4.2

A customer purchases stock for $40 per share and holds it for one year, selling it for $50 per share exactly 12 months after the date of purchase. Four quarterly qualifying dividends of $.50 were paid during the year. If the customer's tax bracket is 30%, what is the after-tax rate of return? A) 21.75%. B) 21%. C) 17.5%. D) 18.40%.

21.75%.

If an investment adviser representative commits a criminal violation of the Uniform Securities Act, he is subject to legal action for: A) there is no statute of limitations under the act. B) 10 years after the alleged violation. C) 3 years after the alleged violation. D) 5 years after the alleged violation.

5 years after the alleged violation.

Under the Investment Advisers Act of 1940, unless delayed by the SEC, registration of an investment adviser becomes effective how many days after filing? A) 90 days. B) 45 days. C) 60 days. D) 30 days.

45 days.

Which of the following is a federal covered adviser as defined by the NSMIA? A) A financial representative for a celebrity. B) A pension consultant offering advisory services to employee benefit plans. C) A financial representative for a professional athlete. D) A person who only provides advice on U.S. government agency securities.

A person who only provides advice on U.S. government agency securities.

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

Annuity

When describing exempt transactions under the USA, which of the following are fiduciaries? I.Executor of an estate II.Administrator in intestacy III.Custodian for a minor in an UTMA account IV.An agent with authority over time and price execution A) I and III B) III and IV C) I and II D) II and IV

I and II

An investment policy statement would likely include: I. expected returns of the recommended strategy and the expected range of these returns. II. recommended allocations among differing asset classes. III. strategies used for selecting specific stocks in the equity portion of the portfolio. IV. disclosure of the fees that the adviser will earn for implementing the recommended strategy. A) I, II and III. B) II, III and IV. C) I and II. D) I only.

I, II and III.

Among the differences between C corporations and S corporations is I.the liability assumed by the shareholders II.the number of allowable shareholders III.the tax treatment of the corporation's earnings IV.residency requirements of shareholders A) I and IV B) I, II, III and IV C) II, III and IV D) II and III

II, III and IV

As compared to value investors, growth investors tend to: A) take more of a long-term approach to their investments. B) look for companies whose sales, earnings, or market share are increasing at an above-average rate. C) be very price-conscious when purchasing stocks. D) look for companies that are undervalued or overlooked by other investors.

look for companies whose sales, earnings, or market share are increasing at an above-average rate.

All of the following are true of negotiable, jumbo certificates of deposit EXCEPT: A) they are readily marketable. B) they usually have maturities of less than 1 year. C) they are secured obligations of the issuing bank. D) they are usually issued in denominations of $100,000 to $1 million.

they are secured obligations of the issuing bank.

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

I, II, III and IV.

Under the Securities Exchange Act of 1934, the authority of the SEC to investigate violations of rules extends over: I. the state securities statutes. II. the federal securities acts and rules of the SEC. III. the SROs. A) II and III. B) I and II. C) I and III. D) I, II and III.

II and III.

All of the following are securities under the Uniform Securities Act EXCEPT: A) a right or warrant. B) a commodities futures contract. C) a variable annuity. D) common stock.

a commodities futures contract.

An investment adviser sends a notice offering a research report she has recently prepared to a group of new members of the local Lions Club. Under the NASAA Model Rule on recordkeeping for investment advisers, she must keep a copy of the notice along with A) the date the Administrator approved the research report B) the names of those members to whom the report was sent C) a copy of the full roster of the local chapter D) a memorandum describing the list and its source

a memorandum describing the list and its source

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

continue to manage the account unless the advisory contract called for termination upon death or informed otherwise by the executor.

If a nonexempt company has authorized a stock split that will give each shareholder two shares for every one share owned without charge, this action A) need not be registered because the shares of the corporation have already been registered B) must be registered because it is the issuance of new nonexempt securities C) must have the prior written approval of each state Administrator in which the shares trade D) need not be registered because it is neither an offer to sell nor a sale

need not be registered because it is neither an offer to sell nor a sale

The primary purpose of the securities registration requirements of the Uniform Securities Act is to ensure that proper disclosure is made available to potential investors. However, not all securities are required to register. Securities issued by which of the following qualify for an exemption from registration under the Act? I. Life insurance companies authorized to conduct insurance sales in that state. II. Railroads whose rates are subject to regulation by a state or federal agency. III. Commercial paper with no more than 9 months to maturity that is in one of the three highest ratings by a nationally recognized rating agency and in a minimum denomination of $25,000. IV. Bonds that are obligations of the People's Republic of North Korea. A) II and III. B) I, II, III and IV. C) I and II. D) I, II and III.

