Series 65: Simulated Exam 1
What is the maximum amount of bitcoin that will ever be in circulation? A. 21 million coins B. 21 billion coins C. 194,425 coins D. Indefinite number of coins
21 million coins
Which of the following rates of return is used by investment professionals as the risk-free rate? A. Prime rate B. 91-day Treasury bill rate C. Discount rate D. Federal funds rate
91-day Treasury bill rate
Under the Uniform Securities Act, the Administrator may deny or revoke the exemption from registration for which of the following? 1. A security issued by a nonprofit organization 2. Investment contracts of employee benefit plans 3. An exempt transaction not involving a federal covered security
A security issued by a nonprofit organization, investment contracts of employee benefit plans, and an exempt transaction not involving a federal covered security
According to the Investment Advisers Act of 1940, which of the following is always a natural person? A. An investment adviser representative B. A broker-dealer C. The city of Chicago D. An investment adviser
An investment adviser representative
The Straitened Corporation filed for bankruptcy. One of your clients held a mortgage secured by the corporation's building. When the building was sold, the proceeds were less than the mortgage balance, creating a deficiency balance. Where does this investor's claim stand? A. As a general creditor on a pro rata basis B. There is no further claim once the building has been sold C. After the secured creditors D. After the unsecured creditors
As a general creditor on a pro rata basis
The Conference Board, a nongovernmental nonprofit organization, regularly publishes a list of economic indicators. Which of the following would be included in their list of leading indicators? A. Average duration of unemployment B. Manufacturing and trade sales (in constant dollars) C. Average weekly initial claims for unemployment insurance D. Average prime rate
Average weekly initial claims for unemployment insurance
Which of the following is true of Ginnie Maes but not of other agency mortgage-backed securities? A. Collateralized by mortgages B. Backed by the full faith and credit of the U.S. government C. Yield more than T-bonds D. Are pass-through securities
Backed by the full faith and credit of the U.S. government
When discussing employment and production, which of the following industries are typically more affected by a recession? 1. Capital goods 2. Consumer durable goods 3. Consumer nondurable goods 4. Services
Capital goods and consumer durable goods
As defined in the Uniform Securities Act, the term security would include which of these? 1. Debentures 2. Keogh plans 3. A preorganization subscription 4. Whole life insurance policies that pay dividends to their policyholders
Debentures and a preorganization subscription
Which of the following statements regarding the risks inherent in bonds is most accurate? A. The reinvestment rate assumption in calculating bond yields is generally not significant to the bond's yield. B. Interest rate risk is the risk that the bond's coupon rate will be adjusted downward if market rates decline. C. Price risk refers to the decrease in bond prices as interest rates fall. D. Default risk deals with the likelihood that the issuer will fail to meet its obligation to pay interest and/or principal.
Default risk deals w/ the likelihood that the issuer will fail to meet its obligation to pay interest and/or principal
An increase in the earnings per share growth rate from one reporting period to the next is called A. finding alpha. B. profitability. C. earnings momentum. D. price-to-earnings ratio.
Earnings momentum
Which of the following investments would not be considered exchange-traded derivatives? A. Futures B. Warrants C. Options D. Forwards
Forwards
Management style is a phrase that is often used to describe the methodology employed by a particular portfolio manager. If the manager under discussion used earnings momentum to select stocks, it could be said that the style being used was A. value B. growth C. passive D. asset allocation
Growth
Which of the following types of mutual funds would be most likely to have capital appreciation as its stated objective? A. Income B. Balanced C. Municipal bond D. Growth
Growth
The Sharpe ratio is the average annual return of a security A. plus the risk-free rate with the sum divided by the security's beta B. divided by the risk-free rate C. divided by the expected return of the market D. minus the risk-free rate for the period with the remainder divided by the security's standard deviation
Minus the risk-free rate for the period w/ the remainder divided by the security's standard deviation
Which of the following statements regarding foreign investing is (are) true? 1. Foreign financial markets are more efficient than the U.S. market. 2. Most foreign investment entails foreign exchange or currency risk. 3. Adding foreign-issued securities to a portfolio provides the greatest diversification when the foreign stock market has a 1.0 correlation relative to the U.S. market. 4. Foreign securities markets are more highly regulated than the U.S. market.
