Series 65: Unit 5 Quiz 1

One of the benefits of adding precious metals to an investor's portfolio is A. low transaction costs. B. generous income. C. a potential inflation hedge. D. a high correlation to the stock market.

A potential inflation hedge

A REIT and a direct participation program are similar because they both A. are operated by a centralized management. B. can be described as a limited partnership. C. are traded actively in the secondary market. D. pass through losses to investors.

Are operated by a centralized management

A client invests $100,000 in a commercial real estate venture taking a 10% interest as a limited partner. Unfortunately, the demand for new office space deteriorates and the partnership is unable to meet the mortgage payments. The end result is foreclosure with a net loss of $2 million. This would have the effect of: A. a potential claim against the agent who sold the client this program. B. requiring the client to pay his share of the loss to the creditors. C. giving the client a passive loss of $200,000. D. giving the client a passive loss of $100,000.

Giving the client a passive loss of $100k

Among the differences between an investment in a limited partnership offering and in a corporation is that A. limited partners take a more active role in the management of the enterprise than do stockholders of a corporation. B. only corporations issue securities. C. only corporations are organized to run a business. D. limited partnership offerings do not pay dividends; corporations do.

Limited partnership offerings don't pay dividends; corporations do

Commodities contracts are available on A. pearls. B. diamonds. C. platinum. D. emeralds.

Platinum

An investor owns an inverse ETF. If the underlying index should decrease in value, A. there is no correlation between the fund and the value of the index. B. the fund shares will increase in value. C. the fund shares will increase by a factor of 2. D. the fund shares will also decrease in value.

The fund shares will increase in value

All of the following are features of limited partnership direct participation programs except A. the limited partners have limited liability. B. the general partner controls the business activities of the partnership. C. the limited partners may participate in the management of the partnership. D. the general partner determines when distributions are made to the limited partners.

The limited partnerships may participate in the management of the partnership

A 3x leveraged fund priced at $42 tracks an index that is up 2% one day and then down 3% on the next day. What should this fund be approximately priced at following these two volatile days? A. $45.86 B. $41.55 C. $43.18 D. $40.50

$40.50

A client with limited assets seeking additional income in retirement would probably find which of the following investment choices to be the least suitable? A. ETFs B. Insured bank CDs C. ETNs D. Treasury bonds

ETNs

With respect to liquidity and potential for diversification, in comparing alternative investments to exchange-traded stocks, the markets for alternative investments are generally A. more liquid and provide more opportunity for diversification. B. more liquid and provide less opportunity for diversification. C. less liquid and provide more opportunity for diversification. D. less liquid and provide less opportunity for diversification.

Less liquid and provide more opportunity for diversification

Commodity futures contracts are available on all of the following except A. single-family homes. B. industrial metals. C. eggs. D. soybeans.

Single-family homes

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

Tax-free income

One type of alternative investment considered to be a pooled investment vehicle is the exchange-traded note. Exchange-traded notes (ETNs) are which of these? 1. Unsecured debt securities 2. Unsecured equity securities 3. Issued by financial institutions, such as banks 4. Insured by the FDIC

Unsecured debt securities and issued by financial institutions, such as banks

Among the characteristics of leveraged exchange-traded funds is that A. they can only be sold to accredited investors. B. they are generally suitable for investors with a long time horizon. C. leveraged ETFs may be purchased on margin. D. leveraged ETFs generally obtain the leverage through bank borrowing.

Leveraged ETFs may be purchased on margin

An investor looking for liquidity would be least likely to consider A. ETFs. B. NFTs. C. REITs. D. CEFs.

NFTs

Regarding the use of the term direct participation programs, when referring to tax-sheltered investments, which of the following is not a DPP? A. Real estate limited partnership B. Equipment leasing limited partnership C. Oil and gas limited partnership D. Real estate investment trust

Real estate investment trust

An alternative investment vehicle that is managed to perform contrary to a benchmark market index such as the S&P 500 is A. an equity-linked note. B. a long put on the index. C. a leveraged exchange-traded fund. D. an inverse exchange-traded fund.

An inverse exchange-traded fund

If an investor was of the opinion that the market was going to have a bad day, to maximize that investor's gains, you might recommend A. an inverse ETF. B. a leveraged ETF. C. an inverse leveraged ETF. D. selling a call option on the S&P 500 Index.

An inverse leveraged ETF

One of the benefits of being a limited partner in a direct participation program is that A. any losses generated by the partnership flow through to the limited partner and can be used against ordinary income in an amount up to $3,000 per year. B. the limited partner can make certain management decisions. C. any income generated by the partnership flows through to the limited partner and is treated as a long-term capital gain. D. the general partner is the only person liable for the debts of the business.

The general partner is the only person liable for the debts of the business

One of your clients is 10 years away from retirement and is trying to decide what would be a suitable investment for this year's IRA contribution. You would probably not recommend A. leveraged ETFs. B. target date mutual funds. C. broad market ETFs. D. conservative growth mutual funds

Leveraged ETFs

Which of the following is a motivation for creating structured products? A. Structured products reduce costs to issuers. B. Structured products improve profits for broker-dealers. C. Structured products are less expensive for investors to buy and trade. D. Structured products improve market completeness.

Structured products improve market completeness