2. A total investment of $80,000 in an S&P 500 Index mutual fund accumulated through steady investment over an eight-year period ($10,000 per year invested on the first trading day after January 1st of 1995 to 2002 inclusive). About what was this investment worth on December 31st 2002?

A. $102,000
B. $98,000
C. $91,000
D. $81,000
E. $73,000

3. Buying a corporate bond fund may be superior to buying individual corporate bonds if:

A. The buyer may need to sell some or all of his holdings on relatively short notice.
B. The buyer has less than $50,000 to invest.
C. The bond fund has a low turnover ratio.
D. A and C
E. All of the above.

4. Sell-Side stock analysts’ estimates of earnings per share for companies they follow carry an average forecasting error of:

A. 20%
B. 11%
C. 8%
D. 5%
E. 3%

5. A study of all companies listed on the New York Stock Exchange and American Stock Exchange during the period of 1968 through 1990 analyzed investment returns by comparing the respective 1-year, 3-year, and 5-year results of the 20% of companies with the lowest price-to-book value ratios (an important criterion for possible margin of safety opportunities) versus the 20% of companies with the highest price-to-book value ratios. The study found:

A. There was little difference in most of the 23 1-year periods, while the high price-to-book companies outperformed during 12 of the 18 5-year periods.
B. The low price-to-book companies outperformed in 73% of the 1-year periods and 90% of the 3-year periods.
C. The low price-to-book companies outperformed during all of the 18 5-year periods.
D. B and C
E. None of the above.

6. Which Mutual Fund Family dominates among the ten-year outperformers of question 1?

A. Fidelity
B. Janus
C. Vanguard
D. American
E. None

7. Parents who have saved $20,000 for a child’s college education in a 529 prepaid tuition account will find that child’s financial aid:

A. Unaffected by their 529 savings.
B. Reduced dollar for dollar for every dollar saved.
C. Reduced by 50 cents for every dollar saved.
D. Reduced by 35 cents for every dollar saved.
E. None of the above.

8. The right time to sell an investment is:

A. When everyone else is selling.
B. When the skill of management or the future strength of earning power has declined.
C. When experience shows the analysis underlying the original decision to buy to be erroneous.
D. B and C
E. All of the above.

9. A high net worth fifty-something couple intends leave their money to their children, their grandchildren and to a local hospital. Eighty per cent of their investment assets are in stocks, ten per cent in bonds and ten per cent in cash. At what point do they “rebalance” their portfolio to increase the fixed income allocation and decrease equities?

A. The multi-generational aspect of estate and philanthropic planning may commend postponing indefinitely the normal rebalancing associated with a single lifecycle.
B. When they turn sixty-five.
C. When they turn seventy.
D. When they turn seventy-five.
E. Now



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