Most foreign investment entails foreign exchange or currency risk
One of the ways in which a simple trust differs from a complex trust is that simple trusts A. must distribute their distributable net income each year. B. may make distributions from the corpus of the trust. C. are easier to prepare. D. may retain income.
Must distribute their distributable net income each yr
When opening an account at a broker-dealer, if the most recent copy of the firm's fee schedule is not available, NASAA recommends that the client A. select another broker-dealer and open the account there. B. not place any assets in the account until it is provided. C. promptly notify the Administrator of the firm's failure to comply. D. go ahead with the account opening but refrain from trading until its receipt.
Not place any assets in the account until it is provided
A federal covered investment adviser is a person A. registered with the North American Securities Administrators Association (NASAA). B. exempt from regulation under the Securities Exchange Act of 1934. C. registered under the Uniform Securities Act. D. registered, or excluded from the definition, under the Investment Advisers Act of 1940.
Registered, or excluded from the definition, under the Investment Advisers Act of 1940
Some registered investment advisers (IAs) are federal covered, while others register on a state-by-state basis. In the case of a state-registered investment adviser having its only office in Oregon with no offices in any other state, the authority of the office of the Administrator would include A. requiring the IA to renew its consent to service of process when paying the annual fee. B. requiring each IAR to provide a statement of financial condition. C. requiring IARs to pass a qualification exam. D. the Idaho Administrator requiring registration of IARs who make telephone calls to residents of Idaho.
Requiring IARs to pass a qualification exam
Current market interest rates are 6%. A bond with an 8% coupon would be most likely to have a net present value of zero when the bond is A. selling at a premium. B. selling at par. C. selling at a discount. D. called for redemption.
Selling at a premium
A concern of some investors is the volatility of a security. Securities with a higher volatility exhibit a greater variability in their returns. A statistical measure used to predict the volatility of a security by examining the dispersion in a set of historical returns is A. standard deviation. B. correlation. C. beta. D. geometric mean.
Standard deviation
When comparing a private equity fund to a public one, it would be incorrect to state that the private fund has A. less liquidity. B. lower reporting costs. C. stronger governance. D. higher risk.
Stronger governance
Plentitude Abundant Returns (PAR) is a broker-dealer registered in a dozen states. The principal office is located in State X. To be in compliance with the Uniform Securities Act, PAR must satisfy the recordkeeping requirements of A. the SEC. B. the state with the least stringent requirements. C. State X. D. the state with the most stringent requirements.
The SEC
Those investors wishing to examine a document that would probably give them the most information about a corporation's current and planned operations would seek out A. the investor's brochure. B. Form 10-K. C. the annual report. D. the balance sheet.
The annual report
A bond's yield to maturity is A. the annualized return of a bond if it is held to maturity. B. the annualized return of a bond if it is held to call date. C. set at issuance and printed on the face of the bond. D. determined by dividing the coupon rate by the bond's current market price.
The annualized return of a bond if it is held to maturity
The rate that produces a net present value of a series of discounted cash flows equal to zero is called A. the average rate of return. B. the opportunity cost of investing. C. the return on investment (ROI). D. the internal rate of return (IRR).
The internal rate of return (IRR)
The most common form of investment vehicle for venture capital is A. the venture capital fund of funds. B. the limited partnership. C. the corporate venture capital funds. D. the limited liability company.
The limited partnership
Which of the following is not a characteristic of expansionary monetary policy? A. The reserve requirement will be increased. B. The money supply will increase. C. Interest rates may decline. D. More funds are available for banks to lend to borrowers.
The reserve requirement will be increased
Which of the following statements regarding ADRs are true? 1. The securities are vehicles used to facilitate U.S. trading of foreign securities. 2. Dividends are received in the foreign currency. 3. Holders have foreign currency risk. 4. The receipts are issued by a foreign branch of a domestic bank.
