Chapter 6

Question 1

Objectives

Answer 1

Return Requirements

Risk Tolerance

Question 2

Constraints

Answer 2

Time Horizon
Tax Implications
Liquidity
Regulations and Laws
Unique Preferences

Question 3

Distributable Net Income

Answer 3

Taxable income from a trust. Commissions and other fees are subtracted from DNI, realized capital gains that are reinvested in the corpus of the trust are not cosidered part of the DNI.

Question 4

Market Capitalization

Answer 4

Micro-Cap = less than $300 Million
Small Cap = Between $300 Million - $2 Billion
Mid Cap = $2 Billion - $10 Billion
Large Cap = More than $10 Billion

Question 5

Top Down Analysis

Answer 5

Interted Triangle - Top is the economy, bottom is the fundamental analysis.

Question 6

Bottom Up Analysis

Answer 6

Fundamental analysis is a the bottom, economy is at the top.

Question 7

Alternative Minimum Tax

Answer 7

Accelerated Deprication on Property Placed on service after 1986
Excess research and development costs as well as excess intangible drilling costs.
Local tax and interest on investments that don’t generate income.
Tax exempt interest on private purpose municipals issued after Aug 7, 1986
Incentive stock options to the extent that the fair market value of the employer’s stock is in excess of strike price for the option.

Question 8

Adjusted Gross Estate

Answer 8

Total Gross Estate even if beneficiary such as spouse minus funeral expenses and debts.

Question 9

Taxable Estate

Answer 9

Unlimited Marital and Charitable deductions are subtracted from AGE.