Practice Part 2
An IRA account at a broker-dealer must be set up as A. a cash account. B. a margin account. C. a fee-based account. D. a prime broker account.
Ans: A
An individual's net worth is A. the difference between the individual's assets and the individual's liabilities. B. best determined by examining the individual's personal income statement. C. largely irrelevant in identifying the individual's investment objectives. D. another term for discretionary income.
Ans: A
An institutional customer would like to use one broker-dealer to handle the administration of the account but would like to use various other broker-dealers to execute trades for certain types of securities. Which type of account would meet the customer's needs? A. A prime brokerage account B. A DVP account C. A fee-based account D. An advisory account
Ans: A
An investor is seeking tax advantages through an oil and gas direct participation program (DPP). With this type of partnership, the investor would expect to benefit most from A. depletion and intangible drilling costs. B. depletion and depreciation allowances. C. depreciation allowances and intangible drilling costs. D. depletion and tax credits.
Ans: A
Before making a recommendation to a client, which of the following must happen? I. The registered representative is required to perform a reasonable-basis suitability analysis. II. The registered representative is not required to perform a reasonable-basis suitability analysis. III. The registered representative is required to perform a customer-specific suitability analysis. IV. The registered representative is not required to perform a customer-specific suitability analysis. A. I and III B. I and IV C. II and III D. II and IV
Ans: A
FINRA Rule 2111 places three obligations on members when determining if a specific recommendation to a customer is suitable. Which of the following is not one of those three? A. Qualitative-basis suitability B. Quantitative suitability C. Reasonable-basis suitability D. Customer-specific suitability
Ans: A
Generally speaking, nonqualified retirement plans A. are funded with after-tax dollars. B. must have a trust agreement. C. may not discriminate with regard to who can participate. D. must have IRS approval.
Ans: A
If Alpha Enterprises, Inc., wants to open a cash account, a firm must have all of the following documents on file except A. a hypothecation agreement. B. a new account form. C. a copy of the corporate charter. D. a copy of the corporate resolution.
Ans: A
In a direct participation program (DPP), liability for the debts of the business falls upon A. the general partner(s) (GPs). B. the limited partner(s) (LPs). C. the shareholder(s). D. the agent(s) selling the program.
Ans: A
Programs allowing for the direct pass-through of losses and income to investors include all of the following except A. real estate investment trusts (REITs). B. new-construction real estate direct participation programs. C. S corporations. D. oil and gas drilling direct participation programs.
Ans: A
Several investors open an account as tenants in common (TIC). For suitability purposes, financial information is required on which of the following investors? A. All of the investors B. Most of the investors C. The largest investor only D. Only the one authorized to trade the account
Ans: A
The managing partner of a limited partnership has responsibility for all of the following except A. providing unlimited capital for the partnership business. B. organizing the business. C. paying partnership's debts. D. managing the operations.
Ans: A
Which of the following accounts could be opened without any legal documents? A. UTMA B. Trust C. Estate D. Pension plan
Ans: A
Which of the following debt securities does not have a fixed maturity date? A. Collateralized mortgage obligation (CMO) B. General obligation (GO) bond C. Treasury STRIPS D. Subordinated debenture
Ans: A
Which of the following is not a correct statement in respect to the at-risk provisions when investing in a direct participation program (DPP)? A. The at-risk provisions do not apply to oil and gas exploration programs. B. Qualified nonrecourse financing is excluded from tax basis except in the real estate programs. C. Deductions or losses are limited to the investors' invested capital plus their percentage of partnership liabilities for which they are personally liable. D. Losses disallowed by the at-risk provisions in any one year may be carried over to following taxable years.
Ans: A
Who of the following will not incur a penalty on an IRA withdrawal? A. A man who has just become totally disabled B. A woman who turned 59 a month before the withdrawal C. A woman, age 50, who decides on early retirement D. A man in his early 40s who uses the money to buy a second home
Ans: A
Your client invests $20,000 to purchase a 10% interest in a movie production limited partnership. At the time of subscribing, the investor signs on an $800,000 recourse loan to the partnership. After completing the first year of operations, the program shows a loss of $1,200,000. All of the following statements are correct except A. the investor's original basis was $20,000. B. the investor has a passive loss deduction of $100,000. C. the investor's original basis was $100,000. D. the investor's basis is now $0.00.
