Series 65 Missed questions 2

All of the following are characteristics of a rights offering except A) the subscription period is up to two years. B) the rights are marketable. C) it is issued to current stockholders. D) the subscription price is below the current market value.

A

An advisory client of yours dies in 2022, and you transfer the $1.4 million of securities in the individual's name to the estate account. You will A) continue to manage the account unless the advisory contract called for termination upon death or informed otherwise by the executor. B) inform the executor that you need to keep sufficient liquid funds in the account because estate taxes will be due in 6 months. C) tell the executor that he will be receiving a Form 1099 for tax purposes, representing the transfer of account over to the estate account. D) notify the executor of the estate that he is able to do any trades to rebalance the account, and that taxes will be of no consideration.

A

Each of these would be considered an advantage of using a 529 plan rather than a Coverdell ESA to fund a child's future education except A) the 529 plan is counted at a lower percentage of assets when applying for financial aid. B) the 529 plan has no age limits. C) the 529 plan has no earnings limitation on the donor. D) the 529 plan allows for higher contribution levels.

A

In comparing the change in the GDP from one year to another, to arrive at an accurate figure, each year's GDP should be converted to which of the following? A) Constant dollars B) International dollars C) Dollars valued by exchange with foreign currencies D) Dollars in terms of gold bullion

A

The head of research for your firm has just prepared a very positive report on DEF Industries, Inc. The report will be placed on the firm's website later today, and copies will be mailed to clients for whom the security is deemed appropriate. Tonight, this analyst will be appearing on CNBC and will be describing why he has issued this strong buy recommendation. As an investment adviser representative, you would A) not be permitted to contact your clients until it was ascertained that the report was publicly available on the firm's web site. B) be permitted to contact your clients with this recommendation right now. C) be permitted to contact your clients with this recommendation no sooner than tomorrow. D) be required to send your clients to the firm's website before making comments regarding this security.

A

Under all of the following circumstances, the USA requires investment advisers with no place of business in the state to register except A) when an adviser only provides advice to registered investment companies. B) when an adviser with numerous clients in the state has not been subject to disciplinary action within any state within the last 10 years. C) when an adviser has maintained assets of $100 million or more for 7 out of the last 10 years. D) when an adviser only provides investment advice to 401(k) plans with assets of $250,000 or more.

A

Washington, Adams, and Jefferson, Inc., (WAJI) is an investment adviser whose principal and only office is in Alexandria, VA. WAJI's sole business is advising institutional investors. Rutherford Buchanan is employed by the firm in the main office and has the responsibility of servicing the firm's bank and insurance company clients. Which of the following statements is correct regarding Rutherford's licensing requirements? A) Rutherford must register as an IAR of WAJI with the State of Virginia. B) Rutherford cannot register as an IAR of WAJI because providing advice exclusively to institutions exempts the firm from registration. C) Rutherford is exempt from registration because he has fewer than six retail clients. D) Rutherford is exempt from registration because his only clients are institutions.

A

Which of the following is not included in taxable income on an individual's federal income tax return? A) Receipt of stock dividends B) Income from a sole proprietorship C) Wages and tips D) Interest received on Treasury bonds

A

Which of the following is true regarding ETNs? A) Their value can be impacted by changes in the issuer's credit rating. B) As fixed-income investments, they do not have market risk. C) They are noncallable prior to maturity. D) They are suitable for conservative investors seeking income.

A

Which of the following offers the opportunity to realize a capital gain rather than ordinary income? A) Stock dividends B) Section 529 plans C) Cash dividends D) Deferred annuities

A

All of the following must be disclosed by an investment adviser except A) a senior officer's suspension from the securities industry. B) an investment adviser representative in the firm was fined $1,000 by FINRA for making unsuitable recommendations. C) a senior officer of the firm was convicted of a felony six years ago. D) the president of the investment adviser was found liable in a civil action involving unsuitable advice in a state where the adviser does not have an office.

B

An individual has been employed by a broker-dealer to solicit new subscriptions for the firm's free monthly stock market report. The individual is paid a salary plus bonus based on his success rate with signing up subscribers. Under the USA, this person would A) have to be registered as an agent of the broker-dealer. B) not have to be registered as an agent of the broker-dealer. C) only be allowed to contact existing clients of the broker-dealer. D) have to be registered as an investment adviser representative.

