Series 66 Mastery Exam
C) $0
A 57-year-old investor who earns $26,000 contributes $7,000 to an IRA for the year 2023. What amount of the contribution will be subject to the 6% penalty levied on excess contributions? A) $6,500 B) $500 C) $0 D) $1,000
A) makes a cash deposit in excess of $10,000.
A FinCEN Form 112 would need to be filed when a client A) makes a cash deposit in excess of $10,000. B) makes a cash deposit of $10,000 or more. C) initiates a wire transfer of $3,000 or more. D) initiates a wire transfer in excess of $3,000.
B) a measure of a bond's price sensitivity to a change in interest rates.
A bond's duration is A) equal to the maturity of the bond in most cases. B) a measure of a bond's price sensitivity to a change in interest rates. C) a time-weighted measure of a bond's sensitivity to credit and default risk. D) an explicit measure of the number of years to maturity.
C) recommend the client consult with a qualified legal professional.
A client calls and tells her adviser that she has read about how to avoid estate taxes by transferring all her assets into an irrevocable living trust and would like the adviser's opinion on the matter. The adviser's most appropriate and ethical response should be to A) discuss the advantages of the arrangement and assist the client in drafting the appropriate documents for a fee. B) urge the client to consult with an attorney without disclosing that this attorney pays a referral fee to the investment adviser. C) recommend the client consult with a qualified legal professional. D) refuse to discuss the trust with the client because the adviser does not want the client to transfer her assets to another account.
A) 12-year maturity when the discount rate is 7%
A client interested in fixed income is viewing different bonds with the same rating and a coupon of 5%. Using the discounted cash flow method, which bond should have the lowest market value? A) 12-year maturity when the discount rate is 7% B) 6-year maturity when the discount rate is 7% C) 12-year maturity when the discount rate is 3% D) 6-year maturity when the discount rate is 3%
A) 5.37%.
A corporate bond with an A rating is currently selling for 105. If the bond has a coupon of 6% and matures in 10 years, its yield to maturity is closest to A) 5.37%. B) 6.34%. C) 5.71%. D) 6.19%.
A) a decrease in the company's interest costs.
A corporation may benefit by attaching warrants to a new issue of debt securities from A) a decrease in the company's interest costs. B) a decrease in the bond's rating. C) a decrease in the earnings per share. D) a decrease in the company's amount of debt service coverage.
C) $15
A corporation with a 10%, $100 par cumulative preferred paid $5 to preferred stockholders last year. This year the company wants to pay common dividends. How much must it pay each preferred share outstanding before paying common shareholders? A) $10 B) $0 C) $15 D) $5
B) The customer must accept the execution for 300 shares, and the remainder of the order remains open until filled or canceled.
A good-til-canceled (GTC) order is entered to buy 500 LMN at 24.35. By the close, the firm has acquired 100 shares at 24.25 and 200 at 24.35. The remainder is unfilled. What is the outcome? A) The customer may reject the incomplete order unless the broker-dealer can guarantee filling the remainder by the end of the day. B) The customer must accept the execution for 300 shares, and the remainder of the order remains open until filled or canceled. C) The customer may reject the incomplete order unless the remainder can be filled within two business days. D) The customer may demand that the firm deliver the remaining shares at 24.35.
C) laddering.
A popular strategy for income investors who wish to take advantage of potentially higher interest rates when reinvesting maturing securities, while at the same time mitigating against interest rate risk, is A) bulleting. B) rebalancing. C) laddering. D) barbelling.
B) Durable power of attorney
A power of attorney is a legal document that conveys certain powers from one party to another. Which of the following will survive the mental incompetence of a client? A) Full power of attorney B) Durable power of attorney C) Limited power of attorney D) Discretionary power
A) when the Administrator says so.
A registration statement has been filed using the process known as qualification. Under normal circumstances, this registration will become effective A) when the Administrator says so. B) when the SEC says so. C) at noon of the 30th day after filing. D) once the appropriate filing fees have been paid, accompanied by a consent to service of process.
B) has an additional level of safety because it is registered on both federal and state levels.
A security has been registered in 23 states using the process known as coordination. When recommending this stock to a client, it would not be permitted to state that the security A) does not meet the NSMIA's definition of a federal covered security. B) has an additional level of safety because it is registered on both federal and state levels. C) is registered on both federal and state levels. D) is not a registered investment company.
A) lower expenses than a mutual fund with similar objectives.
