Investment
Showing posts with label Investment. Show all posts
Showing posts with label Investment. Show all posts

Which TWO of the following statements are TRUE about real estate investment trusts (REITs)?

Which TWO of the following statements are TRUE about real estate investment trusts (REITs)?


I. They must distribute 90% of their earnings to shareholders
II. They may invest only in short-term construction loans
III. They must invest in mortgages and securities
IV. Their profits are derived from the difference between the payments made on outstanding mortgages and the amount received in rental income

A. I and II
B. I and IV
C. II and III
D. II and IV








Answer: B

Ms. Taylor purchased $25,000 of mutual fund shares. To date, the fund has paid her $1,000 of net investment income and $500 of capital gain distributions. If Ms. Taylor reinvested all of these monies back in the fund, the cost basis of her total investment is:

Ms. Taylor purchased $25,000 of mutual fund shares. To date, the fund has paid her $1,000 of net investment income and $500 of capital gain distributions. If Ms. Taylor reinvested all of these monies back in the fund, the cost basis of her total investment is:



A. $25,000
B. $25,500
C. $26,000
D. $26,500


Answer: D






Which of the following statements is TRUE regarding the straight life payout option available in a variable annuity?

Which of the following statements is TRUE regarding the straight life payout option available in a variable annuity?



A. It is the most conservative method for receiving payments
B. It allows for a beneficiary for the entire payout period
C. It provides the maximum cash flow of all payout options
D. It provides an equal amount each month for the investor's lifetime








Answer: C

Mr. and Mrs. Blue both have full-time jobs and are covered by their employers' pension plans. Mr. Blue's salary is $65,000. Mrs. Blue's salary is $75,000. If they file a joint tax return and each wants to open an IRA:

Mr. and Mrs. Blue both have full-time jobs and are covered by their employers' pension plans. Mr. Blue's salary is $65,000. Mrs. Blue's salary is $75,000. If they file a joint tax return and each wants to open an IRA:




A. They will be prohibited from doing so since they are covered by their company's pension plans
B. They may open a joint IRA to consolidate their savings
C. Each may do so in separate accounts and may contribute up to $5,500 in each account
D. Each may do so in separate accounts with the maximum contribution for both accounts combined being $5,500










Answer: C

An investor owns 1,000 shares of a mutual fund. The offering price is $12 per share. The fund charges a 6% sales charge and has a 1% redemption fee. If the investor redeems his shares, he will receive approximately:

An investor owns 1,000 shares of a mutual fund. The offering price is $12 per share. The fund charges a 6% sales charge and has a 1% redemption fee. If the investor redeems his shares, he will receive approximately:



A. $11,167
B. $11,280
C. $11,880
D. $12,000







Answer: A

Which TWO of the following statements are TRUE concerning hedge funds?

Which TWO of the following statements are TRUE concerning hedge funds?

I. They do not have fees that include a percentage of assets under management and only charge a fee based on a percentage of the gains
II. They may employ a wide range of investment strategies that include selling short, arbitrage, derivatives, and the use of leverage
III. They are suitable for investors seeking liquidity
IV. They may place restrictions on withdrawals


A. I and III
B. I and IV
C. II and III
D. II and IV







Answer: D

Under what circumstances will the payout from a variable annuity increase?

Under what circumstances will the payout from a variable annuity increase?




A. The rate of inflation exceeds the AIR
B. The performance of the separate account exceeds the rate of inflation
C. The performance of the separate account exceeds the AIR
D. The performance of the separate account for the current period exceeds the performance of the separate account for the previous period








Answer: C

Which TWO of the following choices are advantages of trading exchange-traded funds (ETFs)? They may be purchased on margin Investors can receive breakpoints There is no fee to liquidate shares They may be sold short

Which TWO of the following choices are advantages of trading exchange-traded funds (ETFs)?
They may be purchased on margin
Investors can receive breakpoints
There is no fee to liquidate shares
They may be sold short



A. I and III
B. I and IV
C. II and III
D. III and IV








Answer: B

Who is permitted to participate in a tax-sheltered annuity established under Internal Revenue Code Section 403(b)?

