A "rising equity glidepath" typically will lead to which equity exposure over one's total
lifetime?
A)
increased
B)
consistent
C)
decreased
D)
increased in the early years and decreased in the later years
CORRECT ANSWER
C
The strategy of increasing equity exposure throughout retirement can result in less equity
exposure over one's lifetime due to the reduced exposure in the early years.
LO 7-6
A fundamental duty owed to a client is to always look out for what is in the client's best
interest. Which fiduciary duty best personifies this?
CORRECT ANSWER
DUTY OF LOYALTY
1
@THE STUDY VAULT
,The fiduciary duty that best personifies looking out for the client's best interest first is the
fiduciary duty of loyalty. This duty requires being loyal to the client first and foremost, and
always looking out for what is in their best interest. The duty of care is analogous to medical
care. It looks at the degree of skill and diligence, not the adviser's feelings about the client's
situation.
LO 9-4
A lump sum payment of the proceeds of a life insurance policy that is made to the
beneficiary upon the insured's death
A)
is exempt from estate taxation.
B)
is taxable if from a modified endowment contract (MEC).
C)
is generally exempt from income taxation.
D)
is typically taxable.
CORRECT ANSWER
C
The lump sum proceeds of a life insurance policy (even if a MEC) paid to a beneficiary are
generally exempt from income taxation. Withdrawals and loans from a MEC may be taxable.
Life insurance proceeds, however, are subject to estate taxes if the deceased owned a life
insurance policy. If the deceased owner was also the insured, the death benefits are
included in his estate. If the deceased owner is not also the insured, the current value of the
policy is in the deceased owner's gross estate.
LO 4-7
2
@THE STUDY VAULT
,A Medicare Part A patient must pay
A)
the approved costs of care in a skilled nursing facility for the first 10 days.
B)
all costs for a hospital stay beyond 150 days.
C)
the annual deductible for out-of-hospital doctor's services.
D)
all costs above the hospital deductible for a 30-day stay in a hospital.
CORRECT ANSWER
B
The patient must pay all costs related to a hospital stay beyond 150 days. The annual
deductible describes a gap in Medicare Part B coverage, not Part A. Medicare pays for the
cost of the first 60 days in a hospital, but the patient must pay the Part A deductible.
Medicare will pay the approved charges for the first 20 days in a skilled nursing facility. The
gap results from the cost of care that exceeds 20 days (the patient pays the per day
copayment) or the need for custodial care.
LO 5-3
A nonspringing durable power of attorney
A)
remains effective after the principal becomes incapacitated.
B)
3
@THE STUDY VAULT
, remains effective after the principal's death.
C)
is usually created in a person's revocable trust.
D)
gives the attorney-in-fact authority only when the principal becomes incompetent.
CORRECT ANSWER
A
The very purpose of any durable power of attorney is to give the attorney-in-fact authority
to act after the principal becomes incapacitated. However, such authority does not survive
the principal's death. Such authority is created in an independent document, and is effective
immediately in this type of power of attorney.
LO 5-2
A springing durable power of attorney
A)
is usually created in a person's revocable trust.
B)
remains effective after the principal's death.
C)
gives the attorney-in-fact authority only when the principal is deemed incompetent.
D)
remains effective until the principal becomes incapacitated.
CORRECT ANSWER
C
4
@THE STUDY VAULT
lifetime?
A)
increased
B)
consistent
C)
decreased
D)
increased in the early years and decreased in the later years
CORRECT ANSWER
C
The strategy of increasing equity exposure throughout retirement can result in less equity
exposure over one's lifetime due to the reduced exposure in the early years.
LO 7-6
A fundamental duty owed to a client is to always look out for what is in the client's best
interest. Which fiduciary duty best personifies this?
CORRECT ANSWER
DUTY OF LOYALTY
1
@THE STUDY VAULT
,The fiduciary duty that best personifies looking out for the client's best interest first is the
fiduciary duty of loyalty. This duty requires being loyal to the client first and foremost, and
always looking out for what is in their best interest. The duty of care is analogous to medical
care. It looks at the degree of skill and diligence, not the adviser's feelings about the client's
situation.
LO 9-4
A lump sum payment of the proceeds of a life insurance policy that is made to the
beneficiary upon the insured's death
A)
is exempt from estate taxation.
B)
is taxable if from a modified endowment contract (MEC).
C)
is generally exempt from income taxation.
D)
is typically taxable.
CORRECT ANSWER
C
The lump sum proceeds of a life insurance policy (even if a MEC) paid to a beneficiary are
generally exempt from income taxation. Withdrawals and loans from a MEC may be taxable.
Life insurance proceeds, however, are subject to estate taxes if the deceased owned a life
insurance policy. If the deceased owner was also the insured, the death benefits are
included in his estate. If the deceased owner is not also the insured, the current value of the
policy is in the deceased owner's gross estate.
LO 4-7
2
@THE STUDY VAULT
,A Medicare Part A patient must pay
A)
the approved costs of care in a skilled nursing facility for the first 10 days.
B)
all costs for a hospital stay beyond 150 days.
C)
the annual deductible for out-of-hospital doctor's services.
D)
all costs above the hospital deductible for a 30-day stay in a hospital.
CORRECT ANSWER
B
The patient must pay all costs related to a hospital stay beyond 150 days. The annual
deductible describes a gap in Medicare Part B coverage, not Part A. Medicare pays for the
cost of the first 60 days in a hospital, but the patient must pay the Part A deductible.
Medicare will pay the approved charges for the first 20 days in a skilled nursing facility. The
gap results from the cost of care that exceeds 20 days (the patient pays the per day
copayment) or the need for custodial care.
LO 5-3
A nonspringing durable power of attorney
A)
remains effective after the principal becomes incapacitated.
B)
3
@THE STUDY VAULT
, remains effective after the principal's death.
C)
is usually created in a person's revocable trust.
D)
gives the attorney-in-fact authority only when the principal becomes incompetent.
CORRECT ANSWER
A
The very purpose of any durable power of attorney is to give the attorney-in-fact authority
to act after the principal becomes incapacitated. However, such authority does not survive
the principal's death. Such authority is created in an independent document, and is effective
immediately in this type of power of attorney.
LO 5-2
A springing durable power of attorney
A)
is usually created in a person's revocable trust.
B)
remains effective after the principal's death.
C)
gives the attorney-in-fact authority only when the principal is deemed incompetent.
D)
remains effective until the principal becomes incapacitated.
CORRECT ANSWER
C
4
@THE STUDY VAULT
