault, bbwhereas bbpreferred bbstock bbwould bbgo bbthrough bbbankruptcy bbliquidation. How bbfrequently bbdo bbmortgage bbpass-through bbbonds bbmake bbpayments? bb- bbANSWER: bb bb➡ bbmonthly Pass-through bbbonds bbmake bbmonthly bbpayments bbof bbprincipal bband bbinterest bbas bbthey bbpass bbthrough bbmortgage bbpayments, bbwhich bbare bbmade bbmonthly, bbto bbinvestors. How bbare bbdividends bbfrom bbREITs bbtaxed? bb- bbANSWER: bb bb➡ bbordinary bbincome bbtax bbrates Dividends bbfrom bbREITs bbare bbnot bb"qualified bbdividends" bband bbare bbtaxed bbat bbordinary bbincome bbtax bbrates. Lily bbhas bbseveral bbaccounts bbwith bbProgress bbBank, bbwhich bbis bbFDIC bbinsured. bbShe bbhas bbthe bbfollowing bbbalances: $300,000 bbin bba bbsingle bbaccount $280,000 bbin bba bbjoint bbaccount bbwith bbher bbson $280,000 bbin bba bbjoint bbaccount bbwith bbher bbdaughter $225,000 bbin bban bbIRA Lily bbis bbconcerned bbabout bbthe bbsafety bbof bbher bbfunds bband bbhas bbasked bbyou bbhow bbmuch bbFDIC bbcoverage bbshe bbhas bbpersonally.You bbwould bbadvise bbher bbthat bbthe bbtotal bbamount bbof bbher bbcoverage bbis bb- bbANSWER: bb bb➡ bb$725,000. Lily bbreceives bbpersonal bbcoverage bbof bb$250,000 bbfor bbher bbsingle bbaccount, bb$225,000 bbfor bbher bbIRA, bband bbis bbthen bblimited bbto bba bbtotal bbof bb$250,000 bbof bbthe bb$560,000 bbcombined bbvalue bbin bbthe bbjoint bbaccounts bb(due bbto bbthe bblike bbregistration). The bbprincipal bbof bba bbTreasury bbinflation bbprotected bbsecurity bb(TIPS) bbis bbtied bbto bb- bbANSWER: bb bb➡ bbCPI. TIPS bbadjustments bbare bbtied bbto bbthe bbconsumer bbprice bbindex bb(CPI), bbwhich bbis bbuseful bbin bbmeasuring bbinflation. All bbother bbfactors bbbeing bbequal, bbwhich bbof bbthe bbfollowing bbbonds bbhave bbthe bbgreatest bbduration? bb- bbANSWER: bb bb➡ bba bbzero-coupon bbbond Duration bbis bbinversely bbrelated bbto bbthe bbcoupon bbrate. bbThe bbzero-coupon bbbond bbwould bbhave bbthe bblongest bbduration, bball bbother bbfactors bbbeing bbequal. Acme bbGNMA bbfund bbmust bbhave bbat bbleast bbwhat bbpercentage bbof bbits bbassets bbin bbGNMAs? bb- bbANSWER: bb bb➡ bb80% A bbfund bbthat bbhas bba bbsecurity bbin bbits bbname bbmust bbhave bbat bbleast bb80% bbof bbits bbassets bbin bbthat bbtype bbof bbsecurity. In bbwhich bbway bbis bban bbETF bb(exchange-traded bbfund) bbdifferent bbfrom bba bbmutual bbfund? bb- bbANSWER: bb bb➡ bbthey bbcan bbbe bbsold bbshort Unlike bbmutual bbfunds, bbETFs bbcan bbbe bbsold bbshort. An bbexchange-traded bbnote bbis bba(n) bb- bbANSWER: bb bb➡ bbunsecured bbdebt. An bbexchange-traded bbnote bbis bban bbunsecured bbdebt bbobligation, bbusually bbof bban bbinvestment bbbank bbor bbcommercial bbbank bbthat bbtrades bblike bba bbstock bband bbrepresents bbpromises bbby bbthe bbissuers bbto bbmatch bbthe bbreturns bbof bban bbindex bbor bbcommodity, bbminus bbfees. If bba bbstock bbpays bba bbdividend bbof bb$1.60 bbper bbshare, bbthe bbgrowth bbrate bbof bbthat bbdividend bbis bb6%, bband bbthe bbrequired bbreturn bbis bb10%, bbwhat bbis bbthe bbintrinsic bbvalue bbof bbthe bbstock bbaccording bbto bbthe bbdividend bbdiscount bbmodel? bb- bbANSWER: bb bb➡ bb$42.40 The bbdividend bbdiscount bbmodel bbis bbD1/r-g bbwhere bbD1 bbis bbthe bbdividend bbvalue bbat bbthe bbend bbof bbthe bbfirst bbyear, bbr bbis bbthe bbrequired bbreturn, bband bbg bbis bbthe bbdividend bbgrowth bbrate:(1.60 bb× bb1.06) bb/ bb(.10 bb- bb.06) bb= bb$1.696 bb/ bb.04 bb= bb$42.40 Using bbthe bbP/E bbratio bbas bba bbvaluation bbtool, bbwhich bbtype bbof bbearnings bbcan bbbe bbused? bb- bbANSWER: bb bb➡ bbboth The bbP/E bb(price-to-earnings) bbratio bbcan bbbe bbcalculated bbusing bbeither bbhistorical bbor bbprojected bbearnings. Your bbclient bbhas bba bb7% bbcoupon bbbond bbwith bba bbduration bbof bb7.5 bband bba bbmaturity bbof bb12 bbyears. bbYour bbclient bbis bbconcerned bbthat bbrates bbmay bbgo bbup bb0.50% bbin bbthe bbcoming bbmonths, bband bbwants bbto bbknow bbwhat bbimpact bbthis bbwould bbhave bbon bbher bbbond. bbYou bbtell bbher bbthat bbthe bbapproximate bbprice bbmovement bbwould bbbe bb- bbANSWER: bb bb➡ bb-3.75%. The bbcorrect bbanswer bbis bb-3.75%, bbcalculated bbas bbfollows: bb-7.5 bb× bb.50 bb= bb-3.75. bbRemember bbto bbuse bbthe bbminus bbsign bbin bbfront bbof bbthe bbduration bbfigure, bbas bbthat bbwill bbautomatically bbaccount bbfor bbthe bbinverse bbrelationship bbbetween bbthe bbdirection bbof bbthe bbinterest bbrate bbmovement bband bbthe bbvalue bbof bbthe bbbond. Which bbone bbof bbthe bbfollowing bbbest bbdescribes bbthe bbrequirements bbof bban bbinvestment bbstrategy? bb- bbANSWER: bb bb➡ bbcompetencies, bbresources, bbgoal, bbmethod All bbof bbthese bbelements—competencies, bbresources, bbgoal, bband bbmethod—are bbrequirements bbof bban bbinvestment bbstrategy. Which bbone bbof bbthe bbfollowing bbstatements bbis bbcorrect bbregarding bbdollar-cost bbaveraging? bb- bbANSWER: bb bb➡ bbThe bbtime bbperiod bbbetween bbinvestments bbis bbfixed. One bbcharacteristic bbof bbdollar-cost bbaveraging bbis bbthat bbinvestments bbare bbmade bbat bbfixed bbintervals, bbsuch bbas bbthe bbfirst bbof bbeach bbmonth. Which bbone bbof bbthe bbfollowing bbindustries bbtends bbto bbdo bbwell bbin bbthe bblate bbstage bbof bban bbeconomic bbexpansion? bb- bbANSWER: bb bb➡ bbcapital bbgoods Capital bbgoods bb(companies bbmanufacturing bbmachinery bbused bbto bbproduce bbfinished bbgoods) bbtend bbto bbdo bbwell bbin bbthe bblate bbstage bbof bban bbeconomic bbexpansion. David bbDreman's bbadvice bbto bbthe bbinvestor bbcenters bbon bbthree bbrules. bbWhich bbof bbthe bbfollowing bbis bbnot bbone bbof bbthose bbrules? bb- bbANSWER: bb bb➡ bbselect bbonly bbindustry bbaverage bbP/E bbstocks Dreman's bbthree bbrules bbwere bbselect bbonly bblow bbP/E bbstock, bbdiversify bbwith bb20?30 bbstocks bbin bb15+ bbindustries, bband bbinvest bbonly bbin bbmedium bbor bblarger bbcompanies bblisted bbon bbthe bbNYSE. Which bbone bbof bbthe bbfollowing bbis bbnot bban bbindicator bbutilized bbby bbcontrarian bbinvestors? bb- bbANSWER: bb bb➡ bbopen bbinterest Open bbinterest bbsimply bbshows bbhow bbmany bbopen bbpositions bbexist bbin bba bbgiven bboption bbcontract. Benjamin bbGraham's bbstyle bbof bbinvesting bbcan bbbe bbdescribed bbas bbwhich bbof bbthe bbfollowing? bb- bbANSWER: bb bb➡ bbbottom-up Graham's bbstyle bbof bbinvestment bbwas bb"bottom-up," bblooking bbfirst bbto bbthe bbfinancial bbdynamics bbof bban bbindividual bbcompany bband bbthen bbconsidering bbthe bblarger bbeconomic bbenvironment. All bbof bbthe bbfollowing bbare bbindicators bbthat bba bbcontrarian bbinvestor bbwould bbuse bbas bbcues bbfor bbtheir bbown bbbuying bband bbselling bbof bbstocks, bbexcept bb- bbANSWER: bb bb➡ bbaverage bbdaily bbtrading bbvolume Contrarian bbinvestors bbwould bbuse bbshort bbselling, bbspecialists' bbsentiment, bbmutual bbfund bbcash bbpositions, bbinvestment bbadvisory bbopinions, bband bbput-call bbvolume bbratio. Growth bbstocks bbtypically bbhave bbwhich bbof bbthe bbfollowing bbcharacteristics? bb- bbANSWER: bb bb➡ bbGrowth bbstocks bbhave bbhigh bbprofit bbmargins, bbcarry bbhigh bbbetas, bband bbpay bbsmall bbdividends. One bbof bbthe bbcharacteristics bbregarding bbgrowth bbstocks bbis bbthat bbthe bbearnings bbper bbshare bbgrowth bbrate bbshould bbbe bbat bbleast bbwhat bbpercentage? bb- bbANSWER: bb bb➡ bb15% One bbof bbthe bbtypical bbcharacteristics bbof bbgrowth bbstocks bbis bbearnings bbper bbshare bbgrowth bbrate bbof bb15% bbor bbmore. Which bbof bbthe bbfollowing bbare bbattributes bbof bba bbgrowth bbstock? bb- bbANSWER: bb bb➡ bbAttributes bbof bba bbgrowth bbstock bbinclude bbthe bbabsence bbof bbsignificant bbcompetition, bbhigh bbprofit bbmargins, bband bbhigher bbthan bbaverage bbP/E bbratios. Which bbone bbof bbthe bbfollowing bbis bbnot bba bbcharacteristic bbof bba bbgrowth bbstock? bb- bbANSWER: bb bb➡ bblow bbto bbaverage bbbetas Growth bbstocks bbtypically bbhave bbhigh bbbetas, bbnot bblow bbbetas. One bbreason bbto bbuse bbpassive bbinvesting bbis bbthat bb- bbANSWER: bb bb➡ bblong-term bbreturns bbcan bbbe bbbetter bbwhen bbcompared bbwith bbthe bbreturns bbof bbactive bbmanagement. Passive bbinvesting bboften bbprovides bbbetter bbreturns bbover bbtime bbthan bbwith bbactive bbinvestment bbmanagement. A bbbond bbinvestor bbbuys bb$10,000 bbof bb1-year bbbonds, bb$10,000 bbof bb2-year bbbonds, bband bbso bbon—with bbthe bbfinal bb$10,000 bbinvested bbin bb15-year bbbonds. bbWhat bbtype bbof bbstrategy bbis bbthis bbinvestor bbusing? bb- bbANSWER: bb bb➡ bbladder bbstrategy The bbladder bbstrategy bbspreads bbequal bbamounts bbof bbbond bbholdings bbamong bbdifferent bbmaturities. Assume bban bbinvestor bbsells bba bb25-year, bbA-rated, bb5% bbmunicipal bbbond bband bbreinvests bbin bba bb30-year bbA- rated bb6.5% bbmunicipal bbbond. bbBoth bbbonds bbare bbcallable bbin bbfive bbyears. bbWhich bbone bbof bbthe bbfollowing bbis bblikely bbto bboccur bbwith bbthis bbpure bbyield bbpickup bbstrategy? bb- bbANSWER: bb bb➡ bbCall bbrisk bbis bbincreased. A bbhigher bbcoupon bbrate bbincreases bbcall bbrisk. A bbclient bbwho bbexpects bbhis bbportfolio bbof bbintermediate-term bbgovernment bbbonds bbto bbearn bb13% bba bbyear bbsuffers bbfrom bbwhich bbone bbof bbthe bbfollowing? bb- bbANSWER: bb bb➡ bbunrealistic bbexpectations Historically, bbintermediate-term bbgovernment bbbonds bbhave bbhad bban bbannual bbreturn bbof bbbetween bb5% bband bb6%, bbso bbthis bbclient bbhas bbvery bbunrealistic bbexpectations. In bb"A bbRandom bbWalk bbDown bbWall bbStreet," bbBurton bbMalkiel bbwrote bbthat bb"A bbsimple bbpolicy bbof bbbuying bband bbholding bbwill bbbe bb__________ bbany bbtechnical bbprocedure. bb- bbANSWER: bb bb➡ bbas bbgood bbas Malkiel bbwrote bbthat bb"A bbsimple bbpolicy bbof bbbuying bband bbholding bbwill bbbe bbat bbleast bbas bbgood bbas bbany bbtechnical bbprocedure." The bbamount bbremaining bbafter