Practice Test

An investor $600 of an open-end fund on the first day of the month for 6 months. Share price on purchsase days are as follows. What is the break even point? $10, $12, $15, $20, $12, $8 A) 12.83 per share B) $11.80 per share C) 12.50 per share D) $8 per share

$11.80 per share Add up total amount of shares purchased across 6 tranches...305 shares total Total cost = $3,600 $3,600/305= $11.80

An ex-spouse can qualify for benefits on a former spouses social sec benefits as long as the marriage lasted ____ years

10

A stock w market cap above $_ MM is considered large cap

10M

SRO proceedings in which the IA or management person received a dine in excess of ____ meet the definition of material disciplinary actions and require disclosure. A) 2,500 B) 10,000 C) 1,000 D) 5,000

2,500

It is generally prohibited for an invmt company registered under Invmt Company Act of 1940 to acquire more than __% of the outstanding voting shares of another investment company. A) 10% B) 2% C) 5% D) 3%

3%

If a SS recipient delays taking benefits as long as possible (age 70), the benefit amounts increase by __% at full retirement age (age 67)

8%

A FinCEN Form 112 would need to be filed when a client A) makes a cash deposit in excess of 10k B) initiates a wire transfer in excess of 3k C) initiates a wire transfer of 3k or more D) makes a cash deposit of 10k or more

A

A client with a bearish outlook on a particular stock would be able to benefit from taking which of the following actions? A) Selling the stock short B) Entering a sell limit order C) Entering a market order to sell D) Buying the stock on margin

A) Selling the stock short

With regard to nonqualified stock options (NQSOs) and incentive stock options (ISOs), which of the following statements is not correct? A) Capital gain treatment is available only with NQSOs. B) AMT is an issue only for those exercising ISOs. C) A tax deduction for the employer is generally available only with NQSOs. D) Board of director approval is required for both NQSOs and ISOs.

A) Capital gain treatment is available only with NQSOs - Only the ISO offers the employee a capital gain treatment.

In October 1987, the SEC promulgated Release IA-1092, which had the effect of broadening the definition of investment adviser. As a result of the release, which of the following is included in the definition? Banks offering comprehensive financial planning for their high net worth clients Entertainment agents earning a fee for negotiating contracts for their clients and then placing a portion of the client's royalties into investment-grade bonds or large-cap stocks as market conditions dictate Persons being compensated for assisting employee benefit plan administrators in selecting investment managers for the plan's assets Lawyers who prepare trust agreements for clients with large securities holdings, with a goal of minimizing estate taxes A) II and III B) II and IV C) I and II D) I and IV

A) II and III - Once the entertainment agent makes investment decisions for a client who is paying fees for overall services rendered, that agent comes under the IA-1092 definition of investment adviser (IA). - In a like manner, any person who is compensated for giving investment-related advice to employee benefit plans is considered a pension consultant, requiring registration under IA-1092. - Banks are never IAs, and the lawyer is merely doing legal and tax work.

Which of the following is required for annual renewal of the registration of an investment adviser representative affiliated with a federal covered adviser? A) Paying the state licensing fee B) Filling out Form U4 C) Filling out the consent to service of process D) Sending a renewal notice to the SEC

A) Paying the state licensing fee - All investment adviser representatives are registered with their respective states, not with the SEC. Renewal requires the payment of the annual renewal registration or licensing fee. -The consent to service of process is a permanent document submitted with the initial application for registration.

Each of the following would be exempt from the definition of an agent under the Uniform Securities Act except A) Violet, an employee of the Widget Spinners Corporation, who is paid a commission on sales of the company stock to fellow employees. B) Florence, an employee of the First Fidelity Trust Company, who buys and sells securities to meet the needs of her trust clients. C) Beatrice, who was appointed by the other members of her investment club to make the portfolio decisions for the next quarter. D) Katrina, the administrator of the Widget Spinners Corporation pension plan, who is paid for making investment decisions for the portfolio.

