Cumulative
Which of the following statements regarding unrealized gain in a mutual fund portfolio are true?
-It affects the mutual fund's shares' value. -It is realized by shareholders when they redeem their shares.
Which of the following statements about FINRA are true?
-It has authority to regulate the OTC market in nonexempt securities. - All branch offices of a member broker-dealer must be registered with FINRA.
Which of the following occurrences will change the net asset value per share of a mutual fund?
-Net appreciation of the assets held in the portfolio of the fund -Net depreciation of assets held in the portfolio of the fund
A client of yours has chosen to invest in a principal-protected fund. Which of the following disclosures must be made to your client?
-Potential 5- to 10-year lockup period -additional costs
Which of the following statements regarding the differences between Rule 506(b) and Rule 506(c) of Regulation D of the Securities Act of 1933 are true?
-Rule 506(c) offerings can be advertised, while Rule 506(b) offerings cannot. -Rule 506(c) offerings are limited exclusively to accredited investors, while nonaccredited investors can participate in Rule 506(b) offerings.
TIPS offer which of the following benefits to an investor?
-Semiannual adjustments to principal based on the CPI -Interest payments that keep pace with inflation
Which of the following are advantages of a periodic payment deferred annuity over a lump-sum deferred annuity?
-Smaller individual payments spread out over time are easier to meet than a single large payment. -With periodic payments, the investor's commitment is spread out over years and is easier to reverse, if necessary, than is payment of a lump sum.
Regulation A Tier 1
-The general public may invest -General solicitations are allowed -Offering must not exceed $20 million *NO specific qualifications*
Which of the following statements about an established FINRA member firm's handling of a mutual fund's sale literature are true?
-The material used to solicit the sale of mutual fund shares requires prior approval by a principal of the firm. -If the mutual fund sponsor has had the literature reviewed by FINRA in advance, other firms need not submit the literature to FINRA.
A holder of mutual fund shares
-has the right to vote for a vacancy on the board of directors. -receives regular reports on the fund's expenses no less frequently than semiannually.
bond's nominal yield
-is fixed as of the date of issue. -It identifies the amount of interest an investor receives and, once the bond is issued, is not affected by changes in market interest rates. -It is also known as the coupon rate of the bond and is stated on the bond certificate.
Open-end companies (mutual funds)
-issue one class of security: common stock - borrow money -lend money - purchase call option contracts
blend/core funds
-leverage the virtues of both value and growth investing styles. - hope to benefit from value increases by investing in companies at market prices below an estimate of true worth and hope to be rewarded with higher future prices because of their potential for positive trends in sales and earnings.
Internal Revenue Code Section 1035
-permanent life insurance can be exchanged for an annuity contract without generating any tax consequence. -a fixed annuity policyholder cannot use a transfer under Section 1035 to exchange it for a life insurance policy. -policyholders can exchange a variable life policy for another variable life policy of a different company without generating any tax consequences.
T-bills are direct obligations of the U.S. government and
-trade in the secondary market. -issued (sold) at a discount
According to federal law, an insurance company under the provisions of the Investment Company Act of 1940 must allow a variable life policyholder the option to convert the policy into a permanent form of insurance contract for a period of
24 months
A mutual fund can hold which of the following securities in its investment portfolio?
Common stock Preferred stock Corporate bonds Municipal bonds
Under the USA PATROIT Act of 2001, which of the following must be maintained by financial institutions, such as banks and broker-dealers, to prevent the financing of terrorist operations and money laundering?
Customer Identification programs (CIP)
All of the following entities may issue municipal bonds except
Holy Name Cathedral Church, Chicago. (not churches)
Which of the following best describes the purpose of life insurance?
It creates an estate.
The best account for a married couple who both need access to the account and want to maintain control if one of them should pass away would be which of these?
Joint tenants with rights of survivorship (JTWROS)
Your customer, age 37, makes $60,000 per year and wants to invest $10,000. He wants a conservative investment with annual returns in the 10%-20% range. Which of the following should you suggest?
Managing and lowering your customer's expectations (Conservative investments result in lower returns.)
A debt fund manager, extremely sensitive to interest rate risk, has taken the opinion that interest rates will begin to come down and perhaps stay at low rates for the foreseeable future. With that opinion in mind, and wanting to take a conservative approach, which of the following would be a suitable recommendation for the portfolio?
Noncallable corporate bonds
If a customer wishes to open a cash account, who must sign the new account form?
Only the principal
A representative that has reasonable grounds to believe that options are a suitable investment for a client should take which of these next steps?
