S66 10/16

Strategic Capital Asset Managers (SCAM) is preparing its Form ADV, Part 2B relating to certain individuals. On this form, SCAM must disclose all of the following information except A) compensation earned on dealings with clients. B) the fact that any listed person has no formal education after high school. C) disciplinary information about material events within the past 10 years. D) the name, title, and telephone number of the individual supervising any listed person.

A

Which investment strategy is consistent with a belief in the efficient market hypothesis? A) Comparing the calculated value of a security, through fundamental analysis, to the market value of the stock B) Searching for undervalued securities C) Waiting to purchase a stock until it increases above the 40-day moving average D) Selecting a random set of stocks for a portfolio

D

An owner of an equity index annuity would be wise to use the high-water crediting method if the underlying index was expected to A) decline. B) remain steady. C) be volatile. D) change its objective.

C

When investing in mutual funds, each of the following is a sales charge except A) a front-end load. B) a back-end load. C) 12b-1 fees. D) a CDSC.

C

True or False? Combining assets with less than perfect positive correlation will not reduce the total risk of the portfolio.

False

True or False? Regarding qualified corporate retirement plans with defined benefit plans, the employee bears the investment risk

False

True or False? Regarding the differences between Rule 506(b) and Rule 506(c) of Regulation D of the Securities Act of 1933, Rule 506(c) offerings are limited to 35 nonaccredited investors, while Rule 506(b) offerings do not have a limit.

False

True or False? The state securities Administrator has the authority to issue and enforce an injunction against a registered party.

False

True or False? Under the Uniform Securities Act, financial planners who provide fee-based investment advisory services to clients are exempt from state registration as investment advisers

False

Which of the following statements are generally true of the buy-and-hold strategy? I. Equities would grow relative to fixed income II. Lower taxes and transactional costs III. Easy to manage IV. The portfolio would more accurately demonstrate the client's investment objectives and risk tolerance

I, II, & III

Under the Uniform Securities Act, if sent to two or more persons, a file must be maintained containing a copy of which of the following? I. Bulletins II. Newspaper articles III. Notices IV. Websites

I, II, III, & IV

Fill in the blank: The 457 is a _ but _ retirement plan. The 457 Plan is unique in that it is the only retirement plan permitting _, for any reason, before reaching age 59½ without _.

The 457 is a nonqualified but tax-advantaged retirement plan. The 457 Plan is unique in that it is the only retirement plan permitting withdrawals, for any reason, before reaching age 59½ without penalty.

True or False? A correlation coefficient of 0.0 means there is no relationship between the returns of the assets.

True

True or False? Perfectly negatively correlated assets have a correlation coefficient of -1.0.

True

True or False? Perfectly positively correlated assets have a correlation coefficient of +1.0.

True

Greater Wealth Managers (GWM) is an investment adviser registered in States A, B, C, and D. An individual was recently hired to solicit new advisory accounts for the firm. This person will not be engaged in giving advice of any kind, and all activities will be closely supervised by senior personnel of the firm. Under Section 201 of the Uniform Securities Act, A) registration as an investment adviser representative is required for this individual. B) registration as an investment adviser representative and as an agent is required for this individual. C) no registration is required, because this individual is not rendering investment advice. D) no registration is required, because this individual is not rendering investment advice and is being closely supervised.

A

An agent has a new client who is prone to tergiversation. As such, it would probably make sense to A) make recommendations on a frequent basis. B) accept unsolicited orders only. C) obtain permission from both the client and the broker-dealer before sharing in the profits and losses in the account. D) open a discretionary account.

B

Which of the following is a method for determining the internal rate of return to an investor based on cash flow in and out of the portfolio? A) Dollar cost averaging B) Discounted cash flow C) Dollar-weighted return D) Time-weighted return

C

Which of the following is not a fraudulent business practice when committed by a registered broker-dealer? A) Conducting transactions that do not result in the transfer of ownership between buyers and sellers B) Trading securities between house accounts and customer accounts to create trading volume or the appearance of interest in a security C) Acting as agent for both buyer and seller on a transaction D) Engaging in trades between other broker-dealers to increase or decrease the price of securities

C

John and his sister, Alice, open a margin account as JTWROS. John contributes $50,000, and Alice contributes $25,000. They have agreed that Alice will trade the account, and they will share in the profits and losses equally. As their agent, you would gather information regarding suitability for A) John, because he has made the larger contribution. B) either, because in a JTWROS account the owners share equally. C) Alice, because she will be trading the account. D) both, because information regarding all owners is relevant.

