AWMA UPDATED ACTUAL QUESTIONS
AND CORRECT ANSWERS
COMPREHENSIVE STUDY GUIDE
●● 1031 Exchange
Answer: A swap of one real estate investment property for another that
allows capital gains taxes to be deferred. The term—which gets its name
from Section 1031 of the Internal Revenue Code (IRC)—is bandied
about by real estate agents, title companies, investors, and more. Some
people even insist on making it into a verb, as in, "Let's 1031 that
building for another."
●● Emotional Intelligence
Answer: The ability to perceive and control one's own emotions and use
those emotions to guide thought and behavior.
●● Emotional Perception
Answer: The ability to notice and accurately express emotions.
Ex: A client has been angry at his meetings w/his adviser. The client
realizes his anger stems from his work and is lashing out at his adviser's
financial suggestions.
●● Emotional Facilitation
,Answer: Describes how individuals use emotions to assist thinking,
including responding to changes in their environment and in themselves.
Ex: A client tells her planner that she prefers afternoon meetings at the
planner's office. She's aware that she'll be in a BETTER MOOD and
away from distractions.
●● Emotional Understanding
Answer: Understanding and analyzing emotions or employing emotional
knowledge.
●● Emotional Regulation
Answer: Regulation of emotions to promote emotional and intellectual
growth. Openness and understanding of feelings permit the individual to
learn to control their feelings and dictate expression when appropriate.
●● Total Risk
Answer: The combination of systematic risk and unsystematic risk. It is
measured by the standard deviation (variability).
●● Systematic Risk
Answer: The uncertainty of return inherent in the "system" of which any
asset is a part. Found in nearly all securities because comparable
securities generally move together in a systematic manner. It is non-
diversifiable.
, - Purchasing power risk
- Reinvestment risk
- Interest rate risk
- Market risk
- Exchange rate risk
●● Purchasing Power (Inflation) Risk
Answer: The risk of one's purchasing power decreasing as a result of an
increase in inflation. Inflation is most devastating to bond prices since
the interest and principal are usually fixed in terms of dollar amounts.
Increase inflation will send bond prices downward.
Inflation rate is pro-cyclical (moving in the same direction as the
economy as a whole) but will lag by a year or more.
●● Reinvestment Risk
Answer: The risk that market interest rates have decreased at the time
payments from an investment are received. An investor is forced to
reinvest his payment amount at a time when rates are not as favorable as
they may have been previously.
●● Market Risk
Answer: This risk stems from factors independent of any particular
security. Factors include political events, broad economic and social
changes, and the mood of the investing public.
AND CORRECT ANSWERS
COMPREHENSIVE STUDY GUIDE
●● 1031 Exchange
Answer: A swap of one real estate investment property for another that
allows capital gains taxes to be deferred. The term—which gets its name
from Section 1031 of the Internal Revenue Code (IRC)—is bandied
about by real estate agents, title companies, investors, and more. Some
people even insist on making it into a verb, as in, "Let's 1031 that
building for another."
●● Emotional Intelligence
Answer: The ability to perceive and control one's own emotions and use
those emotions to guide thought and behavior.
●● Emotional Perception
Answer: The ability to notice and accurately express emotions.
Ex: A client has been angry at his meetings w/his adviser. The client
realizes his anger stems from his work and is lashing out at his adviser's
financial suggestions.
●● Emotional Facilitation
,Answer: Describes how individuals use emotions to assist thinking,
including responding to changes in their environment and in themselves.
Ex: A client tells her planner that she prefers afternoon meetings at the
planner's office. She's aware that she'll be in a BETTER MOOD and
away from distractions.
●● Emotional Understanding
Answer: Understanding and analyzing emotions or employing emotional
knowledge.
●● Emotional Regulation
Answer: Regulation of emotions to promote emotional and intellectual
growth. Openness and understanding of feelings permit the individual to
learn to control their feelings and dictate expression when appropriate.
●● Total Risk
Answer: The combination of systematic risk and unsystematic risk. It is
measured by the standard deviation (variability).
●● Systematic Risk
Answer: The uncertainty of return inherent in the "system" of which any
asset is a part. Found in nearly all securities because comparable
securities generally move together in a systematic manner. It is non-
diversifiable.
, - Purchasing power risk
- Reinvestment risk
- Interest rate risk
- Market risk
- Exchange rate risk
●● Purchasing Power (Inflation) Risk
Answer: The risk of one's purchasing power decreasing as a result of an
increase in inflation. Inflation is most devastating to bond prices since
the interest and principal are usually fixed in terms of dollar amounts.
Increase inflation will send bond prices downward.
Inflation rate is pro-cyclical (moving in the same direction as the
economy as a whole) but will lag by a year or more.
●● Reinvestment Risk
Answer: The risk that market interest rates have decreased at the time
payments from an investment are received. An investor is forced to
reinvest his payment amount at a time when rates are not as favorable as
they may have been previously.
●● Market Risk
Answer: This risk stems from factors independent of any particular
security. Factors include political events, broad economic and social
changes, and the mood of the investing public.
