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AWMA Exam 1 Questions With Complete Solutions
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AWMA Exam 1 Questions With Complete Solutions
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AWMA Exam 1 Questions With Complete SolutionsA client who expects her portfolio of intermediate-term
government bonds to earn 12% a year suffers from which one of
the following?
A)Inadequate time horizons
B)Overreaction to market events
C) Unrealistic expectations
D)Overconfidence bias Correct Answer C) Historically,
intermediate-term government bonds have had an annual return
of between 5% and 6%, so this client has unrealistic
expectations. Mod 3
A funded deferred compensation plan
A) does not avoid current income taxation.
B) will provide an immediate deduction to an employer.
C) will be taxable to an employee if nonforfeitable.
D) must be made available to all employees. Correct Answer
C) If the employee has constructive receipt of plan
compensation (funds are nonforfeitable), such compensation
will be taxable to the employee. Mod 6
A major responsibility of FINRA is
A) registering agents of broker-dealers to do business with the
public.
B) insuring customer accounts in the event of the liquidation of
brokerage firms.
,C) establishing rules for issuing new securities in primary
markets.
D) developing rules and regulations for its members. Correct
Answer D) FINRA is the largest securities industry self-
regulating organization and, therefore, develops rules and
regulations for its members. Mod 8
A potential client, Ross Walker, is contacted by Amy Taylor, an
investment professional. Ross is interested in trading complex
options and is willing to open an account if Amy is
knowledgeable about options. Amy implies to Ross that she is
an expert in option trading but, in fact, knows only the basic
elements of it. Looking solely at Amy's lack of competency in
this area, which fiduciary duty has not been met?
A) Duty of care
B) Duty to keep current
C) Duty to consult
D) Duty to disclose Correct Answer A) Lacking the
competency to provide advice in the best interest of the client
falls under the fiduciary duty of care. Mod 8
A top hat plan
A) provides current benefits for key employees.
B) may be funded or unfunded.
C) is subject to the reporting and disclosure requirements of
ERISA.
D) is intended to provide benefits to all employees of a
company. Correct Answer C) Although not subject to the other
,provisions of ERISA, a top hat plan must comply with that law's
reporting and disclosure requirements. Mod 6
According to the Barnewall study, which one of the following
would be a likely candidate for complex and risky investment
opportunities?
A)Corporate executives
B)Individuals with inherited wealth
C)Surgeons (medical and dental)
D)Non-surgeons (medical and dental) Correct Answer C)
Medical and dental surgeons fall into what Barnewall described
as "active investors" who are measurably less risk averse. The
category also includes small business owners who started their
business, independent CPAs and lawyers, and entrepreneurs.
Mod2
All of the following are potential personal security risks except
A) serving on a board.
B)kidnapping.
C)extortion.
D)home invasion. Correct Answer A) Home invasion,
kidnapping, and extortion are all personal security risks that high
net worth people need to be concerned with. Serving on a board
presents personal liability risks, but not to one's security merely
from serving on the board. Mod 4
All the things that make a high net worth business owner's
business unique, including the knowledge, experience,
, relationships, and human resources that create value can be
categorized as their
A)trade secrets.
B)intellectual capital.
C)business secrets.
D)inventions. Correct Answer B) Intellectual capital consists of
all the things that make the business owner's business unique,
including the knowledge, experience, relationships, and human
resources that create value. It may also consist of trademarks
and patents as well as brand names that the business has
developed. If a business owner client has invented a product or a
process that is unique, it may be the business's most valuable
asset. Mod 4
An equity REIT typically
A)has no debt financing.
B)pays a fixed dividend.
C)owns property.
D)invests in mortgage loans. Correct Answer C) An equity
REIT owns property. Mod3
An investment professional who reads investment journals is
complying with the
A) duty to disclose.
B) duty to keep current.
C) duty to consult.
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