Private Wealth Management - Reading 15: Excerpts from Inves concerning, correct, statements, 2009

mayanfang1

Q2. Are Johnson’s statements concerning superannuation correct?

       Identifying the           Indentifying the
party most at risk                  solution to it

 

A)    Incorrect                              Correct

B)    Correct                                Incorrect

C)    Correct                                Correct

Q3. Is Weinke’s statement concerning the tax efficiency of hedge funds and Johnson’s statement concerning the tax efficiency of private equity investments correct?

          Weinke                                Johnson

 

A)   Incorrect                                Correct

B)   Correct                                  Incorrect

C)   Incorrect                                Incorrect

Q4. Are Weinke’s and Johnson’s statements concerning the attractiveness of bonds as investments for wealthy investors correct?

          Weinke                                Johnson

 

A)   Correct                                  Correct

B)   Incorrect                                Correct

C)   Correct                                  Incorrect

Q5. Assuming he liquidates a portion of his shares, what shares should Brooks sell of Dumas Environmental?

A)   30,000 of the 1/9/00 shares, 50,000 of the 2/9/02 shares, and 40,000 shares of the 12/8/04 shares.

B)   100,000 of the 1/9/00 shares and 20,000 of the 2/9/02 shares.

C)   30,000 of the 1/9/00 shares, 50,000 of the 2/9/02 shares, and 39,000 shares of the 12/8/04 shares.

mayanfang1

答案和详解如下：

Q2. Correct answer is C)

Superannuation refers to when an individual outlives their wealth. Given Davis’s financial situation, she is at the most risk for it. The most effective method of controlling for it would be to recommend a life annuity for Davis when she retires. A life annuity is essentially a life insurance policy in reverse. The investor pays a lump sum and receives a series of payments over his or her lifespan. The investor cannot outlive the annuity unless the insurance company fails and is unable to make the promised payments.

Q3.Correct answer is C)

Weinke is incorrect because hedge funds are typically tax inefficient. They generate high turnover and take numerous positions using long-short strategies. Johnson is also incorrect because private equity investments are tax efficient. They are typically long term in nature and taxed at lower rates.

Q4. Correct answer is B)

Weinke is incorrect because there have been long periods of time when the returns for bonds and equities were positively correlated. Thus bonds would not be good diversification vehicles for wealthy investors. Johnson is correct because wealthy investors are in high marginal tax brackets. Because the coupon income from bonds cannot be deferred, bonds are often unattractive investments for wealthy individuals from a tax standpoint.

Q5. Correct answer is A)

Brooks will sell the stock at the dealer’s bid of $25. He would like to generate $3,000,000 so he will need to sell $3,000,000 / $25 = 120,000 shares. To minimize taxes, he should sell the high cost basis stock first. He should sell 30,000 of the 1/9/00 shares, 50,000 of the 2/9/02 shares, and 40,000 shares of the 12/8/04 shares.

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