Tag: Series 65

Study Question of the Week: December 18, 2013 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 6, Series 7, Series 65, and Series 66. –ANSWER POSTED– Continue reading

This week’s study question from the Solomon Online Exam Simulator question database is now available.

Study ? of the Week

Question (Relevant to the Series 6, Series 7, Series 65, and Series 66): 

The IRS uses the FIFO method for taxing:

Answers:

A. Withdrawals from a life insurance contract

B. Withdrawals in excess of the basis in a variable annuity contract

C. Loans from a life insurance contract

D. None of the choices listed

Correct Answer: A. Withdrawals from a life insurance contract

Rationale: Life insurance enjoys “first in, first out“ treatment from the IRS. Annuities are taxed on a LIFO basis, and money borrowed from a life insurance contract is not taxed at all.

Weekly study questions are from Solomon’s industry-leading Online Exam Simulator.

Study Question of the Week: November 27, 2013 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 65, Series 66, and Series 79. –ANSWER POSTED– Continue reading

This week’s study question from the Solomon Online Exam Simulator question database is now available.

Study ? of the Week

Question (Relevant to the Series 65, Series 66, and Series 79): 

Given the following assumptions for stock ABC, what is its expected return using the Capital Asset Pricing Model (CAPM)? Risk Free Rate: 2%, Expected Return on general stock market: 10%, Beta: .5, Sharpe Ratio: 3.

Answers:

A. 4%

B. 6%

C. 12%

D. 2%

Correct Answer: B. 6%

Rationale: The formula for the Capital Asset Pricing Model (CAPM) is given by the following:  Return on Stock = Risk Free Rate + Beta of Stock x (Return on Market – Risk Free Rate).  Plugging in for Stock ABC gives Return on Stock ABC = 2% + .5 x (10% – 2%) = 6%.  Note the Sharpe Ratio is not used in the CAPM formula.

Weekly study questions are from Solomon’s industry-leading Online Exam Simulator.

Study Question of the Week: November 13, 2013 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 6, Series 7, Series 62, Series 65, and Series 82. –ANSWER POSTED– Continue reading

This week’s study question from the Solomon Online Exam Simulator question database is now available.

Study ? of the Week

Question (Relevant to the Series 6, Series 7, Series 62, Series 65, and Series 82): 

Which of the following statements are true about government agency-issued bonds?

I. They typically have a lower face value than other bonds
II. Interest is paid on a monthly basis
III. The maturity date is always specified
IV. They are known as high-risk investments

Answers:

A. II and III

B. III and IV

C. II only

D. I and II

Correct Answer: C. II only

Rationale: Government agency-issued bonds typically have higher face value than other bonds and their maturity dates are often not specified. Interest is typically paid on a monthly basis and these bonds are generally low-risk investments.

Weekly study questions are from Solomon’s industry-leading Online Exam Simulator.

Testimonial Tuesday: November 12, 2013 Edition

“The Solomon books are awesome and allowed me to pass these challenging exams [Series 65 and Series 7] the first time.” Continue reading

“I used you guys when I sat for the Series 7 two weeks prior and passed that bad boy too. The Solomon books are awesome and allowed me to pass these challenging exams [Series 65 and Series 7] the first time.  Highly recommended. Thank you” -Jonathan Freehill, Houston, TX

 

 

Study Question of the Week: November 6, 2013 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 62 and Series 65. –ANSWER POSTED– Continue reading

This week’s study question from the Solomon Online Exam Simulator question database is now available.

Study ? of the Week

Question (Relevant to the Series 62, and Series 65): 

When a central bank pursues a policy of monetary easing all of the following may be expected except:

Answers:

A. Stocks rise

B. Exports rise

C. Imports fall

D. Foreign currency values fall

Correct Answer: D. Foreign currency values fall

Rationale: When a central bank eases monetary policy, it reduces interest rates.  Lower rates mean investors will seek higher returns in other countries, reducing demand for the domestic currency and increasing the value of other currencies.  A weaker domestic currency will, on a currency-adjusted basis, lower the price of exports.  Likewise, on a currency-adjusted basis, imports will be more expensive since the domestic currency will have depreciated.  Stock prices are generally boosted by monetary easing as fixed income investments become less attractive with lower interest rates.  Also, easier credit is seen as a long-term positive to economic growth which can give further encouragement to equity investing.

Weekly study questions are from Solomon’s industry-leading Online Exam Simulator.

Study Question of the Week: October 30, 2013 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 6, Series 7, Series 62, Series 65, Series 66, Series 79, and Series 82. –ANSWER POSTED– Continue reading

This week’s study question from the Solomon Online Exam Simulator question database is now available.

Study ? of the Week

Question (Relevant to the Series 6, Series 7, Series 62, Series 65, Series 66, Series 79, and Series 82): 

Johnny owns several U.S. Treasury Notes, he reads in the paper that the discount rate has fallen. What can Johnny safely infer about his Treasury Notes?

Answers:

A. On the market, the price of his Treasury Notes has fallen

B. On the market, the price of his Treasury Notes has risen

C. His annual interest from the Notes will increase

D. His annual interest from the Notes will decrease

Correct Answer: B. On the market, the price of his Treasury Notes has risen

Rationale: When the discount rate falls, this suggests that interest rates in general have lowered. This will make the Treasury Notes that Johnny is holding more attractive to buyers because they paid a higher interest rate than what new Treasury Notes are paying. Thus, the price of his Treasury Notes will have risen on the secondary market because buyers are willing to pay a premium for them. The annual interest paid on Treasury Notes is fixed so it will neither increase nor decrease.

