Free AAFM CWM_LEVEL_2 Practice Exam with Questions & Answers | Set: 3

Section B (2 Mark)

An employee benefit plan can generally help in accomplishing all of the following items except:

Section A (1 Mark)

“Early accumulation” life stage is normally during ______

Section A (1 Mark)

Unabsorbed depreciation can be carried forward for ____________.

Section C (4 Mark)

Read the senario and answer to the question.

Assume Reena retires at the age of 60 years and invests her salary at 8% p.a.What will be the future value of Reena’s salary at the time of her retirement if she saves her entire salary?

Section B (2 Mark)

You may need to file your Returns in India under the following circumstances:

Section A (1 Mark)

Given below is the portfolio return; calculate the expected portfolio rate of return:

Section A (1 Mark)

When two banks simply agree to exchange a portion of their customers' loan repayments, they are using:

Section B (2 Mark)

Eric, who has lived in the Netherlands for the whole of his life, arrives in the UK on 1 June 2011 and remains in the UK until 31 December 2011, when he returns permanently to the Netherlands. His UK residence status for 2011-12 is:

Section C (4 Mark)

Roger deposits Rs. 10,00,000 in a bank account on 1st March 2005 and another Rs. 5,00,000 on 1st March 2011. He wants to withdraw all of this money with interest on 1st March 2015. If the account pays ROI of 11% p.a. compounded quarterly what amount can he withdraw from this account?

Section B (2 Mark)

In the calculation of rates of return on common stock, dividends are _______ and capital gains are _____.

Section B (2 Mark)

You are required to calculate standard deviation of the following portfolio

CovAB = 220.

Section C (4 Mark)

Read the senario and answer to the question.

Calculate his Life Insurance Coverage Ratio based on his net worth.

Section A (1 Mark)

In traditional approach to client servicing ,product offers were determined prior to analysis of client needs where as in Need Based approach a firm looks at book of business, and existing and targeted clients to assess its own core competencies and offerings

Section B (2 Mark)

A bank plans to offer new subordinated notes in the open market next month but knows that its credit rating is being reviewed by a credit rating agency. The bank wants to avoid paying sharply higher credit costs. Which type of credit derivative contract would you most recommend for this situation?

Section B (2 Mark)

In the year to 31 March 2012, a UK resident company made a UK trading profit of £800,000 and received net overseas income of £26,000 (net of 20% withholding tax). These were the company's only sources of income. The company also paid a qualifying charitable donation of £5,000.

For double tax relief purposes, the charitable donation will be allocated as a deduction from the company's overseas income. True or False?

Section A (1 Mark)

Which of the following statement is not true?

Section A (1 Mark)

If an investor searches for patterns in security returns by examining various techniques applied to a set of data, this is known as:

Section A (1 Mark)

Loans to individuals and families to finance the purchase of new homes are known as:

Section A (1 Mark)

Notice of loss should be given to the insurer within ________days of the event of loss.

Section C (4 Mark)

Read the senario and answer to the question.

Calculate the tax liability of Mr. Neeraj for the A.Y.08–09 assuming that he has avail full deduction under section 80C

Section B (2 Mark)

Which of the following is/are the Potential Challenges for wealth management players in India:

Section B (2 Mark)

The lesson from the credit crisis of 2007-2009 is that securitized assets and credit swaps are:

Section A (1 Mark)

The concept of indemnity is based on the key principle that policyholders should be prevented from

Section C (4 Mark)

Read the senario and answer to the question.

Sajan wants to cover for the expenses of his family without compromising their present lifestyle till the expected life time of Jennifer in case of his untimely death. He consumes 8% of monthly expenses exclusively on self. You advise him that the child plan covers a different goal. Assuming the cover proceeds are invested in a Balanced MF scheme, he should supplement his cover by taking a term insurance for _________ immediately to cover such future expenses. (Please ignore taxes and charges, if applicable, in regular withdrawals from Balanced MF scheme to meet proposed monthly expenses).

Section A (1 Mark)

What would be the tax liability if tea and snacks are provided in the office after office hours?

Section B (2 Mark)

Which of the following statements is most correct?

Section C (4 Mark)

Mr. XYZ sells a Nifty Put option with a strike price of Rs. 4000 at a premium of Rs. 21.45 and buys a further OTM Nifty Put option with a strike price Rs. 3800 at a premium of Rs. 3.00 when the current Nifty is at 4191.10, with both options expiring on 31st July.

What would be the Net Payoff of the Strategy?

• If Nifty closes at 3980.55

• If Nifty closes at 4800

Section A (1 Mark)

A draft of a will prepared by the head of the family which will decide the nature in which his properties will be distrubuted among his heirs is known as_____________________.

Section A (1 Mark)

_______________ is concerned with capturing, storing, extracting, integrating, processing, interpreting, distributing, using and reporting customer-related data to enhance both customer and company value.

Section A (1 Mark)

For a “single income family” priority is on

Section A (1 Mark)

Which of the following is not one a part of the primary stage in the Francis Buttle model?

Section B (2 Mark)

What is the PV of an Annuity Due which provides Rs. 2,000/- per month for first 3 years and then Rs. 3,000/- per month for next 2 years. This annuity starts 4 years from now and ROI is 9 % per annum compounded monthly?

Section A (1 Mark)

Assessing client’s level of risk tolerance is done while

Section C (4 Mark)

You have collected the following information regarding Companies C and D:

The two companies have the same total assets.

The two companies have the same operating income (EBIT).

The two companies have the same tax rate.

Company C has a higher debt ratio and a higher interest expense than Company D.

