RN Domain 1: Management of Care (Quiz 1) Welcome to your Series 66 Practice Quizzes. Note: We designed four (4) parts of practice quizzes for each Domain. Each part has 25 questions. Domain 1 (part 2): Economic Factors and Business Information​​​​​​​. (25 questions) Please click NEXT to start your Free Series 66 Practice Quizzes right away. Best of Luck! 1. Series 66, Economic Factors and Business Information,Series 66 One of your clients has $150,000 in his 401(k) plan at work. He is assuming the portfolio will increase in value at a rate of 7% compounded annually for the next 5 years. If that is the case, the portfolio value at the end of that 5-year period will be closest to A. A) $160,500. B. B) $240,867. C. C) $210,383. D. D) $202,500. None 2. Series 66, Economic Factors and Business Information,Series 66 Which of the following incorrectly states the relationship between NPV, IRR, and required return? A. A) If NPV > 0, then IRR > required return. B. B) If NPV > 0, then IRR < required return. C. C) If NPV < 0, then IRR < required return. D. D) If NPV = 0, then IRR = required return. None 3. Series 66, Economic Factors and Business Information,Series 66 Using the net present value method, a potential investment should be undertaken if the present value of all cash inflows minus the present value of all cash outflows (which equals the net present value) is A. A) less than zero B. B) equal to zero C. C) positively correlated D. D) greater than zero None 4. Series 66, Economic Factors and Business Information,Series 66 When a bond's NPV is zero, it is usually an indication that A. A) the bond is mispriced. B. B) the bond is a zero-coupon bond. C. C) the market is highly efficient. D. D) the bond is highly rated. None 5. Series 66, Economic Factors and Business Information,Series 66 If the required rate of return is higher than anticipated in a present value calculation, the effect would be that A. A) the present value would be lower B. B) the present value would be higher C. C) the yield to maturity would increase D. D) the future value would be higher None 6. Series 66, Economic Factors and Business Information,Series 66 The rate that produces a net present value of a series of discounted cash flows equal to zero is called A. A) the average rate of return. B. B) the return on investment (ROI). C. C) the internal rate of return (IRR). D. D) the opportunity cost of investing. None 7. Series 66, Economic Factors and Business Information,Series 66 Which of the following securities has an easily determinable internal rate of return? A. A) 6% Ginnie Mae B. B) 7% corporate bond C. C) Zero-coupon bond D. D) 5% municipal bond None 8. Series 65, Economic Factors and Business Information,Series 65 Which of the following best describes net present value? A. A) The difference between the sum of the discounted cash flows that are expected from an investment and its initial cost B. B) The discount rate that results in a return of zero for a series of future cash flows C. C) The amount of money that must be invested today at some specified rate of return to equal a targeted value in a specified number of years D. D) It is the true interest yield expected from an investment expressed as a percentage None 9. Series 66, Economic Factors and Business Information,Series 66 A bond's yield to maturity reflects its A. A) taxable equivalent return B. B) internal rate of return C. C) return based on annual interest as a percentage of current price D. D) nominal return None 10. Series 66, Economic Factors and Business Information,Series 66 All of the following statements regarding an investment's internal rate of return (IRR) are true EXCEPT A. A) IRR is most often used with growth stocks B. B) IRR is the one rate of return that results in an investment having a net present value (NPV) of 0 C. C) investments are acceptable when their internal rates of return exceed the investor’s required rate of return D. D) IRR expresses the rate of interest that matches the initial investment with the present value of future cash flows None 11. Series 66, Economic Factors and Business Information,Series 66 Which of the following statements is most accurate regarding the net present value (NPV) and internal rate of return (IRR) on a bond? A. A) IRR assumes the cash flows are reinvested annually. B. B) NPV assumes that cash flows can be reinvested at the bond’s IRR. C. C) IRR assumes the cash flows are reinvested at market interest rates. D. D) NPV assumes the cash flows can be reinvested at market interest rates. None 12. Series 66, Economic Factors and Business Information,Series 66 To make a quantitative evaluation using the present value computation, which of the following is NOT needed? A. A) Account value at the end of the period B. B) Time period involved C. C) Account value at the beginning of the period D. D) Anticipated rate of return of the portfolio None 13. Series 66, Economic Factors and Business Information,Series 