Term
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Definition
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Term
| What is Gross Domestic Product |
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Definition
| The total market value of all final goods and services produced within a given period by the factors of production located in the country, regardless of who owns the factors of production. |
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Term
True or False
A car produced by a foreign-owned Toyota Plant in Tennessee does not count in GDP. |
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Definition
| False. A car produced by a foriegn-owned Toyota plant in TN counts towards US GDP. |
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Term
True or False
A car produced by a US-owned Ford Plant in Mexico does not count in GDP. |
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Definition
| True. If the product is produced outside of the country, irregardless of the manufacture, it is excluded from that country's GDP. |
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Term
| Why would fiberglass produced to be used in the production of a board would not count towards GDP? |
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Definition
| The fiberglass is referred to as an intermediate good and is excluded from GDP because its value will be counted in the total value of the boat created. |
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Term
| What are three factors of production used in computing GDP? |
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Definition
| Land, Labor, Capital [equipment and buildings] |
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Term
| What five things are omitted from GDP? |
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Definition
1-Nonmarket goods an dservices,w hich are items not sold in a market, i.e. value of a homemakers' service.
2- Underground economy [illegal]
3- Sales of used goods
4- Financial transactions and transfer payments.
5- Social costs, i.e. pollution, effect of changes in the distribution of income. |
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Term
| what are the two ways to measure GDP? |
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Definition
| The expenditure Approach & the Income Approach. |
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Term
| Definition of the Expenditure Approach to GDP. |
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Definition
| GDP can be measured by totalling all of the spending by the different sectors of the economy. |
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Term
|
Definition
GDP = C + I + G + (x-m]
C: Consumption
I: Investment
G: Government
X: Exports
M: Imports
(x-m): Net Exports |
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Term
| What is C: Consumption, in the GDP calculation & what share of total GDP is Consumption? |
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Definition
| Consumption is the spending by households on consumption goods, such as food, cars, clothes and so on. It makes approximately 2/3 of GDP. |
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Term
| What factors influence C: Consumption in the GDP calculation? |
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Definition
Disposable Income [income less taxes]
Wealth
Consumer Confidence
The cost of borrowing or interest rates |
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Term
| What is I: Investment, in the GDP calculation? |
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Definition
| Spending by businesses on such items as new equipment and structures. Investment also includes new home sales. |
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Term
| What factors influence I: Investment in the GDP calculation? |
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Definition
| The cost of borrowing and Expectations about future profitability. |
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Term
| what is G: Government, in the GDP calculation? |
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Definition
| what the government is spending on goods and services. |
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Term
| what is (x-m): Net Exports, in the GDP calculation? |
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Definition
| The spending difference between what domestic consumers by from foreigners and what domestic producers sell to foreigners. |
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Term
| What factors influence (x-m): Net Exports, in the GDP calculation? |
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Definition
Tastes [foreign products vs. domestic products]
Relative prices
exchange rates
foreign economies
government restrictions on trade. |
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Term
| What is the Income approach to the GDP calculation? |
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Definition
| the sum of all incomes earned by factors of production. |
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Term
| What items are included in the income approach to the GDP calculation? |
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Definition
Wages [income earned by workers]
rent [income earned by property owners]
Interest [income earned by savers]
profit [income earned by businesses]
less inderect business taxes [sales taxes, excise taxes, and import taxes]
less capital consumption allowances or depreciation [the value of plants and equipment that wear out each year]. |
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Term
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Definition
| the dollar value of production representing all final goods and services produced and valued at current market prices. |
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Term
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Definition
| current year production valued at a collection of fixed base-year prices. |
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Term
| What is real GDP per capita? |
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Definition
| Dividing Real GDP by a country's population. |
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Term
| What is the use of real GDP per capita? |
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Definition
| To measure a country's standard of living. |
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Term
| What factors does GDP exclude that also effect a country's well being? |
|
Definition
Pollution
The underground economy
liesure time
the distribution of income. |
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Term
| What is real GDP deflator? |
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Definition
| Nominal GDP divided by real GDP. Teh deflator is a price index that measures how much prices have changed since a base year and between two non base years. |
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Term
| How often is GDP measured? |
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Definition
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Term
| What organization [founded in 1916]creates and disseminates economic and business data. |
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Definition
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Term
| what 3 indexes does the Conference Board create to attempt to forcast future moves in GDP? |
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Definition
The index of leading economic indicators.
the coincident index
the lagging index |
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Term
| Created by the Conference Board, what is the leading index? |
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Definition
1-Average weekly initial claims for unemployment insurance.
2-Interest rate spreads [the difference between short term and long term interest rates.
3-money supply
4-average weekly manufacturing hours.
5-Index of consumer expectations
6-New Building permits
7-Stock prices [S&P 500]
8-Vendor performance
9- Manufactures' new orders for non-defense capital goods.
10- Manufacturers' new orders for consumer goods and materials. |
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Term
| What is the Business Cycle? |
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Definition
| the pattern that the path of real GDP typically takes over time. |
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Term
| What are the four definable points/period of GDP? |
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Definition
1: Peak
2: Recession
3: Trough
4: Recovery or Expansion |
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|
Term
| In the business cycle, what is a Peak? |
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Definition
| the point at which real GDP reaches its maximum level for that cycle. |
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Term
| In the business cycle, what is a Trough? |
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Definition
| THE PERIOD DURING WHICH REAL GDP REACHES ITS MINIMUM LEVEL FOR THAT CYCLE. |
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Term
| In the business cycle, what is a Recession? |
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Definition
| The period during which real GDP is declining, and typically unemployment is rising. |
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Term
| In the business cycle, what is a Expansion/Recovery? |
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Definition
| THE PERIOD DURING WHICH REAL GDP IS RISING. |
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Term
| TRUE OR FALSE? STOCK PERFORMANCE TENDS TO LEAD THE BUSINESS CYCLE BY AROUND SIX TO EIGHT MONTHS, ON AVERAGE. |
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Definition
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Term
| TRUE OR FALSE? INTEREST RATES BEGIN TO DECLINE AFTER THE PEAK OF THE BUSINESS CYCLE? |
|
Definition
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|
Term
| HOW LONG DOES THE AVERAGE BUSINESS CYCLE LAST? |
|
Definition
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Term
| WHAT IS AN EXAMPLE OF AN EXOGENOUS SHOCK IN THE BUSINESS CYCLE? |
|
Definition
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|
Term
| WHAT DEPARTMENT MEASURES GDP? |
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Definition
| THE DEPARTMENT OF COMMERCE. |
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Term
| WHAT DOES THE GDP DEFLATOR ALWAYS EQUAL? |
|
Definition
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Term
| WHAT IS THE GDP DEFLATOR EQUATION? |
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Definition
| NOMINAL GDP DIVIDED BY REAL GDP TIMES 100 |
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Term
| What organization determines when recessions begin and end? |
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Definition
| THE NATIONAL BUREAU OF ECONOMIC RESEARCH. |
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Term
| WHAT IS THE DEFINITION OF INFLATION? |
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Definition
| A PERSISTENT UPWARD MOVEMENT IN THE GENERAL PRICE LEVEL. |
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Term
| WHAT ARE TWO CAUSES OF INFLATION? |
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Definition
1: DEMAND-PULL INFLATION
2: COST-PULL INFLATION |
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Term
| WHAT IS DEMAND PULL INFLATION? |
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Definition
| TOO MUCH MONEY CHASING TOO FEW GOODS AND SERVICES DRIVES THE PRICES OF THOSE GOODS AND SERVICES UP. |
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Term
| WHAT IS COST PULL INFLATION? |
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Definition
| A SUPPLY-SIDE RISE IN PRODUCTION COST PER UNIT. |
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Term
| WHEN DOES DEMAND PULL INFLATION OCCUR? |
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Definition
| AFTER A SUSTAINED ECONOMIC EXPANSION. |
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Term
| WHEN DOES COST PULL INFLATION OCCUR? |
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Definition
| WHEN PRODUCERS PASS RISING COSTS ON TO THE CONSUMER IN THE FORM OF HIGHER PRICES. |
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Term
| WHAT ARE TWO CATAYLISTS FOR A COST PULL INFLATION OCCURANCE? |
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Definition
1: A WAGE PUSH IN WHICH WOKERS DEMAND HIGHER WAGES.
2: A SUPPLY SHOCK, SUCH AS A DROUGHT, OIL EMBARGO, LABOR STRIKE, OR SIMILAR EVENT. |
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Term
| WHAT ARE THREE COMMON MEASURES OF INFLATION? |
|
Definition
1: THE REAL GDP DEFLATOR
2: CONSUMER PRICE INDEX
3: THE PRODUCER PRICE INDEX |
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Term
| WHAT IS THE CONSUMER PRICE INDEX [CPI]? |
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Definition
| MEASURES THE COST OF A FIXED BASKET OF GOODS OVER TIME. THE BASKET OF GOODS IS DESIGNED TO REFLECT THE BUYING HABITS OF THE AVERAGE CONSUMER. |
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Term
| HOW OFTEN IS CPI [CONSUMER PRICE INDEX] MEASURED? |
|
Definition
|
|
Term
| WHAT IS THE PRODUCER PRICE INDEX [PPI]? |
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Definition
| THE COST OF INTERMEDIATE GOODS USED BY PRODUCERS. |
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Term
| A RISE IN PPI WILL MOST LIKELY CAUSE A NEAR TERM RISE IN CPI BECAUSE PRODUCERS WILL PASS THEIR HIGHER PRODUCTION COSTS ONTO THE CONSUMER. TRUE OR FALSE? |
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Definition
|
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Term
|
Definition
| A PERIOD OF DECLINE IN THE OVERALL PRICE LEVEL. |
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Term
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Definition
| A PERIOD IN WHICH PRICES CONTINUE TO RISE, BUT AT A DECELERATING RATE. |
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Term
|
Definition
| A PERIOD OF SIMULTANEOUSLY RISING PRICES AND FALLING REAL GDP. |
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|
Term
| WHAT IS THE DEFINITION OF UNEMPLOYMENT? |
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Definition
| THE PERCENTAGE OF US LABOR FORCE THAT IS NOT CURRENTLY WORKING BUT WILLING AND ABLE TO WORK AND ACTIVELY SEEKING EMPLOYMENT. |
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Term
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Definition
| THOSE PERSONS 16 YEARS OF AGE AND OLDER WHO ARE NOT INSTITUTIONALIZED AND WHO ARE EMPLOYED OR ACTIVELY SEEKING EMPLOYMENT. |
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Term
| wHAT ORGANIZATION MEASURES UNEMPLOYMENT & CPI? |
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Definition
| THE BUREAU OF LABOR STATISTICS [BLS] |
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Term
| TRUE OR FALSE? THE OFFICIAL UNEMPLOYMENT RATE REFLECTS THOSE WORKERS EMPLOYED IN PART TIME POSITIONS WHO ARE ACTIVELY SEEKING FULL-TIME EMPLOYMENT. |
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Definition
| FALSE: IT DOES NOT REFLECT THOSE WORKERS EMPLOYED IN PART TIME EMPLOYMENT WHO ARE ACTIVELY SEEKING FULL TIME EMPLOYMENT. |
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Term
| TRUE OR FALSE? THE UNEMPLOYMENT RATE DOES NOT REFLECT THOSE WORKERS WHO ARE UNDER-EMPLOYED IN POSITIONS FOR WHICH THEY ARE OVERQUALIFIED. |
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Definition
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Term
| TRUE OR FALSE? INDIVIDUALS WHO HAVE GIVEN UP LOOKING FOR WORK AFTER AN EXTENDED SEARCH ARE NOT COUNTED AS UNEMPLOYED BECAUSE, NOT ACTIVELY SEEKING WORK, THEY ARE NO LONGER INCLUDED IN THE LABOR FORCE. |
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Definition
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Term
| TRUE OR FALSE? THE UNEMPLOYMENT RATE DOES NOT REFLECTS UNPAID FAMILY MEMBERS WHO WORK FOR THE FAMILY BUSINESS |
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Definition
| FALSE. UNPAID FAMILY MEMBERS WHO WORK FOR THE FAMILY BUSINESS ARE COUNTED AS EMPLOYED. |
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Term
| WHAT ARE THREE TYPES OF UNEMPLOYMENT? |
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Definition
FRICTIONAL UNEMPLOYMENT
STRUCTURAL UNEMPLOYMENT
CYCLICAL UNEMPLOYMENT |
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Term
| wHAT IS FRICTIONAL UNEMPLOYMENT? |
|
Definition
| DESCRIBES PEOPLE NEW TO THE LABOR FORCE OR TEMPORARILY BETWEEN JOBS. |
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Term
| WHAT IS STRUCTURAL UNEMPLOYMENT? |
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Definition
| DESCRIBES WORKERS WITHOUT THE PROPER SKILLS TO TAKE ON EXISTING JOB OPENINGS. |
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Term
| WHAT IS CYCLICAL UNEMPLOYMENT? |
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Definition
| WORKERS DISPLACED BECAUSE OF AN ECONOMIC TURNDOWN AND LOSS OF JOBS IN THE ECONOMY. |
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Term
| WHAT IS NATURAL UNEMPLOYMENT |
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Definition
| A COMBINATION OF FRICTIONAL AND STRUCTURAL UNEMPLOYMENT. |
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Term
| TRUE OR FALSE? WHEN UNEMPLOYMENT IS AT ITS NATURAL RATE, THE ECONOMY IS PRODUCING AT ITS POTENTIAL [POTENTIAL GDP]. |
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Definition
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Term
| WHEN PRODUCTION FALLS BELOW THE ECONOMY'S POTENTIAL, IT CREATES A ____________. |
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Definition
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Term
|
Definition
| THE DIFFERENCE BETWEEN ACTUAL AND POTENTIAL GDP. |
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Term
| WHAT ARE FINANCIAL MARKETS? |
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Definition
| A MARKET SYSTEM WITHIN WHICH FUNDS FLOW FROM MARKET PARTICIPANTS WITH AN EXCESS OF FINANCIAL ASSETS, SUCH AS LENDERS AND INVESTORS, TO THOSE WITH A DEFICIENCY, SUCH AS BORROWERS. |
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Term
| FINANCIAL MARKETS ARE BROKEN DOWN INTO WHAT TWO MARKETS? |
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Definition
|
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Term
|
Definition
| THE MARKET FOR BORROWED MONEY. |
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Term
| WHAT IS THE EQUITY MARKET? |
|
Definition
| THE MARKET FOR OWNERSHIP OF CORPORATIONS AKA THE STOCK MARKET. |
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Term
| HOW IS THE MARKET INTEREST RATE DETERMINED? |
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Definition
| THE DEMAND AND SUPPLY OF LOANABLE MONIES INTERACT IN TEH DEBT MARKETS. |
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Term
| THE RATE OF INTEREST IS ONE FACTOR INFLUENCES ______ SPENDING,W HICH MAKES UP ABOUT TWO-THIRDS OF GDP. |
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Definition
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Term
| WHAT IS THE PRIMARY FACTOR INFLUENCING BUSINESS INVESTMENT SPENDING? |
|
Definition
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|
Term
| _______________ RATES INFLUECE OUR CURRENCY'S EXCHANGE RATE WITH FOREIGN CURRENCIES AND THIS AFFECTS IMPORTS,E XPORTS AND GDP. |
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Definition
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Term
| WHY DO STRONG EQUITY MARKETS TYPICALLY LEAD TO INCREASED INVESTMENT SPENDING BY BUSINESSES? |
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Definition
| WHEN STOCK PRICES RISE, CORPORATIONS ARE MORE LIKELY TO ISSUE ADDITIONAL STOCK TO FUND INVESTMENTS, SUCH AS NEW EQUIPMENT AND PLANT EXPANSIONS. |
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Term
| INTEREST RATES ARE DETERMINED BY WHAT TWO THINGS? |
|
Definition
|
|
Term
|
Definition
| THE PAYMENT FOR THE TEMPORARY USE OF FUNDS. THE PRICE OF MONEY. |
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|
Term
| IN TERM OF INTEREST, WHAT IS MATURITY? |
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Definition
| THE DATE ON WHICH THE PRINCIPAL OF A BOND OR A NOTE BECOMES DUE AND PAYABLE. |
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Term
| WHAT IS THE MATURITY RANGE FOR COMMERICAL PAPER? |
|
Definition
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|
Term
| WHAT IS A SHORT TERM MATURITY FOR INVESTMENTS. |
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Definition
| AN INVESTMENT WIHT A MATURITY OF LESS THAN ONE YEAR. |
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Term
| HOW ARE SHORT TERM INVESTMENTS TRADED? |
|
Definition
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|
Term
| WHAT IS AN INTERMEDIATE TERM MATURITY INVESTMENT? |
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Definition
| AN INVESTMENT WITH A MATURITY GREATER THAN ONE YEAR BUT LESS THAN 10 YEARS. |
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Term
| WHAT IS A LONG TERM MATURITY INVESTMENT. |
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Definition
| AN INVESTMENT WITH A MATURITY GREATER THAN 10 YEARS. |
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Term
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Definition
| A GRAPH THAT RELATES THE INTEREST RATE ON A SECURITY TO THE TERM TO MATURITY [THE TIME REMAINING TO MATURITY] OF THE SECURITY. |
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|
Term
| HOW DOES THE YIELD CURVE SLOPE NORMALLY? |
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Definition
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|
Term
| WHAT DOES THE YIELD CURVE SLOPE MEAN? |
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Definition
| REFLECTING THE FACT THAT LONGER TERM SECURITIES TYPICALLY PAY HIGHER INTEREST RATES THAN SHORTER TERM SECURITIES. |
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Term
| WHAT IS THE EXPECTATIONS THEORY? |
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Definition
| INVESTORS WHO EXPECT THAT FUTURE INTEREST RATES WILL RISE WANT TO HOLD SHORT TERM INVESTMETNS TO GET THEIR MONEY BACK QUICKLY IN ORDER TO REINVEST IT AT HIGHER RATES [AS RATES RISE]. |
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Term
| WHAT IS THE PREFERRED HABITAT THEORY [LIQUIDITY PREFERENCE]? |
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Definition
| DUE TO THE FEAR TO INVEST IN LONG TERM SECURITIES, INVESTORS MAY INVEST IN SHORT TERM SECURITIES TO ALLOW FLEXIBILITY/LIQUIDITY. |
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Term
| WHEN IS AN FLAT OR INVERTED [DOWNWARD SLOPING] YIELD CURVE NORMALLY SEEN? |
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Definition
| DURING TIMES OF HIGH INFLATION. |
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Term
| WHAT IS THE NOMINAL INTEREST RATE? |
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Definition
| THE ACTUAL RATE PAID OR RECIEVED, I.E. NOT ADJUSTED FOR INFLATION. |
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Term
| JOHN HAS A $100 LOAN FROM BANK OF AMERICA FOR ONE YEAR AT A 10 PERCENT SIMPLE INTEREST RATE. HOW MUCH WOULD THE LENDER RECIEVE IN ONE YEAR & WHAT IS THE CALCULATION CALLED? |
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Definition
| $110 - NOMINAL INTEREST RATE CALCULATION. |
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Term
| What is the Fisher Effect? |
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Definition
| When NOMINAL RATES ON NEW LOANS ARE EXPECTED TO RISE PROPORTIONATLY WITH INCREAASES IN ANTICIPATED INFLATION. |
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Term
| IF A $100 LOAN IS MADE AT A 10 PERCENT SIMPLE INTEREST RATE AND DURING THE COURSE OF THAT YEAR INFLATION IS 10 PERCENT, THEN THE REAL INTEREST RATE [OR REAL RETURN] WILL BE WHAT NUMBER? |
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Definition
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Term
| WHAT IS THE DIFERENCE BETWEEN AN EX POST AND AN EX -ANTE REAL INTEREST RATE? |
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Definition
| AND EX POST INTEREST RATE IS THE REAL RETURN AFTER THE FACT. THE EX ANTE INTEREST RATE IS THE IMPLIED REAL INTEREST RATE. |
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Term
| FIRST BANK AND TRUST EXPECTS INFLATION DURING THE NEXT YEAR TO BE 4 PERCENT. THE BANK MAKES A ONE-YEAR, $1000 LOAN WITH AN EX-ANTE REAL INTEREST RATE OF 3%. INFLATION ACTUALLY TURNS OUT TO BE 6% DURING THE YEAR. WHAT IS THE NOMINAL INTEREST RATE ON THE LOAN? |
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Definition
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|
Term
| FIRST BANK AND TRUST EXPECTS INFLATION DURING THE NEXT YEAR TO BE 4 PERCENT. THE BANK MAKES A ONE-YEAR, $1000 LOAN WITH AN EX-ANTE REAL INTEREST RATE OF 3%. INFLATION ACTUALLY TURNS OUT TO BE 6% DURING THE YEAR. HOW MUCH DOES THE BANK GET BACK IN ONE YEAR WHEN THE LOAN IS REPAID [DOLLAR AMOUNT]? |
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Definition
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|
Term
| FIRST BANK AND TRUST EXPECTS INFLATION DURING THE NEXT YEAR TO BE 4 PERCENT. THE BANK MAKES A ONE-YEAR, $1000 LOAN WITH AN EX-ANTE REAL INTEREST RATE OF 3%. INFLATION ACTUALLY TURNS OUT TO BE 6% DURING THE YEAR. WHAT IS THE EX-POST REAL INTEREST RATE ON THE LOAN? WHY DOES IT DIFFER FROM THE EX-ANTE REAL INTEREST RATE? |
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Definition
| 6%. tHE SIX PERCENT IS THE ACTUAL RATE OF INFLATION. THE EX ANTE RATE IS THE IMPLIED OR EXPECTED RATE THAT WOULD BE EXACT OR EXCEED THE RATE OF INFLATION. |
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Term
| WHAT ARE FIVE FACTORS THAT LEAD TO DECREASING INTEREST RATES? |
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Definition
1: LOW OR DECREASING RATES OF INFLATION.
2: STEADY OR DECREASING GOVERNMENT DEFICITS.
3: LOOSE MONEARY POLICY
4: BUYING OF DOLLAR-DENOMINATED ASSETS BY FOREIGN INVESTORS.
5: WEAK CREDIT DEMAND BY THE PRIVATE SECTOR. |
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Term
| WHAT IS THE FISCAL POLICY? |
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Definition
| THE GOVERNMENTS USE OF TAXES AND SPENDING TO ACHIEVE ECNOMIC AND SOCIAL GOALS. |
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Term
| IN THE FISCAL POLICY, NAME THREE DISCRETIONARY SPENDING CATEGORY EXAMPLES. |
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Definition
EDUCATION
ROADS
MEDICAL RESEARCH
ETC |
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Term
| In 2001, George W. Bush signed into law this record $1.35 Trillion tax relief act in June of 2001 in and effort to stimulte the economy. |
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Definition
| The Economic Growth and Tax RElief Reconciliation Act of 2001. |
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Term
| THE ECONOMIC GROWTH AND TAX RELIEF RECONCILIATION ACT OF 2001 WAS SET TO EXPIRE IN jANUARY 1, 2011. OBAMA EXTENDED THESE CUTS FOR HOW LONG? |
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Definition
|
|
Term
| THE JOBS AND GROWTH TAX RELIEF ACT OF 2003, LOWERED THE CAPITAL GAINS RATE FROM 20% TO WHAT RATE? |
|
Definition
|
|
Term
| THE JOBS AND GROWTH TAX RELIEF ACT OF 2003, LOWERED THE DIVIDENDS TAX RATE TO THIS AMOUNT FROM 38.6 PERCENT. |
|
Definition
|
|
Term
| THE JOBS AND GROWTH TAX RELIEF ACT OF 2003, RAISED TEH CHILDRE CARE CREDIT FROM $600 TO WHAT AMOUNT? |
|
Definition
|
|
Term
| THE OBAMA TAX PACKAGE OF DECEMBER 2010, ADJUSTED THE FEDERAL ESTATE TAX RATE TO BE 35% AFTER A $ ____ EXEMPTION. |
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Definition
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|
Term
| WHAT IS THE DEFINITION OF THE FEDERAL DEBT/SURPLUS? |
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Definition
| THE AMOUNT BY WHICH SPENDING EXCEEDS OR FALLS SHORT OF TAX REVENUES. |
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Term
| THE FEDERAL DEBT IS AN ACCUMULATION OF WHAT? |
|
Definition
|
|
Term
| THE DEFICIT FOR 2010 DECLINED TO APPROXIMATELY WHAT PERCENTAGE OF GDP? |
|
Definition
|
|
Term
| WHAT ARE THREE ECONOMIC GOALS OF THE FEDERAL GOVERNMENT? |
|
Definition
1: ECONOMIC GROWTH
2: LOW UNEMPLOYMENT
3: STABLE PRICES |
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|
Term
| tHE TIME LAGS THAT CORRESPOND TO FISCAL POLICY CAN BE CLASSIFIED IN WHAT FOUR CATEGORIES? |
|
Definition
RECOGNITION LAG
ADMINISTATIVE OR LEGISLATIVE LAG
IMPLEMENTATION LAG
EFFECTIVENESS LAG |
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|
Term
| In fiscal policy, what is recognition lag? |
|
Definition
| this is the time it takes to recognize that there is an economic problem. |
|
|
Term
| In fiscal policy, what is administrative or legislative lag? |
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Definition
| the time it takes to effect action through the political process after the economic problem has been recognized. |
|
|
Term
| In fiscal policy, what is implementation lag? |
|
Definition
| this is the time it takes to implement the policies after legislation has been passed. |
|
|
Term
| In fiscal policy, what is effeciveness lag? |
|
Definition
| the time it takes for policy actions to actually effect the economy. |
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Term
| In fiscal policy, what is the crowding-out effect? |
|
Definition
| government borrowing reduces the amount of investment money for businesses and households to borrow, thereby driving up the cost of borrowing and driving tdown the consumption and investment spending. |
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Term
| For those persons born before 1938, what is the normal retirement age? |
|
Definition
|
|
Term
| Workers born in 1938 and thereafter have what expected retirement age? |
|
Definition
|
|
Term
| For social security, what is the definition of the maximum primary insurance amount[PIA] |
|
Definition
| The maximum monthly benefit for a worker retiring at full retirement age. |
|
|
Term
| What is the maximum base for old age benefits in 2012? |
|
Definition
|
|
Term
| In order to begin early retirement, a fully insured worker can start receiving benefits at what age? |
|
Definition
|
|
Term
| If a fully insured worker elects to recieve benefits before age 65, how much is the benefit reduced? |
|
Definition
| 5/9 of 1 percent for every month under age 65. |
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Term
| True or False? a worker can obtain higher social security benefits by working beyond retirement age. |
|
Definition
|
|
Term
| If a worker works beyond retirement age, benefits will increase by what percentage for each year of continued employment between full retirement age and 72? |
|
Definition
|
|
Term
| TRUE OR FALSE? THE MONTHLY SPOUSE'S BENEFIT BEGINNING AT THE FULL RETIREMENT AGE IS EQUAL TO 50 PERCENT OF THE WORKER'S PIA. |
|
Definition
|
|
Term
| IF INCOME IS OVER $34K FOR AN INDIVIDUAL OR $44K FOR A MARRIED COUPLE, WHAT PERCENTAGE OF SOCIAL SECURITY IS TAXED AS ORDINARY INCOME? |
|
Definition
|
|
Term
| TRUE OR FALSE? IN THE YEAR A WORKER ATTAINS FULL RETIREMENT AGE, $1 IN BENEFITS WILL BE LOST FOR EVERY $5 OF EMPLOYMENT INCOME EARNED INT EH MONTHS BEFORE ATTAINING FULL RETIREMENT INCOME, ABOVE AN ANNUAL LIMIT. THIS LIMIT IN 2012 IS PROJECTED TO BE $37,680. |
|
Definition
| FALSE. IT IS $1 FOR EVERY $3 OF EMPLOYMENT INCOME EARNED. |
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|
Term
IN ORDER TO ATTAIN TOTAL RETIREMENT SECURITY:
A: TOTAL INVESTMENT ASSETS MUST EQUAL PROJECTED EXPENSES.
B: AFTER TAX INCOME MUST EQUAL NFLATING EXPENSES ON AN ANNUAL BASIS.
C: TOTAL INCOME MUST EQUAL TAX LIABILITIES PLUS EXPENSES.
D: THE PRESENT VALUE OF ALL FINANCIAL RESOURCES [INCOME AND CAPITAL] MUST EQUAL OR EXCEED THE PRESENT VALUE OF ALL PROJECTED CASH OUTFLOWS[TAXES AND SPENDING] |
|
Definition
| D: THE PRESENT VALUE OF ALL FINANCIAL RESOURCES [INCOME AND CAPITAL] MUST EQUAL OR EXCEED THE PRESENT VALUE OF ALL PROJECTED CASH OUTFLOWS[TAXES AND SPENDING] |
|
|
Term
IF AN UNMARRIED INDIVIDUAL RETIRES AT AGE 65 WITH A 20 YEAR LIFE EXPECTANCY AND AN ANNUAL LIVING EXPENSE BUDGET OF $30K SUBJECT TO A 5% INFLATION RATE, WHAT WILL BE THE AGGREGATE AMOUNT O FINANCIAL RESOURCES EVENTUALLY CONSUMED TO MEET THIS INDIVIDUAL'S TOTAL ECONOMIC NEEDS?
A: $600K
b: LESS THAN $600K
C: MORE THAN $600K
D: DEPENDS ON THE INDIVIDUAL'S MARGINAL TAX RATE. |
|
Definition
|
|
Term
THE LARGEST MONTHLY PENSION PAYMENT WILL BE AVAILABLE UNDER THE FOLLOWING DISTRIBUTION OPTION:
A: SINGLE LIFE ANNUITY
B: SINGLE LIFE ANNUITY WITH 10 YEAR CERTAIN
C: 100 PERCENT JOINT AN DSURVIVOR ANNUITY
D: 50% JOINT AN DSURVIVOR ANNUITY |
|
Definition
| A: SINGLE LIFE ANNUITY. A SINGLE LIFE WITHOUT A TERM CERTAIN HAS THE SHORTEST PAYOUT TIME ON AN ACTUARIAL BASIS AND THEREFORE WOULD RECEIVE THE LARGEST MONTHLY PAYMENT. |
|
|
Term
THE MAXIMUM PRE TAX EMPLOYEE CONTRIBUTION TO A 401K PLAN IN 2012 FOR A PERSON UNDER AGE 50 IS:
A: $50K
B: $17K
C: THE LESSER OF $50K OR 100 PERCENT OF COMPENSATION.
D: UNLIMITED |
|
Definition
| B: $17K; $5,500 CATCH UP AMOUNT OVER AGE 50. |
|
|
Term
THE FOLLOWING TAX TREATMENT WILL BE APPLIED TO A LUMP SUM DISTRIBUTION FROM A NON QUALIFIED RETIREMENT PLAN:
A: ALTERNATIVE MINIMUM TAX
B: IRA ROLLOVER
C: CAPITAL GAIN
D: ORDINARY INCOME |
|
Definition
|
|
Term
THE LAST CALENDAR DAY ON WHICH A CONTRIBUTION CAN BE MADE TO AN IRA FOR THE DEDUCTION THAT YEAR IS:
A: DECEMBER 31 OF THAT SAME TAX YEAR
B: APRIL 1 OF THE FOLLOWING TAX YEAR
C: APRIL 15 OF THE FOLLOWING TAX YEAR
D: JANUARY 15 OF THE FOLLOWING TAX YEAR |
|
Definition
| C: APRIL 15 OF THE FOLLOWING TAX YEAR |
|
|
Term
A RETIREEE IN 2012 MAY EARN AND UNLIMITED AMOUNT OF COMPENSATION WITHOUT ANY LOSS OF SOCIAL SECURITY BENEFITS IF HE OR SHE IS:
A: BETWEEN THE AGES OF 62 AND 65
B: AGE 62 OR OLDER
C: AT OR AFTER FULL RETIREMENT AGE
D: AGE 70 OR OLDER. |
|
Definition
| C: AT OR AFTER FULL RETIREMENT AGE |
|
|
Term
| WHAT ARE THE THREE MOST COMMON FORMS OF JOINT PROPERTY OWNERSHIP? |
|
Definition
1: JOINT TENANCY WITH RIGHT OF SURVIVORSHIP
2: TENANCY BY THE ENTIRETY
3: TENANCY IN COMMON |
|
|
Term
| WHAT IS JOINT TENANCY WITH THE RIGHT OR SURVIVORSHIP? |
|
Definition
| AT DEATH OF ONE CO-OWNER, THE DECEDENT'S SHARE OF THE PROPERTY WILL AUTOMATICALLY PASS TO THE SURVIVING CO-OWNER WITHOUT THE REQUIREMENT OF PROBATE. |
|
|
Term
| WHAT IS TENANCY BY THE ENTIRETY? |
|
Definition
| A JOINT OWNERSHIP ONLY FOR HUSBAND AND WIFE. IN MANY STATES IT ONLY APPLIES TO REAL ESTATE. ONE CO-OWNER CANNOT DISPOSE OF THE PROPERTY WITHOUT THE PERMISSION OF THE SPOUSE. WHEN ONE SPOUSE DIES, THE ENTIRE INTEREST IN THE PROPERTY PASSES TO THE SURVIVING SPOUSE. |
|
|
Term
| TRUE OR FALSE? RYAN AND FERGIE OWN A HOME WITH JOINT TENANCY BY THE ENTIRETY. RYAN, SOLELY, OWES LOWES $10K. LOWES CAN ATTACH TE PROPERTY OWNED BY RYAN AND FERGIE. |
|
Definition
| FALSE. A CREDITOR OF ONE SPOUSE CANNOT ATTACK PROPERTY OWNED IN JOINT TENANCY BY THE ENTIRETY UNLESS THE NON-DEBTOR SPOUSE DIES, LEAVING THE PROPERTY IN THE HANDS OF THE DEBTOR SPOUSE. |
|
|
Term
| WHAT IS TENANCY IN COMMON? |
|
Definition
| OWNED BY TWO OR MORE CO-OWNERS AND PERMITS ONE OF THE OWNERS TO DISPOSE OF HIS OR HER INTEREST IN THE PROPERTY WITHOUT THE PERMISSION OF THE OTHER CO-OWNERS. |
|
|
Term
| IN TENANCY IN COMMON, IF A CO-OWNER DIES WHO DOES HIS/HER SHARE PASS TO? |
|
Definition
|
|
Term
| WHAT ARE THE EIGHT COMMUNITY PROPERTY STATES? |
|
Definition
NEVADA
LOUISIANA
ARIZONA
CALIFORNIA
IDAHO
NEW MEXICO
TEXAS
WASHINGTON |
|
|
Term
| TRUE OR FALSE? ALL ASSETS ACQUIRED DURING MARRIAGE ARE CONSIDERED COMMUNITY OR MARITAL PROPERTY, REGARDLESS OF WHETHER THEY WERE ACQUIRED BY THE HUSBAND OR THE WIFE. |
|
Definition
|
|
Term
| IN A COMMUNITY PROPERTY STATE, WHAT IS CONSIDERED SEPERATE PROPERTY? |
|
Definition
GIFT OR INHERITANCE DURING MARRIAGE.
PROPERTY ACQUIRED BEFORE MARRIAGE. |
|
|
Term
| IN SOME STATES, IF A HUSBAND ACQUIRES A LIFE INSURANCE POLICY AND NAMES HIS DAUGHTER AS THE BENEFICIARY OF THE POLICY, WITH COMMUNITY PROPERTY ASSETS, AND THE WIFE DIES BEFORE THE HUSBAND WITH A WILL NAMING THE SON AS THE SOLE BENEFICIARY, THE SON WILL NOT BECOME THE CO-OWNER OF THE POLICY WITH THE HUSBAND OF THE POLICY WITH THE RIGHT TO CHANGE THE BENEFICIARY DESIGNATION. |
|
Definition
| FALSE. THE SON MAY BECOME THE CO-OWNER OF THE POLICY WITH THE RIGHT TO CHANGE THE BENEFICIARY DESIGNATION. |
|
|
Term
|
Definition
| THE COURT SUPERVISED ADMINISTRATION OF A DECEDENT'S ESTATE. |
|
|
Term
| WHAT DOES INTESTATE MEAN? |
|
Definition
| SOMEONE WHO DIED WITHOUT LEAVING A WILL. |
|
|
Term
| WITH REGARDS TO AN ESTATE, WHEN SHOULD A DISCLAIMER BE MADE? |
|
Definition
| WITHIN 9 MONTHS OF THE DEATH OF THE GRANTOR. |
|
|
Term
| WITH REGARDS TO A DISCLAIMER, CAN A DISCLAIMANT RECIEVE FUNDS PRIOR TOT HE DISCLAIMER? |
|
Definition
|
|
Term
| WHAT IS A TRANSFER BY DISCLAIMER? |
|
Definition
| THE BENEFICIARY WILL BE TREATED AS THOUGH HE/SHE PREDECEASED THE GRANTOR AND THE FUNDS WILL GO TO THE NEXT PERSON IN LINE PER DOCUMENT OR STATE STATUTE. |
|
|
Term
| YES OR NO? ARE GIFTS MADE WITHIN THREE YEARS OF A DEATH INCLUDABLE IN THE ESTATE OR ESTATE TAX PURPOSES? |
|
Definition
|
|
Term
| TRUE OR FALSE. THERE ARE NO RESTRICTIONS ON THE MARITAL DEDUCTION AMOUNT FOR SPOUSES THAT ARE NOT US CITIZENS. |
|
Definition
|
|
Term
| TRUE OR FALSE. THE IRC PERMITS AN UNLIMITED MARITAL DEDUCTION IF THE ASSETS OF AN ESTATE ARE TRANSFERRED INTO A SPECIAL TRUST FOR THE BENEFIT OF THE ALIEN SPOUSE. |
|
Definition
|
|
Term
| WHAT IS A QDOT: QUALIFIED DOMESTIC TRUST |
|
Definition
| THE IRC PERMITS AN UNLIMITED MARITAL DEDUCTION IF THE ASSETS OF AN ESTATE ARE TRANSFERRED INTO A SPECIAL TRUST FOR THE BENEFIT OF THE ALIEN SPOUSE. |
|
|
Term
| WHAT IS THE ESTATE TAX CREDIT IN 2012? |
|
Definition
| $1,765,800 - TRANSLATING INTO A $5.12 MILLION EXEMPTION AMOUNT. |
|
|
Term
| WHAT IS INCOME WITH RESPECT TO THE DECEDENT [IRD]? |
|
Definition
| CERTAIN ITEMS WITH AN INCOME COMPONENT THAT WAS EARNED BEFORE DEATH, BUT NOT RECEIVED UNTIL AFTER DEATH, I.E. ACCRUED BUT NOT PAID RETIREMENT BENEFIT. |
|
|
Term
| WHAT IS THE GENERATION SKIPPING TAX EXEMPTION AMOUNT? |
|
Definition
| $5.12MILLION BUT INDEXED FOR INFLATION SO IT CHANGES YEARLY. |
|
|
Term
| DURING LIFE, ONE CAN GIVE UP TO $5.12mILLION FREE OF GIFT TAX FOR 2012. TRUE OR FALSE? |
|
Definition
|
|
Term
| WHAT IS THE GIFT AND ESTATE TAX RATE FOR AMOUNTS EXCEEDING $5.12 MILLION? |
|
Definition
|
|
Term
| WHAT WAS THE MODIFIED CARRYOVER RULE IN 2010? |
|
Definition
| THE STEP UP IN BASIS PROVISIONS WERE REPLACED WITH A SET OF CARRYOVER BASIS PROVISIONS. THE DECENDANTS TAX BASIS IS CARRIED OVER TO THE TRANSFEREE. |
|
|
Term
| TRUE OR FALSE? IF ACCURATE COST BASIS INFORMATION IS NOT PROVIDED TO THE IRS, THEY CAN IMPOSE A ZERO BASIS ASSUMPTION FOR THE COST BASIS. |
|
Definition
|
|
Term
| HOW MUCH CAN A PARENT OR GRANDPARENT CONTRIBUTE TO A 529 PLAN WITHOUT GIFT TAX IMPLICATIONS? |
|
Definition
| 5 YEARS WORTH OF GIFTS AKA $6500 |
|
|
Term
| TRUE OR FALSE? THE DONOR'S BASIS IN GIFTED ASSETS THAT HAVE APPRECIATED IS STEPPED UP. |
|
Definition
| FALSE. THE COST BASIS IS CARRIED OVER TO THE TRANSFEREE. |
|
|
Term
| MARIAN PURCHASED REAL ESTATE FOR $1M. WHEN GIFTING IT TO TOM, THE VALUE HAD DECLINED TO $900K. tOM SOLD THE PROPERTY FOR $800K. WHAT IS THE LOSS ON THE PROPERTY? |
|
Definition
| $100K. BECAUSE THE BASIS INT EH VALUE OF THE LOSS OR THE BASIS...THE LESSER OF. IN THIS CASE, THE BASIS IS $900K. |
|
|
Term
| WHAT IS THE INCOME REQUIREMENT OF A QTIP. |
|
Definition
| IN ORDER TO QUALIFY FOR THE MARITAL DEDUCTION, THE TOTAL NET INCOME IN A QTIP MUST BE DISTRIBUTED OR MADE AVAILABLE TO THE LIVING SPOUSE ON AN ANNUAL BASIS. |
|
|
Term
|
Definition
| TRUST ESTABLISHED BY THE GRANTOR WITH THE GRANTOR AS TRUSTEE. |
|
|
Term
| IN AN IRREVOCABLE INSURANCE TRUST, WHY WOULD THE INSURANCE PROCEEDS PASS ESTATE TAX FREE? |
|
Definition
| BECAUSE THE OWNER OF THE POLICY IS NO LONGER THE GRANTOR. |
|
|
Term
| TRUE OR FALSE? WHOLE LIFE INSURANCE CARRIES A TAXABLE VALUE FOR GIFT TAX PURPOSES, APPROX. EQUAL TO THE NET CASH VALUE OF THE POLICY. |
|
Definition
|
|
Term
| WHAT IS A QUALIFIED PERSONAL RESIDENCE TRUST [QPRT] |
|
Definition
| AN IRREVOCABLE TRUST THAT IS CREATED SPECIFICALLY FOR HTE PURPOSE OF TRANSFERRING EVENTUAL OWNERSHIP OF ONE'S PERSONAL RESIDENCE. |
|
|
Term
| ONE OF THE MOST ATTRACTIVE FEATURES OF THE FAMILY LIMITED PARTNERSHIP OR LIMITED LIABILITY COMPANY IS THE CONCEPT OF A VALUATION DISCOUNT FOR ESTATE PLANNING PURPOSES. WHAT IS THE VALUATION DISCOUNT? |
|
Definition
| THE TRANSFER OFA PARTERNSHIP INTEREST OR NONMANAGING MEMBER UNIT TYPICALLY RESULTS IN THE CREATION OF A MINORITY INTEREST AND IN ADDITION, DESCENDANTS HAVE NO CONTROL. THIS OFTEN RESULTS INA 30 TO 40% DISCOUNT. |
|
|
Term
TRUE OR FALSE? MULTIPLE BENEFICIARIES OF AN INHERITED IRA HAVE UNTIL APRIL 1 OF THE YEAR AFTER THE ACCOUNT OWNER DIED TO SPLIT THE IRA INTO INDIVIDUAL ACCOUNT
S AND USE THEIR OWN LIFE EXPECTANCIES TO CALCULATE DISTRIBUTIONS. |
|
Definition
| FALSE. BENEFICIARIES HAVE UNTIL DEECEMBER 31 OF THE YEAR FOLLOWING THE DEATH OF THE IRA OWNER. |
|
|
Term
| WHAT IS A CHARITABLE REMAINDER ANNUITY TRUST? |
|
Definition
| A DONOR CAN MAKE A DEFERRED CHARITABLE GIFT OF PRINCIPAL, WHILE RESERVING THE INCOME INTEREST FOR INDIVIDUAL BENEFICIARIES,SUCH AS HIS OR HER SPOUSE OR CHILDREN. |
|
|
Term
| IN A CHARITABLE REMAINDER ANNUITY TRUST, IS THE RESIDUE OF THE TRUST DEDUCTIBLE FOR ESTATE TAX PURPOSES? |
|
Definition
|
|
Term
| TO QUALIFY AS A CHARITABLE REMAINDER ANNUITY TRUST, A TRUST MUST PAY A FIXED DOLLAR AMOUNT ANNUALLY OF NOTLESS THAN 5 PERCENT OF THE INITIAL FAIR MARKET VALUE OF THE TRUST ASSETS. TRUE OR FALSE? |
|
Definition
|
|
Term
| WHAT IS A CHARITABLE REMAINDER UNITRUST? |
|
Definition
| A DONOR CAN MAKE A DEFERRED CHARITABLE GIFT OF PRINCIPAL,W HILE RESERVING AN INCOME INTEREST IN THE FORM OF A VARIABLE ANNUITY FOR INDIVIDUAL BENEFICIARIES. |
|
|
Term
| WHAT IS THE MINIMUM MANDATORY DISBURSEMENT FROM A CHARITABLE REMAINDER UNITRUST> |
|
Definition
|
|
Term
| WHAT IS A CHARITABLE LEAD TRUST? |
|
Definition
| THE CHARITY RECIEVESTHE RIGHT TO RECEIVE THE INCOME FROM THE TRUST FOR A PERIOD OF YEARS AND THE INDIVIDUAL BENEFICIARIES RECEIVE THE REMAINDER. |
|
|
Term
| WHEN WILL A DONOR RECIEVE A TAX BENEFIT FROM A CLUT [CHARITABLE LEAD UNI-TRUST]? |
|
Definition
| WHEN THE CLUT WAS CREATED AT DEATH. |
|
|
Term
| IS A FAMILY FOUNDATION TAX EXEMPT? |
|
Definition
|
|
Term
THE LIVING WILL IS USED TO:
A: AVOID PROBATE
B: AUTHORIZE ORGAN DONATION
C: AVOID INTESTACY
D: AUTHORIZE TERMINATION OF CERTAIN MEDICAL PROCEDURES. |
|
Definition
| D: AUTHORIZE TERMINATION OF CERTAIN MEDICAL PROCEDURES. |
|
|
Term
THE FOLLOWING PROVISION REGARDING THE USE OF PRINCIPAL CANNOT BE UTILIZED IN A MARITAL DEDUCTION TRUST:
A: TRUSTEE'S DISCRETION TO DISTRIBUTE PRINCIPAL BETWEEN SPOUSE AND CHILDREN.
B: TRUSTEE'S DISCRETION TO DISTRIBUTE PRINCIPAL TO THE SURVIVING SPOUSE.
C: SPOUSE'S GENERAL TESTAMENTARY POWER OF APPOINTMENT.
D: SPOUSE'S UNRESTRICTED LIFETIME RIGHT OF WITHDRAWAL. |
|
Definition
| A: TRUSTEE'S DISCRETION TO DISTRBUTE PRINCIPAL BETWEEN SPOUSE AND CHILDREN. |
|
|
Term
THE MAXIMUM AMOUNT OF TAX FREE TRANSFERS AVAILABLE BETWEEN SPOUSES FOR FEDERAL GIFT TAX PURPOSES.
A: $1m
B: $2m
C: $3M
D: UNLIMITED |
|
Definition
|
|
Term
A PROVISION IN THE DECEDENT'S WILL THAT ATTEMPTS TO DISPOSE OF THE FOLLOWING PROPERTY IS INEFFECTIVE.
A: PROPERTY IN WHICH THE DECEDENT HOLDS A POWER OF APPOINTMENT.
B: THE DECEDENT'S PORTION OF TENANCY IN COMMON PROPERTY.
C: THE DECEDENT'S PORTION OF JOINT TENANCY PROPERTY.
D: THE DECEDENT'S FINAL PAYCHECK. |
|
Definition
| C: THE DECEDENT'S PORTION OF JOINT TENANCY PROPERTY. |
|
|
Term
A FORM OF JOINTLY OWNED PROPERTY THAT CAN ONLY BE HELD BETWEEN HUSBAND AND WIFE IS:
A: JOINT TENANCY WITH RIGHT OF SURVIVORSHIP
B: TENANCY BY THE ENTIRETY
C: TENANCY IN COMMON
D: QUALIFIED TERMINABLE INTEREST PROPERTY. |
|
Definition
| B: TENANCY BY THE ENTIRETIES |
|
|
Term
THE FOLLOWING TYPE OF ASSET CANNOT BE USED TO FUND A CREDIT SHELTER TRUST:
A: JOINT TENANCY PROPERTY
B: EMPLOYEE BENEFIT PLAN
C: LIFE INSURANCE POLICY
D: SAILBOAT |
|
Definition
| A: JOINT TENANCY PROPERTY |
|
|
Term
THE FOLLOWING IS NOT A CHARACTERISTIC OF A LIVING TRUST:
A: SELF TRUSTEED
B: IRREVOCABLE
C: FUNDED
D: AVOID PROBATE |
|
Definition
|
|
Term
| WHAT IS THE SARBANES OXLEY ACT OF 2002? |
|
Definition
| GRANTED THE SEC POWERS TO ENFORCE ETHICAL STANDARDS. REDESIGNED FEDERAL REGULATIONS OF PUBLIC COMPANY CORPORATE GOVERNMANCE AND REPORTING OBLIGATIONS. |
|
|
Term
| TRUE OR FALSE? REFERRAL FEES, COMMISSIONS AND OTHER FORMS OF DIRECT OR INDIRECT COMPENSATION BY A THIRD PARTY DOES NOT HAVE TO BE DISCLOSED TO A CLIENT. |
|
Definition
| FALSE. IT RAISES A CONFLICT OF INTEREST AND SHOULD BE DISCLOSED. |
|
|
Term
IN ORDER TO AVOID AN UNDISCLOSED CONFLICT OF INTEREST WHEN PROVIDING FINANCIAL PLANNING ADVICE, A STOCK BROKER SHOULD:
A: EXPLAIN THAT HE OR SHE RECEIVES A COMMISSION FOR THE SALE OF AN INVESTMENT PRODUCT.
