Simulated Exam - Series 65 Practice Exam 3
B) principal.
According to standard terminology used in the securities industry, when a person sells securities out of inventory, that person is acting in the capacity of a (an): A) agent. B) principal. C) investor. D) broker.
A) warrants.
All of the following pay dividends except A) warrants. B) convertible preferred stock. C) common stock. D) preferred stock.
C) a debenture.
An unsecured long-term debt security issued by a corporation is known as A) a collateral trust bond. B) an equipment trust certificate. C) a debenture. D) a mortgage bond.
B) highly risk-averse investors.
Derivatives have a major role to play in the management of many large portfolios and can be used for all of the following except A) hedging. B) highly risk-averse investors. C) income. D) asset allocation.
D) II and III
Due to changes in market rates, a corporation is able to purchase some of its outstanding 20-year bonds at a discount. Which of the following is correct? Working capital is increased. Working capital is reduced. Net worth is increased. Net worth is reduced. A) I and III B) I and IV C) II and IV D) II and III
B) I and IV
Partners with the United States in the creation of Brady bonds were which of these? International Monetary Fund (IMF) Import/Export Bank United Nations World Bank A) III and IV B) I and IV C) II and III D) I and II
A) 14%
The capital asset pricing model (CAPM) is used by many to assess the expected return of a security. If the current risk-free rate is 2%, the current return on the market is 10%, and a particular stock's beta is 1.5 with a standard deviation of 3.2, the expected return would be A) 14% B) 18.2% C) 15% D) 12%
D) a 10-year maturity, 10% coupon rate.
Which of the following bonds has the shortest duration? A bond with A) a 20-year maturity, 10% coupon rate. B) a 10-year maturity, 6% coupon rate. C) a 20-year maturity, 6% coupon rate. D) a 10-year maturity, 10% coupon rate.
D) Limited partnership
Which of the following entities would issue a Schedule K-1? A) C corporation B) REIT C) Sole proprietorship D) Limited partnership
D) III and IV
Which of the following investment adviser compensation arrangements is permitted under the Uniform Securities Act? The value of a client's account at the start of the year is subtracted from the value at the end of the year. The adviser's compensation is 5% of the difference. The adviser charges an annual fee of $2,000, but the agreement calls for a waiver of the fee if the client's portfolio value has not increased by at least $20,000. The adviser charges a fee of 1% of the average value of the account portfolio during the year. The adviser charges a flat fee of $1,000 if the client's portfolio assets are $100,000 or more or $2,000 if the client's assets increase to $200,000 or more. A) I and IV B) I and II C) III only D) III and IV
B) Unit investment trust
Which of the following is not considered a derivative? A) Warrant B) Unit investment trust C) Call option D) Futures contract
D) II and IV
A frequently used metric by analysts is the yield, or credit, spread. Common methods of computing this would be comparing which of these? Bonds of similar quality and similar maturities Bonds of similar quality and different maturities Bonds of different quality and different maturities Bonds of different quality and similar maturities A) I and IV B) I and III C) II and III D) II and IV
B) liquidity risk
A stock that does not have a ready market is said to have a higher than average degree of A) business risk B) liquidity risk C) market risk D) investment risk
B) owners' equity.
A term used to describe the results of subtracting a corporation's liabilities from its assets is A) operating income. B) owners' equity. C) net income. D) retained earnings.
D) employee stock options.
A corporation would like to offer their employees an opportunity to participate in the future growth of the company. Among the methods you might suggest are A) voting trust certificates. B) subordinated debentures. C) preemptive rights. D) employee stock options.
B) the Securities Act of 1933 and Securities Exchange Act of 1934.
A discussion referring to blue-sky laws would include all of the following except A) a state securities law that grants state securities Administrators the power to deny or revoke a broker-dealer's or an agent's registration within its state. B) the Securities Act of 1933 and Securities Exchange Act of 1934. C) forms requiring issuers selling securities in the state to comply with state securities laws. D) state laws that are designed to protect the public against fraud in securities sales within a state.