A) Violet, an employee of the Widget Spinners Corporation, who is paid a commission on sales of the company stock to fellow employees. - When an individual receives compensation for selling employer stock to employees, that person is defined as an agent and must register as such. - Managing a pension plan (and getting paid for it, naturally) does not make one an agent; she is not being compensated for the trades. - Because banks and trust companies are excluded from the definition of a broker-dealer, their employees cannot be considered agents.

All of the following would decrease the U.S. balance of payments deficit except A) a decrease in purchases of U.S. securities by foreign investors. B) an increase in exports of domestic goods from the U.S. C) a decrease in dividend payments by U.S. companies to foreign investors. D) a decrease in imports of foreign goods into the U.S.

A) a decrease in purchases of U.S. securities by foreign investors. -Anything that brings foreign money to the U.S. will decrease the balance of payments. Foreign investors pulling their money out of the U.S. or investing less in the U.S. will increase the deficit.

An individual has just received an inheritance of $15,000 and has the goal of preservation of capital and income. The client is in a low tax bracket. Which of the following would be the most suitable choice? A) Bank-insured CDs B) Public utility stocks C) Newly issued U.S. Treasury bonds D) Insured municipal bonds

A) bank insured CDs - When preservation of capital is a goal and one of the choices is an insured bank CD, choose that answer. - When the question refers to a low tax bracket, municipal bonds will never be the correct choice. - Newly issued Treasury bonds have maturities of at least 10 years. During that time, changes to interest rates in the marketplace would cause the market price of those bonds to fluctuate. - Although the public utilities will offer income frequently higher than the CD, there are no guarantees the principal will remain intact. (Some public utilities have gone bankrupt.)

A technical analyst who has been charting the common stock of Kloud Information Storage Systems (KISS) would most likely sell KISS stock short when the market price of the stock is A) below the support level. B) just above the support level. C) above the resistance level. D) just below the resistance level.

A) below the support level - The support level of a stock is the historic repeating bottom. That is, whenever the stock gets that low, it brings out the buyers and pushes the price up. However, when a stock breaks through the support level, it is usually an indication that the support has dried up and there is going to be further decline. That is good for the short seller.

For a profitable and rapidly growing firm, holders of preference shares are least likely to benefit from firm growth if the preference shares are A) cumulative B) convertible C) participating D) Common stock

A) cumulative - return on cumulative PS shares are FIXED so no matter the growth of firm, dividends will remain the same. - Participating PS may receive additional dividends if the firms profits exceed that of a stated level - Convertible PS can benefit from firms growth bc of the ability to convert to CS

Which is the following is a direct commitment between one buyer and one seller? A) forward contract B) option C) futures contract D) settlement contract

A) forward contract - forward seller is obligated to make delivery and the buyer is obligated to take the delivery

Which of the following would be an indicator of lowering inflation rate? A) high unemployement B) increased consumer demand C) an increase in manufacturing goods D) A reduction in interest rates

A) high unemployment - employment figures are a leading figure, whereas changes in inflation rates are a result (not a predictor/leader).

Section 15 of the Investment Company Act of 1940 spells out many of the specific requirements for the contract between a management investment company and its investment manager. Among those requirements is that A) no contract may be terminated with more than 60 days' written notice. B) the contract should be in writing. C) the initial contract is for a maximum of one year and then may be renewed on either an annual or a biannual basis. D) the fund may not engage in margin trading unless a specific exemption applies.

A) no contract may be terminated with more than 60 days' written notice. - Contracts between funds and their advisers may not be terminated with more than 60 days' written notice, and these contracts must—not should—be in writing. - The initial contract is for a two-year period after which the contract is renewed on an annual basis. Whether or not the fund can trade on margin is not a function of the management contract

All of the following are included in the SML (security market line) EXCEPT A) std deviation of the asset B) risk free rate C) expected rate of return of the asset D) beta of the asset

A) std dev - unlike the CML, the SML does not include the std deviation of the asset

An early distrib from a traditional IRA can avoid 10% tax penalty in all of the following cases except: A) reaching age 59 1/2 B) QDRO C) payments made under IRS rule 72(t) D) death

