series 66 test #2
A Chinese Wall must be maintained by a broker-dealer between all of the following EXCEPT: A: Sales and Back Office Operations B: Research and Trading C: Investment Banking and Research D: Investment Banking and Sales
A
A customer buys 1 ABC Jul 40 Put at $6 when the market price of ABC is 38. The maximum potential loss to the holder is: A: $600 B: $3,400 C: $4,000 D: unlimited
A
A customer has invested in mutual funds and chooses to have dividends and capital gains automatically reinvested. All of the following statements are true about this EXCEPT: A: automatic reinvestment permits taxation to be deferred until distributions are taken B: distributions are reinvested at NAV C: the customer's NAV will appreciate faster than if automatic reinvestment were not chosen D: the customer will receive a Form 1099-DIV each year from the fund for tax reporting purposes
A
A customer places an order to sell 500 shares of ABCD stock at the best price possible, so that the customer can use the funds from the settlement in 2 business days to pay for a new car purchase. The agent notices that the price of the stock is dropping rapidly and decides to sell 200 out of the 500 shares that day - since he believes that the price will rebound. The next day the price rises and the agent sells the remaining 300 shares. Which statement is TRUE regarding the agent's actions? A: The agent has violated the Uniform Securities Act because he or she exceeded the discretionary authority that was granted by the customer B: The agent has not violated the Uniform Securities Act because he or she executed the transactions in a manner that was consistent with the customer's best interests C: The agent has violated the Uniform Securities Act because any order placed by a customer must be executed in its entirety as soon as possible after the order is placed D: The agent has not violated the Uniform Securities Act because the order was executed at the best possible prices for the customer
A
A portfolio invested in actively managed funds that is rebalanced monthly is considered to be: A: Active/Active B: Passive/Passive C: Active/Passive D: Passive/Active
A
An agent receives material inside information about a publicly held company. All of the following actions by the agent are violations of the Uniform Securities Act EXCEPT: A: soliciting orders from customers based on this information B: discussing the information with the principal of the broker-dealer C: effecting trades in discretionary customer accounts based on this information D: effecting trades for the agent's personal account based on this information
A
An investor has been following the stock of ACME - a company in which she has a position purchased at $22. Currently the stock has been trading between $20 and $25 per share. She believes that if the stock drops below $20, it is a good investment and wants to buy more shares. On the other hand, if the stock rises above $25, she wants to take her profit and sell her position. What two orders should she use? A: Buy Limit and Sell Limit B: Buy Limit and Sell Stop C: Buy Stop and Sell Limit D: Buy Stop and Sell Stop
A
Delivery of a prospectus is required if a: I new issue of corporate bonds is being offered to the public II trade in a corporate bond takes place in the secondary market III new issue of government bonds is being offered to the public IV trade of a government bond takes place in the secondary market A: I only B: I and II C: I and III D: I, II, III, IV
A
The process by which future value is determined is known as: A: compounding B: discounting C: accreting D: amortizing
A
Two companies, Company A and Company B, are involved in a securities offering. Company B is selling its stock. Company A's employees help sell the shares. Company A receives commissions from Company B and pays the commissions to its staff. Therefore, the employees of Company A are: A: agents of a broker-dealer B: their own broker-dealer C: independent contractors D: agents of an issuer
A
Which of the following are "preference" items included in the alternative minimum tax computation? I Excess intangible drilling costs II Excess depletion III Straight line depreciation IV Tax credits A: I and II B: II, III, IV C: I, II, IV D: I, II, III, IV
A
Which of the following statements is TRUE regarding an investment adviser that solely follows and recommends NYSE listed securities? A: The adviser is subject to either State or Federal registration depending upon the amount of assets under management B: The adviser is subject to State registration only C: The adviser is exempt from State registration D: The adviser is exempt from State and Federal registration regardless of the amount of assets under management
A