C) 4.2:1
A fundamental analyst reviewing the current ratios of four different companies would consider which of the following to be in the most liquid position? A) 1.5:1 B) 0.5:1 C) 4.2:1 D) 2.7:1
D) any record of securities industry violations by the investment adviser.
According to NASAA's Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers, an investment advisory contract must describe all of the following except A) that assignment of the contract cannot occur without client consent. B) the amount of prepaid fees to be returned if the contract is terminated. C) whether or not the contract grants discretionary authority. D) any record of securities industry violations by the investment adviser.
D) a contract to transfer ownership of a security for value.
According to the Uniform Securities Act, a sale is A) a solicitation of an offer to buy. B) an offer of an equivalent contract. C) an attempt to transfer ownership of a security. D) a contract to transfer ownership of a security for value.
A) after proper written disclosure, an adviser recommends the transaction to both the seller and the buyer.
All of the following activities comply with the requirements for agency cross transactions except A) after proper written disclosure, an adviser recommends the transaction to both the seller and the buyer. B) an adviser sends an annual statement to clients that reveals the total number of agency cross transactions for the client and the total amount of commissions the adviser received from those transactions. C) before obtaining a client's written consent in an agency cross transaction, the adviser must disclose that it will receive commissions from both parties and that the transactions involve a conflict of interest. D) a client consents (in writing) to the adviser's dual role in the transaction as both adviser to the client and broker to the other party.
D) debt-to-equity ratio
An analyst attempting to determine the extent to which financial leverage is being employed by a company would examine the company's A) acid-test ratio B) working capital C) book value per share D) debt-to-equity ratio
A) $2.50 per bond.
An investor sells ten 5% bonds at a profit and buys another 10 bonds with a 5¼% coupon rate. The investor's yearly return will increase by A) $2.50 per bond. B) $1.00 per bond. C) $2.00 per bond. D) $1.50 per bond.
D) A private placement.
An offer to sell which of the following need not comply with the prospectus delivery requirements of the Securities Act of 1933? A) Open-end investment company shares. B) A publicly offered real estate limited partnership. C) A new issue of a nonexempt security with warrants attached. D) A private placement.
A) the net worth of the firm at the end of the reporting period.
Balance sheets contain A) the net worth of the firm at the end of the reporting period. B) the amount of cash and cash equivalents expended during the first half of the fiscal year as opposed to the second half. C) no reference to the accounting methods used to construct the balance sheet. D) gross revenues for the year.
D) S&P 500
Beta is most frequently measured against which of the following? A) S&P 100 B) Dow Jones Industrial Average C) Nasdaq Composite Index D) S&P 500
A) Default risk
Calvin has the following securities in his portfolio: ABC common stock, XYZ common stock, PQR mutual fund (domestic small cap), DEZ mutual fund (foreign small cap), 30-year Treasury bond, and 5-year Treasury note. Which of the following risks should not concern Calvin? A) Default risk B) Reinvestment rate risk C) Systematic risk D) Business risk
B) Decrease
If a company successfully gets the owners of its long-term bond issue paying 7% annual interest to exchange them on a dollar-for-dollar basis with the company's preferred stock paying a 7% annual dividend, what is the effect on EPS? A) Not enough information B) Decrease C) No effect D) Increase
D) The spouse is an affiliate and Rule 144 applies.
If a customer owns 7% of a publicly traded company's stock and his spouse owns 6% and wants to sell her shares, which of the following statements is true? A) The spouse is not an affiliate and Rule 144 does not apply. B) The spouse is not an affiliate and Rule 144 applies. C) The spouse is an affiliate and Rule 144 does not apply. D) The spouse is an affiliate and Rule 144 applies.