bbsubtracting bbadjustments bbto bbincome bbfrom bbtotal bbincome bbis bbthe bbdefinition bbof bbwhich bbone bbof bbthe bbfollowing? bb- bbANSWER: bb bb➡ bbadjusted bbgross bbincome Total bbincome bbminus bbadjustments bbto bbincome bbequals bbadjusted bbgross bbincome. Which bbone bbof bbthe bbfollowing bbis bba bbtax bbpreference bbitem bbor bbadjustment bbfor bbpurposes bbof bbthe bbalternative bbminimum bbtax? bb- bbANSWER: bb bb➡ bbbargain bbelement bbon bbexercise bbof bban bbISO The bbbargain bbelement bbon bbexercise bbof bban bbISO bbis bba bbpreference bbitem bbfor bbthe bbalternative bbminimum bbtax. A bbself-employed bbclient bbopens bband bbfunds bba bbSEP-IRA bbon bbthe bbadvice bbof bbher bbinvestment bbprofessional. bbThe bbmost bbimmediate bbeffect bbon bbher bbtax bbsituation bbfor bbthis bbyear bbis bb- bbANSWER: bb bb➡ bbtax bbreduction. Because bbthe bbcontribution bbto bbthe bbSEP-IRA bbcan bbbe bbclaimed bbas bba bbdeduction, bbthis bbclient's bbtaxable bbincome bbhas bbbeen bbreduced bbfor bbthis bbyear. Ms. bbArbuckle bbpaid bbapproximately bb$22,100, bbor bb22.1% bbof bbher bbtaxable bbincome bbof bb$100,000, bbto bbthe bbIRS. bbWhat bbdoes bbthis bbpercentage bbrepresent? bb- bbANSWER: bb bb➡ bbaverage bbtax bbrate Ms. bbArbuckle's bbtax bbliability bbof bb$22,100 bbdivided bbby bbher bbtaxable bbincome bbof bb$100,000 bbequals bbher bbaverage bbtax bbrate bbof bb22.1%. Sarah bbHamilton bbis bba bbmanagement bbconsultant bbwhose bbbusiness bboperates bbunder bbthe bbcash bbmethod, bbor bbcash bbbasis, bbof bbaccounting. bbHer bbtax bbyear bbcoincides bbwith bbthe bbcalendar bbyear. bbIn bblate bbNovember bb2019, bbshe bbfinished bba bbconsulting bbjob bband bbbilled bbthe bbclient, bbwho bbsent bbher bba bbcheck bbon bbJanuary bb6, bb2020. bbHow bbshould bbshe bbtreat bbthis bbincome, bband bbwhy? bb- bbANSWER: bb bb➡ bbas bb2020 bbincome, bbbecause bbthe bbcheck bbwas bbreceived bbin bb2020 Because bbSarah, bba bbcash bbbasis bbtaxpayer, bbreceived bbthe bbcheck bbin bb2020, bbshe bbshould bbreport bbthe bbincome bbfor bb2020. David bbVandercamp bbpassed bbaway bbin bb2020, bbleaving bba bbsizable bbestate. bbHis bbwill bbleft, bbamong bbother bbthings, bb2,000 bbshares bbof bbGE bbto bbhis bbdaughter, bbBianca. bbThese bbshares bbhad bbbeen bbpurchased bbas bba The bbexecutor bbof bba bbdecedent's bbestate bbmay bbelect bbto bbvalue bbthe bbproperty bbfor bbestate bbtax bbpurposes bbas bbof bban bb"alternative bbvaluation bbdate," bbwhich bbis bb__________ bbmonths bb__________ bbthe bbdate bbof bbdeath? bb- bbANSWER: bb bb➡ bbsix bbmonths, bbafter If bbthe bb"alternative bbvaluation bbdate" bbis bbelected, bbthe bbproperty bbwill bbbe bbvalued bbfor bbestate bbtax bbpurposes bbsix bbmonths bbafter bbthe bbdate bbof bbdeath. The bb"kiddie bbtax" bbapplies bbto bbchildren bbunder bbage bb19, bband bbalso bbto bbchildren bbwho bbare bbage bb19 bband bbare bbfull-time bbstudents, bbbut bbunder bbthe bbage bbof bb_____, bbprovided bbthe bbchild's bbearned bbincome bbdoes bbnot bbexceed bbone-half bbof bbhis/her bbsupport? bb- bbANSWER: bb bb➡ bb24 The bb"kiddie bbtax" bbapplies bbto bbfull-time bbstudents bbage bb19, bbbut bbunder bbthe bbage bbof bb24, bbprovided bbthe bbchild's bbearned bbincome bbdoes bbnot bbexceed bbone-half bbof bbhis bbor bbher bbsupport. Which bbof bbthe bbfollowing bbrates bbapply bbto bbnet bblong-term bbcapital bbgains bbfrom bba bbstock bbportfolio bbif bba bbtaxpayer's bbtaxable bbincome bbplaces bbthem bbin bbthe bb37% bbmarginal bbincome bbtax bbbracket? bb- bbANSWER: bb bb➡ bb20%. In bb2020, bbif bba bbtaxpayer bbis bbin bbthe bb37% bbmarginal bbbracket bb($500,000+ bbSingle bbor bb$600,000+ bbMFJ), bbthen bbtheir bbtaxable bbincome bbalso bbexceeds bbthe bbthreshold(s) bbfor bbthe bb20% bblong bbterm bbcapital bbgains bbrate bb($441,450+ bbSingle bbor bb$496,600 bbMFJ). In bba bbtaxable bbaccount, bbcorporate bbzero-coupon bbbonds bbgenerate bbannual bb- bbANSWER: bb bb➡ bbtaxable bbincome. In bba bbtaxable bbaccount, bbcorporate bbzeros bbdo bbgenerate bbtaxable bbincome bbwithout bbgenerating bbthe bbcash bbto bbpay bbthe bbtaxes bb(phantom bbincome); bbin bba bbtax-deferred bbaccount, bbincome bbfrom bbzeros bbis bbdeferred. Which bbone bbof bbthe bbfollowing bbis bbnot bba bbmotivating bbfactor bbto bbengage bbin bba bbbond bbswap? bb- bbANSWER: bb bb➡ bbto bblock bbin bba bbtax bbloss bbby bbselling bba bbbond bbat bba bbloss bband bbthen bbimmediately bbrepurchasing bbthe bbsame bbbond This bbis bba bbwash-sale—the bbloss bbwill bbbe bbdisallowed bband bbis bbalso bbadded bbto bbthe bbbasis bbof bbthe bbnewly bbpurchased bbbond. Income bbfrom bba bbTreasury bbbond bbis bb- bbANSWER: bb bb➡ bbexempt bbfrom bbstate bband bblocal bbtaxation. A bbTreasury bbbond bbpays bbinterest bbthat bbis bbexempt bbfrom bbstate bband bblocal bbtaxation. Cash bbvalue bblife bbinsurance bbpolicies bbbuild bbcash bbvalue bbon bbwhat bbtype bbof bbbasis? bb- bbANSWER: bb bb➡ bbtax-deferred bbbasis Cash bbvalue bblife bbinsurance bbpolicies bbgrow bbtax-deferred bbuntil bbthe bbcash bbvalue bbis bbwithdrawn bbfrom bbthe bbpolicy. A bbREIT bb(real bbestate bbinvestment bbtrust) bbthat bbdistributes bb_____% bbof bbits bbtaxable bbincome bbto bbits bbshareholders bbdoes bbnot bbhave bbto bbpay bbtaxes. bb- bbANSWER: bb bb➡ bb90% REITs bbthat bbdistribute bbat bbleast bb90% bbof bbtheir bbtaxable bbincome bbto bbshareholders bbdo bbnot bbhave bbto bbpay bbtaxes. A bbperson's bbmarginal bbtax bbrate bbequals bbthe bbrate bbof bbtax bbpaid bbon bbthe bb__________? bb- bbANSWER: bb bb➡ bblast bbdollar bbof bbincome. The bbmarginal bbtax bbrate bbis bbthe bbtax bbrate bbpaid bbon bbthe bblast bbdollar bbof bbincome. With bbrespect bbto bba bbMEC bb(modified bbendowment bbcontract) bball bbof bbthe bbfollowing bbconstitute bba bbdistribution, bbexcept bb- bbANSWER: bb bb➡ bbdividends bbretained bb(by bbinsurer) bbto bbpurchase bbpaid-up bbinsurance. A bbdistribution bbdoes bbnot bbinclude bbdividends bbretained bbby bbthe bbinsurer bbto bbpay bbpremiums bbor bbpurchase bbpaid-up bbinsurance. Can bbthe bbinterest bbpaid bbon bbfunds bbborrowed bbto bbpurchase bbmunicipal bbbonds bbbe bbdeductible? bb- bbANSWER: bb bb➡ bbno Interest bbpaid bbon bbfunds bbto bbpurchase bbmunicipal bbbonds bbis bbnot bbdeductible. Life bbinsurance bbproceeds bbpaid bbto bbbeneficiaries bbare bbgenerally bb- bbANSWER: bb bb➡ bbtax-free. Generally bbspeaking, bblife bbinsurance bbproceeds bbpaid bbto bbbeneficiaries bbare bbincome-tax-free. What bbportion bbof bbthe bbpayments bbreceived bbfrom bbmortgage-backed bbsecurities bbare bbsubject bbto bbtaxation? bb- bbANSWER: bb bb➡ bbthe bbinterest bbportion The bbinterest bbportion, bbbut bbnot bbthe bbprincipal bbportion, bbof bbpayments bbfrom bbmortgage-backed bbsecurities bbare bbtaxable. Based bbon bbthe bb2008 bbAon bbConsulting bbWorldwide bbstudy bbcited bbin bbthe bbmodule, bba bbclient bbwith bba bbpreretirement bbincome bbof bb$90,000 bbwill bbneed bbapproximately bbhow bbmuch bbincome bbduring bbretirement? bb- bbANSWER: bb bb➡ bb$70,200 This bbis bb78% bbof bbpreretirement bbincome, bbwhich bbis bbthe bbrange bbcited bbin bbthe bbstudy. The bbsources bbof bbretirement bbincome bbtypically bbreferred bbto bbas bbthe bb"three-legged bbstool bbof bbretirement bbincome" bbare bb- bbANSWER: bb bb➡ bbSocial bbSecurity, bbpension bbincome, bband bbindividual bbinvestments. Social bbSecurity, bbpension bbincome, bband bbindividual bbinvestments bbare bball bbimportant bbsources bbof bbretirement bbincome. A bbclient bbcan bbbest bbestimate bbhis bbor bbher bbold bbage bbSocial bbSecurity bbbenefits bbby bb- bbANSWER: bb bb➡ bbobtaining bban bbestimate bbof bbfuture bbbenefits bbdirectly bbfrom bbthe bbSocial bbSecurity bbAdministration. The bbSocial bbSecurity bbAdministration bbis bbthe bbbest bbsource bbfor bban bbestimate bbof bbSocial bbSecurity bbold- age bbbenefits. Sam bbwas bbborn bbin bb1954, bbso bbhis bbFRA bbis bb66. bbIf bbhe bbbegins bbreceiving bbSocial bbSecurity bbbenefits bbearly, bbthe bbamount bbof bbhis bbmonthly bbSocial bbSecurity bbchecks bbwill bbbe bb- bbANSWER: bb bb➡ bbreduced bbfor bbthe bbrest bbof bbhis bblife. Early bbretirees bbborn bbin bb1954 bbwill bbhave bbtheir bbretirement bbbenefits bbreduced bbthroughout bbthe bbremainder bbof bbtheir bblives. Which bbone bbof bbthe bbfollowing bbbest bbexplains bba bbfundamental bbinvestment bbstrategy bbfor bbaccumulating bbfunds bbto bbbe bbused bbduring bbretirement? bb- bbANSWER: bb bb➡ bbYou bbshould bbbegin bbinvesting bbmany bbyears bbbefore bbretirement bbso bbthat bbcompounded bbreturns bbincrease bbyour bbretirement bbfund. Time bbis bbone bbof bbthe bbgreatest bbassets bbavailable bbto bban bbinvestor, bbso bbthe bbsooner bban bbinvestor bbstarts bbsaving bbfor bbretirement, bbthe bbbetter. A bbclient, bbage bb55, bbtakes bba bb$3,000 bbdistribution bbfrom bbhis bbrollover bbIRA bbto bbpay bbfor bba bbsemester bbof bbcollege bbtuition bbfor bbhis bb21-year-old bbson. bbWhich bbone bbof bbthe bbfollowing bbcorrectly bbexplains bbthe bbtax bbconsequences bbfor bbthe bbfather? bb- bbANSWER: bb bb➡ bbThe bbentire bbdistribution bbis bbsubject bbto bbincome bbtax, bbbut bbit bbis bbfree bbfrom bbthe bb10% bbearly bbwithdrawal bbpenalty. There bbis bbno bb10% bbearly bbwithdrawal bbpenalty bbfor bbfunds bbwithdrawn bbto bbpay bbfor bbhigher bbeducation. bbThe bbdistribution bbis, bbhowever, bbsubject bbto bbordinary bbincome bbtaxation. With bbcurrent bbeconomic bbconditions, bbwhich bbone bbof bbthe bbfollowing bbwould bbbe bbthe bbmost bbprudent bbassumption bbfor bbinflation bbwith bbrespect bbto bbplanning bbfor bbretirement bbincome bband bbexpenses? bb- bbANSWER: bb bb➡ bb4% Historically, bbinflation bbwas bbestimated bbat bb3%, bbbut bbin bblight bbof bbevents bbover bbthe bbpast bbdecade bband bbcurrent bbeconomic bbconditions, bbmany bbbelieve bbinflation bbshould bbbe bbestimated bbat