Series 65
A client is considering the purchase of American depositary receipts (ADRs). The client is looking to further diversify her portfolio. Which of the following is not a feature of this type of investment vehicle? A) Information regarding the foreign company is more easily attainable than if directly purchased. B) ADRs are both liquid and marketable. C) They are not subject to exchange rate, or currency, risk. D) ADRs are denominated and pay dividends in U.S. dollars.
Even though ADRs are denominated in U.S. dollars, they are subject to exchange rate, or currency, risk. The bank furnishes information about the underlying security in English rather than the foreign language and ADRs are traded like any domestic stock.
Which of the following is true of GNMA securities? Interest is subject to federal income tax. Interest is exempt from federal income tax. They are backed by farm mortgages. They are backed by residential mortgages. A) I and IV B) II and IV C) II and III D) I and III
Income received by investors in Government National Mortgage Association (GNMA) securities is subject to both state and federal income tax, and the asset backing them is residential mortgages.
Investing in emerging market stocks is least likely to expose your client to which of the following risks? A) Political B) Liquidity C) Currency D) Interest rate
Interest rate risk applies primarily to fixed income securities. Stock, unless it specifies preferred stock, are not normally considered to have interest rate risk. However, any foreign investment incurs currency risk and, when dealing with emerging markets, there is a higher degree of liquidity and political risk than with developed economies.
The term used to describe a broker-dealer contacting a margin account client with a demand for additional funds is A) Reg. T call B) market call C) margin call D) maintenance margin
The original call for funds is the Reg. T or margin call. But, when the call is for additional money, it is known as maintenance margin. This generally occurs when the value of the collateral in the account has fallen sharply.
Section 402 of the Uniform Securities Act contains a listing of those securities that are granted an exemption from the registration and advertising filing requirements of the act. Excluded from the listing would be A) securities issued by a credit union authorized to do business in the state. B) bonds issued by the District of Columbia. C) bonds issued by a Canadian province. D) corporate debentures.
Unless some other condition is given, such as the issuer's common stock is listed on an exchange or Nasdaq (making it federal covered), a corporate debenture is not an exempt security. State and local issues (the USA includes the District of Columbia in its definition of state) and Canadian provinces are exempt. Any security issued by a federally chartered credit union or one that is authorized to do business in the state is exempt.
Reasons why a corporation might issue a convertible preferred stock would include
giving those shareholders an opportunity to participate in the future success of the company.
An individual wishing to register as an agent with a broker-dealer may have to do which of these? Pass an examination. Post a bond. Maintain minimum net capital. Meet minimum state educational requirements. A) I and III B) II and III C) III and IV D) I and II
In almost all cases, an individual wishing to register as an agent must pass an examination. Many Administrators require that all agents post a bond, whereas others only require bonding for those with investment discretion in customer accounts. Minimum net capital requirements apply to broker-dealers, not agents.
Currently, a company issues 5% Aaa/AAA debentures at par. Two years ago, the corporation issued 4% AAA rated debentures at par. Which of the following statements regarding the outstanding 4% issue are true? The dollar price per bond will be higher than par. The dollar price per bond will be lower than par. The current yield on the issue will be higher than the coupon. The current yield on the issue will be lower than the coupon
Interest rates in general have risen since the issuance of the 4% bonds, so the bond's price will be discounted to produce a higher current yield on the bonds. Remember that as interest rates go up, the price of outstanding debt securities goes down.
An agent is analyzing the financial statements of a corporation. The company has cash on hand of $2 million, accounts receivable of $500,000, accounts payable of $700,000, land valued at $3 million, wages payable of $300,000, goodwill of $100,000, inventory of $1.5 million, and retained earnings of $5 million. From this information, the agent would determine that the acid-test ratio for this company is
The acid-test, or quick, ratio is all of the current assets, except for inventory, divided by the current liabilities. The non-inventory current assets are the cash on hand and the accounts receivable. The current liabilities are the accounts payable and wages payable. This results in a calculation of $2.5 million divided by $1 million, or 2.5:1.