D

An investor purchased 200 shares of Affinage Refining Company (ARC) common stock at $63 per share. Over the next six months, two quarterly qualified dividends of $0.50 per share were paid. The investor liquidated the position at $66 per share. If the investor is in the 32% federal income tax bracket, the approximate after-tax return is A) 4.3%. B) 5.4% . C) 3.9%. D) 4.6%.

D The qualified dividend is taxed at 15%, and the short-term capital gain is taxed at the 32% rate. The total dividend return is 200 shares × $1.00 (two fifty-cent quarterly dividends) or $200. The short-term capital gain is; $600 ($66 − cost of $63) = 200 shares × $3 or $600. After the 15% tax on the dividends, the investor has $170. After the 32% tax on the gain, the investor has $408. That is a total of $578 after tax. Dividing that by the original cost of $12,600 (200 shares × $63) results in an after-tax return of approximately 4.6%.

When advising an investor on the purchase of mutual funds, the agent should instruct the client to compare open-end mutual funds with the same objective for all of the following except A) liquidity. B) portfolio turnover. C) services offered. D) costs.

A

Which of the following documents would aid an investment adviser in its responsibility to fully understand the needs of a client when making investment recommendations? A) An investment policy statement. B) A restricted list. C) A communications agreement. D) A proxy voting policy.

A

Which of the following actions should be taken by an agent when a client decides to open an options account? A) Assure that an options agreement has been signed prior to the first trade taking place B) Obtain approval from the designated options supervisor to open the account no later than 1 business day after the first options trade C) Provide an options disclosure document (ODD) no later than 15 days after the first trade D) Review with the client the risks involved when trading options before the first options trade

D

True or False? Regarding qualified corporate retirement plans all corporate pension and profit-sharing plans must be established under a trust agreement

True

True or False? Regarding the differences between Rule 506(b) and Rule 506(c) of Regulation D of the Securities Act of 1933, Rule 506(c) offerings are limited exclusively to accredited investors, while nonaccredited investors can participate in Rule 506(b) offerings.

True

True or False? Regarding the differences between Rule 506(b) and Rule 506(c) of Regulation D of the Securities Act of 1933, Rule 506(c) offerings can be advertised, while Rule 506(b) offerings cannot.

True

From the following 4 portfolios, choose the 1 that would generally be considered to be the most diversified. A) ABC common stock, beta 1.20, correlation to the S&P 500, +0.82; DEF common stock, beta 0.90, correlation to the S&P 500, +0.91; GHI common stock; beta +0.65, correlation to the S&P 500, +0.06 B) STU common stock, beta 0.95, correlation to the S&P 500, +0.84, VWX common stock, beta 0.90, correlation to the S&P 500, +0.07; YZA common stock, beta 0.88, correlation to the S&P 500, −0.45 C) DCB common stock, beta 1.00, correlation to the S&P 500, +0.75; HGF common stock, beta 0.10, correlation to the S&P 500, +0.25; KJI common stock, beta −0.50, correlation to the S&P 500 +0.50 D) JKL common stock, beta 1.50, correlation to the S&P 500, +0.77; MNO common stock, beta 1.00, correlation to the S&P 500, +0.93, PQR common stock, beta 0.50, correlation to the S&P 500, +0.34

B Most analysts would agree that the greatest portfolio diversification occurs when there are some holdings with a negative correlation. Beta measures volatility, so varying those positions will offer some protection against volatility. However, including securities that move in opposite directions will provide protection against general market declines.

Which of the following securities of Synergy, Inc., an issuer whose stock trades on the Nasdaq Stock Market, does not have an exemption from registration with the state? A) Synergy, Inc., debentures B) Synergy, Inc., senior bonds C) Synergy's oil and gas limited partnership units (Synergy, Inc., is the general partner) D) Synergy, Inc., preferred stock

C

True or False? The state securities Administrator has the authority to make, amend, or rescind rules, forms, and orders necessary to administer the Uniform Securities Act.

True

True or False? Under the Uniform Securities Act, investment advisers with no office in the state who only advise employee benefit plans with assets of more than $1 million are exempt from state registration as investment advisers

True