I and II.

A bond with a par value of $1,000 and a nominal yield of 6% paid semi-annually is currently selling for $1,300. The bond matures in 25 years and is callable in 15 years at $1,080. In the computation of the bond's yield to call, which of these would be a factor? A) Present value of $1,080 B) 50 payment periods C) Interest payments of $30 D) Future value of $1,300

Interest payments of $30

Which of the following statements is NOT correct? A) Net present value analysis (NPV) is a commonly used time value of money technique employed by businesses and investors to evaluate the cash flows associated with capital projects and capital expenditures. B) Net present value (NPV) is the difference between the initial cash outflow (investment) and the future value of discounted cash flows. C) Internal rate of return (IRR) is a method of determining the exact discount rate to equalize cash inflows and outflows, thus allowing comparison of rates of return on alternative investments of unequal size and investment amounts. D) Time-weighted returns show performance without the influences of additional investor deposits or withdrawals from the account.

Net present value (NPV) is the difference between the initial cash outflow (investment) and the future value of discounted cash flows.

Your client's wife retired as a 3rd grade teacher in 2009 where she was covered under the school system's 403(b) plan. If she resumes employment with a corporate employer, and that new employer has a 401(k) plan, is she entitled to defer RMDs from the 403(b) plan past the regular age 70 ½ date? A) RMDs may be deferred only from the plan sponsored by the current employer. B) RMDs may be deferred as long as the individual is employed on a full-time basis. C) RMDs may be deferred only if the current employer offered a 403(b) plan. D) RMDs may never be deferred for those who were participants in a 403(b) plan.

RMDs may be deferred only from the plan sponsored by the current employer.

XYZ Corp. will issue a new security and distribute it through a public offering. Under the Securities Act of 1933, which of the following is NOT required to be included in XYZ's registration statement? A) The name and address of XYZ's personnel manager. B) The identity of the underwriter. C) The name and address of Jan Michael, who owns 11% of XYZ's stock. D) An estimate of the proceeds that will be raised through the offering and how that money will be used.

The name and address of XYZ's personnel manager.

Which of the following statements regarding the Administrator's authority to examine the books and records of registrants is TRUE? A) The records may be examined at any time for any reason within or outside the state if it is in the public interest to do so. B) Broker/dealer records may be examined at any time, but the same is not so in the case of investment advisers. C) Such examinations are not necessary or appropriate for the protection of investors or in the public interest. D) If a broker/dealer's or investment adviser's records are located outside the Administrator's state, they only may be examined to collect evidence for a hearing.

The records may be examined at any time for any reason within or outside the state if it is in the public interest to do so.

What is the smallest order that can be placed for an institutional account? A) $50,000 or 1,000 shares. B) $100,000 or 5,000 shares. C) There is no limit on institutional order sizes. D) $100,000 or 2,500 shares.

There is no limit on institutional order sizes.

A popular funding technique that involves investing the same amount at regular intervals is known as dollar cost averaging. Participating in this funding approach tends to lessen which risk? A) Inflation. B) Market. C) Timing. D) Credit.

Timing.

Broker/dealers who charge fees or commissions for securities transactions are prohibited from: A) engaging in activities common to a broker/dealer when underwriting a corporate offering acting as an agent for the issue. B) operating as a market maker in more than one stock. C) soliciting nonexempt transactions in unregistered, nonexempt securities. D) acting as a principal in a corporate underwriting.

soliciting nonexempt transactions in unregistered, nonexempt securities.

An investment adviser is approached by an investment company that has 25 investors. The company would like to employ the adviser to manage their account. The IA is willing to do so, but proposes a compensation agreement that provides for a 20% share of the profits if performance exceeds a certain benchmark. In order for this to be acceptable: A) all of the shareholders in the investment company must be qualified investors. B) the investment company must have net worth of at least $2 million or at least $1 million in assets under management with the IA. C) a majority of the shareholders in the investment company must be qualified investors. D) the individual in charge of the investment company must be a qualified investor.

the investment company must have net worth of at least $2 million or at least $1 million in assets under management with the IA.