B: PROVIDE ADVICE FREE OF CHARGE.
C: NOT MENTION THAT SHE RECIEVES EXTRA COMPENSATION FOR RECOMMENDING HIS OR HER EMPLOYER'S LOAD FUNDS.
D: CHARGE A FEE FOR FINANCIAL PLANNING ADVICE AND OJECTIVELY RECOMMEND HIS OR HER EMPLOYER'S LOAD FUNDS. |
|
Definition
| A: EXPLAIN THAT HE OR SHE RECEIVES A COMMISSION FOR THE SALE OF AN INVESTMENT PRODUCT. |
|
|
Term
THE FOLLOWING ACTIVITY BY A PERSON ENGAGED IN FINANCIAL PLANNING FOR A CLIENT IS MOST LIKELY TO BE A BREACH OF PROFESSIONAL ETHICS:
A: ACTING ON THE REQUEST OF THE CLIENT, THE PLANNER INVESTS THE CLIENT'S FUNDS IN AN INDEX FUND WHEN THE PLANNER BELIEVES THAT THE MARKET WILL DECLINE IN THE NEAR FUTURE.
B: SELLING SHARES OF STOCK AT A FAIR MARKET VALUE TO THE CLIENT AFTER CORRECTLY ADVISING THE CLIENT THAT THE COMPANY IS HIGHLY REGARDED BY LEADING MARKET ANALYSTS.
C: ADDING THE CLIENT'S FUNDS TO THE PLANNER'S PERSONAL FUNDS WITHOUT ADVISING THE CLIENT IN ORDER TO MEET THE MINIMUM INVESTMENT FUNDS REQUIREMENT OF A TOP PORTFOLIO MANAGER.
D: MAINTAINING BOTH CUSTODY AND DISCRETIONARY AUTHORITY OVER A CLIENT'S FUNDS IN A WELL-DIVERSIFIED PORTFOLIO. |
|
Definition
| C: ADDING THE CLIENT'S FUNDS TO THE PLANNER'S PERSONAL FUNDS WITHOUT ADVISING THE CLIENT IN ORDER TO MEET THE MINIMUM INVESTMENT FUNDS REQUIREMENT OF A TOP PORTFOLIO MANAGER. |
|
|
Term
AS A MATTER OF PROFESSIONAL RESPONSIBILITY, IT IS MOST IMPORTANT THAT AN INDIVIDUAL WHO WILL PROVIDE FINANCIAL PLANNIGN ADVICE TO A CLIENT DISCLOSE BEFOREHAND IN WRITING THAT:
A: THE QUOTED FEE FOR PLANNING SERVICES IS BASED, IN PART, ON ANTICIPATED COMMISSIONS OR REFERRAL FEES, BU TTHAT THE CLIENT IS NOT REQUIRED TO PURCHASE ANY PRODUCTS FROM THE ADVISOR.
B: THE STATISTICAL DATA ON INVESTMENT PERFOMANCE USED BY THE PLANNER IS PROVIDED BY A THIRD PARTY SOURCE.
C: THE SOFTWARE USED BY THE PLANNER IS NEWLY DEVLOPED AND RELATIVELY UNTESTED.
D: A LEADING ESTATE PLANNING ATTORNEY OFTEN RECOMMENDED BY THE PLANNER IS A PERSONAL FRIEND. |
|
Definition
| A: THE QUOTED FEE FOR PLANNING SERVICES IS BASED, IN PART, ON ANTICIPATED COMMISSIONS OR REFERRAL FEES, BU TTHAT THE CLIENT IS NOT REQUIRED TO PURCHASE ANY PRODUCTS FROM THE ADVISOR. |
|
|
Term
IN ORDER TO EQUATE THE VALUE OF A MONTHLY PENSION ANNUITY TO ITS LUMP SUM EQUIVALENT, THE FOLLOWING TIME VALUE FORMULA SHOULD BE USED:
A: FUTURE VALUE OF 1 PER PERIOD.
B: FUTURE VALUE OF 1
C: PRESENT VALUE OF 1 PER PERIOD
D: PRESENT VALUE OF 1 |
|
Definition
| C: PRESENT VALUE OF 1 PER PERIOD. |
|
|
Term
IN ORDER TO COMPARE ALTERNATIVE INVESTMENT OPPORTUNITIES WITH DIFFERENTINITIAL VALUES, THE FOLLOWING METHOD SHOULD BE USED:
A: NET PRESENT VALUE
B: NET FUTURE VALUE
C: INTERNAL RATE OF RETURN
D: OPPORTUNITY COST |
|
Definition
| C: INTERNAL RATE OR RETURN |
|
|
Term
| THE DERIVED DISCOUNT RATE AT WHICH THE SUMS OF THE PRESENT VALUES OF THE COSTS AND THE BENEFITS OF AN INVESTMENT ARE EQUAL; THAT IS, THE RATE IN WHICH THE NET IS ZERO. |
|
Definition
| IRR: INTERNAL RATE OR RETURN. |
|
|
Term
| TRUE OR FALSE? MORE THAN ONE IRR MAY BE DERIVED FROM THE SAME DATA. |
|
Definition
|
|
Term
| THIS RATE OF RETURN ASSUMES THAT THE INVESTOR REINVESTS ALL CASH FLOWS GENERATED BY THE INVESTMENT AT A GIVEN COMPOUND AFTER TAX OR OPPORTUNITY RATE. IT IS A VARIATION OF IRR AND FV TECHNIQUES. |
|
Definition
| EFFECTIVE RATE OF RETURN [ERR] |
|
|
Term
| WHAT IS THE AFTER TAX INTEREST EXPENSE REQUIRED TO SERVICE A DEBT? |
|
Definition
|
|
Term
| WAHT IS THE AFTER TAX INVESTMENT RETURN FORGONE BY COMMITTING FUNDS TO AN ALTERNATIVE PURPOSE. |
|
Definition
|
|
Term
NET INTEREST COST IS:
A: INVESTMENT INCOME LESS INVESTMENT INTEREST.
B: THE AMOUNT OF INTEREST PAID ON A DEBT
C: THE NONDEDUCTIBLE PORTION OF INTEREST EXPENSE.
D: THE AFTER TAX INTEREST COST OF DEBT. |
|
Definition
| D: THE AFTER TAX INTEREST COST OF DEBT. |
|
|
Term
NET WORTH EQUALS:
A: TOTAL ASSETS LESS LIABILITIES
B: NONCONTINGENT ASSETS PLUS LIABILITIES
C: NONCONTINGENT ASSETS PLUS CONTINGENT ASSETS
D: LIQUID ASSETS LESS LIABILITIES. |
|
Definition
| A: TOTAL ASSETS LESS LIABILITIES. |
|
|
Term
NET CASH FLOW EQUALS:
A: INCOME LESS LIABILITIES
B: GROSS INCOME LESS EXPENSES
C: TAX LIABILITIES PLUS EXPENSES
D: AFTER TAX INCOME LESS EXPENSES. |
|
Definition
| D: AFTER TAX INCOME LESS EXPENSES. |
|
|
Term
FOR INCOME TAX PURPOSES, THE INTEREST EXPENSE ON BORROWED FUNDS FOR THE PURPOSE OF PURCHASING A MUNICIPAL BOND IS:
A: FULLY NONDEDUCTIBLE
B: FULLY DEDUCTIBLE
C: PARTIALLY DEDUCTIBLE
D: AN ADJUSTMENT TO BASIS. |
|
Definition
|
|
Term
A TAXPAYER WHO IS IN THE 35% MARGINAL FEDERAL INCOME TAX RATE BRACKET AND WHO LIVES IN A STATE WITH A 10% TAX STATE TAX RATE WILL HAVE A TOTAL NET INCOME TAX LIABILITY OF APPROXIMATELY:
A: 25%
B: 35%
C: 41.5%
D: 45% |
|
Definition
C: 41.5%
THE TAX PAYER WILL DEDUCT STATE TAXES FROM FEDERALLY TAXABLE INCOME. THEREFORE, THE AFTER-TAX BURDEN OF STATE TAXES IS 10% [1 - FEDERAL TAX RATE], OR 5.6%. THIS 6.5 PERCENT IS ADDED TO THE 35% FEDERAL TAX RATE TO DERTERMINE THE OVERALL TAX RATE. |
|
|
Term
A 12 YEAR OLD CHILD, WHOSE ONLY INCOME WAS $1000 IN INTEREST AND DIVIDENDS FRM A $24K GIFT FROM HER GRANDPARENTS, AND WHOSE PARENTS HAVE TAXABLE INCOME OF $300,000 WILL BE TAXED IN THE FOLLOWING MANNER:
A: AT THE CHILD'S RATE
B: AT HER PARENT'S MARGINAL TAX RATE
C: AT HER GRANDPARENTS' MARGINAL TAX RATE
D: THERE WILL BE NO TAX LIABILITY. |
|
Definition
|
|
Term
WHAT IS MEANT BY "CONVERATBILITY" WITH RESPECT TO A TERM INSURANCE POLICY?
A: THE INSURANCEW COMPANY HAS THE OPTIONTO CANCEL THE POLICY AND SWITCH IT TO A NON-TERM POLICY.
B: THE POLICY OWNER HAS THE OPTION TO CONVERT THE TERM POLICY TO ANOTHER POLICY THAT THE INSURANCE COMPANY OFFERS, WITHOUT PROOF OF INSURABILITY.
C: THE POLICY OWNER CAN STRIP OUT THE POLICY'S CASH VALUE AND MOVE IT INTO ANY OF THE INSURANCE COMPANY'S MUTUAL FUNDS.
D: THE INSURANCE COMPANY CAN SWITCH FROM A MUTUAL COMPANY STATUS TO A STOCK COMPANY STATUS, A CONCEPT KNOWN AS DEMUTUALIZATION. |
|
Definition
| B: THE POLICY OWNER HAS THE OPTION TO CONVERT THE TERM POLICY TO ANOTHER POLICY THAT THE INSURANCE COMPANY OFFERS, WITHOUT PROOF OF INSURABILITY. |
|
|
Term
WHICH OF THE FOLLOWING LIFE INSURANCE POLICIES ALLOW POLICY OWNERS TO INVEST IN SEPERATE MUTUAL FUND ACCOUNTS?
A:WHOLE LIFE AND TERM LIFE
B: UNIVERSAL LIFE AND VARIABLE LIFE
C: UNIVERSAL LIFE AND WHOLE LIFE
D: VARIABLE LIFE AND VARIABLE UNIVERSAL LIFE |
|
Definition
| D: VARIABLE LIFE AND VARIABLE UNIVERSAL LIFE. |
|
|
Term
FROM AN INCOME TAX PERSPECTIVE, THE INSIDE BUILD UP OF CASH VALUE IN A LIFE INSURANCE POLICY IS:
A: GENERALLY TAX DEFERRED
B: TAXABLE EACH YEAR ON A CAPITAL GAINS BASIS
C: TAXABLE EACH YEAR AS ORDINARY INCOME
D: TAX FREE IF THE INSURED WAITS UNTIL AGE 70 1/2 TO WITHDRAW IT. |
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Definition
| A: CASH VALUE BUILD UP INSIDE A LIFE INSURANCE POLICY IS GERNALLY TAX DEFERRED EXCEPT FOR VARIABLE AND UNIVERSAL VARIABLE LIFE POLICIES THAT DO NOT qualify as life insurance policies due to excess premium investment. |
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Term
LIFE INSURANCE DEATH BENEFITS RECEIVED BY A BENEFICIARY ON A POLICY THAT IS OWNED BY THE INSURED ARE:
A: INCOME TAXABLE AND INCLUDABLE IN THE INSURED'S ESTATE.
B: INCOME TAX FREE AND EXCLUDABLE FROM THE INSURED'S ESTATE.
C: INCOME TAXABLE AND EXCLUDABLE FROM THE INSURED'S ESTATE.
D: INCOME TAX FREE AND INCLUDABLE IN THE INSURED'S ESTATE. |
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Definition
| D: THE IRS STATES THAT LIFE INSURANCE DEATH BENEFITS ARE NOT TAXABLE INCOME. IF THE INSURED OWNS THE POLICY, THE DEATH BENEFIT IS CONSIDERED AN ASSET OF HTE INSURED'S ESTATE UPON DEATH. |
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Term
WITH RESPECT TO A LIFE INSURANCE POLICY INVENTORY, WHICH OF THE FOLLOWING STATEMENTS IS CORRECT:
A: THE REGISTER DATE IS THE DATE WHEN THE INSURANCE COMPANY REGISTERS ITS POLICIES WITH THE NATIONAL ASSOCIATION OF INSURANCE COMMISSIONS.
B: THE ASSET VALUE IS THE POLICY'S CURRENT DEATH BENEFIT.
C: THE BENEFICIARY IS THE PERSON WHO HAS THE RIGHT TO BORROW FROM THE POLICIES' CASH VALUE.
D: RIDERS ARE ADDITIONAL FEATURES ADDED TO A POLICY, SUCH AS AN ACCIDENTAL DEATH BENEFIT OR A WAIVER OF PREMIUM BENEFIT. |
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Definition
| D: THE REGISTER DATE IS THE POLICIES ANNIVERSARY DATE; A POLICY'S ASSET VALUE IS THE CASH VALUE, NOT THE DEATH BENEFIT; ONLY THE POLICY OWNER CAN BORROW FROM THE POLICY'S CASH VALUE; FOR THESE REASONS, OPTION D IS THE CORRECT ANSWER. |
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Term
WHICH STATEMENT IS CORRECT WITH RESPECT TO A POLICY INFORMATION REQUEST:
A: THE REQUEST SHOULD BE SENT TO THE POLICY OWNER'S TRUST ADVISOR.
B: IF THE REQUEST IS NOT ANSWERED BY TH EINSURANCE COMPANY WITHIIN THE STATUTORY 5 DAY "LOOK-SEE" PERIOD, THE INSURED SHOULD CONTACT HIS LOCAL BETTER BUSINESS BUREAU.
C: IF THE REQUESTED REPORT IS TO BE SENT TO SOMEONE OTHER THAN THE POLICY OWNER, PERMISSION MUST BE GRANTED BY THE POLICY OWNER.
D: THIS FORM IS USED TO REQUEST CONVERSION OF A TERM POLICY TO AN ENDOWMENT POLICY. |
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Definition
| C: TO SEND A POLICY INFORMATION REQUEST TO SOMEONE OTHER THAN THE INSURED, THE SENDER MUST OBTAIN PERMISSION FROM THE INSURED. |
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Term
WHEN PURCHASING A LIFE INSURANCE POLICY, A PERSON'S INSURABILITY DEPENDS ON:
A: THE PERSON'S AGE, HEALTH, OCCUPATION,AND AVOCATION.
B: THE PERSON'S ABILITY TO PAY THE PREMIUM.
C: THE RELATIONSHIP OF THE BENEFICIARY TO THE INSURED.
D: THE ABILITY TO CHANGE THE INSURED FROM ONE PERSON TO ANOTHER. |
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Definition
| A: THE PERSON'S AGE, HEALTH, OCCUPATION,AND AVOCATION. |
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Term
INSURANCE COMPANY RATING SERVICES DETERMINE WHAT ABOUT AN INSURANCE COMPANY?
A: ITS ABILITY TO MEET ITS PROJECTED DIVIDENDS.
B: ITS STRENGTH WITH RESPECT TO INVESTMENT PERFORMANCE AND CLIENT SERVICE SATISFACTION, AMONG OTHER CONSIDERATIONS.
C: ITS RIGHT TO SELL INSURANCE IN A PARTICULAR STATE.
D: ITS COMMISION STRUCTURES. |
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Definition
| B: ITS STRENGTH WITH RESPECT TO INVESTMENT PERFORMANCE AND CLIENT SERVICE SATISFACTION, AMONG OTHER CONSIDERATIONS |
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Term
WHICH OF THE FOLLOWING STATEMENTS IS CORRECT WITH RESPECT TO DETERMINING LIFE INSURANCE NEEDS?
A: CLIENT SHOULD USE A MULTIPLE OF INCOME CALCULATION TO DETERMINE THE AMOUNT OF INSURANCE HE SHOULD OWN.
B: A WEALTH ADVISOR SHOULD SEEK A COMPANY THAT IS NOT LIMITED BY RE-INSURANCE AMOUNTS.
C: A POTENTIAL LIFE INSURANCE PURCHASER SHOULD PRIMARILY DEPEND ON PURCHASING THE MAXIMUM AMOUNT OF INSURANCE THAT CAN BE BOUGHT WITH A FINANCIAL FACTOR OF 10 PERCENT OF DISPOSABLE INCOME.
D: IT IS IMPORTANT TO CONSIDER CASH NEEDS AT DEATH, SUCH AS PROBATE EXPENSES, DEBTS AND TAX LIABILITIES. |
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Definition
| D: IT IS IMPORTANT TO CONSIDER CASH NEEDS AT DEATH, SUCH AS PROBATE EXPENSES, DEBTS AND TAX LIABILITIES. |
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Term
WHEN USING A CAPITAL NEEDS ANALYSIS APPROACH TO DETERMINING THE AMOUNT OF INSURANCE THAT A CLIENT SHOULD OWN, IT IS IMPORTANT TO CONSIDER:
A: HOW MUCH INCOME IS NEEDED IN ADDITION TO THE SURVIVING SPOUSE'S INCOME.
B: THE LIMITS OF DEATH BENEFIT THAT AN INSURANCE COMPANY WILL UNDERWRITE.
C: THE AMOUNT OF CAPITAL NEEDED AND AVAILABLE TO GENERATE INCOME TO MEET THE FAMILY'S NEEDS.
D: THE INVESTMENT PERFORMANCE OF A VARIABLE UNIVERSAL LIFE POLICY. |
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Definition
| C: THE AMOUNT OF CAPITAL NEEDED AND AVAILABLE TO GENERATE INCOME TO MEET THE FAMILY'S NEEDS. |
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Term
AMONG OTHER FACTORS, LIFE INSURANCE MANAGEMENT CONSISTS OF WHICH OF THE FOLLOWING:
A: MAINTAINING THE POLICIES IN A SAFE PLACE, SUCH AS A SAFE DEPOSIT BOX.
B: ENSURING THAT THE POLICY OWNER'S TRUST ADVISOR DOES NOT EARN A COMMISSION ON THE PURCHASE OF THE POLICY.
C: BALANCING THE CLIENT'S LIFE INSURNACE PORTFOLIO BASED ON PREMIUM DOLLARS AVAILABLE AND THE CLIENT'S INVESTMENT RISK TOLERANCE.
D: PURCHASING POLICIES FROM A MUTUAL LIFE INSURANCE COMPANY. |
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Definition
| C: BALANCING THE CLIENT'S LIFE INSURNACE PORTFOLIO BASED ON PREMIUM DOLLARS AVAILABLE AND THE CLIENT'S INVESTMENT RISK TOLERANCE. |
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Term
WHICH STATEMENT IS CORRECT WITH RESPECT TO POLICY ILLUSTRATIONS FOR LIFE INSURANCE POLICIES:
A: IF THE IINSURANCE POLICY IS A PARTICIPATING PLAN, THE INSURANCE COMPANY CAN PROVIDE GUARANTEES OF GUTURE DIVIDENDS IF THEY ARE NOT GREATER THAN PAST YEAR PAYMENTS.
B: THE ILLUSTRATION MUST INCLUDE EXPENSES FOR SALES LOADS, PREMIUM TAXES, AND MORTALITY CHARGES.
C: THESE ILLUSTRATIONS ARE NOT REQUIRED BY LAW IF THE POLICY IS A TERM PLAN.
D: IF THE INSURANCE POLICY IS ISSUED BY A STOCK COMPANY, THE INSURANCE COMPANY CAN WAIVE THE COST OF ADDITIONAL BENEFITS [RIDERS], SUCH AS A GUARANTEED INSURANCE PURCHASE PLAN. |
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Definition
| B: THE ILLUSTRATION MUST INCLUDE EXPENSES FOR SALES LOADS, PREMIUM TAXES, AND MORTALITY CHARGES. |
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Term
WHICH STATEMENT IS CORRECT WITH RESPECT TO A LIFE INSURANCE POLICY THAT IS OWNED BY SOMEONE OTHER THAN THE INSURED?
A: LIFE INSURANCE CANNOT BE OWNED BY A PERSON OTHER THAN THE INSURED.
B: INSURANCE OWNED BY AN IRREVOCABLE TRUST IS POTENTIALLY AN IMPRUDENT INVESTMENT.
C: WITH A TRUST OWNED LIFE INSURANCE POLICY, THE PRIMARY RESPONSIBILITY OF THE TRUSTEE IS TO ENSURE THAT THE POLICY DOES NOT LAPSE.
D: THE TRUSTEE OF A TRUST OWNED POLICY IS EXCULPATED FROM LIABILITY IF IT WARRANTS THAT THE POLICY IS RATED AAA BY AM BEST COMPANY. |
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Definition
| B: INSURANCE OWNED BY AN IRREVOCABLE TRUST IS POTENTIALLY AN IMPRUDENT INVESTMENT. OPTION C IS A TRUSTEE'S RESPONSIBILITY BUT NOT A PRIMARY ONE. B IS THE ANSWER BECAUSE THE ONE ASSET DOES NOT ENCOURAGE DIVERSIFICATION. |
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Term
WITH RESPECT TO INVESTMENT RESPONSIBILITIES OF A TRUSTEE OF A TRUST OWNED POLICY, WHICH STATEMENT IS CORRECT?
A: INVESTMENT DIVERSIFICATIONIS IMMATERIAL IF A SOUND ASSET ALLOCATION PROGRAM IS MAINTAINED.
B: INVESTMENT COSTS ARE ACCEPTABLE IF THEY COMPLY WITH THE NATIONAL ASSOCIATION OF SECURITIES DEALER'S PARAMETERS.
C: THE TRUSTEE MUST ASSESS IF THE PREMIUM INVESTMENTS ARE APPROPRIATE, GIVEN A CLIENT'S GOALS, NEEDS AND RISK TOLERANCE.
D: IT IS RISKY FOR A TRUSTEE TO USE MODERN PORTFOLIO MANAGEMENT PRINCIPALS. |
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Definition
| C: THE TRUSTEE MUST ASSESS IF THE PREMIUM INVESTMENTS ARE APPROPRIATE, GIVEN A CLIENT'S GOALS, NEEDS AND RISK TOLERANCE |
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Term
WHAT DISABILITY PLAN IS MOST RELIABLE AND COMPREHENSIVE?
A: NONCANCELABLE AND GUARANTEED RENEWABLE INDIVIDUAL PLAN.
B: GOVERNMENT PLAN
C: NONCANCELABLE, GUARANTEED-RENEWABLE INDIVIDUAL PLAN WITH AN OWN-OCC DEFINITION OF DISABILITY.
D: GROUP PLAN PROVIDED BY EMPLOIYER |
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Definition
| C: NONCANCELABLE, GUARANTEED-RENEWABLE INDIVIDUAL PLAN WITH AN OWN-OCC DEFINITION OF DISABILITY. |
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Term
WHAT IS MEANT BY AN ELIMINATION PERIOD IN A DISABILITY INCOME INSURANCE POLICY.
A: THIS IS THE AMOUNT OF TIME AN INSURED MUST WAIT UNTIL THE INSURED CAN PURCAHSE ADDITIONAL COVERAGE.
B: THIS IS THE AMOUNT OF TIME AN INSURED MUST WAIT FOLLOWING ONSET OF DISABILITY BEFORE BENEFITS BEGIN.
C: THIS IS THE PERIOD OF TIME DURING WHICH THE INSURNACE COMPANY CAN CANCEL THE POLICY.
D: THIS IS THE PERIOD OF TIME DURING WHICH THE INSURANCE COMPANY CAN REDUCE BENEFITS EQUAL TO THAT RECEIVED FROM SOCIAL SECURITY. |
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Definition
| B: THIS IS THE AMOUNT OF TIME AN INSURED MUST WAIT FOLLOWING ONSET OF DISABILITY BEFORE BENEFITS BEGIN. |
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Term
WHAT ARE BENEFIT TRIGGERS FOR LONG TERM CARE?
A: ACCIDENTS THAT CAUSE PHYSICAL HARM TO A PERSON, LEADING TO A NEED FOR NURSING CARE.
B: WAYS TO MEASURE FUNCTIONAL IMPAIRMENT, WHERE BENEFITS BECOME PAYABLE UNDER A LONG TERM CARE CONTRACT.
C: MAJOR SURGERY.
D: THREE DAY HOSPITAL STAY. |
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Definition
| B: WAYS TO MEASURE FUNCTIONAL IMPAIRMENT, WHERE BENEFITS BECOME PAYABLE UNDER A LONG TERM CARE CONTRACT. |
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Term
PREMIUMS ARE DEDUCTIBLE FOR LONG TERM CARE POLICIES IF:
A: THE INSURED IS SELF EMPLOYED.
B: THE INSURED IS UNABLE TO PERFORM TWO OUT OF SIX ACTIVITIES OF DAILY LIVING.
C: THE INSURED'S ANNUAL INCOME IS LESS THAN $150K.
D: THE ANNUAL COSTS PLUS OTHER MEDICAL DEDUCTIONS EXCEED 7.5 PERCENT OF THE INSURED'S ADJUSTED GROSS INCOME. |
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Definition
| D: THE ANNUAL COSTS PLUS OTHER MEDICAL DEDUCTIONS EXCEED 7.5 PERCENT OF THE INSURED'S ADJUSTED GROSS INCOME. |
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Term
UNDER HIPAA, WHAT CHANGE WAS MADE TO HEALTH INSURANCE?
A: COMPANIES HAD TO COVER INSUREDS WHO CAME FROM ANOTHER COMPANY'S HEALTH PLAN WITHOUT ASKING MEDICAL QUESTIONS.
B: AN INDIVUDAL'S NEW EMPLOYER MUST GIVE CREDIT FOR PRIOR HEALTH INSURANCE COVERAGE WHEN DETERMINING PREEXISTING CONDITION LIMITATIONS.
C: ALL COMPANIES MUST OFFER FULL HEALTH COVERAGE TO ANYONE WHO WAS COVERED BY A HEALTH PLAN PREVIOUSLY.
D: HEALTH PLANS NEED TO ALLOW INSUREDS TO CHOOSE THEIR OWN DOCTORS. |
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Definition
| B: AN INDIVUDAL'S NEW EMPLOYER MUST GIVE CREDIT FOR PRIOR HEALTH INSURANCE COVERAGE WHEN DETERMINING PREEXISTING CONDITION LIMITATIONS. |
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Term
WHAT TYPE OF HEALTH PLAN ALLOWS INSUREDS TO DECIDE WHETHER TOSEEK MEDICAL TREATMENT VIA THE PROVIDER NETWORK OR THEIR OWN PROVIDER AT THE TIME OF NEED?
A: PPO
B: HMO
C: POS
D: INDEMNITY PLAN |
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Definition
C: POS: POINT OF SERVICE
AN INSURED CHOOSES A NETWORK OR AN INDIVIDUAL PROVIDER AT THE TIME MEDICAL SERVICE IS PROVIDED. |
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Term
WHAT IS THE BEST WAY TO EVALUATE A HOMEOWNER POLICY?
A: ASK FOR THE MOST RECENT BILLING STATEMENT AND COMPLETE THE PROPERTY INSURANCE INVENTORY.
B: CA;; TJE AGEMT AMD ASK IF EVERUTHING IS SATISFACTORY.
C: ASK THE CLIENT TO TELL YOU EVERYTHING KNOWN ABOUT THE INSURANCE POLICY.
D: WRITE TO THE STATE INSURANCE COMMISSIONER. |
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Definition
| A: ASK FOR THE MOST RECENT BILLING STATEMENT AND COMPLETE THE PROPERTY INSURANCE INVENTORY. |
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Term
WHAT OTHER COVERAGE, BESIDES CONDOMINIUM INSURANCE, MIGHT A CONDOMINIUM OWNER WISH TO HAVE AND WHY?
A: A LOSS OF USE ENDORSEMENT THAT ALLOWS THE OWNER TO LIVE ELSEWHERE IF THE CONDO IS SERIOUSLY DAMANGED.
B: LOSS ASSESSMENT INSURANCEW THAT PAYS FOR ANY LOSSES SUFFERED BY THE ASSOCIATION FOR DAMAGES INCURRED IN COMMON AREAS.
C: A LOSS OF INCOME ENDORSEMENT THAT PROVIDES THE OWNER WITH INCOME FOR LOST WAGES.
D: A SPECIAL SITUATIONS LOSS ENDORSEMENT THAT ALLOWS THE OWNER TO REBUILD THE INTERIOR IN CERTAIN UNUSUAL SITUATIONS. |
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Definition
| B: LOSS ASSESSMENT INSURANCEW THAT PAYS FOR ANY LOSSES SUFFERED BY THE ASSOCIATION FOR DAMAGES INCURRED IN COMMON AREAS. |
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Term
WHO OF THE FOLLOWING WOULD NOT BE COVERED UNDER A VEHICLE INSURANCE POLICY.
A: THE SPOUSE OF THE INSURED.
B: THE CHILD OF THE INSURED WHO LIVES AT COLLEGE BUT WHO STILL CONSIDERS THE PARENTS' [INSURED'S] HOUSE AS HOME.
C: THE SPOUSE OF THE INSURED WHO IS SEPERATED FROM THE INSURED AND IS LIVING SEPERATELY.
D: A FOSTER CHILD LIVING WITH THE INSURED. |
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Definition
| C: THE SPOUSE OF THE INSURED WHO IS SEPERATED FROM THE INSURED AND IS LIVING SEPERATELY. |
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Term
WHICH VEHICLES WOULD NOT BE COVERED UNDER A VEHICLE INSURANCE POLICY.
A: ANY VEHICLES SHOWN ON THE DECLARATIONS PAGE.
B: ANY VEHICLES ACQUIRED DURING THE POLICY PERIOD FOR WHICH THE INSURED ASKS THE INSURANCE COMPANY FOR COVERAGE WITHIN 30 DAYS OF ACQUISITION.
C: NON-OWNED VEHICLES USED AS TEMPORARY SUBSTITUTES FOR AN INSURED VEHICLE THAT IS BEING REPAIRED.
D: RENTED OR BORROWED MISC. VEHICLES. |
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Definition
| D: RENTED OR BORROWED MISC. VEHICLES |
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Term
LIABILITY INSURANCE COVERAGE IS:
A: INSURANCE PURCHASED TO PROTECT AN INDIVIDUAL OR BUSINESS AGAINST LOSS RESULTING FROM INJURY OR DAMAGE TO PERSONS OR PROPERTY.
B: IN FORCE TO PROTECT NEGLIGENT INDIVIDUALS.
C: UNNECESSARY IF INSURANCE IS CARRIED ON BOTH A HOME AND AUTOMOBILES.
D: INSURANCE TO COVER THOSE WHO ARE REGULARLY NEGLIGENT AND CARELESS, BUT NOT NECESSARY FOR MOST PRUDENT INDIVIDUALS. |
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Definition
| A: INSURANCE PURCHASED TO PROTECT AN INDIVIDUAL OR BUSINESS AGAINST LOSS RESULTING FROM INJURY OR DAMAGE TO PERSONS OR PROPERTY. |
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Term
A SPECIAL RISKS LIABILITY INSURANCE POLICY IS ONE THAT:
A: PROTECTS THEINSURED FROM LIBEL AND SLANDER.
B: COVERS THE INSURED FOR RISKS INCURRED BY PEOPLE HIRED TO HELP THE INSURED WITH HOUSEHOLD TASKS
C: PROTECTS THE INSURED FOR INVASION OF PRIVACY AND DEFAMATION OF CHARACTER
D: COVERS THE INSURED'S SPECIAL ASSETS SUCH AS A STAMP COLLECTION. |
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Definition
| B: COVERS THE INSURED FOR RISKS INCURRED BY PEOPLE HIRED TO HELP THE INSURED WITH HOUSEHOLD TASKS. |
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Term
IN ORDER TO ATTAIN TOTAL RETIREMENT SECURITY:
A: TOTAL INVESTMENT ASSETS MUST EQUAL PROJECTED EXPENSES.
B: AFTER TAX INCOME MUST EQUAL INFLATING EXPENSES ON AN ANNUAL BASIS.
C: TOTAL INCOME MUST EQUAL TAX LIABILITIES PLUS EXPENSES.
D: THE PRESENT VALUE OF ALL FINANCIAL RESOURCES [INCOME AND CAPITAL] MUST EQUAL OR EXCEED THE PRESENT VALUE OF ALL PROJECTED CASH OUTFLOWS [TAXES AND SPENDING]. |
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Definition
| D: THE PRESENT VALUE OF ALL FINANCIAL RESOURCES [INCOME AND CAPITAL] MUST EQUAL OR EXCEED THE PRESENT VALUE OF ALL PROJECTED CASH OUTFLOWS [TAXES AND SPENDING]. |
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Term
IF AN UNMARRIED INDIVIDUAL RETIRES AT AGE 65 WITH A 20 YEAR LIFE EXPECTANCY AND AN ANNUAL LIVING EXPENSE BUDGET OF $30K SUBJECT TO A 5 PERCENT INFLATION RATE, WHAT WILL BE THE AGGREGATE AMOUNT OF FINANCIAL RESOURCES EVENTUALLY CONSUMED TO MEET THIS INDIVIDUAL'S TOTAL ECONOMIC NEEDS?
A: $600K
B: LESS THAN $600K
C: MORE THAN $600K
D: DEPENDS ON THE INDIVIDUAL'S MARGINAL TAX RATE. |
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Definition
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Term
THE LARGEST MONTHLY PENSION PAYMENT WILL BE AVAILABLE UNDER THE FOLLOWING DISTRIBUTION OPTION:
A: SINGLE LIFE ANNUITY
B: SINGLE LIFE ANNUITY WITH 10 YEAR CERTAIN.
C: 100 PERCENT JOINT AND SURVIVOR ANNUITY.
D: 50% JOINT AND SURVIVOR ANNUITY. |
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Definition
| a: SINGLE LIFE ANNUITY. A SINGLE LIFE WITHOUT A TERM CERTAIN HAS THE SHORTEST PAYOUT TIME ON AN ACTUARIAL BASIS AND THEREFORE WOULD RECEIVE THE LARGEST MONTHLY PAYMENT. |
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Term
THE MAXIMUM PRETAX EMPLOYEE CONTRIBUTION TO A 401K PLAN IS 2012 FOR A PERSON UNDER AGE 50 IS:
A: $50K
B: $17K
C: THE LESSEROF $50K OR 100% OF COMPENSATION.
D: UNLIMITED. |
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Definition
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Term
THE FOLLOWING TAX TREATMENT WILL BE APPLIED TO ALUMP SUM DISTRIBUTION FROM A NONQUALIFIED RETIREMENT PLAN:
A: ALTERNATIVE MINIMUM TAX
B: IRA ROLLOVER
C: CAPITAL GAIN
D: ORDINARY INCOME |
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Definition
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Term
THE LAST CALENDAR DAY ON WHICH A CONTRIBUTION CAN BE MADE TO AN IRA FOR DEDUCTION THAT YEAR IS:
A: DECEMBER 31 OF THE SAME TAX YEAR.
B: APRIL 1 OF THE FOLLOWING TAX YEAR.
C: APRIL 15 OF THE FOLLOWING TAX YEAR.
D: JANUARY 15 OF THE FOLLOWING TAX YEAR. |
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Definition
| C: APRIL 15 OF THE FOLLOWING TAX YEAR. |
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Term
A RETIREE IN 2012 MAY EARN AN UNLIMITED AMOUNT OF COMPENSATION WITHOUT ANY LOSS OF SOCIAL SECURITY BENEFITS IF HE OR SHE IS:
A: BETWEEN THE AGES OF 62 AND 65
B: AGE 62 OR OLDER.
C: AT OR AFTER FULL RETIREMENT AGE
D: AGE 70 OR OLDER. |
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Definition
| C: AT OR AFTER FULL RETIREMENT AGE |
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Term
IF YOUR CLIENT RETIRES AT AGE 65 AND ELECTS TO RECEIVE A $5000 MONTHLY PENSION BENEFIT AND HER ACTUARIAL LIFE EXPECTANCY IS 20 YEARS, OVER A 20 YEAR PERIOD THE AGGREGATE AMOUNT OF THESE MONTHLY PENSION BENEFITS WILL BE $1.2MM. IF, INSTEAD OF A MONTHLY PENSION ANNUITY, YOUR CLIENT ELECTS TO RECIEVE A LUMP SUM PENSION PAYMENT, THE AMOUNT OF HTE LUMP SUM WILL BE:
A: MORE THAN $2mm
B: MORE THAN 1.2MM
C: LESS THAN $1.2MM
D: EQUAL TO $1.2MM |
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Definition
C: LESS THAN 1.2MM
THE PRESENT VALUE OF AN AMOUNT OT BE RECEIVED IN THE FUTURE IS ALWAYS LOWER THAN THE NOMINAL FUTURE AMOUNT. |
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Term
NET WORTH DOES NOT INCLUDE:
A: CHECKING ACCOUNT BALANCES
B: FAIR MARKET VALUE OF RESIDENCES
C: DAMAGES THAT MIGHT BE RECEIVED FROM A LAWSUIT CURRENTLY BEING LITIGATED
D: CASH VALUE PORTION OF LIFE INSURANCE. |
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Definition
| C: DAMAGES THAT MIGHT BE RECIEVED FROM A LAWSUIT CURRENTLY BEING LITIGATED. |
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Term
THE MOST APPROPRIATE INVESTMENT PRODUCT FOR USE AS AN EMERGENY FUND IS:
A: MONEY MARKET ACCOUNTS
B: US TREASURY NOTES
C: AAA RATED CORPORATE BONDS
D: UTILITY STOCKS |
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Definition
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Term
MEDICARE BENEFITS CAN BE SUPPLEMENTED BY MEDIGAP PLANS. WHAT IS A MEDIGAP PLAN?
A: A SUPPLEMENTAL BENEFIT PLAN MEANT TO COVER GAPS IN MEDICARE COVERAGE, SUCH AS SUPPLEMENTING THE PAYMENT OF BILLS TO PHYSICIANS.
B: STATE SPONSORED PLANS THAT CAN REPLACE AT THE OPTION OF THE REITREE.
C: A PLAN THAT CAN BE PURCHASED TO COVER MEDICAL EXPENSES BEFORE AN INDIVIDUAL QUALIFIES FOR MEDICARE BENEFITS.
D: AN EMPLOYER PROVIDED MEDICAL INSURANCE PLAN DESIGNED TO PAY BENEFITS FOR EMPLOYEES WHO CANNOT AFFORD TO PAY THEIR MEDICAL EXPENSES. |
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Definition
| A: A SUPPLEMENTAL BENEFIT PLAN MEANT TO COVER GAPS IN MEDICARE COVERAGE, SUCH AS SUPPLEMENTING THE PAYMENT OF BILLS TO PHYSICIANS. |
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Term
THE REGULAR FEDERAL INCOME TAX LIABILITY IS CALCULATED BY MULTIPLYING THE APPROPRIATE TAX RATE BY:
A: GROSS INCOME
B: ADJUSTED GROSS INCOME
C: TAXABLE INCOME
D: ALTERNATIVE MINIMUM TAXABLE INCOME. |
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Definition
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Term
DISTRIBUTIONS FROM A 529 PLAN FOR EDUCATIONAL PURPOSES ARE:
A: TAX EXEMPT
B: FULLY TAXABLE AS ORDINARY INCOME
C: FULLY TAXABLE AS CAPITAL GAIN
D: ONLY SUBJECT TO ALTERNATIVE MINIMUM TAX AS A PREFERENCE ITEM. |
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Definition
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Term
THE IRS MANDATES THAT A VARIABLE UNIVERSAL LIFE INSURNACE POLICY WILL BE CLASSIFIED AS A TAXABLE INVESTMENT VEHICLE IF PREMIUMS EXCEED CERTAIN AMOUNTS. THE POLICY'S EARNING WILL NOT BE TAXABLE IF THE POLICY OWNER STAYS WITHIN A GOVERNMENT MANDATED GUIDELINE CALLED THE:
A: MATERIAL CHANGES TEST
B: SEVEN PAY TEST
C: PROSPECTUS TEST
D: INSURABLE INTEREST TEST |
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Definition
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Term
IN TERMS OF CAPITAL SUFFICIENCY, AN INDIVIDUAL CANNOT AFFORD TO RETIRE AND MAINTAIN HIS OR HER CURRENT ECONOMIC LIFESTYLE IF:
A: ANNUAL NEGATIVE CASHFLOWS ARE PROJECTED THROUGHOUT THE RETIREMENT PERIOD.
B: THE PROJECTED INFLATION RATE EXCEEDS THE EXPECTED RATE OF RETURN ON INVESTMENTS.
C- THERE IS A VERY SMALL BEGINNING BALANCE IN THE RETIREE'S IRA ACCOUNTS.
D- INVESTMENT CAPITAL IS EXHAUSTED AND FUTURE EXPENSES EXCEED AVAILABLE INCOME. |
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Definition
| D- INVESTMENT CAPITAL IS EXHAUSTED AND FUTURE EXPENSES EXCEED AVAILABLE INCOME. |
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Term
A RETIRING INVESTOR'S EQUITY POSITION:
A: SHOULD NOT EXCEED THE RETIRED INVESTOR'S AGE AS A PERCENTAGE OF HIS OR HER OVERALL PORTFOLIO FOLLOWING RETIREMENT.
B- SHOULD BE COMPLETELY LIQUIDATED BEFORE RETIREMENT.
C- SHOULD NOT EXCEED THE PERCENTAGE DICTATED BY THE RETIREE'S RISK TOLERANCE.
D- SHOULD EQUAL THE PERCENTAGE OF THE OVERALL PORTFOLIO COMMITTED TO FIXED INCOME SECURITIES. |
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Definition
| C- SHOULD NOT EXCEED THE PERCENTAGE DICTATED BY THE RETIREES RISK TOLERANCE. |
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Term
WHAT IS MEANT BY A WAIVER OF PREMIUM RIDER IN A LIFE INSURANCE POLICY.
A- THE PREMIUM WILL BE WAIVED AFTE RTHE INSURED HAS BEEN DISABLED FOR A STATED PERIOD OF TIME, SUCH AS SIX MONTHS.
B- THE INSURED HAS AN OPTION TO WAIVE FUTURE DIVIDENT PAYMENTS IN A PARTICPATING POLICY.
C- THE INSURANCE COMPANY CAN WAIVE A POLICY OWNER'S RIGHT TO RENEW THE POLICY IF PREMIUMS ARE NOT PAID WITHIN TEN DAYS OF THE PREMIUM DUE DATE.
D- THE POLICY OWNER CAN WAIVE HER INSURABILITY RIGHTS IF THEY VIOLATE COBRA GUIDELINES. |
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Definition
| A- THE PREMIUM WILL BE WAIVED AFTE RTHE INSURED HAS BEEN DISABLED FOR A STATED PERIOD OF TIME, SUCH AS SIX MONTHS. |
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Term
UNER THE CURRENT IRA REGULATIONS, A BENEFICIARYOF AN IRA MUST BE IRREVOCABLY DESIGNATED:
A- WITHIN 60 DAY SO FRETIREMENT.
B- AT AGE 70 1/2
C- BEFORE THE IRA OWNER'S DEATH
D- BY SEPTEMBER 30 OF THE YEAR FOLLOWING THE YEAR OF THE IRA OWNER'S DEATH. |
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Definition
| D- BY SEPTEMBER 30 OF THE YEAR FOLLOWING THE YEAR OF THE IRA OWNER'S DEATH. |
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Term
AN INDIVIDUAL CANNOT RECEIVE A RETIREE'S SOCIAL SECURITY BENEFITS IF HE OR SHE IS:
A- RECEIVING EARNINGS FROM EMPLOYMENT
B- UNDER AGE 65
C- UNDER AGE 65 AND RECEIVING EARNINGS FROM EMPLOYMENT
D- UNDER AGE 62 |
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Definition
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Term
WHICH OF THE FOLLOWING STATEMENTS IS CORRECT WITH RESPECT TO INVESTMENT OPTIONS AVAILABLE TO APOLICY OWNER IN A LIFE INSURANCE POLICY?
A- A POLICY OWNER HAS THE OPTIONTO MOVE FUNDS AMONG INVESTMENT ACCOUNTS IN A UNIVERSAL LIFE POLICY.
B- IN A VARIABLE LIFE POLICY A POLICY OWNER IS PERMITTED TO MOVE FUNDS IN AND OUT OF INVESTMENT ACCOUNTS ONLY ONCE A YEAR.
C: IN A WHOLE LIFE POLICY, THE POLICY OWNER CAN CHANGE THEINVESTMENT MODE OF THE POLICY'S CASH VALUE IF HE CONTINUES TO BE INSURABLE.
D: WITH A VARIABLE UNIVERSAL LIFE POLICY, A POLICY OWNER MAY INVEST IN ANY OF THE ACCOUNTS THE INSURANCE COMPANY MAKES AVAILABLE TO THE POLICY OWNER. |
|
Definition
| D: WITH A VARIABLE UNIVERSAL LIFE POLICY, A POLICY OWNER MAY INVEST IN ANY OF THE ACCOUNTS THE INSURANCE COMPANY MAKES AVAILABLE TO THE POLICY OWNER. |
|
|
Term
WHICH STATEMENT IS CORRECT WHEN AN INSURANCE POLICY IS AN ASSET OF AN IRREVOCABLE LIFE INSURANCE TRUST?
A- THE INSURED IS THE POLICY OWNER.
B- BECAUSE THE POLICY IS OWNED BY A TRUST, THERE IS NO CONCERN ABOUT VIOLATING THE INVESTMENT PROVISIONS OF HTE PRUDENT INVESTOR RULE.
C: THE TRUSTEE MUST PROVIDE DUE DILLIGENCE WITH RESPECT TO THE LIFE INSURANCE, FOR EXAMPLE ASCERTAINING THAT THE POLICY IS PRICED APPROPRIATELY.
D: LIFE INSURANCE IS LIFE INSURANCE; IT IS NOT AN INVESTMENT VEHICLE. |
|
Definition
| C: THE TRUSTEE MUST PROVIDE DUE DILLIGENCE WITH RESPECT TO THE LIFE INSURANCE, FOR EXAMPLE ASCERTAINING THAT THE POLICY IS PRICED APPROPRIATELY. |
|
|
Term
ASSUME THE CLIENT INHERITS FROM HIS PARENT STOCK THAT WAS PURCHASED BY THE PARENT AT $50 PER SHARE AND APPRECIATED TO $75 PER SHARE BY THE DATE OF THE PARENT'S DEATH. AT THE TIME THE ESTATE WAS SETTLED ONE YEAR LATER, THE STOCK HAD DECLINED TO $65 PER SHARE. WHAT IS THE CLIENT'S TAX BASIS IN THE STOCK?
A- $50 PER SHARE
B- $65 PER SHARE
C- $75 PER SHARE
D- $0 PER SHARE. |
|
Definition
|
|
Term
A SPRINGING DURABLE POWER OF ATTORNEY IS:
A. IMMEDIATELY EFFECTIVE
B. EFFECTIVE ONLY ON A CONDITIONAL EVENT
C. EFFECTIVE ONLY IF LATER NOTARIZED.
D. EFFECTIVE ONLY IF SIGNED BY THE ATTORNEY IN FACT. |
|
Definition
| B. EFFECTIVE ONLY ON A CONDITIONAL EVENT. |
|
|
Term
THE FOLLOWING IS TYPICAL OF A MARITAL DEDUCTION TRUST:
A. INCOME IS DISTRIBUTED AT THE TRUSTEE'S DISCRETION.
B. THE GRNATOR'S CHILDREN CAN EXERCISE A POWER OF APPOINTMENT OVER PRINCIPAL.
C. THE SURVIVING SPOUSE HAS THE UNRESTRICTED RIGHT TO RECIEVE INCOME.
D. THE SURVIVING SPOUSE IS NOT ENTITLED TO ANY INCOME. |
|
Definition
| C- THE SURVIVING SPOUSE HAS THE UNRESTRICTED RIGHT TO INCOME. |
|
|
Term
THE PURPOSE OF HTE VALUATION DISCOUNT IN A FAMILY LIMITED PARTNERSHIP OR LIMITED LIABILTY COMPANY IS FOR:
A. FEDERAL GIFT AND ESTATE TAX PURPOSES.
B. STATE INCOME TAX PURPOSES.
C. FEDERAL INCOME TAX PURPOSES.
D. SALES AND USE TAX PURPOSES. |
|
Definition
| A. FEDERAL GIFT AND ESTATE TAX PURPOSES. |
|
|
Term
CONGRESS PASSED THE ARVANES OXLEY ACT OF 2002 IN ORDER TO:
A. PROHIBIT ACCOUNTING FIRMS FROM PROVIDING FINANCIAL PLANNING TO THEIR CLIENTS.
B. REQUIRE FINANCIAL PLANNERS TO REGISTER WITH THE SEC.
C. PROHIBIT FINNCIAL PLANNER FROM RECEIVING REFERRAL FEES FROM OTHER ADVISORS.
D. GRANT THE SEC NEW POWERS TO ENFORCE ETHICAL STANDARDS. |
|
Definition
| D. GRANT THE SEC NEW POWERS TO ENFORCE ETHICAL STANDARDS. |
|
|
Term
DISABILITY INCOME INSURANCE POLICIES ARE AVAILABLE FROM SEVERAL SOURCES. WHICH ONE OF THE FOLLOWING OPTIONS IS CORRECT?
