Overview

A corporation calls in a portion of its long-term debt at 101. This will have the effect of I. decreasing working capital II. increasing working capital III. decreasing net worth IV. increasing net worth

I and III

As defined in the Uniform Securities Act, the term person would include I. a limited partnership II. a political subdivision III. an unincorporated association IV. the executor of an estate for a deceased individual

I, II, III, and IV

Purchasers of options can have a number of different objectives. One of your clients who is a soft drink fan already has a long position in KO. What would be a possible reason for this client to go long a KO call option?

To fix the cost of acquiring additional stock to the portfolio

Which of the following securities can legally be purchased on margin?

Warrants exercisable into shares of a stock traded on Nasdaq Stock Market.

An agent in this state would be acting illegally if he sold

nonexempt securities properly registered in a neighboring state but not registered in this state

For larger accounts, a broker-dealer is least likely to waive its normal fee for

transferring the account to another broker-dealer

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

$0

An investor purchases a Treasury note and the confirmation shows a price of $102.21. Rounded to the nearest cent, the investor's cost, excluding commissions, is

$1,026.56

An investment adviser may not have custody of a customer's funds and securities under the Uniform Securities Act if

there is a rule in the state barring such custody

Assume that a corporation issues a 5% Aaa/AAA-rated debenture at par. Two years later, similarly rated debt issues are being offered in the primary market at 5.5%. Which of the following statements regarding the outstanding 5% debenture are TRUE? I. The current yield on the debenture will be higher than 5%. II. The current yield on the debenture will be lower than 5%. III. The dollar price per bond will be higher than par. IV. The dollar price per bond will be lower than par.

I and IV

Which of the following is an example of dollar cost averaging?

Investing $200 into the KAPCO Growth Fund on the 15th of each month

Under the Insider Trading and Securities Fraud Enforcement Act of 1988, which of the following are insiders for purposes of insider trading? I. Attorney who writes an offering circular for a company II. An investor holding 4% of the company's stock III. The next-door neighbor of a board member of a company IV. Brother of a company's president

I and IV

The SEC has determined that advertising regarding past recommendations made by investment advisers is misleading if I. results do not reflect the deduction of fees II. actual market conditions during the referenced period are not disclosed III. the advertisement did not reflect performance for a minimum period of 3 years IV. the advertisement did not disclose that it applied to only a specific group of clients

I, II, and IV

Which of the following investment strategies would be appropriate for an advisory client with a 20-year time horizon before retirement? I. Holding more stock II. Holding less cash III. Holding fewer bonds

I,II, and III

Under the Investment Advisers Act of 1940, if an investment adviser's sales literature describes an investment system, the description must include I. the length of time the system has been used II. the difficulties and limitations of using the system III. the performance history of the system

II only

Without prior authorization from the client, an investment adviser could release information relating to the client's account I. in order to comply with the brochure delivery requirements of the USA II. when requested by the IRS as part of litigation against the client III. for the purpose of furnishing information for a statistical survey being compiled by the Administrator IV. upon the receipt of a subpoena from a court of competent jurisdiction

II and IV

If required by the Administrator, a stock traded on the Nasdaq Capital Market would most likely use which of these?

Notice Filing

Which of the following transactions are exempt? I. XYZ Corp., a local manufacturing firm, sells its common stock to several local individual accredited investors on an infrequent or isolated basis. II. Joe Smith, an agent with ABC Securities, Inc., sells XYZ Corporation's 5-year fixed-income securities, rated AAA by Standard & Poor's, on a regular basis to selected members of his large retail client base. III. Joe Smith, an agent with ABC Securities, Inc., sells XYZ Corporation's securities to a high-net worth client on an unsolicited basis. IV. Alexander Wimpton had his sizable portfolio of stocks and bonds sold by the administrator of his estate upon his death.

III and IV

An IAR handling the portfolio of a senior citizen with diminished mental capacity is deemed to be acting as a fiduciary and, therefore, bound by the provisions of the Uniform Prudent Investor Act. Compliance with the act would require the IAR to do all of the following EXCEPT

make sure that the investment allocation is done prior to the renewal date of the contract

Under both federal and state law, the concept of a discretionary account is defined. It would be considered discretion when an agent

picks the specific security that is the subject of a transaction

Covered call writing is a strategy where an investor

sells a call on a security he owns to reduce the volatility of the stock's returns and to generate income with the premium

When reviewing a corporation's financial statements, shareholders' equity is computed by

subtracting total liabilities from total assets.

A discussion referring to blue-sky laws would include all of the following EXCEPT

the Securities Act of 1933 and Securities Exchange Act of 1934

Your married client has an AGI of $105,000 per year and is covered by his employer's defined benefit pension plan. When inquiring about opening a Roth IRA, you would respond that

the client could open the Roth IRA without any restriction

In the formula for determining the real rate of return,

the inflation rate is subtracted from the investment return

Investment advisers who preach the benefits of strategic asset allocation do so because they believe

the market is perfectly efficient because stock prices reflect all available information

George and Martha Washington are both in their mid-70s, very active in their community, and both work part time at the local community bank. They would like to contribute a small portion of their earnings to some form of retirement plan. Which of the following choices would be the most appropriate for this couple?

A Roth IRA

Based on the following information, which stock is most attractive to a value investor?

Book value of $22 per share, current market value of $17 per share

Judy is in the business of giving general investment advice, suggesting appropriate asset allocation percentages, but not recommending specific securities. George's business model is giving investment advice and recommending specific securities. Assuming that both receive compensation, who must register as an investment adviser under the Uniform Securities Act?

Both

Under current regulations, registration with the SEC is optional for all of the following investment advisers EXCEPT

CEF Investment Managers, LTD., a partnership managing a small registered closed-end investment company traded on the OTC Bulletin Board

When must an investment adviser disclose personal securities transactions to a client? i. If the adviser makes trades in his own account that are inconsistent with advice given to a client II. If the adviser makes trades that are designed to take advantage of the impact caused by recommendations to clients III. Investment advisers must disclose all personal transactions to clients

I and II

When a client is interested in investing in commodities, you would expect to discuss

Soybeans, wheat, and corn

Which of the following is responsible for administration of the Bank Secrecy Act?

The Financial Crimes Enforcement Network

Securities traded in which of the following marketplaces would be excluded from the definition of federal covered securities?

Toronto Stock Exchange

Gaston is a police officer and wishes to contribute to a retirement plan sponsored by the city. Gaston wants the flexibility of being able to have unfettered penalty-free access to his funds before reaching age 59½. This can only be accomplished if Gaston contributes to

a 457 plan

Tamika is an investment adviser representative with Financial Engineers, LLC, a covered investment adviser. The firm uses an investment policy statement to help design financial plans for their clients. One of Tamika's current clients plans to purchase a new boat 7 months from now. When using the IPS, this would be considered

an investment constraint

An investment adviser to a private fund wishes to qualify for the exemption offered under the Uniform Securities Act when the fund has no more than 100 investors. In order to qualify,

every investor must have either at least $1 million in assets managed by the investment adviser, or a net worth, excluding the value of the primary residence, in excess of $2.1 million

A state-registered investment adviser organized as a corporation is required to preserve a copy of its articles of incorporation

for 3 years after the termination of the enterprise

Among the benefits of an HSA is

funds not used for health expenses may be invested in mutual funds and other securities.