FINANCE 390 FINANCE 341 Midterm Study Guide NEWEST-2022

1. A good financial planning report must include an analysis of all of the following EXCEPT:
a. Where you are now
b. Where you want to be
c. Why you failed previously
d. How to reach your goals
2. The five steps in the financial management process outlined by the authors include the
following EXCEPT:
a. Establish goals
b. Collect data
c. Measure performance
d. Establish living wills
3. Match the terms in column A with the description in column B.
A B
a. Risk management 1. Boosts investment return by deferring
taxes
b. Marketability of borrowing 2. Earning rate of return greater than the cost
c. Liquidity 3. Protecting ground gained without giving up
much in return
d. Tax leverage 4. Irrevocable life insurance trust
e. Estate freeze 5. Ability to turn investment quickly into cash
with little or no loss
f. Estate tax-free wealth transfer 6. Ability to quickly dispose of an investment
g. Leverage 7. Transfer asset growth to next generation
4. Which of the following is NOT part of the definition of an Investment Advisor as defined
by the Investment Advisers Act of 1940 (the Act)?
a. provides advice regarding securities
b. is in the business of providing advice
c. holds a CFP® or series 7 license
d. receives compensation for advice
FINANCE 390 FINANCE 341 Midterm Study
Guide Updated 2022/2023
5. The Act defines compensation as
a. Commission only
b. Fees only
c. Receipt of any economic benefit
d. 12(b) 1 fees only.
6. Which of the following is NOT exempt from the definition of an investment advisor?
a. Publisher of the local newspaper, the Daily Beagle
b. Insurance agent who advises clients about no load mutual funds
c. Those who advise clients solely about U.S. treasury obligations
d. Local attorney who occasionally advises clients about setting up investment
accounts for their jury awards
7. The “brochure rule” requires that the investment adviser do which of the following?
a. Provide the client with an audited financial statement of the adviser’s net worth.
b. Deliver a written disclosure document (such as part II of form ADV) to each
client
c. Provide a copy of part I of form ADV to each client
d. Provide clients with copies of the adviser’s marketing brochure.
8. The anti-fraud provisions of the Act applies to:
a. All investment advisors, even those who are exempt from registration
b. Only those who must register with the SEC or the states
c. Only situations where security transactions take place.
d. Only advisors of pension plans
9. Which of the following statements about the definition of “security” under the Investment
Advisor Act is CORRECT?
a. The act defines the term “security” in the broadest possible fashion
b. The act defines the term narrowly, to include only stocks, bonds and certificates of
deposit
c. The SEC periodically holds hearings to define the term
d. The definition is left to the NASD
10. Financial advisor John Smith manages investment accounts for clients mostly in his
home state of Ohio. He should register with the Ohio division of securities if:
a. He has any clients outside Ohio
b. The assets under his management exceed 30 million
c. Assets under his management are less than 25 million
d. He is not a CFP® certificant