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CFP® > D.27 Characteristics, uses and taxation of investment vehicles > Flashcards

D.27 Characteristics, uses and taxation of investment vehicles Flashcards

Learners will beg able to identify the characteristics, uses, and taxation implications of various investment vehicles to effectively advise clients on investment strategies suitable to their financial goals and tax situations.

1
Q

Which of the following is a characteristic of a mutual fund?

A. Tax-free returns
B. Low fees
C. Professional management
D. Guaranteed returns

A

C. Professional management

D.27 Characteristics, uses and taxation of investment vehicles

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2
Q

What type of investment vehicle is designed to provide a steady stream of income?

A. Growth stock
B. Bond
C. Mutual fund
D Options

A

B. Bond

D.27 Characteristics, uses and taxation of investment vehicles

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3
Q

Which of the following is a characteristic of a mutual fund?

A. Active management by a professional portfolio manager
B. Guaranteed returns
C. Limited diversification
D. High liquidity

A

A. Active management by a professional portfolio manager

D.27 Characteristics, uses and taxation of investment vehicles

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4
Q

Which of the following investment vehicles is the most tax-efficient?

A. Mutual funds
B. Exchange-traded funds (ETFs)
C. Individual stocks
D. Real estate investment trusts (REITs)

A

B. Exchange-traded funds (ETFs)

D.27 Characteristics, uses and taxation of investment vehicles

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5
Q

Which of the following is a characteristic of a closed-end fund?

A. It can issue new shares to raise additional capital
B. It is traded on an exchange
C. It always sells at a premium to its net asset value (NAV)
D. It provides daily liquidity to investors

A

B. It is traded on an exchange

D.27 Characteristics, uses and taxation of investment vehicles

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6
Q

Which of the following investment vehicles is most appropriate for an investor seeking to diversify their portfolio with exposure to different asset classes?

A. Individual stocks
B. Corporate bonds
C. Exchange-traded funds (ETFs)
D. Certificates of deposit (CDs)

A

C. Exchange-traded funds (ETFs)

D.27 Characteristics, uses and taxation of investment vehicles

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7
Q

Which of the following is a characteristic of a real estate investment trust (REIT)?

A. It invests only in commercial properties
B. It is taxed as a partnership
C. It is required to distribute at least 90% of its taxable income to shareholders
D. It has a fixed term of 10 years

A

C. It is required to distribute at least 90% of its taxable income to shareholders

D.27 Characteristics, uses and taxation of investment vehicles

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8
Q

Which of the following investment vehicles is most appropriate for an investor seeking to generate income with low risk?

A. Individual stocks
B. High-yield bonds
C. Money market funds
D. Options

A

C. Money market funds

D.27 Characteristics, uses and taxation of investment vehicles

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9
Q

Julie is a retired investor seeking a steady stream of income from her investments. Which of the following investment vehicles would be most appropriate for her?

A. Growth stocks
B. Corporate bonds
C. Index funds
D. Options

A

B. Corporate bonds

D.27 Characteristics, uses and taxation of investment vehicles

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10
Q

David is a young investor with a long-term investment horizon. He is seeking to invest in a diversified portfolio of stocks with the potential for high returns. Which of the following investment vehicles would be most appropriate for him?

A. Money market funds
B. Municipal bonds
C. Exchange-traded funds (ETFs)
D. Certificates of deposit (CDs)

A

C. Exchange-traded funds (ETFs)

D.27 Characteristics, uses and taxation of investment vehicles

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11
Q

Lisa is an investor seeking to minimize her tax liability. Which of the following investment vehicles would be most tax-efficient for her?

A. Mutual funds
B. Real estate investment trusts (REITs)
C. Exchange-traded funds (ETFs)
D. Individual stocks

A

C. Exchange-traded funds (ETFs)

D.27 Characteristics, uses and taxation of investment vehicles

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12
Q

John is a high net worth investor seeking to invest in alternative assets. Which of the following investment vehicles would be most appropriate for him?
A. Index funds
B. Hedge funds
C. Money market funds
D. Treasury bonds

A

B. Hedge funds

D.27 Characteristics, uses and taxation of investment vehicles

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13
Q

Sue is a risk-averse investor seeking a low-risk investment vehicle with high liquidity. Which of the following investment vehicles would be most appropriate for her?