B) - early distribution due to QDRO only avoid early 10% penalty in the case of a qualified plan, not an IRA

Under the provisions of the Uniform Securities Act, which of the following statements about unsolicited orders is true? A) Under certain conditions, an administrator may prohibit a broker-dealer registered in the state from accepting any unsolicited orders. B) An unsolicited order from a noninstitutional client for an unregistered, nonexempt security is considered a transaction exempt from the registration and advertising filing requirements of the act. C) A client may not purchase, at his own initiative, securities trading in the secondary market if the agent is otherwise prohibited from soliciting the order. D) If the order ticket is appropriately marked, the administrator may not challenge a broker-dealer's assertion that the order was unsolicited.

B) An unsolicited order from a noninstitutional client for an unregistered, nonexempt security is considered a transaction exempt from the registration and advertising filing requirements of the act - Clients have the right to buy or sell whatever they desire. The issue becomes a question of who initiates the trade. -An unsolicited transaction may be executed by an agent if it is the client who asks for the trade. -The trade ticket should be marked as unsolicited. The state securities administrator has the right to seek verification from the client that the trade was, in fact, unsolicited. -The security involved in the trade can be one that is nonexempt and unregistered in the state.

A covered IA offering a wrap fee program must provide new clients with A) Appendix 1 of Form ADV Part 2A within 120 days after entering into agreement B) Appendix 1 of Form ADV Part 2A no later than entering into the contract C) Form ADV Part 2A no later than entering into the contract D) Form ADV Part 2A unless there have been no material changes since the last brochure

B) Appendix 1 of Form ADV no later than entering into contract. - New clients must always receive copy of brochure. In the case of a wrap fee program, that brochure is found in appendix 1 of Form ADV Part 2A

LMN, Inc., is preparing to report its net income for the past year. An increase in which of the following would not cause a decrease in the reported net income? A) Allowance for bad debts B) Cash dividends C) Corporate income tax rate increase D) Year-end bonuses to employees

B) Cash dividends - Cash dividends are paid out of the company's net income, so an increase or decrease will not impact that net income.

An investor is concerned that interest rates will be volatile over the next few years. Which of the following would eliminate interest rate risk? A) Zero-coupon bonds B) Insured bank CDs C) Cumulative preferred stock D) TIPS bonds

B) Insured bank CDs - Any negotiable instrument that has a yield component will be subject to interest rate risk. The insured bank CD cannot be traded and, therefore, will not be affected by changes in market interest rates. - TIPS protect against inflation, and zero-coupon bonds have the greatest interest rate risk.

Which of the following debt instruments pays no interest? A) T-Bonds B) T-Bills C) T-Notes D) TIPS

B) T-Bills - These are always issued at issued a discount from their face value and investor receives par at maturity

One of the differences between state and federal laws involving an investment adviser maintaining custody of customer funds and/or securities relates to the handling of client checks made payable to third parties such as broker-dealers. Which of the following properly expresses that difference? A) Under fed law, receipt of a check payable to a third party is considered to be custody unless forwarded to the third party within 24 hrs of receipt B) Under state law, receipt of a check payable to a third party is considered to be custody unless forwarded to the third party within three business days of receipt C) Under fed law, receipt of a check payable to a third party is considered to be custody unless forwarded to the third party within three business days of receipt D) Under state law, receipt of a check payable to a third party is considered to be custody unless forwarded to the third party within 24 hrs of receipt

B) Under state law, receipt of a check payable to a third party is considered to be custody unless forwarded to the third party within three business days of receipt - Under the Uniform Securities Act, if an investment adviser receives a check made payable to an unrelated third party, it will be considered custody unless forwarded within three business days of receipt. Third-party checks are never considered custody under federal law.

An investment adviser wishes to advertise a proprietary charting system used to time the market. In order to be in compliance with the Investment Advisers Act of 1940, A) authorship of the system must be prominently disclosed. B) a statement reflecting the limitations and difficulties of using the system must be included in the ad. C) the advertisement must be filed with the appropriate SRO within 10 business days of first use. D) results obtained by using the system must be shown using a time period of no less than 12 months.

