Series 65: Simulated Exam 6

An account where a securities professional may invest the client's money without consulting the client about the amount or type of security for the trades that are placed for the account is known as A. an advisory account. B. a margin account. C. a discretionary account. D. a wrap account.

A discretionary account This is the basic definition of a discretionary account.

A client's portfolio consists of holdings in long-term U.S. Treasury bonds and Treasury notes. Of least concern to this investor would be A. interest rate risk B. purchasing power risk C. market risk D. credit risk

Credit risk Securities issued by the U.S. Treasury are, at least for exam purposes, free of default or credit risk, but, as with all fixed-income securities, are subject to interest rate risk and inflation or purchasing power risk. Any marketable security is subject to market risk.

One of the features of broker-dealers is that they sometimes maintain an inventory of securities, even when not in the role of market maker. If a broker-dealer has shares of a somewhat speculative, thinly traded stock in its inventory whose last reported trade was several days ago at $4 per share and the firm were to offer its shares at $10 per share, the NASAA Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents might consider this A. not prohibited because with thinly traded stocks, one expects there to be a wide spread B. may only be done if the broker-dealer makes adequate disclosure to clients who purchase the stock C. prohibited because broker-dealers may not offer stock to the public from their own inventory D. prohibited because the offering price does not bear a reasonable relationship to the current market

Prohibited because the offering price does not bear a reasonable relationship to the current market Yes, it is always possible that in just a couple of days, this company's stock may have increased by 150%, ($6 gain on a cost of $4 is 1.5 times or 150%) but there is nothing in the question to indicate that. Yes, thinly traded stocks tend to have wider spreads, but not like this.

The interest from which of the following bonds is exempt from federal income tax? 1. State of California bonds 2. City of Anchorage bonds 3. Treasury bonds 4. GNMA bonds

State of California bonds and City of Anchorage bonds Municipal bonds are exempt from federal income tax. Treasury bonds are exempt from state tax but not federal tax. GNMAs are subject to federal, state, and local income tax.

When cash flow of a business is negative, all of the following are true except A. the company may struggle to pay its bills. B. the company might have a hard time figuring out how to cover expenses it hasn't budgeted for. C. the company might not be agile enough to respond to new opportunities. D. the company will probably increase its dividend.

The company will probably increase its dividend The basic definition of negative cash flow is when a business does not have enough cash on hand to pay its immediate outstanding bills. It certainly would not be the time to increase its dividend. In fact, the dividend might be cut or even eliminated. Negative cash flow may also lead to the company being unable to take advantage of a business opportunity and meeting emergencies.

If a business fails because a new technology makes its products obsolete, this is an example of A. inflation risk B. unsystematic risk C. interest rate risk D. systematic risk

Unsystematic risk Unsystematic (business) risk is the danger inherent in conducting the operations of the business itself. Technology companies are especially sensitive to business risk as a result of competing technologies. Systematic (market risk) refers to risk of the overall market. Inflation risk refers to the loss of buying power as the result of the increase in prices. Interest rate risk is the danger that interest rates will increase, causing a fixed-income security to decline in price.

If a federal covered adviser's fiscal year ends on November 30, 2022, it must file its annual updating amendment to its Form ADV no later than A. March 30, 2023. B. January 18, 2023. C. December 31, 2022. D. February 28, 2023.

February 28, 2023 The annual updating amendment to Form ADV must be filed within 90 days of the adviser's fiscal year-end.

Debts that will come due more than one year after the date on the balance sheet are known as A. accounts payable. B. current liabilities. C. fixed (or long-term) liabilities. D. deferred charges.

Fixed (or long-term) liabilities Debts that will come due more than one year after the date on the balance sheet are known as fixed (or long-term) liabilities. Current liabilities are debts that may come due within one year from the date on the balance sheet.

It is not uncommon for many federal covered advisers to be affiliated with a broker-dealer. Take the case where an IAR with a federal covered adviser is also an agent with a broker-dealer. When dealing with advisory clients, all of the following are true except A. the IAR must disclose that he is liable for any losses suffered in the account due to poor portfolio performance. B. the IAR must disclose that the advisory services he offers are separate from the broker-dealer. C. the IAR must disclose that trades will be executed through his broker-dealer unless the client elects otherwise. D. the IAR must disclose that he may earn commissions in addition to the fees charged for advice.

The IAR must disclose that he is liable for any losses suffered in the account due to poor portfolio performance Full disclosure of all possible conflicts of interest must always be made. However, registered persons can never assume liability for losses due to poor portfolio performance.

Despite management's best efforts, a corporation with stock traded publicly on the New York Stock Exchange has had to declare bankruptcy and is being forced to liquidate its assets. The liquidation priority is determined by A. the date of the claim. B. the Securities and Exchange Commission (SEC). C. last-in, first-out (LIFO). D. the seniority of the claim.

The seniority of the claim The seniority of the claim refers to senior (secured) debt which has the highest priority among security holders in a bankruptcy case. The SEC (or the exchange) has nothing to do with it; we're dealing with federal (sometimes state) bankruptcy law.

One of your firm's portfolio managers is discussing risk that can be reduced during the portfolio construction process. Which of the following options might she be referring to? A. Market risk B. Systematic risk C. Unsystematic risk D. Credit risk

Unsystematic risk Unsystematic risk (diversifiable risk) is the risk that is eliminated when the investor builds a well-diversified portfolio. Credit risk is a form of unsystematic risk.

Which of the following is not a standard used to determine whether a particular mutual fund is suitable for an individual investor? A. Whether the investment is made directly through the fund itself or through a broker-dealer B. Components of an investor's current portfolio C. The amount of time elapsing between the deposit of the investment and the investor's anticipated use of the funds D. The investor's estimated tolerance for risk and volatility

Whether the investment is made directly through the fund itself or through a broker-dealer Whether a mutual fund is offered through the issuer or through broker-dealer channels is not a suitability determinant. However, time horizon, risk tolerance, and existing portfolio components help determine investment suitability.

A corporation ends its accounting year on September 30. It would be correct to state that it uses A. a fiscal year. B. an accounting year. C. an alternative year. D. a nine-month year.

A fiscal year Fiscal-year accounting is the term used to describe whenever an entity ends its accounting year on a date other than December 31.

If an investor was of the opinion that the market was going to have a bad day, to maximize that investor's gains, you might recommend A. selling a call option on the S&P 500 Index. B. an inverse ETF. C. a leveraged ETF. D. an inverse leveraged ETF.

An inverse leveraged ETF An inverse ETF should go up if the market goes down. Adding leverage to it means moving by a factor of 2x or 3x, so to maximize the potential gain, we combine leverage to the inverse and suggest the inverse leveraged ETF.

Which of the following choices would best describe the investment style of an adviser who generally buys when the majority of other advisers are selling and sells when the majority of other advisers are buying? A. Negative correlation. B. Indexing. C. Buy and hold. D. Contrarian.

Contrarian As the term implies, a contrarian takes positions that are opposite the prevailing opinions.

Which of the following analyze corporate financial statements and trends in sales and income? A. Market timers B. Technicians C. Fundamentalists D. Chartists

Fundamentalists Fundamental analysts obtain information from corporate financial statements, as well as other relevant sources. Technical analysts review market charts, while fundamental analysts are concerned with the earnings ability of corporations derived from corporate financial statements.

As a registered investment adviser, you have managed $10 million of a customer's funds for several years. The customer asks you to prepare a trust for his children, to transfer $3 million of his funds into the trust, and to trade the trust with the same objectives as the existing account. You should A. refer the customer to an attorney that can set up the trust. B. tell the customer to contact a tax specialist. C. explain to the customer that trusts cannot be traded. D. prepare the trust, transfer funds, and begin investing.

Refer the customer to an attorney that can set up the trust The best choice is to have the customer contact a qualified attorney to set up a trust.

MaryBeth is the CEO of MBW Software Associates. MBW is having an offering of common stock to investors on an intrastate basis. Williamson has been telling potential investors that the registration of the stock indicates approval by the state. Under the Uniform Securities Act, she is committing misrepresentation of A. registration. B. material information. C. authorization. D. qualification.

Registration Stating that a securities offering has been approved by a regulatory body is misrepresentation of the registration of the security. As an intrastate offering, the registration format would be qualification, but that is not the misrepresentation here.

A high net worth individual wishes to know when a gift can be made this year without being obligated to pay gift tax. You would respond that there is no gift tax when the gift is made to A. a grandchild of the donor. B. a sibling of the donor. C. a non-citizen spouse. D. the American Red Cross.

The American Red Cross Gifts to recognized 501(c)(3) charities, such as the American Red Cross, are never subject to the gift tax. If the spouse is a non-citizen, there is a limit ($164,000 in 2022) and anything in excess of $16,000 to a grandchild or sibling is taxable unless the donor elects to use the excess against the lifetime exclusion ($12.06 million in 2020).

Under modern portfolio theory (MPT), all portfolios that can be constructed from a given set of stocks is referred to as A. the correlation coefficient B. the feasible set C. the capital market line D. the efficient set

The feasible set A feasible portfolio is defined as a portfolio that an investor can construct given the assets available. The feasible set is the collection of all feasible portfolios. Once we have the feasible set, we can select the efficient set (the most return for a given amount of risk, or the least risk for a given amount of return).

A customer owns cumulative preferred stock (par value of $100) that pays an 8% dividend. The dividend has not been paid this year or for the two previous years. How much must the company pay the customer per share before it may pay dividends to the common stockholders? A. $16 B. $24 C. $8 D. $0

$24 If the company is going to pay a common stock dividend, it must pay the preferred dividends first. A cumulative preferred stockholder must also receive all dividends in arrears. There are $16 due in back dividends, in addition to $8 this year, for a total of $24.

