Question 1

Joel has a 28-year-old client who has been promoted to the elevated position of senior software engineer with a large, well-known, software company at her relatively young age. She has come to Joel for investment advice, explaining to him that she is risk-averse, having been influenced by parents who grew up in a foreign country and had little, prior to immigrating to America and working hard to achieve their dreams for themselves and their children. She has $50,000 that she wants him to invest for her, and her primary goal is to be able to have enough money, beyond what she expects to have in her employer’s retirement program, to return to her home country and help others achieve their dreams. Joel explains to her that she may have to invest in riskier securities in order to achieve her goal, but his client is adamant that she wants her portfolio to be invested to target growth with the least risk exposure possible. Given the facts:

Options :

A :

Joel should divide his client’s monies among growth, aggressive growth, and foreign stock funds. Regardless of what she says, she has a long investment horizon and can afford to take on more risk.

B : Joel should invest his client’s monies in a fund that specializes in stocks of his client’s home country to avoid the

C :

Joel should invest his client’s monies in a fund that specializes in stocks of his client’s home country to avoid the exchange rate risk that she will be exposed to when she returns.

D : Joel should invest his client’s monies in a growth fund to target her growth objective.

Answer: D

Question 2

Mr. Cross wanders into your office with a $35,000 check that he has received from his recently-deceased wife’s insurance company and wants you to advise him how to invest it, since that is your job, as he puts it. You ask him to fill out a standard investor profile questionnaire, but he refuses to do so. You offer to fill it out for him, based on his answers to your verbal questions, but he still refuses and calls you a “nibby-nose.” Based on this, you can:

Options :

A : allocate the $35,000 any way you choose since you have an uncooperative client.

B : advise him to invest the money in a money market mutual fund instead of holding it as cash.

C : advise him to invest the money in an S&P 500 Index fund.

D : The advice provided in either Choice B or Choice C would be appropriate.

Answer: B

Question 3

NASDAQ is:

Options :

A : an acronym for Norway’s major stock exchange.

B : the government organization that insures accounts at U.S. brokerage firms.

C : a computerized system that links together the U.S. regional exchanges.

D : a computerized quotation system used in the over-the-counter market.

Answer: D

Question 4

The total of a mutual fund’s front-end load, rear-end load, and 12b-1 fees may not exceed:

Options :

A : 10.0% of the fund’s offer price.

B : 10.0% of the fund’s net asset value.

C : 8.5% of the fund’s offer price.

D : 8.5% of the average annual net assets of the fund.

Answer: C

Question 5

Uncle Scrooge (uncharacteristically) wants to set up a Section 529 college savings plan for his nephew, Louie. If he does so:

Options :

A : he can contribute at most $2,000 a year.

B : his contributions will be tax deductible.

C :

any withdrawals that Louie makes to cover tuition, books, and room and board will be free from both federal and state taxes.

D :

and Louie decides not to go to college, Uncle Scrooge can name Louie’s brother, Huey, as the beneficiary of the plan without any tax consequences.

Answer: D