series 65 economics analysis book 1, Investment Vehicles book 2, Book 3, Book 4, Book4 Business practice section, Book 4 last

Which of the following is a precious metal investment that is permitted in an IRA account? A. platinum B. copper C. zinc D. steel

a

A 75-year old man: I can continue to make contributions to a Roth IRA II cannot make contributions to a Roth IRA III must take distributions from a Roth IRA IV is not required to take distributions from a Roth IRA A. I and III B. I and IV C. II and III D. II and IV

b

A Broker-Dealer (BD) agent is registered in State A. You are an agent in State B, registered with the same broker-dealer. You happen to be a personal friend of a client of the agent registered in State A. Your friend calls you, saying that he has tried to contact his agent in State A to place an order, but he cannot reach him. He knows that you work for the same BD and asks you to place the order for him. Can you execute the trade for the client? A. Yes, because both agents work for the same Broker-Dealer B. No, you must reject the trade because you are not registered in State A C. Yes, but only if you re-route the order to an unregistered associate of the agent in State A who can place the trade D. Yes, you can place the trade but any commission must be credited to the agent in State A

b

A Canadian Investment Adviser Representative (IAR) has an existing client who goes on vacation to Seattle, Washington. The IAR wishes to contact the customer in Seattle about an investment strategy that he wishes to recommend. The IAR: A. is required to register in the State of Washington, as must the employing Investment Adviser B. need not register in the State of Washington because the customer is on vacation C. is able to do business in the State of Washington as long as the IAR is registered in Canada D. is required to register in the State of Washington, but the IA is not required to do so

b

If the reader of corporation's financial statements wishes to get additional detail on items presented, this can be found in the: A. prospectus B. footnotes C. correcting amendment D. operations overview

b

The minimum dollar amount of a negotiable certificate of deposit is usually: A. $10,000 B. $100,000 C. $1,000,000 D. $10,000,000

b

The portfolio management technique that uses a market index as a performance benchmark that the asset manager must EXCEED is called: A. Passive asset management B. Active asset management C. Strategic asset management D. Tactical asset management

b

The primary risk associated with investing in an index fund is: A. liquidity risk B. market risk C. business risk D. regulatory risk

b

The principal difference between a structured product and an ETN is: A. investment time horizon B. liquidity risk C. credit risk D. reference index

b

Under the Uniform Securities Act, which individual is defined as an "agent"? A. A principal of a broker-dealer B. A secretary who takes customer orders C. A clerk who solely performs clerical functions D. A silent partner of a broker-dealer

b

Under the Uniform Securities Act, which of the following are defined as federal covered investment advisers? I Investment advisers managing assets of $100,000,000 or more II Investment advisers to investment companies registered under the Investment Company Act of 1940 III Investment advisers to insurance companies A. I only B. I and II C. II and III D. I, II, III

b

If a company in the 50% tax bracket has sales of $2,000 and a gross margin of $400, what is the pre-tax gross margin percentage? A. 5% B. 10% C. 20% D. 50%

c

A breakout through a resistance level is: I an upside breakout II a downside breakout III bullish IV bearish A. I and III B. I and IV C. II and III D. II and IV

a

A corporation has reported quarterly earnings of $3 per share. The corporation retained $9 of earnings at year end The corporation's dividend payout ratio is: A. 25% B. 33% C. 66% D. 75%

a

A customer has a large portfolio of diversified blue chip stocks and would like to increase the income from the investments. Which strategy is suitable? A. Covered call writing B. Naked call writing C. Covered put writing D. Naked put writing

a

A customer has won $1,000,000 in a lottery. The customer has the choice of taking $1,000,000 today or $65,000 per year for the next 20 years. To evaluate the best option, the customer would use: A. Net Present Value B. Total Return C. Rule of 72 D. Expected Rate of Return

a

A customer that lives in State A is traveling by air to State C. While he is changing planes in State B, he receives a call on his cell phone from his broker, who solicits him to buy a security. He places the order with his broker and boards his connecting flight to State C. When he returns to his home in State A, he finds the trade confirmation in his mailbox. Which State Administrator(s) has (have) jurisdiction over the transaction? A. State A only B. State B only C. Both State A and B D. States A, B and C

a

A mutual fund which invests in common stocks, preferred stocks, and bonds of companies in various industries is known as a(n): A. balanced fund B. dual purpose fund C. income fund D. sector fund

a

A portfolio with a beta of +1 has: A. systematic risk B. non-systematic risk C. both systematic and non-systematic risk D. no risk

a

Amendments to filings made with the Administrator to make changes, or to correct misstatements or omissions, must be made: A. promptly B. within 5 business days of the change C. within 45 calendar days of the change D. at the annual renewal of registration or notice

a

An agent of a broker-dealer wishes to withdraw his registration. If there is a customer complaint, the Administrator: A. retains jurisdiction over the resigned agent for a period of 1 year B. retains jurisdiction over the resigned agent for a period of 3 years C. retains jurisdiction over the resigned agent for a period of 5 years D. has no authority over the agent as the agent is no longer employed by the broker-dealer

a

An individual client purchased his residence 5 years ago for $300,000. For 3 of the last 5 years, the client rented out the property for income, and lived in the house of 2 of those years. The client sells the house for $500,000. How much of the gain is taxable? A. 0 B. $100,000 C. $150,000 D. $200,000

a

An investment adviser has its principal office in State A. It also has offices in States B, C, and D. The recordkeeping requirements of States C and D are more stringent than that required by State A and the recordkeeping rules of State B are the most stringent of all. The investment adviser is required to maintain its records in accordance with the rules of: A. State A B. State B C. State C D. State D

a

An investment adviser representative (IAR) actively trades his client accounts, concentrating on equity and ETF trades, normally routing the trades through ABC Brokerage, a broker-dealer affiliated with the RIA. The IAR gets a new large customer, who wants a large portion of her portfolio invested in municipal bonds. ABC Brokerage does not have a municipal bond trading desk, so the IAR sends his municipal bond trades for the client to XYZ Brokerage, which specializes in municipal bonds of the client's state. This is an example of: A. trading away B. haircutting C. trading ahead D. diversifying

a

An investment adviser that is registered with the SEC under the Investment Advisers Act of 1940 moves to a new location. An amendment to Form ADV MUST be filed with the SEC: A. promptly B. within 1 day C. within 30 days D. within 90 days

a

If an investment yields 6% at the same time as inflation as measured by the CPI increases by 6%, the inflation-adjusted rate of return is: A. 0% B. 6% C. 12% D. 16%

a

Jumbo Certificates of Deposit in amounts above $250,000 are: I Guaranteed by the issuing bank II Guaranteed by the Federal Deposit Insurance Corporation III Guaranteed by the Securities Investor Protection Corporation A. I only B. II only C. I and II D. I and III

a

Which of the following are reasons to trade options? I Hedging II Tax Benefits III Speculation IV Liquidity A. I and III B. I and IV C. II and III D. II and IV

a

A block trade is a trade of at least: A. 1,000 shares B. 10,000 shares C. 100,000 shares D. 1,000,000 shares

b

A fee payment is NOT required to be made when a(n): A. agent of a broker-dealer registers in a State for the first time B. new broker-dealer files as a successor to a firm that has ceased operations C. renewal registration is filed by an investment adviser by December 31st of that year D. notice filing is made in the State by a Federal Covered Adviser

b

All of the following securities are "redeemable" EXCEPT: A. Open-end fund shares B. Closed-end fund shares C. Unit investment trusts D. Series EE bonds

b

An individual holding a CFP designation can get a waiver from taking the: A. Series 63 examination B. Series 65 examination C. Series 66 examination D. Either the Series 65 or 66 examination

b

Delivery of the investor brochure under the brochure rule can be satisfied by giving the customer a copy of the investment adviser's Form: A. ADV Part 1 B. ADV Part 2A C. ADV-S D. ADV-W

b

If an investment adviser is appointed by a trustee to manage the financial assets of the trust, the adviser has a fiduciary responsibility to the: A. trustee B. beneficiary C. grantor D. donor

b

If the SEC sends a deficiency letter to the issuer regarding an issue in registration: A. it disapproves of registering the issue B. disclosure is not considered to be adequate C. the underwriters have failed to establish the Public Offering Price D. due diligence has not been performed by the underwriters

b

If the alternative minimum tax computation is less than the regular income tax computation, which statement is TRUE? A. The alternative amount is due B. The regular amount is due C. The alternative amount is added to the regular amount, with the combined amount due D. The taxpayer selects the computation he wishes to use for that year, but must continue using that method in future years

b

Section 529 plans are used to fund: A. retirement needs B. higher education needs C. medical needs D. disability needs

b

Under Uniform State Law, advisory contracts: A. must be oral B. must be in writing C. may be either oral or in writing D. may be oral if documented in writing within 10 days of entering into the oral contract

b

Under the provisions of the Investment Advisers Act of 1940, if an adviser takes custody of customer funds or securities, account statements MUST be sent to the customer: A. monthly B. quarterly C. semi-annually D. annually

b

Which of the following is the LAST step in opening a new account for a customer? A. Completing the new account form B. Executing the first transaction C. The manager signing new account form D. Completing the order ticket for first order

b

A couple owns a home together and they file for bankruptcy. If there is an excess of funds from the sale of the home, where does the extra money go? A. To the mortgagor (debtor) couple B. To the mortgagee (mortgage) holder C. To the additional creditors D. To the secured creditors

c

A portfolio manager generates a 10% rate of return on a "small cap" portfolio, compared to an 8% rate of return on the benchmark portfolio and a 6% rate of return on the Standard and Poor's 500 index over the same period. The passive rate of return on the portfolio is: A. 2% B. 6% C. 8% D. 10%

c

A technical analyst would evaluate all of the following EXCEPT: A. moving averages B. chart formations C. dividend yields D. advance/decline ratios

c

All of the following accounts avoid probate upon death of an owner EXCEPT: A. Totten trust B. JTWROS C. Tenants in Common D. Payable on Death

c

An agent's registration becomes effective: A. immediately when filed in the State B. 10 days after filing in the State C. 30 days after filing in the State D. 90 days after filing in the State

c

As interest rates rise, preferred stock prices will: A. remain unaffected B. rise C. fall D. fluctuate

c

Exchange traded funds are NOT: A. marginable B. negotiable C. redeemable D. diversifiable

c

The lowest investment grade rating is: A. B B. BB C. BBB D. CCC

c

Under the Investment Company Act of 1940, violations are punishable for up to how many years in jail? A. 1 year B. 3 years C. 5 years D. 10 years

c

What is the sales charge on a mutual fund called? A. 12b-1 fee B. commission C. load D. mark-up

c

A municipal dealer quotes a 9 year, 6% term revenue bond at 92. The yield to maturity is: A. 6.50% B. 6.92% C. 7.12% D. 7.18%

d

All of the following are components of common stockholders' equity EXCEPT: A. Common at Par B. Capital in Excess of Par C. Retained Earnings D. Intangibles

d

All of the following statements are true about estate or gift tax due EXCEPT: A. the amount of tax due is based on the size of the gift or estate B. the larger the size of the gift or estate, the higher the tax rate C. a lifetime unified credit is applied against any tax due D. gifts or bequests made by an individual under age 59½ are subject to a penalty tax

d

An individual that has not yet passed the appropriate State licensing examination for agent registration in a State would be permitted to: A. accept an unsolicited order from a customer B. make a recommendation to a customer C. make a cold call to a potential client D. report a completed trade to a customer

d

In a corporate liquidation, the last to get paid is: A. Unpaid wages and taxes B. Bondholders C. Preferred stockholders D. Common stockholders

d

The sale of an "at the money" call is a: A. bull strategy B. bear strategy C. neutral strategy D. bear/neutral strategy

d

What is the maximum amount that an individual can contribute to a 529 plan without gift tax consequences in 2020? A. $6,000 B. $15,000 C. $56,000 D. $75,000

d

Which of the following strategies has unlimited loss potential? A. long stock / short call B. long stock / long put C. short stock / long call D. short stock / short put

d

Which option position is used to generate additional income against a short stock position? A. long call B. short call C. long put D. short put

d

Which statements are TRUE? I Traditional 401(k) plans require mandatory annual employer matching contributions II Safe harbor 401(k) plans require mandatory annual employer matching contributions III Traditional 401(k) plans require 100% vesting of employer-paid benefits IV Safe harbor 401(k) plans require 100% vesting of employer-paid benefits A. I and III B. I and IV C. II and III D. II and IV

d

XYZ Advisers is a federal covered adviser with an office in State A. It has 400 clients in State A; 6 clients in State B; and 3 clients in State C. A customer in State C files a complaint with that State's Administrator alleging that XYZ adviser made misleading statements. Which State Administrator(s) has the authority to revoke XYZ Adviser's registration? (federal?) A. State A only B. States A and B only C. States A, B and C D. None of the above

d

A BD application is received by the State Administrator for a new broker-dealer subsidiary of a Swiss securities firm. The application includes the disclosure that the parent firm was suspended from membership on the Deutsche Bourse 6 years ago because of unauthorized trading by its Hong Kong branch. The State Administrator A. cannot deny registration based on the suspension that was imposed by a foreign regulator B. can deny registration based on the suspension by the foreign regulator C. must grant registration because the U.S. subsidiary is a legally separate entity from the parent company that is based in Switzerland D. can deny registration only if the actions of the parent company were a criminal offense

a

A NASDAQ stock is quoted at $34 Bid / $35 Ask. A trader that places a buy order will most likely be filled at: A. $35 B. $34 1/2 C. $34 D. $33 1/2

a

A Registered Investment Adviser (RIA) is formed as a partnership. The RIA intends to charge an incentive fee that is based on investment performance. Under NASAA rules, the RIA: A. must be able to show that the fee is fair and reasonable to the State Administrator B. is not permitted to have an incentive fee under any circumstances C. can charge an incentive fee as long as it is included in the partnership agreement D. must offer the customer a fee refund if the performance does not meet the benchmark

a

A Registered Investment Adviser plans on offering options strategies as part of his services. For this added investment strategy, he will charge .6% of assets monthly. This information is added to the RIA's disclosure statement and the RIA tells all of his clients of the fees orally in seminars. Each of his clients signs an agreement regarding the options strategies and fees. Which statement is TRUE? A. The actions taken by the RIA are permitted because clients got full disclosure of all strategies and fees and agreed to such in writing B. The actions taken by the RIA are permitted because the fees charged to clients do not exceed 10% annually C. The actions taken by the RIA are prohibited because clients cannot be charged separately for options transactions D. The actions taken by the RIA are prohibited because options strategies are prohibited in managed accounts unless they conform to ERISA standards

a

A broker-dealer holds a sales contest that will award a $3,000 trip to Europe to the registered representative in the firm that sells the highest dollar value of mutual funds during the month of September. Which statement is TRUE? A. The holding of a mutual fund sales contest is permitted under NASAA rules B. The holding of a mutual fund sales contest is only permitted if the customer is offered a sales charge reduction C. The holding of a mutual fund sales contest is prohibited because it violates the Anti-Reciprocal rule D. The holding of a mutual fund sales contest is prohibited unless the winner receives a prize that has educational value about securities

a

A broker-dealer is a syndicate member in a best efforts underwriting of ABC Common stock. The issue is oversubscribed. The broker-dealer may allocate sales of the issue to: I employees of the issuer II employees of the broker-dealer III officers of the issuer IV officers of the broker-dealer A. I and III B. I and IV C. II and III D. II and IV

a

A broker-dealer located in State A makes an offer of securities to a customer whose principal residence is in State B. The customer has temporarily moved to State C and has asked the post office in State B to forward the mail to the customer's address in State C. Which State Administrator(s) has (have) jurisdiction over the offer? I State A II State B III State C A. I only B. I and II only C. I and III only D. II and III only

a

A broker-dealer that is registered in New York and that is not registered in any other State may effect transactions in securities: A. with any existing customer that is a New York resident that is vacationing anywhere in the United States B. with any new customer that is a New York resident that is vacationing anywhere in the United States C. with any New York resident located in any part of the United States D. only in New York and not in any other State

a

A client of an investment adviser brings his father to a consultation with his investment adviser representative to discuss investment alternatives for the father. The meeting is concluded. Two weeks later, the parent telephones the investment adviser representative, inquiring about the tax status of the client. The investment adviser representative should: A. refuse to disclose any information about the client B. disclose the requested information but communicate the father's request and the response given in a written communication to the client C. disclose the requested information but communicate the father's request and the response given to the investment adviser D. disclose the information

a

A client of an investment adviser representative has enjoyed excellent returns on his portfolio over the past 5 years. The client needs $25,000 of cash, but does not want to sell securities from his portfolio since it is performing so well. He asks the investment adviser representative for a loan, which the investment adviser representative gives. The investment adviser representative is guilty of a: A. fiduciary violation B. churning violation C. selling away violation D. failure to supervise violation

a

A company is formed with 120 shareholders and $20,000,000 of capital with the purpose of investing in securities. Which statement is TRUE? A. This company must be registered as an investment company under the 1940 Act B. This company must be registered with the Securities and Exchange Commission under the 1933 Act C. This company is exempt from registration under the Investment Company Act of 1940 D. This company is exempt from registration under the Securities Act of 1933

a

A company that has issued first mortgage bonds is declared in default by the trustee. Which statement is TRUE? A. The bondholders have legal claim to the property backing the bond; and may sell that property to satisfy the unpaid obligation B. The bondholders have legal claim to all property of the failed company; and may attach and sell any, or all, of that property C. The bondholders have first claim to all assets of the failed company that have not been pledged D. The bondholders are general creditors of the failed company

a

A corporation has issued 50,000,000 shares of common stock at $.50 par. The corporation has 10,000,000 shares of Treasury Stock on its books. The aggregate par value of the outstanding shares is: A. $20,000,000 B. $40,000,000 C. $80,000,000 D. $100,000,000

a

A customer approaches your firm, stating that he wishes to fund his 3 year old son's future college education. He states that he wants to maximize his contributions, minimize taxes, and maintain complete control over the account. Based on these objectives, the best recommendation is a: A. 529 college savings plan B. 529 prepaid tuition plan C. UGMA account D. Coverdell ESA

a

A customer buys $23,000 of ABC stock in March of 20XX. On December 31, 20XX, the stock is valued at $20,000. The customer will be able to deduct how much on this year's tax return? A. 0 B. $1,500 C. $3,000 D. $6,000

a

A customer buys a 6.50% municipal bond at par in the State. The customer is in the 30% Federal Tax Bracket and the 10% State Tax Bracket. After considering taxes, the customer's yield will be: A. 6.50% B. 5.90% C. 4.60% D. 3.90%

a

A customer has $10,000 in passive losses from a limited partnership investment. If the customer has no other passive income for that tax year, the customer may deduct: A. 0 B. $3,000 C. $5,000 D. $10,000

a

A customer has $20,000 to invest, but needs immediate access to the funds to pay a variety of bills that will arrive over the next 3 months. The BEST recommendation is for the customer to deposit the funds to a: A. Money market checking account B. Money market mutual fund C. Money market instrument D. Treasury Direct account

a

A customer has a 10-year investment time horizon and has $5,000 available for investment each year over that time frame. The customer wishes to have $100,000 at the end of that time. In order to accumulate $100,000 at the end of 10 years, the approximate rate of return on investment would need to be: A. 12% B. 8% C. 6% D. 4%

a

A customer has a free credit balance at a broker-dealer. The customer makes a verbal request over the phone that the broker-dealer pay the amount of the balance immediately, in check form. Which statement is TRUE? A. The request should be honored as given B. The broker-dealer cannot honor the request unless it is in writing C. The broker-dealer cannot honor the request unless the customer makes it in person D. The request cannot be honored since free credit balances are not payable to the customer

a

A customer in the 28% tax bracket has $6,000 of capital gains and $9,000 of capital losses. How much unused loss is carried forward to the next tax year? A. 0 B. $3,000 C. $6,000 D. $9,000

a

A customer in the 28% tax bracket is considering the purchase of a municipal bond yielding 8% or a corporate bond yielding 11%. Both bonds have similar maturities and credit ratings. Which statement is TRUE? A. The effective yield on the municipal bond is higher B. The effective yield on the corporate bond is higher C. Both effective yields are equivalent D. The coupon rates for each bond are necessary to determine the effective yield

a

A customer in the 35% tax bracket has $6,000 of capital gains and $10,000 of capital losses. How much loss is deductible from this year's tax return? A. $3,000 B. $4,000 C. $6,000 D. $10,000

a

A customer invests $1,000 over a 10-year time horizon. At the end of 10 years, the investment is worth $4,000. The non-compounded annual rate of return is: A. 30% B. 40% C. 300% D. 400%

a

A customer owns 200 shares of ABC, purchased 2 years ago at $50 per share. The current market value of ABC stock is $80 per share. If the customer gifts the stock to his son, the result is: I The donor may have gift tax liability II The recipient may have gift tax liability III The cost basis to the gift recipient is $50 per share IV The cost basis to the gift recipient is $80 per share A. I and III B. I and IV C. II and III D. II and IV

a

A customer residing in New York that is in the 35% Federal tax bracket and the 10% State tax bracket wishes to make a bond investment with a minimum 10-year life. The customer also wants a high level of safety. The following 10-year bonds are available: Yield AAA Corporate Bond 6.00 U.S. Treasury Bond 4.00 AAA Federal Home Loan Bank Bond 4.50 AAA New York Bond 3.50 The best recommendation for the customer is the: A. U.S. Treasury bond B. AAA Corporate bond C. AAA New York bond D. AAA Federal Home Loan Bank bond

a

A customer sells short 3000 shares of XYZ stock at $23 per share. The stock subsequently declines in price to $20 per share, and the customer believes that there may be a temporary change in market direction. If the customer is not concerned about the cost of hedging, he would be best advised to: A. buy 30 "at the money" calls B. buy 30 "at the money" puts C. sell 30 "at the money" calls D. sell 30 "at the money" puts

a

A customer that typically buys NYSE-listed stocks places an order to buy a very thinly traded stock that is quoted only in the Pink Sheets. Because of the extra work involved in handling this transaction, the firm imposes an extra $150 charge in addition to the regular commission. Which statement is TRUE? A. The extra charge must be disclosed to the customer at the time that the order is placed B. The extra charge must be disclosed to the customer no later than on the confirmation of the transaction C. The extra charge must be disclosed to the customer no later than on the next account statement D. There is no requirement to disclose the extra charge

a

A customer who buys a 10 year zero coupon bond with the intention of holding it to maturity would be MOST concerned with: A. inflation risk B. liquidity risk C. market risk D. business risk

a

A customer wishes to make an investment that provides liquidity, marketability and current income. The BEST recommendation is: A. Treasury Note B. Bank CD C. Preferred Stock D. Growth stock

a

A customer wishes to place a buy order for a security that has not been registered with the SEC. The security may be purchased if the security: I is exempt from SEC registration II is traded by at least 2 market makers III has been trading in the market for at least 1 year A. I only B. II and III C. I, II, III D. None of the above

a

A customer would sell put contracts because: A. the customer is bullish on the underlying security B. the customer is bearish on the underlying security C. the customer wishes to generate ordinary income D. the customer wishes to defer taxation of gains on the underlying stock

a

A first time offering of securities to be sold only to residents of a particular state is exempt from: A. federal registration B. state registration C. both federal and state registration D. the anti-fraud provisions of federal and state law

a

A fundamental analyst is likely to use technical analysis to determine: A. transaction timing B. investment selection C. portfolio diversification D. market volatility

a

A lawsuit filed alleging violations of the Uniform Securities Act: I survives the death of the plaintiff II does not survive the death of the plaintiff III survives the death of the defendant IV does not survive the death of the defendant A. I and III B. I and IV C. II and III D. II and IV

a

A management company has a net asset value of $8.59 per share. The fund's ask price is 5.3% lower than the net asset value. Which statement is TRUE? A. The fund must be closed-end B. The fund is no-load C. The fund has a contingent deferred sales charge D. The fund's assets are devalued

a

A manager of a small cap portfolio wishes to use an index to establish a benchmark rate of return. The most appropriate index to use is the: A. Russell 2000 Index B. Standard and Poor's 400 Index C. Dow Jones Industrial Average D. NASDAQ 100 Index

a

A married couple has a combined net worth of $10,000,000. If one dies in 2020, the taxable amount of the estate to the surviving spouse is: A. 0 B. $500,000 C. $5,000,000 D. $10,000,000

a

A married couple that is in the maximum tax bracket has 1 child, age 13. The couple is looking to start a 529 plan to fund the child's college education beginning 5 years from now. To calculate the amount of money needed to pay for college, all of the following are needed EXCEPT: A. parent's income B. current cost of tuition C. assumed rate of return D. expected inflation rate

a

A method of valuing a common stock is: A. dividend discount B. internal rate of return C. yield to maturity D. expected return

a

A municipal bond which is secured by taxes OTHER than ad valorem taxes is a(n): A. Special tax bond B. Industrial revenue bond C. Moral obligation bond D. General obligation bond

a

A plan trustee is considering making an investment in XYZ stock for a trust that has multiple beneficiaries. Under the provisions of the Uniform Prudent Investor Act, this investment decision must give consideration to the role that this investment plays: A. to the overall portfolio strategy B. to the investment strategy desired by each beneficiary C. on its own merits, regardless of its impact on the overall portfolio D. in meeting the financial needs of the trustee

a

A portfolio manager generates a 15% rate of return on an "aggressive growth" portfolio compared to a 13% rate of return on the benchmark portfolio and a 10% rate of return on the Standard and Poor's 500 index over the same period. The manager's active rate of return is: (return above the passive) A. 2% B. 3% C. 5% D. 15%

a

A portfolio manager that trades options would: A. buy a call option to lock in a stock's price prior to an anticipated price rise B. sell a call option to establish a short stock position prior to an anticipated price fall C. buy a put option to generate extra income against an existing long stock position D. sell a put option to protect an existing long stock position from a market decline

a

A privately-held company offers a 401(k) plan to its employees. The average age of the employees is 29 and the plan offers 10 different equity strategies. According to the Employee Retirement Income Security Act of 1974, Rule 404(c), the plan MUST be amended to: A. include at least 1 of the existing equity funds in addition to a fixed income fund and a capital preservation fund B. give the company's employees an investment option consisting of that company's publicly traded stock C. allow the company's employees to rebalance their portfolios at least monthly D. provide tax advice to any employee that makes an investment into the 401(k) plan

a

A registered broker-dealer has an employee who is not registered as an agent in that State. The employee wishes to sell U.S. Government bonds in that State. Which statement is TRUE? A. The employee is prohibited from selling the U.S. Government bonds unless he is registered as an agent in that State B. The employee is permitted to sell U.S. Government bonds because the securities are exempt C. The employee is permitted to sell U.S. Government bonds because the transaction is exempt D. The employee is permitted to sell U.S. Government bonds only if no commissions or other "transaction based" compensation is paid

a

A registered investment adviser pays $85,000 U.S. for a $100,000 AUD (Australian Dollar) bond that has a 7% coupon and a 10 year maturity. Which statement is TRUE? A. In 10 years, the adviser will receive $100,000 AU B. In 10 years, the adviser will receive $85,000 U.S. C. Every year, the adviser will receive $7,000 U.S. in interest D. The foreign exchange rate is locked in at the time of purchase of the bond

a

A registered representative wishes to work in his family's bar and grill at nights and on weekends to earn extra money. This work does not conflict with his normal work hours at his member firm. Which statement is TRUE? A. In order to take the outside job, the representative must give written notice to his employer B. No written notice to the employer is required because the representative will be working in a family business C. No written notice to the employer is required because the representative will not be working at the bar and grill during regular business hours D. In order to take the outside job, the representative must give written notice to the State Administrator

a

A registered representative with a broker-dealer sets up a financial planning practice at home to create financial plans for a fee for individuals who are not customers at the broker-dealer. Which statement is TRUE? A. The registered representative has become a "statutory" investment adviser and must register with the State as such B. The registered representative has violated the Investment Advisers Act of 1940, since registered representatives cannot give separate investment advice C. The registered representative must give prior notice to his customers at the broker-dealer of his outside investment advisory practice D. The registered representative may do so without restriction

a

A research report on an issuer CANNOT be published by the underwriter of that issuer's securities for the time period encompassing: I 10 days following the effective date for an initial public offering II 20 days following the effective date for an initial public offering III 3 days following the effective date for a secondary offering IV 5 days following the effective date for a secondary offering A. I and III B. I and IV C. II and III D. II and IV

a

A retired customer that has a portfolio of blue chip stocks is looking to supplement his retirement income. An appropriate recommendation would be to: A. sell covered calls B. sell naked calls C. sell covered puts D. sell naked puts

a

A retired customer, who has an investment objective of high current income and safety of principal, directs an agent to buy 500 shares of an unlisted speculative stock. The agent should: A. inform the customer that the trade is unsuitable and execute the transaction as directed if the customer insists B. refuse the transaction C. refer the customer to the State Administrator D. refer the customer to the Securities and Exchange Commission

a

A retiree who annuitizes a variable annuity contract subjects him or herself to: A. market risk B. purchasing power risk C. regulatory risk D. opportunity cost risk

a

A retirement plan would invest in all of the following securities EXCEPT: A. Tax Free Municipal Bonds B. U.S. Government Bonds C. Equities D. Corporate Bonds

a

A securities firm that stands ready to buy and sell a security for its own account is a(n): A. Market maker B. Broker C. Agent D. Principal

a

A security that is priced at equilibrium would tend to: I be stable in priceII be volatile in priceIII have lower transaction costsIV have higher transaction costs A. I and III B. I and IV C. II and III D. II and IV

a

A socially responsible customer would NOT invest in a(n): A. defense company B. food company C. drug company D. computer company

a

A sole proprietor has applied for and acts under a DBA. Under federal law, the tax return that must be filed is a(n): I individual return Form 1040 II partnership return Form 1065 III with Schedule C attached IV with Schedule E attached A. I and III B. I and IV C. II and III D. II and IV

a

A speculator that initiates a short futures position in Swiss Francs: I believes that the Swiss Franc will decline II believes that the Swiss Franc will increase III will need to buy Swiss Franc futures to close his position if he wants to avoid making delivery in the future IV can only satisfy the terms of the contract by making delivery of Swiss Francs on the delivery date A. I and III B. I and IV C. II and III D. II and IV

a

A willful violation of the Uniform Securities Act would occur if an agent of a broker-dealer recommends the purchase of a(n): A. non-exempt security to a customer that the agent knows is not registered, however the customer does not buy that security B. security to a customer that the agent believes to be exempt and is not registered, however the agent later discovers that the Administrator has denied the issue's exemption C. exempt security to a customer that the agent knows is not registered and the customer makes a purchase of the recommended security D. non-exempt security to a customer that the agent believes to be registered and the customer does not buy that security

a

A written customer complaint is received by mail that the firm resolves to the customer's satisfaction. Which statement is TRUE regarding keeping this record? A. A copy of the original complaint along with its resolution must be retained in the file of the agent by the broker-dealer B. A copy of the original complaint along with its resolution must be retained at the firm's supervisory office C. A copy of the original complaint along with its resolution must be retained by the State Administrator D. There is no requirement to retain a copy of the complaint because it was resolved to the customer's satisfaction

a

A younger female customer, in the highest tax bracket, already has a substantial investment portfolio that is invested in a balance of quality stocks and bonds. She wants an investment that will provide rapid asset growth and is willing to assume risk. The BEST recommendation would be: A. Emerging markets fund B. Single stock C. Municipal bond D. Index fund

a

Administrators can require minimum Net Capital and Net Worth for: A. Investment Advisers B. Investment Adviser Representatives C. Issuers D. Agents

a

All of the following actions will dilute the shareholders' equity EXCEPT: A. payment of a stock dividend B. conversion of convertible preferred stock C. exercise of stock options granted to officers D. issuance of additional common shares

a

All of the following actions would be permitted under the Uniform Securities Act EXCEPT: A. engaging in wash trades for a customer B. engaging in tax swaps for a customer C. omitting facts when making a recommendation to a customer D. recommending unregistered exempt securities to a customer

a

All of the following are acceptable investments in an Individual Retirement Account EXCEPT: A. Municipal Bonds B. U.S. Minted Gold Coins C. Common Stocks D. Common Stock Options

a

All of the following are covered under the Securities Exchange Act of 1934 EXCEPT: A. registration of new issues B. registration of broker-dealers C. registration of insiders D. registration of securities information processors

a

All of the following are defined as investment advisers who have been compensated under SEC Release IA-1092 EXCEPT a(n): A. estate planner receives a fee for setting up an investment trust for a client B. financial planner who receives a fee for providing a master financial plan without rendering specific investment advice C. insurance agent who receives a commission for selling life insurance that was part of an overall financial plan for which there was no charge to the client D. investment newsletter that charges a subscription fee for reports issued on specific securities

a

All of the following are requirements for an internet communication (a website) posted by a broker-dealer, agent, investment adviser or investment adviser representative EXCEPT the communication must A. attempt to effect securities transactions or the rendering of personalized investment advice for compensation in the State B. include a firewall or other implemented procedure to ensure that prior to any subsequent communication with prospective clients in the State, that the broker-dealer, agent, investment adviser, or investment adviser representative are registered in the State, or are exempt or excluded from registration C. include a legend that states that: "The broker-dealer, agent, investment adviser or investment adviser representative may only transact business in the State if registered in the State or if exempted or excluded from registration" D. include a legend that states that: "Follow ups or individualized responses to persons in the State by the broker-dealer agent or investment adviser representative that involve either effecting or attempting to effect transactions in securities, or the rendering of personalized investment advice for compensation, will not be made absent compliance with State registration requirements or an applicable exemption or exclusion."

a

All of the following can establish a 403(b) plan EXCEPT a public: A. corporation B. university C. hospital D. school system

a

All of the following come under the jurisdiction of the State Administrator EXCEPT a: A. television broadcast from a neighboring State, received in that State B. television broadcast from within that State, received in that State C. mailing of sales literature to a customer in a neighboring State D. mailing of sales literature to a customer in that State

a

All of the following information is included on an applicant's registration application EXCEPT: A. Educational history of applicant B. Business history of applicant C. Conviction record of applicant D. Financial condition of applicant

a

All of the following statements are true regarding a Standard and Poor's 500 Index fund EXCEPT: A. the portfolio manager can decide to invest in any stock as long as it is included in the Standard and Poor's 500 Index B. the portfolio manager must change the composition of the fund if the stocks included in the index are changed C. the fund must weight its investments in the same manner as the Standard and Poor's 500 index is weighted D. the management fee for such a fund is typically lower than for an actively managed fund

a

All of the following statements are true regarding municipal bonds EXCEPT: A. General obligation bonds have a higher risk of default than revenue bonds B. General obligation bonds are backed by the full faith and credit of the issuer C. Interest income received from both general obligations and revenue bonds is exempt from Federal income tax D. General obligation bonds cannot be issued in excess of statutory debt limits

a

All of the following statements concerning a 403(b) plan are correct EXCEPT: A. contributions are determined by the employer's level of profits B. the plan may provide only for employee contributions C. employee contributions may be matched by employer contributions D. contributions may be invested in mutual funds or annuities

a

All of the following statements concerning dollar cost averaging (DCA) are correct EXCEPT: A. DCA reduces the cost of purchasing shares below current market price B. the investor using DCA makes no attempt to adjust the amounts of investment by market trends C. an investor using DCA makes fixed dollar investments at regular intervals D. an investor using DCA will buy fewer shares when the price of shares is high

a

American Depositary Receipts would trade on all of the following exchanges EXCEPT the: A. London Stock Exchange B. New York Stock Exchange C. NASDAQ Stock Market D. American Stock Exchange

a

An Investment Adviser Representative (IAR) has been employed by a Registered Investment Adviser (RIA) for the past 12 years and has accumulated $18,000,000 of customer assets under management in accounts for 47 different customers. The IAR has experienced a personal economic decline and has been trading these customer accounts with ever-increasing frequency to generate the commissions necessary to meet his personal debt obligations. Which statements are TRUE? I The IAR has regulatory liability II The IAR has no regulatory liability III The RIA has regulatory liability IV The RIA has no regulatory liability A. I and III B. I and IV C. II and III D. II and IV

a

An agent is prohibited from doing all of the following EXCEPT: A. performing investment advisory services for customers as long as they are solely incidental to his work as a broker and no fees are charged B. soliciting orders for non-exempt unregistered securities C. effecting transactions in a State where he is not registered, but the broker-dealer is registered D. effecting transactions in a State where the broker-dealer is not registered, but he is registered

a

An agent of a broker-dealer is told by a wealthy, well-connected client that "I just talked to the president of ABCD Corp. (an NYSE listed company) and was told that this quarter's results are going to be lousy." Which statement is TRUE? A. The agent can discuss this phone conversation with his branch manager B. The agent can discuss the phone conversation with his spouse C. The agent can discuss the phone conversation with anyone who is registered as an agent in that State D. The agent cannot discuss this phone conversation with anyone

a

An agent recommends that a customer purchase an unregistered non-exempt security. This is a violation of which section of the Uniform Securities Act? A. Part I - Fraudulent and Other Prohibited Practices B. Part II - Registration and Notice Filing Procedures For Broker-Dealers, Agents, Investment Advisers and Investment Adviser Representatives C. Part III - Registration and Notice Filing Procedures Of Securities D. Part IV - General Provisions

a

An individual buys stock from a distant family member for $2,000. The family member paid $1,000 for the stock and held it for many years before selling it. A short while later, the same individual inherits $3,000 of the same stock. 6 months later the stock has doubled in value, and the individual sells all the shares. The tax consequence is: A. $2, 000 short-term capital gain; $3,000 long-term capital gain B. $2,000 long-term capital gain; $3,000 short-term capital gain C. $5,000 short-term capital gain D. $5,000 long-term capital gain

a

An individual owns a Traditional IRA from which she has never taken a distribution. Her 70th birthday falls on June 30, 2020. Her first distribution must be taken no later than A. April 1st of 2021 B. April 1st of 2022 C. June 30th of 2023 D. June 30th of 2024

a

An individual that has not reached retirement age that has an IRA account dies, splitting the estate equally between his wife and his 2 sons. The wife is age 60, one son is age 35 and the other son is age 30. Distribution of the assets in the account is based on the life expectancy of the: A. wife B. 35 year old son C. 30 year old son D. the average of the life expectancies of the 3 beneficiaries

a

An institutional buyer is defined under the Uniform Securities Act as any person: A. so designated by the Administrator by rule or order B. with over $100 million of assets under management C. defined under Section 4(6) of the Securities Act of 1933 D. that solely effects transactions using the mails or other means of interstate commerce

a

An investment adviser can hold all of its customer securities in a single brokerage account without identifying the individual customers to the brokerage dealer: A. in an omnibus account B. in a joint account - tenants in common C. in a prime brokerage account D. under no circumstances

a

An investment adviser directs its trades to a broker-dealer paying non-discounted rates. In return, the broker-dealer provides the adviser with proprietary investment analysis software that it has developed. This is: I a soft dollar arrangement II a quid pro quo arrangement III permitted under the Uniform Securities Act IV prohibited under the Uniform Securities Act A. I and III B. I and IV C. II and III D. II and IV

a

An investment adviser has decided to change its fee structure and will begin charging a prepaid advisory fee for new clients, but will keep its pre-existing fee structure for its existing clients. Under the requirements of the Investment Advisers Act of 1940, which statements are TRUE? I A revised brochure must be provided to new clients II Prompt amendment of Form ADV filed with the SEC is required III Approval of the investment adviser's existing clients must be obtained IV Filing with the SEC of the fee change must be completed within 30 days A. I and II B. III and IV C. I and IV D. II and III

a

An investment adviser has determined that ABCD stock would be an appropriate investment for his client, but only if the price falls from the current level of $50 per share to $35 per share. What MUST the adviser do prior to placing an order to buy ABCD stock for the client's account? A. Obtain verbal authority for that specific transaction B. Obtain verbal authority to exercise discretion over the account C. Obtain verbal authority to exercise discretion only over price and time of execution in the account D. Secure an appointment as trustee over the account to formalize the fiduciary relationship

a

An investment adviser has developed 11 different investment strategies that use a combination of fundamental and technical factors to make investment decisions among both equity and fixed income investments. Based on the customer account profile, the adviser then uses one of 7 different algorithms that allocates the client's funds using these 11 investment strategies. The adviser has implemented a fee structure that charges a 1.10% annual management fee on assets invested, plus the adviser charges a fee of .50% of assets annually for use of the algorithms. The adviser provides each client with a flyer covering the adviser's 11 different investment strategies with disclosure of the 1.10% annual management fee. Under the NASAA Rule on Unethical Business Practices of Investment Advisers, this is: A. a violation of the prohibition on charging unreasonable advisory fees, because the client is being double charged for these services B. a violation of the prohibition on charging a client an advisory fee for rendering advice when a commission for executing securities transactions pursuant to such advice will be received by the adviser C. not a violation of the prohibition on charging unreasonable advisory fees, because the management fee was disclosed to the client D. not a violation of the NASAA Rule on Unethical Business Practices of Investment Advisers because the advisory fees are based on assets under management

a

An investment adviser headquartered in State A wishes to solicit customers in State B. Which statements are TRUE? I If the investment adviser has an office in State B, it must register in State B II If the investment adviser has an office in State B, it need not register in State B III If the investment adviser has no office in State B, it must register in State B IV If the investment adviser has no office in State B, it need not register in State B A. I and III B. II and IV C. I and IV D. II and III

a

An investment adviser is registered in State A where it maintains its home office and most of its employees. The IA has an office in State B as well. The Administrator of State B determines that the IA is insolvent in State B. What action can the Administrator of State B take? A. The Administrator can revoke the registration of the Investment Adviser in State B B. The Administrator can revoke the registration of the Investment Adviser in State B only if the adviser has custody of client funds C. The Administrator can revoke the registration of the Investment Adviser in both States A and B D. The Administrator can do nothing because the adviser's principal place of business is State A

a

An investment adviser may receive a percentage of gains and losses in a client's account: A. under no circumstances B. only if specifically agreed in writing by both the customer and adviser C. only if a written agreement is approved in advance by the Administrator D. without restriction

a

An investment adviser representative obtains a list of all 263 members of the local Kiwanis Club and sends a coupon to 52 leads on the list, along with a letter, offering a 20% discount on services to new clients that are club members. Aside from retaining a copy of the letter, under the provisions of the Investment Advisers Act of 1940, the investment adviser MUST keep: A. a memorandum describing the list and the source of the list B. a record of the names and addresses of the persons to whom the offer was made C. the worksheets that estimate the net worth of leads and the standards used to determine which leads were to receive the offer D. a record of the names and addresses of all of the Kiwanis Club members on the list

a

An investment adviser to a hedge fund with $250 million of AUM has invested 100% of fund assets in gold, anticipating a steep stock market decline and flight to safety by investors. The investment adviser: A. must register with the SEC B. must register with the CFTC C. must register with both the CFTC and the SEC D. is neither required to register with the SEC nor the CFTC

a

An investment adviser with its principal office in the State of Kentucky has 3 branch offices in Ohio and 4 branch offices in Tennessee. The State of Kentucky has a minimum net worth requirement for Investment Advisers of $30,000. The net worth requirement for the State of Ohio is $40,000 and the net worth requirement for the State of Tennessee is $35,000. Under the Uniform Securities Act, the minimum net worth that must be maintained by the Investment Adviser is: A. $30,000 B. $35,000 C. $40,000 D. $0, since this is a Federal Covered Adviser

a

An investment adviser would recommend to a client that he or she should buy which of the following in order to properly fund an investment plan if the client dies prematurely? A. Life insurance B. Life annuity C. Bonds D. Mutual funds

a

An investment advisory firm does its own research, using a group of dedicated employees and has a separate staff of investment adviser representatives (IARs) who solicit new accounts. In an effort to maintain confidentiality between the research staff and sales staff, the investment adviser MUST: A. establish a Chinese Wall between the research personnel and the sales personnel B. register both the research personnel and the sales personnel in each State where the IA's services are offered C. cross-train the research personnel and the sales personnel in each other's functions so that in the event of a confidentiality breach, one can take over the functions of the other D. establish two separate IA firms registered with the State with one only having research personnel and the other only having sales personnel

a

An investment generates the following annual returns: Year 1: 7% Year 2: 4% Year 3: 2% Year 4: 10% Year 5: 8% The return of 7% is the: A. median B. mode C. mean D. range

a

An investment strategy where a higher price is paid for a stock based upon expected returns is: A. growth investing B. value investing C. conservative investing D. passive investing

a

An investment would be made in a variable annuity in order to get: A. tax-deferred growth of an equity investment B. tax-free income at retirement age C. immediate income while contributions are being made D. life insurance coverage at no additional cost

a

An investor has $50,000 that she wishes to invest for her child's college expenses, which the child starts next year. The most suitable recommendation to the client is to invest the funds in: A. Treasury bills B. Intermediate-term bonds maturing in 5 years C. Long-term bonds of blue chip companies maturing in 10-30 years D. a mutual fund based on the S&P 500 Index

a

An investor in a limited partnership generating passive losses can offset these against: A. income generated from direct investments in real estate B. dividends received from blue chip corporations C. capital gains generated from the sale of partnership units D. income generated from investments in municipal bonds

a

An investor who places the majority of assets in a single stock exposes the portfolio to: A. business risk B. liquidity risk C. inflation risk D. market risk

a

An investor's securities portfolio has depreciated by $3,000 this year. How much of the loss can the investor deduct on this year's tax return? A. 0 B. $1,500 C. $3,000 D. $6,000

a

An offering of securities in an amount that does not exceed $50,000,000, is given an exemption from registration under the Securities Act of 1933's: A. Regulation A B. Rule 147 C. Regulation D D. Rule 144

a

Annual renewal of registration as an agent or an investment adviser in each State is made by filing: I Form U-4 II Form U-6 III within 30 days of the date that renewal statements are sent out IV within 60 days of the date that renewal statements are sent out A. I and III B. I and IV C. II and III D. II and IV

a

As the economy fluctuates, the holder of a variable annuity contract should know that: A. payments will fluctuate based upon the actual return that the separate account earns B. payments will not fluctuate over time C. during periods of recession, annuity payments are protected and will not be reduced D. during periods of negative economic growth, it is likely that annuity payments will increase

a

At the initial discussion phase with a customer about portfolio planning, which of the following is NOT necessary? A. Testamentary letter B. Listing of customer brokerage accounts C. Life insurance coverage held by the customer D. Listing of assets owned by the customer

a

Buy limit orders are: I placed below the current market value II placed above the current market value III executed if the market falls IV executed if the market rises A. I and III B. I and IV C. II and III D. II and IV

a

China has announced that it will reduce its purchases of Treasury securities at the weekly auction and shift more of their investment to Euros. This action will: A. cause U.S. interest rates to rise B. cause U.S. interest rates to fall C. cause U.S. interest rates to be volatile D. have no effect on U.S. interest rates

a

Common dividends are usually: I declared quarterly II declared semi-annually III paid quarterly IV paid semi-annually A. I and III B. I and IV C. II and III D. II and IV

a

Contingent bond portfolio immunization: A. is an investment approach where an active fund manager will switch to a defensive strategy if the portfolio falls below a predetermined point B. matches the maturity of each expected liability to an investment that will provide cash flows to match C. uses put options to hedge against potential market interest rate increases that will devalue the value of positions held in the portfolio D. periodically liquidates positions that have increased in value and uses to proceeds to invest in positions that have decreased in value

a

Criminal violations of the Uniform Securities Act are punishable by: I $5,000 fine II $10,000 fine III 3 years in jail IV 5 years in jail A. I and III B. I and IV C. II and III D. II and IV

a

Declines in all of the following would likely result in the FOMC making net purchases of government securities in the open market EXCEPT a decline in (the): A. unemployment levels B. Consumer Price Index C. Gross Domestic Product D. bond prices

a

Delivery of a prospectus is required if a: I new issue of corporate bonds is being offered to the public II trade in a corporate bond takes place in the secondary market III new issue of government bonds is being offered to the public IV trade of a government bond takes place in the secondary market A. I only B. I and II C. I and III D. I, II, III, IV

a

During a period of steep economic decline, equity investments fall out of favor with investors, who rotate their investments out of equities into safe investments such as Treasury Bills. This is an example of: A. market risk B. business risk C. regulatory risk D. opportunity cost

a

During prolonged periods of an economic recession: I interest rates can be expected to fall II interest rates can be expected to rise III the Federal Reserve will begin to loosen credit IV the Federal Reserve will begin to tighten credit A. I and III B. I and IV C. II and III D. II and IV

a

During the payout period of a variable annuity contract, the insurance company assumes: I Mortality risk II Purchasing power risk III Expense risk IV Investment risk A. I and III B. I and IV C. II and III D. II and IV

a

ECNs trade: A. stocks B. stock options C. bonds D. mutual funds

a

Excess contributions to an IRA are subject to: A. a 6% penalty tax B. a 10% penalty tax C. a 15% penalty tax D. penalty tax only if the account owner is under age 59 1/2

a

Exchange traded index funds: I have comparable or lower expense ratios than index mutual funds II can be traded anytime during exchange trading hours at net asset value III can be redeemed at net asset value computed at the close of the market IV can be traded at no commission cost to the customer A. I and II only B. III and IV only C. I, II, III D. I, II, III, IV

a

Federal Farm Credit System bonds are backed by all of the following issuers EXCEPT: A. Federal Home Loan Banks B. Federal Land Banks C. Federal Intermediate Credit Banks D. Banks for Cooperatives

a

Funds deposited to purchase a fixed annuity contract are invested by the insurance company in its: A. general account B. separate account C. investment account D. annuity account

a

If a customer has a margin account at a broker-dealer, the customer: I can receive a margin call II cannot receive a margin call III can receive a maintenance call IV cannot receive a maintenance call A. I and III B. I and IV C. II and III D. II and IV

a

If a firm effects trades solely on an principal basis, the firm: I carries inventory II does not carry inventory III is a market maker IV is not a market maker A. I and III B. I and IV C. II and III D. II and IV

a

If a gift of securities is made to a family member, which of the following are TRUE? I The donor may have gift tax liability if the gift's value is over $10,000 indexed for inflation II The recipient may have gift tax liability if the gift's value is over $10,000 indexed for inflation III The cost basis to the recipient is the same as the donor's IV The cost basis to the recipient is the same as the market value of the securities on the gift date A. I and III B. I and IV C. II and III D. II and IV

