Pre-test 2
Kevin is an agent of CMP Broker-Dealers which is registered in 10 states. Kevin is currently registered in five states, but only transacts business with institutional clients. Due to recent mergers, some of Kevin's clients will be relocating to North Carolina and CMP now wants to open a new office there. Kevin will not be moving from his current office in Missouri, a state in which both Kevin and CMP are registered. Under the USA: a.Both Kevin and CMP are required to be registered in North Carolina b.CMP is required to be registered in North Carolina, but Kevin is not c.Neither Kevin nor CMP is required to be registered in North Carolina d.Only Kevin is required to be registered in North Carolina
a. This is a tricky question, but the main concept is that a broker-dealer is not required to register in a state if it has "no place of business in the state." However, since CMP is opening an office in North Carolina, the firm is required to be registered in the state regardless of the type of securities being sold or the types of clients with which it conducts business. Since the broker-dealer will be registered in North Carolina, any agents of that broker-dealer who execute client transactions in that state are also required to be registered, regardless of the types of clients being represented. Although Kevin may not visit or work out of the North Carolina office, since his firm has a place of business there and Kevin will be effecting transactions in the state, he must register.
With a $1,000 investment, a brokerage client purchases a security that consists of a zero-coupon bond for $750 and an equity call option for $250. At maturity the investor receives the bond's principal plus any appreciation in the option. What is this investment? a.A structured product b.A forward contract c.A covered call d.A straddle
a. A structured product This is an example of a structured product. Although there is no single comprehensive definition, a structured product typically consists of a debt instrument (note or bond) and a derivative product (e.g., an option). The debt instrument provides a guaranteed principal payment, while the derivative provides a variable payment at maturity.
The economic cycle consists of four stages--full recession, early recovery, late recovery, and early recession. Since the market tends to move ahead of the economic cycle, an adviser who believes the economy is in a full recession may advise clients to rotate into what sector? a. Cyclicals, such as transports and technology b. Fixed income securities c. Staples and defensive stocks d. Services and utilities
a. Cyclicals such as transports and technology. In anticipation of changes in the economic cycle, an adviser may advocate sector rotation, in which a client's portfolio holdings are rotated from one or more business sectors into others. If the economy is in full recession, one strategy is to rotate into cyclical stocks that would benefit from a recovering economy, such as industrials, e.g., manufacturers of autos, appliances, or houses, which would experience increased sales in a recovery.
All of the following statements regarding discounted cash flow are NOT TRUE, EXCEPT: a. It is used to calculate the volatility of the market b. It is used to determine the attractiveness of an investment c. It can only be used to determine the value of a bond d. It can only be used to determine the value of common stock
b. Discounted cash flow (DCF) analysis is a method of estimating the fair market price of an investment. If the investment is trading at a value lower than its discounted cash flow value, this would suggest it is attractive or undervalued. Research analysts use discounted cash flow analysis to determine the value of many different investment opportunities in the marketplace.
KiddieLand is a company that operates several theme parks across the United States. Pilar would like to purchase 18 shares of KiddieLand stock for her newborn niece. Her broker-dealer charges a specified minimum ticket amount for small orders. Which of the following statements is TRUE? a. Common stock is a suitable gift for children only if the company pays a dividend b. The agent should disclose that the commissions charged for this transaction could be unusually large as a percentage of the market price c. Pilar will need to obtain the custodian's permission to purchase the stock d. The agent will need to have Pilar's written approval since the number of shares is less than 100
b. It is considered fraudulent for a broker-dealer to fail to notify a client of larger-than-ordinary commissions or costs. Purchases or sales of a small amount of securities can often lead to larger-than-ordinary costs because of minimum charges assessed for transactions. This can lead to commissions that are large as a percentage of the purchase price. It is not illegal to assess such charges, but it is illegal not to inform the client about them. Charging a client an unreasonable commission is prohibited
Which of the following persons would be subject to statutory disqualification under the Securities Exchange Act of 1934? a. A person accused of insider trading b. A person who pleaded guilty to stock manipulation five years ago c. A person who was the defendant in a civil lawsuit d. A person who was the chief executive officer of a failed broker-dealer
b. A person who pleaded guilty to stock manipulation five years ago. A statutory disqualification is the denial of an applicant for registration based on the past transgressions of the applicant, including violations of any securities or commodities law. Being the chief executive of a failed broker-dealer does not itself lead to statutory disqualification, but this information must be disclosed on any subsequent application in the securities industry. A person accused of insider trading has not been convicted.
A technology company's stock is listed on an exchange and is also traded over-the-counter by a small number of market makers. The stock is considered by the Administrator to be a: a.Non-exempt security and subject to registration by coordination b.Federal covered security and not subject to registration with the Administrator c.Federal covered security and subject to registration by qualification d.Federal covered security and subject to notice filing with the Administrator
b. Federal covered security and not subject to registration with the Administrator. Securities that are listed on the NYSE, Nasdaq, or other national exchanges are considered federal covered securities and exempt from registration with the Administrator. This federal covered status applies regardless of where other trades may take place. Although notice filing does apply to certain federal covered securities, it does not apply to listed securities. Investment company securities and securities that are issued under Regulation D Rule 506 are considered federal covered securities (exempt from state registration), but subject to notice filing.
The Administrator of the state of Wisconsin has designated the Investment Adviser Registration Depository (IARD) as the approved method for filing registration applications in that state. All filings must be done electronically through the IARD. Under which TWO conditions would an investment adviser requesting an application in Wisconsin NOT need to file electronically with the IARD? I. The IARD is not able to recognize the form that is filed. II. The application is not filed during normal business hours. III. The investment adviser claims a hardship exemption from filing. IV. The firm has not previously filed a Form ADV. a. I and II b. I and III c. II and IV d. III and IV
b. I and III In states where the Administrator has designated the IARD as the method for filing registration applications electronically, two exemptions are available. The exemptions are given in cases where the form that is filed cannot be accepted by the IARD and for hardships incurred through unexpected technical difficulties in filing. In such cases the investment adviser may file a manual application.
Rancho Rio Investments is a single-office investment advisory firm that is based in New Mexico and plans to expand its business to New Jersey. Under the Uniform Securities Act, in which TWO of the following situations is Rancho Rio NOT considered to be an IA in New Jersey? I. The firm transacts business only with New Jersey broker-dealers II. The firm transacts business in New Jersey, but only with a few employee benefit plans that contain assets under $500,000 III. The firm's only business in New Jersey is with 10 or fewer non-institutional customers within a 12-month period IV. The firm's only business in New Jersey is with a limited number of federal covered advisers a.I and II only b.I and IV only c.II and III only d.II and IV only
b. I and IV Under the Uniform Securities Act, any investment adviser that has no place of business in a given state and whose clients are banks, broker-dealers, investment advisers, and other institutions is exempt from registration in that state. Also, any IA that has no place of business in the state and deals with five or fewer retail customers who are residents of the state within a 12-month period is also exempt. Since this question makes no reference to Rancho Rio having an office in New Jersey, it may transact business with New Jersey institutional investors, such as broker-dealers (choice I) and investment advisers (choice IV), without being registered in New Jersey. To do business with an employee benefit plan in a state without being registered, the plan must have assets of $1 million or more.
Under the Uniform Securities Act, which of the following statements is/are TRUE regarding the registration of securities? I. A security is considered registered for one year from the effective date of its registration statement II. Once the registration statement is declared effective by the Administrator, the security is considered to be registered as long as the issuer files quarterly and annual financial statements III. If the registration statement for a security is declared effective by the Administrator of one state, it is also immediately effective in any state in which an identical registration statement has been filed IV. The filing of a registration statement may be done by a person other than the issuer a.II only b.I and IV only c.I, III, and IV only d.II, III, and IV only
b. I and IV only Under the USA, a registration statement is effective for one year from its effective date and may be filed by the issuer, a registered broker-dealer, or any other person on whose behalf the offering is being made. The filing of quarterly and annual financial statements is not a requirement for registration. Also, if an Administrator of one state declares an offering effective, it does not automatically mean that the registration is effective in any other state.
When investing in a variable annuity, investors would be MOST concerned with which of the following risks? a. Legislative risk b. Investment risk c. Interest-rate risk d. Mortality risk
b. Investment risk In a variable annuity contract, an investor's principal is invested in a separate account. The separate account contains a pool of securities that will fluctuate over time. A variable annuity client would be most concerned with the fact that the value of his investment will fluctuate due to changes in the overall market.
