AAMS (Accredited Asset Management Specialist) – Full Modules Summary, Key Concepts &
Exam Review Guide
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? - correct answer
✔✔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 -
correct answer ✔✔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? - correct answer ✔✔$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? - correct answer ✔✔$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? - correct answer ✔✔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? - correct answer ✔✔indirect rollover
Which one of the following statements regarding a qualified plan is correct? - correct answer
✔✔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 - correct
answer ✔✔specific investments.
Which of the following has a direct bearing on which investments are appropriate for achieving
a goal? - correct answer ✔✔the investor's time horizon
One purpose of an investment policy statement is to - correct answer ✔✔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 - correct answer ✔✔D)
I, II, III, and IV
, As the investment policy statement formulation moves to policy implementation, the - correct
answer ✔✔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? - correct answer ✔✔C)
rationalization
One change in a client's situation that would require an adjustment in the asset management
process would be - correct answer ✔✔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? - correct answer
✔✔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
What is the weighted-average beta of Jim's stock portfolio? - correct answer ✔✔1.23
Exam Review Guide
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? - correct answer
✔✔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 -
correct answer ✔✔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? - correct answer ✔✔$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? - correct answer ✔✔$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? - correct answer ✔✔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? - correct answer ✔✔indirect rollover
Which one of the following statements regarding a qualified plan is correct? - correct answer
✔✔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 - correct
answer ✔✔specific investments.
Which of the following has a direct bearing on which investments are appropriate for achieving
a goal? - correct answer ✔✔the investor's time horizon
One purpose of an investment policy statement is to - correct answer ✔✔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 - correct answer ✔✔D)
I, II, III, and IV
, As the investment policy statement formulation moves to policy implementation, the - correct
answer ✔✔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? - correct answer ✔✔C)
rationalization
One change in a client's situation that would require an adjustment in the asset management
process would be - correct answer ✔✔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? - correct answer
✔✔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
What is the weighted-average beta of Jim's stock portfolio? - correct answer ✔✔1.23