66 A client owns an investment-grade bond with a coupon of 5% that is priced to yield 6.7%. If similarly rated bonds are being issued today with coupons of 7%, it would be expected that the client's bond A. A) will be selling at a premium over par B. B) has a zero net present value C. C) has a positive net present value D. D) has a negative net present value None 14. Series 66, Economic Factors and Business Information,Series 66 Present value is a computation that is frequently used to determine the amount of a deposit needed now to meet a future need, such as a college education. If an investor uses an expected return of 8% but the actual return over the period is 10%, the future value will be A. A) the same as anticipated B. B) lower than anticipated C. C) higher than anticipated D. D) too varying to tell None 15. Series 66, Economic Factors and Business Information,Series 66 An investor places $10,000 into BCD common stock 12 years ago. Today, that stock has a market value of $20,000. Using the Rule of 72, the internal rate of return on BCD is closest to A. A) 6.8%. B. B) 6%. C. C) 8%. D. D) 5%. None 16. Series 66, Economic Factors and Business Information,Series 66 Your client has $10,000 to invest today and expects to earn an after-tax return of 8% to send his daughter to college in 12 years. Which of the following is needed to determine whether the investment is likely to satisfy the client's goal? A. A) Consumer Price Index B. B) Present value C. C) Client’s marginal federal income tax bracket D. D) Expected cost of college None 17. Series 66, Economic Factors and Business Information,Series 66 A client owns an investment-grade bond with a coupon of 7%. If similarly rated bonds are being issued today with coupons of 5%, and the market is efficient, it would be expected that the client's bond A. A) will be selling at a discount from par B. B) has a zero net present value C. C) has a positive net present value D. D) has a negative net present value None 18. Series 66, Economic Factors and Business Information,Series 66 Your client has $10,000 to invest and expects to earn an after-tax return of 8% to send his daughter to college in 12 years. Which of the following items will help determine whether the investment is likely to satisfy the client's goal? A. A) Consumer Price Index B. B) Client's marginal federal income tax bracket C. C) Present value D. D) Expected cost of college None 19. Series 66, Economic Factors and Business Information,Series 66 One of your clients wishes to give her daughter $200,000 to start her own business. The daughter expects to be finished with graduate school and an internship in 8 years. The expected rate of return is 9%. Using the Rule of 72, calculate the amount the client must deposit today to meet that future goal. A. A) $100,000 B. B) $112,500 C. C) $72,000 D. D) $144,000 None 20. Series 66, Economic Factors and Business Information,Series 66 The time value of money is part of the computation for A. A) the risk-adjusted return B. B) the after-tax return C. C) the internal rate of return D. D) the real rate of return None 21. Series 66, Economic Factors and Business Information,Series 66 Twelve years ago, an investor placed $2,500 into an account. The account is now worth $10,000. Using the Rule of 72, you can determine that the approximate annual return was A. A) 400% B. B) 36% C. C) 6% D. D) 12% None 22. Series 66, Economic Factors and Business Information,Series 66 A client is meeting with you to discuss the best way to invest today to meet the goal of funding their child's college expenses. The least important information needed to determine the amount to deposit is A. A) age of the child B. B) parent’s salary C. C) expected inflation rate D. D) current college costs None 23. Series 66, Economic Factors and Business Information,Series 66 When determining whether to make an investment in a real estate limited partnership, Bill is concerned with the discount rate that equates the net investment cash inflows to the net investment cash outflows. Which calculation is Bill using to make this prudent investment decision? A. A) Future value B. B) Internal rate of return C. C) Duration D. D) Net present value None 24. Series 66, Economic Factors and Business Information,Series 66 Securities analysts would agree that it makes sense to purchase a fixed-income security when its net present value (NPV) is A. A) zero B. B) negative C. C) variable D. D) positive None 25. Series 66, Economic Factors and Business Information,Series 66 Your client wants to have $1 million in her investment account when she retires at age 70. She is currently 50 and has about $215,000 available to invest today. You tell her that if the portfolio can earn at a compounded rate of 8%, she will reach her goal. That 8% rate is A. A) the internal rate of return B. B) the future value rate C. C) the present value rate D. D) the market rate of return None 1 out of 25 Time is Up! Time's up
