AWMA Practice Exam – Portfolio Management, Risk Analysis, Tax & Estate
Planning MCQ Test
Baby boomers and older GenXers as compared to millennials and younger Gen Xers-
-Are likely to be advised by a millennial adviser
-Have financial planning needs that has stayed relatively the same over many years
-Have not experienced significant bear markets
-Are generally seeking many more technological options in financial planning - ANS ✔✔Have
financial planning needs that has stayed relatively the same over many years
Dan has bonds maturing in two weeks. Since he bought the bonds interest rates have fallen. To
which one these risks are Dan's bonds most likely to be subject?
-Financial risk
-Default risk
-Reinvestment rate risk
-Interest rate risk - ANS ✔✔Reinvestment rate risk
The relationship between investment strategy and investment policy is one in which
-investment strategy is subservient to investment policy.
-investment policy is determined by investment strategy.
-investment strategy dictates the asset categories to be incorporated into the investment policy.
-investment policy is established once the investment strategies to be used are agreed upon.
,investment strategy is subservient to investment policy. - ANS ✔✔
,If ABC Corporation has net profits of $100,000 and distributes $50,000 as dividends. what is its
taxable income?
-$50,000
-$0
-$100,000
-$25,000 - ANS ✔✔$100,000
Joseph, age 60, is a taxpayer who has a considerable amount of income that is not subject to
withholding. He has not made any estimated payments during the year. At a planning review
session in mid-December, his adviser informs him that he's approximately $25,000
underwithheld. What course of action might Joseph follow to avoid an underpayment penalty?
-Make an estimated tax payment before the end of the year. This will make up for any
underwithholding.
-Initiate a $25,000 distribution from his IRA account, and direct that 100% of the distribution be
withheld for federal income tax before year-end. This will make up for any underwithholding.
-Make an estimated tax payment in December and another before the January 15 deadline for
the fourth quarter. This will make up for any underwithholding.
-No exceptions to the underpayment penalty are available. - ANS ✔✔Initiate a $25,000
distribution from his IRA account, and direct that 100% of the distribution be withheld for
federal income tax before year-end. This will make up for any underwithholding
Which of these statements accurately describe characteristics of using life insurance for the
informal funding of a nonqualified deferred compensation plan?
It represents an asset that may be purchased to fund the employer's unsecured promise to pay
deferred amounts to the employee.
It offers the advantage of being able to fund a death benefit immediately.
It offers the advantage of various settlement options.
,It offers the advantage of simplified administration since death proceeds are paid directly to an
employee's surviving spouse or other beneficiary.
-II and IV
-I and II
-I, II, and III
-I and III - ANS ✔✔I, II, and III
Which statement best explains the unauthorized practice of law?
-A non-attorney who discusses with a licensed attorney whether provisions in their client's will
are necessary
-A non-attorney who advises a client to have their estate plan updated
-A non-attorney who advises a client of potential "red flags" in their estate plan
-A non-attorney who advises a client to take actions that will affect their property or legal rights
- ANS ✔✔A non-attorney who advises a client to take actions that will affect their property or
legal rights
Changes that have occurred since investment firms changed from private partnerships to
publicly traded companies include all of these except
-partners no longer share in both the profits and losses of the firm.
-risk taking has increased.
-there is greater individual accountability.
-profits can be privatized (bonuses) and losses socialized (bailouts). - ANS ✔✔there is greater
individual accountability.
The most important stated life goal of wealthy individuals is
, -assuring retirement lifestyle.
-maintaining good health.
-protecting wealth.
-leaving an estate to heirs. - ANS ✔✔maintaining good health.
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 Value Beta
Stock A 10% 1.1
Stock B 20% 1.15
Stock C 30% 1.3
Stock D 40% 1.25
What is the weighted-average beta of Wilson's stock portfolio? - ANS ✔✔1.23
Which of these is an advantage of equity REITs over mortgage REITs?
-Equity REITs have the right to repossess the underlying property if the mortgage REIT fails to
make its mortgage payments.
-Equity REITs participate in the capital gains of the mortgages, whereas mortgage REITs receive
only the coupon payments.
-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.
-Equity REITs can participate in the appreciation of the underlying properties. - ANS ✔✔Equity
REITs can participate in the appreciation of the underlying properties.
