CTFA Practice Exam 1 Solved Papers -
Questions with Complete Solutions
Q. Which of the following describes a bank's ability to invest
fiduciary accounts in its own mutual funds?
A. A bank's ability to invest in its own mutual funds is
governed by OCC Regulation 9
B. A bank cannot invest in its own mutual funds
C. The trustee must collect both an investment advisory fee
from the fund and an investment management fee from the
trust
D. The trustee must look to the trust instrument, statutory
authority, or the consent of all beneficiaries for authorization
- Correct Answers ✅D. The trustee must look to the trust
instrument, statutory authority, or the consent of all
beneficiaries for authorization
Q. In 2022, an individual may make tax-exempt gifts of up to
$16,000. The annual exclusion applies if the gift is made to:
A. The donor's children only
B. The donor's school only
C. Any individual
D. A qualified charitable organization - Correct Answers
✅C. Any individual
Sam has a long-standing relationship with an RIA. He is the
trustee of his revocable trust. His RIA is the trust's investment
manager. Sam wants to borrow funds from your institution,
using the assets of the trust to secure the loan. In order for
your institution to make the loan, Sam should:
,CTFA Practice Exam 1 Solved Papers -
Questions with Complete Solutions
A. Liquidate the portfolio and use the cash to fund his project
B. Replace the RIA with your institution as investment
manager
C. Amend his trust to make it irrevocable and name your
institution as sole trustee
D. Establish a custody account with a collateral agreement at
your institution - Correct Answers ✅D. Establish a custody
account with a collateral agreement at your institution
Q. John is the sole trustee of an irrevocable trust established
by his father, Steve, for the benefit of his grandchildren, Mike
(age 18) and Kate (age 16). The grandchildren are entitled to
net income at age 18. The trustee may expend principal for
the health, education, support, and maintenance of the
grandchildren. John may not make any remittances on his
own behalf. He wants to open an investment management
agency account for the trust. The USA PATRIOT Act requires
you to perform customer identification for:
A. Steve
B. John
C. Mike
D. Steve's trust - Correct Answers ✅B. John
Q. John named his cousin, Anita, beneficiary of his life
insurance policy. John would now like to borrow from the
policy's cash value. He can do so without Anita's permission
because:
, CTFA Practice Exam 1 Solved Papers -
Questions with Complete Solutions
A. Anita has no interest in the policy until John dies
B. He is required to repay the loan within the next two years
C. The amount that he borrows will not affect Anita's payout
D. Anita has a vested interest in the policy which guarantees
her payout - Correct Answers ✅A. Anita has no interest in
the policy until John dies
Q. The two MOST relevant factors of risk used in investment
analysis and measurement of individual securities are:
A. Alpha and beta.
B. Beta and correlation.
C. Standard deviation and alpha.
D. Standard deviation and beta. - Correct Answers ✅D.
Standard deviation and beta.
Q. A trust terminates with an unused capital loss carryforward
of $15,000. What happens to the loss carryforward?
A. It is unable to be carried forward to the beneficiaries.
B. It is equally allocated among the remaindermen of the
trust.
C. It is allocable solely to trust income in the remaindermen's
trusts.
D. It is allocated to the remaindermen in proportion to their
interest in the trust - Correct Answers ✅D. It is allocated to
the remaindermen in proportion to their interest in the trust
Questions with Complete Solutions
Q. Which of the following describes a bank's ability to invest
fiduciary accounts in its own mutual funds?
A. A bank's ability to invest in its own mutual funds is
governed by OCC Regulation 9
B. A bank cannot invest in its own mutual funds
C. The trustee must collect both an investment advisory fee
from the fund and an investment management fee from the
trust
D. The trustee must look to the trust instrument, statutory
authority, or the consent of all beneficiaries for authorization
- Correct Answers ✅D. The trustee must look to the trust
instrument, statutory authority, or the consent of all
beneficiaries for authorization
Q. In 2022, an individual may make tax-exempt gifts of up to
$16,000. The annual exclusion applies if the gift is made to:
A. The donor's children only
B. The donor's school only
C. Any individual
D. A qualified charitable organization - Correct Answers
✅C. Any individual
Sam has a long-standing relationship with an RIA. He is the
trustee of his revocable trust. His RIA is the trust's investment
manager. Sam wants to borrow funds from your institution,
using the assets of the trust to secure the loan. In order for
your institution to make the loan, Sam should:
,CTFA Practice Exam 1 Solved Papers -
Questions with Complete Solutions
A. Liquidate the portfolio and use the cash to fund his project
B. Replace the RIA with your institution as investment
manager
C. Amend his trust to make it irrevocable and name your
institution as sole trustee
D. Establish a custody account with a collateral agreement at
your institution - Correct Answers ✅D. Establish a custody
account with a collateral agreement at your institution
Q. John is the sole trustee of an irrevocable trust established
by his father, Steve, for the benefit of his grandchildren, Mike
(age 18) and Kate (age 16). The grandchildren are entitled to
net income at age 18. The trustee may expend principal for
the health, education, support, and maintenance of the
grandchildren. John may not make any remittances on his
own behalf. He wants to open an investment management
agency account for the trust. The USA PATRIOT Act requires
you to perform customer identification for:
A. Steve
B. John
C. Mike
D. Steve's trust - Correct Answers ✅B. John
Q. John named his cousin, Anita, beneficiary of his life
insurance policy. John would now like to borrow from the
policy's cash value. He can do so without Anita's permission
because:
, CTFA Practice Exam 1 Solved Papers -
Questions with Complete Solutions
A. Anita has no interest in the policy until John dies
B. He is required to repay the loan within the next two years
C. The amount that he borrows will not affect Anita's payout
D. Anita has a vested interest in the policy which guarantees
her payout - Correct Answers ✅A. Anita has no interest in
the policy until John dies
Q. The two MOST relevant factors of risk used in investment
analysis and measurement of individual securities are:
A. Alpha and beta.
B. Beta and correlation.
C. Standard deviation and alpha.
D. Standard deviation and beta. - Correct Answers ✅D.
Standard deviation and beta.
Q. A trust terminates with an unused capital loss carryforward
of $15,000. What happens to the loss carryforward?
A. It is unable to be carried forward to the beneficiaries.
B. It is equally allocated among the remaindermen of the
trust.
C. It is allocable solely to trust income in the remaindermen's
trusts.
D. It is allocated to the remaindermen in proportion to their
interest in the trust - Correct Answers ✅D. It is allocated to
the remaindermen in proportion to their interest in the trust