The fee charged by some mutual fund companies if shares are redeemed within a specified time after being purchased is known as A. a breakpoint fee. B. a 12b-1 fee. C. a forward pricing fee. D. a contingent-deferred sales charge.

A contingent-deferred sales charge Some mutual funds impose contingent-deferred sales charges (CDSC) on investors who redeem their shares within a specified period after purchasing them. These fees are designed to encourage investors to leave their money in the fund for longer periods. Typically, the amount of the contingent-deferred sales charge decreases the longer the investor owns the shares.

An economic indicator that has turning points that tend to occur after the turning points in the business cycle is classified as A. a trailing indicator. B. a lagging indicator. C. a coincident indicator. D. a leading indicator.

A lagging indicator Lagging indicators have turning points that occur after business cycle turning points. That is why they are called lagging indicators. Leading indicators are ahead of the cycle and coincident indicators parallel the cycle.

Which of the following is specifically excluded from the definition of investment adviser under the Investment Advisers Act of 1940, when that person's investment advice is solely incidental to the practice of their profession? A. Aeronautical engineer B. Financial planner C. Pension consultant D. Athlete's financial manager

Aeronautical engineer Lawyers, accountants, engineers, teachers, and broker-dealers who do not charge a separate fee for investment-related advice, when such advice is solely incidental to the practice of their profession, are excluded from the definition.

The current yield of a callable bond selling at a premium is calculated A. as a percentage of its call price. B. as a percentage of its market value. C. as a percentage of its par value. D. to its maturity date.

As a percentage of its market value Current yield for any security is always computed on the basis of the current market value.

Although there may be some slight differences in methodology, when S&P or Moody's evaluate a security in order to assign a rating, they would be least likely to consider the issuer's A. profitability ratio B. liquidity ratio C. cash flow to debt ratio D. asset turnover ratio

Asset turnover ratio What is the purpose of a security's rating? To inform investors of the financial risk of the investment. The higher the rating, the lower the risk. This is one of those questions that students answer correctly because all of the other choices are incorrect (they are important factors). Remember, this is a negative question: "least likely." Certainly profitability of the issuer is a key factor in assessing the safety of the issue. Liquidity and cash flow are important factors as well. The rate at which assets are turned over is not nearly as important to determining a rating as the other three.

Andrew voluntarily leaves his position as an agent with Gibraltar Securities. Which of the following best describes the reporting requirements relative to this termination? A. Only the firm must notify the Administrator, and it must do so within 30 days of Andrew's resignation. B. Both Andrew and the firm must notify the Administrator of Andrew's resignation promptly. C. Notification to the Administrator is not required, presuming that Andrew was not terminated for cause. D. Only Andrew must notify the Administrator, and it must do so within 30 days of his resignation.

Both Andrew and the firm must notify the Administrator of Andrew's resignation promptly On termination of an agent from a firm with which he is registered, both the agent and the firm must notify the Administrator of such termination promptly.

Which of the following is considered the most accurate method of measuring GDP? A. As a function of GNP B. Constant dollars C. Actual dollars D. Eurodollars

Constant dollars Constant dollars are mathematically adjusted to remove the effects of inflation, so when economists compare the gross domestic product of one period with that of another, they measure economic activity rather than inflation.

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. Contraction B. Recovery C. Expansion D. Peak

Contraction Downturns in the business cycle (a contraction) tend to be characterized by rising inventories due to a lack of consumer demand. During expansion or recovery, demand is high and goods are less likely to remain in inventory.

According to the Uniform Securities Act, which of the following is an example of market manipulation? A. Omitting material facts in a presentation B. Guaranteeing performance of a security C. Transactions in excess of a customer's financial capability D. Creating the illusion of active trading

Creating the illusion of active trading Creating the illusion of trading activity is market manipulation. Guaranteeing performance of a security and omitting material facts are prohibited practices but do not constitute market manipulation. Trades too large for a customer are also prohibited because they are not suitable.

Which of these is not considered to be a systematic risk? A. Purchasing power risk B. Default risk C. Exchange rate risk D. Market risk

Default risk Recall the P.R.I.M.E. acronym for systematic (or nondiversifiable) risk: Purchasing power, Reinvestment, Interest rate, Market, and Exchange rate risks. Default or credit risk is a form of unsystematic (or diversifiable) risk.

Under the USA, when one is referring to a security that is guaranteed, the guarantee applies to which of these? 1. Capital gains to be expected by holding the specified security 2. Dividends to be paid on the specified stock 3. Interest and principal payment on the specified bond 4. Reimbursement by the firm for any losses suffered while holding that security

Dividends to be paid on the specified stock & interest and principal payment on the specified bond The USA defines the term guaranteed when referring to a security as meaning guaranteed as to payment of principal, interest, or dividends.

One of your clients is in the process of forming a new business venture with a friend and is considering whether to operate as a general partnership or a C corporation. Among the advantages of operating as a general partnership are 1. ease of dissolution 2. ease of raising additional capital 3. flow-through of income or loss 4. limited liability

Ease of dissolution and flow-through of income or loss Unlike a C corporation, operating income or losses of a general partnership flow through directly to the partners. There are several easy ways to dissolve a partnership. However, they do not offer the limited liability protection of a corporation. The corporate form of business is generally the most suitable for raising additional capital.

In making suitable investment recommendations, the least significant element would be the client's A. current income B. retirement needs C. educational level D. death and disability needs

Educational level A client's educational level is not as important as retirement needs, death and disability needs, and current income. However, the agent should take note of the client's educational level to ensure that the client fully understands the investments recommended. Also, a person with a professional educational background may have more employment opportunities and be able to take more risk as a result.

A third-party post has been made on a broker-dealer's Facebook page. If the firm has involved itself in the preparation of the content, this would be known as A. disgorgement. B. misrepresentation. C. entanglement. D. replacement.

Entanglement The entanglement theory means the firm is or its personnel are entangled (take part in) the preparation of the third-party post. A similar concept is that of adoption. This is when the broker-dealer explicitly or implicitly endorsed or approved the content posted by the third party but had no role in its preparation.

Which of the following statements are generally true of the buy-and-hold strategy? 1. Equities would grow relative to fixed income 2. Lower taxes and transactional costs 3. Easy to manage 4. The portfolio would more accurately demonstrate the client's investment objectives and risk tolerance

Equities would grow relative to fixed income, lower taxes and transactional costs, & easy to manage Over the long run, using the buy-and-hold strategy with equity securities has outperformed the rate of return on fixed income investments. With few transactions, there are almost no commissions and capital gains taxes. Of all strategies, this is the easiest to follow. There is no way to determine the client's objectives or risk tolerance based on the decision to buy and hold. The portfolio might contain small-cap stocks or large-cap stocks. It might contain 90% equities or 75% debt securities. Investors with differing goals and risk tolerance can use this strategy.

The exchange privilege offered by open-end investment companies allows investors to A. delay the payment of taxes on shares. B. exchange shares of one open-end fund for another in the same fund family at a net asset value basis. C. purchase new fund shares from dividends. D. exchange personally owned securities for shares of the investment company.

Exchange shares of one open-end fund for another in the same fund family at a net asset value basis Exchange privileges allow an investor to convert the value of shares held in one fund for those of an equal value in the same family. Remember that conversion is a taxable event; if the shares converted have increased in value, capital gains taxes will be due.

The capital asset pricing model (CAPM) is most commonly used to determine an investor's A. time-weighted return B. holding period return C. risk-adjusted return D. expected return

Expected return The CAPM suggests that we can determine the expected return of any security (or portfolio) by using the following mathematical formula: Er = Rf + Beta(expected return on the market − Rf). Er stands for expected return, Rf is the risk-free return. Remember, expected return is a form of risk-adjusted return and is the more specific answer to this question.

Which of these industries would be considered defensive in the face of a recession? A. Trucking B. Real estate construction C. Food producer D. Automobile manufacturing

Food producer Defensive industries are least affected by normal business cycles. Companies in defensive industries generally produce nondurable consumer goods, such as food, pharmaceuticals, tobacco, and energy. Public consumption of such goods remains fairly steady throughout the business cycle. During recessions and bear markets, stocks in defensive industries generally decline less than stocks in other industries.

If a customer is in the 15% federal income tax bracket and his main investment objective is current income, which of the following securities should the agent recommend? A. U.S. government bond. B. City of Milwaukee GO bond. C. Investment-grade corporate bond. D. Zero-coupon bond.

Investment-grade corporate bond The investor is in a low tax bracket, so the tax-exempt municipal bond is not a suitable investment. To maximize income, the best recommendation is the corporate bond which offers a higher yield than a government bond with a similar maturity.

Kapco Advisers registers with the Administrator on April 1. Pete Patel, an IAR with Kapco, registers on the same day. Both of them file renewal papers, accompanied by the appropriate fees, on March 31 of the following year. Which of the following statements are true? 1. Kapco's renewal was timely. 2. Kapco's renewal was late. 3. Patel's renewal was timely. 4. Patel's renewal was late.

Kapco's and Patel's renewal time was late Regardless of when initial registration occurs, the renewal date for all professionals is December 31.

