Series 7 practice questionhardSeminars and Public Appearances — Hypothetical Performance Illustrations
A representative uses a hypothetical illustration at a seminar to demonstrate the potential growth of a $100,000 investment over 15 years at an 8% annual return, compounded annually. What amount should be shown to the audience as the ending value, and what additional disclosure is required?
- A$317,216; no disclosure is necessary if the math is correct.
- B$320,000; disclosure that projections guarantee future performance.
- C$317,216; disclosure that hypothetical performance does not reflect actual results and that results may vary.✓ Correct answer
- D$300,000; disclosure that all investments are guaranteed by the SIPC.
Explanation
Why C — $317,216; disclosure that hypothetical performance does not reflect actual results and that results may vary.
Compounded annually: $100,000 × (1.08^15) = $317,216. Disclosure must state that hypothetical results are not guarantees and actual results may differ.
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