All of the following are reasons to consider investing in a variable annuity except A) lower expenses than a mutual fund with similar objectives. B) the ability to choose among subaccounts offering equities, fixed income, or a combination of both. C) tax deferral of earnings in the account. D) IRS Section 1035 transfers.
A) dividend yield as of the pricing date.
All of the following are required to compute the total return of a common stock except A) dividend yield as of the pricing date. B) purchase price of the stock. C) price of stock at the end of the holding period. D) amount of dividends paid during the holding period.
C) LinkedIn.
All of the following social media sites are considered to be predominately used for personal rather than business communications except A) Instagram. B) Facebook. C) LinkedIn. D) Twitter.
D) a fulcrum fee.
Although the general rule is that investment advisers are prohibited from receiving performance-based compensation, state and federal law provide an exception if certain conditions are met. Assuming an investment adviser meets the requirements, the most common type of performance fee is known as A) a benchmark fee. B) an incentive fee. C) a performance fee. D) a fulcrum fee.
C) a holdings report no later than 10 days after the person becomes an access person.
An access person, as defined in the Investment Adviser Codes of Ethics, must submit to the chief compliance officer (CCO) or other persons designated in the firm's code of ethics A) quarterly securities holdings reports within 30 days of the end of each quarter. B) quarterly securities transactions reports within 10 days of the end of each quarter. C) a holdings report no later than 10 days after the person becomes an access person. D) a transactions report no later than 10 days after the person becomes an access person.
B) Recommending that attendees purchase shares of ABC, Inc., common stock, which is a local company
An agent is conducting a seminar open to the public. Under the NASAA Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents, which of the following would be prohibited? A) Distributing the prospectus for a mutual fund discussed during the seminar B) Recommending that attendees purchase shares of ABC, Inc., common stock, which is a local company C) Having an economics professor from the local university speak about current economic trends D) Handing out her business card and a new account application
B) current ratio.
An analyst viewing a corporate income statement will review all of the following except A) operating expenses. B) current ratio. C) net sales or net revenues. D) pretax income.
B) a QDRO.
An early distribution from a traditional IRA can avoid the 10% tax penalty in all of the following cases except A) death. B) a QDRO. C) reaching age 59½ . D) payments made under IRS Rule 72(t).
D) 9.00%
An index annuity has no cap on gains but guarantees a minimum return of 2.75% with a 75% participation rate. If the index being tracked increases by 12.00%, what is the rate of return to the investor? A) 2.06% B) 7.40% C) 12.00% D) 9.00%
C) State A and State B.
An individual is employed by Prolixity Investment Advisers (PIA), an investment adviser with almost $200 million in assets under management (AUM). The individual works out of PIA's office in State A and spends three days every month in PIA's State B office where she conducts concise investing seminars for potential advisory clients. Under the provisions of the Uniform Securities Act and applicable federal laws, this individual would be required to register as an investment adviser representative in A) State B. B) no state, because the individual does not provide investment advice to any retail clients. C) State A and State B. D) State A.
A) register with the state as an investment adviser representative.
An individual who is licensed with the administrator as an agent of a broker-dealer wants to offer wrap fee programs sponsored by the firm. In order to do so, it would be necessary to A) register with the state as an investment adviser representative. B) register with the state as an investment adviser. C) maintain his current agent registration only. D) register with the SEC as an investment adviser representative.
B) the investment adviser has a list of customer user names and passwords.
An investment adviser is considered to maintain custody of customer assets when A) customer funds and securities are kept by a nonaffiliated broker-dealer. B) the investment adviser has a list of customer user names and passwords. C) the investment adviser receives a check for advisory fees. D) the investment adviser exercises discretion over an advisory account.
