78% 3/30
Which of the following would best describe a Yankee bond?
A U.S. dollar-denominated bond issued by a non-U.S. entity inside the United States
Looking at the balance sheet, a corporation builds its capital structure with all of the following except
A corporation's capital structure consists of its long-term debt plus shareholders' equity. Included in shareholders' equity are the equity capital (stock) and the retained earnings.
Which of these features are common to both variable annuities and scheduled premium variable life insurance? Income earned in the separate account is tax deferred. Separate account performance below the AIR causes a reduction in cash value. Fixed contributions are required. Contract owners have voting rights.
All variable products offer tax deferral of earnings in the separate account. Unit holders of a variable annuity vote on the basis of the number of units they own; holders of variable life insurance receive 1 vote for each $100 of cash value. With variable life insurance, AIR applies only to the death benefit, not to cash value as it does with variable annuities. Scheduled premium is another way of saying fixed premium and that applies only to variable life insurance, not variable annuities. U15LO7
An investor wants to moderate overall portfolio risk and return profile with assets that have a low correlation to traditional asset classes.
Alternative asset classes like hedge funds, private equity, and commodities help moderate overall portfolio risk and different return profiles from traditional asset classes like stocks and bonds.
A research analyst studying the performance of ABC Industries compares that with reports from other analysts reviewing other companies in other industries. This is known as
Bottom-up analysis starts by attempting to find superior performing companies, regardless of the industry. Those analysts believe that these companies will provide attractive returns even if they are in an industry sector that is in a negative position in the economic cycle.
Under current regulations, registration with the SEC is optional for all of the following investment advisers EXCEPT
Currently, registration with the SEC is mandatory (not optional) for any investment adviser managing a registered investment company (open or closed-end). It is optional for: pension consultants once their AUM reach $200 million; small and mid-size advisers who would be required to register in 15 or more states; and those advisers with at least $100 million in AUM, but not $110 million in AUM.
Which of the following is NOT a type of diversification that is achieved by investing in international equities?
Following a value or a growth style, or using a buy-and-hold strategy, is independent of the continent of domicile of the issuer. Investing in different countries diversifies investments among various currencies, other than the client's domestic currency. Different geographic areas have different types of industries whose performance may vary on the basis of regional resources. International equities are considered another asset class for purposes of asset allocation in one's portfolio.
The Investment Advisers Act of 1940 requires delivery of a brochure containing information about the adviser's background and business practices in all of the following situations EXCEPT when the service provided is an individual supervisory service when the client is an investment company when the contract is for an impersonal advisory service requiring payment of less than $500 when the client is an individual with a net worth of more than $1 million
II and III A disclosure brochure is not required to be delivered if the client is a registered investment company, or if the advisory service is of an impersonal nature and costs less than $500. A brochure is required when the service provided is an individual supervisory service and the client's net worth has no bearing on brochure delivery requirements.
Mary Huggins is the ex-wife of Charlie Huggins. They were married for 12 years and then finalized a divorce. Charlie is now 70 and has begun taking his Social Security benefits. Mary remarried last year. It would be correct to state that
Mary is not entitled to any of Charlie's Social Security benefit.
Your clients, a married couple, are trying to decide whether to open an account as joint tenants with right of survivorship or tenants by the entirety. You might point out to them that one of the differences to consider is that:
One of the unique characteristics of the joint by the entirety (JBE) account is that the consent of the other party is necessary in order for one of the parties to enter a trade. With a JTWROS account, either party can enter trades independently. Both JTWROS and JBE avoid probate and the JBE is limited to married couples only.
Which of the following mutual funds should an investment adviser representative recommend to a client whose objective is current income with moderate risk?
Preferred stock generates current income in the form of dividends. Aggressive growth funds strive for capital appreciation rather than current income. Money market funds have low yields, not the high yields that an income investor wants. While high-yield bonds provide current income, they entail a high, rather than a moderate, degree of risk.