Your married customers are both 42 years old, have 2 children ages 14 and 12, and have spent the past 10 years accumulating money to provide for their children's education. Their oldest child will enter college in 4 years, and the customers are very cautious investors. If they need a safe investment that provides regular income to help them meet tuition payments, which of the following mutual funds is the most suitable for these customers? A. RST Balanced Fund B. ATF Overseas Opportunities Fund C. ABC Stock Index Fund D. LMN Investment-Grade Bond Fund

LMN Investment-Grade Bond Fund These clients cannot afford a downturn in the stock market between now and the time they want to send their children to college. An investment-grade bond fund will provide the income and safety required for accumulating additional funds for college expenses.

A client of a brokerage firm purchases 100 shares of ABC common stock at a price of $50 per share. On settlement date, the firm journals $2,500 from the client's money market account to pay for the trade. No further call for money is made. This trade must have taken place in a A. wrap fee account B. margin account C. cash account D. depository account

Margin account When a purchase is made and only 50% of the cost of the transaction is required, the trade is being made on margin.

Which of the following is federally tax exempt for a corporation? A. Preferred stock dividends B. Capital gains C. Foreign corporate stock dividends D. Municipal bond interest

Municipal bond interest Municipal bonds are tax exempt for corporations, as well as for individuals. Preferred stock dividends are taxable but at a reduced rate for corporations due to the 50% dividend exclusion. That break does not apply to the dividends on foreign securities. Regardless of the security, capital gains are taxable.

Which of the following practices is prohibited under the Uniform Securities Act? A. Failing to inform the firm's principal of frequent verbal customer complaints B. Offering services that an agent cannot realistically perform because of his broker-dealer's limitations C. Altering the customer's order at the request of a customer, which subsequently results in a substantial loss D. Participating in active trading of a security in which an unusually high trading volume has occurred

Offering services that an agent cannot realistically perform because of his broker-dealer's limitations An agent may not offer services that he cannot perform. An agent may participate actively in trading a security in which an unusually high trading volume has occurred, provided the trading is not designed to create a false appearance of high volume. An agent is only required to report written complaints to his employing principal, although it would be wise to report repeated oral complaints if they are serious.

Which of the following statements is not true? A. The sale of open-end investment company shares is a continuous public offering and must be accompanied by a prospectus. B. Mutual fund shares may not be purchased on margin because their shares are always public offerings of new shares. C. Mutual funds may be used as collateral in a margin account if they have been owned for more than 30 days. D. Open-end investment companies must have a minimum of $1 million in assets to have a public offering.

Open-end investment companies must have a minimum of $1 million in assets to have a public offering. Minimum assets of $100,000 are required.

Which of the following statements about equity securities is not true? A. Preferred stock is usually nonvoting. B. Common stock is less sensitive to interest rate risk than preferred stock. C. Preferred stock is an equity security while common stock is a hybrid. D. Preferred stock pays a fixed dividend.

Preferred stock is an equity security while common stock is a hybrid Both common and preferred stock are equity securities. Common stock is never referred to as a hybrid; there are times when preferred stock is because of those features that are similar to a debt security. The dividend on preferred stock is fixed, and shares do not have voting rights. The price of a common share generally doesn't fluctuate with changes to interest rates in the same manner as that of preferred stock.

An agent receives a check in the mail from a client. The check was made out to the agent in error and the client who has left the country cannot be reached for several weeks. To prevent a margin call, the agent deposits the check in his personal account and simultaneously deposits a check for the same amount into the client's account. The state Administrator would consider this action to be which of the following? 1. Prohibited. 2. Permissible. 3. Commingling. 4. Borrowing.

Prohibited and commingling The agent has violated the Policy by commingling client funds with his personal funds. This practice is prohibited regardless of the situation.

When contrasting preemptive rights and warrants, it would be correct to state that, at issuance, A. rights have time value while warrants have intrinsic and time value. B. rights have intrinsic and time value while warrants only have intrinsic value. C. rights have intrinsic and time value while warrants only have time value. D. rights have intrinsic value while warrants have intrinsic and time value.

Rights have intrinsic and time value while warrants only have time value At the time of issuance, preemptive rights always offer the stock at a price below the current market, thus creating intrinsic value. Although rights rarely are effective for longer than 45-60 days, that does represent time value. On the other hand, warrants are always issued with an exercise price above the current market (no intrinsic value) but do have time value.

Although bonds are issued by many different entities, most of their features are the same. With few exceptions, included in that list of similarities would be all of these except A. price movement that is inverse to interest rates. B. safety of principal. C. a stated maturity date. D. a stated interest date.

Safety of principal The safety of principal largely depends on the issuer. For example, there are no bonds as safe as U.S. Treasury bonds. On the other hand, there are some corporate bonds that are quite speculative. In general, all bonds have a stated maturity date , interest rate, and interest payment date, and they are exposed to interest rate risk. That is the risk that as interest rates rise, the price of the bonds will decline.

Serendipity Asset Planning (SAP) is a covered investment adviser doing business in 48 states. Alicia Adams is an IAR with SAP and splits her time between an office in state X and state Z. Adams has retail clients as follows: 10 clients in state W 30 clients in state X 65 clients in state Y 4 clients in state Z Adams would have to register as an IAR in A. states W and Z. B. states W, X, and Y. C. states X and Y. D. states X and Z.

States X and Z In the Investment Advisers Act of 1940, it states that "no law of any State requiring the registration, licensing, or qualification as an investment adviser or supervised person of an investment adviser shall apply to any person that is registered under section 203 as an investment adviser, or that is a supervised person of such person, except that a State may license, register, or otherwise qualify any investment adviser representative who has a place of business located within that State." Therefore, when employed by a covered adviser, the only time that state registration is required is when the individual functioning as an IAR has a place of business in the state. Had this been an IAR with a state-registered adviser, registration in all of the states would have been required (the de minimis exemption would not apply to state Z because the IAR has a place of business there).

An investment adviser registered in State A decides it wishes to maintain custody of customer assets. As long as the securities laws of State A do not prohibit custody, the investment adviser would have to promptly notify A. the Administrator by filing an amended Form ADV that it is going to maintain custody. B. the Administrator electronically (email) that it is going to maintain custody. C. the Administrator in a letter that it is going to maintain custody. D. the SEC on Form ADV that it is going to maintain custody.

The Administrator by filing an amended Form ADV that it is going to maintain custody The notification to the Administrator (as a state-registered IA—the SEC has nothing to do with this) must be made promptly by amending Form ADV.

Ebony sets up a revocable trust, naming her daughter, Sylvia, as the sole beneficiary. Ebony has appointed the Pacific Atlantic Trust Institution (PATI) as the trustee. Any income to the trust will be taxable to A. the trustee. B. the beneficiary. C. the trust. D. the grantor.

The grantor In almost all cases, income received into a revocable (grantor) trust, whether distributed or not, is taxable to the grantor. Things are different when the trust is irrevocable, but much more complicated and not likely to be tested.

In the formula for determining the real rate of return, A. the marginal tax bracket is subtracted from the investment return B. the investment return is divided by the inflation rate C. the inflation rate is divided by the investment return D. the inflation rate is subtracted from the investment return

The inflation rate is subtracted from the investment return In computing the real rate of return, which represents inflation-adjusted compounding (or discounting), a formula is applied in which the rate of inflation (usually as measured by the CPI) is subtracted from the investor's rate of return.

An investment advisory firm requires all new clients to complete a 4-page questionnaire before conducting the first meeting. This would be known as A. the information-gathering stage. B. fulfilling the requirements of the CIP. C. the client disclosure document. D. the investment adviser's brochure.

The information-gathering stage The first step in any adviser's relationship with a client is information gathering. A popular way of doing this is by using a questionnaire.

Which of the following statements regarding ADRs are true? 1. The securities are vehicles used to facilitate U.S. trading of foreign securities. 2. Dividends are received in the foreign currency. 3. Holders have foreign currency risk. 4. The receipts are issued by a foreign branch of a domestic bank.

The securities are vehicles used to facilitate U.S. trading of foreign securities and holders have foreign currency risk ADRs are vehicles that facilitate U.S. trading of foreign securities. They are issued in English in the United States by domestic banks. Dividends are declared in the foreign currency but are payable to holders in U.S. dollars, which means that ADR holders are subject to foreign currency risk.

Which of the following statements regarding ADRs are true? 1. They are issued by large domestic commercial banks. 2. They are issued by foreign banks. 3. They facilitate U.S. trading in foreign securities. 4. They facilitate a foreign investor who wants to trade U.S. securities.

They are issued by large domestic commercial banks and they facilitate U.S. trading in foreign securities ADRs are issued by large domestic commercial banks to facilitate U.S. investors who want to trade in foreign securities.

The policyholder could surrender a whole life insurance policy and choose from all the following except A. using a Section 1035 exchange to purchase an immediate annuity. B. transferring the insurance coverage to another person. C. ceasing payment of premiums and using the accumulated cash value to provide an extended term-life policy. D. surrendering the policy and taking the cash value.

Transferring the insurance coverage to another person Although ownership of a life insurance policy may be transferred (think ILIT), a policyholder cannot appoint another individual as the insured. Among the many options available are the right to surrender the policy and take the cash value. Another option is to stop paying the premiums and have the insurance company use the accumulated cash value to provide the policyholder with extended term insurance. The face value remains the same and the policy lasts as long as the cash value supports the premiums. Section 1035 of the Internal Revenue Code permits the tax-free transfer of insurance cash value into an annuity, variable or fixed.

One of your ultra-high net worth clients would like to give some low cost basis stock as gifts to her adult grandchildren. It would be prudent for you to tell her that A. unlike an inheritance, there is no stepped-up cost basis. B. it would be wise for her to use a TOD account to avoid probate. C. making the gift under the Uniform Transfer to Minors Act is generally the most advantageous for the child. D. for purposes of the gift tax, her cost basis will be used.