D) Portfolios 1 and 2 with a correlation coefficient of +0.90
An investment adviser representative (IAR) is attempting to develop an investment plan for a client. The IAR decides to use two different mutual funds in an effort to provide appropriate diversification. Which of the following would offer the least diversification? A) Portfolios 3 and 4 with a correlation coefficient of +0.20 B) Portfolios 7 and 8 with a correlation coefficient of -0.90 C) Portfolios 5 and 6 with a correlation coefficient of -0.20 D) Portfolios 1 and 2 with a correlation coefficient of +0.90
C) The Amalgamated Dock Workers Credit Union
An investment adviser representative would be permitted to borrow money from which of the following clients? A) ABC Mortgage Brokers B) The investment adviser representative's father for graduate school tuition C) The Amalgamated Dock Workers Credit Union D) The XYZ Short-Term Bond Fund
A) I and II
An investment adviser with custody of customer funds and securities discovers that its net worth has dropped below the required minimum under the rules of the state administrator. Under NASAA rules, what must the adviser do? I. Notify the administrator by the close of business the day after discovery II. File a report of its financial condition with the administrator no later than the close of business one day after notification and include a statement as to the number of client accounts III. Cease doing business IV. Notify all clients and make plans for the return of the funds and securities A) I and II B) I, II, and IV C) I, II, III, and IV D) I, II, and III
C) $11.80 per share
An investor begins contributing $600 on the third day of each month to a purchase plan for the KAPCO Total Return Fund. For the first six months, the per share prices were as follows: $10 $12 $15 $20 $12 $8 What is this investor's breakeven point? A) $12.83 per share B) $12.50 per share C) $11.80 per share D) $8.00 per share
C) closed-end fund.
An investor interested in obtaining the benefit of professional portfolio management has been tracking a particular investment company for the past several months. In so doing, it becomes obvious that the market price of the shares moves independently from the computed NAV. This investor must be following a A) balanced fund. B) special situations fund. C) closed-end fund. D) common stock fund.
D) interest rate risk.
An investor's portfolio is heavily weighted in AA and AAArated municipal bonds with an average maturity of 18 years. The client has the most exposure to A) liquidity risk. B) business risk. C) default (credit) risk. D) interest rate risk.
D) requires the consent of and written disclosure to the client prior to completion of the transaction.
As part of a comprehensive financial plan, a registered investment adviser representative of All-Star Advisory Services recommends the purchase of several stocks from the inventory of All-Star's affiliated broker-dealer. Under the Investment Advisers Act of 1940, this activity A) is prohibited. B) requires advance written disclosure to the client. C) requires the written consent of the client. D) requires the consent of and written disclosure to the client prior to completion of the transaction.
B) II and IV
Discounted cash flow (DCF) is commonly thought of as applying solely to fixed-income securities. However, forms of DCF used for the valuation of common stock also include which of the following? I. The price-to-earnings ratio II. The dividend discount model III. The discounted book value model IV. The dividend growth model A) I and IV B) II and IV C) I and II D) II and III
B) 2.00%.
During the past year, the market price of KAPCO common stock increased from $47 to $50 per share. Over that period, KAPCO's earnings per share (EPS) have increased from $2.00 to $2.50 per share, and their dividend payout ratio has decreased from 50% to 40%. Based on this information, the current yield on KAPCO common stock is A) 2.13%. B) 2.00%. C) 4.26%. D) 6.34%.
A) I and II
ERISA regulations apply to the retirement plans of which of the following? I. ABC Corporation, listed on the NYSE II. DEF Corporation, privately held among nine shareholders III. City of Detroit employee's retirement benefit plan IV. FBI employee's retirement benefit plan A) I and II B) I only C) I, II, III, and IV D) III and IV
D) bonds issued by a city in a country with which the United States has diplomatic relations.
Exemption from the registration requirements of the Uniform Securities Act would be granted to all of the following except A) stock issued by an insurance company authorized to do business in the state. B) any security issued or guaranteed by any federal credit union. C) revenue bonds issued by a state authority. D) bonds issued by a city in a country with which the United States has diplomatic relations.
C) cumulative.
For a profitable and rapidly growing firm, holders of preference shares are least likely to benefit from the firm's growth if the preference shares are A) common stock B) convertible. C) cumulative. D) participating.
C) I and II
For an investment adviser to advertise a proprietary technical-based formula for timing the market, what disclosures must be made? I. The extent of difficulty involved in applying the formula II. Limitations of using the formula III. Recommendations based on the formula that generated profits in the previous year IV. The amount of experience the adviser has using the formula A) I, II, III, and IV B) II, III, and IV C) I and II D) II and III
B) Common stock
Holders of which of the following securities would be most likely to receive preemptive rights? A) Preferred stock B) Common stock C) Secured bonds D) Treasury stock
A) because of the leverage involved, the client can lose more than the original amount invested.
If a client wishes to open a margin account, the most important warning you should give is that A) because of the leverage involved, the client can lose more than the original amount invested. B) the Fed has the power to change margin requirements at any time. C) not all stocks can be purchased on margin. D) the cost of the money borrowed to carry the account is not fixed and has no upper limit.
D) lowest offer.
If a customer enters a market order to buy 100 shares of GFT, the trade will be executed at the A) highest ask. B) lowest bid. C) highest bid. D) lowest offer.
