Series 65 - Unit 5 Quiz #2

An investment adviser who is discussing forward contracts with a client would most likely be referring to an investment in A) an agricultural commodity. B) a diversified portfolio. C) puts and calls. D) an equity index annuity.

A.

An investor in a high tax bracket who invested in a DPP should have which of the following characteristics? Need for tax benefits Substantial liquid assets Ability to identify both risks and merits of the program Ability to commit money for a long time A) II, III, and IV B) I and II C) I, II, III, and IV D) II and III

C.

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

C.

Many sophisticated investors have added alternative investments to their portfolios. Benefits in doing so include A) lower expenses than traditional stock and bond investments. B) returns that almost always exceed those of traditional stock and bond investments. C) portfolio diversification. D) greater regulation than traditional investments such as stocks and bonds.

C.

A number of different pooled investment vehicles are included in the term alternative investment. One of them, a synthetic investment instrument that has been created to meet a specific need that cannot be met by a standardized financial instrument, is known as A) an arbitrage. B) a z-tranche CMO. C) an inverse fund. D) a structured product.

D.

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

D.

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 leveraged ETF. B) selling a call option on the S&P 500 Index. C) an inverse ETF. D) a leveraged ETF.

A.

Your client has turned bearish on the market, but does not have a margin account. Which of the following securities would probably best meet your client's needs? A) A balanced mutual fund B) An inverse fund C) A long call option D) An interest rate swap

B.

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) the general partner is the only person liable for the debts of the business. D) any income generated by the partnership flows through to the limited partner and is treated as a long-term capital gain.

C.

One of your clients calls to tell you that they overheard someone at work talking about investing in NFTs. What do those initials stand for? A) No free ticket B) Neuroplastic functional training C) Nonfungible tokens D) Nutrition and food technology

C.

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

D.

Inverse ETFs are suitable primarily for investors A) who follow a passive investment strategy. B) who are bullish on the market's future. C) wishing to leverage their income. D) with a very short time horizon.

D.

In search of higher returns, many investors have turned to structured products such as structured notes. Your clients need to be aware that these are complex instruments that have which of the following characteristics? I. Credit or default risk because they are unsecured obligations of the issuing institution II. High price transparency III. Limited or no liquidity IV. High initial returns that diminish over time A) II and III B) I and III C) I and IV D) II and IV

B.

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

B.

Which of the following is true regarding ETNs? A) They are suitable for conservative investors seeking income. B) They are noncallable prior to maturity. C) Their value can be impacted by changes in the issuer's credit rating. D) As fixed-income investments, they do not have market risk.

C.

Which of the following statements regarding the general partner (GP) in a direct participation program (DPP) is not true? A) The GP cannot borrow from the partnership, compete with the partnership, or commingle personal funds with partnership funds. B) A GP has a fiduciary relationship to the limited partners (LPs). C) The GP, as the active manager of the partnership, does not maintain a financial interest in the partnership and only receives income distributions from profits on the business prior to the limited partners. D) The GP is the active investor in a limited partnership and assumes responsibility for all aspects of the partnership's operations.

C.

If near-term liquidity is the only objective for a client, which of the following pairs of investments represents the most/least liquid? A) Variable annuity accumulation unit/money market mutual fund shares B) 10-year corporate bonds/U.S. T-bills C) Annuity units of a variable annuity/unit in a direct participation program (DPP) D) Common stock listed on the New York Stock Exchange/unit in a direct participation program (DPP)

D.

One of your clients expresses interest in purchasing a unique piece of art in digital form. More than likely, the client is referring to A) a new way to decorate the home. B) cryptocurrency. C) a way to add liquidity to the portfolio. D) a nonfungible token.

D.

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

B.

All of the following would flow through as a loss to limited partners except A) depletion. B) interest payments on partnership debt. C) accelerated depreciation. D) principal repayment on partnership debt.

D.

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

B.