AAMS PRACTICE EXAM QUESTIONS & ANSWERS 2025
COMPREHENSIVE QUESTIONS A+
An employer plans to use corporate−owned life insurance to informally fund a nonqualified deferred
compensation agreement and wants flexibility regarding investment choices. Which one of the following
types of life insurance should this employer choose? − Variable life insurance
The latest economic reports have been gloomy, and the stock market is in a protracted slump. Most of
your regular stock customers are selling out their positions. A new client, Mr. Jones, sees these conditions
as a buying opportunity. You would define his investment personality as − contrarian
As of December 31, 20X1, Bob Larkin has the following financial data:
Bond fund $17,000 Residence$400,000 Vested 401(k) plan$95,000 Auto notes$16,000
Residence mortgage$285,000 Auto payments$7,000 Automobiles$45,000 Checking account$8,000
Utilities$4,000
CD$15,000
Stock$125,000
Home equity loan$40,000
What is Bob's net worth? − $364,000
Assets = $17,000 + $400,000 + $95,000 +$45,000 + $8,000 + $15,000 + $125,000 = $705,000. Liabilities =
$16,000 + $285,000 + $40,000 = $341,000, so net worth is $364,000. Notice that auto notes of $16,000 are
included in this calculation, but auto payments of $7,000 is a cash flow item and therefore not included.
For the year ending December 31, 20X2, Ted Jones has the following financial information:
Salaries$70,000
Auto payments$5,000 Insurance$3,800 Food$8,000
Credit card balance$10,000 Dividends$1,100 Utilities$3,500
Mortgage payments$14,000 Taxes$13,000 Clothing$9,000
Interest income$2,100 Checking account$4,000 Vacations$8,400 Donations$5,800
What is the surplus or (deficit) for Ted? − $2,700
Income = $70,000 + $1,100 + $2,100 = $73,200. Expenses = $5,000 + $3,800 + $8,000 + $3,500 + $14,000
+ $13,000 + $9,000 + $8,400 + $5,800 = $70,500, so there is a surplus of $2,700
Which one of the following statements comparing the suitability and fiduciary standards is correct?
− Legally, suitability disputes are often resolved in arbitration whereas fiduciary disputes are
ultimately resolved in the courts.
, Which one of the following types of distributions from a qualified retirement plan may be subject to
mandatory 20% withholding? − indirect rollover
Which one of the following statements regarding a qualified plan is correct? − The employer's deduction is
available in the year that a contribution is made.
All of the following should be agreed upon between the client and the investment professional when
making recommendations based on an investment policy statement EXCEPT − specific investments.
Which of the following has a direct bearing on which investments are appropriate for achieving a goal?
− the investor's time horizon
One purpose of an investment policy statement is to − provide guidelines around which the portfolio is
to be constructed and managed.
Which of the following are elements of any investment policy statement?
I. the client's investment goal
II. suitable and unsuitable investment vehicles
III. an acceptable risk level
IV. a provision for periodic review − D) I, II, III, and IV
As the investment policy statement formulation moves to policy implementation, the − A) investment
professional takes a leading role.
An investor notices that technology stocks are in a strong bull market and wants to take advantage of it.
Even though valuations are at record high levels, he buys a technology stock that a brokerage firm is
recommending. Which one of the following is the investor demonstrating? − C)
rationalization
One change in a client's situation that would require an adjustment in the asset management process
would be − a sudden early retirement from employment.
Dan has bonds maturing in two weeks. Since he bought the bonds, interest rates have fallen. Dan's
bonds are most likely subject to which one of the following risks? − reinvestment risk
Jim Wilson has a $20,000 portfolio of four different stocks. The distribution of this capital and the betas of
these stocks are shown below.
% of Portfolio Value/ Beta Stock A 10% 1.10
Stock B 20% 1.15
Stock C 30% 1.30
Stock D 40% 1.25
COMPREHENSIVE QUESTIONS A+
An employer plans to use corporate−owned life insurance to informally fund a nonqualified deferred
compensation agreement and wants flexibility regarding investment choices. Which one of the following
types of life insurance should this employer choose? − Variable life insurance
The latest economic reports have been gloomy, and the stock market is in a protracted slump. Most of
your regular stock customers are selling out their positions. A new client, Mr. Jones, sees these conditions
as a buying opportunity. You would define his investment personality as − contrarian
As of December 31, 20X1, Bob Larkin has the following financial data:
Bond fund $17,000 Residence$400,000 Vested 401(k) plan$95,000 Auto notes$16,000
Residence mortgage$285,000 Auto payments$7,000 Automobiles$45,000 Checking account$8,000
Utilities$4,000
CD$15,000
Stock$125,000
Home equity loan$40,000
What is Bob's net worth? − $364,000
Assets = $17,000 + $400,000 + $95,000 +$45,000 + $8,000 + $15,000 + $125,000 = $705,000. Liabilities =
$16,000 + $285,000 + $40,000 = $341,000, so net worth is $364,000. Notice that auto notes of $16,000 are
included in this calculation, but auto payments of $7,000 is a cash flow item and therefore not included.
For the year ending December 31, 20X2, Ted Jones has the following financial information:
Salaries$70,000
Auto payments$5,000 Insurance$3,800 Food$8,000
Credit card balance$10,000 Dividends$1,100 Utilities$3,500
Mortgage payments$14,000 Taxes$13,000 Clothing$9,000
Interest income$2,100 Checking account$4,000 Vacations$8,400 Donations$5,800
What is the surplus or (deficit) for Ted? − $2,700
Income = $70,000 + $1,100 + $2,100 = $73,200. Expenses = $5,000 + $3,800 + $8,000 + $3,500 + $14,000
+ $13,000 + $9,000 + $8,400 + $5,800 = $70,500, so there is a surplus of $2,700
Which one of the following statements comparing the suitability and fiduciary standards is correct?
− Legally, suitability disputes are often resolved in arbitration whereas fiduciary disputes are
ultimately resolved in the courts.
, Which one of the following types of distributions from a qualified retirement plan may be subject to
mandatory 20% withholding? − indirect rollover
Which one of the following statements regarding a qualified plan is correct? − The employer's deduction is
available in the year that a contribution is made.
All of the following should be agreed upon between the client and the investment professional when
making recommendations based on an investment policy statement EXCEPT − specific investments.
Which of the following has a direct bearing on which investments are appropriate for achieving a goal?
− the investor's time horizon
One purpose of an investment policy statement is to − provide guidelines around which the portfolio is
to be constructed and managed.
Which of the following are elements of any investment policy statement?
I. the client's investment goal
II. suitable and unsuitable investment vehicles
III. an acceptable risk level
IV. a provision for periodic review − D) I, II, III, and IV
As the investment policy statement formulation moves to policy implementation, the − A) investment
professional takes a leading role.
An investor notices that technology stocks are in a strong bull market and wants to take advantage of it.
Even though valuations are at record high levels, he buys a technology stock that a brokerage firm is
recommending. Which one of the following is the investor demonstrating? − C)
rationalization
One change in a client's situation that would require an adjustment in the asset management process
would be − a sudden early retirement from employment.
Dan has bonds maturing in two weeks. Since he bought the bonds, interest rates have fallen. Dan's
bonds are most likely subject to which one of the following risks? − reinvestment risk
Jim Wilson has a $20,000 portfolio of four different stocks. The distribution of this capital and the betas of
these stocks are shown below.
% of Portfolio Value/ Beta Stock A 10% 1.10
Stock B 20% 1.15
Stock C 30% 1.30
Stock D 40% 1.25
