Study 65
John and Jane have a net worth of $20,000 and total assets of $150,000. If their revolving credit and unpaid bills totals $8,000, how much are their total liabilities?
$130,000
John purchased 100 shares of DEF common stock at a price of $25 per share on August 4, 2015. On December 1, 2017, with the stock selling for $29 per share, he passed away, leaving the stock to his daughter. She subsequently sold the stock nine months later for $32 per share. Her tax consequence is
$300 long-term capital gain
Fines levied by any SRO require disclosure if they were in excess of
$5,000.
A corporate bond with an A rating is currently selling for 105. If the bond has a coupon of 6% and matures in 10 years, its yield to maturity is closest to
5.71%
Which of the following business structures is most appropriate for retaining money in the business?
A C corporation
Holders of certain professional qualifications may be granted a waiver from taking the Series 65. However, that waiver would not apply to an individual holding which of the following designations?
CLU®
A power of attorney is a legal document that conveys certain powers from one party to another. Which of the following will survive the mental incompetence of a client?
Discretionary power
Which of the following is a direct commitment between one buyer and one seller?
Forward contract
The dictator of a foreign nation, with whom the United States barely maintains diplomatic relations, has just placed an order for 25 armor plated limousines to be manufactured in Detroit. Upon completion and payment for this order there will be a 1. credit to the foreign account balance of the United States 2. debit to the foreign account balance of the United States 3. positive impact on the U.S. GDP 4. negative impact on the U.S. GDP
II and III
Which of the following items will affect a corporation's cash flow? Cash Depreciation Net sales Accounts receivable
II and III
Which of the following quantitative measurements would probably be the most important to an investor in high-quality fixed income investments?
Inflation-adjusted return
Which of the following statements regarding investment companies is TRUE?
It is generally prohibited for an investment company registered under the Investment Company Act of 1940 to acquire more than 3% of the outstanding voting shares of another investment company.
It would be most unusual to see which one of the following issued at a discount?
Jumbo CD
Which of the following statements regarding a Roth IRA is TRUE?
Nonqualified distributions of earnings before the age of 59½ are subject to both penalty and taxation.
The assumptions underlying the efficient market hypothesis (EMH) lead its proponents to believe that stock market prices react rapidly to newly released information and, therefore, limit the ability of the investor to achieve abnormal gains. Which of the forms of EMH concludes that an investor cannot achieve abnormal gains using fundamental analysis?
Spring form
Which of the following debt instruments pays no interest?
T-bills
The Uniform Prudent Investor Act identified a number of fundamental changes in the former criteria for prudent investing. Which of the following statements incorrectly states one of these changes?
The standard of prudence is applied to each investment individually.
XYZ Securities is a broker-dealer based in Wisconsin with offices in no other state. In addition to its Wisconsin clients, XYZ has 30 retail customers living in Illinois. During the winter, if 10 existing customers vacation in Florida for up to 7 weeks at a time, XYZ Securities is a broker-dealer in
Wisconsin and Illinois
If a client wishes to open a margin account, the most important warning you should give is that
because of the leverage involved, the client can lose more than the original amount invested
An analyst viewing a corporate income statement will review all of the following EXCEPT
current ratio
As the number of stocks in a portfolio increases, the portfolio's systematic risk
decreases at a decreasing rate
A client calls and tells her adviser that she has read about how to avoid estate taxes by transferring all her assets into an irrevocable living trust and would like the adviser's opinion on the matter. The adviser's most appropriate and ethical response should be to
discuss the advantages of the arrangement and assist the client in drafting the appropriate documents for a fee
The method of computing long-term returns that takes into consideration time value of money is
internal rate of return
Investors purchasing Nasdaq traded stocks generally are not concerned with
liquidity risk
All of the following are reasons to consider investing in a variable annuity EXCEPT
lower expenses than a mutual fund with similar objectives
A fundamental analyst wishing to evaluate a corporation's ability to meet its short-term obligations under extreme conditions would probably wish to compute the
quick ratio
In the investment industry, the term "2&20%" most commonly refers to
the fees charged by hedge fund managers
During the past year, the market price of KAPCO common stock has increased from $47 to $50 per share. Over that period, KAPCO's earnings per share (EPS) have increased from $2.00 to $2.50 per share, and their dividend payout ratio has decreased from 50% to 40%. Based on this information, the current yield on KAPCO common stock is
2.00%
The Prudent Investor Rule applies to an investment adviser representative with full discretionary authorization a client executing orders in a joint account with an adult son a court appointed guardian for an adult with dementia an executor appointed by a court for a decedent's estate
I, III, and IV
Discounted cash flow is commonly thought of as applying solely to fixed-income securities. However, forms of DCF used for the valuation of common stock also include the price-to-earnings ratio the dividend discount model the discounted book value model the dividend growth model
II and IV
One of the responsibilities of the fiduciary handling a qualified retirement plan is providing an investment policy statement. Which one of the following is NOT typically included in that document?
Investment selection
Active government manipulation of the economy through tax and budget policies is referred to as
Keynesian
Two brothers are interested in forming a business together. They have three initial concerns: (1) maximizing their benefits despite the fact that the business is expected to lose money for at least the first year or so, (2) making sure that the business will be able to continue in the event one of the brothers dies, and (3) minimizing their personal liability for the obligations of the business. On the basis of the brother's concerns, which form of business is appropriate for the situation?
LLC
In order to qualify for the private fund adviser exemption, a domestic investment adviser must limit its assets under management in the United States to less than
United States of less than $150 million Amendment to Rule 203(m)-1
Use of a corporation's balance sheet and income statement would be of greater importance to an investment manager following which style?
Value
One of your customers has a substantial savings account at the local S&L. The customer has several grandchildren and wants the flexibility of being able to change the beneficiary allocations as their financial conditions change. You should recommend that the customer investigate the use of
a Totten trust.
When investors tend to increase their investments in debt securities into those on the long end of the spectrum rather than those with short-term maturities, it generally leads to
a positive yield curve
An investor's portfolio is heavily weighted in AA and AAA rated municipal bonds with an average maturity of 18 years. The client has the most exposure to
interest rate risk
Providing liquidity in the over-the-counter (OTC) market is the primary function of
market makers
When market conditions are such that a passively managed portfolio no longer meets its target allocation, the tool most commonly used to rectify the situation is
rebalancing
As part of a comprehensive financial plan, a registered investment adviser representative of All-Star Advisory Services recommends the purchase of several stocks from the inventory of All-Star's affiliated broker-dealer. Under the Investment Advisers Act of 1940, this activity
requires the consent of and written disclosure to the client prior to completion of the transaction
An investor has 1,000 shares of a JNS, Inc., a large-cap value stock purchased 5 years ago at $40 per share. It is currently trading at $52 per share. The investor believes that the current market for this stock is going to remain stable for the next 9 to 12 months. To increase his return on this investment, the representative should recommend that the customer
sell 10 JNS 55 calls
You have a client who is subject to the AMT. As a result, the client would not receive the full benefit of investing in
tax-exempt private purpose bonds
For those following the Capital Asset Pricing Model (CAPM), the Security Market Line (SML) uses all of the following EXCEPT
the standard deviation of the asset.
A primary difference between a life settlement and a viatical settlement is
the viatical settlement is used for those with a terminal illness while the life settlement is not