All of the following would be reasons for an employer to choose a nonqualified plan over a qualified plan except A) the nonqualified plan provides greater flexibility. B) the nonqualified plan provides an immediate income tax deduction for the employer. C) the nonqualified plan can discriminate in favor of highly-compensated employees. D) the nonqualified plan is not subject to ERISA reporting and disclosure requirements.
The answer is the nonqualified plan provides an immediate income tax deduction for the employer. Nonqualified plans do not provide a tax deduction to the employer until the employee receives the economic benefit as income at some point in the future. They are, however, more flexible because they do not have to comply with ERISA reporting and non-discrimination requirements.
When an investor divides the coupon rate of a municipal bond by the complement of her tax rate, she is computing the bond's A) after-tax rate of return. B) tax-equivalent yield. C) discounted cash flow. D) inflation-adjusted return.
The computation for the tax-equivalent yield of a municipal bond is performed by dividing the bond's coupon rate by the complement of the investor's tax rate (1 - the investor's tax bracket). If the bond has a coupon of 4% and the investor is in the 20% bracket, the tax-equivalent yield is 4% divided by (1 - 0.20), or 4% divided by 0.80 = 5%.
An analyst is viewing a subject company's financial statements. She notices that the company has current assets of $20 million, fixed assets of $50 million, and total liabilities of $45 million (of which $10 million is considered long-term). This company's debt-to-equity ratio is A) 28.6% B) 22.2% C) 64.3% D) 40%
The debt-to-equity ratio is computed by dividing the issuer's long-term debt by their total capitalization. Total capitalization is the company's net worth (assets minus liabilities) plus the long-term debt. In this example, the net worth is $70 million minus $45 million, or $25 million. Adding the long-term debt of $10 million results in total capital of $35 million. Divide the $10 million by that $35 million to arrive at 28.57%. As we point out in the LEM, this is really a misnomer—it should be called the debt-to-total-capital ratio, but probably will not be shown that way on the exam.
DERP Corporation has issued 5% convertible debentures maturing in 2040. The conversion price is $40 and the common is currently trading at $48 per share. One would expect the DERP debentures to be selling somewhat A) below $1,200. B) above $1,000. C) below $1,000. D) above $1,200.
The first step here is to compute the parity price. A conversion price of $40 means the debenture is convertible into 25 shares of the common stock (par of $1,000 divided by $40 = 25 shares). With a current market price of $48 per share, the parity price of the convertible would be $1,200 (25 × $48). Because convertible securities generally sell at a slight premium over their parity price, the debentures should have a current market value a bit higher than $1,20
Under the Securities Act of 1933, the definition of prospectus includes which of these? An offer of a security made orally A tombstone advertisement for a new issue of common stock An offer of a security made in an email communication A) I, II, and III B) II and III C) III only D) I and III
A prospectus is a communication made in writing or by radio or television that offers a security for sale. An oral offer would therefore not be a prospectus. Tombstone advertisements are specifically excluded from the definition of prospectus. An email meets the definition of a written communication.
According to the Investment Advisers Act of 1940, which of the following statements regarding Part 2 of Form ADV are true? It must be filed with the state Administrator. A balance sheet must be submitted if the adviser collects prepaid fees of more than $1,200, six or more months in advance. Certain minimum business and education qualifications must be met before an investment adviser can file. It may be used to satisfy the brochure requirements of the act.
An investment adviser required to register with the SEC under the Investment Advisers Act of 1940 must submit its Form ADV to the SEC. In some cases, the Form ADV will also be filed with the state Administrator, but that is state law, not a federal requirement. A balance sheet must be submitted with Part 2 if the adviser receives "substantial" prepayments of fees. Part 2 may be used as an investment adviser's disclosure brochure to clients.
