Question 1

A broker is:

Accepted Answer

The answer of A broker is:
...

Question 2

A person purchased a share of Acme.com common stock exactly one year ago for $45. During the past year the common stock paid an annual dividend of $2.40. The person sold the security today for $85. What is the rate of return the firm has earned?

Accepted Answer

The rate of return is calculated as [(Selling Price - Purchase Price + Dividend) / Purchase Price] * 100. Here, it is [(85 - 45 + 2.40) / 45] * 100 = 94.2%.

Question 3

Which of the following id NOT the kind of Insurance?

Accepted Answer

Business policies are a category of insurance that can include various types of coverage, such as property, liability, and workers' compensation, rather than a specific type of insurance like the others listed.

Question 4

A person who buys and sells securities on behalf of clients and gives them investment advice and information is called:

Accepted Answer

The answer of A person who buys and sells securities...

Question 5

The weighted average of possible returns, with the weights being the probabilities of occurrence is referred to as __________.

Accepted Answer

The weighted average of possible returns, with the weights being the probabilities of occurrence is referred to as the expected return. It represents the most likely outcome of an investment, taking into account the different possible results and their probability of occurrence. A probability distribution is a graphic representation of the possible outcomes and their likelihood. The standard deviation measures the variability or dispersion of returns around the average, while the coefficient of variation is a relative measure of risk-adjusted return, calculated as the standard deviation divided by the expected return.

Question 6

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 is a set of all possible values that a random variable can assume, along with the associated probabilities of occurrence. The other options (B, C, D) are measures of central tendency and variability within a probability distribution, but do not encompass the entire set of possible values and probabilities.

Question 7

What provide for monetary compensation to third parties for failure by the insured to perform specifically covered acts with in a state period?

Accepted Answer

Surety bonds provide for monetary compensation to third parties for failure by the insured to perform specifically covered acts within a stated period. Worker compensation pools provide coverage for on-the-job injuries to employees. Multiple perils refer to insurance policies that cover a variety of risks, such as fire, theft, and liability. There is no such thing as an "Inter-insurance act."

Question 8

Total portfolio risk is __________.

Accepted Answer

Total portfolio risk consists of two components: systematic risk and diversifiable risk. Systematic risk is the risk that is inherent in the market and affects all securities, whereas diversifiable risk is specific to individual securities and can be eliminated through diversification. Therefore, total portfolio risk is equal to the sum of systematic risk and diversifiable risk.

Question 9

Which of the following statements regarding covariance is correct?

Accepted Answer

Covariances can take on positive values if the returns of two securities move in the same direction, negative values if the returns move in opposite directions, or zero if there is no linear relationship between the returns. Option A and B are incorrect because covariance does not have a specific range and it can be negative. Option C is incorrect because low covariance among returns for different securities can reduce portfolio risk through diversification.

Question 10

A package of coverage including most property and liability coverage except workers' compensation, automobile insurance and surely bonds is called:

Accepted Answer

A multiple peril policy covers most property and liability coverage, except for specific policies such as workers' compensation, automobile insurance, and surety bonds.

Question 11

Excess liability:

Accepted Answer

Excess liability insurance provides coverage for losses that exceed the limits of an underlying policy, covering the insured for amounts above a stated threshold.

Question 12

A broker who, in addition to executing clients' transactions, offers a full array of brokerage services is:

Accepted Answer

A full-service broker offers a variety of services, including investment advice, research, retirement planning, and even financial planning. They also charge higher fees for their services than discount or online brokers.

Question 13

Compared to investors with long investment time horizons, investors with short investment time horizons most likely require:

Accepted Answer

Investors with short investment time horizons are likely to require more liquidity as they may need to access their funds quickly. Additionally, they may be less concerned with capital appreciation as their goal is to make a profit in a shorter amount of time.

Question 14

Coverage of risks that do not fit normal underwriting patterns and that are not commensurate with standard rates is normally refers to as:

Accepted Answer

Surplus lines refer to the coverage of risks that do not fit normal underwriting patterns and are not commensurate with standard rates. These risks may be too large, too specialized, or too unusual for standard insurance companies to cover, thus requiring coverage from non-admitted insurers.

Question 15

Fidelity bonds cover employees against dishonest acts by employees.

Accepted Answer

Fidelity bonds provide insurance coverage for companies against fraudulent or dishonest acts committed by their employees, such as theft, embezzlement, and other financial crimes.

Question 16

A statistical measure of the variability of a distribution around its mean is referred to as __________.

Accepted Answer

The standard deviation is a measure of how spread out a set of data is from the mean. It is calculated by finding the square root of the variance of the data. The standard deviation is widely used in statistics to measure the degree of variability or dispersion in a set of data.

Question 17

It is a market condition normally associated with investor optimism, economic recovery, and expansion; characterized by generally rising securities prices.

Accepted Answer

A bull market is characterized by rising securities prices, which reflects investor optimism and economic growth. It's typically associated with a strong economy and a positive outlook for companies and the overall market. In contrast, a bear market is characterized by falling securities prices, reflecting investor pessimism and an economic downturn. OTC (Over-the-counter) and Dealer markets refer to the methods of trading securities, and are not related to market conditions.

Question 18

A primary motivation for investment in commodities is most likely the:

Accepted Answer

Commodities are often used as a hedge against unexpected inflation because they tend to have a positive correlation with inflation, providing diversification benefits to an investment portfolio.

Question 19

In which plan all activities writing automobile insurance in a state are allocated a share of the involuntary business on an equitable basis?

Accepted Answer

The answer of In which plan all activities writing automobile...

Question 20

______________ is a condition of the markets typically associated with investor pessimism and economic slowdown; characterized by generally falling securities prices.

Accepted Answer

The answer of ______________ is a condition of the markets...

Exam 2: Certified Trust and Financial Advisor