D) are not backed by underlying asset cash flows.
In contrast to traditional asset classes, digital assets most likely A) are recorded on private ledgers maintained by central intermediaries. B) have less price volatility. C) have established regulatory guidance in most jurisdictions. D) are not backed by underlying asset cash flows.
C) $150 million.
In order to qualify for the private fund adviser exemption, a domestic investment adviser must limit its assets under management in the United States to less than A) $25 million. B) $100 million. C) $150 million. D) $110 million.
C) the fees charged by hedge fund managers.
In the investment industry, the phrase 2 and 20% most commonly refers to A) a strategy involving buying and selling options on the same underlying asset. B) the minimum acceptable return in a bull market. C) the fees charged by hedge fund managers. D) the sales commission paid on an equity index annuity.
C) $2,500.
Investment advisers must disclose any material disciplinary action to all current and prospective clients. The broadest definition of material would include any actions taken against the firm or management persons by a court or regulatory authority within the past 10 years. Fines levied by any SRO require disclosure if they were in excess of A) $5,000. B) $1,000. C) $2,500. D) $10,000.
D) recommend Torex to a client, but she must disclose her investment in Torex to the client.
Isabelle is an investment adviser representative (IAR) with Constructive Allocation Programs (CAP), a firm whose client base is composed of highnetworth individuals. In her personal portfolio, Isabelle has an investment in Torex, a company that has developed software to speed up internet browsing. Isabelle has thoroughly researched Torex and believes the company is financially strong although currently significantly undervalued. Under the NASAA Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers, Isabelle may A) not recommend Torex as long as she holds a position in the stock. B) recommend Torex to a client without disclosing her position as long as the stock is suitable for the client. C) not recommend Torex to a client unless CAP gives written consent to do so. D) recommend Torex to a client, but she must disclose her investment in Torex to the client.
B) fail to disclose the amount of commission being charged on an exempt transaction involving an exempt security.
It would be considered an unethical business practice for an agent of a broker-dealer to A) sell unregistered exempt securities. B) fail to disclose the amount of commission being charged on an exempt transaction involving an exempt security. C) offer registered nonexempt securities to clients. D) accept unsolicited orders from individual clients for unregistered nonexempt securities.
C) $130,000
John and Jane have a net worth of $20,000 and total assets of $150,000. If their revolving credit and unpaid bills total $8,000, how much are their total liabilities? A) $122,000 B) $138,000 C) $130,000 D) $150,000
C) $300 long-term capital gain.
John purchased 100 shares of DEF common stock at a price of $25 per share on August 4, 2020. On December 1, 2022, with the stock selling for $29 per share, he passed away, leaving the stock to his daughter. She subsequently sold the stock nine months later for $32 per share. Her tax consequence is A) $700 long-term capital gain. B) $300 short-term capital gain. C) $300 long-term capital gain. D) $700 short-term capital gain.
D) the Dow Jones 30 Industrials.
Measuring an adviser's performance is most often done by comparing it to a relevant benchmark index. An index is either cap weighted or price weighted. An example of a price-weighted index is A) the Nasdaq 100. B) the Wilshire 5000. C) the Standard & Poor's 500. D) the Dow Jones 30 Industrials.
D) II and III
Modern portfolio theory (MPT) depends on certain assumptions regarding investor behavior. Which of the following statements most accurately reflect the Markowitz assumptions about investor behavior? I. Given two investments with equal expected returns, investors prefer the one with the higher risk. II. Given two investments with equal risk, investors prefer the one with the greater expected return. III. Given two investments with equal expected returns, investors prefer the one with the lower risk. IV. Given two investments with equal risk, investors prefer the one with the lower expected return. A) I and II B) I and IV C) III and IV D) II and III
B) withdrawals for a first-time purchase of a primary residence ($10,000 lifetime maximum) avoid the pre-59½ 10% penalty tax.
Norberto and Maria are considering purchasing an annuity to provide additional retirement income, but they are concerned about needing to withdraw funds from the annuity before they retire. All of the following statements regarding withdrawals from their annuity are true except A) withdrawals will consist of taxable earnings until all the earnings have been withdrawn; thereafter withdrawals are a non-taxable return of principal. B) withdrawals for a first-time purchase of a primary residence ($10,000 lifetime maximum) avoid the pre-59½ 10% penalty tax. C) withdrawals will likely be subject to a 10% penalty tax if taken before age 59½. D) annuitizing before age 59½ does not incur the 10% penalty.