B) a statement reflecting the limitations and difficulties of using the system must be included in the ad. - An advertisement describing a charting system or any type of formula must always state that there are limitations and difficulties to using the system.

The head of marketing for a regional broker-dealer spots an article in the local newspaper that is an excellent presentation of an investment strategy the firm recommends. If the firm posts a link to the article on its website, it would be known as A) entanglement. B) adoption. C) endorsement. D) plagiarizing.

B) adoption. - Adoption is the use of content or a link to content that is solely the creation of someone else; your firm is just using it. Entanglement is when the firm had a role in the creation of the material.

When recommending a stock to a customer, you would most likely want to see that the auditor gave that corporation a ________ opinion on their most recent audit. A) a certified opinion B) an unqualified opinion C) a comprehensive opinion D) a qualified opinion

B) an unqualified opinion. - An unqualified or "clean" opinion is the best type of report a business can get, meaning the auditor had little to no reservations about the info in the company's financial statements

If an economist was describing defensive issues, he would probably not include companies that produce... A) food products B) building materials C) clothing D) tobacco

B) building materials - when economy is in a down turn, new construction/building materials are susceptible to that downturn

You have a 45-year-old client wishing to save for retirement. The client does not have a great deal of investment sophistication and inquires about the risks you have exposed him to by placing the majority of his portfolio in listed common stocks. You would respond that one risk he should not concern himself with is A) systematic risk. B) liquidity risk. C) inflation risk. D) business risk.

B) liquidity risk. - A portfolio of listed common stocks will have little to no liquidity risk as listed shares are easily traded. Even though common stock tends to offer protection against inflation, there is no assurance that the portfolio will keep pace with the rising cost of living.

Investors seeking current income would benefit from A) buying periodic payment variable annuities. B) selling call options. C) buying U.S. Treasury STRIPS. D) buying LEAPS.

B) selling call options. - When an investor sells an option, put, or call, the premium is received, generating immediate income. - LEAPS are long-term options and, like all long options positions, do not generate any income. - A periodic payment variable annuity will not begin any payout until the end of the deferral period. -A commonsense way to answer this question is to ask yourself, "How do many people generate their income?" They do so by selling something.

Both state-registered and federal covered investment advisers have brochure delivery requirements. One significant difference between the two is that A) federal covered advisers are exempt from the brochure delivery requirements to investment company clients while state-registered advisers are not. B) state-registered advisers who do not deliver the brochure at least 48 hours prior to contract signing must offer a five-day, penalty-free withdrawal. C) state-registered advisers who do not deliver the brochure at least five days prior to contract signing must offer a 48-hour, penalty-free withdrawal. D) state-registered advisers must deliver the brochure within 90 days of the end of their fiscal year while covered advisers have 120 days.

B) state-registered advisers who do not deliver the brochure at least 48 hours prior to contract signing must offer a five-day, penalty-free withdrawal. - State-registered investment advisers who do not deliver the brochure at least 48 hours prior to entering the contract must offer a penalty-free withdrawal of five days. There is nothing comparable to that in the federal law. Both have the 120-day delivery requirement, and state-registered investment advisers cannot have investment companies as clients.

Individuals who pass the Series 65 exam will be able to tell prospects that A) by passing the exam, they are now registered as investment adviser representatives with the SEC. B) they passed a 130-question examination in order to qualify as investment adviser representatives. C) this indicates the regulatory bodies consider them qualified to manage money. D) their investments will be offered protection by the antifraud statutes of the Uniform Securities Act.

B) they passed a 130-question examination in order to qualify as investment adviser representatives. - Passing the exam allows individuals to make no claims other than that the exam was a requirement for licensure. - Additionally, they are not registered with the SEC, only with the states.

A registration statement has been filed in process called qualification. Under normal circumstances, this registration will become effective... A) at noon of 30th day after filing B) when Admin says so C) when SEC says so D) once appropriate filing fees have been paid

B) when Admin says so.

