Cannon Post Assessment with Error-free Answers.
Recent surveys of HW clients reveal which of the following attitudes regarding their feelings and
decisions on investing? correct answers b. Clients are likely to be more focused today than in the
past on real life goals than arbitrary investment goals
Which of the following best describes a convertible bond? correct answers c. A bond that can be
converted into stock in the company
Corporate bonds are securities representing corporate _. correct answers b. Debt
If interest rates are expected to fall, what should an investor do? correct answers c. Buy bonds
When interest rates rise, existing bond prices _. correct answers b. Normally fall
Five years ago, John bought a $1,000 10-year Treasury note at face value for par. Assume the
current market value is $1,060. If John sells the Treasury note now, what is the tax implication?
correct answers a. $60 capital gain
Which of the following is NOT an advantage to investing in Exchange Traded Funds (ETFs)?
correct answers a. Active management
Under what circumstances are Real Estate Investment Trusts (REITs) free of federal income tax
at the corporate level? correct answers d. At least 90 percent of the net annual earnings are
distributed to shareholders
Which of the following is true regarding Exchange Traded Funds (ETFs)? correct answers b.
ETFs may be bought and sold on an exchange anytime throughout the trading day
Dan bought a call option in Stock A. Which of the following is true concerning this transaction?
correct answers a. Dan's profit potential is unlimited
Which of the following is also the market price for an option? correct answers d. The premium
Which of the following is considered to be the riskiest of options? correct answers b. Uncovered
calls
What is a major distinction between mutual funds and managed accounts? correct answers a.
With a mutual fund, investors own shares of a pool of securities; with a managed account,
investors own the underlying portfolio of securities
,Modern Portfolio Theory supports which of the following? correct answers d. 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
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 c. 14%
A combination of investments offering the highest possible yield at a given risk or the minimal
possible risk at a given yield level is referred to as _. correct answers a. The Efficient Frontier
A client has expressed an interest in a "risk free" investment. What should you recommend?
correct answers c. A Treasury Bill
A strategy that attempts to manage the various risks associated with investing in fixed-income
securities by having 10 percent of the bonds come due each year is referred to as _. correct
answers d. The ladder strategy
The major goal of the Investment Policy Statement is to _. correct answers a. Coordinate the
development of a client's investment strategy and monitor it on an ongoing basis
What shortcoming have some researchers noted with Modern Portfolio Theory? correct answers
b. Failure to take into account investors' need for personal safety
As Americans approach retirement, their focus tends to shift to which of the following concerns?
I. Reallocation of assets to maximize income
II. The most efficient way to take distributions
III. Identification of assets they should access first correct answers d. I, II, and III
What is the greatest indicator of post-retirement spending? correct answers b. Pre-retirement
spending
Janice estimates that she has $500,000 in expenses each year. Her planner thinks this figure will
decrease in her retire years and believes her annual after-tax retirement income needs will be
about $350,000. What type of method is her pl using to determine her retirement needs? correct
answers c. Expense Method
What is the earliest age an individual can receive Social Security retirement benefits? correct
answers c. 62
,Defined contribution plans generally favor which individuals? correct answers d. Younger
employees
What type of qualified retirement plan (QR) bases the employer's annual contribution on a
formula or is discretionary a each participant has an individual account in the plan? correct
answers c. Profit sharing plan
A(n) _ must invest primarily in employer stock. correct answers c. ESOP
A rabbi trust offers which of the following benefits to executives covered by a non-qualified
retirement plan (NQRP)?
I. Protection in the event management defaults
II. Protection from the claims of the employer's creditors
III. Protection in the event of a hostile takeover correct answers b. I and III only
Which of the following are true of Roth IRAs?
I. Anyone with earned income and modified adjusted gross income below a certain amount may
contribute
II. Contributions are deductible within limits
III. Qualified distributions are income tax free correct answers b. I and III only
Hillary owns a deferred annuity. She purchased the annuity in 1985 when she was a mere 20
years old. Now, she needs the cash value to pay for her son's college tuition. Her investment in
the contract consists of her single premium contribution of $45,000. Her cash value is $48,000. If
she withdraws $10,000, how much is taxable income to her. correct answers b. $3,000
Bill, age 65, has a life expectancy of 20 years. The amount of his monthly annuity benefit is
$500. His investment in th contract is $30,000. How much of his monthly benefit is taxable?
correct answers c. $375
Who among the following is eligible for Medicare Part A? correct answers d. All U.S. citizens
age 65 or older who are eligible for Social Security
What is the form of a normal retirement benefit for a married individual under a QRP? correct
answers b. Joint and survivor annuity with his or her spouse
What is the greatest downside to an indirect rollover from a QRP to an IRA? correct answers a.
