Which TWO of the following represent accurate statements concerning growth and value investing?
1) growth investors are willing to pay high valuation ratios
2) growth investors prefer stocks trading close to their book value
3) value investors are willing to pay high valuation ratios
4) value investors prefer stocks trading close to their book value
C) 1,4
Which of the following represents a valuation ratio?
C) price-to-book
Which of the following would typically interest a value investor?
1) stock trading at its book value
2) stock trading below its book value
3) stock trading at a high multiple to earnings
4) stock trading at a low multiple to earnings
B) 1,2,4
Which of the following represent(s) (an) accurate statement(s) concerning equity mutual funds?
C) all choices listed
Which of the following is/are related to a belief in efficient markets?
Which TWO of the following are considered the most important in determinig investment results?
1) timing
2) investment manager's skill and experience
3) time horizon
4) asset allocation
C) 3,4
Use the followingt information to determine an investor's capital gains liability for Tax Year 2010:
--Bought 1,000 shares ORCL January 5, 2009 @15
--Sold 1,000 shares ORCL January 6 2010 @21
--Bought 1,000 shares MSFTJanuary 4 2009 @27
--Sold 1,000 shares MSFT January 4, 2010 @25
B) $4,000 long-term capital gain
One of your investing clients is a married couple interested in gifting various relatives as much as possible without incurring tax liability. In 2010 the husband gave his nephew, Jason, $18,000, and the wife gave her niece, Jennifer, $19,000. Therefore, which of the following accurately addresses the tax ramifications?
A) the couple can choose to split the gifts without incurring gift tax liability, but must file a return
Which of the following features do CESA (Coverdell Educational Savings Accounts) and 529 Savings Plans have in common?
1. qualified withdrawals are exempt from federal taxation
2. may be used to cover middle school expenses
3. become the property of the beneficiary at the age of majority
4. may be used to cover college tuition, books, room & board
B) 1,4 only
Which of the following represent(s) taxable withdrawals from a Traditional IRA?
1. first-time purchase of a primary residence, to $10,000
2. withdrawals as a result of disability
withdrawals after age 59 1/2
A) 1, 2, 3
Use the following information to determine an investor's capital gains liability for Tax Year 2010:
--Bought 1,000 shares ORCL January 5, 2009 @15
--Sold 1,000 shares ORCL January 6, 2010 @12
--Bought 1,000 shares MSFT January 4, 2009 @27
--Sold 1,000 shares MSFT January 4, 2010 @36
D) $6,000 short-term capital gain
A client would expect to take federally tax-free withdrawals from which of the following plans in most cases?
1. SEP-IRA
2. Roth IRA
3. Health Savings Account
4. 529 Plan
C) 2,3,4
One of your investing clients purchased 1,000 shares of GE @ 22, paying a $50 commission. Which of the following accurately describes the tax implications?
A) short-term capital gain of $10,900
Which of the following is/are subject to state taxation?
1. municipal bond interest
2. interest on U.S. Treasury obligations
3. capital gains on U.S Treasury obligations
4. GNMA interest
B) 1,3,4
One of your investing clients has inquired about methods of increasing personal financial net worth. Which of the following would increase net worth for the client?
1. paying down a mortgage balance with a personal check
2. capital appreciation on stock held within a 401 (k) account
3. market value appreciation on a home with a small mortgage balance
D) market value appreciation on a home with no mortgage balance
C) 2,3,4
Eileen resides in Richmond, Va. If Eileen purchases a tax-exempt municipal bond mutual fund from Rory, an associated sales agent of a FINRA member firm, which of the following accurately describes the tax implications?
A) when Eileen receives dividend distributions, they will likely be exempt from federal income taxes
Aunt Myrna purchased 392 shares of the XLT Value Fund in 1983, with the NAV at $9.92 and the POP at $10. Aunt Myrna dies and wills all shares to you. On the date of death the NAV is $12. If you redeem the shares 4 months later with the NAV at $13 and the POP at $13.25, your capital gain will be:
A) long-term gain of $1.00 per share
Mason Meyer purchased 1,000 shares o MMM on January 1st, 2009. On December 31st, 2009, Mason sold the shares for a $300 capital gain. If the trade settled on January 4th, 2010, which of the following accurately describes the tax consequences?
