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Sortel Industries has preferred stock outstanding that pays annual dividends of $3.75 a share. If an investor wants to earn a rate of return of 8.5%, how much should she be willing to pay for a share of Sortel preferred stock?
$44.12 3.75 is 8.5% of what number? 3.75/.085 = $44.12
Which of the following items would be found on a family balance sheet?
--- Spouse's engagement ring Dividends and interest received Annual salary Income taxes paid A balance sheet, whether for a family or a business, shows assets and liabilities, not income and expenses. The ring is certainly an asset; the others are income or expenses.
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
Several investors open an account in joint tenancy. Financial information is required on which of the following investors?
All the investors
An investor's portfolio consists of a single stock. If a stock with a correlation of +.95 was added to the portfolio and the stock market turned bearish, what would be the likely effect of having added this additional security?
Almost no noticeable impact.
Which of the following business accounts does not require considering the suitability of the owners?
C corporation
The term "sale" includes which of the following?
I. A contract of sale II. A contract to sell III. The disposition for value of an interest in a security IV. A warrant (for common stock of the issuer) given with the purchase of a bond
Based on the following information, which stock is most likely to appeal to a growth investor?
P/E ratio of 8:1 -- Dividend yield of 0.3% Dividend payout ratio of 65% Book value of $22 per share, current market value of $17 per share Growth investors usually seek stocks with high-growth expectations, reflected by a higher-than-normal P/E ratio, typically 20:1 or higher, and a low dividend yield, usually caused by a low dividend payout ratio. It would be unlikely to find a growth stock selling for close to its book value and certainly not below it.
The Uniform Securities Act defines a guaranteed security as one
where the payment of interest and principal (bond) or dividend (stock) is guaranteed by a party other than the issuer
One of your clients is confused about the difference between active and passive styles of management. It would be correct to state that, compared to the active style, passive portfolio managers
would be more likely to include index funds or ETFs in their portfolio.
Which of the following would be included in the Uniform Securities Act's definition of a "sale"?
Transfers, for value, of unit trusts to a nontaxable organization
If XYZ is a registered broker-dealer with its lone office located in State T, under which of the following circumstances must it also register in State L?
XYZ routinely sells nonexempt securities to extremely high net-worth residents of State L. XYZ purchases exempt securities from extremely high net-worth residents of State L for resale to residents of State T.
Your retired 72-year-old client still lives in the home he purchased 35 years ago for $40,000. It is currently valued at $700,000 and there is no mortgage. The client has almost $500,000 in his self-directed IRA rollover account. When determining suitable investments for this client, you would base your recommendations on the fact that
as a retiree, any losses suffered cannot be made up from current income the client's time horizon could be as long as 20 years
Which of the following orders would be used to protect a short sale profit?
buy stop
The registration of an investment adviser would automatically register which of the following as investment adviser representatives?
directors, officers, and partners
A federal covered investment adviser has decided that it is necessary to increase its fee schedule and charge commissions on securities trades. However, they are going to leave the fee structure in place for existing customers. This information must be
disclosed promptly only to those customers who will be affected by the change through an amended brochure
The Sharpe ratio measures a stock's
excess return earned compared to its systematic risk The Sharpe ratio is defined as a fund's excess return (fund's return exceeding the risk-free rate) divided by the total risk (standard deviation).
An agent is assisting a prospective client in opening an account. The individual refuses to provide his net worth and annual income. The agent should
in the absence of company policy to the contrary, open the account but limit transactions to unsolicited orders
Potential investment company clients should be advised to investigate a fund by looking at which of the following?
investment policy portfolio
Under the Uniform Securities Act, a broker-dealer is defined as any person who
is in the business of effecting securities transactions for its own account or for the accounts of others
With regard to a state-registered investment adviser using Form ADV Part 2 as its brochure, it would be correct to state that
it is filed through the IARD system
A new client indicates a desire to avoid investing in mid-cap stocks because of large losses suffered several years ago. What type of consideration would this be?
nonfinancial
Under the Investment Advisers Act of 1940, an adviser who has custody of a client's funds must
notify a client when the client's funds are moved to another location segregate client's funds and keep them identified by client
value investors
seek securities that are undervalued or selling for less than their intrinsic value
One element of the formula used to compute the Sharpe ratio is
standard deviation
USATrade Securities, a FINRA member broker-dealer, is registered in 10 Midwest states. Regarding financial requirements, USATrade must meet those of
the SEC
Discounted cash flow is commonly thought of as applying solely to fixed-income securities. However, forms of DCF used for the valuation of common stock also include
the dividend discount model the dividend growth model
In a financial market that is efficient,
the prices of securities will not differ from their justified economic values for any length of time.
Under the Investment Advisers Act of 1940, an adviser's registration usually becomes effective how many days after it is filed?
45
According to the Investment Advisers Act of 1940, which of the following statements regarding Part 2 of Form ADV are TRUE?
A balance sheet must be submitted if the adviser collects prepaid fees of more than $1,200, 6 or more months in advance. It may be used to satisfy the brochure requirements of the act.
Jean owns a $1 million life insurance policy on her mother, Clara. Jean is named as sole beneficiary, and so far she has paid $150,000 in premiums. If Clara dies, which of the following will occur?
The proceeds will be exempt from income tax. The proceeds will not be included in Clara's estate.
Under the Uniform Securities Act, all of the following are included in the definition of the term exempt transaction except
a sale of securities to an individual investor with a net worth of more than $5 million
Under the Uniform Securities Act, an agent who deliberately gives a fictitious quote to a customer
has committed a fraudulent and unlawful business practice
In general, a broker-dealer is required to register with the SEC. An exception to that requirement would apply to a broker-dealer who
maintains a place of business in a single state, only deals with residents of that states, and does not execute transactions in securities traded on a national exchange
The Investment Company Act of 1940 states that:
open-end companies may issue common stock only