Which of the following are examples of unsystematic risk? I. Market risk II. Business risk III. Default risk IV. Interest rate risk

Business risk and default risk - market and interest rate risk are risks you take by simply being in the market itself, which cant be diversified away

Which is a reason a client is most likely to invest in commodities? A) commod prices tend to have higher correlation coefficient with the equity markets B) commod prices tend to be less volatile than stock or bond prices C) commod prices tend to have a high correlation coefficient with inflation rates D) investments in commodities tend to have higher liquidity than equities

C - Historically, commodity prices tend to follow inflation and have a low or negative correlation with equity markets. Commodity prices ares usually more volatile than stocks or bonds

As the # of stocks go up in a portfolio, the portfolios systemic risk... A) decreases at an increasing rate B) decreases at a decreasing rate C) increases or decreases depending on the beta of the added stocks D) increases at a decreasing date

C - portfolio's systemic risk can be increased by adding higher-beta stocks and decrease with lower-beta stocks

An investor purchased a 2x leveraged ETF at a price of $100 per share. On the first day, the index was up 10%. On the next day, it was down 10%. The investor's share value is now A) $99. B) $101. C) $96. D) $100.

C) $96. - On the first day, the value increased by twice the 10% the ETF gained (20% × 100 = 20). That makes the share value $120. On the second day, the value decreased by twice the 10% the ETF lost (20% × 120 = 24). That makes the current value $96.

AMC common stock price increased from $47 to $50 in the past year, with EPS increasing from $2 to $2.5, and dividend payout ratio decreasing from 50% to 40%. What is the current yield of the stock? A) 4.26% B) 6.34% C) 2% D) 2.13%

C) 2% CY= annual dividend/ mkt price EPS of $2.50 and 40% payout ratio, the dividend is $1. $1 divided by 50= 2%

Which of the following bonds would most likely be exposed to the greatest amount of interest rate risk? A) JKL 4s of 2022 B) DEF 6s of 2051 C) ABC 5s of 2050 D) GHI 7s of 2052

C) ABC 5s of 2050 - The bond with the longest duration is generally going to have the greatest exposure to interest rate risk. Because there is very little difference between maturity dates of 2050 through 2052, the bond with the lowest coupon will have the longest duration. The 4s of 2022 have a relatively short duration, even though their coupon is low.

Which of the following clients of a federal covered investment adviser are not exempt from the delivery requirements of the brochure rule? A) A closed-end investment company traded on the New York Stock Exchange B) An individual investor purchasing the investment adviser's newsletter with an annual subscription price of $410 C) An employee benefit plan with assets of at least $5 million D) An open-end investment company with less than $25 million in assets

C) An employee benefit plan with assets of at least $5 million - The only exemptions from the investment adviser brochure rule are registered investment companies (both open- and closed-end) and impersonal advice costing less than $500 per year.

Which of the following classes of mutual fund shares would be appropriate for an investor who doesn't mind paying some sales charges on a purchase but wants to minimize operating expenses over a long-term holding period? A) Class C shares B) Class B shares C) Class A shares D) No load shares

C) Class A shares

Which of the following activities might result in a positive yield curve in the bond market? A) A parallel upward shift in interest rates B) A parallel downward shift in interest rates C) Investors buying short-term bonds and selling long-term bonds D) Investors buying long-term bonds and selling short-term bonds

C) Investors buying short-term bonds and selling long-term bonds - A positive yield curve is the normal condition and occurs when long-term rates are higher than short-term rates. Buying short-term bonds tends to drive their prices up and their yields down, while selling long-term bonds has the opposite effect.

Which of the following would probably be the best indicator of where the economy is headed? A) Average prime rate B) Rate of industrial production C) Number of permits for construction of new housing units D) Average duration of unemployment

C) Number of permits for construction of new housing units

Under the provisions of Regulation SP, a person who has an investment advisory contract with a registered investment adviser is known as A) a consumer. B) a cohort. C) a customer. D) a client.

C) a customer. - Regulation SP uses two terms: customer and consumer. The customer is one with an ongoing relationship, such as would be the case with an advisory contract. A consumer is basically a one-shot deal.