Planning MCQ Test
Baby boomers and older GenXers as compared to millennials and younger Gen Xers-
-Are likely to be advised by a millennial adviser
-Have financial planning needs that has stayed relatively the same over many years
-Have not experienced significant bear markets
-Are generally seeking many more technological options in financial planning - ANS ✔✔Have
financial planning needs that has stayed relatively the same over many years
Dan has bonds maturing in two weeks. Since he bought the bonds interest rates have fallen. To
which one these risks are Dan's bonds most likely to be subject?
-Financial risk
-Default risk
-Reinvestment rate risk
-Interest rate risk - ANS ✔✔Reinvestment rate risk
The relationship between investment strategy and investment policy is one in which
-investment strategy is subservient to investment policy.
-investment policy is determined by investment strategy.
-investment strategy dictates the asset categories to be incorporated into the investment policy.
-investment policy is established once the investment strategies to be used are agreed upon.
,investment strategy is subservient to investment policy. - ANS ✔✔
,If ABC Corporation has net profits of $100,000 and distributes $50,000 as dividends. what is its
taxable income?
-$50,000
-$0
-$100,000
-$25,000 - ANS ✔✔$100,000
Joseph, age 60, is a taxpayer who has a considerable amount of income that is not subject to
withholding. He has not made any estimated payments during the year. At a planning review
session in mid-December, his adviser informs him that he's approximately $25,000
underwithheld. What course of action might Joseph follow to avoid an underpayment penalty?
-Make an estimated tax payment before the end of the year. This will make up for any
underwithholding.
-Initiate a $25,000 distribution from his IRA account, and direct that 100% of the distribution be
withheld for federal income tax before year-end. This will make up for any underwithholding.
-Make an estimated tax payment in December and another before the January 15 deadline for
the fourth quarter. This will make up for any underwithholding.
-No exceptions to the underpayment penalty are available. - ANS ✔✔Initiate a $25,000
distribution from his IRA account, and direct that 100% of the distribution be withheld for
federal income tax before year-end. This will make up for any underwithholding
Which of these statements accurately describe characteristics of using life insurance for the
informal funding of a nonqualified deferred compensation plan?
It represents an asset that may be purchased to fund the employer's unsecured promise to pay
deferred amounts to the employee.
It offers the advantage of being able to fund a death benefit immediately.
It offers the advantage of various settlement options.
,It offers the advantage of simplified administration since death proceeds are paid directly to an
employee's surviving spouse or other beneficiary.
-II and IV
-I and II
-I, II, and III
-I and III - ANS ✔✔I, II, and III
Which statement best explains the unauthorized practice of law?
-A non-attorney who discusses with a licensed attorney whether provisions in their client's will
are necessary
-A non-attorney who advises a client to have their estate plan updated
-A non-attorney who advises a client of potential "red flags" in their estate plan
-A non-attorney who advises a client to take actions that will affect their property or legal rights
- ANS ✔✔A non-attorney who advises a client to take actions that will affect their property or
legal rights
Changes that have occurred since investment firms changed from private partnerships to
publicly traded companies include all of these except
-partners no longer share in both the profits and losses of the firm.
-risk taking has increased.
-there is greater individual accountability.
-profits can be privatized (bonuses) and losses socialized (bailouts). - ANS ✔✔there is greater
individual accountability.
The most important stated life goal of wealthy individuals is
, -assuring retirement lifestyle.
-maintaining good health.
-protecting wealth.
-leaving an estate to heirs. - ANS ✔✔maintaining good health.
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 Value Beta
Stock A 10% 1.1
Stock B 20% 1.15
Stock C 30% 1.3
Stock D 40% 1.25
What is the weighted-average beta of Wilson's stock portfolio? - ANS ✔✔1.23
Which of these is an advantage of equity REITs over mortgage REITs?
-Equity REITs have the right to repossess the underlying property if the mortgage REIT fails to
make its mortgage payments.
-Equity REITs participate in the capital gains of the mortgages, whereas mortgage REITs receive
only the coupon payments.
-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.
-Equity REITs can participate in the appreciation of the underlying properties. - ANS ✔✔Equity
REITs can participate in the appreciation of the underlying properties.
