Question 1

Major types of Real Estate Investment Trust (REITs) include all of the following EXCEPT:

Accepted Answer

Equity REITs, Mortgage REITs, and Hybrid REITs are all major types of REITs, so none of the options listed are exceptions.

Question 2

Not all misstatements will be material enough to affect the fair presentation of the financial statement. A material misstatement is one that the auditors determine would change or influence the option of a reasonable person relying on the financial statements for information. Ultimately, auditors must exercise judgment to assess materiality based on the qualitative nature of the misstatements and their quantitative extent. Materiality is also based on auditors' assessment of control risk levels in the organization. The following factors may influence the auditors' assessment of control risk EXCEPT:

Accepted Answer

All the listed factors (A, B, C) can influence the auditors' assessment of control risk, so none of them is an exception.

Question 3

_____________ funds may specialize in a particular industry segment, such as technology or consumer products stocks.

Accepted Answer

Sector funds focus on a specific industry or sector, such as technology or consumer products, and invest in stocks within that sector. This allows investors to target their investments more specifically and potentially achieve higher returns in a specific area of the market.

Question 4

There are different classes of mutual funds. Classes that typically do not have a front-end sales load. Instead they may impose a contingent deferred sales load and a 12b-1 fee (along with other annual expenses) is called:

Accepted Answer

The answer of There are different classes of mutual funds....

Question 5

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

Accepted Answer

The balance sheet is the financial statement that reports a company's assets, liabilities, and stockholders' equity at a specific point in time. The income statement reports a company's revenues and expenses over a period of time, and does not include information on assets, liabilities, or equity. The statement of cash flows reports a company's cash inflows and outflows over a period of time, and also does not include information on assets, liabilities, or equity. The statement of changes in equity reports the changes in a company's equity accounts over a period of time, and may include information on stockholders' equity, but does not provide a comprehensive list of assets and liabilities.

Question 6

In a bar chart what does the red line represents?

Accepted Answer

In a bar chart, a red line typically indicates that the stock prices are getting low, meaning the closing price is lower than the opening price for that period.

Question 7

Red color indicates market or share price is going down

Accepted Answer

Leverage ratios are designed to measure a company's capital structure, indicating the proportion of debt and equity used to finance the company's assets.

Question 8

Companies that have capitalization amounts of more than $2 billion are known as _________.

Accepted Answer

Large cap companies are those that have a market capitalization amount of more than $2 billion. Small cap companies typically have market capitalization amounts of less than $2 billion, mid cap companies have market capitalization amounts between $2 billion and $10 billion, while growth companies are those that are expected to grow at a rate faster than the overall economy or their industry.

Question 9

Technical Analysis method that tries to pinpoint when a security's shares are being accumulated (being bought) or are being sold is known as.

Accepted Answer

On Balance Volume (OBV) is a technical analysis indicator that uses volume flow to predict changes in stock price. It measures buying and selling pressure as a cumulative indicator, adding volume on days that the price closes higher and subtracting volume on days that the price closes lower. When the OBV is rising, it indicates that the security is being accumulated or bought, and when it is falling, it indicates that the security is being sold. Therefore, OBV is a good method to pinpoint the accumulation or distribution of a security's shares.

Question 10

Which of the following is the theories searching the patterns in randomness?

Accepted Answer

Chaos theory is the theory that searches for patterns within seemingly random situations. It is often applied in the study of financial markets to try to identify trends or patterns in price movements. Elliott wave theory, portfolio theory, and valuation theory do not specifically search for patterns in randomness.

Question 11

________ is a temporary restriction on program trading in a particular security or market, usually to reduce dramatic price movements.

Accepted Answer

A trading curb is a temporary restriction on program trading to reduce dramatic price movements. The restriction is usually implemented for a particular security or market. The NYSE has implemented trading curbs in the past as a measure to prevent market crashes. The other options, Super Dot, NYSE direct, and ticker tape are all specific terms related to trading but not necessarily related to trading curbs.

Question 12

Which of the following is NOT a source of Return on Equity (ROE)?

Accepted Answer

Book value per share is not a source of Return on Equity. ROE is calculated as net income divided by shareholders' equity. Return on assets, leverage, and sales per total assets are all sources of ROE as they all impact net income and/or shareholders' equity.

Question 13

Which of the following bonds do not pay interest during the life of the bonds?

Accepted Answer

Zero coupon bonds are sold at a deep discount to their face value and do not make periodic interest payments. Instead, the investor receives the full face amount of the bond at maturity.

Question 14

Hedge funds:

Accepted Answer

Hedge funds seek to profit in all kinds of markets by pursuing leveraging and other speculative investment practices, are subject to very few regulatory controls, and voluntarily restrict investment to wealthy investors through high investment minimums (e.g. $1 million).

Question 15

What does the abbreviation SIC stands for?

Accepted Answer

SIC stands for Standard Industrial Classification, which is a system used to categorize and classify industries based on their primary activities.

Question 16

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

Accepted Answer

Secondary trends in Dow Theory are often referred to as waves, which are shorter-term movements that go against the primary trend.

Question 17

Which of the following industry is sensitive to business cycle and price changes?

Accepted Answer

Cyclical industries are sensitive to business cycle and price changes as they are heavily influenced by economic factors like GDP, inflation, and interest rates. These industries experience high growth in good economic times but suffer during recessions. Examples of cyclical industries include automotive, construction, and travel industries.

Question 18

Bond prices are expressed as a percentage of:

Accepted Answer

Bond prices are expressed as a percentage of par value, which is the face value of the bond.

Question 19

Some objectives of an audit related to mutual funds might include determining that:

Accepted Answer

All of the objectives listed in choices A, B, and C are important objectives of an audit related to mutual funds. Therefore, the best choice is D, which includes all of these objectives.

Question 20

All of the following are the forms of risk, EXCEPT:

Accepted Answer

Presented risks is not a recognized form of risk. The other options (political, interest rate, and economic risks) are well-established forms of risk that can impact investment decisions.

Exam 2: Certified Trust and Financial Advisor