Financial

Planning
and
Wealth
Management
A z ero coupon bond:

a. is sold at a discount to face value.

b. is worthless.
c. matures immediately.
d. always has a call feature.
A z ero coupon bond:

– is sold a t a di sco unt t o f ace va lue.

– is worthless.
– matures immediately.
– always has a call feature.
 Sto cks whose retu rn s are
ti ed closel y to th e over all
nat ional ec onomy are
typi call y call ed:

a. Blue Chip stocks.

b. Defensive stocks.
c. Speculative stocks.
d. Cyclical stocks.
 Sto cks whose retu rn s are
ti ed closel y to th e over all
nat ional ec onomy are
typi call y call ed:

– Blue Chip stocks.

– Defensive stocks.
– Speculative stocks.
– Cycli ca l s tocks.
Mo rt gage pa yment s:

a. Can be completely deducted from income

for tax purposes.
b. Vary from month to month on a fixed rate
loan.
c. Represent high principal payments early
in the term of the loan.
d. Are typically tax deductible to the extent
that they represent payment of interest.
Mo rt gage pa yment s:

– Can be completely deducted from income

for tax purposes.
– Vary from month to month on a fixed rate
loan.
– Represent high principal payments early
in the term of the loan.
– Ar e typica ll y ta x deduct ib le t o t he
ex tent t ha t t hey r epr ese nt pa yment
of in terest .
For tax p urpos es, a capit al ga in is
conside red lo ng term if the
inves tm ent was held more tha n:

a. 6 month
b. 1 year
c. 5 years
d. 10 years
For tax p urpos es, a capit al ga in is
conside red lo ng term if the
inves tm ent was held more tha n:

– 6 month
– 1 yea r
– 5 years
– 10 years
A 35 -ye ar old indi vidual wit h 4
yo ung chi ldren and a spo use who
do esn’ t work should pr oba bly
conside r p urchasing whic h of the
fol lo wing type s of insura nc e:

a. Long-term care insurance.

b. Disability insurance.
c. Life insurance.
d. (b) and (c).
A 35 -ye ar old indi vidual wit h 4
yo ung chi ldren and a spo use who
do esn’ t work should pr oba bly
conside r p urchasing whic h of the
fol lo wing type s of insura nc e:

– Long-term care insurance.

– Disability insurance.
– Life insurance.
– (b ) and (c).
Inv estmen ts i n CDs :

a. are riskier than investments in stocks.

b. are inferior to investments in 8-tracks and
vinyl records.
c. are always tax deferred.
d. are insured by the FDIC, but have
generally underperformed stock
investments over the long run.
Inv estmen ts i n CDs :

– are riskier than investments in stocks.

– are inferior to investments in 8-tracks and
vinyl records.
– are always tax deferred.
– are i ns ured by the FDIC, but ha ve
genera lly und erperfor me d stock
inve stment s ove r t he l ong run .
The ne t as set va lue (NA V) of a
bo nd f und:

a. cannot be determined.
b. changes as interest rates change.
c. is determined by the average coupon
rates of the bonds in the fund.
d. will not change as bonds in the fund are
bought or sold.
The ne t as set va lue (NA V) of a
bo nd f und:

– cannot be determined.
– changes as int erest r at es cha ng e.
– is determined by the average coupon
rates of the bonds in the fund.
– will not change as bonds in the fund are
bought or sold.
Disabi li ty i ncome i nsu ra nc e:

a. Can cover part of your lost income while

you are disabled.
b. Pays medical expenses associated with a
disability.
c. Should only be purchased by star
athletes.
d. Is primarily for the unemployed.
Disabi li ty i ncome i nsu ra nc e:

