AWMA Study Guide Questions With Correct
Answers
Baby boomers and older Gen Xers, as compared to millennials and younger Gen
| | | | | | | | | | | | |
Xers
have financial planning needs that have stayed relatively the same over many
| | | | | | | | | | | |
years.
Dan has bonds maturing in two weeks. Since he bought the bonds, interest rates
| | | | | | | | | | | | | |
have fallen. To which one these risks are Dan's bonds most likely to be subject?
| | | | | | | | | | | | | |
Reinvestment rate risk | |
The relationship between investment strategy and investment policy is one in
| | | | | | | | | | |
which
investment strategy is subservient to investment policy.
| | | | | |
If ABC Corporation has net profits of $100,000 and distributes $50,000 as
| | | | | | | | | | | |
dividends, what is its taxable income?
| | | | |
$100,000
,Joseph, age 60, is a taxpayer who has a considerable amount of income that is
| | | | | | | | | | | | | | |
not subject to withholding. He has not made any estimated payments during the
| | | | | | | | | | | | |
year. At a planning review session in mid-December, his adviser informs him that
| | | | | | | | | | | | |
he's approximately $25,000 underwithheld. What course of action might Joseph
| | | | | | | | | |
follow to avoid an underpayment penalty?
| | | | |
Initiate a $25,000 distribution from his IRA account, and direct that 100% of the
| | | | | | | | | | | | | |
distribution be withheld for federal income tax before year-end. This will make up
| | | | | | | | | | | |
|for any underwithholding.
| |
Which of these statements accurately describe characteristics of using life
| | | | | | | | | |
insurance for the informal funding of a nonqualified deferred compensation plan?
| | | | | | | | | |
1.) It represents an asset that may be purchased to fund the employer's
| | | | | | | | | | | | |
unsecured promise to pay deferred amounts to the employee.
| | | | | | | |
2.) It offers the advantage of being able to fund a death benefit immediately.
| | | | | | | | | | | | |
3.) It offers the advantage of various settlement options.
| | | | | | | |
4.) It offers the advantage of simplified administration since death proceeds are
| | | | | | | | | | | |
paid directly to an employee's surviving spouse or other beneficiary.
| | | | | | | | |
1,2, and 3 | |
,Which statement best explains the unauthorized practice of law?
| | | | | | | |
A non-attorney who advises a client to take actions that will affect their property
| | | | | | | | | | | | | |
or legal rights
| |
Changes that have occurred since investment firms changed from private
| | | | | | | | | |
partnerships to publicly traded companies include all of these except
| | | | | | | | |
there is greater individual accountability.
| | | |
The most important stated life goal of wealthy individuals is
| | | | | | | | |
maintaining good health. | |
Wilson has a $20,000 portfolio of four different stocks. The distribution of this
| | | | | | | | | | | | |
capital and the betas of these stocks are shown below.
| | | | | | | | |
A 10% 1.1
| |
B 20% 1.15
| |
C 30% 1.3
| |
, D 40% 1.25
| |
Weighted Beta = 1.23 | | |
Which of these is an advantage of equity REITs over mortgage REITs?
| | | | | | | | | | |
Equity REITs can participate in the appreciation of the underlying properties.
| | | | | | | | | |
Susan, age 50, is the sole shareholder of Market Designs Inc., a small consulting
| | | | | | | | | | | | | |
firm. All of the employees of Market Designs are considerably younger than
| | | | | | | | | | | |
Susan, and turnover is relatively high. Susan is paid more than three times the
| | | | | | | | | | | | | |
salary of the next highest paid employee and wants to install a retirement plan
| | | | | | | | | | | | | |
for the company. Excluding Susan, the oldest employee is 32. Which type of plan
| | | | | | | | | | | | | |
would be most appropriate, assuming she wants to maximize the contributions
| | | | | | | | | | |
for her account and minimize the cost of the other employees?
| | | | | | | | | |
Age-weighted profit sharing plan | | |
For the current tax year, Bob, an individual taxpayer filing a joint return, has
| | | | | | | | | | | | | |
$6,000 of investment interest expense and $11,000 of net investment income
| | | | | | | | | | |
(interest income and dividends). How much investment interest expense, if any,
| | | | | | | | | | |
may Bob deduct in the current tax year?
| | | | | | |
$6,000
Answers
Baby boomers and older Gen Xers, as compared to millennials and younger Gen
| | | | | | | | | | | | |
Xers
have financial planning needs that have stayed relatively the same over many
| | | | | | | | | | | |
years.
