AWMA Practice Exam I
exam QUESTIONS AND
VERIFIED CORRECT
ANSWERS GRADED A+
LATEST 100% GUARANTEED
PASS
There are two actions that constitute the unauthorized practice of law in every state: drafting
documents that will affect the property or legal rights of someone else, and advising another
person to take actions that will affect their property or legal rights. The other choices are
authorized actions by a non-attorney.
Changes that have occurred since investment firms changed from private partnerships to
publicly traded companies include all of these except
A) partners no longer share in both the profits and losses of the firm.
B) profits can be privatized (bonuses) and losses socialized (bailouts).
C)Nthere is greater individual accountability.
D) risk taking has increased. - CORRECT ANSWER-C)
,The repeal of Glass-Steagall accelerated the conversion of investment firms that had been
structured as partnerships into publicly traded companies that took on more risk. This
transferred much of the risk and accountability from general partners to public shareholders.
The most important stated life goal of wealthy individuals is
A) protecting wealth.
B) assuring retirement lifestyle.
C) leaving an estate to heirs.
D) maintaining good health. - CORRECT ANSWER-D)
The most-stated life goals for wealthy individuals are maintaining good health, travelling the
world, and achieving financial success. To achieve financial success, the most common financial
goals are protecting wealth, assuring retirement lifestyle, minimizing taxes, and leaving an
estate to their heirs.
Wilson has a $20,000 portfolio of four different stocks. The distribution of this capital and the
betas of these stocks are shown below.
% of Portfolio ValueBetaStock A10%1.1Stock B20%1.15Stock C30%1.3Stock D40%1.25
What is the weighted-average beta of Wilson's stock portfolio?
A) 1.25
B) 1.23
C) 1.27
D) 1.20 - CORRECT ANSWER-B)
(.1 × 1.10) + (.2 × 1.15) + (.3 × 1.3) + (.4 × 1.25) = 1.23 (We recommend setting your calculator to
four decimal places for this course.)
,Which of these is an advantage of equity REITs over mortgage REITs?
A) Equity REITs retain the right to the potential appreciation of a property, but mortgage REITs
retain the right to only the property's rental income.
B) Equity REITs have the right to repossess the underlying property if the mortgage REIT fails to
make its mortgage payments.
C) Equity REITs can participate in the appreciation of the underlying properties.
D) Equity REITs participate in the capital gains of the mortgages, whereas mortgage REITs
receive only the coupon payments. - CORRECT ANSWER-C)
Equity REITs own the underlying real estate properties, giving the owners an opportunity to
participate in the net cash flows from the operation of the properties and in any appreciation in
the market price of the properties.
Susan, age 50, is the sole shareholder of Market Designs Inc., a small consulting firm. All of the
employees of Market Designs are considerably younger than Susan, and turnover is relatively
high. Susan is paid more than three times the salary of the next highest paid employee and
wants to install a retirement plan for the company. Excluding Susan, the oldest employee is 32.
Which type of plan would be most appropriate, assuming she wants to maximize the
contributions for her account and minimize the cost of the other employees?
A) SARSEP
B) Cross-tested ESOP
C) Target benefit plan
D) Age-weighted profit sharing plan - CORRECT ANSWER-D)
An age-weighted profit sharing plan is a type of qualified plan that allocates proportionately
larger employer contributions to individuals who are relatively older than the other plan
participants. In other words, an age-weighted profit sharing plan allocates employer
contributions based on compensation and age. An age-weighted profit sharing plan can be used
to increase the amount of employer contributions made on Susan's behalf because she is
considerably older than the other employees.
, For the current tax year, Bob, an individual taxpayer filing a joint return, has $6,000 of
investment interest expense and $11,000 of net investment income (interest income and
dividends). How much investment interest expense, if any, may Bob deduct in the current tax
year?
A) $11,000
B) $6,000
C) $5,000
D) $0 - CORRECT ANSWER-B)
Investment interest expense is deductible up to the amount of net investment income. The fact
pattern tells us that the net investment income is $11,000, thus it is the maximum deduction.
The actual deduction is limited to the amount of investment interest, which we know is $6,000.
The fact that the dividends are included in the net investment income indicates that the
taxpayer elected to include them in investment income and is forgoing the preferential capital
gain rates associated with qualified dividends.
Which statement below does not correctly describe a concept related to nonqualified deferred
compensation?
A) Substantial risk of forfeiture exists when the employee's receipt of deferred compensation
benefits is contingent upon performance of substantial services in the future.
B) The availability of deferred compensation plan funds to the employee, without substantial
restriction, generally result in constructive receipt.
C) The employee's receipt of anything that can be assigned a cash value results in economic
benefit and taxation.