Low risk tolerance and high liquidity needs are typical characteristics of which type of institutional investor? A) Defined benefit pension plans B) Foundations C) Banks D) Trusts

C) banks

A balance sheet shows that a corporation builds its capital structure with all of the following except A) capital stock. B) retained earnings. C) cash. D) long-term debt.

C) cash. - A corporation's capital structure consists of the capital raised through the issuance of long-term debt securities (bonds), equity securities (stocks), and money reinvested in the business (retained earnings).

All of the following statements relating to ADRs are true except A) trading takes place on domestic secondary markets. B) the issuer is a domestic bank. C) currency risk is avoided. D) dividends are paid in U.S. dollars.

C) currency risk is avoided. - Even though everything relating to ADRs is done in English using U.S. dollars on domestic stock markets, there is still currency risk since the ultimate value of the stock and its dividends are based on the foreign company's home currency.

There are thousands of cryptocurrencies, but all A) are a form of fiat currency. B) are based on the U.S. dollar. C) have a digital representation of value that allows owners to use the cryptocurrency as a medium of exchange. D) may be converted into any other form of cryptocurrency.

C) have a digital representation of value that allows owners to use the cryptocurrency as a medium of exchange.

When investors increase their investments in LT debt securities rather than ST, it generally leads to A) a flat yield curve B) a position yield curve C) an invested yield curve

C) inverted yield curve - investors buying more LT debt securities rather than short will have the effect of driving LT bond prices up, and as a result, their yields down

One respect in which advertising by investment advisers differs from that of broker-dealers is that A) investment advisers are permitted to conduct seminars while broker-dealers cannot. B) investment advisers are not permitted to use the internet while broker-dealers can. C) investment adviser advertising is regulated by federal law while advertising by broker-dealers is regulated by FINRA. D) investment advisers are permitted to refer to charting systems in their advertisements while broker-dealers cannot.

C) investment adviser advertising is regulated by federal law while advertising by broker-dealers is regulated by FINRA. - When it comes to investment advisers, state registered or federal covered, any advertisement that does not comply with the SEC's Investment Adviser Marketing Rule as found in the Investment Advisers Act of 1940 (federal law) would be prohibited. - On the other hand, broker-dealers must comply with FINRA's rule on communication with the public as well as the NASAA Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents.

Which of the following would be most unusual to see issued at a discount? A) zero-coupon bonds B) commercial paper C) jumbo CD D) T-BIll

C) jumbo CD - these are one of the few money market instruments issued at face value. Unlike MMKT instruments issued at a discount, jumbo CDs are interest bearing

An individual who is licensed with the state Admin as an agent of a BD wants to offer wrap fee programs sponsored by the firm. In order to do, he would have to A) maintain agent registration onlt B) register as an IAR with the SEC C) resister as an IAR with the Admin D) register as an IA with the Admin

C) register as an IAR with the state

Use of a corporations BS and income statement would be of greater importance to an invmt manager of which of the following styles? A) Market cap B) growth C) value D) contrarian

C) value - Value managers focus attention on a firms finanacial statements in effort to undercover value

Which of the following would be most important to an investor in all high-quality FI investments? A) Annulaized return B) after-tax return C) expected return D) inflation-adjusted return

D - Fixed income investors face purchasing power risk

Which of the following is not true regarding Reg SP? A) Customers need not be given an annual privacy notice B) customers may be provided with privacy info on internet pages C) Customers must be given an initial privacy notice D) customers must be given annual privacy disclosures on separate piece of paper

D - customers with ongoing relationships must receive initial and annual privacy notice

The investment advisors act of 1940 as modified by SEC release IA-1092 includes all of the following in the definition of an IA EXCEPT A) financial rep for a pro athlete B) financial rep for a celebrity C) a pension consultant offering advisory services to employee benefit plans D) an advisor who only gives advise on US govmt securities

D - if you are giving advise concerning direct obligations of federal govmt, you are excluded from definition of a federal IA

