AAMS Exam 2 – Questions With Verified Answers
Which of the following is a false statement regarding a good business plan?
The plan
A) is in writing.
B) includes actionable steps.
C) should only contain business goals.
D) is shared with a mentor. Correct Ans - c
Jim Hanson's financial situation is as follows:
Savings account$5,000
Life insurance cash value$20,000
Short-term debts$3,000
Mortgage loan$100,000
Auto loan$10,000
Tuition payments$17,000
Auto loan payments$3,000
Mortgage loan payments$9,600
Invested assets$40,000
Use assets$220,000
A) $127,000
B) $132,000
C) $172,000
D) $182,000
What is his net worth? Correct Ans - c
As of December 31, 20X1, Bill Simpson has the following financial data:
Salaries$90,000
Investment income$4,000
Mortgage payments$16,000
Insurance$3,000
Auto notes$20,000
Income taxes$25,000
Auto payments$6,000
,Medical/dental$4,000
Misc.expenses$15,000
Utilities$3,000
CD$5,000
Education$10,000
Food$8,000
What is Bill's surplus or deficit?
A)$14,000
B)$4,000
C)$1,000
D)$7,000 Correct Ans - b
Which one of the following is the most correctly formulated goal for a client?
A) invest $500 monthly using a dollar cost averaging strategy to increase net
worth
B) accumulate $50,000 in seven years for a son's education
C) accumulate $50,000 for a second home
D) build enough net worth to retire in 15 years Correct Ans - b
Which one of the following is most accurate with respect to the life insurance
needs of the typical family?
A) The need for insurance to cover both final expenses and lost income
decreases at age 70.
B) Life insurance generally allows families to reduce their income taxation
exposures.
C) The need for life insurance remains steady until age 65.
D) Total life insurance requirements may decrease as an individual
approaches retirement. Correct Ans - d
Upon retirement, the bulk of a client's assets generally should be invested in
A) derivatives and other alternative investment for above-average short-term
gains.
B) fixed-income investments for current income and safety of principal.
C) money market funds for maximum safety of principal.
, D) growth investments to preserve purchasing power. Correct Ans - d
One of the primary purposes of an investment policy statement is to
A) provide a basis for portfolio review.
B) project market returns for the portfolio.
C) separate the role of the client and the investment professional.
D) identify the securities to be included in the portfolio. Correct Ans - a
An investment policy statement should be
A) developed to provide considerable investment flexibility.
B) written to reflect current market trends.
C) constructed to reflect realistic return expectations.
D) consistent with SEC investment policy guidelines. Correct Ans - c
In an investment policy statement, which of these attributes is necessary to
benefit from the positive bias of most investment vehicles?
A) Clearly written goals
B) Long-term perspective
C) Moderate risk tolerance
D) Realistic expectations Correct Ans - b
In developing an investment policy, the investment professional is responsible
for
A) assisting the client in creating the policy.
B) formulating the general policy.
C) setting the step-by-step actions to be taken.
D) implementing the investment selections. Correct Ans - a
One adverse way clients react to market price changes is by
A) increasing their portfolio risk and stock holdings.
B) changing their portfolio to match the recommendations of those in the
media.
C) mistaking random fluctuations around the market trajectory as real change.
D) decreasing their allocation to stocks. Correct Ans - c
Which of the following is a false statement regarding a good business plan?
The plan
A) is in writing.
B) includes actionable steps.
C) should only contain business goals.
D) is shared with a mentor. Correct Ans - c
Jim Hanson's financial situation is as follows:
Savings account$5,000
Life insurance cash value$20,000
Short-term debts$3,000
Mortgage loan$100,000
Auto loan$10,000
Tuition payments$17,000
Auto loan payments$3,000
Mortgage loan payments$9,600
Invested assets$40,000
Use assets$220,000
A) $127,000
B) $132,000
C) $172,000
D) $182,000
What is his net worth? Correct Ans - c
As of December 31, 20X1, Bill Simpson has the following financial data:
Salaries$90,000
Investment income$4,000
Mortgage payments$16,000
Insurance$3,000
Auto notes$20,000
Income taxes$25,000
Auto payments$6,000
,Medical/dental$4,000
Misc.expenses$15,000
Utilities$3,000
CD$5,000
Education$10,000
Food$8,000
What is Bill's surplus or deficit?
A)$14,000
B)$4,000
C)$1,000
D)$7,000 Correct Ans - b
Which one of the following is the most correctly formulated goal for a client?
A) invest $500 monthly using a dollar cost averaging strategy to increase net
worth
B) accumulate $50,000 in seven years for a son's education
C) accumulate $50,000 for a second home
D) build enough net worth to retire in 15 years Correct Ans - b
Which one of the following is most accurate with respect to the life insurance
needs of the typical family?
A) The need for insurance to cover both final expenses and lost income
decreases at age 70.
B) Life insurance generally allows families to reduce their income taxation
exposures.
C) The need for life insurance remains steady until age 65.
D) Total life insurance requirements may decrease as an individual
approaches retirement. Correct Ans - d
Upon retirement, the bulk of a client's assets generally should be invested in
A) derivatives and other alternative investment for above-average short-term
gains.
B) fixed-income investments for current income and safety of principal.
C) money market funds for maximum safety of principal.
, D) growth investments to preserve purchasing power. Correct Ans - d
One of the primary purposes of an investment policy statement is to
A) provide a basis for portfolio review.
B) project market returns for the portfolio.
C) separate the role of the client and the investment professional.
D) identify the securities to be included in the portfolio. Correct Ans - a
An investment policy statement should be
A) developed to provide considerable investment flexibility.
B) written to reflect current market trends.
C) constructed to reflect realistic return expectations.
D) consistent with SEC investment policy guidelines. Correct Ans - c
In an investment policy statement, which of these attributes is necessary to
benefit from the positive bias of most investment vehicles?
A) Clearly written goals
B) Long-term perspective
C) Moderate risk tolerance
D) Realistic expectations Correct Ans - b
In developing an investment policy, the investment professional is responsible
for
A) assisting the client in creating the policy.
B) formulating the general policy.
C) setting the step-by-step actions to be taken.
D) implementing the investment selections. Correct Ans - a
One adverse way clients react to market price changes is by
A) increasing their portfolio risk and stock holdings.
B) changing their portfolio to match the recommendations of those in the
media.
C) mistaking random fluctuations around the market trajectory as real change.
D) decreasing their allocation to stocks. Correct Ans - c
