Missed Questions
An investor's portfolio consists of a single stock. If a stock with a correlation of +.95 was added to the portfolio and the stock market turned bearish, what would be the likely effect of having added this additional security? A) Almost no noticeable impact. B) The portfolio's value would increase. C) Not enough information to tell. D) The portfolio's value would remain the same.
A
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 A) I and II B) I and IV C) I only D) I, II, III, and IV
A
In designing a client's portfolio, a registered investment adviser representative of Greater Wealth Advisory Services recommends the purchase of several stocks from the inventory of Greater Wealth's wholly owned broker-dealer. Under the Investment Advisers Act of 1940, this activity requires written A) disclosure to the client and consent prior to completion of the transaction. B) consent of and disclosure to the client prior to execution of the transaction. C) consent of the client. D) disclosure to the client.
A
In which of the following cases is the exemption from registration with the SEC not based on the value of assets under management? A) An investment adviser that acts as an adviser solely to one or more venture capital funds B) An investment adviser that acts as an adviser solely to one or more national banks C) An investment adviser with assets under management of less than $25 million D) An investment adviser that acts as an adviser solely to private funds and has assets under management in the United States of less than $150 million
A
Regarding the use of the term direct participation programs, when referring to tax-sheltered investments, which of the following is not a DPP? A) Real estate investment trust B) Equipment leasing limited partnership C) Real estate limited partnership D) Oil and gas limited partnership
A
USATrade Securities, a FINRA member broker-dealer, is registered in 10 Midwest states. Regarding financial requirements, USATrade must meet those of A) the SEC. B) FINRA. C) the state in which the principal office of the member is located. D) the state with the most stringent financial requirements.
A
Which of the following accounts could be opened with a TOD designation? Individual Joint tenants in common Joint tenants with rights of survivorship UTMA A) I and III B) I, III, and IV C) I and II D) II and IV
A
Which of the following statements correctly expresses requirements under the Investment Company Act of 1940? A) No investment advisory contract may be entered into that does not provide for termination with no more than 60 days' notice in writing. B) No registered investment company may acquire less than 3% of the shares of another investment company. C) A registered open-end investment company using a bank as custodian must choose one that has FDIC coverage. D) Renewal of the advisory contract can only be done with majority vote of the fund's board of directors.
A
According to the Investment Advisers Act of 1940, under which of the following circumstances is an exculpatory provision acceptable in a contract between an investment adviser and its clients? A) The client is purchasing government securities only. B) This provision is prohibited under all circumstances. C) The client is a broker-dealer. D) The client has received written disclosure of this provision and has signed a written acceptance prior to any transaction.
B
Concerning index annuities and their method of crediting interest, which of the following is true? A) Annual reset offers the best return regardless of market fluctuations. B) High-water mark with look back offers the best return during periods of high volatility. C) Point to point offers the best return when the market has had a single drastic decline during the period. D) On average, annual reset has a higher participation rate than point to point.
B
Current market interest rates are 6%. A bond with an 8% coupon would be most likely to have a net present value of zero when the bond's internal rate of return is A) 0%. B) 6%. C) 8%. D) 4%.
B
Given the following information: StockBetaA2.16B1.54C.96D1.28 Assume the risk-free rate of return is 2.75% and the market rate of return is 6.75%. An investor has a required rate of return of 9.5%. Which of these stocks would offer the best investment opportunity? A) Stock C B) Stock A C) Stock D D) Stock B
B
The firm engaged to manage the portfolio of an investment company registered under the Investment Company Act of 1940 must: A) provide notice to SEC. B) register with SEC. C) register with the Administrator in each state in which the fund's shares will be offered. D) offer to provide a brochure to the investment company no less frequently than annually.
B
If GHI currently has earnings of $3.00 and pays an annual dividend of $1.75 and GHI's market price is $35, the current yield is A) 8.60%. B) 5.00%. C) 3.00%. D) 1.75%
B The current yield is calculated by dividing the annual dividend by the current market value ($1.75 ÷ $35.00 = 5%).
