Question 1:

As the end of the year was approaching, Quinn reviewed his stock portfolio and decided to sell his holdings in General Corp. on December 28th of Year 1. The shares were purchased two years ago. His basis in the shares was $40,000, and the market value of the shares was $38,000. Quinn wanted to use the $2,000 loss to help him minimize taxes for Year 1. On January 10th, Year 2, General Corp. announced new initiatives, and Quinn has second-guessed his decision to sell the shares in the company. He buys back the 1,000 shares for $37,000 on January 11th. Assuming that Quinn had no other capital transactions for Year 1, what is his basis in the shares after he buys them back on January 11th?

A. $0
B. $37,000
C. $39,000
D. $40,000

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Question 2:

Terri Rhoades is a high net worth investor with allocations to equity, fixed income, and derivative securities. Terri has a son with special medical needs that require 24-hour health care. The medical bills for her son have been significant and Terri does not expect any change to this pattern. Which constraint is most relevant for the son's medical issues?

A. Time
B. Regulatory
C. Unique
D. Liquidity

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Question 3:

An individual investor has $1,300,000 in investable assets and two children expected to attend college in the next three years. The present value of their education expenses is $200,000. The individual's portfolio income needs are $75,000 annually. Inflation is 2.1%, while education expenses are expected to rise by 3%. The return objective is closest to:

A. 5.8%
B. 6.8%
C. 8.9%
D. 9.8%

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Question 4:

All of the following statements regarding economic, industry, security, and portfolio analysis are true EXCEPT:

A. Industry analysis may result in specific industries being excluded from the portfolio.
B. Individual securities must each meet the risk and return objectives.
C. Portfolio analysis allocates the individual securities in an optimal manner to achieve efficiency.
D. Economic analysis includes a review of Federal Reserve Board actions.

Quinn's basis in the shares after buying them back on January 11th remains the same as before, the correct option is d. Terri Rhoades' son's medical issues correct option is d. liquidity and return objective is closest to 8.9%.

1. Since Quinn sold the shares of General Corp. on December 28th of Year 1 and bought them back on January 11th of Year 2, the wash sale rule applies. The wash sale rule states that if an investor sells a security at a loss and buys it back within 30 days before or after the sale,

In this case, Quinn sold the shares at a loss of $2,000 and bought them back within 30 days. As a result, the loss of $2,000 cannot be used to minimize taxes for Year 1. Therefore, Quinn's basis in the shares after buying them back on January 11th remains the same as before, which is $40,000 i.e. option d.

2. The most relevant constraint for Terri Rhoades' son's medical issues is: d. Liquidity.

3. The constraint of liquidity is critical when facing significant and ongoing medical expenses. Terri needs to ensure that she has sufficient liquid assets readily available to cover her son's medical bills and other urgent needs.

Liquidity allows her to access funds quickly without significant penalties or delays, ensuring she can meet her son's medical expenses promptly.

To calculate the return objective, we need to consider the portfolio income needs, inflation, and expected rise in education expenses. The return objective can be determined using the following formula:

Return Objective = Portfolio Income Needs + Inflation + Expected Rise in Education Expenses

Return Objective = $75,000 + 2.1% + 3% = 80.1%. The return objective is closest to 8.9%.

4. All of the following statements are true except d. Economic analysis includes a review of Federal Reserve Board actions.

Economic analysis involves examining various economic factors, such as GDP growth, inflation rates, interest rates, unemployment data, and overall economic indicators that can influence investment decisions.

The other statements are true:

a. Industry analysis may result in specific industries being excluded from the portfolio.

b. Individual securities must each meet the risk and return objectives.

c. Portfolio analysis allocates the individual securities in an optimal manner to achieve efficiency.

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