INVESTMENT COMPANIES EXAM
COMPLETE QUESTIOMNS WITH
CORRECT ANSWERS ALREADY
GRADED!!
1. Distributions from an Individual Retirement Account must
commence by age: - ANSWER ✔ -70 1/2
2. Which statement is FALSE regarding RMDs (Required Minimum
Distributions) from IRA accounts? - ANSWER ✔ -The RMD is
taxable at capital gains tax rates
3. Which statements are TRUE regarding RMDs (Required Minimum
Distributions) from IRA accounts? - ANSWER ✔ -The RMD is
based on the life expectancy of the account beneficiary -If the
RMD is not taken, a penalty tax of 50% is applied
4. Which of the following statements are TRUE regarding lump sum
distributions from qualified plans? - ANSWER ✔ -They may be
rolled over into an IRA without dollar limit -They remain tax
deferred as long as the rollover is performed within 60 days
5. A new customer, age 45, has been terminated from his assembly-
line job of the past 20 years at an automotive parts supplier. During
that time period, he has accumulated $124,000 in the company's
401(k) plan. He wishes to rollover the funds to an IRA account
with your brokerage firm. This customer, who is an
unsophisticated investor, has the entire 401(k) invested in a growth
mutual fund and has no other investments. As the representative
for this customer, your IMMEDIATE concern should be: -
ANSWER ✔ -communicating effectively with an unsophisticated
, customer in an understandable manner to assess financial goals and
risk tolerance
6. A new customer, age 40, has been terminated by her current
employer. This individual had an annual salary of $60,000 per year
and has $180,000 in her 401(k) account at that employer. She has
been informed that the funds cannot be maintained in the ex-
employer's plan. This client is single with no children, has little
investment experience, and has no other investments or retirement
plans. The client asks about rolling over the funds into an IRA. As
the registered representative for this client, the LEAST important
consideration when discussing this with the customer is that: -
ANSWER ✔ -the rollover of the assets in the 401(k) to an IRA
will impact the customer's reported taxable income for that year
7. A new customer, age 45, has been terminated from his assembly-
line job of the past 20 years at an automotive parts supplier. During
that time period, he has accumulated $124,000 in the company's
401(k) plan. He wishes to rollover the funds to an IRA account
with your brokerage firm. This customer, who is an
unsophisticated investor, has the entire 401(k) invested in a growth
mutual fund and has no other investments. As the representative
for this customer, you should be concerned about which of the
following? - ANSWER ✔ All
8. Distributions prior to age 59 1/2 from qualified retirement plans
that are not rolled over into an IRA or other qualified plan are
subject to: - ANSWER ✔ -10% penalty tax -20% withholding tax
9. Distributions from qualified retirement plans that are not rolled
over into an IRA or other qualified plan are subject to: - ANSWER
✔ -20% withholding tax
,10. All of the following statements are true regarding the transfer
of Individual Retirement Accounts from one trustee to another
EXCEPT: - ANSWER ✔ -the funds can be transferred by having
the trustee or custodian make a check payable to the account
holder; who will then deposit the check with the new trustee or
custodian
11. Which of the following statements are TRUE regarding the
transfer of Individual Retirement Accounts from one trustee to
another? - ANSWER ✔ -The transfer can be effected by wiring
the funds directly between trustees or custodians
12. -The transfer can be effected by having the predecessor
trustee or custodian make a check payable to the successor trustee
or custodian
13. Which statement is TRUE about transfers of Individual
Retirement Accounts? - ANSWER ✔ -There is no limit on
transfers
14. In order to defer taxation on an IRA that is inherited from a
deceased spouse, the surviving spouse can: - ANSWER ✔ -roll
over the IRA proceeds into an existing IRA owned by the
surviving spouse
15. -roll over the IRA proceeds into a new IRA set up by the
surviving spouse
16. Your customer, age 68, that has an IRA account at your firm
valued at $500,000, passes away. The customer leaves the account
to his wife, age 58. She has no need for current income as she is
still working, and wishes to know her best option to minimize
taxes. She expects to retire in 12 years, at which time, she will
need the funds to pay for annual living expenses. You should
, advise the spouse to: - ANSWER ✔ -roll the funds over into a
new IRA in the spouse's name
17. Your customer, age 68, that has an IRA account at your firm
valued at $500,000, passes away. The customer leaves the account
to his daughter, age 28. The daughter is permitted to do all of the
following with the inherited IRA EXCEPT: - ANSWER ✔ -roll
the funds over into a new IRA in the daughter's name
18. Which of the following statements are TRUE about
Individual Retirement Accounts? - ANSWER ✔ -Contributions
are allowed based solely upon personal service income
19. -Contributions may be made if the individual is covered by
another type of retirement plan
20. -To remain tax deferred, distributions from other retirement
plans must be rolled over within 60 days
21. All of the following are true statements about Individual
Retirement Accounts EXCEPT: - ANSWER ✔ -if the taxpayer
obtained a 4 month filing extension, he can make the annual
contribution up to the extension date
22. In 2014, a self-employed individual earns $180,000 for the
year, and contributes the maximum amount to an HR10 plan. If
this individual wished to make a contribution to a self-directed
Individual Retirement Account for this year, which statement is
TRUE? - ANSWER ✔ -A maximum contribution of $5,500 is
permitted, but no adjustment is allowed to that year's taxable
income for that amount
23. Which of the following statements are TRUE regarding
Individual Retirement Accounts? - ANSWER ✔ -The earliest a
COMPLETE QUESTIOMNS WITH
CORRECT ANSWERS ALREADY
GRADED!!