B

Jean owns a $1 million life insurance policy on her mother, Clara. Jean is named as sole beneficiary, and so far she has paid $150,000 in premiums. If Clara dies, which of the following will occur? The proceeds will be exempt from income tax. Some of the proceeds ($850,000) will be subject to income tax. The proceeds will be included in Clara's estate for estate tax purposes. The proceeds will not be included in Clara's estate. A) II and IV B) I and IV C) II and III D) I and III

B

The pundits are predicting slowly-rising inflation over the next 5 years. An IAR recommends that one of her clients splits his bond portfolio into equal percentages with maturities ranging from 1 to 5 years. As each bond matures, the proceeds are used to purchase bonds with a 5-year maturity. The IAR is using A) the interest discount model. B) the laddering strategy. C) the barbell strategy. D) the bullet strategy.

B

Which of the following are characteristics of commercial paper? Backed by money market deposits Negotiated maturities and yields Issued by insurance companies Not registered with the SEC A) III and IV B) II and IV C) I and III D) I and II

B

Which of the following statements regarding hedging with options is correct? A long stock position is hedged with a long put. A long stock position is hedged with a short put. A short stock position is hedged with a short call. A short stock position is hedged with a long call. A) I and III B) I and IV C) II and IV D) II and III

B

Which of the following would be a violation of the NASAA Contents of Investment Advisory Contract Model Rule? A) An investment adviser permits clients to renew their investment advisory contracts by email. B) Without the consent of advisory contract holders, the owner of a majority of the stock of the advisory firm pledges that stock to a bank as collateral for a loan enabling the firm to acquire better cybersecurity technology. C) It is indicated that a performance-based contract has a fee arrangement that may create an incentive for the investment adviser to make investments that are riskier or more speculative than would be the case in the absence of a performance fee. D) An investment adviser organized as a partnership has the practice of notifying clients of any change in the membership of the partnership within a reasonable time after the change.

B

While reviewing nationwide industrial production figures, an analyst notices that inventories have been rising. From that information, one would gather that the economy is most likely in which phase of the business cycle? A) Expansion B) Contraction C) Recovery D) Peak

B

Your client purchased an index annuity from you last year with an investment of $100,000. The particular index tied to this product had an annual return of -4%. If the participation rate is 90% with a cap of 5% and no annual minimum guarantee, the value of the account would be A) $103,600. B) $100,000. C) $96,400. D) $96,000.

B

The Seeking Alpha Growth Fund directs a sizable portion of its portfolio executions to your broker-dealer. If the firm has this fund on its highly recommended list, this would be A) allowed without restriction. B) a conflict of interest that would have to be disclosed. C) allowed only when the investment company uses more than one broker-dealer to sell its shares. D) prohibited only if selling shares and executions for the portfolio by the member takes place on the same business day.

B) a conflict of interest that would have to be disclosed.

A client asks her investment adviser representative what footnotes to the financial statements are for. The best reply would be that footnotes A) serve as a bibliography indicating where additional information may be obtained. B) are used to explain how the various ratios are computed because companies recognize that many shareholders do not have a financial background. C) contain information that doesn't have a place in the main body of the financial statements. D) contain a detailed history of the enterprise and its products or services.

C

A securities market investment theory that attempts to derive the expected return on an assetbased upon the asset's systematic risk is A) the efficient market hypothesis (EMH). B) the Monte Carlo simulation. C) the capital asset pricing model (CAPM). D) the random walk theory.

C

After receiving some money from an inheritance, an individual purchases a rare gold coin for $10,000. Five years later, he gives the coin to his daughter-in-law after receiving an appraisal showing the coin is worth $15,000. The daughter-in-law's cost basis of the coin is A) $0.00. B) $15,000. C) $10,000. D) $5,000.

C

An investor plans to fund the college education for her newborn child by purchasing $5,000 of investment-grade bonds on an annual basis. She is most likely using A) the barbell strategy. B) the laddering strategy. C) the bullet strategy. D) the 529 plan strategy.

C

If a federal covered investment adviser wishes to sell his business to another advisory firm, which of the following statements is true? A) The sale must be approved by each customer of the selling adviser. B) The sale must be approved by the Administrator. C) The sale must be approved by the SEC. D) No approvals are required.

C

Registration with the state as an investment adviser would be required for a person with an office in this state who A) only gives advice on securities issued by or guaranteed by the government of the United States. B) manages the portfolio of the KPF Balanced Fund, a registered open-end investment company with $22 million in net assets. C) manages $13 million in assets for four clients. D) serves as a pension consultant to the XYZ Employees Retirement Plan, covering 1,200 employees with total assets of $278 million.

