Question 1

In which of the following approaches the capitalization of an income is done?

Accepted Answer

A)  Present value approach 
B)  Multiple of earning approach 
C)  Communicative approach 
D)  Integrated eclectic approach

Question 2

All of the following are the problem associated with the Dividend Discount Model Except:

Accepted Answer

A)  This model needs infinite stream of dividends 
B)  This model has uncertain dividend stream 
C)  This model must estimate future dividends 
D)  This model requires constant earnings per share

Question 3

Which of the following is the ratio of a company's total market value (price times number of shares) divided by sales?

Accepted Answer

A)  Price to sales ratio 
B)  Price to book value ratio 
C)  Debt coverage ratio 
D)  Leverage ratio

Question 4

Which of the following estimates are needed while applying fundamental analysis to the market?

Accepted Answer

A)  Stream of shareholder benefits 
B)  Earnings and dividends 
C)  Required return or earnings multiple 
D)  All of given options

Question 5

The S&P 500 Composite Stock Index is favored by most institutional investors and money managers. What does S&P stands for?

Accepted Answer

A)  Sophisticated and Poised 
B)  Standard and Poor 
C)  Stylish and Permanent 
D)  Sojourn and Perennial

Question 6

Procter & Gamble is not affected by the recession in the economy; we will consider Procter & Gamble as:

Accepted Answer

A)  Cyclic industry 
B)  Defensive industry 
C)  Interest sensitive industry 
D)  None

Question 7

Which of the following has the assumptions of absence of personal taxes, single-period investment and riskless borrowing or lending?

Accepted Answer

A)  Modern Portfolio Theory 
B)  Capital Asset Pricing Model 
C)  Binomial Options Pricing Model 
D)  Arbitrage Pricing Theory

Question 8

Which of the following bonds are high yield bonds issued by companies that are considered highly speculative because of risk of default?

Accepted Answer

A)  Junk bonds 
B)  Municipal bonds 
C)  Callable bonds 
D)  Convertible bonds

Question 9

In which account current, for individual policies, the agent collects the premiums directly from the insureds, subtracts his or her commissions and remits the net premiums due to entity?

Accepted Answer

A)  Billing basis 
B)  Paying commission basis 
C)  Item basis 
D)  Bushiness costs

Question 10

Which of the following depicts a bullish trend in the stock market?

Accepted Answer

A)  Stock price drop below support level 
B)  Stock price drop below resident level 
C)  Stock price never drops below support level 
D)  None of these

Question 11

When a family member becomes sick for an extended period, the effect on the family goes beyond medical bills. The average chance of a person age 35 becoming disabled for 90 days or longer before 65 is about:

Accepted Answer

A)  30% 
B)  40% 
C)  50% 
D)  55%

Question 12

Margin accounts are mostly used by:

Accepted Answer

A)  Traders who think that their long run returns will be greater than their cost of borrowing 
B)  Speculators who think that their long run returns will be greater than the cost of borrowing 
C)  Investors who think that their long run returns will be greater than the cost of borrowing 
D)  All of the above

Question 13

Which of the following give payback period of investment made?

Accepted Answer

A)  Future cash flows 
B)  Present cash flows 
C)  Operating cash flows 
D)  Free cash flows

Question 14

A universal life insurance provides two types of death protections, i.e. Type A and B. As with any insurance policy, universal life insurance has its own pros and cons. There are two principle advantages. Which of the followings is/are out of those advantages?

Accepted Answer

A)  Flexibility 
B)  Flexibility and savings feature 
C)  Flexibility and variability 
D)  Variability and savings feature

Question 15

Which of the following ratios will be used if portfolio's numerous other assets systematic risk of investment is the best?

Accepted Answer

A)  Treynor reward-to-volatility ratio 
B)  Jensen's differential return ratio 
C)  Jennet's return on liquidity ratio 
D)  Sharpe reward-to-variability ratio

Question 16

Kelly and Pete just had a baby. They received money as baby gifts and want to put it away for the baby's education. Which of the following tends to have the highest growth over periods of time as long as 18 years?

Accepted Answer

A)  A U.S. government savings bond 
B)  A savings account 
C)  A checking account 
D)  Stocks

Question 17

Which of the following measures variation of the bond's price yield curve from a straight line?

Accepted Answer

A)  Bond duration 
B)  Bond convexity 
C)  Bond valuation 
D)  All of the above

Question 18

Which are the types of misstatements relevant to the auditor's consideration of fraud in a financial statement audit?

Accepted Answer

A)  Misstatements arising from fraudulent financial reporting 
B)  Misstatements arising from misappropriations of assets 
C)  Both A & B 
D)  Neither A nor B

Question 19

Which of the following is defined as the rate of return anticipated on a bond if it is held until the maturity date?

Accepted Answer

A)  Discount rate 
B)  Interest free rate 
C)  Return on equity 
D)  Yield to maturity

Question 20

Which of the following stage offers the highest potential returns and the greatest risk?

Accepted Answer

A)  Pioneering stage 
B)  Expansion stage 
C)  Stabilization stage 
D)  Decline stage

Exam 2: Certified Trust and Financial Advisor