Series 65
As defined in the Uniform Securities Act, the term offer to sell would include A) a gift of warrants. B) the attempt to sell gold coins. C) a gift of nonassessable stock. D) the sale of U.S. Treasury bills.
A
In order to compute a client's realized holding period return, it is not necessary to know A) paper losses B) the original investment C) income received during the holding period D) value at the end of the holding period
A
Investing in emerging market stocks is least likely to expose your client to which of the following risks? A) Interest rate B) Political C) Currency D) Liquidity
A
Maria, age 49, was discussing with some coworkers the recent family vacation she took. She commented that she was able to afford it by taking a penalty-free withdrawal from her retirement plan. Based on that statement, Maria must be covered under A) a 457 Plan. B) a 403(b) plan. C) a 401(k) plan. D) a defined benefit plan.
A
Myla is retiring in two years and will need income. Which of the following mutual fund types would most likely be the least desirable for her? A) A special situation fund B) A growth and income fund C) A bond fund D) A balanced fund
A
Registration as an investment adviser or investment adviser representative under the Uniform Securities Act is required of A) an economics professor at a local community college who gives lectures in the evenings to public groups about portfolio analysis, for which he charges a nominal fee. B) a tax attorney who, as an incidental part of his tax practice, recommends that his high-tax-bracket clients investigate the use of municipal bonds in their portfolios. C) an officer of a trust company handling investments for trust accounts. D) an agent of a broker-dealer who recommends model portfolios to clients in exchange for them executing their trades through him.
A
The contraction phase of the business cycle is least likely accompanied by A) decreasing unemployment. B) decreasing inflation pressure. C) low or negative economic growth. D) decreasing business and consumer expenditures.
A
Treasury bills are A) issued in book-entry form. B) callable. C) issued at par. D) issued in bearer form.
A
Which of the following indices or averages is based on the prices of only 65 stocks (30 industrial, 20 transportation, and 15 utility)? A) Dow Jones Composite Average B) S&P Composite C) Wilshire 5,000 D) Value Line
A
What does a non-qualified plan mean
After tax dollars
A 55-year-old investor makes a withdrawal from his qualified pension plan. Which of the following can he do to avoid tax liability? A) Use the withdrawal to pay his current year's taxes B) Roll over the funds into an IRA within 60 days C) Transfer it as a gift to an UGMA account for his son D) Roll it over into a nonqualified annuity
B
A client is considering the purchase of American depositary receipts (ADRs). She is looking to further diversify her portfolio. Which of the following is not a feature of this type of investment vehicle? A) Information regarding the foreign company is easily attainable. B) They are not subject to exchange rate, or currency, risk. C) ADRs are traded on exchanges and the OTC markets. D) ADRs are denominated and pay dividends in U.S. dollars.
B
Where would you be most likely to find an IPS? A) IRA B) Defined benefit plan C) SPD D) GRAT
B
he Investment Advisers Act of 1940 addresses the issue of investment advisers (IAs) maintaining custody of client funds and/or securities. In which of the following cases would that act consider the IA to have custody? I Possession of client funds or securities II Any arrangement under which the IA is authorized or permitted to withdraw client funds or securities maintained with a custodian upon the IA's instruction to the custodian III Any capacity that gives the IA or a supervised person legal ownership of or access to client funds or securities IV Receipt of a check made out to a third party A) I and III B) I, II, III, and IV C) I, II, and III D) I and II
C
A mortgage-backed security (MBS), such as a Ginnie Mae, makes a combination principal and interest payment to an investor. This payment will be A) taxed as ordinary income. B) taxed as a capital gain if underlying mortgage is prepaid. C) tax free. D) partly taxed as ordinary income and partly a tax-free return of principal.
D
What type of securities does Intrest rate risk apply too
Fixed income
What is an IPS
Investment Policy Statement
What are the Exempt Transactions Under the Uniform Securities Act?
Isolated nonissuer transactions, Unsolicited brokerage transactions, Underwriters transactions, Bankruptcy Guardian or conservator transactions, Institutional investor transactions, Limited offering transactions, Pre-organizing certificates, Transactions with existing security holders, Nonissuer transactions by pledges.
What is different about a 457 plan
It is a nonqualified plan that has penalty free withdrawals but will be taxed as ordinary income
Is the transfer of a JTWROS to a surviving member a taxable event
No
What measures volatility
Standard Deviation
True or false The securities of banks, trust companies, and savings institutions are exempt; the securities of bank holding companies are not.
True
An agent is discussing an equity index annuity purchase with a client. The agent explains that there are several that she feels are equally suitable for the client, but one of the companies is offering a trip for two to Las Vegas for reaching certain sales goals. She continues by stating that this sale will put her over the goal and win her the trip. If the client purchases that annuity, the agent A) should pack her bags for the trip; she earned it. B) will probably be disciplined for failure to disclose the potential conflict of interest. C) should pack her bags and leave the firm before the compliance department learns of her actions. D) should only sell what is suitable for the client based on all available information.
A
What is a Broker Dealer?
A broker-dealer is any person that buys or sells for the accounts of others or for his own account.
An offer to sell describes A) the receipt of a stock dividend. B) the attempt to dispose of a security for value. C) the purchase of a new issue. D) the exercise of warrants.
B
The price of which of the following will fluctuate most with fluctuating interest rates? A) Money market instruments B) Long-term bonds C) Common stock D) Short-term bonds
B
Social media can be static or interactive. Examples of static content typically available through social networking sites include all of the following except A) wall information. B) backgrounds. C) profiles. D) blogs.
Blogs
Why are Blogs considered interactive and not static.
Blogs are seen as being able to be interacted with.
A grantor retained annuity trust is a planning tool designed to pass assets to beneficiaries (usually children) in a way to minimize A) property taxes. B) income taxes. C) estate taxes. D) excise taxes.
C
Under the Uniform Securities Act, commercial paper with a maturity of nine months or less, with a minimum denomination of $50,000, with a rating in the top three grades of a recognized rating agency A) must be sold on the New York Stock Exchange. B) can only be issued by underwriters. C) need not be registered as a security. D) must be registered as a security.
C
Which of the following is the least significant consideration in making an investment recommendation to a client? A) Age B) Net worth C) Education D) Investment objectives
C
An Administrator may restrict the activities of a registered agent who is A) found to have split commissions with another agent in his office. B) found to be a citizen of another country other than the United States. C) found to have inadequate experience. D) determined to have become insolvent.
D
An investor wishes to save for her retirement. She arranges to have $250 per month withdrawn from her account to be invested into a commodity fund. This type of saving plan is called A) speculation B) constant dollar plan C) investing in futures D) dollar cost averaging
D
An unsecured long-term debt security issued by a corporation is known as A) an equipment trust certificate. B) a collateral trust bond. C) a mortgage bond. D) a debenture.
D
The owners' equity portion of a corporation's balance sheet would contain all of the following except A) Treasury stock. B) preferred stock. C) paid-in capital. D) net income.
D
Which of the following sources of income is eligible for funding an IRA? A) Child support B) Income received as a shareholder of an S corporation C) Income received as a limited partner D) Income received as a sole proprietor
D
Included in the definition of a precious metal would be all of the following except
Diamond
What is the only type of income that can fund a IRA
Earned income
Although not illegal, it is generally considered inappropriate to include _______________, such as municipal bonds (whether individual bonds or in a fund), in a _____________ plan.
Tax Exempt, Tax deferred
A securities market investment theory that attempts to derive the expected return on an assetbased upon the asset's systematic risk is A) the Monte Carlo simulation. B) the random walk theory. C) the capital asset pricing model (CAPM). D) the efficient market hypothesis (EMH).
the capital asset pricing model (CAPM).
An agent's recommendation for the purchase of a municipal security to a customer who wants fixed income and is in a relatively low tax bracket would in most cases be? I unsuitable and unethical II a securities felony III grounds, in extreme cases, for suspension or revocation of the agent's license IV outside regulatory jurisdiction A) I and III B) IV only C) I only D) II and III
A
An investor looking for liquidity would be least likely to consider A) NFTs. B) ETFs. C) REITs. D) CEFs.
A
Each of the following is not a prohibited practice under the NASAA Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents except A) a broker-dealer failing to disclose that the firm is affiliated with the issuer of a recommended security. B) a broker-dealer charging a higher-than-normal commission on a trade involving a thinly traded stock. C) a broker-dealer placing an order in a customer's account that was received from an authorized third party. D) a broker-dealer obtaining a mortgage for its new building from a bank that is a client of the firm.
A
How do you The following table shows the individual weightings and probable returns, [E(Rx)], for the three stocks in an investor's portfolio: Stock Weight E(Rx) V 0.40 12% M 0.35 8% S 0.25 5% What is the probable return of this portfolio? A) 8.85% B) 9.05% C) 8.33% D) 9.55%
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) disclosure to the client. C) consent of and disclosure to the client prior to execution of the transaction. D) consent of the client.
A
When comparing a clearing firm to an introducing firm, it would be expected that A) the clearing firm has higher financial requirements. B) the clearing firm holds funds but not securities belonging to the customers of the introducing firm. C) the fully-disclosed firm will generally have clearing arrangements with many carrying firms. D) the fully disclosed firm must comply with the customer protection rule (15c3-3).
A
When completing an individual tax return on Form 1040, one of the most important numbers is the adjusted gross income (AGI). Which of the following would not be included in AGI? A) Tax-exempt interest received from municipal bonds B) Qualifying dividends on common stock C) Alimony received from pre-2019 divorce decree D) Salary and commissions
A
Which of the following is a risk common to all fixed-income securities? A) Interest rate risk B) Market risk C) Opportunity cost D) Liquidity risk
A
Which of the following statements regarding the Uniform Securities Act (USA) are true? I Criminal penalties for violations of the USA are punishable by fines of up to $10,000, imprisonment for up to five years, or both. II If the sale of a security is in violation of the USA, the buyer may sue the selling broker-dealer to recover the money paid for the security. III If the seller of a security discovers that he made an illegal sale, he may offer to repurchase the security at the price paid, less interest charges. IV The buyer of securities may not sue if, within 30 days of receipt, he failed to accept or reject a written offer from the seller to rescind the trade and to refund the money with interest added. A) II and IV B) II and III C) I and II D) I and III
A
Which of these is among the advantages of including preferred stock in an investor's portfolio? A) Dividends must be paid before any distribution to common stockholders. B) The maturity date is likely shorter than that of debt securities offered by the same issuer. C) The rate of return is likely to keep pace with inflation. D) There is an opportunity for increased income if the issuer's profits increase.
A
A client of your broker-dealer, currently long 1,000 shares of DEF Corporation common stock, wishes to liquidate the position. Based on the following market maker quotes, it would be expected that the firm's trader would direct a market order to A) MMB: 9.65 - 9.75, 10 x 10. B) MMC: 9.75 - 9.85, 20 x 20. C) MMD: 9.75 - 9.90, 5 x 10. D) MMA: 9.65 - 9.85, 5 x 5. 23.d
B
A customer has been following several investment company quotes in the newspaper. She notices that the GEM Fund has an net asset value (NAV) of $12 and an ask price of $12.50, and that the ABC Fund has an NAV of $11.50 and an ask price of $10.98. The customer should conclude that A) ABC is an open-end fund and GEM is a closed-end fund. B) GEM may be an open- or closed-end fund and ABC is a closed-end fund. C) both are open-end funds. D) ABC and GEM are both unit investment trusts.
B
A registered investment adviser runs a promotion offering free information to all who request it. Which of the following statements to people who respond do not comply with the advertising interpretation of the Uniform Securities Act? I "The offer is yours, free of charge; all I need are the names of five friends who might be able to use our service." II "Such a deal; our information about the market is free to anyone who makes only one trade with our broker-dealer affiliate." III "Thank you for responding; if we can help you after you read our information, please let us know." A) I, II, and III B) I and II C) II and III D) I and III
B
A transactional exemption would be offered when a sale is made by A) an investment adviser. B) a court-appointed guardian for a minor. C) a custodian for a minor appointed under the Uniform Transfer to Minors Act. D) a broker-dealer.
B
All of the following are exempt transactions under the Uniform Securities Act except A) a sale of common stock by an administrator of an estate, sheriff, marshal, receiver, trustee in bankruptcy, guardian, or conservator. B) initial sale of shares to in-state residents of a local manufacturing company. C) a rescission offer, sale, or purchase. D) a securities transaction by an executor.
B
An agent may open a joint account for which of the following? I Lee and his 13-year-old son, Tom II Mary and Kelley, 2 adult college roommates III Jerry and Mark, friends and partners in business for more than 20 years IV Melinda and her minor nephew, John, for whom she is guardian A) I and III B) II and III C) I and IV D) II and IV
B
Four years after discovering a noncriminal violation of the USA in the sale of a security, a client can A) accept more-favorable access to IPOs to the extent of the damages incurred. B) do nothing because the statute of limitations is limited to three years after commission of the violation or two years from date of discovery of the violation, whichever comes first. C) demand that the trade be rescinded with compensation for damages less income earned. D) agree to a partial settlement and waive any further rights under the USA.
B
If a married couple establishes a JTWROS account with a balance of $25 million and the wife dies, what is the husband's estate tax liability? A) He pays federal estate taxes only on the amount that exceeds the estate tax credit. B) He pays no estate tax. C) He pays federal estate taxes on $12.5 million. D) He pays federal estate taxes on the entire balance.
B
One method of securities registration under the Uniform Securities Act is qualification. The effective date of a security registered using this method is A) within 2 business days of the filing of maximum and minimum proposed offering prices. B) when so ordered by the Administrator. C) when the offering is made effective by the SEC. D) by noon of the 30th day following the filing of the application.
B
The Jones family has scheduled an initial visit with a financial planner. Mr. Jones has an annual salary of $70,000, and this is their first attempt at financial planning. Which of the following should be the first step taken by the financial planner? A) Set goals and dates for reaching them B) Establish an emergency fund C) Pay off credit card debt D) Determine a reasonable fee for designing the plan
B
The Straitened Corporation filed for bankruptcy. One of your clients held a mortgage secured by the corporation's building. When the building was sold, the proceeds were less than the mortgage balance, creating a deficiency balance. Where does this investor's claim stand? A) There is no further claim once the building has been sold B) As a general creditor on a pro rata basis C) After the secured creditors D) After the unsecured creditors
B
The Uniform Securities Act provides for civil penalties in the event of illegal activities of agents. Under the act, what is the maximum that a purchaser would be entitled to claim? I The original consideration paid for the security II Interest at the state's legal rate III Attorney's fees IV Court costs A) III and IV B) I, II, III, and IV C) I and II D) I, III, and IV
B
The Uniform Securities Act specifically exempts certain issues from the registration and advertising filing requirements of the act. Which of the following securities does not carry that exemption? A) Tax-free municipal bond B) Bank holding company stock C) Canadian government bond D) Six-month commercial paper
B
Under the Uniform Securities Act, the Administrator may designate another officer to A) grant registration exemptions. B) serve subpoenas. C) issue a cease and desist order. D) set recordkeeping requirements.
B
Which of the following statements regarding the use of a hedge clause by an investment adviser is correct? A) A properly worded hedge clause may be used to minimize the investment adviser's fiduciary responsibility. B) A hedge clause that limits the investment adviser's liability for losses caused by conditions and events beyond its control, such as war, strikes, and natural disasters, would generally be acceptable to the Administrator. C) The adviser's brochure must always contain at least one hedge clause. D) A hedge clause that limits liability to acts done in bad faith or pursuant to willful misconduct but that also explicitly provides that rights under state or federal law cannot be relinquished would generally be acceptable to the Administrator.
B
A client is risk averse and is planning on retiring in 16 years. As the client's investment adviser, which of the following would you recommend? A) A government bond fund B) A high-yield bond fund C) 50% in an S&P 500 index fund; 50% in a portfolio of high-quality bonds D) A diversified open-end investment company concentrating in small-cap stocks
C
All of the following investments are eligible for a traditional IRA except A) covered call writing B) growth-oriented securities C) works of art D) bank CDs
C
An agent in this state would be acting illegally if he sold A) revenue bonds of Illinois in Florida that were not registered in Florida. B) federal covered securities not registered in the state. C) nonexempt securities properly registered in a neighboring state but not registered in this state. D) securities guaranteed by a federal credit union organized under the laws of the state.
C
An analyst viewing a corporate income statement will be able to review all of the following except A) pre-tax income. B) net sales or net revenues. C) current ratio. D) operating expenses.
C
An investment adviser representative (IAR) has uncovered an unusual investment opportunity that he believes is perfect for one of his clients. When presenting the recommendation to the client, it becomes clear that the client is concerned about the potential of loss. To alleviate that concern, the IAR tells the client that he agrees to repurchase the security from the client anytime within the next six months at the original purchase price. In so doing, the IAR has A) committed the unethical business practice of recommending an unsuitable investment. B) acted fraudulently because his actions would be considered market manipulation. C) committed the unethical business practice of guaranteeing against loss. D) acted ethically because he has not guaranteed a profit to the client.
C
If a federal covered investment adviser wishes to sell his business to another advisory firm, which of the following statements is true? A) The sale must be approved by each customer of the selling adviser. B) The sale must be approved by the Administrator. C) No approvals are required. D) The sale must be approved by the SEC.
C
If an index annuity has a participation rate of 80%, it means A) the investor's account will be charged with 80% of the amount lost by the index. B) the investor's account will participate in 80% of the gains and losses of the index. C) the investor's account will be credited with 80% of the growth of the index. D) the investor's account will never be less than 80% of the initial investment.
C
In general, one of the first steps in becoming an agent for a broker-dealer is the completion of Form U4. One piece of information that is not disclosed on Form U4 is A) employment for the previous 10 years. B) any other names used. C) education background and degrees earned. D) disciplinary actions.
C
In order to compute an investor's real rate of return on a common stock holding, all of the following are necessary except A) inflation rate B) dividends C) marginal tax bracket D) appreciation
C
Jill is an investment adviser representative with FairPlay Advisers, an SEC-registered investment advisory firm. At the recommendation of a close friend who is a client of Jill's, Tom comes in for an interview and portfolio analysis. When examining Tom's IRA, which of the following holdings would Jill feel the need to immediately review? A) GHI Large-Cap Equity Index Fund B) DEF U.S. Government Bond Fund C) ABC Municipal Bond Fund D) JKL Money Market Fund
C
One way in which internal rate of return (IRR) differs from most return computations is that A) it is always an annualized rate of return B) its application to debt securities is limited C) it takes into consideration the time value of money D) it takes into consideration the rate of inflation
C
Publicly traded corporations are subject to an annual audit of their financial records. Those audits must comply with GAAP (generally accepted accounting principles). When preparing to recommend a stock to a customer, you would most likely want to see that the auditor gave A) a qualified opinion. B) a comprehensive opinion. C) an unqualified opinion. D) a certified opinion.
C
Rule 144 applies to the sale of all of the following except A) registered securities by an officer of the issuer. B) unregistered securities by an officer of the issuer. C) registered securities by a nonaffiliated shareholder of the issuer. D) unregistered securities by a nonaffiliated shareholder of the issuer.
C
The NASAA Model Rule on Custody Requirements for Investment Advisers requires that an adviser with custody of client funds or securities do all of the following except A) deposit client funds into separate accounts and provide written notice to clients about the location of their assets. B) submit to an annual surprise audit conducted by an independent accountant. C) send monthly account statements to clients. D) submit an audited balance sheet to the Administrator with Part 2A of Form ADV each year.
C
The goal of modern portfolio theory (MPT) is to construct the most efficient portfolio. An efficient portfolio is one that offers A) the highest correlation coefficient B) the lowest Sharpe ratio C) the least risk for a given amount of return D) the most return for the most risk
C
Under the Uniform Securities Act, investment advisory contracts A) must list each state in which the adviser is registered. B) cannot be assigned without the Administrator's approval. C) must contain a description of fees. D) are cancelable without penalty for 48 hours after the customer signs.
C
Under the Uniform Securities Act, which of the following is a broker-dealer? A) A credit union that sells its own stock B) An agent C) A corporation that sells interests in an oil and gas limited partnership to investors, with the proceeds going to the issuer D) An issuer
C
Under the Uniform Securities Act, which of the following may have to qualify as an investment adviser representative? A) An individual who renders fee-based advice on precious metals B) An agent who offers incidental advice on securities as part of her sales commissions C) An employee of a state-registered investor advisor whose job function is to solicit for new advisory clients D) An employee who, although highly skilled in evaluating securities, solely performs administrative or clerical functions for an investment adviser
C
Which type of individual account allows for investments held in that account to go straight to a named beneficiary outside of probate? A) Advisory account B) Testamentary account C) TOD account D) Account titled JTWROS
C
A customer has a financial commitment of $200,000 that will come due in 2 years. In the interim, the customer wishes to invest the $200,000 to maximize income and have the money available for the obligation in 2 years. You should recommend investments in A) municipal bonds purchased at par with 20-year maturities B) large-cap stocks C) preferred stock purchased in a private placement D) government securities with two year maturities
D
A stock is currently worth $75. If the stock was purchased one year ago for $60, and the stock paid a $1.50 dividend over the course of the year, what is the holding period return? A) 25.0% B) 22.0% C) 24.0% D) 27.5%
D
An agent has a client who calls in with the following instructions: "Please place a sell stop order at $33 for my 100 shares of ABC common stock." A week later, the agent receives inside information that ABC's upcoming earnings report will be disastrous. Three days after that, the report is released and the stock plunges, falling to $33. Can the client's stop order be executed? A) No, because the order isn't triggered until the price falls below $33 B) Yes, but only if the execution price is higher than $33 C) No, because the agent was in possession of material inside information D) Yes, because the order was received prior to the agent receiving the information
D
An employee wishing to obtain long-term capital gain treatment would prefer the employer to offer? A) portable stock options. B) listed stock options. C) nonqualified stock options. D) incentive stock options.
D
An investment adviser who has not been given discretionary authority notices a stock's value declining in a client's portfolio. The adviser is unable to contact the client and sells the stock to prevent the loss. Which of the following statements is true regarding this situation? A) The investment adviser acted unethically by purchasing the stock in the first place. B) It was proper to make the transaction, provided the loss would have been more than $5,000. C) It was proper to make the transaction to prevent the loss. D) The investment adviser acted unethically by selling the stock without the client's permission.
D
An investor owns a debenture convertible into 20 shares of the issuer's common stock. After a 2-for-1 stock split, the terms of the debenture provide for conversion into 40 shares. This is because the debenture has A) increased its par value to $2,000 to account for the split. B) warrants attached. C) preemptive rights. D) an antidilution clause.
D
Broker-dealers operating on the premises of a financial institution must disclose, orally and in writing, that the securities products purchased or sold in a transaction with the broker-dealer I. are not insured by the Federal Deposit Insurance Corporation (FDIC). II. are not deposits or other obligations of the financial institution and are not guaranteed by the financial institution. III. are insured by the Securities Investor Protection Corporation (SIPC). IV. are subject to investment risks, including possible loss of the principal invested. A) I, II and III B) II and IV C) III and IV D) I, II and IV
D
Saving for higher education using which of the following tools will generally result in the worst outcome when filing the FAFSA form? A) Cash value in the parent's insurance policy B) Coverdell ESA C) Section 529 plan D) UTMA
D
To be defined as an investment adviser under the Uniform Securities Act, which of the following must apply? I Compensation must be received. II Advice is provided regarding securities. III Advice must be provided through direct written communication. A) I, II, and III B) I and III C) II and III D) I and II
D
When a variable annuity is annuitized A) the number of accumulation units redeemed each payment period remains constant B) the number of annuity units redeemed each payment period varies based upon the performance of the separate account C) the number of accumulation units redeemed each payment period varies based upon the performance of the separate account D) the number of annuity units redeemed each payment period remains constant
D
When does a customer have to receive the OCC Options Disclosure Document? A) Within 15 days of account approval by the firm's designated options supervisor B) Within 5 business days of the first options trade C) With the confirmation of the first options transaction D) At or prior to accepting the customer's first order to trade options covered by the ODD
D
Which of the following circumstances must be met for a fiduciary to trade options in a trust account? Special circumstances determined by the broker-dealer The trust agreement states the trustee has the power to trade options The trust's investment objectives are determined to be compatible with options trading Only covered options may be traded by a fiduciary A) II and IV B) I and III C) I and IV D) II and III
D
Which of the following is not a security? A) An interest in a real estate condominium sold with a rental pool B) A variable annuity C) A promissory note with a six-month maturity D) A $1 million whole life insurance policy
D
XYZ Corporation common stock has a market price of $45 per share and earnings per share of $3 when XYZ announces a 3-for-1 split. After the split, the price-to-earnings ratio of XYZ stock will be A) 3 B) 5 C) 45 D) 15
D
You have a client who originally invested $25,000 into the ABC Growth Fund. Over the past five years, there have been no distributions and the value of the shares is now $35,000. If the client should ask about exchanging the entire holding for shares of the ABC Income Fund, you would explain that A) taking advantage of the exchange privilege results in taxes being deferred until the liquidation of the account. B) the new shares will have the same cost basis as the old ones. C) the new shares would be acquired at the public offering price. D) there is a long-term capital gain of $10,000.
D