Which statements are TRUE about the alternative minimum tax computation? I The alternative minimum tax computation is required for all taxpayers II The alternative minimum tax computation is required only for investors in limited partnerships' III If the alternative minimum tax amount is greater than the regular income tax amount, the larger amount must be paid IV If the alternative minimum tax amount is greater than the regular income tax amount, the smaller amount must be paid A: I and III B: I and IV C: II and III D: II and IV
A
Which statements are TRUE regarding the payment of fees by registrants? I Registrants with the SEC are required to pay a filing fee II Registrants with the SEC are not required to pay a filing fee III Registrants with the State are required to pay a filing fee IV Registrants with the State are not required to pay a filing fee A: I and III B: I and IV C: II and III D: II and IV
A
Which statements are TRUE regarding variable annuities during the annuity phase? I The annuity unit value fluctuates II The annuity unit value remains the same III The annuity check received may be for a different amount at each payment IV The annuity check received will be for the same amount at each payment A: I and III B: I and IV C: II and III D: II and IV
A
Which will result in the lowest average cost per share? A: Buying a fixed dollar amount of shares on a quarterly basis B: Buying a fixed number of shares on a quarterly basis C: Buying a fixed number of shares at a single time in the market D: Buying a fixed dollar amount of shares at a single time in the market
A
Who administers the Investment Advisers Act of 1940? A: SEC B: MSRB C: FINRA D: NASAA
A
A U.S. investor purchasing foreign securities trading on the LSE (London Stock Exchange) will benefit when the: I U.S. Dollar weakens II U.S. Dollar strengthens III British Pound weakens IV British Pound strengthens A: I and III B: I and IV C: II and III D: II and IV
B
A broker-dealer offers 4 summer passes to an amusement park to each of its agents who sell at least $10,000 of bonds during the month of June. This action is: I allowed II not allowed III considered to be "soft dollar" compensation IV not considered to be "soft dollar" compensation A: I and III B: I and IV C: II and III D: II and IV
B
A broker-dealer wishes to charge its customers that engage in options trading a separate account service charge in addition to a commission on each trade. The new service charge will be based on the volume of options trading in the account, with the fee set at 10% of the value of monthly options trades, but no less than $25 per month. The arrangement is disclosed to all of the broker-dealer's options customers. Which statement is TRUE? A: Broker-dealers are not permitted to charge accounts service fees, so this arrangement is unethical B: This represents an excessive account fee and is a prohibited practice C: The service fee can be charged because the firm's customers were notified of the new fee D: This service fee can be charged because it is fair and reasonable
B
A customer has $10,000 in passive losses from a limited partnership investment. If the customer has $3,000 of passive income for that tax year, the customer may deduct: A: 0 B: $3,000 C: $5,000 D: $10,000
B
A customer signature is needed to open a: A: cash account B: margin account C: both of the above D: neither of the above
B
A registered investment adviser has a client who is an exceptionally intelligent doctor of medicine. The doctor does most of his own investment research and makes many of his own investment decisions. The doctor is married, but his wife is not involved in the investment planning or decision-making process. When constructing a portfolio for this client, the investment adviser should: A: choose the investments in the portfolio based solely on the research conducted by the doctor B: balance the portfolio in a manner that addresses the doctor's investment strategy and that customizes the strategy to meet the needs of the spouse C: charge fees on the assets held in the portfolio that were chosen by the investment adviser without using the doctor's research D: disregard the doctor's research because the doctor is not properly licensed to act as an investment adviser
B
A value fund manager has decided that her position in ABCD stock should be liquidated. To decide the best time to do this, the manager would use: A: fundamental analysis B: technical analysis C: a combination of both fundamental and technical analysis D: a Monte Carlo simulation
B