– Ca n cover pa rt of y our l ost inco me

whi le you are di sab led.
– Pays medical expenses associated with a
disability.
– Should only be purchased by star
athletes.
– Is primarily for the unemployed.
If yo u cal l yo ur bro ke r to
purc ha se a "ro un d lot " yo u ar e:

a. Buying a mutual fund of 100 different

stocks.
b. Authorizing him/her to decide how many
shares to buy.
c. Negotiating commissions on future
purchases and sales.
d. Purchasing 100 shares of a specific stock.
If yo u cal l yo ur bro ke r to
purc ha se a "ro un d lot " yo u ar e:

– Buying a mutual fund of 100 different

stocks.
– Authorizing him/her to decide how many
shares to buy.
– Negotiating commissions on future
purchases and sales.
– Purcha si ng 100 sh ar es of a s pec ific
st oc k.
Va ri abl e life insu ra nce:

a. Offers tax deferral.

b. May provide higher return potential and
greater risk than a whole life policy.
c. Allows you to invest a portion of the
premium in various subaccounts.
d. All of the above.
Va ri abl e life insu ra nce:

– Offers tax deferral.

– May provide higher return potential and
greater risk than a whole life policy.
– Allows you to invest a portion of the
premium in various subaccounts.
– Al l of th e above .
Und er the pro vis io ns of Inc om e
Ta x Act, 19 61 , "T rans po rt
All ow anc e" is exe mpt upt o

a. Rs. 800 per month

b. Rs.400 per month
c. Rs. 500 per month
d. Rs. 9000 per year lump sum
Und er the pro vis io ns of Inc om e
Ta x Act, 19 61 , "T rans po rt
All ow anc e" is exe mpt upt o

– Rs . 80 0 p er m ont h
– Rs.400 per month
– Rs. 500 per month
– Rs. 9000 per year lump sum
Divi den ds ar e taxed :

a. At the investor’s marginal income tax rate.

b. At a maximum rate of 15%.
c. Only when the stock is sold.
d. Dividends are never taxed.
Divi den ds ar e taxed :

– At the investor’s marginal income tax rate.

– At a max imum r at e of 15%.
– Only when the stock is sold.
– Dividends are never taxed.
The term gene ra ll y used to
de scribe the marke t in which
pr ic es full y refl ect al l ava ila ble
inform at ion is :

a. The greater fool hypothesis.

b. Random walk hypothesis.
c. The size-effect hypothesis.
d. Efficient markets hypothesis.
The term gene ra ll y used to
de scribe the marke t in which
pr ic es full y refl ect al l ava ila ble
inform at ion is :

– The greater fool hypothesis.

– Random walk hypothesis.
– The size-effect hypothesis.
– Eff icient m ar kets hyp othesi s.
If a mut ual fund manage r
increases his /he r cash po sit io n, it
can be sai d:

a. The manager is anticipating a bear

market.
b. The manager is anticipating a bull market.
c. The manager is trying to reduce the
fund’s taxable gains.
d. The manager is aggressive.
If a mut ual fund manage r
increases his /he r cash po sit io n, it
can be sai d:

– The ma nag er i s anti cip ati ng a b ear

ma rket .
– The manager is anticipating a bull market.
– The manager is trying to reduce the
fund’s taxable gains.
– The manager is aggressive.
Determi ning tot al ret urn t ypi cal ly
ut ili ze s the :

a. Inflation-adjusted annual performance of

all mutual-funds.
b. Annual capital gain plus dividend payout
of a stock or fund.
c. Math skills learned in college-level
calculus courses.
d. Dividend yield on the Dow Jones
Industrial Average.
Determi ning tot al ret urn t ypi cal ly
ut ili ze s the :

– Inflation-adjusted annual performance of

all mutual-funds.
– Annu al capi tal ga in p lu s di vid end
pa yout of a st ock or f und .
– Math skills learned in college-level
calculus courses.
– Dividend yield on the Dow Jones
Industrial Average.
A mutu al fun d i s…

a. A share of a company’s stock

b. A pool of money managed by an
investment company
c. An insurance policy
d. A brokerage account
A mutu al fun d i s…