Ans: A
A FINRA member firm making a bulk transfer of customers' assets would most likely give notification through A. FINRA's Central Registration Depository (CRD). B. a negative response letter. C. a positive response letter. D. a broadly circulated publication such as the Wall Street Journal.
Ans: B
A FINRA member firm wishes to encourage its registered representatives to sell more limited partnership DPPs. As an incentive, the firm offers an all-expenses-paid trip to a popular vacation resort for those reaching certain sales targets. FINRA rules provide that A. the member can weight the credits differently for different investment companies. B. the target must be based on the total production of associated persons with respect to all direct participation programs offered by the member. C. sales incentives are limited to gifts that do not exceed $100 in value. D. the target must be based on the total production of associated persons with respect to specific investment company securities distributed by the member.
Ans: B
A customer is considering an investment in a hedge fund, noting she has heard much about their high-yield potential from a business acquaintance. In a discussion with her about these types of funds, which of the following statements is true? A. Mutual funds pool investors' money and manage the entire portfolio with a single objective, whereas hedge funds manage each investor's assets separately to meet their individual investment objectives. B. Hedge funds often use higher degrees of leverage and more sophisticated investment strategies than mutual funds. C. Mutual funds are subject to less regulatory oversight than hedge funds. D. Hedge funds tend to be more suitable for many different customer profiles, while mutual funds are generally more suitable for sophisticated, high-net-worth investors only.
Ans: B
A customer wishes to open a new account but refuses to provide suitability information. Under FINRA rules, the member A. may open the account but must limit recommendations to investment-grade securities. B. may open the account, but any recommendations must be limited to suitability information the firm has on the customer. C. must not open the account. D. may open the account but must limit recommendations to U.S. government securities.
Ans: B
A taxpayer's most advantageous tax benefit is A. a tax deduction. B. a tax credit. C. a depletion allowance. D. straight-line depreciation.
Ans: B
All of the following are financial considerations in a customer profile except A. the balance in the 401(k) plan. B. wanting to retire at age 65. C. annual income. D. the remaining balance on the home mortgage.
Ans: B
All of the following would generally be associated with an existing real estate DPP except A. an immediate income stream. B. a high appreciation potential. C. a known history of income and expenses. D. a lower risk than other types of real estate programs.
Ans: B
FINRA member syndication or finder's fees are limited to what percentage of the gross dollar amount of the limited partnership interests sold? A. 8.5% B. 10% C. 12% D. 30%
Ans: B
In order for a REIT to avoid being taxed like a corporation, it must distribute at least A. 75% of its taxable income. B. 90% of its taxable income. C. 95% of its taxable income. D. 100% of its taxable income.
Ans: B
Under ERISA, all of the following retirement plans must set standards for vesting, eligibility, and funding except A. corporate pension plans. B. deferred compensation plans. C. Keogh plans. D. profit-sharing plans.
Ans: B
Under FINRA Rule 2310, which of the following DPP compensation arrangements would be prohibited? A. Organization and offering expenses not exceeding 15% of the gross proceeds B. Compensation to a selling member firm not exceeding 15% of the gross proceeds C. Compensation to a selling member firm not exceeding 10% of the gross proceeds D. Rollup compensation not exceeding 2% of the securities received
Ans: B
Under FINRA rules, members are prohibited from soliciting votes from limited partners in connection with a proposed rollup unless any compensation to be received by the member A. does not exceed 10% of the value of the securities to be received in the exchange. B. does not exceed 2% of the value of the securities to be received in the exchange. C. does not exceed 5% of the value of the securities to be received in the exchange. D. does not exceed 15% of the value of the securities to be received in the exchange.
Ans: B
When comparing investment alternatives, all of the following must be considered except A. the relative after-tax returns, when appropriate. B. the state of incorporation of the companies. C. the differences in risk exposure between the two companies. D. the relative time period of returns on investment.
Ans: B
When opening a margin account, it is mandatory that the customer sign A. the credit agreement and the loan consent agreement. B. the credit agreement and hypothecation agreement. C. the hypothecation agreement and the loan consent agreement. D. the credit agreement only.