An existing customer of an agent who is registered in State Z contacts the agent to inquire about selling 1,000 shares of ABCC Corp. - a thinly traded stock that is sometimes quoted in the Pink Sheets. The agent attempts to locate a buyer for the shares for the customer, but cannot find one. One week later, a new customer contacts the agent, asking him to buy 1,000 shares of ABCC Corp. The agent contacts the existing client to see if he is interested in selling these shares. This action is: A: a violation of the Uniform Securities Act B: considered to be an offer to buy made by the agent C: a conflict of interest that must be disclosed to the existing customer D: defined as a contract to sell the shares
B
An investment adviser directs its trades to a broker-dealer paying non-discounted rates. In return, the broker-dealer is permitted to give the investment adviser: A: software for the IA's back-office operations B: software that compares asset allocation models used by the IA C: software that books travel at the lowest cost to the IA D: nothing of value
B
An order to sell 100 shares of ABC at $50 GTC on the Specialist's book (DMM) is a: A: market order B: limit order C: stop order D: stop limit order
B
Dollar Weighted Average Return is the same as: A: Annualized Rate of Return B: Internal Rate of Return C: Time Weighted Average Return D: Expected Rate of Return
B
Given the formula: X = 72/Rate of Return X is equal to the: A: Actuarial yield to standard retirement age B: Time necessary to double an investment value C: Standard deviation of investment return D: Holding period rate of return on an investment
B
Income in a revocable trust is taxed at the: A: corporate rate B: grantor rate C: trust rate D: AMT rate
B
The Sharpe Ratio is the ratio of: A: portfolio return to standard deviation B: risk-adjusted return to standard deviation C: portfolio return to duration D: risk-adjusted return to duration
B
The major difference between an open-end fund and a unit investment trust is: A: A UIT imposes a management fee while an open-end fund does not B: A UIT portfolio is fixed while an open-end fund portfolio changes C: A UIT is defined as an investment company while an open-end fund it is not D: A UIT has a board of directors while a management company does not
B
Under the Investment Advisers Act of 1940, all of the following statements about investment advisory contracts are true EXCEPT investment advisory contracts: A: must be in writing B: must be filed with the SEC 10 days in advance of their effective date C: must provide for notification to customers if there is a change in the composition of the advisory partnership D: may provide for a fee that is partially based upon capital gains for customers who have at least $1,000,000 of assets invested; or who have a net worth of $2,100,000
B
Under the Investment Advisers Act of 1940, if an investment adviser wishes to effect an agency cross transaction for a customer, which of the following statements are TRUE? I Agency cross transactions cannot have been recommended to both the buyer and seller by the investment adviser II Each client must be sent an annual statement identifying the total number of agency cross transactions effected; and the remuneration received by the adviser for these transactions III Each client must be sent a monthly account statement detailing activity in the account for that period IV To effect an agency cross transaction, written consent from the client must be obtained A: I and III B: I, II, IV C: II, III, IV D: I, II, III, IV
B
Under the Uniform Securities Act, if the Administrator prohibits an investment adviser from taking custody of customer funds or securities, the investment adviser would be permitted to: A: buy securities for a customer using the investment adviser's monies, and then delay delivery of those securities to the customer B: buy securities for a customer who has given a limited power of attorney to the adviser using monies deposited by that customer to an account established by the adviser specifically for that purpose C: hold customer funds in accounts established and maintained by the adviser that have been segregated and properly identified D: accept a prepaid advisory fee of $500 from the client covering a period of up to 1 year
B
Under the provisions of the Prudent Investor Act, all of the following statements are true regarding the management of trust accounts with multiple beneficiaries EXCEPT the fiduciary: A: must manage the trust impartially, taking into account the differing needs of the trust beneficiaries B: is judged based on the performance of each individual investment chosen in the account C: should seek to maximize portfolio performance and can assume extra risk consistent with the beneficiaries' investment objectives and needs D: is permitted to delegate investment decisions to qualified agents without needing consent of the beneficiaries
B
Which of the following investments trades in the market independent of NAV? A: Mutual fund B: Closed-end fund C: Variable annuity D: Hedge fund
B