D) the gain will be considered short-term
If an investor elects to receive dividend and capital gains distribution from a mutual fund in cash, rather than reinvesting into new shares, within a 401 (k) or Traditional IRA plan, which of the following best describes the tax ramifications of this decision?
D) the decision will have no ramifications
Which of the following orders could best be used to protect capital appreciation on a stock position?
D) sell-stop
Heather is a college student. She earned $1,000 last year waiting tables and also earned $500 modeling for art-school classes. If Heather also received $1,400 in T-note interest, she may contribute how much to her Roth IRA?
C) $1,600
You have contributed to your Traditional IRA for each of the past four years. You recently took a job with an employer paying you $27,000 per year. If you participate in the employer's defined benefit pension plan, what is true of your IRA?
A) you may continue to make pre-tax contributions to your IRA
Which of the following would be associated with a 50% insufficient withdrawal penalty?
A) Required Minimum Distribution
Julianne held 1,000 shares of ABC for 13 months before selling them for a loss of $1,000. If Julianne repurchases shares of ABC 23 days later, which of the following accurately describes the tax implications?
A) the loss is disallowed but is added to the cost basis of the new phone
Which of the following risks is reduced through dollar-cost averaging?
C) timing
To which of the following investors should a registered representative most likely recommend an aggressive growth fund?
A) 47-year-old investor whose insurance needs are adequately met and who participates in a defined benefit pension plan
An investor is convinced that the asset allocation of his portfolio is underweighted toward equities, even though he plans to retire in two years. He would like to increase the equity allocation but has only $3,000 to invest. Which of the following best addresses suitability in this example?
B) C-shares of a conservative equity income fund might be suitable
Barb is 53 and plans to retire at age 65. She is fully vested in a defined-benefit pension plan but is concerned about purchasing power. Her mortgage will be paid off over the next two years, and her husband has a life insurance policy with a $500,000 death benefit. Which of the following statements best addresses suitability for this investor?
B) a growth and income fund with a conservative investment approach may be suitable
If and investor were reading a prospectus profiling all of the mutual funds offered within a mutual fund complex, she would expect to see which of the following categorized as having the highest price volatility?
C) growth
One of ABCs equity funds focuses on investing in the stocks of companies with long track records of suffering temporary setbacks. This fund is a
D) value fund
Which of the following represent accurate statements concerning variable annuity contracts?
1. number of accumulation units is fixed
2. number of accumulation units varies
3. number of annuity units is fixed
4. number of annuity units varies
B) 2,3
An investment in which of the following equity mutual funds is generally associated with the highest standard deviation?
A) small-cap growth
Which of the following statements is/are accurate of both variable annuities and variable life insurance?
1. The insurance company bears all investment risk
2. Net payments are allocated to the separate account
3. The main advantage over fixed contracts is the potential protection from inflation
4. They must be registered as securities with the SEC
D) 2,3,4
Which of the following would protect an investor against missing assets due to the failure of her broker-dealer firm?
A) SIPC
Which of the following represents an accurate statement concerning hedge funds?
A) all choices listed
A small business with 15 employees has just established a SIMPLE IRA. Therefore, participants will be fully vested
B) immediately
XYZ Equity Income Fund reports net income of $1,000,000 and distributes $880,000 directly to investors. Therefore, the fund will be taxed on what amount?
A) $1,000,000
Which of the following represent(s) (an) accurate statement(s) concerning 529 Savings Plans?
A) all choices listed
Which of the following orders would be activated in a bull market?
Damien Smith has a cash account with securities valued at $120,000 and a cash position of $380,000. He and his wife have a joint account with $400,000 in securities and $90,000 in cash. What is the SIPC coverage for their accounts?
B) $220,000 covered for cash account; $490,000 for joint account