Unlike an inheritance, there is no stepped-up cost basis One of the benefits of inheriting low cost basis securities is the stepped-up basis and that does not apply to gifts. Although the donor will not be the one subject to capital gains tax, it would be the right thing to do to let her know that the donees (her grandchildren) will be receiving the stock at her cost basis. TOD would not apply to stock that is the subject of a gift; it is only when the stock remains in the grandmother's name and has been designated for the grandchildren after her death. When computing the value of a gift to determine if there is a gift tax obligation, it is the fair market value of the gift that is used. Finally, the question states these are adult grandchildren; UTMA would not apply to them.

Tactical Evaluation and Research (TEAR), a federal covered investment adviser, suggests the purchase of stock in a major tobacco company. The client explains that he doesn't want to invest in tobacco stocks because his father passed away from lung cancer. What kind of reason is this? A. Geographic B. Environmental C. Economic D. Values

Values Because of the negative association with tobacco, this client's values are such that he would avoid owning stock in a tobacco company. Why not environmental? That isn't specific enough because growing tobacco is not an environmental issue and this client's personal experience has shaped his values.

A bond is paying $100 per year in annual interest and is selling at par. If the discount rate is 10%, the net present value is A. negative B. zero C. the same as the coupon D. positive

Zero A bond paying $100 in interest per year has a coupon rate of 10%. Whenever the coupon rate is equal to the discount rate, the NPV is zero. That is, the present value of a bond paying 10% interest when the current market rate is demanding a 10% interest rate is the bond's par value (as is the case with this bond).

An investment adviser reviewing the past performance of a portfolio observes that annual returns have been +6%, +11%, -5%, +8%, +14%, +1%, and +7%. From this information, the adviser would determine that the median value was A. 7.0% B. 19.0% C. 6.0% D. 7.4%

7% The median of a set of numbers is the one in the middle. That is, the number with an equal number of values above and below. It is easiest to compute if the numbers are presented in ascending values. In this question, we have -5, +1, +6, +7, +8, +11, and +14. This way, it is plain to see that 7 has 3 values below and 3 values above.

Among the effects of a country devaluating its currency is that there will probably be which of these? 1. A credit to that nation's trade account balance 2. A debit to that nation's trade account balance 3. An increase in that nation's exports 4. An increase in that nation's imports

A credit to that nation's trade account balance and an increase in that nation's exports When a currency is devalued by a country, it means that foreigners will find their money has more buying power in that country. Therefore, it would be expected that foreigners would buy more goods produced in that country, causing an increase in exports. Those exports result in a credit to the country's trade account balance.

When a broker-dealer acts in the capacity of a principal in a trade, the firm has acted A. as a contra party to the trade B. in an unethical manner C. as an agent D. for the benefit of the client

As a contra party to the trade In every trade, there are 2 principals—the buyer and the seller. If the broker-dealer is one of the principals (either buyer or seller), the firm is the contra party to the other side of the trade.

A company's dividend on its common stock is A. determined by its board of directors. B. voted on by shareholders. C. mandatory if the company is profitable. D. specified in the company charter.

Determined by its board of directors A common stock's dividend payment and amount are determined by the company's board of directors.

Before taking any disciplinary action with respect to a registration under the Uniform Securities Act, the Administrator must always do which of the following? 1. Obtain the approval of the appropriate state court. 2. Find that the action is in the public interest. 3. Cite a cause listed in the act.

Find that the action is in the public interest and cite a cause listed in the act Disciplinary actions with respect to registration may be taken by the Administrator after a finding of public interest and cause. Court orders are required only for legal action, such as seeking an injunction or appointment of a receiver over an adviser's assets.

Which of the following statements is not true? A. Limited partners are not liable for funds in excess of the amounts they have invested or otherwise committed for. B. Management of the enterprise is solely within the jurisdiction of the general partner(s). C. It is the general partners rather than the limited partners who bear the liability for partnership debt. D. Limited partners have the option to actively manage the business operations.

Limited partners have the option to actively manage the business operations Limited partners are passive investors in a partnership whose liability is limited to the amount of funds they have invested and committed to but have not yet contributed. They do not manage the funds in the partnership; the general partner has that responsibility.

How quickly must a broker-dealer notify the Administrator if material information relating to that broker-dealer's registration should change? A. Within days B. Promptly C. No later than the time of license renewal D. Within 24 hours

Promptly If the information contained in any document filed with the Administrator is or becomes inaccurate or incomplete in any material respect, the registrant must file a correcting amendment promptly.

A risk-averse client, living in the United States and holding a high proportion of his assets in cash and cash equivalents in U.S. dollars, is exposed to which of the following risks? A. Purchasing power risk B. Market risk C. Exchange rate risk D. Reinvestment rate risk

Purchasing power risk Although cash and cash equivalents (money market instruments) may assist in managing liquidity risk, they do have purchasing power, or inflation risk, because they have limited opportunity for capital appreciation. Exchange rate, (currency risk) risk does not apply because this is a U.S. client with investments denominated in dollars. There is no market risk to cash and virtually none to cash equivalents. There is nothing to reinvest with cash, and the returns and maturities on cash equivalents are such that reinvestment risk is not a concern.

Alex is planning on registering as an agent for a broker-dealer. Which of the following would be the least likely requirement for a successful application? A. Taking and passing an examination B. Submitting fingerprints C. Filing an application for registration D. Paying the filing fees

Submitting fingerprints Fingerprints are not a specific requirement of the Uniform Securities Act. We know we are dealing with state law because the term agent is used, and that term describes representatives of broker-dealers under state law. This is one of those cases where you have to remember this is a NASAA exam, not a FINRA exam (where fingerprints are generally required).

There are waivers from the Series 65 exam requirement for certain professional designations. Among those qualifying for the waiver are individuals who have which designation? A. CIMA B. PhD in economics C. ChFC® D. MBA in finance

ChFC® There are waivers from the Series 65 exam requirement for certain professional designations. In general, the following designations allow for a waiver of the exam requirement: CFP®—CERTIFIED FINANCIAL PLANNER™ (granted by the CFP Board of Standards) CIC—Chartered Investment Counselor (granted by the Investment Adviser Association) ChFC®—Chartered Financial Consultant® (granted by the American College of Financial Services) PFS—Personal Financial Specialist (granted by the American Institute of Certified Public Accountants) CFA®—Chartered Financial Analyst® (granted by the Chartered Financial Analyst Institute)

The price of which of the following will fluctuate most with fluctuating interest rates? A. Common stock B. Long-term bonds C. Money market instruments D. Short-term bonds

Long-term bonds Because of its longer duration, long-term debt prices will fluctuate more than short-term debt prices as interest rates rise and fall. When buying a debt instrument, one is really buying the interest payments and final principal payment. Money has a time value: the longer it takes to receive the money, the less it is worth today.

Which of the following is not affected by the issuance of a bond? A. Shareholders' equity B. Total liabilities C. Assets D. Working capital

Shareholders' equity When bonds are issued, cash is received (thus increasing current assets) and long-term debt increases (increasing total liabilities). Because there is no corresponding increase in current liabilities, working capital increases. There is no effect on shareholders' equity because the increased liability is offset by the asset (cash) received.

Nonsecurities derivatives include futures and forwards. Among the differences between futures and forwards is that futures contracts A. are nonstandardized, while forwards are. B. are rarely exercised, while forwards generally are. C. are not regulated by the CFTC, while forwards are. D. are preferred to forwards by producers.

Are rarely exercised, while forwards generally are In the vast majority of the cases, futures contracts are closed out prior to expiration. That is one reason they are more popular with speculators than forwards. Because forwards are generally delivered, they are the preferred tool by producers, and it is futures that are standardized and CFTC regulates, not forwards

Earnings momentum would be important to an analyst using which of the following portfolio management styles? A. Buy and hold B. Tactical C. Growth D. Value

Growth Growth managers are looking for companies whose earnings are growing at an increasing rate. That is the basic definition of earnings momentum.

One measure of a corporation's liquidation value is its book value per share. When performing this computation, the value of which of the following would normally be subtracted from the corporation's net worth? 1. Cash 2. Wages payable 3. Patents 4. Preferred stock

Patents and preferred stock The computation of book value per share is basically net tangible worth per share of common stock. Therefore, we subtract both the par value of the preferred stock and the value listed on the balance sheet for the intangible assets, such as patents. The key to this question is recognizing that it is looking for those items that would be subtracted from a corporation's net worth to arrive at the book value per share. There are several ways to calculate the book value per share of a corporation's common stock. One is to take the company's net worth (total assets minus total liabilities) and subtract the par value of the outstanding preferred stock and the value assigned to the intangible assets, such as goodwill. This is the method used to solve this question and is why the wages payable are not included in the correct answer (they've already been subtracted in the net worth calculation). Alternatively, we can take the tangible assets (total assets minus the intangible assets) and subtract the total liabilities and the par value of the preferred stock. Yet a third way would be to take the net tangible assets (net worth minus the intangible assets) and subtract the par value of the preferred stock. Using some numbers in an example, here is how each of these three would look. Total assets: $20 million Total liabilities: $8 million Goodwill: $1 million Par value of outstanding preferred stock: $2 million Number of shares of common stock outstanding: 3 million Method #1: The net worth is $12 million (20 - 8). Subtract the goodwill ($1 million) and the preferred par value of $2 million to get a total of $9 million. Divide the $9 million by the 3 million common shares outstanding, which results in a book value per share of $3. Method #2: Tangible assets of $19 million (20 - 1) minus the to

A bond's yield to maturity is A. the annualized return of a bond if it is held to maturity. B. determined by dividing the coupon rate by the bond's current market price. C. the annualized return of a bond if it is held to call date. D. set at issuance and printed on the face of the bond.