bb4%, bbto bbbe bbmore bbconservative. Which bbone bbof bbthe bbfollowing bbis bbnot bbone bbof bbthe bbsources bbof bbthe bbtraditional bb"three-legged bbstool" bbof bbretirement bbincome? bb- bbANSWER: bb bb➡ bbinheritances Inheritances bbhave bbtraditionally bbnot bbbeen bbconsidered bba bbpart bbof bbthe bb"three-legged bbstool," bbas bbthey bbare bbdifficult bbto bbanticipate. While bbboth bbare bbliving, bbthe bbspouse bbof bba bbSocial bbSecurity bbrecipient bbis bbentitled bbto bb_____of bbthe bbrecipient's bbretirement bbbenefit, bbsubject bbto bba bbfamily bbmaximum, bbas bblong bbas bbthe bbspouse bbis bbof bbfull bbretirement bbage. bb- bbANSWER: bb bb➡ bb50% The bbspouse bbis bbentitled bbto bb50% bbof bbthe bbrecipient's bbretirement bbbenefit bbunless bbthe bbspouse bbis bbentitled bbto bba bblarger bbbenefit bbin bbhis bbor bbher bbown bbright, bbin bbwhich bbcase bbthere bbwould bbbe bbno bbspousal bbbenefit bbpaid. The bblonger bban bbinvestor's bbtime bbhorizon, bbthe bblevel bbof bbannual bbpayments bbneeded bbto bbmeet bba bbparticular bbgoal bbare bb- bbANSWER: bb bb➡ bblower. The bblonger bbthe bbtime bbhorizon, bbthe bblower bbthe bbpayments bbrequired, bbas bbthe bbinvestor bbhas bbmore bbtime bbto bballow bbfor bban bbinvestment bbto bbgrow bband bbcompound. Which bbone bbof bbthe bbfollowing bbis bbthe bbbest bbinvestment bbstrategy bbfor bba bb55-year-old bbwho bbis bbin bbgood bbhealth, bbhas bb$500,000 bbin bbstocks bbearmarked bbfor bbretirement, bband bbplans bbto bbretire bbat bbage bb65? bb- bbANSWER: bb bb➡ bbkeep bbmost bbof bbthe bb$500,000 bbin bbstocks bbbut bbconvert bbpart bbof bbthe bbportfolio bbinto bbless bbvolatile bbinvestments Since bbthis bbperson bbis bbage bb55, bbmost bbof bbthe bbportfolio bbneeds bbto bbbe bbkept bbin bbstocks bbin bborder bbto bbkeep bbahead bbof bbinflation. Which bbone bbof bbthe bbfollowing bbis bbnot bbconsidered bbto bbbe bba bbmajor bbbenefit bbof bbtax-deferred bbplans bb(excluding bbRoth bbIRAs)? bb- bbANSWER: bb bb➡ bbA bbretiree's bbincome bbtax bbbracket bbmay bbbe bbhigher bbat bbthe bbtime bbof bbdistribution. All bbof bbthese bbare bbconsidered bbmajor bbadvantages bbexcept bbd, bbas bbmost bbretirees bbare bbassumed bbto bbbe bbin bba bblower bbincome bbtax bbbracket bbin bbretirement. At bbwhat bbage bbmust bbmandatory bbdistributions bbbegin bbfor bba bbRoth bbIRA bbowner? bb- bbANSWER: bb bb➡ bbnone There bbare bbno bbmandatory bbdistribution bbrequirements bbfor bbthe bbowner bbof bba bbRoth bbIRA. With bbthe bbjoint bband bbsurvivor bbannuity bbpayment bboption, bbretirement bbplan bbbenefits bbare bb- bbANSWER: bb bb➡ bbspread bbover bbtwo bbor bbmore bblives. Retirement bbplan bbbenefits bbare bbspread bbover bbtwo bbor bbmore bblives bbwhen bbthe bbjoint bband bbsurvivor bbannuity bbpayment bboption bbis bbselected. If bba bbminimum bbdistribution bbfrom bban bbIRA bbis bbnot bbtaken bbin bbthe bbcalendar bbyear bbafter bbreaching bbage bb70½, bbthere bbis bba bb_____excise bbtax? bb- bbANSWER: bb bb➡ bb50% If bba bbminimum bbdistribution bbfrom bban bbIRA bbis bbnot bbtaken bbin bbthe bbcalendar bbyear bbafter bbreaching bbage bb70½, bbthere bbis bba bb50% bbexcise bbtax bbon bbthe bbamount bbthat bbshould bbhave bbbeen bbwithdrawn. Which bbone bbof bbthe bbfollowing bbperiodic bbpension bbbenefit bbpayments bbwill bbresult bbin bbthe bbhighest bbmonthly bbpayment? bb- bbANSWER: bb bb➡ bblife bbannuity A bblife bbannuity bbwill bbprovide bbthe bbhighest bbmonthly bbpayment bbbecause bbpayments bbare bbspread bbout bbover bbthe bblife bbof bbthe bbparticipant bbonly—at bbtheir bbdeath, bball bbbenefits bbcease. In bbgeneral, bbwithdrawals bbfor bba bbretiree's bbcash bbflow bbshould bbbe bbtaken bbfrom bb- bbANSWER: bb bb➡ bbtaxable bbaccounts bbfirst. In bbgeneral, bbwithdrawals bbshould bbbe bbtaken bbfrom bbtaxable bbaccounts bbfirst—capital bbthat bbcompounds bbtax-deferred bbwill bbgrow bbto bbmore bbdollars bbthan bbcapital bbthat bbis bbtaxed bbevery bbyear. Each bbafter-tax bbannuity bbpayment bbis bb- bbANSWER: bb bb➡ bbpartly bba bbtax-free bbreturn bbof bbcapital bband bbpartly bbincome bbthat bbis bbsubject bbto bbordinary bbincome bbtaxation. A bbportion bbof bbeach bbannuity bbpayment bbrepresents bba bbtax-free bbreturn bbof bbcapital, bband bba bbportion bbis bbsubject bbto bbordinary bbincome bbtaxation. Which bbone bbof bbthe bbfollowing bbis bba bbrequirement bbof bban bbunfunded bbexcess bbbenefit bbplan? bb- bbANSWER: bb bb➡ bbThe bbplan bbhas bbno bbdisclosure bbor bbfiling bbrequirements bbunder bbERISA. A bbnonqualified bbplan bbdoes bbnot bbneed bbto bbcomply bbwith bbeither bbthe bbdisclosure bbrequirements bbor bbthe bbfiling bbrequirements bbof bbERISA. bbIn bbfact, bban bbunfunded bbexcess bbbenefit bbplan bbis bbfully bbexempt bbfrom bbERISA bbrequirements. Which bbone bbof bbthe bbfollowing bbaccurately bbrepresents bbthe bbgeneral bbtax bbconsequences bbto bban bbemployer bband bbemployee bbunder bba bbnonqualified bbplan? bb- bbANSWER: bb bb➡ bbAn bbemployer bbdoes bbnot bbreceive bba bbdeduction bbfor bba bbcontribution bbto bban bbemployee bbuntil bbthe bbemployee bbrecognizes bbthe bbincome bbupon bbreceipt. An bbemployer bbreceives bba bbdeduction bbfor bba bbcontribution bbwhen bban bbemployee bbrecognizes bbthe bbincome, bband bbnot bbbefore bbthat. Which bbone bbof bbthe bbfollowing bbstatements bbregarding bba bbqualified bbplan bbis bbcorrect? bb- bbANSWER: bb bb➡ bbThe bbemployer's bbdeduction bbis bbavailable bbin bbthe bbyear bbthat bba bbcontribution bbis bbmade. With bba bbqualified bbplan, bbthe bbemployer bbmay bbdeduct bbplan bbcontributions bbin bbthe bbyear bbthat bbthose bbcontributions bbare bbmade. Which bbone bbof bbthe bbfollowing bbis bba bbtax bbconsequence bbof bba bbrabbi bbtrust? bb- bbANSWER: bb bb➡ bbThe bbemployer bbis bbtaxed bbon bbtaxable bbearnings bbin bbthe bbplan bbas bbthey bbaccumulate. Taxable bbplan bbearnings bbare bbtaxed bbto bbthe bbemployer bbas bbthe bbearnings bbaccumulate. Tax bbdeferral bbin bban bbunfunded bbplan bb- bbANSWER: bb bb➡ bbmay bbbe bbachieved bbif bbplan bbassets bbare bbsubject bbto bbcompany bbcreditors. The bbemployer's bbpromise bbmust bbbe bbmerely bba bbnaked bbpromise bband bbmust bbnot bbbe bbsecured bbin bbany bbfashion. A bbfunded bbdeferred bbcompensation bbplan bb- bbANSWER: bb bb➡ bbwill bbbe bbtaxable bbto bban bbemployee bbif bbnonforfeitable. If bbthe bbemployee bbhas bbconstructive bbreceipt bbof bbplan bbcompensation bb(funds bbare bbnonforfeitable), bbsuch bbcompensation bbwill bbbe bbtaxable bbto bbthe bbemployee. Which bbone bbof bbthe bbfollowing bbis bbfrequently bbused bbto bbinformally bbfund bba bbdeferred bbcompensation bbplan? bb- bbANSWER: bb bb➡ bbcorporate-owned bbcash bbvalue bblife bbinsurance The bbconstructive bbreceipt bbdoctrine bbstates bbthat bb- bbANSWER: bb bb➡ bbincome bbis bbtaxable bbwhen bbit bbis bbconstructively bbreceived bbthough bbit bbmay bbnot bbbe bbactually bbreceived. The bbconstructive bbreceipt bbdoctrine bbis bba bbtax bbconcept bbthat bbstates bbthat bbany bbincome bbconstructively, bbthough bbnot bbactually, bbreceived bbis bbstill bbincludible bbin bbthe bbincome bbof bbthe bbindividual bbwho bbis bbreceiving bbthe bbconstructive bbbenefit. A bbrabbi bbtrust bbis bb- bbANSWER: bb bb➡ bba bbform bbof bbirrevocable bbgrantor bbtrust bbestablished bbby bban bbemployer. A bbrabbi bbtrust bbis bba bbform bbof bbirrevocable bbgrantor bbtrust bbestablished bbby bban bbemployer. When bbestablished bbcorrectly bb- bbANSWER: bb bb➡ bbthe bbtrust bbassets bbare bbavailable bbonly bbto bbpay bbbenefits bbto bbthe bbemployees bband bbearnings bbon bbthe bbassets bbare bbtaxable bbto bbthe bbemployer. As bbper bbthe bbdefinition bbof bba bbgrantor bbtrust, bbthe bbtrust bbearnings bbare bbcurrently bbtaxable bbto bbthe bbgrantor, bbor bbemployer, bbrather bbthan bbimposed bbupon bbthe bbemployee. Section bb457 bbplans bbcover bbemployees bbof bb- bbANSWER: bb bb➡ bbnonprofit bborganizations bbonly. Section bb457 bbplans bbcover bbemployees bbof bbstate bband bblocal bbgovernments bband bbtax-exempt bborganizations, bbbut bbthey bbdo bbnot bbcover bbemployees bbof bbfor-profit bborganizations. Which bbform bbof bbemployer-provided bblife bbinsurance bbdoes bbnot bbcreate bba bbtax bbliability bbfor bbthe bbemployee? bb- bbANSWER: bb bb➡ bbkey bbemployee bblife bbinsurance Since bbthere bbare bbno bbbenefits bbpaid bbto bbthe bbemployee, bbthere bbare bbno bbtax bbconsequences bbto bbthe bbemployee bbfrom bba bbkey bbemployee bblife bbinsurance bbpolicy. A bbdisadvantage bbto bbusing bblife bbinsurance bbto bbinformally bbfund bba bbnonqualified bbplan bbis bb- bbANSWER: bb bb➡ bbadditional bbdeath bbbenefit bbproceeds bbwould bbbe bbpaid bbto bba bbbeneficiary bbof bban bbexecutive bbwith bbpotentially bba bbvery bblarge bbestate. Paying bbadditional bbdeath bbbenefits bbto bba bbbeneficiary bbof bban bbexecutive bbwith bba bblarge bbestate bbis bba bbdisadvantage bbif bbthere bbis bbno bbneed bbfor bbthe bbprotection, bband bbit bbmay bbcause bbadditional bbestate bbtaxes bbto bbbe bbowed. Which bbone bbof bbthe bbfollowing bbis bbnot bba bbrequirement bbof bbIRC bbSection bb409A? bb- bbANSWER: bb bb➡ bbElections bbto bbdefer bbcompensation bbmust bboccur bbby bbthe bbend bbof bbthe bbcalendar bbyear bbthat bbservices bbare bbdelivered bbfor bbthe bbcompensation. Elections bbto bbdefer bbcompensation bbmust bboccur bbin bbthe bbyear bbprior bbto bbthe bbtax bbyear bbof bbthe bbdelivery bbof bbservices Equity-based bbcompensation bbplans bbmay bb- bbANSWER: bb bb➡ bbbe bbestablished bbfor bbexecutives bbonly bband bbdo bbnot bbhave bbto bbcover bbrank-and-file bbemployees bband bbare bbtherefore bbnot bbgenerally bbsubject bbto bbERISA bbrequirements. Equity-based bbcompensation bbplans bbmay bbbe bbestablished bbfor bbexecutives bbonly bband bbdo bbnot bbhave bbto bbcover bbrank-and-file bbemployees. bbAs