Ans: B
Which of the following is least likely to be a risk concern to an investor in an oil and gas DPP? A. Lack of liquidity B. Deductions for intangible drilling costs C. Risk of an IRS audit D. Legislative risk
Ans: B
Which of the following is properly referred to as an investment goal rather than an objective? A. Current income B. Endowing a scholarship at your alma mater C. Conservative growth D. Speculation
Ans: B
Which of the following statements best describes a hedge fund? A. An investment pool that is generally unregistered and that, through the use of sophisticated market tools, offers investors returns that generally exceed those available elsewhere B. A private and unregistered investment pool that accepts the investor's money and employs sophisticated hedging and arbitrage techniques using long and short positions, leverage and derivatives, and investments in many markets C. A closed-end investment company employing leverage through the use of debt and preferred stock financing D. An investment company, registered under the Investment Company Act of 1940, that charges higher than usual management fees and employs sophisticated investment techniques in an attempt to provide level returns during periods of market uncertainty
Ans: B
Why are the possible future higher educational needs of a customer's very young children classified as a nonfinancial consideration? A. With very young children, higher education is too far in the future to plan for financially. B. They cannot be expressed as a sum of money or a cash-flow. C. There is no information available about future scholarships or student loans. D. The children may not wish to go to college, so there may be nothing to plan for.
Ans: B
You are reviewing an investor's balance sheet. Which of the following items would be found on a balance sheet and help you determine the client's net worth? I. 401(k) balance II. Credit card balance III. Monthly income IV. Electric bill A. III and IV B. I and II C. II and III D. I and IV
Ans: B
A customer asks your advice regarding a deferred compensation plan at work. You should state that A. if they sit on the board of directors and are also an employee of the company, they are not eligible for the plan. B. deferred compensation plans usually benefit younger employees because the money in the plan has more time to grow prior to retirement. C. deferred compensation plans may be somewhat risky because the employee covered by the plan becomes a general creditor if the business fails. D. if the business fails, the employee is considered a secured bondholder in terms of liquidation priority and getting paid back.
Ans: C
A customer bought a 10% interest in a real estate limited partnership by investing $100,000. The partnership buys a $4 million property with the funds, making a down payment of $800,000 and financing the balance with a nonrecourse mortgage of $3.2 million. Subsequently, the partnership cannot meet the mortgage payment; the lender forecloses when the remaining mortgage balance is $3 million, auctioning off the property for $1 million. How much of the investment will the customer recover? A. $100,000 B. $32,000 C. $0 D. $10,000
Ans: C
A customer, age 75, who is retired and on a fixed income, wants to invest $50,000 in speculative stocks in an account set up as joints tenants with right of survivorship (JTWROS) with a spouse. As a registered representative, you feel the transactions are unsuitable for the customer. Therefore, you should A. refuse the trade as unsuitable. B. require documentation from the other party to the JTWROS account showing they agree with the proposed transactions. C. discuss with the customer why speculative stocks might not be appropriate, given the circumstances as you know them before entering any orders. D. enter the trade without question or discussion.
Ans: C
A deferred compensation plan A. must allow all eligible employees to participate. B. is funded through a trust agreement that protects the employee in the event the company goes out of business. C. might not protect the employee from losing the deferred compensation should the employee leave the company before retirement. D. typically benefits younger employees.
Ans: C
A member firm wishing to verify the accredited investor status of a client would be least likely to ask for A. the past two years of tax returns. B. a written confirmation from a lawyer admitted to the bar in the client's state of residence. C. a current paycheck stub. D. bank or brokerage statements.
Ans: C
A registered representative is discussing investment objectives with one of his clients. The client wants her young children to eventually have access to higher education; she has identified government bonds as the best investment to ensure that they will. Such bonds, she feels, are the only instrument safe enough to protect the portfolio from capital loss. The representative explains that A. utility stocks may provide a higher level of income. B. short-term bonds are the safest, so the portfolio should be confined to those. C. the client's goal requires growth with some risk. D. government bonds are appropriate, but they must be long-term.