Provide the customer an option disclosure document
An offering circular may be used to provide disclosure for which securities?
Regulation A, private placements, and intrastate offerings
Green Thumb Nurseries, Inc., is headquartered in Nevada and has stores throughout the state. Green Thumb wants to issue $100 million in secured bonds with the assistance of Washoe Securities acting as an underwriter. Washoe is a broker dealer registered in Reno, Nevada. Green Thumb intends to sell the security exclusively to investors from the same state. Green Thumb may receive an exemption from registering the offering with the SEC under which of these?
Rule 147 (intrastate offering - sell securities to investors in same state)
Which of the following permits the highest annual contributions?
SEP IRA
Under federal law, which act regulates the activities of broker-dealers and associated persons?
Securities Exchange Act of 1934 (secondary mkt)
A customer would like to know which of the following mutual funds has the highest potential for capital growth. Which would you choose?
Small-cap technology stock fund
Which of the following statements is true regarding the annuity units during the annuitization period of a variable annuity contract?
The number of units remains the same, but the value of each unit changes.
In promoting a variable life insurance contract to a customer, which of the following statements would be permissible?
This product gives you the possibility of a greater death benefit in exchange for accepting investment risk.
A first-year broker-dealer posts an ad in the newspaper to recruit Series 6 registered representatives on May 5, 2010, and again on August 14, 2010. How long must the broker-dealer maintain records of this?
Three years from August 14, 2010
The interest from what bonds is subject to federal income tax?
Treasury notes & FNMA
Which of the following is classified as an independently prepared reprint (IPR)?
Wall Street Journal article on investing
Which of the following investments will require specific disclosure regarding the cost of liquidation?
Windmill Growth Fund Class B (contingent deferred sales charges (back-end loads) associated with liquidation)
A contingent deferred sales charge is best described as
a back-end sales charge that decreases the longer the investor holds the shares.
Customers could pay a commission, rather than a sales charge, for shares of
a closed-end investment company.
Which of the following funds would you recommend to a moderate-risk client seeking long-term capital gains who also values professional stock selection?
a large-cap growth fund (moderate risk, LT capital growth)
When a brokerage firm sells stock from its own inventory, it is acting in the capacity of
a principal and charges a markup.
If a registered representative wishes to place an advertisement in a local newspaper offering her services as a mutual fund representative for XYZ Funds, the advertisement must be approved by
a registered principal. (All retail communications are subject to approval by a registered principal before use.)
Sector funds
a solid financial foundation, has additional discretionary income to invest, is bullish, and is willing to accept the higher risks that come with the potential for higher rewards.
Under the exchange provision, within the first 24 months, a variable life policy may be converted into
a whole life policy
Which of the following funds may issue more than one type of security?
ace closed-end fund (Closed-end investment companies may raise capital through the issuance of common stock, preferred stock, and bonds)
An investor who purchases stock in two technology companies with high projected earnings and growth potential but little performance history is considered
an aggressive investor
The New York Stock Exchange is characterized as
an auction market where the highest bid and lowest ask prices prevail.
A railroad company pledges its railroad cars as collateral for a bond offering. This bond would be issued as
an equipment trust certificate.
Sales of Tier 1 securities under Regulation A require the distribution of
an offering circular
The disclosure document used for the offering of a Section 529 college savings plan is called
an official statement (state sponsored)
An investor who owns shares of a mutual fund actually owns
an undivided interest in the fund's portfolio.
12b-1 fees
are deducted from fund assets every quarter.
Contribution limits for qualified plans
are established by the government and adjusted periodically.
An underwriting agreement in which the underwriters assist customers in purchasing securities from the issuer is what type of underwriting?
best efforts
A financial reporter notices that the offering price of one investment company's share is at a 22% discount from the NAV. From this information, he can conclude that the company must be
closed-end investment company. (If the ask price of a fund is less than the NAV, the fund must be a closed-end investment company.)
All of the following are exempt transactions except
commercial paper offerings (a security)
If the RST Corporation has issued several different debt securities, an investor would expect the lowest income stream from RST's
convertible debentures.
If you invest in a front-end load mutual fund and choose automatic reinvestment, you should expect that
dividend distributions & capital gains distributions will be reinvested at net asset value.