A customer has invested a total of $10,000 in a nonqualified deferred annuity through a payroll deduction plan offered by the school system where he works. The annuity contract is currently valued at $16,000, and he plans to retire. On what amount will the customer be taxed if he chooses a lump-sum withdrawal? A) He will not owe taxes because the annuity was nonqualified. B) $10,000.00 C) $6,000.00 D) $16,000.00
C
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 A) top-down analysis. B) sector analysis. C) bottom-up analysis. D) fundamental analysis.
C
An investor purchased a Mosaks, Inc., put option with a strike price of $105. If Mosaks' stock price is $115 at expiration, the value of the put option is A) $10. B) $105. C) $0. D) -$10.
C
Delta Advisers is registered in Alabama, Mississippi, and Louisiana. Billy Joe works for Delta Advisers rendering investment advice to individual clients. He works out of Delta's Jackson, MS office and has 3 clients in Mississippi, 6 clients in Alabama and 4 in Louisiana. Billy's friend, Bobby Ray, works for Biloxi Investments, a federal covered adviser with offices in several cities in Mississippi. Bobby Ray works out of the Tupelo, MS office and has 45 retail clients in Tennessee, 4 in Georgia, and 6 in Alabama. With regards to registration as an IAR, which of the following statements is TRUE? A) Billy Joe must register in AL and Bobby Ray must register in MS, TN, and AL. B) Billy Joe and Bobby Ray must register in MS only. C) Billy Joe must register in MS and AL and Bobby Ray must register in MS. D) Billy Joe must register in MS and AL and Bobby Ray must register in MS, TN, and AL.
C
Tax preference items are used for the purpose of computing the alternative minimum tax. They include all of the following except A) excess intangible drilling costs. B) accelerated depreciation. C) straight-line depreciation. D) certain incentive stock options.
C
Which of the following is likely to be characterized by no management fees and a portfolio consisting of municipal or corporate bonds? A) Face-amount certificate company B) Closed-end investment company C) Unit investment trust D) Open-end investment company
C
While an application for registration as an agent of a broker-dealer is still pending, that person would be permitted to A) limit her acceptance of orders to those from the broker-dealer's existing clients. B) accept unsolicited orders only. C) assist registered employees of the firm by doing research on securities they are following. D) engage in no activity at the office other than studying for the exam.
C
With the current rate of the 91-day Treasury bill at 2%, a stock paying dividends at a rate of 4% and having a total return over the measured period of 7% would have a risk premium of A) 9% B) 2% C) 5% D) 4%
C
A technical analyst would be most interested in which of the following? A) Price-to-earnings ratios B) Working capital C) Capitalization ratios D) 200-day moving averages
D
An investor is considering the purchase of some bonds to diversify his portfolio. If he should decide to purchase Treasury STRIPS instead of Treasury Bonds, his major risk would be A) credit risk B) reinvestment risk C) purchasing power risk D) interest rate risk
D
In their advertising campaigns, state-registered investment advisers are prohibited from doing all of the following except A) showing past performance of the best performing recommendations. B) guaranteeing future performance. C) exaggerating the capabilities of the firm and its personnel. D) offering free services.
D
Strategic Capital Asset Managers (SCAM) is an investment adviser that is registered in five states. In lieu of preparing a fancy brochure, SCAM is permitted to provide its clients with a copy of its A) Form ADV, Part 1 and Part 1B. B) Form ADV, Part 2, Appendix 1. C) annual renewal form provided to the SEC. D) Form ADV, Part 2A and Part 2B.
D
Under the Uniform Securities Act, all of the following may provide investment advice incidental to their normal business without requiring registration as an investment adviser except A) an engineer. B) a lawyer. C) a teacher. D) an economist.