Mandatory 20 percent withholding is imposed
, Premature distributions from qualified retirement plans are, generally, subject to _. correct
answers c. Ordinary income taxation plus a 10 percent penalty
When must required minimum distributions from a QRP or IRA begin? correct answers d. April
1 of the year following which the participant turns 73
A client receives a $1 million lump-sum distribution consisting of $600,000 in diversified stocks,
bonds, and mutual funds, and $400,000 in employer securities with a $100,000 cost basis.
Assuming the employee rolls over the diversified assets to a Traditional IRA within 60 days of
receipt and retains the $400,000 of employer stock in a non-qualified brokerage account, what
are the likely income tax consequences when the employer stock is sold two years hence for
$400,000? correct answers b. Taxation of the $300,000 gain at capital gains tax rate
The definition of "designated beneficiary" includes _. correct answers d. An individual
When considering the Department of Labor's new fiduciary standard as applied to retirement
accounts, which of the following can be the most problematic for advisors when discussing with
clients? correct answers c. Rollovers
Your client is going through a nasty divorce. He wants to be sure that he retains rights in his
spouse's 401(k). What tool would you recommend? correct answers c. QDRO
Not all risks are insurable. Those that are most commonly insured include which of the
following?
I. Property risk
II. Personal risk
III. Libel and slander risk correct answers a. I and II only
Who among the following are parties to a life insurance contract?
I. Insurance commissioner
II. Insured
III. Beneficiary correct answers c. II and III only
To determine a client's net capital need for life insurance, what do you need to know?
I. Present value of projected survivor income needs
II. Present value of projected income streams
III. Present value of current capital needs correct answers d. I, II, and III
Recent surveys of HW clients reveal which of the following attitudes regarding their feelings and
decisions on investing? correct answers b. Clients are likely to be more focused today than in the
past on real life goals than arbitrary investment goals
Which of the following best describes a convertible bond? correct answers c. A bond that can be
converted into stock in the company
Corporate bonds are securities representing corporate _. correct answers b. Debt
If interest rates are expected to fall, what should an investor do? correct answers c. Buy bonds
When interest rates rise, existing bond prices _. correct answers b. Normally fall
Five years ago, John bought a $1,000 10-year Treasury note at face value for par. Assume the
current market value is $1,060. If John sells the Treasury note now, what is the tax implication?
correct answers a. $60 capital gain
Which of the following is NOT an advantage to investing in Exchange Traded Funds (ETFs)?
correct answers a. Active management
Under what circumstances are Real Estate Investment Trusts (REITs) free of federal income tax
at the corporate level? correct answers d. At least 90 percent of the net annual earnings are
distributed to shareholders
Which of the following is true regarding Exchange Traded Funds (ETFs)? correct answers b.
ETFs may be bought and sold on an exchange anytime throughout the trading day
Dan bought a call option in Stock A. Which of the following is true concerning this transaction?
correct answers a. Dan's profit potential is unlimited
Which of the following is also the market price for an option? correct answers d. The premium
Which of the following is considered to be the riskiest of options? correct answers b. Uncovered
calls
What is a major distinction between mutual funds and managed accounts? correct answers a.
With a mutual fund, investors own shares of a pool of securities; with a managed account,
investors own the underlying portfolio of securities
,Modern Portfolio Theory supports which of the following? correct answers d. 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
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 c. 14%
A combination of investments offering the highest possible yield at a given risk or the minimal
possible risk at a given yield level is referred to as _. correct answers a. The Efficient Frontier
A client has expressed an interest in a "risk free" investment. What should you recommend?
correct answers c. A Treasury Bill
A strategy that attempts to manage the various risks associated with investing in fixed-income
securities by having 10 percent of the bonds come due each year is referred to as _. correct
answers d. The ladder strategy
The major goal of the Investment Policy Statement is to _. correct answers a. Coordinate the
development of a client's investment strategy and monitor it on an ongoing basis
What shortcoming have some researchers noted with Modern Portfolio Theory? correct answers
b. Failure to take into account investors' need for personal safety
As Americans approach retirement, their focus tends to shift to which of the following concerns?