The securities are vehicles used to facilitate U.S. trading of foreign securities and holders have foreign currency risk
Which of the following may an agent determine without written discretionary authority? A. Whether to buy or sell a particular security B. Which security should be purchased C. How many shares of a particular security should be purchased D. The time or price at which to enter an order
The time or price at which to enter an order
An investor purchases a single premium deferred index annuity with an initial premium of $200,000. Soon after the purchase, the investor receives a statement from the insurance company showing an initial balance of $210,000. The most likely reason for the $10,000 increase is A. this is a bonus annuity. B. the insurance company paid a dividend. C. the insurance agent's commission was added to the account. D. the underlying index has had outstanding performance.
This is a bonus annuity
When saving money for a child's college education, one consideration is the impact that those savings will have on the child's eligibility for financial aid. Funds saved in which of the following vehicles has the most detrimental effect on financial aid? A. UTMA B. Coverdell ESA C. Section 529 D. Prepaid tuition plan
UTMA
The issuer-specific component of the variability in a stock's total return that is unrelated to overall market variability is known as A. systematic risk. B. fundamental risk. C. nondiversifiable risk. D. unsystematic risk.
Unsystematic risk
Which types of accounts are billed a single fee that includes a group of services, such as execution of transactions and advice? A. Margin accounts B. Discretionary accounts C. Wrap fee accounts D. Option accounts
Wrap fee accounts
The gain on the sale of a security held as an investment will be treated as a long-term capital gain if the security was held for more than A. 3 months. B. 1 month. C. 12 months. D. 6 months.
12 months
An investor has her agent enter a sell stop order at 60, limit 60. Following the order entry, trades occur at 62.12, 60, 59.95, 60.06, 61. More than likely, the investor received A. 59.95 B. 60 C. 61 D. 60.06
60.06
One of your customers notices that the short interest on KAPCO common stock is high. When she asks you for an interpretation, you should tell her that this signals A. that a change in interest rates is coming B. a bearish outlook C. a shortage of enough stock to go around D. a bullish outlook
A bullish outlook
All of the following are requirements to be a salesman of variable products except A. affiliation with a registered broker-dealer B. possession of a valid life insurance license C. affiliation with a registered investment adviser D. possession of a valid FINRA registration
Affiliation w/ a registered investment advisor
An investor will likely exercise a put option when the price of the stock is A. above the strike price plus the premium. B. at the strike price. C. above the strike price. D. below the strike price.
Below the strike price
A customer has just died. If his wife asks you what amount of federal estate tax will be imposed on the transfer of their personal property to her name, which of the following responses would be best? A. Consult a qualified tax specialist. B. The amount of tax will depend on the size of the estate to be transferred. C. The amount may be prorated over the next four years. D. The amount of tax will depend on your late husband's tax bracket.
Consult a qualified tax specialist
"Stock prices adjust rapidly to the release of all new public information." This statement is an expression of which of the following ideas? A. Arbitrage pricing theory B. Tactical allocation C. Odd-lot theory D. Efficient market hypothesis
Efficient market hypothesis
In which of the following funds would a buy-and-hold style most likely be used by the manager? A. Options income fund B. Information technology fund C. Market timing fund D. Equity index fund
Equity index fund
Shibboleth Research Associates (SRA) meets the definition of an investment adviser and wishes to register with the Securities and Exchange Commission. Assuming the firm meets the requirements, registration is accomplished by filing A. Form ADV Part 1A and Part 1B. B. Form ADV Part 1A. C. Form ADV Parts 1 and 2. D. Form ADV-W.
Form ADV Part 1A
For a trust account not seeking appreciation, which of the following would be recommended? A. Highly rated, fixed-income securities B. Common stock in small, highly profitable companies C. Common stock, preferred stock, and debentures D. Large-cap common and preferred stocks
Highly rated, fixed-income securities
The tactical approach to the asset allocation review process A. is designed to maintain a minimum or floor for the value of the portfolio's assets B. requires no predictive abilities C. intentionally deviates from the normal asset mix to take advantage of market opportunities D. strives to maintain a constant asset mix over a long period of time
Intentionally deviates from the normal asset mix to take advantage of market opportunities
Howard is the owner of 4 different insurance policies. Which of the following policies have death benefits proceeds that are not subject to income tax upon death of the insured? 1. Policy 1; his wife is the insured. 2. Policy 2; his business partner is the insured. 3. Policy 3; his daughter is the insured. 4. Policy 4; he is the insured.