A. DISABILITY BENEFITS AVAIALBE FROM THE SOCIAL SECURITY SYSTEM HAVE A 90 DAY ELIMINATION PERIOD.
B. STATE PROGRAMS -WORKER COMPENSATION PLANS -PROVIDE TWO THIRDS OF AN EMPLOYEES INCOME UNTIL RETIREMENT IF THE EMPLOYEE REGARDLESS OF WHETHER THE PREMIUM IS PAID BY THE EMPLOYER OR THE EMPLOYEE.
C. BENEFITS FROM A GROUP [EMPLOYER PROVIDED] PLAN ARE NOT TAXABLE TO THE EMPLOYEE, REARDLESS OF WHETHER THE PREMIUM IS PAID BY THE EMPLOYER OR EMPLOYEE.
D. WITH AN INDIVIDUAL PLAN -WHERE THE INSURED PAYS THE PREMIUM WITH AFTER TAX DOLLARS THE DISABILITY BENEFIT IS NOT TAXABLE TO THE INSURED. |
|
Definition
| D. WITH AN INDIVIDUAL PLAN -WHERE THE INSURED PAYS THE PREMIUM WITH AFTER TAX DOLLARS THE DISABILITY BENEFIT IS NOT TAXABLE TO THE INSURED. |
|
|
Term
IRA DISTRIBUTIONS PRIOR TO WHAT AGE ARE GENERALLY SUBJECT TO EXCISE TAX?
A- 70 1/2
B. 62
C: 59 1/2
D: 65 |
|
Definition
|
|
Term
WHICH STATEMENT IS CORRECT WIHT RESPECT TO THE TAX ELEMENTS OF A LONG TERM CARE INSURANCE POLICY.
A. BENEFITS ARE NOT TAXABLE AFTER THE INSURED HAS REACHED HIS NORMAL RETIREMENT AGE.
B. THE PREMIUMS ARE NOT SUBJECT TO THE 7.5 PERCENT LIMITATION WIHT RESPECT TO THE TAX DEDUCTIBILITY OF MEDICAL EXPENSES.
C. EACH YEAR THE IRS PUBLISHES THE AMOUNT OF PREMIUMS THAT ARE DEDUCTIBLE ACCORDING TO AN INSURED'S AGE.
D. LONG TERM CARE POLICIES MUST CONFORM TO STATE OVERNMENT STANDARDS THAT ARE ESTABLISHED BY HIPAA. |
|
Definition
| C. THE TAXABLE ISSUE IN OPTION A HAS NOTHING TO DO WITH NORMAL RETIREMENT AGE; WITH RESPECT TO OPTION B, THE DEDUCTIBLE IS SUBJECT TO 7.5 % LIMITATION; OPTION D APPLIES TO THE FEDERAL HIPAA, NOT STATE STATUTES. OPTION C IS CORRECT IN THAT THE GOVERNMENT DOES PUBLISH AND POSSIBLE CHANGE THE AMOUNTS EACH YEAR. |
|
|
Term
THE MAIN CONCERN WITH THE USE OF HOME EQUITY LINES OF CREDIT FOR FINANCING CONSUMER PURCHASES IS:
A: INTEREST IS NOT TAX DEDUCTBILE
B. THE LENDER WILL REQUIRE EVIDENCE OF HOME OWNERS INSURANCE.
C. DOING SO PLACES OWNERSHIP OF THE HOME AT RISK.
D. THE LENDER MAY CHARGE POINTS. |
|
Definition
|
|
Term
IN ORDER TO RECIEVE THE HIGHEST MONTHLY PENSION PAYMENT, A RETIREE SHOULD CHOOSE WHICH PAYMENT OPTION?
A. JOINT AND SURVIVOR
B. SINGLE LIFE WITH TERM CERTAIN
C. SECOND TO DIE.
D. SINGLE LIFE |
|
Definition
|
|
Term
THE MOST IMPORTANT FACTOR IN ASSURING THE ADEQUACY OF ASSETS IN RETIREMENT IS TO:
A. INVEST ENTIRELY IN BONDS DURING RETIREMENT.
B. INVEST ENTIRELY IN STOCKS BEFORE RETIREMENT.
C. LIMIT SPENDING TO THE AMOUNT SUPPORTED BY INCOME AND ASSETS.
D. CHOOSE THE RIGHT RETIREMENT AGE. |
|
Definition
| C. LIMIT SPENDING TO THE AMOUNT SUPPORTED BY INCOME AND ASSETS. |
|
|
Term
| WHAT ACT CREATED THE FEDERAL RESERVE? |
|
Definition
| THE FEDERAL RESERVE ACT OF 1913. |
|
|
Term
| WHAT IS THE POLICY THAT ALTERS THE MONEY SUPPLY AND INTEREST RATES IN AN ATTEMPT TO AFFECT THE ECONOMY. |
|
Definition
|
|
Term
| WHAT ORGANIZATION CARRIES OUT MONETARY POLICY? |
|
Definition
|
|
Term
| THE FEDERAL RESERVE ACT OF 1913 DIVIDED THE COUNTRY INTO HOW MANY DISTRICTS, EACH HAVING ITS OWN FEDERAL RESERVE BANK? |
|
Definition
|
|
Term
| THE FEDERAL RESERVE BOARD OF GOVERNERS CONSISTS OF HOW MANY MEMBERS APPOINTED BY THE PRESIDENT? |
|
Definition
|
|
Term
| WHAT BOARD IS THE PRIMARY POLICY MAKING ARM OF THE FEDERAL RESERVE? |
|
Definition
| THE FEDERAL RESERVE BOARD OF GOVERNORS. |
|
|
Term
| WHAT COMMITTEE CONSISTS OF SEVEN MEMBERS OF THE BOARD, THE PRESIDENT OF THE nEW yORK fEDERAL rESERVE BANK AND FOUR OTHER DISTRICT BANK PRESIDENTS WHO SERVE ON A ROTATING BASIS? |
|
Definition
| THE FEDERAL OPEN MARKET COMMITTEE [FOMC]. |
|
|
Term
| THE FEDERAL OPEN MARKET COMMITTEE FORMULATES AND IMPLEMENTS THIS... |
|
Definition
|
|
Term
| WHAT ARE TWO OBJECTIVES OF MONETARY POLICY? |
|
Definition
A- ASSIT THE ECONOMY IN ACHIEVING FULL EMPLOYMENT.
B. ASSIST THE ECONOMY IN ACHIEVING A STABLE PRICE LEVEL. |
|
|
Term
| MOST ECONOMISTS AGREE THAT MONEY SHOULD SERVE THREE FUNCTIONS. WHAT ARE THESE FUNCTIONS? |
|
Definition
A. MEDIUM OF EXCHANGE
B. STORE OF VALUE.
C. UNIT OF ACCOUNT. |
|
|
Term
| TODAY, THE VALUE OF MONEY IS BASED ON WHAT DECREE? |
|
Definition
|
|
Term
|
Definition
| MONEY BEING ASSIGNED A VALUE SIMPLY BECAUSE OTHERS WILL ACCEPT THAT IT HAS THAT SAME VALUE. |
|
|
Term
| OPEN MARKET OPERATIONS CONSISTS OF: |
|
Definition
| BUYING AND SELLING OF US TREASURY SECURITIES BY THE FEDERAL RESERVE IN THE OPEN MARKET. |
|
|
Term
| BUYING SECURITIES INCREASES BANK RESERVES AND ADDS LIQUIDITY TO THE ECONOMY, WHICH INCREASES THE SUPPLY OF MONEY AND AT LEAST TEMPORARILY REDUCES INTEREST RATES. THIS IS ALSO KNOWN AS... |
|
Definition
|
|
Term
| SELLING SECURITIES DECREASES BANK RESERVES AND REDUCES LIQUIDITY IN THE ECONOMY. THIS IS ALSO KNOWN AS |
|
Definition
|
|
Term
| WHAT IS THE RESERVE REQUIREMENT? |
|
Definition
| THE PERCENTAGE OF CHECKABLE DEPOSITS THAT A BANK MUST KEEP IN NONINTEREST-EARNING ASSETS, EITHER IN ITS VAULT OR AT ITS DISTRICT FEDERAL RESERVE BANK. |
|
|
Term
| RAISING THE REQUIRED RESERVE RATIO DECREASES A BANK'S ABILITY TO DO WHAT? |
|
Definition
|
|
Term
| LOWERING THE RESERVE RATIO INCREASES A BANK'S ABILITY TO DO WHAT? |
|
Definition
|
|
Term
| WHAT IS THE DISCOUNT RATE? |
|
Definition
| THE RATE OF INTEREST BANKS PAY WHEN THEY BORROW MONEY FROM THEIR DISTRICT FEDERAL RESERVE BANK AKA DISCOUNT LOANS. |
|
|
Term
| RAISING THE DISCOUNT RATE TENDS TO ____________ BANK RESERVES. |
|
Definition
|
|
Term
| LOWERING THE DISCOUNT RATE TENDS TO ________ BANK RESERVES. |
|
Definition
|
|
Term
| RAISING THE DISCOUNT RATE TENDS TO DECREASE THE BANK RESERVES LEADING TO AN INCREASE IN THE BANK'S ABILITY TO CREATE THIS? |
|
Definition
|
|
Term
| TO ACHIEVE AN EASY MONEY POLICY AND STIMULATE THE ECONOMY, WHAT THREE THINGS CAN THE FED DO? |
|
Definition
1. BUY SECURITIES
2. REDUCE THE RESERVE RATIO
3. REDUCE THE DISCOUNT RATE |
|
|
Term
| TO ACHIEVE A TIGHT MONEY POLICY AND SLOW THE ECONOMY, THE FED CAN DO WHAT THREE THINGS? |
|
Definition
1. SELL SECURITIES
2. RAISE THE RESERVE RATIO
3. RAISE THE DISCOUNT RATE |
|
|
Term
| EQUILIBRIUM GDP IS IN LARGE PART DETERMINED BY THE LEVEL OF ____________ AND __________ SPENDING. |
|
Definition
| INVESTMENT & CONSUMPTION. |
|
|
Term
TRUE OR FALSE.
AN EASY MONEY POLICY REDUCES INTEREST RATES AND THUS INCREASES SPENDING AND GDP. |
|
Definition
|
|
Term
| TRUE OR FALSE. A TIGHT MONEY POLICY REDUCES INTEREST RATES AND THUS INCREASES SPENDING AND GDP. |
|
Definition
| FALSE. A TIGHT MONEY POLICY INCREASES INTEREST RATES AND THUS DECREASES SPENDING AND GDP. |
|
|
Term
| FEDERAL RESERVE BOARD MEMBERS ARE APPOINTED TO ____ YEAR NON RENEWABLE TERMS AND CANNOT BE REMOVED FROM OFFICE BY THE PRESIDENT. |
|
Definition
|
|
Term
|
Definition
| SALES OF DOMESTICALLY PRODUCED GOODS AND SERVICES TO FOREIGN COUNTRIES AND THEIR CITIZENS |
|
|
Term
|
Definition
| PURCHASES OF FOREIGN PRODUCED GOODS AND SERVICES BY THE UNITED STATES AND ITS CITIZENS. |
|
|
Term
|
Definition
| OCCURS WHEN A COUNTRY IMPORTS MORE THAN IT EXPORTS. |
|
|
Term
| WHAT ARE THE TWIN DEFICITS? |
|
Definition
| THE TRADE DEFICITS AND THE PERSISTENT BUDGET DEFICITS OF THE 1980S, 1990S, AND EARLY TWENTY FIRST CENTURY HAVE TOGETHER BECOME KNOWN AS THE TWIN DEFICITS. |
|
|
Term
|
Definition
|
|
Term
| WHAT IS THE PURPOSE OF A TARIFF. |
|
Definition
| TO MAKE DOMESTICALLY PRODUCED GOODS MORE COMPETITIVE WITH IMPORTED GOODS. |
|
|
Term
TRUE OR FALSE?
TARIFFS REDUCE COMPETITION AND THE RANGE OF CONSUMER CHOICES AND RETARD INNOVATIONS. |
|
Definition
|
|
Term
|
Definition
| NUMBERICAL LIMITS ON IMPORTED GOODS. |
|
|
Term
| WHAT ARE VOLUNTARY EXPORT RESTRICTIONS? |
|
Definition
| USE OF MORAL SUASION TO ENCOURAGE FOREIGN PRODUCERS TO VOLUNTARILY LIMIT THEIR EXPORTS TO A COUNTRY. |
|
|
Term
|
Definition
| THE BELIEVE THAT THE U.S.A. OR ANY COUNTRY SHOULD LIMIT TRADE TO PROTECT DOMESTIC INTERESTS. |
|
|
Term
TRUE OR FALSE.
PROTECTIONISM PROTECTS AGAINST "DUMPING". PROTECTION IS NEEDED WHEN AN EXPORTER IS SELING A GOOD AT A LOWER PRICE THAN IN THE COUNTRY WHERE IT IS PRODUCED. THIS PRACTICE GENERALLY IS A FORM OF PREDATORY PRICING AND DISPLACES WORKERS IN THE IMPORTING COUNTRY. |
|
Definition
|
|
Term
| IN EXTREME CASEES, USUALLY FOR POLITICAL PURPOSES, A COUNTRY MAY COMPLETELY CEASE TRADE WITH ANOTHER COUNTRY. IN THE CASE OF A REFUSAL TO SELL TO ANOTHER COUNTRY, THIS IS CALLED: |
|
Definition
|
|
Term
| IN EXTREME CASEES, USUALLY FOR POLITICAL PURPOSES, A COUNTRY MAY COMPLETELY CEASE TRADE WITH ANOTHER COUNTRY. IN THE CASE OF A REFUSAL TO BUY FROM ANOTHER COUNTRY IS CALLED: |
|
Definition
|
|
Term
| THE PROCESS BY WHICH A GROUP OF COUNTRIES STRIVES TO INCREASE THE COMMON LEVEL OF WELFARE THROUGH PARTNERSHIPS IS CALLED: |
|
Definition
|
|
Term
| THE NORTH AMERICAN FREE TRADE AGREEMENT COMBINES WHAT 3 COUNTRIES? |
|
Definition
| U.S.A, MEXICO, AND CANADA. |
|
|
Term
| THE EUROPEAN UNION HAS HOW MANY MEMBER COUNTRIES? |
|
Definition
|
|
Term
| WHAT IS THE SINGLE CURRENCY OF THE EUROPEAN UNION? |
|
Definition
|
|
Term
| WHAT IS THE COMMON CENTRAL BANK OF THE EUROPEAN UNION? |
|
Definition
| THE EUROPEAN CENTRAL BANK |
|
|
Term
| DO U.S. IMPORT OR EXPORT TRANSACTIONS LEAD TO THE DEPRECIATION OF THE U.S. DOLLAR? |
|
Definition
|
|
Term
| WHAT IS A COUNTRY'S RECORD OF ALL TRANSACTIONS AMONG ITS RESIDENTS AND THE RESIDENTS OF ALL FOREIGN NATIONS. |
|
Definition
| THE INTERNATIONAL BALANCE OF PAYMENTS. |
|
|
Term
| WHAT ARE THE FOUR COMPONENTS OF THE INTERNATIONAL BALANCE OF PAYMENTS? |
|
Definition
1. CURRENT ACCOUNT
2. CAPITAL ACCOUNT
3. INTERRELATIONSHIPS
4. OFFICAL RESERVES |
|
|
Term
| THE NET AMOUNT OF THE CURRENT AND CAPITAL ACCOUNT IN THE INTERNATIONAL BALANCE OF PAYMENTS IS CALLED THE _______________. |
|
Definition
| BALANCE OF PAYMENTS SURPLUS/DEFICIT |
|
|
Term
| CONCERNING THE INTERNATIONAL BALANCE OF PAYMENTS, THE OFFICIAL RESERVES ARE CURRENCIES HELD BY WHAT? |
|
Definition
|
|
Term
| this rate is the amount of one country's currency needed to purchase a unit of another country's currency. |
|
Definition
|
|
Term
| what are three kinds of exchange rates? |
|
Definition
| flexible [floating], fixed [pegged] and managed float rates. |
|
|
Term
| flexible or floating exchange rates are regulated by: |
|
Definition
|
|
Term
| Pegged or Fixed exchange rates are regulated by: |
|
Definition
| relative to a specific standard with intervention to purchase or sell as necessary to maintain the specific exchange rate against another country's currency. |
|
|
Term
| what are two examples of a fixed exchange rate system. |
|
Definition
| the gold standard and the Bretton Woods System. |
|
|
Term
| Concerning Exchange Rates, this standard is a fixed exchange rate system in whIch exchange rates are set in terms of gold and pegged by buying and selling gold as necessary. |
|
Definition
|
|
Term
true or false.
THE GOLD STANDARD PUTS ENORMOUS ECONOMIC POWER IN THE HANDS OF GOLD PRODUCING NATIONS SUCH AS SOUTH AFRICA AND RUSSIA. |
|
Definition
|
|
Term
WHICH OF THE FOLLOWING IS NOT COUNTED AS PART OF THE GDP CALCULATION?
A. DOMESTIC PRODUCTION OF SERVICES.
B. DOMESTIC PRODUCTION OF A NEW CAR.
C. DOMESTIC PRODUCTION OF FIBERGLASS TO BE USED IN AUTO PRODUCTION.
D. DOMESTIC PRODUCTION OF EXPORTED GOODS. |
|
Definition
| C. DOMESTIC PRODUCTION OF FIBERGLASS TO BE USED IN AUTO PRODUCTION. |
|
|
Term
A DECREASE IN INTEREST RATES MIGHT STIMULATE THE DOMESTIC ECONOMY BY:
A: INCREASING SPENDING BY HOUSEHOLDS.
B: DECREASING SPENDING BY BUSINESSES.
C: INCREASING IMPORTS.
D: REDUCING EXPORTS. |
|
Definition
| A. INCREASING SPENDING BY HOUSEHOLDS. |
|
|
Term
NOMINAL INTEREST RATES DIFFERE FROM REAL INTEREST RATES BY:
A. RISK
B. TIME
C. INFLATION
D. TAXES |
|
Definition
| C. INFLATION. NOMINAL INTEREST RATES ARE NOT ADJUSTED FOR INFLATION. |
|
|
Term
TO PROMOT ECONOMIC GROWTH, THE GOVERNMENT MOST LIKELY WOULD:
A: RAISE TAXES AND OR LOWER GOVERNMENT SPENDING.
B. LOWER TAXES AND OR RAISE GOVERNMENT SPENDING.
C. ATTEMPT TO RAISE INTEREST RATES
D. ATTEMPT TO SLOW EXPORTS. |
|
Definition
| B. LOWER TAXES AND OR RAISE GOVERNMENT SPENDING. |
|
|
Term
FACTORS THAT MIGHT LEAD TO RISINIG INTEREST RATES INCLUDE:
A. DECREASING RATES OF INFLATION.
B. TIGHT MONETARY POLICY.
C. WEAK CREDIT DEMAND BY THE PRIVATE SECTOR.
D. LOWER GOVERNMENT DEFICITS. |
|
Definition
| B. TIGHT MONETARY POLICY. |
|
|
Term
THE CROWDING OUT EFFECT IS CAUSED BY:
A. TOO MUCH PRIVATE SPENDING.
B. TOO MUST GOVERNMENT BORROWING.
C. TOO LITTLE TAXATION.
D. TOO LITTLE GOVERNMENT SPENDING. |
|
Definition
| B. TOO MUCH GOVERNMENT BORROWING MAY LEAD TO THE CROWDING OUT OF PRIVATE INVESTMENT. |
|
|
Term
TOOLS OF MONTARY POLICY INCLUDE ALL OF THE FOLLOWING EXCEPT:
A. OPEN MARKET OPERATIONS
B. DISCOUNT LOANS
C. TAXATION
D. RESERVE REQUIREMENTS. |
|
Definition
| C. TAXATION. TAXATION IS APART OF FISCAL POLICY. |
|
|
Term
THE FED HAS BETTER CONTROL OVER:
A. TAXES
B. GOVERNMENT SPENDING
C. SHORT TERM INTEREST RATES
D. LONG TERM INTEREST RATES. |
|
Definition
| C. SHORT TERM INTEREST RATES. |
|
|
Term
PROTECTIONISM AS A U.S. POLICY MAY BE APPROPRIATE TO:
A. PROTECT US WORKERS
B. LOWER PRICES IN THE U.S.
C. INCREASE COMPETITION IN U.S. MARKETS
D. IMPROVE FOREIGN RELATIONS. |
|
Definition
A. PROTECT US WORKERS
BY LIMITING TRADE. |
|
|
Term
OFFICIAL RESERVES ARE USED TO AFFECT THE:
A. CURRENT ACCOUNT
B. CAPITAL ACCOUNT.
C. COUNTRY'S CURRENCY EXCHANGE RATE.
D. BALANCE OF PAYMENTS. |
|
Definition
| A. CURRENT ACCOUNT. OFFICIAL RESERVES ARE USED TO ALTER A COUNTRY'S CURRENT ACCOUNT. |
|
|
Term
AN EXAMPLE OF A FREELY FLOATING EXCHANGE RATE SYSTEM IS:
A. THE GOLD STANDARD
B. THE BRETTON WOODS SYSTEM.
C. CURRENCY MARKET TRADING BETWEEN US DOLLARS AND EUROS
D. THE DISCOUNT RATE. |
|
Definition
| C. CURRENCY MARKET TRADING BETWEEN US DOLLARS AND EUROS. |
|
|
Term
TOOLS OF THE FED INCLUDE:
A. OPEN MARKET OPERATIONS
B. TAXES
C. GOVERNMENT SPENDING
D. FISCAL POLICY. |
|
Definition
| A. OPEN MARKET OPERATIONS. GOVERNMENT SPENDING AND TAXATION MAKE UP THE FISCAL POLICY. |
|
|
Term
THE LARGEST COMPONENT OF GDP IS:
A. CONSUMPTION
B. INVESTMENT
C. IMPORTS
D. EXPORTS. |
|
Definition
|
|
Term
FACTORS OF PRODUCTION INCLUDE ALL OF THE FOLLOWING EXCEPT:
A. LABOR
B. CAPITAL
C. INTEREST RATES
D. LAND |
|
Definition
|
|
Term
UNANTICIPATED INFLATION:
A. HELPS THOSE ON A FIXED INCOME.
B. REDISTRIBUTES INCOME FROM SAVERS TO BORROWERS.
C. REDISTRIBUTEES INCOME FROM BORROWERS TO SAVERS.
D. RESULTS IN THE CPI FALLING. |
|
Definition
| B. REDISTRIBUTES INCOME FROM THE SAVERS TO THE BORROWERS. |
|
|
Term
NATURAL UNEMPLOYMENT INCLUDES:
A. CYCLICAL AND FRICTIONAL UNEMPLOYMENT.
B. FRICTIONAL AND STRUCTURAL UNEMPLOYMENT.
C. STRUCTURAL AND CYCLICAL UNEMPLOYMENT
D. CYCLICAL, FRICTIONAL, AND STRUCTURAL UNEMPLOYMENT. |
|
Definition
| B. FRICITIONAL AND STRUCTURAL UNEMPLOYMENT. |
|
|
Term
SOMEONE WHO IS WORKING PART TIME BUT WOULD LIKE TO BE WORKING FULL TIME IS OFFICIALLY CONSIDERED:
A. UNEMPLOYED.
B. OUT OF LABOR FORCE.
C. EMPLOYED.
D. INSTITUTIONALIZED. |
|
Definition
|
|
Term
IF THE UNEMPLOYMENT RATE IS ABOVE ITS NATURAL RATE, THEN THE ECONOMY MOST LIKELY IS:
A. BELOW GDP
B. ABOVE POTENTIAL GDP
C. AT POTENTIAL GDP
D. CANNOT BE DETERMINED. |
|
Definition
|
|
Term
A MAJOR PROBLEM WITH USING FISCAL POLICY IS THAT:
A. CONGRESS MUST GET APPROVAL FROM THE FED TO CHANGE SPENDING OR TAXES.
B. CONGRESS CAN ONLY CHANGE TAXES ONCE PER FISCAL YEAR.
C. THERE ARE MANY LAGS IN THE POLICY PROCESS.
D. GOVERNMENT SPENDING ONLY MAKES UP 1 PERCENT OF GDP, AND THEREFORE IS NOT VERY EFFECTIVE. |
|
Definition
| C. THERE ARE MANY LAGS IN THE POLICY PROCESS. [LAGS ARE THE RECOGNITION, LEGISLATIVE, IMPLEMENTATION, AND EFFECTIVENESS OF GOVERNMENT]. |
|
|
Term
THE MONETARY POLICY DECISIONS OF THE FED ARE SUBJECT TO THE APPROVAL OF:
A. THE PRESIDENT OF THE USA
B. THE CONGRESS
C. THE TREASUREY
D. NOBODY OUTSIDE OF THE FED. |
|
Definition
| D. NOBODY OUTSIDE OF THE FED. |
|
|
Term
JUDGING FROM HISTORICAL EXPERIENCE, THE AVERAGE BUSINESS CYCLE [PEAK TO PEAK]:
A. CONTRACTS LONGER THAN IT EXPANDS.
B. EXPANDS LONGER THAN IT CONTRACTS
C. LASTS ABOUT 12 YEARS.
D. LASTS ABOUT 2 YEARS. |
|
Definition
| B. EXPANDS LONGER THAN IT CONTRACTS. |
|
|
Term
A SEVERE RECESSION IN MEXICO AND CANADA WOULD MOST LIKELY:
A. SLOW US ECONOMIC GROWTH.
B. SPEED UP US GROWTH.
C. INCREASE US EXPORTS
D. NOT AFFECT THE US ECONOMY. |
|
Definition
| A. SLOW US ECONOMIC GROWTH. |
|
|
Term
WHICH OF THE FOLLOWING CONDITIONS WOULD CAUSE A DECREASE IN THE DEMAND FOR BRITISH POUNDS BY THOSE HOLDING U.S. DOLLARS:
A. INFLATION IN BRITAIN BUT NOT IN THE U.S.A.
B. INFLATION IN THE US BUT NOT IN BRITAIN.
C. AN INCREASE INT EH REAL RATE OF RETURN ON INVESTMENTS IN THE U.K.
D. ANTICIPATION THAT HTE US DOLLAR WILL DEPRECIATE VS. THE BRITISH POUND. |
|
Definition
| A. INFLATION IN BRITAIN BUT NOT IN THE USA. |
|
|
Term
IF A JAPANESE RADIO PRICED AT $2K YEN CAN BE PURCHASED FOR US $10 THE EXCHANGE RATE IS:
A. 200 YEN PER DOLLAR
B. 20 YEN PER DOLLAR
C. 20 DOLLARS PER YEN
D. 200 DOLLARS PER YEN. |
|
Definition
|
|
Term
ASSUME THAT A BANK EXPECTS INFLATION DURING THE NEXT YEAR TO BE 4 PERCENT. THE BANK MAKES ONE YEAR, 1000 LOAN WITH AN EX ANTE REAL INTEREST RATE OF 3 PERCENT. INFLATION ACTUALLY TURNS OUT TO BE 6 PERCENT DURING THE YEAR.
1. WHAT WAS THE NOMINAL INTERST RATE ON THE LOAN |
|
Definition
7%
THE NOMINAL INTEREST RATE IS THE REAL INTEREST RATE PLUS ANTICIPATED INFLATION. IF THE BANK EXPECTS INFLATION TO BE 4 PERCENT AND EXPECTS A REAL INTERST RATE OF 3%, THEN THE BANK MUST BE CHARGING A 7 PERCENT NOMINAL INTEREST RATE. |
|
|
Term
ASSUME THAT A BANK EXPECTS INFLATION DURING THE NEXT YEAR TO BE 4 PERCENT. THE BANK MAKES ONE YEAR, 1000 LOAN WITH AN EX ANTE REAL INTEREST RATE OF 3 PERCENT. INFLATION ACTUALLY TURNS OUT TO BE 6 PERCENT DURING THE YEAR.
1. HOW MUCH [DOLLAR AMOUNT] DOES THE BANK GET BACK IN ONE YEAR WHEN THE LOAN IS REPAID. |
|
Definition
$1,070
iF THE NOMINAL INTEREST RATE IS 7%, THEN IN ONE YEAR THE BANK WOULD EXPECT TO RECIEVE:
$1,000 X [1 X 7%] = $1,070. |
|
|
Term
ASSUME THAT A BANK EXPECTS INFLATION DURING THE NEXT YEAR TO BE 4 PERCENT. THE BANK MAKES ONE YEAR, 1000 LOAN WITH AN EX ANTE REAL INTEREST RATE OF 3 PERCENT. INFLATION ACTUALLY TURNS OUT TO BE 6 PERCENT DURING THE YEAR.
1. WHAT IS THE EX POST [AFTER THE EVENT] REAL INTEREST RATE ON THE LOAN? WHY DOES IT DIFFER FROM THE EX ANTE REAL INTEREST RATE? |
|
Definition
9%
THE EX POST REAL INTEREST RATE IS THE NOMINAL INTERST RATE MINUS ACTUAL INFLATION OVER THE YEAR. aCTUAL INFLATION WAS 6 PERCENT. tHEREFORE THE EX POST REAL INTEREST RATE IS:
.07 - .06 = .01 OR 1% |
|
|
Term
| IF A $100 LOAN IS MADE AT A 10% SIMPLE INTERST RATE AND DURING THE COURSE OF THAT YEAR INFLATION IS 10%, THEN THE REAL INTEREST RATE [OR REAL RETURN] WILL BE: |
|
Definition
| ZERO. THE REASON IS THAT AFTER ONE YEAR IT WILL TAKE THE ENTIRE $110 RECEIVED BY THE LENDER TO BUY WHAT THE LENDER COULD HAVE BOUGHT WITH $100 ONE YEAR AGO. IN REAL TERMS, THE LENDER HAS RECIEVED NOTHING. |
|
|
Term
| WHAT DOES EQUITY REPRESENT? |
|
Definition
|
|
Term
|
Definition
| A PLACE WHERE BROKERS AND SPECIALISTS MATCH BUY AND SELL ORDERS IN ONE PHYSICAL LOCATION. |
|
|
Term
| WHAT EXCHANGE IS THE LARGEST PHYSICAL EXCHANGE AND TRACES ITS ORIGIN BACK TO THE LATE 1700S? |
|
Definition
|
|
Term
| WHAT IS AN EXAMPLE OF A ELECTRONIC EXCHANGE. |
|
Definition
|
|
Term
| WHAT IS AN ELECTRONIC EXCHANGE? |
|
Definition
| AKA OVER THE COUNTER [OTC] EXCHANGES. A COMPUTER SYSTEM THAT LINKS MEMBER BROKERS AND GIVES THEM THE ABILITY TO ELECTRONICALLY POST, BUY AND SELL ORDERS FOR LISTED STOCKS. |
|
|
Term
|
Definition
| A security that represents ownership in a corporation. Holders of common stock exercise control by electing a board of directors and voting on corporate policy. Common stockholders are on the bottom of the priority ladder for ownership structure. In the event of liquidation, common shareholders have rights to a company's assets only after bondholders, preferred shareholders and other debtholders have been paid in full. |
|
|
Term
| CONCERNING COMMON STOCK, WHAT IS A RESIDUAL CLAIM? |
|
Definition
| COMMON STOCKHOLDERS ARE CONSIDERED THE TRUE OWNERS OF THE COMPANY, THEREFORE THEY ARE LAST IN LINE FOR MOST COMPANY PAYOUTS. IF A COMPANY FILES BANKRUPTCY, THE COMMON STOCKHOLDERS ONLY RECIEVE WHAT IS LEFT. |
|
|
Term
TRUE OR FALSE.
STOCK DIVIDENDS ARE TAXED AS CURRENT INCOME WHEN RECIEVED, BUT AT A REDUCED-MAXIMUM 15% RATE FOLLOWING THE 2003 TAX REFORM. |
|
Definition
|
|
Term
TRUE OR FALSE.
PREFERRED STOCK CARRIES A STATED [FIXED] DIVIDENT RATE AND IN MOST CASES WILL NOT RECEIVE ANY DIVIDENT BEYOND THAT RATE. |
|
Definition
|
|
Term
| WHAT DOES IT MEAN TO BE A PARTICIPATEING PREFERRED STOCK. |
|
Definition
| A STOCK THAT SHARES IN TEH EARNINGS BEYOND THE STATED DIVIDENT RATE UNDER CERTAIN CIRCUMSTANCES. |
|
|
Term
| WHAT DOES IT MEAN TO BE A CUMULATIVE PREFERRED STOCK? |
|
Definition
| IF DIVIDENDS ARE MISSED, ALL MISSED DIVIDENDS MUST BE PAID TO THE PREFERRED STOCKHOLDERS BEFORE THE COMMON STOCKHOLDERS CAN RECEIVE A DIVIDEND. |
|
|
Term
tRUE OR FALSE.
PREFERRED STOCK CARRIES VOTING RIGHTS. |
|
Definition
|
|
Term
| WHY IS A PREFERRED STOCK CONSIDERED A HYBRID SECURITYL. |
|
Definition
| BECUASE IT HAS CERTAIN TRAITS OF A COMMON STOCK AND A BOND [SPECIFIED DIVIDENT PAYOUTS]. |
|
|
Term
TRUE OR FALSE.
PREFERRED STOCK IS OFTEN ISSUED IN A SERIES, SUCH AS SERIES A. |
|
Definition
|
|
Term
| TRUE OR FALSE. SOME ISSUES OF PREFERRED STOCK ARE CONVERTIBLE INTO COMMON STOCK AT A FIXED EXCHANGE RATE. |
|
Definition
|
|
Term
| WHAT IS AN INITIAL PUBLIC OFFERING? |
|
Definition
| THE FIRST TIME A COMPANY ISSUES STOCK. |
|
|
Term
| THE PROCESSING OF ISSUING STOCK IS REFERRED TO AS WHAT? |
|
Definition
|
|
Term
| WHO TYPICALLY HANDLES THE ISSUING OF STOCK ON BEHALF OF THE COMPANY? |
|
Definition
|
|
Term
| WHEN INVESTORS SELL AND RESELL STOCK THAT WAS PREVIOUSLY ISSUED, THOSE TRANSACTIONS TAKE PLACE IN WHAT MARKET? |
|
Definition
|
|
Term
| IN THE STOCK MARKET, WHAT IS THE BID PRICE? |
|
Definition
| THE PRICE AT WHICH A BUYER IS WILLING TO BUY THE SECURITY. |
|
|
Term
| IN THE STOCK MARKET, WHAT IS THE ASKED PRICE? |
|
Definition
| THE PRICE AT WHICH A SELLER WISHES TO SELL HIS SHARES IN THE OPEN MARKET. |
|
|
Term
| IN THE STOCK MARKET, WHAT IS THE SPREAD? |
|
Definition
| THE DIFFERENCE BETWEEN THE BID AND ASK PRICE. |
|
|
Term
| WHAT DOES THE SPREAD CONSIST OF? |
|
Definition
| THE MARKUP ON THE SECURITY BY THE MARKET MAKER TO COMPENSATE THE FIRM FOR MAINTAINING AN EFFICIENT MARKET IN THE STOCK. |
|
|
Term
|
Definition
| THE SYMBOL ASSOCIATED WITH THE STOCK THAT IS USED FOR TRADING THE SECURITY. |
|
|
Term
| TRUE OR FALSE. A SYMBOL CONTAINING THREE OR FEWER LETTERS IS TRADED ON AN EXCHANGE, WHILE FOUR OR FIVE LETTERS IS TRADED OVER THE COUNTER. |
|
Definition
|
|
Term
| IN THE CASE OF THIS TYPE OF ORDER, THE STOCK WILL BE PURCHASED OR SOLD AT THE PREVAILING PRICE IN THE MARKET. THIS TYPE OF ORDER CAN BE RISKY BECAUSE THE MARKET PRICE OF A STOCK CAN CHANGE BETWEEN THE TIME THE ORDER IS PLACED AND THE TIME IT IS EXECUTED,BUT STILL THE MOST COMMON TYPE OF ORDER. |
|
Definition
|
|
Term
| IN THE CASE OF THIS ORDER,T HE BUYER PLACES A LIMIT ON THE PRICE HE OR SHE IS WILLING TO PAY OR ACCEPT FOR THE STOCK.. THE ORDER REMAINDS OPEN UNIL THE PRICE OF THE STOCK TRIGGERS THIS ORDER.Q |
|
Definition
| THE LIMIT ORDER. THE LIMIT ORDER CAN BE PLACED AS A ONE DAY ORDER, OR AS A GOOD TIL CANCELLED ORDER. OWNERS OF A STOCK CAN PLACE A SIMILAR TYPE OF ORDER TO AUTOMATICALLY SELL THEIR STOCK IF THE PRICE FALLS TO A CERTAIN LEVEL. LIMIT ORDERS ARE NOT CURRENTLY ACCEPTED ON OTC STOCKS. |
|
|
Term
| WHAT IS A STOP LOSS ORDER. |
|
Definition
| AN ORDER TO SELL STOCK IF IT FALLS BELOW A CERTAIN LEVEL. |
|
|
Term
| WHEN AN INVESTOR PURCHASES A SHARE OF STOCK, THE INVESTOR IS SAID TO BE LONG ON THE STOCK. DOING THIS INVOLVES THE INVESTOR SELLING SHARES OF STOCK THAT HE OR SHE DOES NOT OWN. TECHNICALLY THE SHARES ARE BORROWED FROM SOMEONE WHO DOES OWN THE STOCK AND THEN SOLD TO A THIRD PARTY. |
|
Definition
| SELLING SHORT. THE INVESTOR ENTERING THE SHORT POSITION HOPES THAT THE PRICE OF THE STOCK FALLS. THE INVESTOR SUBSEQUENTLY PURCHASES THE STOCK TO COVER THE SHORT POSITION AND ENDS UP WITH A PROFIT IF THE STOCK PRICE HAS INDEED FALLEN. THE INVESTOR IS CHARGED INTERESZT ON THE USE OF THE STOCK UNTIL THE SHORT POSITION IS COVERED. |
|
|
Term
| NAME FOUR CHOICES AS TO THE SPECIFIC TYPE OF TRADE AN INVESTOR CAN PLACE IN THE SECONDARY MARKET. |
|
Definition
MARKET ORDER
LIMIT ORDER
SELLING SHORT
BUYING ON MARGIN. |
|
|
Term
| IN THE STOCK MARKET, THIS OCCURS WHEN THE INVESTOR BORROWS SOME PORTION [UP TO 50%] OF THE COST OF THE STOCK FROM THE BROKER AND THE BROKER HOLDS THE STOCK AS COLLATERAL AGAINST THE LOAN. THE HOPE IS THAT THE STOCK VALUE RISES . WHEN THE INVESTOR THEN SELLS THE STOCK, THE INVESTOR PAYS BACK THE LOAN AND REALIZES A HIGHER RETURN ON INVESETMENT BECAUSE THEIR INVESTMENT WAS LESS THAN THE FULL VALUE OF THE STOCK. |
|
Definition
|
|
Term
| IF AN INVESTOR PURCAHSED A STOCK ON MARGIN AND THAT STOCK FALLS BELOW THE SPECIFIED MAINTENANCE MARGIN, THE INVESTOR WILL RECEIVE THIS AND MUST DEPOSIT A SUFFICIENT SUM TO RETURN THE EQUITY IN THE MARGIN ACCOUNT TO THE ORIGINAL MARGIN. |
|
Definition
|
|
Term
ASSUME THAT MARI SELLS SHORT ONE SHARE OF IBM FOR $100 [THE CURRENT MARKET PRICE] BY BORROWING THE SHARE FROM TAX AND SELLING IT TO LAURA [TRANSACTION HANDLED THROUGH A BROKERAGE FIRM].
FURTHER ASSUME THAT ONE MONTH LATER, IBM'S STOCK PRICE HAS FALLEN TO $90. MARI CQAN NOW BUY A SHARE OF IBM FOR $90, USE IT TO REPLACE THE SHARE BORROWED FROM TAD AND -IGNORING THE COMMISSIONS AND TAXES-REALIZE HOW MUCH PROFIT? |
|
Definition
| $10. IF THE STOCK PRICE RISES, MARI STANDS TO LOSE A THEORETICALLY UNLIMITED AMOUNT. |
|
|
Term
| WHAT IS THE PROCESS OF ATTEMPTING TO DETERMINE THE TRUE UNDERLYING VALUE OF A STOCK? |
|
Definition
|
|
Term
| WHAT ARE TWO TYPES OF EQUITY VALUATION ANALYSIS TECHNIQUES? |
|
Definition
| FUNDAMENTAL ANALYSIS & TECHNICAL ANALYSIS. |
|
|
Term
| IN EQUITY VALUATION, WHAT IS A FUNDAMENTAL ANALYSIS? |
|
Definition
| THE RELIANCE ON THE FUNDAMENTAL PERFORMANCE INDICTATORS TO DETERMINE THE INTRINSIC [TRUE UNDERLYING] VALUE OF A STOCK. |
|
|
Term
| WHAT ARE TWO APPROACHES TO FUNDAMENTAL ANALYSIS OF AN EQUITY VALUATION? |
|
Definition
| TOP DOWN APPROACH & BOTTOM UP APPROACH. |
|
|
Term
| WHAT TYPE OF APPROACH IN A FUNDAMENTAL ANALYSIS OF AN EQUITY VALUATION, ANALYZES THE OVERALL MARKET, INDUSTRIES, AND COMPANIES? |
|
Definition
|
|
Term
| THIS APPROACH IN A FUNDAMENTAL ANALYSIS OF AN EQUITY VALUATION, RANKS ALL STOCKS UNDER CONSIDERATION ACCORDING TO SOME MEASURE OF EXPECTED RETURN RELATIVE TO RISK AND INVESTS IN THE HIGHEST RANKED STOCKS. |
|
Definition
|
|
Term
| WHAT IS THE MAJOR DIFFERENCE BETWEEN THE TOP DOWN APPROACH AND THE BOTTOM UP APPROACH IN A FUNDAMENTAL ANALYSIS OF AN EQUITY? |
|
Definition
| THE TOP DOWN APPROACH ANALYZES THE ENTIRE MARKET AND THE BOTTUM UP APPROACH ANALYZES SPECIFIC COMPANIES IN THE UNIVERSE OF INVESTMENTS. |
|
|
Term
| What is the price/earnings ratio [P/E Ratio]? |
|
Definition
| The comparison of the stock's selling price to its earnings. this ratio is considered by many as a measure of how expensive a stock is, as it reflects the cost per dollar of earnings. |
|
|
Term
| what is the divident yield? |
|
Definition
| dividend per stock price. |
|
|
Term
| what should an investor be careful about concerning the divident yield of an investment? |
|
Definition
| a stock price that has become depressed because of fundamental problems with the company can cause the dividend yield to rise. |
|
|
Term
| what is the market to book ratio? |
|
Definition
| the market to book ratio of a company's market value to its book value...aka the value of all outstanding equity to its accounting value. |
|
|
Term
| Name two investment styles: |
|
Definition
Value Investing
Growth Investing |
|
|
Term
| Value Investors typically look for stocks with what kind of P/E Ratio and what kind of Market to Book RAtio? |
|
Definition
Low P/E Ratio
Low Market to Book Ratio |
|
|
Term
| Concerning Investment Styles, what is a value stock? |
|
Definition
| AN UNDERPRICED STOCK COMPARIED TO ITS CURRENT EARNINGS OR BOOK VALUE. |
|
|
Term
| CONCERNING INVESTMENT STYLES, WHAT IS A GROWTH STOCK/ |
|
Definition
| A STOCK THAT APPEARS EXPENSIVE RELATIVE TO THEIR CURRENT EARNINGS OR BOOK VALUE AS LONG AS A GROWTH INVESTOR BELIEVE THAT THE COMPANY HAS STRONG FUTURE GROWTH POTENTIAL. |
|
|
Term
| CONCERNING INVESTMENT STYLES, A GROWTH STOCK TYPICALLY HAS WHAT KIND OF P/E RATIO AND WHAT KIND OF MARKET TO BOOK RATIO? |
|
Definition
| HIGH P/E RATIO AND HIGH MARKET TO BOOK VALUE. |
|
|
Term
| CONCERNING EQUITY VALUATION, WHAT IS A TECHNICAL ANALYSIS? |
|
Definition
| A PROCESS USED TO DETERMINE THE DEMAND COMPONENT OF THE SUPPLY AND DEMAND RELATIONSHIP OF A SPECIFIC STOCK OR GROUP OF STOCKS. RATHER THAN RELYING ON SUCH FUNDAMENTALS AS EARNINGS, DEBT, PRODUCT, MANAGEMENT, AND SO FORTH, TECHNICAL ANALYSIS IS BASED UPON THE BELIEF THAT KNOWLEDGE OF A STOCK'S HISTORY WILL HELP PREDICT ITS FUTURE ACTIVITY. |
|
|
Term
| TRUE OR FALSE. BECAUSE THEY USE CHARTS EXTENSIVELY, TECHNICAL ANALYSISTS ARE ALSO KNOWN AS CHARTISTS. |
|
Definition
|
|
Term
| TRUE OR FALSE. TECHNICAL ANALYSIS DIRECTLY CORRESPONDS WITH THE EFFICIENT MARKET HYPOTHESIS. |
|
Definition
|
|
Term
| WHAT IS THE DIVIDEND DISCOUNT MODEL? |
|
Definition
| BECAUSE PURCHASING STOCKS ESSENTIALLY IS PURCHASING THE RIGHT TO RECEIVE THE DIVIDENDS FROM THE COMPANY,T HEN ASSUMING THE STOCK IS HELD INDEFINATELY, THE VALUE OF THE STOCK SHOULD BE THE PRESENT VALUE OF ALL FUTURE DIVIDENDS. |
|
|
Term
TRUE OR FALSE:
THE VALUE OF STOCK TODAY IS EQUAL TO THE DIVIDEND DIVIDED BY THE APPROPRIATE RATE AT WHICH TO DISCOUNT THE DIVIDENDS. |
|
Definition
|
|
Term
| CONCERNING EQUITY VALUATION, WHAT IS THE CONSTANT-GROWTH MODEL AS A VALUATION TECHNIQUE. |
|
Definition
| THE ASSUMPTION THAT DIVIDENDS WILL INCREASE OVER TIME. THE MODEL SIMPLIFIES THE ASSUMPTION BY ALLOWING THE DIVIDENDS TO INCREASE AT A CONSTANT RATE OVER TIME. |
|
|
Term
| ASSUME THAT A COMPANY JUST PAID A DIVIDENT OF $3 PER SHARE, THAT INVESTORS EXPECT THIS DIVIDEND TO GROW AT 7%, AND THAT THE REQUIRED RATE OF RETURN IS 11%. THEN THE CALCULATED INTRINSIC VALUE OF THE COMPANY WOULD BE: |
|
Definition
$80.25 PER SHARE.
INTRINSIC VALUE = 3 (1.07) / (0.11 - 0.07) = $80.25 PER SHARE. |
|
|
Term
| TRUE OR FALSE. USING THE CONSTANT GROWTH MODEL, IF THE ACTUAL MARKET PRICE OF THE STOCK IS LESS THAN ITS VALUE, THE STOCK MAY BE A CANDIDATE FOR SALE. |
|
Definition
| FALSE. THE STOCK MAY BE A CANDIDATE FOR PURCAHSE. IF THE ACTUAL MARKET PRICE OF THE STOCK IS GREATER THAN THIS VALUE, THE STOCK MAY BE A CANDIDATE FOR SALE. |
|
|
Term
| CONCERNING THE EQUITIES VALUATIONS, THE LIFE CYCLE MODEL AS AN EQUITY VALUATION TECHNIQUE IS THIS: |
|
Definition
| ALLOWING FOR DIFFERENT GROWTH RATES FOR DIFFERENT PERIODS OF A COMPANY'S LIFE CYCLE. |
|
|
Term
| A STOCK PAID A RECENT DIVIDENT OF $6 PER SHARE. ASSUME THAT THE APPROPRIATE DISCOUNT RATE [K] FOR THIS COMPANY IS 13%. WHAT WOULD BE THE VALUE OF THE STOCK IF THE DIVIDENT IS EXPECTED TO BE CONSTANT? |
|
Definition
$46.15
PRESENT VALUE = DIVIDEND DIVIDED BY DISCOUNT RATE.
