The key idea is how a Charitable Remainder Unitrust determines its annual payout. A unitrust pays a fixed percentage of the trust’s annual fair market value to the income beneficiaries, and that value is recalculated each year. So the actual dollar amount received can go up or down depending on how the trust’s assets perform, while the percentage itself stays the same. The remaining value of the trust eventually passes to charity. This is what makes the unitrust description correct: you’re not getting a set dollar amount each year; you’re receiving a percentage of the trust’s value each year, with the remainder to the charity. For contrast, a fixed dollar payout describes a Charitable Remainder Annuity Trust, where the payment is constant each year regardless of how the trust’s value changes. And the payout isn’t limited to a lifetime to one person; a unitrust can be set up for a life or for a term of years and can involve one or more beneficiaries, with the amount changing as the trust’s value changes. The idea that the payout cannot be changed is not accurate because the actual cash received will vary with the trust’s annual value.

Alpha reflects the portion of a portfolio’s return that cannot be explained by its exposure to the market. In CAPM terms, it’s the intercept from the regression of excess returns on the market excess return, capturing the abnormal or unexpected return beyond what the market movement would predict given the portfolio’s beta. A positive alpha indicates outperformance relative to the risk-adjusted benchmark, while a negative alpha indicates underperformance. This makes alpha the best description of the “unexpected portion of the actual return.” The other ideas describe different concepts: the sensitivity to the market is beta, not alpha; the range around the expected return relates to volatility or dispersion (not alpha); and risk from dissimilar issues held refers to diversification or unsystematic risk (also not alpha).

When evaluating municipal bonds, the key factor is what backing the issuer provides for debt service. A general obligation bond is backed by the issuer’s full faith and credit, meaning the municipality pledges its taxing power and other available funds to pay interest and principal. This makes it a tax-supported obligation and generally considered safer because repayment isn’t limited to a specific project’s revenues. In contrast, revenue bonds are repaid from a dedicated stream of income—such as tolls, charges, or utility revenues—so they don’t rely on tax revenue or the issuer’s broader taxing power. Mortgage bonds are secured by a mortgage on real property, tying repayment to asset value rather than the issuer’s ability to tax. Debentures are unsecured and rely on the issuer’s credit without specific assets backing the debt. Therefore, the bond backed by the full faith and credit of the municipality is the general obligation bond.

The concept being tested is how a bond issue is structured to repay principal over time. When bonds are designed to mature in a sequence of different years, the principal is paid back in installments each year rather than all at once. This gradual redemption creates a sinking-fee style schedule that aligns debt repayment with the life of the project or asset being financed. This is what makes serial bonds the best description: the issue consists of multiple maturities within one bond issue, so portions of the principal mature in successive years. In contrast, balloon bonds require a single large repayment at the end, and convertible bonds are defined by their option to convert into equity. The term series bonds can be used in some contexts, but serial bonds specifically emphasize the stepped repayment schedule over several years.

The concept here is how a QTIP (qualified terminable interest property) trust works in blended estate and gift tax planning. A QTIP trust lets the first spouse’s assets qualify for the marital deduction while preserving control over who ultimately benefits after the surviving spouse dies. The surviving spouse must receive all the net income from the trust for life (or for a term) and the remainder can be limited to other beneficiaries as defined by the grantor or trustee. This means the surviving spouse doesn’t have free rein to determine the ultimate disposition of the trust property; the trust terms still govern who will receive the assets after the spouse’s death. The statement that is false concerns the allocation of generation-skipping transfer (GST) tax exemption. In reality, the grantor-spouse’s GST exemption can be allocated to trust property, including QTIP property, to shield future transfers to skip persons (like grandchildren) from GST tax. This allocation is a planning tool available under the GST exemption rules, and it’s not correct to say it cannot be allocated to QTIP trust property. So, the other statements align with how QTIP trusts operate: the executor can elect to treat all or part of the marital trust as QTIP, the spouse-beneficiary does not need to control the ultimate disposition, and the spouse must be entitled to all the net income for the QTIP to be valid.