The annualized return of a bond if it is held to maturity The yield to maturity is the annualized return of a bond if it is held to maturity. The computation reflects the internal rate of return and is frequently referred to as the market required rate of return for a debt security. The rate set at issuance and printed on the face of the bond is the nominal or coupon rate. Dividing the coupon rate by the current market price of the bond provides the current yield. The return of a bond if it is held to the call date is the YTC.

When dealing with suitable recommendations to clients, it is important to distinguish between investment objectives and investment constraints. Which of the following would be an investment objective rather than a constraint? A. Need for liquidity B. Current income C. ESG investing D. Tax considerations

Current income The objective is the route you wish to take. The constraints are what might keep you from getting there. The client who has current income as an objective needs to consider the potential obstacles (constraints) in the way. ESG (environmental, social, and corporate governance) represent attitudes. The investor's personal attitude towards certain industries may limit the universe of potential investments. The same is true when the need for liquidity is high. Taxes are another potential roadblock to overcome.

Which of the following statements under the Investment Company Act of 1940 is true? A. Investment companies are prohibited from owning more than 5% of another investment company's shares. B. Mutual funds furnish financial reports to shareholders at least annually. C. Mutual funds must file semiannual reports with the SEC. D. Holding companies are not included in the definition of an investment company.

Holding companies are not included in the definition of an investment company The act lists three different types of investment companies: face-amount certificate companies, unit investment trusts, and management companies. Holding companies—business entities that invest in other companies for the purpose of management control—are not included in the definition. The limit on investment in another investment company's shares is 3%, not 5%. Section 30(d) of the act requires semiannual reports from the fund to its shareholders and an annual filing with the SEC.

Which of the following would make a corporate bond more subject to liquidity risk? 1. Short-term maturity 2. Long-term maturity 3. High credit rating 4. Low credit rating

Long-term maturity and low credit rating Liquidity risk is the risk that when an investor wishes to dispose of an investment, no one will be willing to buy it, or that a very large purchase or sale will not be possible at the current price. The available pool of purchasers for bonds with a low credit rating is much smaller than for those with investment-grade ratings (many institutions are only able to purchase bonds with higher credit ratings). As a result, the lower the credit rating, the greater chance of the bond having liquidity issues. Similarly, bonds with short-term maturities attract many more investors than those with long-term maturities, causing the long-term bonds to be less liquid.

Caroline considers her investment skills to be much greater than they actually are. She takes credit for many decisions that have positive results but blames the economy when her investments do poorly. Caroline's behavior is an example of A. regret aversion. B. confirmation bias. C. anchoring. D. overconfidence.

Overconfidence Caroline's behavior is an example of overconfidence. Confirmation bias is paying attention to information that supports a preconceived opinion and poorly made decision, while disregarding accurate, unsupportive information. Anchoring is making irrational decisions based on information that should have no influence on the decision at hand. Regret aversion is when the investor prepares herself in such a way as to avoid distress over an adverse outcome.

The goal of modern portfolio theory (MPT) is to construct the most efficient portfolio. An efficient portfolio is one that offers A. the least risk for a given amount of return B. the highest correlation coefficient C. the lowest Sharpe ratio D. the most return for the most risk

The least risk for a given amount of return Under MPT, an efficient portfolio is one that manages risk to provide the optimum return. That is, for any given amount of return, the portfolio achieves that return with the lowest possible risk. Conversely, it can be stated that you receive the highest possible return with the lowest possible risk. Analysts using MPT are seeking a high Sharpe ratio.

Over the past 5 years, an investor's portfolio has shown returns of 6%, 4%, 11%, 10%, and 4%. Which of the following statements is correct? 1. The mean return is 7%. 2. The median return is 6%. 3. The mode is 4%. 4. The range is 7%.

The mean return is 7%, the median return is 6%, the mode is 4%, & the range is 7% The mean is the average return. Add these 5 numbers together, and the total is 35% over a 5-year period. That is an average (or mean) return of 7% (35 divided by 5). The median is the return that has as many above as below and, in this case, would be 6% (4, 4 below and 10, 11 above). The mode is the return that appears the most often and, with 2 of the 5 at 4%, that is the mode. The range is the difference between the highest and lowest returns. In this case, from the high of 11% to the low of 4% is a range of 7%.

Which of the following would be considered a security under the provisions of the Uniform Securities Act? A. An endowment contract issued by a life insurance company licensed to do business in the state B. A fixed annuity contract issued by a life insurance company not authorized to do business in the state C. A certificate of interest in a real estate limited partnership offering D. Gold bullion

A certificate of interest in a real estate limited partnership offering It is always best to remember what is not a security than try to remember all of the things that are. All insurance contracts, other than variable ones, are not securities. Commodities, including precious metals, are not securities.

If you were describing an investment that trades on an exchange with a price set by supply and demand, rather than its underlying value, it would be A. an open-end fund. B. a closed-end fund. C. a hedge fund. D. a forward contract.

A closed-end fund The stock of closed-end investment management companies trades on exchanges and, like any other exchange security, is priced based on supply and demand. Although closed-end funds compute their NAV, market forces determine price.

All of the following permit investments into various securities, such as stocks, bonds, and mutual funds except A. an HSA. B. a traditional IRA. C. an FSA. D. a Roth IRA.

An FSA Flexible spending accounts (FSAs) allow deductions from an employee's paycheck. That money is held by the company and is used to pay allowable claims by the employee. A health savings account (HSA) permits the employee to invest in a wide variety of securities. IRAs, traditional and Roth, have always permitted investment flexibility.

A customer's limit order to buy 500 shares of QRS at 60 is executed and the agent reports the trade execution to the customer. One hour later, the customer notices that QRS is down 2 points and informs the agent that he no longer wants the stock and is not planning to pay for it. The agent should tell the customer that A. he may sell the stock at the purchase price in the open market B. the firm will repurchase the securities from the customer for the price paid C. he owns the stock and must submit payment D. he personally will repurchase the securities from the customer for the price paid

He owns the stock and must submit payment The customer has entered into a contract to purchase a security as soon as the order is executed. The customer owns the stock and must submit payment.

Which of the following statements is most accurate regarding employer-sponsored retirement plans? A. The employee in a defined benefit plan bears the shortfall risk. B. In a defined contribution plan, the payments received are related to the number of years of service and the individual's final salary. C. In a defined benefit plan, the payments provided are related to the contributions made and investment performance achieved. D. In a defined benefit plan, the client can have some reasonable certainty about the amount of income that will be received in retirement.

In a defined benefit plan, the client can have some reasonable certainty about the amount of income that will be received in retirement In a defined benefit plan, the client can have some reasonable certainty about the amount of income that will be received in retirement. The investment risk is borne by the employer rather than the employee. That is the case with the defined contribution plan

An investment adviser (IA) registered with the state is organized as a partnership. The IA may A. change its ownership structure without formally notifying its clients. B. not change its ownership structure without formally notifying its clients. C. not change its ownership structure under any circumstances. D. assign their contracts without client notification.

Not change its ownership structure without formally notifying its clients An investment adviser that is organized as a partnership, as opposed to a corporation, must notify its clients of changes in its ownership structure. An investment adviser organized as a corporation need not notify its clients of an organizational change. Investment advisers, whether partnerships or corporations, may not assign their advisory contracts to other advisers without the express written consent of the client.

Although the regulations permit a number of different methods of investment adviser (IA) compensation, it would not be considered proper for an IA to A. tell clients that the fee will be 5% of the profits that exceed a stated benchmark, but nothing if the benchmark is not reached. B. charge an annual fee equal to 1% of assets under management. C. charge $2,500 for developing a financial plan for a client. D. charge an annual fee equal to 1% of the first $250,000 in assets under management and 0.5% for all assets above that amount.

Tell clients that the fee will be 5% of the profits that exceed a stated benchmark, but nothing if the benchmark is not reached Performance-based fees are not allowed except under certain specified conditions, none of which exist in this question.

Senior Wealth Advisers (SWA) is registered as an investment adviser in North and South Carolina with offices in Charlotte, North Carolina and Charleston, South Carolina. On occasion, one of their investment adviser representatives meets with clients who reside in North Augusta, South Carolina in a hotel room in Augusta, Georgia. The registration requirements of the Uniform Securities Act would A. require that both SWA and the IAR register with the Georgia Administrator B. require that SWA register with the Georgia Administrator C. require that the IAR register with the Georgia Administrator D. not require registration of either person with the Georgia Administrator

Not require registration of either person with the Georgia Administrator The hotel room located in Georgia is being used only to meet with existing clients, so no registration in Georgia is necessary. If prospects were invited, registration of both persons would be required. What if only one or two prospects were invited? Wouldn't the de minimis exemption apply? No, because the moment a person who is not an existing client is involved, the hotel room becomes a place of business in the state and that eliminates use of the de minimis rule.

Many sophisticated investors have added alternative investments to their portfolios. Benefits in doing so include A. returns that almost always exceed those of traditional stock and bond investments. B. portfolio diversification. C. greater regulation than traditional investments such as stocks and bonds. D. lower expenses than traditional stock and bond investments.

Portfolio diversification Alternative investments, such as limited partnership vehicles and hedge funds, have a tendency to add diversification to a traditional stock and bond portfolio. Many alternative investments have little or no regulation, and their expenses are typically high. Although many alts offer the opportunity for higher returns, that opportunity is not always realized. Therefore, we cannot make a statement that the returns almost always generate higher returns than traditional investments.

