Practice Test 10/6

Mountain High Securities is a broker-dealer registered in Wyoming and Colorado with its principal office located in Colorado. With reference to the Uniform Securities Act, it would be correct to state that A) the Administrator of Colorado would have to approve of the broker-dealer's method of recordkeeping B) Mountain High Securities must meet the recordkeeping requirements of the SEC C) meeting the recordkeeping requirements of Colorado is sufficient even if those of Wyoming are more stringent D) it is required that any broker-dealer meet the recordkeeping requirements of each state in which they are registered

B) Mountain High Securities must meet the recordkeeping requirements of the SEC

An investment adviser representative has a client who prefers the safety of securities guaranteed by the U.S. Government, yet is concerned about volatility due to uncertainties in the future direction of interest rates. Which of the following recommendations would best address these concerns? A) 5% Treasury bond, maturing in 2037 B) 6% Treasury bond maturing in 2035 C) 8% Treasury bond maturing in 2036 D) Treasury STRIPS, maturing in 2036

C) 8% Treasury bond maturing in 2036

A portfolio manager whose universe of stocks is those with market caps of $4 - $6 billion would most likely be graded against A)Nasdaq 100. B)S&P 500. C)S&P 400. D)Dow Jones Composite Average.

C) S&P 400

A risk faced by many seniors is longevity risk. What security would be most appropriate to protect against that risk? A) REIT B) Fixed annuity C) Variable annuity D) Common stock

C) Variable Annuity

Among the characteristics of exchange-traded funds (ETFs), which distinguish them from mutual funds is that A) their portfolio may be designed to mimic an index. B) they are registered with the SEC. C) they are traded on listed exchanges. D) their NAV is computed daily.

C) they are traded on listed exchanges

An advisory client of yours discusses a business project she is involved with where the partnership is using accelerated depreciation to maximize losses in the early years. It would be prudent of you to inform the client that A)a maximum of $3,000 in losses can be taken against passive income in any year. B)accelerated depreciation leads to a reduction in the partnership's cash flow. C)a maximum of $3,000 in losses can be taken against ordinary income in any year. D)accelerated depreciation could trigger the alternative minimum tax.

D) accelerated depreciation could trigger the alternative minimum tax.

A client owning shares of a closed-end investment company entering an order to liquidate the position would receive a price based on A) the next computed net asset value per share. B) the previous net asset value per share. C) the offering price computed after the order is received. D) supply and demand for the shares.

D) supply and demand for the shares.

The Affray Compassionate Finance Company (ACFC) is offering $100 million of 150-day commercial paper for sale in State L. The paper is available in minimum denominations of $100,000 and has been rated AA by a leading rating organization. Who of the following would be required to register as an agent in State L in order to legally sell this security in the state? A)An employee of the Affray Compassionate Finance Company who receives a 1% commission on sales. B)An agent of a broker-dealer registered in the state. C)An investment adviser who recommends this security to clients. D)Because this security is exempt from registration, offers and sales can be made without registration as an agent.

D)Because this security is exempt from registration, offers and sales can be made without registration as an agent.

Registration with the SEC as an investment adviser would be required for a person who A)limits the advice offered strictly to securities listed on the New York Stock Exchange (NYSE) B)acts as the investment adviser to an investment company registered under the Investment Advisers Act of 1940 C)limits the advice offered strictly to securities issued or guaranteed by the U.S. government D)acts as the investment adviser to an investment company registered under the Investment Company Act of 1940

D)acts as the investment adviser to an investment company registered under the Investment Company Act of 1940

Which of the following activities would have an effect on the NAV of a mutual fund? I. The sale of securities from the portfolio II. Automatic reinvestment of dividends by the shareholders III. Market appreciation of portfolio securities IV. Market decline in the value of portfolio securities

III and IV

An investor purchases a 6% callable senior lien mortgage bond at par. Exactly two years later, the bond is called at $102½. The investor's total return is A) 14.5%. B) 8.5%. C) 7.25%. D) 9.5%.

A) 14.5%

A portfolio manager considers adding an asset to the portfolio. The manager decides between 4 equally-risky assets: W, X, Y, and Z. The correlations of each asset with the portfolio are: Asset W +0.90 Asset X +0.80 Asset Y +0.40 Asset Z +0.20 To achieve the optimal diversification benefits, which of the assets should be selected by the manager?

Asset Z

As used in the Uniform Securities Act, which of the following entities would NOT be included in the term "institutional investor"? A) Open-end investment companies B) Insurance companies C) Any accredited investor D) Closed-end investment companies traded on the NYSE

C) Any accredited investor

Which of the following is required to effectuate annual renewal of the registration of an investment adviser representative affiliated with a federal covered adviser? A) Form U4 B) Renewal notice to the SEC C) State licensing fee D)Consent to service of process

C) State Licensing fee

An investment adviser using an insurance approach to capital needs analysis would A)invest exclusively in insured securities such as insured municipal bonds or Ginnie Maes B) only invest in securities guaranteed by the FDIC C)determine the insurance coverage needed to complete the customer's financial objective should the customer die before the objective is met D)select securities based upon the customer's investment experience

C)determine the insurance coverage needed to complete the customer's financial objective should the customer die before the objective is met