a

If a passively managed fund either underperforms or overperforms the benchmark index, this is called the: A. tracking error B. alpha coefficient C. opportunity cost D. margin of error

a

If a representative that transacts business in a State terminates employment with a federal covered adviser: A. the representative must notify the Administrator promptly B. the federal covered adviser must notify the Administrator promptly C. both the representative and the federal covered adviser must notify the Administrator promptly D. both the representative and the federal covered adviser must notify the Administrator within 30 days

a

If an agent changes his place of employment from one broker-dealer to another, the registration must be transferred: A. immediately B. within 10 days C. within 30 days D. within 90 days

a

If an agent terminates his employment with a broker-dealer, when must the agent and the broker-dealer notify the State Administrator? A. Promptly B. Within 5 days C. Within 10 days D. Within 30 days

a

If an individual, aged 69, takes a withdrawal from his IRA, which statement is TRUE? A. The amount withdrawn is subject to regular income tax only B. The amount withdrawn is subject to a 10% penalty tax only C. The amount withdrawn is subject to regular income tax plus a 10% penalty tax D. The amount withdrawn is not subject to any tax

a

If an investment adviser creates a website and offers individualized investment services based on client input, then: I this is considered to be an offer of advisory services in the State where the client who gave input resides II this is not considered to be an offer of advisory services in the State where the client who gave input resides III the investment adviser and its agents must be registered in each State where the client who gave input resides IV the investment adviser and its agents are not required to be registered in each State where the client who gave input resides A. I and III B. I and IV C. II and III D. II and IV

a

If an investment adviser is recommending that a customer buy a security, that the adviser will sell to the customer out of its own inventory, which of the following statements are TRUE? I This is a "principal transaction" II This is an "agency cross transaction" III This transaction is permitted only if the customer is informed of the circumstances and consents to the transaction IV This transaction is prohibited A. I and III B. I and IV C. II and III D. II and IV

a

If an offerer offers to buy back a securities issue that was inadvertently sold in the State, buyers of the issue have how many days to accept the offer? A. 30 B. 60 C. 90 D. 120

a

If parents set up Coverdell Education Savings Accounts for their 2 children and contribute $2,000 to each of the accounts, how much can a grandfather and grandmother contribute in that year? A. 0 B. $1,000 C. $2,000 D. $4,000

a

In 2019, a customer buys 1 GE 8%, $1,000 par debenture, M '34, at 110. The interest payment dates are Jan 1st and Jul 1st. The yield to maturity on the bond is: A. 6.98% B. 7.58% C. 8.00% D. 8.24%

a

In 2019, a customer buys 5 GE 10% debentures, M '29, at 85. The interest payment dates are Feb 1st and Aug 1st. The bonds are callable as of 2021 at 103. If the bonds are called prior to maturity, which statement is TRUE? A. The yield to call will be higher than the yield to maturity B. The yield to call will be lower than the yield to maturity C. The yield to call will be the same as the yield to maturity D. The yield to call will depend on the current market price of the bond at the time of the call

a

In order for the State Administrator to enter an order revoking or suspending a registration, which requirement MUST be present? A. The order must be in the public interest B. The registration must be misleading C. A complaint must have been received by the Administrator D. A willful violation of the Act must have occurred

a

Industrial development bonds are backed by: I the lease obligating the private user to rent the facility for the life of the bond issue II the unconditional guarantee of the private user III securities pledged as collateral by the private user IV the faith and credit of the governmental issuer A. I and II only B. III and IV only C. I, II, IV D. I, II, III, IV

a

Initial Public Offerings (IPOs) are sold for the first time in the: A. primary market B. first market C. third market D. fourth market

a

Interest income from all of the following bond issues is exempt from Federal State and Local tax EXCEPT: A. State of Hawaii B. Puerto Rico C. Guam D. Virgin Islands

a

Interest income from municipal bonds purchased by a resident of the issuing State is: A. exempt from Federal, State and Local tax B. exempt from Federal tax and subject to State and Local tax C. subject to Federal tax and exempt from State and Local tax D. subject to Federal, State and Local tax

a

Internal Revenue Code Section 1031: A. permits a like-kind exchange of appreciated real estate for another investment property to defer capital gains tax due B. values securities held in an estate at fair market value at the date of death, avoiding capital gains tax on appreciated positions C. allows for the swap of an investment that has depreciated for another similar but not identical asset, with no disallowance of the capital loss D. defers the generation skipping tax owed by an estate on assets left directly to grandchildren

a

Licensing of investment adviser representatives occurs at the: A. State level only B. Federal level only C. Both the Federal and State level D. Neither the Federal nor State level

a

Many years ago, a customer bought 100 shares of ABC stock at $40. The customer makes a single gift to his daughter this year of the stock when it is valued at $50. The stock is sold by the daughter when it is worth $55. For tax purposes, the daughter's cost basis in the security is: A. $40 per share B. $50 per share C. $55 per share D. $60 per share

a

Mutual fund distributions that are automatically reinvested are: A. taxable based on the date of the distribution B. taxable when the shares are redeemed C. taxable upon reaching age 59 1/2 D. not taxable

a

NASAA administers the: A. Uniform Securities Act B. Securities Act of 1933 C. Investment Advisers Act of 1940 D. Investment Company Act of 1940

a

One of the key assumptions of the Capital Asset Pricing Model is that: A. Investors are risk averse B. Investors are emotional C. Investors consider taxes when making investment decisions D. Some investors have access to better market information than other investors

a

Payments received by the owner of a tax qualified variable annuity are: A. 100% taxable as investment income B. only taxable to the extent of earnings above the holder's cost basis C. only taxable to the extent of the holder's cost basis D. non-taxable

a

Prior to the filing of a registration statement, which of the following activities is (are) permitted? I A member firm signing a syndicate agreement to become part of the underwriting group for the issue II A member firm distributing preliminary prospectuses for the issue to customers III A member firm taking indications of interest for the issue from customers IV A member firm selling the issue to customers A. I only B. II and III only C. I, II, III D. I, II, III, IV

a

Regarding inspection powers, the State Administrator: I can visit and conduct a walk-in audit of broker-dealer offices intra-State if it is in the public interest or for the protection of investors II can visit and conduct a walk-in audit of broker-dealer offices inter-State if it is in the public interest or for the protection of investors III can neither visit nor conduct a walk-in audit of broker-dealer offices intra-State IV can neither visit nor conduct a walk-in audit of broker-dealer offices inter-State if it is in the public interest or for the protection of investors A. I and II B. III and IV C. I and IV D. II and III

a

Reports filed by issuers with the SEC under the Securities Exchange Act of 1934 are made available to the public: A. immediately B. after SEC review C. after 10 days have elapsed from filing D. after 30 days have elapsed from filing

a

Short sale transactions are typical for which of the following? I Closed-end funds II Municipal bonds III Treasury bonds IV Limited partnerships A. I and III B. I and IV C. II and III D. II and IV

a

The Administrator can be under the obligation to file a U-6 Form if a(n): A. written complaint about an investment adviser representative is received from a customer that alleges a felony B. oral complaint about an investment adviser representative is received from a customer that alleges a suitability violation C. written complaint is received about an investment adviser representative from a whistleblower D. oral complaint is received about an investment adviser representative from the representative's spouse

a

The Administrator is permitted to deny, revoke, or suspend the registration of any person associated with a broker-dealer who has been convicted of a misdemeanor involving securities or monies; or any felony; within the past: A. 10 years B. 15 years C. 20 years D. 25 years

a

The Federal Reserve would enter into a transaction involving which of the following with a primary U.S. Government securities dealer? A. Overnight repurchase agreement B. Federal Funds C. Eurodollars D. Banker's acceptance

a

The MINIMUM price at which an open-end fund share can be purchased is: A. NAV B. NAV plus a commission C. POP plus a commission D. Any price because the price is negotiated between buyer and seller

a

The difference between a cash forward contract and a commodity futures contract is that the forward contract: A. is traded over-the-counter B. has a standardized delivery date C. deals with a specific quantity of the commodity D. has an acceptable deliverable grade of range of grades of the commodity

a

The formula for Total Return is: A. Dividend yield plus growth divided by original investment B. Dividend yield divided by average investment value C. Ending investment value minus beginning investment value divided by number of years that the investment was held D. Growth minus the inflation rate divided by ending investment value

a

The lower 15% tax rate applies to:I Cash dividends received from stock investmentsII Stock dividends received from stock investmentsIII Stock splits received from stock investments A. I only B. I and II C. II and III D. I, II, III

a

The maximum permitted annual contribution into a Coverdell ESA is: A. $2,000 in any number of Coverdell ESAs per beneficiary per year B. $2,000 in each Coverdell ESA per beneficiary per year C. $5,000 in any number of Coverdell ESAs per beneficiary per year D. $5,000 in each Coverdell ESA per beneficiary per year

a

The person who prepares the Trust Agreement is the: A. Trust Attorney B. Grantor of the Trust C. Beneficiary of the Trust D. Trustee

a

The purchaser of an immediate 15-year period certain annuity will receive payments for: A. a 15-year time frame following annuitization, even if the purchaser dies before the end of the 15-year term B. a minimum 15-year time frame, or the life of the annuitant, if this is shorter C. the life of the annuitant, but will pay for a minimum of 15 years if the annuitant dies before this period elapses D. any selected 15-year time frame, even if the purchaser dies before the end of the 15-year term

a

The real interest rate is the incremental interest earned by an investor above the: A. inflation rate B. prime rate C. investor's tax rate D. discount rate

a

The registration of a broker-dealer automatically constitutes the registration of any agent who is a(n): A. partner of the firm B. secretary of the firm C. analyst of the firm D. employee of the firm

a

The risk adjusted rate of return of an investment is most closely correlated to the investment's: A. alpha coefficient B. beta coefficient C. delta coefficient D. gamma coefficient

a

The setting of specific goals for an investment plan to be created for a customer is known as: A. Strategic asset management B. Tactical asset management C. Dollar cost averaging D. Portfolio rebalancing

a

The simplest way of investing in a mutual fund is: A. buy and hold B. indexing C. rebalancing D. dollar cost averaging

a

The smallest denomination available for Treasury Bills is: A. $100 B. $1,000 C. $10,000 D. $100,000

a

The spread is: I earned by a market maker when it effects a round turn principal transaction II earned by an order entry firm when it effects a riskless agency transaction III the difference between the bid and ask quote IV represents the commission charged for effecting the trade A. I and III B. I and IV C. II and III D. II and IV

a

The type of stock option most often granted to key employees and officers of companies is a(n): A. qualified stock option B. non-qualified stock option C. accredited stock option D. non-accredited stock option

a

The way that unsystematic risk can be avoided is by: A. diversification B. hedging C. rebalancing D. collaring

a

The weak form of efficient market theory states that: I historical stock prices have no validity for predicting future stock price movements II historical stock prices have a strong correlation to future stock price movements III technical analysis cannot be used to improve investment returns IV fundamental analysis cannot be used to improve investment returns A. I and III B. I and IV C. II and III D. II and IV

a

The yield curve shows the yields of different: A. maturities of the same type of security B. types of securities with the same maturity C. risk classes of securities with the same maturity D. maturities of securities with different risk classes

a

To get a customer to open an account, an agent tells a client that he will personally visit the client each month to explain that month's investment results. The agent fails to tell the customer that he expects to be transferred to another state in 3 months. Which statement is TRUE? A. This is a prohibited business practice B. This statement is allowed if the agent will arrange for another individual to take over the account when he is transferred C. This statement is acceptable D. This statement must be given to the customer in writing to be acceptable

a

To open a new account for a non-revocable trust, which statement is true? A. The tax identification number of the trust must be obtained B. The tax identification number of the trustee must be obtained C. The tax identification of the trust beneficiary must be obtained D. There is no requirement to obtain a tax identification number when opening a trust account

a

Transfer on Death registration would likely be used by which of the following? A. Elderly father and adult son B. Middle age mother and minor daughter C. Unrelated business partners D. Husband and wife

a

Treasury Bills are issued by the U.S. Government in which form? A. Book Entry B. Bearer C. Registered to Principal Only D. Registered to Principal and Interest

a

Treasury Notes are issued by the U.S. Government in which form? A. Book Entry B. Bearer C. Registered to Principal Only D. Registered to Principal and Interest

a

Treasury bonds: I are issued in minimum $100 denominations II are issued in minimum $10,000 denominations III mature at par IV mature at par plus accrued interest A. I and III B. I and IV C. II and III D. II and IV

a

Two young professionals each make $50,000 per year. They are getting married and meet with an Investment Adviser Representative for advice about how their tax status will change once they "tie the knot." The IAR should inform them that they will likely: A. pay higher taxes B. pay lower taxes c reduce future estate taxes D. increase future estate taxes

a

Under ERISA provisions, a pension fund manager who wishes to write naked index call options: A. can only do so if explicitly allowed in the plan document B. can do so if the plan document allows for options transactions C. can do so without restriction D. is prohibited under ERISA requirements

a

Under IA-1092, to be considered to be "in the business," the rendering of investment advice must be: A. a regular activity of the adviser B. the principal activity of the adviser C. the sole activity of the adviser D. a non-recurring activity of the adviser

a

Under Uniform State Law, as adopted in most states, an agent may be affiliated with more than one broker-dealer at the same time: A. if both broker-dealers are under common control B. if each broker-dealer has consented to the arrangement in writing C. if the Administrator consents to the arrangement in writing D. under no circumstances

a

Under the Investment Advisers Act of 1940, after receiving an investment adviser application, the SEC must grant a registration to an investment adviser; or start a proceeding denying registration, within how many days? A. 45 B. 90 C. 120 D. 180

a

Under the Investment Advisers Act of 1940, which of the following persons is exempt from registration with the SEC? A. An investment adviser whose only clients are insurance companies B. An investment adviser whose only clients are investment companies C. An investment adviser whose only clients are pension plans D. All of the above

a

Under the NASAA Statement of Policy on unethical practices, written discretionary authority need not be obtained by an investment adviser if the customer: (know the difference between bd,ia) A. gives verbal discretionary authority and a written power of attorney from the customer is obtained within 10 days B. selects the security to be traded and the price of execution C. is an insurance company D. effects 5 or fewer trades within a 12 month period

a

Under the Uniform Securities Act, all of the following statements are true regarding an agent's license EXCEPT: A. once an application is filed, it is effective immediately B. the license is valid through December 31st of that year C. if the broker-dealer's license is revoked, the agent's license is revoked D. if the agent withdraws his or her registration, the withdrawal becomes effective in 30 days

a

Under the Uniform Securities Act, copies of order memoranda maintained by investment advisers must contain all of the following information EXCEPT: A. name of market where trade was executed B. person who placed the order C. name of account for which order was entered D. person connected with the Investment Adviser who recommended the transaction to the client

a

Under the Uniform Securities Act, if an agent hears material inside information, the agent: I should not transmit the information to others II should not trade based upon the information III must wait 1 year before trading that security IV must notify the Federal Bureau of Investigation within 1 business day A. I and II B. III and IV C. I, II, III D. I, II, III, IV

a

Under the Uniform Securities Act, in a civil suit brought by a purchaser against a seller that is alleged to have violated the Uniform Securities Act, the burden of proof rests with the: (plaintiff) A. Buyer of the securities B. Seller of the securities C. State securities administrator D. Judge presiding over the state court hearing the case

a

Under the Uniform Securities Act, the term "broker-dealer" includes which of the following? A. A person in the business of trading securities for his own account or for the account of other persons B. Agents who execute trades for broker-dealers C. Banks D. Issuers of securities

a

Under the Uniform Securities Act, which of the following would be required to register as an investment adviser representative? A person who: A. acts as a solicitor for the adviser B. performs ministerial functions for the adviser C. handles the books and records of the adviser D. registers investment adviser representatives

a

Under the Uniform Securities Act, which persons are EXCLUDED from the definition of an investment adviser? A person who gives advice about: I U.S. Government bonds II Agency bonds III Municipal bonds IV Corporate bonds A. I and II only B. III and IV only C. I, II, III D. I, II, III, IV

a

Unintentional violations of the Uniform Securities Act that are considered to be a misdemeanor subject that person to: A. civil liability only B. civil liability and civil penalties C. criminal liability only D. criminal liability and criminal penalties

a

Value investors: A. seek to find investments that are undervalued by the market B. determine the value of a security through fundamental analysis C. invest in securities included in the Value Line Index D. make their investment decision based upon the market performance of the security

a

What is a Yankee Bond? A. A foreign bond traded in the U.S. market B. A foreign bond traded in a foreign market C. A U.S. bond traded in a foreign market D. A U.S. bond traded in the U.S. market

a

What is the earliest age where funds can be distributed from a 401(k) without a tax penalty? (rule of ?) A. 55 B. 59 1/2 C. 65 D. 70 1/2

a

What type of option can be exercised at any time? A. American Style B. European Style C. Eastern Style D. Western Style

a

When comparing an ETN to a structured product, which statement is TRUE? A. ETNs can be traded at any time while structured products cannot B. ETNs offer current income while structured products do not C. ETN income is taxable at higher rates than income from structured products D. ETNs are equity securities that are exchange listed

a

When comparing convertible to non-convertible corporate bonds, convertible bonds have: I Lower yields II Higher yields III Price appreciation potential based on the market price of the common stock IV No price appreciation potential based upon the market price of the common stock A. I and III B. I and IV C. II and III D. II and IV

a

When evaluating the market price of a common share, why would the Price to Sales ratio be used instead of the Price to Earnings ratio? A. Because the Price to Sales ratio can be used to value a company that does not have earnings or that has losses, while the Price to Earnings ratio cannot B. Because the Price to Sales ratio can be distorted by a non-recurring charge while this has no effect on the Price to Earnings ratio C. Because the calculation of the Price to Sales ratio is simpler than the calculation of the Price to Earnings ratio D. Because the Price to Sales ratio is a more reliable measure for computing share value as compared to the Price to Earnings ratio

a

When making an investment decision using CAPM, the interest rate that would be used as the minimum hurdle rate is the: A. 90 day Treasury Bill rate B. 5 year Treasury Note rate C. 10 year Treasury Note rate D. 30 year Treasury Bond rate

a

When short term interest rates are the same as long term interest rates, the yield curve is said to be: A. flat B. normal C. inverted D. bell shaped

a

When the market is reaching an "oversold" condition, which of the following statements are TRUE? I Market price averages are decreasing daily II Market price averages are increasing daily III The number of declining issues is decreasing relative to the number of advancing issues IV The number of declining issues is rising relative to the number of advancing issues A. I and III B. I and IV C. II and III D. II and IV

a

When the yield curve is inverted: I short term rates are higher than long term rates II long term rates are higher than short term rates III to maximize income, one should invest in short term maturities IV to maximize income, one should invest in long term maturities A. I and III B. I and IV C. II and III D. II and IV

a

Which business form does NOT allow for flow through of income and loss? A. C Corporation B. S Corporation C. Sole Proprietorship D. General Partnership

a

Which business structure has limited liability? A. S corporation B. Sole proprietorship C. General partnership D. Association

a

Which business structure has limited liability? A. C corporation B. Sole proprietorship C. General partnership D. Association

a

Which investment offers tax benefits? A. Municipal bond funds B. REITs C. International Funds D. Index Funds

a

Which item(s) is (are) needed to determine tax filing status? I Marital status on the last day of the year II Age of the filer II Residency on the last day of the year IV Citizenship of the filer A. I only B. II and IV only C. I, II, III D. I, II, III, IV

a

Which of the following BEST describes Limited Liability Companies (LLCs)? LLCs: I give limited liability to investors II give unlimited liability to investors III can be structured to give a flow-through tax benefit IV cannot be structured to give a flow-through tax benefit A. I and III B. I and IV C. II and III D. II and IV

a

Which of the following actions MUST be taken if a municipality wishes to raise its debt limit? A. Public referendum B. Court order C. Judicial edict D. Tax assessment

a

Which of the following are attributes of a living trust? (trust transfers assets only) I Taxable build-up of earnings in the trust II Tax-deferred build-up of earnings in the trust III Upon death, the decedent's estate avoids probate IV Upon death, the decedent's estate is subject to probate A. I and III B. I and IV C. II and III D. II and IV

a

Which of the following can accompany the delivery of a prospectus for a new issue offering to a customer? I A tombstone for that issue II An advertisement for that issue III A discount coupon for that issue A. I only B. I and II C. II and III D. I, II, III

a

Which of the following individuals is "in the business" of rendering investment advice under the Investment Advisers Act of 1940? A. A financial planner who advertises as charging no fee for the financial plan and who only takes commissions on recommended trades B. An individual who only advises friends without receiving any compensation C. A registered representative who receives no separate compensation for investment advice D. A professor who teaches a class on investments

a

Which of the following individuals would be defined as an agent under the Uniform Securities Act? I An insurance salesperson who sells variable annuities to customers II A sales assistant at a broker-dealer who only accepts unsolicited orders III A salaried employee of an issuer that handles the sale of the issuer's securities to its employees through the issuer's ESOP IV A Chief Financial Officer of the issuer that negotiates with an investment banker to set the terms of an additional share offering A. I and II only B. III and IV only C. II and IV only D. I, II, III, IV

a

Which of the following investment companies can adopt a 12b-1 plan? I Mutual fund II Closed end fund III Unit trust IV Face amount certificate company A. I only B. I and II only C. III and IV only D. I, II, III, IV

a

Which of the following investments is NOT categorized into an "asset class"? A. Mutual funds B. Real estate C. Fixed income securities D. Commodities

a

Which of the following investments is an "asset class"? A. Real estate B. Gold coins C. Mutual fund D. Jewelry

a

Which of the following is NOT an accredited investor under Regulation D of the Securities Act of 1933? A. Registered Investment Adviser B. Registered Investment Company C. State Regulated Insurance Company D. State Regulated Banking Institution

a

Which of the following is NOT permitted in a defined contribution plan? A. Mandatory employee contributions B. Mandatory employer contributions C. Voluntary employee contributions D. Voluntary employer contributions

a

Which of the following is a permitted investment in an IRA account? A. U.S. minted gold coins B. Term insurance C. Fine art D. Fixed annuity

a

Which of the following is defined as passive income? A. Distributive share of income from a real estate limited partnership investment B. Dividends received from a real estate investment trust investment C. Interest received from a corporate debenture investment D. Proceeds from the sale of a partnership unit in excess of the tax basis of that unit

a

Which of the following is essentially the "Internal Rate of Return?" A. Yield to Maturity on a bond B. Current Yield on a stock portfolio C. Risk-Adjusted Rate of return on an investment D. Real Rate of Return on a bond

a

Which of the following is the most likely purchaser of a STRIP? A. Pension fund B. Money market fund C. Individual seeking current income D. Individual wishing to avoid purchasing power risk

a

Which of the following municipal issues would NOT be exempt from taxation of interest by the Federal Government? A. San Francisco, California - Convention Center Revenue Bond B. Miami, Florida - Sewer and Water Revenue Bond C. Nassau County, New York - Pollution Control Bond D. Des Moines, Iowa - School District Bond

a

Which of the following option positions is used to hedge a short stock position? A. long call B. short call C. long put D. short put

a

Which of the following persons with no place of business in a State, is EXCLUDED from the definition of an "Investment Adviser"? A. A bank that receives special compensation for rendering advice about securities B. A person who gives advice for a fee about investment grade corporate bonds C. A person who gives advice for a fee about municipal securities D. A person who gives advice about securities for a fee solely to lawyers and accountants

a

Which of the following securities trades in the market at a price that is different than NAV? A. Closed-end fund B. Open-end fund C. Variable annuity D. Hedge fund

a

Which of the following securities transactions would result in a short term capital gain? I Purchase 100 shares of ABC stock at $50 on January 2, 2020; Sell 100 shares of ABC stock at $60 on July 2, 2020 II Purchase 100 shares of ABC stock at $50 on January 2, 2020; Sell 100 shares of XYZ stock at $60 on July 2, 2020 III Purchase 100 shares of ABC stock at $50 on January 2, 2020; Sell 100 shares of ABC stock at $60 on January 3, 2021 IV Purchase 100 shares of ABC stock at $50 on January 2, 2020; Sell 100 shares of XYZ stock at $60 on January 2, 2021 A. I only B. III only C. I and II only D. III and IV only

a

Which of the following statements are TRUE about estate or gift tax due? I The amount of tax due is based on the size of the gift or estate II The tax rate is fixed regardless of the size of the gift or estate III A lifetime unified credit is applied against any tax due IV Gifts or bequests made by an individual under age 59½ are subject to a penalty tax A. I and III B. I and IV C. II and III D. II and IV

a

Which of the following statements are TRUE about non-systematic risk? I It is the same as stock specific risk II It is the same as market risk III It can be diversified away IV It cannot be diversified away A. I and III B. I and IV C. II and III D. II and IV

a

Which of the following statements are TRUE regarding Federal Funds? I Federal funds are overnight loans between member institutions of the Federal Reserve System II Federal funds are overnight loans of reserves from the Federal Reserve Bank to a member institution III The interest rate charged on Federal Funds is the Federal Funds Rate IV The interest rate charged on Federal Funds is the Discount Rate A. I and III B. I and IV C. II and III D. II and IV

a

Which of the following statements are TRUE regarding a joint account with tenancy in common? I A specific percentage ownership is assigned to each party II Each party owns an undivided interest in the account III If one party dies, that person's interest goes to his beneficiary or estate IV If one party dies, the other party wholly owns the account A. I and III B. I and IV C. II and III D. II and IV

a

Which of the following statements are TRUE regarding revocable trusts? I Income is taxed at the rate scheduled for the grantor II Income is taxed at the rate scheduled for the trusts III The grantor has control over the assets IV The trustee has control over the assets A. I and III B. I and IV C. II and III D. II and IV

a

Which of the following statements are TRUE regarding the actions of an investment adviser and its accounts? I The transfer of a customer account to another investment adviser due to the acquisition of the advisory firm must be approved by the customer of the acquired firm II The transfer of a customer account to another investment adviser due to the acquisition of the advisory firm does not have to be approved by the customer of the acquired firm III The transfer of a customer account due to the retirement of the investment adviser must be approved by the customer whose account is being transferred IV The transfer of a customer account due to the retirement of the investment adviser does not have to be approved by the customer whose account is being transferred A. I and III B. I and IV C. II and III D. II and IV

a

Which of the following statements are TRUE when comparing bonds and preferred stock? I Both bonds and preferred stock have a fixed payout rate II Bonds have a fixed payout rate; preferred stock does not III Both bonds and preferred stock can be convertible into shares of common stock IV Bonds can be convertible; preferred stock cannot A. I and III B. I and IV C. II and III D. II and IV

a

Which of the following statements are true regarding overnight repurchase agreements? I A dealer who needs cash will "sell" some of its inventory overnight to another dealer II A dealer who needs cash will "buy" inventory overnight from another dealer III The investment has interest rate risk IV The investment has no interest rate risk A. I and III B. I and IV C. II and III D. II and IV

a

Which of the following statements comparing fixed and variable annuities is TRUE? A. The amount of the payout will be level with a fixed annuity but may increase or decrease with a variable annuity B. The number of years of benefit payments is specified with a fixed annuity but is not specified with a variable annuity C. The rate of return must increase for a variable annuity but remains level for a fixed annuity D. Variable annuities make periodic payments to an annuitant but fixed annuities make lump sum payments to an annuitant

a

Which of the following statements concerning closed-end management companies are TRUE? Closed-end management company shares: I are issued in a one-time offering II trade in the secondary market III are continuously issued IV are continuously redeemed A. I and II only B. I and IV only C. II and III only D. III and IV only

a

Which of the following statements concerning mutual funds is TRUE? A. Mutual funds provide diversification for investors who have only a small amount of money to invest B. An investor is guaranteed marketability of shares at a minimum stated redemption price C. Mutual funds are flexible because their investment objectives can easily be changed to fit special situations D. Mutual funds do not provide compounding by reinvestment of income

a

Which of the following statements is TRUE regarding a sales representative who intentionally embezzles monies from a customer's account? A. The sales representative has committed a felony and is subject to fines and/or imprisonment B. The sales representative has committed a felony and is subject to fines and/or imprisonment only if the customer's monies are not replaced within a specific time frame C. The sales representative has committed a fraudulent and misleading act only if the customer's monies are not replaced within a specific time frame D. None of the above

a

Which of the following statements is TRUE regarding the compensation of an unlicensed solicitor for referring a customer to an investment adviser? A. A referral fee cannot be paid to an unlicensed solicitor B. A referral fee may be paid to an unlicensed solicitor only if there is a prior written agreement detailing work to be performed and compensation to be paid C. A fixed fee may be paid to an unlicensed solicitor only if the investment adviser is a "federal covered adviser" D. The referral fee can be paid as long as the amount is fair and reasonable

a

Which of the following transactions might result in a potential gift tax liability? A. Grandfather gives $25,000 to a grandchild B. Grandfather gives $25,000 to his wife C. Grandfather gives $25,000 to a charity D. Grandfather gives $25,000, divided equally between 3 grandchildren

a

Which one of the following items would be included in the computation of an investment adviser's net capital? A. Sofa in the investment adviser's office B. Business reputation (goodwill) of the investment adviser C. Copyright held by the investment adviser for a finance book D. Franchise right held by the investment adviser

a

Which order is NOT required to be retained as a record by a broker-dealer? A. Subscription order pursuant to a rights offering B. Market-not held order C. Unexecuted order that is subsequently canceled D. Market order that is immediately filled

a

Which statement about variable life insurance is FALSE? A. The policy value may be reduced to zero by poor performance of the separate account B. The policy value is included in the estate of the deceased individual C. The policy value is not taxable to the beneficiary D. In lieu of taking the death benefit as a lump sum, the beneficiary can choose to take it as an annuity

a

Which statement is FALSE about 529 plans? A. The assets in a 529 plan may be used without limit to pay tuition at a private high school B. Contributions are subject to possible gift tax consequences C. Investment earnings are not subject to current income tax D. The beneficiary of a 529 plan may be changed

a

Which statement is TRUE regarding the State Administrator's authority to establish recordkeeping rules for broker-dealers? A. The Administrator can only establish recordkeeping rules that are the same as those set by the SEC B. The Administrator cannot establish recordkeeping rules for broker-dealers C. The Administrator has the power to set recordkeeping rules if it is in the public interest D. The Administrator can neither establish nor enforce recordkeeping requirements for broker-dealers

a

Which statement is TRUE regarding the tax treatment of bond interest income received by a C Corporation versus that received by an S Corporation? A. In a C Corporation, the interest received is taxable at the corporate level and if a dividend is declared based on the receipt of the interest, then the dividend is taxable at the shareholder level B. In an S Corporation, the interest received is taxable at the corporate level and if a dividend is declared based on the receipt of the interest, then the dividend is taxable at the shareholder level C. In both a C Corporation and an S Corporation, income is only taxable at the shareholder level D. In both a C Corporation and an S Corporation, income is only taxable at the corporate level

a

Which statement made by a representative when selling an EIA is NOT misleading? A. "EIAs are regulated by the State insurance commission" B. "EIAs give a minimum guaranteed rate of return at no cost to the purchaser" C. "EIAs outperform variable annuities in a bull market" D. "EIAs are guaranteed by the PBGC"

a

Which statements are TRUE about fixed annuity contracts? I A fixed annuity contract is defined as an "insurance" product II A fixed annuity contract is defined as a "security" product III The issuer of a fixed annuity contract bears the investment risk IV The purchaser of a fixed annuity contract bears the investment risk A. I and III B. I and IV C. II and III D. II and IV

a

Which statements are TRUE about shareholder rights? I Common shareholders have preemptive rights II Preferred shareholders have preemptive rights III Common shareholders have voting rights IV Preferred shareholders have voting rights A. I and III B. I and IV C. II and III D. II and IV

a

Which statements are TRUE about the alternative minimum tax computation? I The alternative minimum tax computation is required for all taxpayers II The alternative minimum tax computation is required only for investors in limited partnerships III If the alternative minimum tax amount is greater than the regular income tax amount, the larger amount must be paid IV If the alternative minimum tax amount is greater than the regular income tax amount, the smaller amount must be paid A. I and III B. I and IV C. II and III D. II and IV

a

Which statements are TRUE regarding joint accounts? I An order to buy or sell may be accepted from any single account owner II An order to buy or sell can only be accepted from all account owners jointly III An order to draw a check on the account can be made by any single account owner IV An order to draw a check from the account must be made by all of the account owners jointly A. I and III B. I and IV C. II and III D. II and IV

a

Which statements are TRUE regarding licenses held by broker-dealers and agents? I If a broker-dealer's license is revoked, all of its agents' licenses are revoked II If an agent's license is revoked, the broker-dealer's license is revoked III If the broker-dealer's license is revoked, its agents may become associated with another broker-dealer IV If an agent's license is revoked, the agent may become associated with another broker-dealer A. I and III B. II and IV C. I, II, III D. I, II, III, IV

a

Which statements are TRUE regarding variable annuities during the annuity phase? I The annuity unit value fluctuates II The annuity unit value remains the same III The annuity check received may be for a different amount at each payment IV The annuity check received will be for the same amount at each payment A. I and III B. I and IV C. II and III D. II and IV

a

Which statements are TRUE regarding variable annuity contracts? I Deposits made into the separate account equals the owner's cost basis II Any withdrawals made prior to age 59½ are subject to penalty tax III Withdrawals must commence when the account holder reaches age 70½ IV Principal amounts are protected against market risk A. I and II only B. III and IV only C. I, II, III D. I, II, III, IV

a

Which statements are TRUE when comparing a 15-year period certain annuity to a life annuity with a 15-year period certain? I The purchaser of 15-year period certain annuity will only receive payments for 15 years and can outlive the annuity payments II The purchaser of a 15-year period certain annuity will receive payments for life, but for no less than 15 years III The purchaser of a 15-year period certain annuity will receive larger payments than the holder of a life annuity with a 15-year period certain IV The purchaser of a 15-year period certain annuity will receive smaller payments than the holder of a life annuity with a 15-year period certain A. I and III B. I and IV C. II and III D. II and IV

a

Which statements are TRUE? I Distributions from a 529 plan to pay for higher education costs are not taxable II Distributions from a 529 plan to pay for higher education costs are taxable III Distributions from a Coverdell ESA to pay for qualified education costs are not taxable IV Distributions from a Coverdell ESA to pay for qualified education costs are taxable A. I and III B. I and IV C. II and III D. II and IV

a

Why would an individual purchasing life insurance establish an ILIT? A. To exclude the death benefit from the decedent's estate B. To maintain control over the policy until death C. To eliminate the possibility of a lawsuit filed by an heir D. To defer the taxation of the death benefit until the heir dies

a

XYZ Corporation has declared a rights offering to stockholders of record on Wednesday, November 15th. Under the offer, shareholders need 5 rights to subscribe to 1 new share at a price of $24. Fractional shares can be rounded up to purchase 1 full share. A customer owning 200 shares wishes to subscribe. The market price of the stock is currently $34. The customer can buy: A. 40 shares for $960 B. 40 shares for $1,360 C. 200 shares for $4,800 D. 200 shares for $6,800

a

Yield curve analysis is useful for an investor in debt securities for all of the following reasons EXCEPT: A. the yield curve is used to compare the marketability risk of one issue to that of another B. investors can compare rates of return relative to changing maturities C. the yield of a specific security can be compared to the market expectation for similar securities D. the curve shows market expectations for interest rates

a

Your client of many years is age 65 and has just been diagnosed with a short-term terminal illness. He is well-off and has 2 adult children, ages 30 and 35. His investment portfolio is overweighted in small dollar low cost stocks. You should talk to the client about: A. gifting the low cost basis stock to the adult children B. selling the low cost basis stock immediately C. rebalancing the portfolio to reduce the overweighting of small dollar stocks D. selling the low cost basis stock and investing the proceeds in Treasury securities

a

A Registered Investment Adviser has discretionary control over 50 accounts that range in value from $200,000 to $1,500,000. She receives a free due diligence trip from a real estate limited partnership sponsor to inspect a property in Florida. She is enthusiastic about the investment potential and purchases a $50,000 real estate limited partnership unit in the property for each of her accounts. The RIA disclosed the fact that she received the free trip to each of her customers before making the purchases. Which statement is TRUE? A. This is unethical because taking the free due diligence trip and then buying the partnership units for her clients is a conflict of interest B. This is unethical because the adviser did not determine the suitability of the investment for each account C. This is unethical because the adviser violated her fiduciary responsibility to her clients D. This is an ethical business practice

b

A Registered Investment Adviser is also a registered representative that manages a client's account. The customer is paying a fixed annual advisory fee and is paying a commission for each execution of a recommended trade, both of which have been disclosed to the customer. Which statements are TRUE? I The account may be charged both the advisory fee and a commission on each trade II The account may not be charged an advisory fee and a commission on each trade III This is an unethical practice IV This is not an unethical practice A. I and III B. I and IV C. II and III D. II and IV

b

A broker-dealer is offering an IPO to the public that is "hot." The broker-dealer withholds 15% of the shares to set aside for its future use. This action is: A. permitted because broker-dealers have discretion over IPO allocations B. prohibited because the broker-dealer is "free riding and withholding" C. permitted because the broker-dealer takes financial liability when performing an underwriting D. prohibited because the broker-dealer is not allowed to own stock in companies that go public

b

A broker-dealer is physically located and registered in State A. The broker-dealer has an existing client in State A who is a student finishing undergraduate studies. The client has just been accepted to medical school in State B. Which statement is TRUE about the broker-dealer contacting the client while she is in medical school in State B? A. The broker-dealer can contact the client while she is in medical school in State B without having to register in State B using the "existing customer" exemption B. The broker-dealer can contact the client while she is in medical school in State B without having to register in State B because students are considered to be residents of the State where they live with their parents; not the State where they go to school C. The broker-dealer can contact the client while she is in medical school in State B without having to register in State B because of the reciprocity agreements that all States maintain regarding registration requirements D. The broker-dealer must be registered in State B in order to contact the client while she is in medical school in State B

b

A broker-dealer that is not registered in a State sells non-exempt securities in non-exempt transactions to customers located in that State. That State's Administrator will: A. require that the securities be registered in the State and that the broker-dealer register in that State B. require the broker-dealer to make an offer of rescission to each purchaser in that State C. require that a notice filing be made in the State along with the payment of a filing fee D. institute an action in a court of law alleging criminal activities on the part of the broker-dealer

b

A convertible bond is convertible into common stock at a 32:1 ratio. The common stock is currently trading at $30. The bond is currently trading at $980. What is the bond's parity price? A. $940 B. $960 C. $980 D. $1,000

b

A corporation has issued 20,000,000 shares of common stock at $2 par. The corporation has 5,000,000 shares of Treasury Stock on its books. The aggregate value of the outstanding shares is: A. $10,000,000 B. $30,000,000 C. $40,000,000 D. $50,000,000

b

A corporation issues $50 par convertible preferred stock, convertible at $10 per share, when the market price of the common is currently $5. Which statement is true? A. The conversion ratio is 10:1 B. The conversion ratio is 5:1 C. The conversion ratio is 2:1 D. The conversion ratio cannot be determined

b

A customer bought a $1,000 par convertible subordinated debenture at par, convertible into common at $31.25 per share. If the bond's market price increases by 20%, the conversion ratio will be: A. 31.25:1 B. 32.00:1 C. 37.50:1 D. 38.40:1

b

A customer buys 100 shares of XYZ stock at $23 per share. The stock subsequently rises in price to $60 per share, and the customer believes that there may be a temporary change in market direction. If the customer is not concerned about the cost of hedging, he would be BEST advised to: A. buy a call B. buy a put C. sell a call D. sell a put

b

A customer buys a new issue inflation-adjusted government bond with a 4% coupon at par. After the first year, the inflation rate as measured by the CPI has increased by 5%. For the second year of holding the security, the customer will receive: A. interest of $40 B. interest of $42 C. interest of $50 D. interest of $40 and a principal adjustment of $50

b

A customer buys a variable annuity and elects a payout option of Life Income with a 20 year period certain. This means that: A. payments will continue for the annuitant's life, not to exceed 20 years B. payments will continue for the annuitant's life, but if he dies before 20 years elapse, payments continue to his heir(s) C. payments continue for the life of the annuitant and then cease D. payments continue for 20 years to the annuitant or beneficiary

b

A customer has $10,000 in passive losses from a limited partnership investment. If the customer has $3,000 of passive income for that tax year, the customer may deduct: A. 0 B. $3,000 C. $5,000 D. $10,000

b

A customer has bought a "book entry" bond which pays interest semi-annually. The customer will receive interest payments: A. from the paying agent once a year B. from the paying agent twice a year C. by clipping coupons once a year D. by clipping coupons twice a year

b

A customer has invested in a Direct Participation Program and is a limited partner with a 10% interest. In November 2020, the partnership sold assets and realized a gain. It made a cash distribution to the partners using the proceeds generated from the asset sale in January 2021. How is this reported for tax purposes on the K-1 distributed to the customer/partner? A. 10% of the gain is reported as ordinary income in 2020 B. 10% of the gain is reported as a capital gain in 2020 C. 10% of the gain is reported as ordinary income in 2021 D. 10% of the gain is reported as a capital gain in 2021

b

A customer has invested in the bonds of companies based in a third world country and is concerned about the results of an upcoming election for the country's president and that this could negatively impact the value of the customer's bonds. This is called: A. sovereign risk B. political risk C. legislative risk D. capital risk

b

A customer has the following balance sheet: Cash:$ 20,000 Marketable Securities:$50,000 Market Value Retirement Portfolio:$100,000 Market Value - Cars:$ 30,000 Market Value - Home:$400,000 Market Value - Personal Items and Furnishings:$ 60,000 Bills Payable:$ 50,000 Car Loan:$ 15,000 Mortgage on Home:$250,000 The customer's net worth is: A. $315,000 B. $345,000 C. $350,000 D. $660,000

b

A customer holds 100 shares of ABC Corp $100 par convertible preferred stock convertible at a 10 to 1 ratio. If ABC declares and pays a 10% stock dividend, then as of the payable date, the customer will now have: A. 90 shares of ABC preferred stock B. 100 shares of ABC preferred stock C. 100 shares of ABC preferred stock and 10 shares of ABC common stock D. 110 shares of ABC preferred stock

b

A customer holds 100 shares of ABC Corp $100 par non-convertible preferred stock. If ABC declares and pays a 10% common stock dividend, then as of the payable date, the customer will now have: A. 90 shares of ABC preferred stock B. 100 shares of ABC preferred stock C. 100 shares of ABC preferred stock and 10 shares of ABC common stock D. 110 shares of ABC preferred stock

b

A customer in the 28% tax bracket has $5,000 of capital losses and $3,000 of capital gains. How much net capital loss is deductible from this year's tax return? A. $0 B. $2,000 C. $3,000 D. $5,000

b

A customer in the 28% tax bracket has $9,000 of capital losses and $5,000 of capital gains. How much loss is deductible from this year's tax return? A. $0 B. $3,000 C. $4,000 D. $5,000

b

A customer made the following purchases of fund shares under a dollar cost averaging plan. Month Investment POP 1 $600 $60 2 $600 $50 3 $600 $55 4 $600 $40 The customer would break even if the NAV per share is:(figure out number of shares purchased inv/pop) A. $50.00 B. $50.10 C. $51.00 D. $51.25

b

A customer makes the following investments in ABC stock: Date Amount Price Per Share 1/1 $6,000 $10 4/1 $6,000 $12 7/1 $6,000 $15 1 $6,000 $20 What is the customer's average cost per share? (total investment/total number of shares) A. $13 B. $13.33 C. $14.25 D. $14.50

b

A customer margin account shows: 100 shares of ABC @ $50 300 shares of DEF @ $80 200 shares of PDQ @ $30 Debit = $6,000 Reg. T = 50% What is the equity in the account? A. $35,000 B. $29,000 C. $23,500 D. $17,500 Long Market Value-Debit=Equity%

b

A customer places an order on the NYSE to buy bonds. The order reads "Buy 5M ABC 9s M '42 @ 90 GTC". Which statement is true about this order? A. The order will be canceled at the end of the day if an execution is not possible B. The order must be executed at a price of 90 or better C. If executed, the customer will pay $4500 for the bonds D. The customer is establishing a short position with this order

b

A customer wishes to open an account at a bank and name her son as beneficiary. She has $4,500 to deposit and wishes to maintain control of the account and be able to use the funds as she wishes. What type of account can be opened? A. POD brokerage account B. Totten trust account C. Demand deposit account D. Intervivos trust account

b

A customer would buy put contracts because: A. the customer is bullish on the underlying security B. the customer is bearish on the underlying security C. the customer is neutral on the underlying security D. the customer wishes to generate ordinary income

b

A customer would sell call contracts because: A. the customer is bullish on the underlying security B. the customer is bearish on the underlying security C. the customer wishes to generate earned income D. the customer wishes to defer taxation of gains on the underlying stock

b

A doctor withdraws money from his profit sharing plan to buy a building for his medical practice and to lease to other tenants. The building will be held as an asset of the profit sharing plan. This action is: A. permitted because the dollar amount of assets held in the plan remains the same B. a prohibited transaction between the plan and a party-in-interest C. permitted however the amount withdrawn will be subject to a 6% penalty tax D. permitted only if the plan pays premiums to the PBGC insurance program

b

A father is writing his will (the testator) and is naming as beneficiaries his 2 adult sons - Son A and Son B, and their children. Son A has 2 children - A1 and A2. Son B has 1 child - B1. Each one will get an equal share "per capita" of the father's estate upon the father's death. Son B predeceases the testator. This means that: A. Son A gets 100% of the assets of the estate upon the death of the testator B. The grandchild B1 gets 25% of the assets of the estate upon the death of the testator C. The grandchildren A1, A2, and B1, each get 33% of the assets of the estate upon the grandfather's death D. No assets will be distributed upon the death of the testator until the grandchildren become adults

b

A father is writing his will (the testator) and is naming as beneficiaries his 2 adult sons - Son A and Son B. Each one will get an equal share "per stirpes" of the father's estate upon the father's death. Each of the sons has children (the grandchildren of the testator) who are not yet adults. Son A has 2 children - A1 and A2. Son B has 1 child - B1. Son B predeceases the testator. This means that: A. Son A gets 100% of the assets of the estate upon the death of the testator B. the grandchild B1 gets 50% of the assets of the estate upon the death of the testator C. the grandchildren A1, A2, and B1, each get 33% of the assets of the estate upon the grandfather's death D. no assets will be distributed upon the death of the testator until the grandchildren become adults

b

A father is writing his will (the testator) and is naming as beneficiaries his 2 adult sons - Son A and Son B. Each one will get an equal share of the father's estate "per capita" upon the father's death. Each of the sons has children (the grandchildren of the testator) who are not yet adults. Son A has 2 young children - Grandchild A1 and Grandchild A2 and Son B has 2 children, Grandchild B1 and Grandchild B2. If Son A predeceases the testator, then: A. Son A's 1/2 share goes into his estate B. Son A's share goes to Son B C. Grandchild A1 gets 25% and Grandchild A2 gets 25% of the estate's assets upon the death of the testator D. the deceased son's share reverts back to the father's estate

b

A father is writing his will (the testator) and is naming as beneficiaries his 3 adult sons. Each one will get an equal share "per capita" of the father's estate upon the father's death. Each of the sons has 2 children (the grandchildren of the testator) who are not yet adults. If one of the sons predeceases the testator, then the: A. deceased son's share goes into the son's estate B. deceased son's share passes to his brothers C. deceased son's shares passes to his children D. deceased son's share reverts back to the father's estate

b

A firm is retained by a company that wishes to make acquisitions of other companies to act as a finder. The finder can be considered to be a broker-dealer: A. under no circumstances B. if it receives compensation contingent on the closing of a deal C. if it receives a flat fee for services rendered D. if it signs a written contract with the company

b

A fund that invests in Treasury Bills, commercial paper, and guaranteed repurchase agreements is a(n): A. government securities fund B. money market fund C. income fund D. balanced fund

b

A husband and wife wish to open a joint account. The husband is concerned that if he is sued, that the assets of the account could be subject to claim and wishes to avoid this. Which statement is TRUE? A. This possibility is avoided if the account is opened as Joint Tenants with Rights of Survivorship B. This possibility is avoided if the account is opened as Tenants by Entireties C. This possibility is avoided if the account is opened as Tenants in Common D. This possibility cannot be avoided

b

A husband and wife wish to open an account that allows either party to trade or draw checks; and that becomes the property of the surviving spouse if one should die. The proper ownership form is: A. Tenants in Common B. Joint Tenants with Rights of Survivorship C. Separate Individual accounts D. Joint Partnership account

b

A long-standing customer of a broker-dealer suffered a stroke and is in a coma. Who can place orders in the client's account? A. The son of the incapacitated individual, who recorded a video document 15 years ago giving instructions to allow his son to trade the account B. The ex-wife of the incapacitated individual, who was named in a durable power of attorney signed 15 years ago by the client C. The current wife of the incapacitated individual who was named in a durable power of attorney that that client forgot to sign D. A letter written and signed by the client's spouse, naming the individual who has a durable power of attorney over the account

b

A man invested $20,000 in a variable annuity purchased in a non-qualified account. At age 62, the account has grown to $35,000 and the man withdraws $3,000. The amount of the withdrawal is: A. tax-free B. subject to ordinary income tax but no penalty tax C. subject to penalty tax but not to ordinary income tax D. permitted to be rolled over to an IRA, if completed within 60 days

b

A market maker in ABCD stock is currently quoting the stock in the OTCBB at:$42.00 Bid (500 shares); $43.00 Ask (1,000 shares) If the market maker receives a customer order to sell 800 shares of ABCD at $42.50, the market maker: A. must update its quote to: $42.50 Bid (800 shares); $43.00 Ask (1,000 shares) B. must update its quote to: $42.00 Bid (500 shares); $42.50 Ask (800 shares) C. must send the order to a stock exchange floor for execution D. is not required to take any action

b

A married man opens an individual account at a brokerage firm. The customer places his first trade. The confirmation is received by the customer's wife, who calls the broker and informs him that her husband doesn't have the money to pay for the transaction by settlement date and that the stock should be sold immediately. The agent should: A. liquidate the account immediately B. attempt to contact the customer but otherwise do nothing C. accept the order from the wife D. refer the customer account to the firm's collection department