Which of the following is not a characteristic of owning a limited partnership? A) An investment managed by others B) Tax-free income C) Legislative risk D) Flow-through of income and expenses of a business to the individual limited partner
The income from limited partnerships is not tax exempt. An investor, however, may use a tax loss from a partnership to offset the income from another passive investment. In limited partnerships, the investor enjoys the advantages and disadvantages of owning a business without having to actually manage one. Limited partnerships are vulnerable to legislative changes that adversely affect ownership of such investments.
Which of the following statements regarding corporate zero-coupon bonds is true? A) The discount is in lieu of periodic interest payments. B) They have lower price volatility than other bonds. C) Interest is paid semiannually. D) They are beneficial for investors in higher tax brackets.
The investor in a corporate zero-coupon bond receives the return in the form of growth of the principal amount over the bond's life. The bond is purchased at a deep discount and redeemed at par at maturity. That discount from par represents the interest that will be earned at maturity date. However, the discount is accreted annually and the investor pays taxes yearly on the imputed interest creating "phantom income." Zero-coupon bonds have greater, not lower, price volatility.
The market price of a convertible bond depends on all of the following except A) current interest rates. B) the conversion prices of bonds from similar companies. C) the value of the underlying stock into which the bond can be converted. D) the rating of the bond.
There are two factors that impact the current market price of all bonds: current interest rates and the rating of the bond. A third factor is unique to convertible bonds and that is the conversion value. The conversion value is based on the price of the underlying stock into which the bond can be converted. Comparing the conversion price of one issuer's bond to another's tells us nothing about the value of a specific bond.
The Uniform Securities Act contains a number of security exemptions. The act empowers the Administrator to revoke the exemption for which of the following? Any security listed or approved for listing upon notice of issuance on the Nasdaq Stock Market; any other security of the same issuer that is of senior or substantially equal rank; any security called for by subscription rights or warrants so listed or approved; or any warrant or right to purchase or subscribe to any of the foregoing Any security issued by any person that is organized and operated not for private profit but exclusively for religious, educational, benevolent, charitable, fraternal, social, athletic, or reformatory purposes, or as a chamber of commerce or trade or professional association Any investment contract issued in connection with an employee's stock purchase, savings, pension, profit-sharing, or similar benefit plan if the Administrator is n
Under the USA, the Administrator can revoke any transaction exemption, except those involving federal covered securities. When it comes to revoking a security's exemption, the only two where the Administrator has the power to do so are those issued by nonprofit organizations and in connection with an employee benefit plan.
Which of the following is not a characteristic of expansionary monetary policy? A) Interest rates may decline. B) The money supply will increase. C) The reserve requirement will be increased. D) More funds are available for banks to lend to borrowers.
Expansionary monetary policy is also referred to as easy monetary policy. The Federal Reserve follows an easy monetary policy when it wants to expand the level of income and employment. The Federal Reserve may decrease rather than increase the reserve requirement, affording banks the opportunity to loan more money to borrowers.
Which of the following statements regarding a $1,000 corporate 8.50% bond offered at 110 is true? A) The bond's current yield is lower than its yield to maturity. B) The bond's current yield is calculated by dividing its annual interest by its current market price. C) The bond is a discount bond. D) To determine the bond's current yield, its stated rate must be compared against other fixed-rate investments in the client's portfolio.
A bond's current yield is calculated by dividing its annual interest by its current (market) price. In this case, it would be $85 ÷ $1,100. The current yield will be higher than its yield to maturity, which takes into consideration the $100 difference between the purchase price and the par value (a loss of $100). The determination of a bond's yield is unrelated to other bonds. In addition, this bond is selling at a premium (more than $1,000), not at a discount (less than $1,000).
Which of the following statements regarding the brochure delivery requirements of the Investment Advisers Act of 1940 are true? The brochure must be updated each time Part 1A of Form ADV is updated. The brochure delivery requirement does not apply to investment companies or clients who are serviced on an impersonal basis, such as with a newsletter, with an annual cost of less than $500. A brochure, or summary of material changes, if any, must be delivered to all clients within 120 days of the end of the adviser's fiscal year.
