Cannon Post Test 2026 Study Guide 1-5 with Complete
Solutions.
The real value of prepaid forward contracts is that they ___________________. correct answers
Can be used as collateral for a loan
If interest rates are expected to fall, what should an investor do? correct answers Buy bonds
Recent surveys of HNW clients reveal which of the following attitudes regarding their feelings
and decisions on investing? correct answers Clients are likely to be more focused today than in
the past on real life goals than arbitrary investment goals
Which term below represents the mathematical estimate of the return on a security when the
return on the market as a whole is zero? correct answers Alpha coefficient
Which of the following is also the market price for an option? correct answers premium
Ten years ago, Bob purchased 500 shares of stock in a company for $20 per share. Five years
ago, the stock rose to $100 per share and split 2-for-1. This year, the stock again rose to $100 per
share and had another 2-for-1 stock split. How many shares of the company stock does Bob own
after the second stock split? correct answers 2,000
What is a major distinction between mutual funds and managed accounts? correct answers With
a mutual fund, investors own shares of a pool of securities; with a managed account, investors
own the underlying portfolio of securities
Richard wants to measure portfolio performance by utilizing a risk-adjusted measure. Which of
the following are examples of approaches his advisor might use?
Sharpe's Ratio
Cannon's Beta
Jensen's Alpha correct answers I and III only
Which of the following is NOT an advantage to investing in Exchange Traded Funds (ETFs)?
correct answers Active management
If you thought a stock price is too high and is likely to go down, which action below would be
most appropriate? correct answers Buy a put
An option contract normally represents how many shares of stock? correct answers 100
, Corporate bonds are securities representing corporate ___________. correct answers Debt
Which of the following best describes a convertible bond? correct answers A bond that can be
converted into stock in the company
The major goal of the Investment Policy Statement is to ___________________. correct answers
Coordinate the development of a client's investment strategy and monitor it on an ongoing basis
If a stock has a Beta of 1.14, it is expected to have a return that is _________ greater than the
market in an up market. correct answers 14%
Diversification helps protect against which of the following? correct answers Unsystematic risk
Modern Portfolio Theory supports which of the following? correct answers A collection of
investment assets with a collectively lower risk than any individual asset can generate the same
or higher yield than the individual asset
Under what circumstances are Real Estate Investment Trusts (REITs) free of federal income tax
at the corporate level? correct answers At least 90 percent of the net annual earnings are
distributed to shareholders
Normally, an investor expects the most price volatility from a bond with a _______. correct
answers Long maturity
The client wishes to remain invested 60 percent in stocks and 40 percent invested in bonds.
Recently, stocks experienced a 15 percent gain, while bond prices remained flat. What should the
advisor do? correct answers Rebalance the portfolio by selling stocks and purchasing bonds to
return to original allocation
Stocks of companies with earnings that grow at a faster annual rate than the earnings of
companies in general are known as _______ stocks. correct answers Growth
Dan bought a call option in Stock A. Which of the following is true concerning this transaction?
correct answers Dan's profit potential is unlimited
Which of the following is true regarding Exchange Traded Funds (ETFs)? correct answers ETFs
may be bought and sold on an exchange anytime throughout the trading day
When interest rates rise, existing bond prices ____________. correct answers Normally fall
Solutions.
The real value of prepaid forward contracts is that they ___________________. correct answers
Can be used as collateral for a loan
If interest rates are expected to fall, what should an investor do? correct answers Buy bonds
Recent surveys of HNW clients reveal which of the following attitudes regarding their feelings
and decisions on investing? correct answers Clients are likely to be more focused today than in
the past on real life goals than arbitrary investment goals
Which term below represents the mathematical estimate of the return on a security when the
return on the market as a whole is zero? correct answers Alpha coefficient
Which of the following is also the market price for an option? correct answers premium
Ten years ago, Bob purchased 500 shares of stock in a company for $20 per share. Five years
ago, the stock rose to $100 per share and split 2-for-1. This year, the stock again rose to $100 per
share and had another 2-for-1 stock split. How many shares of the company stock does Bob own
after the second stock split? correct answers 2,000
What is a major distinction between mutual funds and managed accounts? correct answers With
a mutual fund, investors own shares of a pool of securities; with a managed account, investors
own the underlying portfolio of securities
Richard wants to measure portfolio performance by utilizing a risk-adjusted measure. Which of
the following are examples of approaches his advisor might use?
Sharpe's Ratio
Cannon's Beta
Jensen's Alpha correct answers I and III only
Which of the following is NOT an advantage to investing in Exchange Traded Funds (ETFs)?
correct answers Active management
If you thought a stock price is too high and is likely to go down, which action below would be
most appropriate? correct answers Buy a put
An option contract normally represents how many shares of stock? correct answers 100
, Corporate bonds are securities representing corporate ___________. correct answers Debt
Which of the following best describes a convertible bond? correct answers A bond that can be
converted into stock in the company
The major goal of the Investment Policy Statement is to ___________________. correct answers
Coordinate the development of a client's investment strategy and monitor it on an ongoing basis
If a stock has a Beta of 1.14, it is expected to have a return that is _________ greater than the
market in an up market. correct answers 14%
Diversification helps protect against which of the following? correct answers Unsystematic risk
Modern Portfolio Theory supports which of the following? correct answers A collection of
investment assets with a collectively lower risk than any individual asset can generate the same
or higher yield than the individual asset
Under what circumstances are Real Estate Investment Trusts (REITs) free of federal income tax
at the corporate level? correct answers At least 90 percent of the net annual earnings are
distributed to shareholders
Normally, an investor expects the most price volatility from a bond with a _______. correct
answers Long maturity
The client wishes to remain invested 60 percent in stocks and 40 percent invested in bonds.
Recently, stocks experienced a 15 percent gain, while bond prices remained flat. What should the
advisor do? correct answers Rebalance the portfolio by selling stocks and purchasing bonds to
return to original allocation
Stocks of companies with earnings that grow at a faster annual rate than the earnings of
companies in general are known as _______ stocks. correct answers Growth
Dan bought a call option in Stock A. Which of the following is true concerning this transaction?
correct answers Dan's profit potential is unlimited
Which of the following is true regarding Exchange Traded Funds (ETFs)? correct answers ETFs
may be bought and sold on an exchange anytime throughout the trading day
When interest rates rise, existing bond prices ____________. correct answers Normally fall
