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Wealth Management Exam

Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Weighted average of the expected returns of its components






2. 1. define your needs and objectives 2. develop investment sections 3. regularly monitor your portfolio 4. validation






3. Rebalance tax deferred accts first to reduce tax consequences - use tax loss harvesting in your taxable accounts prior to dec. 31 - try taking gains in taxable acct after 12/31 - when taking distributions - sell from overweight classes first - when a






4. 0 company could fail






5. Ordinary income tax rate (high - up to 35%) - capital gains rate (low - 0% or 15%)






6. Brokerages - insurance companies






7. Inherited wealth - suddenly wealthy - endowments and foundations






8. Only those who will be sellers of equities in the near future should be happy at seeing stocks rise. prospective purchasers should much prefer sinking prices






9. Strategy of reducing idiosyncratic risk by making two investments whose payoffs are unrelated






10. 3 yrs qualified work experience - complete cfp courses and exams - financial planning - employee benefits planning - investment planning - risk management - retirement planning






11. Precise and regular review of each investment section - risk management/ volatility check - arbitration proposals - continuous control






12. Increases risk and reduces sharpe (return/risk) ratios






13. Reduce risk and can increase returns






14. More stability - higher salary - less upside potential for income - may need fiduciary skill - more focus on client service - less on asset gathering - sec licensing likely not required - call primarily on bank customers






15. Recovery rate (how much get back if default)


16. High income upside potential - low base salary - greater requirement to sell in many cases - including cold call - cutting edge investment thinking - products - and support - SEC licensing required - potential long term commitment required






17. Target: a proportion for allocation under 'normal' circumstances - range: an allowable band for allocation under variable circumstances






18. Priority of income - growth - safety of principal - benchmarks






19. Value of the worst possible outcome - measures maximum potential loss - over a specific time horizon - at a given probability - used widely in the management and regulation of financial institutions






20. Get paid on hourly basis for advice






21. Invest some fixed amount of money at regular intervals - allows to buy more shares when prices are low - not market timing doesn't work - reduces down side risk of putting lump sum in prior to a drop in value






22. Investment banks - financial consultants






23. Payoff X probability - payoff is the potential return of the investment






24. Never - monthly - quarterly - if more than 5% from target at month's end - if more than 5% from target at quarter's end






25. The longer the time with payments the more the risk - fixed income (bonds) the more time the more risk - stocks: the longer the time less volatility






26. Precise and regular review of each investment section - risk management/ volatility check - arbitration proposals - continuous control






27. Purpose of the funds to be invested - investment objectives - responsibilities of the investment manager - responsibilities of the client - set allocation policy based on targets or ranges






28. Measure of uncertainty about the future payoff to an investment measured over some time horizon and relative to a benchmark






29. Across and within asset classes - internationally as well as domestically - find investments with low correlation R2 - asset correlation changes over time - for stocks diversify across and within sectors - diversify over time with dollar cost averagi






30. Client is unwilling to make appropriate trades due to tax impact or sentimental attachment - wealth management is unable to determine correlations between stocks - trading them through time (actively managing account)






31. Used to minimize issuer specific risks - principle of holding more than one risk at a time






32. Private banks - mutual funds - hedge funds - trust companies - brokerages






33. Selling loses so you avoid capital gain taxes






34. 4 yrs qualified investment work experience - completion of cfa program - 3 6hr exams - 2-5 yrs to complete






35. General economic conditions - tax consequences of change - role of asset w/ in total portfolio - total return including income and principal - other resources - need for liquidity - income - preservation or appreciation of principal






36. Income and capital gain/loss in value - income is passed through to shareholders - gain/loss occurs on the mutual funds shares as well as on the underlying fund portfolio - fund portfolio gains are passed to shareholders; losses are retained in the f






37. St. dev. - correlation or R2 - VaR- value at risk






38. Culture/philosophy - money - risk/reward - career trajectory - other support roles






39. Understand incentives of journalists - analysts - and companies in trying to make you take action - stay in the market - continue to add to your portfolio - buy and hold works






40. Economy wide risks - consumer spending - economy






41. Economy wide risks - consumer spending - economy






42. Probability theory






43. Understand incentives of journalists - analysts - and companies in trying to make you take action - stay in the market - continue to add to your portfolio - buy and hold works






44. Who wants significant input on investment selections or who has very few transactions and very little change in circumstances






45. Income (dividends - interest - rents) - capital gain/ loss in value






46. You would have missed 96% of market's gains






47. Take account of the bank's strategy - product - recommendations - ideas and investment themes - apply allocation rules - investment proposal






48. The longer the time with payments the more the risk - fixed income (bonds) the more time the more risk - stocks: the longer the time less volatility






49. Brokerages - insurance companies






50. Fees or expenses - tax consequences






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