Which of the following retirement plans is a non-qualified plan? A: 401(k) plan B: 457 plan C: Profit sharing plan D: Money purchase plan
B
Which of the following statements are TRUE regarding joint accounts? I Orders can be given by either party II All parties must enter orders together III Checks can be made out in the name of either party IV Checks can only be made out to all parties together A: I and III B: I and IV C: II and III D: II and IV
B
Which of the following statements concerning 529 plans are TRUE? I Contributions are tax deductible to the donor II Distributions to pay for qualified higher education expenses are tax-free III The beneficiary can be changed to another family member without tax consequences IV Any plan balance must be distributed to the beneficiary at age 30 A: I and II only B: II and III only C: III and IV only D: I, II, III, and IV
B
A Registered Investment Adviser charges a fee to customers based on a percentage of assets under management. The adviser invests customer funds solely in mutual funds that have a sales charge. Which statement is TRUE? A: The only disclosure that the adviser must make to the customer is the asset management fee B: The only disclosure that the adviser must make to the customer is the sales charge C: The adviser must disclose to the customer both the management fee and sales charge to the customer D: The adviser is not required to disclose to the customer neither the management fee nor the sales charge
C
A bond portfolio consists of: $100,000 par value of 2-year zero coupon bonds $100,000 par value of 6-year zero coupon bonds $100,000 par value of 10-year zero coupon bonds $100,000 par value of 22-year zero coupon bonds The duration of the portfolio is: A: 2 years B: 8 years C: 10 years D: 22 years
C
A business form that gives a "flow-through" tax benefit and unlimited liability to owners is a(n): A: C Corporation B: S Corporation C: General Partnership D: Limited Partnership
C
A customer invests $100,000 in an Equity Indexed Annuity contract tied to the Standard and Poor's 500 Index. The contract has a 90% participation rate; a 15% cap and a 3% floor. Interest is credited to the contract under the annual reset method and is compounded annually. The performance of the Standard and Poor's Index over the next 3 years is: Year 1:+20% Year 2:-5% Year 3:-10% At the end of year 3, the customer will have a principal balance of approximately: A: $100,000 B: $105,000 C: $122,000 D: $125,000
C
A customer who is retired wants to select an investment that is marketable, and that provides the highest rate of return. The BEST choice would be to recommend: A: Treasury Bills B: Treasury Notes C: Investment Grade Preferred Stock D: Certificates of Deposit
C
A father is writing his will (the testator) and is naming as beneficiaries his 2 adult sons - Son A and Son B. Each one will get an equal share of the father's estate "per stirpes" upon the father's death. Each of the sons has children (the grandchildren of the testator) who are not yet adults. Son A has 2 young children - Grandchild A1 and Grandchild A2. If Son A predeceases the testator, then: A: Son A's 1/2 share goes into his estate B: Son A's share goes to Son B C: Grandchild A1 gets 25% and Grandchild A2 gets 25% of the estate's assets upon the death of the testator D: the deceased son's share reverts back to the father's estate
C
A portfolio with an objective of global investing would: A: invest only in securities issued in foreign countries B: invest only in securities issued by U.S. corporations that have global operations C: spread its investments across both domestic and foreign securities, overweighting countries that are likely to experience faster rates of growth D: spread its investments across both domestic and foreign securities, weighting investments relative to the GDP of each country
C
All of the following actions by an investment adviser are violations of the Uniform Securities Act EXCEPT the adviser: A: makes misleading statements to a client, but the client profits from the advice B: makes misleading statements to a client, but no transaction results from the advice C: discloses the risks of the investment, but the client loses as a result of the advice D: makes misleading statements to a client, but the client is an accredited investor
C
All of the following are defined as investment adviser representatives under the Uniform Securities Act EXCEPT a(n): A: majority partner in an advisory partnership B: minority partner in an advisory partnership C: employee of an advisory firm who performs ministerial functions relating to portfolio selection D: employee of an advisory firm who performs managerial functions relating to portfolio selection
C