Because the information in the brochure is derived from Part 2A of the Form ADV, changes to Part 1A will not necessarily apply to items that are important to the client. Therefore, stating that the brochure must be updated whenever there is a change to Part 1A would not be correct. SEC rules require that a brochure, or summary of material changes, if any, be delivered to all clients within 120 days of the end of the adviser's fiscal year. If there are no material changes, a brochure does not have to be sent. The brochure delivery requirements do not apply to customers that are investment companies or for clients of impersonal services (those that do not purport to meet the investment objectives or needs of specific clients), as long as the cost of the service is less than $500 per year.
Which of the following statements concerning the books and records of a state-registered investment adviser under the Uniform Securities Act is true? Books and records must be maintained in the principal office of the adviser for the first two years. Books and records must be maintained in an easily accessible place for no less than five years from the end of the last fiscal year in which an entry was made. Copies of all investment letters, advertisements, or communications to two or more persons must be preserved for five years from the end of the fiscal year of the publication date. An adviser who ceases business continues to be responsible for the maintenance and preservation of certain records, such as corporate charters and minute books, for three years after termination of the enterprise.
All books and records required to be maintained by actively registered investment advisers—including investment letters, advertisements, or other communications to 2 or more persons (10 if the question dealt with federal law)—must be preserved in a readily accessible place for five years from the end of the fiscal year in which they were created or communicated. For the first two years, they must be maintained in the appropriate office of the adviser. The adviser remains responsible for the preservation of certain records, such as corporate charters and minute books or partnership agreements if operated in that business form, for three years after ceasing business.
Which of the following statements regarding a state-registered investment adviser with custody of customer assets is true? A) An adviser who has discretion over customer accounts faces a higher net worth requirement than an adviser who has custody. B) Every three months, the adviser must send an itemized account statement to each customer whose assets are held in custody. C) Customer assets may be commingled with assets of the investment adviser. D) The Administrator must give written approval before the adviser may hold customer assets in custody.
Customer assets held in custody by an investment adviser must be segregated, and the adviser must send a statement every three months. The Administrator does not approve custodial accounts. If there is no rule prohibiting custody, the Administrator must be notified that the adviser has custody. Advisers with custody of customer assets have a higher net worth requirement than advisers with discretionary authority, not the other way around. Commingling (mixing together) of client and firm assets is never permitted.
When a U.S. resident investor purchases foreign bonds, A) appreciation of the bonds and depreciation of the foreign currency benefit the domestic investor. B) depreciation of the bonds and appreciation of the foreign currency benefit the domestic investor. C) depreciation of both the bonds and the foreign currency benefits the domestic investor. D) appreciation of both the bonds and the foreign currency benefits the domestic investor.
In the same manner that purchasing foreign equities adds diversification to a portfolio, purchasing foreign bonds does as well. As with any security, if the value goes up (it appreciates), that is a benefit to the investor. When foreign securities are involved, there is another concern—currency risk. Because the foreign bond is denominated in the local currency, an increase in that currency's value versus the U.S. dollar means the semiannual interest payments will translate into more dollars. At maturity, the return of principal will be higher as well. Of course, it can go the other way if the market value or the foreign currency depreciates against the dollar.
An investor owns a TIPS bond with an initial par value of $1,000. The coupon rate is 6% and, during the first year, the inflation rate is 9%. How much interest will be paid for the year? A) $60.00 B) $90.00 C) $65.40 D) $64.11
TIPS bonds have a fixed coupon rate with a principal that varies each six months based on the inflation rate. With an annual inflation rate of 9%, each six months, the principal increases by 4.5% (half of the annual rate). Each semiannual coupon is half of the 6% rate times the new principal. The arithmetic is $1,000 × 104.5% = $1,045 × 3% = $31.35 plus $1,045 × 104.5% = $1,092 × 3% = $32.76. Adding the interest payments together results in a total of $64.11 for the year. You should be able to eyeball this. Any bond with a 6% coupon will pay $60 in one year ($30 × 2). Because the TIPS bond increases the principal after the first six months, the second interest payment will be slightly higher than $30. There is only one choice slightly higher than $60.00 and it would be that way on the real exam.
