4.10

If interest rates decline sharply, which of the following bonds is likely to appreciate the most? A) 15-year zero coupon bond trading on a 7.80 basis B) 15-year 8% bond trading on a 7.90 basis C) 15-year 7% bond trading at par D) 15-year 8% bond trading on an 8.10 basis

15-year zero coupon bond trading on a 7.80 basis

Which of the following activities would violate the Uniform Securities Act? I.An investment advisory partnership admits a renowned securities analyst to the partnership without informing its clients of this highly desirable addition. II.An investment adviser incorporated in California fails to inform its clients of the departure of the chief financial officer who did not have an equity position in the firm. III.An investment advisory firm incorporated in Illinois charges clients a share of the capital gains on the basis of a guaranteed performance level above a designated benchmark. IV.An investment advisory firm assigns those accounts that fall to a low level to other firms willing to accept them with the consent of the account holder. A) I and III. B) I, III and IV. C) I and II. D) II and III.

I and III.

Which of the following describe differences between variable and universal variable life insurance? I. Variable life insurance has a minimum guaranteed death benefit, whereas universal variable life insurance does not. II. Universal variable life insurance typically provides a higher death benefit than variable life insurance. III. Variable life insurance provides no inflation protection for the death benefit, whereas universal variable life insurance does. IV. Variable life insurance requires scheduled premium payments, whereas universal variable life insurance permits flexible premium payments. A) I and II. B) III and IV. C) II and III. D) I and IV.

I and IV.

Under current law, who of the following would be required to register as an investment adviser in a state? I.A person who limits advisory services exclusively to issuers of securities in that state while maintaining no office therein II.A person who has directed advice relating to securities to 6 individuals in that state within the past 12 months, even though he has no place of business within the state III.A person whose home office is in the state and who manages less than $25 million in assets IV.A person who deals exclusively with broker/dealers in that state, but maintains no place of business within the boundaries of the state A) I, II and IV B) I, II and III C) II and III D) III and IV

I, II and III

Under section 13(d) of the Securities Exchange Act of 1934, a person who acquires more than 5% of a class of securities registered under the act must, within ten days, file a report of beneficial ownership with: I. the SEC. II. the issuer. III. the exchange where traded. A) I, II and III. B) II and III. C) I and III. D) I and II.

I, II and III.

Under the Securities Act of 1933, which of the following would be civilly liable for false registration statements, using a prospectus that is untrue, or failing to meet the prospectus delivery requirements of the act? I. Any and every person who has signed the registration statement. II. Every expert who is named in the registration statement. III. Every underwriter of the security. IV. Every stockholder named in the registration statement. A) I, II, III and IV. B) I, II and III. C) I, III and IV. D) I and III.

I, II and III.

Under the Investment Advisers Act of 1940, for which of the following is an investment adviser required to disclose to clients the amount of compensation he will receive? I.Commissions on recommended securities transactions II.Commissions on insurance sales III.Incentives from the issuer of a recommended security A) I, II, and III B) II and III C) I and III D) I and II

I, II, and III

XYZ Securities, Inc., a FINRA member broker/dealer, is registered in all 50 states. XYZ has its principal office in New York and a branch office in Arizona. If the Utah Administrator wished to examine certain of XYZ's financial records, the Administrator: I. could do so during normal business hours without prior notice. II. can only examine those records located in the state of Utah. III. could ask the New York Administrator to perform the examination. IV. could ask FINRA to perform the examination. A) I and III. B) I and IV. C) I, III and IV. D) II only.

I, III and IV.

Which of the following are regulated under the Securities Exchange Act of 1934? I. New issues. II. Broker/dealers. III. Transfer agents. A) II and III. B) I only. C) I, II and III. D) I and III.

II and III.

A fixed-premium variable life insurance contract offers a: I. guaranteed maximum death benefit. II. guaranteed minimum death benefit. III. guaranteed cash value. IV. cash value that fluctuates according to the contract's performance. A) I and IV. B) II and III. C) II and IV. D) I and III.

II and IV.

Jack, who is proficient in both fundamental and technical analysis, would like to become an investment adviser. Although Jack is fairly new to the securities business, he worked in the commodities business for many years. Five years ago, Jack's Commodity Pool Operator's license was suspended by the Commodity Futures Trading Commission for having willfully violated or willfully failing to comply with any provision of the Commodity Exchange Act. Which of the following best describes how Jack's application to open an investment advisory business will be handled under the Investment Advisers Act of 1940? A) Jack's application will likely be denied because he has little experience in the securities industry. B) Jack's application will likely be accepted because he has not violated any securities law. C) Jack's application will likely be denied because he violated the Commodity Exchange Act within the 10-year period prior to his application. D) Jack's application will likely be accepted because his violation of investment-oriented regulations occurred 5 years prior to his application.