b

A medical student will complete her residency and go into medical practice in 4 years. She needs to purchase expensive medical equipment to start the practice. In order to determine the amount of money that must be invested today to meet this capital need, all of the following are needed EXCEPT: A. current cost of medical equipment B. expected level of outstanding student loans C. assumed rate of return D. expected inflation rate

b

A municipal investor is considering the purchase of a 10 year, 6% G.O. bond with a 6% yield to maturity. The investor is in the 28% tax bracket. The equivalent taxable yield is: A. 6.00% B. 8.33% C. 9.00% D. 21.4%

b

A municipality is at its debt limit and wishes to sell additional bonds. Voter approval is required for the municipality to sell: I Limited tax general obligation bonds II Unlimited tax general obligation bonds III Self-supporting revenue bonds IV Self-supporting industrial revenue bonds A. I only B. I and II only C. III and IV only D. I, II, III, IV

b

A mutual fund manager would use beta as part of the analysis of the fund's performance in order to: A. measure the fund's return on assets relative to the market as measured by the Standard and Poor's 500 index B. measure the volatility of the fund's share price relative to the Standard and Poor's 500 index C. select the specific securities that will be purchased by the fund; and those that will be sold by the fund D. determine the timing of purchases of securities and sales of securities by the fund

b

A new broker-dealer has filed a registration application in the State. One of the officers listed in the application suddenly dies and another officer is appointed. This is: A. not a material event and no amendment need be filed with the Administrator B. a material event that requires a prompt amendment filing with the Administrator C. a material event that requires an amendment filing with the Administrator within 30 days of occurrence D. an event that only requires filing with the Administrator if the broker-dealer has been formed as a partnership

b

A person who renders advice on variable annuities for a fee; and who then sells the annuities, charging a commission, MUST: I register as an investment adviser in that State II register as a broker-dealer in that State III register as an agent in that State A. I only B. I and II C. I and III D. None of the above

b

A portfolio manager who believes that an extremely large short interest in NYSE listed issues is bullish would be called a: A. fundamentalist B. contrarian C. market timer D. technician

b

A portfolio of securities with a beta of 1.2 has produced an average annual return of 12%. Which investment should the portfolio manager consider adding? A. A stock with an 6% growth rate and a beta of .7 B. A stock with a 10% growth rate and a beta of .8 C. A stock with a 12% growth rate and a beta of 1.3 D. A stock with a 14% growth rate and a beta of 1.5

b

A private fund adviser with less than $150 million of assets under management: A. must register with the SEC B. must report to the SEC C. must register with, and report to, the SEC D. is neither required to register with, nor report to, the SEC

b

A publicly held corporation has 100,000,000 shares outstanding. A wealthy investor that buys 8,000,000 shares of the company as a passive investor: A. must file a 13d report with the SEC B. must file a 13g report with the SEC C. must file a 13f report with the SEC D. is not required to file a report with the SEC

b

A registered investment adviser lives in State X. The adviser does business with 1 client in State A and 1 client in State B. The adviser gives seminars about investing to groups of potential customers in State C. The adviser is required to register in: A. State X only B. States X and C only C. States X, A, and C D. States, X, A, B, and C

b

A registered representative is appointed as a trustee to manage the assets on behalf of a beneficiary. The State where the trust is established only permits investments in government guaranteed bonds or investment grade corporate bonds. The limitations placed on the investments made by the trustee are established by the: A. Prudent Man Rule B. Legal List C. Uniform Securities Act D. Investment Advisers Act of 1940

b

A retired investor seeks safety of principal and current income. All of the following funds would be suitable recommendations EXCEPT: A. Government Bond Fund B. Special Situations Fund C. Money Market Fund D. Insured Corporate Bond Fund

b

A retired married customer, age 73, has a portfolio that is invested in Blue Chip stocks and Treasury bonds that provides current income. The customer is concerned that he is paying a very high Federal and State combined income tax rate. An appropriate recommendation for this customer would be to diversify part of his portfolio into an investment in: A. tax-qualified annuities B. municipal bonds C. securities held in offshore accounts D. short-term promissory notes

b

A retirement plan that favors highly compensated employees compared to rank-and-file employees is a: I top heavy plan II key employee plan III qualified plan IV non-qualified plan A. I and III B. I and IV C. II and III D. II and IV

b

A security which gives the holder an undivided interest in a pool of mortgages is known as a(n): A. equity real estate investment trust B. pass through certificate C. first mortgage bond D. mortgage real estate investment trust

b

A sell stop order is executed: I in falling marketsII in rising marketsIII at the price specifiedIV at the market price A. I and III B. I and IV C. II and III D. II and IV

b

A trade is NOT considered to be discretionary if the representative selects: A. Size and price B. Price and time C. Security and size D. Price and security

b

A trade of 10,000 shares of stock or more is known as a: A. mega trade B. block trade C. decamil trade D. odd lot trade

b

A viatical settlement will typically give the policyholder an immediate cash payment that is: I more than 100% of cash surrender value II less than 100% of cash surrender value III more than 100% of policy face value IV less than 100% of policy face value A. I and III B. I and IV C. II and III D. II and IV

b

A wealthy married couple with 3 adult children have a large estate. They intend to leave their estate to their children, but they both have a life expectancy of at least 15+ years. They are interested in establishing a trust that will minimize estate taxes upon death. The best recommendation would be a(n): A. revocable trust B. irrevocable trust C. testamentary trust D. blind trust

b

ABC 8% $100 par preferred is trading at $105 in the market. The current yield is: A. 6.6% B. 7.6% C. 8.6% D. 10.6%

b

All of the following are "preference" items included in the alternative minimum tax computation EXCEPT: A. Excess intangible drilling costs B. Straight line depreciation C. Excess depletion D. Excess depreciation

b

All of the following are considered when evaluating a customer's tax status EXCEPT: A. Age B. Citizenship C. Total earnings as of the last day of the tax period D. Residency

b

All of the following are exempt securities under the Securities Act of 1933 EXCEPT: A. U.S. Government bonds B. Listed securities C. Commercial paper D. Municipal bonds

b

All of the following are prohibited manipulative practices under the Uniform Securities Act EXCEPT: A. buying a security on one exchange and simultaneously selling it on another exchange to create the appearance of trading activity B. buying a security on one exchange and simultaneously selling it on another exchange for profit C. executing a trade for a customer at a price that is unrelated to the current market D. executing a trade for a customer without the customer's knowledge

b

All of the following events would result in an advisory contract being considered to have been transferred EXCEPT: A. a majority partner in the advisory firm dies B. a minority partner in an advisory firm sells his interest to another individual C. a controlling block of stock in the investment adviser is sold to another individual D. the contract is pledged as collateral for a loan

b

All of the following information must be recorded on an order ticket EXCEPT: A. Customer name or account number B. Customer address C. Execution price and order size D. Identity of agent accepting the order

b

All of the following must be disclosed by an investment adviser to a customer EXCEPT: A. the President of the advisory firm pleaded "nolo contendere" in a civil action taken by a State Administrator B. an investment adviser representative of that firm was fined $1,500 by FINRA for making unsuitable recommendations C. a partner in the firm was suspended by FINRA for 1 year from engaging in the securities business D. a partner in the firm was convicted of misappropriation of funds 8

b

All of the following statements are true regarding equipment trust certificates ("ETCs") EXCEPT: A. Equipment trust certificates are secured by specified corporate assets B. Default of ETCs is common during recessionary periods C. Equipment trust certificates are commonly issued by transportation companies D. Equipment trust certificates are issued in serial maturities

b

All of the following statements are true regarding overnight repurchase agreements EXCEPT: A. the investment has no liquidity risk B. the investment has no interest rate risk C. interest rates charged are most similar to the Federal Funds rate D. the issuer loses control of the underlying securities for the duration of the agreement

b

An 85-year old client owns a portfolio that is yielding 1.2%. His expenses have increased by 15% this year, and he is worried about having sufficient income to pay his increased expenses. Other than his portfolio, his only asset is his fully paid house. Upon his death, he wishes to bequeath his assets to his children. His portfolio consists of: 40% Money Market Fund10% Equities50% Intermediate Term Bonds There is a new issue corporate bond available with a 5 year maturity, AA rated, yielding 2.4%. Also available are 20 year Treasury Bonds yielding 4%. What is the best recommendation to the customer? A. Leave the portfolio alone and wait for interest rates to rise before taking any action B. Liquidate 75% of the money market fund holding and invest it in the corporate bond issue C. Liquidate 75% of the money market fund and invest it in the Treasury Bond issue D. Liquidate 75% of the money market fund and invest it in a growth fund

b

An ETN offers an investor all of the following benefits EXCEPT: A. lack of liquidity risk B. lack of credit risk C. tax-efficiency D. access to returns of foreign investments

b

An IAR meets for the first time with a married couple, ages 24 and 26, that have 3 young children. They own their own home that has a market value of $250,000 and a $200,000 mortgage. They both work and have a combined annual income of $90,000. They have liquid assets available for investment of $28,000. The IAR should: A. recommend that the couple buy life insurance to pay off the mortgage in the event of death of one of the parents B. obtain information about the customer's investment objectives and capital needs C. recommend the opening of Coverdell ESAs for the children D. tell the customers to pay off their mortgage before making any investments

b

An Investment Adviser Representative (IAR) manages the assets of the ABC Corporation Profit Sharing Plan. The trustee of the plan contacts the IAR, explaining to the IAR that he wants a check drawn from the plan account to buy a building that ABC Corporation will occupy. The IAR should: A. refuse to issue the check B. refuse to issue the check because it is a breach of the IAR's fiduciary obligation C. issue the check D. tell the trustee that the check can only be issued if paperwork is provided showing that ABC Corporation has put up collateral equal to the amount of the check

b

An advantage of owning common stock is: A. it always receives quarterly dividends B. the ease of transferring ownership of shares C. not having to vote by proxy at the annual meeting D. residual claim to assets in a liquidation after preferred stockholders and bondholders

b

An adviser with $13,000,000 of assets under management has its main offices in Illinois and branch offices in Wisconsin, Indiana, and Missouri. Which statement is TRUE regarding registration of the adviser? A. The adviser must register only in Illinois B. The adviser must register in Illinois, Wisconsin, Indiana, and Missouri C. The adviser must register with the SEC D. The adviser must register with the SEC and the States of Illinois, Wisconsin, Indiana, and Missouri

b

An agent for a broker-dealer, both of which are registered in the State of Illinois, receives a telephone call from an existing customer who is on a layover in the airport in Atlanta, Georgia. The customer directs the agent to buy 1,000 shares of ABCD stock at the market. Which statement is TRUE? A. In order to accept this order, the agent must be registered in the State of Georgia only B. In order to accept this order, the agent must be registered in the State of Illinois only C. In order to accept this order, the agent must be registered in both the State of Georgia and the State of Illinois D. The agent can accept this order without needing registration in any jurisdiction because it was unsolicited

b

An agent is contacted by a new client that is moving his account from another broker-dealer because he suffered a large loss. The new customer is 80 years old, has $25,000 of annual income and has $117,000 of equity in his home. The customer's investment portfolio consists of $25,000 in a speculative stock mutual fund. This holding was originally worth $140,000. The BEST recommendation to the customer is to: A. continue to hold the speculative stock fund since it should recover its lost value over time B. sell that fund and buy another fund in the same family of funds C. buy another mutual fund in a different family with better performance D. buy a variable annuity to protect the customer from future losses

b

An agent is not yet registered with his broker-dealer. Until registration is effective, the agent is permitted to: A. sell limited partnership units to accredited investors B. process client paperwork in an administrative office on behalf of a registered representative C. accept unsolicited customer orders D. solicit the sale of variable annuities to customers

b

An agent is selling a new issue of a non-exempt security to a customer. In order to make it easier for the customer to understand the risks of the investment, the agent highlights the "Important Risk Factors" section of the prospectus before giving it to the customer. Which statement is TRUE about this action? A. This action is appropriate because it is in the best interests of the customer B. This action is a violation of the Uniform Securities Act C. This action is only permitted if the changes to the prospectus are approved by the SEC D. This action is only permitted if the prospectus is filed with the Administrator

b

An agent of a broker-dealer "A" has been terminated and is associating with broker-dealer "B." The terminated agent agrees to turn over his clients to another agent at broker-dealer "A" in return for half of the commissions generated by those clients over the following year. This arrangement is: A. permitted because it was negotiated while both agents were working at broker-dealer "A" B. prohibited because during the life of the agreement, the agents will be working at different broker-dealers C. permitted as long as both agents were registered in the same State at the time that the agreement was negotiated D. prohibited because the transfer of a customer account at a broker-dealer from one agent to another requires the written consent of the customer

b

An agent who has passed his or her examination, but whose registration is not yet effective in the State, may sell: A. mutual funds for which no commission is paid B. fixed annuity investments C. exempt securities D. corporate bonds

b

An elderly father owns a classic car that was purchased many years ago for $7,500. The father dies and bequeaths the car to his son. At the date that the car was bequeathed to the son, the car was valued at $20,000. A few years later, the son sells the car for $22,500. What is the tax consequence to the son? A. No capital gain or loss because the item sold was personal property B. $2,500 long term capital gain C. $12,500 long term capital gain D. $22,500 long term capital gain

b

An existing customer of a broker-dealer registered in State "A" is vacationing in State "B." Which statement is TRUE? A. The broker-dealer may only solicit the customer in State "B" if it has been registered in State "B" B. The broker-dealer may solicit the customer in State "B" without registering in State "B" C. The broker-dealer is prohibited from making any communication into a State unless it has a branch office in that State D. The broker-dealer must notify the Administrator in State "B" prior to any solicitation in that State

b

An individual client purchased his residence 5 years ago for $200,000. For 3 of the last 5 years, the client rented out the property for income, and lived in the house of 2 of those years. The client sells the house for $500,000. How much of the gain is taxable? A. 0 B. $50,000 C. $250,000 D. $300,000

b

An individual is given the choice of receiving $1,000,000 today; or of receiving $100,000 per year for the next 15 years, for a total of $1,500,000 to be received. The difference of $500,000 between the 2 amounts is due to the: A. risk premium B. time value of money C. opportunity cost D. net present value of a sum

b

An individual owns a Traditional IRA from which she has never taken a distribution. Her 70th birthday falls on December 31, 2020. Her first distribution must be taken no later than A. April 1st of 2021 B. April 1st of 2022 C. June 30th of 2023 . June 30th of 2024

b

An investment adviser enters into an arrangement with a broker-dealer where the adviser, in return for directing trades to that broker-dealer, will receive payments for order flow. The payment, of one cent for each trade, is conditioned upon the adviser directing a minimum number of trades each month. Which statement is TRUE about this arrangement? A. This is a prohibited practice and violates that adviser's fiduciary responsibility to its clients B. This action on the part of the adviser is permitted only if it is disclosed in the Form ADV Part 2A ("Brochure") given to clients C. This action on the part of the adviser is permitted because it reduces the adviser's operating costs D. This action on the part of the adviser is permitted because it is based on a minimum number of trades occurring each month

b

An investment adviser has a new customer. The investment adviser puts 15% of the customer's funds into a Small Cap mutual fund. The customer objects and says that he wants nothing invested in that fund. What should the investment adviser do? A. Retain the 15% allocation in the Small Cap fund B. Remove the Small Cap fund allocation and attempt to educate the client on the benefits of diversification C. Tell the client that he should trust the adviser's decision since he is an experienced investment professional D. Close the account because the customer is not suitable for investments in stocks

b

An investment adviser is a private fund adviser that is not required to register with the SEC. In order to maintain its exempt adviser status, it can only solicit investors who are: A. sophisticated B. qualified C. accredited D. registered

b

An investment adviser is exempted from registering in a State if the firm has no place of business in the State and has no more than: A. 1 client in the State in the preceding 12 month period B. 5 clients in the State in the preceding 12 month period C. 10 clients in the State in the preceding 12 month period D. 15 clients in the State in the preceding 12 month period

b

An investment adviser is ready to open an account for a new customer. In the advisory contract, the adviser has included a clause that the customer has 48 hours to rescind the contract. The adviser gives the customer the brochure, takes payment from the customer, but forgets to have the customer sign the contract. Which statement is TRUE? A. Even though the customer did not sign the contract, he or she still has 48 hours to rescind the contract B. Even though the customer did not sign the contract, he or she has 5 business days to rescind the contract C. The contract is null and void D. The contract is binding and the customer cannot rescind the contract

b

An investment adviser places large block trades for securities positions that are being purchased for its customers' accounts in order to lower its commission costs. The trades are often executed piecemeal, at different prices. The adviser, after being confirmed that the entire block has been filled, allocates the shares to its accounts. As a favor to its most valuable employees, the adviser allocates the shares purchased at the lowest prices to its employees' accounts; and then allocates the remaining shares to its customer accounts pro-rata. The adviser has disclosed its allocation method only to its employees. Which statement is TRUE? A. The investment adviser has breached its fiduciary duty to its customers because the block order must be executed at one price, not in pieces at differing prices B. The investment adviser has breached its fiduciary duty because it has not disclosed its method of allocating shares to its customers C. The investment adviser has not breached its fiduciary duty because it has disclosed its method of allocating shares to its employees D. The investment adviser has not breached its fiduciary duty to customers because it has obtained trade executions for customers at lower commission costs

b

An investment adviser representative quits her employment with a State-registered adviser so that she can move to another State. She learns that the advisory firm with which she was employed did not notify the Administrator of her termination. Which statement is TRUE? A. The IAR is not required to take any action B. The IAR is required to notify the Administrator of the termination C. The IAR must file a consent to service of process with the Administrator D. The IAR must publicly disseminate the fact that she is no longer associated with the advisory firm in the State

b

An investment adviser wishes to participate in the gains of the accounts that he administers. Under the Investment Advisers Act of 1940, the investment adviser: A. can only enter into advisory contracts with accredited investors as promulgated under Regulation D of the Securities Act of 1933 B. can only enter into advisory contracts with individuals that place at least $1,000,000 under management C. can only enter into advisory contracts with QIBs as defined under Rule 144A as promulgated under the Securities Act of 1933 D. is prohibited from entering into advisory contracts that permit participation in profit and loss

b

An investment made 10 years ago is worth $100,000. If the annual return over these 10 years was 7.20%, then the original investment amount was: A. $25,000 B. $50,000 C. $60,000 D. $75,000

b

An investment provides a 5.50% semi-annual return over a 2-year time frame. What is the annual rate of return? A. 5.50% B. 11.0% C. 16.5% D. 22%

b

An investor has a broadly diversified portfolio of blue chip stocks. The use of index options to hedge the portfolio: A. reduces non-systematic risk B. reduces systematic risk C. reduces both systematic and non-systematic risk D. cannot be used to reduce any risk since the portfolio is fully diversified

b

Based on a client's investment objectives and needs, an IAR allocates the client's funds into Treasury bills, commercial paper, banker's acceptances, repos and swaps. If the IAR used a passive investment approach, a similar portfolio construction could be achieved by investing in a(n): A. bond fund B. money market fund C. income fund D. municipal securities fund

b

Bond A and Bond B both have an 8% coupon. Bond A matures in 2 years, while Bond B matures in 10 years. If market interest rates rise: A. the price of both bonds will fall at the same rate B. the price of Bond B will fall faster than the price of Bond A C. the price of both bonds will rise at the same rate D. the price of Bond B will rise faster than the price of Bond A

b

Broker-dealers are permitted to execute all of the following over-the-counter transactions EXCEPT: A. Agency trades where the customer is charged a fair and reasonable commission B. Agency trades where the customer is charged a fair and reasonable mark-up or mark-down C. Principal trades where the customer is charged a fair and reasonable mark-up or mark-down D. Simultaneous transactions where both buyer and seller are charged a fair and reasonable commission

b

Broker-dealers are permitted to execute the following over-the-counter transactions? I Agency trades where the customer is charged a commission II Agency trades where the customer is charged a mark-up or mark-down III Principal trades where the customer is charged a commission IV Principal trades where the customer is charged a mark-up or mark-down A. I and III B. I and IV C. II and III D. II and IV

b

Callable preferred stock is likely to be redeemed by the issuer if: A. interest rates rise B. interest rates fall C. the common stock price rises D. the common stock price falls

b

Cash value of a universal life insurance policy is: A. premium payments plus cost of insurance B. premium payments minus cost of insurance plus interest C. premium payments, plus or minus growth or loss in the separate account, plus the cost of insurance D. premium payments, plus or minus growth or loss in the separate account, minus the cost of insurance

b

Commercial paper is a(n): I Money market instrument II Capital market instrument III Funded debt IV Unfunded debt A. I and III B. I and IV C. II and III D. II and IV

b

Common shareholders have the right to vote on all of the following EXCEPT: A. Changes in the number of authorized shares B. Cash dividends C. Board of Directors D. Stock splits

b

Common stockholders have all of the following "rights" EXCEPT: A. Right to vote for the Board of Directors B. Right to vote for the annual dividend rate C. Pre-emptive right D. Rights to corporate assets upon dissolution

b

Distributions from an Individual Retirement Account must commence: A. by April 1st of the year preceding that person reaching age 70 ½ B. by April 1st of the year following that person reaching age 70 ½ C. upon reaching age 70 ½ D. upon reaching retirement

b

Dollar Weighted Average Return is the same as: A. Annualized Rate of Return B. Internal Rate of Return C. Time Weighted Average Return D. Expected Rate of Return

b

During a given period of time, the overall stock market, which has a Beta of 1, is up 8% in value. XYZ stock, which has a Beta of 1.25, is up 11% during the same period. Assuming that the risk-free rate of return is "0," the "alpha" of XYZ stock is: A. 0% B. 1% C. 10% D. 11%

b

During a period when the yield curve is flat: A. short term bond prices are more volatile than long term bond prices B. long term bond prices are more volatile than short term bond prices C. short term and long term bond prices are equally volatile D. no relationship exists between short term and long term bond price changes

b

During a period when the yield curve is inverted: A. short term bond prices are more volatile than long term bond prices B. long term bond prices are more volatile than short term bond prices C. short term and long term bond prices are equally volatile D. no relationship exists between short term and long term bond price changes

b

ERISA legislation was enacted: I to protect employee retirement funds II to protect employer retirement funds III from employee investment mismanagement IV from employer investment mismanagement A. I and III B. I and IV C. II and III D. II and IV

b

Exchange rate risk associated with foreign investing occurs when: I The U.S. dollar strengthens against foreign currencies II The U.S. dollar weakens against foreign currencies III Foreign currencies strengthen against the U.S. dollar IV Foreign currencies weaken against the U.S. dollar A. I and III B. I and IV C. II and III D. II and IV

b

For an adviser to charge a performance fee, the Investment Advisers Act of 1940 requires which minimum financial standards from customers? I A customer that deposits $1,000,000 or more with the adviser II A customer that deposits $2,100,000 or more with the adviser III A customer with a $1,000,000 or higher net worth IV A customer with a $2,100,000 or higher net worth A. I and III B. I and IV C. II and III D. II and IV

b

For an investor seeking a tax sheltered investment, the primary advantage of a real estate direct participation program is the: A. high level of liquidity provided by the investment B. ability of the program to generate losses for tax purposes but provide positive cash flow C. ability to offset passive losses generated by the program against the investor's earned income D. ability of the program to generate increasing losses until liquidation

b

For the past 5 years, an individual earning $20,000 per year, who was not covered by another retirement plan, has made annual contributions to an Individual Retirement Plan. That individual has changed jobs at the same salary and has been included in that company's qualified retirement plan. Which statement is TRUE? A. Annual contributions to the Individual Retirement Account must cease B. Annual contributions to the Individual Retirement Account can continue and are an adjustment to income each year C. Annual contributions to the Individual Retirement Account can continue but no adjustment to income is allowed D. The employee has 60 days to roll over the funds from the Individual Retirement Account to the qualified retirement plan in order to maintain tax-deferred status on the funds

b

Ford Motor Company has issued 8% convertible debentures, convertible at a 10:1 ratio. Currently the debenture is trading at 102. The stock is trading at 98. Which statements are TRUE? I The conversion price is $100 II The conversion price is $102 III The parity price of the common stock is 98 IV The parity price of the common stock is 102 A. I and III B. I and IV C. II and III D. II and IV

b

Funds withdrawn from an IRA after age 59 1/2 are: A. not taxed if rolled over to another IRA within 90 days B. taxed at ordinary income tax rates C. taxed at ordinary income tax rates for distributions that are part of the build-up in the account and at capital gains rates for distributions that are the return of original capital contributed D. taxed at the same rate as long term capital gains

b

If a customer chooses to stay with one investment vehicle instead of investing in another, any excess return of the other investment is a(n): A. risk free rate of return B. opportunity cost C. real rate of return D. active rate of return

b

If a defined benefit plan is terminated due to the bankruptcy of the company, any unfunded pension liability is: A. not covered by any type of insurance B. covered by PBGC C. covered by FDIC D. covered by SIPC

b

If a person accumulates a 5% or greater holding in a publicly held company with the intention of exercising control: A. Form d must be filed within 5 business days B. Form 13d must be filed within 10 business days C. Form 10k must be filed within 10 business days D. Form S-l must be filed promptly

b

If a representative that transacts business in a State terminates employment with an investment adviser: A. notice must be given to the Administrator by the representative only B. notice must be given to the Administrator by the investment adviser only C. notice must be given to the Administrator by both the investment adviser and the representative D. no notice is required to be given to the Administrator

b

If a representative that transacts business in a State terminates employment with an investment adviser: A. the representative must notify the Administrator promptly B. the investment adviser must notify the Administrator promptly C. both the representative and the investment adviser must notify the Administrator promptly D. both the representative and the investment adviser must notify the Administrator within 30 days

b

If a sole proprietor wishes to register with the State as an Investment Adviser, which of the following documents are required? I Financial statement of the sole proprietor II Income statement of the sole proprietor III An auditor's opinion that the document filed is true and current IV An affirmation made by the sole proprietor that the document filed is true and current A. I and III B. I and IV C. II and III D. II and IV

b

If an investment adviser wishes to charge a performance fee that allows it to share a percentage of capital gains in a customer account, then under the Investment Advisers Act of 1940: A. such an arrangement is prohibited because of the inherent conflict of interest between the investor and the adviser B. the adviser must disclose to the customer that such an arrangement can give the adviser an incentive to increase the portfolio's risk exposure C. the adviser must disclose that if a fixed fee were charged, the customer would be paying a lower fee, but the adviser would have to make this up by increasing its charges D. such an arrangement is permitted as long as all fees are disclosed to customers

b

If an investment company is trading in the market at a price that is higher than NAV, this signifies that the fund is: A. efficient B. priced at a premium C. profitable D. distributing dividends

b

If the Administrator summarily suspends a registration of an agent, all of the following statements are true EXCEPT: A. the Administrator must notify the agent promptly that the order has been entered B. the Administrator must obtain a court order prior to issuing its own order C. an opportunity for a hearing must be given within 15 days of written request D. the individual is prohibited from acting as an agent in that State

b

If the Federal Reserve enters into reverse repurchase agreements with member banks: I the Federal Reserve is tightening credit availability II the Federal Reserve is loosening credit availability III the Federal Funds rate is likely to go down IV the Federal Funds rate is likely to go up A. I and III B. I and IV C. II and III D. II and IV

b

In 2020, the maximum contribution that an individual can make to an IRA is: A. $5,000 B. $6,000 C. $6,500 D. $7,500

b

In a corporate liquidation, the FIRST to get paid is: A. Unpaid wages and taxes B. Secured bondholders C. Preferred stockholders D. Unsecured bondholders

b

In early January, a grandmother buys shares of a company as an investment. At the end of February of the following year, the grandmother gifts 1/2 of the stock holding to her granddaughter. On the gifted stock, the grandmother's cost basis was $1,000 and the market value at the time of the gift was $2,000. In March following the gift, the grandmother dies and bequeaths the remainder (the other 1/2) of the stock in the company to the granddaughter. At the date of death, that holding was worth $3,000. Six months later, the stock has doubled in value and the granddaughter sells the entire holding. What is the tax consequence? A. $8,000 short term capital gain B. $8,000 long term capital gain C. $3,000 short term capital gain and $5,000 long term capital gain D. $5,000 short term capital gain and $3,000 long term capital gain

b

In the same year, a customer has $14,000 of long-term capital losses on stock positions and $4,000 of short-term capital gains on options positions. Which statement is TRUE? A. The capital losses can be netted against the capital gains and a $10,000 net capital loss is reported, all of which is deductible B. The capital losses can be netted against the capital gains and a $10,000 net capital loss is reported, $3,000 of which is deductible C. The $14,000 of capital losses on the stock positions must be reported separately from the $4,000 of capital gains on the options positions, with all $14,000 of capital losses being deductible and all $4,000 of capital gains being taxable D. The $14,000 of capital losses on the stock positions must be reported separately from the $4,000 of capital gains on the options positions, with only $3,000 of capital losses being deductible and all $4,000 of capital gains being taxable

b

Index fund managers: A. attempt to exactly match the investment performance of the securities that comprise the index B. attempt to exceed the investment performance of the securities that comprise the index C. have a problem with exactly tracking the index because the companies in the index may change D. have a problem with selecting the weighting of securities to be purchased since the creator of the index does not disclose this information

b

Information received by the Administrator in a private investigation may: I be shared among the officers and employees of the Administrator II not be shared among the officers and employees of the Administrator III be shared with any interested party that makes a written request IV not be shared with any interested party that makes a written request A. I and III B. I and IV C. II and III D. II and IV

b

Interest income from which of the following securities is subject to State and Local tax? A. Treasury Bonds B. Federal National Mortgage Association Bonds C. Federal Home Loan Bank Bonds D. Puerto Rico Bonds

b

Investment "A" is purchased in May and sold at a gain in the July following. Investment "B" is purchased in June and sold at a gain in the October following. In order to compare the return of investment "A" to investment "B," which measure should be used?(under a year??????) A. Dollar weighted return B. Annualized return C. Holding period return D. Total return

b

Investment advisers are prohibited from doing all of the following EXCEPT: A. assigning a customer's contract without permission B. charging a retainer fee C. charging commissions on trades effected for the client D. changing partnership management without notifying clients

b

Investment advisory contracts must include a: A. power of attorney B. no assignment clause C. consent to service of process D. duplicate copy for the client

b

Investor likes and dislikes that must be taken into account when making a recommendation to a customer is an example of: A. financial considerations B. non-financial considerations C. investment horizon D. investment style

b

Joe Jones, the proprietor of Joe Jones Financial Planning Inc., which is registered as an investment adviser in New York State, has decided that he can expand his business by setting up an Internet website. He includes a questionnaire that solicits individuals to transmit information about their investment objective, financial situation, financial needs, risk tolerance level and investment time horizon, which he will use to create a financial model and plan for a fee. Which statement is TRUE? A. Joe Jones Financial Planning Inc. must register with the SEC as an investment adviser, but is not required to register as an investment adviser in each State where customers complete the questionnaire B. Joe Jones Financial Planning Inc. is not required to register with the SEC as an investment adviser, but the firm is required to register as an investment adviser in each State where customers complete the questionnaire C. Joe Jones Financial Planning Inc. is required to register with the SEC as an investment adviser, and the firm is required to register as an investment adviser in each State where customers complete the questionnaire D. Joe Jones Financial Planning Inc.'s current New York State registration is the only requirement

b

Life insurance companies developed variable life policies from the: A. term life policy B. whole life policy C. universal life policy D. fixed annuity

b

Michael Michaelson has an MBA in finance and has taught classes at a local college for the past 15 years. He has decided to use his knowledge and acumen in the private sector and registers in the State as an investment adviser. His business will be creating financial plans and implementing them for clients. Michael requests a waiver from the State Administrator from having to pass the Series 65/66 exam based on his educational and teaching background and receives it. He registers as an IA in the State. He wishes to publish an advertisement for his new business. Michael can state which of the following in the advertisement? A. "Because of my extensive finance background, I have been approved by the State to sell financial plans without having to take the examination required of other advisers" B. "My fee schedule, which is non-negotiable, is comparable to that charged by other advisers that do not have my extensive finance background" C. "As a registered investment adviser in the State, I have been certified to create financial plans" D. "I have 15 years of experience as an investment adviser in the State"

b

Municipal revenue bonds have which of the following characteristics? A. Backing of the full faith and credit of the municipal issuer B. Backing of the pledge of revenues from a specific project of the municipality C. Backing of an insurance pledge from a private municipal bond insurer D. Backing of the moral obligation of the State to pay if municipal issuer defaults

b

Mutual fund performance charts show: I Time Weighted Average Return II Dollar Weighted Average Return III a return that is affected by investor cash inflows and outflows IV a return that is not affected by investor cash inflows and outflows A. I and III B. I and IV C. II and III D. II and IV

b

Mutual funds must send their financial statements to shareholders: A. annually B. semi-annually C. quarterly D. monthly

b

Obtaining the 4 critical pieces of information from a customer at account opening is part of the company's policies and procedures covering: A. Privacy of Customer Information B. Anti-Money Laundering C. Cybersecurity D. Business Continuity

b

On December 10th, 2020, a mother gives a gift to her daughter of 1,000 shares of ABC stock. The stock was purchased 16 months earlier at a cost basis per share of $51 per share. The market value at the date of the gift was $64 per share. On January 18th, 2021, the mother dies and bequeaths 1,000 shares of XYZ to the daughter. The market value of XYZ at the date of death is $44 per share and the shares were purchased 2 months earlier by the mother at $40 per share. On February 1st, 2021, the daughter sells the ABC stock at $75 per share and sells the XYZ stock at $48 per share. The tax consequence to the daughter upon selling ABC and XYZ is: A. no capital gain or loss B. $24 per share long term capital gain on ABC; $4 per share long term capital gain on XYZ C. $11 per share long term capital gain on ABC; $8 per share short term capital gain on XYZ D. $24 per share short term capital gain on ABC; $8 per share short term capital gain on XYZ

b

Over a period of time, a portfolio needs to be "rebalanced." This means that: A. the percentages assigned to each asset class must be strategically reset based on the relative performance of each asset class B. securities must be bought and sold to maintain the asset allocation at the initial percentage targets C. securities must be bought and sold to take advantage of market price fluctuations D. the portfolio must be liquidated and the proceeds reinvested with another independent investment adviser

b

PDQ Company $10 par common stock is currently trading at $40. PDQ is currently paying a common dividend of $.20 per share quarterly. The current yield of PDQ stock is: A. 0.5% B. 2.0% C. 5.0% D. 8.0%

b

Past performance: A. may not be shown in an investment adviser advertisement B. may only be shown in an investment adviser advertisement if it reflects the deduction of advisory fees, brokerage commissions and any other expenses that a client would pay C. may only be shown in an investment adviser advertisement if a comparison is made to a relevant market index D. may only be made in an investment adviser advertisement if the advertisement is filed in advance with the SEC

b

Pension funds are prohibited from using which investment strategy? A. Purchase government and agency securities B. Sell short government and agency securities C. Sell covered call contracts D. Buy puts on stock positions

b

Premiums deposited to purchase a variable annuity contract are invested by the insurance company in: A. the general account B. a separate account C. an investment account D. an annuity account

b

Regulation T controls credit on securities from: A. broker to broker B. broker to customer C. bank to broker D. bank to customer

b

Sallie Mae debentures are backed by: A. the full faith and credit of the U.S. Government B. the full faith and credit of the Student Loan Marketing Association C. designated pooled mortgages D. designated pooled student college loans

b

The "Efficient Market Theory" states that securities markets are efficient if: A. trades are executed instantaneously and accurately B. prices instantaneously and fully reflect all relevant available information C. trades are reported instantaneously and accurately D. dealers report all trades within 10 seconds of execution for dissemination to the public

b

The "Monetary Environment" is a reflection of all of the following EXCEPT: A. money supply levels B. stock price levels C. monetary policy D. fiscal policy

b

The "Monetary Environment" is a reflection of which of the following? I Stock trading volumes II Stock price levels III Monetary policy IV Fiscal policy A. I and II only B. III and IV only C. I and IV only D. II and III only

b

The Administrator can require the filing of sales literature related to which of the following transactions? A. An underwriter purchasing the stock of an issuer in a firm commitment underwriting B. A for-profit company issuing securities that are not exchange listed C. An investment company that is making purchases of listed stock in the secondary market D. An offer of bonds made by a State government that guarantees payment of interest and principal

b

The Administrator can subpoena the records of a broker-dealer or agent: A. only after a violation has occurred B. if he suspects that a violation has occurred C. only if written customer complaints are received by the Administrator D. only if criminal charges are being filed against that person

b

The Administrator is empowered to amend or rescind any rule of the Uniform Securities Act: A. if such change is ratified by majority vote of the state legislature B. as he deems necessary to carry out the provisions of the Act C. if the change is approved by the Securities and Exchange Commission D. if the change is approved by the Governor of that state

b

The CEO of a publicly traded company is a large client of an investment adviser representative. The CEO, who is a member of the prestigious River Rocks Country Club, tells the IAR that he will refer other club members to the IAR if the IAR will give the referred clients a discount, and will give the CEO the same discounted rate. Which statement is TRUE about this situation? A. The IAR is prohibited from giving a group of individuals a discount that is not being offered to all of the IAR's clients B. The IAR can offer the discount as long as the fact that non-club members pay a higher fee is disclosed in the Form ADV Part 2A C. The IAR can offer the discount as long as charges to all of the IAR's customers are fair and reasonable D. The IAR is prohibited from offering the CEO the discount since he or she is an existing client, but can offer the discounted rate to any new clients that belong to the country club

b

The Dividend Discount model values common stock by discounting future dividends by the: A. expected rate of return B. required rate of return C. discount rate D. risk free rate of return

b

The Federal Intermediate Credit Banks make loans to, and buys the agricultural and livestock paper of all of the following EXCEPT: A. Commercial Banks B. Federal Reserve Banks C. Agricultural Credit Corporations D. Incorporated Livestock Loan Companies

b

The Internal Rate of Return computation assumes that cash flows will be reinvested at the: A. Real Interest Rate B. Internal Rate of Return C. Risk Free Interest Rate D. Nominal Interest Rate

b

The Investment Policy Statement would include the: A. investment adviser's mission statement B. customer investment objectives and goals C. investment adviser's compensation terms D. portfolio review procedures and intervals

b

The Second Market is trading of: A. listed securities on an exchange floor B. unlisted securities "over-the-counter" C. listed securities "over-the-counter" D. securities directly between institutions

b

The Securities Act of 1933 requires that new issues of securities be registered with the SEC if the: A. issue will be sold within 1 State only to residents of that State B. mails, or other means of interstate commerce, are used to sell the securities C. value of the securities offering exceeds $5,000,000 D. securities offering will be made to more than 35 accredited investors

b

The Securities Act of 1933: I prevents fraud in the sale of new issue securities to the public II prevents fraud in the trading of securities in the secondary market III provisions apply to non-exempt securities only A. I and II B. I and III C. II and III D. I, II, III

b

The State Administrator is permitted to do all of the following EXCEPT: A. withhold registration of a security B. arrest an individual for violating State law C. request that the state Attorney General file criminal charges against an individual for willfully violating State law D. request that the state Attorney General file civil charges against an individual for violating State law

b

The State Administrator receives a complaint about a Federal Covered adviser which has made a notice filing in the State, alleging that the adviser stole from him. Which statement is TRUE about this? A. The Administrator cannot take action because the adviser is Federal Covered B. The Administrator can investigate the complaint C. The Administrator must refer the complaint to the SEC and tell the client that it is doing so D. The Administrator can rescind the registration of the adviser

b

The advantage of buying a foreign index fund as compared to direct investing in foreign stocks is that it: A. minimizes the risk of changing currency values B. is easier than individually investing in foreign stocks C. reduces tax liability when dividends are distributed D. minimizes the business risk of the investments

b

The assets in a Coverdell Education Savings Account may be used to pay all of the following expenses EXCEPT: A. tuition at a private high school B. private music lessons C. tuition at a religious elementary school D. tuition at a public university

b

The custodian bank usually performs all of the following functions EXCEPT: A. sending dividends and capital gains distributions to shareholders B. selecting the investment manager C. preparing and mailing proxies to shareholders D. holding the portfolio of investments in safekeeping

b

The dollar has depreciated against foreign currencies. The likely result is a(n): I increasing trade surplus II decreasing trade surplus III increasing trade deficit IV decreasing trade deficit A. I and III B. I and IV C. II and III D. II and IV

b

The earliest that a European style option can be exercised is: A. anytime before the expiration date of the contract B. the business day of the expiration of the contract C. the Wednesday preceding the third Friday of the month D. the Saturday following the third Friday of the month

b

The formula V ='P' (1 + r)n is used to compute an investment's: A. present value B. future value C. internal rate of return D. standard deviation

b

The investment adviser performs which of the following functions? I Sending dividend and capital gains distributions to shareholders II Selecting the securities to be purchased in the portfolio of investments III Selecting the securities to be sold from the portfolio of investments IV Selecting the brokers to sell the fund shares A. I and IV only B. II and III only C. I, II, III D. I, II, III, IV

b

The manager of a pension plan would most likely invest in which of the following debt issues? I Corporate Bonds II Municipal Bonds III Government Bonds A. I only B. I and III only C. II and III only D. I, II, III

b

The market price average is decreasing daily; however, the level of declines relative to advances is falling. The market is reaching a(n): A. overbought condition B. oversold condition C. breakout on the upside D. breakout on the downside

b

The maximum permitted annual contribution to a Coverdell Education Savings Account for a single beneficiary is: A. $2,000 in a single account B. $2,000 total in any number of accounts C. $4,000 in a single account D. $4,000 total in any number of accounts

b

The purchase of a put is a: A. bull strategy B. bear strategy C. neutral strategy D. bear/neutral strategy

b

The risk adjusted rate of return is the: A. Investment's Total Return + Risk Free Rate of Return B. Investment's Total Return - Risk Free Rate of Return C. Investment's Total Return + Benchmark Portfolio Rate of Return D. Investment's Total Return - Benchmark Portfolio Rate of Return

b

The risk inherent in a portfolio that can be diversified away is known as: A. systematic risk B. non-systematic risk C. credit risk D. marketability risk

b

The risk that is unique to mortgage backed securities is: A. credit risk B. prepayment risk C. interest rate risk D. purchasing power risk

b

The sale of a put has all of the same characteristics as buying stock EXCEPT: A. limited loss potential in a falling market B. unlimited gain potential in a rising market C. low liquidity risk if the position is to be liquidated D. both are bull market strategies

b

The semi-strong version of the efficient market hypothesis states that: A. it is impossible to use technical trading tools to earn excess returns because current prices already reflect all available information in past price patterns B. current securities prices reflect all publicly available information C. current securities prices fully and instantaneously reflect all information, whether it is publicly available or not D. future securities prices are determined by the discounted value of all dividends and growth that are expected in future years

b

The term "marriage penalty" refers to the: A. reduced estate tax exclusion for married couples B. higher tax rates applied to higher joint reported income C. lower income exemptions for married couples D. alternative minimum tax that applies to couples filing jointly

b

The yield to maturity on a bond is more than the current yield. This bond is trading: A. at par B. at a discount C. at a premium D. in the money

b

To act as an adviser in a State, federal covered advisers must do all of the following EXCEPT: A. register with the Securities and Exchange Commission B. register with the State C. file notice with the State D. pay a filing fee to the State

b

To be defined as a diversified management company, a fund can hold no more than what percentage of a single issuer's voting stock? 75/10/5 A. 5% B. 10% C. 25% D. 75%

b

Treasury Bills are issued for all of the following initial maturities EXCEPT: A. 4 weeks B. 8 weeks C. 13 weeks D. 26 weeks

b

Under NASAA recordkeeping rules for investment advisers, any advertisement, circular or other communication must be retained: I if it is circulated to 2 or more persons II if it is circulated to 10 or more persons III for a minimum of 3 years IV for a minimum of 5 years A. I and III B. I and IV C. II and III D. II and IV

b

Under NASAA rules, a complaint is defined as one received: I in a written letter II by e-mail III verbally over the telephone A. I only B. I and II only C. II and III only D. I, II, III

b

Under NASAA rules, within 120 days of year end, the customer of an investment adviser must receive: A. the investment adviser's audited financial statements B. Form ADV Part 2A if there are material changes C. Form ADV Part 1 D. a written prospectus supplement

b

Under SEC rules regarding taking custody of client funds: A. custody can only be taken for clients who have at least $1,000,000 under management; or a net worth of at least $2,100,000 B. customers must be notified of the location where the funds are being held C. customers must receive semi-annual account statements D. the advisory firm must be audited, on a surprise basis, at least semi-annually

b

Under the Investment Advisers Act of 1940, all of the following statements about investment advisory contracts are true EXCEPT investment advisory contracts: A. must be in writing B. must be filed with the SEC 10 days in advance of their effective date C. must provide for notification to customers if there is a change in the composition of the advisory partnership D. may provide for a fee that is partially based upon capital gains for customers who have at least $1,000,000 of assets invested; or who have a net worth of $2,100,000

b

Under the Investment Advisers Act of 1940, which of the following statements are TRUE regarding the investment adviser's relationship with a broker-dealer? I The investment adviser must disclose if it recommends the use of a specific broker-dealer to effect recommended trades II The investment adviser doesn't have to disclose if it recommends the use of a specific broker-dealer to effect recommended trades III The customer must effect trades through the broker-dealer of the investment adviser's choosing IV The customer doesn't have to effect trades through the broker-dealer of the investment adviser's choosing A. I and III B. I and IV C. II and III D. II and IV

b

Under the Investment Advisers Act of 1940, which of the following statements is FALSE about the acceptance of prepaid advisory fees by an investment adviser? A. The fees must be detailed in writing in the advisory contract B. The fees cannot amount to more than 6 months' payment in advance C. Prepaid fees in excess of $1,200 require that the adviser's balance sheet be included in the "Brochure" D. A refund of prepaid fees must be given if the contract is cancelled prematurely

b

Under the Uniform Securities Act of 1956, as amended, an issuer is defined as any person: A. engaged in the sale of new issue offerings to the public B. who issues or proposes to issue a security. C. engaged in the sale of non-exempt securities offerings to the public D. engaged in the sale of secondary offerings to the public

b

Under the Uniform Securities Act, "consent to service of process" means that the: A. Administrator is empowered to fine or penalize an agent or broker-dealer B. Administrator is authorized to receive suits on behalf of an agent or broker-dealer C. registrant is under the jurisdiction of the Administrator for up to 1 year after withdrawal from registration D. registrant cannot be compelled to give testimony in an investigation

b

Under the Uniform Securities Act, an investment adviser who has no place of business in a State is exempt from registration if the: I firm's clients consist solely of institutional investors in the State II firm has no more than 5 clients other than financial or institutional investors within a 12 month period III firm's advice relates solely to municipal securities A. I only B. I and II C. II and III D. I, II, III

b

Under the Uniform Securities Act, if an Investment Adviser limits its clientele to insurance companies, which statement is TRUE? A. The investment adviser must register with the State of residence of the insurance company B. The investment adviser is exempt from registration in the state of residence of the insurance company as long as it is not physically located in that State C. An investment adviser dealing with insurance companies is never required to register within a State D. None of the above

b

Under the provisions of ERISA (Employee Retirement Income Security Act), the use of index options is: A. prohibited because of the speculative nature of these instruments B. allowed only if the strategies followed are in compliance with the objectives and restrictions of the plan C. allowed only if the plan trustee maintains physical possession of the underlying securities D. allowed without restriction as long as the investment manager acts in a prudent manner

b

Under the provisions of the Securities Exchange Act of 1934, margin on securities is set by the: A. Securities and Exchange Commission B. Board of Governors of the Federal Reserve System C. Federal Deposit Insurance Corporation D. Department of Treasury

b

Under the provisions of the Uniform Securities Act, all of the following persons with no office in the State are NOT required to register in a State as an investment adviser EXCEPT: A. an adviser that renders advice solely to banks in the State B. an adviser managing less than $100,000,000 of assets held by State residents C. an adviser that renders advice to no more than 5 clients in the State within a 12 month period D. an adviser that renders advice to employee benefit plans in the State with assets of at least $1,000,000

b

Under the provisions of the Uniform Securities Act, net capital requirements for broker-dealers must be kept in accordance with the provisions of the: A. Securities Act of 1933 B. Securities Exchange Act of 1934 C. Investment Advisers Act of 1940 D. Uniform Securities Act as adopted in that State

b

Under the provisions of the Uniform Securities Act, required records for broker-dealers must be kept in accordance with the provisions of the: A. Securities Act of 1933 B. Securities Exchange Act of 1934 C. Investment Advisers Act of 1940 D. Uniform Securities Act as adopted in that State

b

Under the provisions of the Uniform Securities Act, the determinant of whether an investment adviser can take custody of client funds is whether the RIA: A. is named as the trustee of a client trust account B. has taken out a surety bond C. has a signed power of attorney D. has at least $25 million of assets

b

Using the CAPM approach to making an investment decision, an investor will: A. estimate the risk of a particular stock based on the standard deviation of the investment's expected returns and calculate the required rate of return necessary to make that investment B. use the risk-free rate of return as the baseline return and add to it an estimated risk premium based on the beta coefficient of that investment to find the expected return of that investment C. add the annual cash flows from the investment and divide them by the number of years the investment will be held to find the average annual return and then divide this by the cash investment outlay to find the investment's rate of return D. calculate the non-systematic risk of an investment and deduct it from the expected rate of return to find the risk-adjusted rate of return of the investment

b

Voting of the common stockholder is required for which of the following? I When a corporation wishes to issue convertible securities II When a shareholder decides to accept a tender offer for the company's shares III When a corporation declares a stock split IV When a corporation declares a cash dividend B. I, II, III C. I, II, IV D. I, II, III, IV

b

What happens to the rate of return calculation on a non-callable bond if the rate of interest stays the same and the time intervals are changed? I Shortening the time intervals will increase the rate of return II Shortening the time intervals will decrease the rate of return III Lengthening the time intervals will increase the rate of return IV Lengthening the time intervals will decrease the rate of return A. I and III B. I and IV C. II and III D. II and IV

b

What is the best way to ensure that customer account information held at a broker-dealer is not stolen due to cyber theft? A. Require that the customer send a text message to the firm from a registered device before allowing access B. Maintain customer information in a secure website in encrypted form C. Purchase an adequate level of insurance to cover the full range of cyber risks D. Retain third party vendor to evaluate the firm's cyber risks