A corporation with a 6%, $25 par cumulative preferred paid $0.50 to preferred stockholders last year. This year, the company wants to pay common dividends. How much must it pay each preferred share? A) $0.50 B) $11.50 C) $1.50 D) $2.50

D) $2.50 - A 6% cumulative preferred stock with a $25 par value would pay an annual dividend of $1.50 ($25 × 6%). Cumulative preferred stock requires payment of all dividends that have previously been skipped before any dividends can be paid to common stock. The $0.50 that was paid last year left $1 in dividends in arrears. Therefore, this year requires a $2.50 dividend to be paid to the preferred shareholders before any common dividend can be paid to common shareholders.

Current market interest rates are 6%. Using the discounted cash flow method of valuation, you would expect to arrive at the highest valuation for which of the following? A) 7% coupon maturing in 9 years B) 5% coupon maturing in 20 years C) Zero-coupon bond maturing in 11 years D) 10% coupon maturing in 10 years

D) 10% coupon maturing in 10 years - In general, bonds with higher coupons will have the greatest value because they will clearly produce the most cash flow, and zero-coupon bonds will produce the lowest because they have no cash flow other than the return of the face value at maturity.

As specified in the Dodd-Frank Act of 2010, which of the following would not qualify for the private fund exemption? A) An investment adviser who limits her advisory services to private funds with less than $150 million in assets under management in the United States B) An investment adviser who limits her advisory services to venture capital funds C) A non-U.S.-based investment adviser with no place of business in the United States and less than $25 million in assets under management belonging to U.S. clients D) An investment adviser who limits her advisory services to insurance companies

D) An investment adviser who limits her advisory services to insurance companies

What is the term generally given by analysts to the number generated by the addition of a company's annual depreciation expense to its net income? A) Book value per share B) Dividend payout ratio C) Working capital D) Cash flow

D) Cash flow - Cash flow from operations is the sum of net income plus nonexpended business expenses such as depreciation.

Which of the following affects a firms cash flow? I. Cash II. Depreciation III. Net sales IV. Accounts receivable A) III and IV B) I and II C) I and IV D) II and III

D) Depreciation and Net sales Cash flow is basically NI + depreciation and net sales is the beginning of the company's income. - Cash and AR are assets, found on balance sheet, not income statement

Which of the following statements regarding an agent's registration is correct? A) If the broker-dealer with which that agent is registered should have its registration revoked, the agent's license will be held by the administrator and the agent will be required to register with an active broker-dealer no later than 30 days following the revocation. B) Individuals whose only securities activity with a broker-dealer is trading for the firm's proprietary account are not required to register as agents. C) Agents may be licensed in a state even if their broker-dealer is not. D) Revocation of the registration of an agent's broker-dealer will result in placing that agent's effective registration in suspense.

D) Revocation of the registration of an agent's broker-dealer will result in placing that agent's effective registration in suspense. - The registration of an agent is not effective during any period when he is not associated with a particular broker-dealer registered under the Uniform Securities Act or a particular issuer.

A client is subject to AMT and as a result would not receive the full benefit of investing in A) cumulative pref stock B) ADRs C) non-qualified stock options D) tax-exempt private purpose bonds

D) T-E private purpose bonds - Also on the list of pref stock items subject to AMT is incentive stock options, but NOT NQSOs

A life insurance policy with benefits tied to the performance of a separate account that allows the policyholder to skip premium payments is called A) a scheduled premium variable life insurance policy. B) a universal life insurance policy. C) a fixed premium variable life insurance policy. D) a flexible premium variable life insurance policy.

D) a flexible premium variable life insurance policy. - Flexible premium means that the policyholder can elect to skip premium payments. This is a feature of all universal life policies, but only in the case of universal variable life insurance does the performance of the separate account impact benefits.

In order to come under the SEC's requirement to file a Form 13F, an institutional manager must have discretion over A) an equity portfolio of at least $100 million. B) an equity portfolio of at least $50 million in 13(f) securities. C) more than 10% of the outstanding voting securities of a reporting company. D) an equity portfolio of at least $100 million in 13(f) securities.