Ans: C
A registered representative speaking to a customer is explaining registered funds that invest in nonregistered hedge funds. Which of the following statements is not correct? A. These funds generally allow purchases with an initial investment that is lower than what is required to invest directly in a hedge fund. B. To divest of your fund of hedge fund investment, the shares will need to be redeemed by the mutual fund issuer. C. These funds, called funds of hedge funds, eliminate all of the risks associated with hedge funds. D. Hedge funds are directly available to sophisticated (accredited) investors, while funds of hedge funds allow all investors to invest in hedge funds indirectly.
Ans: C
Among the requirements for accumulated earnings in a Roth IRA to be withdrawn free of tax is A. the owner of the account is at least age 73. B. the money is withdrawn for a first-time purchase of a vacation home. C. the initial deposit to a Roth IRA was made at least five years ago. D. the owner's spouse is declared disabled.
Ans: C
An investment banking firm has been hired to roll up various partnerships into one master limited partnership. What is the compensation limit for this activity? A. 8.5% B. 10% C. 2% D. 5%
Ans: C
An investor purchased an interest in a limited partnership, paying $10,000 in cash and signing a recourse note to the partnership under a letter of credit for $40,000. Which of the following statements are true? I. The investor's tax basis will be $10,000. II. The investor's tax basis will be $50,000. III. The investor's maximum loss will be $10,000. IV. The investor's maximum loss will be $50,000. A. I and III B. I and IV C. II and IV D. II and III
Ans: C
Certain investments are available only to those who meet the SEC's definition of an accredited investor. Which of the following qualify? A. An individual who has joint income with that person's spouse in excess of $200,000 in each of the previous two years and has a reasonable expectation of reaching the same income level in the current year B. An individual with net worth in excess of $1 million, inclusive of the equity in a primary residence C. An individual with net worth in excess of $1 million, exclusive of the equity in a primary residence D. An individual with earnings of $200,000 in the previous year with a reasonable expectation of reaching the same income level in the current year
Ans: C
Collateralized mortgage obligation (CMO) tranche A has been created to have the most predictable near-term principal pay off. A tranche set up in this way will have I. the highest reinvestment risk. II. the least reinvestment risk. III. a higher yield. IV. a lower yield. A. II and III B. I and III C. II and IV D. I and IV
Ans: C
Depreciation expense is a deduction for investors in all of the following except A. movie production limited partnerships. B. real estate limited partnerships (RELPs). C. real estate investment trusts (REITs). D. equipment leasing limited partnerships.
Ans: C
Extension risk and prepayment risk are among the most prominent risks facing investors in collateralized mortgage obligations (CMOs). That risk would likely be the least in which of the following? A. Target amortization class CMOs (TACs) B. Companion or support tranches C. Planned amortization class CMOs (PACs) D. Plain vanilla CMOs
Ans: C
Flow-through is one of the characteristics of a direct participation program (DPP). For tax purposes, losses cannot exceed a limited partner's cost basis. Which of the following would be a way to increase that cost basis? A. Depreciation on the partnership's assets B. Receiving tax credits C. Assumption of recourse debt D. Using the depletion allowance
Ans: C
Greater Growth Capital (GGC), a FINRA member firm, has just been acquired by Better Retirement Outcomes (BRO), a much larger FINRA member. If GGC would like to effect a bulk transfer of its customer accounts using a negative consent procedure, FINRA rules A. prohibit GGC from charging a fee to any existing GGC customers who elect to transfer their accounts to BRO but permit a nominal charge if the customer wishes to transfer to another member firm. B. require GGC to obtain affirmative written consent before transferring a customer's account to BRO. C. prohibit GGC from charging a fee to any existing GGC customers who decide to transfer their accounts to a different firm. D. require that GGC send a notice to each affected customer at least 60 calendar days before it effects the bulk transfer.
Ans: C
If a customer attempts to place an order for municipal securities that the registered representative deems completely unsuitable for the customer, the registered representative A. may execute the order on a not held basis. B. must refuse to execute the order. C. may execute the order and mark the order ticket as unsolicited. D. must obtain the permission of a municipal securities principal before executing the order.