D) Investment selection
One of the responsibilities of the fiduciary handling a qualified retirement plan is providing an investment policy statement. Which one of the following is not typically included in that document? A) Investment objectives B) Current income needs C) Risk tolerance D) Investment selection
C) an individual whose sole duties are ministerial in nature.
One of the terms found in the Securities Exchange Act of 1934 is a "person associated with a broker-dealer." Included in that definition would be all of the following except A) an individual registered with the broker-dealer as an agent who does not maintain a place of business in the state. B) any person directly or indirectly controlling, controlled by, or under common control with the broker-dealer. C) an individual whose sole duties are ministerial in nature. D) the individual managing the firm's smallest branch office.
C) a Totten trust.
One of your customers has a substantial savings account at the local S&L. The customer has several grandchildren and wants the flexibility of being able to change the beneficiary allocations as their financial conditions change. You should recommend that the customer investigate the use of A) an UTMA account. B) an irrevocable trust. C) a Totten trust. D) a durable power of attorney.
B) a TOD account.
Probate may be avoided by using A) a medical directive. B) a TOD account. C) an advance directive. D) a living will.
D) appendix 1 of Form ADV Part 2A no later than entering into the advisory agreement.
Providential Asset Allocation Services (PAAS) is a covered investment adviser offering wrap free programs. As a result, PAAS must provide new clients with A) Form ADV Part 2A unless there have been no material changes since the last brochure. B) appendix 1 of Form ADV Part 2A within 120 days after entering into the advisory agreement. C) Form ADV Part 2A no later than entering into the advisory agreement. D) appendix 1 of Form ADV Part 2A no later than entering into the advisory agreement.
D) tax deferral until the acquired shares are sold.
Reinvestment of mutual fund distributions has all of the following benefits except A) reinvestment of capital gains at NAV. B) reinvestment of dividends at NAV. C) compounding of returns. D) tax deferral until the acquired shares are sold.
B) a short-term time horizon.
Relatively high portfolio volatility is least appropriate for investors with A) a long-term time horizon. B) a short-term time horizon. C) an indefinite time horizon. D) an intermediate-term time horizon.
C) all investors must be qualified clients.
Reticent Asset Management (RAM) is claiming an exemption from registration with the state because it is an adviser to private funds. One of the requirements to qualify for this exemption is A) all investors must be accredited. B) there can be no more than 10 investors during any 12-month period. C) all investors must be qualified clients. D) private fund assets under management cannot exceed $110 million.
B) 7.05%.
Sixteen years ago, the Chicago and Northeastern (C&NE) railroad issued a 30-year bond carrying a nominal yield of 6.37%. If the bond is currently trading at a price of 93 5/8, the yield to maturity is approximately A) 6.17%. B) 7.05%. C) 6.37%. D) 6.80%.
B) in a face-to-face meeting with a client.
Social media concerns are not likely to occur when an agent is A) linking to a third-party site on Facebook. B) in a face-to-face meeting with a client. C) communicating with a client via email. D) posting a tweet.
B) shortening the maturity of the issue.
The Alter Kay Corporation, established almost 100 years ago, has major expansion plans. The management decided to raise the needed capital by issuing a 20-year bond. Shortly before the bonds were issued to the public, the company received word from the underwriter managing the offering that Moody's raised the issue's rating from Ba to Baa. This will most likely have all of the following effects except A) increasing the salability of the issue. B) shortening the maturity of the issue. C) reducing the nominal yield of the issue. D) causing the bonds to be considered investment grade.
A) $52.00 per share.
The Barzel Steel Corporation (BSC) paid dividends of $2.80 per share for the year. That represented a dividend payout ratio of 70%. If BSC's price-to-earnings ratio is 13, the current market price of the stock is A) $52.00 per share. B) $36.40 per share. C) $25.48 per share. D) $208.00 per share.
A) 1.2:1
The DEF Corporation's financial statements reveal the following information: Total current assets = $10 million Cash = $2 million Inventory = $4 million Building and land = $20 million Total current liabilities = $5 million Net worth = $18 million Based on this information, what is DEF's quick asset ratio? A) 1.2:1 B) 1.6:1 C) 0.8:1 D) 2.4:1
B) an adviser who only gives advice on U.S. government securities.
The Investment Advisers Act of 1940 as modified by SEC Release IA-1092 includes all of the following in the definition of an investment adviser except A) a financial representative for a professional athlete. B) an adviser who only gives advice on U.S. government securities. C) a pension consultant offering advisory services to employee benefit plans. D) a financial representative for a celebrity.
