HS 300 Exam Review Questions With
Correct Answers
For SEC registration purposes, which act sets the limit for assets under management? -
answerThe Investment Advisors Act
What is an appropriate investment for an emergency fund? - answerA money market mutual
fund.
What is the yield to maturity...
For SEC registration purposes, which act sets the limit for assets under management? -
answer✔✔The Investment Advisors Act
What is an appropriate investment for an emergency fund? - answer✔✔A money market mutual
fund.
What is the yield to maturity of a $1,000 face amount bond that currently sells for $875, pays
$60 of interest at the end of each year, and matures in 10 years? - answer✔✔7.85%
Keystrokes: 1000FV, 875+/-PV, 60PMT, 10N; I/yr
According to a consumer survey conducted by the CFP Board of Standards, the top reason why
people begin financial planning is to: - answer✔✔Build and liquidate a retirement fund.
A financial service professional would devise client recommendations during which domain of
financial planning? - answer✔✔Developing recommendations
How do you calculate the liquidity ratio? - answer✔✔Liquid Assets / total current debts
How do you calculate the debt service ratio? - answer✔✔Total debt payments / gross income
How do you calculate the solvency ratio? - answer✔✔Net Worth / Total Assets
How do you calculate the savings ratio? - answer✔✔Net cash flow + Savings and investments /
annual after-tax income
A comprehensive financial plan organized to follow the financial planning process should start
by: - answer✔✔Specifying the responsibilities of each party for implementing the plan and
carrying it through to completion.
When calculating the liquidity ratio, if the top of the equation is liquid assets, what does the
denominator of the equation consist of? - answer✔✔Short term liabilities (credit card debt
included)
How much should an investor be willing to pay for a bond that pays $25 of interest every 6
months for the next 3 years and the $1,000 face amount at the end of 3 years if the investor
requires a yield to maturity of 8%? - answer✔✔$921.37
Keystrokes: 2P/Yr, 3xP/Yr, 25PMT, 1000FV, 8 i/yr; PV
Dave has a credit card balance of $20,000, which carries an APR of 20%. He pays $400 per
month towards retiring the balance. How long will it take Dave to reduce the balance to $0? -
answer✔✔9.03 years
Keystrokes: 20,000PV, 20/12= I/yr, -400PMT; N
A multiline insurance agent who sells life, health, and property and liability insurance to a client
is engaging in what type of financial planning? - answer✔✔Multi-Purpose
Mariah is considering attending an accredited university next year. Which is most likely to limit
the amount of federal student aid she may receive?
Mariah's parents estimated income next year, or her reported taxable income this year of $25,000
- answer✔✔Mariah's reported taxable income this year of $25,000
What is the appropriate standard of conduct for a fiduciary? - answer✔✔Acting as a prudent
investor.
Why do Home equity loans and HELOCs offer such low interest rates? - answer✔✔Because the
level of equity in the home decreases the lender's risk.
Which of the following federal student aid programs are need based?
a) Parent Loans for Undergraduate Students (PLUS Loans)
b) Federal Perkins Loan - answer✔✔Federal Perkins Loan... Plus loans are available to all
family income levels.
What is the point of the Pension Benefit Guaranty Corporation (PBGC)? And who created it? -
answer✔✔To protect vested benefits in defined benefit plans. Created by ERISA in 1974
What form of bankruptcy is used when Debt is restructured and the debtor enters a repayment
plan? - answer✔✔Chapter 13 bankruptcy
Which of the following statements concerning disintermediation are correct?
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