b

What item could a State Administrator require a broker-dealer operating as a sole proprietor to file with the State that would not be required to be filed with the SEC? A. Balance Sheet B. Surety Bond C. Statement of Net Capital D. Form BD

b

What options are available for a Coverdell Education Savings Account that is not used by the time the beneficiary is age 30? I The account balance is distributed tax-free to the educational institution selected by the beneficiary II The account balance is distributed to the beneficiary and distributions are taxed to the beneficiary III The account balance is rolled over to a family member who is under 30 years of age IV The account balance is rolled over to an IRA for the beneficiary A. I and II only B. II and III only C. II and IV only D. III and IV only

b

What portfolio construction is most appropriate for a retired school teacher who is age 60? A. 100% common stocks B. 40% common stock / 60% bonds C. 60% common stock / 40% bonds D. 100% bonds

b

What type of joint account can only be opened by married couples? A. Joint Tenants With Rights of Survivorship B. Tenants By Entireties C. Tenants In Common D. Any of the above

b

What type of life insurance policy has fixed premiums, guaranteed cash value, and a guaranteed death benefit? A. Term life B. Whole life C. Variable life D. Universal life

b

When comparing a mutual fund purchase to a variable annuity purchase, the main advantage of investing in a variable annuity is the fact that: A. the contribution to a variable annuity is tax deductible while the contribution to a mutual fund is not tax deductible B. the dividends earned in the variable annuity subaccount grow tax deferred while the dividends earned in a mutual fund are taxable annually C. annual expenses charged against a variable annuity holding are lower than the annual expenses charged against a mutual fund holding D. the dividends earned in the variable annuity subaccount must be reinvested prior to annuitization while the dividends earned in a mutual fund can either be reinvested or withdrawn

b

When comparing an Exchange Traded Fund to a Unit Investment Trust, the customer should be made aware that: A. expense ratios tend to be higher for ETFs than for UITs B. the secondary market for UITs is limited while ETFs are actively traded C. UIT portfolios are actively managed while ETF portfolios are passively managed D. cash dividends received from UITs do not qualify for the lower 15% tax rate, while cash dividends received from ETFs do qualify for the lower rate

b

When looking at the Price/Book Value ratio of a corporation, "Book Value" is best described as: A. Net Intrinsic Value B. Net Accounting Value C. Net Market Value D. Net Liquidation Value

b

When performing a suitability determination, the customer informs you that she will not invest in any companies that produce or market tobacco or alcohol products. This is an example of: A. faith-based investing B. non-financial considerations C. investment strategy D. personal customer profiling

b

When the market is reaching an "overbought" condition, it is expected that the next market move will be: A. upwards B. downwards C. sideways D. either upwards or downwards

b

When the yield curve is ascending, which of the following statements are TRUE? I Short term rates are lower than long term rates II Short term rates are higher than long term rates III To maximize income, an investor should invest in short term maturities IV To maximize income, an investor should invest in long term maturities A. I and III B. I and IV C. II and III D. II and IV

b

Where no fraud is present, an action to recover monies arising from a violation of the Uniform Securities Act must commence within: A. 1 year following discovery B. 2 years following discovery C. 5 years following discovery D. 10 years following discovery

b

Which action taken by the Administrator is the most severe? A. Suspension B. Revocation C. Cease and Desist D. Cancellation

b

Which characteristics make a security LEAST subject to liquidity risk? I Short term maturity II Long term maturity III Low credit rating IV High credit rating A. I and III B. I and IV C. II and III D. II and IV

b

Which first market does NOT trade futures contracts? A. NYMEX B. NYSE C. CBOT D. CME

b

Which individual is defined as an agent under the Uniform Securities Act? A. An individual representing a broker-dealer who takes phone messages from clients that wish to purchase or sell listed stocks B. An individual representing a broker-dealer who takes unsolicited orders for partnership units C. An individual representing an investment adviser who provides advice to clients about investing in securities D. An individual who works for an issuer selling that issuer's stock to the issuer's employees

b

Which is considered to be a direct obligation of the U.S. Government? A. Federal National Mortgage Association Pass Through Certificates B. Government National Mortgage Association Pass Through Certificates C. Federal National Mortgage Association Bonds D. Federal Home Loan Bank Bonds

b

Which of the following are needed to determine tax filing status? I Marital status on the last day of the year II Nationality III Residency IV Cost of home upkeep A. I and III B. I and IV C. II and III D. II and IV

b

Which of the following are taxable in the year of receipt? I Interest earned from investments II Cash dividends from investments III Stock dividends from investments IV Stock splits on investments A. I only B. I and II C. III and IV D. I, II, III, IV

b

Which of the following business structures has unlimited liability? A. S corporation B. Sole proprietorship C. C corporation D. Limited liability company

b

Which of the following describes a transaction that occurred in the "Fourth Market"? A. The President of a listed company selling a large block of that company's stock B. A mutual fund buying shares of stock directly from an insurance company C. A dealer selling shares of stock through a broker's broker D. A company listing its shares directly after completing its Initial Public Offering

b

Which of the following individuals is EXCLUDED from the definition of an "agent" under the Uniform Securities Act? I An individual who represents a broker-dealer selling exempt securities to the public II An individual who represents a broker-dealer selling securities listed on a national stock exchange III An individual who represents an issuer in an exempt transaction IV An individual who represents an issuer in a transaction with existing employees without accepting a commission A. I and II only B. III and IV only C. I, II, IV D. I, II, III, IV

b

Which of the following influences the market price of common stock? A. The par value of the shares B. Investor expectations about the future of the company C. Stated value of the shares D. Book value of the shares

b

Which of the following information MUST be included on a customer confirmation? I Whether the transaction was solicited or unsolicited II The exchange where the transaction was effected III The customer name and account number IV The price of execution A. I and II B. III and IV C. II, III, IV D. I, II, III, IV

b

Which of the following investment company securities is NOT redeemable? A. open-end fund shares B. closed-end fund shares C. fixed unit investment trusts D. participating unit investment trusts

b

Which of the following investments trades in the market independent of NAV? A. Limited partnership B. Closed-end fund C. Variable annuity D. Hedge fund

b

Which of the following is (are) violations of the Uniform Securities Act that can result in civil liability? I An investment adviser recommends the purchase of a non-exempt security that was unregistered, even though an exemption is not available II An investment adviser recommends the purchase of an exempt security that was unregistered to a customer III An investment adviser recommends a non-exempt security that is unregistered to a customer after being informed by his manager that the security was registered A. I only B. I and III C. II and III D. I, II, III

b

Which of the following is NOT a characteristic of a cash account? A. Marginable securities may be purchased in a cash account B. Marginable securities may be sold short in a cash account C. Non-marginable securities may be purchased in a cash account D. Non-marginable securities may be sold long in a cash account

b

Which of the following is NOT a fiduciary under ERISA? A. Plan trustee B. Plan participant C. Plan administrator D. Plan adviser

b

Which of the following is NOT an advantage of owning a variable annuity? A. Separate account accumulation units allow for participation in the equity markets B. The costs and fees associated with owning the contract are lower than making direct investments in mutual funds C. The separate account growth is tax-deferred until distributions commence D. There are no limits on the amount that an individual can invest

b

Which of the following is a "non-issuer" transaction? A. The sale of a new issue of bonds by a corporation B. The trade of 100 shares of stock on an exchange floor C. The sale of mutual fund shares to a customer D. The sale of Treasury Bills by the U.S. Government

b

Which of the following is an acceptable investment in an Individual Retirement Account? A. Municipal Bonds B. U.S. Minted Gold Coins C. Commodities Futures Contracts D. Variable Annuity Contracts

b

Which of the following is an asset class? A. Diamonds and precious jewels B. Real estate C. Annuity D. S&P 500 Index

b

Which of the following is an original issue discount obligation? A. GNMA certificate B. Treasury bill C. U.S. Government bond D. FNMA bond

b

Which of the following is covered by ERISA? A. State employee pension plans B. Private employee pension plans C. Individual Retirement Accounts D. Medical Trust Savings Accounts

b

Which of the following is defined as an investment adviser under the Investment Advisers Act of 1940? (give advice) A. Dealers in U.S. minted gold coins B. Pension consultants C. Broker-dealers in securities D. Managed commodity fund advisers

b

Which of the following is prohibited in an advisory contract under NASAA rules? A. Custody Provision B. Liquidated Damages Provision C. Non-Assignment Provision D. Discretionary Authority Provision

b

Which of the following options strategies provides a gain equal to the premium in a bear market? A. Long Call B. Short Call C. Long Put D. Short Put

b

Which of the following projects would be financed by a general obligation bond issue? A. The construction of a new subway line B. The construction of a new junior high school C. The construction of a new hydroelectric generating plant D. The construction of a new sewage treatment plant

b

Which of the following statements are TRUE about a Life Annuity? I A Life Annuity will cease when the person dies II A Life Annuity will continue to pay to a beneficiary if the person dies before a stated date III The periodic payment for a Life Annuity will be lower than the periodic payment for a Period Certain annuity IV The periodic payment for a Life Annuity will be higher than the periodic payment for a Period Certain annuity A. I and III B. I and IV C. II and III D. II and IV

b

Which of the following statements are TRUE regarding payouts from variable annuity contracts? I The payout is determined by the number of annuity units II The payout is determined by the number of accumulation units III When payout commences, unit value is fixed while the number of units varies IV When payout commences, unit value varies while the number of units is fixed A. I and III B. I and IV C. II and III D. II and IV

b

Which of the following statements are TRUE when comparing a corporation and a limited partnership? I A corporation is a taxable entity II A partnership is a taxable entity III A corporation allows for the flow through of gain and loss IV A partnership allows for the flow through of gain and loss A. I and III B. I and IV C. II and III D. II and IV

b

Which of the following statements are true regarding Treasury Stock? I Treasury Stock receives dividends II Treasury Stock votes III Treasury Stock reduces the number of shares outstanding IV Treasury Stock purchases are used to increase reported Earnings Per Share A. I and II B. III and IV C. II, III, IV D. I, II, III, IV

b

Which of the following statements concerning 529 plans are TRUE? I Contributions are tax deductible to the donor II Distributions to pay for qualified higher education expenses are tax-free III The beneficiary can be changed to another family member without tax consequences IV Any plan balance must be distributed to the beneficiary at age 30 A. I and II only B. II and III only C. III and IV only D. I, II, III, and IV

b

Which of the following statements concerning a 457 plan is TRUE? A. The plan is established by the government employee B. The plan can discriminate in favor of highly paid employees C. The plan cannot exclude rank-and-file employees D. The plan limits the employer deduction to 25% of participant compensation

b

Which of the following statements concerning an open-end investment company are TRUE? I They can sell common stock II They can sell bonds III They can sell preferred stock IV They can pledge their portfolio of investments for loans A. I and II only B. I and IV only C. II and III only D. I, II, III, and IV

b

Which of the following statements concerning taxation of 401(k) plans are TRUE? I Employees must pay income tax in the year earned of salary that is deferred II Employer matching contributions are tax deductible to the employer III Distributions are taxed at ordinary income tax rates IV Investment earnings are taxed to the employer in the year earned A. I and II only B. II and III only C. III and IV only D. I, II, III, and IV

b

Which orders are lower in price than the current market? I Open Buy Limits II Open Buy Stops II Open Sell Limits IV Open Sell Stops A. I and III B. I and IV C. II and III D. II and IV

b

Which person would be required to register as a broker-dealer in a State? A. A person with no place of business in the State who conducts securities transactions with the issuer of non-exempt securities B. A person with no place of business in the State who represents an issuer in the sale of exempt securities to non-institutional customers for compensation C. A person with no place of business in the State who represents an issuer in the sale of non-exempt securities to the issuer's employees without receiving compensation D. A person with no place of business in a State who conducts securities transactions with financial institutions in the State for compensation

b

Which ratio would be used to measure the financial leverage of a broker-dealer? A. Assets to Net Capital B. Loans to Net Capital C. Assets to Liabilities D. Net Income to Revenue

b

Which security's price would fluctuate the MOST due to a change in interest rates? A. 10 year GNMA with an 8% coupon and a 9% yield to maturity B. 10 year zero-coupon Treasury Note with a 7% yield to maturity C. 10 year AA rated corporate bond with an 8.5% coupon and a 9.3% yield to maturity D. 10 year junk-rated corporate bond with a 9% coupon and a 10% yield to maturity

b

Which statement describes a variable life insurance policy? A. A policy owner has flexibility in skipping some premium payments B. The cash value increases based on equity investments C. The death benefit is fixed and guaranteed for the insured's entire life D. Premium payments are low for a young insured individual and increase with age

b

Which statement is TRUE about ERISA's fiduciary requirement? A. There is no requirement to appoint a plan fiduciary as long as the plan assets are held in trust B. The plan fiduciary is a person who exercises control or discretion over the plan C. There can only be one plan fiduciary named in the plan document D. The fiduciary has a dual obligation to act in the interests of the plan sponsor and the plan beneficiaries

b

Which statement is TRUE about a 73-year old man that is still employed earning $30,000 who has a Roth IRA? A. This person can continue to make tax-deductible contributions B. This person can continue to make non-tax deductible contributions C. This person cannot take distributions without penalty D. This person cannot change the account beneficiary

b

Which statement is TRUE about state registration renewal? If the license is not renewed at the end of the year, it: A. goes on an automatic 90 day extension B. expires with no action taken on the part of the Administrator C. cannot be renewed in that state until the end of the next year D. cannot be renewed in that state until the registrant files an explanation of the failure to renew

b

Which statement is TRUE for both Traditional IRAs and Roth IRAs? A. Distributions are taxed as ordinary income B. There is no annual taxation of investment earnings C. Contributions to one do not reduce the amount that can be contributed to the other D. No contributions are permitted once the owner reaches age 70 ½

b

Which statement is TRUE regarding calculating cost basis for tax purposes for stocks versus calculating cost basis for corporate bonds? A. The cost basis calculation for stocks takes into account amortization of premiums paid or accretion of any discount earned while the cost basis calculation of bonds does not B. The cost basis calculation for bonds takes into account amortization of premiums paid or accretion of any discount earned, while the cost basis calculation of stocks does not C. The cost basis calculation for both stocks and bonds takes into account amortization of premiums paid or accretion of any discount earned D. The cost basis calculation for both stocks and bonds does not take into account amortization of premiums paid or accretion of any discount earned

b

Which statement is TRUE regarding family limited partnerships? A. At least 1 parent and 1 child must be general partners in the venture B. The venture must have a legitimate business purpose other than tax avoidance C. Both the general partner(s) and limited partner(s) can assume a management role D. Only intangible financial assets can be held in the partnership

b

Which statement is TRUE regarding mutual fund distributions? A. All dividends distributed by the fund are taxable to the recipient at the same tax rate as for ordinary income B. All capital gains distributed by the fund are taxable to the recipient based on the fund's holding period, even if the recipient has held the shares for less than 1 year C. All distributions reported on Form 1099-DIV are excluded from tax if they are automatically reinvested D. All distributions from municipal bond funds are excluded from taxation because of the federal tax exemption applied to the underlying securities

b

Which statement is TRUE regarding the tax treatment of the annual adjustment to the principal amount of a Treasury Inflation Protection Security? A. An annual upward adjustment due to inflation is taxable in that year; an annual downward adjustment due to deflation is not tax deductible in that year. B. An annual upward adjustment due to inflation is taxable in that year; an annual downward adjustment due to deflation is tax deductible in that year. C. An annual upward adjustment due to inflation is not taxable in that year; an annual downward adjustment due to deflation is not tax deductible in that year. D. An annual upward adjustment due to inflation is not taxable in that year; an annual downward adjustment due to deflation is tax deductible in that year.

b

Which statement is true regarding dollar cost averaging? A. If market prices remain constant, the plan will produce a lower average per share cost B. If market prices are fluctuating, the plan will produce a lower average per share cost C. If prices rise, smaller dollar purchases must be made; while if prices fall, larger dollar purchases must be made D. The plan requires that a constant dollar amount be maintained in equity securities, with any excess invested in debt

b

Which statements are TRUE about Coverdell Education Savings Accounts? I Contributions can continue until the beneficiary reaches age 18 II Contributions can continue until the beneficiary reaches age 30 III Distributions for the beneficiary must be completed upon reaching age 18 IV Distributions for the beneficiary must be completed upon reaching age 30 A. I and III B. I and IV C. II and III D. II and IV

b

Which statements are TRUE about IRA accounts? I Excess contributions are subject to a 6% penalty tax II Excess contributions are subject to a 10% penalty tax III Premature withdrawals are subject to a 6% penalty tax IV Premature withdrawals are subject to a 10% penalty tax A. I and III B. I and IV C. II and III D. II and IV

b

Which statements are TRUE about an investment adviser with an office in State A? I If the investment adviser's only clients are investment companies, the investment adviser must register with the SEC II If the investment adviser's only clients are investment companies, the investment adviser must register in the State III If the investment adviser's only clients are insurance companies, the investment adviser must register with the SEC IV If the investment adviser's only clients are insurance companies, the investment adviser must register in the State A. I and III B. I and IV C. II and III D. II and IV

b

Which statements are TRUE about callable bonds quoted on a yield basis? I Discount bonds are priced based on yield to maturity II Discount bonds are priced based on yield to call III Premium bonds are priced based on yield to maturity IV Premium bonds are priced based on yield to call A. I and III B. I and IV C. II and III D. II and IV

b

Which statements are TRUE about fixed annuity contracts? I The issuer assumes the investment risk II The issuer assumes the purchasing power risk III The purchaser assumes the investment risk IV The purchaser assumes the purchasing power risk A. I and III B. I and IV C. II and III D. II and IV

b

Which statements are TRUE about the use of testimonials in advertising? I Testimonials are permitted in broker-dealer advertising II Testimonials are prohibited in broker-dealer advertising III Testimonials are permitted in investment adviser advertising IV Testimonials are prohibited in investment adviser advertising A. I and III B. I and IV C. II and III D. II and IV

b

Which statements are TRUE regarding Treasury Inflation Protection securities? I In periods of deflation, the amount of each interest payment will decline II In periods of deflation, the amount of each interest payment is unchanged III In periods of deflation, the principal amount received at maturity will decline below par IV In periods of deflation, the principal amount received at maturity is unchanged at par A. I and III B. I and IV C. II and III D. II and IV

b

Which statements are TRUE regarding distributions from 457 plans? I Distributions taken at any age are subject to tax II Distributions taken at any age are tax free III Distributions taken prior to age 59 1/2 are subject to a 10% penalty tax IV Distributions taken prior to age 59 1/2 are not subject to a 10% penalty tax A. I and III B. I and IV C. II and III D. II and IV

b

Which statements are TRUE regarding rules and orders that are entered by the Administrator? I Rules are general in applicability II Rules are specific in applicability III Orders are general in applicability IV Orders are specific in applicability A. I and III B. I and IV C. II and III D. II and IV

b

Which statements are TRUE when comparing futures contracts to forward contracts? I Futures contracts are exchange traded II Futures contracts are traded OTC III Forward contracts are exchange traded IV Forward contracts are traded OTC A. I and III B. I and IV C. II and III D. II and IV

b

Which statements are TRUE? I Strategic portfolio management establishes the basic portfolio structure II Tactical portfolio management establishes the basic portfolio structure III Strategic portfolio management allows market timing adjustments to portfolio structure IV Tactical portfolio management allows market timing adjustments to portfolio structure A. I and II B. I and IV C. II and III D. III and IV

b

With regard to closed-end investment companies, which statements are TRUE? I An initial offering must be made with a prospectus II The issuer redeems shares at NAV III Once issued, shares trade on the secondary market at prevailing market prices IV The portfolio of securities is fixed and is not managed A. I & II only B. I & III only C. III & IV only D. I, III & IV only

b

A Federal covered investment adviser registered under the Investment Advisers Act of 1940 wants to include an exculpatory clause in the advisory contract. Which statement is TRUE about this? A. The clause is permitted because this is a Federal covered adviser B. The clause is permitted because it is beneficial to the client C. The clause is prohibited and unenforceable under Federal and State law D. The clause is prohibited because it denies the adviser the right to pursue claims against the client

c

A Prime Banker's Acceptance is: I the lowest quality banker's acceptance II the highest quality banker's acceptance III eligible for trading by the Federal Reserve trading desk IV ineligible for trading by the Federal Reserve trading desk A. I and III B. I and IV C. II and III D. II and IV

c

A Registered Investment Adviser charges a fee to customers based on a percentage of assets under management. The adviser invests customer funds solely in mutual funds that have a sales charge. Which statement is TRUE? A. The only disclosure that the adviser must make to the customer is the asset management fee B. The only disclosure that the adviser must make to the customer is the sales charge C. The adviser must disclose to the customer both the management fee and sales charge to the customer D. The adviser is not required to disclose to the customer neither the management fee nor the sales charge

c

A Registered Investment Adviser has a client with the following stock positions: Cost basis Current market ABC$60,000 $10,000 DEF$20,000 $ 40,000 PDQ$25,000 $30,000 XYZ$80,000 $40,000 The customer has a realized short term capital gain of $20,000 on another stock that was sold and wants to generate a $20,000 capital loss to offset this gain. What should the customer do? A. Sell $5,000 of ABC B. Sell $10,000 of ABC C. Sell $20,000 of XYZ D. Sell $40,000 of XYZ

c

A Registered Investment Adviser has a client with the following stock positions: Cost basis Current market value ABC$10,000 $40,000 DEF$15,000 $25,000 PDQ$28,000 $32,000 XYZ$20,000 $40,000 All of these positions have been held for over 1 year. The customer needs to liquidate $20,000 of securities and wishes to pay the lowest capital gains tax. What should the customer do? A. Sell $20,000 of ABC B. Sell $20,000 of DEF C. Sell $20,000 of PDQ D. Sell $20,000 of XYZ

c

A Registered Investment Adviser has been retained by a trustee to develop an investment plan for the trust. Such a plan would consider all of the following EXCEPT: A. inflation forecast B. investment objectives C. will for the trustee D. liquidity needs

c

A Representative is making a presentation to a married couple, ages 77 and 81, about their need for continuing income as the expected life spans of the general population have increased. The representative is strongly recommending that the couple buy an equity indexed annuity (EIA). Which statements made by the representative would be misleading and fraudulent? I "EIAs guarantee a minimum rate of return that is equal to the Standard and Poor's 500 Index" II "I do not earn any commissions when I sell you an EIA" III "EIAs are tax qualified, allowing you to reduce your taxable income by deducting any contribution that you make" IV "EIAs provide a minimum guaranteed rate of return that is guaranteed by the issuing insurance company" A. I and III B. I and II C. I, II, III D. I, II, III, IV

c

A broker-dealer MUST maintain physical possession of which of the following? A. Securities issued by municipalities B. Securities traded in an omnibus trading account C. Securities held as collateral for derivative trading components D. Securities that are unregistered and non-exempt

c

A broker-dealer located in State A has all of its agents registered in State A. The broker-dealer has no office in neighboring State B. The broker-dealer would be required to register in State B if its clients in State B consisted solely of: A. broker-dealers B. investment advisers C. government employees of State B D. deposit taking institutions

c

A broker-dealer participates in the distribution of a new issue on a firm commitment basis, earning a spread on each share sold. The broker-dealer is: I acting as agent for the issuer II acting as a principal III the underwriter of the securities IV the investment adviser to the issuer A. I and III B. I and IV C. II and III D. II and IV

c

A broker-dealer registration application CANNOT be denied in a State if the broker-dealer has: A. filed an application that is incomplete in any material respect B. hired an individual as an agent who has committed a felony C. a lack of experience trading securities for its own account or for the account of others D. willfully violated a provision of the Uniform Securities Act

c

A broker-dealer that is offering a new issue in a State has obtained a legal opinion from its counsel that the issue is exempt from registration in that State. After the offering is completed, the State Administrator determines that the issue should have been registered. Which statement is TRUE regarding the broker-dealer's liability in this situation? A. The broker-dealer has no liability because it can rely on the legal opinion as its defense B. The broker-dealer has no liability because it acted in good faith in the transaction C. The broker-dealer has civil liability since it offered the securities in contravention of State law D. The broker-dealer has criminal liability because it has shown scienter in this transaction

c

A brokerage firm was founded 5 years ago by 3 partners - John, Joe and Mary. John and Joe supervise sales and trading; while Mary is responsible for the firm's back-office operations and financial reporting. The firm has been very successful and operates in all 50 States. John dies suddenly and Mary assumes his responsibilities. Which statement is TRUE? A. Mary is not required to register as an agent in each State because she was registered when the Form BD was filed B. Mary is not required to register as an agent in each State because the broker-dealer is federal covered C. Mary must register as an agent in each of the 50 States D. Mary is not required to register as an agent because she is only supervising sales and not actually selling securities herself

c

A clearing broker-dealer that makes markets in most NASDAQ securities has decided that holding its trading securities inventory together with its customer's securities positions would result in a substantial cost savings to the firm. As a result, the firm would be able to reduce the amount that it charges its customers for safekeeping of securities. Which statement is TRUE about this action, if taken? A. This action is permitted if the firm can demonstrate that overall costs to customers would be lowered B. This action is called rehypothecation and is prohibited C. This action is called commingling and is prohibited D. This action is permitted without restriction

c

A client invests in an equity indexed annuity that has a guaranteed 3% annual return, a 10% cap and an 80% participation rate. In a year when the reference index increases by 9%, the investor will be credited with interest at the rate of: A. 2.4% B. 3.0% C. 7.2% D. 9.0%

c

A convertible bond is convertible into common stock at a 32:1 ratio. The common stock is currently trading at $30. The bond is currently trading at $980. What is the conversion price? A. 30.00 B. 30.63 C. 31.25 D. 32.67

c

A corporate investor may exclude from taxation, part of: I dividends received from common stock investments II dividends received from preferred stock investments III dividends received from convertible preferred stock investments IV interest received from convertible bond investments A. I and II only B. III and IV only C. I, II, III D. I, II, III, IV

c

A corporation buys the stock of another company. Which percentage of dividends received from the investment in the acquired company's shares are excluded from tax to the corporate purchaser of those shares? A. 0% b. 30% C. 50% d. 100%

c

A corporation can pay a dividend in which of the following fashions? I Distributing tax credits to shareholders II Distributing the stock of another company to shareholders III Making a stock distribution to shareholders IV Making a cash distribution to shareholders A. I and II only B. I, III, IV C. II, III, IV D. I, II, III, IV

c

A corporation that has a market capitalization of $4,000,000,000 would be an appropriate investment for a: A. Micro Cap Mutual Fund B. Small Cap Mutual Fund C. Mid Cap Mutual Fund D. Large Cap Mutual Fund

c

A couple owns a home purchased for $200,000 and files for bankruptcy. The home has a $125,000 mortgage and is sold by the trustee in bankruptcy for $175,000. Which statement is TRUE? A. The holder of the mortgage receives $175,000 from the sale of the property B. The holder of the mortgage receives $125,000 from the sale of the property and the extra $50,000 goes to the debtor couple C. The holder of the mortgage receives $125,000 from the sale of the property and the extra $50,000 can be claimed by any additional creditors D. The couple receives the $175,000 from the sale of the property and has a $25,000 capital loss

c

A customer buys a $1,000 par Treasury Inflation Protection security with a 4% coupon and a 10 year maturity. If the inflation rate during the first year of the security's life is 5%, the: I coupon rate is adjusted to 9% II coupon rate remains at 4% III principal amount is adjusted to $1,050 IV principal amount remains at $1,000 A. I and III B. I and IV C. II and III D. II and IV

c

A customer buys a TIPS at par with a 3½% coupon. Inflation stays at 4% over the life of the security. What is the total return on the investment? A. 3½% B. 4% C. 7½% D. This cannot be determined from the information presented

c

A customer has a Roth IRA that has experienced considerable losses on the securities positions held in the account, but has not yet sold those positions. Which statement is TRUE about the customer's ability to deduct these losses? A. The losses can never be deducted B. The losses can only be deducted if the depreciated securities positions are sold by April 15th of the following tax year C. The losses can only be deducted if the Roth is liquidated and the investments are sold for less than their cost basis D. The losses can be deducted without restriction in the current tax year

c

A customer has placed an indication of interest to buy a non-exempt new issue security that is currently in the "quiet period." The customer has been delivered a preliminary prospectus. Once registration is effective, to be confirmed as purchasing the issue, the customer: A. must receive a copy of the final price amendment B. must receive a copy of the registration statement C. must receive a copy of the final prospectus D. is not required to receive any further disclosure documentation

c

A customer has previously signed a durable power of attorney giving his spouse power of attorney over his individual brokerage account. Which statements are TRUE? I The power of attorney continues upon the customer's death II The power of attorney ceases upon the customer's death III The power of attorney continues upon the customer's incapacitation IV The power of attorney ceases upon the customer's incapacitation A. I and III B. I and IV C. II and III D. II and IV

c

A customer has purchased 1,000 shares of ABC stock at $30 per share, paying a commission of $1 per share for the transaction. ABC stock declares a 5% stock dividend. When the dividend is paid, the tax status of the investment is: A. 1,000 shares held at a cost basis of $30 per share B. 1,000 shares held at a cost basis of $31 per share C. 1,050 shares held at a cost basis of $29.52 per share D. 1,050 shares held at a cost basis of $30 per share

c

A customer has purchased 5,000 shares of ABC corporation stock in lots of 100 shares over an extended period of time at varying prices. The customer now sells 500 of the shares. Which statement is TRUE? A. IRS rules require that First-In, First-Out (FIFO) accounting be used to identify the shares sold when computing any gain or loss B. IRS rules require that Last-In, First-Out (LIFO) accounting be used to identify the shares sold when computing any gain or loss C. IRS rules allow the taxpayer to specify which shares are being sold D. IRS rules require that the method giving the largest capital gain be used

c

A customer has the following investment mix: 25%Growth Stocks25%Defensive Stocks25%Investment Grade Corporate Bonds25%Speculative Stocks During a period of economic recession, the best performing asset classes are likely to be: I Growth Stocks II Defensive Stocks III Investment Grade Corporate Bonds IV Speculative Stocks A. I and III B. I and IV C. II and III D. II and IV

c

A customer holds 52% of ABCD Corp. common stock, a thinly traded stock listed in the OTCBB. The customer wishes to sell 1% of her holding and requests that the broker display her offering quote. Which statement is TRUE? A. The quote cannot be shown since only dealer offerings are listed in the OTCBB B. The dealer cannot enter the quote unless the State Administrator approves C. The dealer can enter the quote only if it is bona-fide D. The dealer can enter the quote without restriction

c

A customer in the 28% tax bracket has $4,000 of capital gains and $12,000 of capital losses. How much unused loss is carried forward to the next tax year? A. 0 B. $3,000 C. $5,000 D. $8,000

c

A customer invests $100,000 in an Equity Indexed Annuity contract tied to the Standard and Poor's 500 Index. The contract has a 90% participation rate; a 15% cap and a 3% floor. Interest is credited to the contract under the annual reset method and is compounded annually. The performance of the Standard and Poor's Index over the next 3 years is: 15,3,3 Year 1: + 20% Year 2: - 5% Year 3: - 10% At the end of year 3, the customer will have a principal balance of approximately: A. $100,000 B. $105,000 C. $122,000 D. $125,000

c

A customer is considering investing in a private partnership that is currently being formed to buy an office building. The certificate of limited partnership places a life of 9 years on the partnership, after which the office building will be sold and the proceeds distributed to the limited partners. The customer is evaluating the annual cash flow projections included in the Private Placement Memorandum using a CAPM approach. When doing so, the interest rate that would be used as the minimum "hurdle rate" for the project would be the: A. 90 day Treasury Bill rate B. 5 year Treasury Note rate C. 10 year Treasury Note rate D. 20 year CD rate

c

A customer is long the Swiss Franc at a cost of $.60 per SF. The customer wishes to place a collar on the position using PHLX SF FLEX options. To create the collar, the customer would: I Buy 1 PHLX 59 SF Call II Buy 1 PHLX 59 SF Put III Sell 1 PHLX 61 SF Call IV Sell 1 PHLX 61 SF Put A. I and III B. I and IV C. II and III D. II and IV

c

A customer is told by a bank that his investment will pay interest at the rate of .3% per month. This would be the same as telling the customer that his or her: A. annual real rate of return is 3.6% B. annual percentage yield is 3.6% C. annual percentage rate is 3.6% D. yield to maturity is 3.6%

c

A customer of a broker-dealer that is located in California moves to Nevada. The broker-dealer is registered in both States. The agent that handles the account wishes to remain the agent of record on the account. In order to do so, the agent: A. is not required to do anything B. must appear in front of the Nevada State Administrator C. must register in Nevada D. must file a dual registration on Form U-4

c

A customer owning 100 shares of stock could receive protection by: A. buying another 100 shares of the stock B. buying a call C. buying a put D. selling a put

c

A customer owns a cash value life insurance policy. Any of the following can result in a taxable event EXCEPT: A. payment of a death benefit B. taking a partial withdrawal from the policy C. taking a loan from the policy D. surrender of the policy

c

A customer places an order on the NYSE to sell bonds. The order reads "Sell 5M ABC 9s M '42 @ 90 GTC." At which of the following prices may the order be executed?I 89II 90III 91IV 92 A. I and II only B. III and IV only C. II, III, IV D. I, II, III, IV

c

A customer submits a written complaint to your broker-dealer. Later, he changes his mind and asks that the complaint be returned. You should: A. do nothing unless the customer makes a written request B. return the original written complaint to the client C. return a copy of the complaint to the client and retain the original complaint in the firm's files D. return the original complaint to the client and retain a copy of the complaint in the firm's files

c

A customer wishes to buy a security that provides monthly payments for his retirement. Which of the following is suitable? A. Treasury Bonds B. Income Bonds C. GNMA Pass Through Certificates D. Treasury Notes

c

A customer wishes to make an investment in growth mutual funds for an Individual Retirement Account. All of the following statements by an agent are prohibited EXCEPT: A. "The fund has averaged a 20% annual growth rate in the past and is guaranteed to produce the same growth rate in the future" B. "Last year, the fund paid out dividends of $1.00 per share and capital gains of $.50 per share, for a total income yield of $1.50" C. "The fund yielded 20% last year and is expected to yield the same this year, though the actual yield may be more or less" D. "The fund is registered with the SEC, which has approved of the fund's shares"

c

A customer, age 30, believes that equity investments for growth are the best choice for his long-term investment goals. He does not believe that asset managers can outperform the market over long time periods and doesn't wish to pay for them. The best recommendation for this customer is the purchase of: A. High Tech Mutual Fund Shares B. Government Bond Fund Shares C. Equity Index Fund Shares D. Corporate Bond Fund Shares

c

A customer, age 49, invests $30,000 in a variable annuity contract as a lump sum. After 10 years at age 59, the customer wishes to withdraw $20,000 from the contract. At that point, the separate account is valued at $50,000. The withdrawal is: A. non-taxable B. 100% taxable as a capital gain C. 100% taxable at ordinary income rates D. 100% taxable at ordinary income rates plus is subject to a 10% penalty tax

c

A divorced father with 2 young children would be best off choosing which tax filing status? A. Single B. Married Filing Separately C. Head of Household D. Divorced

c

A double barreled municipal bond is one that is backed by: A. 2 separate sources of revenue B. 2 separate sources of taxing power C. a pledge of revenues and the backing of that municipality's ad valorem taxing power D. a pledge of revenues and the unconditional guarantee of the U.S. Government

c

A father and mother established a 529 plan for their son when he was age 12. The son has just turned 18 and is entering college. The father gets the first tuition and boarding bill from the college for $22,000. Since the son will be commuting home every other weekend, the father withdraws $25,000 from the 529 plan to pay for the college bill and the commuting expenses. Which statement is TRUE? (school only) A. There is no tax consequence to the $25,000 withdrawal B. $3,000 of the distribution is subject to regular income tax C. $3,000 of the distribution is subject to both regular income tax and a penalty tax

c

A father is writing his will (the testator) and is naming as beneficiaries his 2 adult sons - Son A and Son B. Each one will get an equal share of the father's estate "per stirpes" upon the father's death. Each of the sons has children (the grandchildren of the testator) who are not yet adults. Son A has 2 young children - Grandchild A1 and Grandchild A2. If Son A predeceases the testator, then: A. Son A's 1/2 share goes into his estate B. Son A's share goes to Son B C. Grandchild A1 gets 25% and Grandchild A2 gets 25% of the estate's assets upon the death of the testator D. the deceased son's share reverts back to the father's estate

c

A father is writing his will (the testator) and is naming as beneficiaries his 3 adult sons. Each one will get an equal share "per stirpes" of the father's estate upon the father's death. Each of the sons has children (the grandchildren of the testator) who are not yet adults. If one of the sons predeceases the testator, then the: A. deceased son's share goes into the son's estate B. deceased son's share passes to his brothers C. deceased son's share passes to his children D. deceased son's share reverts back to the father's estate

c

A food manufacturer has entered into a contract to buy 5,000 bushels of corn at $4.23 per bushel, to be delivered at the firm's place of business, 6 months from now. The firm has entered into a(n): A. options contract B. futures contract C. forward contract D. delivery contract

c

A fund that distributes at least 90% of its Net Investment Income to shareholders is termed a(n): A. income fund B. registered fund C. regulated fund D. tax exempt fund

c

A long-established public company that is listed on the AMEX is "bought out" and delisted. The buyer is an investment fund organized as a limited partnership, that intends to overhaul the company's management and operations and then sell off the pieces to other investors at a profit. The buyer in this situation would be called a(n): A. venture capital firm B. business development company C. private equity firm D. angel investor

c

A management company's Board of Directors CANNOT consist of more than what percentage of affiliated persons? A. 40% B. 50% C. 60% D. 90%

c

A married couple with 2 young children, has their assets in a revocable trust. If one spouse dies, the: A. surviving spouse acquires title to the deceased spouse's assets B. deceased spouse's assets are passed to the surviving children C. assets are handled according to the terms of the trust D. surviving spouse acts as trustee for all assets in the trust, including those of the deceased individual

c

A married customer who has an individual account dies. The broker who handles the account learns that one of the major holdings in the account is likely to miss its earnings projections and is thus likely to fall sharply in value. The broker should: A. sell the stock immediately B. contact the customer's spouse immediately and get permission to sell the stock C. wait for the appointment of an executor over the account before taking any action D. get approval from the branch manager and then sell the stock

c

A money manager that believes that a company that reports higher than expected earnings will continue to generate superior returns and stock price appreciation is a follower of: A. value investing B. growth investing C. momentum investing D. efficient market theory

c

A money manager that employs momentum investing makes investment decisions based on the: A. fundamental value of the company as determined by analysis of the company B. earnings growth of the company C. reported earnings of the company as compared to the "whisper" number D. efficient market theory

c

A municipal bond is issued with a covenant that states "if revenue collections are insufficient, the state legislature has the authority, but not the obligation, to make an annual apportionment of funds necessary to meet debt service requirements." This is a: A. special tax bond B. double barreled bond C. moral obligation bond D. general obligation bond

c

A mutual fund has a beginning of year Net Asset Value (NAV) per share of $50. During the year, the fund has Net Investment Income (NII) of $2 per share. At the end of the year, the fund distributes $1 per share in dividends to its shareholders. The end of year NAV per share is: 50+2-1 A. $49 B. $50 C. $51 D. $52

c

A mutual fund is offered with no up-front sales charge and no contingent deferred sales charge. It charges 50 basis points of 12b-1 fees annually. The fund publishes an advertisement stating that: "This is a no-load fund." Which statement is TRUE? A. The statement is true as presented B. This statement is misleading because no-load mutual funds cannot charge 12b-1 fees C. This statement is misleading because a no-load fund cannot charge more than 25 basis points of 12b-1 fees D. This statement is misleading because mutual funds are not permitted to advertise themselves as no-load funds

c

A new client with no other investment assets has just come into an inheritance of $500,000 of ABCD stock, a blue chip company listed on the NYSE. As the adviser to this customer, your IMMEDIATE concern should be: A. whether the company is a candidate for delisting B. the possibility that the value of ABCD stock may decline sharply C. the lack of diversification of the customer's investment D. whether the customer paid any estate tax liability due

c

A new customer calls a representative and says the following: "I own 1,000 shares of DEF stock, which is currently held at another broker-dealer. I want to sell the shares at the market." The representative accepts the order from the customer. The order ticket should be marked: A. long sale B. long sale - exempt C. short sale D. short sale - exempt

c

A new customer wants to open a discretionary account by initially depositing $20,000 in cash. He signs the authorization form and indicates to an agent that his investment objective is long-term growth. He wishes that the agent immediately invest his money to take advantage of market timing. Which statement is TRUE? A. As long as the customer is an American Citizen born in the United States and this is verified, the agent may invest the money in a manner consistent with the customer's objective B. Once the new account form is approved by the State Administrator, the agent can start investing as long as the investment is consistent with the customer's objective C. The agent should contact her branch manager as cash deposits or withdrawals exceeding $10,000 must be reported to the Department of Treasury D. The agent should contact her State Administrator as amounts exceeding $10,000 must be reported to the Secretary of the State

c

A person makes an initial application for State registration on September 30th. Which statement is TRUE regarding the filing fee? A. The fee will be pro-rated and only 3/12ths of the annual fee must be paid B. The fee will be pro-rated and only 9/12ths of the annual fee must be paid C. The annual fee is not pro-rated and the full year filing fee must be paid D. No filing fee is due until the annual December 31st renewal

c

A person must begin to make withdrawals from an IRA: A. the day after reaching age 59 ½ B. 2 months after reaching age 70 ½ C. by April 1st of the year following the year the individual reaches age 70 ½ D. 9 months following the date the individual reaches age 70 ½

c

A person who is interested in a long term bond investment strategy would: A. use a barbell B. use a ladder C. not be concerned with volatility D. be a growth investor

c

A portfolio invested in index funds that is rebalanced monthly is considered to be: A. Active/Active B. Passive/Passive C. Active/Passive D. Passive/Active

c

A portfolio manager at an investment advisory firm buys 100,000 shares of ABCD stock in a private placement for his personal account. One year later, the company goes public and the portfolio manager purchases 2,000,000 shares of the IPO for the adviser's customers. This action is a violation known as: A. free riding and withholding B. insider trading C. an undisclosed conflict of interest D. churning the accounts of customers

c

A portfolio manager generates a 20% rate of return on a "small cap" portfolio, compared to a 15% rate of return on the benchmark portfolio and a 10% rate of return on the Standard and Poor's 500 index over the same period. The passive rate of return on the portfolio is: A. 5% B. 10% C. 15% . 20%

c

A portfolio of securities with a beta of 1.2 has produced an average annual return of 12%. Which investment should the portfolio manager NOT consider adding? A. An investment with a 7.8% growth rate and a beta of .6 B. An investment with a 15.4% growth rate and a beta of 1.2 C. An investment with a 20% growth rate and a beta of 2.2 D. An investment with a 26% growth rate and a beta of 2.1

c

A portfolio with an objective of global investing would: A. invest only in securities issued in foreign countries B. invest only in securities issued by U.S. corporations that have global operations C. spread its investments across both domestic and foreign securities, overweighting countries that are likely to experience faster rates of growth D. spread its investments across both domestic and foreign securities, weighting investments relative to the GDP of each country

c

A private fund adviser: A. must file Form PF with the SEC B. must file Form ADV with the SEC C. must file both Form PF and Form ADV with the SEC D. is neither required to file Form PF nor Form ADV with the SEC

c

A private investment fund that is only open to sophisticated investors is known as a: A. management company B. specialty fund C. hedge fund D. special situations fund

c

A registered investment adviser has hired several investment adviser representatives and wishes to print up business cards for these individuals. Each business card will have the IAR's name, followed by "Registered Investment Adviser." Under the provisions of the Investment Advisers Act of 1940, the investment adviser has: A. not violated the Act B. violated the Act because the business card implies that the SEC approves of the representative C. violated the Act because the business card implies that the representative is registered with the SEC D. violated the Act because representatives may not have business cards under the provisions of the Act

c

A registered investment adviser that has been growing rapidly would like to borrow funds for the expansion of its corporate offices and to add staff. The adviser would be permitted to borrow from a(n): A. client who has the financial capability of making the loan, as long as the loan is documented in writing and the existence of the loan is disclosed in writing to the adviser's other clients B. a client that meets the definition of an accredited investor under Regulation D C. financial institution that is in the business of making this type of loan D. bank that is also a client of the registered investment adviser

c

A registered representative receives a telephone call from a customer who tells the representative to: "Sell my 500 shares of ABC stock at the market." The representative has the record of the customer purchasing the shares 2 years ago, but the shares were transferred into the customer's name and shipped to the customer at his home address. The representative asks the customer where the shares are and the customer responds as follows: "The shares are in a fireproof safe in my bedroom." The representative should: A. not accept the sell order because the stock is not in custody of the broker-dealer B. accept the sell order, but mark the order ticket short because the shares are not in custody of the broker-dealer C. accept the sell order, but mark the order ticket long because it can be reasonably expected that the customer will deliver the shares by settlement D. not accept the sell order because the stock is not in good deliverable form

c

A representative is making a presentation to a married couple, ages 77 and 81, about their need for continuing income as the expected life spans of the general population have increased. The representative is strongly recommending that the couple buy an equity indexed annuity (EIA). Which statements made by the representative would be misleading and fraudulent? I "EIAs guarantee a minimum rate of return that is equal to the Standard and Poor's 500 Index" II "I do not earn any commissions when I sell you an EIA" III "EIAs are tax qualified, allowing you to reduce your taxable income by deducting any contribution that you make" IV "EIAs provide a minimum guaranteed rate of return that is guaranteed by the issuing insurance company" A. I and III B. I and II C. I, II, III D. I, II, III, IV

c

A retiree who receives fixed annuity payments is subjecting him or herself to: A. market risk B. liquidity risk C. purchasing power risk D. regulatory risk

c

A sales representative who fails to register as an agent of a broker-dealer: I has committed a felony II has committed a misleading Act III is subject to civil liability IV is subject to criminal liability A. I and III only B. I and IV only C. II and III only D. II and IV only

c

A single 30-year old investor has no current investments and $20,000 in a savings account. The customer earns $150,000 per year and has discretionary investment funds of $25,000 per year. Which of the following is an appropriate asset allocation for this customer? A. 80% Aggressive Growth Fund, 20% Emerging Markets Fund B. 80% Emerging Markets Fund, 20% Aggressive Growth Fund C. 30% Aggressive Growth Fund, 30% Emerging Markets Fund, 30% Growth Fund, 10% Money Market Fund D. 30% Money Market Fund, 30% Treasury Securities Fund, 30% Blue Chip Stock Fund, 10% Aggressive Growth Fund

c

A speculator that initiates a long futures position in Euros: I believes that the Euro will decline II believes that the Euro will increase III will need to sell Euro futures to close his position if he wants to avoid taking delivery in the future IV can only satisfy the terms of the contract by taking delivery of Euros on the delivery date A. I and III B. I and IV C. II and III D. II and IV

c

A stock with a P/E Ratio of 10 has just closed at $50 per share. This means that the approximate EPS for this company is: A. $.20 B. $2.00 C. $5.00 D. $10.00

c

A student at a U.S. college wishes to spend her summer year abroad at the American University in Paris, France. Can her 529 plan be used to pay for tuition? A. No, because the funds can only be used to pay for college in the United States B. No, because the funds can only be paid for college courses that are taught in English C. Yes, as long as the American University in Paris is on the list of foreign schools that qualify for Title IV federal student aid D. Yes, because the funds can be used to pay for college or higher education in the United States or in any foreign institution

c

A surety bond requirement for registration of a broker-dealer: A. protects each customer against loss of principal in the event of the failure of the broker-dealer B. can be met by using the broker-dealer's existing fidelity bond coverage C. can be used by any person who has an enforceable legal claim against the broker-dealer D. can be met by giving the State a lien on the broker-dealer's real property in lieu of posting cash, securities, or an indemnity policy

c

A wealthy investor has $400,000 of funds to invest, but will need the money in one year to pay for a house that is currently under construction. Which investment is suitable? A. 30-year U.S. Government bonds B. 20-year AAA rated corporate bonds C. 1-year Treasury securities D. Blue chip stocks

c

ABC Corporation has declared a cash dividend to stockholders of record on Thursday, October 24th. The last day to buy ABC shares BEFORE they go ex dividend is? A. Friday, October 18th B. Monday, October 21st C. Tuesday, October 22nd D. Wednesday, October 23rd

c

ACME Securities is a registered broker-dealer in State A. ACME is soliciting individuals to work for the firm in their spare time, from a home office. For selling ACME's products to customers, these individuals will be paid 25% of commissions generated. Since these individuals are not working in ACME's office, ACME has classified them as independent contractors. Which statement is TRUE? A. These individuals are not required to be registered as representatives in State A because they are not ACME employees B. These individuals must register themselves as representatives in State A because they are not ACME employees C. These individuals must be registered as representatives in State A by ACME Securities D. These individuals only need to be registered in State A by ACME if they become full-time representatives

c

All of the following are characteristics of 529 college savings plans EXCEPT: A. a one-time single contribution of up to 5 times the annual gift tax exclusion may be contributed in a single year B. eligibility of contributions is not affected by the income of the contributor C. contributors purchase tuition credits or units D. the plans are sponsored by States

c

All of the following are included in the taxable income of a corporation EXCEPT: A. Dividends received from foreign investments B. Gain on the sale of a capital asset C. Proceeds received from the issuance of debt securities D. Interest received from domestic investments

c

All of the following are likely to purchase dealer commercial paper EXCEPT: A. Insurance Companies B. Trust Companies C. Individuals D. Open-end Investment Companies

c

All of the following are specifically EXCLUDED from the definition of an investment adviser under the Investment Advisers Act of 1940 EXCEPT: A. lawyers B. accountants C. financial planners D. engineers

c

All of the following are terms associated with preferred stock EXCEPT: A. callable B. cumulative C. redeemable D. convertible

c

All of the following are tests that are considered to determine if one is defined as an "investment adviser" that must register with the SEC EXCEPT whether that person: A. gives advice about securities B. is compensated for giving advice about securities C. has previously been registered with the SEC D. is "in the business" of giving investment advice