Jack's application will likely be denied because he violated the Commodity Exchange Act within the 10-year period prior to his application.

Which of the following statements is TRUE concerning variable life separate account valuation? A) Unit values are computed weekly and cash values are computed monthly. B) Unit values are computed daily and cash values are computed monthly. C) Unit values are computed monthly and cash values are computed daily. D) Unit values are computed monthly and cash values are computed weekly.

Unit values are computed daily and cash values are computed monthly.

An agent wishes to be able to share in the profits and losses in a customer's account. Which of the following requirements must be met? A) Written consent must be obtained from the client and the employing broker/dealer. B) Sharing may only be done once written discretionary authorization from the client has been received. C) The client must have either a net worth of at least $2 million or $1 million in assets invested with the agent. D) The agent must also be registered as an investment adviser representative.

Written consent must be obtained from the client and the employing broker/dealer.

Regarding the use of testimonials in advertising, all of the following are true EXCEPT: A) a prominent celebrity speaking publicly about his relationship with the investment adviser is considered to be giving a testimonial. B) an agent of a broker/dealer may use a testimonial from an existing client with the approval of a designated principal of the firm. C) divulging a list of the investment adviser's clients in response to a court order is not considered a testimonial. D) an investment adviser representative may only use a testimonial from an existing client.

an investment adviser representative may only use a testimonial from an existing client.

When using the Dividend Discount Model, A) future expected dividends are discounted to compute the present value of the stock B) best results are obtained from stocks that pay irregular dividends C) the discount rate is generally lower than the expected rate of return D) a higher degree of accuracy in forecasting stock prices is obtained with preferred stock

future expected dividends are discounted to compute the present value of the stock

The needs analysis approach to life insurance planning: A) does not include other assets. B) is based on a series of generally accepted rules of practice. C) involves calculating the present value of cash and future income needs of an individual's survivors. D) provides an accurate insurance recommendation that ensures that the survivors' needs will be met.

involves calculating the present value of cash and future income needs of an individual's survivors.

With regard to a state registered investment adviser using Form ADV Part 2 as its brochure, it would be correct to state that A) if requested by a client, it must be sent within 5 days of the request B) it must be delivered not later than 48 hours after entering into an advisory agreement with a new client C) it must be delivered to all new clients D) it is filed through the IARD system

it is filed through the IARD system

Harry Thomas has turned 19 and decided that he is going to join the Marines and postpone going to college. If Harry decides to stay in the military, the unused funds contributed to his Coverdell ESA A) may be transferred into another Coverdell ESA for Harry's 25 year-old cousin Julia. B) must be distributed to Harry no later than 30 days after his 21st birthday. C) must remain in the plan until Harry's 30th birthday. D) must be returned to the donor with tax plus a 10% penalty on the earnings.

may be transferred into another Coverdell ESA for Harry's 25 year-old cousin Julia.

A publicly traded corporation offers its employees an opportunity to purchase shares of the company's common stock directly from the issuer. A specific employee of the company is designated to process any orders for that stock. Under the USA, the employee: A) may receive commissions without registration. B) need not register as an agent of the issuer under any circumstances. C) must register as an agent only if he will receive commissions or remuneration, either directly or indirectly related to the volume of sales. D) must register as an agent of the issuer.

must register as an agent only if he will receive commissions or remuneration, either directly or indirectly related to the volume of sales.

An investment adviser has legal access to a broker/dealer's confidential research document and uses the information to support a recommendation to a client. The investment is successful. Under NASAA's Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers, the adviser: A) must share the commission with the broker/dealer that prepared the research document. B) need not disclose the source of the information. C) must notify the client that the recommendation was based on the broker/dealer's research document. D) must provide the client with a copy of the research document.

need not disclose the source of the information.

During a trip to visit grandchildren, one of your clients suffers a massive heart attack and dies, intestate. Directions for handling the account could only come from the: A) person named as executor of the estate. B) person with a durable power of attorney. C) person appointed as administrator of the estate. D) spouse.

person appointed as administrator of the estate.