In which of the following cases is the exemption from registration with the SEC not based on the value of assets under management? A. An investment adviser that acts as an adviser solely to private funds and has assets under management in the United States of less than $150 million B. An investment adviser that acts as an adviser solely to one or more venture capital funds C. An investment adviser that acts as an adviser solely to one or more national banks D. An investment adviser with assets under management of less than $25 million

An investment adviser that acts as an adviser solely to one or more venture capital funds It is only in the case of the adviser to venture capital funds where there is no dollar limitation on AUM. Private fund advisers with AUM of $150 million or more must register, and "small" investment advisers—those with less than $25 million in AUM—are generally prohibited from SEC registration. If the investment adviser's only clients are insurance companies, the adviser is exempt from SEC registration even if the firm has billions in AUM, but that exemption does not apply when the only clients are banks.

Which of the following would be considered an unethical business practice? A. Broker-dealers sending retail clients an email 30 days in advance of a change to fees B. Agents exercising discretion in discretionary accounts C. Agents correcting execution orders in their customer's accounts D. Broker-dealers charging larger-than-ordinary commissions on certain transactions

Agents correcting execution orders in their customer's accounts When a good-faith error is made, only the firm can make the correction; the regulators are concerned that giving that power to an agent could lead to covering up unethical activity. When the security involved in the trade is thinly traded (inactive), it is customary to charge a higher commission to cover the added expense. Broker-dealers are required to deliver a copy of their fee schedule no later than account opening. When changes are made, notice must be given at least 30 days in advance and may be done electronically (by email or posting on the firm's website).

Which of the following actions would not result in the denial or revocation of the registration of a security? A. The registration statement was found to be both incomplete and misleading. B. The provisions of the Uniform Securities Act were violated by persons filing the registration statement. C. The registrant's underwriters earned underwriting fees that were considered reasonable by the Administrator. D. The registrant engaged in illegal business operations.

The registrant's underwriters earned underwriting fees that were considered reasonable by the Administrator Underwriters may, and often do, earn lucrative underwriting fees; only fees considered excessive and unreasonable are prohibited. A registration statement that is incomplete or a misleading registration will result in denial of the registration. Illegal acts by the registrant (the issuer) or those filing the registration statement will lead to denial (if found before the registration is effective) or revocation (if discovered afterwards).

If a group of money managers was having a discussion and the term SOFR was mentioned, the topic would most likely be A. long-term borrowing rates. B. short-term borrowing rates. C. contract negotiations with the employee's union. D. current economic conditions in Liberia.

Short-term borrowing rates For more than 40 years, the London Interbank Offered Rate—commonly known as LIBOR—was a key benchmark for setting the interest rates charged on adjustable-rate loans, mortgages, and corporate debt. Over the last decade, LIBOR has been burdened by scandals and crises. Effective January 2022, LIBOR is no longer being used to issue new short-term loans in the U.S. It was replaced by the Secured Overnight Financing Rate (SOFR) which many experts consider a more accurate and more secure pricing benchmark. As is always the case with NASAA, we do not know when the exam questions will be updated. One thing we can promise you is that any question relating to this topic will not have both LIBOR and SOFR as choices, so you should choose whichever one appears.

Which of the following statements regarding standard deviation is true? A. Standard deviation is expressed in dollars. B. Two investments with the same expected return will not necessarily have the same level of risk and standard deviation. C. The smaller the deviation from the average performance, the riskier the investment becomes. D. Standard deviation quantifies expected return.

Two investments with the same expected return will not necessarily have the same level of risk and standard deviation Two investments can have the same expected return but have significantly different deviations. The investment with the larger standard deviation is the riskier of the 2 and will be more volatile even if the expected returns are the same. Standard deviation measures the deviation percentage from the average of the expected or historical returns of an investment. The larger the standard deviation, the riskier the investment. Standard deviation is not expressed in dollars, it is expressed in percentages.

Based on the SECURE Act 2.0, an individual who is 73 on November 15, 2023, has an IRA's first required minimum distribution date of A. December 31, 2024. B. April 1, 2024. C. April 1, 2025. D. December 31, 2023.

April 1, 2024 An individual's first required minimum distribution (RMD) is due by April 1 of the year after turning 73. In this question, that would be April 1, 2024. The second would be due by December 31 of that same year, and then by December 31 of each year thereafter. How do we know this is not a Roth IRA for which there are no RMDs? Because any IRA question is about a traditional IRA unless it specifies Roth.

A stock analyst viewing a corporation's income statement would not be able to determine the company's A. revenues. B. cash on hand. C. income. D. expenses.

Cash on hand The income statement reflects the firm's revenues (sales), expenses, and income. Assets, such as cash, are found on the balance sheet.

The terms mean, median, and mode are all measures of A. correlation coefficient B. standard deviation C. central tendency D. beta coefficient

Central tendency Central tendency is usually defined as the center or middle of a distribution. The three most common tools used are mean, median, and mode.

The RIF Corporation would not be able to issue A. RIF call options. B. RIF rights. C. RIF warrants. D. RIF common stock.

RIF call options Options contracts are not issued by the underlying asset. Technically, listed options (the only type that will be on the exam) are issued by the Options Clearing Corporation (OCC). A corporation issues common stock and can issue rights (preemptive rights) and/or warrants

Mr. and Mrs. Williams are a retired couple receiving most of their income from a diversified portfolio of high-quality bonds and preferred stock. One of the reasons that life insurance might be a useful addition to their overall planning is that A. the premiums can be paid directly from their brokerage account. B. the proceeds of a life insurance policy are free of income tax. C. dividends received on a life insurance policy are tax free. D. upon the death of the insured, the insurance provides liquidity to preserve income-producing assets from having to be liquidated to cover death expenses.

Upon the death of the insured, the insurance provides liquidity to preserve income-producing assets from having to be liquidated to cover death expenses Even for those whose estate is not large enough to incur estate tax, life insurance proceeds provide liquidity to cover the expenses incurred at death without having to sell assets out of the portfolio. It is true that the proceeds are free of income tax, but that is not the major reason to own life insurance.

An IAR has received several referrals from a prominent estate-planning attorney. Under the USA, the IAR would be permitted to A. open a managed account for the attorney and offer a discounted fee structure based on the frequency of referrals. B. compensate the attorney with a fee based on the assets placed under management as a result of these referrals. C. send a thank you note and nothing else. D. refer advisory clients who need estate planning to this attorney.

Refer advisory clients who need estate planning to this attorney Referrals from unaffiliated third parties are considered endorsements under the investment adviser marketing rule. Disclosures of any potential conflicts of interest must be made, and if there is any compensation paid for the endorsement, it must be noted as well. If the amount of the compensation, cash or non-cash, exceeds $1,000 over the preceding 12 months, a written agreement between the investment adviser and the endorser must be in effect.

The Investment Advisers Act of 1940 excludes from the definition of "investment adviser" persons whose advice: 1. relates solely to municipal issues. 2. relates solely to issues issued by or guaranteed by the U.S. Treasury. 3. is solely incidental to their professional practice as an aeronautical engineer. 4. is limited to insurance companies only.

Relates solely to issues issued by or guaranteed by the U.S. Treasury & is solely incidental to their professional practice as an aeronautical engineer Among the exclusions from the definition of" investment adviser "under both state and federal regulations is the case where certain professionals, including engineers, render the advice in a manner solely incidental to the practice of their professions. Unique to the federal law is the exclusion granted to those persons whose advice deals exclusively with federal government issued or guaranteed issues. Advice to solely insurance companies qualifies one for an exemption from registration, but does not exclude the person from the definition of IA.

When it comes to advertising by investment advisers and their representatives, which of the following would most likely be acceptable to the SEC? A. A paid testimonial from a nonaffiliated third party B. Showing past performance over the most recent 12 months of a group of securities selected from all of the adviser's recommendations C. A like from a client on an investment adviser representative's Facebook post that announced the birth of her most recent child D. Offering prospective clients a free 3-month trial to the investment adviser's special investment formula that ensures success

A like from a client on an investment adviser representative's Facebook post that announced the birth of her most recent child Although the SEC Model Rule for Investment Advisers has specific requirements for testimonials, it has been determined that a Facebook like for a non-business-related matter (such as the birth of a child, a wedding anniversary, or vacation photos) is not considered a testimonial. The rule is tricky in that it states that testimonials come from clients and third parties give endorsements. When showing past performance, an investment adviser cannot cherry-pick the ones it wishes to show—all recommendations of similar types of securities (all common stock or all bonds) must be shown. No securities professional can ever ensure investment success; that would be considered a performance guarantee.

All of the following statements concerning IRA contributions are true except A. contributions for the past year may be made after April 15, provided an extension has been filed on a timely basis B. contributions can be paid into this year's IRA from January 1 of this year until April 15 of next year C. if you pay your tax on January 15, you can still deduct your IRA contribution, even if not made until April 15 D. between January 1 and April 15, contributions may be made for the current year, the past year, or both

Contributions for the past year may be made after April 15, provided an extension has been filed on a timely basis Contributions can be made to an IRA only until the first tax filing deadline (April 15), regardless of having filed an extension.

As a fiduciary, the investment adviser representative (IAR) owes his clients an affirmative duty of utmost good faith, as well as full and fair disclosure of all material facts. This affirmative duty of disclosure is required by the IAR in all of the following situations except A. he has donated funds to a nonprofit medical research institute that owns securities that he has recommended. B. his family has a beneficial interest in a private medical equipment firm that he recommends to the client. C. he receives compensation from his employing broker for transactions that are executed through the brokerage house. D. the advice he is providing is outside the scope of his brokerage employment and is not under the control or supervision of his employer.