Policy 1; his wife is the insured, Policy 2; his business partner is the insured, Policy 3; his daughter is the insured, and Policy 4; he is the insured.
Which of the following statements regarding preemptive rights is true? A. Both common and preferred stockholders have the right to subscribe to a rights offering. B. Common stockholders do not have the right to subscribe to a rights offering. C. Preferred stockholders do not have the right to subscribe to a rights offering. D. Neither common nor preferred stockholders have the right to subscribe to a rights offering.
Preferred stockholders don't have the right to subscribe to a rights offering
It would be incorrect to state that a lump-sum distribution from a 401(k) before retirement may be A. eligible to be transferred to a Roth IRA B. tax free if the recipient is disabled C. eligible to be rolled over into a traditional IRA D. subject to ordinary income tax and penalty
Tax free if the recipient is disabled
When does the Investment Advisers Act of 1940 not require delivery of a brochure containing information about the adviser's background and business practices? 1. When the service provided is an individual supervisory service 2. When the client is an investment company 3. When the contract is for an impersonal advisory service requiring payment of less than $500 4. When the client is an individual with a net worth of more than $1 million
When the client is an investment company and when the contract is for an impersonal advisory service requiring payment of less than $500
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. 2%. B. 11%. C. 4%. D. 7.5%.
7.5%
One of your customers owns 300 shares of the 5% $100 par cumulative preferred stock issued by the Northern Atlantic Railroad (NAR). The cumulative feature provides that A. the annual dividend is $5 per year. B. all unpaid dividend arrearage must be brought current before a dividend may be paid on NAR's common stock. C. all unpaid dividend arrearage must be brought current before interest may be paid on NAR's subordinated debentures. D. the customer has 300 votes times the number of directors being elected and can vote them in any manner desired.
All unpaid dividend arrearage must be brought current before a dividend may be paid on NAR's common stock
Under the Uniform Securities Act, the definition of person includes which of the following? 1. An unincorporated investment club 2. An individual who buys and sells securities only for his own account 3. Associations and partnerships, whether or not they issue certificates 4. The U.S. government
An unincorporated investment club, an individual who buys and sells securities only for his own account, associations and partnerships, whether or not they issue certificates, and the U.S. government
A benefit of waiting until the age of 70 to claim Social Security benefits is that A. the income tax rate is reduced once the claimant reaches 70. B. a higher percentage of the monthly benefit is exempt from income taxes. C. Medicare benefits are increased. D. benefits are increased by 8% for each year from the full retirement age.
Benefits are increased by 8% for each yr from the full retirement age
In general, when describing the characteristics of equity index annuities and variable annuities, each of the following would be a true statement except A. only the EIA has a minimum guaranteed return B. only the variable annuity is considered a security C. both are issued by life insurance companies D. both offer an opportunity for unlimited gain
Both offer an opportunity for unlimited gain
Unless done under a specific exemption described in the law, it would generally be prohibited for an investment adviser to A. charge fees in advance of services performed. B. charge commissions. C. have discretion over a client's assets. D. charge fees based on performance.
Charge fees based on performance
Which of the following is considered the most accurate method of measuring GDP? A. As a function of GNP B. Actual dollars C. Constant dollars D. Eurodollars
Constant dollars
Registration as an investment adviser is required for any firm in the business of giving advice on the purchase of A. apartments undergoing a conversion to condominiums. B. convertible bonds. C. gold coins. D. rare convertible automobiles.
Convertible bonds
A free trade agreement is entered into between Country A and Country B. As time goes on, the value of Country A's currency increases while that of Country B's decreases. The effect of this will likely be that A. Country A's imports from Country B will increase. B. the free trade agreement will be abrogated. C. Country A's exports to Country B will increase. D. Country B's imports from Country A will increase.