C) II and IV
The NASAA Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents deals with the topic of commission sharing. Under that policy, in order for two agents to be able to share in commissions, which of the following must be true? I. The client must give consent to the sharing. II. Both agents must be licensed with the same or affiliated broker-dealers. III. The administrator must approve of the sharing arrangement. IV. The broker-dealer must agree to permit the sharing. A) I, II, and III B) I and III C) II and IV D) I, II, III, and IV
C) enforce their antifraud provisions against federal covered securities.
The National Securities Markets Improvement Actof 1996(NSMIA) allows state administrators to A) impose state registrations and net capital requirements on federal covered investment advisers. B) accept filing fees on behalf of the SEC. C) enforce their antifraud provisions against federal covered securities. D) require registered open-end investment companies wishing to offer securities in their state to coordinate their registrations with the SEC.
A) I, III, and IV
The Prudent Investor Rule applies to which of these? I. An investment adviser representative with full discretionary authorization II. A client executing orders in a joint account with an adult son III. A court-appointed guardian for an adult with dementia IV. An executor appointed by a court for a decedent's estate A) I, III, and IV B) II and IV C) I and III D) II and III
A) arbitrage.
The SEC defines the term market manipulation as "intentional or willful conduct designed to deceive or defraud investors by controlling or artificially affecting the price of securities, or intentional interference with the free forces of supply and demand." That definition includes all of the following except A) arbitrage. B) wash trades. C) matched orders. D) painting the Tape.
B) The standard of prudence is applied to each investment individually.
The Uniform Prudent Investor Act identified a number of fundamental changes in the former criteria for prudent investing. Which of the following statements does not state one of these changes correctly? A) The tradeoff between risk and return in all investing is the fiduciary's central consideration. B) The standard of prudence is applied to each investment individually. C) Delegation of trust investment and management functions is permitted, subject to safeguards. D) Prudent investing requires that fiduciaries diversify their investments.
C) Semi-strong form
The assumptions underlying the efficient market hypothesis (EMH) lead its proponents to believe that stock market prices react rapidly to newly released information and, therefore, limit the ability of the investor to achieve abnormal gains. Which of the forms of EMH concludes that an investor cannot achieve abnormal gains using fundamental analysis? A) Spring form B) Weak form C) Semi-strong form D) Strong form
D) a high likelihood that the contract will be exercised.
The characteristics of an exchange-traded futures contract would include all of the following except A) the location of delivery of the underlying asset. B) the delivery price and month of delivery. C) the quantity and quality of the commodity. D) a high likelihood that the contract will be exercised.
A) 7.5%.
The following numbers (in %) represent the returns from an investment fund over the past seven years: 2016: 13%, 2017: 11%, 2018: 2%, 2019: 6%, 2020: 5%, 2021: 8%, 2022: 6%. Using the range measure would indicate that the seven-year returns from the fund had a mid-range of A) 7.5%. B) 2%. C) 11%. D) 4%.
B) the internal rate of return (IRR).
The rate that produces a net present value of a series of discounted cash flows equal to zero is called A) the return on investment (ROI). B) the internal rate of return (IRR). C) the average rate of return. D) the opportunity cost of investing.
C) LLC
Two brothers are interested in forming a business together. They have three initial concerns: (1) maximizing their benefits despite the fact that the business is expected to lose money for at least the first year or so, (2) making sure that the business will be able to continue in the event one of the brothers dies, and (3) minimizing their personal liability for the obligations of the business. On the basis of the brothers' concerns, which form of business is appropriate for the situation? A) General partnership B) C corporation C) LLC D) Limited partnership
B) issued by and representing an interest in or a debt of, or guaranteed by, any bank organized under the laws of the United States, or any bank, savings institution, or trust company organized and supervised under the laws of any state.
Under Section 401 of the Uniform Securities Act, the term agent does not include an individual who represents an issuer in effecting transactions in a security A) issued by any person organized and operated not for private profit but exclusively for religious, educational, benevolent, charitable, fraternal, social, athletic, or reformatory purposes or as a chamber of commerce or trade or professional association. B) issued by and representing an interest in or a debt of, or guaranteed by, any bank organized under the laws of the United States, or any bank, savings institution, or trust company organized and supervised under the laws of any state. C) issued by and representing an interest in or a debt of, or guaranteed by, any federal savings and loan association, or any building and loan or similar association organized under the laws of any state and authorized to do business in this state. D) issued or guaranteed by any federal credit union or any credit union, industrial loan association, or similar association organized and supervised under the laws of this state.
