Wealth Management Exam
Materials
Course Introduction
Wealth Management is a comprehensive course designed to equip students with essential knowledge and practical skills in managing individual and institutional wealth. The course covers key topics such as investment strategies, asset allocation, risk assessment, portfolio management, estate planning, tax optimization, and retirement planning. Students will explore the financial instruments and products used in wealth preservation and growth, while also analyzing the roles of financial advisors and wealth managers. Through case studies and real-world applications, the course emphasizes ethical considerations and regulatory frameworks critical to effective wealth management in todays dynamic financial environment.
Recommended Textbook Fundamentals of Investing 11th Edition by
Lawrence J. Gitman
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15 Chapters
1588 Verified Questions
1588 Flashcards
Source URL: https://quizplus.com/study-set/3353
Page 2
Chapter 1: The Investment Environment
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76 Verified Questions
76 Flashcards
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Sample Questions
Q1) 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.
Q2) Which one of the following statements about the economy is correct?
A) It is difficult to accurately predict movements in the stock market when the economy is at a peak.
B) A strong economy is associated with a declining business cycle.
C) Stocks tend to perform well in a weak economy.
D) The economic cycle has little effect on stocks.
Answer: A
Q3) Since 1900, the average annual return on savings accounts has been higher than the return on stocks.
A)True
B)False
Answer: False
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Page 3
Chapter 2: Securities Markets and Transactions
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95 Verified Questions
95 Flashcards
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Sample Questions
Q1) The primary market for futures is the
A) Kansas City Board of Trade.
B) New York Mercantile Exchange.
C) Chicago Board of Trade.
D) Chicago Board Options Exchange.
Answer: C
Q2) Members of a selling group receive compensation in the form of a discount on the selling price of the security.
A)True
B)False
Answer: True
Q3) Margin trading requires the borrowing of securities.
A)True
B)False
Answer: False
Q4) The U.S.stock markets tend to produce the highest rate of return each year.
A)True
B)False
Answer: False
Page 4
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Chapter 3: Investment Information and Securities Transactions
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114 Verified Questions
114 Flashcards
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Sample Questions
Q1) Stock market averages and indexes are commonly used to measure the
A) specific behavior of companies.
B) general behavior of stock prices.
C) specific behavior of alternative investments.
D) specific behavior of the economy.
Answer: B
Q2) If the market moves rapidly, an on-line trader may experience difficulty placing a trade.
A)True
B)False Answer: True
Q3) Investors who are aware of current economic, political, and market events tend to make better investment decisions.
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) The required return on Beta stock is 14%.The risk-free rate of return is 4% and the real rate of return is 2%.How much are investors requiring as compensation for risk?
A) 8%
B) 10%
C) 12%
D) 14%
Q2) The stated rate of interest is equal to the true rate of interest when
A) interest is compounded annually and the period in questions is exactly 1 year.
B) interest is compounded continuously over one or more years.
C) interest is compounded annually over a period of several years.
D) interest is discounted rather than compounded.
Q3) The holding period is a useful way to compare investments because it considers A) the time value of money
B) only capital gains, but not income
C) both income and capital gains or losses
D) the relative size of investments being compared
Q4) Briefly explain the holding period return (HPR)and give several characteristics of this measure.
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Chapter 5: Modern Portfolio Concepts
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96 Flashcards
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Sample Questions
Q1) The market rate of return increased by 8% while the rate of return on XYZ stock increased by 4%.The beta of XYZ stock is
A) -2.0.
B) -0.40.
C) 0.50.
D) 2.0.
Q2) A portfolio with a beta of 1.06
A) is 106% more risky than the overall market.
B) has less risk than the lowest risk security held within that portfolio.
C) is 6% more risky than a risk-free asset.
D) is slightly more risky than the overall market.
Q3) Portfolios located on the efficient frontier may not be part of the feasible set.
A)True
B)False
Q4) Combining uncorrelated assets should
A) increase the overall risk level of a portfolio.
B) decrease the overall risk level of a portfolio.
C) not change the overall risk level of a portfolio.
D) cause the other assets in the portfolio to become positively related.
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Chapter 6: Common Stocks
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116 Verified Questions
116 Flashcards
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Sample Questions
Q1) A round lot consists of
A) 1 share.
B) 10 shares.
C) 100 shares.
D) 1,000 shares.
Q2) Over the 50-year period of 1953-2002, the stock market provided an average annual rate of return of approximately 11%.
A)True
B)False
Q3) High dividend yields are typical of rapidly growing companies.
A)True
B)False
Q4) Since 1960, returns on the Dow Jones Industrial Average have never been negative for 3 consecutive years.
A)True
B)False
Q5) The technology bubble of the 1990s lasted about 18 months.
A)True
B)False
Q6) Explain why every stock portfolio should include some defensive stocks.
Page 8
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Chapter 7: Analyzing Common Stocks
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106 Verified Questions
106 Flashcards
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Sample Questions
Q1) Which stage of an industry's growth cycle is most influenced by economic events?
A) initial development
B) stability or decline
C) mature growth
D) rapid expansion
Q2) Industries in the rapid expansion stage will be especially sensitive to a slowing economy.
A)True
B)False
Q3) A company may appear to be profitable on its income statement, but fail to generate strong cash flows.
A)True
B)False
Q4) The income statement indicates how successfully a company has utilized its assets.