All of the following risks are essentially equivalent for long term corporate bonds EXCEPT: A: Interest rate risk B: Market risk C: Default risk D: Inflation risk
C
All of the following statements are true regarding defined benefit plans EXCEPT: A: contributions made to the plan can vary from year to year B: employees with the highest salaries and the fewest years to retirement benefit the most C: benefits paid to employees consists of a tax free return of capital and a taxable return of earnings D: actuarial tables are used to determine contribution rates for each employee
C
An agent of a broker-dealer may: I charge a fee for investment advice in addition to any commission charged if a recommendation performs well II not charge a fee for investment advice in addition to any commission charged if a recommendation performs well III charge for clerical services where the charge is not based on performance IV not charge for clerical services A: I and III B: I and IV C: II and III D: II and IV
C
An application for a registered investment adviser can be denied in a State because a person associated with the adviser was: I convicted of a securities misdemeanor 7 years ago II convicted of a felony 15 years ago III denied registration by another State administrator within the past 3 years IV convicted of a traffic misdemeanor 8 years ago A: I and II B: III and IV C: I and III D: II and IV
C
An investment generates the following annual returns: Year 1:6% Year 2:4% Year 3:2% Year 4:10% Year 5:8% The median return is: A: 2% B: 4% C: 6% D: 8%
C
An investor has $200,000 invested in an account that earns 3% annually. The investor wishes to withdraw $30,000 per year. If the investor withdraws $30,000 annually, the account will be fully depleted in: A: 4 years B: 6 years C: 8 years D: 10 years
C
If any information filed with the State Administrator is discovered to be incomplete or inaccurate in any material respect, the registrant MUST: A: withdraw from registration and re-file with the State Administrator B: cease business operations until an amended registration has been filed with the State Administrator C: file a correcting amendment promptly with the State Administrator D: file an updating amendment with the State Administrator no later than 30 days from discovery
C
If it is expected that the price of an asset will fall in the future, all of the following strategies are profitable EXCEPT: A: Buy a put B: Sell a call C: Buy a future D: Sell a future
C
If stockholders' equity is subtracted from total assets, you are left with: A: current liabilities B: long term debt C: current liabilities and long term debt D: retained earnings
C
In order to make an offer of a non-exempt security, an agent of a broker-dealer: A: must be registered in the State in which he or she resides and the broker-dealer is located B: must be registered in the State where he or she is offering the security C: must be registered in the State in which he or she resides and the broker-dealer is located and must be registered in the State where he or she is offering the security D: need not be registered
C
The Administrator is authorized to do which of the following? I Obtain an injunction against any person suspected of violating the Act II Revoke the registration of all agents associated with a broker-dealer when the broker-dealer's registration is revoked III Subpoena the books and records of a broker-dealer after a suspension order is issued IV Suspend a registration pending a hearing without stating a reason for the suspension A: I only B: II and IV C: I, II, III D: I, II, III, IV
C
The President of an investment advisory firm is also a registered representative of a broker-dealer. This fact is disclosed in the adviser's disclosure document. The President buys 50 partnership units for his clients who are suitable. The President does not disclose to the clients that he receives a commission on each partnership unit purchased by his clients. Under NASAA Rules on Unethical Business Practices for Investment Advisers and Federal Covered Advisers, is this permitted? A: Yes, because the President is properly registered as an agent of a broker-dealer and this fact is disclosed in the adviser's disclosure document B: Yes, because the adviser determined the suitability of the investment for each of his clients C: No, because the adviser should have specifically informed each client that he would earn a commission on each limited partnership unit sold D: No, because officers of investment advisers are not permitted to receive commissions on recommended transactions in addition to collecting an advisory fee
C
The lowest investment grade rating is: A: B B: BB C: BBB D: CCC
C
The maximum amount that can be given to a child in a 529 plan is: A: the annual gift tax exclusion amount B: 5 times the annual gift tax exclusion amount C: determined by the limitations established by the State D: unlimited