D) I and III
If a woman owns 9% of the common shares of XYZ and her spouse owns 2% and wishes to sell his shares, which of these is true? He is considered an affiliate. He is not considered an affiliate. He must file a Form 144 to sell. He does not have to file a Form 144 to sell.A) II and III B) I and IV C) II and IV D) I and III
B) a large-cap stock
One method used by some analysts to estimate the future value of a stock is the dividend growth model. This model would probably be most useful in the case of A) a AAA corporate bond B) a large-cap stock C) a small-cap stock D) a preferred stock
D) Participation rate
One of the features of an index annuity is the ability for the principal value to increase based on the performance of the specified index. Which of the following is not used as a method to compute the amount of interest to be credited to the account? A) Point to point B) High-water mark C) Annual reset D) Participation rate
C) I and III
One type of alternative investment considered to be a pooled investment vehicle is the exchange-traded note. Exchange-traded notes (ETNs) are which of these? Unsecured debt securities Unsecured equity securities Issued by financial institutions, such as banks Insured by the FDIC A) II and IV B) II and III C) I and III D) I and IV
A) REITs.
Programs allowing for the direct pass-through of losses and income to investors include all of the following except A) REITs. B) oil and gas drilling direct participation programs. C) S corporations. D) new construction real estate direct participation programs.
A) the sum of all consumer goods, capital goods, and services produced in the United States and net exports to other countries.
The gross domestic product (GDP) for the United States is composed of A) the sum of all consumer goods, capital goods, and services produced in the United States and net exports to other countries. B) the national debt. C) the balance of payments. D) the sum of all goods and services, imports, and foreign investments.
A) Defined benefit plan
Where would you be most likely to find an IPS? A) Defined benefit plan B) SPD C) IRA D) GRAT
D) Both supervisory personnel and agents need to understand the difference between interactive and static content.
Which of the following conditions would most likely meet compliance standards of state regulators? A) Maintaining an under-the-radar system of monitoring social media use by its agents is permissible when determining compliance with NASAA's rules. B) Only those in a supervisory role need to recognize the difference between business and nonbusiness communications. C) At a minimum, a firm that permits use of social media sites must hold biannual training as part of its continuing education obligations. D) Both supervisory personnel and agents need to understand the difference between interactive and static content.
D) Long-term municipal bond fund
Which of the following investments is the most liquid? A) Common stock in a small oil drilling corporation that is quoted on the OTC Link B) Oil drilling limited partnership interest C) Municipal revenue bond issued by a township D) Long-term municipal bond fund
A) I and II
Which of the following is (are) advantages of irrevocable insurance trusts? Provide estate liquidity. Insurance proceeds are removed from the estate of the insured for tax purposes. The insured has the flexibility to alter the trust arrangements. Once set up, no changes may be made. A) I and II B) II and IV C) I and III D) III and IV
A) Accrued sales charges
Which of the following is not included in the calculation of a mutual fund's NAV per share? A) Accrued sales charges B) Closing values of portfolio assets C) Accrued custodian bank fees D) Accrued management fees
A) The amount of money a corporation has available to work with if it liquidates its current assets and pays off all of its current liabilities
Which of the following would best describe working capital? A) The amount of money a corporation has available to work with if it liquidates its current assets and pays off all of its current liabilities B) The amount of money available to the corporation that is currently being held in cash or cash-equivalent positions C) A corporation's net worth D) The value per share available to shareholders in the event of bankruptcy
B) can only be exercised on its expiration date.
A European-style option differs from an American-style option primarily in that it A) derives its value from some underlying asset. B) can only be exercised on its expiration date. C) is generally offered with a limited number of expiration dates. D) is primarily used for options on foreign securities.
B) internal rate of return
A bond's yield to maturity reflects its A) nominal return B) internal rate of return C) taxable equivalent return D) return based on annual interest as a percentage of current price
D) a maintenance margin call.
A client owns 300 shares of BACH common stock in a margin account. If there were to be a significant decline in the market price of the BACH, the client would likely receive A) a short margin call. B) a rehypothecation call. C) a Regulation T margin call. D) a maintenance margin call.
B) express the author's end-of-life wishes.
A living will is used to A) avoid the cost and time of probate. B) express the author's end-of-life wishes. C) ensure that the author's assets are properly distributed after death. D) eliminate, or at least reduce, estate taxes.
