FNCE 2820 EXAM WITH
COMPLETE SOLUTION
What is a stock exchange? Please give an example. - Answer A market where stocks are
bought and sold. if a company has 100,000 shares, and you buy 1,000 of them, you own
1% of the company. NASDEQ
What is a stock? How is a stock different from cash or bonds? - Answer type of
investment that represents an ownership share in a company. Where a bond is a loan
given to a company.
What is a growth stock? What is a growth mutual fund? What is a value stock? What is a
value mutual fund? - Answer Growth stocks tend to be more volatile than other types of
companies, with share price fluctuations. Investors buy growth stocks to earn profits
from rapid price appreciation, rather than income from dividends. Value stocks remain
steady through all sorts of market conditions and take time to gain in price. stocks that
appear to be undervalued in the marketplace.
How does your time horizon (how long you have to invest) impact your ability to take risk
in an Investment Policy Statement? - Answer In general, the longer your time horizon,
the more risk you can afford. That's because you have more time to recover if an
investment doesn't perform as expected
. Know the difference between a mutual fund and index fund and an ETF. - Answer EFT
can be traded during the day while mutual funds can not. A index fund is something such
as the SNP500 rather than being actively traded by agent.
What is diversification and why is it useful in a portfolio of stocks, bonds and cash? -
Answer spreading investments around so they can all balance out
What is a 12b51 fee and how does it differ from a front end and also a back end load? -
Answer an annual marketing or distribution fee on a mutual fund. back end is fee
redeemed when the mutral fund is over. vs a flat fee at the start.
How does the average fee for a mutual fund compare to the fees on an ETF or index
fund? - Answer ETFs expense ratios generally are lower than mutual funds,
. What are the limitations of mutual funds? - Answer high expense ratios and sales
charges, management abuses, tax inefficiency, and poor trade execution. the higher
return could bite you due to the fees impacting the effects of compounding
What is an international mutual fund? What are some of the risks associated with
international investing? What is the difference between an international mutual fund and
a global mutual fund? - Answer An international fund is a mutual fund that can invest in
companies located anywhere in the world outside of its investors' country of residence.
the risk is These funds carry unique risks such as volatility due to geopolitical events or
, fluctuations in currencies. international funds invest in non-U.S. markets, while global
funds may invest in U.S. stocks alongside non-U.S. stocks.
What is the biggest factor in determining a portfolio's total return? - Answer The
timespan and return rate.?????
What affects your credit score (positives and negatives) - Answer Payment history.
Amounts owed.
Length of credit history.
New credit.
Credit mix.
What is liquidity and how does it apply to investing? - Answer how easily the investment
can be turned to cash
What is the difference between a full service brokerage account and a discount or self
directed brokerage account? - Answer While a discount brokerage firm will provide you
with all the trading tools you require in exchange for a minimal cost, full service
brokerage firms will offer you investing guidance in exchange for a higher fee.
What is a fiduciary? - Answer a financial advisor that must do in best regards to the
client
Please rank these asset classes (cash, bonds, stocks) with regards to inflation risk. -
Answer ???????
Please understand the terms of bonds- coupon, face value, credit risk, and maturity. -
Answer coupon- percent that is payed in interest.
Face Value- always 1000
credit risk- risk that a bond issuer may fail to make payment when requested or that an
insurance company will be unable to pay a claim.
maturity- period of when the owner receives interest
How often do bonds pay an investor interest? How is this interest payment calculated? -
Answer twice a year and is half of the coupon rate.
How do you calculate the after tax yield on a bond? Know how to compare bond yields
on an after tax basis. I will give you the tax rate on the exam but you will need to do the
calculation. After tax yield= Pretax Yield * (1- tax rate). - Answer Pretax Yield * (1- tax
rate).
Please know how to figure out the total cost of a trade. If I give you the price of a stock,
and all the number of shares, you need to multiply them together. How does a
COMPLETE SOLUTION
What is a stock exchange? Please give an example. - Answer A market where stocks are
bought and sold. if a company has 100,000 shares, and you buy 1,000 of them, you own
1% of the company. NASDEQ
What is a stock? How is a stock different from cash or bonds? - Answer type of
investment that represents an ownership share in a company. Where a bond is a loan
given to a company.
What is a growth stock? What is a growth mutual fund? What is a value stock? What is a
value mutual fund? - Answer Growth stocks tend to be more volatile than other types of
companies, with share price fluctuations. Investors buy growth stocks to earn profits
from rapid price appreciation, rather than income from dividends. Value stocks remain
steady through all sorts of market conditions and take time to gain in price. stocks that
appear to be undervalued in the marketplace.
How does your time horizon (how long you have to invest) impact your ability to take risk
in an Investment Policy Statement? - Answer In general, the longer your time horizon,
the more risk you can afford. That's because you have more time to recover if an
investment doesn't perform as expected
. Know the difference between a mutual fund and index fund and an ETF. - Answer EFT
can be traded during the day while mutual funds can not. A index fund is something such
as the SNP500 rather than being actively traded by agent.
What is diversification and why is it useful in a portfolio of stocks, bonds and cash? -
Answer spreading investments around so they can all balance out
What is a 12b51 fee and how does it differ from a front end and also a back end load? -
Answer an annual marketing or distribution fee on a mutual fund. back end is fee
redeemed when the mutral fund is over. vs a flat fee at the start.
How does the average fee for a mutual fund compare to the fees on an ETF or index
fund? - Answer ETFs expense ratios generally are lower than mutual funds,
. What are the limitations of mutual funds? - Answer high expense ratios and sales
charges, management abuses, tax inefficiency, and poor trade execution. the higher
return could bite you due to the fees impacting the effects of compounding
What is an international mutual fund? What are some of the risks associated with
international investing? What is the difference between an international mutual fund and
a global mutual fund? - Answer An international fund is a mutual fund that can invest in
companies located anywhere in the world outside of its investors' country of residence.
the risk is These funds carry unique risks such as volatility due to geopolitical events or
, fluctuations in currencies. international funds invest in non-U.S. markets, while global
funds may invest in U.S. stocks alongside non-U.S. stocks.
What is the biggest factor in determining a portfolio's total return? - Answer The
timespan and return rate.?????
What affects your credit score (positives and negatives) - Answer Payment history.
Amounts owed.
Length of credit history.
New credit.
Credit mix.
What is liquidity and how does it apply to investing? - Answer how easily the investment
can be turned to cash
What is the difference between a full service brokerage account and a discount or self
directed brokerage account? - Answer While a discount brokerage firm will provide you
with all the trading tools you require in exchange for a minimal cost, full service
brokerage firms will offer you investing guidance in exchange for a higher fee.
What is a fiduciary? - Answer a financial advisor that must do in best regards to the
client
Please rank these asset classes (cash, bonds, stocks) with regards to inflation risk. -
Answer ???????
Please understand the terms of bonds- coupon, face value, credit risk, and maturity. -
Answer coupon- percent that is payed in interest.
Face Value- always 1000
credit risk- risk that a bond issuer may fail to make payment when requested or that an
insurance company will be unable to pay a claim.
maturity- period of when the owner receives interest
How often do bonds pay an investor interest? How is this interest payment calculated? -
Answer twice a year and is half of the coupon rate.
How do you calculate the after tax yield on a bond? Know how to compare bond yields
on an after tax basis. I will give you the tax rate on the exam but you will need to do the
calculation. After tax yield= Pretax Yield * (1- tax rate). - Answer Pretax Yield * (1- tax
rate).
Please know how to figure out the total cost of a trade. If I give you the price of a stock,
and all the number of shares, you need to multiply them together. How does a