A client plans to purchase a home within the next three months and will require $100,000 for the down payment. The client has the money in her DDA and asks you for your recommendation as to the best place to put the money. Your recommendation would probably be for the client to A) use the money to buy IPOs until the home is purchased. B) keep the money where it is. C) purchase a GNMA for the monthly income. D) move the money into a 1-year CD.
DDA stands for demand deposit account, usually a checking account at a bank. Because this client cannot afford any risk to principal, and the bank account is covered by FDIC insurance, this is the most attractive option. The 1-year CD would offer more income, but there would likely be a penalty for early withdrawal. Even though the GNMA is directly backed by the U.S. government, it is subject to market fluctuation, a risk this client cannot take.
An investor purchases zero-coupon bonds issued by the U.S. Treasury due to mature in 18 years at $100,000. Which of the following might describe the primary reason for selecting that investment vehicle? The investor is 65 years old and needs the reliability of current income. The investor is 45 years old and has purchased these in an IRA rollover account and wants the assurance of funds for retirement. The investor is 30 years old and has a newborn child and wishes to assure funds for a college education. The investor is 20 years old, has just received an inheritance, and wishes to shelter income for as long as possible. A) I and II B) I and IV C) III and IV D) II and III
Zero-coupon bonds maturing in 18 years would assure the 45-year-old of the face value at age 63. Being in an IRA, there would be no current taxation and, upon maturity, if desired, the funds could be distributed without the 10% penalty. Zero-coupon bonds are one way to guarantee funds for college education. However, with no current income, they would not be suitable for the 65-year-old and would not offer any tax shelter to the 20-year-old.
One of your clients wishes to reallocate the assets in his 401(k) plan. Specifically, he plans to assist his parents in the purchase of a retirement home. He claims that it makes sense to have about 10% of his plan assets in real estate. A) An asset allocation model would not have 10% in real estate. B) This is prohibited as qualified plans cannot own real estate. C) This is not permitted because a prohibited party will benefit. D) This would only be permitted if the home were for his personal use.
A) An asset allocation model would not have 10% in real estate. B) This is prohibited as qualified plans cannot own real estate. C) This is not permitted because a prohibited party will benefit. D) This would only be permitted if the home were for his personal use.
An investor may expect to receive dividends from A) a warrant. B) a call option. C) an ADR. D) a put option.
An American depositary receipt (ADR) represents ownership in a foreign corporation, and dividends declared by the corporation are paid to the ADR owner. The currency conversion is performed by the issuing domestic bank. Options and warrants do not grant the holder the right to receive dividends on the underlying stock; one must own the security itself to be entitled to the dividend.
In the construction of a qualified retirement plan portfolio, which of the following investment vehicles would be considered generally inappropriate? A guaranteed investment contract (GIC) A municipal bond fund A leveraged real estate limited partnership A corporate bond rated A or higher
GIC's and investment-grade corporate bonds (A or higher-rated bonds) are considered appropriate investments for a qualified plan. A municipal bond fund will potentially convert tax-free income into ordinary income, and using leveraged investments in retirement plans is generally prohibited.
Ginnie Mae pass-throughs will pay back both principal and interest A) quarterly. B) semiannually. C) monthly. D) annually.
Ginnie Mae (GNMA) securities are called pass-through certificates because the monthly home mortgage payments, which consist of both principal and interest, pass through to the GNMA investor monthly.
When a security is being registered under coordination, all of the following are required except A) prompt filing with the Administrator of any amendments filed with the SEC. B) payment of the appropriate fee. C) a description of the proposed use of the proceeds of the underwriting. D) filing with the Administrator of a statement of the maximum and minimum proposed offering prices and maximum underwriting discounts or commissions concurrently with the filing of the registration statement with the SEC.
The statement of the maximum and minimum proposed offering prices and the maximum underwriting compensation must be filed at least two full business days before the effective date, not with the initial filing.