D) the client's investment objective is quick return, the client has the financial resources necessary for such activity, and the agent uses a sophisticated technical program designed to cut losses and take profits quickly
A review of an agent's client's account indicates daily trading with rapid portfolio turnover. Under NASAA's Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents, this would not be considered excessive trading activity (churning) if A) the client has approved each trade B) the client's account shows a profit C) each security purchased is suitable for the client D) the client's investment objective is quick return, the client has the financial resources necessary for such activity, and the agent uses a sophisticated technical program designed to cut losses and take profits quickly
A) sell part of the stock in the portfolio
A well-diversified investor following a rebalancing portfolio strategy in a rising market will most likely A) sell part of the stock in the portfolio B) write covered calls on the long stock currently in the portfolio C) purchase additional stock D) sell all the stock in the portfolio
C) agents selling a Section 529 Plan must deliver a currently effective prospectus.
All of the following statements regarding a Section 529 QTP are true EXCEPT A) the plan owner can rollover the assets into a different plan no more frequently than once every 12 months. B) 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. C) agents selling a Section 529 Plan must deliver a currently effective prospectus. D) a beneficiary may be covered under both a Coverdell ESA and a Section 529 QTP.
A) A money market fund
Among investor objectives is preservation of capital. Which of the following would be most appropriate for inclusion in the portfolio of this kind of investor? A) A money market fund B) Blue-chip stocks C) U.S. Treasury bonds D) International funds
B) are paid ahead of holders of unsecured debt, as well as equity securities
Among the advantages of being the holder of secured bond is that if the issuer files for bankruptcy, you A) will receive your principal plus all unpaid interest B) are paid ahead of holders of unsecured debt, as well as equity securities C) are sure to recover 100% of your investment D) are paid ahead of everyone, except past-due wages to employees
C) the agent would be defined as an investment adviser.
An individual is currently registered as an agent with a broker-dealer. If the agent would like to offer wrap fee programs through the firm, all of the following statements are correct except A) the broker-dealer would have to be registered as an investment adviser. B) the agent would be defined as an investment adviser representative. C) the agent would be defined as an investment adviser. D) the agent would now be considered to have a fiduciary responsibility.
D) Client's stamp collection
An investment adviser cannot adequately advise a client without knowing the client's financial status. When determining that status, it is important to differentiate between financial and nonfinancial considerations. Which of the following would be considered a financial consideration rather than a nonfinancial one? A) Fact that both parents were smokers who died of lung cancer B) Client's membership in Greenpeace C) Client's marital status D) Client's stamp collection
D) permitted following disclosure of the potential conflict of interest.
An investment adviser who is affiliated with a broker-dealer recommends only products that are provided through that broker-dealer. This is A) prohibited and a violation. B) permitted without restriction. C) prohibited only if the adviser participates in commissions in conjunction with sales of the proprietary products. D) permitted following disclosure of the potential conflict of interest.
A) I, II, III, and IV
An investor in a high tax bracket who invested in a DPP should have which of the following characteristics? Need for tax benefits Substantial liquid assets Ability to identify both risks and merits of the program Ability to commit money for a long time A) I, II, III, and IV B) I and II C) II and III D) II, III, and IV
C) the tax bracket of the investor
An investor is reviewing his portfolio. To compute the real rate of return on an investment, it would be necessary to know all of the following except A) the rate of inflation B) the gain (or loss) recognized on the asset C) the tax bracket of the investor D) the income received from holding the asset
B) he has donated funds to a nonprofit medical research institute that owns securities that he has recommended.
As a fiduciary, the investment adviser representative (IAR) owes his clients an affirmative duty of utmost good faith, as well as full and fair disclosure of all material facts. This affirmative duty of disclosure is required by the IAR in all of the following situations except A) the advice he is providing is outside the scope of his brokerage employment and is not under the control or supervision of his employer. B) he has donated funds to a nonprofit medical research institute that owns securities that he has recommended. C) he receives compensation from his employing broker for transactions that are executed through the brokerage house. D) his family has a beneficial interest in a private medical equipment firm that he recommends to the client.
