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Test your basic knowledge |
Wealth Management Exam
Start Test
Study First
Subjects
:
personal-finance
,
business-skills
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. Investment banks - financial consultants
what does rebalancing control?
uniform prudent investor act
who use hourly
what makes a good benchmark
2. 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?
what to ask if client has inappropriate allocation
monitor step of wealth management
diversification
use fee based model
3. Buy low and sell high
what does rebalancing force?
develop investment sections step of wealth management
setting allocation policy based on targets and ranges
certified financial planner
4. Weighted average of the expected returns of its components
diversifying bonds
calculating expected return
How many issues needed to create a diversified stock portfolio?
chartered financial analyst
5. Paid as percentage of assets under management for your advice
risk
fee
iowa trust code requires the trustee to consider
working at brokerage
6. Unique risks
idiosyncratic risk
calculating expected return
validation step of wealth management
systematic risk
7. Economy wide risks - consumer spending - economy
drivers of return
systematic risk
investment objectives
idiosyncratic risk
8. 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
who use hourly
setting allocation policy based on targets and ranges
needs step of wealth management
best client suited for fee based
9. Brokerages - insurance companies
use commissions model
risk-free investment
what does rebalancing force?
salary
10. 4 yrs qualified investment work experience - completion of cfa program - 3 6hr exams - 2-5 yrs to complete
probability theory
chartered financial analyst
what to ask if client has inappropriate allocation
what Warren Buffet says about diversifying over time with $ cost averaging
11. Define investor profile and liquidity needs over time - identify the proportion of each section in line with your risk profile - investor profile - asset allocation
needs step of wealth management
rebalancing
how to protect client from unjustified risks?
market timing
12. 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
qualified dividends
diversifying stocks
How many issues needed to create a diversified stock portfolio?
what return includes for mutual funds
13. 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
who use hourly
what Warren Buffet says about diversifying over time with $ cost averaging
how to protect client from unjustified risks?
who else will you serve?
14. Paid per transaction for your idea
chartered financial analyst
systematic risk
steps of wealth management
commission
15. Asset allocation and diversification
how to protect client from unjustified risks?
best client suited for fee based
offer wealth management services
who use hourly
16. Ordinary income tax rate (high - up to 35%) - capital gains rate (low - 0% or 15%)
expected value of probability theory
two rates that returns are taxed by
drivers of return
steps of wealth management
17. You would have missed 96% of market's gains
hedging risk
hedging risk
what would happen if you were out of the stock market during the 90 best days
probability theory
18. Fees or expenses - tax consequences
reasons to retain certain assets
asset allocation
responsibilities of the client
how to computer std. dev
19. Restricted and unrestricted funds - characteristics and constraints
diversifying bonds
purpose of the funds to be invested
why correlation matters
wealth management positions
20. St. dev. - correlation or R2 - VaR- value at risk
calculating expected return
measuring risk
4 ways of getting paid
what happens if you never rebalance
21. Probability theory
market timing
how 15-20 stockswill not diversify portfolio
fee
What risk measurement is based on
22. Recovery rate (how much get back if default)
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23. Used to minimize issuer specific risks - principle of holding more than one risk at a time
diversification
VaR of stocks and bonds
working at large national bank
who use hourly
24. Private banks - mutual funds - retail brokerages - hedge/private equity funds
what to ask if client has inappropriate allocation
who use salary based model
use fee based model
rebalancing recommendations
25. Payoff-expected value
two rates that returns are taxed by
commission
working at community bank
deviation of payoff from expected value
26. Economy wide risks - consumer spending - economy
who governs these services
What risk measurement is based on
how 15-20 stocks create diversified portfolio
systematic risk
27. 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
qualified dividends
Value at Risk (VaR)
market timing
how to diversify
28. Measure of uncertainty about the future payoff to an investment measured over some time horizon and relative to a benchmark
salary
wealth management positions
diversification
risk
29. Investment banks - financial consultants
what Warren Buffet says about diversifying over time with $ cost averaging
who use hourly
how to choose where to work
how to compute variance
30. 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
hedging risk
working at large national bank
reasons to retain certain assets
certified financial planner
31. Monitoring performance and adherence to policy - reviewing IPS on regular basis
hedging risk
diversifying bonds
what to ask if client has inappropriate allocation
responsibilities of the client
32. Determines broad portfolio composition across asset classes - allocation between stock - bond - and cash determined more than 90% of the variability of returns
spreading risk
how to compute variance
asset allocation
qualified dividends
33. Bonds: coupon income + changes in price due to changes in interest rates - stocks: dividend yield + growth in earnings + change in p/e
diversifying bonds
hourly
systematic risk
drivers of return
34. 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
working at community bank
what return includes for mutual funds
fee
measuring risk
35. Review at least annually to manage gains/losses - clients adding or taking distributions require more frequent monitoring
wealth management recommendation about rebalancing
develop investment sections step of wealth management
hedging risk
what does rebalancing control?