Ans: C
In constructing a profile for your customer, you wish to assemble information on both financial and nonfinancial investment considerations that affect your customer. Which of the following qualify as financial investment considerations? I. Your customer's tolerance of various forms of risk II. Your customer's dependents and their ages III. Your customer's liquid net worth IV. Your customer's monthly credit card payments A. I and III B. I and II C. III and IV D. II and IV
Ans: C
In designing an investment portfolio for a new client, one of the first things to do is determine the client's A. home address. B. Social Security or tax ID number. C. risk tolerance. D. beneficiary.
Ans: C
In opening a new retail customer account, which of the following is deemed a nonfinancial consideration needed before making a recommendation to the customer? A. Personal income statement B. Personal balance sheet C. Tax status D. Analysis of monthly expenses
Ans: C
In the partnership agreement of a limited partnership, all of the following would be disclosed except A. what matters the limited partners can vote on under the democracy provisions. B. how the general partners will be compensated. C. the procedures for the annual election of general partners. D. how the operating profits will be distributed.
Ans: C
Intangible drilling costs would include all of the following except A. fuel. B. wages. C. casing. D. land surveys.
Ans: C
It would be correct to state that hedge funds typically have A. restrictions placed on their investment strategies. B. detailed disclosure requirements to the SEC. C. unrestricted share concentration limits. D. offering minimums as low as $10,000.
Ans: C
One spouse of a married couple in their 30s earns an annual salary of $45,000, while the other earns $2,000 annually from a home-based business. If they file a joint tax return, their maximum IRA contribution for the year is A. $7,000. B. $8,000. C. $14,000. D. $15,000.
Ans: C
Opening a margin account involves a number of different documents. The document describing how the interest on the margin debt is calculated is generally known as A. the loan consent agreement. B. the risk disclosure document. C. the credit agreement. D. the hypothecation agreement
Ans: C
Regarding the use of the term direct participation programs (DPPs) when referring to tax-sheltered investments, which of the following is not a DPP? A. An equipment-leasing limited partnership B. A real estate limited partnership C. A real estate investment trust (REIT) D. An oil and gas limited partnership
Ans: C
Regulation BI contains four key component obligations. Which two of them apply to registered representatives? I. Disclosure Obligation II. Care Obligation III. Conflict of Interest Obligation IV. Compliance Obligation A. I and III B. III and IV C. I and II D. II and III
Ans: C
The main difference between a traditional IRA and a Roth IRA is A. the traditional IRA is funded with after-tax dollars and the Roth IRA is funded with pretax dollars. b. the Roth IRA has higher contribution limits. C. if meeting the requirements, distributions from a Roth IRA are taxfree while distributions from traditional IRAs are taxed as ordinary income. D. if the individual has too much AGI, contributions to a traditional IRA are not allowed; no such limitation exists for Roth IRAs.
Ans: C
The rights and liabilities of general partners (GPs) and limited partners (LPs) are listed in A. the certificate of partnership. B. the Uniform Limited Partnership Act. C. the partnership agreement. D. the partnership title.
Ans: C
When a registered representative opens a new options account for a client, in which order must the following actions take place? I. Obtain approval from a qualified supervisor. II. Obtain essential facts from the customer and provide the ODD. III. Obtain a signed options agreement. IV. Enter the initial order. A. I, II, III, IV B. I, II, IV, III C. II, I, IV, III D. II, I, III, IV
Ans: C
When opening a margin account for an individual customer, a number of documents are required. Which one of the following never requires the customer's signature? A. The credit agreement B. The hypothecation agreement C. The margin risk disclosure document D. The loan consent agreement
Ans: C
Which of the following characteristics do hedge funds share with mutual funds? A. A high degree of transparency B. Relatively low management costs C. A pooled investment with other investors D. High liquidity
Ans: C
Which of the following could an analyst use to establish the rate of return on a direct participation program (DPP)? I. Present value II. Internal rate of return III. Yield to maturity IV. First-in, first-out A. II and III B. I and IV C. I and II D. III and IV
Ans: C
Which of the following sharing arrangements is the most common in an oil and gas DPP? A. Net operating profits interest B. Carried interest C. Functional allocation D. Overriding royalty interest
Ans: C
Which type of fund is most often organized as a limited partnership? A. Unit investment trust (UIT) B. Exchange-traded fund (ETF) C. Hedge fund D. Face-amount certificate (FAC) company
Ans: C
ZOO is trading at 50.63. Your customer, who owns 100 shares of the stock, places an order to sell ZOO at 50.25 stop limit. The tape subsequently reports the following trades: ZOO 50.63 50.75 50.13 50.17 50.27 Your customer's order could first be executed at A. 50.17. B. 50.75. C. 50.27. D. 50.13.
