Cannon Trust School 1 Exam
2026/2027 – Certified Questions with
Verified Correct Answers & Detailed
Explanations
1. The most important factor in the long-term performance of equity (stock)
investments is:
A. the economy.
B. interest rates.
C. the industry of the corporation.
D. the management of the corporation. - ANSWER ✅ the management
of the corporation.
2. The most important factor in the short-term performance of equity (stock)
investments is:
A. the economy.
B. interest rates.
C. the industry of the corporation.
D. the management of the corporation. - ANSWER ✅ the economy.
3. Cyclical changes in the business cycle would most likely have the greatest
effect on a:
A. utility company.
, B. food retailer.
C. brewery.
D. machine tool company. - ANSWER ✅ machine tool company.
4. Which of the following would be an example of the use of fiscal policy to
stimulate the economy?
A. An increase in spending by the federal government on new highway
construction.
B. A decrease in the reserve requirement for banks.
C. Action by the Federal Reserve Board to increase the money supply.
D. Intervention in the currency markets by the government to strengthen
the U.S. dollar. - ANSWER ✅ An increase in spending by the federal
government on new highway construction.
5. The strengthening in the U.S. dollar in comparison to other currencies would
have the effect of making which of the following true?
A. U.S. exports less competitive than domestic goods only, no effect on
Foreign imports.
B. U.S. exports more competitive than domestic goods only, no effect on
Foreign imports
C. Foreign imports less competitive than U.S. goods & U.S. exports
more competitive than domestic goods.
D. Foreign imports more competitive than U.S. goods & U.S. exports
less competitive than domestic goods. - ANSWER ✅ Foreign imports
more competitive than U.S. goods & U.S. exports less competitive
than domestic goods.
6. Interest rates rise and yields on money market instruments increase well
above interest rates offered by banks. Investors, therefore, invest directly in
, the higher yielding instruments with funds they have withdrawn from banks.
This is known as which of the following?
A. Intermediation
B. Disintermediation
C. Crowding out
D. The multiplier effect - ANSWER ✅ Disintermediation
7. The Federal Reserve Board has three tools to regulate the economy: Open
market operations, reserve requirements, and margin requirements. If the
Federal Reserve Board wishes to stimulate a sluggish economy, it would do
so by doing which of the following?
A. Selling U.S. Government securities in the open market & Raising
reserve requirements & Reducing margin requirements.
B. Buying U.S. Government securities in the open market & Raising
reserve requirements & Increasing margin requirements.
C. Selling U.S. Government securities in the open market & Lowering
reserve requirements & Increasing margin requirements.
D. Buying U.S. Government securities in the open market & Lowering
reserve requirements & Reducing margin requirements. - ANSWER
✅ Buying U.S. Government securities in the open market &
Lowering reserve requirements & Reducing margin requirements.
8. When a member bank of the Federal Reserve System borrows from the
Federal Reserve Bank in its district, it will pay the:
A. Prime rate.
B. Federal funds rate.
C. Call rate.
D. Discount rate. - ANSWER ✅ Discount rate.
, 9. The Uniform Prudent Investor Act incorporates which of the following?
A. Modern Portfolio Theory
B. Random-Waltz Theory
C. Odd-1st Ratio
D. Efficient Market Hypothesis - ANSWER ✅ Modern Portfolio Theory
10.Which of the following types of companies is cyclical?
A. Health care
B. Tobacco
C. Supermarket
D. Household appliances - ANSWER ✅ Household appliances
11.The auto industry is considered which of the following?
A. Cyclical
B. Defensive
C. Income
D. Growth - ANSWER ✅ Cyclical
12.Which of the following investments represent ownership?
A. T-Bill
B. CD
C. Puts
D. Stocks - ANSWER ✅ Stocks
13.Which of the following is the term for stocks of companies whose earnings
are growing at a faster annual rate than the earnings of companies in
general?
2026/2027 – Certified Questions with
Verified Correct Answers & Detailed
Explanations
1. The most important factor in the long-term performance of equity (stock)
investments is:
A. the economy.
B. interest rates.
C. the industry of the corporation.
D. the management of the corporation. - ANSWER ✅ the management
of the corporation.
2. The most important factor in the short-term performance of equity (stock)
investments is:
A. the economy.
B. interest rates.
C. the industry of the corporation.
D. the management of the corporation. - ANSWER ✅ the economy.
3. Cyclical changes in the business cycle would most likely have the greatest
effect on a:
A. utility company.
, B. food retailer.
C. brewery.
D. machine tool company. - ANSWER ✅ machine tool company.
4. Which of the following would be an example of the use of fiscal policy to
stimulate the economy?
A. An increase in spending by the federal government on new highway
construction.
B. A decrease in the reserve requirement for banks.
C. Action by the Federal Reserve Board to increase the money supply.
D. Intervention in the currency markets by the government to strengthen
the U.S. dollar. - ANSWER ✅ An increase in spending by the federal
government on new highway construction.
5. The strengthening in the U.S. dollar in comparison to other currencies would
have the effect of making which of the following true?
A. U.S. exports less competitive than domestic goods only, no effect on
Foreign imports.
B. U.S. exports more competitive than domestic goods only, no effect on
Foreign imports
C. Foreign imports less competitive than U.S. goods & U.S. exports
more competitive than domestic goods.
D. Foreign imports more competitive than U.S. goods & U.S. exports
less competitive than domestic goods. - ANSWER ✅ Foreign imports
more competitive than U.S. goods & U.S. exports less competitive
than domestic goods.
6. Interest rates rise and yields on money market instruments increase well
above interest rates offered by banks. Investors, therefore, invest directly in
, the higher yielding instruments with funds they have withdrawn from banks.
This is known as which of the following?
A. Intermediation
B. Disintermediation
C. Crowding out
D. The multiplier effect - ANSWER ✅ Disintermediation
7. The Federal Reserve Board has three tools to regulate the economy: Open
market operations, reserve requirements, and margin requirements. If the
Federal Reserve Board wishes to stimulate a sluggish economy, it would do
so by doing which of the following?
A. Selling U.S. Government securities in the open market & Raising
reserve requirements & Reducing margin requirements.
B. Buying U.S. Government securities in the open market & Raising
reserve requirements & Increasing margin requirements.
C. Selling U.S. Government securities in the open market & Lowering
reserve requirements & Increasing margin requirements.
D. Buying U.S. Government securities in the open market & Lowering
reserve requirements & Reducing margin requirements. - ANSWER
✅ Buying U.S. Government securities in the open market &
Lowering reserve requirements & Reducing margin requirements.
8. When a member bank of the Federal Reserve System borrows from the
Federal Reserve Bank in its district, it will pay the:
A. Prime rate.
B. Federal funds rate.
C. Call rate.
D. Discount rate. - ANSWER ✅ Discount rate.
, 9. The Uniform Prudent Investor Act incorporates which of the following?
A. Modern Portfolio Theory
B. Random-Waltz Theory
C. Odd-1st Ratio
D. Efficient Market Hypothesis - ANSWER ✅ Modern Portfolio Theory
10.Which of the following types of companies is cyclical?
A. Health care
B. Tobacco
C. Supermarket
D. Household appliances - ANSWER ✅ Household appliances
11.The auto industry is considered which of the following?
A. Cyclical
B. Defensive
C. Income
D. Growth - ANSWER ✅ Cyclical
12.Which of the following investments represent ownership?
A. T-Bill
B. CD
C. Puts
D. Stocks - ANSWER ✅ Stocks
13.Which of the following is the term for stocks of companies whose earnings
are growing at a faster annual rate than the earnings of companies in
general?