Weekly study questions are from Solomon’s industry-leading Online Exam Simulator.

Study Question of the Week: October 23, 2013 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 65, and Series 66. –ANSWER POSTED– Continue reading

This week’s study question from the Solomon Online Exam Simulator question database is now available.

Study ? of the Week

Question (Relevant to the Series 65, and Series 66): 

A portfolio manager is constructing a portfolio of two stocks, and wants the stocks to be as uncorrelated as possible. Which of the following correlation values is best suited to the manager’s goals?

Answers:

A. -1

B. -0.5

C. 0.1

D. 1

Correct Answer: C. 0.1

Rationale: Correlation measures the relative movement of two stocks, and is represented by values between -1 and 1. At 1, the stocks are perfectly correlated, meaning if the first stock increases by a certain percentage, the other stock increases by the exact same percentage. At -1, if the first stock increases by a certain percentage, the other decreases by that same percentage. At 0, there is no correlation, meaning stocks move independent of each other. The portfolio manager is seeking to have very little correlation, where 0 would be ideal. Since 0 is not one of the answers, we need to find the answer closest to zero, which is 0.1.

Weekly study questions are from Solomon’s industry-leading Online Exam Simulator.

 

Study Question of the Week: October 16, 2013 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 7, Series 62, Series 65, Series 79, Series 82 and Series 99. –ANSWER POSTED– Continue reading

This week’s study question from the Solomon Online Exam Simulator question database is now available.

Study ? of the Week

Question (Relevant to the Series 7, Series 62, Series 65, Series 79, Series 82, and Series 99): 

Branch Environmental Industries is trading at $2 per share and there are 35 million shares of common stock outstanding. The management and board of directors have decided that in order to make the stock more attractive to institutional investors, the share price needs to rise to $5. In order to accomplish that, the company could do which of the following?

Answers:

A. Initiate a 2.5 for 1 stock split which will increase the number of common shares outstanding to 87.5 million.

B. Initiate a 2.5 for 1 stock split which will reduce the number of common shares outstanding to 14 million.

C. Initiate a 1 for 2.5 reverse stock split which will increase the number of common shares outstanding to 87.5 million.

D. Initiate a 1 for 2.5 reverse stock split which will reduce the common shares outstanding to 14 million.

Correct Answer: D. Initiate a 1 for 2.5 reverse stock split which will reduce the common shares outstanding to 14 million.

Rationale: In order to increase the share price to $5, the company would initiate a reverse stock split, that is reduce the number of shares. A stock split would have the opposite effect, it would increase the number of shares and proportionately lower the share price even further which is not what the company wants. In this case, the reverse stock split would be 1 for 2.5 . Mathematically it would be $2 per share/.4 = $5 per new share price. Thus shareholders would give up two-and-one-half $2 shares and they would receive one $5 share in return. The number of shares common shares outstanding would decrease likewise from 35 million to 14 million (35/2.5 = 14).

Weekly study questions are from Solomon’s industry-leading Online Exam Simulator.

Study Question of the Week: September 3, 2013 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 6, Series 7, Series 62, Series 65, and Series 66. –ANSWER POSTED– Continue reading

This week’s study question from the Solomon Online Exam Simulator question database is now available.

Question (Relevant to the Series 6, Series 7, Series 62, Series 65, and Series 66): 

Concerning municipal bonds issued by the city of Baltimore, Maryland:

Answers:

A. If you live in the state of Maryland, you will pay state tax on the interest you earn

B. If you live in the state of Virginia, you will not pay state tax on the interest you earn

C. If you live in the state of Maryland, you will pay federal capital gains tax on any profits you realize when you sell the bonds

D. If you live in the state of Virginia, you will not pay federal capital gains tax on any profits you realize when you sell the bonds

Correct Answer: C.

Rationale: Interest income earned on municipal bonds is not taxable at the federal level, and only taxable at the state level outside the state of their issuance. Capital gains realized upon the sale of such bonds are subject to capital gains tax regardless of the taxpayer’s state of residence.

Weekly study questions are from Solomon’s industry-leading Online Exam Simulator.

 

Study Question of the Week: August 20, 2013 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 65 and Series 66. –ANSWER POSTED– Continue reading

This week’s study question from the Solomon Online Exam Simulator question database is now available.

Question (Relevant to the Series 65 and Series 66): 

Over a five year period, the annual returns on a particular investment were 15%, -10%, -5%, 10%, 10%. What is the most appropriate measure of central tendency for this investment?

Answers:

A. arithmetic mean

B. geometric mean

C. median

D. mode

Correct Answer: B. geometric mean

Rationale: Central tendency is a single value that summarizes a set of scores. The geometric mean is the most accurate measure of central tendency for a set of returns because the returns for each year on an investment are not independent of one another. Each year your total capital is shrinking or growing depending on the performance of the previous year, so that a 10% increase one year may be different than a 10% increase in another year. The arithmetic average does not account for this fact. The geometric mean does account for this, and thus gives the investor a truer representation of the central tendency of their returns.

Weekly study questions are from Solomon’s industry-leading Online Exam Simulator.