bba bbgeneral bbrule, bbequity-based bbcompensation bbplans bbare bbnot bbsubject bbto bbthe bbcoverage bband bbparticipation, bband bbother bbrequirements bbof bbthe bbEmployee bbRetirement bbIncome bbSecurity bbAct bbof bb1974 bb(ERISA) bbbecause bbthey bbare bbnot bbconsidered bbto bbbe bb"employee bbbenefit bbplans;" bbthat bbis, bbemployee bbpension bbplans bbor bbemployee bbwelfare bbbenefit bbplans bbsubject bbto bbthe bbrequirements bbof bbERISA. Which bbone bbof bbthe bbfollowing bbis bbnot bba bbtype bbof bbequity-based bbcompensation bbplan? bb- bbANSWER: bb bb➡ bban bbunrestricted bbstock bbplan Restricted bbstock bbis bba bbtype bbof bbequity-based bbcompensation. bbThere bbis bbno bbsuch bbthing bbas bban bbunrestricted bbstock bbplan. Technology bbStartup bbInc. bb(TSI) bbgrants bba bbnonqualified bbstock bboption bbto bbDoug bbEdwards, bbone bbof bbits bbvice bbpresidents, bbto bbpurchase bb1,000 bbshares bbof bbTSI bbstock bbafter bbfive bbyears bbof bbemployment. bbAs bba bbstartup bbcompany, bbthe bbvalue bbwas bbnot bbascertainable bbat bbthe bbtime bbof bbthe bbgrant. bbToday, bbthe bbfair bbmarket bbvalue bbof bbthe bbstock bbis bb$30 bbper bbshare bband bbDoug bbdecides bbto bbexercise bbthe bboption bbat bbthis bbtime bbat bba bbprice bbof bb$10 bbper bbshare. bbDoug's bbmarginal bbtax bbrate bbis bb25%. bbThe bbtax bbdue bbupon bbexercise bbof bbthe bboption bbby bbDoug bbis bb- bbANSWER: bb bb➡ bb$5,000. The bbtax bbdue bbupon bbexercise bbof bbthe bboption bbby bbDoug bbis bb$5,000 bb($20,000 bb× bb.25). Technology bbStartup bbInc. bb(TSI) bbgrants bba bbnonqualified bbstock bboption bbto bbDoug bbEdwards, bbone bbof bbits bbvice bbpresidents, bbto bbpurchase bb1,000 bbshares bbof bbTSI bbstock bbafter bbfive bbyears bbof bbemployment. bbDoug's bbmarginal bbtax bbrate bbis bb25%. bbAs bba bbstartup bbcompany, bbthe bbvalue bbwas bbnot bbascertainable bbat bbthe bbtime bbof bbthe bbgrant. bbFive bbyears bbago, bbwhen bbthe bbfair bbmarket bbvalue bbof bbthe bbstock bbwas bb$30 bbper bbshare, bbDoug bbexercised bbthe bboption bbat bba bbprice bbof bb$10 bbper bbshare. bbThree bbyears bblater, bbthe bbstock bbis bbworth bb$50 bbper bbshare, bband bbDoug bbdecides bbto bbsell bbhis bbholdings. bbDoug bbwould bbowe bb- bbANSWER: bb bb➡ bbcapital bbgains bbtaxes bbon bbhis bbgain bbof bb$20,000. Because bbDoug bbpaid bbincome bbtaxes bbwhen bbhe bbexercised bbhis bboption bbfive bbyears bbago, bbhis bbbasis bbis bb$30,000 bband bbhe bbowes bbcapital bbgains bbtaxes bbon bbthe bbgain, bbwhich bbis bb$20,000 bb($50,000 bbfrom bbthe bbsale bb- bbhis bb$30,000 bbbasis). All bbof bbthe bbfollowing bbare bbadvantages bbto bbimplementing bba bbnonqualified bbdeferred bbcompensation bbplan, bbexcept bb- bbANSWER: bb bb➡ bbthe bbNQDC bbis bboffered bbin bblieu bbof bbthe bbqualified bbplan. The bbNQDC bbis bbsupplemental bbto bbany bbqualified bbplan bbthat bbis bbin bbplace. A bbmajor bbdifference bbbetween bbexcess bbbenefit bbplans bband bbsupplemental bbexecutive bbretirement bbplans bb(SERPs) bbis(LO bb7-3) bb- bbANSWER: bb bb➡ bbSERPs bboften bbprovide bbfor bbdisability bbretirement bbbenefits. SERPs bbare bbgenerally bbprovided bbto bbhigh-level bbexecutives, bband bbare bbprimarily bbdesigned bbto bbprovide bbadequate bbpost-retirement bbincome, bbincluding bbthe bbpossibility bbof bba bbdisability-related bbretirement. A bbpotential bbimplication bbof bba bbsalary bbreduction bbplan bbis bbthat bb- bbANSWER: bb bb➡ bbincome bbtax bbis bbpaid bbat bbthe bbemployee's bbmarginal bbtax bbrate bbin bbretirement, bbwith bbthe bbexpectation bbit bbwill bbbe bba bblower bbrate bbat bbthat bbtime. While bbfuture bbtax bbrates bbare bbunknown, bbthe bbemployee bbexpects bbto bbbe bbtaxed bbat bba bblower bbrate bbin bbretirement. Which bbone bbof bbthe bbfollowing bbgenerally bbis bbtrue bbwith bbrespect bbto bbthe bblife bbinsurance bbneeds bbof bbthe bbtypical bbfamily? bb- bbANSWER: bb bb➡ bbTotal bblife bbinsurance bbrequirements bbmay bbdecrease bbas bban bbindividual bbapproaches bbretirement. Life bbinsurance bbneeds bbgenerally bbdecrease bbas bban bbindividual bbreaches bbretirement. Assume bba bbclient bbhas bb$30,000 bbin bba bbmoney bbmarket bbfund, bb$2,000 bbin bba bbchecking bbaccount, bba bbmortgage bbloan bbof bb$110,000 bb(not bbto bbbe bbpaid bboff, bbas bbit bbwill bbbe bbtransferred bbto bbthe bbspouse), bban bbauto bbloan bbof bb$20,000, bband bbcredit bbcard bbbalances bbof bb$5,000. bbAssume bbthat bbif bbhe bbdied, bbpostmortem bbexpenses bbwould bbbe bb$15,000. bbWhat bbwould bbbe bbthe bbcash bbrequirements bbfor bbthis bbclient? bb- bbANSWER: bb bb➡ bb$8,000 A bbmajor bbreason bbsome bblife bbinsurance bbbuyers bblike bbuniversal bblife bbis bbthat bbthe bbpolicy bbis bbflexible bbin bbmany bbways, bbincluding bbits bbface bbvalue, bbits bbcash bbvalue, bband bbits bbpremiums. A bbbeneficiary bbwho bbis bbguaranteed bbpayments bbfor bblife bb(with bba bbminimum bbguarantee bbof bb10 bbyears bbof bbpayments) bbhas bbselected bbwhich bbone bbof bbthe bbfollowing bbsettlement bboptions? bb- bbANSWER: bb bb➡ bblife bbincome bbwith bbperiod bbcertain A bb"life bbincome bbwith bbperiod bbcertain" bbsettlement bboption bbguarantees bbpayments bbfor bblife bbto bbthe bbprimary bbbeneficiary bbwith bba bbguarantee bbof bb10 bbyears bbof bbpayments bbminimum bbto bba bbcontingent bbbeneficiary bbshould bbthe bbprimary bbbeneficiary bbbe bbunable bbto bbcollect. bbIf bbthe bbfirst bbbeneficiary bbdies bbprior bbto bbcollecting bbthe bb10 bbyears bbof bbpayments, bbthe bbsecond bbbeneficiary bbgets bbthe bbremaining bbpayments. When bban bbannuity bbpayment bbis bbmade bb(assuming bbit bbis bbnot bbin bba bbqualified bbretirement bbplan bbaccount), bbthe bbportion bbof bbthe bbpayment bbthat bbis bbtaxed bbis bb- bbANSWER: bb bb➡ bbthe bbearnings bbonly. The bbonly bbamount bbof bban bbannuity bbpayment bbthat bbis bbsubject bbto bbtaxation bbis bbthe bbearnings. bbMost bbannuity bbpayments bbwill bbbe bbmade bbup bbof bbboth bbprincipal bband bbearnings. Dividends bbreceived bbfrom bba bbparticipating bblife bbinsurance bbpolicy bbare bb- bbANSWER: bb bb➡ bba bbreturn bbof bbunused bbpremium bbpayments. Unlike bbcash bbdividends bbfrom bbstock, bbdividends bbfrom bba bbparticipating bblife bbinsurance bbpolicy bbare bba bbreturn bbof bbexcess bbpremium bbpayments, bband bbnot bbtaxable. Over bbtime, bbthe bbcash bbvalue bbof bba bbpermanent bblife bbinsurance bbpolicy bbcould bbgrow bbsubstantially. bbThis bbcash bbvalue bbcan bbbe bbused bbto bb- bbANSWER: bb bb➡ bb1. bbhelp bbsupplement bbretirement bbexpenses 2. bbhelp bbpay bbfor bbcollege bbexpenses 3. bbpay bbfor bba bbvacation Life bbinsurance bbcan bbbe bbused bbto bbaddress bbwhich bbof bbthe bbfollowing bbneeds? bb- bbANSWER: bb bb➡ bb1. bbthe bbcare bbof bbaging bbparents 2. bbthe bbpayment bbof bbestate bbtaxes 3. bbreplacement bbof bba bbspouse's bbincome The bbamount bbof bblife bbinsurance bban bbindividual bbneeds bbis bb- bbANSWER: bb bb➡ bbequal bbto bbthe bbtotal bbof bbthe bbcash bbrequirements bbneeded bbto bbpay bboff bbdebts bband bbfinal bbexpenses bbplus bbreplace bblost bbincome. The bbcash bbrequirements bbare bbonly bbpart bbof bbthe bbamount bbof bblife bbinsurance bbneeded. bbThe bbother bbpart bbis bbthe bbfunds bbneeded bbto bbmaintain bbthe bbsurvivors' bblifestyles. bbThe bbtotal bbneed bbis bbthe bbamount bbto bbcover bbboth bbparts. For bbmost bbclients, bbthe bbtwo bbmost bbcommonly bboverlooked bbrisks bbare bb- bbANSWER: bb bb➡ bblong-term bbcare bbinsurance bband bbdisability bbinsurance. For bbmost bbclients, bbthe bbneeds bbfor bb(1) bbdisability bbinsurance bband bb(2) bblong-term bbcare bbinsurance bbare bbthe bbmost bbcommonly bboverlooked bbrisks. bbMost bbpeople bbrecognize bbthe bbneed bbfor bbat bbleast bbsome bblife bbinsurance. bbAccidental bbdeath bband bbdismemberment bbis bbtypically bba bbrider bbavailable bbwith bblife bbinsurance bbor bba bbstand-alone bbemployee bbbenefit bboption. In bbthe bbearly bbyears bbof bbhis bbor bbher bbbusiness, bba bbself-employed bbindividual bbmay bbbe bba bbgood bbcandidate bbfor bb- bbANSWER: bb bb➡ bbterm bblife bbinsurance. Because bbcash bbflow bbis bboften bblimited bbin bbthe bbearly bbyears bbof bba bbbusiness, bbterm bbinsurance bboften bbmakes bbsense bbfor bbself-employed bbindividuals. Generally, bbloans bbtaken bbagainst bbthe bbcash bbvalue bbof bban bbin-force bblife bbinsurance bbpolicy bb(not bbclassified bbas bba bbMEC) bbare bb- bbANSWER: bb bb➡ bbnot bbcurrently bbtaxable. Except bbin bbthe bbcase bbof bba bbMEC, bbthere bbare bbno bbtaxes bbgenerated bbfrom bbloans bbtaken bbagainst bbthe bbcash bbvalue bbof bblife bbinsurance bbpolicies. bbIf bba bbpolicy bbis bbsurrendered bbor bblapses bbwith bba bbloan bboutstanding, bball bbor bbpart bbof bbthe bbloan bbamount bbmay bbbe bbtaxable. A bbperson bbwith bbno bbheirs bb(or bbanyone bbwho bbis bba bbfinancial bbdependent) bbwould bbmost bblikely bbselect bbthe bb- bbANSWER: bb bb➡ bbstraight bblife bbincome bboption. A bbstraight bblife bbincome bboption bbmay bbbe bbbest bbfor bbsomeone bbwho bbhas bbno bbheirs, bbbecause bbupon bbthe bbindividual's bbdeath, bbpayments bbstop. bbIncome bbpayments bbwill bbbe bbhigher bbthan bbpayments bbwith bba bblonger bbguaranteed bbincome bbperiod bb(e.g., bbjoint bblife bbor bb10 bbyears bbcertain). An bbindividual bbwho bbowns bban bbannuity bbhas bbelected bbto bbreceive bbincome bbfor bblife. bbAfter bbreceiving bbpayments bbfor bbfive bbmonths, bbshe bbdies bband bbpayments bbcease, bbwith bbno bbadditional bbpayments bbto bbbeneficiaries. bbShe bbelected bbwhich bbannuity bbincome bboption? bb- bbANSWER: bb bb➡ bbstraight bblife bbincome bboption The bbstraight bblife bbincome bboption bbis bbbased bbon bbonly bbone bbperson's bblife, bbso bbwhen bbthat bbbeneficiary bbdies, bball bbpayments bbend. bbLife bbincome bbwith bbperiod bbcertain bbor bbrefund