He has donated funds to a nonprofit medical research institute that owns securities that he has recommended The investment adviser representative (IAR) need not disclose that he donated funds to a nonprofit research institute. No conflict of interest is present that requires an affirmative duty to disclose. The fact that the institute owns securities consistent with the IAR's recommendations is not relevant to the IAR's relationship with the client. The IAR has an affirmative duty to disclose all material facts in all the other choices.

Unethical business practices of investment advisers include which of these? 1. Charging a client an unreasonable advisory fee 2. Guaranteeing a client that a specific result will be achieved as a result of advice that will be rendered 3. Recommending an investment to a client without reasonable grounds to believe the investment is suitable for that client 4. Continuing to exercise discretionary investment authority under an oral agreement with the client

Charging a client an unreasonable advisory fee, guaranteeing a client that a specific result will be achieved as a result of advice that will be rendered, recommending an investment to a client without reasonable grounds to believe the investment is suitable for that client, & continuing to exercise discretionary investment authority under an oral agreement with the client All of the following are unethical practices for investment advisers: charging a client an unreasonable advisory fee; guaranteeing a client that a specific result will be achieved with advice that will be rendered; recommending to a client an investment without reasonable grounds to believe the recommendation is suitable for the client; and exercising discretionary investment authority under an oral agreement with the client. While it is true that an investment adviser may trade using discretion and with oral approval for up to 10 days, that is only a convenience to be used while awaiting delivery of the written authorization.

Steve and Haley, ages 48 and 45, respectively, invest in large-cap stocks, international stock mutual funds, and real estate. They consider themselves moderately aggressive investors. Their investment portfolio is subject to all of the following risks except A. currency risk. B. systematic risk. C. default risk. D. business risk.

Default risk Their investment portfolio is subject to all of these risks except default risk. Default risk primarily applies when holding debt securities. A portfolio heavily concentrated in equity securities is going to have market (systematic) risk. Business risk is the risk that a company's managerial decisions or even factors out of its control, such as expiration of a patent, may negatively affect the value of an equity investment. By holding investments in international stock mutual funds, they are subject to exchange rate risk.

A federal covered investment adviser may enter into a contract with a client that provides for performance-based compensation under all of the following conditions except A. disclosure that the performance compensation may create an incentive for the adviser to take greater risks. B. the client must meet certain minimum financial standards. C. the formula used to calculate compensation includes realized capital losses and unrealized depreciation. D. compensation is based on gains, less losses, for a period of no less than one year.

Disclosure that the performance compensation may create an incentive for the adviser to take greater risks Because these types of compensation agreements may only be entered into with clients meeting minimum financial standards, the SEC assumes that clients understand the increased risks they are being exposed to. The minimum net worth requirement is over $2.2 million, or a client is qualified if he has at least $1.1 million under management with the adviser. Any performance fee must take into consideration gains and losses, both realized and unrealized, and the performance period must be no less than one year. Please note: State-registered investment advisers must make this "incentive" disclosure so if the question asked about them, there would be no exception.

The Uniform Securities Act authorizes the state Administrator to require which of these? 1. Either oral or written qualification examinations of investment adviser representatives and officers of investment adviser partnerships or corporations 2. Officers of investment advisers to pass a qualification examination 3. An applicant for initial registration to publish an announcement of the application in one or more specified newspapers published in the state 4. Investment adviser representatives to pass a qualification examination

Either oral or written qualification examinations of investment adviser representatives and officers of investment adviser partnerships or corporations, officers of investment advisers to pass a qualification examination, an applicant for initial registration to publish an announcement of the application in one or more specified newspapers published in the state, & investment adviser representatives to pass a qualification examination The state Administrator may require qualification examinations for officers of investment advisers, as well as its representatives, and may require them to publish an announcement in one or more newspapers published in the state. The Administrator may also require either an oral or written examination.

Among the many exempt transactions under the Uniform Securities Act are the private placement and the preorganization certificate or subscription. While these two exemptions have several requirements in common, they have which of the following differences? 1. The private placement exemption places a limit on the number of sales to retail investors, while the preorganization certificate places a limit on the number of offers to all investors.​ 2. Payment for the purchase may be made in the case of a private placement, while no money changes hands in a preorganization subscription. 3. It is expected that noninstitutional buyers of the private placement are purchasing for investment only, while no such requirement exists for the investors in a preorganization certificate. 4. Commissions may be paid on the sale of a private placement to noninstitutional clients, while no remuneration is payable on the sale of a preorg

Payment for the purchase may be made in the case of a private placement, while no money changes hands in a preorganization subscription & it is expected that noninstitutional buyers of the private placement are purchasing for investment only, while no such requirement exists for the investors in a preorganization certificate The term sale means that there has been an exchange of value. No money changes hands in the case of a preorganization certificate or subscription. It is simply a commitment to invest when the corporation's charter has been granted. On the other hand, a private placement is a sale because the seller receives payment—value is exchanged. The state will consider a private placement an exempt transaction if it is anticipated that individual (noninstitutional) investors are purchasing for investment only, not immediate resale. No holding period restrictions are placed on preorganization certificates. Only in the case of a sale of a private placement to an institutional client is it permissible to pay commissions. Finally, Choice I has it backwards. When referring to retail (noninstitutional) investors, there is a limit to the number of offerees (10), while in the preorganization certificate, the number of subscribers is limited to 10, regardless of whether they are retail or institutional.

To comply with ERISA Section 404(c), a 401(k) plan must satisfy all the following requirements except A. plan participants must have the ability to transfer assets among investment options at least quarterly. B. plan participants must have access to at least 3 core diversified investment options. C. sufficient information must be provided to plan participants about investment alternatives available under the plan to permit informed decision making. D. plan participants must be provided with the services of a Certified Financial Planner at least annually to assist them with investment decision making.

Plan participants must be provided with the services of a Certified Financial Planner at least annually to assist them with investment decision making Section 404(c) relieves a plan fiduciary from liabilities associated with losses stemming from employee investment choices. To qualify for this protection, the plan must provide at least 3 core diversified investment options, participants must have the ability to transfer assets among investment options at least quarterly, and sufficient information must be provided to participants to allow for informed decision making.

Which of the following statements is correct? A. The efficient frontier represents individual securities. B. As the correlation coefficient moves from +1 to zero, the potential for diversification diminishes. C. When a risk-averse investor is confronted with two investment opportunities having the same expected return, the investor will take the opportunity with the lower risk. D. The efficient frontier represents portfolios that have the lowest expected return for each level of risk.

When a risk-averse investor is confronted with two investment opportunities having the same expected return, the investor will take the opportunity with the lower risk It is expected that investors will always choose the lower risk investment if both generate the same return. The other statements are incorrect. As the correlation coefficient declines, the potential for greater diversification increases. Efficient portfolios, not individual securities, lie on the efficient frontier. The efficient frontier contains portfolios with the highest expected return at each level of risk.

Which of the following would NASAA consider to be a substantial prepayment of fees? A. $500 covering the next six months B. $600 covering the next calendar quarter C. $1,000 covering the next month D. $600 covering the entire contract year

$600 covering the entire contract year NASAA defines a substantial prepayment of fees to be more than $500 six or more months in advance. A payment of $600 covering a full year qualifies on both points; it is more than $500 and for more than six months. A payment of $500 covering the next six months meets the time requirement, but it is not more than $500. Payments of $600 for the next quarter or $1,000 for the next month meet the dollar amount but not the time requirement.

A farmer entered into a forward contract to sell his produce at $2.25 per bushel. At the expiration date of the contract, the price was $2.00 per bushel. The farmer would receive A. $2.25. B. $2.125 per contract. C. a price negotiated between the buyer and the seller. D. $2.00.

$2.25 The reason the farmer entered into this contract was to hedge against a drop in price. Because the strike price was higher than the market price at expiration, the farmer made a good deal, while the buyer of the contract lost.

An investor purchases shares of ABC stock at $50 per share. One year later, ABC is selling for $54 per share and, at the end of the 2nd year, the price is $52 per share. ABC has paid dividends of $2 per year. Upon liquidation, the investor would have earned a return of A. $2 per share B. $4 per share C. $8 per share D. $6 per share

$6 per share The investor paid $50 and sold it for $52 for a $2 per share gain. During the 2-year holding period, $4 in dividends were paid. That is a total return of $6 per share.

According to the Investment Advisers Act of 1940, the SEC must either grant investment adviser registration or begin proceedings to determine whether registration should be denied within how many days of filing? A. 45 B. 90 C. 60 D. 30

45 The SEC is required by the Investment Advisers Act of 1940 to either grant an adviser registration or begin proceedings to determine whether the registration should be denied within 45 days of application.

If the current risk-free rate is 4%, and the expected return from the market is 10%, what return should we expect from a security that has a beta of .9? A. 6.4% B. 9.4% C. 13% D. 9%

9.4% Required return = 4% + ([10% - 4%] × .9) = 4% + (6% x .9) = 4% + 5.4% = 9.4%.

A 35 year-old client indicates that he needs $500,000 of life insurance coverage for the next 20 years. The lowest out-of-pocket cost would be if he purchased A. variable annuity with an extended death benefit B. a 20-year level term policy C. a 20-pay life policy D. a whole life policy

A 20-year level term policy In almost all circumstances, certainly for short-to-immediate time periods, term life will be the least expensive form of insurance. A 20-pay life is a permanent policy where the premiums are paid in a 20-year period rather than until death. Variable annuities are not life insurance policies, even though they are issued by life insurance companies.

