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Test Questions Missed > Test Questions Missed > Flashcards

Test Questions Missed Flashcards

1
Q

Under NAIC model legislation, Alzheimer’s disease may not be…

A

Excluded

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2
Q

Types of benefits provided by long-term care policies include?

A

Skilled-nursing care

Intermediate care

Custodial care

Home healthcare

Adult care

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3
Q

The two interest adjusted methods of comparing life insurance policy cost are what?

A

The surrender cost index and the net payment index

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4
Q

What are hybrid plans that are between a defined contribution plan and a defined benefit plan

A

Target benefit and age weighted plans

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5
Q

What are the defined contribution plans?

A

Money purchase plans

Profit sharing plans

Stock bonus plans

Employees stock ownership plans (ESOP)

Savings / thrift plan

401(k) plan

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6
Q

What pension plans are covered by pension guaranteed corporation insurance? (PGB)

A

Define benefit plans, including cash balance pension plans

Defined benefit plans include: traditional define benefit pension plans and cash balance pension plans

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7
Q

Defined contribution plans must vest at least as rapidly as?

How does each work?

A

1 - 3 year cliff: must provide 100% investing after three years

2 - 6 years graded vesting: 20% vesting at two years and increases 20% per year until year six they are 100% vested

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8
Q

Loans from a qualified plan…

Max amount?

Limit on term?

Loans to 100% owner?

A

Max amount: $50,000

Limit on term: 5 years

Loans to owners: allowed as long as not discriminatory

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9
Q

Contributions to a traditional IRA are fully deductible regardless of taxpayers MAGI if they are not active participants, and whose spouse is not an active participant in what sort of plans?

A

Qualified plan, SEP, SARSEP, SIMPLE, or 403b

If the spouse is an active participant, then the phase out is 230,000 to 240,000

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10
Q

What is the max you can invest in an IRA for 2024 and what is the 50 years old catch up total?

A

$7000

An additional $1000 catch up contributions

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11
Q

When do phaseouts start on IRA contributions?

A

$77,000 to 87,000 single
$123,000 to $143,000 MFJ

Note: MFJ is $230,000 to $240,000 if one spouse is covered by qualified plan, but one is not and wants to invest in an IRA

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12
Q

In a defined benefit pension plan, the max annual benefit is limited to the lesser of

A

$275,000 (2024) participants compensation average over the three highest consecutive earnings years

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13
Q

Once vested, when can NQSO or ISO be exercised and sold?

A

Immediately

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14
Q

The clients assessment of the magnitude of the risk being traded off is known as what?

A

Risk perception

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15
Q

The trade-offs clients are willing to make between potential risk and rewards is known as what kind of risk?

A

Risk tolerance

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16
Q

The degree to which a clients financial resources can cushion risk is known as what kind of risk?

A

Risk capacity

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17
Q

What is the difference between an opened ended question and a closed ended question?

A

Open ended questions require a client to answer in their own words

Closed ended question require only a yes or no answer

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18
Q

How much will homeowners insurance cover if you are not caring enough insurance on your home? (Insurance amount is the less replacement cost.)

A

Amount carried / (should have carried x coininsurance %) = % insurance company will pay

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19
Q

The grant date of an option is typically not a taxable event for a NQSO or an ISO

True or false

A

True

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20
Q

Single premium deferred annuity

Before annuitant reaches the age of projected life expectancy each payment from a fixed annuity is considered partially as taxable income as determined by an exclusion ratio

How do you calculate what amount is included in gross income?

A

Cost basis / total expected benefits = % amount excluded from gross income. Remaining amount is included in gross income.

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21
Q

How many months of cobra coverage qualify for?

  1. Voluntary or involuntary termination.
  2. Divorce, legal separation, or termination due to death.
A
  1. 18 mos
  2. 36 mos
22
Q

Under Medicare part A regarding skilled nursing home facility benefits

  1. How many days of coverage until patient must pay entire cost?
  2. Pays the entire cost for how many days?
  3. Does it provide coverage for custodial care?
A
  1. 100 days.
  2. 20 days.
  3. No
23
Q

Bonds

Lower coupon bonds are more volatile than……., as interest rates change?

A

Higher coupon bonds

24
Q

Bonds

Greater a bond duration, greater price volatility of the bond?

True or false

A

True

25
Q

Bonds

Coupon rate and duration of a bond have an …..

A

Inverse relationship

26
Q

How do you get to net capital loss or gain on a tax return?

A

1st: Net LTCL & LTCG

2nd: Net STCL & STCG

3rd: Then a total short term and long-term to determine short term or long-term loss or gain. Then carry over the remainder of what the max deduction over $3000 is for the following year and then report the above.

27
Q

Is alimony excluded from income?

A

If divorce was finalized after December 31 of 2018, it is

28
Q

Under the kitty tax rules (under age 18 or dependent full-time students under age 24) income will be taxed at parents marginal rate in excess of what?

