Mid Exam, questions and answers PDF

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Fins2643 Wealth Management Midsession Exam Practice MCQs Select the MOST appropriate response.

1. Which of the following is NOT a step in the Financial Planning Process? A. Collect the client data B. Identify financial problems C. Recommendations and implementation D. Preparation of a Financial Services Guide 2. A data gathering instrument is important because A. It is the prime means of providing comprehensive information to the client B. It is the prime means of obtaining comprehensive information from a client C. It is the best way of storing client information D. This document is not a primary source of information 3. The single licensing regulator in the Financial Services Industry is A. Australian Competition and Consumer Commission B. The Australian Taxation Office C. Australian Securities and Investment Commission D. The Reserve Bank 4. The Smith family purchased a Volvo sedan for $42,000 by making a $4,000 cash payment and getting a loan of $38,000 from a finance firm. What net impact did this transaction have on their balance sheet? A. Assets decreased: liabilities increased. B. Assets increased: liabilities increased. C. Assets increased: liabilities no change. D. Assets decreased: liabilities decreased. 5. The ....... ratio is primarily a measure of the cushion in the net worth. A. solvency B. liquidity C. debt service D. savings 6. The ....... ratio of a household is measured by its ability to satisfy its short-term obligations as they become due. A. debt service B. solvency C. liquidity D. savings

7. Which of the followings is the MOST correct? A. The typical definition of a recession is two consecutive quarters of negative GDP growth. B. Aggregate risk aversion is likely to be lower after significant market downturn because asset prices are low. C. All of the above statements are correct. D. None of the above statements are correct. 8. Pioneers of the Australian financial planning industry includes A. International fund managers. B. Tax agencies. C. Life insurance writers D. All of the above. 9. By law, the minimum education standard required of a financial planner that provides personal financial product advice is _______. A. a Bachelor of Finance/Financial Planning degree B. the RG146 Tier 1 standard and a Bachelor degree C. the RG146 Tier 1 standard D. the RG146 Tier 2 standard 10. The disclosure of potential conflict of interest and dollar remuneration of a specific personal financial advice is most likely to be found in A. the Financial Service Guide B. the executive summary of the statement of advice C. the body of the statement of advice D. All of the above

11. Personal financial product advisers' best interest duty is imposed by A. RG146. B. ATO. C. APRA. D. RG175. 12. The introduction of a low cost no frill superannuation fund is the recommendation of A. the Henry Review B. the Cooper Review C. the Bowen Review D. None of the above 13. Which part of the wealth management value chain is MOSTLY an information technology business? A. Asset management B. Platform

C. Dealer group D. None of the above 14.

Negative gearing is: A. Where the interest payments are approximately the same level as income earned from an investment. B. Where income earned from the investment is significantly less than interest paid on the borrowing. C. Where the amount borrowed to fund an investment is higher than the equity capital. D. The least risky gearing to use.

15. A. B. C. D.

The 6-Step financial planning process is embodied in FPA’s Code of Ethics. RG146 Skill requirements. Both of the above. None of the above.

16. Using the lifecycle theory, clients of which of the following phases have both large investment needs and high risk tolerance? Select one: A. Early family formation B. Wealth accumulation C. Approaching retirement D. Post-retirement 17. A. B. C. D. 18.

RG146 generic knowledge requirement does not include the economic environment financial planning operations of financial markets financial products

Risk tolerance A. is most commonly assessed with psychometric instruments by financial planners. B. assessment always directly leads to asset allocation recommendations. C. All of the above. D. None of the above.

19. A tax offset has the effect of lowering the amount of tax for a taxpayer by A. giving eligible taxpayers to reduce the taxable income for such things as the medical insurance B. allowing taxpayers to reduce their actual tax liability for specific items rather than reducing income C. allowing taxpayers earning up to the national average income to be able to claim a general tax rebate D. None of the above 20. Sue works as a freelance copy editor for a publisher of law manuals. She purchases a printer for her home office which she uses partly for work purposes and partly for personal purposes (such as printing holiday photos). Which of the following statements is true? A. Sue can claim all expenses relating to the printer because it is directly related to her earning income as a lawyer. B. Sue cannot claim any expenses since the printer is for personal use and not deductible. C. Sue’s purchase of the printer is a capital asset and therefore no deductions are available to her in relation to the use of the printer. D. Sue can claim the portion of the printing expenses that relates to her work as a deduction.

21. Jack earns $45,000 in salary in 2016 /17. He also sells 1,000 shares at $200 which he bought in a public offering 5 years ago for $50 each. Jack has private health insurance. What is the total tax and Medicare levy that he will pay in? A. B. C. D. E.

$32,347 $61,297 $34,432 $64,222 None of the above.

22. Charlie receives a 50% franked dividend of $4,500 through his shareholding in Pesto Pasta Inc. The franking credit to which Charlie is entitled is: A. B. C. D. E.

$964 $675 $6,429 $4,500 None of the above.

23. Which of the following statements regarding tax avoidance, tax evasion, and tax planning is correct?

A. The selection of tax-efficient investment vehicles would be an example of tax evasion and is illegal. B. Failing to declare income is tax avoidance and is illegal. C. Setting up a complex web of companies and trusts with the sole intent to minimise taxation is tax planning and is legal. D. Paying a family member a salary from a business even though that member is not contributing to it is tax evasion and is illegal. 24. Which of the following statements regarding partnerships is correct? A. Partnerships may come under ATO scrutiny if income is being distributed to persons, including family members, who are not really working in the partnership. B. Partnerships are primarily used, particularly in family circumstances, because there are no capital gains payable. C. Partnerships have the disadvantage that they cannot be classed as a small business. D. Partnerships pay tax and then pass the dividend to each of its participants.

End of Practise Exam Questions

Answers: 1. D 2. B 3. C 4. B 5. A 6. C 7. A 8. C 9. C 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24.

C D B B B B B B D B D C A D A...