AWMA Exam Practice Questions and Answers All Correct with Rationales (Already Graded A+) Newest Version
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AWMA Exam Practice Questions and Answers All Correct with Rationales (Already Graded A+) Newest Version
The gross income multiplier (GIM) that can be used to value real estate is closest to what financial ratio? - Answer- *price-to-sales
The gross income multiplier approach is similar to the ...
AWMA Exam Practice Questions and
Answers All Correct with Rationales
(Already Graded A+) Newest Version
The gross income multiplier (GIM) that can be used to value real estate is closest to
what financial ratio? - Answer- *price-to-sales
The gross income multiplier approach is similar to the price-to-sales ratio since it
involves coming up with a multiplier based on either gross rental receipts, the potential
gross income (which would include any other income in addition to rent), or the effective
gross income (potential gross income after deducting for vacancy and collection losses).
*
What is correct with respect to net unrealized appreciation (NUA) treatment from a
distribution of employer securities? - Answer- The distribution must be a lump-sum
distribution from the plan.
In order to qualify for NUA treatment, the distribution must be a lump-sum distribution
taken in-kind. The stock must not have been rolled over to an IRA. The basis of the
stock is treated as ordinary income in the year of distribution, and the NUA is treated as
long-term capital gain, regardless of the holding period.
Which of the following are characteristics of SERPs and excess benefit plans?
I. Benefits are usually paid out of the employer's general assets.
II. Both plans are used to supplement benefits provided by the employer's qualified plan.
III. They are subject to the same ERISA requirements.
IV. The plan's benefit formula may provide for defined contributions or a defined benefit.
- Answer- I, II, and IV only
Statements I, II, and IV are correct. Unfunded excess benefit plans are exempt from the
requirements of ERISA. In contrast, funded excess benefit plans are subject to the
fiduciary, written plan requirements; reporting and disclosure requirements; and the
enforcement and claims provisions of ERISA. However, funded excess benefit plans are
exempt from other ERISA requirements. SERPs are subject to brief reporting and
disclosure requirements, and the enforcement and claims provisions of ERISA.
However, top hat plans and unfunded SERPs are exempt from other ERISA
requirements.
, What two acts have been cited by many to have contributed to the market meltdown
and financial crisis in 2008? - Answer- Gramm-Leach-Bliley Act of 1999 and Commodity
Futures Modernization Act of 2000
Gramm-Leach-Bliley repealed part of the Glass-Stegall Act of 1933, and this allowed
financial institutions to consolidate and offer banking services along with investments
and insurance. This led to banks taking on more risk and complexity than they had in
the past. The Commodity Futures Modernization Act had an impact on the financial
crisis for what it did not do, namely exempting derivatives such as credit default swaps
(which played a major role in the 2008 meltdown) from regulation.
Which of the following describe Jensen's Alpha?
I. Alpha is a relative measure used to compare the manager's performance to the
appropriate benchmark.
II. Standard deviation is the risk measure used to calculate Alpha.
III. The calculation includes the use of the CAPM formula.
IV. The risk-free rate is determined by the Federal Reserve on an annual basis. -
Answer- III only
Alpha is a standalone measure of the manager's performance, while Sharpe and
Treynor are relative measures. Alpha relies on Beta for the risk measurement. The
calculation does consist of the realized return minus the CAPM formula. The risk-free
rate is the market rate for the U.S. Treasury security that one wishes to use.
XYZ Inc., an S corporation, has $200,000 in income this tax year, including $100,000 in
cash dividends from other corporations. As far as XYZ Inc. is concerned, which one of
the following amounts, if any, is subject to the federal corporate income tax? - Answer-
$0
The S corporation is, for tax purposes, a "conduit"; that is, an entity that pays no income
taxes but merely funnels corporate earnings (or losses or credits) to its shareholders.
The individual shareholders pay taxes on these earnings at their personal tax rates.
What might be an intermediate goal for a high net worth client? - Answer- funding
child's/grandchild's education
Funding a child's or grandchild's education can be a long-term goal for a high net worth
client. Starting an emergency fund or using funds for a luxury vacation or to upgrade a
home would be short-term goals.
Which of the following are characteristics of the Sharpe performance evaluation index?
I. It adjusts the return for variability by using standard deviation as the measure of risk.
II. It assumes that the portfolio being evaluated is well diversified.
III. Both alpha and beta appear in the formula for the index.
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