Question 1

Which of the following correctly describes how the holding period of a security is calculated when determining whether its sale will result in a short-term or a long-term capital gain?

Options :

A : The holding period begins the day after the buy order is submitted and ends the day the sell order is submitted.

B :

The holding period begins on the settlement day of the purchase and ends on the settlement day associated with the sale.

C : The holding period begins on the settlement day of the purchase and ends on the day the sell order is submitted.

Answer: A

Question 2

Which of the following must be true for a fund to be called a “no load” fund? I. The fund can have no front-end load. II. The fund can have no contingent deferred sales charge. III. The fund can charge no 12b-1 fees. IV. The fund cannot charge investors an exchange fee.

Options :

A : Only I and II must be true.

B : I, II, and III must all be true.

C : Only I must be true.

D : I, II, III, and IV must all be true.

Answer: A

Question 3

Which of the following statements regarding the purchase and redemption of mutual fund shares is false?

Options :

A : Mutual fund shares may not be purchased on margin.

B : An investor can both purchase and sell fractional shares of mutual funds.

C : When an investor redeems his shares, the mutual fund must pay for the shares within 7 business days.

D :

If an investor places an order to buy or redeem shares of a mutual fund before 4 P.M.EST on a day when the markets are open, the price will be based on the fund’s net asset value (NAV), as calculated at the end of that trading day.

Answer: C

Question 4

Phil Anthropy wrote his cousin a $15,000 check to pay for medical bills the cousin had accumulated. He also distributed $5,000 checks to three nephews who were in college, and gave his mother a check for $12,000. Have Phil’s actions triggered any gift taxes?

Options :

A : Yes, $19,000 of his total distributions is subject to the gift tax.

B : Yes, $2,000 of his total distributions is subject to the gift tax.

C : Yes, $7,000 in distributions is subject to the gift tax.

D : No. None of Phil’s distributions is subject to the gift tax.

Answer: B

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