bbwould bbprovide bba bbbenefit bbto bbbeneficiaries bband bba bbjoint bblife bbincome bboption bbwould bbcontinue bbto bbmake bbpayments bbto bbthe bbsurvivor. A bbSection bb1035 bbexchange bbis bbnot bbpermitted bbfrom bb- bbANSWER: bb bb➡ bban bbannuity bbto bba bbcash bbvalue bblife bbinsurance bbpolicy. A bbSection bb1035 bbexchange bbcan bbbe bbused bbto bbmove bbmoney bbfrom bba bbcash bbvalue bblife bbinsurance bbpolicy bbto bban bbannuity bbbut bbnot bbin bbthe bbreverse bbdirection. bbMoving bbfrom bban bbannuity bbto bba bblife bbinsurance bbpolicy bbwould bbbypass bbunderwriting, bbwhich bbwould bbnot bbbe bballowed. The bbskilled, bbintermediate, bbor bbcustodial bblevel bbof bbcare bbthat bbindividuals bboften bbneed bbwhen bbthey bbget bbolder bbis bb- bbANSWER: bb bb➡ bblong-term bbcare. Long-term bbcare bbis bbthe bbskilled, bbintermediate, bbor bbcustodial bblevel bbof bbcare bbthat bbindividuals bboften bbneed bbwhen bbthey bbget bbolder. bbLong-term bbcare bbinsurance, bbon bbthe bbother bbhand, bbis bbthe bbinsurance bbproduct bbspecifically bbdesigned bbto bbhelp bbpay bbfor bbthe bblong-term bbcare bbneeds bbindividuals bbmay bbhave. bbMedicare bbis bba bbgovernment bbinsurance bbplan bbthat bbmay bbprovide bbsome bblimited bblong-term bbcare bbbenefits bbunder bbspecific bbcircumstances. bbMedicaid bbis bba bbwelfare bbprogram bbthat bbdoes bbpay bbfor bblong- term bbcare. Disability bbinsurance bbis bbconcerned bbwith bb___________ bbrisks, bband bblife bbinsurance bbis bbconcerned bbwith bb_____________ bbrisks. bb- bbANSWER: bb bb➡ bbmorbidity bb/ bbmortality The bbdifference bbbetween bblife bbinsurance bband bbdisability bbinsurance bbis bbthe bbdifference bbbetween bbmortality bband bbmorbidity. bbLife bbinsurance bbprotects bbagainst bbthe bbrisk bbof bbpremature bbdeath— mortality. bbDisability bbinsurance bbproducts bb(and bbother bbhealth bbinsurance bbproducts) bbprotect bbagainst bbmorbidity bbrisks, bbwhich bbare bbrisks bbassociated bbwith bbreduced bbhealth. Which bbof bbthe bbfollowing bbdescribe bblife bbinsurance bblife bbincome bbsettlement bboptions? I. bbThe bbproceeds bbare bbpaid bbto bbthe bbbeneficiary bbon bbthe bbbasis bbof bblife bbexpectancy, bband bbpayments bbstop bbupon bbthe bbdeath bbof bbthe bbbeneficiary. II. bbThe bbbeneficiary bbis bbpaid bba bblife bbincome bbwith bba bbminimum bbnumber bbof bbpayments bbguaranteed. III. bbThe bbbeneficiary bbis bbpaid bban bbincome bbfor bblife bbwith bbany bbremaining bbproceeds bbpaid bbto bba bbcontingent bbbeneficiary. IV. bbThe bbproceeds bbare bbleft bbwith bbthe bbcompany, bband bbinterest bbis bbpaid bbto bbthe bbbeneficiary. bb- bbANSWER: bb bb➡ bbI, bbII, bband bbIII bbonly A bbcontingent bb(standby) bbtrust bb- bbANSWER: bb bb➡ bbreceives bbthe bbdonor's bbincome bbtax bbbasis bbif bbthe bbvalue bbof bbthe bbproperty bbequals bbor bbexceeds bbthe bbdonor's bbbasis. The bbrecipient bbreceives bbthe bbdonor's bbincome bbtax bbbasis bbif bbthe bbvalue bbof bbthe bbproperty bbequals bbor bbexceeds bbthe bbdonor's bbbasis. Gift bbsplitting bballows bb- bbANSWER: bb bb➡ bba bbmarried bbcouple bbto bbdouble bbtheir bballowable bbannual bbexclusions. Gift bbsplitting bballows bba bbgift bbof bbproperty bbowned bbby bbone bbspouse bbto bbbe bbtreated bbas bbif bbit bbwere bbmade bbone-half bbby bbeach bbspouse, bbthereby bbdoubling bbthe bballowable bbannual bbexclusions. The bbmarital bbdeduction bbfor bba bbrecipient bbspouse bbwho bbis bba bbU.S. bbcitizen bbis bb- bbANSWER: bb bb➡ bbunlimited. For bba bbrecipient bbspouse bbwho bbis bba bbU.S. bbcitizen, bbthe bbmarital bbdeduction bbis bbunlimited. Trusts bbcan bbprovide bb- bbANSWER: bb bb➡ bb1. bbincome bbtax bbsavings 2. bbgift bbtax bbsavings 3. bbestate bbtax bbsavings A bbliving bbwill bb- bbANSWER: bb bb➡ bbapplies bbonly bbwhen bba bbpatient bbis bbterminally bbill bband bbincompetent bbto bbmake bbmedical bbdecisions. Only bbwhen bba bbpatient bbis bbterminal bband bbincompetent bbto bbmake bbmedical bbdecisions bbwill bbthe bbprovisions bbof bba bbliving bbwill bbapply. The bbgross bbestate bbis bbbest bbdefined bbas bb- bbANSWER: bb bb➡ bball bbproperty bbthat bbis bbsubject bbto bbthe bbfederal bbestate bbtax. The bbproperty bbthat bbis bbsubject bbto bbthe bbfederal bbestate bbtax bbis bbconsidered bbthe bbgross bbestate. Which bbone bbof bbthe bbfollowing bbis bbnot bba bbfederal bbtransfer bbtax? bb- bbANSWER: bb bb➡ bbthe bbincome bbtax There bbare bbnow bbonly bbthree bbfederal bbtransfer bbtaxes; bbthe bbincome bbtax bbis bbassessed bbon bbthe bbaccumulation bbof bbwealth, bbnot bbits bbtransfer. Which bbis bbthe bbvaluation bbdate bbfor bbgifts? bb- bbANSWER: bb bb➡ bbthe bbdate bbon bbwhich bbthe bbtransfer bbis bbcompleted The bbdate bbof bbcompletion bbof bbthe bbgift bbis bbthe bbvaluation bbdate bbfor bbgifts. Which bbtype bbof bbtrust bbis bbone bbfrom bbwhich bbthe bbgrantor bbreceives bball bbincome bbearned bbby bbthe bbtrust? bb- bbANSWER: bb bb➡ bbgrantor bbretained bbincome bbtrust bb(GRIT) The bbGRIT bbprovides bbfor bbthe bbgrantor bbto bbreceive bbeach bbyear bball bbof bbthe bbincome bbfrom bbthe bbtrust. Grantor bbRetained bbAnnuity bbTrust bb(GRAT) bb- bbANSWER: bb bb➡ bbthe bbgrantor bbreceives bba bbfixed bbdollar bbamount bbfrom bbthe bbtrust bbfund bbannually Grantor bbRetained bbUnitrust bb(GRUT) bb- bbANSWER: bb bb➡ bbgrantor bbreceives bba bbspecified bbpercentage bbof bbthe bbvalue bbof bbthe bbtrust bbfunds bbannually Which bbform bbof bbproperty bbownership bbis bbavailable bbfor bbspouses bbonly? bb- bbANSWER: bb bb➡ bbtenancy bbby bbthe bbentirety Tenancy bbby bbthe bbentirety bbis bba bbtype bbof bbjoint bbownership bbspecifically bbbetween bbspouses. Which bbterm bbdescribes bbthe bbprocess bbto bbbe bbfollowed bbif bba bbperson bbdies bbwith bbno bbwill? bb- bbANSWER: bb bb➡ bbintestate. Intestate bbrefers bbto bbthe bbsituation bbwhere bba bbperson bbdies bbwithout bba bbwill. Which bbwould bba bbperson bbwho bbwants bbto bbprovide bbdirectives bbconcerning bblife-sustaining bbmedical bbmeasures bbthat bbare bbto bbbe bbused bbon bbthat bbperson bbexecute? bb- bbANSWER: bb bb➡ bba bbliving bbwill People bbcreate bba bb"living bbwill" bbwhen bbthey bbwant bbto bbdictate bbahead bbof bbtime bbtheir bbwishes bbconcerning bblife-sustaining bbmedical bbmeasures bbthat bbare bbto bbbe bbused bbon bbthem. What bbis bbthe bbmain bbdifference bbbetween bba bbrevocable bbliving bbtrust bband bba bbcontingent bb(standby) bbtrust? bb- bbANSWER: bb bb➡ bbwhen bbtrust bbfunding bboccurs A bbrevocable bbliving bbtrust bbis bbfunded bbwhen bbthe bbtrust bbis bbcreated. bbA bbcontingent bbtrust bbis bbfunded bbonly bbafter bbthe bbgrantor bbbecomes bbincapacitated. Which bbof bbthe bbfollowing bbis bbqualified bbto bbdetermine bbwhether bba bbdeed bbcreates bbjoint bbtenancy bbbetween bbtwo bbclients? bb- bbANSWER: bb bb➡ bban bbattorney Only bban bbadviser bbwho bbis bblicensed bbto bbpractice bblaw bbin bbthe bbclient's bbstate bbof bbresidence bbmay bbanswer bbsuch bba bbquestion. Which bbof bbthe bbfollowing bbdescribes bba bb"skip bbperson"? bb- bbANSWER: bb bb➡ bbSomeone bbwho bbis bbtwo bbor bbmore bbgenerations bbbelow bbthe bbperson bbmaking bba bbtransfer. A bb"skip bbperson" bbis bbsomeone, bblike bba bbgrandparent bbto bba bbgrandchild, bbwho bbis bbtwo bbor bbmore bbgenerations bbbelow bbthe bbperson bbmaking bba bbtransfer. For bbwhom bbcan bban bbUGMA bbbe bbused bbto bbbenefit? bb- bbANSWER: bb bb➡ bba bbchild bbup bbto bba bbmaximum bbage UGMAs bbcan bbbe bbused bbfor bbthe bbbenefit bbof bba bbchild bbup bbto bba bbmaximum bbage, bbas bbspecified bbby bbindividual bbstate bblaw. In bbwhich bbof bbthe bbfollowing bbtypes bbof bbownership bbis bbproperty bbacquired bbduring bba bbmarriage bbconsidered bbto bbbelong bbone-half bbto bbthe bbwife bband bbone-half bbto bbthe bbhusband, bbregardless bbof bbwhose bbname bbis bbon bbthe bbtitle? bb- bbANSWER: bb bb➡ bbcommunity bbproperty In bbcommunity bbproperty bbstates, bbproperty bbacquired bbduring bba bbmarriage bbis bbconsidered bbto bbbelong bbone-half bbto bbthe bbwife bband bbone-half bbto bbthe bbhusband, bbregardless bbof bbwhose bbname bbis bbon bbthe bbtitle. The bbfederal bbgeneration-skipping bbtransfer bbtax bb(GSTT) bbis bbin bbaddition bbto bbwhich bbto bbof bbthe bbfollowing bbtypes bbof bbtax? bb- bbANSWER: bb bb➡ bbestate bbtax bbor bbgift bbtax The bbintent bbof bbthe bbGSTT bbis bbto bbtax bbthe bbtransfer bbof bbproperty bbas bbit bbpasses bbfrom bbeach bbgeneration, bband bbis bbin bbaddition bbto bbany bbgift bbor bbestate bbtax bbon bbthe bbtransfer. Under bbcertain bbcircumstances, bban bbalternate bbvaluation bbdate bbcan bbbe bbused bbas bbthe bbestate bbvaluation bbdate. bbWhich bbof bbthe bbfollowing bbcorrectly bbdescribes bbthe bbalternate bbvaluation bbdate bb- bbANSWER: bb bb➡ bbsix bbmonths bbafter bbthe bbdecedent's bbdeath Under bbcertain bbcircumstances, bba bbdate bbof bbsix bbmonths bbafter bbthe bbdecedent's bbdeath bbcan bbbe bbused bbas bbthe bbestate bbvaluation bbdate. bbcompetency bbin bbthis bbarea, bbwhich bbfiduciary bbduty bbhas bbnot bbbeen bbmet? bb- bbANSWER: bb bb➡ bbduty bbof bbcare Lacking bbthe bbcompetency bbto bbprovide bbadvice bbin bbthe bbbest bbinterest bbof bbthe bbclient bbfalls bbunder bbthe bbfiduciary bbduty bbof bbcare. The bbfundamental bbduty bbof bba bbfiduciary bbadviser bbis bbto bblook bbout bbfor bbthe bbclient's bbbest bbinterest. bbWhich bbfiduciary bbduty bbis bbmost bbdirectly bbtied bbto bbmaking bbsure bball bbactions bbare bbbeing bbmade bbsolely bbfor bbthe bbbenefit bbof bbthe bbclient? bb- bbANSWER: bb bb➡ bbduty bbof bbloyalty The bbduty bbof bbloyalty bbrequires bba bbfiduciary bbto bbalways bbput bbthe bbclient's bbinterest bbahead bbof bbtheir bbown, bband bbthat bball bbactions bbbe bbmade bbsolely bbfor bbthe bbbenefit bbof bbthe bbclient. The bb"suitability bbrule" bbis bbone bbof bbthe bbkey