Review

Max sales charge on a variable life insurance policy

4.8 2.8 1.25

Which of the following would be used to provide end-of-life instructions once a person becomes incapacitated?

A living will The purpose of a living will is to give clear instructions regarding end-of-life decisions, such as organ donation or when to "pull the plug." A living trust deals with how assets are distributed, and a durable power of attorney grants authorization to a person to legally act on behalf of someone who cannot do so. U18LO4

Mutual fund shares class expenses

A shares B shares C shares

Yield curve analysis plays an important role as a benchmarking and forecasting tool for the future direction of interest rates. In most cases, this analysis involves examining A) bonds of similar quality over varying maturities. B) bonds of varying quality of similar maturities. C) bonds of varying quality over a number of maturities. D) bonds of a single issuer over varying maturities.

D. The most common yield curves are drawn using U.S. Treasury securities. The curve is plotted using maturities ranging from U8LO4

Which of the following investments would NOT be considered an exchange-traded derivative?

Forwards are never traded on an exchange U16LO4

Typically, there are 5 standardized parts to an exchange-traded futures contract:

Quantity of the commodity (e.g., 5,000 bushels of corn or 100 oz. of gold) Quality of the commodity (specific grade or range of grades may be acceptable for delivery, including price adjustments for different deliverable grades) Delivery price (similar to exercise or strike price with options) Time for delivery (e.g., December wheat to be delivered) Location (approved for delivery) U16LO4

An investment advisory firm advertises a stock-picking system that helps investors choose the timing and selection of securities for purchase. Under the Investment Advisers Act of 1940, which of the following must be disclosed in the advertisement?

The act prohibits reference to any formula, charting, or graphing device without disclosing the difficulties or limitations in their use. The number of years used is not required. U6LO5

A bond's yield to maturity reflects its

Yield to maturity reflects the internal rate of return on a bond. Internal rate of return (IRR) equates the cost of an investment to the cash flows produced by that investment. U10LO1

Asset-based sales charges will generally be lowest when holding which of the following mutual fund share classes?

Class A shares have a front-end load, but a low- or no asset-based sales charge. Class B and C shares don't have a front-end load, but do have a higher asset-based sales charge. Class T shares always have a 12b-1 charge. U14LO4

The interest from which of the following bonds is exempt from federal income tax? State of California bonds City of Anchorage bonds Treasury bonds GNMA bonds

I and II Municipal bonds are exempt from federal income tax. Treasury bonds are exempt from state tax but not federal tax. GNMAs are subject to federal, state, and local income tax. U13LO5

Which of the following is considered to be a security? A) Section 529 plan B) Section 457 plan C) Coverdell ESA D) Section 403(b) plan

The definition of security specifically excludes retirement plans (the Coverdell was originally known as the Education IRA). Section 529 plans are technically considered municipal fund securities. U24LO6

Which of the following are characteristics of newly issued warrants?

Time value, but no intrinsic value Warrants could be thought of as call options with a long expiration period. They are always issued with a strike price in excess of the current market value, so there is no intrinsic value. One could say that on issuance, they are always out-of-the-money. The only value is in the time to expiration, usually several years or longer. U16LO3

An investor purchases a Treasury note and the confirmation shows a price of $102.25. Rounded to the nearest cent, the investor's cost, excluding commissions, is

Treasury notes are quoted in 32nds where each 32nd equals $.3125. The 102 in the quote equals $1,020 and the 25/32 is an additional $7.81 bringing the total to $1,027.81. U13LO2

In designing a client's portfolio, a registered investment adviser representative of Greater Wealth Advisory Services recommends the purchase of several stocks from the inventory of Greater Wealth's wholly owned broker-dealer. Under the Investment Advisers Act of 1940, this activity requires written

Unlike broker-dealers, investment advisers must obtain the consent of and make written disclosure to the client of the intent to act as agent or principal in any transaction with that advisory client. SEC Release IA- 1732 requires that this be accomplished before the completion of the transaction, where completion is defined as settlement date. U6LO1

It would be correct to state that

the specialist stands ready to buy or sell stock on the floor of an exchange in an effort to keep an orderly market the market maker stands ready to buy or sell stock on the over-the-counter market in an effort to keep an orderly market The specialist performs his activities on the floor of an exchange, while the market maker performs a similar function in the OTC market. Note: The term specialist has been replaced by designated market maker (DMM), but specialist might still appear on the exam. U22LO3