$46.15 = $6/0.13 |
|
|
Term
| A STOCK PAID A RECENT DIVIDENT OF $6 PER SHARE. ASSUME THAT THE APPROPRIATE DISCOUNT RATE [K] FOR THIS COMPANY IS 13%. WHAT WOULD BE THE VALUE OF THE STOCK IF THE DIVIDENT IS EXPECTED TO GROW AT 10%? |
|
Definition
220
V= D(1+G)/(K-G)
220=$6(1.10)/(0.13-0.10) |
|
|
Term
| WHAT DOES THE CONCEPT OF EFFICIENT MARKETS SUGGEST? |
|
Definition
| THAT ALL RELEVANT INFORMATION PERTAINING TO THE VALUE OF AN INVESTMENT ALREADY IS FACTORED INTO THE PRICE OF THE SECURITY, AND THAT NEW INFORMATION WILL BE FACTORED IMMEDIATELY INTO THE PRICE. THEREFORE INVESTORS CANNOT USE AVAILABLE INFORMATION TO PRICK STOCKS THAT WILL RECEIVE RETURNS HIGHER THAN THOSE JUSTIFIED BY THEIR RISK LEVEL. |
|
|
Term
| WHAT ARE THREE LEVELS OF EFFICIENCY COMMONLY ADDRESSED IN THE CONCEPT OF EFFICIENT MARKETS? |
|
Definition
1. A WEAK FORM EFFICIENT.
2. A SEMI STRONG EFFICIENT
3. A STRONG FORM EFFICIENT |
|
|
Term
| CONCERNING THE CONCEPT OF EFFICIENT MARKETS, WHEN ARE MARKETS CONSIDERED TO BE WEAK-FORM EFFICIENT? |
|
Definition
| IF ALL HISTORICAL INFORMATION IS FACTORED INTO THE STOCK'S PRICE AND THUS THE INVESTOR CANNOT OBTAIN ABNORMALLY HIGH RETURNS USING HISTORICAL INFORMATION ONLY. |
|
|
Term
| CONCERNING THE CONCEPT OF EFFICIENT MARKETS, WHEN ARE MARKETS CONSIDERED TO BE SEMI STRONG EFFICIENT? |
|
Definition
| IF BOTH HISTORICAL AND PUBLICALLY AVAILABLE CURRENT INFORMATION ARE FACTORED INTOT HE STOCK'S PRICE. THEREFORE, INVESTORS CANNOT OBTAIN ABNORMALLY HIGH RETURNS USING HISTORICAL OR PUBLICALLY AVAILABLE CURRENT INFORMATION. |
|
|
Term
| CONCERNING THE CONCEPT OF EFFICIENT MARKETS, WHEN ARE MARKETS CONSIDERED TO BE STRONG FROM EFFICIENT? |
|
Definition
| IF HISTORICAL PUBLICALLY AVAILABLE CURRENT INFORMATION AND LEGAL PRIVATE INFORMATION ARE ALL FACTORED INTO THE STOCK'S PRICE. THUS THE INVESTORS CANNOT OBTAIN ABNORMALLY HIGH RETURNS USING HISTORICAL, PUBLICALLY AVAILABLE CURRENT INFORMATION OR LEGAL PRIVATE INFORMATION. |
|
|
Term
| WHEN DEFINING EFFICIENCY, THIS TERM MEANS ANY DEVIATION OF RETURN FROM THE RETURN PREDICTED BY THE CAPITAL ASSET PRICING MODEL [CAPM]. |
|
Definition
|
|
Term
| WHAT IS ANOTHER WORD FOR THE DEBT MARKET? |
|
Definition
|
|
Term
|
Definition
| THE MARKET WHERE INDIVIDUALS AND BUSINESSES LEND AND BORROW MONEY, AND WHERE INVESTORS BUY AND SELL THOSE CLAIMS IN THE SECONDARY MARKET. |
|
|
Term
| CONCERNING THE DEBT MARKET, WHAT DOES PAR MEAN? |
|
Definition
|
|
Term
| DEBT INSTRUMENTS WITH MATURITIES OF LESS THAN ONE YEAR ARE REFERRED TO AS THIS AND ARE TRADED IN WHAT MARKET? |
|
Definition
| REFERRED TO AS MONEY MARKET INSTRUMENTS AND ARE TRADED IN THE MONEY MARKET. |
|
|
Term
| DEBT INSTRUMENTS WITH MATURITIES OF MORE THAN ONE YEAR ARE REFERRED TO AS THIS AND ARE TRADED IN WHAT MARKET? |
|
Definition
| REFERRED TO AS CAPITAL MARKET INSTRUMENTS AND ARE TRADED IN THE CAPITAL MARKET. |
|
|
Term
| WHAT TYPE OF DEBT IS ONE FO THE LARGEST VOLUME MONEY MARKET INSTRUMENTS? |
|
Definition
|
|
Term
| WHAT IS COMMERICAL PAPER? |
|
Definition
| UNSECURED, SHORT TERM BORROWING BY A BUSINESS. |
|
|
Term
| TRUE OR FALSE. COMMERICAL PAPER IS REQUIRED TO BE REGISTED WITH THE SECURITIES AND EXCHANGE COMMISSION. |
|
Definition
| FALSE. BECAUSE COMMERICAL PAPER HAS A LESS THAN 270 DAY MATURITY, IT IS NOT REQUIRED TO BE REGISTERED WITH THE SEC. |
|
|
Term
| WHAT IS THE MATURITY OF A BOND? |
|
Definition
| THE TIME AT WHICH INTEREST PAYMENTS WILL CEASE AND THE FACE VALUE OF A BOND WILL BE RETURNED TO THE LENDER [BONDHOLDER]. |
|
|
Term
| WHAT IS THE FACE VALUE OF A BOND [PAR OR PAR VALUE]? |
|
Definition
| THE AMOUTN THAT WILL BE RETURNED TO THE LENDER AT THE MATURITY OF THE BOND. IT IS SET BEFORE ISSUANCE OF THE BOND AND WILL NOT CHANGE, BUT NOT NECESSARILY THE AMOUNT ORIGINALLY LOANED [IN OTHER WORDS, NOT NECESSARILY THE ORIGINAL PURCHASE PRICE OF THE BOND]. |
|
|
Term
| WHAT IS A COUPON PAYMENT FOR A BOND? |
|
Definition
| THE AMOUNT THAT WILL BE PAID PERIODICALLY TO THE LENDER. ESSENTIALLY IT REPRESENTS INTEREST. |
|
|
Term
| CONCERNING DEBT INSTRUMENTS, WHERE DID THE TERM "COUPON" COME FROM? |
|
Definition
| BONDS USED TO BE ISSUED IN BEARER FORM WHICH MEANS NO OWNER REGISTRATION. IT USED TO COME WITH COUPONS ATTACHED TO THE BOND. THE BONDHOLDER WOULD SIMPLY DETACH THE APPROPRIATE COUPON EACH TIME INTEREST WAS DUE [USUALLY SEMI ANNUALLY] AND REDEEM IT FOR THE INTEREST PAYMENT. |
|
|
Term
| CONCERNING DEBT INSTRUMENTS, WHEN IS THE COUPON PAYMENT DETERMINED? |
|
Definition
| THE COUPON PAYMENT IS DETERMINED BEFORE BOND ISSUANCE AND IS USUALLY CONSTANT. IT IS CALCULATED AS THE COUPON INTEREST RATE TIMES THE FACE VALUE OF THE BOND. |
|
|
Term
| CONSIDER A $1000 FACE VALUE BOND WITH A COUPON INTEREST RATE OF 7 PERCENT AND A MATURITY OF 20 YEARS. THE ANNUAL COUPON PAYMENT WOULD BE WHAT? |
|
Definition
|
|
Term
| TRUE OR FALSE? WHEN THE BOND IS ORIGINALLY ISSUED, IF THE COUPON INTEREST RATE IS NOT EQUAL TO THE CURRENT MARKET INTERST RATE OR SIMILAR RISK BONDS, THEN THE SELLING PRICE WILL ADJUST TO REFLECT THIS. IF THE COUPON RATE IS ABOVE THE MARKET RATE, THEN THE BOND PRICE WILL BE ABOVE FACE BALUE [SELLING AT A PREMIUM]. cONVERSLY IF THE COUPON RATE IS BELOW MARKET RATES, THEN THE BOND WILL SELL AT A PRICE BELOW FACE VALUE OR SELL AT A DISCOUNT. |
|
Definition
|
|
Term
| WHAT DOES IT MEAN TO SELL A BOND AT A DISCOUNT? |
|
Definition
| IF THE COUPON RATE IS BELOW MARKET RATES, THEN THE BOND WILL SELL AT A PRICE BELOW FACE VALUE AKA DISCOUNT. |
|
|
Term
| WHAT DOES IT MEEAN TO SELL A BOND AT A PREMIUM? |
|
Definition
| IF THE COUPON RATE IS ABOVE THE MARKET RATE, THEN THE BOND PRICE WILL BE ABOVE THE FACE VALUE AKA SELLING AT A PREMIUM. |
|
|
Term
| BONDS THAT PAY NO INTEREST UNTIL MATURITY ARE CALLED THIS? |
|
Definition
|
|
Term
| HOW IS THE CURRENT YIELD OF A BOND CALCULATED? |
|
Definition
| COUPON/CURRENT BOND PRICE. |
|
|
Term
| ASSUME JERRI PAYS $700 FOR A 5 YEAR, $1000 FACE VALUE BOND WITH ZERO COUPON PAYMENTS. THE $300 BEYOND THE INVESTMENT COST, RECIEVED AT MUTURITY, WOULD REPRESENT WHAT. |
|
Definition
|
|
Term
| ASSUME JERRI PAYS $700 FOR A 5 YEAR, $1000 FACE VALUE BOND WITH ZERO COUPON PAYMENTS. AFTER THE BOND IS ISSUED, JERRI MAY CHOOSE TO SELL THE BOND BEFORE ITS MATURITY. THE PRICE SHE WILL RECIEVE IS NOT NECESSARILY EQUAL TO THE FACE VALUE OF THE BOND. THE CURRENT VALUE OF THE BOND WILL DEPEND ON WHAT? |
|
Definition
| THE COUPON INTEREST RATE ONT HE BOND RELATIVE TO CURRENT MARKET INTEREST RATES ON BONDS WITH SIMILAR CHARACTERISTICS [SUCH AS RISK]. |
|
|
Term
| TRUE OR FALSE. THE VALUE OF EXISTING BONDS MOVES PARALLEL WITH MARKET INTEREST RATES. |
|
Definition
|
|
Term
| A BOND HAS A FACE VALUE OF $1000, A FIXED COUPON RATE OF 7 PERCENT. ASSUME THAT MARKET INTEREST RATES INCREASE, MAKING THIS 7% BOND LESS ATTRACTIVE. THE VALUE OF THE BOND FALLS TO $800 FROM THE ORIGINAL $1000. WHILE THE COUPON INTEREST RATE WOULD REMAIN AT 7 PERCENT, THE CURRENT YIELD WOULD RISE TO WHAT? |
|
Definition
8.75%
=70/800
THE CURRENT YIELD WILL ALWAYS MOVE WITH THE CURRENT MARKET INTEREST RATES. |
|
|
Term
| CONCERNING THE DEBT MARKET, WHAT DOES THE MEASURE OF 'YIELD TO MATURITY' ACCOUNT FOR? |
|
Definition
1. COUPON RATE.
2. THE CURRENT SELLING PRICE
3. THE MATURITY OF A BOND.
IN OTHER WORDS, THE YTM TAKES INTO ACCOUNT ALL THE CASH FLOWS TO THE BOND, AS WELL AS WHEN THOSE CASH FLOWS ARE RECIEVED. |
|
|
Term
| TWO BONDS ARE BOTH SELLING FOR $800. bOTH HAVE A COUPON RATE OF 7%. ASSUME THAT ONE BOND MATURES IN 1 YEAR AND THE OTHER IN 20 YEARS. THE BOND MATURING IN 1 year will return THE FACE VALUE OF $1000. COMBINING THE GAIN WITH THE COUPON PAYMENT, THE RETUN ON THAT BOND WOULD BE WHAT PERCENTAGE? |
|
Definition
33.75%
$200 GAIN
$70 COUPON PAYMENT
$270/$800 = 33.75% |
|
|
Term
| TRUE OR FALSE. THE YIELD TO MATURITY [YTM] AND BOND PRICE MOVE INVERSELY. |
|
Definition
|
|
Term
| TRUE OR FALSE. THE YIELD TO MATURITY, CURRENT YIELD, AND COUPON INTEREST RATE WILL BE EQUAL IF THE SELLING PRICE AND FACE VALUE ARE EQUAL. |
|
Definition
|
|
Term
TRUE OR FALSE.
IF THE BOND PRICE FALLS BELOW THE FACE VALUE, BOTH THE CURRENT YIELD AND THE YIELD TO MATURITY WILL DECLINE BELOW THE COUPON INTEREST RATE. |
|
Definition
| FALSE. THEY WILL RISE ABOVE THE COUPON INTEREST RATE. |
|
|
Term
TRUE OR FALSE.
BOTH THE YIELD TO MATURITY AND THE CURRENT YIELD MOVE AGAINS TTHE MARKET INTEREST RATES. |
|
Definition
| FALSE. THEY MOVE WITH THE MARKET INTEREST RATES. |
|
|
Term
| TRUE OR FALSE. IF A COMPANY ISSUES A BOND AND THE COMPANY LOSES ITS CREDITWORTHINESS, THE VALUE OF THE BOND MAY FALL AS INVESTORS FEAR IT WILL NOT BE REPAID. THIS WILL CAUSE THE YTM AND THE CURRENT YIELD TO RISE. |
|
Definition
|
|
Term
| CONCERNING DEBT MARKETS, WHAT IS DEFAULT OR CREDIT RISK. |
|
Definition
| IF THE BOND ISSUER HAS A FINANCIAL PROBLEM, THE INTERST ON THE BONDS MAY NOT BE PAID ON TIME OR AT ALL. AND THE FACE VALUE MAY NOT BE RETURNED AT MATURITY. |
|
|
Term
| CONCERNING DEBT MARKETS, WHAT IS INTEREST RATE RISK. |
|
Definition
| THIS IS THE RISK THAT THE VALUE OF HTE BOND WILL FALL AS MARKET INTEREST RATES RISE. THE LONGER THE TERM TO MATURITY OF THE BOND, THE GREATER WILL BE THE FALL IN VALUE AS RATES RISE. THE LONGER A BOND'S MATURITY, THE LONGER THE INVESTOR'S MONEY WILL BE COMMITTED AT A LOWER RATE THAN AVAILABLE ON THE MARKET. THUS, WHEN CONSIDERING THE YIELD CURVE, LONGER TERM BONDS MUST OFFER A HIGHER INTERST RATE TO ATTRACT INVESTORS. |
|
|
Term
| CONCERNING DEBT MARKETS, WHAT IS THE OPPOSITE OF INTEREST RATE RISK? |
|
Definition
|
|
Term
| WHAT IS REINVESTMENT RISK? |
|
Definition
| THE RISK THAT INTERST RATES WILL DECLINE AND IF THE INVESTOR CHOOSEES TO REINVEST THE COUPON PAYMENTS FROM THE BOND, THE EARNING S ON THE REINVESTED EARNINGS WILL BE AT A LOWER RATE. |
|
|
Term
| CONCERNING BONDS, WHAT DOES CALLABLE MEAN? |
|
Definition
| THE ISSUER CAN REPAY THE BOND EARLY [USUALLY AT A SLIGHT PREMIUM TO THE FACE VALUE]. |
|
|
Term
| CONCERNING BONDS, WHAT DOES CONVERTIBLE MEAN? |
|
Definition
| A BOND CAN BE CONVERTED INTO COMMON STOCK OF THE ISSUING CORPORATION. THE BONDHOLDER HAS THE OPTION OF CONVERTING THE BOND INTO A FIXED NUMBER OF SHARES OF THE ISSUING COMPANY'S STOCK. |
|
|
Term
| WHAT IS A TREASURY NOTE AKA T-NOTE? |
|
Definition
| ISSUED BY THE US TREASURY AND HAVE MATURITIES RANGING FROM 2 TO 10 YEARS. HAVE A STATED COUPON RATE, FACE VALUE AND MATURITY. NO DEFAULT RISK AND FREE FROM STATE AND LOCAL TAXES. |
|
|
Term
|
Definition
| BONDS ISSUED BY THE US TREASURY WITH MATURITIES RANGING FROM 10 TO 30 YEARS. |
|
|
Term
| WHAT IS A TREASURY BILL aka T-BILL? |
|
Definition
| SHORT TERM BORROWING BY THE TREASURY. ISSUED IN FOUR WEEK, THREE MONTH AND SIX MONTH MATURITIES. PURE DISCOUNT SECURITIES, MEANING THAT THEY DONT PAY INTEREST UNTIL MATURITY. T-BILLS ARE PURCHASED AT A DISCOUNT FROM FACE VALUE AND THEN RETURN THE FACE VALUE AT MATURITY. |
|
|
Term
| MARK PURCHASES A ONE YEAR T BILL FOR $980. iN ONE YEAR, MARK WILL RECIEVE $1000. THUS THE PERCENTAGE RETURN IS WHAT? |
|
Definition
| $20/980 = 2.04%. NO INTERST IS PAID DURING THE YEAR. |
|
|
Term
| WHAT ARE TREASURY INFLATION PROTECTION SECURITIES [TIPS]? |
|
Definition
| DURING TIMES OF RISING INFLATION, TIPS PROTECT THE INVESTOR FROM THE ADVERSE AFFECTS OF RISING INFLATION. |
|
|
Term
| WHAT TYPE OF AGENCY SECURITIES PAY INTEREST THAT IS FULLY TAXABLE? |
|
Definition
| GOVERNMENT SPONSORED ENTITIES [GSEs]. |
|
|
Term
| WHAT ARE TWO EXAMPLES OF GOVERNMENT SPONSORED ENTITES [GSEs]? |
|
Definition
|
|
Term
TRUE OR FALSE.
FANNIE MAE AND FREDDIE MAC ARE GOVERNMENT SPONSOERED AND GOVERNEMTN GUARANTEED ISSUERS. |
|
Definition
| FALSE. THEY ARE GOVERNMENT SPONSORED BUT NOT GOVERNMENT GAURANTEED. |
|
|
Term
| WHAT ARE MUNICIPAL BONDS? |
|
Definition
| STATE AND LOCAL GOVERNMENTS ISSUE BONDS TO RAISE FUNDS FOR ROADS, HOSPITALS, SCHOOLS AND OTHER MUNICIPAL NEEDS. |
|
|
Term
| TRUE OR FALSE. MUNICIPAL BONDS ARE DEFAULT RISK FREE. |
|
Definition
| FALSE. THEY ARE NOT DEFAULT RISK FREE. |
|
|
Term
| TRUE OR FALSE. MUNICIPAL BONDS ARE FREE FROM FEDERAL INCOME TAXES AS WELL AS STATE AND LOCAL TAXES. |
|
Definition
|
|
Term
| MUNICIPAL BONDS ARE ISSUED IN TWO DIFFERENT FORMS. WHAT ARE THESE FORMS? |
|
Definition
1. GENERAL OBLIGATION BONDS
2. REVENUE BOND |
|
|
Term
| WHAT IS A GENERAL OBLIGATION BOND? |
|
Definition
| BONDS THAT ARE BACKED BY THE FULL FAITH AND CREDIT OF THE TAXING POWER OF THE ISSUING MUNICIPALITY. |
|
|
Term
|
Definition
| SERVICED BY THE INCOME GENERATED BY SPECIFIC INCOME PRODUCING PROJECTS, SUCH AS TOLL ROADS OR SEWER PROJECTS. |
|
|
Term
| WHAT IS A MAJOR DIFFERENCE BETWEEN A GENERAL OBLIGATION BOND AND A REVENUE BOND? |
|
Definition
| THE ISSUER OF A REVENUE BOND IS OBLIGATED TO PAY THEPRINCIPAL AND ITNEREST ONLY IF A SUFFIENCIENT LEVEL OF INCOME IS GENERATED. |
|
|
Term
|
Definition
| AN INVESTMENT COMPANY THAT POOLS TOGETHER FUNDS FROM INDIVIDUAL INVESTORS AND INVESTS THOSE FUNDS ON BEHALF OF THE INVESTORS AS A GROUP. |
|
|
Term
| WHAT IS AN OPEN END MUTUAL FUND? |
|
Definition
| THE MOST COMMON VARIETY OF MUTUAL FUND. NO LIMIT TO NUMBER OF SHARE IN THE FUND UNLESS FUND CHOOSES TO CLOSE THE FUND TO NEW INVESTORS. SELLS ARE BOUGHT AND SOLD WITH THE COMPANY AND NOT THE EXCHANGE. |
|
|
Term
| CONCERNING OPEN ENDED MUTUAL FUNDS, WHAT IS THE NET ASSET VALUE? |
|
Definition
| HOW OPEN ENDED MUTUAL FUNDS PRICE THEIR SHARES. THE TOTAL MARKET VALUE OF ALL SHARES MINUS LIABILITIES AND DIVIDING THE RESULT BY THE NUMBER OF SHARES OUTSTANDING. |
|
|
Term
| TRUE OR FALSE. THER EARE MORE OPEN ENDED MUTUAL FUNDS AVAILABLE THAN THE TOTAL NUMBER OF STOCKS LISTED ON THE NYSE. |
|
Definition
|
|
Term
|
Definition
| OPEN END MUTUAL FUNDS THAT CHARGE A SALES FEE [LOAD] TO PURCHASE SHARES OF A FUND. TYPICALLY PURCHASED THROUGH A BROKER. |
|
|
Term
| THE SALES CHARGES FOR LOAD FUNDS ARE IN ADDITION TO WHAT FEES? |
|
Definition
| ANNUAL OPERATING EXPENSES AND 12B-1 FEES. |
|
|
Term
| CONCERING OPEN END MUTUAL FUNDS, WHAT ARE FRONT END LOAD FUNDS. |
|
Definition
| THE INVESTOR PAYS A CERTAIN PERCENTAGE OF THE INTIAL PURCHASE AMOUNT. FOR EXAMPLE, A $100 INVESTMENT IN A FUND WITH A 5% FRONT END SALES LOAD WOULD HAVE AN INTIIAL FUND BALANCE OF $95 WITH A $5 SALES CHARGE. |
|
|
Term
| CONCERNING OPEN END MUTUAL FUNDS, WHAT IS ANOTHER WORD FOR FRONT END LOAD FUNDS? |
|
Definition
|
|
Term
| CONCERNING OPEN END MUTUAL FUNDS, WHAT ARE NO LOAD FUNDS? |
|
Definition
| FUNDS THAT DO NOT CHARGE A SALES LOAD AT ALL. A TRUE NO LOAD FUND DOES NOT CHARGE A 12B-1 FEE, BUT WILL CHARGE THE ANNUAL OPERATING EXPENSE FEES. |
|
|
Term
| TRUE OR FALSE. OPERATING EXPENSES DO NOT INCLUDE THE FUND MANAGER'S SALARY AND BONUSES [MANAGEMENT FEES/EXPENSES]. |
|
Definition
| FALSE. THEY DO INCLUDE THESE COSTS. |
|
|
Term
| TRUE OR FALSE. THE TOTAL EXPENSE RATIO OF AN OPEN END MUTUAL FUND TYPICALLY RANGES FROM .2% TO 2% ANNUALLY. |
|
Definition
|
|
Term
|
Definition
| FEES CHARGED TO INVESTORS TO COVER MARKETING AND DISTRIBUTION EXPENSES. THIS FEE MUST BE DISCLOSED SEPERATELY FROM THE NORMAL OPERATING EXPENSES. |
|
|
Term
| WHAT IS A CLOSED END MUTUAL FUND? |
|
Definition
| IT IS TRADED ON A STOCK ECHANGE AND INVESTORS BUY OR SELL SHARES INT HE FUND THROUGH A BROKER JUST AS THEY WOULD FOR A STOCK. THE PRICES FLUCTUATE IN RESPONSE TO THE FUND'S PERFORMANCE AND WHAT PEOPLE ARE WILLING TO PAY FOR IT. |
|
|
Term
| TRUE OR FALSE. THE AVERAGE EQUITY MUTUAL FUND HAS CONSISTENTLY UNDERPERFORMED THE S&p 500 INDEX AFTER EXPENSES. |
|
Definition
|
|
Term
| TRUE OR FALSE. ONE DRAWBACK TO OPEN END FUNDS IS THAT SHAREHOLDERS MAY BUY INTO SECURITIES THAT HAVE ALREADY APPRECIATED INSIDE THE MUTUAL, THEREFORE FINDING THEMSELVES LIABLE FOR TAXABLE GAINS THEY DID NOT EXPERIENCE. |
|
Definition
|
|
Term
| WHAT IS A MONEY MARKET MUTUAL FUND? |
|
Definition
| A SPECIAL CLASS OF GENERAL MUTUAL FUND. IT POOLS THE CAPITAL OF A NUMBER OF INVESTORS AND USES IT TO INVEST EXCLUSIVELY IN SHORT TERM SECURITIES SUCH AS T-BILLS, CORPORATE COMMERCIAL PAPER, JUMBO CERTIFICATESE OF DEPOSIT AND THE LIKE. |
|
|
Term
| TRUE OR FALSE. MONEY MARKET MUTUAL FUNDS ARE NOT FEDERALLY INSURED. |
|
Definition
|
|
Term
| ARE TAX EXEMPT MONEY MARKET MUTUAL FUNDS AVAILABLE? |
|
Definition
|
|
Term
| WHAT IS THE MODERN PORTFOLIO THEORY? |
|
Definition
| DESCRIBES HOW TO PUT TOGETHER EFFICIENT PORTFOLIOS [MAXIMIZATION OF RETURN PER UNIT OF RISK]. |
|
|
Term
| NAME FOUR LEVELS TO DIVERSIFY A PORTFOLIO: |
|
Definition
1. ACROSS MULTIPLE ASSET CLASSES. [STOCKS, BONDS, REAL ESTATE]
2.WITHIN EACH ASSET CLASS OR ACROSS MULTIPLE SECTORS [I.E. ALL STOCKS FROM VARIOUS INDUSTRIES]
3. WITHIN EACH SECTOR OR ACROSS MULTIPLE SECURITIES. [ALL AUTOMOTIVE BUT DIFFERENT AUTO COMPANIES]
4. ACROSS GEOGRAPHY. |
|
|
Term
| CONCERNING THE MODERN PORTFOLIO THEORY AND DIVERSIFICATION, WHAT IS CORRELATION? |
|
Definition
| A MEASURE O THE EXTENT TWO SECURITIES MOVE TOGETHER [POSITIVE CORRELATION] OR OPPOSITE TO EACH OTHER [NEGATIVE CORRELATION]. |
|
|
Term
| THE STATISTICAL MEASURE OF CORRELATION BETWEEN TWO STOCKS OR TWO ASSET CLASSES IS THE GREEK LETTER RHO. TRUE OR FALSE |
|
Definition
|
|
Term
| THE CORRELATION COEFFICIENT MUST LIE WHERE? |
|
Definition
|
|
Term
| IF RHO EQUALS +1, THEN THE TWO STOCKS ARE WHAT? |
|
Definition
PERFECTLY POSITIVELY CORRELATED.
COMBINING THEM INTO THE SAME PORTFOLIO PROVIDES ZERO DIVERSIFICATION BENEFITS. |
|
|
Term
| If rho is -1, then the two stocks are perfectly negatively correlated. this means that as the returns of one increase, the returns of the other do what? |
|
Definition
| the returns of the other decrease at the exact same percent. By properly combining the two stocks, the investor can eliminate the risk to the portfolio. |
|
|
Term
| what is unsystematic or firm specific risk? |
|
Definition
| bad, unforseen risks effecting a stock. |
|
|
Term
|
Definition
| co-movement that cannot be diversified away. Also known as nondiversifiable risk. |
|
|
Term
| What are three examples of systematic risk? |
|
Definition
military
economic
political |
|
|
Term
| Managers take different approaches to the process of rebalancing the allocation due to risk. what is a passive strategy? |
|
Definition
| doing nothing. simply allowing the allocation to change with the market conditions. |
|
|
Term
| Managers take different approaches to the process of rebalancing the allocation due to risk. What are active strategies? |
|
Definition
| doing something. rebalancing the portfolio in some way. |
|
|
Term
| Managers take different approaches to the process of rebalancing the allocation due to risk. what is a constant mix strategy? |
|
Definition
| the manager establishes acceptable ranges for each asset class and then takes the appropriate buying and selling actions necessary to return the allocations to each class to an acceptable level if one or more exceed or fall shrt of the acceptable range. |
|
|
Term
| What is Constant Proportions Portfolio Insurance [CPPI]? |
|
Definition
| Rather than selling winning asset classes and buying losing asset classes, the manager purchases more of the winning asset class and sells th losing asset class. |
|
|
Term
| what is the major difference between the Constant Proportions Portfolio Insurance Strategy and the Constant Mix Strategy in Portfolio Rebalancing? |
|
Definition
| Under the CPPI strategy, the portfolio would outperform the constant mix strategy in both rising and falling stock markets. However, the constant mix strategy outperforms the cppi strategy in volatile markets with little upward or downward trend. |
|
|
Term
true or false?
A WIDESPREAD USE OF CONSTANT PROPORTIONS PORTFOLIO INSURANCE STRATEGIES EXACERBATES VOLATILITY BY CAUSING STOCK SBOTH TO RISE MORE AND TO FALL FURTHER THAN THEY WOULD IN TEH ABSENCE OF SUCH STRATEGIES. |
|
Definition
|
|
Term
| WHAT IS THE EQUILIBRIUM MODEL USED TO CALCULATE EXPECTED RETURN ON A STOCK BASED ON SYSTEMATIC [NONDIVERSIFIABLE] RISK, BECAUSE UNSYSTEMATIC RISK IS DIVERSIFIED AWAY BY HOLDING A PORTFOLIO OF MANY STOCKS? |
|
Definition
| CAPITAL ASSET PRICING MODEL [CAPM] |
|
|
Term
| HOW IS A STOCK MEASURED IN THE CAPITAL ASSET PRICING MODEL [CAPM]? |
|
Definition
| BY THE DEGREE TO WHICH A STOCK IS CORRELATED TO THE OVERALL STOCK MARKET. |
|
|
Term
| THE DEGREE TO WHICH A STOCK IS RELATED TO THE MARKET IS REFERRED TO AS THIS. |
|
Definition
|
|
Term
| WHAT IS THE EQUATION FOR CAPITAL ASSET PRICING MODEL? |
|
Definition
| THE EXPECTED RATE OF RETURN OF THE STOCK EQUALS THE RISK FREE RATE OF INTEREST [SUCH AS THE T-BILL RATE] PLUS [BETA TIMES THE EXPECTED MARKET RETURN MINUS THE RISK FREE RATE OF INTEREST [SUCH AS THE T-BILL]. |
|
|
Term
TRUE OR FALSE.
THE REQUIRED RATE OF RETURN INCREASESES AS BETA DECREASES. |
|
Definition
FALSE.
THE REQUIRED RATE OF RETURN INCREASES AS BETA INCREASES AND VICE VERSA. [HOLDING OTHER VARIABLES CONSTANT] |
|
|
Term
| THIS IS A STATISTICAL MEASURE OF RISK. |
|
Definition
|
|
Term
|
Definition
| MEASURING THE RETURNS OF A PARTICULAR STOCK RELATIVE TO THE RETURNS OF THE MARKET. |
|
|
Term
| IF BETA EXCEEDS 1, THE STOCK IS MORE WHAT THAN THE MARKET? |
|
Definition
|
|
Term
| IF THE BETA IS LESS THAN 1, THE STOCK IS ________ RISKY THAN THE MARKET. |
|
Definition
|
|
Term
| IF THE BETA EQUALS 1, THE STOCK IS EQUALLY AS RISKY AS THE MARKET. TRUE OR FALSE. |
|
Definition
|
|
Term
| ASSUME THE EXPECTED MARKET RETURN IS 10%, THE RISK FREE INTEREST RATE IS 4% AND A STOCK HAS A BETA OF 1.3. THE EXPECTED RETURN ON THIS STOCK WOULD BE WHAT? |
|
Definition
11.8%
.04 + 1.3 (.10 - .04) |
|
|
Term
THE ____ IS MEASURE OF THE DEGREE TO WHICH RETURNS OF TWO ASSETS MOVE TOGETHER:
A: NASDAQ
B: STANDARD DEVIATION
C CORRELATION COEFFICIENT
D SEMI VARIANCE |
|
Definition
| C: CORRRELATION COEFFICIENT |
|
|
Term
| New York was the first state to enact a “decanting” statute, which effectively permits THIS: |
|
Definition
| the trustee acting alone to amend the terms of an irrevocable trust. The most important prerequisite to utilizing New York’s decanting statute, found in EPTL §10-6.6(b), is that the original trust must contain language granting the trustee absolute discretion with respect to making trust distributions to beneficiaries. If the original trust only grants the trustee discretion to make distributions in accordance with an ascertainable standard (i.e., for the beneficiary’s health, education, maintenance or support), or even if the trustee is given absolute discretion to make distributions, but only for the beneficiary’s comfort, then EPTL §10-6.6(b) cannot apply, and the original trust cannot be decanted or distributed into a new trust. |
|
|
Term
| WHAT DOES IT MEAN TO BE AN EQUILIBRIUM MODEL, I.E. CAPM? |
|
Definition
| IT GENERATES THE RETURN EXPECTED FROM THE STOCK IN EQUILIBRIUM. IN ANY GIVEN PERIOD, THE STOCK'S REALIZED RETURN COULD BE ABOVE OR BELOW THAT LEVEL. |
|
|
Term
| A STOCK'S BETA IS TYPICALLY CALCULATED USING REGRESSION ANLYSIS AND HISTORICAL RETURNS FOR THE STOCK AND THE MARKET. TRUE OR FALSE. |
|
Definition
|
|
Term
| THE CAPITAL ASSET PRICING MODEL IS REFERRED TO AS THIS TYPE OF MODEL. |
|
Definition
|
|
Term
tRUE OR FALSE.
THE CAPITAL ASSET PRICING MODEL ASSUMES THAT ALL SYSTEMATIC RISK [COMMON CO-MOVEMENT BETWEEN STOCKS] IS A RESULT OF ALL STOCKS MOVING WITH THE OVERALL MARKET. |
|
Definition
|
|
Term
| TRUE OR FALSE. WHEN INTEREST RATES RISE, PRICES OF EXISTING BONDS GENERALLY FALL AS THEY BECOME RELATIVELY LESS ATTRACTIVE VS. THE NOW HIGHER MARKET INTEREST RATES. |
|
Definition
|
|
Term
| THIS REPRESENTS THE WEIGHTED AVERAGE TIME TO MATURITY OF THE SECURITIES CASH FLOW WHEN THE WEIGHTS ARE THE RELATIVE PRESENT VALUE OF THE CASH FLOWS. |
|
Definition
|
|
Term
| CONSIDER TWO $1000 FACE VALUE BONDS. bOND Y HAS A MATURITY OF 10 YEARS AND IS A ZERO COUPON BOND. BOND X HAS A COUPON RATE OF 10 PERCENT AND ALSO MATURES IN 10 YEARS. WHILE BOTH BONDS HAVE MATURITIES OF 10 YEARS, WITH BOND X SOME MONEY IS RETURNED BEFORE MATURITY. PRESUMABLY, THOSE COUPON PAYMENTS COULD BE REINVESTED AT THE HIGER MARKET INTEREST RATE. WIHT BOND Y, NOTHING IS RETURNED UNTIL FINAL MATURITY. WOULD BOND X OR BOND Y BE MORE ADVERSLY EFFECTED BY AN INCREASE IN INTEREST RATES? |
|
Definition
| BOND Y IS EXPECTED TO BE MORE ADVERSLY AFFECTED BY AN INCREASE IN INTEREST RATES EVEN THOUGH THE BONDS HAVE THE SAME MATURITY. DURATION WOULD ADJUST FOR THE FACT THAT BOND X GETS SOOME MONEY BACK BEFORE MATURITY. BOND X WOULD HAVE A LOWER DURATION THAN BOND Y. |
|
|
Term
RULES OF DURATION:
FOR A COUPON BOND, DURATION IS MORE THAN MATURITY. TRUE OR FALSE. |
|
Definition
| FALSE. FOR A COUPON BOND, DURATION IS LESS THAN MATURITY. |
|
|
Term
DURATION RULES
TRUE OR FALSE.
FOR A ZERO COUPON BOND, DURATION EQUALS MATURITY. |
|
Definition
|
|
Term
DURATION RULES.
TRUE OR FALSE.
DURATION AND MATURITY ARE INVERSELY RELATED. |
|
Definition
| FALSE. THEY ARE POSITIVELY RELATED. |
|
|
Term
DURATION RULES
TRUE OR FALSE.
DURATION AND COUPON ARE INVERSELY RELATED. |
|
Definition
|
|
Term
| DURATION AND YIELD ARE INVERSELY RELATED. TRUE OR FALSE. |
|
Definition
|
|
Term
| DURATION AND MATURITY ARE POSITIVELY RELATED. DURATION AND THESE TWO ITEMS ARE INVERSLY RELATED. |
|
Definition
|
|
Term
TRUE OR FALSE.
THE IMPORTANCE OF DURATION IS THAT IT GIVES US A MORE ACCURATE MEASURE OF HOW SENSITIVE A BON'D PRICE IS TO CHANGES IN INTEREST RATES. |
|
Definition
|
|
Term
| WHAT IS THE EQUATION FOR DURATION? |
|
Definition
| PERCENT CHANGE IN BOND PRICE = NEGATIVE MODIFIED DURATION MULTIPLIED BY YIELD CHANGE X 100. |
|
|
Term
ASSUME THAT A BOND HAS THE FOLLOWING CHARACTERISTICS:
DURATION = 10.87
YIELD TO MATURITY = 9%
SEMIANNUAL COMPOUNDING
THEN FROM EQUATION, THE MODIFIED DURATION WOULD EQUAL WHAT? |
|
Definition
10.4
=10.87 / [1 + (.09/2)] |
|
|
Term
| AN INVESTOR CAN USE THIS AS A TOOL FOR ACTIVELY MANAGING FIXED INCOME SECURITIES BASED ON FORECASTING INTEREST RATES. |
|
Definition
|
|
Term
| IF AN INVESTOR EXPECTS INTEREST RATES TO INCREASE, THE INVESTOR WOULD SEEK TO DO THIS TO DURATION? |
|
Definition
|
|
Term
| IF AN INVESTOR EXPECTS INTEREST RATES TO DECREASE, THE INVESTOR WOULD SEEK TO DO THIS TO DURATION. |
|
Definition
|
|
Term
| WHAT DOES IT MEAN TO LADDER FIXED INCOME SECURITIES? |
|
Definition
| TO CONTINUALLY REINVEST FUNDS AS THE SECURITIES MATURE. |
|
|
Term
BONDS THAT CAN BE TRADED IN FRO STOCK ARE KNOWN AS:
A. CONVERTIBE
B. CUMULATIVE
C. PREFERRED
D. CALLABLE |
|
Definition
|
|
Term
STOCKS THAT CARRY A STATED, TYPICALLY FIXED, DIVIDENT RATE ARE KNOWN AS:
A. COMMON STOCK
B. PREFERRED STOCK
C. IPO STOCK
D. CONVERTIBLE STOCK |
|
Definition
|
|
Term
THE COMPUTERIZED STOCK TRADING SYSTEM CONNECTING BROKERS IS THE:
A. NASDAQ
B. NYSE
C. AMEX
D. OTS |
|
Definition
|
|
Term
A STOCK PURCHASE ORDER TO BUY A STOCK AT THE PREVAILING PRICE, WHATEVER THAT PRICE MAY BE IS A:
A. LIMIT ORDER
B. STOP ORDER.
C. GOOD TIL CANCELLED ORDER.
D. MARKET ORDER. |
|
Definition
|
|
Term
RELYING ON PAST MOVEMENTS OF A STOCK'S PRICE TO PREDICT FUTURE PRICE MOVEMENTS IS KNOWN AS:
A. TECHNICAL ANALYSIS
B. FUNDAMENTAL ANALSYS
C. VALUE INVESTING
D. TOP DOWN INVESTING. |
|
Definition
| A. TECHNICAL ANALYSIS. RELIES ON EXAMING PAST PRICE MOVEMENTS TO PREDICT FUTURE PRICE MOVEMENTS. |
|
|
Term
IF INVESTORS CANNOT CONSISTENTLY PRODUCE ABNORMALLY HIGH STOCK RETURNS USING HISTORICAL DADTA, THEN THE MARKET IS SAID TO BE:
A. WEAK FORM EFFICIENT
B. SEMI STRONG FROM EFFICIENT
C. STRONG FORM EFFICIENT
D. INEFFICIENT. |
|
Definition
| A. WEAK FORM EFFICIENT. IF ALL HISTORICAL INFORMATION IS FACTORING INO THE STOCK'S PRICE AND THE INVESTOR CANNOT OBTAIN ABNORMALLY HIGH RETURNS, THE MARKET IS WEAK FORM EFFICIENT. |
|
|
Term
| THE RULES GOVERNING THE ACTIONS OF A TRUSTEE WILL BE DETERMINED BY WHAT TWO ENTITIES? |
|
Definition
STATE LAW
THE TRUST DOCUMENT |
|
|
Term
| WHAT IS THE PURPOSE OF THE UNIFORM TRUST CODE? |
|
Definition
| AN ATTEMPT TO CODIFY AND PROVIDE CONSISTENCY TO THE LAW OF TRUSTS ACROSS THE ENACTING JURISDICTIONS. |
|
|
Term
| HOW MANY STATES HAVE ENACTED THE UNIFORM TRUST COST? |
|
Definition
| 23 AND THE DISTRICT OF COLUMBIA |
|
|
Term
| TRUE OR FALSE. A PERSON WHO OWNS ALL OF THE RIGHTS AND INTERESTS TO A PARTICULAR ITEM OF REAL OR PERSONAL PROPERTY IS SAID TO HOLD LEGAL AND EQUITABLE TITLE TO THAT PROPERTY. |
|
Definition
|
|
Term
| WHAT TYPE OF TITLE MEANS THE INDIVIDUAL IS THE OWNER OF PUBLIC RECORD? |
|
Definition
|
|
Term
| WHAT TYPE OF TITLE MEANS THAT THE OWNER IS ENTITLED TO THE USE AND ENJOYMENT OF THE PROPERTY WITHIIN THE LIMITS ESTABLISHED BY LAW? |
|
Definition
|
|
Term
| IN A TRUST, WHAT TYPES OF TITLE ARE SPLIT? |
|
Definition
| LEGAL AND EQUITABLLE TITLE |
|
|
Term
| IN A TRUST, THE TRUST OWNS WHAT TYPE OF TITLE TO THE TRUST PROPERTY AND THE BENEFICIARIES OWN WHAT TYPE OF TITLE>? |
|
Definition
TRUSTEE: LEGAL TITLE
BENEFICIARIES: EQUITABLE TITLE |
|
|
Term
| WHAT THREE TERMS COULD BE USED TO IDENTIFY THE PROPERTY HELD IN TRUST? |
|
Definition
1. CORPUS
2. RES
3. PRINCIPAL |
|
|
Term
| UNDER THE STATUTE OF FRAUDS, THE TRUST MUST BE WRITTEN OR PREPARED ORALLY? |
|
Definition
| WRITTEN DUE TO THE REAL ESTATE. |
|
|
Term
|
Definition
|
|
Term
| WHAT IS THE DIFFERENCE BETWEEN A DECLARATION OF TRUST AND A TRUST AGREEMENT. |
|
Definition
| WITH A DECLARATION OF TRUST, THE SETTLOR DECLAREES THAT HE OR SHE IS ACTING AS TRUSTEE OF CERTAIN PROPERTY FOR THE BENEFIT OF SPECIFIED TRUST BENEFICIARIES. WITH A TRUST AGREEMENT, THE SETTLOR TRANSFERS PROPERTY TO A THIRD PERSON ON THE CONDITION THAT THE TRANSFEREE WILL HOLD THE PROPERTY AS TRUSTEE FOR THE BENEFIT OF TRUST BENEFICIARIES. |
|
|
Term
| HOW MANY STATES HAVE ADOPTED THE UNIFORM POWER OF ATTORNEY ACT? |
|
Definition
|
|
Term
| WHAT ACT STATES THAT A SETTLOR'S AGENT UNDER A POWER OF ATTORNEY MAY HAVE THE AUTHORITY TO CREATE A TRUST ON THE SETTLOR'S BEHALF F THE INSTRUMENT APPOINTED THE AGENT EXPRESSLY GIVES THE AGENT THAT AUTHORITY. |
|
Definition
| THE UNIFORM POWER OF ATTORNEY ACT. |
|
|
Term
|
Definition
| TRUSTS THAT ARISE BY OPERATION OF LAW AND IMPOSED BY COURTS. |
|
|
Term
| WHAT IS THE DIFFERENCE BETWEEN AN IMPLIED TRUST AND AN EXPRESS TRUST. |
|
Definition
| AN EXPRESS TRUST IS FORMED BY A GRANTOR/SETTLOR AND AN IMPLIED TRUST IS FORMED OR IMPOSED BY THE COURT. |
|
|
Term
| WHAT IS A CONSTRUCTIVE TRUST? |
|
Definition
| FRAUD RECTIFYING TRUST. IT IS A REMEDY AVAILABLE FOR USE BY A COURT OF EQUITY WHERE THE COURT FINDS THAT A PERSON HAS OBTAINED PROPERTY THROUGH A WRONGFUL ACT OR HAS OTHERWISE RECEIVED PROPERTY TO WHICH HE IS NOT ENTITLED. THE COURT REQUIRES THAT THE WRONGDOER HOLDS THE PROPERTY IN TRUST FOR THE PERSONS RIGHTFULLY ENTITLED TO THE PROPERTY. |
|
|
Term
| WHAT IS A RESULTING TRUST? |
|
Definition
| AN INTENT ENFORCING TRUST. MAY BE IMPOSED BY A COURT WHEN THE COURT DETERMINES THAT PROPERTY WAS TRANSFERRED TO ONE PERSON WITH THE INTENT THAT IT BE HELD IN TRUST FOR ANOTHER. BASED UPON THE PRESUMED OR UNEXPRESSED INTENT OF THE TRANSFEROR. |
|
|
Term
| WHAT IS THE DIFFERENCE BETWEEN A RESULTING TRUST AND AN EXPRESS TRUST? |
|
Definition
| A CONSTRUCTIVE TRUST IS A FRAUD RECTIFYING TRUST AND A RESULTING TRUST IS A INTENT ENFORCING TRUST. |
|
|
Term
| TRUE OR FALSE. IN SOME STATES, EITHER BY STATUTE OR BY THE POWER OF SUBSTITUTED JUDGEMENT, A COURT MAY CREATE A TRUST ON BEHALF OF AN INCAPACITATED PERSON. |
|
Definition
|
|
Term
| WHAT ARE THE FIVE COMMON LAW REQUIREMENTS TO CREATE A VALID EXPRESS TRUST? |
|
Definition
1. INTENT BY LEGALLY COMPETENT SETTLOR.
2. PRESENT ACT OF DECLARATION OR TRANSFER BY THE SETTLOR.
3. EXISTENCE OF TRUST CORPUS.
4. NAMING TRUSTEE WITH DUTIES TO PERFORM
5. THE IDENTIFICATION OF DEFINITE AND IDENTIFIABLE BENEFICIARIES. |
|
|
Term
| WHAT ARE PRECATORY WORDS? |
|
Definition
| TO EXPRESS INTENT OR DESIRE IN A TRUST DOCUMENT. |
|
|
Term
| TRUE OR FALSE. CONCERNING TRUST LAW, THE EXPECTANCY, SUCH AN ANTICIPATED INHERITANCE, IS SUFFICIENT TO BE QUALIFIED AS TRUST RES. |
|
Definition
FALSE.
IT IS INSUFFICIENT. THE CORPUS OF THE TRUST MAY CONSIST OF ANY TRANSFERABLE PROPERTY INTEREST, WHETHER REAL OR PERSONAL, VESTED OR CONTINENT, PRESENT OR FUTURE. |
|
|
Term
|
Definition
| DESIGNATED PROPERTY MAY PASS BY OPERATION OF THE SETTLOR'S WILL TO A SETTLOR'S LIVING TRUST AS IT EXISTS ON THE DATE OF THE SETTLOR'S DEATH. |
|
|
Term
| ANN CREATES A TRSUT UNDER WHICH SHE DECLARES THAT ANY INTEREST IN REAL PROPERTY THAT ANN RECEIVES UNDER THE WILL OF HER AUNT SUE IS HELD IN TRUST FOR THE BENEFIT OF HER NIECE, MAGGIE. HAS ANN CREATED AN ENFORCEABLE TRUST? |
|
Definition
| NO; BECAUSE AN EXPECTANCY UNDER A WILL IS NOT A TRANSFERABLE PROPERTY INTEREST. |
|
|
Term
TRUE OR FALSE.
IF NO TRUSTEE IS SERVING, A COURT WITH JURISDICTION OVER THE TRUST WILL APPOINT A TRUSTEE RATHER THAN LET THE TRUST FAIL. |
|
Definition
|
|
Term
TRUE OR FALSE
IN MOST STATES, THE SETTLOR MAY BE THE SOLE CURRENT BENEFICIARY OF THE TRUST AS LONG AS THERE IS AT LEAST ONE REMAINDER BENEFICIARY THAT IS NOT THE SETTLOR. |
|
Definition
|
|
Term
TRUE OR FALSE.
IF THETRUST FAILS FOR WANT OF ANY BENEFICIARIES, MOST COURTS WOULD FIND THAT A CONSTRUCTIVE TRUST HAS BEEN CREATED IN FAVOR OF THE SETTLOR, IF LIVIN, OR THE SETTLOR'S ESTATE, IF DECEASED. |
|
Definition
| FALSE. IT WOULD BE A RESULTING TRUST. |
|
|
Term
TRUE OR FALSE.
WITH A TRUST FOR VALID CHARITABLE PURPOSES, IF THE IDENTITY OF THE BENEFICIARIES IS UNCERTAIN, THE COURT MAY SELECT BENEFICIARIES FOR THE TRUST. |
|
Definition
|
|
Term
| CONCERNING TRUST CREATION, WHAT IS THE DEAD HAND CONTROL? |
|
Definition
| CREATING A TRUST TO HAVE THE ABILITY TO CONTROL USE OF WEALTH AFTER DEATH. |
|
|
Term
| WHAT TYPE OF TRUST IS STRUCTURED SO THAT ASSETS TO NOT PREVENT A BENEFICIARY FROM RECEIVING CERTAIN FORMS OF GOVERNMENTAL ASSISTANCE. |
|
Definition
|
|
Term
TRUE OR FALSE.