C

A management investment company owns portfolio securities with a current market value of $100 million. The company owes $10 million for securities purchased but not yet paid for and accrued management fees of $5 million. If there are 2,611,437 shares outstanding, the net asset value per share is closest to A) $34.46. B) $36.38. C) $26.11. D) $32.55.

D

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

D

Management style is a phrase that is often used to describe the methodology employed by a particular portfolio manager. If the manager under discussion used earnings momentum to select stocks, it could be said that the style being used was A) asset allocation B) value C) passive D) growth

D

One of the features of convertible preferred stock is that A) the dividend is paid ahead of all other securities. B) the owner has the opportunity to convert the stock into the issuer's bonds. C) the holder is able to select the conversion price. D) the owner has the opportunity to participate in the growth of the company.

D

The common stock of companies within which industry sector would be most adversely affected by an increase in the general level of interest rates? A) The electronics industry B) The clothing industry C) The food industry D) The utilities industry

D

Which of the following are not investment advisers under the Uniform Securities Act? Joe advises customers regarding the value of gold and silver coins. The trust department of ABC Bank provides investment advice to its clients. Tammy writes a newspaper column in which she analyzes and recommends securities. Jack is an investment adviser representative. A) I and II B) I and IV C) II, III, and IV D) I, II, III, and IV

D

The Conference Board releases information about the economy on a monthly basis. Included are a number of different indicators. Economic indicators can be leading, lagging, or coincidental, which indicates the timing of their changes relative to how the economy as a whole changes. Which of the following is a coincident economic indicator? A) Industrial production B) Stock market prices as measured by the S&P 500 C) Machine tool orders D) Agricultural employment

a

An IAR has set up the initial meeting with a prospective advisory client. An important part of that meeting is gathering client data. Of the following items, which is generally considered to be the most important for preparing suitable recommendations? A) Age of the prospect B) Risk tolerance C) Life stage D) Assets available for investment

b

Fusion Financial is a broker-dealer registered in States A, B, and C, with its home office in State B. A complaint is filed against the firm by a client who resides in State A. Under the powers granted under the Uniform Securities Act, the Administrator of State B could do all of the following except A) gather evidence from State A. B) issue an injunction against Fusion Financial. C) gather evidence from State B. D) subpoena witnesses from State C.

b

The contraction phase of the business cycle is least likely accompanied by A) low or negative economic growth. B) decreasing unemployment. C) decreasing business and consumer expenditures. D) decreasing inflation pressure.

b

Which of the following is a motivation for creating structured products? A) Structured products improve profits for broker-dealers. B) Structured products improve market completeness. C) Structured products reduce costs to issuers. D) Structured products are less expensive for investors to buy and trade.

b

Years ago, following your advice, a client opened a 529 Plan to save for their son's college education. The child is now about 3 years from beginning his freshman year. The client, believing that the stock market is currently undervalued, wishes to reallocate the plan assets so that most of the funds are in a broad stock market index portfolio. At this time, your advice would probably be against this allocation because of A) business risk B) market risk C) interest rate risk D) liquidity risk

b

The term Eurodollars refers to A) obsolete currency that was formerly backed by the gold standard. B) a worldwide currency system that is expected to someday replace existing currency systems. C) American dollars held by banks in other countries, especially in Europe. D) European currency held in U.S. banks.

c

Under Rule 144, which of the following sales are subject to volume limitations? Control person selling registered stock held for one year Control person selling restricted stock held for two year Nonaffiliate selling registered stock held for one year Nonaffiliate selling restricted stock held for two year A) III and IV B) II and IV C) I and II D) I and III

c

Under the Uniform Securities Act, investment advisory contracts A) cannot be assigned without the Administrator's approval. B) are cancelable without penalty for 48 hours after the customer signs. C) must contain a description of fees. D) must list each state in which the adviser is registered.

c

Which of the following funds would you recommend to a moderate-risk client seeking long-term capital gains who also values professional stock selection? A) A small-cap growth fund B) S&P 500 Index fund C) A large-cap growth fund D) An international index fund

c

Which of the following is an example of a passive investment management style? A) Investment in small capitalization technology securities B) Use of index funds in conjunction with selecting specific securities in the index to overweight certain sectors C) Value investing D) Exclusive use of index funds

d