D
Which of the following mutual fund share classes generally has a 1% CDSC that is eliminated once the shares have been held more than one year? A) Class B B) Class A C) Class 1% D) Class C
D
Which of the following statements are not true? The kiddie tax applies to any income received by a child under the age of 19. IRAs have advantages over other estate assets when left to charity. Simple trusts have to distribute income annually. For U.S. citizens, there is an unlimited marital estate tax deduction. A) I, II, and III B) II, III, and IV C) I, II, III, and IV D) I and II
D
Which of these would be specified in an exchange-traded futures contract? The quantity of the underlying asset The quality of the underlying asset The time of delivery of the underlying asset The location of delivery of the underlying asset A) I, II, III, and IV B) I and III C) II and IV D) I, II, and III
D
If an individual leaves her current employer and takes a new job, which of the following cannot be done with the assets in her 401(k) plan? A) Roll them over into a traditional IRA. B) Roll them over into the new employer's 401(k) plan. C) Roll them over into a variable life insurance policy. D) Keep them in the plan.
C Qualified distributions from a 401(k) plan cannot be rolled over into a a life insurance policy, variable or not.
A client calls to say he has just read about a European option and doesn't know what it is. You would explain that it is a derivative because A) it can only be exercised on the expiration date. B) the currency used is generally something other than the U.S. dollar. C) intrinsic value does not affect the premium. D) its value is based on some underlying asset.
D
Which of the following is (are) true regarding qualified pension plans? They must not discriminate. They must have a vesting schedule. They must be in writing. Every month the employer must update the current status of all accounts. A) I and III B) I, II, III, and IV C) III only D) I, II, and III
D
If an investment adviser representative of a federal covered adviser that transacts business in a state terminates employment with that investment adviser, which of the following statements is true? A) No notice to the Administrator is required. B) The representative must notify the Administrator. C) The investment adviser must notify the Administrator. D) Both the representative and the investment adviser must notify the Administrator.
B
Three years ago, an investor purchased 1,000 shares of stock in the Equity Protective Life Insurance Company (EPLIC). The purchase price was $53 per share. The current market value of EPLIC stock is $79 per share. If the investor is in the 24% federal income tax bracket, it is correct to state that A) the investor's tax liability is $3,900. B) no tax is owed by the investor. C) the investor owes tax on a $26,000 short-term capital gain. D) the investor owes tax on a $26,000 long-term capital gain.
B
Under the provisions of the Internal Revenue Code, which of the following business forms is not required to file a separate tax return? A) S corporation B) Sole proprietorship C) LLC D) Limited partnership
B
When an IA tells a client who is investigating the common stock of two different issuers that there is no linear relationship between the two stock's returns, it means A) one is likely to pay dividends, the other not B) the correlation coefficient is zero C) one is listed on an exchange, the other traded OTC D) one of the stock's standard deviation is significantly higher than the other
B
All of the following statements regarding investment advisory contracts under NASAA's Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers are true except A) the contract must not permit assignment without the client's consent. B) the contract must detail any prepaid fees to be refunded to the client upon termination. C) the contract's term may not exceed one year. D) the contract must be renewed in writing.
C
It is not uncommon to find financial planners who use their home as the base of their operations. When a financial planner who works from home is also registered as an agent of a broker-dealer, she must A) not use personal computers to store client information. B) not remain open during hours when the broker-dealer is closed. C) ensure that her office is separate from her living quarters. D) have cybersecurity policies and procedures in place to protect customer data.
D
Which of the following is NOT registered with the SEC under the Investment Company Act of 1940? A) Open-end investment companies B) Exchange-traded funds C) Unit investment trusts D) Exchange-traded notes
D
All of the following statements regarding a Section 529 QTP are true EXCEPT A) a beneficiary may be covered under both a Coverdell ESA and a Section 529 QTP. B) the plan owner can rollover the assets into a different plan no more frequently than once every 12 months. C) the plan owner can rollover any unused funds to a member of the beneficiary's immediate family without incurring any tax liability as long as the rollover is completed within 60 days of the distribution. D) agents selling a Section 529 Plan must deliver a currently effective prospectus.
D
In designing a client's portfolio, a registered investment adviser representative of Greater Wealth Advisory Services recommends the purchase of several stocks from the inventory of Greater Wealth's wholly owned broker-dealer. Under the Investment Advisers Act of 1940 this activity requires written: A) consent of the client. B) disclosure to the client and consent prior to completion of the transaction. C) disclosure to the client. D) consent of and the disclosure to the client prior to execution of the transaction.
B
