Posts by Keir

Which of the following statements concerning potential disadvantages of S Corporations is (are) correct? (1)   If the business continues to produce losses after the start-up period, the shareholders’ basis in their stock might become exhausted and then additional losses would not be tax-deductible. (2)   The receipt of significant amounts of passive income by an S…

Which of the following is includible in gross income for federal income tax purposes? A. Gift from a grandfather to pay tuition B. A year-end bonus received by an employee, based on business profits C. Excess living expenses received under an insurance contract after a home was damaged by fire D. Interest paid on most…

Which of the following are logical reasons for writing a covered call? (1)   To profit when stock prices increase (2)   To utilize leverage (3)   To provide additional income in a flat market (4)   To provide additional gain while disposing of a long stock position A. (1) only B. (1) and (3) only C. (1), (2),…

Which of the following statements correctly describes duration? A. There is a positive relationship between the coupon rate and duration. B. There is an inverse relationship between the yield to maturity and duration. C. Bonds with shorter durations are more volatile. D. There is an inverse relationship between maturity and duration. CLICK TO REVEAL ANSWER…

Bill asks you to price a zero-coupon bond that matures in seven years for $1,000. Bonds with similar risk and maturity yield 10.5%. What is a fair price for Bill to pay for this bond? $473 $481 $489 $497 CLICK TO REVEAL ANSWER Expand The correct answer is C.   TI BA-II Plus                                  HP-12C 7,…

Portfolio X has a weighted beta coefficient of 1.5, and Portfolio Y has a weighted beta coefficient of .8. Both portfolios are expected to earn the same weighted-average expected return. With these assumptions, which of the following statements is correct? An investor should choose Portfolio X because of its higher beta. An investor should choose…

Which of the following statements correctly describe differences between preferred stock and long-term bonds? (1)   Preferred stock is more risky for the investor than long-term bonds issued by the same company. (2)   The market price of preferred stock fluctuates more than the market price of long-term bonds. (3)   Long-term bonds usually have a longer maturity…

Which of the following statements concerning the disadvantages of universal life insurance is (are) correct? (1)   The future yield potential for the policy owner is uncertain. (2)   The semi-compulsory regular savings feature of conventional whole life insurance is lost. (3)   Since the cash value is invested primarily in common stocks and other equities, it is…

Bob broke his leg skiing earlier this year. Bob collected $10,000 from his short-term disability plan, paid for solely by his employer. How much does Bob have to include in his gross income? A.   $0 B.   $5,000 C.   $8,500 D.   $10,000 CLICK TO REVEAL ANSWER Expand The correct answer is D. Bob must include 100%…

If a financial planner is unable to obtain all the relevant quantitative information and documents from the client needed to make recommendations, which of the following actions by the planner is acceptable under the CFP Board’s Practice Standards? (1)  The planner may terminate the engagement. (2) The planner may limit the scope of the engagement.…