AWMA Practice Exam I
QUESTIONS AND VERIFIED
CORRECT ANSWERS
GRADED A+ LATEST 100%
GUARANTEED PASS
A charitable lead trust allows him to benefit the charity with the income interest, while
retaining the remainder interest for his family. A charitable remainder trust, pooled income
fund, and qualified conservation easement will all distribute the remainder interest to the
charity.
Module 7-4
Which of these describes the specialized role of a liquidity manager?
A) To monitor alternative investments for liquidity risk
B) To keep cash and cash equivalent percentage of the portfolio at a specified amount
C) To handle large assets, such as yachts, multiple homes, and private aircraft
D) To monitor bond investments for liquidity - CORRECT ANSWER-To handle large assets, such
as yachts, multiple homes, and private aircraft
Module 1-3
,Under the Employee Retirement Income Security Act of 1974, a prohibited transaction is a
transaction that
A) must be reversed and the plan participant made whole again as if the transaction had never
taken place.
B) is not allowed and will result in a fine and/or administrative action.
C) has a substantial conflict of interest and must be avoided or an exemption must be met.
D) is not allowed under any circumstances. - CORRECT ANSWER-has a substantial conflict of
interest and must be avoided or an exemption must be met.
Module 8-1
Portfolio A has a Treynor ratio of 1.22 while Portfolio B has a Treynor ratio of .61. Assuming both
portfolios are diversified, which statement is correct?
A) Portfolio A has better performance than Portfolio B on a risk-adjusted basis.
B) Portfolio A has twice the performance of Portfolio B.
C) Portfolio A has worse overall performance than Portfolio B.
D) Portfolio A has better overall performance than Portfolio B. - CORRECT ANSWER-Portfolio A
has better performance than Portfolio B on a risk-adjusted basis.
Module 2-6
Which of these options are factors that undermine investment strategy?
Risk aversion
Inadequate time horizons
Rigid investment discipline
Unrealistic expectations
,A) I and II
B) II and IV
C) III and IV
D) I and III - CORRECT ANSWER-II and IV
Module 3-1
Which is the best insurance against a public relations crisis?
A)A liability umbrella policy
B) Prevention
C) An employment practices liability policy
D) An endorsement to the homeowners insurance policy - CORRECT ANSWER-Prevention
High net worth business owners have worked hard to build their business. In the process, they
have also built their brand and it is often closely tied to their name. It takes years to build a
good reputation and only moments to destroy it. That can be more financially devastating than
any other risk if your livelihood depends on the success of your business. Care needs to be
taken with the use of social media. One embarrassing photo or emotional rant can greatly
damage one's reputation. In this world of instant information, reputation management has
become an industry unto itself. These services keep an eye on their client's web footprint and
reduce or eliminate negative history. Prevention is the best insurance against a public relations
nightmare.
Module 4-5
Reece is a single taxpayer. In 2020, his AGI is $240,000, including a net long-term capital gain of
$50,000. What is the amount of Medicare contribution tax that he must pay?
, A) $1,900
B) Unknowable since Reece's taxable income has not been provided
C) $1,520
D)$0 - CORRECT ANSWER-$1,520
He will pay the 3.8% Medicare contribution tax on $40,000. This is the lesser of the net
investment income ($50,000) or the AGI in excess of the threshold amount ($240,000 −
$200,000, or $40,000). In this situation, only $40,000 of the net investment income is subject to
the Medicare contribution tax. Reece will pay a $1,520 Medicare contribution tax (3.8% on
$40,000).
Module 5-5
Which of these options describe characteristics of a performance incentive plan?
-A phantom stock plan is a valuable motivational tool since benefits are based on the
performance of the company.
-When benefits in a restricted stock plan become forfeitable, they are included in the
employee's income and are deductible by the employer.
-With both a phantom stock plan and a performance award plan, the value of the payout from
the plan is taxed to the employee and is deductible by the employer in the year of receipt.
-The Section 83(b) election is available with a phantom stock plan; thus, the employee can
choose to recognize taxable income in the year the stock is granted rather than at the time of
sale.