D) the U.S. Court of Appeals within 60 days of the order.
As a result of an SEC hearing, an investment adviser's penalty is $5,000 and a 50-day suspension. If the investment adviser wishes to appeal this verdict, a request for review must be filed with A) the U.S. Court of Appeals within 45 days of the order. B) the Administrator within 60 days of the order. C) the SEC within 45 days of the order. D) the U.S. Court of Appeals within 60 days of the order.
A) the risk of losing money.
As a securities professional, one of your obligations to your clients is protecting their best interests. One of the ways to do that is to make them aware of the red flags of investment fraud. Those red flags would include all of the following except A) the risk of losing money. B) promises of guaranteed high, risk-free investment returns. C) pressure to invest immediately. D) unsolicited offers that seem too good to be true.
C) I, II and IV
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) II and IV B) I, II and III C) I, II and IV D) III and IV
C) diamonds.
Commodity contracts are available on many different types of commodities. One of those types is precious metals. Included in the definition of a precious metal would be all of the following except A) gold. B) silver. C) diamonds. D) platinum.
D) bonds place the issuer under an obligation but stock does not.
Corporate bonds are considered safer than common stock issued by the same company because A) bonds and similar fixed-rate securities are guaranteed by the FDIC. B) the par value of bonds is generally higher than that of stock. C) if there is a shortage of cash, dividends are paid before interest. D) bonds place the issuer under an obligation but stock does not.
A) 270 days
Corporate debt securities (such as commercial paper) are exempt from registration under the Securities Act of 1933 if their maturities do not exceed how many days? A) 270 days B) 30 days C) 90 days D) 365 days
C) must register with the SEC.
Emmet opened an investment advisory service three years ago and raised $50 million in capital from family, friends, and contacts and then closed to new investors. If Emmet's stock picks expanded assets under management to $110 million, Emmet A) must register for the first time with the state Administrator. B) must update his registration with the state Administrator. C) must register with the SEC. D) is not required to take any action.
D) universal variable life
Flexible premium payments are a feature of A) whole life B) term life C) variable life D) universal variable life
A) a capital gain.
For tax purposes, the sale of an investment at a profit will result in A) a capital gain. B) ordinary income. C) passive income. D) alternative minimum tax liability.
B) Expansion to peak
If the Consumer Price Index (CPI) is up and consumer demand is also up, the economy is likely in which stage of the business cycle? A) Peak to contraction B) Expansion to peak C) Contraction to trough D) Recovery to trough
A) I and IV
If the U.S. dollar is devalued relative to other world currencies, which of the following will occur with respect to the prices of goods? U.S. exports will be more price competitive overseas. U.S. exports will be less price competitive overseas. Foreign imported goods will be more price competitive with ours. Foreign imported goods will be less price competitive with ours. A) I and IV B) II and IV C) II and III D) I and III
D) using the alternative valuation date.
If the executor of an estate containing a substantial stock portfolio is of the opinion that the economy is about to enter a down cycle, estate taxes could be reduced by A) asking for an extension to file the return. B) liquidating the portfolio in advance of the market downturn. C) reallocating the assets to less risky securities. D) using the alternative valuation date.
D) a large-cap stock fund
If your clients, spouses both age 50, are interested in long-term growth and are willing to accept a moderate amount of risk, you should recommend A) a money market fund B) a municipal bond fund C) an equity/income fund D) a large-cap stock fund
D) help reimburse the broker-dealer for expenses incurred in performing the transaction or a service for the client.
In addition to transaction costs (e.g., commissions or markups), most broker-dealers have a schedule of miscellaneous fees. The purpose of these fees is to A) increase the broker-dealer's net income. B) keep commissions low while making up the difference with fees. C) build in a hidden markup. D) help reimburse the broker-dealer for expenses incurred in performing the transaction or a service for the client.
C) SRA is considered to be maintaining custody of client funds and securities.