Company C has a lower profit margin than Company D.

Based on this information, which of the following statements is most correct?

Section A (1 Mark)

Short-term capital gain arising for the transfer of equity shares and units of equity oriented fund shall be taxable

Section A (1 Mark)

The slope of the CML is the:

Section A (1 Mark)

A good customer relationship management program will allow a business to:

Section B (2 Mark)

Which of the following Biases are exhibited by Passive Preserver?

Section A (1 Mark)

A testamentary trust is affected after the

Section A (1 Mark)

Company J and Company K each recently reported the same earnings per share (EPS). Company J’s stock, however, trades at a higher price. Which of the following statements is most correct?

Section B (2 Mark)

Which of the following Statements are correct?

Section A (1 Mark)

An option which gives the holder the right to sell a stock at a specified price at some time in the future is called a

Section C (4 Mark)

Suppose Nifty is at 4450 on 27th April. An investor, Mr. A, enters into a short straddle by selling a May Rs 4500 Nifty Put for Rs. 85 and a May Rs. 4500 Nifty Call for Rs. 122.

What would be the Net Payoff of the Strategy?

• If Nifty closes at 4293

• If Nifty closes at 5158

Section B (2 Mark)

Lokesh purchased a flat on 1-4-1996 for Rs. 10,00,000/-. He sells the same flat on 1-10-2006 for Rs. 25,00,000/-.As a CWM® calculate the Indexed Cost of Acquisition on which capital gain would be calculated. (The CII of year 1995-96 is 281, for year 1996-97 is 305, for year 2005-06 is 497 and for year 2006-07 is 519).

Section A (1 Mark)

Which of the following is an element of an organization’s internal-environment?

Section B (2 Mark)

If Raman Industries Ltd. share price is Rs.50 and its current dividend is Rs.5/- per share which is growing at 7 percent rate per year, determine its required return?

Section C (4 Mark)

Omax Inc. one of the largest developer of residential projects, reported earnings per share of Rs 8.0 in 2003, and paid dividends per share of Rs 4.8 in that year. The firm is expected to report earnings growth of 25% in 2004, after which the growth rate is expected to decline linearly over the following six years to 7% in 2009. The stock is expected to have a beta of 0.85 and current risk free rate is 6.25%.

Estimate the value of the firm using the H Model.

Section C (4 Mark)

Read the senario and answer to the question.

Nimita wants to know if she were to meet with an accident and get permanent disability in the third year of her Term Insurance policy, what amount of the premium due in the fourth year would be payable by her if the premium being paid towards the policy is Rs. 15,000 with sum assured of Rs. 50 lakh?

Section B (2 Mark)

Mr. Jatin is a single forty nine year-old pharmaceutical executive earningRs25,00,000 per year. He lives extravagantly, occasionally spending more than his income, but has saved approximately Rs. 15,00,000. His primary investment goal is to donate Rs30,00,000 to his alma mater, but cannot obtain life insurance. Mr. Jatin exhibits the following biases:

Section C (4 Mark)

Sajan Mathews, aged 29 years (as on 2nd April, 2010), is working with a Multi National Company since December 2004. He has approached you, a CWM® for preparing his wealth plan. He is staying in his own house at Ahmedabad. His wife Jennifer, aged 31 years, is a fashion designer. She has earned a net profit of Rs. 4 lakh in FY 2008-09. They have a son, Mark of age 4 years (born on 12.02.2006), and a daughter, Stephanie (born on of 23.09.2009). Sajan is also supporting his parents staying in their own house at Surat to whom he sends Rs. 10,000 p.m. His monthly house hold expenses are Rs. 30000 p.m. (excludes his investments, payment of premia and EMIs). Sajan normally gets 5% increase in his gross salary year-on-year in the beginning of every financial year, apart from bonus. The effect for this year is yet to take place, though he has received a bonus of Rs. 3,31,680 for the year 2009-10. He has taken a family floater policy for health insurance involving an annual premium of Rs. 16268 and a total cover of Rs. 15 lakh.

Current Assets & Liabilities of the Family (As on 31st March, 2010 unless otherwise specified in foot notes)

____________

1.Purchased on 25th October, 2006, annual premium paid Rs. 14,798

2.Purchased on Mark’s 2nd birthday for a term of 15 years; annual premium Rs. 41,374

3.Subscribed on 01.09.2008 @ 10% p.a., with interest credited quarterly to his savings account; renewed at same rate for one year on 01.09.2009 without penal provision for premature withdrawal

4.Home loan of Rs. 17 lakh taken on 1st November, 2004 at a fixed interest of 7.5% p.a. for a 15 year term.

5.Car loan of Rs. 4.50 lakh taken on 1st April, 2008 at a fixed interest of 11.25% p.a. for a 4-year term.

Goals:

1.To provide for higher education of Mark and Stephanie. Initial expenses at their respective age of 18 years, Rs. 3 lakh (current cost), and subsequently Rs. 2 lakh p.a. for the next two years, and Rs. 3.5 lakh p.a. for the following 2 years.

2.Marriage expenses of Rs. 15 lakh (current cost) for each child at their respective age of 27 years.

3.Retirement corpus at the age of 58 years to sustain 70% of pre-retirement household expenses till his lifetime and 50% till stephanie’s expected life.

4.A Bigger house valued at Rs. 50 lakh today, a year from now.

5.To build a separate fund for vacation expenses of Rs. 2 lakh (at current cost) every year 10 years from now so that the corpus so built is self-sustaining till the marriage of Stephanie.

Assumptions: