S66 10/05

If a technician believed in the importance of volume, which of the following would indicate bullish sentiment? A) Prices decrease on heavy volume. B) Prices decrease on light volume. C) Prices increase on heavy volume. D) Prices increase on light volume.

C

All the following securities are issued at a discount except A) commercial paper. B) Treasury bills. C) zero-coupon bonds. D) CDs.

D

One of your clients has a margin account. There is a drop in the value of the stock owned in the account, and additional funds are required based on the terms of the firm's margin agreement. This would be known as A) a sellout B) a margin call C) a Regulation T call D) a house call

D

True or False? Administrators power include suspending an agent's registration without an opportunity for a hearing

False

Which of the following may be required by the Administrator to post surety bonds? I. An agent who has discretion over client funds and securities II. A broker-dealer who has custody of, or discretion over, client funds and securities III. An investment adviser who has custody of, or discretion over, client funds and securities

I, II, & III

Under ERISA Section 404(c), plan participants must be able to reallocate plan assets A) once every 3 months B) daily C) once every week D) annually

A

What is the name of the bond document that states the issuer's obligation to pay back a specific amount of money on a specific date? A) The indenture B) The debenture C) The bond agreement D) The bond coupon

A

A working group convened by NASAA has developed a model fee disclosure schedule to help investors better understand the costs involved in doing business with their broker-dealer. The template has broker-dealers disclose all of the following fees except A) interest on debit balances in margin accounts. B) markups and markdowns on trades done as a principal. C) the cost of overnight delivery services. D) safekeeping of customer funds and securities.

B

If a widow with no outside source of income and moderate financial resources asked you for investment advice, the most appropriate recommendation(s) would be I. new issues of common stocks II. growth stocks III. speculative issues IV. income securities

IV only

Lucy and Rick, ages 52 and 47, respectively, are concerned that they will not have enough money to retire comfortably at Lucy's age 70. Lucy was recently promoted to district manager of an inventory control company. Along with the promotion, they have an additional $400 per month they would like to invest into a new retirement investment portfolio. They consider themselves aggressive risk takers with a long-term time horizon. Based on their profile, which of the following portfolios should the firm recommend to Lucy and Rick for investment? Portfolio 1— 20% Balanced Fund, 60% High-Yield Bond Fund, 10% Emerging Markets Fund, 10% International Stock Fund Portfolio 2— 70% S&P 500 Index Fund, 20% Corporate Bond Fund, 10% International Stock Fund Portfolio 3— 60% Russell 2000 Index Fund, 30% U.S. Government Securities Fund, 10% Money Market Fund Portfolio 4— 20% S&P 500 Index Fund, 40% Corporate Bond Fund, 40% Municipal Bond Fund A) Portfolio 2 B) Portfolio 1 C) Portfolio 3 D) Portfolio 4

A

Strategic Capital Asset Managers (SCAM) is an investment adviser that is registered in five states. In lieu of preparing a fancy brochure, SCAM is permitted to provide its clients with a copy of its A) Form ADV, Part 2A and Part 2B. B) annual renewal form provided to the SEC. C) Form ADV, Part 1 and Part 1B. D) Form ADV, Part 2, Appendix 1.

A

An investor has bonds maturing in three weeks on the first day of the upcoming month. Since his purchase of the bonds five years ago, interest rates have fallen. To which one these risks are these bonds most likely to be subject? A) Purchasing power risk B) Interest rate risk C) Reinvestment risk D) Default risk

C

Fill in the blank: Form ADV Part 1 is for _ purposes, and Part 1B is only used by _ advisers Part 2, Appendix 1 is used for investment advisers who offer _

Form Part 1 is for registration purposes, and Part 1B is only used by state-registered advisers Part 2, Appendix 1 is used for investment advisers who offer wrap fee programs.

Fill in the blank: In order to qualify for the safe harbor under 404(c), the portfolio selections must include at least _ different asset classes, such as _, _, and _ _.

In order to qualify for the safe harbor under 404(c), the portfolio selections must include at least 3 different asset classes, such as equity, debt, and cash equivalent.

Fill in the blanks: Reinvestment risk is the risk associated with _ _ and/or _ _ when interest rates have fallen.

Reinvestment risk is the risk associated with reinvesting interest and/or principal payments when interest rates have fallen.

True or False? Administrators powers include conducting investigations of broker-dealers residing outside the Administrator's state

True

An investor would have to pay the alternative minimum tax when A) there are tax-preference items reported on the tax return. B) it exceeds the investor's regular income tax. C) the investor has received income from a limited partnership. D) the investor's capital gains exceed 10% of total income.

B

Washington, Adams, and Jefferson, Inc., (WAJI) is an investment adviser whose principal and only office is in Alexandria, VA. WAJI's sole business is advising institutional investors. Rutherford Buchanan is employed by the firm in the main office and has the responsibility of servicing the firm's bank and insurance company clients. Which of the following statements is correct regarding Rutherford's licensing requirements? A) Rutherford is exempt from registration because his only clients are institutions. B) Rutherford must register as an IAR of WAJI with the State of Virginia. C) Rutherford is exempt from registration because he has fewer than six retail clients. D) Rutherford cannot register as an IAR of WAJI because providing advice exclusively to institutions exempts the firm from registration.

B

Which of the following is least likely to be considered an asset class? A) Cash and cash equivalents B) Mutual funds C) Bonds D) Stock

B

An agent and a broker-dealer maintain wrap fee accounts for several of their customers. Which of the following registrations is required? A) Neither the broker-dealer nor the agent is required to have any license other than their regular securities license. B) The agent must be registered as an investment adviser. C) The firm must register as an investment adviser. D) Only the registered principal would need to be registered in the state(s) in which they do business.

C

An agent making a sales presentation to a client about a mutual fund's historical returns is required to explain to the client the difference between the fund's A) current yield and real return. B) current yield and holding period return. C) total return and risk-adjusted return. D) current yield and total return.

D

An offer to sell which of the following need not comply with the prospectus delivery requirements of the Securities Act of 1933? A) A publicly offered real estate limited partnership. B) Open-end investment company shares. C) A new issue of a nonexempt security with warrants attached. D) A private placement.

D

One of the differences between broker-dealers and investment advisers (IAs) is the disclosures that must be made when the IA is acting as a principal or agent in a transaction with an advisory client. In the case of a firm registered in both capacities, those disclosures would not be required when A) the transaction is in an exempt security. B) approval is granted by an officer of the firm. C) cleared with the Administrator. D) there is a transaction with a client of both entities but the trade is not based upon advisory services rendered.

D