Dan has bonds maturing in two weeks. Since he bought the bonds, interest rates
| | | | | | | | | | | | | |
have fallen. To which one these risks are Dan's bonds most likely to be subject?
| | | | | | | | | | | | | |
Reinvestment rate risk | |
The relationship between investment strategy and investment policy is one in
| | | | | | | | | | |
which
investment strategy is subservient to investment policy.
| | | | | |
If ABC Corporation has net profits of $100,000 and distributes $50,000 as
| | | | | | | | | | | |
dividends, what is its taxable income?
| | | | |
$100,000
,Joseph, age 60, is a taxpayer who has a considerable amount of income that is
| | | | | | | | | | | | | | |
not subject to withholding. He has not made any estimated payments during the
| | | | | | | | | | | | |
year. At a planning review session in mid-December, his adviser informs him that
| | | | | | | | | | | | |
he's approximately $25,000 underwithheld. What course of action might Joseph
| | | | | | | | | |
follow to avoid an underpayment penalty?
| | | | |
Initiate a $25,000 distribution from his IRA account, and direct that 100% of the
| | | | | | | | | | | | | |
distribution be withheld for federal income tax before year-end. This will make up
| | | | | | | | | | | |
|for any underwithholding.
| |
Which of these statements accurately describe characteristics of using life
| | | | | | | | | |
insurance for the informal funding of a nonqualified deferred compensation plan?
| | | | | | | | | |
1.) It represents an asset that may be purchased to fund the employer's
| | | | | | | | | | | | |
unsecured promise to pay deferred amounts to the employee.
| | | | | | | |
2.) It offers the advantage of being able to fund a death benefit immediately.
| | | | | | | | | | | | |
3.) It offers the advantage of various settlement options.
| | | | | | | |
4.) It offers the advantage of simplified administration since death proceeds are
| | | | | | | | | | | |
paid directly to an employee's surviving spouse or other beneficiary.
| | | | | | | | |
1,2, and 3 | |
,Which statement best explains the unauthorized practice of law?
| | | | | | | |
A non-attorney who advises a client to take actions that will affect their property
| | | | | | | | | | | | | |
or legal rights
| |
Changes that have occurred since investment firms changed from private
| | | | | | | | | |
partnerships to publicly traded companies include all of these except
| | | | | | | | |
there is greater individual accountability.
| | | |
The most important stated life goal of wealthy individuals is
| | | | | | | | |
maintaining good health. | |
Wilson has a $20,000 portfolio of four different stocks. The distribution of this
| | | | | | | | | | | | |
capital and the betas of these stocks are shown below.
| | | | | | | | |
A 10% 1.1
| |
B 20% 1.15
| |
C 30% 1.3
| |
, D 40% 1.25
| |
Weighted Beta = 1.23 | | |
Which of these is an advantage of equity REITs over mortgage REITs?
| | | | | | | | | | |
Equity REITs can participate in the appreciation of the underlying properties.
| | | | | | | | | |
Susan, age 50, is the sole shareholder of Market Designs Inc., a small consulting
| | | | | | | | | | | | | |
firm. All of the employees of Market Designs are considerably younger than
| | | | | | | | | | | |
Susan, and turnover is relatively high. Susan is paid more than three times the
| | | | | | | | | | | | | |
salary of the next highest paid employee and wants to install a retirement plan
| | | | | | | | | | | | | |
for the company. Excluding Susan, the oldest employee is 32. Which type of plan
| | | | | | | | | | | | | |
would be most appropriate, assuming she wants to maximize the contributions
| | | | | | | | | | |
for her account and minimize the cost of the other employees?
| | | | | | | | | |
Age-weighted profit sharing plan | | |
For the current tax year, Bob, an individual taxpayer filing a joint return, has
| | | | | | | | | | | | | |
$6,000 of investment interest expense and $11,000 of net investment income
| | | | | | | | | | |
(interest income and dividends). How much investment interest expense, if any,
| | | | | | | | | | |
may Bob deduct in the current tax year?
| | | | | | |
$6,000