bbrules bbof bbthe bb- bbANSWER: bb bb➡ bbFINRA bbConduct bbRules. The bbFINRA bbConduct bbRules bbrequire bbthat bbrecommended bbinvestments bbbe bb"suitable" bbfor bbclients. Which bbone bbof bbthe bbfollowing bbstatements bbcomparing bbthe bbsuitability bbstandard bband bbthe bbfiduciary bbstandard bbis bbcorrect? bb- bbANSWER: bb bb➡ bbVerbal bbdisclosure bbmay bbbe bbadequate bbunder bbthe bbsuitability bbstandard bbbut bbnot bbthe bbfiduciary bbstandard. Fiduciaries bbhave bbwritten bbdisclosure bbrequirements bbwhereas bbverbal bbdisclosure bbmay bbbe bball bbthat bbis bbrequired bbunder bbthe bbsuitability bbstandard. In bb2010 bbDodd bbFrank bbtasked bbthe bbSEC bbto bbstudy bbthe bbfeasibility bbof bbdrafting bba bbharmonized bbfiduciary bbstandard bbfor bbboth bbinvestment bbadvisers bband bbbroker-dealers. bbIn bbApril bb2018 bbthe bbSEC bbproposed bb- bbANSWER: bb bb➡ bbcontinuing bbboth bba bbsuitability bbstandard bbfor bbbrokers bband bba bbfiduciary bbstandard bbfor bbadvisers. The bbproposals bbreleased bbby bbthe bbSEC bbin bbApril bb2018 bbdid bbnot bbrecommend bba bbharmonized bbfiduciary bbstandard bbbut bbrather bbmaintained bbtwo bbdifferent bbstandards—a bbsuitability bbstandard bbfor bbbrokers bband bba bbfiduciary bbstandard bbfor bbadvisers. bbBoth bbstandards bbwould bbhave bbadditional bbrequirements bband bbexpectations bbunder bbthe bbproposed bbrules bbreleased bbby bbthe bbSEC. Under bbERISA, bbwhich bbof bbthe bbfollowing bbstatements bbis bbcorrect? bb- bbANSWER: bb bb➡ bbProhibited bbtransactions bbare bballowed, bbbut bban bbexemption bbmust bbbe bbmet. Prohibited bbtransactions bbapply bbto bbtransactions bbthat bbhave bbsuch bbpotential bbconflicts bbof bbinterest bbthat bbfiduciary bbadvisers bbmust bbeither bbavoid bbthem bbor bbmeet bbthe bbrequirements bbof bban bbexemption. What bbwas bbthe bbapproximate bbdollar bbamount bbof bbU.S. bbretirement bbassets bbheld bbin bbIRA bbaccounts bbat bbthe bbend bbof bb2018? bb- bbANSWER: bb bb➡ bb$8.8 bbtrillion According bbto bbthe bbInvestment bbCompany bbInstitute bbat bbthe bbend bbof bb2018 bbthere bbwas bb$8.8 bbtrillion bbbeing bbheld bbin bbIRA bbaccounts. bbTotal bbU.S. bbretirement bbassets bb(including bball bbU.S. bbretirement bbaccounts, bbnot bbjust bbIRAs) bbstood bbat bb$27.1 bbtrillion bbat bbthe bbend bbof bb2018. bbA bbfee bbof bbjust bb10 bbbasis bbpoints bbon bb$27.1 bbtrillion bbwould bbbe bb$271 bbbillion. Which bbof bbthe bbfollowing bbstatements bbregarding bbthe bblevel bbof bbtrust bbin bbthe bbfinancial bbservices bbindustry bbis bbcorrect? bb- bbANSWER: bb bb➡ bbDespite bbthe bboverall bbstock bbmarket bbrecovery bbsince bbthe bbmarket bbmeltdown bbin bb2008, bbtrust bblevels bbof bbfinancial bbservices bbremain bblow. This bbis bbtrue. bbEver bbsince bbthe bbGreat bbRecession bbin bb2008-2009, bbtrust bblevels bbof bbthe bbfinancial bbservices bbindustry bbhas bbremained bblow bbrelative bbto bbother bbsectors, bbaccording bbto bbthe bbEdelman bbTrust bbBarometer. The bbadvent bbof bbadvanced bbtechnology bbhas bb- bbANSWER: bb bb➡ bbmade bbmanagement bbof bbbrokerage bbfirms bbmore bbdifficult. With bbthe bbincreased bbsophistication bbof bbtechnical bbspecialists, bbmanaging bband bbcontrolling bbthem bbhas bbbecome bbmore bbdifficult bbfor bbmanagers bbat bbbrokerage bbfirms. Which bbof bbthe bbfollowing bbis bbthe bbmost bbimportant bbarea bbof bbconcern bbthat bbwas bbaddressed bbin bbthe bbDodd-Frank bbWall bbStreet bbReform bbAct? bb- bbANSWER: bb bb➡ bbsystemic bbrisk Concern bbover bbsystemic bbrisk bband bbthe bbneed bbto bbmaintain bba bbstable bbfinancial bbsystem bbis bbthe bbprimary bbissue bbthat bbDodd-Frank bbaddressed. bbThe bbfinancial bbsystem bbitself bbalmost bbcame bbto bba bbgrinding bbhalt bbin bb2008. bbDerivatives bbdid bbcontribute bbto bbthe bbcrisis, bbbut bbthe bbcrisis bbspread bbwell bbbeyond bbthe bbderivatives bbmarket bbinto bbareas bbthat bbno bbone bbexpected, bbsuch bbas bbthe bbcommercial bbpaper bbmarket. bbHedge bbfund bbregulation bbwas bbaddressed bbbut bbwas bbnot bbthe bbmost bbimportant bbarea bbof bbconcern. bbDodd-Frank bbasked bbthe bbSEC bbto bblook bbinto bba bbuniform bbfiduciary bbstandard bbfor bbboth bbbroker-dealers bband bbinvestment bbadvisers. Roger bbJones bbis bbconsidering bbrecommending bbone bbof bbtwo bbmutual bbfunds bbfor bba bbclient. bbAlthough bbboth bbfunds bbare bbgenerally bbappropriate bbfor bbthe bbclient, bbone bbis bba bbproprietary bbfund bbthat bbpays bbRoger bba bbhigher bbcommission bband bbthe bbother bbhas bba bbbetter bbrisk/return bbprofile. bbRoger bbdecides bbto bbrecommend bbthe bblatter bbfund bbto bbthe bbclient. bbWith bbwhich bbof bbthe bbfollowing bbfiduciary bbduties bbhas bbRoger bbcomplied? bb- bbANSWER: bb bb➡ bbloyalty The bbfiduciary bbduty bbof bbloyalty bbrequires bbthe bbadviser bbto bblook bbout bbfor bbthe bbbest bbinterest bbof bbthe bbclient, bbwhich bbis bbwhat bbRoger bbhad bbdone. bbThe bbproprietary bbproduct bbmay bbbe bbsuitable, bbbut bbnot bbin bbthe bbbest bbinterest bbof bbthe bbclient bbsince bbanother bbsimilar bbfund bbis bbavailable bbwith bba bbbetter bbrisk/return bbprofile. Which bbof bbthe bbfollowing bbstatements bbregarding bbthe bbfiduciary bbstandard bbis bbcorrect? bb- bbANSWER: bb bb➡ bbThe bbfiduciary bbstandard bbis bbconsidered bba bbhigher bbstandard bbthan bbthe bbsuitability bbstandard. The bbfiduciary bbstandard bbis bba bbhigher bbstandard bbthan bbthat bbrequired bbunder bbthe bbsuitability bbstandard. bbFor bbexample, bban bbinvestment bbrecommendation bbmight bbbe bbsuitable, bbbut bbnot bbnecessarily bbin bbthe bbbest bbinterest bbof bbthe bbclient. What bbis bbthe bbprimary bbfunction bbof bbcentral bbclearing bbcounterparties bb(CCPs) bbthat bbhave bbbeen bbset bbup bbas bbrequired bbby bbthe bbDodd-Frank bbWall bbStreet bbReform bband bbConsumer bbProtection bbAct bbof bb2010? bb- bbANSWER: bb bb➡ bbto bbfacilitate bbthe bbnetting bbof bbswap bbcontracts CCPs bbfacilitate bbthe bbnetting bbof bbswap bbcontracts bbin bborder bbto bbreduce bbsystematic bbrisk. The bbSEC bbcommissioned bba bbRAND bbstudy, bbwhich bbfound bbthat bbthere bbwas bba bbgreat bbdeal bbof bbconfusion bbfor bbinvestors bbas bbfar bbas bbunderstanding bbthe bbdifferences bbbetween bb- bbANSWER: bb bb➡ bbbroker-dealers bband bbinvestment bbadvisers. The bbRAND bbstudy bbfound bbthat bbthere bbwas bba bbgreat bbdeal bbof bbinvestor bbconfusion bbbetween bbinvestment bbadvisers bband bbbroker-dealers, bbincluding bbconfusion bbover bbtheir bbduties, bbthe bbtitles bbthey bbuse, bbthe bbservices bbthey bboffer, bband bbthe bbfees bbthey bbcharge. The bbimpartial bbconduct bbstandards bbthat bbwere bbenacted bbby bbthe bbDepartment bbof bbLabor bb(and bbthen bbvacated bbby bbthe bbcourt) bbrequire bball bbof bbthe bbfollowing bbexcept bb- bbANSWER: bb bb➡ bbeliminate bbconflicts bbof bbinterest. The bbimpartial bbconduct bbstandards bbrequire bbthat bbany bbadvice bbbe bbin bbthe bbbest bbinterest bbof bbthe bbclient, bbthat bbany bbfee bbbe bbreasonable, bband bbthat bbthe bbadviser bbdoes bbnot bbmake bbany bbmisleading bbstatements. bbIt bbis bba bbrequirement bbthat bbconflicts bbof bbinterest bbmust bbbe bbdisclosed, bbnot bbeliminated. What bbis bbthe bbestimated bbannual bbcost bbof bbconflicted bbadvice bbaccording bbto bbthe bb2015 bbWhite bbHouse bbreport? bb- bbANSWER: bb bb➡ bb1.0% The bbannual bbcost bbof bbconflicted bbadvice bbis bbabout bb1% bba bbyear, bbaccording bbto bbthe bbWhite bbHouse bbreport. bbVarious bbsources bbhave bbdisputed bbthis bbamount, bbbut bbthe bbgeneral bbconsensus bbis bbthat bbthere bbare bbretirement bbinvestors bbpaying bbtoo bbmuch bbin bbfees, bbwhich bbcan bbsignificantly bbimpact bbthe bbvalue bbof bbtheir bbnest bbegg bbwhen bbthey bbretire. bbAt bbthe bbend bbof bb2018, bbU.S. bbretirement bbassets bbtotaled Which bbof bbthe bbfollowing bbdescribes bbone bbpurpose bbof bban bbinvestment bbpolicy bbstatement? bb- bbANSWER: bb bb➡ bbto bbprovide bbguidelines bbaround bbwhich bbthe bbportfolio bbis bbto bbbe bbconstructed bband bbmanaged One bbof bbthe bbpurposes bbof bban bbinvestment bbpolicy bbstatement bbis bbto bbprovide bbguidelines bbfor bbmanaging bbthe bbportfolio. bbThe bbother bbanswers bbare bbelements bbthat bbshould bbbe bbin bban bbinvestment bbpolicy bbstatement. Which bbof bbthe bbfollowing bbare bbelements bbof bbany bbinvestment bbpolicy bbstatement? bb- bbANSWER: bb bb➡ bbI. bbthe bbclient's bbinvestment bbgoal II. bbsuitable bband bbunsuitable bbinvestment bbvehicles III. bban bbacceptable bbrisk bblevel IV. bba bbprovision bbfor bbperiodic bbreview As bbthe bbinvestment bbpolicy bbstatement bbformulation bbmoves bbto bbpolicy bbimplementation, bb- bbANSWER: bb bb➡ bbthe bbinvestment bbprofessional bbtakes bba bbleading bbrole. The bbinvestment bbprofessional, bbusing bbthe bbguidelines bbalready bbestablished bbin bbthe bbinvestment bbpolicy bbstatement, bbtakes bbthe bblead bbrole bbduring bbthe bbpolicy bbimplementation bbphase bbof bbthe bbprocess. An bbinvestor bbnotices bbthat bbtechnology bbstocks bbare bbin bba bbstrong bbbull bbmarket bband bbwants bbto bbtake bbadvantage bbof bbit. bbEven bbthough bbvaluations bbare bbat bbrecord bbhigh bblevels, bbhe bbbuys bba bbtechnology bbstock bbthat bba bbbrokerage bbfirm bbis bbrecommending. bbWhich bbone bbof bbthe bbfollowing bbis bbthe bbinvestor bbdemonstrating? bb- bbANSWER: bb bb➡ bbrationalization/illusion bbof bbvalidity Rationalization/illusion bbof bbvalidity bboccurs bbwhen bban bbinvestor bbrelies bbon bbinformation bbthat bbsupports bbher bbdecisions bbor bbignores bbor bbdismisses bbinformation bbthat bbdoes bbnot bbsupport bbthose bbdecisions. One bbchange bbin bba bbclient's bbsituation bbthat bbwould bbrequire bban bbadjustment bbin bbthe bbasset bbmanagement bbprocess bbwould bbbe bb- bbANSWER: bb bb➡ bba bbsudden bbearly bbretirement bbfrom bbhis bbemployer. A bbsudden bbearly