Ans: C
A customer invests $20,000 in a direct participation program and signs a recourse note for $50,000. During the first year of operation, the customer receives a cash distribution of $15,000 from the partnership. At year's end, the customer receives a K-1 statement reporting his share of partnership losses of $75,000. How much of the loss may the customer deduct from passive income? A. $75,000 B. $35,000 C. $0 D. $55,000
Ans: D
A customer wanting to invest in an oil and gas limited partnership wants to know what her cost basis would be for tax purposes. While there can be a number of variables, cost basis for a limited partner (LP) is best defined as A. recourse debt minus cash contributions. B. cash investment made minus distributions. C. noncash contribution plus nonrecourse debt minus recourse debt. D. cash investment made plus recourse debt minus distributions.
Ans: D
A direct participation program shows the following operating results for the year: Revenues: $3 million Operating expense: $1 million Interest expense: $200,000 Management fees: $200,000 Depreciation: $3 million The cash flow from program operations is A. $1.4 million. B. $3 million. C. a loss of $1.4 million. D. $1.6 million.
Ans: D
A high net worth investor with substantial annual income likes real estate as a potential investment. The investor notes that any investment potentially offering tax credits would be most interesting to consider first. Which of the following would be suitable investments to discuss? A. Raw land and existing property direct participation programs (DPPs) B. Real estate investment equity trusts (REITs) and new construction direct participation programs (DPPs) C. Real estate investment trusts (REITs) D. Historic rehabilitation and government-assisted housing direct participation programs (DPPs)
Ans: D
A real estate limited partnership is created for $800,000 with 1 general partner and 10 limited partners. Each of the limited partners has an equal 10% share. The proceeds are used to purchase an office building for $2 million. The additional financing is provided by a nonrecourse bank loan. Economic conditions cause the occupancy rate to fall dramatically, and the partnership is dissolved as insolvent. Each limited partner may claim a loss of A. $2,000,000. B. $120,000. C. $80,000. D. $200,000.
Ans: D
A registered representative is interviewing a new customer, age 27. The customer wants to list capital appreciation as the primary investment objective for the account and is willing to take a moderate degree of risk at this time in her life. The customer also notes concern about inflation and how it will impact her portfolio over time. Which of the following investments is the most suitable recommendation? A. Municipal debt securities B. Long-term government bonds C .Corporate debt securities D. Equities such as common and preferred stock
Ans: D
A retail investor opens an account at your firm but provides only minimal information. She wants to invest for retirement in 20 years and is willing to take moderate risk. Which of the following statements best describes the responsibilities of the registered representative handling the account? A. Recommendations cannot be made because the customer refuses to provide income information, personal assets and liabilities, or how much can be invested. B. The account cannot be opened without financial and nonfinancial information. C. Only unsolicited trades can be made in this account. D. The representative is limited to what can be recommended to the customer based on the information that was provided.
Ans: D
A structured instrument known as an asset-backed security (ABS) would not be backed by A. auto loans. B. credit card debt. C. student loans. D. real estate.
Ans: D
All of the following are financial considerations in a customer profile except A. the equity in vacation home. B. an expected inheritance. C. the balance in the Roth IRA. D. wanting to learn a new language.
Ans: D
All of the following are investment constraints except A. time horizon. B. liquidity. C. investor preferences. D. growth of capital.
Ans: D
All of the following documentation is necessary for a publicly subscribed limited partnership except A. a certificate of limited partnership. B. a subscription agreement. C. a partnership agreement. D. a cash flow analysis.
Ans: D
All of the following statements regarding liquidity are correct except A. liquid assets include CDs and Treasury bills. B. a liquid asset can easily be converted to cash. C. the most liquid of assets is cash. D. it is the inability to find willing buyers for an asset.
