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CANNON TRUST SCHOOL II EXAM
QUESTIONS WITH ANSWERS.
The purpose of the valuation discount in an FLP or LLC is for:
A. Federal gift and estate tax purposes.
B. State income tax purposes.
C. Federal income tax purposes.
D. Sales and use tax purposes. - correct answer -A. Federal gift
and estate tax purposes.
In order to establish the Deceased Spouse's Unused Exemption
Amount (DSUEA) for the surviving spouse, which of the following
must be true at the first spouse's death?
A. The first decedent spouse must have a taxable estate at death.
B. The surviving spouse must make an election within one year of
the first spouse's death.
C. A timely filed estate tax return was filed.
D. No requirements except that all of the exemption was not, in
fact, used at the first spouse's death. - correct answer -C. A timely
filed estate tax return was filed.
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Bonds that can be traded in for stock are known as:
A. Convertible.
B. Cumulative.
C. Preferred.
D. Callable. - correct answer -A. Convertible.
A company most likely will call bonds (assuming the bonds are
callable) it had
previously issued if:
A. interest rates rise.
B. interest rates fall.
C. interest rates remain the same.
D. the company experiences difficult financial conditions. - correct
answer -B. interest rates fall.
Betty wants to purchase an investment grade bond. The
LOWEST Standard & Poor's rating that would qualify as
investment grade is:
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A. AA
B. BBB-
C. BB
D. B - correct answer -B. BBB-
A Treasury bill is taxable by which of the following entities?
A. States only
B. Federal government only
C. States and municipalities
D. States, municipalities, and federal government - correct answer
-B. Federal government only
Compared to bonds, money market investments typically
possess:
A. lower liquidity and lower marketability.
B. higher liquidity and higher marketability.
C. greater price volatility.
D. more sensitivity to interest rate changes. - correct answer -B.
higher liquidity and higher marketability.
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You manage a trust that holds zero-coupon bonds. To determine
the income tax liability, you should:
A. report the full amount of the discount at maturity.
B. report the annual accrual each year.
C. report semi-annual interest.
D. elect to defer income recognition until bonds mature. - correct
answer -B. report the annual accrual each year.
If investors expect interest rates to increase they will:
A. ladder bond maturities.
B. decrease duration.
C. increase duration.
D. buy all long-term bonds. - correct answer -B. decrease
duration.
A municipal bond issue secured by the income from a bridge or
toll road is called a:
A. mortgage bond issue.
CANNON TRUST SCHOOL II EXAM
QUESTIONS WITH ANSWERS.
The purpose of the valuation discount in an FLP or LLC is for:
A. Federal gift and estate tax purposes.
B. State income tax purposes.
C. Federal income tax purposes.
D. Sales and use tax purposes. - correct answer -A. Federal gift
and estate tax purposes.
In order to establish the Deceased Spouse's Unused Exemption
Amount (DSUEA) for the surviving spouse, which of the following
must be true at the first spouse's death?
A. The first decedent spouse must have a taxable estate at death.
B. The surviving spouse must make an election within one year of
the first spouse's death.
C. A timely filed estate tax return was filed.
D. No requirements except that all of the exemption was not, in
fact, used at the first spouse's death. - correct answer -C. A timely
filed estate tax return was filed.
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Bonds that can be traded in for stock are known as:
A. Convertible.
B. Cumulative.
C. Preferred.
D. Callable. - correct answer -A. Convertible.
A company most likely will call bonds (assuming the bonds are
callable) it had
previously issued if:
A. interest rates rise.
B. interest rates fall.
C. interest rates remain the same.
D. the company experiences difficult financial conditions. - correct
answer -B. interest rates fall.
Betty wants to purchase an investment grade bond. The
LOWEST Standard & Poor's rating that would qualify as
investment grade is:
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A. AA
B. BBB-
C. BB
D. B - correct answer -B. BBB-
A Treasury bill is taxable by which of the following entities?
A. States only
B. Federal government only
C. States and municipalities
D. States, municipalities, and federal government - correct answer
-B. Federal government only
Compared to bonds, money market investments typically
possess:
A. lower liquidity and lower marketability.
B. higher liquidity and higher marketability.
C. greater price volatility.
D. more sensitivity to interest rate changes. - correct answer -B.
higher liquidity and higher marketability.
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You manage a trust that holds zero-coupon bonds. To determine
the income tax liability, you should:
A. report the full amount of the discount at maturity.
B. report the annual accrual each year.
C. report semi-annual interest.
D. elect to defer income recognition until bonds mature. - correct
answer -B. report the annual accrual each year.
If investors expect interest rates to increase they will:
A. ladder bond maturities.
B. decrease duration.
C. increase duration.
D. buy all long-term bonds. - correct answer -B. decrease
duration.
A municipal bond issue secured by the income from a bridge or
toll road is called a:
A. mortgage bond issue.