B) the sofa in the office reception room.
Under certain conditions, investment advisers registered with the state must maintain a specified minimum net worth. Under NASAA's Model Rules, assets included in the computation of the net worth of an adviser structured as a sole proprietorship would exclude all of the following except A) goodwill. B) the sofa in the office reception room. C) an automobile owned by the adviser. D) the table in the owner's dining room.
C) I, II, and III
Under the Uniform Securities Act, which of the following is considered a place of business of a registered investment adviser representative? I. An office from which the representative regularly provides advisory services to clients II. A location published in a professional directory, indicated on business cards, or displayed in a telephone book listing that identifies it as a place where the representative will be available to meet or communicate with clients III. A hotel or auditorium at which the representative has advertised to the public that he will be available to conduct advisory business at that site IV. A hotel meeting room identified only to current clients as a place the representative will be available to conduct advisory business A) I, II, III, and IV B) I only C) I, II, and III D) I and II
B) Value
Use of a corporation's balance sheet and income statement would be of greater importance to an investment manager following which style? A) Contrarian B) Value C) Growth D) Market capitalization
B) UTMA
Wanda is 17 years old and is in the process of applying to colleges for next year. When completing the FAFSA form, which of the following assets would be included at the highest percentage of actual value? A) ESA B) UTMA C) QTP D) 529 plan
C) radio broadcasts of 30 seconds or less.
When a broker-dealer operates on the premises of a financial institution, certain disclosures must be prominently made in communications with the public. As long as omission of the disclosures would not cause the message to be misleading, these disclosures need not be made as part of A) TV broadcasts of 60 seconds or less. B) radio broadcasts of 60 seconds or less. C) radio broadcasts of 30 seconds or less. D) TV broadcasts of 30 seconds or less.
D) the commission schedule
When a prospective client opens a new brokerage account, the broker-dealer's fee disclosure document would be least likely to contain A) late settlement fees. B) account transfer fees. C) account maintenance fees. D) the commission schedule.
A) An adviser may not use specific research reports that are prepared by an outside third party without disclosure of the source.
When an investment adviser prepares a financial plan and distributes research reports prepared by several different third parties, which of the following statements is true? A) An adviser may not use specific research reports that are prepared by an outside third party without disclosure of the source. B) An adviser is prohibited from distributing someone else's work. C) An adviser must disclose the source of any information used in making a recommendation to a client whenever requested by the client. D) An adviser is required to disclose all sources of information used in making a recommendation to a client.
C) the investment adviser representative must give notification of the termination, and the state-registered adviser must give notification of the employment to the administrator promptly.
When an investment adviser representative terminates employment with a federal covered investment adviser and then registers with a state-registered investment adviser in the state where the individual maintains a place of business, A) only the state-registered investment adviser must notify the administrator. B) the investment adviser representative and the federal covered adviser must notify the administrator promptly. C) the investment adviser representative must give notification of the termination, and the state-registered adviser must give notification of the employment to the administrator promptly. D) only the investment adviser representative must notify the administrator promptly.
B) an inverted yield curve.
When investors tend to increase their investments in debt securities into those on the long end of the spectrum rather than those with short-term maturities, it generally leads to A) a flat yield curve. B) an inverted yield curve. C) a positive yield curve. D) long-term yields that greatly exceed short-term yields.
D) rebalancing.
When market conditions are such that a passively managed portfolio no longer meets its target allocation, the tool most commonly used to rectify the situation is A) retargeting. B) sector rotation. C) tactical management. D) rebalancing.
C) Investment policy statement
Which of the following is a written document that sets forth a client's objectives, sets limitations on the portfolio manager, provides guidance to the portfolio manager, and provides a means for evaluating performance? A) Risk profile questionnaire B) Financial planning disclosure C) Investment policy statement D) New account form
A) The registration statement was filed without the appropriate fees.
Which of the following offenses are grounds for the denial, suspension, or revocation of an issuer's registration? A) The registration statement was filed without the appropriate fees. B) Persons filing the registration statement engaged a third party to assist in the preparation of the registration statement. C) The registrant engaged in business operations outside of the United States. D) The registrant's underwriting fees are considered reasonable by the administrator.
