AAMS: ALL CHAPTERS EXAM
QUESTIONS AND ANSWERS
Which one of these best describes the requirements of an investment strategy? -
Correct Answers -Competencies, resources, goal, method
Which one of the following industries would be expected to perform well in the early
stage of an economic expansion? - Correct Answers -Consumer credit
Which one of the following indicators would a contrarian investor interpret as a bearish
indicator? - Correct Answers -A decreased short-interest ratio
All of the follow are true regarding the P/E ratio, except - Correct Answers -it is an
absolute measure of a stock valuation.
Which one of the following is a bearish contrarian signal? - Correct Answers -A low put-
call ratio
One reason to use active investment management is - Correct Answers -the potential
for downside protection.
Which one of the following industries tends to do well in the late stage of an economic
expansion? - Correct Answers -capital goods
Dreman's advice to the investor centers on three rules. Which of the following is NOT
one of those rules? - Correct Answers -Select only industry average P/E stocks
Growth stocks typically have which of these characteristics?
I. Low P/E ratios
II. High profit margins
III. High betas
IV. Large dividends - Correct Answers -II and III
One of the characteristics regarding growth stocks is that the earnings per share growth
rate should be at least what percentage? - Correct Answers -15%
Which of the following are characteristics of supplemental executive retirement plans
(SERPs)?
I. SERPs do not provide disability retirement benefits.
II. SERPs are designed for a select group of management or highly compensated
employees.
, III. SERPs must be unfunded.
IV. Benefits are paid by the employer out of general assets. - Correct Answers -II and IV
Which statement regarding an executive bonus plan is NOT correct? - Correct Answers
-The employer owns the policy and names the designated beneficiary.
A disadvantage to using life insurance to informally fund a nonqualified plan is - Correct
Answers -additional death benefit proceeds would be paid to a beneficiary of an
executive with potentially a large estate.
Which one of the following is not a characteristic of a growth stock? - Correct Answers -
low to average betas
Assume an investor sells a 25-year, A rated, 2% municipal bond and reinvests in a 30-
year A rated 3% municipal bond. Both bonds are callable in five years. Which one of the
following is likely to occur with this pure yield pickup strategy? - Correct Answers -Call
risk is increased.
All of these are itemized deductions from adjusted gross income EXCEPT - Correct
Answers -traditional IRA contributions.
Which one of the following is a tax preference item or adjustment for purposes of the
alternative minimum tax? - Correct Answers -bargain element on exercise of an ISO
When determining the taxation on capital gains or losses, the first step is - Correct
Answers -netting long-term gains and long-term losses.
If a shareholder participates in a public utility's dividend reinvestment program, - Correct
Answers -the shareholder is treated as if he or she received a cash dividend equal to
the fair market value of the shares purchased under the plan.
A return of capital dividend from a stock - Correct Answers -reduces the investor's basis
in the stock.
To exclude the accrued interest on Series EE bonds used to pay higher education
expenses from income, the - Correct Answers -redemption proceeds must be used to
pay the higher education expenses of the bondholder, the bondholder's spouse, or the
bondholder's dependents.
Income from a Treasury bond is exempt from - Correct Answers -state and local
taxation.
What is the lowest marginal tax rate for a taxpayer? - Correct Answers -10%
In order to qualify for a reverse mortgage, the borrower must meet all of these following
requirements except - Correct Answers -be 55 years of age or older.
QUESTIONS AND ANSWERS
Which one of these best describes the requirements of an investment strategy? -
Correct Answers -Competencies, resources, goal, method
Which one of the following industries would be expected to perform well in the early
stage of an economic expansion? - Correct Answers -Consumer credit
Which one of the following indicators would a contrarian investor interpret as a bearish
indicator? - Correct Answers -A decreased short-interest ratio
All of the follow are true regarding the P/E ratio, except - Correct Answers -it is an
absolute measure of a stock valuation.
Which one of the following is a bearish contrarian signal? - Correct Answers -A low put-
call ratio
One reason to use active investment management is - Correct Answers -the potential
for downside protection.
Which one of the following industries tends to do well in the late stage of an economic
expansion? - Correct Answers -capital goods
Dreman's advice to the investor centers on three rules. Which of the following is NOT
one of those rules? - Correct Answers -Select only industry average P/E stocks
Growth stocks typically have which of these characteristics?
I. Low P/E ratios
II. High profit margins
III. High betas
IV. Large dividends - Correct Answers -II and III
One of the characteristics regarding growth stocks is that the earnings per share growth
rate should be at least what percentage? - Correct Answers -15%
Which of the following are characteristics of supplemental executive retirement plans
(SERPs)?
I. SERPs do not provide disability retirement benefits.
II. SERPs are designed for a select group of management or highly compensated
employees.
, III. SERPs must be unfunded.
IV. Benefits are paid by the employer out of general assets. - Correct Answers -II and IV
Which statement regarding an executive bonus plan is NOT correct? - Correct Answers
-The employer owns the policy and names the designated beneficiary.
A disadvantage to using life insurance to informally fund a nonqualified plan is - Correct
Answers -additional death benefit proceeds would be paid to a beneficiary of an
executive with potentially a large estate.
Which one of the following is not a characteristic of a growth stock? - Correct Answers -
low to average betas
Assume an investor sells a 25-year, A rated, 2% municipal bond and reinvests in a 30-
year A rated 3% municipal bond. Both bonds are callable in five years. Which one of the
following is likely to occur with this pure yield pickup strategy? - Correct Answers -Call
risk is increased.
All of these are itemized deductions from adjusted gross income EXCEPT - Correct
Answers -traditional IRA contributions.
Which one of the following is a tax preference item or adjustment for purposes of the
alternative minimum tax? - Correct Answers -bargain element on exercise of an ISO
When determining the taxation on capital gains or losses, the first step is - Correct
Answers -netting long-term gains and long-term losses.
If a shareholder participates in a public utility's dividend reinvestment program, - Correct
Answers -the shareholder is treated as if he or she received a cash dividend equal to
the fair market value of the shares purchased under the plan.
A return of capital dividend from a stock - Correct Answers -reduces the investor's basis
in the stock.
To exclude the accrued interest on Series EE bonds used to pay higher education
expenses from income, the - Correct Answers -redemption proceeds must be used to
pay the higher education expenses of the bondholder, the bondholder's spouse, or the
bondholder's dependents.
Income from a Treasury bond is exempt from - Correct Answers -state and local
taxation.
What is the lowest marginal tax rate for a taxpayer? - Correct Answers -10%
In order to qualify for a reverse mortgage, the borrower must meet all of these following
requirements except - Correct Answers -be 55 years of age or older.