Mr. Brown has received preemptive rights from one of the stocks held in his portfolio. Which of the following is NOT an alternative regarding these stock rights?
Redeeming them for cash Rights are not redeemable by the issuer. They may be sold in the secondary market or be given to someone else to exercise. If exercised, rights are exchanged for an appropriate number of shares of the underlying common stock.
Which of the following is an example of a regressive tax?
Regressive taxes are those where the rate remains the same, regardless of the cost of the item subject to the tax. For example, if your state has a 6% sales tax, it makes no difference if you are buying an item for $1.00 or one for $10,000, the tax rate is the same 6%. The other choices given are progressive taxes where the tax rate increases as the dollar amount being taxed increases
A money market mutual fund would be least likely to invest in which of the following assets?
Repurchase agreements A money market mutual fund typically invests in money market instruments, those with a maturity date not exceeding 397 days. Treasury notes are issued with maturity dates of 2-10 years.
The Administrator of a state securities department conducted a hearing regarding misconduct by an investment adviser registered at the state level. The Administrator required the adviser, as well as several clients who had lodged complaints against the adviser, to take a sworn oath that their testimony was true. Does the Administrator have the power to require sworn oaths?
The USA empowers Administrators to administer oaths. Sworn oaths typically occur in conjunction with hearings.
In order to act as an agent (or principal) in a trade with an advisory client, there are 2 requirements:
The client receives full written disclosure as to the capacity in which the adviser proposes to act Consent of the client Both of these are required before the completion of the transaction.
An investor purchases a Treasury note and the confirmation shows a price of $102.25. Rounded to the nearest cent, the investor's cost, excluding commissions, is
Treasury notes are quoted in 32nds where each 32nd equals $.3125. The 102 in the quote equals $1,020 and the 25/32 is an additional $7.81 bringing the total to $1,027.81.
Over time, a country's trade deficit will lead to a decline in the value of its currency because
When a country's imports exceed its exports, a trade deficit will occur, which causes selling pressure on the country's currency, therefore lowering its exchange rate against other currencies. When a country's currency declines in price relative to other currencies, exports tend to increase over time because they become less expensive in terms of foreign currency, thus reversing the trade deficit.
Under the Investment Company Act of 1940, SEC rules permit mutual funds to make sales charge discounts available to each of the following EXCEPT
an individual acting as agent for an investment club Discounts for quantity purchases of mutual fund shares are not permitted for investment clubs. SEC and FINRA rules do permit sales charge discounts for individual purchasers making large purchases, tax-exempt organizations (e.g., pension plans, employee benefit plans), and directors, officers, employees, underwriters, and other persons affiliated with the fund.
If Perfect Pasta, Inc., a privately held company in Illinois that owns four restaurants, wants to issue shares to public investors who are residents of Illinois, the company
must register by qualification Perfect Pasta must register by qualification because the other methods listed are not available to an initial public offering for an intrastate (as opposed to interstate) offering. Perfect Pasta is not a federal covered security and may not use the notice filing procedure. The private placement exemption refers to the number of persons being offered the security, not the number of restaurants the issuer runs.
One reason why employers like using deferred compensation plans is that
they can be structured so that the employee's benefits are forfeited upon termination with cause Deferred compensation plans frequently provide that employees leaving before a certain period of time, going to the competition, or being terminated for cause forfeit plan benefits. There are no current tax deductions, the plans discriminate, and because they are nonqualified, there is no IRS approval.
