Series 65 - Difficult Quiz Questions

What is the size of a negotiable CD?

$100,000, also called Jumbo CDs

One of the most common uses of the NPV calc

-a corporation to determine the feasability of investing in new capital equiptment

Under the Securities Act of 1933, the SEC

-attempts to make certain that all pertinent information is fully disclosed

Difference between Core CPI and normal CPI

-core CPI is the CPI excluding energy and food prices

The Securities Exchange Act of 1934 does..

-requires all securities listed on a national exchange be registered with SEC -prohibits manipulative practices -requires disclosure of information about listed securities does NOT: -prevent fraud in the sale of NEW issues

The Securities Exchange Act of 1934 does all the following

-requires publicly held corporation to provide annual reports for shareholders -provides regulation of credit in securities transactions -provides establishment of securities and exchange commission does NOT: -require the registration of new securities

Advantages of Including Preferred Stock in Portfolio

1. dividends paid before common stock holders 2. a fixed rate of return that is higher than a debt security by same issuer

Under Regulation T, it is not possible to purchase which of the following on margin?

A. Common stock B. Preferred Stock C. ADR's D. Options answer: D

A wealthy individual has set up a GRAT. Should she die during the time the trust is active, how are the remaining assets in the trust taxed? A. Theoriginalvalueplusanyappreciationis taxed as part of the grantor's estate. B. The original value plus any appreciation passes to the beneficiaries but is subject to gift tax. C. The original value plus any appreciation passes to the beneficiaries and is taxed as ordinary income. D. No tax is due if the grantor should die during the term of the trust.

A. One of the risks in setting up a GRAT is that if the grantor dies during the term of the trust (usually 3-10 years), the assets put in the GRAT, plus any appreciation, are included in her estate.

Under Federal Securities Law, which of the following are considered to be securities

A. Treasury Stock B. Investment Contracts C. Voting Trust Certificate D. Debenture ALL OF THE ABOVE

All of the following are advantages of universal life insurance EXCEPT A. ability to adjust the amount of premium payments B. the policy is guaranteed never to lapse C. ability to change death benefit amount D. when the cash value is sufficient, no premium payment is required

B

Which of the following statements concerning universal life insurance is(are) CORRECT? I. Universal life has flexible premiums. II. Universal life is based on the assumption that level annual premiums are to be paid throughout the insured's life. III. Thedeathbenefitcanfluctuate,butnever below the guaranteed minimum face amount. IV. Cash values can fluctuate and may even fall to zero. A. IandII B. IandIV C. II and III D. III and IV

B

ABC investment company, with $3 Billion in assets, is a diversified investment company. All of the following statements are correct EXCEPT A. ABC could own more than 10% of the outstanding voting securities of a particular issuer B. ABC could not have more than $150 million invested in securities of a par- ticular issuer C. ABC could have as much as $900 million invested in the securities of a par- ticular issuer D. ABC could be either an open-end or closed-end company

B The 5% and 10% limitations apply only to an identified 75% of the total assets. The other 25% can be invested in any fashion desired. Therefore, a diversified company could have as much as 30% of its assets invested in the securities of a particular issuer, and with that free 25%, could own significantly more than 10% of the voting stock of any particular company. The term diversified company applies to either an open- end or a closed-end company.

Which of the following is NOT a restriction that the SEC has placed on money market mutual funds? A. Investments are limited to securities with remaining maturities of 397 days or less, with the average portfolio maturity not to exceed 90 days. B. Investments are limited to eligible securities determined to have minimal risk. C. No more than 5% of the fund's assets may be invested in below-investment-grade securities. D. The prospectus must prominently indicate that the US government does not guarantee the fund and that there is no guarantee that the NAV will be maintained.

C

During the previous fiscal year, The Kaplan Family Trust received $24,000 in dividends and $35,000 in interest from corporate bonds. Securities transactions during the year resulted in long-term capital gains of $48,000, $20,000 of which were reinvested in the corpus. The DNI for the Kaplan Family Trust is A. $11,000 B. $79,000 C. $87,000 D. $107,000

C. Distributable Net Income (DNI) is dividends and interest plus capital gains that have not been reinvested back into the trust. In this case, $24,000 + $35,000 + $28,000 = $87,000.