C
Under the Investment Advisers Act of 1940, an SEC registration application as an investment adviser must be granted; or a proceeding must be initiated denying registration, within: A: 10 days B: 30 days C: 45 days D: 60 days
C
Under the Investment Advisers Act of 1940, copies of all advertising, notices and circulars must be retained if distributed to at least: A: 1 person B: 5 people C: 10 people D: 15 people
C
Under the Investment Advisers Act of 1940, which of the following MUST be disclosed to customers by an investment adviser? I An investment adviser takes $1,750 of prepaid advisory fees, 9 months in advance of services rendered, is having financial difficulties II An investment adviser that does not take custody of client funds; have discretionary accounts; or accept prepaid advisory fees; is having financial difficulties III An investment adviser that takes $1,750 of prepaid advisory fees, 9 months in advance of services rendered, is the subject of a disciplinary or legal action IV An investment adviser that does not take custody of client funds; have discretionary accounts; or accept prepaid advisory fees; is the subject of a disciplinary or legal action A: I and III only B: II and IV only C: I, III and IV D: I, II, III, IV
C
Under the NASAA Statement of Policy on unethical practices, all of the following investment advisers would be able to loan monies where securities are collateral for the loan EXCEPT an investment adviser that: A: has a registered broker-dealer that lends money to a customer through the broker-dealer affiliate B: is a subsidiary of a parent bank that lends money to a customer through the bank affiliate C: is a partnership that lends money to a customer under the provisions of Regulation T of the Federal Reserve Board D: is a corporation that lends money to its officers
C
Under the provisions of the Uniform Securities Act, all of the following statements are true EXCEPT: A: an investment adviser with no place of business in the State, need not register in that State if it is only dealing with insurance companies B: a broker-dealer with no place of business in the State, need not register in that State if it is only dealing with insurance companies C: if a broker-dealer is registered with the Financial Industry Regulatory Authority, then it is also registered in that State D: if a broker-dealer has its registration revoked, then the registration of its agents will also be revoked
C
Which of the following are covered under the Securities Exchange Act of 1934? I Registration of broker-dealers II Registration of investment advisers III Registration of insiders IV Registration of securities information processors A: I and II only B: III and IV only C: I, III, IV D: I, II, III, IV
C
Which of the following are defined as "Investment Advisers" under the Uniform Securities Act? I Lawyers who advise customers on investments for pension planning who charge a separate fee for advice II Newspapers having an "Investments" column with a general circulation III Persons who take a fee for advising clients about securities IV Publisher of an investment newsletter that provides advice based upon each client's specific investment situation A: I and II only B: I and III only C: I, III and IV D: I, II, III, IV
C
Which of the following are violations of the "suitability" rule? I Recommending speculative common stocks to a customer who has income objectives II Recommending to a customer who is 2 years from retirement that he get a second mortgage on his home to invest in growth stocks III Recommending trades of excessive size to a customer IV Recommending municipal bond funds to a customer who seeks income that is exempt from Federal income tax A: I and II only B: III and IV only C: I, II, III D: I, II, III, IV
C
Which of the following come under the jurisdiction of the State Administrator? I A mailing of sales literature to a customer in that State II A mailing of sales literature to a customer in a neighboring State III A television broadcast from within that State, received in that State IV A television broadcast from a neighboring State, received in that State A: I and II only B: III and IV only C: I, II, and III D: I, II, III, IV
C
Which of the following is (are) issuer transactions? I Purchase of a NASDAQ listed security II Purchase of a mutual fund share III Purchase of a limited partnership interest from the sponsor IV Purchase of an NYSE listed security A: I only B: I and IV C: II and III D: I, II, III, IV
C
Which of the following option positions is used to hedge a long stock position? A: long call B: short call C: long put D: short put
C