Country A's imports from Country B will increase
Which of the following statements best describes what will happen when the value of the American dollar rises in relation to foreign currencies? A. Foreign goods and services will become more expensive for Americans. B. The risk of stagflation will increase. C. Foreign goods and services will become less expensive for Americans. D. Shares of foreign stock will be worth more in terms of American dollars.
Foreign goods and services will become less expensive for Americans
Under the NASAA Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents, it would be considered a prohibited practice for a broker-dealer to A. fail to maintain the required net capital. B. have a history of repeatedly delaying the delivery of securities to its customers. C. maintain an office in the state but fail to register with the Administrator. D. inform customers that past performance is no guarantee of future results.
Have a history of repeatedly delaying the delivery of securities to its customers
All of the following practices violate NASAA's Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents except A. hypothecating customer securities held in margin accounts. B. effecting a transaction with no change in beneficial ownership. C. recommending the purchase of a security to a majority of the clients solely on the basis of the issuer's properly published press release regarding a likely increase in earnings per a new product branding strategy. D. conducting securities transactions, with clients, that are not reflected on the books of the broker-dealer and without the knowledge and supervision of the employing broker-dealer.
Hypothecating customer securities held in margin accounts
If, during a given year, a company has net income of $1 million and pays out dividends of $800,000, its retained earnings will A. decrease by $1 million. B. increase by $1 million. C. increase by $200,000. D. decrease by $200,000.
Increase by $200k
An investment adviser (IA) is a member of a country club and provides substantial fee reductions to those members who become clients. The adviser justifies this because these club members are known for great referrals. The IA charges regular clients a fee that is larger for the same services because they are not members of the country club. Is this permissible? A. It is permissible as long as the offer is not published as an inducement to join the country club. B. It is not permissible because all clients must be charged at the same rate. C. It is not permissible because the firm is charging other clients fees that are excessive in nature compared with the fees charged to country club members. D. It is permissible as long as proper disclosure is made in the adviser's brochure.
It is permissible as long as proper disclosure is made in the adviser's brochure
Which of the following would constitute political risk that might affect a security? A. A strike by the union representing the company's employees B. A bad decision by the company's CEO C. New tariffs are levied against the company's major product D. New environment regulations
New tariffs are levied against the company's major product
The process of making changes to an asset allocation model over time, in an effort to adapt for any allocation percentages that are no longer in tandem with the original portfolio allocation model, is called A. corrective adaptation B. rebalancing C. portfolio modification D. allocation adjustment theory
Rebalancing
Although bonds are issued by many different entities, most of their features are the same. With few exceptions, included in that list of similarities would be all of these except A. price movement that is inverse to interest rates. B. a stated maturity date. C. safety of principal. D. a stated interest date.
Safety of principal
Under the Uniform Securities Act, an individual does not meet the definition of an agent if he is employed by a broker-dealer and only: A. represents the broker-dealer in effecting transactions between the issuer and underwriter. B. trades for the firm's market-making account. C. serves as a partner, officer, or director of the firm with full-time responsibilities in back office management. D. accepts unsolicited orders.
Serves as a partner, officer, or director of the firm w/ full-time responsibilities in back office management
All of the following positions expose a customer to unlimited risk except A. short 200 shares of XYZ and short 2 XYZ puts. B. short 2 XYZ uncovered calls. C. short 2 XYZ uncovered puts. D. short 200 shares of XYZ.
Short 2 XYZ uncovered puts
Charles wishes to preserve his capital and generate income with moderate risk by investing in mutual funds. Which of the following mutual fund types would probably least meet these investment objectives? A. Technology funds B. A bond fund C. An income fund D. A balanced fund
Technology funds
Under NASAA's Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers, which of the following practices is appropriate for an adviser who does not have custody or discretion over clients' assets? A. Vanessa discusses a security with a client who agrees it is a good buy. A short time later, she learns shares are available and purchases them for the client. B. Chris purchases shares of a stock without discussing it with his client. The client previously agreed to buy another stock, but at the time of purchase, it was losing heavily. To spare his client from a loss, Chris purchases the stock. C. Without authority, Shawna trades a security that is losing heavily for a similar security that she recently discussed with her client. D. Tom manages 35 clients who suffer financial loss while he is trying to contact them for authorization to trade.
