4.3

Early in the year, an investor purchased 100 shares of KAP common stock at a price of $60 per share. Just prior to the end of the year, after receiving three quarterly dividends of $1, the investor liquidated all of the KAP at a price of $59 per share. If the CPI increased by 3%, the investor's total return over the holding period was: A) 2%. B) 5%. C) 0.33%. D) 3.33%.

3.33%.

A client is risk averse and is planning on retiring in 16 years. As the client's investment adviser, which of the following would you recommend? A) A high-yield bond fund. B) A diversified open-end investment company concentrating in small-cap stocks. C) A government bond fund. D) 50% in an S&P 500 index fund; 50% in a portfolio of high quality bonds.

50% in an S&P 500 index fund; 50% in a portfolio of high quality bonds.

An investment adviser is preparing to meet with his An investment Adviser is prepparing to meet with his client to discuss some recent changes in her financial situation and propose some alternatives to best suit her needs. As he readies himself for the meeting, the adviser prepares a recommendation of a growing technology company for his client's portfolio. His recommendation is partially based on some research prepared by ABC Advisers, a firm he used to work for. If the adviser does not reveal the source of the research to the client, which of the following statements is TRUE? A) This is permissible, and no disclosure is required. B) This is permissible if oral disclosure has been made, and the client has been given the opportunity to review the research. C) This is permissible with written disclosure to the client prior to any purchase of securities. D) This is prohibited.

This is permissible, and no disclosure is required

An Administrator has jurisdiction over an offer to sell securities if it is made in a newspaper published out of state: A) under no circumstances. B) with at least 1/3 of its circulation in the state. C) with at least ½ of its circulation in the state. D) with at least 2/3 of its circulation in the state.

under no circumstances.

A client has just finalized her divorce and intends to sell her gold wedding band. Because the price of gold has risen significantly since she married 20 years ago, she will be able to realize a profit on the sale, but she does not know what to use as the cost basis. You suggest she speak to a tax specialist who will tell her to A) obtain an appraisal from a qualified jeweler and use that as the cost basis B) use a cost basis of zero because it was a gift C) use the original cost of the ring D) ignore the profit for tax purposes because precious metals are not subject to capital gains taxation

use the original cost of the ring

Among the benefits of purchasing derivatives would be: I.leverage. II.increased income. III.unlimited potential gain. IV.protection against loss. A) I, II, III and IV. B) I and II. C) I, III and IV. D) III and IV.

I, III and IV.

As part of your annual review for clients, you perform a net worth computation. You have computed a specific client's net worth at $500,000. This client calls you and asks what his net worth will be after withdrawing $4,000 from his savings account to pay off credit cards, taking another $5,500 to deposit to his IRA and buying a $25,000 home theater system using store credit. You would respond that the client's net worth is now: A) $475,000.00 B) $491,000.00 C) $500,000.00 D) $466,000.00

$500,000.00

ABC Industries common stock has a beta of .8 while DEF Technologies common stock has a beta of 1.2. The total return for ABC was 15% and that for DEF was 24.5%. Based on this information, you could say that DEF had alpha of: A) +9.5% B) +2% C) +6.5% D) -2%

+2% (1.2/.8=1.5) 15%*1.5=22.5% anything greater than 22.5 would be positive alpha.

Under the Uniform Securities Act, which of the following would NOT be considered an exempt transaction? A) The purchase of an unregistered nonexempt security by an individual client at that client's request. B) An executor liquidates the estate's portfolio. C) An agent sells U.S. Treasury notes to an individual client. D) The sale of ABCD common stock, listed on the Nasdaq Stock Market, to a trust company.

An agent sells U.S. Treasury notes to an individual client.

For which of the following is there no active secondary market? A) Forward contracts. B) Options. C) Futures contracts. D) ETFs.

Forward contracts

Two contrasting styles of portfolio management are growth and value. Which of the following pairs best describes the contrast? A) Earnings momentum/book value B) High P/E ratio/low current ratio C) Capital structure/earnings per share D) Dividend yield/dividend payout ratio

Earnings momentum/book value

Under the Securities Exchange Act of 1934, which of the following is (are) TRUE regarding the authority of the SEC to suspend trading? I.The SEC may suspend all trading on a specific exchange for up to 90 days. II.The SEC may summarily suspend trading on a particular nonexempt security for up to 10 days. III.The SEC may suspend trading on exempt securities. A) I, II and III. B) I only. C) I and III. D) I and II.

I and II.

An individual purchasing a flexible premium variable life contract should know which of the following? I. Timing and amount of premiums generally are discretionary. II. The death benefit will generally be higher than that of a comparable whole life policy. III. The face amount is fixed at the beginning of the contract. IV. The performance of the separate account directly affects the policy's cash value. A) II and IV. B) I and III. C) II and III. D) I and IV.

I and IV.

Under the Uniform Securities Act, a civil suit to recover damages may not be brought by an advisory client if: I. the client realized the improper advice was rendered more than two years ago. II. the adviser has died. III. the client willingly signed a statement waiving the adviser's compliance with the provision of the act on which the suit is based. A) I, II and III. B) I and II. C) II and III. D) I only.

I only.

Under the Uniform Securities Act, which of the following statements is (are) TRUE regarding civil liability of advisers and broker/dealers? I. The statute of limitations for civil liability is 5 years. II. A lawsuit against a broker/dealer or adviser can be avoided if restitution, costs, and interest are paid to a client. III. If restitution is made to a client by a broker/dealer, the Administrator may not prosecute the securities violation. A) II and III. B) I only. C) II only. D) I and II.

II only.

In 1940, Congress passed the Investment Company Act. Among the provisions of this sweeping law was the listing of the classifications of investment companies. Included in that listing would be all of the following EXCEPT: A) face amount certificate companies. B) management investment companies. C) unit investment trusts. D) holding companies.

holding companies

A broker/dealer receives a written complaint from one of its customers. The most appropriate action to take is to: A) immediately reply to the client in writing. B) immediately notify NASAA. C) immediately notify the Administrator. D) immediately freeze the client's account.

immediately reply to the client in writing.

LMN Manufacturing Company, listed on the NYSE, is an SEC reporting company. Each of the following would require the filing of a Form 8-K EXCEPT A) a change in top management B) relocation of wholly owned subsidiary C) a change in external CPA firm engaged to perform the annual audit D) acquisition of a major asset

relocation of wholly owned subsidiary

In an account opened by two individuals as joint tenants with rights of survivorship, all of the following are true EXCEPT: A) mail may be directed to the joint owner agreed upon by both parties to the account. B) orders may be entered by either party. C) stock certificates may be delivered in the name of either party. D) in the event of death, the other party assumes full ownership of the account.

stock certificates may be delivered in the name of either party.