The Securities Exchange Act of 1934 defines a market maker is
a dealer who, with respect to a security, holds himself out as being willing to buy and sell that security for his own account on a regular or continuous basis
Rule 144 applies to the sale of all of the following except A) registered securities by a nonaffiliated shareholder of the issuer. B) unregistered securities by an officer of the issuer. C) registered securities by an officer of the issuer. D) unregistered securities by a nonaffiliated shareholder of the issuer. Rule 144 applies to the sale of unregistered securities owned by affiliates or nonaffiliates and the sale of control stock. It does not apply to the sale of registered securities by nonaffiliated persons.
understanding what an affiliate is and rule 144
Which of the following statements about zero-coupon bonds are true? Zero-coupon bonds are sold at a deep discount from face value. Zero-coupon bonds pay periodic interest payments. The owner of a zero-coupon bond receives his return only at maturity. A) I and III B) II and III C) I and II D) I, II, and III
A zero-coupon bond is a type of debt security that pays no periodic interest payments. Instead, the investor receives his return only at maturity, when the bonds are redeemed. Zero-coupon bonds are sold at a deep discount from face value, but they are redeemed at full face value when they mature.
A bond is selling at a premium over par value. Therefore, A) none of these are correct. B) its nominal yield is less than its current yield. C) its yield to maturity is greater than its current yield. D) its current yield is less than its nominal yield.
Any bond selling at a premium will yield less than the coupon rate (nominal yield). Conversely, of course, a bond trading at a discount will certainly yield more. Remember, there is an inverse relationship between bond prices and bond yields.
Assume that a corporation issued a 5% Aaa/AAA rated debenture at par. Two years later, similarly rated debt issues are being offered in the primary market at 5.5%. Which of the following statements regarding the outstanding 5% debenture are true? The current yield on the debenture will be higher than 5%. The current yield on the debenture will be lower than 5%. The dollar price per bond will be higher than par. The dollar price per bond will be lower than par. A) I and III B) II and III C) I and IV D) II and IV
Because interest rates have risen after the issue of the 5% debenture, the bond's price will be discounted to result in a higher current yield (computed as annual income divided by current market price). Accordingly, the discounting of the issue will make the 5% debenture competitive with new issues offered with a 5.5% coupon. i dont understand why
High-yield bonds are frequently called junk bonds. Which of the following expresses the highest rating that would apply to a junk bond? A) BB B) CCC C) CC D) BBB
Explanation Investment-grade bonds run from a highest Standard and Poor's rating of AAA (Aaa for Moody's) down to BBB (Baa for Moody's). When the rating gets to BB (or Ba), the bond is considered high yield, or a junk bond.
Which of the following is a direct obligation of the U.S. government? A) Bank for cooperatives bonds B) Fannie Maes C) Ginnie Maes D) Government bond mutual funds
Ginnie Maes are backed by the full faith and credit of the United States. Other agencies have a moral, but not direct, government backing. Government bond mutual funds are not backed by the U.S. government.
One of your retired clients aims to maintain a 70%/30% relationship between bonds and equities in her portfolio. At the beginning of the year, the mix was $1.4 million in bonds and $600,000 in equity. At the end of the year, her bonds were worth $1.54 million. Rebalancing the portfolio would not be required if the equities were worth A) $462,000 B) $666,000 C) $513,333 D) $660,000
If the bonds are now worth $1.54 million and the desired percentage is 70%, dividing that value by 70% results in a portfolio value of $2.2 million. That would mean that the 30% in equity would have to be the other $660,000. At the test center, you would plug in $1.54 million; divide by 70% to get the total of $2.2 million. When you subtract the bonds of $1.54 million the remainder is the equity of $660,00
When an investment adviser prepares a BCP, what should it be based on? The size of the firm The firm's annual net income The number of locations of the firm The types of services provided
The amount of an investment adviser's net income is not relevant to a BCP.
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? A) U.S. government bond. B) Investment-grade corporate bond. C) City of Milwaukee GO bond. D) Zero-coupon bond.
