Question 1

Which of the following take place at the expansion stage of the industry life cycle?

Accepted Answer

A)  Firm operations get more stable and dependable 
B)  No rapid growth in demand 
C)  Costs get stable rather than decreasing or increasing 
D)  Sales growth decline as new products are developed

Question 2

Which of the following is not an audit objective of a commodity department?

Accepted Answer

A)  All customer accounts are opened and maintained in accordance with the rules and regulations commodity futures trading commission (CFT
C)  and the various commodity Exchanges 
B)  Adequate control exist to ensure the accuracy and propriety of information contained in regulatory reports, such as the commodity futures trading commission form 1-FR, and the focus report 
C)  Verify the accuracy and reporting (inventory reports, fail reports, again reports and profit and loss reports.) 
D)  None of these

Question 3

People often put money aside, sometimes for years, to save up enough to make just one major expenditure. Here are some common ones. Which of the following is Not out of those expenditures:

Accepted Answer

A)  The down payment on a home 
B)  An regular vacation 
C)  Some capital for going into business 
D)  Funds for retirement

Question 4

According to multiple of earnings method, the rule of thumb used by many insurance agents is that your insurance coverage should be equal to 5 to 10 times your current income. For example, if you currently earn $70,000 a year, using the multiple of earning method then you need between:

Accepted Answer

A)  $300,000 and $700,000 life insurance 
B)  $400,000 and $700,000 life insurance 
C)  $390,000 and $800,000 life insurance 
D)  $350,000 and $700,000 life insurance

Question 5

Which of the following is known as Secondary trend in Dow Theory?

Accepted Answer

A)  Wave 
B)  Triangle 
C)  Tide 
D)  Rounded bottom

Question 6

Which of the following involves an additional source of basis risk due to the difference between the asset being hedged and the asset underlying the futures?

Accepted Answer

A)  Long hedge 
B)  Short hedge 
C)  Cross hedge 
D)  Stack hedge

Question 7

Which of the following is difference between the expected return and actual return on an investment?

Accepted Answer

A)  Expected return 
B)  Abnormal Return 
C)  Normal return 
D)  Tax return

Question 8

_____________ is an insurance specialist who works for the insurance company as an independent adjustor or for an adjustment bureau, to investigate claims.

Accepted Answer

A)  Personal liability umbrella 
B)  Captive agent 
C)  Independent agent 
D)  Claims adjuster

Question 9

The maximum error in the population that the auditor is willing to accept is called:

Accepted Answer

A)  Risk of material misstatement 
B)  detection of risk 
C)  Both A & B 
D)  Neither A nor B

Question 10

A set of possible values that a random variable can assume and their associated probabilities of occurrence are referred to as __________.

Accepted Answer

A)  Probability distribution 
B)  The expected return 
C)  The standard deviation 
D)  Co-efficient of variation

Question 11

Prescription drug coverage is:

Accepted Answer

A)  A voluntary program 
B)  A state-run public assisted program 
C)  Needs co-payments and co-insurances 
D)  Both A and C are correct

Question 12

On which of the following financial statements would you expect to find assets, liabilities, and stockholders' equity?

Accepted Answer

A)  Balance sheet 
B)  Income statement 
C)  Statement of cash flows 
D)  Statement of changes in equity

Question 13

Risk tolerance is more than a function of an individual's psychological makeup; it is affected by other factors such as:

Accepted Answer

A)  Person's current insurance coverage and cash reserves 
B)  Nature of job 
C)  An individual's family situation (for example, marital status and the number and ages of children) and by his or her age 
D)  Person's current assets at a specified time period

Question 14

All of the following are properties of stop order Except:

Accepted Answer

A)  Protecting profits 
B)  Minimizing losses 
C)  Rapid execution 
D)  Continuous inflation

Question 15

Short-duration contracts provide insurance protection for fixed period and can cancel the contract at the end of any contract period.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is an income that is the source of revenue for members or brokers?

Accepted Answer

A)  Copyright fee 
B)  Application fee 
C)  Fixed cost fee 
D)  Trading fee

Question 17

Which of the following is the right to buy?

Accepted Answer

A)  Put option 
B)  Strategic option 
C)  System option 
D)  Call option

Question 18

Customer accounts: Ensure that the firm is exercising due diligence in the opening and supervision of customer accounts. The procedures should be formalized in writing and in accordance with the rules and regulations of the appropriate regulatory authority. Ensure that daily customer positions and option exercises are in accordance with the limits established by the appropriate exchange. Verify that commissions generated by customer trades are properly calculated and posted to the general ledger.

Accepted Answer

A)  This is one of the primary audit objectives of stock and options 
B)  This is one of the primary audit objectives of swaps 
C)  This is one of the primary audit objectives of bonds 
D)  None of these

Question 19

One of the largest components of the global derivative markets and natural adjunct to the fixed income markets is the:

Accepted Answer

A)  Volatility 
B)  Interests rate Swaps 
C)  Commodity Swaps 
D)  Both B & C

Question 20

Which of the following are required inputs of the present value approach?

Accepted Answer

A)  Discount rate and the expected cash flows 
B)  Expenses paid in cash and dividends disbursed 
C)  Earnings in valuing stocks and stock-in-trade 
D)  Retained earnings and dividend payout ratio

Exam 2: Certified Trust and Financial Advisor