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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. Check compliance with concentration rules and diversification in the portfolio - validate the proposal or develop a new asset allocation - revision






2. Buy low and sell high






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






4. Monitoring performance and adherence to policy - reviewing IPS on regular basis






5. Selling loses so you avoid capital gain taxes






6. Commission - fee - salary - hourly fee for service






7. 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






8. Don't want stocks highly correlated if trying to diversify






9. Weighted average of the expected returns of its components






10. Who wants ongoing service over financial affairs; should align interests insofar as the wealth management professional wants to see the portfolio grow as much as the client






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






12. Execution at 18 mo intervals provides most of the benefits with less costs






13. 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






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






15. Paid for U.S. corp or qualified foreign corp - taxed at 15% for those in tax bracket of 25% or more - taxed at 0% for those in tax bracket less than 25% - holding period requirement






16. 4 yrs qualified investment work experience - completion of cfa program - 3 6hr exams - 2-5 yrs to complete






17. 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






18. High ethical standards - communication skills - quantitative and analytical skills - attention to detail - work independently - current events - financial matters - client interests






19. Representation in domestic and international - large - mid - small cap - no individual stock more than 5% of total portfolio






20. Risk by keeping investor with pre-determined risk profile






21. How far does it stray? - do other client characteristics justify the variance? what changes need to be made to correct? - how long? - - cost in taxes and transaction costs? - worth it to reallocate?






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






23. Brokerages - insurance companies






24. Reduce risk and can increase returns






25. Sell assets with losses and offset with sales of those with gains - rebalance in tax advantaged accounts (IRA or 401K)






26. 3 yrs qualified work experience - complete cfp courses and exams - financial planning - employee benefits planning - investment planning - risk management - retirement planning






27. Strategy of reducing idiosyncratic risks by making two investments with opposing risks






28. Amount of money you have paid into the house






29. Strategy of reducing idiosyncratic risks by making two investments with opposing risks






30. Commission - fee - salary - hourly fee for service






31. Inherited wealth - suddenly wealthy - endowments and foundations






32. Inherited wealth - suddenly wealthy - endowments and foundations






33. Bonds: coupon income + changes in price due to changes in interest rates - stocks: dividend yield + growth in earnings + change in p/e






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






35. Focus on integrated services/ cross selling - may be less pressure to sell than brokerage but more than community bank - blurring lines between brokerage and trust areas






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






37. 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






38. Square root of variance/initial investment






39. 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






40. High ethical standards - communication skills - quantitative and analytical skills - attention to detail - work independently - current events - financial matters - client interests






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






42. Brokerages - investment banks - commercial banks - trust departments - large comprehensive accounting firms - independent financial planners - insurance companies






43. Bonds: coupon income + changes in price due to changes in interest rates - stocks: dividend yield + growth in earnings + change in p/e






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






45. 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






46. Appropriate credit quality and interest rate risk - no individual corporate issuer more than 5%






47. 4 yrs qualified investment work experience - completion of cfa program - 3 6hr exams - 2-5 yrs to complete






48. 0 company could fail






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






50. The theoretical rate of return of an investment with no risk of financial loss - i.e. short dated domestic govt bond (default benchmark)