Cannon Post Test Study Guide 1-5 Questions
with Detailed Verified Answers
The real value of prepaid forward contracts is that they
___________________.— ANSWER: Can be used as collateral for a loan
If interest rates are expected to fall, what should an investor do?—
ANSWER: Buy bonds
Recent surveys of HNW clients reveal which of the following attitudes
regarding their feelings and decisions on investing?— ANSWER: 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?—
ANSWER: Alpha coefficient
Which of the following is also the market price for an option?—
ANSWER: 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-
,2 | Page
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?— ANSWER: 2,000
What is a major distinction between mutual funds and managed
accounts?— ANSWER: 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— ANSWER: I and III only
Which of the following is NOT an advantage to investing in Exchange
Traded Funds (ETFs)?— ANSWER: Active management
If you thought a stock price is too high and is likely to go down, which
action below would be most appropriate?— ANSWER: Buy a put
,3 | Page
An option contract normally represents how many shares of stock?—
ANSWER: 100
Corporate bonds are securities representing corporate ___________.—
ANSWER: Debt
Which of the following best describes a convertible bond?— ANSWER: A
bond that can be converted into stock in the company
The major goal of the Investment Policy Statement is to
___________________.— ANSWER: 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.— ANSWER: 14%
Diversification helps protect against which of the following?— ANSWER:
Unsystematic risk
Modern Portfolio Theory supports which of the following?— ANSWER: 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
, 4 | Page
Under what circumstances are Real Estate Investment Trusts (REITs) free
of federal income tax at the corporate level?— ANSWER: 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 _______.— ANSWER: 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?—
ANSWER: 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.— ANSWER: Growth
Dan bought a call option in Stock A. Which of the following is true
concerning this transaction?— ANSWER: Dan's profit potential is
unlimited
Which of the following is true regarding Exchange Traded Funds
(ETFs)?— ANSWER: ETFs may be bought and sold on an exchange
anytime throughout the trading day
with Detailed Verified Answers
The real value of prepaid forward contracts is that they
___________________.— ANSWER: Can be used as collateral for a loan
If interest rates are expected to fall, what should an investor do?—
ANSWER: Buy bonds
Recent surveys of HNW clients reveal which of the following attitudes
regarding their feelings and decisions on investing?— ANSWER: 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?—
ANSWER: Alpha coefficient
Which of the following is also the market price for an option?—
ANSWER: 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-
,2 | Page
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?— ANSWER: 2,000
What is a major distinction between mutual funds and managed
accounts?— ANSWER: 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— ANSWER: I and III only
Which of the following is NOT an advantage to investing in Exchange
Traded Funds (ETFs)?— ANSWER: Active management
If you thought a stock price is too high and is likely to go down, which
action below would be most appropriate?— ANSWER: Buy a put
,3 | Page
An option contract normally represents how many shares of stock?—
ANSWER: 100
Corporate bonds are securities representing corporate ___________.—
ANSWER: Debt
Which of the following best describes a convertible bond?— ANSWER: A
bond that can be converted into stock in the company
The major goal of the Investment Policy Statement is to
___________________.— ANSWER: 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.— ANSWER: 14%
Diversification helps protect against which of the following?— ANSWER:
Unsystematic risk
Modern Portfolio Theory supports which of the following?— ANSWER: 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
, 4 | Page
Under what circumstances are Real Estate Investment Trusts (REITs) free
of federal income tax at the corporate level?— ANSWER: 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 _______.— ANSWER: 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?—
ANSWER: 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.— ANSWER: Growth
Dan bought a call option in Stock A. Which of the following is true
concerning this transaction?— ANSWER: Dan's profit potential is
unlimited
Which of the following is true regarding Exchange Traded Funds
(ETFs)?— ANSWER: ETFs may be bought and sold on an exchange
anytime throughout the trading day