Under Section 404(c) of ERISA, fiduciaries are: a. Relieved of all responsibility for monitoring the plan and its investment options b. Not liable for investment losses provided that certain requirements are met c. Able to engage in prohibited transactions d. Considered the same as the plan participants
b. Not liable for investment losses provided that certain requirements are met. Section 404(c) provides a limited exception to the normal rules governing fiduciary responsibility under ERISA for plans that provide for individual, self-directed accounts, such as 401(k) plans. Fiduciaries are not held responsible for investment losses if certain conditions are met.
A hedge fund is being sold to accredited investors as a private placement under Regulation D. An agent believes that this fund would be an excellent investment for several of his clients. The agent may recommend the fund to which of the following investors? a. A newly-retired man, whose annual income last year was $200,000 b. A middle-aged couple who are both physicians with a joint annual income of $400,000 c. A young aggressive investor with a net worth of $500,000 and an annual income of $150,000 d. A couple that just won the lottery, whose annual income this year was $500,000 and whose net worth is $550,000
b. a middle-aged couple who are both physicians with a joint annual income of $400,000. Many hedge funds are issued as private placements under Regulation D. In order to qualify for the exemption, they must be offered only to accredited investors, or no more than 35 nonaccredited investors. Accredited investors include: • Individuals with an annual income of at least $200,000 during the last two years who reasonably expect to continue to earn that much in the future • A married couple with a joint income of at least $300,000 who reasonably expect their income to continue at the same level in the future • An individual or a couple with a net worth of at least $1 million The investor in choice (a) meets the income requirement but his income will probably drop now that he is retired. The investor described in choice (c) does not meet either the income or the net worth requirements. The couple described in choice (d) just won the lottery. Thus, their income was probably much higher this year than normal and it is unlikely to remain at the same level. Only the couple described in choice (b), two doctors in their prime earning years, can reasonably expect to continue making the same income.
A broker-dealer located in State A, in business for three years, goes out of business in July. Some of the principals at the firm start a new broker-dealer in August of that year. Which of the following statements is TRUE concerning the broker-dealer's registration fee? a. A fee is not required until the next year b. The appropriate registration fee must be paid c. A prorated fee must be paid d. A fee is not required since the broker-dealer and not the agent is seeking registration
b. the appropriate registration fee must be paid. Every applicant whether an agent, broker-dealer, investment adviser, or investment adviser representative must pay a registration fee. This fee is paid when an applicant files the initial application as well as when the registration expires each year on December 31. If a registration fee is paid in the middle of the year, the fee is usually not prorated.
An 81-year-old father is establishing a bypass trust for his two adult children who are both in their 40s. His investment adviser is evaluating the risks and benefits of numerous investment vehicles. Which of the following choices is MOST appropriate investment in a bypass trust? a.Government securities, since they preserve the value of the assets that will be passed to the beneficiaries b.Growth stocks, since the beneficiaries will not need the funds for several years c.Municipal securities, since the income that will be provided to the beneficiaries is tax-free d.Bonds with short-term maturities due to the grantor's age
b.Growth stocks, since the beneficiaries will not need the funds for several years A Bypass Trust (or Credit Shelter Trust) is a type of irrevocable trust and is most commonly used to pass assets from parents to children at the time of the second parent's death. These trusts are structured in such a way that the children will be required to pay estate taxes on any assets that exceed the current estate tax exemption. The key to this specific question is to identify the ages of the beneficiaries. Since both children are in their 40s, a growth investment is the most appropriate. The focus must be on the beneficiaries, not the grantor
A registered representative has written an electronic marketing piece that recommends the purchase of a new variable annuity being offered by his firm. He wants to send it by e-mail to 40 retail clients. If the product is suitable for each of the clients on the RR's distribution list, which of the following statements is TRUE? a.The content of the e-mail must be reviewed by a principal within 10 business days b.The initial communication must be approved, while the second communication must be reviewed c.The e-mail must be approved by a principal d.The RR may not send the e-mail since it is a bulk recommendation
c. Since the communication is being sent to more than 25 retail investors, it is considered a retail communication. A retail communication containing an investment or financial recommendation, or promoting a product or service of the member firm, must be preapproved by a principal. Correspondence is defined as any written or electronic message that is sent by a member firm to 25 or fewer retail investors within any 30-calendar-day period. Correspondence does not require principal preapproval.