UNDER THE UNIFORM POWER OF ATTORNEY ACT, A BENEFICIARY'S AGENT MAY DISCLAIM AN INTEREST EVEN IF THE BENEFICIARY IS NOT DISABLED, PROVIDED THAT THE TRUST INSTRUMENT APPOINTING THE AGENT EXPRESSLY GIVES THE AGENT THAT AUTHORITY. |
|
Definition
|
|
Term
TRUE OR FALSE
A MINOR MAY DISCLAIM AN INHERITANCE. |
|
Definition
FALSE
A MINOR MAY DISCLAIM A BENEFICIAL INTEREST WITHIN A REASONABLE TIME OF ATTAINING THE AGE OF MAJORITY. |
|
|
Term
| WHAT ARE THE THREE MOST COMMON TYPES OF REVOCABLE TRUSTS? |
|
Definition
1. LIFE INSURANCE TRUSTS.
2. LIVING TRUSTS
3. TESTAMENTARY TRUSTS PRIOR TO THE DEATH OF THE TESTATOR. |
|
|
Term
| WHEN A WILL IS OFFERED FOR PROBATE, THE WILL AND THE ACCOUNTING FILED BY THE EXECUTOR BECOME MATTERS OF PUBLIC RECORD. TAKING THIS INTO ACCOUNT, WHY WOULD A GRANTOR REFER TO USE A TRUST TO DISPOSE OF HIS/HER ASSETS AFTER DEATH? |
|
Definition
| THE PROVISIONS AND ASSETS OF A TRUST WILL NOT BE MADE PUBLIC OR REQUIRED TO BE DISCLOSED TO A PROBATE COURT. IT CAN THEREFORE PROVIDE A MEASURE OF PRIVACY NOT AVAILABLE TO PURELY PROBATE PROVISIONS BY WILL. |
|
|
Term
| WHAT IS A REVOCABLE LIFE INSURANCE TRUST? |
|
Definition
| THE TRUSTEE IS DESIGNATED AS TEH RECIPIENT OF LIFE INSURANCE PROCEEDS PAYABLE UPON THE SETTLOR'S DEATH. THE TRUST REMAINS UNFUNDED DURING THE LIFE OF THE GRANTOR. |
|
|
Term
| WHAT IS A TESTAMENTARY TRUST? |
|
Definition
| A TRUST CREATED UNDER WILL. |
|
|
Term
| WHAT IS THE PRIMARY DISADVANTAGE OF A TESTAMENTARY TRUST? |
|
Definition
| THE TRUST PROPERTY ACTUALLY PASSES TO THE TRUST CREATED IN THE TESTATORY'S WILL, THEREBY SUBJECTING THOSE ASSETS TO PROBATE AND MAKING THE CONTENTS OF THE TRUST A MATTER OF PUBLIC RECORD. |
|
|
Term
| WHAT TYPE OF TRUST CANNOT BE AMENDED, MODIFIED, OR REVOKED ABSENT A COURT ORDER? |
|
Definition
|
|
Term
| WHAT ARE TWO PRIMARY REASONS FOR THE CREATION OF AN IRREVOCABLE TRUST? |
|
Definition
1. VEHICLE TO COMPLETE A GIFT SHORT OF OUTRIGHT TRANSFER TO THE DONEE.
2. TRANSFER TAX SAVINGS AS A RESULT OF THE COMPLETED GIFT. |
|
|
Term
| CONCERNING THE CORPUS OF IRREVOCABLE TRUSTS, THE VALUE OF THE GIFT AT THE TIME OF THE TRANSFER IS SUBJECT TO GIFT TAX, WILL THE APPRECIATION AND INCOME IN VALUE AFTER THE DATE OF THE TRANSFER ALSO BE SUBJECT TO GIFT TAX? |
|
Definition
|
|
Term
| WHAT IS THE GIFT TAX EXLUSION AMOUNT IN 2011. |
|
Definition
|
|
Term
TRUE OR FALSE.
IF A GIFT IS PAID UPON THE CREATION OF AN IRREVOCABLE TRUST, THEAMOUNT OF GIFT TAX PAID IS EXCLUDED FROM THE SETTLOR'S ESTATE AT DEATH, UNLESS THE SETTLOR FAILRS TO SURVIVE THE PAYMENT OF THE TAX BY AT LEAST THREE YEARS. |
|
Definition
|
|
Term
| WHAT IS THE UNIFIED CREDIT AMOUNT FOR GIFT AND ESTATE TAX PURPOSES? |
|
Definition
|
|
Term
| WHAT IS THE HIGHEST ESTATE AND GIFT TAX RATE IN ACCORDANCE WITH THE TAX RELIEF, UNEMPLOYMENT INSURANCE REAUTHORIZATION AND JOB CREATION ACT OF 201O? |
|
Definition
|
|
Term
| WHAT IS AN INTER VIVOS TRUST? |
|
Definition
| A TRUST CREATED AND BECOMES OPERATIVE DURING THE LIFETIME OF THE GRANTOR. |
|
|
Term
| WHAT IS THE DIFFERENCE BETWEEN AN INTER VIVOS TRUST AND A TESTAMENTARY TRUST. |
|
Definition
| A TESTAMENTARY TRUST IS CREATED AT DEATH OF THE GRANTOR BY WILL. AN INTER VIVOS TRUST IS CREATED AND BECOMES OPERATIVE DURING THE LIFETIME OF THE GRANTOR. |
|
|
Term
| CONCERNING TRUST CREATION, WHAT ARE THE PRIMARY COMPONENTS OF AN A-B PLAN? |
|
Definition
| THE UNIFIED CREDIT SHELTER AND MARITAL DEDUCTION TRUSTS ARE PRIMARY COMPOENTS OF THE A-B ESTATE PLAN. |
|
|
Term
| CONCERNING TRUST CREATION, IN THE A-B PLAN, THE TRUST ASSETS ARE TYPICALLY DIVIDED BETWEEN THE CREDIT SHELTER TRUST AND THE MARITAL TRUST BY A FORMULA DESIGNED TO TAKE MAXIMUM ADVANTAGE OF THIS CREDIT. |
|
Definition
| THE UNIFIED CREDIT AMOUNT, THAT IS, THE AMOUNT THE DECEDENT MAY PASS FREE OF ESTATE TAX. |
|
|
Term
TRUE OR FALSE.
CONCERNING TRUST CREATION, THE ASSETS REMAINING IN THE MARITAL TRUST AT THE SURVIVING SPOUSE'S DEATH ARE INCLUDED IN AND TAXED AS A PART OF THE SURVIVING SPOUSE'S ESTATE. |
|
Definition
|
|
Term
TRUE OR FALSE.
IN A CREDIT SHELTER TRUST, DURING THE LIFE OF THE SURVIVING SPOUSE, THE CREDIT SHELTER TRUST MAY PROVIDE FOR MANDATORY DISTRIBUTIONS OF INCOME OR IT MAY GIVE THE TRUSTEE DISCRETION WHEN DETERMINING HOW MUCH, IF ANY, OF THE TRUST'S INCOME AND PRINCIPAL IS TO BE DISTRIBUTED. |
|
Definition
|
|
Term
| WHAT IS A SPRINKLING OR 'SPRAY' TRUST? |
|
Definition
| GIVES THE TRUSTEE THE RIGHT TO RETAIN INCOME IN THE TRUST OR TO DIVIDE INCOME AMONG THE SETTLOR'S SPOUSE AND DESCENDANTS AS THE TRUSTEE DETERMINES ADVISABLE FOR THEIR HEALTH,S UPPORT IN REASONABLE COMFORT AND EDUCATION. |
|
|
Term
| WHAT ARE THREE MONETARY POLICIES THE FEDERAL RESERVE USES TO TINKER WITHTHE MACO ECONOMY? |
|
Definition
1. DISCOUNT RATE
2. BANK RESERVES
3. OPEN MARKET OPERATIONS. |
|
|
Term
| THIS IS THE RATE THAT THE FED CHARGES BANKS TO BORROW MONEY FROM THE FED. |
|
Definition
|
|
Term
TRUE OR FALSE.
BY LOWERING THE DISCOUNT RATE, IT ALLOWS BANKS TO BRORWO CHEAPER DOLLARS AND TURN AROUND AND LEND THE MONEY TO YOU AND ME AT A HIGHER RATE. |
|
Definition
| TRUE. WHEN WE BORROW MONEY, WE ARE PURCHASING HOMES, CARS OR RAISING CAPPITAL TO RUN A BUSINESS. ALL OF THESE ACTIONS WILL SPUR THE ECONOMY UPWARD-OR AT LEAST IN THEORY. |
|
|
Term
TRUE OR FALSE.
IF THE FEDERAL RESERVE RAISES THE DISCOUNT RATE, THEN BANKS HAVE TO PAY MORE MONEY TO BORROW FROM THE FEDERAL RESEVER AND IN TURN CHARGES US MORE TO BORROW MONEY. |
|
Definition
TRUE.
IF IT COSTS MORE TO BRORROW MONEY THEN WE ARE LESS LIKELY TO BUY CARS, HOMES OR INVEST IN NEW CAPITALFOR BUSINESSES. THE ECONOMY WILL SLOW DOWN.Q |
|
|
Term
| CONCERNING THE FEDERAL RESERVE, WHAT ARE BANK RESERVES ? |
|
Definition
| BANKS ARE REQUIRED BY LAW TO HAVE A PERCENTAGE OF CASH ON HAND IN RELATION TO THE LOANS THAT THEY CAN GIVE. FOR EASE OF CONVERSATION, SAY THE AMOUNT IS 10%. SO FOR EVERY $1mm IN LOANS A BANK HAS OUTSTANDING THEN THEY MUST HAVE $100,000 IN RESERVE [CASH AND CASH EQUIVALENTS] AT THE BANK. FOR EXAMPLE, YOU DEPOSIT YOUR WEEKLY PAYCHECK OF $10,000 INTO YOUR CHECKING ACCOUNT AT YOUR LOCAL WELLS FARGO BANK. THE BANK NOW HAS RESERVES OF $10,000 AND CAN GIVE THE GUY BEHIND YOU IN LINE A $100K LOAN. |
|
|
Term
| THE FED RESERVES THE RIGHT TO CHANGE THE PERCENTAGE OF THE BANK RESERVES. WHAT IS THE BENEFIT IF THE FED LOWERS THE BANK RESERVES AMOUNT? |
|
Definition
| THE BANKS CAN LEND MORE MONEY TO YOU AND ME IN ORDER TO SPEND AND INCREASE THE ECONOMY. |
|
|
Term
| THE FED RESERVES THE RIGHT TO CHANGE THE PERCENTAGE OF THE BANK RESERVES. WHAT IS THE BENEFIT IF THE FED INCREASES THE RESERVES? |
|
Definition
| THE BANK CAN LEND LESS WHICH IN TURN MEANS THAT THE ECONOMY WILL GROW LESS. |
|
|
Term
| TRUE OR FALSE. THE FED CAN BUY AND SELL TREASURY EQUITIES. THIS IS CALLED OPEN MARKET OPERATIONS. |
|
Definition
|
|
Term
| THE FED CAN BUY AND SELL TREASURY SECURITIES. THESE SECURITIES ARE USUALLY SHORT TERM LOANS [LESS THAN 9 MONTHS] IN THE FORM OF WHAT TYPE OF FIXED INCOME SECURITY? |
|
Definition
|
|
Term
| TRUE OR FALSE. WHEN THE FED SELLS T-BILLS, PEOPLE PURCHASE THE SECURITY AND THEIR MONEY IS LOCKED UP FOR SEVERAL MONTHS. BECAUSE OF THIS, THE OVERALL ECONOMY SLOWS DOWN BECAUSE WE CANNOT PURCHASE CARS, HOMES, DURABLE GOODS, ETC. |
|
Definition
|
|
Term
| TRUE OR FALSE.WHEN THE FED RESERVE BUYS T-BILLS, THEN THERE IS MORE MONEY IN THE POCKETS OF PEOPLE LIKE YOU AND ME TO PURCHASE CARS, HOMES AND DURABLE GOODS AND TO INVEST IN BUSINESS CAPITAL. |
|
Definition
|
|
Term
TRUE OR FALSE.
THE GOAL OF THE FED IS TO HAVE AN EVER INCREASING ECONOMY AND INFLATION RATE. |
|
Definition
| FALSE. THE GOAL OF THE FED IS TO HAVE AN EVER INCREASING ECONOMY BUT TO LIMIT THE EFFECTS OF INFLATION. |
|
|
Term
|
Definition
| RECESSION MINGLED WITH HIGH INFLATION. |
|
|
Term
|
Definition
| Decanting is the term generally used to describe the distribution of trust property to another trust pursuant to the trustee’s discretionary authority to make distributions to, or for the benefit of, one or more beneficiaries |
|
|
Term
| WHAT IS THE THEORY OF DECANTING? |
|
Definition
| The rationale that underlies decanting is that if a trustee has the discretionary power to distribute property to, or for the benefit of, one or more current beneficiaries, then the trustee, in effect, has a special power of appointment that should enable the trustee to distribute the property to a second trust for the benefit of such beneficiaries. |
|
|
Term
| WHAT WAS THE PURPOSE OF THE BRETTON WOODS SYSTEM? |
|
Definition
| the Bretton Woods system created an international basis for exchanging one currency for another |
|
|
Term
| THE BRETTON WOODS SYSTEM LED TO THE CREATION OF WHAT TWO ENTITIES? |
|
Definition
| It also led to the creation of the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development, now known as the World Bank |
|
|
Term
| WHAT WAS THE ORIGINAL PURPOSE OF THE INTERNATIONAL MONETARY FUND? |
|
Definition
| designed to monitor exchange rates and lend reserve currencies to nations with trade deficits, |
|
|
Term
| WHAT WAS THE PURPOSE OF THE WORLD BANK? |
|
Definition
| PROVIDE UNDERDEVELOPED NATIONS WITH NEEDED CAPITAL. |
|
|
Term
| IN THE BRETTON WOODS SYSTEM, THE MEMBER STATES AGREED TO FIX THEIR EXCHANGE RATES BY TYING THEIR CURRENCIES TO WHAT? |
|
Definition
|
|
Term
| WHEN DID THE BRETTON WOODS SYSTEM COLLAPSE? |
|
Definition
| 1971. WHEN PRESIDENT RICHARD NIXON SEVERED THE LINK BETWEEN THE DOLLAR AND GOLD. BY 1973, MOST MAJOR WORLD ECONOMIES HAD ALLOWED THEIR CURRENCIES TO FLOAT FREELY AGAINST THE DOLLAR. |
|
|
Term
THE MONEY MARKET IS THE MARKET FOR:
1. SHORT TERM DEBT
2. LONG TERM DEBT
3. CORPORATE BONDS
4. TREASUREY BONDS |
|
Definition
| A. SHORT TERM DEBT [TYPICALLY MATURITIES LESS THAN 12 MONTHS] |
|
|
Term
NONDIVERSIFIABLE RISK IS ALSO KNOWN AS
A. UNSYSTEMATIC
B. SYSTEMATIC
C. FIRM SPECIFIC
D. STANDARD DEVIATION |
|
Definition
| B. SYSTEMATIC [GENERAL MARKET RISK AND CANNOT BE DIVERSIFIED AWAY] |
|
|
Term
FUNDAMENTAL ANALYSIS IS CONCERNED WITH:
A. DETERMINING THE PAST PERFORMANCE OF A STOCK
B. DETERMINING THE MARKET PRICE OF A STOCK
C. DETERMINING THE INSTRINSIC, OR TRUST, VALUE OF A STOCK
D. ESTIMATING A STOCK'S EXPECTED RETURN BASED ON PAST PRICE MOVEMENTS. |
|
Definition
| C. DETERMINING THE INSTRINSIC, TRUE, VALUE OF A STOCK IN ORDER TO COMPARE IT TO THE CURRENT SELLING PRICE. |
|
|
Term
THE TOP DOWN APPROACH DIFFERS FROM THE BOTTOM UP APPRAOCH IN THAT THE TOP DOWN APPROACH:
A. ANALYZES STOCKS WITHIN A SPECIFIC INDUSTRY FIRST.
B. ANALYZES THE OVERALL MARKET FIRST.
C. ASSUMES THE MARKET IS EFFICIENT
D. FOCUSES ON HISTORICAL PERFORMANCE. |
|
Definition
| B. ANALYZES THE OVERALL MARKET FIRST. |
|
|
Term
BUYING AND SELLING STOCKS AND BONDS TO KEEP ASSET ALLOCATION WITHIN A SPECIFIED RANGE IS CALLED:
A. CONSTANT MIX STRATEGY
B. CONSTANT PROPROTIONS PORTFOLIO INSURANCE.
C. PASSIVE MANAGEMENT
D. LADDERING. |
|
Definition
| A. CONSTANT MIX STRATEGY. |
|
|
Term
IN TERMS OF THE CAPM, WHICH OF THE FOLLOWING IS TRUE.
A. BETA LESS THAN 1.0 IS AN AGGRESSIVE STOCK.
B. BETA GREATER THAN 1 IS A DEFENSIVE STOCK
C. BETA EQUAL TO O IS MARKET NUETRAL
D. BETA GREATER THAN 1 IS AN AGGRESSIVE STOCK. |
|
Definition
| D. BETA GREATER THAN 1 IS AN AGGRESSIVE STOCK. IF IT EXCEEDS ONE IT IS MORE RISKY THAN THE MARKET. |
|
|
Term
FOR TWO OTHERWISE IDENTICAL BONDS, IT GENERALLY HOLDS TRUE THAT:
A. CORPORATE BOND YIELDS ARE LESS THAN TREASUREY BOND YIELDS.
B. TREASURY BOND YIELDS ARE LESS THAN CORPORATE BOND YIELDS.
C. CORPORATE BOND YIELDS EQUAL TREASURY BOND YIELDS.
D. CORPORATE BOND YIELDS MAY BE HIGHER OR LOWER THAN TREASURY BOND YIELDS AND THERE IS NO GENERAL RELATIONSHIP. |
|
Definition
| B. TREASURY BOND YIELDS ARE LESS THAN CORPORATE BOND YIELDS BECUASE T-BILLS ARE RISK FREE AND STATE INCOME TAX FREE |
|
|
Term
THE EQUATION V0 = D1 (K-G) ASSUMES THIS?
A. NO DIVIDENT GROWTH.
B. CONSTANT DIVIDENDS
C. VARIABLE DIVIDEND GROWTH.
D. CONSTANT DIVIDEND GROWTH. |
|
Definition
| D. CONSTANT DIVIDENT GROWTH. |
|
|
Term
ACCORDING TO THE CAPM, A STOCK WITH A BETA OF 1 SHOULD HAVE AN EXPECTED RETURN OF THIS:
A. EQUAL TO ZERO
B. EQUAL TO THE EXPECTED MARKET RETURN
C. GREATER THAN THE EXPECTED MARKET RETURN
D. LESS THAN THE EXPECTED RETURN |
|
Definition
B. EQUAL TO THE EXPECTED MARKET RETURN.
NUETRAL...NOT ZERO. |
|
|
Term
IF AN INVESTOR WAS UNCERTAIN ABOUT THE FUTURE DIRECTION OF INTEREST RATE MOVEMENTS, THE INVESTOR MOST LIKELY WOULD:
A. LADDER BOND DURATIONS
B. INCREASE BOND MATURITIES
C. INCREASE THE PORTFOLIOS DURATION
D. LOWER THE PORTFOLIO'S DURATION. |
|
Definition
| A. LADDER BOND DURATIONS. |
|
|
Term
A COMPANY MOST LIKELY WILL CALL BONDS [ASSUMING THE BONDS ARE CALLABLE] IT HAD PREVIOUSLY ISSUED IF:
A. INTEREST RATES RISE.
B. INTEREST RATES FALL
C. INTEREST RATES REMAIN CONSTANT
D. THE COMPANY EXPERIENCES DIFFICULT FINANCIAL CONDITIONS. |
|
Definition
| B. WHEN INTEREST RATES FALL; COMPANIES ARE MOST LIKELY TO CALL BONDS IF INTEREST RATES FALL SO THEY CAN REFINANCE AT THE NOW LOWER RATE. |
|
|
Term
IF THE MARKET ANTICIPATES A FIRM'S EARNING GROWTH TO BE 10%, BUT THE FIRM REPORTS EARNINGS GROWTH OF 9%:
A. THE STOCK PRICES PROBABLY WILL INCREASE.
B. THE STOCK PRICES WILL PROBABLY DECLINE
C. BETA EQUALS ZERO
D. THE STOCK WILL GET THE SAME RETURN AS THE OVERALL MARKET |
|
Definition
| B. THE STOCK PRICE PROBABLY WILL DECLINE OVER TIME BECAUSE THE LOWER THAN EXPECTED EARNINGS. |
|
|
Term
IF THE STOCK MARKET IS EFFICIENT:
A. STOCK PRICES ADJUST SLOWLY TO NEW INFORMATION.
B. STOCK PRICES ADJUST QUICKLY TO NEW INFORMATION
C. INVESTORS CAN BEAT THE MARKET
D. ANALYSTS ARE NOT NEEDED. |
|
Definition
| B. STOCK PRICES ADJUST QUICKLY TO THE NEW INFORMATION. ASSET PRICES ADJUST QUICKLY TO REFLECT ALL AVAILABLE INFORMATION. |
|
|
Term
DURATION...
A. EXCEEDS MATURITY FOR A ZERO COUPON BOND.
B. EQUALS MATURITY FOR A ZERO COUPON BOND.
C. IS LESS THAN MATURITY FOR A ZERO COUPON BOND.
D. IS DIRECTLY [POSITIVELY] RELATED TO THE BOND'S COUPON RATE. |
|
Definition
| B. EQUALS MATURITY FOR A ZERO COUPON BOND. DURATION AND MATURITY ARE EQUAL. |
|
|
Term
IF INVESTORS EXPECT INTEREST RATES TO INCREASE, THEY WILL:
A. LADDER BOND MATURITIES.
B. DECREASE DURATION
C. INCREASE DURATION
D. BUY ALL LONG TERM BONDS. |
|
Definition
| B. DECREASE DURATION. BECAUSE LONG TERM BONDS ARE ADVERSELY AFFECTED BY RISING INTEREST RATES, IF INVESTORS EXPECT INTEREST RATES TO RISE, THEY WILL DECREASE DURATION. |
|
|
Term
THE EFFICIENT MARKET HYPOTHESIS IMPLIES THAT:
A. PAST INFORMATION IS USEFUL IN ESTIMATING FUTURE RETURNS.
B. STOCK PRICES DO NOT RESPOND TO NEW INFORMATION.
C. STOCK PRICES REFLECT THE MOST CURRENT INFORMATION.
D. STOCK PRICES ARE INDEPENDENT OF BUSINESS CONDITIONS. |
|
Definition
| C. STOCK PRICES REFLECT THE MOST CURRENT INFORMATION. |
|
|
Term
AN INVESTOR CAN BEST REDUCE THE PORTFOLIO RISK BY ADDING ANOTHER SECURITY THAT:
A. IS FROM AN INDUSTRY NOT REPRESENTED IN THAT PORTFOLIO.
B. HAS A HIGH CORRELATION OF RETURNS WITH THE LARGEST SECURITIES IN THAT PORTFOLIO.
C. IS A HIGH QUALITY LONG TERM BOND
D. IS NEGATIVELY CORRELATED WITH SECURITIES IN THE PORTFOLIO. |
|
Definition
| D. IS NEGATIVELY CORRELATED WITH SECURITIES IN THE PORTFOLIO, THUS REDUCING THE RISK FO THE PORTFOLIO. |
|
|
Term
THE PORTFOLIO RISK THAT IS CAUSED BY CHANGES INT EH PRICES OF THE OVERALL MARKET IS CALLED:
A. DIVERSIFABLE RISK.
B. NONSYSTEMATIC RISK
C. LIQUIDITY RISK
D. SYSTEMATIC RISK |
|
Definition
d. SYSTEMATIC RISK
SYSTEMATIC RISK IS OVERALL MARKET RISK AND IS NON DIVERSIFIABLE. |
|
|
Term
INCLUDING INTERNATIONAL SECURITIES IN A PORTFOLIO OF EXISTING DOMESTIC STOCKS AND BONDS MOST LIKELY WOULD:
A. DECREASE DIVERSIFICATION
B. IMPROVE DIVERSIFICATION
C. INCREASE PORTFOLIO VOLATILITY
D. HAVE NO EFFECT ON THE PORTFOLIO. |
|
Definition
| B. IMPROVE DIVERSIFICATION. INTERNATIONAL SECURITIES ARE LIKELY TO HAVE LOWER CORRELATIONS WITH DOMESTIC SECURITIES. |
|
|
Term
A BONDHOLDER IS MOST WORRIED ABOUT INTEREST RATE RISK WHEN:
A. RATES RISE
B. RATES FALL
C. RATES REMAIN FLAT
D. THE BONDHOLDER IS EQUALLY CONCERNED UNDER ALL THREE CONDITIONS. |
|
Definition
|
|
Term
A MUTUAL FUND TRADED ON A STOCK EXCHANGE IS AN:
A. OPEN END FUND
B. CLOSELY END FUND
C. MONEY MARKET MUTUAL FUND
D. FRONT END LOAD FUND. |
|
Definition
|
|
Term
| THESE TYPES OF ASSETS ARE USED BY INVESTMENT PROFESSIONALS TO DESCRIBE INVESTMENTS THAT HAVE PATTERS OF EXPECTED RISK AND RETURN THAT ARE BELIEVED TO BE DIFFERENT THAN THOSE OF TRADITIONAL, LONG ONLY, MARKET TRADED SECURITIES [STOCKS AND BONDS] |
|
Definition
|
|
Term
| WHAT ARE FOUR CATEGORIES OF ALTERNATIVE ASSETS? |
|
Definition
A. HEDGE FUNDS
B. PRIVATE EQUITY
C. REAL ESTATE.
D. COMMODITIES |
|
|
Term
|
Definition
| PHYSICAL ITEMS SUCH AS GOLD BARS, CORN, WHEAT. |
|
|
Term
| WHAT IS THE DIFFERENCE BETWEEN AN ALTERNATIVE INSTRUMENT AND AN ALTERNATIVE FORMAT? |
|
Definition
| AN ALTERNATIVE INSTRUMENT IS AN OPTION, FOWARD, FUTURE OR OTHER DERIVATIVE. AN ALTERNATIVE FORMAT IS A COMMON TRUST FUND, LIMITED PARTNERSHIPS, ETFS AND ADRS. |
|
|
Term
| THIS IS A PRIVATE INVESTMENT PORTFOLIO THAT TYPICALLY IS STRUCTURED AS A LIMITED LIABILITY COMPANY OR PARTNERSHIP AND MANAGED BY A GENERAL PARTNER ON BEHALF OF LIMITED PARTNERS, WHO SUPPLY MOST OF THE INVESTMENT CAPITAL. |
|
Definition
|
|
Term
TRUE OR FALSE.
A HEDGE FUND IS A PRIVATE INVESTMENT PORTFOLIO TYPICALLY STRUCTURED AS A LIMITED LIABILITY COMPANY OR PARTNERSHIP. |
|
Definition
|
|
Term
| THE LIMITED INVESTOR BASES FOR A HEDGE FUND ARE: |
|
Definition
| ACCREDITED INVESTORS AND QUALIFIED PURCHASERS |
|
|
Term
TRUE OR FALSE
HEDGE FUNDS ARE NOT EXEMPT FROM SEC REGISTRATION REQUIREMENTS. |
|
Definition
| THEY ARE EXEMPT, THEREFORE THEY DO NOT BROADLY SOLICIT FUNDS FROM INVESTORS VIA PUBLIC OFFERINGS. |
|
|
Term
| CONCERNING HEDGE FUNDS, WHAT IS AN ACCREDITED INVESTOR? |
|
Definition
TEST 1: NATURAL PERSON
TEST 2: WORTH MORE THAN $1MM
TEST 3: EARNED MORE THAN $200K PER YEAR FOR EACH OF THE LAST TWO YEARS [$300K FOR MARRIED COUPLE]
TEST 4l WHO EXPECTS EARN THE SAME OR MORE THIS YEAR. |
|
|
Term
TRUE OR FALSE
MALCOM IS WORTH $5.3MM. HE CURRENTLY GENERATES APPROXIMATELY $80K PER YEAR. MALCOM IS CONSIDERED AN ACCCREDITED INVESTOR. |
|
Definition
| FALSE. MALCOM MUST BE WORTH MORE THAN $1MM AND HE MUST GENERATE MORE THAN $200K THIS YEAR, AND FOR THE LAST TWO YEARS. HE CAN BE CONSIDERED A QUALIFIED PURCHASER. |
|
|
Term
| HOW MANY PARTNERS CAN A LIMITED PARTNERSHIP ACCEPT [INCLUDING THE GENERAL PARTNER]? |
|
Definition
|
|
Term
| CONCERNING HEDGE FUNDS, WHAT IS A QUALIFIED PURCHASER. |
|
Definition
TEST 1: NATURAL PERSON
TEST 2: HAS INVESTIBLE WORTH OF $5MM OR MORE.
THERE IS NO INCOME TEST. |
|
|
Term
| A LIMITED PARTNERSHIP THAT ACCEPTS ONLY QUALIFIED PURCHASERS MAY HAVE A TOTAL OF HOW MANY PARTNERS [INCLUDING THE GENERAL PARTNER]? |
|
Definition
|
|
Term
TRUE OR FALSE.
HEDGE FUNDS ARE SUBJECT TO ANTI-FRAUD AND INSIDER TRADING RULES AND REGULATIONS. |
|
Definition
|
|
Term
| WHAT IS THE FEE STRUCTURE TYPICAL OF A HEDGE FUND? |
|
Definition
INCENTIVE FEE [20% OF PROFITS]
ASSET MANAGEMENT FEE [1-2% OF ASSETS] |
|
|
Term
| CONCERNING HEDGE FUNDS, WHAT DOES IT MEAN TO USE THE STRATEGY ENTITLED, "LONG AND SHORT EQUITY FUNDS STRATEGY"? |
|
Definition
| PURCHASE STOCKS THEY DEEMED TO BE UNDERVALUED AND SELL SHORT STOCKS THAT ARE OVERVALUED. THEY MAY BE GENERALISTS OR MAY BE SPECIALIZE BY SECTOR OR GEOGRAPHY. THE UNDERLYING INVESTMENT STYLE MAY BE GROWTH. |
|
|
Term
| CONCERNING HEDGE FUNDS, HOW TO EVENT DRIVEN FUNDS TRY TO PROFIT? |
|
Definition
| FROM SUCCESSFUL CONCLUSION OF CORPORATE EVENTS, SUCH AS MERGERS OR BANKRUPTCIES AKA DISTRESSED SECURITIES INVESTING. |
|
|
Term
| CONCERNING HEDGE FUNDS, ARBITRAGE FUNDS TRY TO PROFIT BY DOING THIS. |
|
Definition
| PROFIT FROM SMALL MISPRICINGS OF CLOSELY RELATED SECURITIES,S UCH AS THE COMMON STOCK AND THE CONVERTIBLE PREFERRED STOCK OF THE SAME ISSUER. SOMETIMES THE SECURITIES TRADE ON DIFFERENT EXCHANGES OR IN DIFFERENT COUNTRIES. THE STRATEGY IS TO BUY THE CHEARPER OF THE PAIR OF SECURITIES AND SELL SHORT THE MORE EXPENSIVE. |
|
|
Term
| CONCERNIGN HEDGE FUNDS, GLOBAL ASSET ALLOCATORS ARE FUNDS THAT DO THIS. |
|
Definition
| MAKE TOP DOWN BETS ON THE DIRECTION OF MACRO INDICATORS SUCH AS INTEREST RATES OR COMMODITIES PRICES. |
|
|
Term
TRUE OR FALSE
HEDGE FUNDS ARE TAX EFFICIENT INVESTMENTS. |
|
Definition
| FALSE. THEY ARE TAX INEFFICIENT BECAUSE PROFITS FROM SHORT SALES ARE ALWAYS TAXED AT SHORT TERM RATES, REGARDLESS OF HOW LONG THE SHORT POSITION WAS IN PLACE AND BECAUSE MANY HEDGE FUND STRATEGIES EMPLOY SHORT TERM TRADING ON THE LONG SIDE OF THE PORTFOLIO. |
|
|
Term
|
Definition
| PRIVATE EQUITY IS CAPITAL INVESTED DIRECTLY IN A PRIVATE COMPANY IN EXCHANGE FOR A SHARE OF OWNERSHIP IN THE COMPANY. |
|
|
Term
| WHAT IS VENTURE CAPITAL INVESTING? |
|
Definition
| INVESTING IN YOUNG COMPANIES THAT HAVE NEVER BEEN PUBLIC. |
|
|
Term
| CONCERNING PRIVATE EQUITY FUNDS, WHAT IS BUYOUT INVESTING? |
|
Definition
| INVESTING IN MORE MATURE COMPANIES THAT MAY HAVE BEEN PUBLIC AS INDEPENDENT COMPANIES OR AS DIVISIONS OF A LARGER COMPANY. |
|
|
Term
TRUE OR FALSE.
OFTEN COMPANIES SUBJECT TO BUYOUTS HAVE BEEN UNDERPEFORMING AND NEED FINANCIAL OR OPERATIONS RESTRUCTURING. |
|
Definition
|
|
Term
| WHAT ARE THE THREE STAGES OF VENTURE CAPITAL? |
|
Definition
1. SEED CAPITAL FUNDS RESEARCH AND DEVELOPMENT.
2. EARLY STAGE CAPITAL FUNDS THE INITIATION OF COMMERCIAL MANUFACUTING
3. EXPANSION CAPITAL FINANCES EXPANSION. |
|
|
Term
| WHAT IS THE DIFFERENT BETWEEN A PRIVATE AND A PUBLIC INVESTOR? |
|
Definition
| PRIVATE INVESTORS MUST CREATE VALUE WHEREAS PUBLIC INVESTORS MUST RECOGNIZE VALUE. |
|
|
Term
| HOW LONG IS THE LIFE CYCLE OF A PRIVATE EQUITY FUND? |
|
Definition
|
|
Term
| CONCERNING PRIVATE EQUITY FUNDS, WHAT ARE THE TWO STAGES OF THE LIFE CYCLE? |
|
Definition
1. PRE-CLOSING OR FUND RAISING.
2. CLOSING DATE. |
|
|
Term
| ONCE THE GENERAL PARTNER HAS SECURED THE DESIRED LEVEL OF COMMITMENTS, THERE WILL BE A CLOSING DATE. WHAT HAPPENS ON THE CLOSING DATE? |
|
Definition
| THE PARTNERS SIGN DOCUMENTS THAT LEGALLY OBLIGATE THE LIMITED PARTNERS TO PROVIDE THE FUNDS THEY HAVE COMMITTED,W HEN THE GENERAL PARTER CALLS [SENDS A NOTICE ASKING FOR THE FUNDS]. THAT IS, LIMITED PARTNERS DO NOT SEND MONEY AT THE CLOSING; INSTEAD THEY INCUR A LEGAL OBLIGATION TO SEND IT WHEN IT IS CALLED. THIS WILL HAPPEN WHEN THE GENERAL PARTNER INCURS EXPENSES OR FINDS COMPANIES TO FUND. |
|
|
Term
| CONCERNING PRIVATE EQUITY FUNDS, WHEN THE GENERAL MANAGER CALLS THE FUNDS IT IS MANDATORY THAT THE FUNDS BE PROVIDED PER LEGAL OBLIGATION. IF NOT..WHAT COULD HAPPEN? |
|
Definition
| IT COULD GENERALLY RESULT IN FORFEITURE OF ALL CAPITAL PREVIOUSLY INVESTED IN THE FUND BY THE DEFAUILTING LIMITED PARTNER. |
|
|
Term
| TRUE OR FALSE. ONCE THE FINAL CLOSING DATE AS OCCURED, NO NEW INVESTORS ARE PERMITTED TO INVEST IN A PRIVATE EQUITY FUND. |
|
Definition
|
|
Term
| CONCERNING PRIVATE EQUITY FUNDS, AFTER THE CLOSING PERIOD, THE GENERAL PARTNER WILL SEEK INVESTMENT OPPORTUNITIES. WHAT IS THIS PERIOD CALLED AND HOW LONG DOES IT TYPICALLY LAST? |
|
Definition
THE INVESTMENT PERIOD.
2 -4 YEARS. |
|
|
Term
| WHAT ARE THE THREE PERIODS FOLLOWING THE CLOSING OF A PRIVATE EQUITY FUND? |
|
Definition
1. INVESTMENT PERIOD.
2. MANAGEMENT PERIOD.
3. HARESTING PERIOD. |
|
|
Term
| CONCERNING PRIVATE EQUITY FUNDS, WHAT IS THE HARVESTING PERIOD>? |
|
Definition
| THE GENERAL PARTNER SELLS OFF THE PORTFOLIO COMPANIES, EITHER IN THE PUBLIC MARKETS, THROUGH IPS OR BY PRIVATE SALE AND RETURNS THE CAPITAL TO THE LIMITED PARTNERS. ALL COMPANIES SHOULD BE SOLD AT SOME POINT. OFTEN THIS PERIOD IS TEN TO TWELVE YEARS. |
|
|
Term
|
Definition
| THE RETURN PATTERN OF PRIVATE EQUITY FUNDS. THE CUMULATIVE RETURN IS ENGATIVE INT HE EARLY LIFE OF A FUND BEFORE TURNING POSITIVE. THIS IS BECAUSE INT HE EARLY LIFE OF A PRIVATE EQUITY FUND THERE ARE EXPENSES INCURRED IN TEH SEARCH FOR ATTRACTIVE INVESTMENTS BUT THERE ARE NOT YET ANY INVESTMENTS TO GENERATE RETURNS. |
|
|
Term
| TRUE OR FALSE. PRIVATE EQUITY INVESTING IS AN EXCELLENT SOURCE OF LIQUIDITY. |
|
Definition
| FALSE. SINCE PRIVATE EQUITY IS NOT TRADED ON ANY MARKET, AN INVESTOR SHOULD BE PREPARED TO HAVE NO ACCESS TO THEIR MONEY FOR AN EXTENDED PERIOD OF TIME [I.E. TERM OF 10 - 12 YEARS] |
|
|
Term
| HOW OFTEN ARE HEDGE FUND INCENTIVE FEES PAID? |
|
Definition
|
|
Term
| HOW OFTEN ARE PRIVATE EQUITY FUND INCENTIVE FEES PAID? |
|
Definition
| WHEN THE INVESTMENTS ARE ACTUALLY SOLD AT A PROFIT. |
|
|
Term
| WHAT IS A CLOSELY HELD CORPORATION? |
|
Definition
| A CORPORATION FOR WHICH MORE THAN 50% OF THE VALUE OF ITS OUTSTANDING STOCK IS OWNED BY FIVE OR FEWER INDIVIDUALS. THERE ARE GENERALLY NO PUBLIC INVESTORS IN A CLOSELY HELD CORPORATION. |
|
|
Term
| WHAT ARE THE PRIMARY COMPONENTS OF THE A-B ESTATE PLAN? |
|
Definition
MARITAL DEDUCTION
CREDIT SHELTER TRUST |
|
|
Term
| WHAT ARE THE TWO TRUSTS COMMONLY USED UNDER THE A-B ESTATE PLAN CALLED? |
|
Definition
THE CREDIT SHELTER TRUST
THE MARITAL DEDUCTION TRUST |
|
|
Term
| WHY ARE THE ASSETS IN A MARITAL DEDUCTION TRUST ARE TAX DEFERRED? |
|
Definition
| BECAUSE THE ASSETS UTILIZE THE UNLIMITED MARITAL DEDUCTION. |
|
|
Term
| TRUE OR FALSE. WHILE THE ASSETS IN THE MARITAL DEDUCTION TRUST UTILIZE THE UNLIMITED MARITAL DEDUCTION, THE ASSETS REMAINING IN THE MARITAL TRUST AT THE SURVIVING SPOUSE'S DEATH ARE NOT INCLUDED IN AND TAXED AS APART OF THE SURVIVING SPOUSE'S ESTATE. |
|
Definition
FALSE
THEY ARE INCLUDED IN THE SURVIVING SPOUSE'S ESTATE. |
|
|
Term
| WHAT IS THE PRIMARY PURPOSE OF THE CREDIT SHELTER TRUST? |
|
Definition
| DESIGNED TO PASS FAMILY WEALTH ULTIMATELY TO ONE'S DESCENDANTS ,WHILE ALSO MAKING TRUST PROPERTY AVAILABLE TO THE DECEDENT'S SURVIVING SPOUSE DURING THE SPOUSES LIFETIME. |
|
|
Term
TRUE OR FALSE.
DURING THE LIFE OF THE SURVIVING SPOUSE, THE CREDIT SHELTER TRUST MAY PROVIDE FOR MANDATORY DISTRIBUTIONS OF INCOME, OR IT MAY GIVE THE TRUSTEE DISCRETION WHEN DETERMINING HOW MUCH, IF ANY, OF THE TRUST'S INCOME AND PRINCIPAL IS TO BE DISTRIBUTED. |
|
Definition
|
|
Term
| WHAT IS A SPRAY [SPRINKLING] TRUST? |
|
Definition
| A SPRAY PROVISION GENERALLY GIVES THE TRUSTEE THE RIGHT TO RETAIN INCOME IN THE TRUST OR TO DIVIDE INCOME AMONG THE SETTLOR'S SPOUSE AND DESCENDATNS AS THE TRUSTEE DETERMINES ADVISABLE FOR THEIR HEALTH, SUPPORT IN REASONABLE COMFORT AND EDUCATION. |
|
|
Term
| WHAT ARE THE FOUR TYPES OF MARITAL TRUSTS? |
|
Definition
1. POWER OF APPOINTMENT TRUSTS
2. ESTATE TRUSTS
3. QUALIFIED TERMINABLE INTEREST PROPERTY [QTIP]
4. QUALIFIED DOMESTIC TRUSTS [QDOT] |
|
|
Term
| TO QUALIFY FOR THE MARITAL DEDUCTION IN A MARITAL DEDUCTION TRUST, THIS MUST BE PRIMARILY DONE? |
|
Definition
| THE GRANTOR MUST GIVE THE SPOUSE A GENERAL POWER OF APPOINTMENT OVER TRUST PROPERY DURING LIFE OR DEATH. |
|
|
Term
TRUE OR FALSE.
IN A MARTIAL DEDUCTION TRUST, IN ORDER TO QUALIFY FOR THE MARITAL DEDUCTION, THE GRANTOR MUST GIVE THE SPOUSE A GENERAL POWER OF APPOINTMENT TO BE USED IN DEATH. |
|
Definition
| FALSE. IT MUST BE DURING LIFE OR DEATH. |
|
|
Term
TRUE OR FALSE.
IN A MARTIAL DEDUCTION TRUST, IN ORDER TO QUALIFY FOR THE MARITAL DEDUCTION, THE GRANTOR MUST GIVE THE SPOUSE ALL OF THE TRUST INCOME GENERATED DURING HER LIFETIME. |
|
Definition
|
|
Term
TRUE OR FALSE.
IN A MARTIAL DEDUCTION TRUST, IN ORDER TO QUALIFY FOR THE MARITAL DEDUCTION, THE GRANTOR MUST GIVE THE SPOUSE INCOME PAYABLE AT LEAST MONTHLY. |
|
Definition
|
|
Term
| IN THE PAST, THIS TYPE OF MARITAL DEDUCTION TRUST WAS MOST POPULAR. TODAY, THIS TYPE OF MARITAL DEDUCTION TRUST IS MOST POPULAR. |
|
Definition
| THE POWER OF APPOINTMENT TRUST WAS THE MOST POPULAR, AND NOW THE QTIP IS THE MOST POPULAR. |
|
|
Term
| THIS IS THE ONLY WAY TO QUALIFY FOR THE MARITAL DEDUCTION WHILE RETAINING CONTROL OF THE ULTIMATE DISPOSITION OF THE TRUST ASSETS... |
|
Definition
|
|
Term
| DOES THE QTIP HAVE A POWER OF APPOINTMENT? |
|
Definition
|
|
Term
| IN A QTIP, MAY THE SPOUSE HAVE A LIMITED POWER OF WITHDRAWAL DURING LIFETIME. |
|
Definition
|
|
Term
| TO QUALIFY FOR THE MARITAL DEDUCTION, THE EXECUTOR MUST MAKE AN IRREVOCABLE ELECTION ON THIS TAX RETURN OF THE DONOR. |
|
Definition
|
|
Term
| CONCERNING THE MARITAL DEDUCTION TRUSTS, WHO ARE THE BENEFICIARIES OF AN ESTATE TRUST? |
|
Definition
| THE SURVIVING SPOUSE AND THE ESTATE OF THE SURVIVING SPOUSE. |
|
|
Term
| TRUE OR FALSE. CONCERNING THE MARITAL DEDUCTION TRUST, UNDER AN ESTATE TRUST, THE TRUSTEE MAY BE AUTHORIZED TO PAY AS MUCH OF THE TRUST INCOME OR PRINCIPAL AS NEEDED OR DESIRABLE FOR THE SURVIVING SPOUSE'S BENEFIT. |
|
Definition
|
|
Term
| CONCERNING AN ESTATE MARITAL DEDUCTION TRUST, WHO IS THE BENEFICIARY AT DEATH OF THE SURVIVING SPOUSE? |
|
Definition
| THE ESTATE OF THE SURVIVING SPOUSE. |
|
|
Term
TRUE OR FALSE
A BENEFIT OF THE ESTATE MARITAL DEDUCTION TRUST IS THAT THE SPOUSE HAS A LIMITED LIFETIME APPOINTMENT RIGHT. |
|
Definition
| FALSE. A PRIMARY DISADVANTAGE OF THE ESTATE TRUST IS THAT THE SURVIVING SPOUSE CANNOT APPOINT TRUST PROPERTY DURING HIS OR HER LIFETIME TO FAMILY MEMBERS. |
|
|
Term
| PROPERTY PASSING TO A SURVIVING SPOUSE WHO IS NOT A US CITIZEN CAN QUALIFY FOR THE MARITAL DEDUCTION ONLY IF THE PROPERTY PASSES THROUGH THIS INSTRUMENT. |
|
Definition
| A QDOT[QUALIFIED DOMESTIC TRUST] |
|
|
Term
TRUE OR FALSE.
IN A QDOT, IT IS NOT A REQUIREMENT THAT THE TRUSTEE BE A US CITIZEN. |
|
Definition
| FALSE. THE TRUSTEE MAY BE A US CITIZEN WITH THE RIGHT TO WITHHOLD FROM ANY DISTRIBUTION THE ESTATE TAX IMPOSED UNDER SECTION 2056A OF THE IRC OF 1986, AS AMENDED. |
|
|
Term
| TRUE OR FALSE. THE EXECUTOR OF THE GRANTOR MUST IRREVOCABLY ELECT TO HAVE THE TRUST TREATED AS A QDOT |
|
Definition
|
|
Term
| WHAT DOES A SPLIT INTEREST TRUST MEAN? |
|
Definition
| WHEN INCOME AND REMAINDER INTERESTS INT HE TRUST ARE SPLIT AMONG TWO DIFFERENT CLASSES OF BENEFICIARIES. |
|
|
Term
| WHAT IS A CHARITABLE SPLIT INTEREST TRUST? |
|
Definition
| ONE OR MORE CHARITIES MAY BE NAMED AS BENEFICIAY OF EITHER THE INCOME [LEAD] OR OF THE REMAINDER INTEREST. |
|
|
Term
| CONCERNING CHARITABLE SPLIT INTERST TRUSTS, WHAT IS A CHARITABLE REMAINDER TRUST. |
|
Definition
| ONE OR MORE NONCHARITABLE BENEFICIARIES RECEIVE A STATED AMOUNT EACH YEAR FOR A FIXED TERM OR FOR THE LIFE OR LIVES OF HE BENEFICIARY OR BENEFICIARIES. AT THE END OF THE TERM OF THE TRUST, THE REMAINING TRUST CORPUS IS DISTRIBUTED TO CHARITY. |
|
|
Term
| WHAT IS THE PURPOSE OF A CHARITABLE REMAINDER TRUST? |
|
Definition
| USED PRIMARILY TO PROVIDE INCOME SECURITY TO THE NON-CHARITABLE BENEFICIARY WHILE AT THE SAME TIME OBTAINING A CHARITABLE DEDUCTION. |
|
|
Term
| WHAT ARE THREE LIMITATIONS TO THE CHARITABLE REMAINDER TRUST? |
|
Definition
1. TERM OF TRUST CANNOT EXCEED 20 YEARS.
2. THE VALUE OF THE CHARITABLE RESIDUE MUST EQUAL OR EXCEED 10 PERCENT OF THE NET FAIR MARKET VALUE OF THE PROPERTY CONTRIBUTED TO THE TRUST ON THE DATE OF ITS CONTRIBUTION.
3. THE PAYOUT CANNOT EXCEED 50% OF THE FIAR MARKET VALUE OF THE TRUST ASSETS. |
|
|
Term
| WHAT ARE THE TWO TYPES OF CHARITABLE REMAINDER TRUSTS PERMITTED UNDER FEDERAL TAX LAWS? |
|
Definition
1. CHARITABLE REMAINDER ANNUITY TRUST [CRAT]
2. CHARITABLE REMAINDER UNI-TRUST [CRUT] |
|
|
Term
| IN THE CHARITABLE REMAINDER ANNUITY TRUST, THE AMOUNT THAT MUST BE PAID ANNUALLY TO THE NON-CHARITABLE BENEFICIARIES MUST BE WHAT? |
|
Definition
TEST 1: A CERTAIN SUM.
TEST 2: CANNOT BE LESS THAN 5% OF THE INITIAL FAIR MARKET VALUE OF THE TRUST.
TEST 3: CANNOT EXCEED 50% OF THE INITIATE FAIR MARKET VALUE OF THE TRUST. |
|
|
Term
| IN A CHARITABLE REMAINDER UNITRUST, THE AMOUNT THAT MUST BE PAID ANNUALLY TO THE NON-CHARITABLE BENEFICIARY MUST BE WHAT? |
|
Definition
| A FIXED PERCENTAGE OF AT LEAST 5% BUT NOT MORE THAN 50% OF THE ANNUALLY DETERMINED FAIR MARKET VALUE OF THE TRUST ASSETS. |
|
|
Term
| WHAT ARE THE TWO MAJOR DIFFERENCES BETWEEN A CRUT AND A CRAT? |
|
Definition
A CRUT HAS A DISTRIBUTION TO THE NON-CHARITABLE BENEFICIARY THAT IS A FIXED PERCENTAGE AND DETERMINED ANNUALLY.
