A Fiduciary Is Instructed by a Trust Instrument to Distribute

question 13

Multiple Choice

A fiduciary is instructed by a trust instrument to distribute currently all trust income equally between two beneficiaries.Furthermore, the corpus of the trust is to be preserved intact for the remainderman.The instrument states that no charitable contributions are allowed from either income or principal.During the year, the trust's DNI was $23,000: $22,000 from rents and $1,000 from interest on a tax-exempt debenture.Based on these facts, the trust is a(n)

• A)Simple trust
• B)Complex trust
• C)Grantor trust
• D)Income trust

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Definitions:

Efficient Market Hypothesis

A theory that suggests all known information is already reflected in stock prices; therefore, it is impossible to consistently achieve higher returns than the overall market.

Nonzero Alphas

Refers to the active return on an investment, indicating performance that deviates from the expected risk-return trade-off.

Neglected-firm Effect

A phenomenon where lesser-known, smaller companies may outperform larger companies because they receive less attention from analysts.

January Effect

A seasonal increase in stock market prices that typically occurs during the month of January, often attributed to the buying of stocks that were sold at the end of the previous year for tax purposes.