A Registered Investment Adviser uses past performance in an advertisement. The results shown must be based on: A: Gross investment income before any deductions B: Investment income after the deduction of expenses C: Investment income after the deduction of management fees D: Investment income after the deduction of management fees and expenses
D
A corporation is similar to a partnership in that: A: neither entity can be taxed directly B: both entities flow through gain and loss to owners C: both entities provide limited liability to owners D: both entities have no limit to the number of owners
D
A couple has been recently married, both for the second time. They are both age 40, and each has 2 kids from their prior marriage. They want to open a brokerage account that will ensure that the kids get assets from their natural parent. In order to accomplish this, the account should be opened as a: A: Totten Trust B: Partnership C: Joint Account With Rights Of Survivorship D: Joint Account With Tenants In Common
D
All of the following State-registered advisers must file an annual audited financial statement with the Administrator within 120 days of completion of a surprise audit EXCEPT an adviser that: A: accepts $500 or more of prepaid advisory fees, 6 months or more in advance of rendering services B: uses a qualified custodian to hold customer assets C: maintains custody of customer assets D: exercises discretion in customer accounts under a limited power of attorney
D
All of the following information would be found in a registration statement for a security that is going to be registered by qualification in a State EXCEPT: A: a current balance sheet of issuer B: the price of the security being offered C: the use of proceeds of the offering D: projections of future earnings of issuer
D
All of the following statements are true regarding the appointment of SEC commissioners EXCEPT: A: each commissioner holds the office for a term of 5 years B: there are 5 SEC Commissioners appointed by the President of the United States with the consent of the Senate C: commissioners are not permitted to engage in any other business or employment D: commissioners are permitted to engage in securities transactions as long as they are publicly disclosed
D
All of the following terms are synonymous EXCEPT: A: capital in excess of par B: capital surplus C: additional paid in capital D: retained earnings
D
An agent is conducting securities activities on the premises of a bank. Which statement is TRUE? A: This is an unethical practice B: This is permitted if the agent discloses orally to the customer that the products offered are not bank products; are not FDIC insured; and may lose value C: This is permitted if the agent discloses in writing to the customer that the products offered are not bank products; are not FDIC insured; and may lose value D: This is permitted if the agent discloses both orally and in writing to the customer that the products offered are not bank products; are not FDIC insured; and may lose value
D
An individual wishes to form a broker-dealer as a sole proprietorship. Which of the following can the State require? I Filing of a Form BD II Consent To Service of Process III Surety Bond IV Posting of Minimum Net Capital A: I and II only B: III and IV only C: I, II, III only D: I, II, III, IV
D
An investor has $100,000 to invest. She allocates about half of her portfolio to the purchase of a municipal bond with 1 year to maturity that has a 4% coupon, paying $50,465 for the bond. The investor's approximate rate of return (current) is: A: 2.75% B: 3.00% C: 3.25% D: 4.00%
D
Due to an overall market decline, an investment adviser that imposes a .50% annual management fee on its clients is under financial pressure. To meet its expenses, the adviser wishes to increase its management fee to .65% for any new clients; the existing clients will see no change to the management fee charged. In order to do so, the adviser must: I file an ADV Part 2A with the Administrator within 30 days II provide the amended ADV Part 2A or a brochure to its new clients III provide the amended ADV Part 2A or a brochure to its existing clients at year end A: I only B: I and II only C: II and III only D: I, II, III
D
If a customer stops making payments on a whole life policy, all of the following are permitted EXCEPT: A: taking the cash value of the contract as a lump sum B: taking a reduced paid-up whole life policy C: using the equity to purchase a term life policy D: using the equity to purchase a non-participating policy
D
If current liabilities of a company are subtracted from current assets of a company, the result is the company's: A: market value B: net worth C: capitalization D: net working capital
D