Lamar is an investment adviser representative for Southeast Retirement Advisers (SRA), a wholly owned subsidiary of Southeast Retirement Solutions (SRS), a broker-dealer registered in a number of southeastern states. Lamar is also a registered agent with SRS. If one of Lamar's advisory clients sends a check made payable to SRS for a stock purchase, under NASAA's Model Rule on Custody, A) Lamar would have to post a surety bond in the amount of $35,000. B) SRA would be in violation of the NASAA requirement to use a qualified custodian. C) SRA is considered to be maintaining custody of client funds and securities. D) Lamar is considered to be maintaining custody of client funds and securities.
A) Unit investment trust
Louis owns an investment that is an unmanaged portfolio in which the money manager initially selects the securities to be included in the portfolio and then holds those securities until they mature or the investment portfolio terminates. This statement best describes which type of investment? A) Unit investment trust B) Hedge fund C) Closed-end investment company D) Open-end investment company
C) A vacation trip to Orlando
Money in an UTMA may be used to pay for certain expenses relating to the minor. Which of the following would be permitted usage of funds in an UTMA? A) Paying for the minor's share of the heating and lighting expenses B) Milk, bread, and eggs C) A vacation trip to Orlando D) A new suit
B) the fund has made dividend distributions to shareholders.
Net asset value per share for a mutual fund can be expected to decrease if A) the securities in the portfolio have appreciated in value. B) the fund has made dividend distributions to shareholders. C) the issuers of securities in the portfolio have made dividend distributions. D) the fund has experienced net redemptions of shares.
C) represents the amount of money remaining after all expenses, including taxes.
Net income A) reflects the operating profits of a firm only. B) must be paid out in dividends. C) represents the amount of money remaining after all expenses, including taxes. D) is paid out in cash to stockholders in addition to any declared dividends.
A) sharing in the profits and losses in a client's account without making a financial contribution to the account.
Prohibited business practices under the NASAA Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents would not include A) sharing in the profits and losses in a client's account without making a financial contribution to the account. B) sharing commissions with an agent of a nonaffiliated broker-dealer. C) making specific investment recommendations to the group attending a free lunch seminar. D) borrowing money for graduate school tuition from a client who happens to be the agent's father.
B) I, II, III, and IV
Securities industry rules require that securities professionals disclose all potential conflicts of interest to their clients. Examples of potential conflicts of interest include which of these? Offering a proprietary product An agent having a financial interest in a recommended security A broker-dealer publishing a favorable research report after underwriting the issuer's stock offering The sponsor of a mutual fund offering a trip to Key West for all agents reaching a minimum sales level of any of the sponsor's funds A) II and IV B) I, II, III, and IV C) I, III, and IV D) I and III
B) Average prime rate
The Conference Board releases information about the economy on a monthly basis. Included are a number of different indicators. Economic indicators can be leading, lagging, or coincidental, which indicates the timing of their changes relative to how the economy as a whole changes. Which of the following is a lagging economic indicator? A) Nonagricultural employment B) Average prime rate C) Manufacturers' new orders for consumer goods D) Building permits (housing starts)
C) the plan be reasonable in relation to the IA's business model and size.
The NASAA Model Rule on Business Continuity and Succession Planning requires that every investment adviser (IA) establish, implement, and maintain written procedures relating to a business continuity and succession plan. The rule requires that A) the adviser use offsite servers. B) all data be properly encrypted. C) the plan be reasonable in relation to the IA's business model and size. D) double authentication methods be used to protect data.
C) The IAR is prohibited from making this loan because of his fiduciary responsibility to the plan.
The chief financial officer (CFO) of a company approaches an investment adviser representative who happens to be the trustee of the corporation's qualified plan requesting a loan from the plan to help the company meet some short-term obligations. Which of the following would be the appropriate action to be taken by the IAR? A) With sufficient collateral, the loan may be made. B) The IAR is permitted to meet any reasonable request from the CFO of the employing company. C) The IAR is prohibited from making this loan because of his fiduciary responsibility to the plan. D) The IAR is prohibited from making this loan if it is not a part of the asset allocation model used in the plan's investment policy statement.