I. Reallocation of assets to maximize income
II. The most efficient way to take distributions
III. Identification of assets they should access first correct answers d. I, II, and III
What is the greatest indicator of post-retirement spending? correct answers b. Pre-retirement
spending
Janice estimates that she has $500,000 in expenses each year. Her planner thinks this figure will
decrease in her retire years and believes her annual after-tax retirement income needs will be
about $350,000. What type of method is her pl using to determine her retirement needs? correct
answers c. Expense Method
What is the earliest age an individual can receive Social Security retirement benefits? correct
answers c. 62
,Defined contribution plans generally favor which individuals? correct answers d. Younger
employees
What type of qualified retirement plan (QR) bases the employer's annual contribution on a
formula or is discretionary a each participant has an individual account in the plan? correct
answers c. Profit sharing plan
A(n) _ must invest primarily in employer stock. correct answers c. ESOP
A rabbi trust offers which of the following benefits to executives covered by a non-qualified
retirement plan (NQRP)?
I. Protection in the event management defaults
II. Protection from the claims of the employer's creditors
III. Protection in the event of a hostile takeover correct answers b. I and III only
Which of the following are true of Roth IRAs?
I. Anyone with earned income and modified adjusted gross income below a certain amount may
contribute
II. Contributions are deductible within limits
III. Qualified distributions are income tax free correct answers b. I and III only
Hillary owns a deferred annuity. She purchased the annuity in 1985 when she was a mere 20
years old. Now, she needs the cash value to pay for her son's college tuition. Her investment in
the contract consists of her single premium contribution of $45,000. Her cash value is $48,000. If
she withdraws $10,000, how much is taxable income to her. correct answers b. $3,000
Bill, age 65, has a life expectancy of 20 years. The amount of his monthly annuity benefit is
$500. His investment in th contract is $30,000. How much of his monthly benefit is taxable?
correct answers c. $375
Who among the following is eligible for Medicare Part A? correct answers d. All U.S. citizens
age 65 or older who are eligible for Social Security
What is the form of a normal retirement benefit for a married individual under a QRP? correct
answers b. Joint and survivor annuity with his or her spouse
What is the greatest downside to an indirect rollover from a QRP to an IRA? correct answers a.
Mandatory 20 percent withholding is imposed
, Premature distributions from qualified retirement plans are, generally, subject to _. correct
answers c. Ordinary income taxation plus a 10 percent penalty
When must required minimum distributions from a QRP or IRA begin? correct answers d. April
1 of the year following which the participant turns 73
A client receives a $1 million lump-sum distribution consisting of $600,000 in diversified stocks,
bonds, and mutual funds, and $400,000 in employer securities with a $100,000 cost basis.
Assuming the employee rolls over the diversified assets to a Traditional IRA within 60 days of
receipt and retains the $400,000 of employer stock in a non-qualified brokerage account, what
are the likely income tax consequences when the employer stock is sold two years hence for
$400,000? correct answers b. Taxation of the $300,000 gain at capital gains tax rate
The definition of "designated beneficiary" includes _. correct answers d. An individual
When considering the Department of Labor's new fiduciary standard as applied to retirement
accounts, which of the following can be the most problematic for advisors when discussing with
clients? correct answers c. Rollovers
Your client is going through a nasty divorce. He wants to be sure that he retains rights in his
spouse's 401(k). What tool would you recommend? correct answers c. QDRO
Not all risks are insurable. Those that are most commonly insured include which of the
following?
I. Property risk
II. Personal risk
III. Libel and slander risk correct answers a. I and II only
Who among the following are parties to a life insurance contract?
I. Insurance commissioner
II. Insured
III. Beneficiary correct answers c. II and III only
To determine a client's net capital need for life insurance, what do you need to know?
I. Present value of projected survivor income needs
II. Present value of projected income streams
III. Present value of current capital needs correct answers d. I, II, and III
