Identify Which of the Following Statements Is True

question 69

Multiple Choice

Identify which of the following statements is true.

• A)Under the grantor trust rules, a grantor may be taxed on all or a portion of the trust's income even though the income is distributed to the named beneficiary or someone else.
• B)An irrevocable trust cannot be a grantor trust.
• C)Large amounts of income can be shifted to children under the age of 18 through the use of trusts that make distributions, and the income will be taxed at the lower rates of the children.
• D)All of the above are false.

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Definitions:

Single Factor Model

A model that explains the returns of an asset or portfolio using a single risk factor.

SMB Beta

A measure used in finance to assess the sensitivity of a stock's return relative to the size factor in an asset pricing model.

Factor Portfolio

A portfolio that is constructed to have a high sensitivity to certain economic or financial factors, aiming to capture specific risk premiums.

Well-diversified Portfolio

An investment portfolio comprised of various assets to reduce exposure to risk by spreading investments across different industries, asset classes, or other categories.