Series 65: Unit 5 Exam

A high-net-worth client of yours invested $250,000 into an oil and gas limited partnership drilling program for which she received a 10% interest in the project. Unfortunately, after two years of drilling without success, the project was foreclosed with outstanding debt of $4 million. Your client is liable to the partnership's creditors for A. $250,000. B. $0. C. $400,000. D. $150,000.

$0

Which of the following would not be considered an agricultural commodity? A. Coffee B. Aluminum C. Oats D. Soybeans

Aluminum

For a customer interested in buying an inverse exchange-traded fund (ETF) tracking the performance of the Standard & Poor's 500 Index, which of the following market views would make that purchase most inappropriate? A. Neutral B. Bullish or bearish C. Bullish D. Bearish

Bullish

Which of the following is not a feature of owning a limited partnership? A. Legislative risk B. An investment managed by others C. Flow-through of income and expenses of a business to the individual limited partner D. Tax-free income

Tax-free income

A client wishing to invest in precious metals could consider each of the following except A. lead. B. silver. C. platinum. D. gold.

Lead

One of your clients approaches you and is looking for an investment that will provide ready marketability and income. Which of the following would be the least appropriate recommendation? A. U.S. Treasury notes B. A money market mutual fund C. A limited partnership in rental real estate D. NYSE-listed preferred stock

A limited partnership in rental real estate

The price of which of the following commodities is most likely to be impacted by weather? A. Lead B. Orange juice C. Gold D. Livestock

Orange juice

Flow-through is one of the features of A. open-end investment companies. B. direct participation plans. C. variable annuities. D. REITs.

Direct participation plans

Your customer is asking if either exchange-traded funds (ETFs) or exchange-traded notes (ETNs) might be suitable investments for his portfolio. The customer makes several statements regarding his understanding of the products, but only one of them is accurate. Which is it? A. ETNs are issued by financial institutions; therefore, I should be concerned about the credit worthiness of the issuer. B. ETNs are equity securities because they trade on exchanges. C. If I want to sell my shares of an ETF, I have to wait until the next price is calculated to value the portfolio of securities. D. ETFs have a fixed coupon rate that I should expect to realize when they mature.

ETNs are issued by financial institutions; therefore, I should be concerned about the credit worthiness of the issuer

In general, an investor wishing to gain economic exposure to commodities would find it easiest to do so by A. investing in futures contracts. B. buying the commodity directly. C. investing in forwards contracts. D. growing the commodity.

Investing in futures contracts

Investing in commodities could involve investing in any of these except A. agricultural items. B. animals. C. consumer durables. D. industrial metals

Consumer durables

A client was reading an offering document for an oil and gas drilling limited partnership program and noticed that one of the features was flow-through benefits. How would you explain this? A. Losses generated by the program pass-through to the investor and may be deducted in full against ordinary income. B. Once the program has paid taxes on its income, the entire remaining balance passes-through to the investors. C. Rather than being a separate taxable entity, the program's income or losses pass-through directly to the investors. D. Investors in the program are assured of a steady flow of income if the drilling is successful.

Rather than being a separate taxable entity, the program's income or losses pass-through directly to the investors

In a limited partnership program, which partners manage the partnership's day-to-day operations and incur unlimited personal liability for the partnership's debts? A. Both the general partners and the limited partners B. The general partners C. The limited partners D. Neither the general partners nor the limited partners

The general partners

Your customer is interested in a leveraged fund and makes the following statements about leveraged funds to you. All of the statements regarding leveraged funds are true except A. some leveraged funds are exchange-traded products. B. the funds attempt to return a multiple of the return of a benchmark index they are tracking, perhaps two or three times. C. there are no unusual risks associated with these funds other than those one would incur with any index tracking fund. D. these funds sometimes use derivatives products to achieve their stated goals.

There are no unusual risks associated w/ these funds other than those one would incur w/ any index tracking fund