In the administration of a qualified retirement plan, which of the following individuals is considered to be a fiduciary? A. A CPA who prepares the plan's Form 5500 for an annual fee B. The marketing director of the plan sponsor C. A financial planner acting as a trustee over the plan assets D. A highly-compensated employee who participates in the plan

A financial planner acting as a trustee over the plan assets An individual or business entity is considered a fiduciary under ERISA if that person renders investment advice or services to the plan for direct or indirect compensation. Clearly, the financial planner-investment trustee is within this definition. Completing an IRS form (5500) is not an investment-related activity.

Current IRS regulations permit an unlimited contribution to which of the following tax-deferred plans? A. Roth IRA B. SEP IRA C. Annuity D. 401(k)

Annuity Nonqualified annuities offer tax deferral similar to that of qualified retirement plans. However, unlike qualified plans and IRAs, the IRS places no limitation on the amount that may be contributed.

In an efficient market: A. investors have a good chance of beating the market B. it is fairly easy to predict major market swings C. any information that could affect a stock's value is quickly reflected in its price D. information is disseminated slowly

Any information that could affect a stock's value is quickly reflected in its price An efficient market is one in which every individual can quickly obtain and use information about new events in the marketplace. Because information is disseminated quickly, any new information that could affect a stock's value is quickly reflected in its price.

Jasper is considered an affiliated person of the Tahor Clean Energy Mutual Fund. Under the Investment Company Act of 1940, Jasper is prohibited from all of the following except A. buying securities from the fund's portfolio. B. selling stock to the fund for its portfolio. C. being elected to the fund's board of directors. D. borrowing from the fund (money or property).

Being elected to the fund's board of directors There is no problem with an affiliated person being elected to the fund's board of directors. Under the act, as many as 60% of the board members may be affiliated persons (the law states that at least 40% must be noninterested parties). Affiliated persons may not have any dealings with the investment company (outside of contractual obligations and the purchase or redemption of shares of the investment company), such as buying securities, furniture, real estate, or other property from the company or selling such property to the company.

When discussing employment and production, which of the following industries are typically more affected by a recession? 1. Capital goods 2. Consumer durable goods 3. Consumer nondurable goods 4. Services

Capital goods and consumer durable goods Durable goods and capital goods are more affected by a recession than are nondurable goods and services. This is primarily because they are larger items, last for a longer period, and are somewhat discretionary.

Which of the following statements regarding investment adviser compliance rules is true? A. Compliance procedures should be designed to prevent violations, as well as detect existing violations. B. If the chief compliance officer conducts appropriate annual compliance reviews, an interim review is generally not necessary. C. The chief compliance officer must have at least three years' experience in securities industry compliance. D. Compliance procedures should review the accuracy of disclosures made to clients and investors, although it is not necessary that they review disclosures made to regulators.

Compliance procedures should be designed to prevent violations, as well as detect existing violations Although the CCO should conduct annual compliance reviews, the CCO should also recognize the necessity for interim reviews in light of such events, including changes in business arrangements and regulatory developments. There is no specific experience requirement that the CCO must fulfill; however, the CCO should be knowledgeable in securities law. Compliance procedures should review the accuracy of disclosures made to regulators, clients, and investors.

An investor wishes to save for her retirement. She arranges to have $250 per month withdrawn from her account to be invested into a commodity fund. This type of saving plan is called A. constant dollar plan B. investing in futures C. dollar cost averaging D. speculation

Dollar cost averaging Investing the same amount at regular intervals is the formula method of investing known as dollar cost averaging. It ensures that more shares are purchased when the price is low and fewer when the price is high, thus resulting in a lower average cost per share than average price paid per trade.

If John Good, a properly registered investment adviser, opens his own office and hires several representatives to work for him, his business card may not read A. Good's Investment Advisers, Inc. B. Good and Associates Investment Advisers, Inc. C. John Good Investment Advisers, Inc. D. Good Performance Advisers, Inc.

Good Performance Advisers, Inc. John Good, a registered investment adviser, cannot put on his business card "Good Performance Advisers." In this instance, the word Good can be interpreted as an adjective modifying the word performance, as opposed to John's given name, Good. An adviser cannot present himself to the public in terms that can be misleading or interpreted as exaggerating performance. The other three choices are appropriate because they do not use Good as an adjective touting the results of the adviser, but as the name of the adviser.

If an investment adviser purchases a research report from the advisory arm of a nonaffiliated broker-dealer, the adviser may distribute this report to clients A. under no circumstances. B. without restriction. C. provided a fee is paid to the broker-dealer for each copy distributed. D. if the clients are told that the report was prepared by a third party.

If the clients are told that the report was prepared by a third party An adviser may use research prepared by others, provided disclosure is made that the report was prepared by a third party, not the adviser. There is an exception for certain statistical information but not research reports.

Of the popular social media sites, the one most thought of as a business networking site is A. Facebook. B. Twitter. C. Instagram. D. LinkedIn.

LinkedIn In most regulatory literature, LinkedIn is the most common form of social media used as the example of business networking

In a DPP, a general partner is all of the following except A. a key executive who makes day-to-day business decisions. B. one who buys and sells the program's property. C. one who appoints the property manager. D. one who has limited liability.

One who has limited liability A general partner of a limited partnership is a key executive of the program who purchases and sells the property and/or appoints someone to manage the property. The general partner does not have limited liability. By not allowing the general partner to have limited liability, the program is able to rule out limited liability as a corporate characteristic.

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

Receipt of stock dividends Stock dividends (dividends paid as additional shares of stock rather than in cash) adjust the investor's cost basis and don't come into play until the stock is sold.

According to NASAA's Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers, which of the following is unethical? A. Recommending a certain limited partnership investment to all clients B. Exercising discretion with regard to the time or price of an order without written authorization from the client C. Omitting nonmaterial facts in a presentation to an advisory client about a recommended investment D. Borrowing funds for personal use from a client that is a bank

Recommending a certain limited partnership investment to all clients Recommending an investment without determining its suitability to each client is considered unethical. When the same investment is recommended to all clients, it is called a blanket recommendation and almost always raises the suitability question. Time and price are not considered to be discretion, so no written authority is needed. While borrowing from clients is usually prohibited, that rule is suspended when the lender is a person in the business of lending money, such as a bank or a broker-dealer. Omitting nonmaterial facts is permissible when recommending securities to a client; the material facts must be disclosed.

Which of the following is an example of a regressive tax? A. Estate tax B. Gift tax C. Sales tax D. Income tax

Sales tax Regressive taxes are those where the rate remains the same, regardless of the cost of the item subject to the tax. For example, if your state has a 6% sales tax, it makes no difference if you are buying an item for $1 or $10,000—the tax rate is the same 6%. The other choices given are progressive taxes, where the tax rate increases as the dollar amount being taxed increases.

When an investor divides the coupon rate of a municipal bond by the complement of her tax rate, she is computing the bond's A. discounted cash flow. B. tax-equivalent yield. C. after-tax rate of return. D. inflation-adjusted return.

Tax-equivalent yield The computation for the tax-equivalent yield of a municipal bond is performed by dividing the bond's coupon rate by the complement of the investor's tax rate (1 - the investor's tax bracket). If the bond has a coupon of 4% and the investor is in the 20% bracket, the tax-equivalent yield is 4% divided by (1 - 0.20), or 4% divided by 0.80 = 5%.

The Uniform Securities Act defines all of the following as securities except A. term life insurance. B. fixed-premium variable life insurance policies. C. unlisted options. D. common stock.

Term life insurance Term life insurance is an insurance contract, not a security. Remember the short list of those items that are not securities.

In the secondary market, U.S. Treasury bond prices are most influenced by A. the primary dealers. B. the prime rate. C. the inflation rate. D. the Treasury Department.

The inflation rate There are two major influences on the price of bonds in the secondary market. One of those is the amount of credit risk (chances that the issuer won't be able to pay the interest and/or principal). That is not considered a risk with U.S. Treasury securities. The other, and generally stronger, influence is the inflation rate. Inflation eats away at the fixed income and principal of bonds. To compensate, the bonds must offer a higher return. That is either in the form of a new bond carrying a higher coupon rate or, as this question refers to, trading in the secondary market at a lower price. Remember the inverse relationship between interest rates and bond prices. Interest rates follow the inflation rate, so when inflation rises, so must the yield on bonds. The yield on outstanding bonds increases as the market price decreases.

A pension plan administrator hires an investment adviser to oversee the investment decisions of the plan. The adviser's primary responsibility is to which of the following? A. The plan B. The pension plan administrator C. The plan sponsor D. The adviser

The plan The adviser's primary fiduciary responsibility is to the plan itself. By maintaining proper fiduciary responsibility to the plan, the interests of the participants of the plan are protected.

The long party to a put option contract has A. the right to buy the underlying asset. B. the obligation to buy the underlying asset. C. the obligation to sell the underlying asset. D. the right to sell the underlying asset.

The right to sell the underlying asset Being long a put option means owning the option. Owners have rights, while sellers have obligations. A put option gives the owner the right to sell the underlying asset at the exercise price. The seller of the put option is obliged to take delivery and pay the exercise price if the buyer exercises the option.

A stock's beta coefficient is a measure of the stock's A. institutional ownership relative to outstanding shares B. volatility relative to the market C. profitability relative to its group D. consistency of its dividend payment

Volatility relative to the market Beta measures a stock's volatility relative to the overall market. A beta above 1 indicates a more volatile stock, while a beta below 1 describes a stock less volatile than the market.