Ans: D
Asset-backed securities (ABS) can be amortizing or nonamortizing. An example of a nonamortizing ABS would be one backed by A. auto loans. B. mortgages. C. student loans. D. credit card debt.
Ans: D
Compared to U.S. government agency-backed CMOs, CDOs have A. generally more secure collateral. B. less credit risk. C. greater liquidity. D. less prepayment risk.
Ans: D
Direct participation limited partnerships offer a number of benefits for those in high income tax brackets. However, there can be tax consequences that are not advantageous, one of which is A. tax deductions. B. tax credits. C. recourse debt assumed included in cost basis. D. depreciation recapture.
Ans: D
For an oil and gas limited partnership (LP), allowances in the form of deductions are allowed by the IRS to be taken to compensate for a depleting resource. The allowance can be taken based on A. the amount of the natural resource extracted. B. the cost of moving the natural resource to refiners and distributors. C. the condition or grade of the natural resource. D. the amount of the natural resource sold.
Ans: D
If an investor expects to have a large amount of passive income over the next two years, which of the following programs listed will most likely lead to the largest amount of shelter? A. Undeveloped land purchasing B. Equipment leasing C. Real estate income D. Oil and gas drilling
Ans: D
One of the effects of Regulation BI is to place a limitation on the use of the descriptive term A. stockbroker. B. registered representative. C. agent. D. financial advisor.
Ans: D
One of the key requirements in offering a DPP to a customer is that the program must be suitable. FINRA has some specific suitability requirements for DPPs. Among those is the investor A. does not own a DPP that will compete with the program being offered. B. has sufficient experience in the type of business the program is undertaking. C. has sufficient net worth to be deemed an accredited investor. D. has a net worth sufficient to sustain the risks of the DPP, including loss of investment.
Ans: D
One of your accounts is a specified adult. If the firm reasonably believes that an attempt at exploiting the person has been made. A temporary hold is permitted on disbursements for A. 30 calendar days. B. 3 business days. C. 5 business days. D. 55 business days.
Ans: D
The term wildcatting refers to A. buying new-construction real estate for speculative appreciation value. B. small-cap mutual fund diversification. C. limiting your investment portfolio to initial public offerings. D. drilling for oil or gas where none has occurred previously.
Ans: D
Under Regulation SP, if a broker-dealer sends a customer an initial privacy notice that contains an opt-out provision, the firm may not disclose nonpublic, personal information about that customer for how many days from the mailing? A. 15 B. 10 C. 20 D. 30
Ans: D
When a DPP reaches the crossover point, A. any assets have been fully depreciated. B. the general and limited partners have earned income. C. there are no further commissions paid to broker-dealers who sold units. D. the general partners have earned income while the limited partners have passive income.
Ans: D
When a limited partnership terminates, a limited partner's gain or loss is determined by comparing A. the passive income to the passive losses. B. the final proceeds to the original cost basis. C. the total losses to the total income. D. the final proceeds to the adjusted cost basis.
Ans: D
When conducting a discussion with a client about the merits of investing in a direct participation program, all of the following could be tax advantages except I. accelerated depreciation. II. depletion allowances. III. recapture of depreciation. IV. tangible drilling expenses. A. I and IV B. I and II C. II and III D. III and IV
Ans: D
When discussing a 35-year-old client's finances, which of the following is most important when recommending a lump-sum investment? A. Traditional IRA balance B. Monthly mortgage payment C. Current salary D. Cash in the bank
Ans: D
When discussing a client's finances, which of the following would be of least importance when planning to make a lump-sum investment? A. Expected inheritance B. Year-end bonus C. Winning the lottery D. Current salary
Ans: D
Which of the following is not one of the three obligations of members when determining if a recommendation to a customer is suitable? A. The associated person must have a reasonable basis for believing that a series of recommended transactions, even if suitable when viewed in isolation, are not excessive and unsuitable for the customer when taken together in light of the customer's investment profile. B. The associted person must meet the reasonable-basis obligation that the recommendation must be suitable for at least some customers. C. The associated person must meet the customer-specific obligation, having a reasonable basis to believe that the recommendation is suitable for a particular customer based on that customer's investment profile. D. The associated person must disclose control relationships.
Ans: D