bbretirement bbis bba bbmajor bbchange bbthat bbwould bbrequire bban bbadjustment bbto bbthe bbasset bbmanagement bbprocess. Dan bbSmith bbhas bbbonds bbmaturing bbin bbtwo bbweeks. bbSince bbhe bbbought bbthe bbbonds, bbinterest bbrates bbhave bbfallen. bbDan's bbbonds bbare bbmost bblikely bbsubject bbto bbwhich bbone bbof bbthe bbfollowing bbrisks? bb- bbANSWER: bb bb➡ bbreinvestment bbrate bbrisk Reinvestment bbrate bbrisk bbis bbthe bbrisk bbassociated bbwith bbreinvesting bbinterest bband/or bbprincipal bbpayments bbwhen bbinterest bbrates bbhave bbfallen. Treynor bbRatio/Index bb- bbANSWER: bb bb➡ bbthe bbhigher bbthe bbbetter—so bbthe bblogical bbconclusion bbwould bbbe bbthat bbPortfolio bbA bbhad bbbetter bbrisk-adjusted bbperformance bbthan bbPortfolio bbB. Asset bballocation bbcan bbbest bbbe bbdefined bbas bbthe bbprocess bbof bb- bbANSWER: bb bb➡ bbdistributing bbportfolio bbinvestments bbamong bbvarious bbinvestment bbcategories. The bbessence bbof bbasset bballocation bbis bbhaving bbportfolio bbinvestments bbdivided bbamong bbdifferent bbinvestment bbcategories. Based bbon bbhistoric bbperformance bbdata bbin bbthe bbcourse, bbwhich bbclass bbof bbassets bbhas bbprovided bbthe bbgreatest bbpretax bbtotal bbreturn bbsince bb1926? bb- bbANSWER: bb bb➡ bbsmall bbcap Which bbone bbof bbthe bbfollowing bbis bba bbcharacteristic bbof bbmortgage-backed bbsecurities? bb- bbANSWER: bb bb➡ bbQuoted bbyields bbare bbbased bbupon bbanticipated bbprepayments bbof bbthe bbunderlying bbmortgages. Mortgage-backed bbsecurities bbpay bbmonthly bbpayments bbthat bbvary bbfrom bbmonth bbto bbmonth bbdepending bbon bbany bbprepayments bbof bbprincipal. bbAs bbsuch, bbyields bbare bbquoted bbbased bbon bbthese bbanticipated bbprepayments. According bbto bbresearch bbreports bbfrom bbyour bbfirm, bbCodeHead bbSoftware's bbearnings bbfor bbthis bbyear bbare bbestimated bbto bbbe bb$2.00 bband bbnext bbyear bbare bbestimated bbto bbbe bb$2.25 bbper bbshare. bbThe bbcurrent bbP/E bbratio bbof bbsimilar bbsoftware bbvendors bbis bb15, bbbut bbCodeHead bbtypically bbsells bbat bba bb10% bbpremium bbto bbthese bbother bbvendors. bbWhat bbstock bbprice bbwould bbyou bbestimate bbfor bbCodeHead bbnext bbyear? bb- bbANSWER: bb bb➡ bb$37.13 First bbdetermine bbthe bbP/E bbfor bbCodeHead. bbIt bbsells bbat bba bb10% bbpremium bbso bbthe bbP/E bbof bbthe bbindustry, bb15, bbhas bbto bbbe bbincreased bbby bb10%. bb10% bbof bb15 bb= bb1.5, bbwhich bbadded bbto bb15 bb= bb16.5. bbThen bbtaking bbnext bbyear's bbearnings bbof bb$2.25 bb× bb16.5 bb= bb$37.125 bbor bb$37.13. If bbthe bbmarket bbrate bbon bbbonds bbsimilar bbto bbBond bbA bbincreases, bbBond bbA's bbpresent bbvalue bbwill bb- bbANSWER: bb bb➡ bbdecrease. When bbmarket bbinterest bbrates bbincrease, bbbond bbprices bb(present bbvalue) bbdecreases. Which bbone bbof bbthe bbfollowing bbcorrectly bblists bbcharacteristics bbof bbthe bbdownturn bbperiod bbof bba bbbusiness bbcycle? bb- bbANSWER: bb bb➡ bbdeclining bbinterest bbrates, bbincreased bbunemployment, bblower bblending bbactivities In bba bbdownturn bbeconomic bbperiod, bbthere bbis bbusually bbincreased bbunemployment, bbdeclining bbinterest bbrates, bblower bbconsumer bbdemand bband bbdecreased bblending bbactivities. Tactical bbasset bballocation bbis bbutilized bbto bb- bbANSWER: bb bb➡ bbmove bbassets bbfrom bbthose bbthat bbappear bbovervalued bbto bbthose bbthat bbappear bbundervalued. Tactical bbasset bballocation bbuses bbsecurities bbselection bband bbmarket bbtiming bbtechniques bbto bbshift bbassets bbfrom bbthose bbperceived bbto bbbe bbovervalued bbto bbthose bbthat bbare bbperceived bbto bbbe bbundervalued. The bbrelationship bbbetween bbinvestment bbstrategy bband bbinvestment bbpolicy bbis bbone bbin bbwhich bb- bbANSWER: bb bb➡ bbinvestment bbstrategy bbis bbcompliant bbwith bbthe bbinvestment bbpolicy. Investment bbpolicy bbprovides bbthe bbguidelines bbto bbbe bbused bbin bbmanaging bba bbportfolio, bbincluding bbinvestment bbstrategies bbthat bbmay bbbe bbemployed. A bbbarrier bbof bbeffective bbinvestment bbstrategy bbis bb- bbANSWER: bb bb➡ bbinadequate bbtime bbhorizons One bbof bbthe bbbiggest bbenemies bbof bbeffective bbstrategy bbis bbinadequate bbtime bbhorizons, bbsince bbmany bbeffective bbstrategies bbcan bbtake bbyears bbto bbunfold. What bbare bbsome bbbond bbstrategies? bb- bbANSWER: bb bb➡ bb1. bbbarbell 2. bbpure bbyield bbpickup bbswap 3. bbtax bbswap Which bbone bbof bbthe bbfollowing bbis bbpart bbof bbBenjamin bbGraham's bbapproach bbto bbvalue bbinvesting? bb- bbANSWER: bb bb➡ bbThe bbdividend bbyield bbshould bbbe bbno bbless bbthan bbtwo-thirds bbof bbthe bbAAA bbbond bbyield. One bbof bbGraham's bbguidelines bbwas bbthat bbthe bbdividend bbyield bbshould bbbe bbno bbless bbthan bbtwo-thirds bbof bbthe bbAAA bbbond bbyield. A bbpotential bbimplication bbof bba bbsalary bbreduction bbplan bbis bbthat bb- bbANSWER: bb bb➡ bbIncome bbtax bbis bbpaid bbat bbthe bbemployee's bbmarginal bbtax bbrate bbin bbretirement, bbwith bbthe bbexpectation bbit bbwill bbbe bba bblower bbrate bbat bbthat bbtime. bbsufficiently bblong bbperiod bbof bbtime bbfor bbthe bbinflation bbrate bbto bbsignificantly bbimpact bbone's bbstandard bbof bbliving.(LO bb6-1) Earned bbincome bbusually bbceases bbwhen bba bbperson bbretires. bbFrom bbwhat bbsources bbwill bba bbretired bbperson bbtypically bbreceive bbincome? bb- bbANSWER: bb bb➡ bbinvested bbsavings, bbSocial bbSecurity, bband bbemployer-sponsored bbretirement bbplans Typically, bbthere bbare bbthree bbincome bbsources bbthat bbare bbused bbto bbpay bbretirement bbexpenses: bbSocial bbSecurity, bbemployer-sponsored bbpension bband bbprofit bbsharing bbplans, bband bbthe bbindividual's bbaccumulated bbinvestments. bbThese bbsources bbare bbknown bbas bbthe bb"three-legged bbstool" bbof bbretirement bbincome. Which bbone bbof bbthe bbfollowing bbbest bbexplains bba bbfundamental bbinvestment bbstrategy bbfor bbaccumulating bbfunds bbto bbbe bbused bbduring bbretirement? bb- bbANSWER: bb bb➡ bbYou bbshould bbbegin bbinvesting bbmany bbyears bbbefore bbretirement bbso bbthat bbcompounded bbreturns bbincrease bbyour bbretirement bbfund. In bbaccumulating bba bbpool bbof bbcapital bbto bbsupport bbretirement bbincome, bbthe bbfirst bbprinciple bbis bbto bbbegin bbas bbearly bbas bbpossible, bbeven bbif bbthe bbamounts bbare bbsmall. bbThe bbmathematics bbof bbcompounding bbunderscore bbthe bbneed bbto bbbegin bbearly bband bbstay bbwith bbit. A bbclient, bbage bb55, bbtakes bba bb$3,000 bbdistribution bbfrom bbhis bbrollover bbIRA bbto bbpay bbfor bba bbsemester bbof bbhis bbson's bbcollege bbtuition; bbhis bbson bbis bbage bb21. bbWhich bbone bbof bbthe bbfollowing bbcorrectly bbexplains bbthe bbtax bbconsequences bbfor bbthe bbfather? bb- bbANSWER: bb bb➡ bbThe bbentire bbdistribution bbis bbsubject bbto bbincome bbtax, bbbut bbit bbis bbfree bbfrom bbthe bb10% bbearly bbwithdrawal bbpenalty. There bbgenerally bbis bba bb10% bbpenalty bb(with bbsome bbexceptions) bbfor bbdistributions bbtaken bbfrom bban bbIRA bbif bbthe bbindividual bbis bbunder bb59½ bbyears bbold; bbthese bbsame bbdistributions bbare bbalso bbsubject bbto bbcurrent bbincome bbtaxation. bbPenalty-free bbwithdrawals bbmay bbbe bbtaken bbfrom bbrollover bbIRAs bbif bbthe bbwithdrawal bbis bbto bbbe bbused bbpay bbfor bbqualified bbeducation bbexpenses, bbsuch bbas bbcollege bbtuition bbfor bba bbson bbor bbdaughter. Joan bbAllen bbrecently bbterminated bbfrom bbthe bbCarson bbCounty bbSchool bbDistrict. bbShe bbplans bbto bbroll bbher bb403(b) bbplan bbaccount bbinto bbher bbIRA bb(account bbnumber bb235472) bbat bbMega bbMutual bbFunds bband bbwants bbto bbavoid bbthe bb20% bbwithholding. bbWhich bbone bbof bbthe bbfollowing bbstatements bbcorrectly bbinstructs bbher bbon bbthe bbprocedure? bb- bbANSWER: bb bb➡ bbInstruct bbthe bbplan bbadministrator bbto bbmake bbthe bbdistribution bbcheck bbto bb"Mega bbMutual bbFunds, bbaccount bb#235472, bbfor bbthe bbbenefit bbof bbJoan bbAllen." bbShe bbshould bbmail bbto bbor bbdeposit bbthat bbcheck bbwith bbMega bbMutual bbFunds. After bbseparation bbfrom bbservice, bba bb403(b) bbplan bbparticipant bbcan bbelect bbto bbmove bbher bbassets bbto bbcertain bbother bbretirement bbarrangements. bbAnd, bblike bbdistributions bbfrom bbemployer bbplans, bbthe bbamounts bbmust bbbe bbdirectly bbrolled bbover bbfrom bbthe bb403(b) bbcustodian bbto bbthe bbother bbretirement bbarrangement bbto bbavoid bba bb20% bbwithholding bbtax. George bbBillups bbrecently bbretired. bbPrior bbto bbhis bbretirement, bbhe bband bbhis bbwife bbagreed bbthat bbshe bbshould bbsign bbthe bbrequired bbwaiver bbto bballow bbthe bbmoney bbpurchase bbplan bbto bbpay bbGeorge's bbretirement bbincome bbas bba bbsingle bblife bbannuity bbwith bbno bbperiod bbcertain. bbWhich bbone bbof bbthe bbfollowing bbstatements bbbest bbexplains bbwhy bbGeorge bband bbhis bbwife bbwould bbselect bbthe bbsingle bblife bbannuity bbdistribution bboption bbfrom bbhis bbretirement bbplan? bb- bbANSWER: bb bb➡ bbto bbmaximize bbthe bbperiodic bbpayment bbbecause bbGeorge bband bbhis bbwife bbhave bbno bbneed bbor bbdesire bbto bbhave bbany bbportion bbof bbthe bbplan bbbenefits bbleft bbafter bbhis bbdeath Persons bbwith bbno bbdependents bbor bbothers bbthey bbwish bbto bbbenefit, bband bbthose bbwho bbwish bbto bbmaximize bbmonthly bbcash bbflow, bbmay bbfind bba bbsingle bblife bbannuity bbattractive. bbA bbpermanent bblife bbinsurance bbplan bbmay bbmake bbthis bbattractive bbeven bbto bbmarried bbpersons bbor bbthose bbwho bbwant bbto bbleave bban bbestate. Which bbone bbof bbthe bbfollowing bbexplains bban bbinvestment bbplanning bbconsideration bbduring bbretirement bbthat bbis bbrelated bbto bbthe bblength bbof bbthe bbretirement bbperiod? bb- bbANSWER: bb bb➡ bbBecause bbthe bbretirement bbperiod bbcan bbbe bblong, bbclients bbshould bbconsider bbtaking bbgreater bbrisk bbfor bbgreater bbreturn bbto bbkeep bbup