Wealth Management Exam Questions
Course Introduction
Wealth Management is a comprehensive course designed to equip students with the principles and practices of managing personal and institutional wealth. The course covers topics such as investment planning, asset allocation, risk management, estate planning, tax considerations, retirement planning, and the role of financial advisers. Students will learn how to develop effective financial strategies tailored to clients' individual goals and risk tolerances, as well as explore the ethical and regulatory frameworks governing the wealth management industry. Practical case studies and real-world scenarios provide hands-on experience in portfolio management and holistic financial planning.
Recommended Textbook Fundamentals of Investing 11th Edition by
Lawrence J. Gitman
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15 Chapters
1588 Verified Questions
1588 Flashcards
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Page 2
Chapter 1: The Investment Environment
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76 Flashcards
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Sample Questions
Q1) Banks and insurance companies are examples of institutional investors.
A)True
B)False Answer: True
Q2) Discuss the relationship between stock prices and investors' beliefs about the business cycle.
Answer: Stock prices tend to anticipate the economic conditions that investors expect in the future.When they believe that economic conditions will deteriorate and profits will decline, stock prices fall.When they expect an improving economy and higher corporate profits, stock prices rise.
Q3) Liquidity is the ability to convert an investment into cash quickly with little or no loss of value.
A)True
B)False Answer: True
Q4) Common stock is a type of debt instrument.
A)True
B)False Answer: False
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Chapter 2: Securities Markets and Transactions
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95 Flashcards
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Sample Questions
Q1) Crossing markets are those that
A) trade foreign securities.
B) conduct transactions between institutional and individual traders.
C) fill only the orders which have opposing orders at identical prices.
D) conduct business at locations in varying time zones.
Answer: C
Q2) Most commodity futures are traded on the NYSE Amex.
A)True
B)False
Answer: False
Q3) Stocks purchased in the secondary market are purchased
A) directly from the issuing corporation.
B) from other investors.
C) from small, little-known brokerages.
D) indirectly through financial institutions.
Answer: B
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Chapter 3: Investment Information and Securities Transactions
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114 Flashcards
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Sample Questions
Q1) The basic function of stockbrokers is to execute client orders at the best possible price.
A)True
B)False
Answer: True
Q2) A fill-or-kill order will be
A) executed immediately upon order arrival on the floor of the exchange.
B) will be cancelled if not immediately executed at the stated price or better.
C) will be cancelled at the end of the trading day if not executed by that time.
D) in effect until cancelled by the customer who placed the order.
Answer: B
Q3) Chartered Financial Analysts and Certified Financial Planners must pass a rigorous series of exams, as well as meet educational and experience requirements.
A)True
B)False
Answer: True
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Page 5
Chapter 4: Return and Risk
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108 Verified Questions
108 Flashcards
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Sample Questions
Q1) When using a financial calculator or electronic spreadsheet to calculate an investment's yield, the amount invested is expressed as a negative number.
A)True
B)False
Q2) David has purchased an investment that he expects to produce an annual cash flow of $3,000 for five years.He requires an 8% rate of return compounded annually.What is the maximum amount that David can pay and still earn the required rate of return?
Q3) If the risk-free rate of return is less than the inflation rate, the real rate of return is negative.
A)True
B)False
Q4) When computing an investment's yield using a financial calculator or spreadsheet such as Excel, which of the following should be entered as a negative number?
A) the number of time periods
B) dividend or interest payments
C) the price at which the investment is sold
D) the initial cost of the investment
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6
Chapter 5: Modern Portfolio Concepts
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96 Flashcards
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Sample Questions
Q1) The beta of the market is
A) -1.0.
B) 0.0.
C) 1.0.
D) undefined.
Q2) Beta measures
A) total risk.
B) diversifiable risk.
C) relevant risk.
D) the total return.
Q3) It is relatively easy to obtain the beta for actively traded stocks.
A)True
B)False
Q4) Explain the efficient frontier as it relates to the utility function of an individual investor.
Q5) Analysts commonly use the ________ to measure market return.