Which of the following is indicative of the primary difference between variable life insurance and straight whole life insurance? A. Amountofinsurancethatcanbeissued B. Cost of the insurance C. Tax treatment of the death proceeds D. Way in which the cash values are invested

D

True or false: with an index annuity there are never any reductions in a down market

True

All are risks associated with CMO's EXCEPT a. credit b. liquidity c. prepayment d. reinvestment

answer: A -carry AAA or AA ratings, so little credit risk

The difference between a Section 457 plan established by a governmental entity and one established by a private tax-exempt organization is: A. governmental plan must hold assets in trust or custodial accounts B. a tax-exempt plan participant does not have to include plan distributions in taxable income C. a governmental plan cannot make a distribution before the participant attains the age 70 1/2 D. a tax-exempt plans distributions are not eligible for a favoraable lump sum 10 yr averaging treatment

answer: A -governmental plans must hold assets in trusts or custodial accounts -tax-exempt plans do not have to be funded

An investor wants to invest in bonds and is worried that rates will be even higher in a few years, what do you suggest? A. Barbell Bonds B. Bullet Bonds C. Diversifying D. Laddering

answer: A -purchases bonds maturing in one or two years and an equal amount maturing in 10 or more **Bullets are purchased at different times but all mature at same time** **Ladders are all purchased at same time. but mature at different times**

Which of the following industries are more affected by a recession A. Capital Goods B. Consumer Durable Goods C. Consumer Non-Durable Goods D. Services

answer: A and B -these usually last longer and are usually discretionary

Under Investment Company Act of 1940, the separate account of a variable annuity is.. A. an open-end investment company if funds are used to purchase securities B. a unit investment trust if funds are used to purchase shares in an existing mutual fund C. structured so investor bears investment risk so the annuity must be registered under the Investment Company Act of 1940 D. only allowed to be sold by salespeople registered with FINRA and insurance licensed

answer: A, B, C

Advantages of universal life insurance A. ability to adjust premium payments B. policy is guaranteed never to lapse C. ability to change death benefit D. when cash value is sufficient, no premium payment is required

answer: A, C, D -may lapse if accumulation funds drop below specified level and additional premium is not paid

All are true of government agency bonds EXCEPT a. safe investments b. direct obligations of U.S. government c. trade openly d. older ones have coupons, new ones are book entry

answer: B -only GNMA's are direct obligations

Which of the following orders would most likely add fuel to a bullish stock market A. Buy Limit B. Buy Stop C. Sell Limit D. Sell Stop

answer: B -these are placed above current market price and usually used with short positions

Which of the following about the CPI is NOT true A. measures the increase in general price level of a basket of consumer goods B. measures increase or decrease in the level of prices with respect to wholesale prices C. computed monthly D. measures rate of increase or decrease in a broad range of prices, such as food, housing, medical care, and clothing

answer: B -wholesale prices do not matter

Which descriptions of time-related orders are true A. Fill or Kill must be executed immediately and the remainder of the shares not sold/purchased are canceled B. An immediate or cancel order must be executed immediately and if the entire order is not filled, any remainder is canceled C. A not held order allows the floor broker to use his judgement as to price and timing of the transaction D. An all or none order must be filled in full but not immediately

answer: B,C,D -fill or kills orders must be executed immediately in FULL or canceled

With an Annuity... A. taxes on earned dividends, interest, and capital gains are paid annually B. random withdrawals are handled under LIFO C. money invested in a Nonqualified annuity represents investors cost basis D. upon withdrawal, the amount exceeding cost basis is taxed as ordinary income

answer: C -taxes are deferred

Which of the following regarding the general partner of a DPP is NOT true A. GP is active investor and assumes responsibility for all aspects of the partnerships operations B. GP has a fiduciary relationship to the LP's C. GP cannot borrow from the partnership, compete, or commingle personal funds D. GP is the active manager, does not maintain a financial interest and only receives income from profits on the business prior to the LP's

answer: D -MUST maintain financial interest and do NOT receive distributions before LP's

All of the following are true about GMNSs except A. they are backed by the US government B. they provide funds for residential mortgages C. interest on GMNAs is not exempt from state and local taxes. D. interest is paid semiannually.

answer: D. Interest is paid monthly due to monthly mortgage payments from borrowers.