Series 65 Exam

Which of the following statements is not true?

Beta is a measure of a security's deviation from its historical average returns.

Jane and Malka are discussing the possible form of efficient markets. Jane states that, "A weak form price-efficient market is one in which security prices fully reflect past share price and trading volume data." Malka retorts that she is not sure of Jane's thoughts and says, "If markets are weak form efficient, we cannot consistently outperform the market based on technical analysis."

Both Jane and Malka are correct.

Which of the following could accelerate a rise in a bull market?

Buy Stop

Looking at the balance sheet, a corporation builds its capital structure with all of the following except

Cash

Under state law, the registration of an agent of a broker-dealer is in effect until

December 31, unless renewed.

Which of the following are examples of systematic risk? Business risk Market risk Interest rate risk Credit (default) risk

II and III

Which of the following statements is true if a corporate bond is callable?

The issuing corporation has the option to redeem the bond before it matures.

Which of the following statements regarding modern portfolio theory is not correct?

The optimal portfolio will always lie above the efficient frontier.

Which of the following is true regarding ETNs?

Their value can be impacted by changes in the issuer's credit rating.

On a scheduled premium variable life insurance policy, the insured is guaranteed:

at least 100% of the stated death benfit

Mary Whiting has been a customer of yours for several years. Now that her oldest child is out of the house and living on his own, she wants to open a joint account with her son. If the account is opened tenants in common and Mary contributes 75% of the funding, it is correct to say that

both mary and her child have an undivided interest in the account

In general, a broker-dealer will disclose any changes to its fee schedule

by notifying clients of the change in advance.

A client owning shares of a closed-end investment company entering an order to liquidate the position would receive a price based on

supply and demand for the shares.

Pricing of a closed-end fund is determined by

supply and demand for the shares.

An investment adviser representative has discretion over an advisory client's account. The client made about 20% on a particular stock that had been a recommendation from the representative. Then, the client gave the IAR instructions to sell the stock once it drops 5% from its current level. The IAR contacted the brokerage firm handling the account's transactions and entered a sell stop order at the designated price. Several days later, the IAR received inside information that was going to have a negative effect on the market price of that specific stock. Instead of selling the stock then, the IAR waited until the news becomes public. The news caused a rapid drop in the stock's price. This caused the stop order to be triggered, and the final execution price is well below the investor's target.

the investment adviser representative did the right thing by not making use of inside information.

When a will calls for property to be distributed per stirpes, it means that

the property is divided into as many equal shares as there are surviving children of the designated ancestor and deceased children who left surviving descendants.

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

this is a bonus annuity.

Any recommendations made to customers by a broker-dealer must be suitable for the customer on the basis of an investigation of the customer's 1.investment objectives 2.financial status 3.ability to pay high commissions 4.desirability as a customer

1,2

Due to changes in market rates, a corporation is able to purchase some of its outstanding 20-year bonds at a discount. Which of the following is correct? 1.Working capital is increased. 2.Working capital is reduced. 3.Net worth is increased. 4.Net worth is reduced.

2 & 3

An agent would be engaged in a prohibited practice if he did which of these? 1.Split commissions with other agents of his broker-dealer 2.Sold a nonexempt, unregistered security to a CPA who specialized in auditing financial institutions 3.Shared both the gains and losses in a client's account with written approval of both the client and the employing broker-dealer 4.Aggressively traded a discretionary account on a daily basis with long-term growth as an objective

2,& 4

BFJ Corp.'s 5% convertible bond is trading at 120. The bond is convertible at $50. An investor buying the bond now and immediately converting into common stock would receive

20 shares.

Expressed as a percentage, what is the total return on a 1-year, newly issued (365 days to maturity) zero coupon debt obligation priced at 95?

5.26%

An investor purchases 100 shares of Kapco stock at $50 per share. At the time of the purchase, the stock is paying a quarterly dividend of $0.25. The dividend increases 5% each year over the next five years. The purchaser sells the 100 shares five years after purchase for $82 per share. What is the total return for the investor over the five-year holding period?

75%

A broker-dealer registered with State A created a website two years ago to promote its services. Recently, they hired a new media person who totally redesigned the site. Under the recordkeeping requirements of the Uniform Securities Act,

A copy of original web page msut be maintained for 3 years from original use

XYZ Aircraft Manufacturing Corporation, based in the United States, announces a multibillion-dollar order for its new jumbo jet from Fly Airlines, a Japanese-based carrier. When the sale is completed, there will be

A credit to the current accoutns of the US

What is the name given to an order to purchase or sell a stock where the investor has specified a price?