A) the Dow Jones Industrial Average
B) the rate of return on 10 year Treasury bonds
C) some large, mainstream company such as General Electric
D) the Standard & Poors 500 Index
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Chapter 6: Common Stocks
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116 Flashcards
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Sample Questions
Q1) High dividend yields are typical of rapidly growing companies.
A)True
B)False
Q2) The most common reason for an investor to adopt the quality long-term growth investment strategy is for long-term accumulation of capital.
A)True
B)False
Q3) The value that investors place on a stock is called its
A) book value.
B) investment value.
C) liquidation value.
D) par value.
Q4) To take advantage of the opportunity to acquire additional shares of a company's stock without incurring any brokerage commissions, many investors participate in A) initial public offerings.
B) dividend reinvestment plans.
C) deferred equity securities.
D) corporate trusts.
Q5) Describe the bear market of 2008 through 2009 and put it in historical context.
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Chapter 7: Analyzing Common Stocks
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106 Flashcards
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Sample Questions
Q1) Fundamental analysis involves the in-depth study of the A) role of nondiversifiable risk in an investor's portfolio.
B) financial condition and operating results of a given firm.
C) pattern of security prices as revealed in chart formations.
D) role of diversifiable risk in an investor's portfolio.
Q2) Investors who conduct industry analyses typically favor companies with strong market positions over companies with less secure market positions because firms with strong market positions tend to I.be price leaders.
II.benefit more from economies of scale.
III.have better R&D programs.
IV.have lower production costs.
A) II and IV only.
B) I, II and IV only.
C) I, II and III only
D) I, II, III and IV
Q3) A high P/E ratio may be an indication that a stock is overpriced.
A)True
B)False
Q4) Briefly describe and discuss both industry analysis and fundamental analysis.
Page 9
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Chapter 8: Stock Valuation
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102 Verified Questions
102 Flashcards
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Sample Questions
Q1) In the price/earnings approach to stock valuation, A) historical stock prices are utilized.
B) forecasted EPS are typically used.
C) the P/E ratio is computed by multiplying the stock price by the earnings per share.
D) the market P/E ratio, adjusted by beta, is used to value individual stocks.
Q2) List the key variables that affect the P/E ratio and explain the relationship between each variable and the P/E ratio.
Q3) One method of estimating the dividend growth rate is to calculate the discount rate that equates today's dividend with the dividend paid ten years ago.
A)True B)False
Q4) There is no assurance that the actual rate of return on an asset will be similar to the projected rate of return.
A)True
B)False
Q5) Most stocks trade at five to seven times their book values. A)True B)False
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Chapter 9: Market Efficiency, Behavioral Finance, and Technical Analysis
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112 Flashcards
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Sample Questions
Q1) Which of the following are contrary indicators?
A) investment newsletter sentiment index and odd-lot trading
B) breadth of market and market volume
C) short-interest and the advance/decline line
D) new highs-new lows indicator and the TRIN measure
Q2) Explain why technical analysts use charts so extensively.
Q3) The weak form of the efficient market theory contends that
A) past price performance is useless in predicting future price movements.
B) past performance can help determine the general direction of future price movements.
C) any publicly available information is useless in predicting future price movements. D) price movements are not random but follow a general trend over a period of time.
Q4) The tendency of investors to blame others for their failures and take personal credit for their successes is referred to as
A) loss aversion.
B) representativeness.
C) narrow framing.
D) biased self-attribution.
Page 11
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Chapter 10: Fixed-Income Securities
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118 Flashcards
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Sample Questions
Q1) When convertible bonds are first issued
I.the conversion price of the stock is higher than the market price.
II.the market price of the stock is higher than the conversion price.
III.the coupon rate is higher than if the bond were not convertible.
IV.the coupon rate is lower than if the bond were not convertible.
A) I and III only
B) II and IV only
C) I and IV only
D) II and III only
Q2) A bond which has a deferred call
A) does not have to be redeemed when it reaches maturity.
B) can be retired at any time prior to maturity provided six months notice is given.
C) cannot be retired for a specific period of time after which it can be retired at any time.
D) can be retired at any time during the initial call period but after that time can not be redeemed prior to maturity.