The investor is in a low tax bracket, so the tax-exempt municipal bond is not a suitable investment. To maximize income, the best recommendation is the corporate bond which offers a higher yield than a government bond with a similar maturity.
An exemption from registration under the Securities Act of 1933 is available to securities that are A) offered to the public only when the total amount is more than $4 million. B) listed on national exchanges. C) sold in more than one state by persons residing in those states. D) sold only to persons residing in one state when the issuer is a resident doing business within that state.
These securities are eligible for the intrastate exemption afforded under Rule 147. They might have to register in that particular state, depending on whether they meet the exemption requirements in that state for that type of issue. Only under the NSMIA and the Uniform Securities Act do securities listed on a national stock exchange receive a registration exemption.
ABC's stock has paid a regular dividend every quarter for the past several years. If the price of the stock has remained the same over the past year but the dividend amount per share has increased, it may be concluded that ABC's A) yield to maturity has gone up. B) current yield per share has decreased. C) current yield per share has been unaffected. D) current yield per share has increased.
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A fundamental analyst researching a stock is concerned with all of the following except A) the stock's market price as a multiple of the company's earnings B) volume of shares traded C) capitalization ratio D) management efficiency
A fundamental analyst is concerned with the economic climate, the inflation rate, how an industry is performing, a company's historical earnings trends, how it is capitalized, and its product lines, management, and financial statement ratios, such as the P/E ratio. A technical analyst is concerned with trading volumes or market trends and prices.
Under the Uniform Securities Act, which of the following disciplinary actions is authorized as part of the Administrator's authority? The Administrator may suspend or revoke a current registration. The Administrator may censure or bar an applicant from future registration. The Administrator may restrict the securities-related business of a broker-dealer, adviser, or registered agent. A) I and III B) I, II, and III C) II and III D) I only
An Administrator may by order deny, suspend, or revoke any registration; or bar or censure any registrant or any officer, director, partner, or person occupying a similar status or performing similar functions for a registrant from employment with a registered broker-dealer or investment adviser; or restrict or limit a registrant as to any function or activity of the business for which registration is required in this state.
If having discretion over $100 million or more in 13(f) securities, which of the following would be exempt from filing Form 13F? A) An investment adviser that manages mutual fund assets B) A trustee C) A natural person who exercises investment discretion over the account of any other natural person or entity D) A natural person who exercises investment discretion over her own account
An institutional investment manager is also a natural person or an entity that exercises investment discretion over the account of any other natural person or entity. For example, an investment adviser that manages private accounts, mutual fund assets, or pension plan assets is an institutional investment manager; so is the trust department of a bank. A trustee is an institutional investment manager, but a natural person who exercises investment discretion over her own account is not an institutional investment manager.
Parker and Mary have recently divorced. For Mary to receive Social Security benefits based on Parker's earnings, which of the following conditions must exist? A) Parker must not be remarried. B) Mary must have worked at least 40 quarters to be eligible for benefits. C) Parker must already be at full retirement age. D) The marriage must have lasted at least 10 years.
The marriage of these two must have lasted at least 10 years. In addition, Mary cannot be remarried (Parker can be). It is Parker who must have at least 40 quarters to earn Social Security benefits. As long as Parker is drawing benefits, and one can start before full retirement age, benefits will be available as long as all of the conditions are met.
Which of the following has the least exposure to inflation risk? A) Preferred stock B) Cash C) Common stock D) Fixed annuity
The returns on common stock have historically outperformed inflation, making them less vulnerable to loss of purchasing power among the choices presented.
All of the following statements regarding incentive stock options (ISOs) are correct except A) upon the exercise of an ISO, income for AMT (alternative minimum tax) purposes is created B) the favorable tax treatment associated with ISOs is lost if the shares acquired through the ISO exercise are sold before 1 year from the date of grant or 2 years from the date of exercise C) the exercise of ISOs does not create taxable income D) if the holding period is satisfied, the gain upon the sale of ISO shares will be a long-term capital gain
i don't get it