A)I and II
B) II and III
C) II and IV
D) I and III - CORRECT ANSWER-I and III
QUESTIONS AND VERIFIED
CORRECT ANSWERS
GRADED A+ LATEST 100%
GUARANTEED PASS
A charitable lead trust allows him to benefit the charity with the income interest, while
retaining the remainder interest for his family. A charitable remainder trust, pooled income
fund, and qualified conservation easement will all distribute the remainder interest to the
charity.
Module 7-4
Which of these describes the specialized role of a liquidity manager?
A) To monitor alternative investments for liquidity risk
B) To keep cash and cash equivalent percentage of the portfolio at a specified amount
C) To handle large assets, such as yachts, multiple homes, and private aircraft
D) To monitor bond investments for liquidity - CORRECT ANSWER-To handle large assets, such
as yachts, multiple homes, and private aircraft
Module 1-3
,Under the Employee Retirement Income Security Act of 1974, a prohibited transaction is a
transaction that
A) must be reversed and the plan participant made whole again as if the transaction had never
taken place.
B) is not allowed and will result in a fine and/or administrative action.
C) has a substantial conflict of interest and must be avoided or an exemption must be met.
D) is not allowed under any circumstances. - CORRECT ANSWER-has a substantial conflict of
interest and must be avoided or an exemption must be met.
Module 8-1
Portfolio A has a Treynor ratio of 1.22 while Portfolio B has a Treynor ratio of .61. Assuming both
portfolios are diversified, which statement is correct?
A) Portfolio A has better performance than Portfolio B on a risk-adjusted basis.
B) Portfolio A has twice the performance of Portfolio B.
C) Portfolio A has worse overall performance than Portfolio B.
D) Portfolio A has better overall performance than Portfolio B. - CORRECT ANSWER-Portfolio A
has better performance than Portfolio B on a risk-adjusted basis.
Module 2-6
Which of these options are factors that undermine investment strategy?
Risk aversion
Inadequate time horizons
Rigid investment discipline
Unrealistic expectations
,A) I and II
B) II and IV
C) III and IV
D) I and III - CORRECT ANSWER-II and IV
Module 3-1
Which is the best insurance against a public relations crisis?
A)A liability umbrella policy
B) Prevention
C) An employment practices liability policy
D) An endorsement to the homeowners insurance policy - CORRECT ANSWER-Prevention
High net worth business owners have worked hard to build their business. In the process, they
have also built their brand and it is often closely tied to their name. It takes years to build a
good reputation and only moments to destroy it. That can be more financially devastating than
any other risk if your livelihood depends on the success of your business. Care needs to be
taken with the use of social media. One embarrassing photo or emotional rant can greatly
damage one's reputation. In this world of instant information, reputation management has
become an industry unto itself. These services keep an eye on their client's web footprint and
reduce or eliminate negative history. Prevention is the best insurance against a public relations
nightmare.
Module 4-5
Reece is a single taxpayer. In 2020, his AGI is $240,000, including a net long-term capital gain of
$50,000. What is the amount of Medicare contribution tax that he must pay?
, A) $1,900
B) Unknowable since Reece's taxable income has not been provided
C) $1,520
D)$0 - CORRECT ANSWER-$1,520
He will pay the 3.8% Medicare contribution tax on $40,000. This is the lesser of the net
investment income ($50,000) or the AGI in excess of the threshold amount ($240,000 −
$200,000, or $40,000). In this situation, only $40,000 of the net investment income is subject to
the Medicare contribution tax. Reece will pay a $1,520 Medicare contribution tax (3.8% on
$40,000).
Module 5-5
Which of these options describe characteristics of a performance incentive plan?
-A phantom stock plan is a valuable motivational tool since benefits are based on the
performance of the company.
-When benefits in a restricted stock plan become forfeitable, they are included in the
employee's income and are deductible by the employer.
-With both a phantom stock plan and a performance award plan, the value of the payout from
the plan is taxed to the employee and is deductible by the employer in the year of receipt.
-The Section 83(b) election is available with a phantom stock plan; thus, the employee can
choose to recognize taxable income in the year the stock is granted rather than at the time of
sale.
A)I and II
B) II and III
C) II and IV
D) I and III - CORRECT ANSWER-I and III
