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AWMA PRACTICE EXAM II LATEST UPDATED
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AWMA PRACTICE EXAM II LATEST UPDATEDUsing the capital asset pricing model, what is the expected return on a stock with a
beta of 1.20, a risk-free rate of 4%, and a market return of 10%? (Set the calculator
to four decimal places to reduce rounding errors.)
A)11.2%
B)8.8%
C)10.1%
D) 16.0% - Answer A
.04 + 1.2 (.10 − .04) = .04 + .072 = .112 or 11.2%
Which of the following is NOT a basic rule for investing in small businesses?
A) Look for equities with low volatility.
B) Diversify among 20-30 different issues.
C) have a long-term time perspective.
D) Avoid turnover of more than 30% each year - ANSWER A
Investors in small businesses should anticipate volatility and have a long-term time
horizon. Gerald Perritt proposes investing in 20 to 30 different issues, with a
turnover of no more than 30% each year to control transaction expenses.
Which condition necessitates special measures for the dwelling and contents of a
high-net-worth individual's principal residence?
A)When the owner intends to live overseas for a year.
B)When the owner spends a month travelling through Europe.
,C)When the owner goes on vacation for one week.
D)When the owner is in their vacation house for two weeks—ANSWER A
When the primary dwelling is temporarily vacant, homeowners policies will
continue to offer coverage. However, if the owner will be out of the country for a
year, the property may be declared vacant and coverage may not be available.
Specialty insurance companies that frequently deal with scenarios such as clients
who live abroad for extended periods of time might lessen the likelihood of an
important risk being overlooked. These organizations frequently supply risk
managers who can adequately advise clients on their options.
Your client is currently subject to Medicare's contribution tax. Which strategy may
help to mitigate the impact of the Medicare contribution tax?
A) Receiving passive business revenue.
B) Receiving municipal bond interest.
C)Collecting capital gain income
D) Maximizing charitable contribution deductions. ANSWER B
Municipal bond interest is not subject to the Medicare contribution tax, and it does
not increase AGI.
Charitable contributions enhance itemized deductions, which reduces taxable
income. However, the Medicare contribution tax threshold is based on adjusted
gross income rather than taxable income.
, Passive company income and capital gains are both subject to the Medicare
contribution tax.
Which of these describes an underfunded excess benefit plan?
A)The plan must meet the reporting requirements but not the disclosure
requirements of ERISA.
B)The plan must meet both the transparency and reporting requirements of ERISA.
C)Generally, the plan is not required to comply with ERISA's disclosure or
reporting requirements.
D)The plan must meet the disclosure requirements but not the reporting
requirements of ERISA. - ANSWER C
Unfunded excess benefit plans are exempt from ERISA disclosure and filing
requirements; however, funded excess benefit plans are required to comply.
Top-hat plans and SERPs are likewise subject to ERISA reporting and disclosure
obligations.
Which statement is correct about federal transfer taxes?
A)Use of the estate tax marital deduction exempts the subject property from further
transfer taxes.
B)The direct payment of tuition expenditures to an educational institution by a
decedent's estate for the benefit of a surviving child is not subject to transfer
taxation.
C)The generation-skipping transfer tax (GSTT) applies to wealth transfers between
non-related parties.
D) The gift tax is tax-inclusive. - ANSWER C
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