Bail Bonds, Inc., might issue warrants in connection with a bond issue for which of the following reasons? As an inducement to make the bonds more marketable To lower their interest cost on the issue To increase the marketability of their common stock To increase the number of common shares outstanding
-As an inducement to make the bonds more marketable -To lower their interest cost on the issue
Under the Uniform Securities Act, which of the following are NOT considered investment advisers or investment adviser representatives in this state? An individual who sells advisory services in several states, including this one, for AAA Advisers, Inc. United Trust Company of America An agent for a broker-dealer advising customers for a fixed separate fee stated as a percentage of the customer's assets under management An investment adviser with no office in the state that does business exclusively with other investment advisers located in the state
2 & 4 An agent for a broker-dealer advising customers for a fixed fee, stated as a percentage of the customer's assets under management, is acting as an investment adviser representative. An individual who sells advisory services for AAA Advisers, Inc., is an investment adviser representative. A trust company is not an investment adviser under the USA. An investment adviser with no office in the state and does business exclusively with other investment advisers located in that state is also excluded as an investment adviser under the USA.
Which of the following securities has an easily determinable internal rate of return?
A) 7% corporate bond B) 6% Ginnie Mae C) Zero-coupon bond D) 5% municipal bond The only security that does not have reinvestment risk (the risk that periodic interest payments cannot be reinvested at the same yield as the bond providing the interest payments) is a zero-coupon bond such as Treasury STRIPS. With a zero-coupon bond, there are no periodic interest payments to reinvest, so a yield can be locked in. The interest rate that discounts the redemption price (par) to the discounted purchase price is the locked-in yield, which is the same as the internal rate of return, also referred to as the yield to maturity.
For larger accounts, a broker-dealer is least likely to waive its normal fee for
Although there is no official standard, larger accounts tend to have many of the smaller fees waived. However, if the client is moving the account to another firm, it is likely that the transfer fee will be charged
A Canadian broker-dealer is registered in Province Q. The firm has clients who vacation in several New England states and they would like to continue to do business with them while on their holidays. Under the Uniform Securities Act,
Canadian broker-dealers and their agents must be registered in any state in which they wish to do business with exisiting clients who are temporarily in the state. The Uniform Securities Act provides for a form of limited registration for Canadian broker-dealers wishing to do business with their clients who are vacationing or otherwise traveling through the United States. In order to qualify for the limited registration, the BD must be properly licensed in its home province and their only dealing in the states is with an existing client.
When does a customer have to receive the OCC Options Disclosure Document
When opening an account to trade options, the owner must be told about the risks involved with trading options. By providing the owner with an options disclosure document titled Understanding the Risks and Uses of Options, the broker-dealer satisfies the risk disclosure requirements. There are 2 alternatives for meeting the delivery requirement. It may be done before or at the time the broker-dealer approves that customer's options account or accepts the customer's first order to trade the listed options covered by the ODD.
An investor has unexpectedly received $30,000 from an old debt he had written off. This money will come in handy for a business venture planned for 3 years from now. Meanwhile, he would like to generate some income on the money with as little risk and expense as possible. Which of the following recommendations is likely to be the most suitable for this customer?
Class C shares of the ABC Investment-Grade Bond Fund The customer wants income with as little risk as possible, so our answer must be one of the choices that offer an investment-grade bond fund. Of those offered, Class C shares would be best because the customer would pay no front-end sales charge and no CDSC after a short time, probably 1 year. He will pay somewhat higher 12b-1 fees than with Class A shares, but this will amount to only a fraction of 1% per year, and only for the 3 years of his investment.
Which of the following activities would violate the Uniform Securities Act? -An investment advisory partnership admits a renowned securities analyst to the partnership without informing its clients of this highly desirable addition. -An investment adviser incorporated in California fails to inform its clients of the departure of the chief financial officer, who did not have an equity position in the firm. -An investment advisory firm incorporated in Illinois charges clients a share of the capital gains on the basis of a guaranteed performance level above a designated benchmark. -An investment advisory firm assigns those accounts that fall to a low level to other firms willing to accept them with the consent of the account holder.
I and III Investment advisers who are partnerships must inform their clients of any change in the membership of the partnership within a reasonable period. Unless the question refers to a specific exemption, it is a violation of the USA for an advisory firm to charge on the basis of performance. An investment advisory firm may assign accounts to another firm with the consent of the client.