A) The full cost of tuition and required fees
The child of one of your clients is headed off for a year of graduate study at the University of Oxford in England. The Section 529 plan used to fund the child's undergraduate study still has about $20,000 in the account. Because Oxford is on the U.S. Department of Education's list of approved institutions, qualified expenses would include which of the following? A) The full cost of tuition and required fees B) The full cost of an off-campus luxury apartment C) Textbooks used to supplement the required reading assignments D) Dues to sports clubs or societies
A) compound the growth of a mutual fund investment.
The main purpose of dividend reinvestment in a mutual fund accumulation plan is to A) compound the growth of a mutual fund investment. B) protect against capital loss. C) avoid commissions or sales charges. D) avoid taxes.
C) strategic management
The management style that is most similar to buy and hold is A) tactical management B) active management C) strategic management D) contrarian
C) electronic communications such as email.
The term digital assets would include all of the following except A) cryptocurrency. B) stablecoins. C) electronic communications such as email. D) nonfungible tokens.
D) II and III
The term investment adviser representative includes which of the following? A receptionist for an adviser An employee who solicits new business for an adviser A supervisor who oversees employees who manage client portfolios for an adviser An investment advisory firm registered in the state of Texas A) I and III B) I, II, and IV C) I, II, III, and IV D) II and III
C) An adviser may use a report prepared by someone else if the source of the report is disclosed.
Under NASAA's Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers, which of the following statements regarding the distribution of reports prepared by third parties that are not affiliated with the adviser is true? A) An adviser need not disclose the author of any outside third-party report unless the client asks. B) An adviser is prohibited from basing recommendations on work that is wholly the product of someone else's efforts. C) An adviser may use a report prepared by someone else if the source of the report is disclosed. D) An adviser is required to disclose any source of information used in making recommendations to clients.
C) every December 31, unless renewed.
Under the Uniform Securities Act, agents' registrations expire A) three years from their effective date, unless renewed. B) two years from their effective date, unless renewed. C) every December 31, unless renewed. D) one year from their effective date, unless renewed.
A) I and IV
Under the Uniform Securities Act, an investment adviser is exempt from registration if the person has no place of business in a state and does not direct communication to more than 5 noninstitutional clients to more than 15 noninstitutional clients within 9 consecutive months within 12 consecutive months A) I and IV B) I and III C) II and IV D) II and III
D) It regulates the persons involved in the secondary market.
What is the purpose of the Securities Exchange Act of 1934? A) It provides policies relating to unethical business practices. B) It provides requirements relating to new issues. C) It provides standards among the states. D) It regulates the persons involved in the secondary market.
D) Qualified withdrawals of up to $10,000 per year to pay for K-12 tuition
What new benefit did the TCJA of 2017 bring to 529 plans effective 2018? A) Withdrawals may be made for qualified expenses at certain foreign educational institutions. B) Tax-deductible contributions of up to $10,000 per year to pay for K-12 tuition C) Qualified withdrawals of up to $10,000 per year to pay for K-12 expenses D) Qualified withdrawals of up to $10,000 per year to pay for K-12 tuition
A) tax-equivalent yield.
When referring to municipal bonds, the formula of (1 − tax bracket) is found in the computation of A) tax-equivalent yield. B) return on investment. C) current yield. D) yield to maturity.
A) The act bars the use of arbitrage by broker-dealers.
Which of the following is not true regarding the antifraud provisions of the Securities Exchange Act of 1934? A) The act bars the use of arbitrage by broker-dealers. B) The act prohibits the simultaneous purchase and sale of a security to create the appearance of trading. C) The act prohibits the spread of false rumors to induce others to trade. D) The act proscribes the use of wash trades.