bbwith bbinflation. Once bbretirement bboccurs, bbthe bbinvestment bbtime bbhorizon bbfor bbretirement bbincome bbcan bbbe bblong, bbbut bbit bbis bbnot bbcertain bbin bbits bblength. bbThe bbimplication bbfor bballocation bbdecisions bbis bbthat bba bbfair bbamount bbof bbrisk bbcan bbbe bbtaken bbwith bba bbsubstantial bbamount bbof bbthe bbportfolio. bbSudden bb"conservative" bballocation bbchanges bbdue bbto bbthe bbmere bbfact bbof bbretirement bbbeginning bbare bbnot bbin bborder bbfor bbclients bbwho bbplan bbfor bba bblong bbretirement bbperiod—25, bb30, bbeven bb35 bbyears—and bbwho bbhave bbincreasing bbincome bbneeds bbto bbmerely bbkeep bbup bbwith bbinflation. Which bbone bbof bbthe bbfollowing bbprovides bba bbmeans bbby bbwhich bba bbperson bbwho bbhas bbaccumulated bba bblarge bbamount bbof bbher bbcompany's bbstock bbcan bbconvert bbthat bbstock bbinto bba bbcash bbflow bbstream bbfor bbretirement bb(without bbher bbselling bbthe bbstock)? bb- bbANSWER: bb bb➡ bba bbcharitable bbremainder bbtrust Clients bbwho bbare bbcash bbflow bbpoor, bbbut bbasset bbrich, bbmay bbfind bbestablishing bba bbcharitable bbremainder bbtrust bb(CRT) bbwith bbappreciated bbequities bbto bbbe bban bbideal bbsolution bbto bbincreasing bbtheir bbretirement bbincome. bbMeeting bbthe bbrequirements bbfor bbsuch bbtrusts, bbas bbdelineated bbin bbthe bbtax bbcode, bbcan bbresult bbin bbturning bba bbhighly bbappreciated bbasset bbthat bbproduces bblittle bbor bbno bbincome bbinto bba bbsource bbof bblifetime bbincome bbthat bbalso bbcarries bban bbincome bbtax bbdeduction. Which bbone bbof bbthe bbfollowing bbgenerally bbrepresents bbthe bbtax bbconsequences bbto bban bbemployer bband bbemployee bbunder bba bbnonqualified bbdeferred bbcompensation bbplan? bb- bbANSWER: bb bb➡ bbAn bbemployer bbwill bbreceive bba bbdeduction bbwhen bbthe bbemployee bbrecognizes bbincome. As bba bbgeneral bbrule, bban bbemployer-sponsor bbof bba bbnonqualified bbdeferred bbcompensation bbplan bbwill bbreceive bba bbdeduction bbfor bbbenefits bbpaid bbby bbthe bbplan bbwhen bbsuch bbbenefits bbare bbtaxable bbincome bbto bbthe bbparticipant. Which bbone bbof bbthe bbfollowing bbis bba bbcorrect bbstatement bbof bba bbtax bbconsequence bbof bban bboff-shore bbrabbi bbtrust? bb- bbANSWER: bb bb➡ bbUnder bbSection bb409A, bbthe bbemployee bbis bbtaxed bbimmediately bbon bball bbdeferrals bbto bbthe bbplan bband bbinterest bbdating bbfrom bbeach bbdeferral, bband bbis bbassessed bba bb20% bbpenalty bbon bbthe bbresulting bbtaxable bbincome. The bbemployee bbis bbtaxed bbimmediately bbon bball bbdeferrals bbto bbthe bbplan bband bbinterest bbdating bbfrom bbeach bbdeferral, bband bbis bbassessed bba bb20% bbpenalty bbon bbthe bbresulting bbtaxable bbincome. A bbmajor bbresponsibility bbof bbFINRA bbis bb- bbANSWER: bb bb➡ bbdeveloping bbrules bband bbregulations bbfor bbits bbmembers. Hi-Tech bbSolutions bbInc. bbis bba bbsmall bbpublicly bbtraded bbcorporation. bbThe bbcompany bbwants bbto bbpersuade bbTom bbSalazar, bbits bbvice bbpresident bbof bbsales, bbto bbcontinue bbwith bbthe bbcompany bband bbis bbseeking bban bbincentive bbfor bbTom bbto bbachieve bbthis bbend. bbHowever, bbthe bbcompany bbneeds bbto bbavoid bbany bbwithdrawal bbfrom bbits bbmuch-needed bbcash bbaccount. bbBased bbon bbthese bbcharacteristics, bbHi-Tech bbSolutions bbInc. bbshould bbestablish bb- bbANSWER: bb bb➡ bba bbrestricted bbstock bbplan. The bbfact bbthat bbthe bbcompany bbdoes bbnot bbwant bbto bbincrease bbcosts bbwould bbindicate bbthey bbshould bbuse bbthe bbrestricted bbstock bbplan bbsince bbit bbdoes bbnot bbcreate bbadditional bbexpenses bbor bbclaims bbon bbcash bbflow. bbAll bbthe bbother bbchoices bbwould bbincrease bbcompany bbexpenses. Of bbthe bbfollowing bboptions, bbwhich bbis bbthe bbmost bbappropriate bbuse bbof bblife bbinsurance bbby bba bbbusiness? bb- bbANSWER: bb bb➡ bbProvide bbmoney bbto bbhelp bbcontinue bbthe bbbusiness bbat bbthe bbdeath bbof bba bbpartner bbor bbother bbowner. When bba bbkey bbperson bb(especially bba bbpartner bbor bbother bbowner) bbdies, bblife bbinsurance bbcan bbprovide bbneeded bbmoney bbto bbfund bba bbbuy-sell bbagreement bbor bbto bbkeep bbthe bbbusiness bboperating. As bbdescribed bbin bbthis bbcourse, bbmany bbindividuals bband bbhouseholds bboverlook bbthe bbpotential bbneeds bbfor bb- bbANSWER: bb bb➡ bbdisability bbincome bband bblong-term bbcare bbinsurance. Both bbdisability bbincome bband bblong-term bbcare bbinsurance bbare bbintended bbto bbprovide bbincome bbwhen bban bbindividual bbis bbunable bbto bbwork bband bbmay bbbe bbincurring bbcosts bbfor bbmedical bbcare. A bbnonspringing bbdurable bbpower bbof bbattorney bb- bbANSWER: bb bb➡ bbremains bbeffective bbafter bbthe bbprincipal bbbecomes bbincapacitated. The bbvery bbpurpose bbof bbany bbdurable bbpower bbof bbattorney bbis bbto bbgive bbthe bbattorney-in-fact bbauthority bbto bbact bbafter bbthe bbprincipal bbbecomes bbincapacitated. bbHowever, bbsuch bbauthority bbdoes bbnot bbsurvive bbthe bbprincipal's bbdeath. bbSuch bbauthority bbis bbcreated bbin bban bbindependent bbdocument, bband bbis bbeffective bbimmediately bbin bbthis bbtype bbof bbpower bbof bbattorney. The bbInvestment bbCompany bbAct bbof bb1940 bbaddresses bbwhich bbone bbof bbthe bbfollowing? bb- bbANSWER: bb bb➡ bbthe bbrequirement bbthat bbmutual bbfunds bbmust bbsend bbsemiannual bband bbannual bbreports bbto bbshareholders One bbprovision bbof bbthe bbInvestment bbCompany bbAct bbof bb1940 bbis bbthat bbsemiannual bband bbannual bbreports bbmust bbbe bbsent bbto bbshareholders. A bb"walk bbin" bbcustomer bbtells bbyou bbhow bbhis bbbest bbfriend bbhas bbmade bba bbprofit bbthrough bbrapid bbtrading bbof bbsmall bbover-the-counter bb(OTC) bbstocks. bbHe bbwants bbto bbdo bbthe bbsame. bbYou bbexplain bbthe bbhigh bbrisks bbinvolved bbin bbsuch bba bbstrategy bband bbyour bbpersonal bbreservations bbabout bbit. bbHe bbgives bbyou bball bbthe bbinformation bbyou bbneed bbfor bbyour bbnew bbaccount bbform. bbThe bbnext bbweek, bbhe bbrequests bbthat bbyou bbbuy bblarge bbpositions bbin bbtwo bbthinly bbtraded bbOTC bbissues. bbYou bbthink bbthe bborder bbis bbtoo bbrisky bbgiven bbhis bbcircumstances bband bbtell bbhim bbso, bbbut bbhe bbinsists bbthat bbyou bbinitiate bbthe bbtransaction. bbWhich bbone bbof bbthe bbfollowing bbwould bbrepresent bban bbappropriate bbcourse bbof bbaction? bb- bbANSWER: bb bb➡ bbConsult bbwith bbyour bbbranch bbmanager bbabout bbwhat bbto bbdo. When bbfaced bbwith bba bbdifficult bbcustomer bbsituation, bbinvestment bbprofessionals bbshould bbconsult bbwith bbtheir bbbranch bbmanager. Which bbone bbof bbthe bbfollowing bbis bba bbsource bbof bbethical bbconflict bbin bbthe bbsecurities bbindustry? bb- bbANSWER: bb bb➡ bbunrealistic bbclient bbexpectations A bbclient bbwith bbunrealistic bbexpectations bbcan bbresult bbin bba bbsituation bbwhereby bbthe bbclient bbexpects bba bbvery bbhigh bbrate bbof bbreturn. bbIn bbtrying bbto bbget bbthat bbreturn, bbthe bbinvestment bbprofessional bbmight bbhave bbthe bbethical bbconflict bbof bbselling bban bbinvestment bbwith bbhigh bbrisk, bbwhile bbknowing bbthat bbthe bbclient bbshould bbnot bbtake bbthat bbmuch bbrisk. The bb"duty bbof bbloyalty" bbis bbthe bb- bbANSWER: bb bb➡ bbfiduciary bbduty. The bbfiduciary bbduty bbis bbalso bbknown bbas bbthe bbduty bbof bbloyalty, bbrequiring bbthe bbutmost bbgood bbfaith. You bbhave bbjust bbsold bbone bbof bbyour bbcustomers bbsome bbspeculative bbstocks bbwithout bbknowing bbher bbrisk bbtolerance bblevel. bbIn bbwhich bbone bbof bbthe bbfollowing bbethical bbduties bbmay bbyou bbhave bbfailed bbyour bbcustomer? bb- bbANSWER: bb bb➡ bbduty bbto bbdiagnose An bbinvestment bbprofessional bbwho bbdoes bbnot bb"know bbthe bbcustomer," bbincluding bbher bbrisk bbtolerance bblevel, bbviolates bbthe bbduty bbto bbdiagnose. Confidentiality bbis bban bbimportant bbethical bbobligation bbfor bball bbthose bbwho bbrender bbinvestment bbadvice. bbThe bbCFP bbBoard bband bbNASAA bballow bbthe bbunauthorized bbdisclosure bbof bbconfidential bbclient bbinformation bbduring bb- bbANSWER: bb bb➡ bblegal bbprocedures bbthat bbrequire bbdisclosure. The bbprinciple bbof bbconfidentiality bbmeans bbensuring bbthat bbinformation bbis bbaccessible bbonly bbto bbthose bbauthorized bbto bbhave bbaccess, bbso bbit bbdoes bbnot bbpreclude bbdisclosure bbrequired bbunder bblegal bbproceedings. A bbpotential bbclient, bbDr. bbShepard, bbis bbcontacted bbby bbJames bbHyde, bban bbinvestment bbprofessional. bbDr. bbShepard bbtells bbJames bbthat bbhe bbis bba bbregular bbinvestor bbin bbbiotech bbcompanies, bband bbthat bbif bbJames bbwas bbknowledgeable bbabout bbthe bbindustry, bbhe bbwould bbdo bbbusiness bbwith bbhim. bbJames bbtells bbthe bbdoctor bbthat bbhe bbhas bblots bbof bbcontacts bbin bbthe bbindustry bband bbthat bbmany bbof bbhis bbbest bbclients bbare bbactive bbinvestors bbin bbbiotech bbissues. bbActually, bbJames bbhas bbonly bbone bbsuch bbclient, bbfrom bbwhom bbhe bbtakes bbunsolicited bborders. bbJames bbclearly bbis bbviolating bbthe bbprinciple bbof bb- bbANSWER: bb bb➡ bbintegrity The bbBIC bb(best bbinterest bbcontract) bbexemption bbfrom bbthe bbvacated bbDepartment bbof bbLabor bbfiduciary bbrule bbrequires bbadvisers bbto bbdo bball bbof bbthe bbfollowing bbexcept bb- bbANSWER: bb bb➡ bbprovide bbthe bbbest bbrecommendation. The bbvacated bbDOL bbfiduciary bbstandard bbrequires bbthat bbany bbadvice bbbe bb"prudent" bband bbnot bbthe bbmore bbdifficult bbto bbdefine bb"best." bbThe bbDOL bbstates bbthat bb"prudent bbadvice bbis bbadvice bbthat bbis bbbased bbon bbthe bbinvestment bbobjectives, bbrisk bbtolerance, bbfinancial bbcircumstances, bband bbneeds bbof bbthe bbretirement bbinvestor, bbwithout bbregard bbto bbthe bbfinancial bbor bbother bbinterests bbof bbthe bbadviser, bbfinancial bbinstitution, bbor bbtheir bbaffiliates, bbrelated bbentities, bbor bbother bbparties."