c

All of the following are true about preferred stock EXCEPT: A. Preferred dividends are paid before common B. In most cases dividends are paid semi-annually C. Corporations must pay preferred dividends D. Preferred shareholders are paid before common shareholders upon liquidation of a corporation

c

All of the following can initiate repurchase agreements with government and agency securities as collateral EXCEPT: A. Government securities dealers B. Federal Reserve Banks C. Federal Home Loan Banks D. Commercial banks

c

All of the following corporate bonds are secured EXCEPT: A. equipment trust certificates B. second mortgage bonds C. sinking fund debentures D. collateral trust certificates

c

All of the following information is required for an investment adviser representative to register in a State EXCEPT: A. work history B. residential history C. legal actions taken against the employee D. misdemeanor convictions involving securities occurring within the past 10 years

c

All of the following persons are defined as federal covered advisers EXCEPT: A. advisers with $100,000,000 or more of assets under management B. advisers to investment companies C. advisers to sophisticated investors D. advisers not subject to State regulation

c

All of the following persons can contribute to a 403(b) plan EXCEPT a: A. professor at a university B. nurse at a hospital C. student at a college D. secretary at a foundation

c

All of the following statements are true about "agency cross transactions" under the Investment Advisers Act of 1940 EXCEPT: A. to effect an agency cross transaction, written consent from the client must be obtained B. agency cross transactions cannot have been recommended to both the buyer and seller by the investment adviser C. each client must be sent a quarterly account statement detailing activity in the account for that period D. each client must be sent an annual statement identifying the total number of agency cross transactions effected; and the remuneration received by the adviser for these transactions

c

All of the following statements are true about American Depositary Receipts EXCEPT: A. ADRs facilitate domestic trading of foreign securities B. ADR holders receive dividends C. ADR holders have voting and pre-emptive rights D. ADRs are issued by domestic banks

c

All of the following statements are true about GNMA and FNMA securities EXCEPT: A. GNMA and FNMA make a secondary market in mortgages B. GNMA and FNMA issue pass through certificates C. GNMA and FNMA pass through certificates are directly backed by the U.S. Government D. GNMA and FNMA pass through certificates pay interest and principal monthly

c

All of the following statements are true about an agent's registration EXCEPT: A. once an agent has filed a registration application in a State, it is effective within 30 days of application B. if an agent terminates employment with a broker-dealer, the agent's registration is terminated C. once an agent is registered in one State, that agent is registered in all 50 States D. unless the State adopts another rule, registration expires on December 31st of each year

c

All of the following statements are true about both bonds and preferred stock EXCEPT: A. Both bonds and preferred stock are "Senior" securities over common stock in a dissolution B. Both bonds and preferred stock can be convertible C. Payments to both bondholders and preferred stockholders are subject to approval of the Board of Directors D. Both bonds and preferred stock have a stated fixed payment rate

c

All of the following statements are true for both limited partnerships and corporations EXCEPT both limited partnerships and corporations: A. limit liability for the business owners B. have centralized management C. allow for "flow-through" of gain and loss D. are formed with business intent

c

All of the following statements are true regarding defined benefit plans EXCEPT: A. contributions made to the plan can vary from year to year B. employees with the highest salaries and the fewest years to retirement benefit the most C. benefits paid to employees consists of a tax free return of capital and a taxable return of earnings D. actuarial tables are used to determine contribution rates for each employee

c

All of the following statements are true regarding stop orders EXCEPT stop orders: A. can protect a profit on a long stock position B. can limit a loss on a long stock position C. allow a specific execution price to be "locked-in" D. are placed "away" from the current market

c

All of the following statements concerning a variable life insurance policy are correct EXCEPT: A. premium payments are level and fixed for the insured's lifetime B. the cash value increases based on equity investments C. the death benefit is fixed and guaranteed for the insured's entire life D. policy loans will reduce the amount paid at death

c

All of the following terms are synonymous EXCEPT: A. agent B. broker .c dealer D. middleman

c

All of the following tools are used by the Federal Reserve to control the money supply EXCEPT: A. open market operations B. setting the discount rate C. setting the federal funds rate D. setting reserve requirements

c

An IAR has been retained to manage the brokerage account of an estate. When examining the account statement, the IAR sees the following holdings: $9,000,000 ABC Corp. AA-rated long term bonds $1,000,000 XYZ Money Market Fund Over the past year, the ABC bond position has appreciated by 30% due to falling interest rates. The IAR notes that the yield curve has steepened its positive slope and believes that the Federal Reserve will start tightening credit to reduce the risk of inflation. The BEST action for the IAR to take is to: A. do nothing because the account assets must be distributed to the heirs within 9 months B. sell the appreciated bond position and reinvest the proceeds in a growth mutual fund C. sell the appreciated bond position and reinvest the proceeds in the money market fund D. either hold or sell the appreciated bond position using the prudent investor rule as a guideline

c

An IAR has constructed a buy and hold bond portfolio. The major factor to consider is: A. selecting bonds that will give superior performance B. making sure all of the bonds have the same maturity C. selecting bonds with high credit ratings D. choosing bonds with differing issuers

c

An Investment Adviser Representative (IAR) prepares a sophisticated investment strategy for a client. The IAR subsequently learns that the strategy will have severe tax consequences for the client. The IAR should: A. implement the plan and let the client's tax accountant deal with any tax issues B. implement the plan and recommend a tax professional to the client C. develop another plan for the client D. implement the plan only if the customer signs a waiver of liability

c

An Investment Adviser Representative enters into a contract with a new client for advisory services and provides the client with a glossy copy of Form ADV Part 2 (the "Brochure") and the Brochure Supplement. When he gets back to the office, he realizes that he forgot to have the client sign that the Brochure was received. The IAR: A. is not required to do anything because the customer received the Brochure and Brochure Supplement B . must have the customer sign within 48 hours that the Brochure was received C. must have the customer sign the contract and give the customer 5 business days to terminate the contract without penalty D. must rescind the contract immediately

c

An Investment Adviser Representative is terminated. Under the Uniform Securities Act, which statement is TRUE about the records that must be retained by the Investment Adviser relating to this? A. The copy of the original U-4 signed by the registrant must be filed with the State Administrator B. The copy of the original U-4 signed by the registrant must be destroyed C. The copy of the original U-4 signed by the registrant must be retained for a period of time specified by the State D. The copy of the original U-4 signed by the registrant must be given to the terminated representative

c

An Investment Adviser Representative takes an annual look at his client's portfolio holdings and reallocates them to match up to a previously determined strategic asset allocation percentage. This is known as: A. portfolio insurance B. portfolio optimization C. portfolio rebalancing D. portfolio tracking

c

An Investment Adviser Representative wishes to set up a blog on the Internet to provide information to interested persons about current Federal and State regulatory events related to investment advisers. Which statement is TRUE about this? A. This action is prohibited under NASAA rules B. This action is permitted because the blog covers regulatory issues and is not promotional C. This action is permitted only if the Investment Adviser Representative obtains permission of the Investment Adviser firm D. This action is permitted only if the Investment Adviser Representative is affiliated with a Federal Covered Adviser

c

An Investment Adviser can give advice on: I NYSE listed securities II Options III Commodity futures IV Variable annuities A. I only B. II and III only C. I, II and IV D. I, II, III, IV

c

An Investment Adviser is screening companies for their investment potential and finds what he believes to be an undiscovered growth stock. The adviser puts in an order to buy 10,000 shares, which is executed in 2-5,000 share purchases at different prices. What is the most appropriate way for the adviser to distribute these shares to his client's accounts? A. The clients that pay the highest advisory fees should get the better-priced shares B. The clients that have the largest accounts should get the better-priced shares C. The shares should be distributed pro-rata across all client accounts D. The shares should be distributed on a random basis across all client accounts

c

An Investment Adviser is set up as a sole proprietorship. The owner has hired an Investment Adviser Representative (IAR) to market the firm to potential clients. The most important consideration in the firm's Business Continuity and Succession Plan would be: A. the identification of the business model of the Investment Adviser including size of the firm, types of services provided, and the number of locations B. making provision for the Investment Adviser Representative to notify the clients of the Investment Adviser in the event of business interruption caused by the owner's death or unexpected permanent incapacitation C. making provision for the IAR to contact clients to get their permission to assign advisory contracts to a 3rd party in the event that the owner dies or is unexpectedly unavailable D. providing for an appropriate emergency contact person when the investment adviser representative is away on vacation

c

An advantage of ADRs is that they are: A. less expensive than going to a foreign exchange and purchasing the shares there B. sold through U.S. branches of foreign banks in small denominations C. a way of buying foreign stocks easily in the U.S. D. a simple way for foreigners to buy U.S. Government securities

c

An agent has an individual account for a husband. The husband calls the agent and states that he wishes to open an account in his wife's name and buy 500 shares of PDQ stock. Which statement is TRUE? A. The agent can open the account B. The agent can open the account only if the husband gives authorization C. The agent can open the account only if the wife gives written authorization D. The account cannot be opened unless the wife orally approves

c

An agent of a broker-dealer is solicited by the general partner of an oil and gas income program being offered as a private placement only to accredited investors. The general partner explains that for each customer that the agent brings to the general partner, he will pay a finder's fee of 10% of the amount invested. The agent gets 20 copies of a full-color brochure from the general partner and distributes them to his largest customers for their consideration. Based on this information, you should be LEAST concerned about: A. a potential violation of Regulation D B. whether the investment is defined as a security C. the track record of the general partner D. the information disclosed in the brochure

c

An agent of a broker-dealer maintains accounts for immediate family members, including an account for his brother-in-law. The agent is having a bad year, and his brother-in-law offers to lend him $20,000 until things get "better." Which statement is TRUE regarding this offer? A. As long as the loan amount is documented in writing and has a fixed repayment date and fixed interest rate, this is permitted B. As long as the terms of the loan are the same as would be offered in an arm's length transaction by an unaffiliated third party lender, this is permitted C. This offer cannot be accepted because borrowing money from a customer is an unethical business practice D. This offer cannot be accepted because borrowing money from family members that are customers is only permitted from direct family members - not from "in-laws"

c

An agent of a broker-dealer may: I charge a fee for investment advice in addition to any commission charged if a recommendation performs well II not charge a fee for investment advice in addition to any commission charged if a recommendation performs well III charge for clerical services where the charge is not based on performance IV not charge for clerical services A. I and III B. I and IV C. II and III D. II and IV

c

An agent of a broker-dealer wishes to create a website to solicit securities business from customers. Based on each customer's responses to questions asked, appropriate investment recommendations will be made. Which statements are TRUE? I The broker-dealer must review and approve the content of the website II The Administrator must review and approve the content of the website III The broker-dealer must be registered in each State where a customer responds to the website IV The agent must be registered in each State where a customer responds to the website A. I and II B. III and IV C. I, III, IV D. I, II, III, IV

c

An agent would be denied registration for all of the following reasons EXCEPT the agent: A. is insolvent B. failed to pay registration filing fees C. was convicted of a securities misdemeanor 11 years ago D. is not affiliated with a broker-dealer

c

An annuitized account in a variable annuity is most similar to: A. a mutual fund B. a whole life insurance unit C. pension payments D. an individual retirement account

c

An elderly client is visiting an Investment Adviser Representative (IAR) in the IA's office. He tells the IAR that he is going to have major surgery and is concerned about the safety of his stock certificates that he keeps at home in a small fireproof box. The Investment Adviser Representative wishes to help the client out. Which of the following should the IAR NOT do? A. Drive the client to his house to retrieve the stock certificates and then take him to the bank used by the Investment Adviser where the client rents a safe deposit box in the client's name and deposits the securities B. Ask the client for the name of his attorney and then call him to ask for his opinion of what should be done in this situation C. Drive the client to his house to retrieve the stock certificates and then take him to the Investment Adviser's bank and place the certificates in the Investment Adviser's safety deposit box, making sure to write down all of the certificate numbers and other pertinent information D. Drive the client to his house to retrieve the stock certificates and then take him to his bank where the client rents an existing safe deposit box and deposit the securities

c

An elderly widow, age 81, is seeking to supplement her retirement income with an investment that will provide income that will grow with inflation. Which statement about variable annuities could be made to this client? A. "A variable annuity is guaranteed to give a rate of return that matches the inflation rate" B. "A variable annuity is backed by the investment assets of the insurance company, which are always growing" C. "A variable annuity will give a rate of return that closely matches the performance of the mutual fund that you select" D. "A variable annuity will give a rate of return that is adjusted each year by the growth in the CPI"

c

An employee is a participant in her company's 401(k) plan. She is now 63 years old and wants to retire in 2 years. Her brother is an attorney and tells her that if the company had provided a higher match to her 401(k) contributions, she would have had a much larger retirement balance, and because of this, she may have to defer retirement for 5 more years. Under ERISA, the plan fiduciaries: A. can be sued for damages equal to the 5 additional years of retirement contributions that must be made by the employee B. can be sued for breach of fiduciary duty C. cannot be sued because the level of employer matching contributions is a settlor decision D. cannot be sued because ERISA fiduciaries are given immunity from prosecution

c

An income fund would likely invest in which of the following securities? I Common stocks II Preferred stocks III Debentures IV Income bonds A. I and II only B. III and IV only C. II and III only D. I and IV only

c

An individual is being paid to sell securities and is being compensated on a commission basis. The commissions are being paid by both the broker-dealer and the issuer. This person is defined as a(n): A. agent of the issuer only B. agent of the broker-dealer only C. agent of both the issuer and the broker-dealer D. none of the above

c

An individual that earns $210,000 per year and that is not covered by another qualified retirement plan would be permitted to: A. make a non-deductible contribution to a Roth IRA that was opened years ago B. make a deductible contribution to a new Roth IRA C. convert a Traditional IRA into a Roth IRA after paying taxes due D. convert a Roth IRA into a Traditional IRA after paying taxed due

c

An individual that invests a constant dollar amount at regular time intervals over a long-term investment time horizon is: A. rebalancing B. market timing C. dollar cost averaging D. reinvesting

c

An individual who lived in State B is an existing client of Broker-Dealer. She has temporarily relocated to State A. She contacts her agent located in State B to buy securities. Which statement is TRUE? A. The Broker-Dealer and the agent must be registered in State A only B. The Broker-Dealer and the agent must be registered in State B only C. The Broker-Dealer and the agent must be registered in both States A and B D. The Broker-Dealer is only required to be registered in State B and the agent must be registered in both States A and B

c

An investment adviser has determined that it MUST register as a federal covered adviser. This means that the adviser: A. solicits clients on behalf of other investment advisers B. currently operates in at least 10 States C. has at least $110,000,000 of assets under management D. provides financial planning to customers for compensation as a regular business

c

An investment adviser is considered to be "in the business" of rendering investment advice under SEC Release IA-1092 if: A. advice is rendered on non-exempt securities B. giving advice on securities is one of the businesses of the firm C. the firm advertises its services D. the firm prepares economic reports or analyses

c

An investment adviser is opening that day's mail and receives a check from a customer for $5,000; however there is no payment due from the customer. The customer mailed the check in error. The same day, the investment adviser mails the check back to the customer. Under NASAA rules, the investment adviser:(have 3 business days) I is deemed to have taken custody of the customer's funds II has not taken custody of the customer's funds III must keep a record of the check received IV is not required to keep a record of the check received A. I and III B. I and IV C. II and III D. II and IV

c

An investment adviser manages the portfolio of a client on a discretionary basis. The customer's objective is conservation of principal and income. Under prudent investor standards, which statement is TRUE about the use of options in the portfolio? A. The use of options strategies is unsuitable for this client based on her investment objective B. The use of options strategies is only suitable if the customer has previous investment experience with options C. The use of options strategies is only suitable if the strategies are limited to the sale of covered options D. The use of options strategies is only suitable if the strategies are limited to the purchase of options

c

An investment adviser representative has been given the financial assets of a large estate to manage. What should be the IAR's IMMEDIATE concern? A. The monetary needs of the beneficiaries of the estate B. The investment objectives outlined in the will or trust document C. Any upcoming liquidity needs to pay obligations as they are due D. Compliance with the Prudent Investor Act when making investment decisions

c

An investment adviser representative has solicited a new client over the phone to purchase advisory services, but no sale results and she takes no further action. The IAR knows this individual, who she has met at her kid's school PTA meetings. The IAR has no more interaction with the potential client, but at the next PTA meeting, the potential client tells the IAR that she has thought about it and is ready to sign the agreement right there. The IAR has a contract form in her briefcase, but does not have the brochure. Which statement is TRUE? A. The investment adviser representative can have the customer sign the contract as long as the brochure is delivered within 48 hours B. The investment adviser representative can have the customer sign the contract as long as the brochure is delivered within 5 business days C. The investment adviser representative cannot have the customer sign the contract unless a brochure is delivered at the same time D. The investment adviser representative can have the customer sign the contract as long as she does not cash the check until the brochure is delivered

c

An investment adviser representative prepares financial plans for clients and has been asked by many of them for tax advice. The representative has an undergraduate degree in business and took 1 course in tax law while in school. The investment adviser representative: A. can give tax advice to her clients but cannot accept separate payment for doing so B. can give tax advice to her clients because completing the college tax course makes her qualified to do so C. should refer her clients to a qualified tax preparer D. should refer her clients to the AICPA

c

An investment adviser representative receives a written complaint from a client about the handling of the client's account. Under the NASAA Statement of Policy on unethical practices, which statement is TRUE? A. A copy of the complaint must be filed promptly with the Administrator B. A copy of the complaint must be filed promptly with the SEC C. The complaint must be forwarded to a manager for resolution D. All of the above

c

An investment adviser representative would be denied registration for all of the following reasons EXCEPT the IAR: A. is insolvent B. failed to pay registration filing fees C. was convicted of a securities misdemeanor 11 years ago D. is not affiliated with an investment adviser

c

An investment adviser representative's friend provides him with a list of 10 prospective clients. The representative agrees to pay his friend a referral fee for each person on the list that opens an account with the adviser. Which statement is TRUE? A. The arrangement is permitted without restriction B. The arrangement is permitted only if it is in writing between the investment adviser and the friend C. The arrangement is permitted only if it is in writing between the investment adviser and the friend and the arrangement is disclosed in writing to any customer opening an account D. The arrangement is prohibited

c

An investment adviser that claims that it is a "fee only" adviser could NOT be compensated based on: (unbiased) A. a percentage of assets under management B. a flat annual or hourly fee for all work performed C. 12b-1 fees paid by mutual funds D. a performance based fee for wealthy investors

c

An investment adviser whose principal business is rendering advice to customers about securities wishes to prepare an advertisement. Which of the following are allowed? I Showing past performance II Using illustrative performance charts III Using the term "investment counsel" IV Using a paid testimonial A. I and II B. III and IV C. I, II, III D. I, II, III, IV

c

An investment adviser's research department is going to issue a report, changing its recommendation from "Buy" to "Hold" on XYZZ stock. The analyst that prepared the report wants to sell his XYZZ holding that he has in his personal account. Which statement is TRUE? A. The analyst can sell the stock immediately prior to the release of the research report without any further action needed B. The analyst can sell the stock immediately prior to the release of the research report if the investment adviser approves in writing C. The analyst is prohibited from selling the stock until the report is released D. The analyst can tell his associates to sell the stock prior to the release of the report

c

An investment approach where an active bond fund manager will switch to a defensive strategy if the portfolio falls below a predetermined point is known as: A. portfolio immunization B. portfolio rebalancing C. contingent portfolio immunization D. contingent portfolio rebalancing

c

An investment of $100,000 is worth $105,000 after 3 months. If the investment keeps growing at the current rate, at the end of one year, the annualized rate of return will be: A. 5.00% B. 20.00% C. 21.55% D. 25.00%

c

An investor buys 100 shares of ABC stock at $60 in January of 2020. In March of 2021, the stock is worth $100 per share and the investor donates it to a charity. The tax consequences are: I a $6,000 charitable deduction II a $10,000 charitable deduction III no tax due on the appreciation IV tax is due on the appreciation A. I and III B. I and IV C. II and III D. II and IV

c

An investor buys a $100,000, 10% corporate bond maturing in 2029 for $125,000. The bond is callable starting in the year 2019. What is the most appropriate measure for calculating yield? A. Total Return B. Current Yield C. Yield to Call D. Yield to Maturity

c

An investor has $200,000 invested in an account that earns 3% annually. The investor wishes to withdraw $30,000 per year. If the investor withdraws $30,000 annually, the account will be fully depleted in: A. 4 years B. 6 years C. 8 years D. 10 years

c

An investor has a $1,000,000 portfolio that is split evenly between "blue chip" stocks and Treasury securities. The current economic environment is characterized by low interest rates and flat stock prices - and this is expected to remain unchanged for a number of years. However, the residential and commercial real estate market is expected to be strong. The investor would like to diversify the portfolio and enhance returns without adding much additional risk. Which of the following investment purchase recommendations would help achieve this objective? A. Mortgage REITs B. Mortgage Bonds C. Equity REITs D. Fannie Mae Pass-Through Certificates

c

An investor in a "Ginnie Mae" mutual fund assumes all of the risks EXCEPT: A. Fluctuation of Net Asset Value B. Reinvestment Risk C. Credit Risk D. Prepayment Risk

c

An investor in a "Ginnie Mae" mutual fund assumes which of the risks? I Prepayment Risk II Credit Risk III Fluctuation of Net Asset Value IV Reinvestment Risk A. I and II only B. III and IV only C. I, III, IV D. I, II, III, IV

c

An investor wishes to buy mutual fund shares with the primary objective of aggressive growth. Based on this information, the appropriate recommendation is a: A. balanced fund B. money market fund C. sector fund D. preferred stock fund

c

An officer of an issuer is engaged in the sale of that issuer's securities to the public. The issuer's securities are federal covered. The officer is: A. excluded from the definition of an agent because the securities involved are federal covered B. not defined as an agent because officers of issuers are excluded C. defined as an agent who must register in the State D. defined as an issuer and is not required to register in the State

c

An unmarried couple wishes to open a new account as "JTWROS." What should the registered representative do? A. Open the account without making any further inquiries B. Explain the risks involved with opening such an account C. Ask why they wish to open this type of account D. Refuse to open the account

c

An updating amendment to Form ADV must be filed by an investment adviser with the SEC: I within 45 days II within 90 days lII of the firm's fiscal year end IV of the calendar year end A. I and III B. I and IV C. II and III D. II and IV

c

Apart from the filing of a registration for a broker-dealer, separate registration is required for each individual that is a(n): A. partner of the broker-dealer B. director of the broker-dealer C. agent of the broker-dealer D. all of the above

c

As the economy and the stock market fluctuate, which of the following can the holder of a fixed annuity expect to occur during the payout years? A. Benefits will fluctuate according to the return the separate account earns B. Benefits may increase during periods of declining economic growth and a declining stock market C. Benefits will not fluctuate over time D. Benefits may decrease during periods of declining economic growth and a declining stock market

c

Banker's Acceptances are: I overnight loans available to member institutions of the Federal Reserve System II drafts on banks used to finance imports and exports III negotiable securities IV non-negotiable securities A. I and III B. I and IV C. II and III D. II and IV

c

Buy and hold is an appropriate strategy when investing in: I stocks II stock mutual funds III stock exchange traded funds IV stock options A. I and III B. I and IV C. II and III D. II and IV

c

Common stockholders have all of the following rights EXCEPT: A. voting for the Board of Directors B. transferring share ownership without restriction by the issuer C. inspecting minutes of executive meetings D. maintaining proportionate ownership in the company

c

Common stockholders have which of the following rights? I Inspecting minutes of executive meetings II Maintaining proportionate ownership in the company III Voting for the Board of Directors IV Transferring share ownership without restriction by the issuer A. I and III only B. I, II, IV C. II, III, IV D. I, II, III, IV

c

Constitutional debt limits are imposed on the issuance of: A. revenue bonds B. moral obligation bonds C. general obligation bonds D. industrial development bonds

c

Cumulative voting is considered to be an advantage to the: A. large investor B. institutional investor C. small investor D. novice investor

c

Dealers are showing the following quotes for XYZZ stock: XYZZ Stock Bid Ask Size Dealer A 7.25 7.70 10 x 20 Dealer B 7.60 7.85 5 x 10 Dealer C 7.35 7.75 15 x 25 The "size" of the market is: A. 5 x 10 B. 10 x 25 C. 5 x 20 D. 30 x 55

c

Distributions from an Individual Retirement Plan funded with deductible contributions: I can start at age 59 1/2 II must start by April 1st of the year after reaching age 70 1/2 III are taxable IV are non-taxable A. I and III only B. II and IV only C. I, II, and III D. I, II and IV

c

Diversification among multiple asset classes reduces the: I market risk of the portfolioII marketability risk of the portfolioIII standard deviation of portfolio returns A. I only B. II and III C. I and III D. I, II, III

c

Dividend payments made by which of the following are qualified? A. Real Estate Investment Trusts B. Master Limited Partnerships C. Foreign companies that are listed in the United States D. Short seller of stock who remits a payment in lieu of a dividend to the individual from whom the stock was borrowed

c

Dividends on preferred stock may only be paid in: A. Common shares of another issuer B. Common shares of the same issuer C. Cash D. Preferred stock of the same issuer

c

Duration would NOT be an appropriate measure for: A. Treasury bonds B. Corporate bonds C. Corporate common stock D. Corporate preferred stock

c

During the normal sequence of the economic cycle, after a period of recovery, the economy will move to a period of: A. depression B. recovery C. expansion D. prosperity

c

ERISA requirements regarding the investments that are suitable for a retirement account stress: A. income potential B. capital gain potential C. safety of principal D. legal list securities

c

Each sole proprietor that applies for initial registration in a State as either a broker-dealer or investment adviser must file: A. an annual personal income statement B. copies of federal tax returns for the prior 3 years C. a statement of financial condition D. proof of the sole proprietor's identity

c

Federal Farm Credit System issues include: I Short term notes issued at par II Short term original issue discount notes III Long term bonds issued at par IV Long term original issue discount bonds A. I and III B. I and IV C. II and III D. II and IV

c

For which of the following contracts does the insurer typically invest the premium in the insurer's general account? I Variable life insurance II Universal life insurance III Variable universal life insurance IV Whole life insurance A. IV only B. I & III only C. II & IV only D. I, II & III only

c

Growth stocks would have all of the following characteristics EXCEPT: A. high price-earnings ratios B. high price to book value ratios C. high dividend payout ratios D. high retained earnings ratios

c

Health Saving Accounts (HSAs): I can be established by all employers that offer health insurance plans II can only be established by employers that have high deductible health insurance plans III are funded with tax-deductible contributions V are funded with non tax-deductible contributions A. I and III B. I and IV C. II and III D. II and IV

c

If an investment adviser acquires a 5% or greater holding in a publicly held company, it MUST file a 13d report: A. only if the purchases were for its proprietary account and it intends to exercise control over that issuer B. only if the purchases were for its customer accounts and it intends to exercise control over that issuer C. if the purchases were for either its proprietary account or its customer accounts and it intends to exercise control over that issuer D. if the purchases were for either its proprietary account or its customer accounts and it intends to remain a passive investor

c

If an investment adviser is an individual, which of the following items would be included in the computation of adviser's net capital? A. Goodwill B. Automobile C. Accounts receivable D. Copyright

c

If an investment adviser is found to be insolvent, powers of the Administrator include the ability to: I petition the court to issue a permanent injunction against a person from engaging in the investment advisory business II make the showing required to appoint a receiver to protect the assets of customers held in custody of the investment adviser III imprison individuals for a period of up to 10 years for willful violations A. I only B. II only C. I and II D. I, II, III

c

If an investment adviser wishes to recommend the purchase of a security to a customer where the adviser personally owns that security, the adviser: A. must dispose of the personal position prior to recommending that security to the customer B. must offer to sell that position personally to the customer C. must disclose this fact to the customer D. is prohibited from making the recommendation

c

If an investment adviser, for the first time, takes a $1,200 prepaid advisory fee, more than 6 months in advance of services rendered: A. the SEC will terminate the adviser's registration within 45 days B. an ADV Part 1 must be filed by the adviser promptly C. an ADV Part 2A along with a balance sheet must be filed by the adviser promptly D. the investment adviser must obtain fidelity bonding coverage of at least $25,000

c

If an investor believes that inflation rates will be rising in the foreseeable future, he might rebalance his portfolio to include: A. Fixed annuities B. 5 year certificates of deposit C. Tangible assets D. U.S. Government bonds

c

If appreciated securities are inherited, the tax basis to the beneficiary is: I cost of the securities II fair market value at the date of death III fair market value 6 months after death if values have fallen IV fair market value 9 months after death if values have fallen A. I or III B. I or IV C. II or III D. II or IV

c

If interest rates rise, which of the following U.S. Government debt instruments would show the greatest percentage drop in value? A. Treasury Bills B. Treasury Notes C. Treasury Bonds D. Savings (EE) Bonds

c

If investors expect a recession, the best investment strategy would be to: I sell U.S. Government bonds II sell corporate bonds III buy U.S. Government bonds IV buy corporate bonds A. I and III B. I and IV C. II and III D. II and IV

c

If market interest rates decline, which statement is TRUE? A. A bond's price will fall B. A bond's current yield will rise C. A bond's yield to maturity will fall D. A bond's nominal yield will rise

c

If the beneficiary of a Coverdell Education Savings Account receives a full scholarship for education expenses, which statement concerning distributions is TRUE? A. The beneficiary can take distributions free of income tax and penalty tax B. Distributions to the beneficiary are subject to income tax and penalty tax C. Distributions to the beneficiary are subject to income tax but no penalty tax D. Distributions must be rolled over to a Traditional IRA or Roth IRA

c

In January, 20XX a customer buys 100 shares of ABC stock at $50 per share and pays a $2 commission per share. The customer receives $2 in cash dividends during the year. The customer's cost basis in the stock is: A. $48 per share B. $50 per share C. $52 per share D. $54 per share

c

In March, an investment adviser wishes to increase its annual management fee from 1% of assets annually to 1.25% of assets annually, starting the following July 1st. In order to do this: I the investment adviser must amend the Form ADV filed with the State immediately II the investment adviser must amend the Form ADV filed with the State within 30 days III the adviser's customers must approve of the change by July 1st IV the adviser's customers are not required to approve the change A. I and III B. I and IV C. II and III D. II and IV

c

In a repurchase agreement, the initiating government securities dealer: I buys securities from another dealer II sells securities to another dealer III agrees to buy back the securities at a later date IV agrees to sell the securities at a later date A. I and III B. I and IV C. II and III D. II and IV

c

In what way are Class C mutual fund shares unique? A. They convert to Class B shares after being held for a stated period of time B. They charge a redemption fee if redemption occurs within the first 7 years of purchase C. They charge a level annual load regardless of how long the shares are held D. They are subject to lowered sales charges (breakpoints) for larger dollar purchases

c

In which situation is the investment adviser NOT exceeding the authority granted by the customer over the account, assuming that the adviser does not have discretionary authority? A. Upon seeing that the price of a security that the adviser has purchased in 25 client accounts has started to drop precipitously, the adviser liquidates the position so that there is no loss to his clients B. A customer has asked the adviser for a good recommendation and the adviser tells the customer that he will do some research and get back to him. When the adviser calls back the customer with the recommendation, the customer's wife answers the phone and says it is OK to buy that stock, so the adviser follows the wife's instructions C. The adviser has received a note from the customer saying that he will be out of town for 1 week, and that he should take instructions during that time from the customer's attorney. The customer's attorney calls and says that he wants a position sold out of the account and the adviser follows the attorney's instructions D. The manager of a mutual fund in which the adviser has placed all of his clients, is convicted of insider trading and is replaced by a new manager that the adviser does not like. The adviser sells the mutual fund holding and places his clients in another fund that has a similar investment objective

c

Income in a non-revocable trust is taxed at the: A. corporate rate B. individual rate C. trust rate D. AMT rate

c

Investment adviser solicitors: I must be registered with the SEC as investment advisers II are not required to be registered with the SEC as investment advisers III are required to be registered in the State as either an investment adviser or an adviser representative IV are not required to be registered in the State as either an investment adviser or an adviser representative A. I and III B. I and IV C. II and III D. II and IV

c

Investment advisers that have separate broker-dealer entities are permitted to accept which of the following compensation items? I Fixed annual fees II Fees based on a percentage of assets under management III Commissions based on trades IV Fees based on the capital appreciation of the securities in the portfolio A. II only B. I and IV C. I, II, III D. I, II, III, IV

c

Jack Jones has been an IAR with a registered investment adviser for 10 years. He is leaving to start his own advisory business as a sole proprietor. He has hired an advertising firm to create a radio spot for his new firm. The account manager recommends that they use one of his largest clients - the managing partner of a prominent law firm in town - to give a testimonial about Jack. The lawyer agrees and records the following: "I have been a client of Jack Jones for the past 10 years. My investments with Jack have reliably produced superior returns and he has always acted ethically and with integrity." The use of this testimonial in a radio advertisement is: A. permitted since it is being made by a person that is unaffiliated with Jack Jones B. permitted because it is true and not misleading C. prohibited under the provisions of the Investment Advisers Act of 1940 D. prohibited because the lawyer cannot express an opinion on the performance of an investment adviser

c

Limited partnership "democracy" provisions allow for all of the following EXCEPT: A. the limited partners' claim to assets upon dissolution B. a majority vote of the limited partners before investments are sold or refinanced C. the limited partners' right to manage the partnership D. the right to inspect partnership records and receive reports about partnership operations

c

Limited partnerships MUST have at least: A. 2 Limited partners B. 2 General partners C. 1 General partner and 1 Limited partner D. 100 partners, in any combination of either Limited or General

c

Long Market Value: $62,000 Short Market Value: $30,000 Debit: $30,000 Credit: $50,000 SMA: $6,000 The equity in the account is: A. $6,000 B. $36,000 C. $52,000 D. $78,000 long and short accounts separately. Long Market ValueDebitEquity$62,000 -$30,000$ =32,000 CreditsShort Market ValueEquity$50,000$-30,000=$20,000

c

Management companies are permitted to: A. buy securities on margin B. sell securities short C. borrow from banks D. lend monies to shareholders

c

Many years ago, a customer bought 100 shares of ABC stock at $40. The customer gifts the stock to her son when it is valued at $50. The son sells the security at $55. The tax consequence to the son is: A. no capital gain or loss B. $10 per share capital gain C. $15 per share capital gain D. $55 per share capital gain

c

Money purchase retirement plans limit the maximum annual contribution in 2020 to: (erisa) A. $19,500 B. $6,000 plus an extra $1,000 catch up contribution for individuals age 50 or older C. 25% of income, capped at a maximum of $57,000 D. $2,000 per year per individual

c

NASAA Model Rule 502 (c) applies to: A. State registered advisers only to the extent that the conduct is fraudulent or deceptive B. Federal Covered advisers only to the extent that the conduct is fraudulent or deceptive C. State registered advisers and Federal Covered advisers only to the extent that the conduct is fraudulent or deceptive D. Federal covered advisers and State registered advisers only to the extent that the conduct is fraudulent or deceptive

c

On December 10th, 2020, a mother gives a gift to her daughter of 1,000 shares of PDQ stock. The stock was purchased 6 months earlier at a cost basis per share of $48 per share. The market value at the date of the gift was $64 per share. On January 18th, 2021, the mother dies and bequeaths 1,000 shares of DEF to the daughter. The market value of DEF at the date of death is $40 per share and the shares were purchased 2 months earlier by the mother at $35 per share. On February 1st, 2021, the daughter sells the PDQ stock at $70 per share and sells the DEF stock at $50 per share. The tax consequence to the daughter upon selling PDQ and DEF is: A. no capital gain or loss B. $22 per share long term capital gain on PDQ; $10 per share short term capital gain on DEF C. $22 per share short term capital gain on PDQ; $10 per share long term capital gain on DEF D. $6 per share short term capital gain on PDQ; $8 per share short term capital gain on DEF

c

Orders that are placed higher than the current market are: I buy limitsII buy stopsIII sell limitsIV sell stops A. I and III B. I and IV C. II and III D. II and IV

c

Preferred stock market valuation is based primarily upon: A. future earnings expectations for the issuer B. short term market interest rate levels C. long term market interest rate levels D. future dividend payment expectations for the issuer

c

Private Fund Advisers: A. are not required to register with the SEC B. must register with the SEC once assets under management reach $100 million C. must register with the SEC once assets under management reach $150 million D. must register with the SEC once assets under management reach $200 million

c

REITs can invest in which of the following? I Limited partnerships II Government securities III Mortgages IV Real estate A. IV only B. II and IV C. II, III and IV D. I, II, III, IV

c

Regarding the Administrator's ability to inspect the books and records of a broker-dealer, which statement is TRUE? A. The Administrator can only inspect the books and records of a broker-dealer if a customer complaint has been filed against that firm B. Customer records held by the broker-dealer can only be inspected by the Administrator if a court so orders C. Broker-dealer records may be examined in any State in which the firm does business D. An examination cannot be conducted by the Administrator if it would duplicate an examination already conducted by a self-regulatory organization or the SEC

c

Retirement plans that must comply with ERISA requirements include all of the following EXCEPT: A. Defined benefit plans B. Profit sharing plans C. Federal Government plans D. Payroll deduction savings plans

c

Sell limit orders: I used to sell securities at prices that are lower than the current market price II used to sell securities at prices that are higher than the current market III guarantee a specific execution price or better IV do not guarantee a specific execution price or better A. I and III B. I and IV C. II and III D. II and IV

c

Short Positions 100 ABC @ $60 200 XYZ @ $50 Credit = $40,000 Reg. T = 50% What is the equity in the account? A. $8,000 B. $16,000 C. $24,000 D. $32,000 Credits-Short Market Value=Equity%

c

Tactical asset allocation requires that: A. a laddered equity portfolio be created B. a buy and hold strategy be employed C. more frequent trading be used to rebalance the portfolio D. neutral cash positions are dominant in the portfolio

c

The "Brochure Rule" applies to: A. oral advisory contracts only B. written advisory contracts only C. both oral and written advisory contracts D. neither oral nor written advisory contracts

c

The Administrator can deny a registration as an investment adviser representative if the individual: I is currently under suspension by FINRA II has been expelled by FINRA III was convicted of a disorderly conduct misdemeanor 8 years ago IV was convicted of theft 8 years ago A. I and III only B. II and IV only C. I, II and IV D. I, II, III, IV

c

The Administrator can take which of the following actions? I Require a witness to testify in a hearing, even though the testimony may tend to incriminate that witness II Suspend the constitutional privilege against self-incrimination available to an individual III Inspect a broker-dealer located in another State that does business in the Administrator's State IV Coordinate inspections with those conducted by the Securities and Exchange Commission A. II and IV B. I, II, III C. I, III, IV D. I, II, III, IV

c

The Administrator defines the "completion" of the registration application process as the receipt of the: A. proper documents B. filing fee C. proper documents and the filing fee D. consent to service of process

c

The Administrator of State Z receives a complaint about an advertisement placed by an investment adviser. The complaint claims the advertisement stated that: "Any investment made with IZZI Advisers would double in 5 years." IZZI Advisers is located in State X and the advertisement was created in State X and distributed in States X and Z. Which statement is TRUE? A. The Administrator of State Z has no jurisdiction because the adviser is located in State X B. The Administrator of State Z will refer the complaint to the Administrator of State X C. The Administrator of State Z will investigate the complaint D. The Administrator of State Z will enjoin IZZI Advisers from the publication of future advertisements in the State Z

c

The Administrator of a State determines that a broker-dealer has violated State law by selling unregistered non-exempt securities and issues a cease and desist order. If the broker-dealer continues to offer these securities in the State, then the Administrator may: A. refer the case to the SEC who can issue an injunction B. bring action in Federal Court to request an injunction C. bring action in a court of competent jurisdiction to request an injunction D. refer the case to the local police for arrest and arraignment of the officers and agents of the broker-dealer

c

The Assumed Interest Rate (AIR) associated with variable annuities is the: A. rate at which the annuity payments are scheduled to increase each year B. interest rate paid to the annuitant C. estimated future earnings rate needed to maintain level payments to the annuitant D. average of past and assumed future rates of return earned by the annuity

c

The Current Account and the Capital Account are part of a: A. corporate balance sheet formula B. customer's personal financial statement C. nation's balance of payments D. municipality's flow of funds

c

The Federal Farm Credit System: I issues equity securities II issues long term loans secured by mortgages on farm property III issues short term loans to farmers for agricultural purposes A. I only B. I and II only C. II and III only D. I, II, III

c

The Generation Skipping Tax applies to outright gifts or transfers in trust to: A. siblings B. children C. grandchildren D. nieces and nephews

c

The Securities Exchange Act of 1934 requires that: I there are 3 SEC Commissioners II there are 5 SEC Commissioners III SEC Commissioners have no outside work and cannot trade their own accounts IV SEC Commissioners cannot be affiliated with any political party A. I and III B. I and IV C. II and III D. II and IV

c

The Value Line Index fund consists of: A. all issues traded on the New York Stock Exchange B. only issues rated in the top 2 ratings by the Value Line Investment Survey C. all companies included in the Value Line Investment Survey D. small capitalization issues not listed on the New York Stock Exchange

c

The amount of money that a customer has available for additional investment based on that customer's earnings in a specific year would be based on: A. Adjusted Gross Income B. Taxable Income C. Discretionary Income D. Portfolio Income

c

The anti-fraud provisions of the Uniform Securities Act would apply to the sale in the State of:no insurance products) I fixed annuities II variable annuities III whole life insurance IV variable life insurance A. I and II only B. III and IV only C. II and IV only D. I, II, III, IV

c

The cash value increases at a fixed, guaranteed rate for which of the following life insurance policies? A. Term life B. Variable life C. Whole life D. Variable universal life

c

The exchange where a security trades sets which of the following dates? A. declaration date B. record date C. ex date D. payable date

c

The executor of an estate subject to federal estate tax is permitted to use an alternate valuation date: I for securities that have appreciated after the date of death II for securities that have depreciated after the date of death III that is 6 months from the date of death IV that is 9 months from the date of death A. I and III B. I and IV C. II and III D. II and IV

c

The fiduciary engaged in the administration of a trust finds that, under the directions of the trust document, there is a conflict of interest relating to a proposed investment. Under the provisions of the Prudent Investor Act, the fiduciary: A. should do nothing and permit the investment to be made B. is permitted to allow the investment as long as it is made in accordance with the Prudent Investor rule C. should ask the settlor of the trust to amend the trust document by express provision, expanding or restricting the provisions of the trust document for this investment D. should not permit the investment, otherwise the fiduciary is subject to liability for breach of fiduciary responsibility

c

The holder of a call on a listed stock exercises. The holder MUST: I deliver stock II deliver cash III take delivery of stock IV take delivery of cash A. I and III B. I and IV C. II and III D. II and IV

c

The holder of a variable annuity contract elects the settlement option of Life Annuity - 10 Year Period Certain. This individual annuitizes at age 66 and recently died at age 78. Which statement is TRUE? A. Annuity payments to this individual would have stopped at age 76 B. Annuity payments to this individual will continue to be made to the individual's beneficiary C. Annuity payments to this individual will stop D. Annuity payments to this individual will continue for another 2 years

c

The interest income earned on which of the following municipal bonds would be included in the alternative minimum tax computation? A. School District Bond B. Turnpike Revenue Bond C. Industrial Revenue Bond D. Water District Revenue Bond

c

The interest rate applied to a loan represents the: A. money multiplier B. opportunity cost C. cost of money D. velocity of money

c

The major risks of investing in a Real Estate Limited Partnership (RELP) are: I Interest rate risk II Liquidity risk III Regulatory risk IV Reinvestment risk A. I and III B. I and IV C. II and III D. II and IV

c

The market capitalization of a company is the: A. net present value of the company's earnings stream projected infinitely into the future B. book value of the company, excluding the value of intangible assets C. number of common shares outstanding times the price per share D. future value of today's stock price times the earnings multiple times the number of outstanding shares

c

The method for computing return as shown in a mutual fund performance chart is: A. Internal Rate of Return B. Dollar Weighted Average Return C. Time Weighted Average Return D. Expected Rate of Return

c

The minimum denomination on a mortgage backed pass through certificate is: A. $1,000 B. $10,000 C. $25,000 D. $100,000

c

The provisions of the Uniform Securities Act apply to solicitation of the public to buy or sell securities or advisory services that are made: A. by mail or telephone in that State and received in that State B. by mail or telephone outside that State and received in that State C. by mail or telephone either inside or outside that State and received in that State D. by mail or telephone either inside or outside that State and are received either inside or outside that State

c

The purchase of an emerging markets foreign stock index fund will subject the shareholder to all of the following risks EXCEPT: A. exchange rate risk B. political risk C. stock-specific risk D. business risk

c

The sale of covered calls is used to: A. hedge a long stock position in a falling market B. protect a short stock position in a falling market C. generate additional income in a stable market D. profit if the market drops

c

The securities of which of the following agencies are NOT directly backed by the U.S. Government and pay interest and principal monthly? I GNMA II FNMA III FHLMC IV FLB A. I only B. II and III C. II, III, IV D. I, II, III, IV

c

The statute of limitations for criminal violations of the Uniform Securities Act is: A. 1 year B. 3 years C. 5 years D. 6 years

c

The stock market has reacted negatively to the release of strongly negative economic indicators and has fallen by 15% over a 2 week time window. An investor that believes that this is a buying opportunity would be called a(n): A. opportunist B. fundamentalist C. contrarian D. technician

c

The tax basis for an investor in a limited partnership that establishes the maximum loss deduction is: A. original investment only B. original investment plus partnership debt assumed C. original investment plus partnership debt assumed, plus partnership gains or minus partnership losses D. original investment minus partnership debt assumed, minus partnership gains or plus partnership losses

c

The term "Investment Adviser" includes: A. lawyers who give advice about investments as part of an estate tax plan B. depository institutions that recommend bank products as investments C. publishers of reports on securities tailored to client situations D. broker-dealers who make recommendations to clients and charge commissions on the resulting trades

c

The term "broker-dealer" EXCLUDES which of the following? I A person in the business of trading securities for his own account II A person in the business of trading securities for the account of others III Financial Institutions IV Issuers of securities A. I only B. I and II C. III and IV D. I, II, III, IV

c

The use of a third party solicitor by an Investment Adviser: I is permitted if there is a written agreement between the solicitor and investment adviser II is not permitted if the solicitor is subject to statutory disqualification as defined under the Investment Advisers Act of 1940 III requires that the solicitor be registered with the investment adviser as that firm's representative in that State IV requires that the solicitor be registered as either an investment adviser or an investment adviser representative in that State A. I and II only B. III and IV only C. I, II, and IV D. I, II, III, IV

c

The use of customer names by an investment adviser to promote the sale of the firm's advisory services is: A. prohibited in all circumstances B. permitted if the adviser notifies each client of its intentions C. permitted if the adviser notifies each client of its intentions and the clients consent to such disclosure D. permitted if the adviser notifies the State Administrator that the client names will be used

c

Time Weighted Average Return: I is the return measure used for mutual fund performance charts II assumes investment of a fixed amount, ignoring additional deposits or withdrawals of cash at different points in time III is the same as Dollar Weighted Average Return IV allows for accurate comparison of one fund's performance to that of other funds A. I and II only B. III and IV only C. I, II and IV D. I, II, III, IV

c

To evaluate investor sentiment, a technical analyst would examine which of the following? I Odd lot transactions II Put / Call ratio III Revised corporate earning reports IV Short Interest figures A. I and II B. III and IV C. I, II, IV D. I, II, III, IV

c

To form a limited partnership, there must be at least: A. 1 limited partner B. 1 general partner C. 1 limited partner and 1 general partner D. 10 limited partners for each general partner

c

Treasury STRIPS are quoted by dealers: A. as a percentage of par in minimum increments of $.10 B. as a percentage of par in minimum increments of 1/8ths C. as a percentage of par in minimum increments of 1/32nds D. on a yield to maturity basis

c

Types of funds used to back revenue bond issues include all of the following EXCEPT: A. excise taxes B. lease rentals C. ad valorem taxes D. enterprise activity income

c

U.S. Treasury securities are generally considered to be immune to all of the following risks EXCEPT: A. default risk B. marketability risk C. purchasing power risk D. credit risk

c

U.S. dollar denominated bonds backed by zero-coupon Treasuries, issued in the 1980s and 1990s by Latin American countries to replace their international bank loans that were in default, are known as: A. Pan-American bonds B. Dollar bonds C. Brady bonds D. Yankee bonds

c

Under NASAA rules for State-registered advisers, transactions must be recorded in customer account records no later than: A. 10 business days following the end of the month in which the transaction was effected B. 20 business days following the end of the month in which the transaction was effected C. 10 business days following the end of the quarter in which the transaction was effected D. 20 business days following the end of the quarter in which the transaction was effected

c

Under NASAA rules, advertisement by investment advisers :I can contain testimonials II cannot contain testimonials III can show the performance of previous recommendations IV cannot show the performance of previous recommendations A. I and III B. I and IV C. II and III D. II and IV

c

Under NASAA rules, it is prohibited for an agent to: A. place an order in a customer account after receiving verbal authorization from the customer B. place an order in a customer account from that customer's attorney after receiving a written authorization from the customer C. make a recommendation to a customer without first inquiring about the customer's investment objectives and needs D. accept an unsolicited trade from a customer without first inquiring about the customer's investment objectives and needs

c

Under the Employee Retirement Income Security Act of 1974, any plan that complies with Rule 404(c) MUST: I offer employees the ability to change their investments II offer employees the ability to diversify their investments III offer a minimum of 3 different investment strategies with different risk and return characteristics IV require that employees purchase a minimum amount of company stock on an annual basis A. I and II B. III and IV C. I, II, III D. I, II, III, IV

c

Under the Investment Adviser's Act of 1940, an investment adviser that advertises itself as a "fee only" adviser would be permitted to collect: I a fee charged for each hour of work performed for the client II a fee based on asset performance in that client's account for wealthy investors III 12b-1 fees from mutual funds recommended to that client IV a fee based on assets held under management in that client's account A. I and III B. II and IV C. I, II, IV D. I, II, III, IV

c

Under the Investment Advisers Act of 1940, an investment adviser's advertising: I cannot show past performance II can show past performance as long as it is not deliberately selective in which clients' results are shown III cannot use specific client names when showing performance unless the client approves IV can use specific client names when showing performance regardless of client approval A. I and III B. I and IV C. II and III D. II and IV