Tom manages 35 clients who suffer financial loss while he is trying to contact them for authorization to trade
Which of the following is the risk that diminishes through portfolio diversification? A. Purchasing power risk B. Systematic risk C. Interest rate risk D. Unsystematic risk
Unsystematic risk
Investors interested in acquiring convertible debentures as part of their investment portfolio would A. seek to minimize changes in the bond price during periods of steady interest rates. B. want the assurance of a guaranteed dividend on the underlying common stock. C. want the safety of a fixed-income investment along with potential capital appreciation. D. be interested in tax advantages available to convertible debt securities
Want the safety of a fixed-income investment along w/ potential capital appreciation
To make a quantitative evaluation using the present value computation, which of the following is not needed? A. Time period involved B. Anticipated rate of return of the portfolio C. Account value at the end of the period D. Account value at the beginning of the period
Account value at the beginning of the period
Under the NASAA Model Rule on Business Continuity and Succession Planning, which of the following investment advisers should be most concerned about succession planning? A. The Four Partners Advisory Service B. Finest Financial Advisers, Incorporated C. Jeremy's Financial Planning and Advice, organized as a sole proprietorship D. Bob and Ted's Excellent Advice, LLC
Jeremy's Financial Planning and Advice, organized as a sole proprietorship
ABC Manufacturing Company is in the business of making high-quality machine tools. Which of the following would be included in ABC's cash flow from financing activities? A. Payment of cash dividends B. The sale of XYZ Lathe Manufacturing bonds C. The purchase of a new building to store inventory D. The purchase of a new computer-driven lathe
Payment of cash dividends
Matt, a registered investment adviser, operates an office down the hall from Jane, a CPA. Because Jane has no interest in portfolio management, she frequently refers her clients to Matt for investment advice. When one of Jane's clients signs a letter of engagement with Matt, Matt sends Jane a $200 referral fee. This occurred five times in the previous year. This situation is A. permitted because there were fewer than six occurrences involving referral fees. B. prohibited. C. permitted if the referral fee is disclosed to the appropriate clients. D. permitted without restriction.
Permitted if the referral fee is disclosed to the appropriate clients
An analyst is reviewing a company's financial statements. One of the calculations involves taking all of the current assets except the inventory and dividing that by the total current liabilities. This analyst is looking at the company's A. working capital. B. quick asset ratio. C. debt-to-assets ratio. D. current ratio.
Quick asset ratio
When a corporation files for bankruptcy, heading the priority for payment would be holders of A. commercial paper B. senior prior lien preferred stock C. senior debt D. common stockholders
Senior debt
Commodity futures contracts are available on all of the following except A. soybeans. B. industrial metals. C. eggs. D. single-family homes.
Single-family homes
Tax considerations are frequently an important factor when determining appropriate recommendations for advisory clients. In which of the following accounts is the tax status of the individual a critical factor? 1. An account opened in the name of the XYZ Corporation, organized as a C corporation, by their chief investment officer 2. An account opened by a sole proprietor in the name of the company 3. An account opened in the name of ABC Corporation, an S corporation by one of its shareholders 4. An account opened in the name of the GHI Fund, a regulated investment company, by the fund's portfolio manager
An account opened by a sole proprietor in the name of the company and opened in the name of ABC Corporation, an S corporation by one of its shareholders
Which of the following regarding the registration of investment advisers and their representatives is true? A. An investment adviser representative terminated his employment with ABC Advisers, Inc., a state-registered investment adviser and, six months later, was employed as an advisory representative by KLM, a federal covered adviser. Each firm is required to notify the Administrator of each event. B. XYZ Advisers, Inc., is a federal covered investment advisory firm registered with the SEC; therefore, its representatives need not be registered with the Administrator. C. ABC Advisers, Inc., registered with the Administrator, employs an investment adviser representative who left the employment of another investment advisory firm six months ago. ABC must notify the Administrator of this association promptly. D. ABC Advisers, Inc., is an investment advisory firm registered with the Administrator; therefore, its representatives need not be registered with the Administrator.