D) an equity portfolio of at least $100 million in 13(f) securities.

To assist broker-dealers with compliance, NASAA prepared a fee disclosure template. Based on the template, all of the following broker-dealer charges would be disclosed except A) account maintenance fees. B) fees for issuance of stock certificates. C) account transfer fees. D) brokerage commissions.

D) brokerage commissions - Not included in the fee disclosure documents are commissions, markups and markdowns, and advisory fees.

Most states have replaced the Uniform Gift to Minors Act (UGMA) with the Uniform Transfers to Minors Act (UTMA). One of the major advantages of UTMA is A) the beneficiary has access to the account at an earlier age. B) better tax benefits. C) reduced fiduciary exposure to the custodian. D) greater flexibility in the choice of investments.

D) greater flexibility in the choice of investments.

A broker-dealer with no place of business in a state is not required to be registered in that state if the broker-dealer A) is registered in the state where its principal office is located. B) is a federal covered broker-dealer. C) is a member of the New York Stock Exchange. D) limits its clientele to employee benefit plans with assets of at least $1 million.

D) limits its clientele to employee benefit plans with assets of at least $1 million - A broker-dealer must be registered in every state in which it sells or offers to sell securities unless an exemption is available. If a broker-dealer has no office in a particular state and no business is done in that state other than with institutional clients, registration there is not required. - There is no such term as federal covered broker-dealer. The term federal covered applies to certain investment advisers and securities.

An individual walks into an office of a BD withing to open an account. Which of the following info would not be required on the new account form? A) citizenship B) physical address C) name of employer D) marital status

D) martial status - although most new account forms do ask for marital status, it is not required

One would not typically place convertible bonds in the portfolio of an investor A) who is bullish on the future for a specific issuer's common stock. B) seeking a position senior to that of common stock. C) seeking capital gains. D) seeking to maximize current income.

D) seeking to maximize current income.

The technical market theory that measures the breadth of the market is A) the short-interest theory. B) the odd-lot theory. C) the support/resistance theory. D) the advance/decline theory.

D)the advance/decline theory. - The advance/decline theory compares the number of stocks advancing versus those declining, generally on the New York Stock Exchange. Because it uses such a large sample, it is used as an example of the breadth of the market.

True or false: when mutual fund shares are sold, you receive the NAV as of the previous days close.

False, you receive the next days NAV

Anytime a bond is selling at a premium above par, the yield much be _________ than the coupon rate

Lower

An access person with a registered IA must submit a holdings report of personal securities no later than 10 days after they become an access person (hired). Then the access person must also submit a securities transactions report to the CCO how many times a year

Quarterly (within 30 days of the quarter end)

Which of the forms of EMH concludes that an investor cannot achieve abnormal gains using fundamental analysis?

Semistrong - says security prices rapidly adjust to arrival of new public info, says prices include all market (price,volume) and non market (fin stmts) info to the public

Initial and renewal contracts between investment advisers and their clients must be in writing when the contract is under the jurisdiction of which of the following? The Securities Exchange Act of 1934 The Investment Company Act of 1940 The Investment Advisers Act of 1940 The Uniform Securities Act

The Investment Company Act of 1940 and The Uniform Securities Act

True or false: nonqualified distributions of earnings from a Roth IRA before age 59 1/2 are subject to both penalty and taxation

True

When a corporate issuer attaches a ______ to an issue of pref stock or debt, it is giving the investor a potential opportunity by setting the price at which the investor will be able to purchase the underlying CS in the future regardless of the current market value. - In return, the investor will accept a lower interest rate on the debt or lower stated dividend rate on the pref stock. This results in a lower cost of capital, translating to higher earnings.

WARRANT

Is It allowed for a 3rd party file the registration statement for an issuer

Yes

U.S. exports should ________ when foreigners have greater purchasing power.

increase

Stocks with a market cap in the range of $_ to $_ billion are considered mid cap

mid cap

A redeemable share would be a characteristic of a(n) ______-end management investment company

open