Question 1

Which of the following bonds may be exchanged for another asset at the owner's discretion?

Accepted Answer

A)  Municipal bonds 
B)  Callable bonds 
C)  Convertible bonds 
D)  Zero coupon bond

Question 2

The joint probability of events A and B is 32 percent with the probability of event A being 60 percent and the probability of event B being 50 percent. Based on this information, the conditional probability of event A given event B has occurred is closest to:

Accepted Answer

A)  30.0% 
B)  53.3% 
C)  64.0% 
D)  56.6%

Question 3

In _________________, an adjustment is based on experience of an individual risk during the term of the policy and is generally subject to maximum and minimum premium limits specified in the policy.

Accepted Answer

A)  Business recordkeeping 
B)  Retrospective premium adjustments 
C)  Premium transaction flow 
D)  Adjusting premiums

Question 4

Long term directs in Dow Theory is depicted through:

Accepted Answer

A)  Holes 
B)  Strings 
C)  Waves 
D)  Tides

Question 5

Which one of the following is correct formula for calculating operating margin?

Accepted Answer

A)  Net Profit/Net Sales 
B)  Net income/Net Sales 
C)  Operating income/Net Sales 
D)  Operating income/credit sales

Question 6

Relief from administrative details and continuity are the major reasons for:

Accepted Answer

A)  Trust acceptance 
B)  Trustee termination 
C)  Naming a financial institution as a trustee 
D)  Convenience and complete services of trusts

Question 7

Which of the following bond will have the longest duration?

Accepted Answer

A)  5 year, 10 percent coupon bond 
B)  5 year, 15 percent coupon bond 
C)  10 year, zero percent coupon bond 
D)  10 year, 10 percent coupon bond

Question 8

Which of the following statements about the over-the-counter market is false?

Accepted Answer

A)  Mutual funds and other new issues are initially issued over the counter 
B)  Security prices are determined through auction bidding 
C)  Broker dealers must be resigned 
D)  Securities are traded at many locations throughout the country

Question 9

___________ is an unmanaged fund designed to replicates closely as possible the performance of a specified index of market activity.

Accepted Answer

A)  Index fund 
B)  Reserve fund 
C)  Mutual fund 
D)  Pension fund

Question 10

Which of the following is the reason stock prices behave the way they do at resistance lines?

Accepted Answer

A)  Many investors want to buy at this price 
B)  Market makers resist moving prices lower than this price 
C)  Many investors want to sell at this price 
D)  Market makers support prices at this level

Question 11

Which of the following is an average signifying the point in time when the present value of security is repaid?

Accepted Answer

A)  Yield to maturity 
B)  Duration 
C)  Convexity 
D)  Immunization

Question 12

Which of the following usually represents an unusually risky stocks?

Accepted Answer

A)  Blue chip stock 
B)  Growth stock 
C)  Penny stock 
D)  None of these

Question 13

Which of the following does not pay fix income (interest/ dividend) to investors?

Accepted Answer

A)  Preferred stock 
B)  Government bond 
C)  Common stock 
D)  Treasury bond

Question 14

The auditor should obtain a sufficient understanding by performing risk assessment procedures to:

Accepted Answer

A)  Evaluate the design of controls not relevant to audit of financial statement 
B)  Determine whether design of controls have been implemented 
C)  Both A & B 
D)  Neither A nor B

Question 15

The accumulation phase in annuities can last from as long as:

Accepted Answer

A)  One day to five years 
B)  One day to decades 
C)  Ten days to ten years 
D)  All of these

Question 16

The objective/s of trust department's administration of corporate trust accounts include:

Accepted Answer

A)  Policies and producers ensure compliance with governing instruments, applicable law and accepted fiduciary principles II. Deficiencies are identified and corrective action is promptly initiated III. There is sufficient management and staff expertise to administer these accounts IV. Effective policies, procedures and internal controls have been established 
B)  The legitimate needs of security holders and other interested parties are met in a professional and timely manner 
C)  III and IV 
D)  I, II and IV 
E)  II, III and V
F) All of these

Question 17

The combined ratio is the sum of it:

Accepted Answer

A)  loss ratio 
B)  Expense ratio 
C)  Dividend ratio 
D)  All of the above

Question 18

___________ is a policy provision ensuring continued insurance coverage for the insured's lifetime as long as premiums continue to be paid.

Accepted Answer

A)  Waiting period 
B)  Guaranteed Renewability 
C)  Optional renewability 
D)  None of these

Question 19

A form of HMO in which subscribers receive services from physicians practicing from their own offices and from community hospitals affiliated with the IPA.

Accepted Answer

A)  Individual practice association 
B)  Preferred provider organization 
C)  Exclusive provider organization 
D)  Point-of-service plan

Question 20

Which of the following is the characteristic of a cyclic stock?

Accepted Answer

A)  Their value is tied with the overall state of national economy 
B)  They are low priced, speculative and risky securities 
C)  They have stable earning and no extensive liabilities 
D)  They have irregular earning and extensive liabilities too

Exam 2: Certified Trust and Financial Advisor