Free Certified Trust and Financial Advisor Question and Answers

Question 1

Bond price percentages are expressed as:

Accepted Answer

Par value

Answer

Bond prices are typically quoted as a percentage of their par value (also known as face value or nominal value). For example, a bond quoted at 101 means it's trading at 101% of its par value, while a bond at 98 means it's trading at 98% of its par value. This standardized method allows for easy comparison of bond prices across the market.

Question 2

Which of the following industries is susceptible to price and business cycle changes?

Accepted Answer

Cyclical industry

Answer

A cyclical industry is one whose performance is closely tied to the overall economic cycle. These industries, such as automotive, housing, or luxury goods, tend to perform well during economic expansions and poorly during recessions. Their revenues and profits are highly sensitive to changes in consumer spending and broader economic conditions.

Question 3

There are several investing options, with the exception of:

Accepted Answer

Collateral securities

Answer

Equity securities (stocks), fixed income securities (bonds), and derivative assets (options, futures) are all common categories of investment options. 'Collateral securities' is not a distinct investment category; rather, collateral refers to assets pledged to secure a loan. While securities can *be* used as collateral, it is not an investment option in itself.

Question 4

A temporary ban on program trading in a certain security or market is known as a _________, and it is typically used to prevent sharp price fluctuations.

Accepted Answer

Answer

The term for a temporary ban on program trading in a certain security or market, typically used to prevent sharp price fluctuations, is a 'circuit breaker' or 'trading halt.' Neither 'Ticker tape' (which displays stock prices) nor 'Super Dot' (an old NYSE order routing system) are correct terms for this mechanism. Therefore, the correct answer is not provided among the given options.

Question 5

Which of the following is the difference between an investment's actual return and its predicted return?

Accepted Answer

Abnormal Return

Answer

Abnormal return, also known as alpha, measures the performance of an investment or portfolio compared to its expected return, given its level of risk. It represents the excess return generated above what would be predicted by a financial model, indicating whether the investment outperformed or underperformed its benchmark. It highlights performance not attributable to market movements.

Financial Advisor Practice Test

Financial Advisor Practice Test

Free Certified Trust and Financial Advisor Question and Answers