D) An example of substantial risk of forfeiture provisions would be the employee's loss of rights
to the plan benefits at death or disability. - CORRECT ANSWER-D)
Substantial risk of forfeiture requires that the employee's right to receive benefits is contingent
upon performance of substantial services. Death and disability do not create substantial risk of
forfeiture, since they do not involve performance of services.
exam QUESTIONS AND
VERIFIED CORRECT
ANSWERS GRADED A+
LATEST 100% GUARANTEED
PASS
There are two actions that constitute the unauthorized practice of law in every state: drafting
documents that will affect the property or legal rights of someone else, and advising another
person to take actions that will affect their property or legal rights. The other choices are
authorized actions by a non-attorney.
Changes that have occurred since investment firms changed from private partnerships to
publicly traded companies include all of these except
A) partners no longer share in both the profits and losses of the firm.
B) profits can be privatized (bonuses) and losses socialized (bailouts).
C)Nthere is greater individual accountability.
D) risk taking has increased. - CORRECT ANSWER-C)
,The repeal of Glass-Steagall accelerated the conversion of investment firms that had been
structured as partnerships into publicly traded companies that took on more risk. This
transferred much of the risk and accountability from general partners to public shareholders.
The most important stated life goal of wealthy individuals is
A) protecting wealth.
B) assuring retirement lifestyle.
C) leaving an estate to heirs.
D) maintaining good health. - CORRECT ANSWER-D)
The most-stated life goals for wealthy individuals are maintaining good health, travelling the
world, and achieving financial success. To achieve financial success, the most common financial
goals are protecting wealth, assuring retirement lifestyle, minimizing taxes, and leaving an
estate to their heirs.
Wilson has a $20,000 portfolio of four different stocks. The distribution of this capital and the
betas of these stocks are shown below.
% of Portfolio ValueBetaStock A10%1.1Stock B20%1.15Stock C30%1.3Stock D40%1.25
What is the weighted-average beta of Wilson's stock portfolio?
A) 1.25
B) 1.23
C) 1.27
D) 1.20 - CORRECT ANSWER-B)
(.1 × 1.10) + (.2 × 1.15) + (.3 × 1.3) + (.4 × 1.25) = 1.23 (We recommend setting your calculator to
four decimal places for this course.)
,Which of these is an advantage of equity REITs over mortgage REITs?
A) Equity REITs retain the right to the potential appreciation of a property, but mortgage REITs
retain the right to only the property's rental income.
B) Equity REITs have the right to repossess the underlying property if the mortgage REIT fails to
make its mortgage payments.
C) Equity REITs can participate in the appreciation of the underlying properties.
D) Equity REITs participate in the capital gains of the mortgages, whereas mortgage REITs
receive only the coupon payments. - CORRECT ANSWER-C)
Equity REITs own the underlying real estate properties, giving the owners an opportunity to
participate in the net cash flows from the operation of the properties and in any appreciation in
the market price of the properties.
Susan, age 50, is the sole shareholder of Market Designs Inc., a small consulting firm. All of the
employees of Market Designs are considerably younger than Susan, and turnover is relatively
high. Susan is paid more than three times the salary of the next highest paid employee and
wants to install a retirement plan for the company. Excluding Susan, the oldest employee is 32.
Which type of plan would be most appropriate, assuming she wants to maximize the
contributions for her account and minimize the cost of the other employees?
A) SARSEP
B) Cross-tested ESOP
C) Target benefit plan
D) Age-weighted profit sharing plan - CORRECT ANSWER-D)
An age-weighted profit sharing plan is a type of qualified plan that allocates proportionately
larger employer contributions to individuals who are relatively older than the other plan
participants. In other words, an age-weighted profit sharing plan allocates employer
contributions based on compensation and age. An age-weighted profit sharing plan can be used
to increase the amount of employer contributions made on Susan's behalf because she is
considerably older than the other employees.
, For the current tax year, Bob, an individual taxpayer filing a joint return, has $6,000 of
investment interest expense and $11,000 of net investment income (interest income and
dividends). How much investment interest expense, if any, may Bob deduct in the current tax
year?
A) $11,000
B) $6,000
C) $5,000
D) $0 - CORRECT ANSWER-B)
Investment interest expense is deductible up to the amount of net investment income. The fact
pattern tells us that the net investment income is $11,000, thus it is the maximum deduction.
The actual deduction is limited to the amount of investment interest, which we know is $6,000.
The fact that the dividends are included in the net investment income indicates that the
taxpayer elected to include them in investment income and is forgoing the preferential capital
gain rates associated with qualified dividends.
Which statement below does not correctly describe a concept related to nonqualified deferred
compensation?
A) Substantial risk of forfeiture exists when the employee's receipt of deferred compensation
benefits is contingent upon performance of substantial services in the future.
B) The availability of deferred compensation plan funds to the employee, without substantial
restriction, generally result in constructive receipt.
C) The employee's receipt of anything that can be assigned a cash value results in economic
benefit and taxation.
D) An example of substantial risk of forfeiture provisions would be the employee's loss of rights
to the plan benefits at death or disability. - CORRECT ANSWER-D)
Substantial risk of forfeiture requires that the employee's right to receive benefits is contingent
upon performance of substantial services. Death and disability do not create substantial risk of
forfeiture, since they do not involve performance of services.