1. Distributions from an Individual Retirement Account must
commence by age: - ANSWER ✔ -70 1/2
2. Which statement is FALSE regarding RMDs (Required Minimum
Distributions) from IRA accounts? - ANSWER ✔ -The RMD is
taxable at capital gains tax rates
3. Which statements are TRUE regarding RMDs (Required Minimum
Distributions) from IRA accounts? - ANSWER ✔ -The RMD is
based on the life expectancy of the account beneficiary -If the
RMD is not taken, a penalty tax of 50% is applied
4. Which of the following statements are TRUE regarding lump sum
distributions from qualified plans? - ANSWER ✔ -They may be
rolled over into an IRA without dollar limit -They remain tax
deferred as long as the rollover is performed within 60 days
5. A new customer, age 45, has been terminated from his assembly-
line job of the past 20 years at an automotive parts supplier. During
that time period, he has accumulated $124,000 in the company's
401(k) plan. He wishes to rollover the funds to an IRA account
with your brokerage firm. This customer, who is an
unsophisticated investor, has the entire 401(k) invested in a growth
mutual fund and has no other investments. As the representative
for this customer, your IMMEDIATE concern should be: -
ANSWER ✔ -communicating effectively with an unsophisticated
, customer in an understandable manner to assess financial goals and
risk tolerance
6. A new customer, age 40, has been terminated by her current
employer. This individual had an annual salary of $60,000 per year
and has $180,000 in her 401(k) account at that employer. She has
been informed that the funds cannot be maintained in the ex-
employer's plan. This client is single with no children, has little
investment experience, and has no other investments or retirement
plans. The client asks about rolling over the funds into an IRA. As
the registered representative for this client, the LEAST important
consideration when discussing this with the customer is that: -
ANSWER ✔ -the rollover of the assets in the 401(k) to an IRA
will impact the customer's reported taxable income for that year
7. A new customer, age 45, has been terminated from his assembly-
line job of the past 20 years at an automotive parts supplier. During
that time period, he has accumulated $124,000 in the company's
401(k) plan. He wishes to rollover the funds to an IRA account
with your brokerage firm. This customer, who is an
unsophisticated investor, has the entire 401(k) invested in a growth
mutual fund and has no other investments. As the representative
for this customer, you should be concerned about which of the
following? - ANSWER ✔ All
8. Distributions prior to age 59 1/2 from qualified retirement plans
that are not rolled over into an IRA or other qualified plan are
subject to: - ANSWER ✔ -10% penalty tax -20% withholding tax
9. Distributions from qualified retirement plans that are not rolled
over into an IRA or other qualified plan are subject to: - ANSWER
✔ -20% withholding tax
,10. All of the following statements are true regarding the transfer
of Individual Retirement Accounts from one trustee to another
EXCEPT: - ANSWER ✔ -the funds can be transferred by having
the trustee or custodian make a check payable to the account
holder; who will then deposit the check with the new trustee or
custodian
11. Which of the following statements are TRUE regarding the
transfer of Individual Retirement Accounts from one trustee to
another? - ANSWER ✔ -The transfer can be effected by wiring
the funds directly between trustees or custodians
12. -The transfer can be effected by having the predecessor
trustee or custodian make a check payable to the successor trustee
or custodian
13. Which statement is TRUE about transfers of Individual
Retirement Accounts? - ANSWER ✔ -There is no limit on
transfers
14. In order to defer taxation on an IRA that is inherited from a
deceased spouse, the surviving spouse can: - ANSWER ✔ -roll
over the IRA proceeds into an existing IRA owned by the
surviving spouse
15. -roll over the IRA proceeds into a new IRA set up by the
surviving spouse
16. Your customer, age 68, that has an IRA account at your firm
valued at $500,000, passes away. The customer leaves the account
to his wife, age 58. She has no need for current income as she is
still working, and wishes to know her best option to minimize
taxes. She expects to retire in 12 years, at which time, she will
need the funds to pay for annual living expenses. You should
, advise the spouse to: - ANSWER ✔ -roll the funds over into a
new IRA in the spouse's name
17. Your customer, age 68, that has an IRA account at your firm
valued at $500,000, passes away. The customer leaves the account
to his daughter, age 28. The daughter is permitted to do all of the
following with the inherited IRA EXCEPT: - ANSWER ✔ -roll
the funds over into a new IRA in the daughter's name
18. Which of the following statements are TRUE about
Individual Retirement Accounts? - ANSWER ✔ -Contributions
are allowed based solely upon personal service income
19. -Contributions may be made if the individual is covered by
another type of retirement plan
20. -To remain tax deferred, distributions from other retirement
plans must be rolled over within 60 days
21. All of the following are true statements about Individual
Retirement Accounts EXCEPT: - ANSWER ✔ -if the taxpayer
obtained a 4 month filing extension, he can make the annual
contribution up to the extension date
22. In 2014, a self-employed individual earns $180,000 for the
year, and contributes the maximum amount to an HR10 plan. If
this individual wished to make a contribution to a self-directed
Individual Retirement Account for this year, which statement is
TRUE? - ANSWER ✔ -A maximum contribution of $5,500 is
permitted, but no adjustment is allowed to that year's taxable
income for that amount
23. Which of the following statements are TRUE regarding
Individual Retirement Accounts? - ANSWER ✔ -The earliest a