ABC Advisers, Inc., registered with the Administrator, employs an investment adviser representative who left the employment of another investment advisory firm six months ago. ABC must notify the Administrator of this association promptly
Which of the following firms in the business of rendering investment advice for compensation would be considered a federal covered adviser? A. GHI Consultants, a sole proprietorship managing $82 million belonging to high-net-worth individuals B. DEF Fund Managers, a corporation managing an unregistered hedge fund with $10 million in assets C. JKL Pension Consultants, a management firm providing services to employee benefit plans, which currently has $179 million under management D. ABC Money Managers, a partnership with $115 million under management
ABC Money Managers, a partnership w/ $115 million under management
If a new customer will not state investment objectives and will not provide a financial statement, the agent may A. solicit orders for any security without restrictions. B. sell only securities listed on a national exchange. C. sell only stocks recommended by the broker-dealer. D. accept unsolicited orders until the customer's suitability is determined.
Accept unsolicited orders until the customer's suitability is determined
Under the Investment Advisers Act of 1940, in which of the following cases has an investment adviser acted improperly by not making appropriate disclosures to clients? 1. An adviser that requires prepayment of $1,000 in fees, nine months in advance, has liabilities that exceed its assets and does not disclose this fact to clients. 2. An adviser that has investment discretion over client accounts cannot meet its financial obligations as they come due and does not disclose this fact to clients. 3. An adviser that does not require prepayment of fees and does not have discretion over accounts or custody of client securities or funds has just been found by a state court to have violated a rule issued by the SEC and does not disclose this fact to clients.
An adviser that has investment discretion over client accounts cannot meet its financial obligations as they come due and does not disclose this fact to clients and an adviser that does not require prepayment of fees and does not have discretion over accounts or custody of client securities or funds has just been found by a state court to have violated a rule issued by the SEC and does not disclose this fact to clients.
SYZ Corporation is having a rights offering that will enable existing shareholders to acquire 1 share of SYZ common stock for each 10 shares they currently own. Under the Uniform Securities Act, what would this be considered? 1. An offer of SYZ rights 2. A sale of SYZ rights 3. An offer of SYZ common stock 4. A sale of SYZ common stock
An offer of SYZ rights and an offer of SYZ common stock
If applicable, disclosure of payment for order flow is required A. on the customer order ticket. B. if requested by the customer. C. on the customer trade confirmation. D. when the trade is in an exempt security.
On the customer trade confirmation
Which of the following statements regarding ERISA and qualified plans is correct? A. ERISA requires the fiduciary to invest for maximum gain under the prudent person rule. B. Qualified plans must meet the requirements of ERISA. C. ERISA regulations are primarily focused on the income tax aspects of qualified plans. D. ERISA applies only to defined benefit pension plans.
Qualified plans must meet the requirements of ERISA
All of the following statements regarding investment companies are correct except A. an open-end investment company is categorized as open-end because it is limited in the number of shares that are sold. B. a closed-end investment company is a type of company whose shares trade in the same manner as publicly-traded stocks in the secondary market. C. a unit investment trust is a type of investment company whose units are redeemable at NAV by the trust's sponsor. D. an exchange-traded fund is an investment that can be bought and sold throughout the trading day.
An open-end investment company is categorized as open-end b/c it is limited in the number of shares that are sold
Which of the following statements about closed-end investment companies are true? 1. Investors in closed-end investment companies may trade only in full shares. 2. Shares in closed-end investment companies may trade at more or less than the net asset value of the shares. 3. A closed-end investment company offers a fixed number of shares and does not continually offer new shares in response to investor demand.
Investors in closed-end investment companies may trade only in full shares, shares in closed-end investment companies may trade at more or less than the net asset value of the shares, and a closed-end investment company offers a fixed number of shares and does not continually offer new shares in response to investor demand.
Among the differences between an investment in a limited partnership offering and in a corporation is that A. only corporations are organized to run a business. B. limited partnership offerings do not pay dividends; corporations do. C. only corporations issue securities. D. limited partners take a more active role in the management of the enterprise than do stockholders of a corporation.