A limit Order

An investor in the 28% tax bracket has a $5,000 loss after netting all capital gains and losses realized. How much may the investor deduct from income for the year?

$3,000

Assume you own KAPCO Stock Fund that returned 14% over the past five years, during which the stock market returned 12%. This fund has a beta of 1.1 and the risk-free rate of return is 4%. What is the fund's alpha?

+1.2

If a customer assumes the risk involved with her variable annuity, what does this mean? 1.She is not assured of the return of her invested principal. 2.The underlying portfolio of the selected subaccount is primarily common stocks, which have no guaranteed return. 3.As an investor, she can be held liable for the debts incurred by the insurance company.

1 & 2

The interest from which of the following bonds is exempt from federal income tax? 1.State of California bonds 2.City of Anchorage bonds 3.Treasury bonds 4.GNMA bonds

1 & 2

Which type of contract obligates both parties to act? 1.Forward contract 2.Futures contract 3.Options contract 4.Warrant

1 & 2

Which of the following statements about balance sheets are true? 1.Balance sheets provide a snapshot of a company's financial position on a given date. 2.Balance sheets represent the relationship between a company's assets, liabilities, and stockholders' equity. 3.Balance sheets provide a record of a company's earnings over a given period.

1,2

The registration of an investment adviser would automatically register which of the following as investment adviser representatives? 1.Directors 2.Officers 3.Partners

1,2,3

Under the Uniform Securities Act, any partner, officer, or director of a registered investment adviser is an investment adviser representative if that individual does which of the following? 1.Offers advice concerning securities 2.Manages client accounts or portfolios 3.Determines securities recommendations for representatives to disseminate 4.Supervises personnel engaged in the above activities but does not sell these services to the public

1,2,3,4

Under the Uniform Securities Act, certain transactions are exempt from the sales literature and advertising filing requirements. Which of the following would be included in that category? 1.Any isolated, nonissuer transaction 2.Any sale to a financial institution 3.Any transaction by the executor of an estate 4.Any transaction between an issuer and underwriters

1,2,3,4

Which of the following actions, if performed by a registered investment adviser representative, would not be considered inappropriate under the Uniform Securities Act? 1.Recommending suitable securities to a client 2.Lending money to a client who is a regular member of your Sunday group at the country club 3.Misappropriating client assets to benefit the client's favorite charity 4.Without having discretionary power, determining when would be the most opportune moment to sell a specific security holding the client has indicated he wishes to liquidate

1,4

Under the Investment Company Act of 1940, which of the following statements regarding the investment objective of a mutual fund are true? 1.Only the board of directors needs to approve changes in the investment objective. 2.The majority of outstanding shares must vote to approve changes in the investment objective. 3.The SEC must approve all changes in the investment objective. 4.The investment adviser does not set, but tries to meet, the investment objective.

2 & 4

Without prior authorization from the client, an investment adviser could release information relating to the client's account 1.in order to comply with the brochure delivery requirements of the USA 2.when requested by the IRS as part of litigation against the client 3.for the purpose of furnishing information for a statistical survey being compiled by the Administrator 4.upon the receipt of a subpoena from a court of competent jurisdiction

2 & 4

Which of the following transactions are exempt? 1.XYZ Corp., a local manufacturing firm, sells its common stock to several local individual accredited investors on an infrequent or isolated basis. 2.Joe, an agent with ABC Securities, Inc., sells XYZ Corporation's 5-year fixed-income securities, rated AAA by Standard & Poor's, on a regular basis to selected members of his large retail client base. 3.Joe, an agent with ABC Securities, Inc., sells XYZ Corporation's securities to a high-net-worth client on an unsolicited basis. 4.Alexander had his sizable portfolio of stocks and bonds sold by the administrator of his estate upon his death.

3 & 4

An investment adviser representative with a state-registered investment adviser reads an article in the newspaper about a local company that has had a surge in demand for its product line. If the representative's supervisor gives approval, posting the article on her social media accounts would constitute

Adoption

As defined in​ the Uniform Securities Act, which of the following statements is true regarding an agent?

An agent represents a Broker-dealer or an issuer in effecting or attempting to effecrt purchases or sales of securities

Under the Uniform Securities Act, which of the following may have to qualify as an investment adviser representative?

