FP 513 EXAM WITH 500 ACTUAL EXAM

FP 513 EXAM WITH 500 ACTUAL EXAM

QUESTIONS AND CORRECT ANSWERS

ALREADY GRADED A / FP 513 PRACTICE

QUESTIONS AND ANSWERS FOR CFP

CERTIFICATION (GUARANTEED PASS)

A money market mutual fund manager recently purchased negotiable, short-term, unsecured promissory notes issued by a number of large corporations for the portfolio. Select the type of investment the money manager purchased. -

ANSWER-Commercial paper:

Commercial paper is usually issued in denominations of $100,000 or more and is a substitute for short-term bank financing. Commercial paper is normally sold at a discount and is rated for quality by a rating service.

Your client has just opened a margin account with your brokerage firm and purchased 500 shares of stock for $60 per share. The firm has a 55% initial margin and 35% maintenance margin policy. Calculate the stock price at which your client will receive a margin call. - ANSWER-The client will receive a margin call when

the price of the stock drops to $41.54, calculated as follows:

margin call = ($60 × 0.45) ÷ (1 - 0.35) margin call = $27.00 ÷ 0.65 = $41.5385, or $41.54

Which of the following would be held in a money market portfolio?Treasury bill Negotiable CDs Commericial paper - ANSWER-The answer is I, II, and III. All of these financial instruments would be held in a money market portfolio.

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Distributions of dividend and capital gains in cash to mutual fund investors are fully taxable to the investor.are added to the tax basis of the shares once taxes on the distributions are paid.decrease the taxable gain or increase the loss on sale of the shares after taxes are paid.decrease the cost basis of the shares whether or not taxes are paid - ANSWER-The answer is I only. If the dividends and capital gains are reinvested, the individual receives an increased tax basis. If the distributions are made in cash, there is no increase in the tax basis of the underlying securities.

Jack sells short 200 shares of ABC stock at $38.50 with a 50% initial margin. ABC pays a dividend of $0.50 per share after he sells the stock. Jack then buys back the stock for $32. Calculate his percent gain or loss. - ANSWER-Jack had a total

percent gain of 31.17%, calculated as follows:

Jack's investment: 200 × $38.50 × 0.50 = $3,850

Proceeds:

$7,700

Cost:

(6,400)

Gain:

$1,300

Less dividend payment:

(100)

Net gain:

$1,200

$1,200 ÷ $3,850 = 31.17% gain

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A wash sale is deemed to have occurred within which of the following time frames? - ANSWER-61 days The answer is 61 days. 30 days before + date of sale + 30 days after = 61 total days.

Which of the following types of federal income tax treatment generally apply to municipal bonds?Ordinary income Tax-free income Capital gains or losses Tax-deferred income - ANSWER-the answer is II and III. Municipal bond interest is received federal income tax free by the bondholder. In addition, when a municipal bond is sold by the investor, the net proceeds above/below basis may be subject to capital gain/loss.

Lloyd is a dealer in government securities. He has purchased government securities from another dealer, Fred, and has agreed to sell them back at a later date. From Lloyd's perspective, which transaction has been executed? - ANSWER-Reverse repurchase agreement Lloyd, as the buyer, has entered into a reverse repurchase agreement, and Fred, as the seller, has entered into a repurchase agreement.

choose the risk that is attributable to cash and cash equivalents. - ANSWER- Purchasing power risk

An investor holding a Treasury bill as of the date of maturity includes - ANSWER- the amount of the discount as ordinary income.

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Which of these is NOT a characteristic of negotiable certificates of deposit (CDs)?

• ANSWER-They are used as short-term drafts drawn to finance imports and

exports.

Select the arrangement that is commonly used by dealers in government securities to satisfy short-term liquidity needs. - ANSWER-Repurchase agreement

Dealers in government securities use repurchase agreements, or repos, to satisfy short-term liquidity needs.

Jordan has the following gains and losses from the previous year:

$10,000 long-term capital gain $6,000 long-term capital loss $7,500 short-term capital gain $15,000 short-term capital loss What is the tax ramification of these transactions? - ANSWER-The answer is $3,000 deductible loss, $500 carryover loss. First, net the long-term gains and losses, and the short-term gains and losses. A $10,000 long-term capital gain with a $6,000 long-term capital loss equals a net long-term capital gain of $4,000. For short-term capital gains and losses, net the $7,500 short-term capital gain with the $15,000 short-term capital loss, which comes to a $7,500 short-term capital loss.Then, take the $4,000 long-term capital gain, and offset it against the $7,500 short- term capital loss, for a net short-term capital loss of $3,500. When Jordan files his tax return he will be able to deduct $3,000 of the $3,500 loss, and will carry forward to the next tax year the remaining $500 short-term loss.

All of the following correctly identify features of limited partnerships except - ANSWER-the limited partners may participate in the management of the partnership.

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