Limited partnership offerings don't pay dividends; corporations do
A single individual earning $250,000 a year may 1. open a Coverdell ESA 2. not open a Coverdell ESA 3. open a 529 college savings plan 4. not open a 529 college savings plan
Not open a Coverdell ESA and open a 529 college savings plan
To comply with the safe harbor requirements of Section 404(c) of ERISA, the trustee of a 401(k) plan must 1. offer plan participants at least three different investment alternatives 2. ensure that plan participants are insulated from control over their portfolios 3. allow plan participants to change their investment options no less frequently than quarterly 4. allow plan participants to purchase U.S. Treasury securities
Offer plan participants at least 3 different investment alternatives and allow plan participants to change their investment options no less frequently than quarterly
Under the Uniform Securities Act, which of the following statements regarding the use of material facts is true? A. Omitting material facts when selling securities is a fraudulent practice. B. The client is the final arbiter on what is material and what is not. C. The agent must not use material facts, unless they are the only ones available. D. Restrictions apply only to sales as to the use of material facts, not to the purchases of securities.
Omitting material facts when selling securities is a fraudulent practice
Which of the following statements regarding IRAs are correct? 1. One may have both a Roth IRA and a traditional IRA, contributing the maximum to each one. 2. One may have both a Roth IRA and a Roth 401(k) contributing the maximum to each one. 3. Both traditional IRAs and Roth 401(k) plans have RMDs at age 73. 4. If one is a participant in a Roth 401(k) plan, the earnings limits are waived for opening a Roth IRA.
One may have both a Roth IRA and a Roth 401(k) contributing the maximum to each one and both traditional IRAs and Roth 401(k) plans have RMDs at age 73
One type of alternative investment considered to be a pooled investment vehicle is the inverse exchange-traded fund (ETF). Inverse ETFs, also known as bear or short funds, are managed to A. be used only by professional traders and market makers. B. perform contrary to a benchmark market index such as the S&P 500. C. be profitable only when interest rates are rising. D. outperform a benchmark market index such as the S&P 500.
Perform contrary to a benchmark market index such as the S&P 500
Under the Uniform Securities Act, which of the following statements is not true regarding registration of securities? A. The Administrator may require periodic sales and other reports to be filed. B. A post-effective amendment must be filed if there are any material changes in the information on file. C. The Administrator may require that the proceeds of the sale of securities be escrowed until sales reach a certain level. D. Registration statements that comply with the Uniform Securities Act automatically comply with requirements in the Investment Company Act of 1940.
Registration statements that comply with the Uniform Securities Act automatically comply with requirements in the Investment Company Act of 1940
Perpetual Pecuniary Rewards (PPR) is an investment adviser registered in several states. PPR is affiliated with Perpetual Rewarding Investments (PRI), a broker-dealer registered with the SEC and the same states as PPR. Through that affiliation, clients of PPR can enter into a wrap program with an annual fee between 1% and 1.75%, depending on the account's assets. When opening a new wrap account, PPR must provide the client with a written disclosure statement containing at least the information A. required by Appendix 1 of Form ADV, Part 2A. B. contained in Form ADV, Part 2A C. contained in PRI's Form BD filed with the state of residence of the client. D. required by Appendix 1 of Form ADV, Part 1A.
Required by Appendix 1 of Form ADV, Part 2A
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 within 30 days. B. Revocation of the registration of that agent's broker-dealer will result in that agent's effective registration being put on hold. C. Agents may be licensed in a state even if their broker-dealer is not. D. If the broker-dealer with which that agent is registered should have its registration revoked, the agent may continue to do business only with existing clients and may not acquire any new ones until registered with an active broker-dealer.
Revocation of the registration of that agent's broker-dealer will result in that agent's effective registration being put on hold
In projecting future cash requirements, one of the tools is a capital needs analysis. When doing one, all of the following would be considered capital needs except A. a $100,000 loan for law school with a due date in 10 years B. a $20,000 loan for undergraduate school with a due date in 6 years C. rolling over a 401(k) into an IRA D. a home equity loan with a $15,000 balance
Rolling over a 401(k) into an IRA
