Cannon Trust School 1 Exam Questions and Correct Answers.

Cannon Trust School 1 Exam Questions and
Correct Answers
Question 1
True or False: Distribution of assets in satisfaction of a Specific Bequest carries out DNI
to the recipient.
Correct Answer
False



Question 2
The Federal Reserve Board has three tools to regulate the economy: Open market
operations, reserve requirements, and margin requirements. If the Federal Reserve
Board wishes to stimulate a sluggish economy, it would do so by doing which of the
following?

A. Selling U.S. Government securities in the open market & Raising reserve
requirements & Reducing margin requirements.
B. Buying U.S. Government securities in the open market & Raising reserve
requirements & Increasing margin requirements.
C. Selling U.S. Government securities in the open market & Lowering reserve
requirements & Increasing margin requirements.
D. Buying U.S. Government securities in the open market & Lowering reserve
requirements & Reducing margin requirements.
Correct Answer
Buying U.S. Government securities in the open market & Lowering reserve
requirements & Reducing margin requirements.




Page 1 of 80

,Question 3
Preferred stock which permits the owner to exchange it for common stock under set
terms and conditions is:

A. convertible preferred stock.
B. callable preferred stock.
C. cumulative preferred stock.
D. participating preferred stock.

Correct Answer
convertible preferred stock.



Question 4
3 primary things to be examined before accepting an account are:
Correct Answer
Instrument (last will and testament; trust agreement)
Assets (type, quality, location of real estate)
Interested parties (settlor; income benes; remainder persons)



Question 5
A trust which by its terms may be terminated by the settlor or by another person.
Correct Answer
Revocable Trust



Question 6
What are the three responsibilities of a trustee?
Correct Answer
1. custody
2. investment management
3. administration




Page 2 of 80

,Question 7
Deena Decedent passed away on September 26. The income she earned and received
for the year up through September 26 was $32,000. Dividends and interest paid on
estate assets for the balance of the year was an additional $15,000. How much income
should be reported on Deena's final 1040 income tax return?

A. None, since she died during the year, her income is reportable on her estate's
fiduciary income tax return.
B. $15,000
C. $32,000
D. $47,000
Correct Answer
$32,000



Question 8
Your client owns a $200,000 home in joint tenancy, a $15,000 car in his own name, an
$8,000 CD in his name alone, and a $100,000-life insurance policy with a cash value of
$10,000, payable to his wife. What is the value of his probate estate?
- $23,000
- $33,000
- $223,000
- $333,000
Correct Answer
$23,000



Question 9
Which of the following BEST describes the level of fiduciary liability of corporate
fiduciaries?

A. a lower level of liability than individual fiduciaries
B. a higher level of liability than individual fiduciaries
C. the same level of liability as individual fiduciaries
D. corporate fiduciaries are not liable
Correct Answer
B. a higher level of liability than individual fiduciaries




Page 3 of 80

, Question 10
In a qualified terminable interest property (QTIP) trust, which of the following is TRUE?

A. The surviving spouse selects the remaindermen
B. The surviving spouse should be given a general power of appointment
C. The QTIP does not qualify for the marital deduction unless elected
D. A QTIP trust must allow for discretionary income payout
Correct Answer
C. The QTIP does not qualify for the marital deduction unless elected



Question 11
Which of the following is the term for stocks of companies whose earnings are less
affected by the economic cycles of business activity?

A. Cyclical
B. Defensive
C. Income
D. Growth
Correct Answer
Defensive



Question 12
Power of _______ grants broad authority to act on behalf of principal in financial
transactions
Correct Answer
attorney




Page 4 of 80