Q3) Interest rates and bond prices are directly related.
A)True
B)False
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Chapter 11: Bond Valuation
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112 Verified Questions
112 Flashcards
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Sample Questions
Q1) Which one of the following statements is correct concerning bond investors?
A) Aggressive investors want to lock in high interest rates.
B) Aggressive investors purchase bonds when they believe interest rates will rise.
C) Conservative investors seek capital gains.
D) Conservative investors buy bonds when interest rates are high.
Q2) A $1,000, 7% annual coupon bond matures in three years.The bond is currently priced at $974.23 and has a YTM of 8.0%.What is the Macaulay duration?
A) 1.95 years
B) 2.60 years
C) 2.81 years
D) 3.00 years
Q3) With exception of zero coupon bonds, a bond's duration is always shorter than its time to maturity.
A)True
B)False
Q4) The real rate of return is the same for all maturities.
A)True
B)False
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13
Chapter 12: Mutual Funds: Professionally Managed Portfolios
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113 Verified Questions
113 Flashcards
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Sample Questions
Q1) Both the performance of the overall stock market as well as the skills of the mutual fund manager affect the performance of a mutual fund.
A)True
B)False
Q2) The net asset value is the price per share an investor will pay to acquire shares in a no-load, open-end fund.
A)True
B)False
Q3) Value funds seek stocks
I.with low dividend yields.
II.with potential for growth.
III.with low P/E ratios.
IV.of newly discovered firms.
A) I and III only
B) II and III only
C) II, III and IV only
D) I, II, III and IV
Q4) What are the primary disadvantages of owning mutual fund shares?
Q5) Explain why closed-end funds can sell at prices other than the fund's NAV.
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Chapter 13: Managing Your Own Portfolios
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109 Flashcards
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Sample Questions
Q1) Sharpe's measure is a measure of the risk premium per unit of total risk.
A)True
B)False
Q2) Allison's portfolio has an expected return of 14% and a beta of 1.37.Brianna's portfolio has an expected rate of return of 11% and a beta of 1.The risk-free rate is 3% and the expected rate of return on the market is 12%.According to the Jensen's measure,
A) Allison has the better portfolio
B) Brianna has the better portfolio
C) The portfolio's are equally desirable
D) The answer depends on Allsison and Brianna's risk tolerance
Q3) Explain the use of limit orders and stop-loss orders in rebalancing an investor's stock portfolio.What are the principal risks in using these orders?
Q4) Jensen's measure of portfolio performance compares the risk premium on a portfolio to the portfolio's beta.
A)True
B)False
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Page 15
Chapter 14: Options: Puts and Calls
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115 Flashcards
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Sample Questions
Q1) Rights are call options issued to current owners of the stock and normally expire within a short period of time.
A)True
B)False
Q2) Steve bought 300 shares of stock at a price of $20 per share.The price of the stock then went up to $33 per share so Steve decided to hedge his position by purchasing 3 puts at a cost of $120 each.The puts have an exercise price of 30.One week prior to the expiration of the puts, the price of the stock was at $22 per share.If Steve closed out all of his positions at that time, he would have earned a net profit of
A) $200.
B) $240.
C) $2,640.
D) $3,000.
Q3) What is the difference between a naked call option and a covered call option? Which one is riskier and why?
Q4) The longer the time to expiration, the lower the option time premium tends to be.
A)True
B)False
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Page 16
Chapter 15: Commodities and Financial Futures
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96 Flashcards
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Sample Questions
Q1) Hedging in the commodities market is a strategy primarily used by A) individual investors with high risk tolerance levels for commodities.
B) institutional investors on behalf of their conservative investors.
C) by producers and processors of commodities.
D) investors looking for short-term capital gains.
Q2) The minimum amount of margin that must be kept in an account for futures contracts is known as the
A) round-trip cost.
B) forward basis.
C) maintenance deposit.
D) initial deposit.
Q3) For individual investors to adequately hedge their personal portfolios, they should always use the S&P 500 Stock Index futures contract.
A)True
B)False
Q4) The use of futures contracts for commodities is a key method of controlling risk. A)True
B)False
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