C) An ETF tracking an index
Which of the following pooled investment vehicles would not generally be considered an alternative investment? A) An exchange traded note (ETN) B) An inverse ETF tracking an index C) An ETF tracking an index D) A 2x leveraged ETF tracking an index
A) Customers must be given annual privacy disclosures on a separate piece of paper.
Which of the following statements is not true of Regulation SP? A) Customers must be given annual privacy disclosures on a separate piece of paper. B) Consumers must be given an initial privacy notice. C) Consumers need not be given an annual privacy notice. D) Customers may be provided with privacy information on internet pages.
B) II and IV
Which of the following statements regarding a mutual fund are true? I. Class A shares have no front-end sales charge and no 12b-1 fee. II. Class B shares have a contingent deferred sales charge and a 12b-1 fee. III. Class A shares are generally not eligible for breakpoint reductions. IV. Class C shares are generally referred to as level load. A) I and II B) II and IV C) I and III D) III and IV
A) It is generally prohibited for an investment company registered under the Investment Company Act of 1940 to acquire more than 3% of the outstanding voting shares of another investment company.
Which of the following statements regarding investment companies is true? A) It is generally prohibited for an investment company registered under the Investment Company Act of 1940 to acquire more than 3% of the outstanding voting shares of another investment company. B) When investors sell or redeem their open-end fund shares, they receive the net asset value (NAV) as of the previous day's close. C) An investment company can offer investors two ways of participating in the fund under management: through the purchase of closed-end shares or, if the investor prefers, through open-end redeemable shares. D) The only two types of investment companies provided for in the Investment Company Act of 1940 are open-end and closed-end management investment companies.
C) II and IV
Which of the following statements regarding real estate investment trusts (REITs) are true? I. Investors receive flow-through benefits of income as well as losses. II. Hybrid REITs own properties as well as make loans on others. III. Equity REITs are prohibited from using leverage to acquire properties. IV. Most REITs are easily traded in the secondary market. A) III and IV B) I and III C) II and IV D) I and IV
B) The revocation of a broker-dealer's registration in a state has no effect on the registration of agents employed by that broker-dealer.
Which of the following statements regarding registration requirements under the Uniform Securities Act is not true? A) If an agent resigns from his employing broker-dealer and affiliates with another broker-dealer, both firms and the agent must notify the state administrator of the change in employment. B) The revocation of a broker-dealer's registration in a state has no effect on the registration of agents employed by that broker-dealer. C) An agent may lawfully sell securities that have been registered in a state or that are exempt from registration in the state. D) An agent who does not live in a state can solicit business in that state if the agent and the broker-dealer are registered in that state.
B) Mid-cap utility company
Which of the following stocks would be the least suitable for an aggressive, risk-tolerant investor? A) Small-cap pharmaceutical company B) Mid-cap utility company C) Large-cap international manufacturing company D) Large-cap in a countercyclical industry
B) within 120 days of the end of its fiscal year a free, updated brochure and related brochure supplements that include or are accompanied by a summary of material changes.
With regard to advisory clients, under the NASAA Brochure Rule Requirements for Investment Advisers, an investment adviser, unless qualifying for an exemption, must deliver A) a free, updated brochure and related brochure supplements every year even when there are no material changes. B) within 120 days of the end of its fiscal year a free, updated brochure and related brochure supplements that include or are accompanied by a summary of material changes. C) within 90 days of the end of its fiscal year a free, updated brochure and related brochure supplements that include or are accompanied by a summary of material changes. D) at least 48 hours in advance of entering into the advisory contract, a copy of the adviser's brochure.
A) Wisconsin and Illinois.
XYZ Securities is a broker-dealer based in Wisconsin with offices in no other state. In addition to its Wisconsin clients, XYZ has 30 retail customers living in Illinois. During the winter, if 10 existing customers vacation in Florida for up to seven weeks at a time, XYZ Securities is a broker-dealer in A) Wisconsin and Illinois. B) Wisconsin, Illinois, and Florida. C) all states having enacted the USA. D) Wisconsin only.
D) tax-exempt private purpose bonds.
You have a client who is subject to the AMT. As a result, the client would not receive the full benefit of investing in A) ADRs. B) cumulative preferred stock. C) nonqualified stock options. D) tax-exempt private purpose bonds.
A) Roth IRA
Your client wishes to begin a self-funded retirement plan that will enable him to make contributions until he is 75 years of age with no required minimum distributions. Which of the following would be your recommendation? A) Roth IRA B) Deferred compensation plan C) Traditional IRA D) 401(k)