A CRAT HAS A CERTAIN SUM TO THE NON-CHARITABLE BENEFICIARY AND IS DETERMINED BY THE INITIAL FAIR MARKET VALUE OF THE TRUST. |
|
|
Term
| WHAT IS A CHARITABLE LEAD TRUST. |
|
Definition
| A CHARITY RECEIVES A STATED AMOUNT EACH YEAR FOR A SPECIFIED TERM OF YEARS OR FOR THE LIFE OR LIVES OF A DESIGNATED INDIVIDUAL OR INDIVIDUALS. AT THE END OF THE TERM, THE REMAINING CORPUS IS DISTRIBUTED TO OR HELD IN TRUST FOR THE GRANTOR'S DESCENDANTS OR OTHER NON-CHARITABLE BENEFICIARIES. |
|
|
Term
| WHAT ARE THE MAJOR DIFFERENCES BETWEEN A CHARITABLE REMAINDER LEAD TRUST AND CHARITABLE REMAINDER TRUST? |
|
Definition
1. NO MINIMUM PAYOUT FOR A CHARITABLE LEAD TRUST.
2. THE CHARITABLE LEAD TRUST IS NOT LIMITED TO A MAXIMUM TERM UNDER FEDERAL TAX LAWS |
|
|
Term
| A CHARITABLE LEAD TRUST CAN BE CLASSIFIED AS WHAT TWO TYPES OF TRUSTS? |
|
Definition
1. CHARITABLE LEAD ANNUITY TRUST.
2. CHARITABLE LEAD UNITRUST |
|
|
Term
| WHAT IS A CHARITABLE LEAD ANNUITY TRUST? |
|
Definition
| THE CHARITABLE BENEFICIARY RECEIVES A SUM CERTAIN OVER THE TERM OF THE TRUST. |
|
|
Term
| WHAT IS A CHARITABLE LEAD UNITRUST? |
|
Definition
| THE CHARITABLE BENEFICIARIES RECEIVE A FIXED PERCENTAGE OF THE FAIR MARKET VALUE OF THE TRUST PROPERTY OVER THE TERM OF THE TRUST. |
|
|
Term
| WHAT ARE THREE NON-CHARITABLE SPLIT INTEREST TRUSTS? |
|
Definition
1. GRANTOR RETAINED INCOME TRUST [GRIT]
2. GRANTOR RETAINED ANNUITY TRUST [GRAT]
3. GRANTOR RETAINED UNITRUST [GRUT] |
|
|
Term
| WHAT IS A GRANTOR RETAINED INCOME TRUST [GRIT]? |
|
Definition
| AN IRREVOCABLE TRUST UNDER WHICH THE GRANTOR RETAINS THE RIGHT TO RECEIVE ALL OF THE TRUST INCOME FOR A FIXED TERM OF YEARS. |
|
|
Term
| CONCERNING A GRIT [GRANTOR RETAINED INCOME TRUST], IF THE GRANTOR SURVIVES THE INCOME TERM, THIS OCCURS. |
|
Definition
| THE CORPUS OF THE TRUST PASSES TO THE REMAINDER BENEFICIARIES WITHOUT THE CORPUS BEING INCLUDED IN THE GRANTOR'S ESTATE FOR FEDERAL ESTATE TAX PURPOSES. |
|
|
Term
| UNDER CURRENT LAW, THE CORPUS OF A GRIT IS LIMITED TO A PERSONAL RESIDENCE OF THE GRANTOR IF THE REMAINDER BENEFICIARIES ARE WHOM? |
|
Definition
| THE IMMEDIATE FAMILY MEMBERS. |
|
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Term
| WHAT IS A GRANTOR RETAINED ANNUITY TRUST? |
|
Definition
| THE GRANTOR RETAINS THE RIGHT TO RECIEVED FIXED ANNUITY PAYMENTS, PAYABLE AT LEAST ANNUALLY, FOR A TERM OF YEARS. IF THE GRANTOR SURVIVES THE ANNUITY TERM, THE REMAINING CORPUS OF THE GRAT IS DISTRIBUTED TO THE REMAINDER BENEFICIARIES, AGAIN WITHOUT THE CORPUS BEING INCLUDED IN THE GRANTOR'S ESTATE. |
|
|
Term
| WHAT IS A GRANTOR RETAINED UNITRUST? |
|
Definition
| THE GRANTOR RECEIVES A FIXED PERCENTAGE OF THE FIAR MARKET VALUE OF THE TRUST CORPUS EACH YEAR. |
|
|
Term
| WHAT ARE THE MAJOR DIFFERENCES BETWEEN A GRIT, GRAT, AND GRUT? |
|
Definition
A GRIT HAS INCOME DISTRIBUTIONS TO GRANTOR & THE REMAINDER CORPUS IS LIMITED TO THE PERSONAL RESIDENCE FOR FAMILY MEMBERS.
A GRAT HAS A FIXED ANNUITY PAYMENT FOR A SPECIFIED TERM OF YEARS.
A GRUT HAS A PERCENTAGE PAYMENT TO GRANTOR FOR A TERM OF YEARS. |
|
|
Term
YES OR NO
IS THE CORPUS OF THE TRUST LIMITED TO A PARTICULAR TYPE OF ASSET? |
|
Definition
|
|
Term
| WHAT IS THE ANNUAL EXCLUSION AMOUNT FOR 2011 AND 2012? |
|
Definition
|
|
Term
| CERTAIN TYPES OF IRREVOCABLE TRUSTS ARE DESIGNED TO FACILITATE GIFT GIVING UNDER THE ANNUAL EXCLUSION. WHAT ARE THE TWO CATEGORIES? |
|
Definition
1. QUALIFYING ANNUAL EXCLUSION TRUSTS
2. CRUMMEY TRUSTS |
|
|
Term
|
Definition
| ONE OR MORE TRUST BENEFICIARIES ARE GIVEN POWERS OF WITHDRAWAL FOR A LIMITED TIME PERIOD OVER FUNDS CONTRIBUTED TO THE TRUST. AS A RESULT OF THE WITHDRAWAL POWER, THE GIFTS TO THE TRUST WILL QUALIFY FOR THE ANNUAL EXCLUSION. WITHOUT THE WITHDRAWAL [CRUMMEY] POWER, A GIFT TO A TRUST DOES NOT QUALIFY FOR THE ANNUAL EXCLUSION BECAUSE IT IS NOT A PRESENT GIFT. |
|
|
Term
TRUE OR FALSE
UNDER A CRUMMEY TRUST, BENEFICIARIES MUST RECEIVE TIMELY NOTICE OF THEIR WITHDRAWAL RIGHTS PRIOR TO THE LAPSE OF SUCH RIGHTS, TYPICAL 30 DAYS. 15 DAYS IN SOME STATES. |
|
Definition
|
|
Term
| AN IRREVOCABLE LIFE INSURANCE TRUST MAY BE DESIGNATED AS THE OWNER AND BENEFICIARY OF ONE OR MORE LIFE INSURANCE POLICIES. IF SUCH POLICIES ARE DONATED TO THE TRUST BY THE INSURED, THE VALUE OF THE GIFT FOR FEDERAL TAX PURPOSES IS THIS |
|
Definition
| THE TERMINAL RESERVE VALUE OF THE POLICY, NOT ITS FACE VALUE, THEREBY PRODUCING A SIGNIFICANT TRANSFER TAX SAVINGS. |
|
|
Term
TRUE OR FALSE?
CONCERNING ILITS, DURING THE LIFE OF THE INSURED, ANNUAL EXCLUSION GIFTS ARE DONATED TO THE TRUST AND USED TO PAY THE LIFE INSURANCE PREMIUMS. SUCH AMOUNTS ARE NOT SUBJECT TO FEDERAL GIFT TAX IF THE TRUST IS STRUCTURED AND ADMINISTERED PROPERLY. |
|
Definition
|
|
Term
TRUE OR FALSE.
IF THE INSURED DONATES A LIFE INSURANCE POLICY TO THE TRUST, THE LIFE INSURANCE PROCEEDS ARE INCLUDED IN THE STATE OF THE INSURED IF THE INSURED DIES WITHIN THREE YEARS OF THE TRANSER. |
|
Definition
|
|
Term
| WHAT IS THE DIFFERENCE BETWEEN AN EXPRESS OR IMPLIED DISCRETIONARY POWER. |
|
Definition
EXPRESS POWER IS SPECIFICALLY OUTLINED BY THE TRUST OR STATE LAW.
THE IMPLIED LAW IS IMPLIED BY THE TRUST AND LEFT UP IN THE AIR. THE TRUSTEE MAY PETITION THE COURT FOR CLARIFICATION OR SEEK CLARIFICATION FROM THE BENEFICIARIES. |
|
|
Term
TRUE OR FALSE
IF AUTHORIZED BY THE TRUST NSTRUMENT OR STATE LAW, OR CONSENTED TO BY ALL OF THE TRUST BENEFICIARIES, A TRUSTEE MAY DELEGATE ANY OR ALL OF ITS POWERS TO A CO-TRUSTEE. |
|
Definition
|
|
Term
TRUE OR FALSE
IF A TRUSTEE REFUSES TO JOIN IN AN ACTION PROPOSED BY THE OTHER TRUSTEES AND IF SUCH REFUSAL CONSTITUTES A BREACH OF TRUST OR AN ABUSE OF DISCRETION, A COURT OF EQUITY MAY REMOVE THE RECALCITRANT TRUSTEE OR REQUIRE THAT TRUSTEE TO ACQUIESCE. UNDER THE UTC, A TRUSTEE MAY DISSENT FROM THE ACTION OF THE OTHER TRUSTEES WITHOUT INCURRING LIABILITY UNLESS THE DISSENT IS A SERIOUS BREACH OF TRUST. |
|
Definition
|
|
Term
| WHAT PARTIES MAY MAINTIAN AN ACTION IN A COURT OR EQUITY TO ENFORCE THE TERMS OF A TRUST? |
|
Definition
THE BENEFICIARIES
THE TRUSTEE |
|
|
Term
TRUE OR FALSE.
ONCE THE TRUST IS OPERATING, THE TRUSTEE'S DUTIES ARE TO THE BENEFICIARIES, NOT THE TRUSTOR. |
|
Definition
|
|
Term
TRUE OR FALSE
ALTHOUGH THE SETTLOR CANNOT ORDINARILY ENFORCE THE TERM SOF HTE TRUST, TH SETTLOR MAY ATTACK THE VALIDITY OF THE TRUST AND SEEK RECOVERY OF THE TRUST PROPERTY. |
|
Definition
|
|
Term
TRUE OR FALSE
UNDER THE UTC, THE SETTLOR MAY NOT BRING SUIT TO ENFORCE THE TRUST. |
|
Definition
FALSE
UNDER THE UTC, A SETLOR MA BRING SUIT TO ENFORCE THE TRUST. |
|
|
Term
| WHAT IS THE RULE AGAINST PERPETUITIES? |
|
Definition
| "NO INTEREST IS GOOD UNLESS IT MUST VEST, IF AT ALL, NOT LATER THAN 21 YEARS AFTER SOME LIFE IN BEIN AT THE CREATION OF THE INTEREST." |
|
|
Term
| GENERALLY, ANY RECEIPT FROM AN INCOME PRODUCING ASSET IS INCOME. WHAT IS THE EXCEPTION TO THIS RULE? |
|
Definition
| RECIEPTS, INCLUDING CORPORATE DISTRIBUTIONS TO STOCKHOLDERS, DUE BUT NOT PAID S OF THE DATE OF DEATH ARE PRINCIPAL. |
|
|
Term
| THE TRUSTEE HAS THE POWER TO ADJUST UNDER THE REVISED ACT ONLY WHEN THE FOLLOWING THREE FACTORS ARE PRESENT: |
|
Definition
1. TRUSTEE IS PRUDENT INVESTOR
2. TERMS OF TRUSTE DESCRIBE AMOUNT THAT MAY OR MUST BE DISTRIBUTED TO A BENE BY REFERRING TO TRUST INCOME.
3. THE TRUSTEE DETERMINES THAT IT CANNOT ADMINISTER THE TRUST IMPARTIALLY ON THE BASIS OF WHAT IS FAIR AND REASONABLE TO ALL OF THE BENEFICIARIES, UNLESS THE TRUST CLEARLY MANIFESTS AN INTENTION THAT THE FIDUCIARY SHALL OR MAY FAVOR ONE OR MORE BENEFICIARIES. |
|
|
Term
| CONCERNING THE ALLOCATION OF TRUST INCOME AND PRINCIPAL, THE ADJUSTMENT POWER CANNOT BE EXERCISED BY A TRUSTEE FOR THIS REASON. |
|
Definition
THE TRUSTEE IS ALSO THE BENEFICIARY.
THAT IS A TRUSTEE WHO WOULD BE AFFECTED BY ITS EXERCISE. |
|
|
Term
| IN A TOTAL RETURN UNITRUST, TRUST INCOME FOR PURPOSES OF DISTRIBUTION TO THE INCOME BENEFICIARIES IS DEFINED AS WHAT?> |
|
Definition
| AN AMOUNT EQUAL TO A FIXED PERCENTAGE OF THE VALUE OF THE TRUST ASSETS EACH YEAR, REGARDLESS OF HOW MUCH ACTUAL FIDUCIARY ACCOUNTING INCOME IS PRODUCED BY THE TRUST ASSETS EACH YEAR. |
|
|
Term
TRUE OR FALSE
IN A TOTAL RETURN UNITRUST, AS THE VALUE OF THE TRUST ASSETS INCREASE, THE UNITRUST AMOUNT INCREASES. |
|
Definition
|
|
Term
TRUE OR FALSE
A UNITRUST APPROACH ELIMINATES THE NEED TO MAKE ADJUSTMENTS BETWEEN INCOME AND PRINCIPAL UNDER THE REVISED ACT AND PROTECTS THE TRUSTEE AGAINST CHALLENGES THAT SUCH ADJUSTMENTS WERE IMPROPER. |
|
Definition
|
|
Term
TRUE OR FALSE
THE COURT MAY NOT MODIFY THE TERMS OF A TRUST IN A MANNER THAT IS NOT CONTRARY TO THE SETTLOR'S PROBABLE INTENTION. |
|
Definition
FALSE
THE COURT MAY MODIFY THE TERMS OF A TRUST IN A MANNER THAT IS NOT CONTRARY TO THE SETTLOR'S PROBABLY INTENTION. |
|
|
Term
TRUE OR FALSE
IF THE CHARITABLE PURPOSE OF A TRUST BECOMES UNLAWFUL, IMPRACTICABLE, IMPOSSIBLE TO ACHIEVE OR WASTEFUL, A COURT MAY ORDER THAT THE TRUST BE MODIFIED OR TERMINATION. |
|
Definition
|
|
Term
| WHAT IS THE DOCTRINE OF CY PRES? |
|
Definition
| A COURT OF EQUITY HAS THE POEWR TO ORDER THAT FUNDS OF A CHARITABLE TRUST BE APPLIED TO A DIFFERENT CHARITABLE PURPOSE THAN THE PARTICULAR PURPOSE SPECIFIED BY THE SETTLOR IN THE TRUST INSTRUMENT. |
|
|
Term
| WHAT ARE THREE REASONS A TRUST WOULD TERMINATE? |
|
Definition
1. TERMS OF TRUST
2. MISTAKE IN TRUST'S CREATION
3. PURPOSE HAS BECOME ACCOMPLISHED. |
|
|
Term
TRUE OR FALSE
A TRUST WILL NOT TERMINATE IF THE TIME PERIOD DESCRIBED IN THE RULE AGAINST PERPETUITIES EXPIRES, OR A TRUST MAY NOT TERMINATE IF ITS PURPOSES HAVE BECOME ILLEGAL. |
|
Definition
|
|
Term
| WHAT ARE THE TWO TITLE INTERESTS IN PROPERTY AND HOW ARE THOSE INTERESTS DIVIDED UNDER A TRUST? |
|
Definition
LEGAL TILE-TRUSTEE
EQUITABLE TITLE-BENEFICIARIES
AN OWNER HOLDS LEGAL AND EQUITABLE TITLE TO PROPERTY. IN A TRUST, LEGAL TITLE IS HELD BY THE TRUSTEE; EQUITABLE TITLE IS HELD BY THE BENEFICIARIES. THUS TH TRUSTEE IS THE NEW RECORD OWNER OF THE PROPERTY, AND THE BENEFICIARIES ARE ENTITLED TO USE AND ENJOY THE PROPERTY WITHIN THE CONFINES OF THE TRUST AND APPLICABLE LAW. |
|
|
Term
TRUE OR FALSE.
A TRUST WILL NOT FAIL FOR WANT OF A SETTLOR. |
|
Definition
TRUE
CERTAIN TYPES OF TRUSTS, CALLED IMPLIED TRUSTS, ARISE BY OPERATION OF LAW. IN OTHER WORDS, AN IMPLIED TRUST IS CREATED DESPITE THE LACK OF A SETTLOR. THEREFORE, A SETTLOR IS NOT A REQUIREMENT OF A VALID, IMPLIED TRUST. |
|
|
Term
| WHAT ARE THE TWO TYPES OF IMPLIED TRUSTS? |
|
Definition
CONSTRUCTIVE
RESULTING
A CONSTRUCTIVE TRUST ESSENTIALLY IS A FRAUD-RECTIFYING TRUST IMPOSED BY A COURT TO PROTECT THOSE WHO LOSE PROPERTY TO A WRONGDOER. A RESULTING TRUST IS AN INTENT-ENFORCING TRUST, BASED UPON THE PRESUMED INTENT OF A TRANSFEROR OF PROPERTY. |
|
|
Term
| WHAT ARE THE FIVE COMMON LAW REQUIREMENTS OF AN EXPRESS TRUST? |
|
Definition
1. INTENT TO CREATE A TRUST BY A LEGALLY COMPETENT SETTLOR.
2. PRESENT DECLARATION OR ACT OF TRANSFER BY THE SETTLOR
3. EXISTENCE OF A TRUST CORPUS
4. NAMING OF A TRUSTEE
5. IDENTIFICATION OF IDENTIFIABLE BENEFICIARIES. |
|
|
Term
TRUE OR FALSE.
PRECATORY WORDS ARE USED BY A SETTLOR TO CONFER LEGALLY ENFORCEABLE DUTIES UPON THE TRUSTEE. |
|
Definition
FALSE
THE USE OF PRECATORY WORDS, SUCH AS I DESIRE OR I REQUEST, WITHOUT MORE, DO NOT CREATE LEGALLY ENFORCEABLE DUTIES IN A TRUSTEE. |
|
|
Term
EGBERT CREATES A TRUST UNDER WHICH HE DECLARES THAT ANY INTERESTS IN REAL PROPERTY THAT HE RECEIVES UNDER THE WILL OF HIS DEAR UNCLE NED ARE HELD IN TRUST FOR THE BENEFIT OF EGBERT'S 11 YEAR OLD SON, DEVON. UNCLE NED IS THRILLED BECAUSE DEVON IS HIS FAVORITE GRANDNEPHEW. AN ENFORCEABLE TRUST HAS NOT BEEN CREATED BECAUSE.
A. AN EXPECTANCY UNDER A WILL IS NOT A TRANSFERABLE PROPERTY INTEREST.
B. UNCLE NED IS NOT COMPETENT BECAUSE A GRANDNEPHEW CANNOT BE THE NATURAL OBJECT OF HIS BOUNTY.
C. A MINOR CANNOT HOLD AN INTEREST IN REAL PROPERTY, NOT EVEN AN EQUITABLE INTEREST HELD IN TRUST.
D. THE TRANSFER VIOLATES THE RULE AGAINST PERPETUITIES BECAUSE UNCLE NED MAY SURVIVE FOR 21 YEARS AFTER THE CREATION OF THE TRUST. |
|
Definition
| A. AN EXPECTANCY UNDER A WILL IS NOT A TRANSFERABLE PROPERTY INTEREST. |
|
|
Term
| WHAT ARE SOME OF THE NONTAX REASONS THAT A SETTLOR MAY HAVE FOR CREATING AN EXPRESS TRUST. |
|
Definition
1. PROFESSIONAL ASSET MANAGEMENT
2. FLEXIBILITY IN SELECTING A POST MORTEM FIDUCIARY THAN UNDER MOST PROBATE LAWS.
3. ASSET PROTECTION FROM CREDITORS OR SPENDTHRIFT BENEFICIARIES.
4. EXPERT MANAGEMENT OF SPECIAL ASSETS, SUCH AS A CLOSELY HELD BUSINESS.
5. SPECIAL NEEDS OF DISABLED BENEFICIARIES
6. VEHICLES FOR MAKING CONTRIBUTIONS TO CHARITY. |
|
|
Term
| FOR WHAT REASONS MIGHT A TRUST TERMINATE? |
|
Definition
1. TERMS OF TRUST
2. COURT RULING OF MISTAKE
3. COURT RULING THAT TRUST PURPOSE HAS BEEN CONFIRMED.
4.TRUST ILLEGAL. |
|
|
Term
| WHAT IS THE EFFECT OF A BENEFICIARY DISCLAIMING HIS OR HER INTEREST IN A TRUST? |
|
Definition
CAUSES ACCELERATION IN THE REMAINDER INTEREST OF THE TRUST.
EQUIVALENT OF THE DISCLAIMANT PRIOR TO THE EFFECTIVE DATE OF THE GOVERNING INSTRUMENT. |
|
|
Term
| WHAT IS THE PRIMARY DIFFERENCE BETWEEN A REVOCABLE AND AN IRREVOCABLE TRUST. |
|
Definition
REVOCABLE TRUST CAN BE AMENDED, REVOKED OR MODIFIED.
IRREVOCABLE TRUST CANNOT BE AMENDED, REVOKED, OR MODIFIED. |
|
|
Term
| WHEN WILL A TRUST INSTRUMENT BE DEEMED IRREVOCABLE? |
|
Definition
PER TERMS OF DOCUMENT OR AT DEATH OF GRANTOR.
IF THE TRUSTOR DOES NOT EXPRESSLY RESERVE IN SOME PERSON THE RIGHT TO REVOKE, AMEND OR MODIFY THE TRUST. THUS A TRUST INSTRUMENT GENERALLY IS REVOCABLE ONLY IF THE SETTLOR MAKES SUCH A EXPRESS RESERVATION OF POWER IN THE TRUST INSTRUMENT. |
|
|
Term
| WHAT ARE THE PRIMARY REASONS THAT A SETTLOR MAY HAVE FOR CREATING AN IRREVOCABLE TRUST? |
|
Definition
1. PROVIDING A VEHICLE FOR MAKING A COMPLETED GIFT WHILE RETAINING SOME CONTROL OVER THE USE AND ENJOYMENT OF THE PROPERTY.
2. TAX SAVINGS THAT ACCOMPANY THE MAKING OF A COMPLETED GIFT. |
|
|
Term
| WHAT ARE THE PRIMARY ADVANTAGES OF USING A TRUST RATHER THAN A WILL TO DISPOSE OF ONE'S ASSETS AT DEATH? |
|
Definition
1. AVOIDANCE OF PROBATE ADMINISTRATION OF ONE'S ESTATE.
2. THE VALUATION OF TRUST ASSETS AND THE DISPOSITIVE TERMS OF THE TRUST ARE NOT MADE AVAILABLE TO THE PUBLIC. |
|
|
Term
| WHAT IS THE PRIMARY DIFFERENCE BETWEEN AN INTERVIVOS TRUST AND A TESTAMENTARY TRUST? |
|
Definition
INTER VIVOS TRUST IS CREATED DURING LIFETIME OF GRANTOR.
TESTAMENTARY CREATED AFTER DEATH OF GRANTOR. |
|
|
Term
| WHAT ARE THE TWO COMPONENTS OF A TYPICAL A-B ESTATE PLAN? |
|
Definition
MARITAL DEDUCTION TRUST AND A CREDIT SHELTER TRUST.
UNDER CURRENT LAW, $1mm REDUCED BY THE AMOUNT OF TAXABLE GIFTS MADE BY A DECEDENT DURING HIS OR HER LIFETIME, MAY BE SHELTERED FROM FEDERAL TRANSFER TAX AT DEATH UNDER THE APPLICABLE EXCLUSION AMOUNT. ADDITIONALLY, A DECEDENT MAY TRANSFER AN UNLIMITED AMOUNT OF PROPERTY TO A SURVIVING SPOUSE WITHOUT THE IMPOSITION OF FEDERAL TRANSFER TAX AT THE THE DECEDENT'S DEATH. THEREFORE, AN A-B PLAN GENERALLY CREATES A FORMULA UNDER WHICH $1MM OR THE DECEDENTS REMAINING APPLICABLE EXCLUSION AMOUNT IS ALLOCATED TO THE UNIFED CREDIT SHELTER TRUST OR BEQUESTS AND THE BALANCE OF HTE DECENDENTS ESTATE IS ALLOCATED TO THE MARITAL TRUST OR BEQUEST. SUCH A PLAN RESULTS IN NO IMPOSITION OF FEDERAL TRANSFER TAX AT THE DEATH OF THE DECEDENT. |
|
|
Term
| UNDER A CREDIT SHELTER TRUST, WHAT IS THE DIFFERENCE BETWEEN THE ONE-POT AND THE SEVERAL POT STRUCTURES UPON THE DEATH OF THE SECOND SPOUSE TO DIE? |
|
Definition
| UNDER THE SEVERAL POT APPROACH, PROPERTY OF THE CREDIT SHELTER TRUST DIVIDEND UPON THE DEATH OF THE SURVIVING SPOUSE INTO SEPARATE TRUSTS FOR EACH OF THE SPOUSE'S CHILDREN PROPERTY FROM ONE CHILD'S TRUST ORDINARILY IS NOT AVAILABLE TO ANOTHER CHILD. UNDER THE ONE-POT APPROACH, PROPERTY OF THE CREDIT SHELTER TRUST IS RETAINED IN A SINGLE TRUST UNTIL THE OCCURRENCE OF A PARTICULAR CONDITION, SUCH AS THE YOUNGEST CHILD REACHING A STATED AGE. THE SINGLE POT APPROACH IS USED WHEN FUNDS ARE INSUFFICIENT TO ESTABLISH SEPARATE TRUSTS OR THE PARENTS ARE CONCERNED ABOUT THE SPECIAL NEEDS, ESPECIALLY THE MEDICAL NEEDS OF A PARTICULAR CHILD. |
|
|
Term
| WHAT ARE THE FOUR CATEGORIES OF MARITAL TRUSTS? |
|
Definition
1- POWER OF APPOINTMENT TRUST
2- QTIP
3- ESTATE TRUST
4- QDOT |
|
|
Term
| UNDER WHAT CIRCUMSTANCES WILL A POWER OF APPOINTMENT TRUST QUALIFY FOR THE MARITAL DEDUCTION? |
|
Definition
1. THE SPOUSE IS ENTITLED TO ALL TRUST INCOME GENERATED DURING HIS OR HER LIFETIME.
2. THE TRUST INCOME IS PAYABLE TO THE SPOUSE AT LEAST AS FREQUENTLY AS ANNUALLY.
3. THE SPOUSE IS GIVEN AN INTER VIVOS OR TESTAMENTARY POWER OF APPOINTMENT OVER THE TRUST PROPERTY THAT IS EXDERCISABLE BY THE POUSE ALONE AND IN ALL EVENTS
4. NO PERSON OTHER THAN THE SPOUSE HAS THE POWER TO APPOINT TRUST PROPERTY TO ANYONE OTHER THAN THE SPOUSE. |
|
|
Term
| HOW DOES AN ESTATE TRUST DIFFER FROM A POWER OF APPOINTMENT TRUST? |
|
Definition
| UNDER AN ESTATE TRUST, THE SURVIVING SPOUSE AND HIS OR HER ESTATE ARE THE ONLY TRUST BENEFICIARIES. THEREFORE, INCOME NEED NOT BE PAID TO THE SPOUSE AND UNDERPRODUCTIVE PROPERTY MAY BE RETAINED IN THE RUST WITHOUT JEOPARDIZING THE MARITAL DEDUCTION. UPON THE SURVIVING SPOUSE'S DEATH, ALL OF THE TRUST PROPERTY IS DISTRIBUTED TO THAT SPOUSE'S ESTATE. THE PRIMARY DISADVANTAGE OF AN ESTATE TRUST IS THAT THE SURVIVING SPOUSE CANNOT APPOINT TRUST PROPERTY DURING HIS OR HER LIFETIME TO FAMILY MEMBERS. |
|
|
Term
| HOW DOES A QUALIFIED TERMINABLE INTEREST PROPERTY TRUST DIFFER FROM A POWER OF APPOINTMENT TRUST?> |
|
Definition
| A QTIP IS LIKE A POWER OF APPOINTMENT TRUST WIHTOUT THE POWER OF APPOINTMENT. THUS THE SURVIVING SPOUSE MUST BE ENTITLTED TO ALL OF THE INCOME OF THE TRUST DURING HIS OR HER LIFETIME, PAYABLE AT LEAST ANNUALLY. UNDER A QTIP TRUST, AT THE DEATH OF THE SURVIVING SPOUSE, THE TRUST PROPERTY IS DISTRIBUTED AS DIRECTED BY THE DONOR SPOUSE IN THE TRUST INSTRUMENT. TO QUALIFY THE TRUST FOR THE MARITAL DEDUCTION, AN IRREVOCABLE QTIP ELECTION MUST BE MADE ON THE DONOR SPOUSE'S ESTATE TAX RETURN. |
|
|
Term
| WHAT IS THE DIFFERENCE BETWEEN A CHARITABLE REMAINDER TRUST AND A CHARITABLE LEAD TRUST? |
|
Definition
| UNDER A CHARITABLE REMAINDER TRUST, NON-CHARITABLE BENEFICIARIES ARE THE CURREN TBENEFICIARIES OF THE TRUST, AND ONE OR MORE CHARITIES ARE THE REMAINDER BENEFICIARIES OF THE TRUST. A CHARITABLE LEAD TRUST IS THE FLIP SIDE OF THE CHARITABLE REMAINDER TRUST, THUS UNDER A CHARITABLE LEAD TRUST, ONE OR MORE CHARITIES ARE THE CURRENT BENEFICIARIES AND THE NON CHARITABLE BENEFICIARIES ARE THE REMAINDER BENEFICIARIES. |
|
|
Term
| WHAT IS THE DIFFERENCE BETWEEN AN ANNUITY TRUST AND A UNITRUST? |
|
Definition
| AN ANNUITYB TRUST PAYS A SUM CERTAIN, WHICH IS DETERMINED WHEN THE TRUST IS CREATED, TO THE CURRENT BENEFICIARIES EACH YEAR. IN CONTRAST, A UNITRUST PAYS A FIXED PERCENTAGE OF THE FAIR MARKET VALUE OF TRUST PRINCIPAL TO THE CURRENT BENEFICIARIES EACH YEAR. |
|
|
Term
| WHAT ARE THE PRIMARY DIFFERENCES BETWEEN A GRIT, GRAT & GRUT? |
|
Definition
| WITH A GRIT, THE GRANTOR RETAINS THE RIGHT TO RECEIVE ALL OF THE INCOME OF THE TRUST FO RA FIXED TERM OF YEARS. UNDER CURRENT LAW, THE CORPUS OF A GRIT IS LIMITED TO A PERSONAL RESIDENCE OF THE GRANTOR, UNLESS THE GRIT IS SET UP FOR THE BENEFIT OF CERTAIN COLLATERAL RELATEIVES OR OTHER UNRELATED THIRD PARTIES. UNDER A GRANTOR RETAINED ANNUITY TRUST, THE GRANTOR RETAINS THE RIGHT TO RECIEVE A FIXED ANNUITY PAYMENTS FOR A TERM OF YEARS. THE CORPUS OF A GRAT IS NOT LIMITED TO A PARTICULAR TYPE OF ASSET. UNDER A GRANTOR RETAINED UNITRUST, THE GRANTOR RETAINS THE RIGHT TO RECIEVE A FIXED PERCENTAGE OF THE FAIR MARKET VALUE OF THE TRUST CORPUS EACH YEAR. LIKE A GRAT, THE TRUST CORPUS OF A GRUT, IS NOT LIMITED TO A PARTICULAR TYPE OF ASSET. ADMINISTRATION OF A GRUT MAY BE BURDENSOME BECAUSE OF THE REQUIREMENT THAT ASSETS BE VALUED ON A AN ANNUAL BASIS TO DETERMINE THE AMOUNT PAYABLE TO THE GRANTOR EACH YEAR. |
|
|
Term
| HOW DOES A QUALIFYING ANNUAL EXCLUSION TRUST DIFFER FROM A CRUMMEY TRUST? |
|
Definition
1. HAVE ONLY ONE CURRENT BENEFICIARY.
2. MAKE INCOME OR PRINCIPAL OR BOTH AVAILABLE FOR THE BNEEFIT OF THE MINRO BENEFICIARY UNTIL THE BENEFICIARY ATTAINS AGE 21
3. PROVIDE THAT THE TRUST PROPERTY WILL PASS TO THE BENEFICIARY UPON HIS OR HER REACHING AGE 21
4. IF THE MINOR DIES PRIOR TO REACHING AGE 21, PROVIDE THAT THE TRUST PROPERTY IS PAYABLE TO THE BENEFICIARY'S ESTATE OR AS THE BENEFICIARY MAY APPOINT UNDER A GPOA.
A CRUMMEY TRUST, HAS MULTIPLE BENEFICIARIES, GIVES TRUST BENEFICIARIES A POWER TO WITHDRAW ONLY RECENT CONTRIBUTIONS, CONTINUE TO OPERATE BEYON A BENEFICIARIES REACHING AGE 21.
A BENEFICIARY UNDER A CRUMMEY TRUST, UNLIKE THE BENEFICIARY OF A QUALIFYING ANNUAL EXCLUSION TRUST, CANNOT UNILATERALLY REQUIRE DISTRIBUTION OF THE ENTIRE TRUST PRINCIPAL UPON REACHING AGE 21. |
|
|
Term
| UNDER WHAT CIRCUMSTANCES WILL A TRUSTEE BE DEEMED TO HAVE BEEN GRANTED A DISCRETIONARY POWER? |
|
Definition
| A TRUSTEE WILL BE DEEMED TO HAVE BEEN GRANTED A DISCRETIONARY POWER IF SUCH POWER IS EXPRESSLY STATED IN THE TRUST INSTRUMENT OR AN APPLICABLE STATUTE, OR REASONABLE IMPLIED THEREIN. IN ADDITION, THE TRUSTEE MAY OBTAIN THE CONSENT OF ALL TRUST BENEFICIARIES TO THE EXERCISE OF A PARTICULAR POWER. |
|
|
Term
| WHEN WILL A COURT INTERFERE WITH A TRUSTEE'S EXERCISE OF A PROPERLY GRANTED DISCRETIONARY POWER? |
|
Definition
| ONCE A COURT DETERMINES THAT A TRUSTEE HAS BEEN GRANTED DISCRETION TO EXERCISE OR NOT EXERCISE A PARTICULAR POWER, THE COURT IS EXTREMELY RELUCTANT TO INTERFERE WITH THE TRUSTEE'S EXERCISE OF THAT DISCRETION. THE COURT WILL INTERVENE, HOWEVER, IF THE TRUSTEES ACTIONS CONSTITUTE AN ABUSE OF DISCRETION, SUCH AS RECKLESS OR CAPRICIOUS ACTION OR THE TRUSTEE ACTS DISHONESTLY OR IN BAD FAITH. |
|
|
Term
| UNDER WHAT CIRCUMSTANCES MAY A TRUSTEE DELEGATE ONE OF ITS POWERS? |
|
Definition
| A TRUSTEE MAY DELEGATE ONE OF ITS POWERS IF THE AUTHORITY TO DELEGATE IS EXPRESSED OR IMPLIED BY THE TRUST INSTRUMENT OR AN APPLICABLE STATUTE, OR IF ALL OF THE TRUST BENEFICIARIES CONSENT TO THE DELEGATION OF THE POWER OR A COURT RULES THAT THE TRUSTEE MAY DELEGATE SUCH POWER. COURTS OFTEN INFER THAT CERTAIN MINISTERIAL POWERS, SUCH AS USE OF A BROKER TO EXECUTE A SECURITIES TRANSACTION, REASONABLY MAY BE DELEGATED UNLESS EXPRESSLY FORBIDDEN BY THE TRUST INSTRUMENT OR APPLICABLE LAW. |
|
|
Term
| WHAT ARE THE TRUSTEE'S DUTIES WHEN DELEGATING ITS AUTHORITY TO AN AGENT? |
|
Definition
| WHEN DELEGATING POWER TO AN AGENT, THE TRUSTEE MUST EXERCISE REASONABLE CARE WHEN SELECTING, INSTRUCTING AND SUPERVISING THE AGENT. |
|
|
Term
TRUE OR FALSE?
AT COMMON LAW, A MAJORITY OF THE ACTING CO-TRUSTEES MAY ACT ON BEHALF OF THE TRUST. |
|
Definition
FALSE
AT COMMON LAW, CO-TRUSTEES HOLD TRUST POWERS JOINTLY AND MUST ACT UNANIMOUSLY THUS THE RIGHTS OF THE TRUST BENEFICIARIES ARE NOT AFFECTED IF FEWER THAN ALL OF THE TRUSTEES ATTEMPT TO EXERCISE TRUST POWERS. DESPITE THE FOREGOTING, THE TRUST INSTRUMENT OR LOCAL LAW MAY PROVIDE CIRCUMSTANCES UNDER WHICH A MAJORITY OF THE CO-TRUSTEES MAY ACT. ADDITIONALLY, ONE OR MORE CO-TRUSTEES MAY ACT PURSUANT TO A PROPER DELEGATION OF A CO-TRUSTEE'S POWER. FINALLY, FEWER THAN ALL OF THE TRUSTEES MAY ACT IN THE EVENT OF AN EXTREME EMERGENCY. |
|
|
Term
| MATILDA IS 88 YEARS OLD, BUT HER MIND IS STILL SHARP. SHE HAS BEEN A WWIDOW FOR NINE YEARS FOLLOWING THE DEAH OF HER HUSBAND, HERBERT. INCOME FROM A SUBSTANTIAL MARITAL TRUST CREATED BY HEBERT HAS PROVIDED MATILDA WITH AMPLE COMFORT AND SUPPORT. MATILDA IS CO-TRUSTEE WIHT FLY BY NIGHT STATE BANK OF A CREDIT SHELTER TRUST ALSO CREATED UNDER HERBERT'S WILL. THE WILL REQUIRES THAT THE CO-TRUSTEES OF THE CREDIT SHELTER TRUST DISTRIBUTE INCOME AND PRINCIPAL TO HERBER'S DESCENDANTS AS NEEDED FOR THEIR HEALTH, SUPPORT AN DEDUCATION. A TRUST OFFICER FROM FLY BY NIGHT CONVINCES MATILDA TO DELEGATE ALL OF HER INVESTMENT POWER AS CO TRUSTEE OF THE TRUST TO THE BANK. MATILDA, WELL AWARE OF HERBERT'S ENTHUSIANSM DURING HIS LIFETIME FOR HTE BANK'S INVESTMENT SKILLS, RELUCTANTLY AGREES. THE BANK THEN INVESTS THE PROPERTY OF THE CREDIT SHELTER TRUST IMPRUDENTLY. HERBERT'S DESCENDANTS, WHO ARE NOT VERY NICE, SUE MATILDA AND THE BANK FOR THE LOSS TO THE TRUST. WITHOUT CONSIDERING WHETHER SHE HAS AN OBLIGATION TO SUPPORT HER CHILDREN, IS MATILDA LIABLE TO THE BENEFICIARIES UNDER THESE CIRCUMSTANCES? |
|
Definition
| ALL CO-TRUSTEES, INCLUDING SO CALLED PASSIVE TRUSTEES, MUST EXERCISE THE SAME DEGREE OF CARE THAT A REASONABLE PERSON WOULD EXERCISE IN THE CONDUCT OF HIS OR HER OWN AFFAIRS. A PASSIVE TRUSTEE MUST EXERCISE DUE CARE IN ANY DELEGATION OF POWER TO A CO-TRUSTEE AND MUST SUPERVISE AND MONITOR THE WORK OF THE ACTIVE TRUSTEE. IF HERBERT'S WILL CONTAINS EXPRESS OR IMPLIED AUTHORITY FOR MATILDA TO DELEGATE INVESTMENT AUTHORITY TO THE BANK AND SHE EXERCISED REASONABLE CARE WHEN DELEGATING THAT AUTHORITY, MATILDA WILL NOT BE LIABLE FOR AN IMPROPER DELEGATION. IF SUCH DELEGATION WAS PROPER, MATILDA ALSO MUST HAVE SUPERVISED AND MONITORED THE BANK'S EXERCISE OF INVESTMENT POWERS. THUS IF THE BANK'S IMPRUDENT INVESTMENTS WERE NOT EXPRESSLY AUTHORIZED BY THE TRUST INSTRUMENT AND IF THE BANK GAVE MATILDA AMPLE OPPORTUNITY TO KEEP INFORMED REGARDING THE BANK'S EXERCISE OF THE CO-TRUSTEES INVESTMENT POWERS, MATILDA PROBABLY WILL BE LIABLE FOR THE LOSSES INCURRED BY THE TRUST. |
|
|
Term
| WHAT FOUR CONDITIONS MAY RESULT IN A VACANCY IN THE OFFICE OF TRUSTEE, |
|
Definition
1- REMOVAL
2- RESIGNATION
3- DEATH /DISSOLUTION
4- DISCLAIMOR |
|
|
Term
true or false
A PERSON OR CORPORATION APPOINTED AS TRUSTEE UNDER THE GOVERNING INSTRUMENT OF A TRUST MAY DISCLAIM THAT APPOINTMENT SIMPLY BE REFUSING TO ACT. |
|
Definition
|
|
Term
| IF ONE OR TWO OR MORE CO-TRUSTEES DIES OR DISSOLVES, THE REMAINING TRUSTREE OR TRUSTEES WILL APPOINT A SUCCESSOR ABSENT CONTRARY AUTHORITY IN THE TRUST INSTRUMENT OR APPLICABLE STATUTE. |
|
Definition
|
|
Term
| WHAT ARE SOME OF THE COMMON LAW GROUNDS FOR REMOVAL OF A TRUSTEE. |
|
Definition
1. IMPROPER APPOINTMENT
2. LEGAL INCAPACITY
3. EXTREME IMPROVIDENCE
4. INSOLVENCY
5. DISREGARD OF THE TRUST TERMS
6. FAILURE OR REFUSAL TO ACT
7. COMMINGLING OF TRUST FUNDS WITH OTHER PROPERTY.
8. FAILURE TO ACCOUNT
9. CONFLICT OF INTEREST
10. UNAUTHORIZED COMPENSATION
11. APPROPRIATION OF TRUST PROPERTY
12. CRIMINAL BEHAVIOR
13. ANY OTHER EQUITABLE GROUND FOR REMOVAL. |
|
|
Term
TRUE OR FALSE
A SUCCESSOR TRUSTEE GENERALLY MAY EXERCISE ALL OF THE POWERS GRANTED TO THE ORIGINAL TRUSTEE. |
|
Definition
|
|
Term
TRUE OR FALSE
A SETTLOR CANNOT MAINTAIN A COURT ACTION TO ENFORCE THE TERMS OF A TRUST, BUT MAY ATTACK THE VALIDITY OF A TRUST. |
|
Definition
|
|
Term
| WHAT ARE SOME OF THE LEGAL AND EQUITABLE REMEDIES AVAILABLE TO BENEFICIARIES AGAINST A TRUSTEE WHO COMMITS A BREACH OF TRUST? |
|
Definition
1. REQUIRING TRUSTEE TO PROVIDE INFORMATION TO THE BENIES REGARDING TRUST ADMINISTRATION.
2. ENJOINING THE TRUSTEE FROM TAKING A PARTICULAR ACTION
3. OBTAINING A DECREE OF SPECIFIC PERFORMANCE REQUIRING THE TRUSTEE TO PERFORM A PARTICULAR ACTION.
4. REMOVAL OF TRUSTEE.
5. APPOINTMENT OF A RECEIVER
ETC. |
|
|
Term
| STATE THE COMMON LAW RULE AGAINST PERPETUTIES. |
|
Definition
| NO INTEREST IS GOOD UNLESS IT MUST VEST, IF AT ALL, NOT LATER THAN TWENTY ONE YEARS AFTER SOME LIFE IN BEING AT THE CREATION OF THE INTEREST. |
|
|
Term
ALICWE CREATES A TRUST.
THE INCOME GOES TO HER SON BILL DURING HIS LIFETIME.
AFTER BILL'S DEATH, THE INCOME WILL BE PAID TO BILL'S WIDOW FOR LIFE. UPON HER DEATH, THE TRUST PROPERTY WILL BE DISTRIBUTED OUTRIGHT TO BILL'S CHILDREN.
AT THE TIME THE TRUST IS CREATED, BILL IS AGE 40 AND IS HAPPILIED MARRIED TO CAROL, HIS WIFE OF 18 YEARS. THEY HAVE NO CHILDREN. ARE ALL OF THE INTEREST CREATED UNDER ALICE'S TRUST VALID AT COMMON LAW? |
|
Definition
THE INTEREST CREATED FOR BILL'S CHILDREN IS NOT A VALID INTEREST UNDER THE COMMON LAW RULE AGAINST PERPETUITIES.
SINCE BILL WAS THE ONLY RELEVANT LIFE IN BEING AT THE TIME THAT THE TRUST WAS CREATED AND BECAUSE THE TRUST COULD VEST MORE THAN 21 YEARS AFTER BILL'S DEATH, THE TRUST VIOLATES THE COMMON LAW RULE. |
|
|
Term
| HOW DOES A WAIT AND SEE PROVISION OPERATE UNDER A STATUTORY RULE AGAINST PERPETUITIES? |
|
Definition
| A CONTINGENT INTEREST THAT VIOLATES THE COMMON LAW RULE WILL NOT BE RENDERED INVALID IF THE INTEREST ACTUALLY VESTS WITHIN THE WAIT AND SEE PERIOD. |
|
|
Term
WHICH OF THE FOLLOWING RECEIPTS IS CONSIDERED PRINCIPAL UNDER THE REVISED UNIFORM PRINCIPAL AND INCOME ACT?
A. CASH DIVIDENDS
B. STOCK DIVIDENDS
C. CROPS RECEIVED FROM A TENANT UNDER A CROP SHARES LEASE.
D. LIFE INSURANCE PROCEEDS THAT THE SETTLOR INDICATES IN THE TRUST INSTRUMENT SHOULD BE TREATED AS INCOME. |
|
Definition
B.
NOT DIVIDENDS FROM STOCK
BUT DIVIDENDS OF STOCK.
SUCH A MESSED UP QUESTION. |
|
|
Term
WHICH OF THE FOLLOWING RECEIPTS IS CONSIDERED INCOME UNDER THE REVISED ACT?
A. PROCEEDS FROM THE SALE OF CORPORATE STOCK?
B. PERIODIC INTEREST PAYMENTS ACCRUED BUT NOT YET DUE OR PAYABLE TO A TESTATOR AS OF THE DATE OF THE TESTATOR'S DEATH.
D. CASH DIVIDENDS DECLARED BUT NOT YET PAID TO A TRUST AS OF THE DATE OF THE TRUST'S TERMINATION. |
|
Definition
|
|
Term
| UNDER WHAT CIRCUMSTANCES WILL A COURT APPLY THE DOCTRINE OF CY PRES. |
|
Definition
| A COURT HAS THE ABILITY TO DETERMINE AN ALTERNATE CHARITY. |
|
|
Term
|
Definition
| SET OF POLICIES AND PROCEDURES BY A FINANCIAL INSTITUTION TO PREVENT COMMUNICATIONS BETWEEN DEPARTMENTS PROVIDING A LEG UP. |
|
|
Term
| WHAT DOES THE PRUDENT INVESTOR RULE FOCUS ON? |
|
Definition
1. THE TRUST PORTFOLIO AS A WHOLE.
2. THE INVESTMENT STRATEGY THAT THE PORTFOLIO IS BASED.
INSTEAD OF EVALUATING THE PROPRIETY OF SPECIFIC INVESTMENTS IN ISOLATION. |
|
|
Term
TRUE OR FALSE
THE PRUDENT INVESTOR RULE INCORPORATES PRINCIPALS OF THE MODERN PORTFOLIO THEORY. |
|
Definition
|
|
Term
| WHAT IS THE PRUDENT PERSON RULE? |
|
Definition
MAKE INVESTMENTS AS A PURDENT PERSON WOULD MAKE OF HIS OR HER OWN PROPERTY HAVING IN VIEW THE PRESERVATION OF THE ESTATE AND THE AMOUNT AND REGULARITY OF THE INCOME TO BE DERIVED.
A PRUDENT FIDUCIARY, MUST MAKE AN INDEPENDENT ASSESSMENT OF EACH ASSET IN THE TRUST OR ESTATE WITH RESPECT TO SUCH FACTORS AS RISK, BOTH IN TERMS OF THE ASSET ITSELF AND THE WIDER MARKET OF WHICH IT MAY BE APART. |
|
|
Term
| WHAT ARE THE FIVE PRINCIPALS OF PRUDENCE? |
|
Definition
1. MUST MAKE CONSCIOUS DECISIONS CONCERNING THE LEVELS OF RISK APPROPRIATE TO THE PURPOSES, DISTRIBUTION REQUIREMENTS, AND OTHER CIRCUMSTANCES OF THE TRUSTS THEY ADMINISTER.