c

Under the Investment Company Act of 1940, an investment adviser's contract is initially set for: A. 1 year; and is subject to renewal every year thereafter B. 1 year; and is subject to renewal every 2 years thereafter C. 2 years; and is subject to renewal every year thereafter D. 2 years; and is subject to renewal every 2 years thereafter

c

Under the NASAA Statement of Policy on unethical practices, third party research reports may: A. not be given to customers B. only be used internally by the investment adviser C. be given to customers if the adviser discloses that the report was not prepared by the advisory firm D. only be given to institutional customers

c

Under the Securities Exchange Act of 1934, which of the following is a national securities exchange that MUST register with the SEC? A. FRB B. TVA C. NASDAQ D. GNMA

c

Under the Uniform Securities Act, an unregistered agent would be permitted to sell: I ownership interests in real estate limited partnerships II fractional ownership interests in a mining company III certificates of deposit issued by a federally chartered bank IV shares of a federally chartered credit union A. I and II only B. III and IV only C. III only D. I, II, III, IV

c

Under the Uniform Securities Act, for an agent to share in the gain and loss of a customer account, which statements are TRUE? I The Administrator must approve the arrangement II The broker-dealer must approve the arrangement III Any sharing percentage must be proportionate to capital contributed IV Any sharing percentage must be based upon a "fairness and reasonableness" test A. I and III B. I and IV C. II and III D. II and IV

c

Under the Uniform Securities Act, if an agent withdraws his or her registration, the withdrawal becomes effective: A. immediately B. after 10 days C. after 30 days D. only when the Administrator so allows

c

Under the Uniform Securities Act, which of the following actions by an agent is (are) prohibited during a sales presentation? I Predicting specific future investment results II Omitting non-essential information III Omitting facts that can influence the investment decision A. I only B. II and III only C. I and III only D. I, II, III

c

Under the Uniform Securities Act, which of the following persons must register as a broker-dealer in a state? I A firm with no place of business in the state that has no clients in the state II A firm with no place of business in the state that has 25 clients in the state over the preceding 12 months III A firm with a place of business in the state that deals exclusively with issuers IV A firm with a place of business in the state that deals exclusively with financial institutions A. I and II only B. III and IV only C. II, III, IV D. I, II, III, IV

c

Under the provisions of Regulation D, which of the following are accredited investors? I Bank II Individual with a $100,000 annual income III Individual with $1,000,000 net worth exclusive of residence IV Investment company A. I and IV B. II and III C. I, III, IV D. I, II, III, IV

c

Under the provisions of the Uniform Securities Act, all of the following statements are true EXCEPT: A. an investment adviser with no place of business in the State, need not register in that State if it is only dealing with insurance companies B. a broker-dealer with no place of business in the State, need not register in that State if it is only dealing with insurance companies C. if a broker-dealer is registered with the Financial Industry Regulatory Authority, then it is also registered in that State D. if a broker-dealer has its registration revoked, then the registration of its agents will also be revoked

c

Variable Universal Life Insurance (VULI) policies provide policy owners with: A. guaranteed minimum cash values B. variable premiums and the guarantees of term insurance C. flexibility with respect to premium payments, investment options, and death benefits D. the guarantees of whole life insurance plus the investment flexibility of variable life insurance

c

Violations of the Investment Advisers Act of 1940 are punishable by which of the following? A. Fines of up to $10,000 only B. Fines of up to $15,000 only C. Fines of up to $10,000; and up to 5 years in jail D. Fines of up to $15,000; and up to 5 years in jail

c

What constitutes "taking custody" under the NASAA rule for investment advisers? A. An employee of an advisory firm who is given discretionary authority to trade the account by a client B. A client who signs a power of attorney, giving the adviser the right to trade on the client's behalf C. An employee of an advisory firm acting as a trustee for a firm D. An introducing broker-dealer receiving checks made out to the carrying broker-dealer that are to be deposited at a broker-dealer

c

What is the difference between Class A and Class B stock in a pooled investment vehicle? A. Class A stock distributes dividends only while Class B stock distributes capital gains only B. Class A stock is negotiable while Class B stock is redeemable C. Class A stock offers breakpoints while Class B stock does not D. Class A stock is more marketable than Class B stock

c

What is the trading characteristic of a Fixed UIT? A. They trade on exchanges like any other stock B. They are securities which are redeemable with the sponsor C. The sponsor makes an OTC market in trust units D. The securities are illiquid and cannot be traded

c

What will happen to a Coverdell Education Savings Account if the beneficiary does not use it? A. The amount in the account is forfeited B. The amount in the account is returned to those who contributed C. The amount in the account is distributed to the beneficiary and taxed to the beneficiary D. The amount in the account is distributed to the parents of the beneficiary and taxed to them

c

When all information about a company, both publicly available and not publicly available, is reflected in the market price of the company's stock, this is known as: A. Weak Form Efficient Market Theory B. Semi-Weak Form Efficient Market Theory C. Strong-Form Efficient Market Theory D. Semi-Strong Form Efficient Market Theory

c

When comparing an ETN to an ETF, which statements are TRUE? I ETNs have both credit risk and market risk II ETFs have both credit and market risk III ETNs have only market risk IV ETFs have only market risk A. I and II only B. III and IV only C. I and IV only D. II and III only

c

When comparing an options contract to a futures contract, which statement is FALSE? A. Both are exchange traded B. Both are standardized C. If not closed by trading, both require delivery of the underlying asset D. Both are regulated

c

When looking at index funds, what is the "benchmark measure"? A. Alpha B. Beta C. Comparable index D. Active return

c

Which State-registered adviser is considered to have taken custody of client funds? A. An adviser that accepts $300 of advisory fees as a prepayment covering the upcoming 5 months B. An adviser that accepts $400 of advisory fees as a prepayment covering the upcoming 4 months C. An adviser that accepts $500 of advisory fees as a prepayment covering the upcoming 6 months D. All of the above

c

Which action taken regarding a universal variable life insurance policy will NOT result in tax liability? A. Cash surrender B. Partial withdrawal C. Loan of up to 95% D. Payout of death benefit

c

Which actions taken regarding a universal variable life insurance policy could result in tax liability? I Cash surrender II Partial withdrawal III Loan of up to 95% IV Payout of death benefit A. I and II only B. III and IV only C. I, II, IV D. I, II, III, IV

c

Which form of efficient market theory states that stock prices respond rapidly to publicly available information, so that no potential gains can be made by trading on that information? A. Weak Form B. Semi-Weak Form C. Semi-Strong Form D. Strong Form

c

Which of the following MUST act in a fiduciary capacity? I Securities agent II Investment adviser representative III Executor of an estate IV Settlor of a pension plan A. I and II only B. III and IV only C. II and III only D. I, II, III, IV

c

Which of the following accounts avoid probate upon death of an owner? I Totten trust II JTWROS III Transfer On Death IV Tenants in Common A. I and II only B. III and IV only C. I, II, III D. I, II, III, IV

c

Which of the following actions by an investment adviser are prohibited under the Investment Advisers Act of 1940? I Making a cash payment to a solicitor that is undisclosed to the customer for signing that customer as an advisory client II Using an advertisement that includes a testimonial from a famous personality III Entering into an oral advisory contract with the customer IV Accepting a prepaid advisory fee from a client A. I and II only B. III and IV only C. I, II, III D. I, II, III, IV

c

Which of the following actions on the part of an agent is unethical in a margin account that does not have a written trading authorization from the customer? The customer directing that the agent: A. buy 1,000 shares of ABCD sometime during that day and the agent executing the trade at the market close that day B. sell short 500 shares of DEF whenever he thinks the time is right and the agent executing the trade at 2:00 PM ET that day C. buy 1,000 shares of a high dividend paying stock as soon as possible and the agent executing the purchase of 1,000 shares of PDQQ 10 minutes later D. sell his entire holding of DEFF stock at whatever the agent thinks is the best price that day and the agent immediately places a market order to sell that is executed 1 minute later

c

Which of the following agencies issuing mortgage backed pass through certificates is (are) restricted to purchasing conventional mortgages that are not VA or FHA insured? I Fannie Mae II Ginnie Mae III Freddie Mac A. I only B. II only C. III only D. I, II, III

c

Which of the following annuity payment options will continue payments to another person for their life after the annuitant dies? A. Life Annuity B. Life Annuity with Period Certain C. Joint and Last Survivor Annuity D. Unit Refund Annuity

c

Which of the following are "asset classes"? I Jewelry II Collectibles III Real Estate IV Life Insurance A. I and III B. I and IV C. II and III D. II and IV

c

Which of the following are "critical" pieces of information that MUST be collected from a customer to open a new account? I Name/address II Date of Birth III Telephone Number IV Social Security Number A. I and II B. III and IV C. I, II, IV D. I, II, III, IV

c

Which of the following are NOT required to register as investment advisers under the Investment Advisers Act of 1940? Persons who give advice: I on U.S. Government securities II solely to insurance companies III solely to investment companies IV to customers within one State, where the investment adviser is a resident of that State A. II and III B. III and IV C. I, II, IV D. I, II, III, IV

c

Which of the following are TRUE when comparing convertible preferred stock and non-convertible preferred stock? I Convertible preferred issues will have a higher yield than similar non-convertible yields of the same issuer II Non-convertible preferred issues will have a higher yield than similar convertible yields of the same issuer III Convertible preferred stockholders can benefit as the common stock price rises IV Non-convertible preferred stockholders can benefit as the common stock price rises A. I and III B. I and IV C. II and III D. II and IV

c

Which of the following are advantages of "DRIPs"? I Additional shares of the issuer are purchased with no commission charges II The investor gets to decide the timing of additional stock purchases in that issuer III The investor can add to an existing position in that issuer without having to place an order through a broker IV The process of buying additional shares via a DRIP allows for dollar cost averaging A. I and II only B. III and IV only C. I, III, IV D. I, II, III, IV

c

Which of the following are defined as "investment companies" under the Investment Company Act of 1940? I Face-Amount Certificate Company II Unit Investment Trust III Management Company IV Mineral Leasehold Holding Company A. I and II only B. III only C. I, II, III D. I, II, III, IV

c

Which of the following are true statements about Treasury Bills? I T-Bills can be purchased directly at weekly auction II T-Bills trade at a discount from par III T-Bills have a maximum maturity of 2 years IV T-Bills are the most actively traded money market instrument A. I and III only B. II and IV only C. I, II, IV D. I, II, III, IV

c

Which of the following are violations of the Uniform Securities Act? I Recommending the purchase of a security from a listing provided by a broker-dealer's research department II Recommending the purchase of a security based on material inside information III Recommending the purchase of a security based on overheard rumors IV Recommending the purchase of a security without fully describing the material facts about the transaction A. I and II only B. III and IV only C. II, III, IV D. I, II, III, IV

c

Which of the following broker-dealers is (are) NOT required to register in a State? I A firm with no place of business in the state that has no clients in the state II A firm with no place of business in the state that has 25 clients in the state over the preceding 12 months III A firm with no place of business in the state that deals exclusively with issuers IV A firm with no place of business in the state that deals exclusively with financial institutions A. I and II only B. II only C. I, III, IV D. I, II, III, IV

c

Which of the following can be purchased on margin? A. Mutual fund shares B. Options C. Futures D. OTCBB issues

c

Which of the following can cause the Administrator to deny an application for registration? A. The applicant was convicted of a Driving Under the Influence misdemeanor 4 years ago B. The applicant plead guilty to a minor traffic violation 2 years ago C. The applicant is the subject of an order from a Canadian court suspending registration as a securities representative D. The applicant declared bankruptcy in another State 5 years ago

c

Which of the following do NOT have an equity position? I Convertible preferred shareholders II Preferred shareholders III Convertible debenture bondholders IV Subordinated debenture bondholders A. I, II B. I, III, IV C. III, IV D. I, II, III, IV

c

Which of the following individuals employed by a Federal Covered Adviser would be required to register in the State? A. An individual employed by the adviser to write research reports distributed to customers B. An individual whose clients consist of 8 mutual funds and 8 individuals, 5 of whom are officers of the adviser C. An individual whose clients consist of 5 mutual funds and 8 individuals D. An individual whose clients consists of 15 mutual funds and 3 individuals

c

Which of the following individuals will be denied federal registration as an investment adviser? A. A person who was convicted of misappropriation of funds 12 years ago B. A person who has been imprisoned for 3 months for "DUI" - driving under the influence C. A person who, 11 years ago, was imprisoned for 18 months for counterfeiting D. None of the above

c

Which of the following individuals would be defined as an "agent" under the Uniform Securities Act? A. The manager of a broker-dealer who does not solicit nor take orders B. A silent partner in the broker-dealer C. A trader who is authorized to accept customer orders D. A clerk who solely performs back-office functions

c

Which of the following information MUST be recorded on an unexecuted order ticket where the trade has been canceled? I Time of execution II Time of receipt III Time of cancellation IV Solicited or unsolicited A. I and II only B. III and IV only C. II, III, IV D. I, II, III, IV

c

Which of the following information is on an order ticket? I Order size II Duration of order III Price of the transaction if it is a market order IV Name of security A. I and IV only B. II and III only C. I, II, IV D. I, II, III, IV

c

Which of the following investment advisers are NOT required to register in a State? I An investment adviser with less than $100,000,000 of assets that is not registered with the SEC under the Investment Adviser's Act of 1940 II An investment adviser with no place of business in the State who deals solely with financial and institutional investors III An investment adviser with no place of business in the State who deals solely with broker-dealers IV An investment adviser with no place of business in the State with no more than 5 clients in that State in the past 12 months A. II and III only B. I, II, and III only C. II, III and IV only D. I, II, III, IV

c

Which of the following investment advisers with no office in a State would be required to register in the State? A. An adviser that writes research reports distributed to customers B. An adviser whose clients consist of 8 mutual funds and 8 individuals, 5 of whom are officers of the adviser C. An adviser whose clients consist of 5 mutual funds and 8 individuals D. An adviser whose clients consists of 15 mutual funds and 3 individuals

c

Which of the following investments are permitted for 403(b) plans? I Corporate common stocks II Certificates of deposit III Fixed annuities IV Variable annuities A. I and IV only B. II and III only C. III and IV only D. I, II, III, IV

c

Which of the following investments gives a rate of return that cannot be affected by "reinvestment risk"? A. Treasury Notes B. Treasury Bonds C. Treasury Receipts D. Ginnie Mae Pass Through Certificate

c

Which of the following is (are) issuer transactions? I Purchase of a NASDAQ listed security II Purchase of a mutual fund share III Purchase of a limited partnership interest from the sponsor IV Purchase of an NYSE listed security A. I only B. I and IV C. II and III D. I, II, III, IV

c

Which of the following is NOT a portfolio management "style?" A. Active management B. Passive management C. Diversification D. Indexing

c

Which of the following is NOT considered to be an "issuer transaction" under the Uniform Securities Act? A. Google Incorporated, selling its common shares in an initial public offering to investors via Dutch auction and then listing its shares on NASDAQ B. MM Mars Corporation, a privately held company that is proposing to go public by offering 20% of its common stock in an initial public offering and then listing its shares on the NYSE C. RJR Corporation, a publicly held company listed on the NYSE that is proposing to go "private" in a leveraged buyout transaction D. AJAX Company, a publicly held company listed on the AMEX (NYSE American), making a secondary offering of common shares that will be listed on the AMEX (NYSE American)

c

Which of the following is a First Market? A. Pink OTC Markets trading B. Primary Market offerings of new issues C. New York Stock Exchange trading D. Trading of U.S. Government securities

c

Which of the following is a capital need for a medical student? A. Paying off student loans B. Setting aside money to pay for medical school tuition C. Buying medical imaging equipment 5 years from now D. Borrowing money to pay for living expense while in school

c

Which of the following is a computer-driven analysis of possible portfolio returns that can be achieved based on varying factors? A. Efficient Market Theory B. Time Value of Money C. Monte Carlo Simulation D. Duration

c

Which of the following is a federal covered adviser? A. An investment adviser with $10,000,000 of assets B. An investment adviser with $50,000,000 or less of assets C. An investment adviser with $100,000,000 of international assets D. An investment adviser to individuals that are accredited investors under Regulation D

c

Which of the following municipal issues would be exempt from taxation of interest by the Federal Government? I San Francisco, California - Convention Center Revenue Bond II Miami, Florida - Sewer and Water Revenue Bond III Nassau County, New York - Pollution Control Bond IV Des Moines, Iowa - Baseball Stadium Revenue Bond A. I only B. I and IV C. II and III D. I, II, III, IV

c

Which of the following must be included in an investment advisory contract under NASAA rules? I The fact that prepaid fees will not be returned if the contract is terminated early II The fact that assignment of the contract is only permitted with customer consent III Whether the contract grants discretionary authority to the adviser IV Disclosure that the fee for managing fixed income securities may be higher than for managing equity securities A. I and II only B. III and IV only C. I, II, III only D. I, II, III, IV

c

Which of the following notifies the Administrator if an agent changes employment from one broker-dealer to another broker-dealer? I Agent II Former Employer III New Employer IV FINRA A. III only B. I and IV only C. I, II, III D. I, II, III, IV

c

Which of the following projects would be financed by a revenue bond issue? I The construction of a new subway line II The construction of a new junior high school III The construction of a new hydroelectric generating plant IV The construction of a new sewage treatment plant A. I and II only B. III and IV only C. I, III, IV D. I, II, III, IV

c

Which of the following records of an investment adviser that takes custody of customer funds are required to be retained under the provisions of the Investment Advisers Act of 1940? I Cash receipts and disbursements journal II Statement of financial position III Customer account statements IV Beneficiary designations for each customer account A. I and III B. I and IV C. I, II, III D. I, II, III, IV

c

Which of the following securities are actively traded in the secondary market? I Open end funds II Closed end funds III Real estate investment trusts IV Direct participation programs A. I and II B. III and IV C. II and III D. I, II, III, IV

c

Which of the following securities are traded in the secondary market? I Preferred Stocks II American Depositary Receipts III Mutual Funds IV Municipal Bonds A. I and II only B. III and IV only C. I, II and IV D. I, II, III, IV

c

Which of the following securities is (are) NOT considered to have an issuer? I Collateral trust certificate II Equipment trust certificates III Fractional interests in oil and gas programs IV Certificates of interest in a gravel mining program A. I and II only B. III only C. III and IV only D. I, II, III, IV

c

Which of the following securities, if purchased by an investment adviser for its own account but not for its client accounts at the same time, is a "red flag" indicator of a potential conflict of interest violation? A. The IA buys index funds for its own account B. The IA buys Treasury Bonds for its own account C. The IA buys an Initial Public Offering for its own account D. The IA buys a money market fund for its own account

c

Which of the following statements about a 529 plan and a UTMA account are TRUE? I Section 529 plan distributions can be used to pay for qualified educational expenses, but UTMA distributions can only be used to pay for higher education expenses II Section 529 plan contribution and UTMA can be made by high-income taxpayers III Section 529 plans allow rollovers of unused account balances to other family members, but UTMAs do not permit rollovers IV Section 529 plans allow deductions for contributions made, but UTMAs do not A. I and III B. I and IV C. II and III D. II and IV

c

Which of the following statements are TRUE about REITs? I 90% of Net Investment Income must be distributed to shareholders to be "regulated" under Subchapter M II 75% of assets must be invested in real estate related activities to be "regulated" under Subchapter M III Gains may be passed through to shareholders under "conduit" tax treatment IV Losses may be passed through to shareholders under "conduit" treatment A. I and IV only B. II and III only C. I, II, III D. I, III, IV

c

Which of the following statements are TRUE regarding REITs? I REITs are similar to closed end investment companies II REITs issue shares of beneficial interest representing an undivided interest in a pool of real estate investments III REITs are similar to open end investment companies IV REITs are registered under the Securities Act of 1933 A. I and II only B. III and IV only C. I, II and IV D. I, II, III, IV

c

Which of the following statements are TRUE regarding equipment trust certificates ("ETC"s)? I Equipment trust certificates are issued in serial maturities II Equipment trust certificates are secured by specified corporate assets III Default of ETCs is common during recessionary periods IV Equipment trust certificates are commonly issued by transportation companies A. I and III only B. II and IV only C. I, II, and IV D. I, II, III, IV

c

Which of the following statements are TRUE regarding the distributions from an Individual Retirement Plan funded with deductible contributions? I Distributions can start at any age II Distributions can start at age 59 1/2 III Distributions are taxable IV Distributions are non-taxable A. I and III B. I and IV C. II and III D. II and IV

c

Which of the following statements are TRUE regarding the sponsor of a mutual fund? I The sponsor establishes the fund II The sponsor manages the fund III The sponsor is also known as the fund underwriter IV The sponsor registers the fund with the Securities and Exchange Commission A. I and II only B. III and IV only C. I, III and IV D. I, II, III, IV

c

Which of the following statements are TRUE when comparing bonds and preferred stock? I Payments to bondholders are subject to approval of the Board of Directors II Payments to preferred stockholders are subject to approval of the Board of Directors III Bonds are considered senior securities over common stock in a corporate dissolution IV Preferred stock is considered to be a senior security over common stock in a corporate dissolution A. I and III only B. II and IV only C. II, III, IV D. I, II, III, IV

c

Which of the following statements are TRUE? I Investment advisers with assets of less than $100,000,000 are required to register in each State II Investment advisers with assets of $100,000,000 are required to be registered with the SEC III Investment adviser representatives associated with advisers with assets of less than $100,000,000 can be required to be registered in each State IV Investment adviser representatives associated with advisers with assets of more than $100,000,000 are required to be registered with the SEC A. I and II B. III and IV C. I, II, III D. I, II, III, IV

c

Which of the following statements are TRUE? I Password-protected websites are defined as Advertising II Password-protected websites are defined as Sales Literature III Password protected websites can be required to be filed with the Administrator IV Password protected websites cannot be required to be filed with the Administrator A. I and III B. I and IV C. II and III D. II and IV

c

Which of the following statements are true regarding a Standard and Poor's 500 Index fund? I The portfolio manager can decide to invest in any stock as long as it is included in the Standard and Poor's 500 Index II The portfolio manager must change the composition of the fund if the stocks included in the index are changed III The fund must weight its investments in the same manner as the Standard and Poor's 500 index is weighted IV The management fee for such a fund is typically lower than for an actively managed fund A. I and II only B. III and IV only C. II, III, IV D. I, II, III, IV

c

Which of the following statements is TRUE regarding an investment adviser taking physical custody of a customer's monies or securities? A. An investment adviser is prohibited, by rule, from taking physical custody of a customer's monies or securities B. An investment adviser is permitted to take physical custody of a customer's monies or securities if the adviser notifies the customer that he will take custody C. An investment adviser is permitted to take physical custody of a customer's monies or securities if the Administrator does not prohibit this by rule; and if the adviser notifies the Administrator that he will take custody D. An investment adviser is permitted to take physical custody of a customer's monies or securities if the adviser notifies FINRA that he will take custody

c

Which of the following statements made during the account opening process on the part of an investment adviser representative would undermine a new customer's level of trust in that representative? A. "When we meet, please bring your latest bank statements, brokerage statements and other pertinent financial information" B. "I really don't know the answer to that question, but I will research it and get back to you" C. "You really are much too conservative in your investment objectives and must increase your risk tolerance level" D. "Before we do anything, let's talk about your immediate and longer term financial goals"

c

Which of the following terms describe Equity-Indexed Annuities? I Investment product II Insurance product III Principal protected IV Not principal protected A. I and III B. I and IV C. II and III D. II and IV

c

Which of the following transactions can be effected on margin? I The purchase of a mutual fund II The purchase of a closed-end fund III The long sale of stock IV The short sale of stock A. I and II B. III and IV C. II, III, IV D. I, II, III, IV

c

Which of the following would NOT be included in Adjusted Gross Income on a tax return? A. Social security payments B. Foreign bond interest C. Distributions from non-qualified retirement plans attributable to cost basis D. Distributions from mutual funds subject to Subchapter M

c

Which of the following would be defined as "earned income" under IRS regulations? I Social Security payments II Tips III Royalty payments IV Bonus payments A. I and II B. III and IV C. II, III, IV D. I, II, III, and IV

c

Which of the following would be defined as a broker-dealer in State A? A. The municipal bond department of a bank located in State A B. A person who gives advice about investing in securities in State A C. A broker-dealer located in State B who has an existing active customer who moves to State A D. An agent of a broker-dealer who effects trades in securities in State A

c

Which of the following would be included in the evaluation of a viatical or life settlement? I Life expectancy II Amount of discount III Availability of investors IV Escrow agent for the settlement transaction A. I and III only B. II and IV only C. I, II, III D. I, II, III, IV

c

Which orders, if executed, guarantee a specific price or better? I Buy LimitsII Buy StopsIII Sell LimitsIV Sell Stops A. I and II B. III and IV C. I and III D. II and IV

c

Which statement is FALSE regarding employee contributions to a 401(k) plan? A. Employee contributions reduce the employee's taxable income B. Employee contributions are immediately vested C. Earnings on employee contributions are taxed at capital gains rates D. Taxes on employee contributions are deferred until distribution

c

Which statement is TRUE about a buy stop order? A. A buy stop order guarantees a specific execution price or better B. A buy stop order becomes a limit order when it is activated C. A buy stop order becomes a market order when it is activated D. A buy stop order guarantees a specific execution time

c

Which statement is TRUE about a rollover from one State's 529 plan to another State's 529 plan? A. State to state rollovers are prohibited B. A rollover is permitted only once every 6 months without tax penalty C. A rollover is permitted only once every 12 months without tax penalty D. A rollover is permitted only once every 24 months without tax penalty

c

Which statement is TRUE about a sell stop order? A. A sell stop order guarantees a specific execution price or better B. A sell stop order becomes a limit order when it is activated C. A sell stop order becomes a market order when it is activated D. A sell stop order guarantees a specific execution time

c

Which statement is TRUE about capital gains taxes? A gain on a security held over: A. 6 months is taxed at a lower rate than a gain on a security held over 3 months B. 9 months is taxed at a lower rate than a gain on a security held over 6 months C. 12 months is taxed at a lower rate than a gain on a security held over 9 months D. 15 months is taxed at a lower rate than a gain on a security held over 12 months

c

Which statement is TRUE about re-registration of broker-dealers in the State? A. Broker-dealers are not required to re-register in the State B. Broker-dealers must re-register in the State annually, based upon their fiscal year end C. Broker-dealers must re-register in the State annually at calendar year end D. Broker-dealers must re-register in the State bi-annually at calendar year end

c

Which statement is TRUE about the use of index option strategies by managers of pension plans subject to ERISA requirements? A. Index option trades are permitted without restriction B. Index option trades are permitted only if the options are broad based and exchange traded C. Index option trades are permitted only if such transactions conform with the objectives stated in the plan document D. Index option trades are prohibited under ERISA legislation

c

Which statement is TRUE about trust taxation? A. The trust is a non-taxable entity B. A Form 1040 must be filed reporting income, gain and loss C. A Form 1041 must be filed reporting income, gain and loss D. A Form 1065 must be filed reporting income, gain and loss

c

Which statement is TRUE regarding calculating cost basis for tax purposes for stocks versus calculating cost basis for corporate bonds? I The cost basis calculation for stocks takes into account amortization of premiums paid or accretion of any discount II The cost basis calculation for stocks does not take into account amortization of premiums paid or accretion of any discount III The cost basis calculation for bonds takes into account amortization of premiums paid or accretion of any discount IV The cost basis calculation for bonds does not take into account amortization of premiums paid or accretion of any discount A. I and III B. I and IV C. II and III D. II and IV

c

Which statement is TRUE? A. The Administrator can require the filing of Internet Communications in electronic form only B. The Administrator can require the filing of Internet Communications in printed form only C. The Administrator can require the filing of Internet Communications in either electronic or printed form D. The Administrator does not have the power to require the filing of Internet Communications

c

Which statement may be made by an agent about a new securities issue that is being registered by qualification? A. "Because this is the most difficult registration process, you are guaranteed that the issue is safe" B. "The Administrator has approved of the offering once registration is effective" C. "The security is being registered in the State" D. "The issue is selling out fast to knowledgeable investors"

c

Which statement(s) is (are) TRUE? I An agent may guarantee a customer account against loss II A broker-dealer may guarantee a customer account against loss III A customer may guarantee another customer account against loss IV An investment adviser may guarantee a customer account against loss A. I and II only B. III and IV only C. III only D. I, II, III, IV

c

Which statements are TRUE about asset classes and investment time horizons? I Equity investments are the better choice for short term time horizons II Interest bearing investments are the better choice for short term time horizons III Equity investments are the better choice for long term time horizons IV Interest bearing investments are the better choice for long term time horizons A. I and III B. I and IV C. II and III D. II and IV

c

Which statements are TRUE about protecting gains on stock positions? I A long call can be used to protect a gain on an appreciated long stock position II A long call can be used to protect a gain on an appreciated short stock position III A long put can be used to protect a gain on an appreciated long stock position IV A long put can be used to protect a gain on an appreciated short stock position A. I and III B. I and IV C. II and III D. II and IV

c

Which statements are TRUE about the applicability of NASAA recordkeeping rules to investment advisers? I NASAA recordkeeping rules apply to Federal Covered advisers II NASAA recordkeeping rules do not apply to Federal Covered advisers III NASAA recordkeeping rules apply to State-registered advisers IV NASAA recordkeeping rules do not apply to State-registered advisers A. I and III B. I and IV C. II and III D. II and IV

c

Which statements are TRUE about the solicitor's brochure under the Investment Advisers Act of 1940? I It must disclose the specific dollar fee, or percentage of advisory fee paid by the customer, that the solicitor will earn for referring the customer II It can be incorporated into the investment adviser's brochure, so that only one document is provided to the customer III It must disclose that the solicitor will be compensated for referring the client to the investment adviser IV The customer must sign that he or she received the solicitor's brochure A. I and II only B. III and IV only C. I, III, and IV D. I, II, III, IV

c

Which statements are TRUE about variable annuity contracts? I The issuer assumes the investment risk II The issuer assumes the mortality risk III The purchaser assumes the investment risk IV The purchaser assumes the mortality risk A. I and III B. I and IV C. II and III D. II and IV

c

Which statements are TRUE regarding ADRs? I Dividends are declared by the issuer of the underlying stock in U.S. dollars II Dividends are declared by the issuer of the underlying stock in the foreign currency III Receipt holders receive dividend payments in U.S. dollars IV Receipt holders receive dividend payments in the foreign currency A. I and III B. I and IV C. II and III D. II and IV

c

Which statements are TRUE regarding structured products? I A "structured product" is a derivative security that is "structured" to have the characteristics of a debt, but give the higher returns typically associated with "equity" securities II Structured products give a rate of return linked to an equity index such as the Standard and Poor's 500 index III Structured products have a fixed maturity at par in around 7 years based on an embedded option in the security IV Structured products are standardized and liquid instruments A. I and II only B. III and IV C. I, II, III D. I, II, III, IV

c

Which statements are TRUE regarding structured products? I Structured products are standardized II Structured products are not standardized III Structured products have a fixed maturity date (similar to a debt security) IV Structured products do not have a maturity date (similar to an equity security) A. I and III B. I and IV C. II and III D. II and IV

c

Which statements are TRUE? I Mutual fund shares can be bought on 50% margin II Mutual fund shares must be paid in full when purchased, but become marginable after being held for 30 days III ETF shares can be bought on 50% margin IV ETF shares must be paid in full when purchased, but become marginable after being held for 30 days A. I and III B. I and IV C. II and III D. II and IV

c

Which statements are TRUE? I The penalty for a premature distribution from an Individual Retirement Account is 6% II The penalty for a premature distribution from an Individual Retirement Account is 10% III The penalty for an excess contribution to an Individual Retirement Account is 6% IV The penalty for an excess contribution to an Individual Retirement Account is 10% A. I and III B. I and IV C. II and III D. II and IV

c

Which statements are always TRUE about Treasury Bonds? I Treasury Bonds are traded in 32nds II Treasury Bonds are quoted at a discount to par value III Treasury Bonds are issued in either bearer or registered form IV Treasury Bonds have minimum maturity of more than 10 years A. I and II only B. II and IV only C. I and IV only D. I, III and IV

c

Which transaction can ONLY be done in a margin account? A. Purchase of stock B. Long sale of stock C. Short sale of stock D. Purchase of an option

c

Who must register in a State as an investment adviser? A. A person selling a subscription to a service that gives timing of buy and sell orders for specific investment company securities that are exchange traded B. An investment adviser representative who has been registered with an investment adviser for more than 5 years C. An on-line broker-dealer who offers a "no maximum number of trades" program for a 90-day period for a set dollar amount D. A bank that is offering "Raise-Your-Rate" Certificates of Deposit for a set promotional period

c

Why are European style options considered to be derivatives? A. Because they can be exercised anytime prior to the expiration of the contract B. Because they can only be exercised during a stated period just prior to expiration C. Because their valuation is contingent on the value of a reference asset D. Because greater returns can be derived when trading options as compared to trading the reference asset

c

With a variable annuity, the insurer takes the risk that expenses for administration will not be more than it expected. What is the charge the insurer makes for taking this risk? A. Investment management fee B. Administrative expense fee C. Expense risk charge D. Mortality risk charge

c

XYZ Company has issued 10%, $100 par non-cumulative preferred stock. Two years ago, XYZ omitted its preferred dividend. Last year, it paid a preferred dividend of $5 per share. This year, XYZ wishes to pay a common dividend. In order to make the distribution to common shareholders, each preferred share must be paid a dividend of: A. 0 B. $5 C. $10 D. $15

c

XYZZ stock has a beta of +2. The expected market rate of return is 9% and the risk-free rate of return is 1%. The standard deviation of returns is 2%. Using the Capital Asset Pricing Model (CAPM), what is the expected rate of return for XYZZ stock? A. 15% B. 16% C. 17% D. 18%

c

Yield to maturity would NOT be appropriate as a measure of the return from investing in: A. Treasury bonds B. Corporate bonds C. Common stock D. Municipal bonds

c

Zero coupon bonds: I pay interest semi-annually II pay interest at maturity III are bought at a discount and mature at par IV are bought at a par and mature at a premium A. I and III B. I and IV C. II and III D. II and IV

c

growth fund would likely invest in which of the following securities? A. Non-convertible corporate bonds B. Government bonds C. Convertible bonds D. Preferred stocks

c

A corporation has issued 10% convertible debentures, convertible into 40 shares of common stock. The current market price of the common stock is $25.25. If the bonds are trading at 10 points above parity, they are priced at: A. 81 B. 91 C. 101 D. 111

d

A corporation has issued 10%, $1,000 par convertible debentures, convertible at $31.25. The common stock is currently trading at $35. If the bond and the common are trading at parity, a customer purchasing 5M of the bonds will pay.(find conversion ratio) A. $3,500 B. $4,800 C. $5,000 D. $5,600

d

A couple has been recently married, both for the second time. They are both age 40, and each has 2 kids from their prior marriage. They want to open a brokerage account that will ensure that the kids get assets from their natural parent. In order to accomplish this, the account should be opened as a: A. Totten Trust B. Partnership C. Joint Account With Rights Of Survivorship D. Joint Account With Tenants In Common

d

A customer could be obligated to purchase stock at a future date if the customer is the: A. buyer of a call B. seller of a call C. buyer of a put D. seller of a put

d

A customer has a young disabled child with multiple sclerosis and wishes to invest enough money to provide $5,000 a month in perpetuity to pay for ongoing medical expenses. Upon the death of the disabled individual, the principal amount will be left to a charity searching for a cure for the disease. Assuming that the principal can be invested at a 6% annual rate of return, the required principal amount is: A. $50,000 B. $100,000 C. $500,000 D. $1,000,000

d

A customer has an individual account. Upon written request, the customer's account statements and confirmations may be sent to the: A. Agent B. Broker-dealer C. State Administrator D. None of the above

d

A customer has purchased 1,000 shares of ABC stock at $44 per share, paying a commission of $1.00 per share for the transaction. ABC stock declares a 20% stock dividend. When the dividend is paid, the tax status of the investment is: A. 1,000 shares held at a cost basis of $44 per share B. 1,000 shares held at a cost basis of $45 per share C. 1,200 shares held at a cost basis of $36.66 per share D. 1,200 shares held at a cost basis of $37.50 per share

d

A customer inherits 3,000,000 shares of ABC stock, a company listed on the NYSE which has 10,000,000 shares outstanding. The customer is not a director or officer of the company. Which of the following statement(s) is/are TRUE? I The customer is defined as an "insider" under the Securities Exchange Act of 1934 II The customer is prohibited from selling ABC stock short except for tax deferral purposes (short against the box) III If the customer trades ABC stock at a profit after having held the stock for less than 6 months, the gain is forfeited IV The customer must report trading activity to the SEC A. I only B. II and IV C. I, II, IV D. I, II, III, IV

d

A customer owns 400 shares of ABC stock. ABC is having a rights offering where 20 rights are needed to subscribe to 1 new share. The customer will receive: A. 1 right B. 20 rights C. 100 rights D. 400 rights

d

A customer purchases securities on April 30th, 2020. The securities appreciate and the customer wants to donate the securities to get a tax deduction. The customer will be able to deduct the full market value without incurring any other taxes if the securities are donated on: (over a year not a year) A. October 30th, 2020 B. April 29th, 2021 C. April 30th, 2021 D. May 1st, 2021

d

A customer sells short 100 shares of ABC at $50 and sells 1 ABC Jan 50 Put @ $5. This position results in a profit when the: I market rises II market falls III market is stable A. I only B. II only C. I and III D. II and III

d

A customer sells short a 3X Leveraged ETF at $30 per share. What is the customer's maximum potential loss? A. $30 per share B. $60 per share C. $90 per share D. Unlimited

d

A customer that is long ABC stock in his portfolio buys call options on that stock. Why would the customer do this? A. To protect the ABC stock position from an adverse market move B. To derive additional income from the ABC stock position C. To speculate on the price of the stock going down D. To lock in a price at which shares can be added to the portfolio

d

A customer that is short ABC stock in his portfolio buys put options on that stock. Why would the customer do this? A. To protect the ABC stock position from an adverse market move B. To derive additional income from the ABC stock position C. To speculate on the price of the stock going up D. To lock in a price at which the short position can be increased in the portfolio

d

A customer that wishes to buy 100 shares of a closed-end management company in the secondary market will pay what amount? A. NAV plus a commission B. NAV plus a sales charge C. Ask price plus a sales charge D. Ask price plus a commission

d

A customer wants an equity investment with a required rate of return of 5% and wants to receive a yearly dividend payment of $2.50. To meet the customer's requirements, the security must cost: d/rrr A. $12.50 B. $25.00 C. $37.50 D. $50.00

d

A customer wants to buy permanent life insurance. He has no desire to participate in the market and may have additional money to add to premiums in the future. The best recommendation for this client is: A. Term life B. Whole life C. Variable life D. Universal life

d

A customer who is concerned with social and environmental issues would minimize which risk when making an investment decision? A. Market B. Opportunity C. Financial D. Regulatory

d

A customer wishes to open a margin account at a broker-dealer. The customer provides all of the necessary information to open the account, but refuses to sign the margin agreement when the agent gives it to the customer. Which statement is the correct course of action to be taken? A. The firm should approve the opening of the account since the customer provided all of the necessary information B. The agent should have the customer sign a waiver, obviating the need for the customer to sign a margin agreement C. The agent should sign the customer's name to the margin agreement, since all of the necessary information has been provided by the customer D. The account cannot be opened because the customer did not sign the margin agreement

d

A customer wishes to purchase a Direct Participation Program Offering. The registered representative should know which of the following about the customer in order to give advice about such an investment? I Annual income II Net worth 1II Age IV Portfolio holdings A. I only B. II only C. I, II, III D. I, II, III, IV

d

A customer, age 55, is in the 30% tax bracket. The customer has a non-tax qualified variable annuity separate account to which he contributed $12,000 that has a current market value of $30,000. The customer takes a distribution of $10,000 from the account. The tax that will be due on this distribution is: A. 0 B. $1,000 C. $3,000 D. $4,000

d

A father gives a $22,000 gift of securities to his son; and a $22,000 gift of securities to his daughter. Which statement is TRUE? A. The father has no gift tax liability B. The father has gift tax liability on the gift to the son C. The father has gift tax liability on the gift to the daughter D. The father has gift tax liability on both gifts

d

A firm's market making desk, aware that the firm is about to publish a bullish research report on ABCD stock, purposefully increases its long position in order to satisfy anticipated retail demand. This action is: A. permitted without restriction B. permitted as long as the research report is released within 48 hours of the first trade made to increase the firm's position C. permitted as long as the market listing the stock is notified, in writing, of the impending research report D. prohibited

d

A grandmother purchased 100 shares of ABC stock for $1,000. She gifts it to her granddaughter when the stock is worth $3,000. 2 years later, the granddaughter sells the stock for $5,000. What is the tax consequence when the granddaughter sells the stock? A. $2,000 Short Term Capital Gain B. $2,000 Long Term Capital Gain C. $4,000 Short Term Capital Gain D. $4,000 Long Term Capital Gain

d

A growth fund is a mutual fund that: A. invests in securities found in one industry or geographic area B. allocates investment among common stocks, preferred stocks, and bonds of companies in various industries C. sells futures on market indices and uses short sales to limit risks of long positions D. invests solely in the common stocks of companies that exhibit higher than average gains in earnings

d

A head and shoulders "bottom" formation is a(n): A. uptrend B. downtrend C. reverse upward trend D. reverse downward trend

d

A husband and wife have a joint brokerage account with your firm. The husband calls up and directs the agent to sell 100 shares of DEF from the account. Which statement is TRUE about accepting this order? A. The order cannot be accepted because it must be placed in writing B. The order cannot be accepted unless approval of the spouse is obtained C. The order cannot be accepted unless the husband has been granted a power of attorney by the wife D. The order can be accepted as given

d

A husband and wife hold a joint account at your firm with rights of survivorship. The husband manages the account, places orders, monitors account activity, and monitors account performance. The wife is not involved at all. The husband dies. What should representative do? A. Close the account B. Freeze the account C. Talk to the estate attorney D. Talk to the wife

d

A married couple, ages 30 and 31, wish to start investing for their retirement at age 55. They have 2 children, ages 3 and 1, that they expect to send to college. What is the time horizon that should be used for their retirement portfolio? A. 15 years B. 20 years C. 25 years D. 40+ years

d

A money manager that employs momentum investing makes investment decisions based on the: A. fundamental values B. earnings growth of the company C. efficient market theory D. earnings trends of the company

d

A municipality has issued a general obligation bond. Which of the following are sources of income available for debt service? I Ad valorem taxes II License fees III Fines IV Assessments A. I and IV B. II and III C. I, III, IV D. I, II, III, IV

d

A mutual fund is owned in a qualified retirement account. Dividends paid by the mutual fund will be taxable: A. annually B. if they are not automatically reinvested in additional fund shares C. if they are automatically reinvested in additional fund shares . if they are taken as a distribution from the account

d

A pension consultant has been hired by an employee benefit fund to render advice for compensation. The adviser is exempt from the registration requirements of the Investment Advisers Act of 1940 if it takes any of the following actions EXCEPT: A. retaining an outside counsel to advise the plan on labor law B. hiring an accounting firm to provide employee benefit consulting services to the plan C. allocating plan assets to investments in real estate D. deciding the proportion of plan assets to be invested in securities

d

A private equity firm is: I typically structured as a corporation II typically structured as a limited partnership III offers private placements to the public IV buys publicly-held and private companies as investments A. I and III B. I and IV C. II and III D. II and IV

d

A registered agent effects a trade for a customer "privately" in a transaction that is not recorded on the books of the agent's broker-dealer. Which statement is TRUE? A. This transaction is allowed as long as the agent told the customer that the trade was being done privately B. This transaction is allowed if no commission was taken on the trade C. This transaction is allowed without restriction D. This transaction is a prohibited business practice

d

A registered agent is permitted to share commissions on securities transactions with all of the following EXCEPT: A. the manager of the branch office to which the agent is assigned B. a registered trading assistant who takes orders for the agent C. another registered agent working at the same firm that renders services to the agent's clients D. a personal friend of an existing client that refers new customers to the registered agent

d

A retired 81 year old customer has $36,000 of annual income from a pension and social security. She has no investments other than a fully-paid home worth $120,000. She has just inherited $75,000 that she would like to invest for supplemental monthly income with minimum default risk. The BEST recommendation is for the customer to purchase: A. AAA rated municipal bonds B. a variable annuity C. whole life insurance D. U.S. government bonds

d

A sole proprietor, 60 years old, has been in business for many years and the business is doing very well. He would like to retire at age 70. He asks his IAR about the potential benefit of changing the business structure to a C Corporation or a General Partnership. In terms of a business advantage, the IAR could tell the sole proprietor that: A. corporate dividends are not taxed until retirement B. partnerships have an unlimited life C. ownership in a corporation can be transferred upon retirement D. corporate ownership will provide the owner with limited liability

d

A support level is: I above the current market price of the stock II below the current market price of the stock III a point through which the stock's price tends not to rise IV a point through which the stock's price tends not to fall A. I and III B. I and IV C. II and III D. II and IV

d

A teacher contributed to a 403(b) annuity contract over the past 12 years. The contributions over this period totaled $10,000 and the current market value of the contract is $16,000. If the teacher takes a lump-sum withdrawal at retirement, the taxable amount is: A. $6,000 B. $8,000 C. $10,000 D. $16,000

d

A working couple has a combined income of $150,000. Neither is covered by an employer sponsored pension plan. Which statement is TRUE about IRA contributions by these persons? A. IRA contributions are prohibited since these persons can be covered by an employer sponsored plan B. IRA contributions are prohibited since these persons' income exceeds allowed limits C. IRA contributions are permitted; however the contribution amount is not deductible D. IRA contributions are permitted with the contribution amount being tax deductible

d

A yield quote change of 5 basis points on municipal bonds with a 6.25% nominal yield will result in the greatest dollar price change for bonds quoted at: A. 8.20% with 3 years to maturity B. 8.30% with 3 1/2 years to maturity C. 8.40% with 4 years to maturity D. 8.50% with 4 1/2 years to maturity

d

ADAP Advisors is a State-registered adviser with 7 IARs. One of the IARs, Mark, leaves the employ of ADAP to join another advisory firm. His accounts are assigned by ADAP to the remaining 6 IARs at ADAP. By taking this action, ADAP: A. is required to notify each of Mark's customers of the change of IAR and get the customer's approval B. is required to send a negative consent letter to each of Mark's clients and if no response is received, the assignment is permitted C. has violated the Investment Advisers Act of 1940 because advisory contracts cannot be assigned D. is not required to take any further action

d

Actions that are violations of the Uniform Securities Act could cause that individual to be subject to: I State government anti-fraud provisions II Federal Government anti-fraud provisions III Common law deceit provisions A. I only B. III only C. I and III D. I, II, III

d

All of the following State-registered advisers must file an annual audited financial statement with the Administrator within 120 days of completion of a surprise audit EXCEPT an adviser that: A. accepts $500 or more of prepaid advisory fees, 6 months or more in advance of rendering services B. uses a qualified custodian to hold customer assets C. maintains custody of customer assets D. exercises discretion in customer accounts under a limited power of attorney

d

All of the following are contrarian economic indicators EXCEPT: A. odd lot sales and purchases B. short interest level C. put/call ratio D. price/earnings ratio

d

All of the following are deductible from a taxable estate EXCEPT: A. Funeral and estate administrative expenses B. Claims against the estate and mortgages against real property owned by the estate C. State death tax liability D. The difference between cost basis and fair market value for depreciated assets owned by the estate

d

All of the following are defined as "portfolio income" under IRS guidelines EXCEPT: A. Dividends received from common stock holdings B. Interest income received from bond holdings C. Proceeds from the sale of securities in excess of the tax basis of those securities D. Royalties received from oil and gas limited partnership holdings

d

All of the following are defined as impersonal advisory services under the Investment Advisers Act of 1940 EXCEPT: A. oral advice that is not based upon specific customer situations B. written advice that is not based upon specific customer situations C. statistical information prepared using a computer program about the performance of a security or group of securities D. financial plan prepared using a computer program based upon statistical information provided by the customer

d

All of the following are defined as investment advisers that are EXEMPT from registration in a State EXCEPT an adviser with no place of business in the State that: A. gives advice to no more than 5 clients in the State in the past 12 months B. gives advice solely to broker-dealers C. gives advice solely to registered investment companies D. distributes financial reports not based on specific client situations

d

All of the following are disclosed in Form ADV Part 2A EXCEPT: 2a only! A. investment policies of the adviser B. type of investments made by the adviser C. investment practices of the adviser D. states in which the adviser is registered

d

All of the following are disclosed in an investment adviser registration under the Investment Advisers Act of 1940 EXCEPT: A. compensation basis to the investment adviser B. approximate market value of portfolios managed C. approximate number of advisory clients D. names and addresses of advisory clients

d

All of the following are included in the 10K report filed by corporate issuers with the SEC EXCEPT: A. income statement B. balance sheet C. retained earnings statement D. net capital computation

d

All of the following are objectives that a capital needs analysis would attempt to address EXCEPT: A. paying for a child's college 15 years from now B. the maturing of a medical resident's balloon loan 10 years from now C. having funds 20 years from now to enjoy a comfortable retirement D. borrowing 5 years from now using a home equity line to make a major home improvement

d

All of the following are relevant considerations when determining if a customer account has been churned EXCEPT: A. excessive size of transactions in the account B. transactions that are inconsistent with the customer's objective C. excessive frequency of transactions in the account D. transactions that are within the financial resources of the client

d

All of the following are risks of investing in a Real Estate Limited Partnership (RELP) EXCEPT: A. Business risk B. Liquidity risk C. Regulatory risk D. Reinvestment risk

d

All of the following are settlor functions in a pension plan established under ERISA EXCEPT: A. choosing the type of plan B. amending or changing plan options C. terminating a plan D. choosing plan investments

d

All of the following are true about registration of agents under the Uniform Securities Act EXCEPT: A. a non-resident agent can solicit business in another State only if both the agent and broker-dealer are registered in that State B. an agent can only sell securities that have been registered in a State, or that are exempt from registration C. if an agent resigns and affiliates with another broker-dealer, the agent, old broker-dealer and new broker-dealer must notify the Administrator D. if a broker-dealer's registration in a State is revoked, it has no effect on the agent's registration