A)True
B)False
Q5) Price-to-book-value indicates how aggressively a stock is being priced.
A)True
B)False
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Chapter 8: Stock Valuation
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102 Verified Questions
102 Flashcards
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Sample Questions
Q1) The price of a stock with a low relative P/E will tend to be more volatile than the price of a stock with a high relative P/E.
A)True
B)False
Q2) 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
Q3) WaterCo is a manufacturer of boat parts and has been in business only a few years.Its board of directors decided to start paying a dividend to help boost the attractiveness of its stock.The dividend will be $0.50 per share next year.After that dividends will increase by 4 percent per year.The company has a beta of 1.6.The market rate of return is 8% and the T-bill rate is 3%.Should you purchase shares in this firm at the current market price of $6.98 per share?
Q4) Higher rates of growth and lower debt levels contribute to higher P/E ratios.
A)True
B)False
Q5) How can you determine the current value of a non-dividend paying stock?
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Chapter 9: Market Efficiency, Behavioral Finance, and Technical Analysis
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112 Verified Questions
112 Flashcards
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Sample Questions
Q1) A relatively high level of short sells is an indicator of a current bull market.
A)True
B)False
Q2) Which of the following are included in technical analysis?
I.charting price movements
II.tracking trading volume
III.determining the investor's risk tolerance
IV.monitoring odd-lot trading
A) I and II only
B) II and III only
C) I, II and III.
D) I, II, and IV
Q3) The breadth of the market refers to the spread between the number of stocks advancing and those declining in value.
A)True
B)False
Q4) The simple moving average is a weighted average.
A)True
B)False
Q5) Explain why technical analysts use charts so extensively.
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Chapter 10: Fixed-Income Securities
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118 Verified Questions
118 Flashcards
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Sample Questions
Q1) What is the tax-equivalent yield of a double tax-free 5% municipal bond if the investor is in the 28% federal and 7% state tax brackets?
A) 6.94%
B) 7.14%
C) 7.47%
D) 7.69%
Q2) Mortgage-backed securities are self-liquidating.
A)True
B)False
Q3) When interest rates change, the prices of short-term bonds will change more than those of long-term bonds.
A)True
B)False
Q4) Convertible bonds are especially attractive when stock prices are falling.
A)True
B)False
Q5) Bondholders can earn income both from interest and from capital gains.
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) Bonds with the same level of risk, the same maturity, and the same coupon rate will always sell for the same price whether the interest is paid annually, semi-annually or quarterly.
A)True
B)False
Q2) A flat or downward sloping yield curve indicates that the economy may be heading toward a recession.
A)True
B)False
Q3) Some common types of bond swaps are
I.tax swaps.
II.yield pickup swaps.
III.substitution swaps.
IV.credit default swaps.
A) I and III
B) II and IV
C) I, II, and III
D) I, II, and IV
Q4) Explain the differences between yield-to-maturity and yield-to-call.
Q5) Explain the technique and the purpose of building bond ladders.
Page 13
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Chapter 12: Mutual Funds: Professionally Managed Portfolios
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113 Verified Questions
113 Flashcards
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Sample Questions
Q1) Performance fees based on profits earned by the fund are typical of A) hedge funds.
B) exchange traded funds.
C) closed-end investment companies.
D) open end mutual funds.
Q2) A closed end fund is selling at a premium when the NAV exceeds the market price.
A)True
B)False
Q3) An aggressive growth mutual fund is least likely to purchase a stock
A) with a high P/E ratio.
B) with a high anticipated rate of growth.
C) of an unseasoned firm.
D) with a high dividend yield.
Q4) 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
Q5) Most exchange-traded funds are index funds.
A)True
B)False
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Chapter 13: Managing Your Own Portfolios
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109 Verified Questions
109 Flashcards
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Sample Questions
Q1) 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%.According to the Treynor 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.
Q2) A portfolio has a total return of 10.5%, a beta of 0.72 and a standard deviation of 6.3%.The risk free rate is 3.8%, the market return is 12.4%.Jensen's measure of this portfolio's performance is A) 0.5%.
B) 4.3%.
C) 7.9%.
D) 9.3%.
Q3) 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 Verified Questions
115 Flashcards
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Sample Questions
Q1) Listed options trade over-the-counter.
A)True
B)False
Q2) Listed options
A) are traded directly between the buyer and the seller.
B) are rarely traded in the secondary markets.
C) have readily available price information.
D) are sold over the counter.
Q3) A put option has a strike price of $32.The current price of the stock is $34.The put option is said to be "in-the-money."
A)True
B)False
Q4) The price behavior of the underlying security is the primary determinant of the price of an option.
A)True
B)False
Q5) Warrants are short-term options usually expiring within a year or less.
A)True
B)False
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Chapter 15: Commodities and Financial Futures
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96 Verified Questions
96 Flashcards
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Sample Questions
Q1) Some investors combine two or more different futures contracts into one investment position that offers the potential for generating a modest amount of profit while restricting exposure to loss.This practice is called
A) speculating.
B) spreading.
C) gambling.
D) market making.
Q2) All futures contracts are traded on a margin basis.What does "margin" mean, and how does the use of margin affect the inherent risk-return nature of the futures market?
Q3) 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.
Q4) There is no limit to the amount of loss than can occur with a futures contract.
A)True
B)False
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