2. DIVERSIFICATION
3. IMPARTIALITY
4. AVOID FEES, TRANSACTION COSTS, AND OTHER EXPENSES THAT ARE NOT JUSTIFIED BY NEEDS AND REALISTIC OBJECTIVES OF THE TRUST'S INVESTMENT PROGRAM.
5. DELEGATION OF INVESTMENT DECISIONS TO 3RD PARTIES AS PRUDENT INVESTORS WOULD. |
|
|
Term
| WHAT IS A COMMON TRUST FUND? |
|
Definition
| A GROUP OF INVESTMENTS PURCHASED BY A TRUSTEE WITH TRUST FUNDS AND HELD FOR THE BENEFIT OF TWO OR MORE PARTICIPATING TRUSTS. |
|
|
Term
TRUE OR FALSE
THE OFFICE OF THE COMPTROLLER OF CURRENCY GOVERNS THE OPERATION OF COLLECTIVE INVESTMENT FUNDS BY NATIONAL BANKS. SUCH FUNDS MUST BE ESTABLISHED PURSUANT TO A WRITTEN PLAN THAT IS APPROVED BY THE BANK'S BOARD OF DIRECTORS AND FILED WITH THE OCC. |
|
Definition
|
|
Term
TRUE OR FALSE
THE OFFICE OF THE COMPTROLLER OF CURRENCY GOVERNS THE OPERATION OF COLLECTIVE INVESTMENT FUNDS BY NATIONAL BANKS. AT LEAST ONCE DURING A 2 YEAR PERIOD, THE FUND MUST BE AUDITED BY AUDITORS RESPONSIBLE ONLY TO THE BANK'S BOARD OF DIRECTORS. |
|
Definition
FALSE
A LEAST ONCE DURING A 12 MONTH PERIOD. |
|
|
Term
| WHAT THREE DUTIES DO MUTUAL FUNDS VIOLATE [ARGUABLY] |
|
Definition
1. IMPLIED DELEGATION OF INVESTMENT AUTHORITY.
2. COMMINGING OF TRUST ASSETS WITH PROPERTY OF THIRD PERSONS.
3. A MANAGEMENT FEE TO THE MUTUAL FUND COMPANY AS WELL AS THE TRUSTEE MANAGEMENT FEE. |
|
|
Term
| WHAT IS THE SECURITIES ACT OF 1933 |
|
Definition
| ENSURES THE AVAILABILITY OF ADEQUATE, RELIABLE INFORMATION ABOUT SECURITIES THAT ARE OFFERED FOR SALE TO THE PUBLIC IN INTERSTATE COMMERCE. |
|
|
Term
| IN THE SALE OF SECURITIES, WHAT DO THE UNDERWRITERS DO? |
|
Definition
| IN A TYPICAL PUBLIC OFFERING, AN ISSUER ENTERS INTO AGREEMENTS WITH UNDERWRITERS TO DISTRIBUTE SECURITIES. THE UNDERWRITERS, IN TURN, SELL THE SECURITIES TO VARIOUS DEALERS, WHO BUY SECURITIES FROM AND SELL SECURITIES TO THE GENERAL PUBLIC. |
|
|
Term
| WHAT IS RULE 44 CONCERNING THE SALE OF SECURITIES. |
|
Definition
| STANDARD FOR DETERMINING WHEHER A SELLER IS AN UNDERWRITER WITHIN THE MEANING OF THE ACT. |
|
|
Term
TRUE OR FALSE.
UNLESS AUTHORIZED BY THE TRUST INSTRUMENT, STATUTE, OR COURT ORDER, A TRUSTEE CANNOT RETAIN OR ACQUIRE A CLOSELY HELD BUSINESS INTEREST AS A TRUST ASSET. |
|
Definition
FALSE.
IT FOCUSES SOLELY UPON THE PROCESS OF SELECTING APPROPRIATE INVESTMENTS, NOT ON THE RESULTS OBTAINED. |
|
|
Term
TRUE OR FALSE
THE PRUDENT PERSON RULE FOCUSES ON THE PROCESS USED BY THE TRUSTEE WHEN SELECTING TRUST INVESTMENTS AND UPON THE RESULTS OBTAINED IN EXERCISING ITS INVESTMENT POWERS. |
|
Definition
| AN INDEPENDENT ASSESSMENT OF EACH ASSET IS MADE WITH RESPECT TO RISK, INVESTMENT OBJECTIVES, CONCENTRATION, SAFETY AND YIELD AND THE LIKE. IN CONTRAST, THE PRUDENT INVESTOR RULE REQUIRES CAREFUL MONITORING OF EACH INVESTMENT, PLUS CONSIDERATION OF THE ENTIRE TRUST PORTFOLIO AND THE TRUST'S OVERALL INVESTMENT STRATEGY. |
|
|
Term
TRUE OR FALSE
A TRUSTEE MUST REASONABLE DIVERSIFY TRUST INVESTMENTS, REGARDLESS OF THE CIRCUMSTANCES. |
|
Definition
FALSE.
ALTHOUGH PRUDENCE ALMOST ALWAYS DICTATES THE DIVERSIFICATION OF TRUST INVESTMENTS, CIRCUMSTANCES MAY INDICATE THAT IT IS PRUDENT NOT TO DIVERSIFY. THE TERMS O THE TRUST MAY PRECLUDE THE TRUSTEE FROM DIVERSIFYING. |
|
|
Term
| WHAT ARE THE ADVANTAGES OF A COMMON TRUST FUND TO THE PARTICIPATING TRUSTS. |
|
Definition
1. ADDITIONAL INVESTMENT OPPORTUNITIES2.
2. EXTRA DEGREE OF DIVERSIFICATION
3. ADMINISTRATION IS EASIER |
|
|
Term
| WHEN MAY A TRUSTEE INVEST FIDUCIARY ASSETS IN A COMMON TRUST FUND. |
|
Definition
| ANYTIME PER STATE STATUTUE. YOU MAY POOL FUNDS TOGETHER FROM SEVERAL TRUSTS SUBJECT TO APPLICABLE STANDARDS GOVERNING THE ADMINISTRATION OF SUCH A FUND. |
|
|
Term
| UNDER OCC REGULATIONS, HOW OFTEN MUST A NATIONAL BANK AUDIT ITS COLLECTIVE INVESTMENT FUNDS. |
|
Definition
| PROVIDE THAT A COLLECTIVE INVESTMENT FUND MANAGED BY A NATIONAL BANK MUST BE AUDITED AT LEAST ONCE DURING EACH 12 MONTH PERIOD. |
|
|
Term
| WHAT IS A MUTUAL TRUST INVESTMENT COMPANY. |
|
Definition
| PROVIDE THE ADVANTAGES OF COMMON TRUST FUND INVESTMENT TO STATE AND NATIONAL BANKS THAT ARE TOO SMALL TO OPERATE THEIR OWN FUNDS. |
|
|
Term
TRUE OR FALSE.
NATIONAL BANKS ARE ENCOURAGED TO ESTABLISH A CHINESE WALL TO RESTRICT THE DISSEMINATION OF MATERIAL INSIDE INFORMATION |
|
Definition
|
|
Term
| WHAT IS THE PURPOSE OF RULE 144 OF THE SECURITIES AND EXCHANGE COMMISSION |
|
Definition
| PROVIDES OBJECTIVE CRITERIA FOR DETERMINING WHETHER A SELLER OF SECURITIES IS NOT AN UNDERWRITER, THEREBY EXEMPTING THE SECURITIES FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933. |
|
|
Term
| WHEN MAY A TRUSTEE RETAIN OR ACQUIRE A CLOSELY HELD BUSINESS INTEREST? |
|
Definition
| EXPRESSLY STATED IN THE DOCUMENT ONLY! |
|
|
Term
| WHEN IS A TRANSACTION PERMISSIBLE BETWEEN TWO TRUSTS ADMINISTERED BY THE SAME TRUSTEE? |
|
Definition
| MOST COURTS PERMIT A TRANSACTION BETWEEN TWO TRUSTS ADMINISTERED BY THE SAME TRUSTEE IF THE TRANSACTION IS FAIR TO BOTH TRUSTS. |
|
|
Term
| FEDERAL ENVIRONMENTAL LAWS PERMIT THE GOVERNMENT TO RECOVER THE COSTS OF CLEANING UP CONTAMINATED SITES FROM THE CURRENT OWNERS OF THE PROPERTY WITHOUT REGARD TO FAULT. THE LIABILITY JOINT AND SEVERAL. WHAT DOES THIS MEAN? |
|
Definition
| IF OTHER INVOLVED PARTIES ARE INSOLVENT, ONE PARTY COULD BEAR THE ENTIRE COST. |
|
|
Term
| WHAT IS THE PRIMARY ACT [SOURCE] OF ENVIRONMENTAL LIABILITY. |
|
Definition
|
|
Term
| WHAT DOES CERCLA STAND FOR? |
|
Definition
| COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION AND LIABILITY ACT OF 1980 |
|
|
Term
|
Definition
| PROVIDES FUNDING AND ENFORCEMENT AUTHORITY FOR CLEANING UP SITES CONTAMINATED OR THREATENED BY HAZARDOUS WASTE. |
|
|
Term
| WHAT IS ANOTHER COMMON NAME FOR THE CERCLA FUND> |
|
Definition
|
|
Term
| CERCLA LIABILITY MAY BE IMPOSED ON ANY ONE OR MORE OF THE FOLLOWING POTENTIALLY RESPONSIBLE PARTIES: |
|
Definition
1. THE CURRENT OWNER OR OPERATOR OF THE PROPERTY, EVEN IF THE OWNER OR OPERATOR DID NOT CONTRIBUTE TO THE CONTAMINATION.
2. THE OWNER OR OPERATION OF THE PROPERTY AT THE TIME THAT HAZARDOUS SUBSTANCES WERE DISPOSED OF OR RELEASED.
3. THE PARTY WHO ARRANGED FOR THE DISPOSAL OR TREATMENT, OR TRANSPORT FOR DISPOSAL OR TREATMENT OF THE HAZARDOUS SUBSTANCES, FREQUENTLY REFERRED TO AS THE GENERATOR.
4. THE PARTY WHO ACCEPTED THE HAZARDOUS SUBSTANCES FOR TRANSPORT OR DISPOSAL FREQUENTLY REFERRED TO AS THE TRANSPORTER. |
|
|
Term
| CONCERNING CERCLA, WHAT IS THE GENERATOR? |
|
Definition
| THE PARTY WHO ARRANGED FOR THE DISPOSAL OR TREATMENT, OR TRANSPORT FOR DISPOSAL OR TREATMENT, OF THE HAZARDOUS SUBSTANCES. |
|
|
Term
| CONCERNING CERLCA, WHAT IS THE TRANSPORTER? |
|
Definition
| THE PARTY WHO ACCEPTED THE HAZARDOUS SUBSTANCES FOR TRANSPORT OR DISPOSAL. |
|
|
Term
TRUE OR FALSE
ENVIRONMENTAL LIABILITY MAY ARISE FROM EVENTS THAT OCCURRED BEFORE THE ENACTMENT OF CERCLA IN 1980. |
|
Definition
|
|
Term
| TRUE OR FALSE. A FIDUCIARY IN ITS REPRESENTATIVE CAPACITY OWNS A PARCEL OF CONTAMINATED LAND, BUT IS NOT RESPONSIBLE FOR THE CONTAMINATION, CERCLA NEVERTHELESS WILL PERMIT THE ERCOVERY OF THE COSTS OF CLEANING UP THE CONTAMINATED PARCEL FROM THE CURRENT OWNER OF THE PROPERTY WITHOUT REGARD TO FAULT. BECAUSE LIABILITY UNDER CERCLA IS STRICT, JOINT AND SEVERAL, IF THE OTHER POTENTIALLY RESPONSIBLE PARTIES ARE INSOLVENT, THE FIDUCIARY COULD BE RESPONSIBLE FOR THE ENTIRE COST OF REMEDIATION. |
|
Definition
|
|
Term
| CONCERNING CERCLA, WHAT ARE RESPONSE COSTS> |
|
Definition
| POTENTIAL COSTS TO PARTIES, INCLUDING EXPENSES ASSOCIATED WITH ASSESSING AND EVALUATING SITES, TAKING ACTION TO MINIMIZE CONINUING HARM, GOVERNMENT LITIGATION COSTS, ATTORNEY'S FEES, AND PRE-JUDGEMENT INTEREST RUNNING FROM ALL DATE THE GOVERNMENT COMPLAINT IS FILED. |
|
|
Term
TRUE OR FALSE
CONCERNING CERLA,
A PARTY CAN BE FINED UP TO $25K PER DAY FOR VIOLATING AN ORDER TO COMPLY WITH CERCLA PROVISIONS. |
|
Definition
|
|
Term
TRUE OR FLASE
IF A PARTY IS FOUND GUILTY OF KNOWING VIOLATIONS, THE FINE INCREASES TO AS MUCH AS $50K PER DAY BUT NO IMPRISONMENT. |
|
Definition
FALSE
IMPRISONMENT FOR UP TO TWO YEARS
AS WELL AS THE $50K PER DAY. |
|
|
Term
| WHAT DOES THE TOXIC SUBSTANCES CONTROL ACT REGULATE? |
|
Definition
| THE HANDLING OF CERTAIN CHEMICAL SUBSTANCES AND MIXTURES USED FOR CHEMICAL PURPOSES. |
|
|
Term
| WHAT DOES THE CLEAN AIR ACT REGULATE? |
|
Definition
| REGULATES ATMOSPHERIC EMISSIONS OF ALL TYPES , INCLUDING RADON AND ASBESTOS IN BUILDINGS. It requires permits for the construction, installation or operation of equipment that could cause or contribute to air pollution. |
|
|
Term
| what does the clean water act regulate? |
|
Definition
| REGULATES ALL TYPES OF POLLUTION OF WATER SURFACES. |
|
|
Term
| WHAT DOES THE FEDERAL RESOURCE CONSERVATION AND RECOVERY ACT REGULATE? |
|
Definition
| BROAD STATUTE REGULATING WASTE AND WASTE DISPOSAL, WITH PRIMARY REGULATORY EMPHASIS ON THE GENERATION, STORAGE, TRANSPORTATION, TREATMENT AND DISPOSAL OF HAZARDOUS WASTES. |
|
|
Term
| WHAT DOES THE FEDERAL INSECTICIDE, FUNGICIDE AND RODENTICIDE ACT REGULATE. |
|
Definition
| REGULATES THE MANUFACTURE, USE AND DISPOSAL OF PEST CONTROL CHEMICALS. |
|
|
Term
| WHAT DOES THE SAFE DRINKING WATER ACT REGULATE?> |
|
Definition
| REGULATES STANDS FOR DRINKING WATER AND THE PROTECTION OF GROUND WATER. |
|
|
Term
| A CRUCIAL QUESTION FOR TRUSTEES IS WHETHER THEIR POTENTIAL cercla LIABILITY IS LIMITED TO THE VALUE OF THE ASSETS HELD IN TRUST CALLED _________________________ OR REACHES BEYOND THE TRUST TO THE TRUSTEE'S OTHER ASSETS CALLED _______________________. |
|
Definition
HELD IN TRUST ARE CALLED REPRESENTATIVE CAPACITY LIABILITY
TRUSTEE'S PERSONAL ASSETS ARE CALLED 'PERSONAL LIABILITY'. |
|
|
Term
| THE APPLICABLE STANDARDS THAT APPLY TO LIABILITY IN A REPRESENTATIVE CAPACITY INVOLVE TWO ASPECTS OF CONTROL. WHAT ARE THESE TWO ASPECTS? |
|
Definition
1. TITLE OWNERSHIP
2. MANAGEMENT POWERS OR ACTIVITIES |
|
|
Term
| UNDER CERCLA, OWNER LIABILITY MAY BE BASED ON WHAT> |
|
Definition
| THE FIDUCIARY BEING THE TITLE OWNER OF CONTAMINATED PROPERTY OR THE OWNER OF BUSINESS ASSETS THAT INCLUDE CONTAMINATED PROPERTY. |
|
|
Term
| UNDER CERCLA, WHAT IS OPERATOR LIABILITY? |
|
Definition
| BASED ON THE EXERCISE OF MANAGEMENT POWERS OVER TRUST ASSETS AND PERHAPS THE MERE POSSESSION OF SUCH POWERS. |
|
|
Term
| WHAT ACT GIVES TRUSTEES AND LENDERS NEW PROTECTION AGAINST ENVIRONMENTAL LIABILITY? |
|
Definition
|
|
Term
| THE ASSET CONSERVATION ACT PROVIDES WHAT TWO SIGNIFICANT PROTECTIONS AGAINST ENVIRONMENTAL LIABILITY. |
|
Definition
1. A FIDUCIARY'S LIABILITY UNDER CERCLA MAY NOT EXCEED THE ASSETS HELD IN A FIDUCIARY CAPACITY [EXCEPT NEGLIGENT TRUSTEES]
2. CERTAIN ACTIVITIES ARE A SAFE HARBOR AGAINST LIABILITY. |
|
|
Term
| UNDER THE ASSET CONSERVATION ACT, WHAT ACTIVITIES ARE A SAFE HARBOR AGAINST LIABILITY OF CERCLA? |
|
Definition
1. PERFORMING LAWFUL ENVIRONMENTAL CLEAN UP.
2. TERMINATING THE FIDUCIARY RELATIONSHIP.
3. INCLUDING IN THE FIDUCIARY AGREEMENT TERMS RELATING TO ENVIRONMENTAL COMPLIANCE.
4. MONITORING OR INSPECTING A FACILITY.
5. GIVING FINANCIAL OR OTHER ADVICE TO OTHER PARTIES TO THE FIDUCIARY RELATIONSHIP, INCLUDING THE SETTLOR OR BENEFICIARY.
6. ALTERING THE TERMS AND CONDITIONS OF THE FIDUCIARY RELATIONSHIP.
7. ADMINISTERING A FACILITY THAT WAS CONTAMINATED BEFORE THE FIDUCIARY RELATIONSHIP BEGAN.
8. DECLINING TO TAKE ANY OF THE ABOVE ACTIONS. |
|
|
Term
TRUE OR FALSE
UNDER CERCLA, A TRUST, AS AN INTERIM OWNER, WOULD NOT ESCAPE LIABILITY IF NO DISPOSAL OCCURRED DURING ITS PERIOD OF OWNERSHIP. |
|
Definition
FALSE.
IT WOULD ESCAPE LIABILITY. |
|
|
Term
TRUE OR FALSE.
SOME SUGGEST A PERSONAL REPRESENTATIVE MAY AVOID POTENTIAL EXPOSURE TO LIABILITY WITH RESPECT TO REAL PROPERTY BECAUSE, IN MAY STATES, TITLE LEGALLY PASSES TO THE LEGATEES AND DEVISEES UPON THE TESTATOR'S DEATH BUT IT IS USUALLY GIVEN POWER UNDER THE GOVERNING INSTRUMENT OR APPLICABLE LAW TO MANAGE AND ADMINISTER THE PROPERTY FOR THE BENEFICIARIES. THE EXERCISE OF ANY OF THESE POWERS MIGHT CAUSE THE FIDUCIARY TO BE TREATED AS AN OPERATOR. |
|
Definition
|
|
Term
| CONCERNING CERCLA, WHAT IS THE THIRD PARTY DEFENSE. |
|
Definition
| THE DEFENSE APPLIES WHERE THE OWNER OR OPERATOR CAN SHOW THAT IT HAD NO DIRECT OR INDIRECT CONTRACTUAL RELATIONSHIP WITH THE PARTY RESPONSIBLE FOR THE CONTAMINATION. AND IT EXERCISED DUE CARE WITH RESPECT TO THE HAZARDOUS MATERIALS, AND TOOK PRECAUTIONS AGAINST THE FORESEEABLE ACT OR OMISSIONS OF ANY THIRD PARTY AND THE CONSEQUENCES THAT MIGHT RESULT. |
|
|
Term
| CONCERNING CERCLA, WHAT IS THE INNOCENT PURCHASER DEFENSE. |
|
Definition
| IT PROTECTS ANY OWNER WHO CAN SHOW IT ACQUIRED THE PROPERTY AFTER CONTAMINATION TOOK PLACE AND DID NOT KNOW OR HAVE ANY REASON TO KNOW AT THE TIME OF THE ACQUISITION THAT HAZARDOUS MATERIAL HAD BEN DISPOSED OF ON THE PROPERTY. |
|
|
Term
| HOW DOES A FIDUCIARY SHOW THE INNOCENT PURCHASER DEFENSE FOR CERCLA? |
|
Definition
| THE FIDUCIARY MUST SHOW THAT IT MADE THE "ALL APPROPRIATE INQUIRY" INTO THE PREVIOUS OWNERSHIP AND USE OF THE PROPERTY, INCLUDING THE POSSIBLE EXISTENCE OF HAZARDOUS SUBSTANCES, IN ACCORDANCE WITH GENERALLY ACCEPTED GOOD COMMERCIAL AND CUSTOMARY STANDARDS AND PRACTICES. |
|
|
Term
| WHAT FIVE FACTORS DETERMINE THE "ALL APPROPRIATE INQUIRY" |
|
Definition
1. INQUIRY MUST BE PERFORMED OR SUPERVISED BY AN ENVIRONMENTAL PROFESSIONAL THAT MEETS CERTAIN EDUCATIONAL OR EXPERIENCE REQUIREMENTS.
2. INTERVIEW PAST AND PRESENT OWNERS, OPERATORS, AND OCCUPANTS MUST BE CONDUCTED TO GATHER INFORMATION REGARDING POTENTIAL CONTAMINATION.
3. MUST INCLUDE REVIEW OF [A] HISTORICAL SOURCES TO DETERMINE PREVIOUS USES AND OCCUPANCIES [2]RECORDED SEARCHES FOR CLEAN UP LIENS AGAINST THAT PROPERTY [3] FEDERAL STATE TRIBAL AND LOCAL GOVERNMENT RECORDS, WASTE DISPOSAL RECORDS, UNDERGROUND STORAGE TANK RECORDS, AND HAZARDOUS WASTE HANDLING, GENERATION, TREATMENT, DISPOSAL AND SPILL RECORDS.
4. INQUIRY MUST INCLUDE VISUAL INSPECTIONS OF THE PROPERTY AND ADJOINING PROPERTY AKA ASCERTAINABLE INFORMATION ABOUT THE PROPERTY.
5. INQUIRY MUST ACCOUNT FOR THE PURCHASE PRICE TO THE VALUE OF THE PROPERTY AND ACCOUNT FOR ANY SPECIALIZED KNOWLEDGE OR EXPERIENCE OF THE OWNER. |
|
|
Term
| WHAT IS THE BEQUEST OR INHERITANCE DEFENSE FOR CERCLA? |
|
Definition
A PERSON WHO ACQUIRED CONTAMINATED PROPERTY BY INHERITANCE OR BEQUEST IF THE ALL APPROPRIATE INQUIRY IS MADE.
IT APPLIES TO THE HEIR OF THE ESTATE, NOT THE ESTATE ITSEF.
A TRUSTEE OR EXECUTOR OF A DECEDENT'S ESTATE IS SUBSTANTIALLY PROTECTED FROM CERCLA LIABILITY BY THE ASSET CONSERVATION ACT. |
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Term
| what is a closely held corporation? |
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Definition
| a corporation for which more than 50% of the value of its outstanding stock is owned by five or fewer individuals. |
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Term
true or false
there are public investors in a closely held corporation. |
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Definition
false
there are no public investors in a closely held corporation. |
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Term
true or false
THERE IS NO MARKET PRICE PER SHARE FOR CLOSELY HELD STOCK. |
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Definition
|
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Term
| THE MARKET-VALUATION APPROACH IS A FOUR STEP PROCESS FOR VALUING CLOSELY HELD CORPORATIONS. WHAT ARE THE FOUR STEPS? |
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Definition
AKA: MARKET ANALYSIS
1. ANALYZE ECONOMY
2. ANALYZE THE INDUSTRY & INDUSTRY VS. ECONOMY.
3. ANALYZE THE SUBJECT COMPANY,
4. SELECT COMPARABLES [COMPARABLE COMPANIES] |
|
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Term
| WHAT VALUATION APPROACH FOR CLOSELY HELD CORPORATIONS REVIEWS THE ECONOMY, INDUSTRY, SPECIFIC STOCK AND ITS COMPETITORS? |
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Definition
| THE MARKET VALUATION APPROACH. |
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Term
| TO VALUE CLOSELY HELD SECURITIES, WHAT IS THE DISCOUNTED CASH FLOW APPROACH? |
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Definition
| THE MODEL STATES THAT THE VALUE OF A STOCK EQUALS THE PRESENT VALUE OF ALL FUTURE CASH FLOWS ACCUMULATING TO THAT STOCK, IN JUST THE SAME WAY STOCKS ARE VALUED. |
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Term
| WHAT ARE THREE FORMS OF REAL ESTATE OWNERSHIP? |
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Definition
1. DIRECT OWNERSHIP
2. PRIVATE REAL ESTATE FUNDS
3. REITS |
|
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Term
| WHAT ARE PRIVATE REAL ESTATE FUNDS? |
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Definition
| AS WITH PRIVATE EQUITY FIRMS, INVESTORS MAY INVEST THROUGH PARTNERSHIPS OFFERED BY GENERAL PARTNERS WHO WILL CHOOSE AND MANAGE THE REAL ESTATE INVETMENTS. |
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Term
|
Definition
REAL ESTATE INVESTMENT TRUSTS
ESSENTIALLY MUTUAL FUNDS OF REAL ESTATE INVESTMENTS AND TRADE ON THE STOCK MARKET. |
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Term
| ARE REITS TRADED ON THE STOCK MARKET? |
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Definition
|
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Term
| WHAT IS THE DIFFERENCE BETWEEN A REIT AND A PRIVATE REAL ESTATE FUND? |
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Definition
| A REIT IS ESSENTIALLY A MUTUAL FUND OF REAL ESTATE INVESTMENTS VS. A PRIVATE EQUITY FUND IS A PRIVATE INVESTMENT IN PARTNERSHIPS OFFERED BY GENERAL PARTNERS WHO CHOOSE THE REAL ESTATE INVESTMENTS. |
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Term
| WHAT FOUR THINGS DO FAIR SALE CONDITIONS REQUIRE? |
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Definition
1. THE BUYER & SELLER ACT PRUDENTLY
2. SPECIFIC SALE DATE
3. REASONABLE TRANSACTION TIME.
4. NO SPECIAL OR CREATIVE FINANCING. |
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Term
| WHAT ARE THREE APPROACHES TO ESTIMATE THE VALUE OF REAL ESTATE? |
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Definition
1. COST APPROACH
2. SALES COMPARISON APPROACH.
3. INCOME APPROACH |
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Term
| IN THE VALUATION OF REAL ESTATE, WHAT IS THE COST APPROACH? |
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Definition
| ASSUMES THE VALUE OF THE PROPERTY IS EQUAL TO THE SUM OF THE LAND VALUE PLUS THE DEPRECIATED REPLACEMENT COST OF THE BUILDING. |
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Term
| IN THE VALUATION OF REAL ESTATE, WHAT IS THE SALES COMPARISON APPROACH? |
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Definition
| COMPARES THE SUBJECT PROPERTY TO OTHER COMPARABLE PROPERTIES THAT HAVE SOLD RECENTLY. |
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Term
| IN THE VALUATION OF REAL ESTATE, WHAT IS THE INCOME APPROACH? |
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Definition
| ATTEMPTS TO DETERMINE WHAT THE TYPICAL INVESTOR WOULD BE WILLING TO PAY FOR THE STREAM OF NET OPERATING INCOME THAT IS EXPECTED FROM THE PROPERTY, USUALLY ON A BEFORE TAX BASIS. THE NOI ESTIMATE COMES FROM COMPARABLE PROPERTIES. |
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Term
| DO REITS PAY CORPORATE INCOME TAXES? |
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Definition
|
|
Term
| WHAT ENTITY DID CONGRESS EXPEMPT FROM THE DIVIDENT RELIEF ACT OF 2003? |
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Definition
|
|
Term
| WHAT IS THE CAPITAL GAINS RATE? |
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Definition
|
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Term
| WHAT IS A FINANCIAL DERIVATIVE? |
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Definition
| A FINANCIAL INSTRUMENT THAT HAS A VALUE BASED ON ANOTHER FINANCIAL INSTRUMENT. |
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Term
| NAME FIVE MAJOR FINANCIAL DERIVATIVES THAT COME UP IN PRIVATE PORTFOLIOS? |
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Definition
1. TO GO LONG [OWN] A PUT OPTION ON A STOCK THEY ALSO OWN, IN ORDER TO HEDGE [PROTECT THE DOWNSIDE VALUE] THE STOCK
2. GO SHORT[SELL] A CALL OPTION ON A STOCK THEY ALSO OWN, IN ORDER TO GENERATE ADDITIONAL INCOME FROM THE STOCKHOLDING.
3. INVESTORS MAY TRANSACT IN OPTIONS ON SHARES THEY DO NOT OWN FOR PURPOSES OF SPECULATION.
4. PRIVATE INVESTORS MAY ACCRUE WEALTH THROUGH GRANTS OF EMPLOYEE STOCK OPTIONS FROM THEIR EMPLOYERS.
5. MAY ENTER INTO COLLARS OR PREPAID FOWARDS [AKA VARIABLE FOWARDS] IN ORDER TO PROTECT THE VALUE OF APPRECIATED SECURITIES THEY OWN, WITHOUT HAVING TO SELL AND INCUR AN IMMEDIATE CAPITAL GAINS TAX. |
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Term
| CONCERNING INVESTMENTS, WHAT DOES IT MEAN TO GO LONG? |
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Definition
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Term
| CONCERNING INVESTMENTS, WHAT DOES IT MEAN TO GO SHORT? |
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Definition
|
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Term
|
Definition
| A CONTRACT THAT TIVES THE OWNER OR HOLDER THE RIGHT, BUT NOT THE OBLIGATION, TO BUY OR SELL AN ASSET AT SOME PREDETERMINED PRICE WITHIN A SPECIFIED PERIOD OF TIME. |
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Term
| WHAT ARE THE TWO MAJOR EXCHANGES OPTIONS ARE TRADED ON? |
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Definition
AMEX: AMERICAN STOCK EXCHANGE
CBOE: CHICAGO BOARD OPTIONS EXCHANGE |
|
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Term
| WHAT COMMISSION REGULATES THE OPTIONS MARKET? |
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Definition
| THE SEC: SECURITIES AND EXCHANGE COMMISSION. |
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Term
| WHAT ENTITY ISSUES US EXCHANGE TRADED OPTIONS? |
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Definition
| THE OPTIONS CLEARNING CORPORATION. |
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Term
|
Definition
| THE RIGHT TO BUY A GIVEN NUMBER OF SHARES OF A PARTICULAR STOCK AT A SPECIFIED PRICE ON OR BEFORE A GIVEN DATE. |
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Term
| AN IBM CALL OPTION WITH A $115K STRIKE PRICE AND EXPIRING IN DECEMBER 2008 GIVES BRAD, THE HOLDER, THE RIGHT TO DO WHAT? |
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Definition
| PURCHASE A SHARE OF IBM STOCK FOR $115 AT ANY TIME BEFORE ITS EXPIRATION ON THE THIRD SATURDAY IN DECEMBER 2008. |
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Term
|
Definition
| THE RIGHT TO SELL A GIVEN NUMBER OF SHARES OF A PARTICULAR STOCK AT A SPECIFIED PRICE ON OR BEFORE A GIVEN DATE. |
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Term
|
Definition
THE PREMIUM.
THE AMOUNT PAID BY THE BUYER OF THE OPTION TO THE SELLER [WRITER] |
|
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Term
| LISTED STOCK OPTION CONTRACTS ARE WRITTEN IN HOW MANY SHARE INCREMENTS? |
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Definition
|
|
Term
TRUE OR FALSE
AN INVESTOR MAY BUY A PUT OPTION ON A STOCK HE OR SHE CURRENTLY OWNS TO PLACE A FLOOR UNDER THE VALUE OF THE STOCK. |
|
Definition
|
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Term
| AN INVESTOR MAY BUY A PUT OPTION ON A STOCK HE OR SHE CURRENTLY OWNS TO PLACE A FLOOR UNDER THE VALUE OF THE STOCK. THIS IS ALSO KNOWN AS THIS: |
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Definition
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Term
| WHAT IS AN EXERCISE PRICE OR STRIKE PRICE? |
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Definition
| THE SHARE PRICE AT WHICH THE OPTION HOLDER MAY BUY OR SELL THE 100 SHARES OF STOCK COVERED BY EACH OPTION CONTRACT. |
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Term
| STOCK OPTIONS EFFECTIVELY EXPIRE ON WHAT DATE? |
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Definition
| THE THIRD FRIDAY OF THE EXPIRATION MONTH. |
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Term
| WHAT ARE EUROPEAN OPTIONS? |
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Definition
| CAN ONLY BE EXERCISED ON THE EXPIRATION DATE. AMERICAN OPTIONS CAN BE EXERCISED AT ANY TIME ON OR BEFORE A GIVEN DATE. |
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Term
TRUE OR FALSE
IF WRITERS [SELLERS] SELL A CALL OPTION ON A STOCK THEY DO NOT OWN, THE WRITERS ARE SAID TO HAVE WRITTEN A NAKED CALL. |
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Definition
|
|
Term
TRUE OR FALSE
IF WRITERS [SELLERS] SELL A CALL OPTION ON A STOCK THEY DO OWN, THE WRITERS ARE SAID TO HAVE WRITTEN A COVERED CALL. |
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Definition
|
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Term
| WHAT IS THE DIFFERENCE BETWEEN A NAKED AND COVERED CALL CONCERNING OPTIONS? |
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Definition
| A NAKED CALL IS SELLING AN OPTION THAT THE WRITER DOES NOT OWN VS. A COVERED CALL IS SELLING AN OPTION THAT THE WRITER DOES OWN. IF THE WRITER SELLS AN OPTION THAT THEY DO OWN, IT IS NORMALLY CALLED A PREMIUM BECAUSE THEY ARE EARNING EXTRA INCOME FROM THE STOCK THEY ALREADY OWN. |
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Term
TRUE OR FALSE
IF THE UNDERLYING STOCK'S PRICE IS ABOVE THE EXERCISE PRICE OF A CALL OPTION, THE OPTION IS SAID TO BE IN THE MONEY. |
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Definition
TRUE.
IN ESSENCE, THE OPTION WOULD HAVE IMMEDIATE VALUE. |
|
|
Term
TRUE OR FALSE
IF THE UNDERLYING STOCK PRICE IS LESS THAN THE EXERCISE PRICE OF A CALL OPTION, THE OPTION IS SAID TO BE OUT OF THE MONEY. |
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Definition
|
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Term
| WHAT ARE EMPLOYEE STOCK OPTIONS? |
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Definition
| SPECIAL CASE OF OPTIONS THAT ARE ALWAYS CALL OPTION, ISSUED AT THE MONEY [THE EXERCISE PRICE IS EQUAL TO THE MARKET PRICE ON THE DATE OF ISSUE], ARE NOT TRADED ON THE MARKETS, HAVE TERMS SET BY THE MPLOYER AND HAVE A VERY LONG EXPIRATION PERIOD [TYPICALLY TEN YEARS]. |
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Term
| HOW LONG IS AN EMPLOYER STOCK OPTION EXPIRATION PERIOD, TYPICALLY? |
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Definition
|
|
Term
TRUE OR FALSE
EMPLOYER STOCK OPTIONS NORMALLY HAVE A IN THE MONEY CALL OPTION. |
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Definition
FALSE.
THEY ARE NORMALLY AT THE MONEY WHICH MEANS THE EXERCISE PRICE EQUAL TO THE MARKET PRICE ON THE DATE OF ISSUE. |
|
|
Term
|
Definition
| A COMBINATION OF A PURCHASED PUT OPTION AND A SOLD CALL OPTION ON THE SAME STOCK, IN A TRANSACTION USED TO PROTECT THE DOWNSIDE OVALUE OF THE STOCK WITHOUT PAYING A CASH COST. |
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Term
| WHAT IS A CASH COST CONCERNING COLLARS? |
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Definition
| THE IMPLICIT PREMIUM THE SOLD CALL PAYS FOR THE PREIMUM OF THE PURCHASED PUT. PURCHASERS ENTER INTO A COLLAR WHEN THEY WISH TO PROTECT THE VALUE OF THE STOCK THEY OWN WITHOUT SELLING IT AN INCURRING CAPITAL GAINS TAX. |
|
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Term
| HOW LONG DO TYPICAL COLLAR TRANSACTIONS LAST? |
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Definition
|
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Term
| WHAT ARE THE DIFFERENCES BETWEEN A COLLAR AND A PREPAID VARIABLE FOWARD? |
|
Definition
| THE PREPAID VARIABLE FOWARD INCLUDE AN UPFRONT CASH FLOW TO THE HOLDER OF THE STOCK, WHICH WILL BE REPAID AT THE END OF THE TRANSACTION THROUGH THE DELIVERY EITHER OF CASH OR OF A VARYING NUMBER OF SHARES [FEWER SHARES IF THE STOCK PRICE HAS RISEN AND MORE IF IT HAS FALLEN] |
|
|
Term
TRUE OR FALSE
COLLARS AND PRE-PAID VARIABLE FOWARDS ARE OVER THE COUNTER TRANSACTIONS THAT ARE STRUCTURED BY AN INVESTMENT BANK OR OTHER OPTIONS DEALER, WHICH GENERALLY BECOMES THE COUNTERPARTY. |
|
Definition
|
|
Term
TRUE OR FALSE
OPTIONS CAN BE PURCHASED ON MARGIN. |
|
Definition
FALSE
OPTIONS CANNOT BE PURCHASED ON MARGIN BECAUASE THEY ARE INHERINTLY LEVERAGED. THE BUYER OF THE OPTION PAYS THE ENTIRE OPTION PREMIUM UP FRONT. |
|
|
Term
TRUE OR FALSE
SELLERS [WRITERS] OF NAKED OPTIONS MUST PUT MONEY INTO A MARGIN ACCOUNT, EVEN THOUGH THEY ARE SELLING THE PRODUCT. |
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Definition
TRUE
IF THE SELLER BEGINS LOSING MONEY, THE LOSSES ARE TAKEN FROM THE MARGIN ACCOUNT. |
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Term
| HOW ARE STOCK OPTIONS SETTLED? |
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Definition
| THE EXCHANGE OF THE STOCK CERTIFICATE. |
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Term
| HOW ARE CURRENCY OPTIONS SETTLED? |
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Definition
| DELIVERY OF THE FOREIGN CURRENCY TO AN APPROVED DEPOSITORY IN THE COUNTRY OF ORIGIN AT THE PRE-SPECIFIED EXCHANGE RATE. |
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Term
| HOW ARE OPTIONS ON FUTURES SETTLED? |
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Definition
| THE BUYER OBTAINS A POSITION IN FUTURES THAT CAN BE DEFINED ON PYSICALS, INTEREST RATES AND INDEXES. AS A RESULT, THE OWNER'S RIGHT TO BUY OR SELL SOME UNDERLYING ASSET BECOMES AN OBLIGATION TO BUY OR SELL THE UNDERLYING ASSET [I.E. CORN] |
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Term
| HOW ARE OPTIONS WITH CASH SETTLEMENT SETTLED? |
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Definition
|
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Term
| what is the prospective purchaser defense for CERCLA? |
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Definition
| PROTECTS A PURCHASER OF PROPERTY WITH KNOWLEDGE OF HAZARDOUS SUBSTANCE CONTAMINATION. TO QUALIFY THE PURCHASER MUST NOT BE AFFICILIATED WITH A LIABLE THIRD PARTY, MUST CONDUCT THE ALL APPROPRIATE INQUIRY, MUST NOT IMPEDE A RESPONSE ACTION OR NATURAL RESOURCE RESTORATION AND MUST TAKE REASONABLE STEPS TO STOP ANY CONTINUING RELEASE, PREVENT ANY THREATENED FUTURE RELEASE, AND PREVENT EXPOSURE TO ANY PREVIOUSLY RELEASED CONTAMINATED SURFACE. |
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Term
| WHAT CERCLA DEFENSE WAS CREATED THROUGH THE BROWNSFIELDS ACT? |
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Definition
| THE PROSPECTIVE PURCHASER DEFENSE. |
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Term
| CONCERNING PRECAUTIONARY MEASURES FOR POTENTIAL ENVIRONMENTAL LIABILITY, WHAT IS THE BENEFIT OF AN EPS [ENVIRONMENTAL POLICY STATEMENT]? |
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Definition
| HELPFUL IN ESTABLISHING THE FIDUCIARIES GOOD FAITH EFFORT TO RESPOND TO ENVIRONMENTAL PROBLEMS IN THE EVENT THAT THE FIDUCIARY LATER BECOMES INVOLVED IN LITIGATION. |
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Term
| WHAT IS AN ENVIRONMENTAL AUDIT? |
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Definition
| A FORMAL EXAMINATION AND ASSESSMENT OF PROPERTY CONDUCTED BY A LICENSED PROFESSIONAL OR FIRM. |
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Term
| CONCERNING ENVIRONMENTAL AUDITS, HOW IS A THREE PHASE AUDIT CONDUCTED? |
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Definition
1. EVALUATION OF THE SITE, REVIEW CHAIN OF TITLE, AND FORMER PROPERTY USES AND OPERATIONS.
2. DETAILED EXAMINATION OF THE SITE DESIGNED TO IDENTIFY THE NATURE AND SCOPE OF ANY CONTAMINATION. INCLUDES AN EVALUATION OF SOIL AND WATER SAMPLES TO DETERMINE THE PRESENCE AND AMOUNT OF CONTAMINATION.
3. FEASIBILITY STUDY ON OPTIONS FOR CLEANING UP THE PROPERTY AND DESIGN OF A CLEANUP PROGRAM. |
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Term
TRUE OR FALSE
LIABILITY MAY BE IMPOSED UPON A FIDUCIARY IN ITS REPRESENTATIVE CAPACITY UNDER THE COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION AND LIABILITY ACT OF 1980 [CERCLA] AS AMENDED ONLY IF THE FIDUCIARY IS SHOWN TO HAVE BEEN RESPONSIBLE FOR THE CONTAMINATION. |
|
Definition
FALSE
CERCLA PERMITS RECOVERY OF THE COSTS OF CLEANING UP CONTAMINATED SITES FROM THE CURRENT OWNER OF THE PROPERTY WITHOUT REGARD TO FAULT.LIABILITY IS STRICT, JOIN AND SEVERAL. |
|
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Term
| UPON WHOM MAY LIABILITY BE IMPOSED UNDER CERCLA? |
|
Definition
WHOMEVER ARRANGED FOR THE DISPOSAL OR TREATMENT OR TRANSPORT.
ENTITY THAT ACCEPTED HAZARDOUS SUBSTANCES.
CURRENT OWNER
ORIGINAL OWNER
FIDUCIARY
EXEXCUTOR
BENEFICIARIES
INTERIM OWNER |
|
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Term
| UNDER CERCLA, MUST THE ENFIRONMENTAL LIABILITY OF A FIDUCIARY BE BASED UPON DIRECT OWNERSHIP OR OPERATION OF CONTAMINATED PROPERTY? |
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Definition
| NO. LIABILITY MAY BE GATHERED WITHOUT DIRECT OWNERSHIP OR OPERATION. |
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Term
| IF A FIDUCIARY'S LIABILITY IN A REPRESENTATIVE CAPACITY UNDER CERCLA LIMITED TO THE VALUE OF THE CONTAMINATED PROPERTY? |
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Definition
NO
CERCLA LIABILITY EXTENDS TO ALL ASSETS OF THE PERSON HELD LIABLE. |
|
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Term
| WHEN MAY A FIDUCIARY BE PERSONALLY LIABLE UNDER CERCLA? THAT IS, WHEN MAY A FIDUCIARY'S CERCLA LIABILITY REACH BEYOND THE ASSETS HELD IN A REPRESENTATIVE CAPACITY? |
|
Definition
| A FIDUCIARIY'S CERCLA LIABILITY IS LIMITED TO THE ASSETS HELD IN A REPRESENTATIVE CAPACITY UNLESS THE FIDUCIARY'S NEGLIGENCE CAUSES OR CONTRIBUTES TO THE CONTAMINATION [SEE ASSET CONSERVATION ACT] |
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Term
| BESIDES THE FEDERAL GOVERNMENT, WHAT OTHER PARTIES MAY ASSERT CLAIMS AGAINST A FIDUCIARY FOR ENVIRONMENTAL DAMAGE |
|
Definition
BENEFICIARIES
OTHER POTENTIALLY RESPONSIBLE PARTIES
STATE AND LOCAL GOVERNMENTS |
|
|
Term
| OTHER THAN AN ACT OF GOD OR AN ACT OF WAR, WHAT IS THE ONLY STATUTORY DEFENSE AVAILABLE UNDER CERCLA TO AN OWNER OR OPERATOR OF CONTAMINATED PROPERTY. |
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Definition
| ACT OR OMISSION OF A THIRD PERSON, OTHER THAN AN EMPLOYEE OR AGENT OF A THIRD PERSON. |
|
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Term
| UNDER CERCLA, WHAT VARIATIONS OF THE THIRD PARTY DEFENSE MAY BE AVAILABLE TO A FIDUCIARY ASSERTING THE THIRD PARTY DEFENSE? |
|
Definition
LACK OF DIRECT OR INDIRECT CONTRACTUAL RELAATIONSHIP WITH THE PARTY RESPONSIBLE FOR THE CONTAMINATION.
2. LACK OF KNOWLEDGE OF ENVIRONMENTAL HAZARDS, DESPITE HAVING MADE ALL APPROPRIATE INQUIRIES INTO THE PREVIOUS OWNERSHIP AND USE OF THE PROPERTY. |
|
|
Term
| WHAT TYPES OF POWERS MAY BE INCLUDED IN A GOVERNING INSTRUMENT TO ENABLE A FIDUCIARY TO PROTECT TRUST OR ESTATE ASSETS, AND THE FIDUCIARY'S PERSONAL ASSETS, FROM LIABILITY FOR ENVIRONMENTAL DAMAGE? |
|
Definition
1. POWER TO CLEAN UP
2. POWER TO DISCLAIM AN INTEREST
3. POWER TO INSPECT AND MONITOR
4. RIGHT TO REFUSE CONTRIBUTION
5. POWER TO DISCLAIM
6. POWER TO SEGREGATE
7. WARRANTY OF THE SETTLOR
8. INDEMNIFICATION FROM THE SETTLOR.
9. EXONERATION FROM LIABILITY. |
|
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Term
| WILL AN INDEMNIFICATION AGREEMENT, UNDER WHICH THE SETTLOR AGREES TO HOLD THE TRUSTEE HARMLESS FOR ANY ENVIRONMENTAL LIABILITY ASSESSED AGAINST THE TRUSTEE, PROTECT THE TRUSTEE FROM LIABILITY UNDER CERCLA? |
|
Definition
NO
AN INDEMNIFICATION AGREEMENT WILL NOT PREVENT A TRUSTEE FROM BEING HELD LIABLE IN A CERCLA ACTION. |
|
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Term
JOHN CREATES A TRUST WITH INCOME DURING LIFE TO SAM, WITH THE REMAINDER T SUE. JOHN RETAINS THE RIGHT TO AMEND OR REVOKE THE AGREEMENT. SUE WILL HAVE TO DISCLAIM HER INTEREST IN THE TRUST WITHIN NINE MONTHS OF:
A. SAM'S DEATH
B. JOHN'S DEATH
C. CREATION OF THE TRUST |
|
Definition
|
|
Term
THE CHINESE WALL CAN BEST BE DESCRIBED AS PROHIBITING:
A. ACCESS TO THE PERSONAL CREDIT FILES OF SENIOR OFFICERS OF A CORPORATE CUSTOMER.
B. INVESTMENT OFFICERS FROM DISCLOSING TO COMMERCIAL BANKERS THE DETAILS OF PORTFOLIO TRANSACTIONS
C. DISCLOSURE OF MATERIAL NON PUBLUC INFORMATION ON PUBLICLY TRADED COMPANIES BETWEEN COMMERCIAL BANKERS AND OTHER BANK EMPLOYEES. |
|
Definition
| C. DISCLOSURE OF MATERIAL NON PUBLUC INFORMATION ON PUBLICLY TRADED COMPANIES BETWEEN COMMERCIAL BANKERS AND OTHER BANK EMPLOYEES. |
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Term
YOUR BANK IS CO-TRUSTEE OF AN IRREVOCABLE TRUST. THE INDIVIDUAL TRUSTEE REQUESTS THAT YOU BUY SHARES OF YOUR OWN BANK STOCK BECAUSE HE BELIEVES IT IS CURRENTLY UNDERVALUED. YOU SHOULD DEAL WITH THIS REQUEST BY:
A. BUYING THE STOCK, EXPRESSING NO OPINION BECAUSE YOU HAVE A POTENTIAL CONFLICT.
B. BUYING THE STOCK AFTER OBTAINING A WRITTEN REQUEST, APPROVAL AND INDEMNIFICATION FROM THE CO-TRUSTEE.
C. DEFERRING THE DECISION, INDICATING THAT YOU BELIEVE THE STOCK IS NOT UNDERVALUED.
D. DECLINING TO PURCHASE, INDICATING THAT BUYING THE STOCK IS CONTRARY TO CURRENT APPLICABLE REGULATIONS. |
|
Definition
| D. DECLINING TO PURCHASE, INDICATING THAT BUYING THE STOCK IS CONTRARY TO CURRENT APPLICABLE REGULATIONS. |
|
|
Term
AS A NEW BUSINESS OFFICER, YOU ARE INTRODUCED SOCIALLY TO A PERSON WHO IS REPUTED TO HAVE SUBSTANTIAL CRIMINAL CONNECTIONS AND HAS SERVED A PRISON SENTENCE. A WEEK LATER, THIS INDIVIDUAL CALLS TO ARRANGE AN APPOINTMENT. DURING TH EMEETING, HE SAYS THAT HE WISHES TO CREATED A $2mm TRUST FOR THE BENEFIT OF HIS HANDICAPPED DAUGHTER. YOUR BANK WOULD BE SOLE TRUSTEE AND WOULD RECEIVE FULL COMMISSIONS. NO CASH IS INVOLVED IN FUNDING THE TRUST. YOU SHOULD:
A. ACCEPT THE TRUST BECAUSE THE PURPOSE IS WORTHY.
B. ACCEPT THE TRUST TO AVOID THE POSSIBLE ANGER OF A POTENTIALLY VIOLENT INDIVIDUAL.
C. REJECT THE TRUST BECAUSE OF THE LIKELIHOOD OF TAINTED FUNDING. |
|
Definition
| C. REJECT THE TRUST BECAUSE OF THE LIKELIHOOD OF TAINTED FUNDING. |
|
|
Term
A DECLARATION OF TRUST IS THE CREATION OF A TRUST BY:
A. STATING IN WRITING THAT THE DECLARANT IS HOLDING CERTAIN ASSETS IN TRUST FOR ANOTHER.
B. TRANSFERRING PROPERTY TO ANOTHER TRUSTEE.
C. OPENING N ACCOUNT FOR THE BENEFIT OF ANOTHER PERSON. |
|
Definition
| A. STATING IN WRITING THAT THE DECLARANT IS HOLDING CERTAIN ASSETS IN TRUST FOR ANOTHER. |
|
|
Term
PRECATORY LANGUAGE IS LANGUAGE IN A TRUST INSTRUMENT THAT:
A. EXPRESSES A WISH OR RECOMMENDATION, BUT MAY NOT BE BINDING.
B. LEGALLY OBLIGATES THE TRUSTEE TO A CERTAIN COURSE OF ACTION.
C. GENERALLY OVERRIDES ANY OTHER PROVISIONS.
D. EXPRESSLY STATES THE POWERS OF THE TRUSTEE. |
|
Definition
| A. EXPRESSES A WISH OR RECOMMENDATION, BUT MAY NOT BE BINDING. |
|
|
Term
WHICH OF THE FOLLOWING IS A VALID RES OR CORPUS?