Who is permitted to participate in a tax-sheltered annuity established under Internal Revenue Code Section 403(b)?



A. A student of a school district that has an established plan
B. Only self-employed individuals
C. Any employee of a corporation who meets the eligibility standards
D. An employee of a nonprofit organization that has an established plan







Answer: D

Which of the following statements about a closed-end investment company is TRUE?

Which of the following statements about a closed-end investment company is TRUE?




A. It is continuously issuing new shares
B. It may be redeemed by the issuing investment company
C. It is traded in the open market at its current market price
D. It may only issue common stock






Answer: C

In reviewing prices for a mutual fund, an investor notices that the Beacon Fund has two listings, one for Class A shares and the other for Class B shares. The distinction between the two classes of shares is most likely that:

In reviewing prices for a mutual fund, an investor notices that the Beacon Fund has two listings, one for Class A shares and the other for Class B shares. The distinction between the two classes of shares is most likely that:



A. Class A shares are oriented toward short-term trading, while Class B shares have a long-term perspective
B. Class A shares should be purchased by income-oriented investors, while Class B shares are for those seeking capital appreciation
C. Class A shares can be purchased directly from the fund, while Class B shares are offered through broker-dealers
D. Class A shares have a front-end sales charge, while Class B shares have a contingent deferred sales charge








Answer: D

Which of the following statements is NOT TRUE about a Keogh plan?

Which of the following statements is NOT TRUE about a Keogh plan?







A. It may only be opened by those with self-employed income
B. It is a retirement plan where earnings in the account are tax-deferred
C. It is a nonqualified plan that is exempt from ERISA standards
D. Contributions made to the plan are tax-deductible









Answer: C

Which TWO of the following statements are TRUE regarding the contract holder of a variable annuity?

Which TWO of the following statements are TRUE regarding the contract holder of a variable annuity?


I. The investor buys into the variable annuity at current market value plus commission
II. The investor buys into the variable annuity at net asset value plus a sales charge
III. The investor bears all the associated investment risk
IV. The investor is provided with the same dollar payments at regular intervals for the contract term


A. I & III
B. I & IV
C. II & III
D. II & IV







Answer: C

Over the last 20 years, Grant Rock, age 66, has invested $200,000 in a tax-qualified annuity sponsored by his employer, Tombstone Enterprises. The account is currently worth $800,000. He decides to annuitize the contract and begin drawing down the contract balance. In the first year he has received $50,000. How will these distributions be taxed?

Over the last 20 years, Grant Rock, age 66, has invested $200,000 in a tax-qualified annuity sponsored by his employer, Tombstone Enterprises. The account is currently worth $800,000. He decides to annuitize the contract and begin drawing down the contract balance. In the first year he has received $50,000. How will these distributions be taxed?




A. 100% is taxable as ordinary income
B. 100% is tax-free since Grant is above age 59 1/2
C. Part of the distribution will be taxable at long-term capital gains rates and the balance will be viewed as a return of capital
D. Part of the distribution will be taxable at ordinary income rates and the balance will be viewed as a return of capital








Answer: A

The separate account of the variable life policy that Tom Jones bought is performing poorly. Does this have any influence on his death benefit?

The separate account of the variable life policy that Tom Jones bought is performing poorly. Does this have any influence on his death benefit?



A. No, the death benefit is fixed over the life of the contract
B. Yes, but it could never drop below the highest death benefit attained during the time that the contract began building cash value
C. Yes, but it could never drop below the fixed minimum
D. No, the cash value can only increase over the life of the contract








Answer: C

An investor might take advantage of a Section 1035 exchange if:

An investor might take advantage of a Section 1035 exchange if:





A. The new contract carries a new or longer surrender period
B. The enhanced features do not apply to her
C. Her investment objectives have changed and she is unable to obtain new benefits by switching to another subaccount in the same contract
D. The total cost of the exchange outweighs the benefits of the exchange








Answer: C
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