C) An investment advisory firm that opens an office in the state with less than $100 million in assets under management
Which of the following is required to register as an investment adviser with the state securities Administrator? A) A newly formed investment advisory firm with $145 million in assets under management B) The author of a book on money and banking that is sold to residents of the state in which it is published C) An investment advisory firm that opens an office in the state with less than $100 million in assets under management D) A person with no office in the state whose only advisory clients are investment companies and banks in the state
D) I and IV
Which of the following is true of GNMA securities? Interest is subject to federal income tax. Interest is exempt from federal income tax. They are backed by farm mortgages. They are backed by residential mortgages. A) II and III B) I and III C) II and IV D) I and IV
C) Proceeds from a life insurance policy owned by the deceased's spouse
Which of the following items are not included in the gross estate of a decedent? A) The first $250,000 of a primary residence if owned singly, $500,000 if owned jointly with spouse B) Proceeds from a life insurance policy held in a revocable trust C) Proceeds from a life insurance policy owned by the deceased's spouse D) Property held in an account registered tenants in common
D) When a risk-averse investor is confronted with two investment opportunities having the same expected return, the investor will take the opportunity with the lower risk.
Which of the following statements is correct? A) The efficient frontier represents portfolios that have the lowest expected return for each level of risk. B) As the correlation coefficient moves from +1 to zero, the potential for diversification diminishes. C) The efficient frontier represents individual securities. D) When a risk-averse investor is confronted with two investment opportunities having the same expected return, the investor will take the opportunity with the lower risk.
D) State Administrators are permitted to establish regulations relating to the registration, testing, and fees for broker-dealers, agents, investment advisers, and investment adviser representatives.
Which of the following statements is true? A) The USA only provides for civil liabilities for persons involved in illegal securities transactions in their state, while federal law provides criminal penalties. B) The Uniform Securities Act is national law that each state enforces through a state Administrator. C) The state Administrator has authority to amend federal law to meet the needs or special circumstance in his state. D) State Administrators are permitted to establish regulations relating to the registration, testing, and fees for broker-dealers, agents, investment advisers, and investment adviser representatives.
D) Business risk is the uncertainty of price fluctuations in the stock market.
Which of the following statements pertaining to the types of risk is not correct? A) Exchange rate risk is the variability in returns on securities caused by currency fluctuations. B) Reinvestment rate risk is the uncertainty that surrounds the rate of return that can be earned on reinvested coupon income. C) Interest rate risk is the risk that the market price of an investment will decline as the result of changes in market interest rates. D) Business risk is the uncertainty of price fluctuations in the stock market.
A) Compliance procedures should be designed to prevent violations, as well as detect existing violations.
Which of the following statements regarding investment adviser compliance rules is true? A) Compliance procedures should be designed to prevent violations, as well as detect existing violations. B) Compliance procedures should review the accuracy of disclosures made to clients and investors, although it is not necessary that they review disclosures made to regulators. C) The chief compliance officer must have at least three years' experience in securities industry compliance. D) If the chief compliance officer conducts appropriate annual compliance reviews, an interim review is generally not necessary.
A) the investment adviser may not compensate a solicitor who is subject to a statutory disqualification.
With regard to an SEC-registered investment adviser employing the services of a promoter to solicit business, it would be correct to state that A) the investment adviser may not compensate a solicitor who is subject to a statutory disqualification. B) cash referral fees may be paid pursuant to a written or oral agreement to which the investment adviser is a party. C) delivery of the solicitor's brochure must take place within five days after entry into the advisory contract. D) referral fees may be paid only if the solicitor is also registered with the SEC.
A) Fixed annuity
Your client has $50,000 to invest. His objective is monthly income that he can receive after he retires to supplement his small pension and Social Security benefits. As part of his profile, he stresses that he has had uncomfortable experiences in the past with the stock market and is not inclined to invest in anything that is based on stock market performance—and he would opt for principal protection instead. Based on the client's profile, which of the following would be the best recommendation? A) Fixed annuity B) Exchange-traded fund (ETF) or exchange-traded note (ETN) C) Mutual fund portfolio consisting of blue-chip stocks D) Variable annuity