d

All of the following are types of joint accounts EXCEPT: A. Tenancy in Common account B. Joint Tenants with Rights of Survivorship account C. Tenants by Entireties account D. Omnibus account

d

All of the following can be filed electronically with the State EXCEPT: A. registration application information B. signature requirement C. payment of fees D. answer to a subpoena

d

All of the following may be required by the Administrator to be licensed as a broker-dealer EXCEPT: A. Minimum Net Capital B. Minimum Surety Bond Coverage C. Minimum Competency As Demonstrated By Passing An Examination D. Minimum Time Periods Of Securities Business Experience

d

All of the following media can be used to store data under Uniform State Law EXCEPT: A. Microfiche B. Digital storage C. CD-ROM D. Audio tape

d

All of the following securities represent ownership of a corporation EXCEPT: A. common stock B. preferred stock C. convertible preferred stock D. warrants

d

All of the following sources of REIT income are counted towards the 75% test required by Subchapter M EXCEPT: A. Net rental income B. Interest income from mortgages C. Real estate tax refunds D. Dividend income from investments

d

All of the following statements are true about the Federal National Mortgage Association Pass-Through Certificates EXCEPT: A. FNMA is a publicly traded company B. interest payments are subject to state and local tax C. certificates are issued in minimum units of $25,000 D. the credit rating is considered the highest of any agency security

d

All of the following statements are true regarding family limited partnerships EXCEPT: A. the venture must have a legitimate business purpose other than tax avoidance B. the partnership must have at least 1 general partner and 1 limited partner C. only general partners can assume a management role D. only securitized assets can be held as investments(any asset can be held)

d

All of the following statements are true regarding the effect of the purchase of Treasury Stock EXCEPT: A. the number of outstanding shares is reduced B. the earnings per share is increased C. the market price of the stock will increase D. the number of authorized shares will be reduced

d

All of the following statements concerning open-end management companies are correct EXCEPT their shares: A. are issued continually to investors B. are redeemed continually from investors C. are redeemed at net asset value D. trade over-the-counter or on the stock exchanges

d

All of the following statements regarding the tax equivalent yield of a municipal bond are true EXCEPT: A. tax equivalent yield of a municipal bond varies with customer's tax bracket B. as the customer's tax bracket increases, so does the tax equivalent yield C. as the market price of the bond moves, the tax equivalent yield changes as well D. tax equivalent yield is disclosed on the customer's confirmation

d

All of the following would be included in the evaluation of a viatical or life settlement EXCEPT: A. Life expectancy of insured/viator B. Amount of discount from policy face value C. Availability of investors D. Tax consequence to the viator of selling the contract

d

All of the following would be included in the evaluation of the amount an investor would pay for a viatical or life settlement EXCEPT: A. Life expectancy of the viator B. Amount of discount from policy face amount C. Availability of investors D. Tax consequence to the viator of selling the policy

d

An ETN does NOT have which risk? A. Market risk B. Credit risk C. Marketability risk D. Reinvestment risk

d

An IAR has a customer with $1 million under management. The customer is experiencing a cash flow shortfall but does not want to liquidate part of the portfolio because it is performing so well. The client calls the IAR and asks for a short-term loan of $25,000. What should the IAR do? A. The IAR should lend the customer the money because the client has sufficient assets under management to ensure that the loan will be repaid B. The IAR should arrange for the customer to rehypothecate a sufficient amount of securities to a bank to secure the loan C. The IAR should co-sign a loan with the client at a bank D. The IAR should refuse the client's request

d

An Investment Adviser Representative (IAR) has a new single client who wishes to retire early. Outside of the client's current financial status, which of the following information should the IAR obtain from the client? I The number of years until retirement II Other sources of income the client will have after retirement III Whether the client has a pension benefit and what this amount will be IV What type of lifestyle the customer wishes to live in retirement A. I and II B. III and IV C. I, II, III D. I, II, III, IV

d

An adviser is permitted to exercise discretion over a customer account when such trades: A. are not too frequent in the account B. are not too large relative to the amount of capital in the account C. are effected only after new funding is placed in the account D. occur under a written power of attorney

d

An agent is registered in State Y. The agent accompanies a customer to State Z on a golf outing, where the agent makes an offer of securities to the customer. Which statements are TRUE? I State Y has jurisdiction over the offer of securities II State Z has jurisdiction over the offer of securities III The agent may qualify for a de minimis exemption in State Y IV The agent may qualify for a de minimis exemption in State Z A. I and III B. I and IV C. II and III D. II and IV

d

An agent of a broker-dealer has hired a sales assistant who is not registered. The sales assistant will answer the telephone, handle customer queries, and perform other clerical duties. All of the following arrangements for compensating the unregistered sales assistant are permitted EXCEPT: A. Hourly wage B. Performance bonus C. Annual salary D. Production bonus

d

An agent of a broker-dealer is opening a new client account. The agent has completed the new account application and the suitability determination. The customer has an investment objective of safety of principal and income. The agent makes an initial recommendation of a conservative blue chip stock with a track record of paying a consistent cash dividend. The customer accepts the recommendation. When must the commission charged on the transaction be disclosed to the customer? A. At the time that the order is placed B. At the time when the order is filled C. At the time when the account is opening D. On the confirmation of the transaction

d

An agent of a broker-dealer recommends a specific stock to a customer and says that the stock will most likely increase in value within the next couple of months. The customer invests in the stock and its market price increases substantially. Which statement is TRUE? A. The agent may accept a bonus based on a percentage of the increase in market value with the specific authorization of the customer B. The agent may accept a bonus based on a percentage of the increase in market value with the specific authorization of the agent's broker-dealer C. Both the customer and the broker-dealer must approve of any increased commission given the agent based on a percentage of the increase in market value D. The only acceptable commission is that which was originally received

d

An agent omits to state material facts which are needed by an investor to make an informed decision. Under the NASAA Statement of Policy on Dishonest and Unethical Business Practices, this action is fraudulent if the statements refer to: I U.S. Government bonds II Municipal bonds III Corporate bonds IV Corporate stock A. I and II only B. III and IV only C. I, II, III D. I, II, III, IV

d

An agent registered under the Uniform Securities Act has his registration revoked by the Administrator. The Administrator may revoke any future applications of the person to be a(n): I Broker-dealer II Agent of a broker-dealer III Investment adviser IV Representative of an investment adviser A. II only B. I and II only C. III and IV only D. I, II, III, IV

d

An agent that is employed by Merrill Lynch believes that the stock of the parent company (Bank of America), which has been trading at new lows on the NYSE, is ready for a rebound. She wants to recommend it to her customers. Which statement is TRUE about doing so? A. This is an unethical business practice and is prohibited B. This is permitted only if the agent discloses the existence of the relationship verbally when making the recommendation C. This is permitted only if existence of the relationship is disclosed in writing on the confirmation D. Both Choices B and C above

d

An agent who works for a broker-dealer has a customer who works near-by who frequently comes into the office to get advice in person and place trades. One day, when returning from lunch, she finds a written note from the client stating that he had stopped by to talk and that he would come by later. The note also said that he was very unhappy with the performance of the agent's latest recommendations. Each of these recommendations was made by the agent from the firm's "Recommended List." Which statement is TRUE about this? A. Because the customer is returning later that day to talk, the agent need not take any action until after the face-to-face meeting with the customer B. Because the recommendations were from the firm's "Recommended List," the agent need not take any further action C. Because the note does not meet the definition of a complaint, the agent need not take any further action D. The agent must forward the note to a supervisor for resolution

d

An associated person is an agent of a broker-dealer registered in State A. The agent quits and goes to work for a broker-dealer located in State B. Which is NOT responsible for notifying the appropriate State Administrator? A. The broker-dealer in State A B. The agent C. The broker-dealer in State B D. The administrator of State B

d

An established customer of yours has a joint account with his wife. While on the phone with you, he discusses a specific NASDAQ stock and wants to buy shares of that stock when it declines to $50 a share or lower. The customer leaves for a 3-week vacation traveling to a third world country where he cannot be contacted. During this time, the stock declines to the level at which the customer wanted to buy the shares. What is an appropriate action to take? A. Buy the stock in the customer's account since he wanted to buy the shares at that price B. Buy the stock in the customer's account as long as the branch manager or compliance officer approves of the transaction C. Buy the stock in your own account and when the customer returns, transfer the shares to his account with his approval D. Attempt to contact the customer's wife, and if this is possible, obtain authorization from her to buy the shares

d

An individual who is covered by another qualified retirement plan is permitted to contribute to a(n):(only thing that stops you is high income) I IRA II Roth IRA III Coverdell Education Savings Account A. I only B. I and II only C. II and III only D. I, II, III

d

An individual wishes to form a broker-dealer as a sole proprietorship. Which of the following MUST be filed with the State? I Form BD II Consent To Service of Process III Surety Bond IV Filing Fee A. I and II only B. III and IV only C. I, II, III only D. I, II, III, IV

d

An insurance agent also prepares financial plans for customers for a fee as a sideline. The agent is registered as an investment adviser representative in the State. Which statement is TRUE? A. The insurance agent may say that he is registered with the SEC B. The insurance agent may say that he or she is an investment counsel C. The insurance agent may say that his qualifications as a planner have been certified by the State D. The insurance agent may say that he is registered in the State

d

An insurance company that sells an Equity Indexed Annuity (EIA) would use any of the following methods to credit the change in investment value EXCEPT: A. Annual reset B. Point-to-point C. High-water mark D. Moving average

d

An investment adviser is assessing the performance of 3 separate investments. Investment A has increased by 6% over the past 6 months. Investment B has increased by 3% over the past 3 months. Investment C has increased by 9% over the past 9 months. Which statement is TRUE? A. Investment A gives the highest rate of return B. Investment B gives the highest rate of return C. Investment C gives the highest rate of return D. Investments A, B and C all give the same rate of return

d

An investment adviser is permitted to accept all of the following from broker-dealers in return for directing its portfolio trades (and thus paying full commissions) to that broker-dealer EXCEPT: What benefits the adviser? A. research reports provided by the broker-dealer B. Monte Carlo simulation software provided by the broker-dealer C. reimbursement for the cost of attending an investment seminar D. reimbursement for the cost of hiring an administrative assistant

d

An investment adviser makes an offer to send, by mail, a "free" analysis covering his top 50 stock picks in an advertisement. In order for an individual to get the report, the adviser could require that individual to: A. fill out a questionnaire detailing that individual's financial resources B. pay a shipping and handling fee of $38 to get the report sent out C. provide the names and addresses of 3 other persons who would be interested in the adviser's reports D. telephone the adviser and listen to a brief sales pitch before taking the mailing information

d

An investment adviser may be compensated with which of the following? I Wrap fees charged to customers for all services rendered by the adviser II Soft dollars paid by an executing broker to the adviser in return for trades sent to the broker by the adviser III 12b-1 fees paid by a mutual fund to the adviser based on annual net assets IV Commissions paid to an affiliated broker-dealer on trades recommended by the adviser A. I and II B. III and IV C. I, II, III D. I, II, III, IV

d

An investment adviser registered in the State of California takes custody of client funds. The State has a minimum $35,000 Net Worth requirement. The IA finds that its Net Worth is $34,500. The adviser: A. is not required to do anything because the Net Worth deficiency is less than $1,000 B. must deposit $1,000 as a Surety Bond with the State Administrator by the close of business the next business day C. must cease business operations until the deficiency is cured D. must notify the State Administrator by the close of business on the next business day and file a report of the adviser's financial condition the next day

d

An investment adviser representative wants to share in the gain and loss of a customer account. Under NASAA rules, this is: A. permitted if the IAR opens a joint account with the customer; contributes capital; and shares in proportion to the capital contributed B. permitted if the Administrator is notified that the Investment Adviser is taking custody C. permitted only if the Investment Adviser does not charge an advisory fee D. prohibited

d

An investment adviser that solely follows and recommends listed securities is: A. exempt from State registration B. exempt from Federal registration C. subject to State registration only D. subject to either State or Federal registration

d

An investment in common stock provides dividends equal to 4% per year and expected long term capital gains equal to 8% per year. For a lower-earning investor in the 30% tax bracket, the after-tax rate of return is:(need to calculations, then add together) A. 8.40% B. 9.00% C. 9.60% D. 10.20%

d

An investment policy statement would NOT include: A. recommended allocations among differing asset classes B. expected returns of the recommended strategy and the expected range of these returns C. strategies used for selecting specific stocks in the equity portion of the portfolio D. disclosure of the fees that the adviser will earn for implementing the recommended strategy

d

An investor buys a $100,000, 7% corporate bond maturing in 2043 for $70,000. The bond is callable starting in the year 2023. What is the most appropriate measure for calculating yield? A. Total Return B. Current Yield C. Yield to Call D. Yield to Maturity

d

An investor buys a bond. At the end of the first year, the bond is worth $1,300. During the year, the investment paid $20 in interest and had a capital gain of $250. What is the Total Return? A. 1.54% B. 1.90% C. 20.77% D. 25.71%

d

An investor buys stock on January 1st for $100 and sells it 1 1/2 years later on July 1st for $90. The investor has a: A. short term capital gain B. short term capital loss C. long term capital gain D. long term capital loss

d

An investor has $100,000 to invest. She allocates about half of her portfolio to the purchase of a municipal bond with 1 year to maturity that has a 4% coupon, paying $50,465 for the bond. The investor's approximate rate of return (current) is: A. 2.75% B. 3.00% C. 3.25% D. 4.00%

d

An investor in a "Ginnie Mae" mutual fund assumes which of the risks? I Prepayment Risk II Extension Risk III Fluctuation of Net Asset Value IV Reinvestment Risk A. I and II only B. III and IV only C. I, III, IV D. I, II, III, IV

d

An older female customer, in the lowest tax bracket, wants an investment that will provide asset growth for retirement. The BEST recommendation would be: A. Emerging markets fund B. Single stock C. Municipal bond D. Index fund

d

An options strategy where the maximum potential loss is equal to the difference between the increase in value of the underlying short securities position and the premiums received is a: A. naked call writer B. covered call writer C. naked put writer D. covered put writer

d

As a condition of registration as an agent or principal of a broker-dealer, all of the following statements are true EXCEPT: A. an oral examination may be required B. a written examination may be required C. both an oral and written examination may be required D. there is no requirement for either a written or oral examination to be taken

d

As a condition of registration, the Uniform Securities Act requires that broker-dealer records be kept on file for: A. 6 months B. 1 year C. 2 years D. for the time period prescribed by Federal law

d

Based solely upon fluctuations in foreign currency exchange rates, the net asset value per share, valued in U.S. dollars, of an "international" bond mutual fund, would increase if: I the value of the U.S. dollar increases II the value of the U.S. dollar decreases III interest rates increase in the United States IV interest rates increase in foreign countries A. I and III B. I and IV C. II and III D. II and IV

d

Commercial paper can be issued for all of the following maturities EXCEPT: A. 14 days B. 30 days C. 90 days D. 360 days

d

Coverdell savings accounts permit a donor to make: A. tax-deductible contributions for a beneficiary to pay for higher education expenses only B. non tax-deductible contributions for a beneficiary to pay for higher education expenses only C. tax-deductible contributions for a beneficiary to pay for education expenses at all levels D. non tax-deductible contributions for a beneficiary to pay for education expenses at all levels

d

Disclosure of which of the following is made in a Form ADV Part 2 that is filed with the SEC under the Investment Advisers Act of 1940? I Description of how fees are assessed II Method of analysis used III Educational background of applicant IV Balance sheet of applicant if the firm takes custody of client funds or accepts $1,200 or more of prepaid advisory fees A. I and II only B. III and IV only C. I, II and IV D. I, II, III, IV

d

During the annuity period of a fixed annuity, the insurance company assumes which of the following risks? I Mortality Risk II Purchasing Power Risk III Expense Risk IV Investment Risk A. I and II B. II and III C. III and IV D. I, III, IV

d

During the payout period of a variable annuity contract, the annuitant assumes: I mortality risk II market risk III expense risk IV investment risk A. I and III B. I and IV C. II and III D. II and IV

d

Federal Funds are overnight loans of reserves from: A. Federal Reserve to broker-dealers B. broker-dealers to Federal Reserve C. commercial bank to broker-dealer D. commercial bank to commercial bank

d

Fixed income portfolios are subject to which of the following risks? I Credit risk II Purchasing power risk III Opportunity cost IV Interest rate risk A. I and IV B. II and III C. I, II, IV D. I, II, III, IV

d

For a family limited partnership account, who gets the termination benefits? A. Grantor B. Trustee C. Income beneficiary D. Remainder beneficiary

d

For any one year, what is the maximum amount that parents can contribute to a 529 plan for a child without incurring gift tax liability in 2020? (multiplier rule) A. $10,000 B. $15,000 C. $55,000 D. $150,000

d

For initial registration as an agent in a State, which can be required? I Consent to Service of Process II Filing Fee III Registration Application IV Fingerprints A. I and II only B. III and IV only C. I, II, III D. I, II, III, IV

d

Forward contracts are: I standardized and exchange traded II non-standardized and OTC traded III can be easily offset with a closing trade IV cannot be easily offset with a closing trade A. I and III B. I and IV C. II and III D. II and IV

d

Forward contracts differ from futures contracts in all of the following ways EXCEPT forward contracts are: A. non-standardized B. non-regulated C. non-competitive D. non-derivative

d

Forward contracts: I can be closed by trading on an exchange II cannot be closed by trading on an exchange III are standardized IV are not standardized A. I and III B. I and IV C. II and III D. II and IV

d

How does a closed-end fund differ from an open-end fund? I Open-end funds trade while closed-end funds do not II Closed-end funds trade while open-end funds do not III Open-end funds can be purchased at a discount to NAV while closed-end funds cannot IV Closed-end funds can be purchased at a discount to NAV while open-end funds cannot A. I and III B. I and IV C. II and III D. II and IV

d

If a broker-dealer is registered with the SEC, and its representatives are registered with the SEC; and if the broker-dealer does not charge separately for advice; then which statement is TRUE? A. Both the individual and the broker-dealer must register with the SEC as an investment adviser representative (IAR) and an investment adviser (IA), respectively B. The individual must register with the SEC as an IAR; the broker-dealer is not required to register with the SEC as an IA C. The individual need not register with the SEC as an IAR; the broker-dealer is required to register with the SEC as an IA D. Neither the individual nor the broker-dealer need register with the SEC as an IAR and an IA, respectively

d

If a customer has a gain on a short stock position that he wishes to protect, which of the following statements are TRUE? I The order will be placed below the current market price II The order will be placed above the current market price III A buy limit order will be entered IV A buy stop order will be entered A. I and III B. I and IV C. II and III D. II and IV

d

If a customer of a broker-dealer fails to pay for a securities purchase by the 4th business day from trade date, the customer's account must be: A. restricted for 30 days B. frozen for 30 days C. restricted for 90 days D. frozen for 90 days

d

If a representative that transacts business in a State terminates employment with an investment adviser, notice must be given to the Administrator by the: A. Investment Adviser only B. Investment Adviser Representative only C. both the Investment Adviser and the Investment Adviser Representative D. Investment Adviser, but if the representative learns that the adviser has not given notice, the representative must do so

d

If an agent does not obey a subpoena to testify in court, as required by the Administrator, the court may do all of the following EXCEPT: A. hold the agent in contempt of court B. order the agent to appear before the Administrator C. grant injunctive relief restricting the sale or offer of securities D. incarcerate the agent for up to 60 days to compel attendance

d

If an agent wishes to withdraw his registration, all of the following statements are true EXCEPT: A. both the agent and the broker-dealer must notify the Administrator B. notification to the Administrator of the withdrawal must be made promptly C. the withdrawal does not become effective for 30 days D. if there is a customer complaint, the Administrator retains jurisdiction over the agent for a period of 5 years from the withdrawal date

d

If an agent wishes to withdraw his registration, which statements are TRUE? I The agent must notify the Administrator II The broker-dealer must notify the Administrator III The withdrawal does not become effective for 30 days IV If there is a customer complaint, the Administrator retains jurisdiction over the agent for a period of 1 year from the withdrawal date A. I only B. I and II only C. III and IV only D. I, II, III, IV

d

If an investment adviser puts its records on microfiche or electronic storage media, all of the following statements are true EXCEPT: A. the paper or hard copy form, as those records are kept in their original form, must be preserved and maintained for 5 years B. the duplicate copy of the record may be immediately reproduced in the medium chosen and must be preserved and maintained for 5 years C. the original record and duplicate copy of the record in the chosen medium must be stored in separate locations for 5 years D. the duplicate copy must be preserved in a format that is alterable, rewritable and erasable

d

If an investment adviser wishes to use a paid solicitor, under the Investment Advisers Act of 1940, all of the following statements are true EXCEPT the: A. solicitor must provide the customer with a copy of the investment adviser's brochure B. solicitor cannot be subject to statutory disqualification under the Securities Acts C. solicitor must disclose to the customer any additional costs of providing advisory services, due to the nature of the relationship between the solicitor and the investment adviser D. solicitor must register with the SEC as an investment adviser

d

If the writer of an equity call contract is exercised, the writer MUST: A. deliver cash in 1 business day B. deliver stock in 1 business day C. deliver cash in 2 business days D. deliver stock in 2 business days

d

In a falling market, which orders will be executed? I Open Buy Stops II Open Buy Limits III Open Sell Stops V Open Sell Limits A. I and II B. III and IV C. I and IV D. II and III

d

In connection with the sale of an issue to a customer, the agent of a broker-dealer must disclose any material public facts about the issuer if: I by not disclosing the information, the presentation to the customer would be misleading in any material respect II the customer is not an employee or officer of the issuer and therefore is not in a position to have knowledge of these material public facts III the information was disclosed to the agent by the broker-dealer, regardless of the broker-dealer's policies and procedures covering disclosure of information to customers A. I only B. I and II C. II and III D. I, II, III

d

In order for an investment adviser to be compensated with a performance fee, which of the following must be disclosed in writing? I The periods that will be used to measure performance and their significance in the computation of the fee II That the fee arrangement is based on both unrealized appreciation and realized capital gains III The nature and significance of any index used as a comparative measure IV The reason why the adviser believes the use of any comparative index is appropriate. A. I and II only B. III and IV only C. I, II, III D. I, II, III, IV

d

Income sources backing a special tax bond issue could be all of the following EXCEPT: A. Excise taxes B. Sales taxes C. Income taxes D. Ad Valorem taxes

d

Insurers generally give a variable life insurance owner investment choices including which of the following investments? I Common stock funds II Bond funds III Money market funds A. I only B. I and II only C. II and III only D. I, II, III

d

Intentional or willful violations of the Uniform Securities Act that are considered to be a felony subject that person to: A. civil liability only B. civil liability and civil penalties C. criminal liability only D. criminal liability and criminal penalties

d

Investment advisers may be compensated based on: A. a percentage of capital gains in the account B. the dividends paid in the account C. the appreciation of the securities in the underlying portfolio D. a percentage of the value of all assets under management

d

Investment advisers may be formed as: I Partnerships II Corporations III Associations A. I only B. II only C. III only D. I, II, III

d

Investment advisers with assets of $110,000,000 or more must register: A. only with the State in which the investment adviser is incorporated B. in all of the States in which the investment adviser does business C. with the SEC and all of the States in which the investment adviser does business D. with the SEC only

d

Keynesian Economic Theory postulates that production and economic growth are stimulated by: I Decreased government borrowing II Increased government borrowing III Lower government spending IV Higher government spending A. I and III B. I and IV C. II and III D. II and IV

d

Net capital rules for broker-dealers under the Securities Exchange Act of 1934 set: I Minimum Net Worth amounts II Minimum Liquid Net Worth amounts III Maximum leverage ratios of Debt to Net Worth IV Maximum leverage ratios of Debt to Liquid Net Worth A. I and III B. I and IV C. II and III D. II and IV

d

Passive asset management is: A. buying securities positions and holding them to the liquidation date of the portfolio B. buying securities positions and holding them until pre-established prices are reached C. selecting securities to be purchased for each asset class based upon fundamental analysis D. using index funds as the investments for each asset class

d

Prior to licensing an agent in a State, the Administrator may require the agent to do all of the following EXCEPT: A. pass a qualifying examination B. certify that the individual has reviewed that State's Blue Sky laws C. certify that the individual understands his responsibilities D. maintain a minimum Net Worth requirement

d

Prior to recommending a specific 529 college savings plan to a customer, a representative should consider all of the following EXCEPT: A. Customer's investment objective(s) B. Age of the beneficiary C. Number of years until the funds are needed D. Age of donor

d

Private equity firms: I make short term investments II make long term investments III in the debt of companies IV in the common stock of companies A. I and III B. I and IV C. II and III D. II and IV

d

Private placements are exempt transactions under the Securities Act of 1933 under the provisions of: A. Regulation A B. Regulation B C. Regulation C D. Regulation D

d

Registration as an investment adviser allows one to say that: A. FINRA approves of the adviser B. the SEC endorses the adviser C. the State Administrator recommends the adviser D. the firm is a registered investment adviser

d

Regulation SP applies to customer information that is: I Obtained from non-public sources II Obtained directly from the customer III Obtained through examination of the customer IV Obtained through observation of the customer A. I only B. II only C. II, III, IV D. I, II, III, IV

d

S Corporations: I are limited as to the number of investors I give limited liability to investors III allow for flow through of gains and losses A. I only B. II only C. I and II D. I, II, III

d

Section 529 plans generally permit: I tax deductible contributions by the donor II non-tax deductible contributions by the donor III taxable distributions to the recipient to pay for higher education IV non-taxable distributions to the recipient to pay for higher education A. I and III B. I and IV C. II and III D. II and IV

d

Sending out a blanket e-mail that makes recommendations of securities to a list of web addresses by a broker-dealer or agent is: A. permitted only if the securities have been registered in each State B. permitted only if the broker-dealer and agent are registered in each State C. permitted only if the list contains existing customers that have accounts at securities firms D. a prohibited and unethical practice

d

Special assessment bond issues are used to fund a public improvement that will: I accrue to the public at large II accrue to segment of the public III be paid from taxes which have no relationship to the value of the benefit received IV be paid from taxes which have a relationship to the value of the benefit received A. I and III B. I and IV C. II and III D. II and IV

d

Specialists (DMMs) on the New York Stock Exchange can perform all of the following functions EXCEPT: A. act as a market maker B. act as a broker's broker C. handle odd-lot transactions D. act as an underwriter

d

State "blue sky" laws provide for registration of: I broker-dealers II agents III investment advisers IV investment adviser representatives A. I only B. I and III C. II and IV D. I, II, III, IV

d

Tactical portfolio management is the selection of the: A. securities in which to invest B. asset classes in which to invest C. target asset allocation for each asset class selected for investment D. variation permitted in target asset allocation for each asset class selected for investment

d

The "AIR" of a variable annuity contract is set when the: A. prospectus is delivered to the client B. purchase contract is completed C. surrender period of the contract has been completed D. contract is annuitized

d

The Administrator can deny registration of an applicant for all of the following reasons EXCEPT the applicant: A. was convicted of a securities misdemeanor within the past 10 years B. has been convicted of a securities felony within the past 10 years C. is insolvent D. is inexperienced

d

The Administrator can deny, suspend or revoke registration of an agent's license for which of the following reasons? I The registration application omits a material fact that would have a bearing on the registration II The agent has intentionally delayed delivery of fully paid customer securities, using the securities for his own purposes III The agent's registration has been suspended in another state IV The agent has not paid required registration fees A. I and II only B. III and IV only C. I, II, IV D. I, II, III, IV

d

The Administrator can do all of the following EXCEPT: A. subpoena witnesses within that State B. subpoena witnesses in other States C. issue a cease and desist order to a person in the securities business D. enjoin a person from engaging in the securities business

d

The Administrator can require the posting of a surety bond by: A. Agents only B. Broker-Dealers only C. Investment Advisers only D. All of the above

d

The Administrator may, by order, cancel the registration of a broker-dealer, agent, investment adviser, or investment adviser representative, if: I it is found that the registrant is no longer in existence or has ceased to do business II the registrant cannot be located after a reasonable search III the registrant is the subject of an adjudication of mental incompetence A. I only B. I and II C. II and III D. I, II, III

d

The Code of Ethics required to be written and adhered to by each investment adviser must cover all of the following topics EXCEPT: A. insider trading B. front running C. trading ahead of research D. short selling

d

The Investment Policy Statement for a qualified plan under ERISA will cover which of the following? I Specific assets classes in which the plan may invest II Asset allocation percentages for each asset class III Names and roles of trustee(s) and plan manager(s) IV Discussion of investment objective, needs, risk tolerance and investment time horizon A. I and II only B. III and IV only C. I, II, III only D. I, II, III, IV

d

The Net Asset Value (NAV) of a mutual fund is the: A. market value of all securities holdings calculated as of market close B. market value of all securities holdings calculated as of market close divided by the number of all outstanding shares C. market value of all securities holding calculated as of market close minus liabilities of the fund D. market value of all securities holding calculated as of market close minus liabilities of the fund divided by the number of outstanding shares

d

The Prudent Investor rule prohibits investments in: I Futures II Options III Speculative Stocks A. I only B. I and II C. II and III D. None of the above

d

The SEC policy regarding emails maintains that: A. personal emails must be retained by investment advisers B. business-related emails that are solicitations must be retained by investment advisers C. all business-related emails must be retained by investment advisers D. both personal and business related e-mails are required to be recorded and maintained

d

The Securities Exchange Act of 1934 requires the registration of all of the following EXCEPT: A. clearing agencies B. securities information processors C. national securities exchanges D. securities attorneys

d

The State Administrator is empowered to do all of the following EXCEPT: A. administer oaths and affirmations B. hold disciplinary hearings C. conduct investigations D. issue a summons for a failure to appear

d

The Third Market trades: A. listed and unlisted stocks between institutions without the use of a broker B. listed securities on the trading floors of regional exchanges C. unlisted securities over-the-counter D. listed securities over-the-counter

d

The Uniform Securities Act covers: I Registration of securities in each State II Registration of broker-dealers in each State III Registration of investment advisers in each State IV Registration of agents of broker-dealers and investment advisers in each State A. I and II B. III and IV C. II, III, IV D. I, II, III, IV

d

The anti-fraud provisions of the Securities Exchange Act of 1934 apply to: I Individuals trading exempt securities II Individuals trading non-exempt securities III Investment adviser firms trading exempt securities IV Investment adviser firms trading non-exempt securities A. II and IV B. I and II C. III and IV D. I, II, III, IV

d

The anti-fraud provisions of the Uniform Securities Act apply to: I exempt securities II non-exempt securities III exempt transactions IV non-exempt transactions A. I only B. I and II C. III and IV D. I, II, III, IV

d

The common stockholder has all of the following rights EXCEPT: A. Voting rights B. Pre-emptive rights C. Dividend rights D. Management rights

d

The independent auditor's annual report of verification of customer funds held in custody by an investment adviser, as required by the Investment Advisers Act of 1940, is filed with the SEC on within 120 days: A. Form ADV Part I B. Form ADV Part 2 C. Form ADV-W D. Form ADV-E

d

The interest earned from which of the following is exempt from state and local tax? A. Fannie Mae Certificate B. Ginnie Mae Certificate C. Real Estate Investment Trust D. Federal Farm Credit Funding Corporation Note

d

The investment performance of an ELN (Equity Linked Note) is determined by all of the following EXCEPT: A. cap on the investment return B. floor on the investment return C. participation rate in the investment return D. interest rate credit set by weekly auction

d

The most important consideration in determining whether a mutual fund is suitable for a customer is the fund's: A. portfolio composition B. portfolio turnover C. net asset value history D. investment objective

d

The sale of an "at the money" put is a: A. bull strategy B. bear strategy C. neutral strategy D. bull/neutral strategy

d

The settlor of a trust does all of the following EXCEPT: A. donates the assets to the trust B. appoints the trustee C. establishes the purpose of the trust D. manages the assets of the trust

d

The term "loan value" when applied to equity securities, is the: I percentage of the purchase price that must be deposited when the securities are bought II percentage of the purchase price that can be borrowed when securities are bought III reciprocal of the Regulation T requirement IV complement of the Regulation T requirement A. I and III B. I and IV C. II and III D. II and IV

d

The use of index funds as investment vehicles for asset classes: I increases market risk II reduces market risk III increases the standard deviation of return IV reduces the standard deviation of return A. I and III B. I and IV C. II and III D. II and IV

d

The use of which tool of the Federal Reserve has the smallest impact on money supply levels? A. Open market operations B. Discount rate C. Reserve requirements D. Margin on securities

d

To determine the present value of an investment, which of the following is NOT considered? A. The interest rate to be used to discount the annual payments received B. The amount of cash expected to be generated each year by the investment C. The time horizon of the expected investment returns D. The required sum needed at the end of the investment's life

d

To open an account for an individual customer, an investment adviser representative should do all of the following EXCEPT: A. determine that the customer has an adequate liquid emergency fund B. determine that the customer has adequate insurance coverage to meet expected needs C. investigate and discuss the customer's investment goals and needs over the investment time horizon D. require the customer to pay off all credit card balances prior to making investment recommendations

d

To smooth out cash flow, a corporation will issue: A. TANs B. RANs C. BANs D. Commercial paper

d

Treasury notes and bonds are: A. bearer securities B. registered to interest only C. registered to principal only D. fully registered in book entry form

d

Under IA-1092, all of the following persons are considered to "give advice about investing in securities" EXCEPT one who, for compensation: A. prepares financial plans for customers that include investments in stocks, bonds, insurance and real estate B. issues research reports solely relating to mutual fund investments C. advises customers on their selection of an investment adviser D. advises customers on their selection of a broker-dealer

d

Under IA-1092, an investment adviser is defined as a person who: I makes advice about securities his principal activityII makes advice about securities his regular activityIII is compensated directly for services renderedIV is compensated directly or indirectly for services rendered A. I and III B. I and IV C. II and III D. II and IV

d

Under NASAA rules, a customer MUST sign and return the margin agreement: A. prior to placing the first trade in the account B. prior to confirmation of the first trade in the account C. prior to settlement of the first trade in the account D. promptly after the initial transaction in the account

d

Under NASAA rules, all of the following records must be retained for at least 5 years by a Registered Investment Adviser EXCEPT: A. Cash receipts and disbursements B. Order tickets C. Written communications D. Articles of incorporation

d

Under NASAA rules, the Form ADV filed with the State must be updated: A. quarterly within 30 days of quarter end B. quarterly within 90 days of quarter end C. annually within 30 days of fiscal year end D. annually within 90 days of fiscal year end

d

Under NASAA rules, which of following are unethical practices when recommending a mutual fund to a customer? I Recommending a letter of intent if the customer does not have the immediate funds to reach a breakpoint II Not disclosing to a customer the sales charge discount if a purchase is made at the breakpoint level III Not disclosing to a customer that dividends can be automatically reinvested without any sales charge imposed IV Recommending the purchase of shares which results in the customer simultaneously holding shares in different investment company portfolios with similar investment objectives A. I and III B. I and IV C. II and III D. II and IV

d

Under NASAA rules, which record is NOT required to be retained by an investment adviser? A. Written customer complaint received 4 years ago B. Advertising copy distributed to the public 2 years ago C. Trial balance of the investment adviser prepared 1 year ago D. Customer account statements prepared 6 years ago

d

Under Supply Side Theory, which of the following will stimulate the economy? I Increased government spending II Decreased government spending III Tax rate increases IV Tax rate reductions A. I and III B. I and IV C. II and III D. II and IV

d

Under the Investment Advisers Act of 1940, a solicitor that contacts a customer to purchase the services of an investment adviser must, upon entering into a written contract: A. give the customer the adviser's brochure B. give the customer both the adviser's brochure and the solicitor's brochure C. obtain a signed and dated statement from the customer acknowledging receipt of the adviser's brochure D. obtain a signed and dated statement from the customer acknowledging receipt of both the adviser's brochure and the solicitor's brochure

d

Under the Investment Advisers Act of 1940, all of the following are requirements for a family office to be excluded from the definition of an Investment Adviser EXCEPT: A. The family office must only provide investment advice to clients who are part of that family B. The family office must be wholly owned by family clients and exclusively controlled by family members or entities C. The family office cannot hold itself out as an investment adviser D. The family office must have less than $100 million of assets under management

d

Under the Investment Advisers Act of 1940, if there are material changes, existing customers of investment advisers MUST be sent a revised "Brochure" at least: A. monthly B. quarterly C. semi-annually D. annually

d

Under the Investment Advisers Act of 1940, the term "investment counsel" may only be used by an investment adviser if the: A. adviser is also a bank located in that State B. adviser is also a broker-dealer registered in that State C. primary business of the adviser is recommending the brokerage services of another firm D. primary business of the adviser is the rendering of investment advice

d

Under the Investment Advisers Act of 1940, to determine if a person is "in the business" of giving investment advice, which of the following statements are TRUE? I The individual regularly gives advice on securities II The advice is rendered about securities III The individual receives compensation for giving advice on securities A. I only B. I and III only C. II and III only D. I, II, III

d

Under the Investment Advisers Act of 1940, which of the following are included in the Form ADV Part 1 filed with the SEC? I A list of the officers of the advisory firm II A list of the shareholders of the advisory firm III The States in which the advisory firm is registered A. I only B. I and II C. III only D. I, II, III

d

Under the Investment Company Act of 1940, an affiliated person is prohibited from doing which of the following? I Borrowing monies from the fund II Borrowing securities from the fund III Buying securities personally from the fund's portfolio IV Selling securities personally to the fund's portfolio A. I and II B. III and IV C. I, II, III D. I, II, III, IV

d

Under the NASAA Statement of Policy on Dishonest and Unethical Business Practices, all of the following are prohibited business practices EXCEPT: A. being deliberately selective in the information told to a customer B. giving inaccurate statements about an issuer's projected earnings C. telling a customer that a company is about to be listed on the New York Stock Exchange without knowing the truth of the statement D. telling a customer that a listed security being recommended is registered with the Securities and Exchange Commission

d

Under the NASAA Statement of Policy on Dishonest and Unethical Business Practices, which of the following practices is (are) prohibited? A. Guaranteeing a customer against loss for non-exempt securities B. Guaranteeing a customer against loss for exempt securities C. Borrowing money from a customer D. All of the above

d

Under the NASAA Statement of Policy on unethical practices, the release of customer information to which of the following would be "unethical"? A. Securities and Exchange Commission B. Internal Revenue Service C. Self-Regulatory Organizations D. Registered broker-dealers

d

Under the Prudent Investor Act, a trustee's investment and management decisions should be evaluated: I based on each individual transaction II based on the context of the portfolio as a whole III as part of the investment strategy of each single trust beneficiary IV as part of the overall investment strategy for all beneficiaries of the trust A. I and III B. I and IV C. II and III D. II and IV

d

Under the Securities Act of 1933, a registered representative is permitted to sell shares of a registered offering: A. when the registration statement is filed with the Securities and Exchange Commission B. once 20 days have elapsed from the date of the filing of the registration statement C. once the tombstone advertisement is published D. once the registration statement is effective

d

Under the Securities Act of 1933, omissions or misstatements of material fact in a registration statement can be considered to be fraudulent for the: I Officers of the issuer II Lawyers for the issuer III Accountants for the issuer IV Board of Directors of the issuer A. I and IV only B. II and III only C. I, II, III D. I, II, III, IV

d

Under the Securities Act of 1933, which of the following sign a registration statement for a new issue? I CEO of the issuer II CFO of the issuer III Members of the Board of Directors of the issuer A. I only B. II only C. II and III D. I, II, III

d

Under the Securities Exchange Act of 1934, registration with the SEC as a broker-dealer may be revoked if the broker-dealer fails to: I maintain minimum net capital II send its financial statements to customers III be audited annually A. I only B. I and II C. II and III D. I, II, III

d

Under the Securities Exchange Act of 1934, the SEC can suspend trading in the securities markets if it gives prior notice to the: A. CEOs of the companies traded on the securities markets B. United States Senate C. United States Congress D. President of the United States

d

Under the Securities Exchange Act of 1934, which of the following statements are TRUE regarding an investment manager that has discretion over customer assets? A. Investment managers who have discretion over $10,000,000 of customer assets must file Form 13D B. Investment managers who have discretion over $100,000,000 of customer assets must file Form 13D C. Investment managers who have discretion over $10,000,000 of customer assets must file Form 13F D. Investment managers who have discretion over $100,000,000 of customer assets must file Form 13F

d

Under the Uniform Securities Act, a broker-dealer that has no place of business in a state does NOT have to register if the firm: A. deals solely with the public in that state B. solicits orders for non-exempt securities in the state C. effects securities trades from its own account on a principal basis with customers in that state D. has a few clients in a state with a broker-dealer "de minimis" rule in the preceding 12 months

d

Under the Uniform Securities Act, a person could give advice about all of the following securities without having to register in the State as an investment adviser EXCEPT: A. Treasury Bonds B. Ginnie Mae Pass-Through Certificates C. Fannie Mae Debentures D. State General Obligation Bonds

d

Under the Uniform Securities Act, after an unintentional illegal sale, the customer who bought the issue can: I sue under civil liability II sue under criminal liability III recover the cost of the securities plus 6% interest IV recover attorney's fees A. I and III only B. II and III only C. II and IV D. I, III, IV

d

Under the Uniform Securities Act, during an investigation, the Administrator may: A. require an affidavit from an agent of a broker-dealer B. subpoena books, records and witnesses C. require testimony that might tend to incriminate the giver D. all of the above

d

Under the Uniform Securities Act, registration of an investment adviser may be revoked for all of the following reasons EXCEPT: A. the adviser's liabilities exceed its assets B. the adviser cannot meet obligations as they come due C. the adviser is declared insolvent D. a non-participatory shareholder in the adviser is declared insolvent

d

Under the Uniform Securities Act, the Administrator does NOT have jurisdiction over offers of advisory services made to: A. residents of that State by a non-resident investment adviser B. residents of that State by a resident investment adviser C. non-residents of that State by a resident investment adviser D. non-residents of that State by a non-resident investment adviser

d

Under the Uniform Securities Act, the registration of a broker-dealer may be revoked for all of the following reasons EXCEPT the firm does not: A. maintain required records B. file financial reports with the Administrator C. file advertising with the Administrator D. file customer complaints with the Administrator

d

Under the Uniform Securities Act, which of the following transactions are voidable by the buyer? I A customer was unknowingly sold stocks at prices higher than the current market at the time of the trade II Material facts were unknowingly omitted by the agent who sold the stock to the customer III A customer was unknowingly sold unsuitable securities A. I only B. I and II C. II and III D. I, II, III

d

Under the Uniform Securities Act, which of the following would be defined as an investment adviser? A. U.S. Trust Corporation B. Countywide Savings and Loan C. IZZI Advisers, which has $110 million of assets under management D. ACCO Publishers, which has a website that charges for customized financial plans based on customer input

d

Under the Uniform Securities Act, who must notify the State Administrator when an agent disassociates from his or her broker-dealer? A. Agent B. Broker-dealer C. Neither of the above D. Both of the above

d

Under the provisions of the Uniform Securities Act, an unregistered agent is permitted to do which of the following in the State? A. Effect transactions in exempt securities with customers B. Effect transactions in non-exempt securities with customers C. Trade securities for the broker-dealer's own account D. Report completed trades of securities to customers

d

What family member(s) could be the alternate payee(s) in a QDRO? A. Children B. A single spouse C. Both spouses D. Spouses and children

d

What formula finds the "expected return" of an investment? A. Beta B. Duration C. Sharpe Ratio D. CAPM

d

What is an example of a 12(b)-1 fee? A. Cost of administrative services provided to shareholders B. Cost of office rent for the staff of a mutual fund C. Management fees paid to the fund adviser D. Marketing fees paid for advertising the fund

d

What would be included in the evaluation of a viatical or life settlement? A. Life expectancy B. Amount of discount C. Availability of investors D. All of the above

d

When an agent of an investment adviser prepares a client balance sheet, all of the following are considered to be personal possessions EXCEPT: A. artwork B. furniture C. jewelry D. investments

d

When evaluating an investment in a limited partnership, an investor should consider which of the following? I Economic soundness of the program II Program objectives III Sponsor track record IV Sponsor conflicts A. I and II only B. III and IV only C. I, II, III D. I, II, III, IV

d

When looking at the Price/Book Value ratio of a corporation, which statements are TRUE? I The numerator on the equation is based on liquidation value II The numerator in the equation is based on market value III The denominator in the equation is based on liquidation value IV The denominator in the equation is based on accounting value A. I and III B. I and IV C. II and III D. II and IV

d

When making a recommendation of corporate commercial paper to a customer, which risk is the MOST important consideration? A. Inflation (purchasing power) risk B. Call risk C. Market risk D. Credit risk

d

Which State-registered investment advisers MUST report that they take custody on Form ADV? I An adviser that is affiliated with a parent bank or trust company II An adviser that directly deducts management fees each quarter from client accounts III An adviser that has discretionary authority over client accounts under a limited power of attorney IV An adviser that acts as a trustee for a client where the grantor of the trust is the client A. I and III B. I and IV C. II and III D. II and IV

d

Which U.S. Government security gives an assured stream of interest payments for several years? A. Treasury Receipt B. Treasury STRIP C. Treasury Bill D. Treasury Bond

d

Which are TRUE statements regarding government agencies and their obligations? I Ginnie Mae is a publicly traded company II Ginnie Mae is a U.S. Government Agency III Ginnie Mae stock is traded on the New York Stock Exchange IV Ginnie Mae bonds are traded Over the Counter A. I and III B. I and IV C. II and III D. II and IV

d

Which individual would NOT be exempt from the definition of an "agent" under the Uniform Securities Act? A. An employee of a corporation who processes 401(k) contributions, issuing shares of the company's stock to the company's employees B. An issuer official of the City of Pittsburgh who authorizes the sale of a new issue of general obligation bonds to the public C. An officer of a privately held company who authorizes the sale of shares of the company to an underwriter D. An officer of a publicly held company who offers the company's bonds, which are rated AA by an NSRO, to the public

d

Which is NOT a feature of a safe harbor 401(k) plan? A. Mandatory annual employer matching contributions B. No annual "top heavy" benefits testing C. Immediate 100% vesting of employer-paid benefits D. 100% of eligible employees must choose to participate

d

Which item is NOT included in a client's income statement? A. Interest received from municipal bond investments B. Qualifying dividends received from stock investments C. Interest paid on a mortgage on the client's primary residence D. Unrealized gains from appreciated securities positions

d

Which legislation has authority over Unit Investment Trusts? A. Securities Act of 1933 B. Securities Exchange Act of 1934 C. Investment Advisers Act of 1940 D. Investment Company Act of 1940

d

Which of the following BEST describes S corporations? I S corporations have a limited life II S corporations have an unlimited life III S corporations are taxable entities IV S corporations are not taxable entities A. I and III B. I and IV C. II and III D. II and IV

d

Which of the following actions by the Federal Reserve will increase interest rates? I Purchases of securities as directed by the FOMC II Sales of securities as directed by the FOMC III Repurchase agreements with U.S. Government dealers and banks IV Reverse repurchase agreements with U.S. Government dealers and banks A. I and III B. I and IV C. II and III D. II and IV

d

Which of the following annuity payment options will pay the estate of the annuitant if the full value of the account was not received? A. Life Annuity B. Life Annuity with Period Certain C. Joint and Last Survivor Annuity D. Unit Refund Annuity

d

Which of the following are "federal covered" advisers? I An investment adviser with $400,000,000 of assets under management II An investment adviser to an investment company with $400,000,000 of assets under management III An investment adviser to an investment company with $40,000,000 of assets under management A. I only B. I and II C. II and III D. I, II, III

d

Which of the following are "federal covered" advisers? I Investment adviser to an investment company with $2,500,000 of assets under management II Investment adviser to an investment company with $25,000,000 of assets under management III Investment adviser to an investment company with $100,000,000 of assets under management A. I only B. II and III only C. III only D. I, II, III

d

Which of the following are deductible from a taxable estate? I Funeral and administrative expenses II Claims against the estate III State death taxes IV Mortgages against real property owned by the estate A. I and III only B. II and IV only C. II, III and IV only D. I, II, III, IV

d

Which of the following are deductible from a taxable estate? A. Funeral and administrative expenses B. Claims against the estate and mortgages against real property owned by the estate C. State death taxes D. All of the above

d

Which of the following are defined as "Investment Advisers" under the Uniform Securities Act? I Lawyers who advise customers on investments for pension planning without taking a fee II Newspapers having an "Investments" column with a general circulation III Persons who take a fee for advising clients about securities IV Publisher of an investment newsletter that provides advice based upon each client's specific investment situation A. I and II B. I and III C. II and III D. III and IV

d

Which of the following are defined as "persons" under the Uniform Securities Act? I Joint Stock Company II Partnership III Estates IV Unincorporated Organization A. II only B. I and IV only C. I, III, and IV D. I, II, III, IV

d

Which of the following are exempt issues under the Securities Act of 1933? I Government Bonds II Municipal Bonds III State Chartered Bank Issues IV Small Business Investment Companies A. I and II only B. III and IV only C. I, II, III D. I, II, III, IV

d

Which of the following are investment adviser conflicts of interest that MUST be disclosed to a client? I The adviser is a general partner in a limited partnership investment that he is recommending to his customers II The adviser is compensated by the broker-dealer to whom he directs the customers' portfolio trades III The adviser owns a stock that he is recommending to customers in his personal account IV The adviser will only take customers that have been referred to it by broker-dealers to whom he pays a referral fee A. I and II only B. III and IV only C. I, II, III D. I, II, III, IV

d

Which of the following are required for registration as an investment adviser under the Investment Advisers Act of 1940? I Payment of a filing fee II Filing of a Form ADV Part 1 III Filing of a Form ADV Part 2 A. II only B. I and II C. II and III D. I, II, III

d

Which of the following are required to have anti-money laundering programs? I Broker-dealers II Federal covered advisers III State-registered advisers A. I only B. I and II only C. II and III only D. I, II, III

d

Which of the following formations are bearish? I Saucer II Head and Shoulders III Inverted Saucer IV Inverted Head and Shoulders A. I and II B. III and IV C. I and IV D. II and III