The exchange privilege offered by open-end investment companies allows investors to
exchange shares of one open-end fund for another in the same fund family at a net asset value basis.
small cap fund
higher risk
A retail investor, age 40, wants to fund an annuity. She would like to take advantage of the stock market gains she sees in the news but is terrified of losing money. If an annuity is the right recommendation, what kind of annuity would be most appropriate?
index annuity - allows investors to participate in gains of stock market
Communications with the public include all of the following except
informational material on a new mutual fund intended for sales personnel. (internal use)
Growth and income funds
invest in common stocks, preferred stocks, convertible securities, and high-yielding bonds. The objective is to provide both income and capital growth to their investors.
The Investment Company Act of 1940 requires that mutual funds pay dividends from their
net investment income
The city of Marysville, Utah, is issuing a bond to raise capital to buy new equipment for the fire department. Which of the following documents would a representative give to a customer to give them more information?
official statement (municipal offering)
An application to open an account with an open-end investment company would be found
online if the prospectus can be downloaded from that site.
An option disclosure document must be provided to a customer before they may buy or sell which of the following investments?
options
Mid-cap stocks
provide good hedges against inflation, making them appropriate for an investor seeking long-term growth and inflation protection.
An investment adviser of a mutual fund may liquidate shares held in the fund's portfolio
provided the liquidation is within the guidelines set forth by the fund's objective.
Filing with FINRA is required for mutual fund-related
retail communications
Under the funding rules of the Employee Retirement Income Security Act (ERISA) funds deposited into an ERISA covered plan must be
segregated from other corporate assets in a trust.
Which of the following certifications would qualify an individual as an accredited investor?
series 7 (Series 7, Series 65, and Series 82 licenses are considered accredited investors)
A customer will be leaving the country and asks his representative to watch his account. If his positions begin to decline in value, the registered representative should
talk to his manager
Which of the following will not be found in a final prospectus?
the SEC approval date
A new client turns in the new account form. While reviewing the information on the form, the registered representative handling the account notices that the space for listing the Social Security number is blank. Under the provisions of the USA PATRIOT Act of 2001,
the account can be opened if the client has already applied for a number.
A customer who participates in a FINRA arbitration hearing would expect that
the award will be stated in writing and rendered to the claimant within 30 days.
When a customer instructs a registered representative to transfer and ship, the representative instructs the margin department to transfer ownership into
the customer's name and deliver the securities to the customer.
Open-end investment company shares normally go ex-dividend
the day after the record date.
If interest rates are dropping, an investor with a maturing bond will be most concerned with
the difficulty in finding another investment with a like yield.
A deferred compensation plan needs the prior approval of
the employer only
In a variable life policy
the face value will fluctuate with the separate account's performance, but it will never decrease below the original minimum face value.
Who determines the contribution limits for qualified retirement plans?
the federal gov't
Which of the following investments may be suitable for a Roth IRA?
- covered calls -International bond mutual funds
According to the Investment Company Act of 1940, which of the following are required of investment companies?
-Investment company registration statement filed with the SEC -Statement of investment policies and diversification status
Section 457 plan
-contributions to the plan for eligible employees are made through salary deferral. -they can be established by state and local governments and other tax-exempt employers. -these are nonqualified plans.
Which of the following pieces of sales material is exempt from routine spot-checking by FINRA?
A public communication that simply offers a specific security at a specific price
research report
An analyst's report on Seabird Airlines, Inc., stock
Qualified investors for a Regulation A Tier 2 offering must meet certain requirements. Which of the following is not one of those requirements?
Be a registered investment advisor
Which of the following regarding both index mutual funds and ETFs is true?
Both are designed to track a particular index.
Which share classes have a back-end load?
Class B & Class C
Which of the following is the best description of a growth stock?
Common shares in companies that retain earnings and pays little or no dividends
Which of the following are types of corporate retirement plans?
Defined benefit plans & Profit-sharing plans
Withdrawals from a 401(k) plan without penalty
Disability and Attainment of age 59½
In a variable annuity contract, the assumed interest rate (AIR) refers to
the rate of return needed to maintain the annuity payments at a constant level.
For an owner to be paid a dividend, his name should be recorded on the stock record book of the issuer's transfer agent by
the record date
For an owner to be paid a dividend, his name should be recorded on the stock record book of the issuer's transfer agent by
the record date.
best efforts underwriting
the underwriter serves as an agent with no financial obligation for unsold securities.
A preliminary prospectus must include all of the following except
the underwriting contract
The maximum amount that may be raised in a Regulation D private placement is
there is no limit
All of the following are true regarding institutional communications except
they must have prior principal approval. (do not need)
Capital gains distributions may be combined with income distributions to calculate annual yield on mutual fund shares
under no circumstances