36. Strategy of reducing idiosyncratic risk by making two investments whose payoffs are unrelated
use commissions model
who is suited for wealth management career
spreading risk
risk
37. Get paid on hourly basis for advice
hourly
dollar cost averaging
VaR of bank's mortgage backed securities
Value at Risk (VaR)
38. The theoretical rate of return of an investment with no risk of financial loss - i.e. short dated domestic govt bond (default benchmark)
risk-free investment
What risk measurement is based on
How many issues needed to create a diversified stock portfolio?
steps of wealth management
39. If stocks are chosen carefully to create lowest possible correlation of returns - if those stocks are monitored carefully to assure that they will continue to have uncorrelated returns
how 15-20 stocks create diversified portfolio
who else will you serve?
what diversification can do
who governs these services
40. Brokerages - investment banks - commercial banks - trust departments - large comprehensive accounting firms - independent financial planners - insurance companies
how to rebalance for no tax cost?
how time impacts risk
offer wealth management services
systematic risk
41. Get paid on hourly basis for advice
expected value of probability theory
hourly
what happens if you never rebalance
use fee based model
42. Appropriate credit quality and interest rate risk - no individual corporate issuer more than 5%
tax loss harvesting
diversifying bonds
reasons to retain certain assets
best client suited for commission based
43. Representation in domestic and international - large - mid - small cap - no individual stock more than 5% of total portfolio
diversifying stocks
risk-free investment
what would happen if you were out of the stock market during the 90 best days
develop investment sections step of wealth management
44. High ethical standards - communication skills - quantitative and analytical skills - attention to detail - work independently - current events - financial matters - client interests
timing of rebalancing
spreading risk
who is suited for wealth management career
hedging risk
45. Accumulate wealth over time by spending less than they earn - invest 20% of income per year - incomes are about average - advanced degrees
who is best suited for hourly wealth management
drivers of return
where do wealthy clients get their money?
who use hourly
46. Majority of diversification benefit is reached with a portfolio of as few as 15-20 stocks => no more than 5% of stock portfolio in any one company - depends on definition of market
VaR of stocks and bonds
salary
How many issues needed to create a diversified stock portfolio?
working at brokerage
47. If stocks are chosen carefully to create lowest possible correlation of returns - if those stocks are monitored carefully to assure that they will continue to have uncorrelated returns
dollar cost averaging
responsibilities of the client
validation step of wealth management
how 15-20 stocks create diversified portfolio
48. In a fee based environment - base salary typically has a sig. variable component in the form of commissions or bonuses - variable compensation determined by quantitative and qualitative factors - similar to fee arrangement for client
salary
who is suited for wealth management career
investment objectives
qualified dividends
49. Selling loses so you avoid capital gain taxes
tax loss harvesting
spreading risk
uniform prudent investor act
setting allocation policy based on targets and ranges
50. St. dev. - correlation or R2 - VaR- value at risk
4 ways of getting paid
wealth management recommendation about rebalancing
how to diversify
measuring risk
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