– A share of a company’s stock

– A pool of mone y ma na ged by an
inve stment compa ny
– An insurance policy
– A brokerage account
The be st way to re sear ch a stoc k
is to lo ok at:

a. The company’s management team and its

track record
b. The outlook for the industry and the
company’s position in it
c. The price/earnings ratio
d. All of the above
The be st way to re sear ch a stoc k
is to lo ok at:

– The company’s management team and its

track record
– The outlook for the industry and the
company’s position in it
– The price/earnings ratio
– Al l of th e above
Being yo ur ow n fina ncial pla nner
en tail s…

a. A fair amount of time

b. A willingness to research money and
business topics
c. Knowing how much risk you’re
comfortable with
d. All of the above
Being yo ur ow n fina ncial pla nner
en tail s…

– A fair amount of time

– A willingness to research money and
business topics
– Knowing how much risk you’re
comfortable with
– Al l of th e above
If a stoc k ha s a high
pr ic e/earnings ra tio it can mean…

a. The outlook for the stock is rosy—you

should buy
b. The stock is considered cheap compared to
others in the industry
c. The stock is considered pricey and may be
trading at its high
d. The stock is trading at the same price as
the overall market
If a stoc k ha s a high
pr ic e/earnings ra tio it can mean…

– The outlook for the stock is rosy—you

should buy
– The stock is considered cheap compared to
others in the industry
– The s tock i s co nsi dered pri ce y and
ma y b e tra di ng a t it s hi gh
– The stock is trading at the same price as
the overall market
Tre as ur y bo nds a re…

a. Issued by the government and carry no

credit risk
b. Issued by local governments and can vary
in quality
c. Bonds that pay the highest interest rate
of all bond types
d. Issued by corporations to finance
acquisitions and expansions
Tre as ur y bo nds a re…

– Is sued by t he g ove rnment and

car ry no cred it r is k
– Issued by local governments and can vary
in quality
– Bonds that pay the highest interest rate
of all bond types
– Issued by corporations to finance
acquisitions and expansions
Bind ing Aut hor it y of an insur anc e
br oker means ____ _.

a. the authority of brokers to accept risks

within certain limits and term as set out
by the Insurers
b. the contract by which a broker is bound
to the insurance companies
c. the contract by which a broker is bound
to the clients
d. the regulatory authority that binds
brokers to the regulations
Bind ing Aut hor it y of an insur anc e
br oker means ____ _.

– the aut hori ty of br ok ers t o acc ept

risk s wi thin ce rta in l imit s and ter m
as set out b y the Ins ur ers
– the contract by which a broker is bound
to the insurance companies
– the contract by which a broker is bound
to the clients
– the regulatory authority that binds
brokers to the regulations
If a Co mpany de cla res and pa ys
di vide nd, this tra ns ac tio n
wil l_ __ _.

– reduce stockholders equity

– increase liabilities
– decrease net income
– not affect total assets
If a Co mpany de cla res and pa ys
di vide nd, this tra ns ac tio n
wil l_ __ _.

– reduc e st ockhol de rs equi ty

– increase liabilities
– decrease net income
– not affect total assets
A re cognis ed Pro vident Fund
acquires its stat us on re cognit io n
by __ __ ___ _.

a. SEBI
b. Income Tax authorities
c. PF Commissioner
d. Labor Ministry
A re cognis ed Pro vident Fund
acquires its stat us on re cognit io n
by __ __ ___ _.

– SEBI
– Income Tax a uthori ties
– PF Commissioner
– Labour Ministry
A typ e of ris k wit h high fr eque nc y
but lo w seve rit y is pro ba bly be st
handl ed by:

a. Transfer
b. Coinsurance
c. Reinsurance
d. Self Insurance
A typ e of ris k wit h high fr eque nc y
but lo w seve rit y is pro ba bly be st
handl ed by:

– Transfer
– Coinsurance
– Reinsurance
– Self In sura nce