Exam 15
A TIPS bond adjusts principal every?
6 months based on the inflation rate
If the current risk-free rate is 4%, and the expected return from the market is 10%, what return should we expect from a security that has a beta of .9? 9.4% 13% 6.4% 9%
9.4% Required return = 4% + ([10% - 4%] × .9) = 4% + (6% x .9) = 4% + 5.4% = 9.4%.
An IA hires a third-party solicitor to recruit new clients. Which records is the IA required to keep?
A statement, signed by the client, that both the IA's and solicitor's brochures were received
The term "eurodollars" refers to
American dollars held by banks in other countries, especially in Europe
Which of the following are regulated under the Securities Exchange Act of 1934? Broker-dealers Investment advisers Pension plans Transfer agents
Broker-dealers Transfer agents
weak form of the efficient market hypothesis implies
It implies that market information cannot be used to identify future price movements.
An investor inherits 1,000 shares of the ABC Global Growth Fund when NAV is $9.50 and POP is $10.00 and elects to receive all distributions in cash. Two years later, sells all when NAV is $14.25 and POP is $15.00. What are the tax consequences of this sale? Long-term capital gain of $5,500 Long-term capital gain of $4,250 Long-term capital gain of $5,000 Long-term capital gain of $4,750
Long-term capital gain of $4,750 Upon death, the beneficiary inherits mutual funds at their NAV ($9.50). Sale (redemption) takes place at the NAV ($14.25) for a profit of $4.75 per share (times 1,000 shares).
Broker-dealer who gives investment advice that is incidental to the course of its business and for which no special compensation is received, need to reg?
NO
does a nonqualified plan provide an immediate income tax deduction for the employer?
NO
What generally happens to outstanding fixed-income securities when the rate of inflation slows?
Prices go up.
What securities are exempt from registration?
Securities issued by the U.S. government or federal agencies. Municipal bonds (local government bonds) Securities issued by banks, savings institutions, and credit unions. Public utility stocks or bonds. Securities issued by religious, educational, or nonprofit organizations.
Which efficient market hypothesis suggests that an investor can achieve above-market returns by only utilizing insider information? Super-strong Weak Strong Semi-strong
Semi-strong
A GO bond generally involves less risk to the investor, true or false?
TRUE
The client's oral approval is sufficient for a specific order, true or false?
TRUE
an agent of a broker-dealer may use a testimonial from an existing client with the approval of a designated officer of the firm, true or false?
TRUE
Under the Uniform Securities Act, which of the following is responsible for notifying the Administrator when an agent changes his place of employment from one broker-dealer to another?
The agent, the former employer, and the new employer
If an investment adviser files an initial registration with a state on June 30, which of the following statements regarding the filing fee to be paid is TRUE? The fee will be prorated from the filing date. No filing fee is required until December 31. The full year's fee must be paid. The fee will be prorated from the effective date.
The full year's fee must be paid.
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.
Which of the following is likely to be characterized by no management fees and a portfolio consisting of municipal or corporate bonds? Closed-end investment companies Unit investment trusts Face-amount certificate companies Open-end investment companies
Unit investment trusts
flexible premium variable death bene premiums to sep account no guaranteed cash value
Universal Variable Life
scheduled premium min guaranteed/variable death bene premiums to gen/sep account no guaranteed cash value
Variable Life
scheduled premium fixed death bene premiums to gen account guaranteed cash value
Whole Life
are BD regulated by the SEC as well as individual stock exchanges?
YES
can an agent sell 3,000 shares of ABC as directed by a client at a price that the agent determines, without oral or written discretionary authority?
YES
if the Administrator is unable to locate the registrant, can they cancel the registration?
YES
A short stock position is hedged with
a long call.
A long stock position is hedged with?
a long put.
