QUESTION: 53

Mr. Fast Lane met an early death at the age of 42. Mr. Lane had been making contributions to a variable annuity contract for several years, and at the time of his death, his contributions totaled $25,000. Although the value of the contract had at one time reached $40,000, earnings included, a downturn in the market has resulted in a contract value of only $23,000.
How much will Mr. Lane's beneficiaries receive as the death benefit associated with this contract under these circumstances?

nothing, since the contract now has a value that is less than Mr. Lane's total contributions
the average of what its value once was and what it is today: $31,500
$25,000
$23,000

Answer(s): C

Explanation:

Since Mr. Lane died while he was still making contributions, his beneficiaries will receive $25,000. If the annuitant dies during the accumulation period, the death benefit is equal to the value of the contract or the total of the contributions, whichever is greater.

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QUESTION: 54

Under the 1988 Insider and Securities Enforcement Act, a person convicted of insider trading can be subject to:

up to 10 years in prison and a fine of either $1.5 million or up to 150% of the amount of profits gained or losses avoided, or both.
up to 5 years in prison, a $150,000 fine, or both.
up to 10 years in prison and a fine of $1,500,000 or both.
up to 10 years in prison and a fine of either $1 million or up to 3 times the amount of profits gained or losses avoided, whichever is greater.

Answer(s): D

Explanation:

The 1988 Insider Trading and Securities Enforcement Act increased the penalties for a person convicted of insider trading to up to 10 years in prison and a fine of either $1 million or up to 3 times the amount of profits gained or losses avoided, whichever is greater.

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QUESTION: 55

The primary difference between dealers and brokers is that:

dealers operate exclusively in the primary market whereas brokers operate only in the secondary market.
dealers operate only in the bond market, while brokers conduct trades in stocks, bonds and options.
dealers are market makers, who buy and sell out of their own inventory of securities, while brokers are matchmakers, who match buyers with sellers.
Both Choices B and C describe differences between dealers and brokers.

Answer(s): C

Explanation:

The primary difference between dealers and brokers is that dealers are market makers, who buy and sell out of their own inventory of securities, while brokers are matchmakers, who match buyers with sellers. Both dealers and brokers engage in primary and secondary market transactions, and both conduct trades in stocks, bonds, and options.

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QUESTION: 56

Tex Payor has invested in Invest4U Mutual Fund shares at various times over the last eight years. In the past year, he has sold some of the shares purchased. To determine the cost basis of these shares, Tex:

can choose to sell specific shares in order to minimize or maximize his cost basis, whichever is more beneficial given his tax circumstances.
must use last in/first out (LIFO) accounting to determine his cost basis.
must use first in/ first out (FIFO) accounting to determine his cost basis.
should use dollar cost averaging to determine his cost basis.

Answer(s): A

Explanation:

To determine the cost basis of share he has bought at various time over the last eight years, Tex can choose to sell specific shares in order to minimize or maximize his cost basis, whichever is more beneficial given his tax circumstances. If Tex doesn't specify shares, the IRS will assume the first shares purchased were the first shares sold (FIFO) in determining Tex's cost basis. The LIFO method cannot be assumed when determining the cost basis of the shares Tex owns, and dollar cost averaging is an investment strategy, not a method used in determining a cost basis.

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QUESTION: 53

Explanation:

QUESTION: 54

Explanation:

QUESTION: 55

Explanation:

QUESTION: 56

Explanation: