Series 65 exam

A married couple has lived in the same home for 40 years and now, with the children all gone, they've decided to sell and move to a retirement village. They purchased the home for $80,000 and have accepted a contract for $800,000. The tax consequence of this sale is A) a $220,000 capital gain. B) a $720,000 capital gain. C) a $470,000 capital gain. D) a $0 capital gain.

A. 800,000-80,000 = 720,000 - 500,000 = 220,000 *they are married ( 500,000 tax exclusion & lived in home for more than 2 years)

Mrs. Beech, age 52, as the sole survivor of her mother, recently inherited a traditional IRA, among other assets. As a result, Mrs. Beech would most likely A) take the cash now and avoid both the 10% penalty and income taxes. B) cash out the IRA following the 10-year rule. C) do a rollover of the funds into her own IRA. D) leave the funds in her mother's IRA, because she is not yet 59½

B

any order ticket submitted by an agent for execution of a broker dealer will include and not include

account number agents name broker dealer name not include current market price

state registered investment advisor wrap fee program. what are the rules?

all filings are with the administrator for wrap fees the form used is appendix 1 of form ADV, part 2A must update the information on file within 90 days of the adviser's fiscal year material changes to wrap fee programs must be filed with administator

dividend yield formula

annual dividend per share/ share price

open end fund

can never have an ask price that is less than its nav

what does standard deviation measure?

market volatility

Dow jones is a what index

price weighted index

withought prior consent from the client an investment advisor can release information to the clients account when ( only two answers)

requested by IRS or by court order

name all the cap wighted index? A) Morgan Stanley Capital International B) Dow Jones Industrial Average C) S&P 500 D) FTSE 100 and FTSE All-Share

A, C, D

What is a beta ?

Beta is a measure of the volatility of an investment compared with the market as a whole. The market has a beta of 1, while investments that are more volatile than the market have a beta greater than 1 and those that are less volatile have a beta of less than 1.

For which of the following is there no active secondary market? A) Futures contracts B) Options C) Forward contracts D) ETFs

C. One of the disadvantages when investing in forward contracts is that there is no active secondary market. Because each contract is between one buyer and one seller and there is no standardization, no exchange trading is possible

Which of the following investment companies registered under the Investment Company Act of 1940 can include senior securities in its capital structure? A) Face-amount certificate companies B) Unit investment trusts C) Closed-end management investment companies D) Open-end management investment companies

C. only closed end company is legally premitted to issue senior securities ( preferred stock and bonds)

What is not a security?

Commodities Personal residence Currencies Collectibles Interest in a retirement plan Fixed annuity

what happens to a recently inherited traditional ira ( no spouse)

When an IRA is inherited from someone other than a spouse, there are basically two options. The most common is to take the funds over a 10-year period. There is no 10% tax penalty regardless of the age of the beneficiary, and the taxes are spread out over the withdrawal period. The other choice is to take the entire amount as a lump sum. Although that also avoids the 10% penalty, income taxes are due on the entire amount. It is only in the case of a spousal beneficiary where the options are to continue the IRA or roll it over.

What is a market maker according to the securities exchange act of 1934?

a dealer who holds himself out as being willing to buy or sell a security at a qouted price on a regular or continuous basis

which of the following is the most common measurement of a stock's historical volatility compared to that of the overall market a. alpha b. standard deviation c. correlation d. beta

beta

Fund to impose 12b-1 charges. what are the rules

distribution plan must be written and approved by a majority of the oustanding shares and majority of board of directors

what analytical tool is used to project the current value of common stock using projected future dividends? ( common stock price projection)

dividend discount model and divident growth model

IAR withdrawal registration . when is it effectice ? when does the administrator intitute disciplinary proceedings

effective in 30 days administrator has one year from the effective date of withdrawal to begin displinary actions for violation for the act

what are the three basic asset classes?

equity (stock) debt (bonds) cash & cash equivalents

what is the state administrator permited to do ?

establish regulations relating to the registration, testing, and fees for broker-dealers, agents, investment advisers, and investment adviser representatives. Have no civil powers (cannot file a civil suit)

what is an efficient market?

every individual can quickly obtain and use information about new events in the marketplace. new information that could affect a stock's value is quickly reflected in its price

What does duration mean for a bond?

measures the effect of an interest rate change on the price of a bond or bond portfolio. it measures a bond's price volatility by weighting the length of time it takes for a bond to pay itself. duration is also a weighted average term to maturity of bond's cash flows

What is correlation?