A. Real estate investment trusts (REITs)
B. Certificates of deposit (CDs)
C. Individual stocks
D. High-yield bonds

A

B. Certificates of deposit (CDs)

D.27 Characteristics, uses and taxation of investment vehicles

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14
Q

Mark is a young investor seeking to invest in a high-risk, high-reward investment vehicle. Which of the following investment vehicles would be most appropriate for him?

A. Treasury bonds
B. Municipal bonds
C. Index funds
D. Penny stocks

A

D. Penny stocks

D.27 Characteristics, uses and taxation of investment vehicles

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15
Q

Linda is an investor seeking to invest in a diversified portfolio of stocks with low fees. Which of the following investment vehicles would be most appropriate for her?

A. Closed-end funds
B. Mutual funds
C. Individual stocks
D. Exchange-traded funds (ETFs)

A

D. Exchange-traded funds (ETFs)

D.27 Characteristics, uses and taxation of investment vehicles

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16
Q

Tom is a high net worth investor seeking to invest in a real estate investment vehicle with the potential for high returns. Which of the following investment vehicles would be most appropriate for him?

A. Real estate investment trusts (REITs)
B. Real estate limited partnerships (RELPs)
C. Exchange-traded funds (ETFs)
D. Individual rental properties

A

B. Real estate limited partnerships (RELPs)

D.27 Characteristics, uses and taxation of investment vehicles

17
Q

Jennifer is an investor seeking to invest in a low-cost investment vehicle that tracks a market index. Which of the following investment vehicles would be most appropriate for her?

A. Mutual funds
B. Individual stocks
C. Closed-end funds
D. Index funds

A

D. Index funds

D.27 Characteristics, uses and taxation of investment vehicles

18
Q

Mike is an investor seeking to invest in a long-term investment vehicle with tax benefits. Which of the following investment vehicles would be most appropriate for him?

A. Individual stocks
B. Mutual funds
C. Money market funds
D. Individual retirement accounts (IRAs)

A

D. Individual retirement accounts (IRAs)

D.27 Characteristics, uses and taxation of investment vehicles

19
Q

Sarah is a retiree seeking to invest in an income-producing investment vehicle that provides regular payouts. Which of the following investment vehicles would be most appropriate for her?

A. Growth stocks
B. Money market funds
C. Dividend-paying stocks
D. Treasury bonds

A

C. Dividend-paying stocks

D.27 Characteristics, uses and taxation of investment vehicles

20
Q

Tony is an investor seeking to invest in a high-risk, high-reward investment vehicle with potential tax benefits. Which of the following investment vehicles would be most appropriate for him?

A. Municipal bonds
B. Real estate investment trusts (REITs)
C. Individual retirement accounts (IRAs)
D. Penny stocks

A

B. Real estate investment trusts (REITs)

D.27 Characteristics, uses and taxation of investment vehicles

21
Q

Rachel is an investor seeking to invest in a low-risk, low-reward investment vehicle with high liquidity. Which of the following investment vehicles would be most appropriate for her?

A. Individual stocks
B. Corporate bonds
C. Money market funds
D. Exchange-traded funds (ETFs)

A

C. Money market funds

D.27 Characteristics, uses and taxation of investment vehicles

22
Q

Tim is an investor seeking to invest in an alternative investment vehicle that provides potential tax benefits and diversification. Which of the following investment vehicles would be most appropriate for him?

A. Hedge funds
B. Index funds
C. Treasury bonds
D. Real estate limited partnerships (RELPs)

A

D. Real estate limited partnerships (RELPs)

D.27 Characteristics, uses and taxation of investment vehicles

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