If an investor bought stock on one exchange and sold it at a higher price on another exchange, this practice constitutes
acceptable arbitrage
Tamika is an investment adviser representative with Financial Engineers, LLC, a covered investment adviser. The firm uses an investment policy statement to help design financial plans for their clients. One of Tamika's current clients plans to purchase a new boat 7 months from now. When using the IPS, this would be considered an investment constraint a capital need a financial objective an investment goal
an investment constraint
The formula for computing the combined equity in a mixed margin account is
current market value of the long positions, + the credit balance in the short account - the current market value of the short positions - the debit balance in the long account
Active Technicians (AT), a state-registered investment adviser serving primarily retail accounts, would be in compliance if it
did not send an annual brochure to its clients if there was no material change from the previous year
An upward sloping yield curve represents all of the following EXCEPT inflation expectations time value of money increased risk of default over time foreign interest rate differentials
foreign interest rate differentials
A 64-year-old woman wishes to withdraw funds from her nonqualified single premium deferred variable annuity purchased a number of years ago. The withdrawal would be taxed as?
ordinary income
In order for a security to lawfully be sold or offered under the USA, it must meet at least one of the following requirements EXCEPT? that it is properly registered with the Administrator that it is an exempt or federal covered security that it is sold in an exempt transaction that it is registered with the SEC
that it is registered with the SEC
The average return over this period is 9%. This would be properly referred to as the geometric mean the internal rate of return the median return the arithmetic mean
the arithmetic mean
The financial ratio that shows the relationship between the price of a company's stock and the company's net worth (stockholders' equity) is
the price-to-book-value ratio
Blue-sky laws pertain to all of the following EXCEPT the regulation of securities transactions in a state the registration of securities within a state the regulation of securities trading in other countries the registration of securities salespeople in a state
the regulation of securities trading in other countries
A policyowner could surrender a whole life insurance policy and choose from all the following EXCEPT purchasing an extended term life policy transferring the policy to another person purchasing a reduced coverage whole life policy taking the cash value
transferring the policy to another person
All of the following are exempt from state registration EXCEPT fixed-income securities issued by a bank variable annuities issued by a major insurance company fixed annuities issued by a small insurance company common stock in Mutual Savings Bank
variable annuities issued by a major insurance company
A common measurement used to evaluate attitudes regarding future economic conditions is the difference in yields between U.S. Treasury bonds and corporate bonds. This is known as
yield spread.
A mutual fund must redeem its tendered shares within how many days after receiving a request for their redemption? 5 10 3 7
7
Long Range Planning (LRP) is a covered investment adviser doing business in all 50 states. Fred Fergus is an IAR with LRP and splits his time between an office in State A and State D. Fred has retail clients as follows: 16 clients in State A 12 clients in State B 6 clients in State C 4 clients in State D need to reg in what states?
A and D
Dividend payments are not a part of the computation for which of the following risk measurement tools? Dividend discount model Net present value Dividend growth model Correlation coefficient
Correlation coefficient
On retirement, if your customer who is a corporate executive will receive retirement income equaling a percentage of the average of his last 5 years of compensation, this is which type of plan? Defined contribution TSA Keogh Defined benefit
Defined benefit
An adviser waives a client's fee if the client experiences a loss for the year, allowed or not allowed?
NOT ALLOWED under the Investment Advisers Act of 1940?
A client of a broker-dealer who sold 200 shares of XYZ stock short? must repay the money borrowed to effect the short sale. might consider purchasing put options on XYZ as protection. is obligated to return the 200 shares borrowed. has a bullish outlook on XYZ stock.
is obligated to return the 200 shares borrowed.
In order to compute an investor's real rate of return on a common stock holding, all of the following are necessary EXCEPT dividends appreciation inflation rate marginal tax bracket
marginal tax bracket
Under the USA, an individual would not be considered an agent while representing the issuer in any of the following transactions EXCEPT promissory notes, such as commercial paper, with a maturity of nine months or less issuers in exempt transactions nonexempt, initial public offerings investment contracts issued in connection with an employee's stock purchases, savings, pension, profit-sharing, or similar employee benefit plan
nonexempt, initial public offerings
An analyst observes that the beta of a security is 1.3, the market return is 6%, and the risk-free rate is 1%. The analyst forecasts that the security will return 7% over the next year. Based on these assumptions, the security is
overvalued, because the required return exceeds the forecasted return.
Under federal law, an application for becoming an associated person of a broker-dealer would be denied for an individual who is not a citizen of the United States pleading no contest to a misdemeanor involving a financial matter 65 months ago convicted of a felony 122 months ago accused of a securities-related felony 110 months ago
pleading no contest to a misdemeanor involving a financial matter 65 months ago