d

Which of the following investment advisers with no place of business in the State is exempt from registration? Investment Advisers whose only clients are: I other investment advisers II broker-dealers III investment companies IV insurance companies A. I only B. I and III only C. II and IV only D. I, II, III, IV

d

Which of the following investments is issued with a stated coupon rate and with a maximum maturity of 30 years? A. Treasury Notes B. Treasury Stock C. Treasury Strips D. Treasury Bonds

d

Which of the following is (are) defined as "affiliated persons" under the Investment Company Act of 1940? I Officer of the management company II Employee of the management company III A 5% holder of the management company's shares A. I only B. II only C. I and III D. I, II, III

d

Which of the following is (are) included in the cash flow analysis performed when determining the current financial status of a customer? I Interest income II Earned income III Dividends A. I only B. II only C. I and III D. I, II, III

d

Which of the following is (are) prohibited in a margin account? I A customer buying a security without the intention to pay on settlement II A customer selling a security without the intention to deliver on settlement III A customer selling short a security that cannot be borrowed and delivered on settlement A. I only B. I and II C. II and III D. I, II, III

d

Which of the following is EXEMPT from the requirement to register as an investment adviser in a State? A. Federal covered adviser B. Investment adviser representative C. Trust company D. Person with no place of business in the State who renders advice solely to Federal covered advisers

d

Which of the following is NOT a measure of volatility? A. Beta B. Correlation coefficient C. Standard deviation D. Interest rate

d

Which of the following is NOT a qualified custodian under NASAA rules? A. FDIC Insured Bank B. Registered Broker-Dealer C. Foreign Financial Institution D. National Securities Clearing Corporation

d

Which of the following is NOT considered to be a defensive stock? A. Tobacco company B. Beverage manufacturer C. Pharmaceutical company D. Home builder

d

Which of the following is NOT defined as correspondence? A. Written letter to a client B. E-mail C. Instant message D. Group e-mail

d

Which of the following is NOT found in the IPS? A. Investment objectives B. Investment time horizon C. Asset allocation percentages D. Portfolio holding list

d

Which of the following is permitted in an investment adviser's advertising under SEC rules? A. A chart showing the previous year's performance of 30% total return, indicating that the trend will continue B. A computer simulation that shows a guaranteed 20% total return C. A testimonial from a customer, where the customer has given written permission for the testimonial's use D. An offer of a list of the investment adviser's prior recommendations, with their performance, over the last year

d

Which of the following is the easiest business to form? A. C Corporation B. S Corporation C. Limited Partnership D. General Partnership

d

Which of the following options strategies provides a gain equal to the premium in a bull market? A. Long Call B. Short Call C. Long Put D. Short Put

d

Which of the following persons is required to register as an investment adviser under the Uniform Securities Act? A. An attorney who writes a legal opinion included in the registration statement filed with the State for a new non-exempt securities offering B. A broker-dealer who gives investment advice in the regular course of business executing transactions for customers C. An agent of a broker-dealer who gives investment advice as part of his or her regular duties and who charges a fee for such advice D. A broker-dealer that charges an annual flat fee to customers for both investment advice and portfolio trade executions

d

Which of the following risks is the primary concern when investing in a municipal bond? A. purchasing power risk B. market risk C. credit risk D. legislative risk

d

Which of the following statements are TRUE about Treasury Receipts? I Interest is paid semi-annually II Tax on interest earned is deferred until maturity III Interest and principal are paid at maturity IV Tax on interest earned is due annually A. I and II B. I and IV C. II and III D. III and IV

d

Which of the following statements are TRUE about systematic risk? I It is the same as stock specific risk II It is the same as market risk III It can be diversified away IV It cannot be diversified away A. I and III B. I and IV C. II and III D. II and IV

d

Which of the following statements are TRUE regarding REITs? I The REIT issues common shares representing a proportional interest in the investment company II The REIT issues shares of beneficial interest representing an undivided interest in a pool of real estate investments III REITs are similar to open end investment company shares IV REITs are similar to closed end investment company shares A. I and III B. I and IV C. II and III D. II and IV

d

Which of the following statements are TRUE regarding convertible bond issues? I At the time of issuance, the conversion price is set at a premium to the stock's current market price II When the stock price is at a premium to the conversion price, the conversion feature has intrinsic value. III For the conversion feature to have value, the stock's price must move up in the market after issuance IV Convertible bonds usually have lower yields than bonds without the conversion feature A. I and II only B. III and IV only C. I, III, IV D. I, II, III, IV

d

Which of the following statements are TRUE regarding gift and estate taxes? I Gift and estate taxes are progressive taxes II Gifts valued up to $15,000 in 2020 are excluded from tax III The first $11,580,000 of an estate (in 2020) is excluded from tax IV Tax liability rests with the donor or estate A. I and II only B. III and IV only C. II, III, IV D. I, II, III, IV

d

Which of the following statements are TRUE regarding indications of interest received during the "cooling off" period for a registered initial public offering? I The indication is binding on the customer II The indication is not binding on the customer III The indication is binding on the underwriter IV The indication is not binding on the underwriter A. I and III B. I and IV C. II and III D. II and IV

d

Which of the following statements are TRUE regarding non-revocable trusts? I Income is taxed at the rate scheduled for the grantor II Income is taxed at the rate scheduled for the trusts III The grantor has the right to reassume control over the assets of the trust IV The trustee has the right to manage the assets of the trust A. I and III B. I and IV C. II and III D. II and IV

d

Which of the following statements are TRUE regarding the distributions from an Individual Retirement Plan funded with non-deductible contributions? I Distributions can start at any age without penalty II Distributions can start at age 59 1/2 without penalty III Distributions are 100% taxable IV Distributions are partially taxable; and partially non-taxable A. I and III B. I and IV C. II and III D. II and IV

d

Which of the following statements are TRUE regarding the distributions from an Individual Retirement Plan? Distributions: I must start at age 59 1/2 II must start at age 70 1/2 III are 100% taxable at ordinary income tax rates only if the original contribution was non-deductible IV are 100% taxable at ordinary income tax rates only if the original contribution was deductible A. I and III B. I and IV C. II and III D. II and IV

d

Which of the following statements are true about commercial paper? I Commercial paper has a maximum maturity of 270 days II Commercial paper matures on a pre-set date at a pre-set price III Commercial paper is quoted on a yield basis IV Commercial paper is an unsecured promissory note A. I and IV only B. II and III only C. I, II, IV D. I, II, III, IV

d

Which of the following statements are true about stop orders? I Buy stop orders can accelerate price advances in bull markets II Sell stop orders can accelerate price declines in bear markets III Buy stop orders limit losses on short stock positions IV Sell stop orders limit losses on long stock positions A. I and II only B. III and IV only C. II and IV only D. I, II, III, IV

d

Which of the following statements are true about the Government National Mortgage Association Pass-Through Certificates? I GNMA is empowered to borrow from the Treasury to pay interest and principal if necessary II Interest payments are taxable at the Federal, State and Local levels III Certificates are issued in minimum units of $25,000 IV The credit rating is considered the highest of any agency security A. I and II B. I and III C. II, III, IV D. I, II, III, IV

d

Which of the following statements are true for both government and agency securities? I They are exempt from registration under the Securities Act of 1933 II Interest bearing obligations are quoted in 32nds III Trades settle in Federal Funds IV They are eligible for trading in Federal Reserve open market operations A. I and II only B. III and IV only C. I, II, IV D. I, II, III, IV

d

Which of the following statements concerning 403(b) plans are TRUE? I Investments are limited to annuities II An employee who elects salary deferral to a 403(b) plan cannot elect salary deferral to another retirement plan III A 403(b) plan can provide only for employee contributions without employer contributions IV Deferrals to a 401(k) plan reduce the amount that an employee can defer to a 403(b) plan A. I and II only B. I and III only C. II and III only D. III and IV only

d

Which of the following technical indicators is considered to be bullish? A. Breakout through a support level B. Head and shoulders top formation C. Inverted Saucer formation D. Odd lot short sales

d

Which of the following terms applies to common stock? A. convertible B. redeemable C. non-negotiable D. non-callable

d

Which of the following would be an asset on a client's personal balance sheet? A. dividends received from stock investments B. policy value of term insurance C. interest received from bond investments D. cash value of whole life insurance

d

Which one of the following items would be included in the computation of an investment adviser's net capital? A. Copyright owned by the adviser B. Franchise right owned by the adviser C. Advance to an officer of the adviser D. Sofa and chair owned by the adviser

d

Which order for a customer's account can be accepted by an agent of a broker-dealer? A. The order is placed by the customer's attorney, who assures the agent that the customer has given him trading authority B. The order is placed by the customer's accountant, who recommended the security to the customer C. The order is placed by the customer's attorney in an account where the customer is deceased, and the attorney provides a written power of attorney signed by the deceased customer D. The order is placed by the customer's attorney in an account where the customer is deceased, and the attorney provides a written copy of the will appointing the attorney as executor over the estate

d

Which risks are unique to mortgage backed securities? I Interest rate risk II Contraction risk III Credit risk IV Extension risk A. I and III B. I and IV C. II and III D. II and IV

d

Which security of the same issuer is likely to give the highest current yield? A. warrant B. common stock C. convertible preferred stock D. non-convertible preferred stock

d

Which statement CAN be made to a customer under the provisions of the Uniform Securities Act? A. "If you purchase 20 year 6% Treasury Bonds at par, you are guaranteed to earn a 6% yield on the investment" B. "You should buy ABCD common stock now at $20 per share because it will go up to $35 per share once it publishes its next quarterly earnings report" C. "This REIT pays a 4% dividend. Buying it now means that you will receive the next scheduled dividend payment that will be made in 1 week" D. "Your investment portfolio needs to be rebalanced - you have appreciated stocks that should be sold, with the proceeds invested in long term corporate bonds"

d

Which statement concerning term life insurance is TRUE? A. The cash value is invested in the insurer's general account B. The representative must have a Series 6 or Series 7 license to sell the policy C. The policy owner can skip premium payments in some years D. The premium is much lower than for whole life while the insured is young

d

Which statement is FALSE about Exchange Traded Funds (ETFs)? A. ETFs are registered under the Investment Company Act of 1940 B. ETFs are typically structured as open-end management companies C. ETFs hold the underlying shares of companies included in a stock index D. ETFs permit individual investors to buy creation units

d

Which statement is NOT true about enforcement of the Investment Advisers Act of 1940? A. The SEC has the power to collect evidence, subpoena witnesses and to take oaths and affirmations B. The SEC can issue orders denying or revoking registration of an investment adviser C. Orders of the SEC may be appealed by filing a motion in the U.S. Court of Appeals D. The State Court in which the defendant is located has primary jurisdiction in both criminal and civil suits brought under the Act

d

Which statement is NOT true regarding the role of the trustee? A. The trustee owes a duty to the beneficiaries to comply with the prudent investor rule B. The trustee must invest and manage trust assets solely in the interest of the beneficiaries C. If the trustee has 2 or more beneficiaries, the trustee must act impartially, taking into account any differing interests of the beneficiaries D. The trustee is prohibited from delegating investment and management functions to an agent unless the beneficiary approves

d

Which statement is TRUE about Coverdell Education Savings Accounts? A. Contributions are tax deductible; distributions are taxable B. Contributions are tax deductible; distributions are not taxable C. Contributions are not tax deductible; distributions are taxable D. Contributions are not tax deductible; distributions are not taxable

d

Which statement is TRUE about hedge fund fees? A. Hedge fund managers can only charge fees based on a percentage of assets under management B. Hedge fund managers can only charge a fixed annual fee C. Hedge fund managers can charge performance fees that are limited in amount by the Investment Advisers Act of 1940 D. Hedge fund managers can charge performance fees that are not limited in amount

d

Which statement is TRUE about the grantor of a trust? A. The grantor can be the grantor only B. The grantor can be the trustee C. The grantor can be the beneficiary D. The grantor can be any of the above

d

Which statement is TRUE? A. Both password-protected and non-password protected websites are defined as advertising B. Both password-protected and non-password protected websites are defined as sales literature C. Password-protected websites are defined as advertising and non-password protected websites are defined as sales literature D. Password-protected websites are defined as sales literature and non-password protected websites are defined as advertising

d

Which statement is best regarding participating preferred stock? A. The dividend rate is fixed B. The dividend rate varies depending on the decision of the Board of Directors C. The dividend rate is fixed as to maximum but not as to minimum D. The dividend rate is fixed as to minimum but not as to maximum

d

Which statements are TRUE about Roth IRAs? I Contributions must cease at age 70 1/2 II Contributions can continue after age 70 1/2 III Distributions must start after age 70 1/2 IV Distributions are not required to start after age 70 1/2 A. I and III B. I and IV C. II and III D. II and IV

d

Which statements are TRUE about civil suits brought under the provisions of the Uniform Securities Act? I A civil suit may be brought by any person who has been damaged by the actions of a broker-dealer, investment adviser or their agents II If the plaintiff wins the suit, the seller is liable to the buyer for the cost of the securities, any interest earned, legal fees, and court costs III The seller will not be held liable by the court if, in the exercise of reasonable care, he or she could not have known about the untrue statement or misleading omission of fact IV Third parties that have a financial interest in the seller's actions can also be held liable under the Act A. I and II B. III and IV C. I, II, III D. I, II, III, IV

d

Which statements are TRUE about structured products? I The bond component pays interest based on an index rate such as the performance of the NASDAQ 100 Index II The interest rate paid is typically capped to an annual maximum rate III The derivative component establishes the payment at maturity and protects principal IV The security may be listed on a national securities exchange, but trading is typically very thin A. I and II only B. III and IV only C. I, II, III D. I, II, III, IV

d

Which statements are TRUE about variable annuity contracts? I A variable annuity contract is defined as an "insurance" product that is regulated under State insurance laws only II A variable annuity contract is defined as a "security" product that is regulated under both Federal securities laws and State insurance laws III The issuer of a variable annuity contract bears the investment risk IV The purchaser of a variable annuity contract bears the investment risk A. I and III B. I and IV C. II and III D. II and IV

d

Which statements are TRUE when comparing Treasury Notes to Treasury Bills? I Treasury Bills have a longer initial maturity II Treasury Notes have a longer initial maturity III Treasury Bills pay interest semi-annually IV Treasury Notes pay interest semi-annually A. I and III B. I and IV C. II and III D. II and IV

d

Which statements are TRUE when comparing an index mutual fund to an index exchange traded fund? I Mutual funds can be purchased on margin; exchange traded funds cannot be purchased on margin II Mutual funds cannot be purchased on margin; exchange traded funds can be purchased on margin III Mutual funds can be sold short; exchange traded funds cannot be sold short IV Mutual funds cannot be sold short; exchange traded funds can be sold short A. I and III only B. I and IV only C. II and III only D. II and IV only

d

Which statements are TRUE when comparing cash forward contracts to futures contracts? I Forward contracts are non-standardized private contracts while futures contracts are subject to the rules and regulations of a futures exchange II Forward contracts are not subject to federal regulation while futures contracts are subject to federal regulation III Forward contracts are not priced in open competitive bidding while futures contracts are competitively priced in the market IV Forward contracts are traded OTC while futures contracts are exchange traded A. I and II only B. III and IV only C. I, II, III D. I, II, III, IV

d

Which statements are TRUE? I Contributions to a 529 plan are tax deductible II Contributions to a 529 plan are not tax deductible III Contributions to a Coverdell ESA are tax deductible IV Contributions to a Coverdell ESA are not tax deductible A. I and III B. I and IV C. II and III D. II and IV

d

Transactions that violate the Uniform Securities Act are voidable at the option of the: A. Issuer B. Purchaser C. Seller D. Administrator

b

Bond portfolio immunization protects the portfolio against: A. default risk B. interest rate risk C. purchasing power risk D. liquidity risk

b

Restricted shares subject to sale under Rule 144 are most commonly acquired through: A. private placements B. registered secondary distributions C. tender offers D. ESOPs (Employee Stock Ownership Plans)

a

A customer buys a 3-year maturity, 6% coupon bond at par. If market interest rates rise to 8%, then the bond's price will fall by: A. 2% B. 5% C. 10% D. 25%

b

Selling a put against a stock position sold short is a suitable strategy when the market is expected to: A. remain stable B. rise sharply C. fall sharply D. fluctuate sharply

a

A non-registered agent of a broker-dealer can sell: A. warrants B. certificates of deposit C. real estate partnership units D. fixed annuities

b

All of the following terms apply to fixed unit investment trusts EXCEPT: A. regulated B. managed C. redeemable D. registered

b

An income fund would likely invest in all of the following securities EXCEPT: A. Debentures B. Treasury STRIPS C. Preferred Stock D. High Yield Bonds

b

Under the provisions of the Uniform Securities Act, a "person" includes all of the following EXCEPT a(n): A. adult couple B. minor C. municipality D. corporation

b

A "consolidating market" is one where prices are: A. rising B. falling C. flat D. volatile

c

A nonqualified retirement plan that is established by a non-profit organization is a: A. 401(k) plan B. 403(b) plan C. 457 plan D. 529 plan

c

To be registered as a broker-dealer, the Administrator typically requires the posting of a surety bond in the amount of: A. $1,000 B. $5,000 C. $10,000 D. $50,000

c

Who contributes assets into a trust? A. Trustee B. Custodian C. Grantor D. Beneficiary

c

Under the Investment Advisers Act of 1940, required records must be retained for: A. 1 Year B. 2 Years C. 3 Years D. 5 Years

d

The "real" interest rate earned on an investment is the stated interest rate: A. minus the inflation rate B. plus the inflation rate C. minus the T-Bill rate D. plus the T-Bill rate

a

Which of the following can be distributed by an REIT to its shareholders? I Dividends II Interest III Capital Gains IV Capital Losses A. I and III B. I and IV C. II and III D. II and IV

a

To counter a recession, the Federal Reserve would: A. increase reserve requirements B. increase the discount rate C. buy securities in open market operations D. sell bonds to the public

c

A non-password protected website is defined as: A. advertising B. sales literature C. correspondence D. public forum

a

A person who makes a secondary market in securities is called a(n): A. market maker B. registered representative C. underwriter D. retail broker

a

Under the Securities Exchange Act of 1934, all of the following are defined as "securities information processors" EXCEPT: A. NYSE TRF B. NASDAQ TRF C. Pink Sheets D. MSRB

d

To counter rapidly rising inflation rates, the Federal Reserve would: A. decrease reserve requirements B. decrease the discount rate C. sell securities in open market operations D. sell bonds to the public

c

Which investment gives the GREATEST protection against purchasing power risk? A. 10 year Double Barreled Bonds B. 10 year Guaranteed Bonds C. 10 year Treasury "TIPS" D. 10 year Treasury "STRIPS"

c

Under the Securities Exchange Act of 1934, all of the following issuers must report to the SEC EXCEPT: A. Corporations B. Investment Companies C. Master Limited Partnerships D. Municipalities

d

If the real Gross Domestic Product of the G-20 countries is growing at a slower rate than real Gross Domestic Product growth in the United States, then the value of the U.S. dollar can be expected to: A. appreciate B. depreciate C. fluctuate D. stagnate

a

In 2019, a customer buys 1 GE 10%, $1,000 par debenture, M '44, at 120. The interest payment dates are Jan 1st and Jul 1st. The bond is callable in 3 years at an 8% call premium. The yield to call on the bond is: A. 5.26% B. 8.00% C. 8.37% D. 10.23%

a

A person who renders investment advice relating solely about municipal securities is: A. defined as an investment adviser and must register under the Act B. exempted from the definition of an investment adviser, and is not required to register under the Act C. defined as a broker-dealer and must register under the Act D. defined as an agent and is required to register under the Act

a

"LIBOR" is the commonly used term for the: A. Long Term Bond Offered Rate B. London Interbank Offered Rate C. Last-In, Best Offered Rate D. Lowest Interest Borrowing Offered Rate

b

2 widowed elderly sisters have decided to jointly buy a retirement house in Florida, so that they can save on living expenses and have companionship. However, they want to make sure that upon death, each one's ownership share goes to her living adult children. How should the ownership of the house be titled? A. Joint Tenants With Rights Of Survivorship B. Tenants In Common C. Transfer On Death D. Tenants By Entirety

b

401(k) plans are typically: I established by the employer II established by the employee III funded by employer contributions IV funded by salary reduction employee contributions A. I and III B. I and IV C. II and III D. II and IV

b

A "saucer" formation is: I bullish II bearish III a reverse upward trend IV a reverse downward trend A. I and III B. I and IV C. II and III D. II and IV

b

A $1,000 par TIPS is issued with 3 years to maturity. The coupon rate on the bond is 2.50%. If the inflation rate for the next 3 years is 1.50%, the bond will be worth how much in 3 years? A. $1,000 B. $1,046 C. $1,077 D. $1,125

b

A 25-year old single customer earns $80,000 per year at a corporation. He contributes the maximum amount to his company's 401(k) plan and wants to put money aside on a tax-deferred basis for the 1st time purchase of a house in 6 years. The best recommendation is that this individual make contributions to a: A. Traditional IRA B. Roth IRA C. Coverdell ESA D. 529 Plan

b

A 5% coupon bond is being offered on a 6% basis. If interest rates for similar bonds fall below 6%, the basis for this bond will: A. increase B. decrease C. be unaffected D. be volatile

b

Interest payments on Ginnie Mae pass-through certificates are made: A. weekly B. monthly C. semi-annually D. annually

b

Yields on 3-month Treasury bills have declined to 4.84% from 5.21% at the prior week's Treasury auction. This indicates that: A. Treasury bill prices are falling B. market interest rates are falling C. demand for Treasury bills is weakening D. the Federal Reserve may have to loosen credit

b

1-year Treasury investments yield 4%; while a "high tech" common stock investment yields 25%. The equity risk premium is: A. 0% B. 4% C. 21% D. 25%

c

A 40-year old man wishes to withdraw funds from his Traditional IRA without paying a penalty. This is permitted: A. under no circumstances B. if the funds are borrowed and re-deposited to the account within 60 days of withdrawal C. to pay for qualified educational expenses D. if the regular tax is paid on the distribution

c

A 403(b) plan is established by a: A. self-employed individual with contributions based upon the individual's self-employed income B. for-profit corporation with contributions made by employees as a salary reduction C. not-for-profit organization with contributions made by employees as a salary reduction D. government agency with contributions made by the employer on behalf of the employees

c

A 55-year old man buys 100 shares of XYZ stock at $40 per share on 2/1/2020. As of 12/1/2020, the stock has doubled in price, appreciating to $80 per share. The customer was thinking of selling the stock at that point, but decided to wait until 1/2/2021 to sell, at which point the price was still $80 per share. The tax consequence to the customer is: A. $4,000 ordinary income, but no 10% penalty tax B. $4,000 ordinary income with a 10% penalty tax imposed C. $4,000 short term capital gain D. $4,000 long term capital gain

c

A 55-year-old individual who is in good health wishes to take a lump sum distribution from his 401(k) plan. Which statement concerning the tax treatment of the distribution is TRUE? A. The distribution is subject to ordinary income tax only B. The distribution is subject to a 10% penalty tax only C. The distribution is subject to ordinary income tax and a 10% penalty tax D. The distribution is 100% taxable as long-term capital gain

c

A 62-year old client makes her first withdrawal from a non-tax qualified annuity. This will result in: A. capital gains taxed at capital gains rates B. ordinary income taxed at ordinary income tax rates that is subject to a penalty C. ordinary income taxed at ordinary income tax rates that is not subject to a penalty D. capital gains taxed at ordinary income tax rates

c

A 62-year old man owns a non-qualified variable annuity contract. He makes a withdrawal. The amount of the withdrawal is: A. not taxable B. potentially subject to taxation at capital gains rates C. potentially subject to taxation at ordinary income tax rates D. not taxable if used to pay for specified medical expenses

c

Dividends are paid to holders of: A. Warrants B. Treasury Stock C. ADRs D. Rights

c

Which statement is TRUE? A. All securities sold through a broker-dealer in a State must be registered in the state B. An agent may maintain his registration without being affiliated with a broker-dealer C. An agent's registration can never be revoked without an opportunity for a hearing D. A broker-dealer cannot also be registered as an investment adviser at the same time

c

Which statements are TRUE when comparing exchange traded index funds to index mutual funds? I Expense ratios for exchange traded index funds are higher than those for index mutual funds II Expense ratios for exchange traded index funds are comparable to, or lower than, those for index mutual funds III Net asset values for exchange traded index funds are calculated continuously through the day; while net asset values for mutual funds are computed once each day IV Net asset values for exchange traded index funds are calculated once each day; while net asset values for mutual funds are computed continuously through the day A. I and III B. I and IV C. II and III D. II and IV

c

Which statements are TRUE? I Alpha measures a stock's price volatility relative to the market as a whole II Alpha measures a stock's price volatility relative to stock specific (non-market) factors III Beta measures a stock's price volatility relative to the market as a whole IV Beta measures a stock's price volatility relative to stock specific (non-market) factors A. I and III B. I and IV C. II and III D. II and IV

c

13G reports are filed with all of the following EXCEPT: A. Securities and Exchange Commission B. Company that is the subject of the report C. Exchange where company trades D. Financial Industry Regulatory Authority

d

A "saucer" formation is a(n): A. uptrend B. downtrend C. reverse upward trend D. reverse downward trend

d

A 40-year old man wishes to remove funds from his IRA to buy his child an automobile for commuting to work after school. The customer has: A. no tax liability B. regular income tax liability only on the amount withdrawn C. 10% penalty tax only on the amount withdrawn D. both regular income tax liability and 10% penalty tax on the amount withdrawn

d

A 62-year old man takes a distribution from a non-tax qualified variable annuity. The distribution is: A. tax free without any penalty imposed B. taxed at capital gains rates without any penalty imposed C. taxed as ordinary income without any penalty imposed D. taxed in accordance with federal tax law

d

A Registered Investment Adviser (RIA) has managed $5,000,000 of a customer's funds successfully for many years. The customer asks the RIA to prepare a revocable trust for his children and tells the RIA to transfer $2,000,000 of his funds into the trust and trade the new account in the same manner as the existing account. The RIA should: A. open the account and begin trading B. tell the customer to contact a tax specialist C. explain to the customer that revocable trusts cannot be traded D. refer the client to an attorney that can set up the trust

d

A broker-dealer is required to register with all of the following EXCEPT: A. the SEC B. FINRA C. the state where it is located or does business with the public and the SEC D. the FTC

d

All of the following terms relating to mortgage backed securities are synonymous EXCEPT: A. Call risk B. Contraction risk C. Prepayment risk D. Extension risk

d

Which statements are TRUE regarding Equity Indexed Annuities (EIAs)? I In a year of sharply rising stock prices, EIAs will match the positive return of the Standard & Poor's 500 Index II In a year of sharply rising stock prices, EIAs will not match the positive return of the Standard & Poor's 500 Index III In a year of sharply falling stock prices, EIAs will match the negative return of the Standard & Poor's 500 Index IV In a year of sharply falling stock prices, EIAs will not match the negative return of the Standard & Poor's 500 Index A. I and III B. I and IV C. II and III D. II and IV

d

Which statements are TRUE regarding registration of agents? I Agents can be registered in a state without affiliating with a broker-dealer II Agents can only be registered in a state if they are affiliated with a broker-dealer III Agents must only be registered in the state where they have an office IV Agents must be registered in any state into which they direct offers of securities A. I and III B. I and IV C. II and III D. II and IV

d

Which statements are TRUE regarding the taxation of capital gains? I A capital gain is first considered to be long term if a position is liquidated at a profit after being held for 1 year or less II A capital gain is first considered to be long term if a position is liquidated at a profit after being held for over 1 year III For investors in the maximum tax bracket, any long term capital gains will be taxed at the same tax rate as that bracket IV For investors in the maximum tax bracket, any long term capital gains will be taxed at a lower rate than that bracket A. I and III B. I and IV C. II and III D. II and IV

d

Which statements are TRUE when a bond sells at a premium? I The nominal yield is less than the yield to maturity II The nominal yield is more than the yield to maturity III The current yield is less than the yield to maturity IV The current yield is more than the yield to maturity A. I and III B. I and IV C. II and III D. II and IV

d

Commercial paper is an exempt security under the Securities Act of 1933 as long as its maturity does not exceed: A. 30 days B. 90 days C. 180 days D. 270 days

d

Income is: I taxed progressively II taxed regressively III taxed at higher marginal rates as income increases IV taxed at the same effective rate as income increases A. I and III B. I and IV C. II and III D. II and IV

a

Index ETFs are: I passively managed II actively managed III negotiable IV redeemable A. I and III B. I and IV C. II and III D. II and IV

a

Corporate debentures are backed by: A. real estate B. equipment C. portfolio of marketable securities D. full faith and credit

d

The NASDAQ Market Diary shows the following: Market Diary Total Issues 4,037 Advanced 1,002 Declined 2,103 Unchanged 332 New Highs 103 New Lows 55 Total Vol 3,503,889,000 The Advance/Decline Ratio is: A. 1:2 B. 2:1 C. 1:4 D. 4:1

a

The Securities and Exchange Commission has jurisdiction over: I FINRA II the MSRB III the FRB IV the FDIC A. I and II only B. III and IV only C. I and IV only D. II and III only

a

The business form that is the LEAST advantageous from a taxation standpoint is a(n): A. C Corporation B. S Corporation C. Limited Liability Company D. Limited Partnership

a

"Painting the tape" is the: A. illegal practice of effecting wash trades in thinly traded issues in a common trading pool B. illegal practice of matching buyers and sellers who want immediate trade executions C. legal practice of effecting both long sales and short sales subject to the "uptick" rule D. legal practice of taking both a stock and option position on the same "side of the market"

a

A "non-issuer" corporation directs its employees to solicit orders for non-exempt securities. For this work, the corporation is paying commissions to the employees. Under the Uniform Securities Act, the corporation: A. falls under the definition of a "broker-dealer" which must be registered B. falls under the definition of an "issuer" that must register C. falls under the definition of an "investment adviser" that must register D. is exempt from the definition of a "broker-dealer" and does not have to registered

a

The purchase of a call is a: A. bull strategy B. bear strategy C. neutral strategy D. bear/neutral strategy

a

Which statements are TRUE about the applicability of recordkeeping rules to investment advisers? I SEC recordkeeping rules apply to Federal Covered advisers II SEC recordkeeping rules do not apply to Federal Covered advisers III NASAA recordkeeping rules apply to State-registered advisers IV NASAA recordkeeping rules do not apply to State-registered advisers A. I and III B. I and IV C. II and III D. II and IV

a

Which statements are TRUE regarding joint accounts? I An order may be accepted from any single account owner II An order can only be accepted from all account owners jointly III A check from the account can be drawn to the name of any single account owner IV A check from the account can be drawn only to the name of all of the account owners A. I and III B. I and IV C. II and III D. II and IV

a

A Canadian broker-dealer has some clients who are "snowbirds" who spend their winters in State Z, which is one of the southernmost States. The broker-dealer does not have an office in State Z and it is not registered there. The clients wish to effect securities transactions while they are residing in State Z. Does this broker-dealer have to register in State Z? A. No - the broker-dealer can effect securities transactions in State Z without registering there as long as the firm has 5 or fewer clients in the State B. No - the broker-dealer can effect securities transactions in State Z for existing customers who are temporarily residing in the State C. Yes - because the broker-dealer's customers are physically present in State Z D. Yes - because the customers are being solicited by the broker-dealer to effect securities transactions while they are in State Z

b

A customer could be obligated to sell stock at a future date if the customer is the: A. buyer of a call B. seller of a call C. buyer of a put D. seller of a put

b

Which statements are TRUE regarding the post-registration requirements of the Uniform Securities Act? I Investment advisers are subject to post-registration requirements II Investment advisers are not subject to post-registration requirements III Agents of investment advisers are subject to post-registration requirements IV Agents of investment advisers are not subject to post-registration requirements A. I and III B. I and IV C. II and III D. II and IV

b

Which statements are TRUE when comparing Equity Indexed Annuities to Variable Annuities? I In a year of sharply rising stock prices, variable annuities will outperform equity indexed annuities II In a year of sharply rising stock prices, equity indexed annuities will outperform variable annuities III In a year of sharply falling stock prices, variable annuities will outperform equity indexed annuities IV In a year of sharply falling stock prices, equity indexed annuities will outperform variable annuities A. I and III B. I and IV C. II and III D. II and IV

b

A Federal Covered Adviser discovers a material error in its Form ADV. When must Form ADV be amended with the State to correct the error? A. Never B. Within 5 business days C. Within 30 calendar days D. On the SEC filing anniversary

c

A Registered Investment Adviser is one that is registered with (the): A. FINRA B. NASAA C. SEC D. MSRB

c

n investment adviser representative has discretion over a customer account. Which of the following MUST be guaranteed to the customer? A. Best return B. Preservation of principal C. Custom tailored allocation D. Current income

c

A broker-dealer that has a place of business in State A would be required to register in State A if it: I sold securities to customers in State A II made an offer to sell securities to customers in State A III effects securities transactions solely with institutional investors in State A IV effects securities transactions solely with issuers in State A A. I and II only B. III and IV only C. I, II, III D. I, II, III, IV

d

A business entity that has the legal protections of a corporation and the tax benefits of a partnership is a: A. general partnership B. limited partnership C. C Corporation D. S Corporation

d

A corporation has issued $10,000,000 of 7 1/4%, 20 year, $1,000 par, convertible debentures, convertible at a ratio of 25:1. The bond is currently trading at 101, while the company's common stock is at 38. The conversion price per share is: A. $25 B. $25.25 C. $26.32 D. $40

d

Which records MUST be retained in a state-registered investment adviser's principal office? A. Financial reports B. Client advisory contracts C. Investment adviser's bank statements D. Records of customer purchases and sales orders

d

Which statements are TRUE about mutual fund distributions that are automatically reinvested? I Dividend distributions that are automatically reinvested are not taxable until the shares are redeemed II Dividend distributions that are automatically reinvested are taxable in the year the distribution is made III Capital gains distributions that are automatically reinvested are not taxable until the shares are redeemed IV Capital gains distributions that are automatically reinvested are taxable in the year the distribution is made A. I and III B. I and IV C. II and III D. II and IV

d

A company receives a bill from its electric company for $1,000. The bill is payable within 30 days. If the company uses accrual accounting, it will: I record the $1,000 electric bill as an account payable as the date of receipt II not record the $1,000 electric bill as an account payable as the date of receipt III record the $1,000 electric bill as an expense as the date of receipt IV not record the $1,000 electric bill as an expense as the date of receipt A. I and III B. I and IV C. II and III D. II and IV

a

A corporation's quarterly unaudited financial statements are reported to the SEC on: A. Form 10Q B. Form 10K C. Form 8K D. Form S-1

a

Account A consists of 90% stocks and 10% bonds. Over the years, it has generated a high return of 9% and a low return of -2%. Account B consists of 60% stocks and 40% bonds. Over the years, it has generated a high return of 10% and a low return of 2%. Account C consists of 40% stocks and 60% bonds. Over the years, it has generated a high return of 8% and a low return of 3%. Account D consists of 100% bonds. Over the years, it has generated a high return of 6% and a low return of 3%. Which account has the highest range of returns? A. Account A B. Account B C. Account C D. Account D

a

All of the following statements are true about Federal Reserve open market trading activities EXCEPT open market operations affect: A. the National Debt B. M 1 levels C. the Treasury's accounts D. the business cycle

a

Amortization of goodwill shows as an expense on a corporate income statement if the company: A. acquired another company or asset at a price higher than book value B. spins off a subsidiary at a price lower than book value C. makes charitable contributions that are in excess of the gift limit D. invests in the preferred stock of another company that includes a warrant attached to each share

a

During the expansion phase of an economic cycle all of the following are true EXCEPT: A. output falls B. demand for goods and services increases C. inflation occurs D. employment levels increase

a

Fundamental analysts would evaluate which of the following? A. Liquidity ratios B. Chart movements C. Trading volumes D. Advance-decline ratios

a

In order to evaluate the total value of goods and services that residents produce in their country, an analyst would look at: A. gross domestic product of the country B. gross national product of the country C. personal consumption expenditures of the country D. business investment of the country

a

Net Worth equals: A. Total assets minus total liabilities B. Current assets minus total liabilities C. Current assets minus current liabilities D. Total assets minus current liabilities

a

The variability of an investment's return is measured by: A. standard deviation B. beta coefficient C. duration D. total return

a

Treasury investments yield 3.5%. Common stock investments yield 12.5%. Corporate bond investments yield 8%. The "risk free" rate of return is: A. 3.5% B. 8% C. 9% D. 12.5%

a

Which item would NOT be found on a corporation's income statement? A. Dividends B. Taxes C. Sales D. Expenses

a

Which of the following investments is LEAST defensive during deflationary periods? A. Common Stock B. Preferred Stock C. 10-Year Bonds D. 30-Year Bonds

a

A portfolio constructed by a manager has the following rate of return probabilities for the coming year: Rate of Return Probability 15% 40% 8% 30% -2% 30% What is the expected rate of return for this portfolio? A. 7.00% B. 7.80% C. 8.33% D. 9.00%

b

XYZ Corporation Balance Sheet ($000) Year ending December 31, 20XX Assets Liabilities and Stockholder's Equity Cash and Equivalents 62,000,000 Notes Payable 27,000,000 Accounts Receivable 83,000,000 Current Maturity - Long Term Debt 12,000,000 Inventory 117,000,000 Accrued Liabilities 15,000,000 Prepaid Expenses 21,000,000 Accounts Payable 36,000,000 Total Current Assets 283,000,000 Total Current Liabilities 90,000,000 Property, Plant and Equipment (Net of Depreciation) 162,000,000 Bank Loans Payable 50,000,000 Patents, Trademarks and Other Intangibles (Net of Amortization) 37,000,000 Senior Debentures 60,000,000 Deferred Taxes Payable 12,000,000 Deferred Charges 8,000,000 Stockholder's Equity Preferred Stock - ($1 Par) 80,000,000 Common Stock at Par ($.10 Par) 10,000,000 Capital in Excess of Par 64,000,000 Retained Earnings 124,000,000 Total Stockholder's Equity 278,000,000 Total Assets 490,000,000 Total Liabilities and Stockholder's Equity 490,000,000 What is XYZ Corporation's Quick Ratio? A. 1.61:1 B. 2.91:1 C. 3.14:1 D. 5.44:1

a

A U.S. balance of payments deficit would be widened by all of the following EXCEPT: A. increased levels of U.S. imports B. increased levels of foreign tourists visiting the United States C. increased dividends paid to foreign holders of U.S. securities D. decreased sales of U.S. securities to foreign holders

b

A company balance sheet in 2019 shows the following: Assets Liabilities Cash $10,000,000 Accounts Payable $10,000,000 Accounts Receivable $ 6,000,000 Wages/Taxes Payable $ 6,000,000 Inventory $ 7,000,000 Short Term Debt $ 4,000,000 Plant/Equipment $ 6,000,000 Bank Loan Due 2024Long Term Debt $ 3,000,000$ 5,000,000 The company's Current Ratio is: A. 1:1 B. 1.15:1 C. 1.30:1 D. 1.50:1

b

An investment adviser that uses a "top down" approach to portfolio management will: A. select the key index that he or she believes will outperform other sectors B. analyze the entire economic outlook to sort out the areas for higher growth potential C. look for emerging markets that are likely to outperform mature markets D. select investments based on the size of each issue's market capitalization from largest to smallest

b

An investor has purchased shares of an international bond fund. The fund will have inferior performance if the value of the: I U.S. Dollar increases II U.S. Dollar decreases III foreign currency increases IV foreign currency decreases A. I and III B. I and IV C. II and III D. II and IV

b

An investor holds an international bond fund. Regarding the performance of the fund, which of the following statements are TRUE? I If the foreign currency value rises against the dollar, the fund's Net Asset Value will increase II If the foreign currency value rises against the dollar, the fund's Net Asset Value will decrease III If the dollar falls against the foreign currency, the fund will have an inferior performance relative to dollar denominated funds IV If the dollar falls against the foreign currency, the fund will have a superior performance relative to dollar denominated funds A. I and III B. I and IV C. II and III D. II and IV

b

DEF Corporation has earned $962,500 after tax. Using the information below, what is DEF Corporation's Return on Common Equity ? DEF Corporation Capitalization Debentures - $1,000 par, 11.75% Matures 2010, convertible at $20 $10,000,000 Common at Par ($1) 275,000 shares outstanding 275,000 Capital In Excess Of Par 2,725,000 Retained Earnings 12,000,000 A. 3.85% B. 6.42% C. 32.08% D. 64.16%

b

Due to economic uncertainty in European markets, foreign investors are making large purchases of Treasury securities at the weekly auction. This action will: A. cause U.S. interest rates to rise B. cause U.S. interest rates to fall C. cause U.S. interest rates to be volatile D. have no effect on U.S. interest rates

b

Gross Domestic Product measures the: A. price of goods and services in the United States B. level of output of goods and services in the United States C. level of consumption of goods and services in the United States D. inflation rate of prices of goods and services in the United States

b

Monetary policy tools of the Federal Reserve Board include changing all of the following EXCEPT: A. the discount rate B. tax rates C. reserve requirements D. margin requirements

b

Portfolio Total Return A 5% B 8% C 12% D 7% If the "mean" of the 4 portfolio returns is calculated as 8%, this is: A. geometric mean B. arithmetic mean C. moving average mean D. weighted mean

b

The Federal Reserve will lend funds at the discount rate to: A. savings and loans B. commercial banks C. investment banks D. insurance companies

b

The Sharpe Ratio is the ratio of: A. portfolio return to standard deviation B. risk-adjusted return to standard deviation C. portfolio return to duration D. risk-adjusted return to duration

b

The change in the cost of a basket of goods and services used by the typical American household is measured by the: A. PPI B. CPI C. GDP D. DJA

b

The formula for Net Worth is: A. (Total Assets - Inventory) / Total Liabilities B. Total Assets - Total Liabilities C. (Current Assets - Inventory) / Current Liabilities D. Current Assets - Current Liabilities

b

Which economic theory postulates that production and economic growth are stimulated by lower interest rate levels, and can be managed by Federal Reserve actions? A. Supply Side Theory B. Monetarist Theory C. Keynesian Theory D. Demand Side Theory

b

Which item would be found on a company's income statement? A. Retained earnings B. Taxes paid C. Reinvested dividends D. Accumulated depreciation

b

Which of the following represents "leverage"? A. Current Assets - Current Liabilities B. Debt / Equity C. Sales - Expenses D. Operating Income / Bond Interest

b

Which of the following stocks would be considered defensive? A. automobile manufacturer B. pharmaceutical manufacturer C. gold mining company D. computer software developer

b

Which statement is TRUE about claim priority in a corporate liquidation? A. Common stockholders are paid before preferred stockholders B. Unsecured creditors are paid before bondholders C. Preferred stockholders are paid before bondholders D. Bondholders are paid before unpaid wages and taxes

b

A foreign government wishes to stabilize its currency, which has been falling against the U.S. Dollar. The government would: I buy U.S. Dollars II sell U.S. Dollars III buy the foreign currency IV sell the foreign currency A. I and III B. I and IV C. II and III D. II and IV

c

All of the following are needed to calculate the Sharpe Ratio EXCEPT: A. Risk measured by variability of return B. Actual rate of return on an investment C. Compound value of a sum D. Rate of return on an investment with zero risk

c

An investment generates the following annual returns: Year 1: 6% Year 2: 4% Year 3: 2% Year 4: 6% Year 5: 8% The mode return is A. 2% B. 4% C. 6% D. 8%

c

An investor buys a security at $95 per share. The stock rises to a high of $105 and ends the year at $99 per share. The stock paid a $3 dividend during the year. What is the investor's total return? A. 2.86% B. 3.16% C. 7.37% D. 12.38%

c

An investor has purchased shares of an international bond fund. The fund will have superior performance if: the value of the I U.S. Dollar increases II U.S. Dollar decreases III foreign currency increases IV foreign currency decreases A. I and III B. I and IV C. II and III D. II and IV

c

Asset Allocation Returns Std. Dev. Portfolio A: 10% Equities;90% Bonds 9% High;(-3%) Low;6% Avg. 1.68 Portfolio B: 50% Equities;50% Bonds 12% High;(-7%) Low;8% Avg. 1.93 Portfolio C: 90% Equities;10% Bonds 16% High;(-10%) Low;9% Avg 1.51 Portfolio D: 70% Equities;30% Bonds 14% High;(-7%) Low;10% Avg. 2.72 Which portfolio showed the LEAST volatility relative to its average annual return? A. Portfolio A B. Portfolio B C. Portfolio C D. Portfolio D

c

During which phase of the economic cycle would one most likely find monetary "deflation" starting to occur? A. Expansion B. Prosperity C. Recession D. Recovery

c

Following is the balance sheet of a company: Cash $20,000 Accounts Receivable $20,000 Inventory $30,000 Marketable Securities $80,000 Trade Payables $15,000 Taxes Payable $30,000 Long Term Debt $25,000 What is the net worth of the company? A. $0 B. $35,000 C. $80,000 D. $150,000

c

Following is the balance sheet of a company: Cash $200,000 Accounts Receivable $200,000 Inventory $300,000 Long Term Assets $500,000 Trade Payables $200,000 Long Term Payables $400,000 Long Term Debt $500,000 What is the net working capital of the company? A. $100,000 B. $200,000 C. $500,000 D. $700,000

c

Foreign exchange markets: A. are regulated B. set exchange rates C. trade foreign currencies D. are centralized

c

Given the set of the following numbers: 5, 5, 7, 18, 12, 9, 23, what is the range, to the nearest 10th? A. 5.00 B. 11.30 C. 18.00 D. 23.00

c

If stockholders' equity is subtracted from total assets, you are left with: A. current liabilities B. long term debt C. current liabilities and long term debt D. retained earnings

c

If the Federal Reserve Open Market Committee authorizes its trading desk to enter into system wide repurchase agreements, the effect will be to: I increase yields II decrease yields III raise debt prices IV lower debt prices A. I and III B. I and IV C. II and III D. II and IV

c

If the dollar falls against foreign currencies, all of the following statements are true EXCEPT: A. U.S. goods are cheaper to foreign countries B. U.S. exports are likely to rise C. foreign currencies buy fewer dollars D. foreign imports are likely to fall

c

The Federal Reserve might consider an easing of credit if which of the following decline? I Unemployment levels II Consumer Price Index III Stock prices IV Real Gross Domestic Product A. I and IV only B. II and III only C. II, III, IV D. I, II, III, IV

c

The formula for Return on Investment (ROI) is: A. (Total Beginning Return - Total Ending Return) / Average Cash Flow B. (Total Ending Return - Total Beginning Return) / Average Cash Flow C. Average Annual Cash Flow / Initial Investment Outlay D. Average Annual Cash Flow / Average Investment Value

c

The rate of inflation as measured by the Consumer Price Index has been rising rapidly over the last months. Ignoring other factors, the effect will be to: I raise stock market values II lower stock market values III raise bond market values IV lower bond market values A. I and III B. I and IV C. II and III D. II and IV

c

To find the real equity risk premium inherent in a stock portfolio, one would deduct: A. total return B. expected return C. risk-free return D. holding period return

c

What is NOT a characteristic of an economy that has entered a recession? A. Rising unemployment B. Falling inflation C. Rising interest rates D. Falling industrial production

c

Which is the MOST important measure when analyzing a company's income statement? A. Gross operating profit margin ratio B. Operating profit margin ratio C. Net operating profit margin ratio D. Accounts receivable turnover ratio

c

Which item is used when computing a corporation's Current Ratio? A. Net Working Capital B. Long Term Debt C. Inventory D. Sales

c

Which of the following is NOT considered to be a cyclical stock? A. Home appliance manufacturer B. Automobile manufacturer C. Natural gas producer D. Home builder

c

Which statements are TRUE when comparing arithmetic mean return to geometric mean return? I Arithmetic mean return considers compounding II Arithmetic mean return does not consider compounding III Geometric mean return considers compounding IV Geometric mean return does not consider compounding A. I and III B. I and IV C. II and III D. II and IV

c

A corporation shows the following in its capital structure: Long Term Debt: $20,000,000 Common at Par: $20,000,000 Capital in Excess of Par: $100,000,000 Retained Earnings: $80,000,000 The corporation's Debt/Equity Ratio is: A. 1:1 B. 1:6 C. 1:8 D. 1:10

d

A recession is defined as a(n): I increase in Gross Domestic Product II decrease in Gross Domestic Product III for at least 3 consecutive months IV for at least 6 consecutive months A. I and III B. I and IV C. II and III D. II and IV

d

All of the following are revenue items found on an income statement EXCEPT: A. sales of fixed assets B. installment sales C. interest income D. reinvested dividends

d

All of the following items are included on a company's income statement EXCEPT: A. Installment sales B. Interest income revenue C. Sales of fixed assets D. Reinvested dividends

d

All of the following would be found in the footnotes to a company's financial statements EXCEPT: A. inventory valuation method B. potential legal liabilities C. schedule of maturing debt D. operations overview

d

An investment adviser that uses a "bottom up" approach to portfolio management will: A. select the key index that he or she believes will outperform other sectors B. analyze the entire economic outlook to sort out the areas for higher growth potential C. look for emerging markets that are likely to outperform mature markets D. select specific investments based on each investment's ability to generate exceptional growth, regardless of the economic outlook

d

Federal Reserve actions can directly influence which of the following? I Discount Rate II Federal Funds Rate III Money Multiplier IV Money Velocity A. I and II only B. III and IV only C. I, II, III D. I, II, III, IV

d

Fiscal policy encompasses all of the following EXCEPT: A. government spending B. social security payment levels C. tax policy D. monetary policy

d

In a period of deflation, which of the following statements about fixed income securities are TRUE? I Issuers are more likely to sell fixed income securities II Issuers are likely to sell non-callable issues III Holders are likely to realize capital appreciation on fixed income securities that are not close to maturity IV Holders receive payments on fixed income securities that buy more in real terms A. I and II only B. III and IV only C. I, II, III D. I, II, III, IV

d

The Federal Reserve might consider an easing of credit if all of the following decline EXCEPT: A. real Gross Domestic Product B. stock prices C. Consumer Price Index D. unemployment levels

d

The formula for Net Working Capital is: A. (Total Assets - Inventory) / Total Liabilities B. Total Assets - Total Liabilities C. (Current Assets - Inventory) / Current Liabilities D. Current Assets - Current Liabilities

d