A. TITLE TO A PARCEL OF VACANT LAND
B. NET PROFITS FOR THE FOLLOWING YEAR FROM THE DONOR'S BUSINESS
C. THE RIGHT TO RECEIVE LIFE INSURANCE PROCEEDS WHERE THE SETTLOR RESERVES THE RIGHT TO CHANGE BENEFICIARIES OR CANCEL THE POLICY.
D. AN ASSET DESCRIBED BY THE SETTLOR AT THE TIME OF CREATION OF THE TRUST, BUT NOT ACTUALLY CONTRIBUTED BY THE SETTLOR UNTIL LATER ACQUIRED. |
|
Definition
| A. TITLE TO A PARCEL OF VACANT LAND |
|
|
Term
UNDER WHAT CIRCUMSTANCES MAY AN INDIVIDUAL CO-TRUSTEE COMPLETELY AVOID LIABILITY FOR DELEGATING DISCRETIONARY POWERS TO A CORPORATE TRUSTEE?
A. WHEN THE CORPORATE TRUSTEE HAS BANKERS' BLANKET BOND INSURANCE.
B. WHEN THE INDIVIDUAL CO-TRUSTEE REALIZES THAT HE OR SHE LACKS THE HIGHLY SPECIALIZED KNOWLEDGE AND EXPERIENCE TO EXEWRCISE SUCH POWERS AND DELEGATES HIS OR HER POWERS IN WRITING TO THE TRUSTEE.
C. WHEN THERE IS A PROPERLY EXECUTED LETTER OF INDEMNITY FROM ALL ADULT INTERESTED PARTIES IN THE TRUST.
D. UNDER NO CIRCUMSTANCES. |
|
Definition
| D. UNDER NO CIRCUMSTANCES. |
|
|
Term
WHICH OF THE FOLLOWING TRUSTS IS IMPOSED BY A COURT ON A HOLDER OF PROPERTY TO PREVENT UNJUST ENRICHMENTS?
A. RESULTING
B. CONSTRUCTIVE
C. EXPRESS
D. CRUMMEY |
|
Definition
|
|
Term
WHICH OF THE FOLLOWING SITUATIONS REPRESENTS COMPLIANCE WITH THE REVISED UNIFORM PRINCIPAL AND INCOME ACT?
A. ALL PROCEEDS FROM ASSETS HELD BY THE TRUST ARE ALLOCATED ONE-HALF TO PRINCIPAL AND ONE-HALF TO INCOME.
B. A TRUSTEE MAKES A PRUDENT, MODERN, PORTFOLIO-BASED INVESTMENT DECISION, BU THE DECISION SKEWS THE RETURN IN FAVOR OF THE PRINCIPAL BENEFICIARIES.
C. THE REALIZED CAPITAL GAIN ON THE SALE OF REAL PROPERTY IS ALLOCATED TO INCOME AFTER PAYMENT OF ALL EXPENSES OF SALE.
D. ALL PROCEEDS FROM THE SALE OF A WORK WHOSE COPYRIGHT IS HELD BY THE TRUST ARE ALLOCATED TO INCOME. |
|
Definition
| B. A TRUSTEE MAKES A PRUDENT, MODERN, PORTFOLIO-BASED INVESTMENT DECISION, BU THE DECISION SKEWS THE RETURN IN FAVOR OF THE PRINCIPAL BENEFICIARIES. |
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Term
IF RETENTION OR ACQUISITION OF A CLOSELY HELD BUSINESS INTEREST IS AUTHORIZED BY THE TRUST INSTRUMENT, WHICH OF THE FOLLOWING ACCURATELY DESCRIBES THE TRUSTEE'S POSITION?
A. THE TRUSTEE'S POSITION WITH RESPECT TO THE DISTRIBUTIONS OF BUSINESS RECEIPTS WILL BE GOVERNED BY THE EXPRESS OR LIMITED TERMS OF THE TRUST.
B. A TRUSTEE IS NOT ALLOWED TO RETAIN R ACQUIRE A CLOSELY HELD BUSINESS INTEREST, REGARDLESS OF AUTHORIZATION IN THE TRUST INSTRUMENT, WITHOUT COURT APPROVAL.
C. THE TRUSTEE SHOULD SELL THE CLOSELY HELD BUSINESS INTERESTS AS SOON AS POSSIBLE AND INVEST THE PROCEEDS IN PROPER TRUST INVESTMENTS.
D. THE TRUSTEE WILL BE SURCHARGED REGARDLESS OF THE TERMS OF THE INSTRUMENT. |
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Definition
| A. THE TRUSTEE'S POSITION WITH RESPECT TO THE DISTRIBUTIONS OF BUSINESS RECEIPTS WILL BE GOVERNED BY THE EXPRESS OR LIMITED TERMS OF THE TRUST. |
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Term
WHICH OF THE FOLLOWING IS NOT CONSIDERED AN ASPECT OF THE "ALL APPROPRIATE INQUIRY" REQUIRED FOR A FIDUCIARY TO ESTABLISH AN INNOCENT-PURCHASER DEFENSE TO CERCLA LIABILIT?
A. INTERVIEWS WITH PAST AND PRESENT OWNERS, OPERATORS AND OCCUPANTS TO GATHER INFORMATION REGARDING POTENTIAL CONTAMINATION.
B. DETAILED SOIL AND AIR SAMPLING BY AN APPROPRIATELY CERTIFIED LABORATORY.
C. AN ECONOMIC ASSESSMENT OF WHETHER THE PURCHASE PRICE SUGGESTED THE PRESENCE OF CONTAMINATION.
D. AN EXTENSIVE ANALYSIS OF NEIGHBORING SITES. |
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Definition
| B. DETAILED SOIL AND AIR SAMPLING BY AN APPROPRIATELY CERTIFIED LABORATORY. |
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Term
ON JUNE 11, 2010, YOUR AGENT-WHOM YOU HAVE FAILED TO SUPERVISE PROPERLY-DIVERTED INCOME FROM THE TRUST INTO HIS PERSONAL ACCOUNT. YOU DISCOVERED YOUR AGENT'S ACTION ON SEPTEMBER 3, 2010. UNDER THE UTC, WHAT IS THE LAST DAY ON WHICH A BENEFICIARY CAN FILE A SURCHARGE ACTION AGAINST YOU BASED ON THESE CIRCUMSTANCES?
A. JUNE 11, 2011
B. OCTOBER 13, 2011
C. OCTOBER 13, 2012
D. MARCH 3, 2011 |
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Definition
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Term
A FIDUCIARY IS ENTITLED TO ALIMITATION ON PERSONAL LIABILITY FOR ENVIRONMENTAL WASTE UNDER CERCLA IN WHICH OF THE FOLLOWING SITUATIONS:
A. THE FIDUCIARY REFUSES TO ADMINISTER A FACILITY THAT WAS CONTAMINATED BEFORE THE FIDUCIARY RELATIONSHIP BEGAN.
B. THE FIDUCIARY ONLY HOLDS AFFECTED ASSETS IN A FIDUCIARY CAPACITY.
C. THE FIDUCIARY TAKES OWNERSHIP OF CONTAMINATED PROPERTY WITHOUT ANY KNOWLEDGE OF THE CONTAMINATION, WHICH IS CONCEALED.
D. THE FIDUCIARY HOLDS THE POWER TO MANAGE CONTAMINATED PROPERTY, BUT DOES NOT EXERCISE IT. |
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Definition
| A. THE FIDUCIARY REFUSES TO ADMINISTER A FACILITY THAT WAS CONTAMINATED BEFORE THE FIDUCIARY RELATIONSHIP BEGAN. |
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Term
CY PRES ALLOWS THE:
A. TRUSTEE TO MODIFY THE TRUST PROVISIONS OF A CHARITABLE TRUST TO MAKE THEM WORKABLE.
B. COURT TO MODIFY THE PROVISIONS OF A CHARITABLE TRUST TO MAKE THEM WORKABLE.
C. TRUSTEE TO EXTEND THE TERM OF THE TRUST BEYOND THE TERM ALLOWED BY THE RULE AGAINST PERPETUITIES.
D. COURT TO EXTEND THE TERM OF THE TRUST BEYOND THE TERM ALLOWED BY THE RULE AGAINST PERPETUITIES. |
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Definition
| B. COURT TO MODIFY THE PROVISIONS OF A CHARITABLE TRUST TO MAKE THEM WORKABLE. |
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Term
YOU SERVE AS THE TRUSTEE OF A NUMBER OF RELATIVELY SMALL SEPARATE TRUSTS AND ARE CONCERNED ABOUT FULFILLING YOUR DUTY TO DIVERSIFY EACH TRUST GIVEN THE LIMITED ASSETS. ONE OF YOUR ASSOCIATES SUGGESTS YOU SET UP A COMMON TRUST FUND, WHICH WOULD ALLOW YOU TO LUMP TOGETHER THE ASSETS OF THE DISTINCT TRUSTS FOR THE PURPOSES OF INVESTING THEM, WHICH TRUST OWNING A SHARE PROPORTIONATE TO THE PURPOSES OF THE INVESTING THEM, WITH EACH TRUST OWNING A SHARE PROPORTIONATE TO THE ASSETS IT CONTRIBUTED. IN SETTING UP THE FUND, WHAT SHOULD YOU BE SURE TO DO?
A. ENSURE THAT THE BANK, NOT THE TRUSTS, IS CHARGED FOR THE COSTS OF SETTING UP THE FUND.
B. HIRE A COMPETENT INVESTMENT MANAGER FROM ANOTHER FINANCIAL INSTITUTION TO ENSURE DISINTERESTED MANAGEMENT OF THE FUND.
C. SET UP BIANNUAL AUDITS FUNDED BY YOUR BANK'S BOARD OF DIRECTORS.
D. MAKE AN ORAL PRESENTATION TO THE BANK'S BOARD OF DIRECTORS ADVISING THEM OF YOUR REASONING AND INTENT TO SET UP THE FUND. |
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Definition
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Term
WHILE SERVING AS TRUSTEE, YOU BECAME AWARE OF A PROMISING BUSINESS OPPORTUNITY IN WHICH TRUST ASSETS COULD BE INVESTED. HOWEVER, RATHER THAN INVESTING THE TRUSTS ASSETS COULD BE INVESTED. HOWEVER, RATHER THAN INVESTING THE TRUST ASSETS, YOU INVESTED YOUR OWN PERSONAL FUNDS AND TURNED A TIDY PROFIT. THE BENEFICIARIES OF THE TRUST BRING SUIT AGAINST YOU FOR BREACH OF TRUST, AND WIN. WHICH OF THE FOLLOWING ARE YOU NOT OBLIGATED TO DO?
A. PAY BACK ANY AMOUNTS NECESSARY TO PREVENT YOU FROM BENEFITING PERSONALLY FROM THE INVESTMENT.
B. PAY TO THE BENEFICIARIES DISTRIBUTIONS THAT THEY WOULD HAVE RECEIVED HAD YOU INVESTED TRUST FUNDS RATHER THAN YOUR OWN.
C. PAY TO TRUST PRINCIPAL THE VALUE THAT THE TRUST WOULD HAVE ATTAINED IF NOT FOR YOUR BREACH.
D. RESIGN AS TRUSTEE. |
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Definition
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Term
X DIED, LEAVING A TRUST WOTH $15MM. ACME TRUST IS ACTING AS X'S SUCCESSOR TRUSTEE. THE TRUST INCLUDES $8MM IN NOTES SECURED BY STOCK IN TKSC CORPORATION AND BY REAL ESTATE WHERE TKSC DOES BUSINESS. TKSC DEVELOPES HAZARDOUS CHEMICALS. THE NOTES WERE PAYMENT TO THE DECEDENT FOR THE SALE OF HIS STOCK, WHICH CONSTITUTED CONTROLLING INTEREST, IN THE TKSC BUSINESS AND TITLE IN THE REAL ESTATE TO HIS ONLY SON, WHO I SNOW THE SOLE BENEFICIARY OF HIS IRREVOCABLE TRUST. THE SON EXERCISES ACTIVE DAY TO DAY CONTROL OVER TKSC ACTIVITIES. THE EPA HAS LISTED TKSC CORPORATION'S FACILITY AS A SUPERFUNDS ITE. WHICH OF THE FOLLOWING PARTIES IS MOST LIKELY TO BE HELD RESPONSIBLE FOR AT LEAST SOEM PART OF THE CLEAN UP COSTS?
A. TRUST ASSETS
B. TRUST ASSETS, UNLESS THEY ARE PROTECTED BY A SPENDTHRIFT CLAUSE
C. ACME TRUST
D. X'S SON, AS CURRENT OWNER-OPERATOR OF THE COMPANY AND ITS REAL ESTATE. |
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Definition
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Term
IN 1995, SMITH PURCHASED 100 ACRES OF VACANT LAND FROM JONES. SMITH DIED IN 2010, NAMING ACME TRUST COMPANY HIS EXECUTOR, IN WHICH CAPACITY THE TRUST COMPANY IS CURRENTLY ACTING. THE ESTATE DISTRIBUTES THE LAND OUTRIGHT TO SMITH'S CHILDREN, ETHEL AND FRANK, WHO ALREADY HAVE TAKEN TITLE TO THE VACANT LAND FROM THE EXECUTOR. THE ESTATE CONTINUES TO HOLD THE REMAINDER OF SMITH'S ASSETS. THE VACANT LAND WAS PREVIOUSLY OWNED BY THE US GOVERNMENT, WHICH USED IT AS A MISSILE TESTING SITE, CAUSING THE PROPERTY TO BE CONTAMINATED. THE PROPERTY'S PRIOR USE WAS KNOWN TO SMITH AND UNKNOWN TO ETHEL AND FRANK. WHICH OF THE FOLLOWING COMBINATIONS OF PARTIES DESCRIBED ABOVE IS MOST LIKELY TO BE HELD RESPONSIBLE FOR THE ENTIRE COST OF AN ENVIRONMENTAL CLEAN UP?
A. SMITH'S ESTATE AND ACME TRUST.
B. SMITHS' ESTATE, ETHEL, AND FRANK.
C. SMITH'S ESTATE, ACME TRUST, ETHEL AND FRANK
D. US GOVERNMENT AND SMITH'S ESTATE. |
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Definition
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Term
YOU HAVE RECENTLY TAKEN OVER THE ADMINISTRATION OF A TRUST AFTER THE REMOVAL OF A PRIOR TRUSTEE. AS PART OF YOUR ACCEPTANCE OF SUCCESSOR TRUSTEE DUTIES, YOU SHOULD NOT DO WHICH OF THE FOLLOWING.
A. OBTAIN TAX RECORDS GOING BACK AT LEAST THREE YEARS, AND EXAMINE THEM FOR POTENTIALLY INACCURATE INFORMATION.
B. MAKE SURE THE LANGUAGE UNDER WHICH YOU ARE SERVING PROVIDES YOU WITH SUFFICIENT AUTHORITY TO ACT AS A SUCCESSOR TRUSTEE.
C. ANALYZE THE MOST RECENT ACCOUNTING BY THE PRIOR TRUSTEE.
D. SEQUESTER THE RECORDS FROM THE PRIOR TRUSTEE AND BEGIN KEEPING RECORDS OF YOUR ACTIVITIES AS TRUSTEE. |
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Definition
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Term
A CHARITABLE REMAINDER UNITRUST OR ANNUITY TRUST MAY NOT INCLUDE A PROVISION:
A. STARTING THAT WHEN THE TRUST ENDS, THE ASSETS MAY BECOME THE SOLE PROPERTY OF THE CHARITABLE INSTITUTION.
B. STATING THAT THE TRUST CAN PROVIDE LIFE INCOME FOR A SURVIVING SPOUSE.
C. ESTABLISHING A TERM OF YEARS EXCEEDING 20 YEARS.
D. REQUIRING THE FIXED PERCENTAGE PAYMENT TO BE 5% OR GREATER. |
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Definition
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Term
EXCEPT IN A CASE OF ILLEGAILTY OF OBJECTIVE, WHEN AN EXPRESS TRUST FAILS:
A. THE TRUSTEE MAY DESIGNATE A NEW CLASS OF BENEFICIARIES.
B. THE TRUSTEE ACQUIRES BENEFICIAL TITLE TO THE PROPERTY.
C. A RESULTING TRUST IS ESTABLISHED FOR THE SETTLOR OR SETTLOR'S SUCCESSORS IN INTEREST.
D. A RESULTING TRUST IS ESTABLISHED FOR CHARITIES TO BE DESIGNATED BY THE COURT. |
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Definition
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Term
YOUR CLIENTS, A MARRIED COUPLE, PREPARED WILLS AND REVOCABLE TRUSTS, WHICH THEY PROPERLY EXECUTED. YOU ARE SERVING AS TRUSTEE UNDER THE REVOCABLE TRUST. THEIR ADULT CHILD CALLS AND WOULD LIKE SOME INFORMATION ON HIS PARENTS' ESTATE PLAN, UNDER WHICH HE IS A NAMED BENEFICIARY. HIS PARENTS ARE STILL LIVING AND ARE NOT INCAPACITATED. YOU SHOULD:
A. TAKE THE FAMILY MEMBERS NAME AND TELEPHONE NUMBER, OBTAIN THE INFORMATION REQUESTED, AND GET BACK TO THE FAMILY MEMBER AS SOON AS POSSIBLE.
B. TELL THE FAMILY MEMBER TO GIVE YOU A TELEPHONE NUMBER FOR IDENTIFICATION AND CALL BACK WITH THE INFORMATION.
C, TELL THE FAMILY MEMBER THAT THE DONORS MUST AUTHORIZE IN WRITING THE RELEASE OF INFORMATION. |
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Definition
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Term
YOU SERVE AS TRUSTEE FOR THE TRUST OF THE NOW DECEASED FOUND OF A MAJOR MULTINATIONAL MANUFACTURING CORPORATION. A LARGE PORTION OF THE TRUST ASSETS HAVE BEEN INVESTED IN THE COMPANY'S STOCK,W HICH HAS RECENTLY SUSTAINED SHARP LOSSES DUE TO HIGH PROFILE PRODUCT LIABLITY LITIGATION. ONE OF THE BENEFICIARIES OF THE TRUST SUES YOU, ALLEGING A FAILURE TO DIVERSIFY. WHICH OF THE FOLLOWING DEFENSES, IF TRUST, IS MOST LIKLEY TO BE SUCCESSFUL?
A. THAT LITIGATION IS ALWAYS UNFORSEEABLE.
B. THAT THE SETTLOR OF THE TRUST HAD A SPECIAL OBJECTIVE OF RETAINING THE COMPANY STOCK FOR HIS CHILDREN AND DIRECTED THE RETENTION OF THE COMPANY STOCK IN THE TRUST INSTRUMENT.
C. THAT THE COMPANY IS POPULAR WITH THE PUBLIC.
D. THAT YOU ACTED AS A PRUDENT INVESTOR IN CARRYING OUT YOUR DUTIES AS TRUSTEE. |
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Definition
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Term
WHICH OF THE FOLLOWING IS THE MOST IMPORTANT AND HELPFUL PROVISION TO INCLUDE IN A TRUST INSTRUMENT TO ENSURE THAT TH ETRUSTEE HAS THE GREATEST FLEXIBILITY IN AVOIDING ENVIRONMENTAL LIABILITY?
A. THE POWER TO UTILIZE TRUST FUNDS FOR ENVIRONMENTAL CLEAN UP.
B. THE AUTHORITY TO INSTITUTE LEGAL ACTION IN ENVIRONMENTAL MATTERS.
C. THE POWER TO DISCLAIM OWNERSHIP OF OR CONTROLLING POWERS AFFECTING POTENTIALLY CONTAMINATED PROPERTY.
D. THE ABILITY TO SEGREGATE POTENTIALLY CONTAMINATED PROPERTY IN A SEPARATE TRUST FROM OTHER TRUST ASSETS. |
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Definition
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Term
| WHAT IS THE DIFFERENCE BETWEEN A BULLISH AND BEARISH STOCK? |
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Definition
A BULLISH IS WHEN STOCK PRICES RISE.
A BEARISH MARKET IS WHEN STOCK PRICES FALL. |
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Term
| AN INVESTOR IS LONG FIVE CALL CONTRACTS WITH A STRIKE PRICE OF 30. WHEN THE CALLS WERE PURCHASED, THE INVESTOR PAID A PREMIUM OF $3. IF THE PRICE OF THE UNDERLYING STOCK IS NOW $36, WHAT IS THE INVESTOR'S TOTAL PROFIT OR LOSS IF THE OPTIONS ARE EXERCISED? |
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Definition
$1500
5 CALL CONTRACTS AT $30 STRIKE PRICE
500 STOCKS AT $30 = $15,000
500 STOCKS AT $36 MARKET PRICE = $18,000
GROSS PROFIT = $3,000
500 X $3 = $1500 PREMIUM
GROSS PROFIT LESS PREMIUM = $1500 |
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Term
| CONCERNING THE VALUE OF AN OPTION PREMIUM, WHAT IS THE MARKET VALUE OF AN OPTION? |
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Definition
| THE PRICE THE OPTION IS CURRENTLY SELLING FOR IN THE OPEN MARKET; IT CONSISTS OF INTRINSIC AND SPECULATIVE VALUE. |
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Term
| CONCERNING THE VALUE OF AN OPTION PREMIUM, WHAT IS THE INTRINSIC VALUE? |
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Definition
| THE DEGREE TO WHICH THE OPTION IS IN THE MONEY AND HAS A POSITIVE PAYOFF IF EXERCIZED. |
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Term
| CONCERNING THE VALUE OF AN OPTION PREMIUM, WHAT IS THE SPECULATIVE VALUE? |
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Definition
AKA TIME VALUE
THE VALUE THE OPTIONS HAS AS A SPECULATIVE INSTRUMENT. EVEN IF THE OPTION CURRENTLY IS NOT IN THE MONEY, IT MAY BECOME SO AFTER EXPIRATION. |
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Term
| WHAT ARE THE FIVE DETERMINANTS OF AN OPTION PREMIUM? |
|
Definition
1. VOLATILITY OF THE UNDERLYING STOCK.
2. STRIKE PRICE VS. CURRENT STOCK PRICE.
3. TIME TO MATURITY
4. DIVIDENT PAYOUT RATIO
5. RISK FREE INTEREST RATE. |
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Term
| BOTH FOWARDS AND FUTURES CONTRACTS REPRESENT WHAT? |
|
Definition
| A PROMISE TO PURCHASE OR DELIVER A CERTAIN QUANTITY OF A GOOD [PHYSICAL OR FINANCIAL] AT A SPECIFIED FUTURE DATE. |
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Term
| HOW DO FOWARDS AND FUTURES RESEMBLE OPTIONS? |
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Definition
| THEY BOTH HAVE A PREDETERMINED PRICE AND CONTRACT FOR DURATION. |
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Term
| WHAT THREE PARTIES DO FUTURES CONTRACTS INVOLVE? |
|
Definition
1. THE SELLER
2. THE BUYER
3. THE OPTIONS CLEARNING CORPORATION |
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Term
| WHAT TWO PARTIES DO FOWARDS CONTRACTS INVOLVE? |
|
Definition
1. THE SELLER
2. THE BUYER |
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Term
| HOW ARE FUTURES AND FOWARDS TRADED? |
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Definition
FUTURES ARE TRADED ON AN EXCHANGE
FOWARDS ARE TRADED ON THE OTC. |
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Term
| FUTURES CONTRACTS ARE BASED ON STANDARDIZED COMMODITIES THAT CLEARLY DEFINE CHARACTERISTICS OF WHAT? |
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Definition
| THE QUANITY AND QUALITY OF A PRODUCT. |
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Term
TRUE OR FALSE.
FOWARD CONTRACTS USUALLY ARE HELD TO MATURITY, WHILE FUTURES CONTRACTS ARE OFTEN CLOSED OUT BEFORE MATURITY. |
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Definition
|
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Term
| COMMISSIONS FOR FUTURE ARE NEGOTIABLE AND PAID WHEN? |
|
Definition
| PAID ONLY WHEN ENTERING INTO A CONTRACT NOT WHEN CLOSING OUT. |
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|
Term
| ON FUTURES AND FOWARDS, WHAT ARE TAXES BASED ON? |
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Definition
DAILY MARK TO MARKET [DAILY GAINS OR LOSSES].
NOT THE NET CLOSING OUT OF CONTRACTS. |
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Term
| WHAT FIVE PARTS ARE COMPRISED IN COMMODITY QUOTES? |
|
Definition
1. THE PRODUCT
2. THE EXCHANGE ON WHICH THE CONTRACT IS TRADED.
3. THE SIZE OF THE CONTRACT
4. THE METHOD OF VALUING THE CONTRACT OR PRICING UNIT.
5. THE DELIVERY MONTH. |
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Term
| FOR COMMODITIES, THE LAST PRICE OF THE DAY, OR THE CLOSING PRICE IS KN OWN AS THIS: |
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Definition
|
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Term
| WHAT ARE THREE LEVELS OF PROTECTION IN A FUTURES CONTRACT? |
|
Definition
1. MARGIN BALANCES
2. MARKETING TO MARKET
3. THE CLEARING HOUSE. |
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Term
| OF THE THREE LEVELS OF PROTECTION IN A FUTURES CONTRACT, WHAT IS MARGIN BALANCES? |
|
Definition
| INVESTORS IN FUTURES MARKETS ARE REQUIRED TO PLACE FUNDS INA MARGIN ACCOUNT TO COVER POTENTIAL DAILY LOSSES. |
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Term
| OF THE THREE LEVELS OF PROTECTION IN A FUTURES CONTRACT, WHAT IS MARKING TO MARKET? |
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Definition
| EACH DAY, THE MARGIN ACCOUNT OF THE PARTY THAT LOST MONEY THAT DAY IS DEBITED, AND THESE FUNDS ARE CREDITED TO THE MARGIN ACCOUNT OF THE PARTY THAT MADE MONEY THAT DAY. IF A PARTY'S MARGIN ACCOUNT FALLS BELOW A SPECIFIED LEVEL, THAT PARTY WILL RECEIVE A MARGIN CALL AND BE REQUIRED TO DEPOSIT ADDITIONAL FUNDS TO THE MARGIN ACCOUNT. |
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Term
| OF THE THREE LEVELS OF PROTECTION IN A FUTURES CONTRACT, WHAT IS THE ROLE OF THE CLEARNING HOUSE? |
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Definition
| THE CLEARNINGHOUSE PROVIDES FURTHER PROTECTION BY GUARANTEEING THE CONTRACTS. |
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Term
| HOW DO YOU CALCULATE THE RETURN ON A FUTURES CONTRACT? |
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Definition
| SELLING PRICE OF THE CONTRACT MINUS THE PURCHASE PRICE OF THE CONTRACT DIVIDED BY THE AMOUNT OF MARGIN DEPOSIT. |
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Term
| WHAT ARE FOUR TYPES OF FUTURES CONTRACTS? |
|
Definition
1. FINANCIAL FUTURES
2. COMMODITY FUTURES
3. FOREIGN EXCHANGE FUTURES
4. INTERST RATE FUTURES |
|
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Term
| WHAT ARE STOCK INDEX FUTURES? |
|
Definition
| SUBSTITUTE FOR HOLDING THE UNDERLYING BASKET OF STOCKS, TEHY ARE CHEAP AND THEY ARE LIQUID. |
|
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Term
| WHAT ARE FOREIGN EXCHANGE FUTURES? |
|
Definition
| CONVERT CURRENCY'S AT A FUTURE DATE AT A PREDETERMINED EXCHANGE RATE. |
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|
Term
| WHAT ARE INTEREST RATE FUTURES? |
|
Definition
| BUY OR SELL A DEBT INSTRUMENT AT A FUTURE DATE AT A PREDETERMINED PRICE. EXAMPLE: AN INVESTOR HOLDING A BOND AND CONCERNED ABOUT RISING INTEREST RATES [THUS FALLING BOND PRICES] WOULD SHORT [SELL] A BOND FUTURES CONTRACT NOW IN ORDER TO LOCK INT HE BOND'S FUTURE SELLING PRICE. |
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Term
| WHAT ARE SWAP AGREEMENTS? |
|
Definition
| CONTRACTUAL AGREEMENTS BETWEEN TWO PARTIES AGREEING TO EXCHANGE CASH STREAMS BASED ON CERTAIN AGREED UPON PARAMETERS AND UNDERLYING PRICE FLUCTUATION IN A SPECIFIED COMMODITY OR MARKET INDEX FOR A STIPULATED PERIOD. |
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Term
| WHAT ARE SWAP FACILITATORS? |
|
Definition
| FINANCIIAL INTERMEDIARIES THAT HELP ORGANIZATIONS STRUCTURE A SWAP AGREEMENT. |
|
|
Term
| WHAT ENTITY TYPICALLY USES SWAPS? |
|
Definition
| CORPORATE RISK MANAGEMENT |
|
|
Term
| WHAT IS A EQUITY INDEX LINKED SWAP? |
|
Definition
| INVOLVES TWO PARTIES EXCHANING CASH FLOWS IN WHICH ONE OF THE CASH FLOWS IS BASED ON THE RETURN ON AN EQUITY INDEX, I.E. DOW JONES. |
|
|
Term
| WHAT IS AN INTEREST RATE SWAP? |
|
Definition
| OCCURS WHEN TWO PARTIES AGREE TO EXCHANGE A SERIES OF CASH FLOWS IN THE FUTURE ACCORDING TO A PREARRANGED FORMULA INVOLVING TWO OR MORE INTEREST RATES. |
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|
Term
| WHAT IS THE MOST COMMON TYPE OF INTERST RATE SWAP? |
|
Definition
| FIXED-FLOATING SWAP AKA VANILLA SWAP. |
|
|
Term
| WHAT IS A FOREIGN CURRENCY SWAP? |
|
Definition
| INVOLVES TWO PARTIES AGREEING TO EXCHANGE CASH FLOWS BASED ON THE VARIATIONS IN THE EXCHANGE RATES BETWEEN TWO OR MORE CURRENCIES. THE PRINCIPAL VALUE OF THE FOREIGN CURRENCIES IS TRADED AT THE INCEPTION AND TERMINATION OF THE SWAP. |
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Term
| WHAT ARE CREDIT DEFAULT SWAPS? |
|
Definition
FACILITATE SPECULATION ON THE CREDITWORTHINESS OF THIRD PARTIES.
EXAMPLE: AIG AND THE GOVERNMENT BAIL OUT. |
|
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Term
|
Definition
| YES, DUE TO THE ACTIVE DEALER MARKET. |
|
|
Term
| WHAT ARE THE ACTIVE PARTICIPANTS IN SWAPS? |
|
Definition
|
|
Term
| WHAT ARE EXCHANGE TRADED FUNDS [ETF'S]? |
|
Definition
| BASKETS OF SECURITIES THAT ARE TRADED LIKE INDIVIDUAL STOCK ON AN EXCHANGE. |
|
|
Term
TRUE OR FALSE
WITH ETF'S NEW HOLDERS GET THEIR OWN TAX BASIS AND WILL THUS PAY TAXES ONLY ON GAINS SUBSEQUENT TO THEIR PURCHASE. |
|
Definition
|
|
Term
| NAME THREE TYPES OF ETF'S [THERE ARE MORE THAN THREE]. |
|
Definition
1. QQQ [OR CUBES] WHICH TRACK THE NASDAQ 100
2. STANDARD AND POORS DEPOSITOR RECEIPTS WHICH TRACK THE S&p 500
3. SECTOR SPDRS WHICH TRACK A SPECIFIC SECTOR OF THE S&P 500 |
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|
Term
| WHAT IS A COMMON TRUST FUND? |
|
Definition
| A FUND MAINTAINED BY A BANK OR TRUST COMPANY EXCLUSIVELY FOR THE COLLECTIVE REINVESTMENT OF MONEY CONTRIBUTED TO THE FUND BY THE BANK OR TRUST COMPANY IN ITS CAPACITY AS TRUSTEE, EXECUTOR OR GUARDIAN. |
|
|
Term
TRUE OR FALSE
COMMON TRUST FUNDS ARE PUBLICALLY TRADED.. |
|
Definition
|
|
Term
TRUE OR FALSE
ETFS ARE PUBLICALLY TRADED. |
|
Definition
|
|
Term
| IN A PARTNERSHIP, WHO IS LIABLE? |
|
Definition
| BOTH PARTNERS SHARE FULL LIABILITY. |
|
|
Term
| WHAT ARE LIMITED PARTNERSHIPS? |
|
Definition
| PARTNERSHIPS WHICH HAVE AT LEAST ONE GENERAL PARTERN WHO CONTROLS THE COMPANY'S DAY TO DAY OPERATIONS AND IS PERSONALLY LIABLE FOR THE BUSINESS DEBTS AND ALSO HAVE PASSIVE PARTNERS BUT HAVE MINIMAL CONTROL OVER DAIL BUSINESS DECISIONS OR OPERATIONS AND HAVE NO PERSONAL LIABILITY FOR THE DEBTS OF THE PARTNERSHIP. |
|
|
Term
TRUE OR FALSE.
MOST HEDGE FUNDS AND PRIVATE EQUITY FUNDS OPERATE AS LIMITED PARTNERSHIPS. |
|
Definition
|
|
Term
| CONCERNING ADR'S, WHAT IS CURRENCY EXCHANGE RISK? |
|
Definition
| TO PURCHASE A FORIEGN SECURITIY, INVESTORS TYPICALLY CONVERT THEIR DOMEESTIC CURRENCY TO THE FOREIGN CURRENCY. WHEN INVESTORS EVENTUALLY SELL THE FOREIGN SECURITY AND CONVERT THE FOREGIN CURRENCY BACK TO THE DOMESTIC CURRENCY, THEY FACE THE RISK THAT THE FOREIGN CURRENCY HAS DEPRECIATED. |
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Term
|
Definition
AMERICAN DEPOSITORY RECEIPT
WHEN A US INVESTOR PURCHASES AN ADR, THE ORIGINAL STOCK CERTIFICATE OF THE FOREGIN SECURITY IS REGISTERED INT HE NAME OF A US TRUST COMPANY OR BANK AND HELD IN SAFEKEEPING BY THE INSTITUTION.
THE TRUST COMPANY OR BANK BUYS THE SHARES ON A FOREIGN EXCHANGE AND ISSUES RECEIPTS AGAINS THIS STOCK. THESE RECEIPTS ARE THE ADRS. |
|
|
Term
| CAN ADRS BE TRADED ON US. STOCK EXCHANGES? |
|
Definition
|
|
Term
|
Definition
|
|
Term
A HEDGE FUND DESIGNED FOR US TAXABLE INVESTORS TYPICALLY IS STRUCTUED AS A:
A. CORPORATION
B. CLOSED END MUTUAL FUND
C. OPEN END MUTUAL FUND
D. LIMITED LIABILITY CORPORATION. |
|
Definition
| D. LIMITED LIABILITY CORPORATION. |
|
|
Term
FUTURES CONTRACTS, UNLIKE FOWARDS CONTRACTS:
A. ARE MARKED TO MARKET
B. ARE NOT MARKETED TO MARKET
C. REPRESENT AN OPTION, NOT AN OBLIGATION.
D. ARE LONG TERM. |
|
Definition
|
|
Term
HEDGE FUNDS DIFFER FROM TRADITIONAL MUTUAL FUNDS IN THAT HEDGE FUNDS ARE LIKELY TO:
A. SELL SHORT
B. HAVE MULTIPLE INVESTORS
C. DIVERSIFY
D. TRADE ON AN EXCHANGE |
|
Definition
|
|
Term
A LIMITED PARTNERSHIP:
A. HAS AT LEAAST ONE GENERAL PARTNER.
B. HAS LIMITED PARTNERS RESPONSIBLE FOR THE DAY TO DAY OPERATION OF THE PORTFOLIO.
C. TYPICALLY IS TAXED AS A COPORATION.
D. TYPICALLY IS TAX EXEMPT. |
|
Definition
| A. HAS AT LEAST ONE GENERAL PARTNER. |
|
|
Term
WHICH OF THE FOLLOWING IS NOT TRUE?
A. CLOSELY HELD COMPANIES GENERALLY HAVE NO PUBLIC INVESTORS.
B. COMMON TRUST FUNDS ARE CLOSED TO THE GENERAL PUBLIC.
C. VALUATION OF A CLOSELY HELD CORPORATION FOLLOWS THE SAME PRINCIPAL AS PUBLICALLY TRADED STOCK.
D. COMMON TRUST FUNDS TYPICALLY TRADE PUBLICALLY. |
|
Definition
|
|
Term
WHICH OF THE FOLLOWING RISKS IS THE MOST PREVALENT IN INTERNATIONAL INVESTING?
A. INTERNATIONAL RETURNS NEGATIVELY CORRELATED WITH DOMESTIC RETURNS.
B. FOREIGN CURRENCY EXCHANGE RATE RISK.
C. MARKING TO MARKET RISK.
D. INCREASED DIVERSIFICATION. |
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Definition
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Term
ONE REASON TO CONSIDER FOREIGN INVESTMENT FOR AN INVESTMENT PORTFOLIO IS:
A. INCOMPLETE ACCOUNTING INFORMATION
B. LOWER CORRELATIONS WITH US SECURITIES
C. INCREASED CORRELATION WITH US SECURITIES
D. REDUCTION OF EXCHANGE RATE RISK |
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Definition
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Term
RECEIPTS REPRESENTING SHARES OF FOREIGN STOCKS THAT ARE HELD ON BEHALF OF AN INVESTOR BY A FINANCIAL INSTITUION IN THE UNITED STATES ARE:
A. ADRS
B. ETFS
C. COMMON TRUST FUNDS
D. MULTINATIONALS. |
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Definition
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Term
SOMEONE WHO BUYS WHEAT FUTURES SIMPLY BECAUSE HE OR SHE BELIEVES WHEAT PRICES WILL RISE, MOST LIKELY IS A:
A. HEDGER
B. FIDUCIARY
C. FOREIGNER
D. SPECULATOR |
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Definition
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Term
IF A STOCK IS SELLING FOR $20, A CALL OPTION WITH A STRIKE PRICE OF $25 SELLING FOR $5 IS:
A. AT THE MONEY
B. IN THE MONEY
C. OUT OF THE MONEY
D. CANNOT DETERMINE WIHTOUT KNOWING THE EXPIRATION OF THE OPTION. |
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Definition
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Term
THE ADVANTAGES OF INVESTING IN MARKET TRADED OPTIONS INCLUDE ALL THE FOLLOWING EXCEPT:
A. THE ABILITY TO TRANSFER RISK.
B. LEVERAGE
C. LESS EXPENSIVE THAN STOCKS
D. LONG TERM MATURITY OF BONDS. |
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Definition
D. LONG TERM MATURITY OF OPTIONS.
MOST OPTIONS ARE SHORT TERM EXPIRED IN A MATTER OF MONTHS. |
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Term
AT EXPIRATION, THE BREAKEVEN PRICE FOR TAKING A LONG POSITION IN A CALL SELLING FOR $3 WITH A STRIKE PRICE OF $90 IS:
A. $87
B. $90
C. $93
D: $96 |
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Definition
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Term
THE MAXIMUM LOSS ON A LONG CALL IS:
A. LIMITED TO THE OPTION PREMIUM
B. UNLIMITED
C. LIMITED TO THE STRIKE PRICE
D. LIMITED TO THE VALUE OF THE STOCK. |
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Definition
| A. LIMITED TO THE OPTION PREMIUM. |
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Term
THE DEFINITION OF A PROTECTIVE PUT IS:
A. LONG STOCK PLUS LONG CALL
B. SHORT STOCK PLUS SHORT CALL
C. SHORT STOCK PLUS LONG CALL
D. LONG STOCK PLUS LONG PUT. |
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Definition
D. LONG STOCK PLUS LONG PUT.
INVOLVES BUYING THE UNDERLYING STOCK AND A PUT CONTRACT ON THAT SAME STOCK. THIS GIVES THE HOLDER OF THE PUT THE RIGHT TO SELL THE STOCK AT A PREDETERMINED PRICE AND PROTECTS THE HOLDER FROM A DECLINE IN THE STOCK PRICE. |
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Term
FINANCIAL FUTURES...
A. ARE TRADED ON AN EXCHANGE.
B. ARE NOT STANDARIZED, BUT CUSTOMIZED TO THE INVESTORS' NEEDS.
C. PROVIDE AN OPTION TO WALK AWAY
D. ARE ONLY AVAIABLE FOR STOCK INDICES. |
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Definition
| A. ARE TRADED ON AN EXCHANGE, I.E. CHICAGO BOARD OF TRADE. |
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Term
iNTEREST RATE SWAPS...
A. INVOLVE THE EXCHANGE OF PRINCIPAL AT THE BEGINNING OF THE CONTRACT.
B. DO NOT INVOLVE THE EXCHANGE OF PRINCIPAL AT THE BEGINNING OF THE CONTRACT.
C. ONLY INVOLVE THE EXCHANGE OF FUNDS AT THE EXPIRATION OF THE CONTRACT.
D. INVOLVE THE EXCHANGE OF FOREIGN CURRENCIES. |
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Definition
B. DO NOT INVOLVE THE EXCHANGE OF PRINCIPAL AT THE BEGINNING OF THE CONTRACT.
THE PRINCIPAL IS REFERRED TO AS NOTIONAL AND IS USED TO DETERMIEN THE CASH FLOWS TO BE EXCHANGED. |
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Term
WHICH OF THE FOLLOWING USUALLY IS NOT AN INVESTMENT CONSTRAINT?
A. TAXES
B. LIQUIDITY
C. ASSET ALLOCATION
D. TIME HORIZON |
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Definition
| C. ASSET ALLOCATION, IMPORTANT BUT NOT A CONSTRAINT. |
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Term
__________ REFER TO DOCUMENTATION SETTING FORTH THE INVESTOR'S REQUIRED RATE OF RETURN RELATIVE TO THE INVESTOR'S RISK TOLDERANCE AND APPLICABLE CONSTRAINTS.
A. INVESTMENT CONSTRAINTS
B. INVESTMENT OBJECTIVES
C. INVESTMENT POLICIES
D. ASSET ALLOCATIONS. |
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Definition
C. INVESTMENT POLICIES
OUTLINES THE INVESTOR'S REQUIRED RETURN AND RISK TOLERANCES AND CONSTRAINTS. |
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Term
PREFERRED STOCK WOULD BE MOST APPROPRIATE FOR:
A. STABILITY OF PRINCIPAL
B. INCOME
C. GROWTH OF INCOME
D. CAPITAL APPRECIATION |
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Definition
B. INCOME
BECAUSE ITS VALUE CAN FLUCTATE SIGNIFICANTLY, PREFERRED STOCK IS NOT APPROPRIATE FOR STABILIZING PRINCIPAL. PREFERRED STOCK GENERALLY CARRIES A FIXED INCOME PAYMENT, SO IT WOULD NOT BE APPROPRIATE FOR "GROWTH" OF INCOME EITHER. IT ALSO DOEES NOT APPRECIATE AS MUCH. IT IS BEST FOR THE PURPOSE OF REGULAR INCOME. |
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Term
___________ REPRESENTSN SPECIAL CONSIDERATIONS INVESTORS FACE IN ACHIEVING THEIR STATED OBJECTIVES.
A. INVESTMENT CONSTRAINTS
B. INVESTMENT OBJECTIVES
C. INVESTMENT POLICIES
D. INVESTMENT ALLOCATIONS |
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Definition
| A. INVESTMENT CONSTRAINTS. |
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Term
WHICH OF THE FOLLOWING ASSETS WOULD BE LEAST LIKELY TO BE INCLUDED IN A PORTFOLIO WITH A CAPITAL APPRECIATION OBJECTIVE?
A. STOCKS
B. TREASURY BONDS
C. CORPORATE BONDS
D. TREASUREY BILLS |
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Definition
D. TREASURY BILLS
LOW YIELDING, SHORT TERM INSTRUMENTS THAT ARE APPROPRIATE FOR THE STABILITY OF PRINCIPAL OBJECTIVE AND PERHAPS THE INCOME OBJECTIVE BUT NOT THE CAPITAL APPRECIATION OBJECTIVE. |
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Term
CLIENT RESPONSIBILITIES INCLUDE:
A. SETTING OBJECTIVES
B. CONSTRUCTING THE PORTFOLIO
C. REVISING THE PORTFOLIO
D. PROVIDING PORTFOLIO PROGRESS REPORTS |
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Definition
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Term
COMPARING AN INVESTMENT MANAGERS' RETURN TO SIMILAR PORTFOLIOS AND INDEXES IS CALLED:
A. LIQUIDITY
B. CONSTRAINING
C. ADHERING
D. BENCHMARKING |
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Definition
D. BENCHMARKING
PROCESS OF COMPARING THE PORTFOLIO MANAGER'S PERFORMANCE TO THAT OF A SIMILAR GROUP OF PORTFOLIOS. |
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Term
ASSET ALLOCATION SHOULD:
A. PROBABLY NOT BE A MAJOR DETERMINANT OF RETURN.
B. PROBABLY BE A MAJOR ASPECT OF PORTFOLIO MANAGEMENT.
C. BE REVISED MONTHLY
D. INCLUDE ONLY STOCKS AND BONDS. |
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Definition
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Term
THE MOST COMMON INVESTMENTS IN A PORTFOLIO WITH THE STABILITY OF PRINCIPAL AND INCOME OBJECTIVE ARE:
A. PREFERRED STOCK
B. TREASUREY BILLS
C. HIGH YIELD CORPORATE BONDS
D. COMMON STOCK |
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Definition
B. TREASURY BILLS.
SHORT TERM STABLE INVESTMENTS THAT ARE POPULAR IN A PORTFOLIO WITH AN OBJECTIVE OF STABILITY OF PRINCIPAL. |
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Term
EVALUATION OF THE PORTFOLIO MANAGER SHOULD INCLUDE:
A. FIRING THE MANAGER IF SHE HAS NOT OUTPERFORMED THE MARKET.
B. DETERMINING WHETHER THE MANAGER IS IN THE TOP 10 PERCENT OF FUND MANAGERS
C. DETERMING WHETHER THE MANAGER IS ACHIEVING THE INVESTMENT OBJECTIVES.
D. ASSURING THAT THE ASSET ALLOCATION WAS REVISED MONTHLY. |
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Definition
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Term
| WHAT IS A SIMPLE TRUST FOR TAX PURPOSES? |
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Definition
1. REQUIRED TO DISTRIBUTE ALL INCOME CURRENTLY
2. NOT AUTHORIZED TO PAY ANY AMOUNTS FOR CHARITABLE PURPOSES.
3. DO NOT MAKE A DISTRIBUTION OTHER THAN CURRENT INCOME DURING THE TAX YEAR. |
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Term
| WHEN IS A TRUST ELIGIBLE FOR THE $300 EXEMPTION? |
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Definition
| IF IT IS REQUIRED TO DISTRIBUTE ALL OF ITS INCOME CURRENTLY. |
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Term
TRUE OR FALSE.
ONLY A PLAN PARTICipant WHO WAS BORN BEFORE 1936 CAN TREAT PART OF THE TAXABLE PORTION OF A LUMP SUMD DISTRIBUTION AS A CAPITAL GAIN; 20 % RATE. |
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Definition
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Term
| CONCERNING LUMP SUM DISTRIBUTIONS FROM QUALIFIED RETIREMENT PLANS, WHAT IS A 10 YEAR AVERAGING OPTION? |
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Definition
| A SPECIAL FORMULA USED TO FIGURE A SEPERATE TAX ON A QUALIFIED LUMP SUM DISTRIBUTION ONLY FOR THE YEAR IN WHICH THE DISTRIBUTUION IS RECIEVED. PAID ONLY ONCE....NOT OVER A 10 YEAR PERIOD. |
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