AAFM Wealth Management Strategies 2

Question 1

Which document formally captures a client's investment objectives, risk tolerance, constraints, and return expectations?

Accepted Answer

Investment Policy Statement

Answer

Statement of Cash Flows

Answer

Financial plan summary

Answer

Prospectus

Question 2

Human capital is best described as the present value of which future financial stream?

Accepted Answer

Earned income from labor

Answer

Dividend income

Answer

Rental income

Answer

Pension benefits

Question 3

Which tax-advantaged account allows high-deductible health plan participants to invest pre-tax dollars for medical expenses?

Accepted Answer

Health Savings Account

Answer

Flexible Spending Account

Answer

529 Plan

Answer

Coverdell ESA

Question 4

A family office differs from a private bank primarily in that it provides services exclusively to which client group?

Accepted Answer

A single ultra-high-net-worth family or small group of families

Answer

Institutional endowments

Answer

Corporate treasury departments

Answer

Sovereign wealth funds

Question 5

In behavioral finance, which bias causes investors to hold losing positions too long because selling would confirm the loss?

Accepted Answer

Disposition effect

Answer

Overconfidence bias

Answer

Anchoring bias

Answer

Recency bias

Question 6

Which charitable giving vehicle allows a donor to receive an immediate tax deduction, invest the gift, and recommend grants over time?

Accepted Answer

Donor-advised fund

Answer

Private foundation

Answer

Charitable remainder trust

Answer

Qualified charitable distribution