An employee of a state-registered investor advisor whose job function is to solicit for new advisory clients

Judy is in the business of giving general investment advice, suggesting appropriate asset allocation percentages but not recommending specific securities. George's business model is giving investment advice and recommending specific securities. Assuming that both receive compensation, who must register as an investment adviser under the Uniform Securities Act?

Both

A support level is the price range at which a technical analyst would expect the

Demand for a stock to increase substantially

Which of the following statements regarding the properties of duration is not true?

Duration measures the holding periso return on a bond

Which of the following is a risk faced by investors in foreign stocks that is not found when investing in domestic issues?

Exchange Rate risk

A 50-year-old client with modest means wants to construct an investment program. He has no investment experience, his major consideration is saving for retirement, and he has limited risk tolerance. Which of the following would you recommend?

Growth and income mutual funds

Which of the following circumstances may cause a person to be identified as a fiduciary? 1. Investment adviser representative who becomes a trustee 2. Investment adviser representative who becomes a member of the board of directors of a foundation 3. nvestment adviser representative who holds himself out as a fiduciary for ERISA plans and pensions 4. Investment adviser representative who manages a discretionary account

I, II, III, and IV

Which of the following statements about the federal government's fiscal policy are true? 1.The federal government's fiscal policy is its policy for managing taxation, spending, and debts. 2.The federal government's fiscal policy can have a great impact on the securities markets. 3.The federal government finances its deficit spending by selling bonds.

I, II, and III

Which of these are included in the term management investment company? 1.Face-amount certificate companies 2.Unit investment trusts 3.Closed-end investment companies 4.Open-end investment companies

III and IV

Which of the following statements with regards to net present value and internal rate of return is correct?

If the net present value is greater than zero, then the internal rate of return is greater than the required rate of return.

Which of the following risks most likely would be reduced as a result of the addition of tangible assets to an investor's Nonsystematicportfolio?

Inflation

Which of the following statements concerning international direct investing is correct?

Information is not as readily available on foreign investments as on domestic ones.

If a customer is in the 15% federal income tax bracket and his main investment objective is current income, which of the following securities should the agent recommend?

Investment-grade corporate bond.

Which of the following would an investor who believes in MPT probably select for a client?

JKL, with a return of 15% and a standard deviation of 15

How quickly must a broker-dealer notify the Administrator if material information relating to that broker-dealer's registration should change?

Promptly

Regarding the use of the term direct participation programs, when referring to tax-sheltered investments, which of the following is not a DPP?

Real estate investment trust

Net income

Represents the amount of money remianing after all expenses, including taxes

When the securities professional is registered in his state, which of the following statements does not correctly reflect the power granted to the Administrator by the Uniform Securities Act?

The Administrator may not examine the records of a broker-dealer without seeking a court order from a federal court.

As defined in the Uniform Securities Act, in which of the following cases would an investment adviser (IA) not be considered to be maintaining custody?

The IA recieves a check mad epayable to the IA and returns within 3 busines days

Which of the following statements regarding a traditional IRA for someone filing a 2023 tax return is true?

The income and capital gains earned in the account are tax deffered until the funds are withdrawn

A client is trying to decide between a par value corporate bond carrying a coupon rate of 6.25% per year and a par value municipal bond that pays an annual coupon rate of 4.75%. Assuming all other factors are equal and your client is in a 28% marginal income tax bracket, which bond do you tell the client to purchase and why?

The municipal bond because its equivalent taxable yield is 6.60%

Among the responsibilities of the Federal Reserve (the Fed) is influencing the supply of money and credit in the economy. When performing this function, adjusting which of the following is not a tool at its disposal?

The prime rate

Which of the following people would not meet the definition of a person associated with an investment adviser?

The typist responsible for operating the desktop publishing systemn that prepares the investment advisers weekly research bulletin

Which of these is the best example of a venture capital investment?

There is an investment in an immature, negative cash flow firm where it is possible to lose 100% of the investment.

Which of the following statements regarding loans from 401(k) plans is not correct?

They must be made available to highly compensated employees in amounts greater than that made available to other employees.

Assuming all of the following mature at about the same time, which of the following bonds should experience the greatest price decline if interest rates rise by 1%?

Treasury bond issued at par and carrying a 4% coupon

A registered investment adviser advertises that it is offering a free six-month subscription to its advisory newsletter. Which of the following qualifiers is acceptable under NASAA's Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers?

