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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. 0 company could fail






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






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






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






5. 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






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






7. Restricted and unrestricted funds - characteristics and constraints






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






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






10. Probability theory






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


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






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






14. Restricted and unrestricted funds - characteristics and constraints






15. Accumulate wealth over time by spending less than they earn - invest 20% of income per year - incomes are about average - advanced degrees






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






17. 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






18. Amount of money you have paid into the house






19. Asset allocation and diversification






20. Probability X squared deviation of payoff from expected value






21. Asset allocation and diversification






22. Assets are comparable - style - type of securites - value and growth






23. 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






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






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






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






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






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






29. 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






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






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






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






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






34. Broker/dealer- FINRA - SEC - bank exemption- fed and state regulators - employers - industry associations






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






36. 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






37. 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






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






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






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






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






42. 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






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






44. 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






45. Private banks - mutual funds - retail brokerages - hedge/private equity funds






46. Inherited wealth - suddenly wealthy - endowments and foundations






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






48. Unique risks






49. Weighted average of the expected returns of its components






50. 3 yrs qualified work experience - complete cfp courses and exams - financial planning - employee benefits planning - investment planning - risk management - retirement planning