If the SEC suspends or revokes the registration of an investment adviser registered under the Investment Advisers Act of 1940: A: the action is binding and non-appealable B: the adviser can take the case to binding arbitration C: an appeal may be filed with the State Administrator within 60 days D: an appeal may be filed in Federal Court within 60 days
D
The State Administrator would NOT deny the registration application of an Investment Adviser because the IA was the subject of a(n): A: adjudication 4 years ago by the Securities and Exchange Commission that the adviser willfully violated the Investment Company Act of 1940 B: conviction in a court of law for a misdemeanor involving the securities business 4 years ago C: determination by the Commodities Futures Trading Commission 4 years ago that the IA willfully violated CFTC rules under the Commodities Exchange Act D: personal bankruptcy proceeding 4 years ago that relieved the individual from the claims of all unsecured creditors as of the date of the bankruptcy filing
D
The vice president of a publicly traded company casually tells a close friend over dinner that the company's results are looking very weak this quarter. The friend offers some comforting words to the vice president and does not tell anyone else about the news. Which statement is TRUE? A: The vice president has violated the insider trading laws B: The friend has violated the insider trading laws C: Both the vice president and the friend have violated the insider trading laws D: Neither the vice president nor the friend have violated the insider trading laws
D
Three different firms have published the following quotes for the purchase and sale of a stock: Firm A $17.00 - $18.00 Firm B $17.50 - $17.75 Firm C $17.25 - $17.60 These are quotes that would be made by a(n): A: broker-dealer B: investment adviser C: investment bank D: market maker
D
To qualify for the private placement exemption, all of the following are required EXCEPT: A: any purchases must be made with investment intent B: no more than 10 persons can purchase the issue during a 12 month period C: no commissions can be paid for soliciting individuals to purchase the issue D: all purchasers must reside in one state
D
Under the Investment Company Act of 1940, an affiliated person is prohibited from doing which of the following? I Borrowing monies from the fund II Borrowing securities from the fund III Buying securities personally from the fund's portfolio IV Selling securities personally to the fund's portfolio A: I and II B: III and IV C: I, II, III D: I, II, III, IV
D
What is NOT a statistical measure? A: Arithmetic average B: Sharpe ratio C: Correlation coefficient D: Quick ratio
D
Which of the following are exempt issues under the Securities Act of 1933? I Government Bonds II Municipal Bonds III State Chartered Bank Issues IV Small Business Investment Companies A: I and II only B: III and IV only C: I, II, III D: I, II, III, IV
D
Which of the following is (are) prohibited in a margin account? A: A customer buying a security without the intention to pay on settlement B: A customer selling a security without the intention to deliver on settlement C: A customer selling short a security that cannot be borrowed and delivered on settlement D: All of the above
D
Which statement is FALSE regarding Transfer on Death (TOD) account registration? A: An older person who registers a security "TOD" maintains full control over the asset until death B: Upon death, the security is excluded from the estate of the decedent and avoids probate C: This registration is designed for older customers D: This registration avoids estate tax upon death of the holder
D
Which statements are TRUE about structured products? I The bond component pays interest based on an index rate such as the performance of the NASDAQ 100 Index II The interest rate paid is typically capped to an annual maximum rate III The derivative component establishes the payment at maturity and protects principal IV The security may be listed on a national securities exchange, but trading is typically very thin A: I and II only B: III and IV only C: I, II, III D: I, II, III, IV
D
Which statements are TRUE regarding buy stop orders? I Buy stop orders will be elected at the stop price or lower II Buy stop orders will be elected at the stop price or higher III Once elected, buy stop orders will be executed at the stop price specified only IV Once elected, buy stop orders may be executed at, above, or below the stop price specified A: I and III B: I and IV C: II and III D: II and IV
D
Which statements are TRUE when a bond sells at a premium? I The nominal yield is less than the yield to maturity II The nominal yield is more than the yield to maturity III The current yield is less than the yield to maturity IV The current yield is more than the yield to maturity A: I and III B: I and IV C: II and III D: II and IV
D
