GEB 3006 COMPREHENSIVE EXAM UPDATED QUESTIONS
AND SOLUTIONS GRADED A+
✔✔If a company's earnings do not vary much with the economy, it would be called a
____ stock. - ✔✔Defensive
✔✔The risks of the overall market that can't be diversified by adding more stocks to a
portfolio is called _____ risk. - ✔✔Systematic or market
✔✔Average returns should always be used when evaluating stock performance since
they are more accurate than geometric returns. - ✔✔False
✔✔Over the long term, which asset class provided the highest rate of return? -
✔✔Stocks
✔✔The historical equity risk premium or excess market return for stocks over risk free
investments is _____. - ✔✔4-6%
✔✔The returns on Real Estate Investment Trusts (REITs) is in the same range of
returns as ______. - ✔✔Stocks
✔✔The US stock market is essentially a ___________ market. - ✔✔Large cap
✔✔A stock with a beta of 2.0 would be a _______ stock. - ✔✔High risk
✔✔Assume a bond with a 4% coupon. If interest rates move up, then which type of
bond would have the greatest sensitivity to the change in interest rates? - ✔✔30 year
bond
✔✔For long term investments, a 30 year old should have about ___ invested in equity
securities. - ✔✔80%
✔✔Which type of mutual fund would maintain a reasonably appropriate allocation of
stocks and bonds for your age? - ✔✔Targeted retirement date fund
✔✔If interest rates decrease, the price of a bond will: - ✔✔increase
✔✔Which of the following is NOT an attribute of mutual funds? - ✔✔Guaranteed returns
✔✔If an investment advisor is acting as a fiduciary, then he or she is obligated to offer
you financial products that are in your best interest. This means that fiduciaries are NOT
likely to offer you "load" funds or mutual funds with high fees since these types of funds
, provide high commissions to the advisor and are not usually in your best interest. -
✔✔True
✔✔Most professional portfolio managers can't beat the returns of index funds over the
long term. - ✔✔True
✔✔The best predictor of future mutual fund performance is: - ✔✔the expense ratio
✔✔Assume you are 30 years old and have 80% of your 401-K in equity securities. In
the event of a 20% drop in the stock market you should: - ✔✔Maintain your appropriate
ratio of stocks for your age which may mean allocating more money to stocks
✔✔One can reduce the risk of out living your savings by starting to save early in life
rather than in your 40s and 50s. - ✔✔true
✔✔If you can limit annual withdrawals from your 401-K to no more than ____, then your
money should last forever. - ✔✔4%
✔✔When calculating the amount a person can withdraw from their 401-K, it is best to
use a __________ annuity which will allow the individual to increase their payment each
year for inflation. - ✔✔Growing
✔✔Which of the following statements is TRUE with respect to Exchange Traded Funds
(ETFs)? - ✔✔ETFs generally track some benchmark index
✔✔Social Security estimates that once the assets of the Social Security Trust Fund are
depleted, they could continue to pay _____ of current benefits with the cash collected
from payroll taxes each year. - ✔✔79%
✔✔Mid cap stocks would be all stocks with a market capitalization between: - ✔✔$2-
10B
✔✔The US stock market would be best described as a _____ market. - ✔✔Large cap
✔✔If all of your money was invested in the S&P 500 Index, you would still have
systematic or market risk as well as investment style risk. - ✔✔True
✔✔Employer benefits can be worth up to ___ of your base salary. - ✔✔50%
✔✔Generally the two main employer benefits with the highest value are: - ✔✔retirement
and health plans
AND SOLUTIONS GRADED A+
✔✔If a company's earnings do not vary much with the economy, it would be called a
____ stock. - ✔✔Defensive
✔✔The risks of the overall market that can't be diversified by adding more stocks to a
portfolio is called _____ risk. - ✔✔Systematic or market
✔✔Average returns should always be used when evaluating stock performance since
they are more accurate than geometric returns. - ✔✔False
✔✔Over the long term, which asset class provided the highest rate of return? -
✔✔Stocks
✔✔The historical equity risk premium or excess market return for stocks over risk free
investments is _____. - ✔✔4-6%
✔✔The returns on Real Estate Investment Trusts (REITs) is in the same range of
returns as ______. - ✔✔Stocks
✔✔The US stock market is essentially a ___________ market. - ✔✔Large cap
✔✔A stock with a beta of 2.0 would be a _______ stock. - ✔✔High risk
✔✔Assume a bond with a 4% coupon. If interest rates move up, then which type of
bond would have the greatest sensitivity to the change in interest rates? - ✔✔30 year
bond
✔✔For long term investments, a 30 year old should have about ___ invested in equity
securities. - ✔✔80%
✔✔Which type of mutual fund would maintain a reasonably appropriate allocation of
stocks and bonds for your age? - ✔✔Targeted retirement date fund
✔✔If interest rates decrease, the price of a bond will: - ✔✔increase
✔✔Which of the following is NOT an attribute of mutual funds? - ✔✔Guaranteed returns
✔✔If an investment advisor is acting as a fiduciary, then he or she is obligated to offer
you financial products that are in your best interest. This means that fiduciaries are NOT
likely to offer you "load" funds or mutual funds with high fees since these types of funds
, provide high commissions to the advisor and are not usually in your best interest. -
✔✔True
✔✔Most professional portfolio managers can't beat the returns of index funds over the
long term. - ✔✔True
✔✔The best predictor of future mutual fund performance is: - ✔✔the expense ratio
✔✔Assume you are 30 years old and have 80% of your 401-K in equity securities. In
the event of a 20% drop in the stock market you should: - ✔✔Maintain your appropriate
ratio of stocks for your age which may mean allocating more money to stocks
✔✔One can reduce the risk of out living your savings by starting to save early in life
rather than in your 40s and 50s. - ✔✔true
✔✔If you can limit annual withdrawals from your 401-K to no more than ____, then your
money should last forever. - ✔✔4%
✔✔When calculating the amount a person can withdraw from their 401-K, it is best to
use a __________ annuity which will allow the individual to increase their payment each
year for inflation. - ✔✔Growing
✔✔Which of the following statements is TRUE with respect to Exchange Traded Funds
(ETFs)? - ✔✔ETFs generally track some benchmark index
✔✔Social Security estimates that once the assets of the Social Security Trust Fund are
depleted, they could continue to pay _____ of current benefits with the cash collected
from payroll taxes each year. - ✔✔79%
✔✔Mid cap stocks would be all stocks with a market capitalization between: - ✔✔$2-
10B
✔✔The US stock market would be best described as a _____ market. - ✔✔Large cap
✔✔If all of your money was invested in the S&P 500 Index, you would still have
systematic or market risk as well as investment style risk. - ✔✔True
✔✔Employer benefits can be worth up to ___ of your base salary. - ✔✔50%
✔✔Generally the two main employer benefits with the highest value are: - ✔✔retirement
and health plans