Your free subcription will start once we have recieved your name and mailing or email address

One of the differences between call options, rights, and warrants is that

a corporation can't issue call options on its own stock

Which of the following involves an offer or sale?

a gift of an asseasable security

An investment adviser registered in 4 states would be permitted to enter into an advisory contract with all of the following prospective clients except

a registered investment company

Wrap fee accounts would tend to be most suitable for investors who follow

a tactical approach to investing

Which of the following would not be considered an unethical practice for a registered investment adviser?

acting as a trustee for a client's trust

Western Securities, Inc., (WSI) is a broker-dealer that also offers portfolio management. One of WSI's portfolio managers notices an article on asset allocation that harmonizes with WSI's investment philosophy. If WSI should post a link to this article on its website, it would probably be considered

adoption.

Which of the followings measures should be used to assess the risk-adjusted return of an active portfolio manager?

alpha

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

an inverese leveraged ETF

II and III A municipal bond has a coupon of 6.25%, and at the present time, its yield to maturity is 6.75%. From this information, it can be determined that the municipal bond is trading

at a discount

One of the most significant risks taken by bond investors is interest rate risk. All of these steps could be used to mitigate the effects of this risk except

buying bonds of highest quality

Arthur M. Munger recently joined Piedmont Partners LLP as an analyst and is curious about modern portfolio theory (MPT). He approaches his senior, Sarah, to describe MPT. Sarah tells Arthur that MPT suggests that

by combining securities into a diversified portfolio, the overall portfolio risk will be less than the weighted average risk of the individual stocks.

If near-term liquidity is the only objective for a client, which of the following pairs of investments represents the most/least liquid?

common stokc listed on the new york stock exchange/ unit in a direc participoation program

All of the following statements regarding futures contracts are correct except

completing a futures contract requires the delivery of the commodity.

All of the following activities of an investment adviser are prohibited under the Uniform Securities Act except

disclosing potential conflicts of interest.

Specific or unsystematic risk refers to investment risk that is

diversifiable

Richard, Tim, Sam, and Fred have a regular golf foursome every weekend. During one of their outings, they decide it is time they did something constructive with their money by opening an account with a brokerage firm. If the account is opened tenants in common, suitability information would be required on

each of the four individuals

Savant Investment Managers (SIM) has a client with a long position in PQR common stock. The position has an average cost per share of $30, and with PQR currently selling at $50 per share, the client is interested in a method that will allow her to protect some of the unrealized profit without an expenditure of funds. Her representative at SIM could suggest

enetering a sells top order at $45

A living will is used to

express the author's end-of-life wishes.

Under the Uniform Securities Act, all of the following are exempt from state registration as investment advisers except

financial planners who provide fee-based investment advisory services to clients.

An investment adviser would be least likely to gather information about a new client

from social media.

If, during a given year, a company has net income of $1 million and pays out dividends of $800,000, its retained earnings will

increase by $200,000.

The primary defining characteristic of an equity security is

it represents ownership in a corporation.

A private foundation is required by statute to pay out a minimum percentage of its asset value each year as qualifying distributions. This investment constraint is best classified as

legal and regulatory

John purchased stock of a company in the business of manufacturing yachts. Two years ago his securities had lost most of their value as a result of a congressionally imposed luxury tax on purchases of more than $30,000. John's investment in the yacht-building business suffered a loss due to

legislative risk

Active Technicians (AT) is a state-registered investment adviser. In its brochure supplement, it would include information relating to each of the following individuals except

members of AT's board of directors who are active in the firm's business

An agent is discussing a specific bond that would be a good addition to the client's portfolio. The client comments that the nominal yield is lower than its current yield. The agent would explain that the bond is

selling at a discount

The portfolio manager of a bond fund believes that interest rates are going to increase in the near future. As such, it would be wise for that manager to

shorten the average duration of the portfolio.

In an account opened by 2 individuals as joint tenants with rights of survivorship, all of the following are true except

stock certificates may be delivered in the name of either party

Which of the following investment strategies reflects determining an appropriate portfolio allocation based on the short-term market movements and risk tolerance of the client?

tactical asset allocation

Mr. and Mrs. Rose, advisory clients of yours, request a meeting with you to discuss the options available if they wish to deposit a lump sum to save for college tuition for their child. All of these would be factors to consider except

the Roses' salaries

All of the following statements are true regarding investment advisory contracts under NASAA's Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers except

the contract must be written in 10-point type or larger.

An individual's net worth is

the differenc ebetween the individuals assets and the individuals liabilities