A

$2600 (2024)

29
Q
  1. Individuals can deduct up to $25,000 of rental real estate losses against active and portfolio income,, what to test must be met to qualify?
  2. In addition the $25,000 offset allowance is reduced by 50% of AGI in excess of?
A
  1. First test participants in management decisions., second test must have 10% or more ownership
  2. $100,000 with phase out at 150,000.
    Loss of one dollar for every two dollars of AGI greater than $100,000
30
Q

Which one of these will create an AMT adjustment?

Nonqualified stock options (NQSO)

Or

Incentive stock options (ISO)

A

Incentive stock options (ISO)

31
Q

Gain may be included in W-2, wages upon exercise of which one of these, NQSO or ISO?

A

Nonqualified stock options (NQSO)

32
Q

What is the “double basis rule” with gifted property?

A

No gain or loss is recognized if the Donie sells the property at a price that is between the donors adjusted basis and the fair market value on the date of the gift

33
Q

Qualified disclaimer from an inheritance must…

A
  1. In writing.
  2. Cannot benefit from interest being disclaimed
  3. Must be made within nine months.
  4. Cannot direct disclaiming interest to other parties.
34
Q

What is the random walk hypothesis?

A

Assumes that stock price changes are essentially random, and therefore, unpredictable; Or that successive stock returns are independent of past returns. Stock prices react quickly to new information. past information is not relevant when predicting future price changes, hence, future price changes are not correlated with past price changes

35
Q

What is bridge financing

A

Is for firms that expect to go public within one year

36
Q

What is first stage financing?

A

For initial manufacturing and sales

37
Q

What is startup financing?

A

Is for product development and marketing for firms who have not sold products or services commercially

38
Q

What is seed money?

A

Early stage business funding for the purpose of research and development of an idea

39
Q

Jeff is analyzing two potential stocks for an investment.

ABC Stock: E(r) 12.5%, standard deviation 4.5%
XYZ Stock: E(r) 18.3%, standard deviation 5.2%

Assume that the two stocks have a covariance of -6.3 based on the information provided, which of the following statements…

What is the covariation of ABC Stock and XYZ Stock?

What is the correlation coefficient between the two stocks?

A

ABC CV = 4.5% / 12.5% = .36

XYZ CV = 5.2% / 18.3% = -.2692

Correlation coefficient = -6.3 / (4.5 x 5.2) = -.2692

40
Q

Security A has a standard deviation of 23% and the market has a standard deviation of 18%. The correlation coefficient between security A and the market is .80. What percent of the change in security As price can be explained by changes in the market?

A

Because the correlation coefficient is .80, the coefficient of determination (R-squared) is .64. Therefore, 64% of investment returns can be explained by changes in the market. (I.e. Systematic risk represents 64%.)

.80 shift x2 (+ key)

41
Q

What are collateral mortgage obligations (CMOs)?

A

Each tranche may have different principal balances, coupon rates, prepayment risk, maturity dates

CMOs differ from other mortgage back securities because they are issued in several different maturity classes

CMO’s offer investors, some protection from homeowners who pay off their mortgages early, a risk known as prepayment risk

42
Q

In equilibrium, investors should only expect to be compensated for bearing systematic risk because

A

Unsystematic risk can be eliminated by diversification

43
Q

A Portfolio has a Standard deviation of 5% and a correlation coefficient of .95

The market has a standard deviation of 4% and a return of 10%

Risk Free rate of return (90 day US T Bills) is 2%

Portfolio has a 16% rate of return

What is the Alpha for this portfolio?

A

You must first solve for Beta because it is needed in Alpha

Beta = (Correlation Coefficient x Standard Deviation of the portfolio) / Standard deviation of the market

(.95 x 5%) / 4% = 1.1875

Alpha = Portfolio return - [risk free rate of return + ( market return - risk free rate of return) x beta

16% - [2% + (10% - 2%) x 1.1875] = 4.5%

44
Q

You buy 100 shares of XYZ stock for $60 per share with an initial margin of 50% and a 30% maintenance margin. At what price would you receive a margin call?

A

Debit balance / 1-maintenance margin

($60 x .50) / 1-.30 = $30 / .70 = 42.85

45
Q

Risk free rate is 5%

Market expected return is 14%

Beta of XYZ stock is 1.2

What would be the expected return for XYZ stock?

A

The expected return can be found using the capital asset pricing model (CAPM)

CAPM = risk free rate + [(market expected return - risk free rate) x Beta]

.05 + [(.14-.05) x 1.2] = 15.80%

46
Q

An investor, considering investing in a particular security is more concerned with what type of return

A

The expected return

47
Q

Under the weak form of the efficient market hypothesis access to what can achieve superior results?

A

Fundamental analysis and insider information

48
Q

Under the semi strong form of efficient market hypothesis only access to what information can achieve superior results?

A

Insider information

49
Q

Under the strong form of the efficient market hypothesis, what information can achieve superior results?

A

None

50
Q

Fundamental analysis is supported by what form of the efficient market hypothesis?

A

The weak form

51
Q

Which form of the efficient market hypothesis does not use fundamental or technical analysis?

A

Semi strong and strong forms

52
Q

What form of the efficient market hypothesis supports the use of technical analysis?

A

It is rejected by all forms of the market hypothesis

Test Questions Missed (2 decks)

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