measures the extent to which stock or portfolio moves in the same direction as the market

what must an individual do when they want to register as an agent with a broker dealer

pass an examination and post a bond

When an investor notices that a bond's coupon yield is lower than its current yield, this is an indication that the bond

selling at a discount

what is sector rotation

the practice of moving out of those industries that are heading for decline and into those whose fortunes are likely to rise as the economy follows the business cycle

what is arbitrage?

the simultaneous buying and selling of securities, currency, or commodities in different markets or in derivative forms in order to take advantage of differing prices for the same asset.

when must a broker dealer register as an investment advisor?

when they charge a seperate fee for providing investment advice

what securities are exempt from registration under the uniform securities act? answer 1) 2) 3) 4)

1) preferred stock issued by corporations traded on the NYSE 2) Common stock issued by a national bank 3) Debenture traded on the NYSE 4) Equipment trust certificated issued by a railroad company regulated by state and fed agency

GHI currently has earnings of $4.00 and pays a $0.50 quarterly dividend. If GHI's market price is $40.00, the current yield is A) 15.00%. B) 5.00%. C) 10.00%. D) 1.25%.

B. (.50x4.00) = 2/40 = 5%

Moonglow Specialties, Inc., is paying a quarterly dividend per share of $0.05. Based on a current share price of $10, the dividend yield is closest to A) 1.25%. B) 2.00%. C) 20.00%. D) 0.50%.

B. .05x 4 quarters =.20 .20 / 10.00 = 2%

which of the following is a characteristic of the passive investment style? A) Income rather than growth objective B) Tactical management C) Rebalancing D) High portfolio turnover

C. the passive (strategic) style of investing does not involve frequent trading (as does the tactical or active style), periodically the portfolio will be rebalanced to insure that the asset mix is at the desired level. This style may be used for either income or growth objectives

Homeowner tax exlusion rules

homeowner has lived in primary residence at least two of the previous 5 years, the first 250,000 of profit is exluded from tax. married couple, its 500,000.

Admininstator acting summarily means what when the admin pospones / suspends a registration of a security?

acting without prior notice. An admin has grounds to postpone or suspend a registration by issuing a stop order. the registrant must be promptly notified of the action and of the opportunity of a hearing. hearing must be held within 15 days of a written request, and the suspension will remain in effect until final disposition

Uniform Securities Act

an issuer registering its securities with the Securities and Exchange Commission (SEC) in accordance with the procedures found in the Securities Act of 1933 shall use the documents it submits to the SEC in its concurrent registration with states in which it plans to offer its securities.

bonds that experience the most effect of interest rate risk

bonds with the gratest time to maturity will experience the greatest fall in a rising interest rate market

markets for alternative investments when it comes to liquidity and potential diversification offer? A) more liquid and provide more opportunity for diversification. B) less liquid and provide more opportunity for diversification. C) more liquid and provide less opportunity for diversification. D) less liquid and provide less opportunity for diversification.

less liquid and provide more opportunity for diversification

fund has net redemptions. what does this mean?

less money is coming in than going out to meet the redemptions, the fund manager will have to sell securities that they planned to hold onto or maintian assets in cash expense ratio will increase potentially due to less assets in the fund

DERP Corporation has issued 5% convertible debentures maturing in 2040. The conversion price is $40 and the common is currently trading at $48 per share. One would expect the DERP debentures to be selling somewhat A) above $1,200. B) below $1,200. C) below $1,000. D) above $1,000.

A. The first step here is to compute the parity price. A conversion price of $40 means the debenture is convertible into 25 shares of the common stock (par of $1,000 divided by $40 = 25 shares). With a current market price of $48 per share, the parity price of the convertible would be $1,200 (25 × $48). Because convertible securities generally sell at a slight premium over their parity price, the debentures should have a current market value a bit higher than $1,200

The Equity Protective Life Insurance Company (EPLIC) is authorized to do business in State K. As such, which of the following securities would be exempt from registration with the State K Administrator? A) Variable life insurance policies issued by EPLIC B) Fixed index annuities issued by EPLIC C) Variable annuities issued by EPLIC with a guaranteed income rider D) The issuance of three million shares of the company's $100 par value preferred stock

D. When an insurance company is authorized to do business (sell its policies) in a state, any securities it issues (such as stock or bonds) are exempt from registration under the Uniform Securities Act. That exemption does not apply to products sold by the insurance company; it applies solely to securities issued for the purpose of raising capital

An employer whose 401(k) plan complies with ERISA Section 404 is placing investment risk with the A) Securities and Exchange Commission B) employer C) Internal Revenue Service D) plan participant

D. a plan sponsor can shift investment risk to the employee by complying with ERisa. the employee is making the investment decision rather than the investment managers employed by the plan