What information is important when determining whether a limited partnership is appropriate for a particular client? I. The client's ability to assume risk II. The client's investment objectives III. Whether the client's other investments are liquid IV. The client's educational background a.I only b.I and II only c.I, II, and III only d.I, II, III, and IV
c. I, II, and III only
Related to a transaction, which of the following actions would cause it to be subject to the laws of State Z? I. The offer and acceptance occur in State Z. II. The offer originates over the phone from State Z and is directed to State A. III. The offer is mailed from State A, directed to State Y, and accepted in State Z. IV. The offer originates over the phone from State Y and the sale occurs in State A. a. I and II only b. II and III only c. I, II, and III only d. I, II, III, and IV
c. I, II, and III only A securities transaction is subject to a state's securities laws if the offer originates in, is directed to, or is accepted in the state. Of the choices listed, only choice (IV) has all of the action occurring outside of State Z.
All the following descriptions are TRUE of a closed-end management company, EXCEPT: I. Shares are purchased at the current offering price II. Shares are redeemable III. Investors can purchase full and fractional shares IV. The company may issue only common stock V. When making a purchase, a customer will pay a markup or a commission a. I and V only b. I, III, and V only c. II, III, and IV only d. II, III, and V only
c. II, III, and IV only Shares of a closed-end fund are not redeemable instruments. The shares are usually traded in the open market on an exchange. The purchaser pays either a commission or a markup on both a purchase and a sale. A closed-end fund may issue common stock, preferred stock, or bonds. The fund may issue only full shares. Unlike a mutual fund, the closed-end management company may not issue fractional shares.
Megamerger is a federal registered investment adviser with offices in all fifty states. John is an investment adviser representative with Megamerger. He is registered in New York where his primary office is located but often travels to New Jersey and uses one of Megamerger's offices there to conduct business. John: a. Must register in New Jersey unless all of his clients there are institutions b. Is exempt from registration in New Jersey, since he is only using the office temporarily c. Must register as an IAR in New Jersey d. Is exempt from registration, since he is already registered in New York
c. Must register as an IAR in New Jersey Investment adviser representatives who work for federal covered investment advisers must register in every state in which they maintain a place of business.
Under what form of ownership may a husband and wife ensure that their property is not able to be attached by the creditors of either spouse? a.Tenants in common b.A qualified domestic partnership order c.Tenancy by the entirety d.Joint tenants with right of survivorship
c. Tenancy by the entirety Tenancy by the entirety, which is only available to married couples, allows spouses to own property as a single legal entity. With this form of ownership, a creditor of one spouse is unable to make a claim to the account's assets. However, if the creditor has a claim against both spouses, it may make a claim to the assets.
If an investment adviser sells a security that it owns to an advisory client, which of the following scenarios would violate the Uniform Securities Act? a. The IA acts as a broker-dealer to the seller of the securities without written disclosure b. The IA acts as a principal in the transaction with written consent and disclosure c. The IA acts as a broker-dealer to the buyer of the securities without written consent and disclosure d. The IA recommends the purchase of a private placement to the customer
c. The IA acts as a broker-dealer to the buyer of the securities without written consent and disclosure.
The Investment Advisers Act of 1940 would consider an individual to be in the business of providing investment advice if: a. On rare occasions, she renders advice that is incidental b. She provides general advice on stocks, bonds, and tangible assets c. She provides mutual fund timing and sector rotation advice to her clients d. She provides advice in isolated instances as part of another service
c. she provides mutual fund timing and sector rotation advice to her clients. Investment advisers provide advice that is timed and tailored to each client. An investment adviser's advice is not general, isolated, or occasionally offered. An adviser is considered in the business of providing advice when it holds itself out as an adviser or makes recommendations that are client-specific. (67515)
Which of the following statements is TRUE regarding futures and forward contracts? a.Forward contracts are standardized, and futures contracts are not standardized b.Both forward contracts and futures contracts are standardized c.Futures contracts are standardized, and forward contracts are not standardized d.Neither futures contracts nor forward contracts are standardized
c..Futures contracts are standardized, and forward contracts are not standardized
Under the Uniform Securities Act, in the absence of fraud, when must action be taken for recovery on a transaction made in violation of a state registration provision? a. Within two years of occurrence b. Within two years of discovery c. Within three years of occurrence and two years of discovery, whichever comes first d. Within two years of occurrence or discovery, whichever occurs last
c.Within three years of occurrence and two years of discovery, whichever comes first. If an agent unknowingly (without fraud) sells a security in violation of a state registration provision, her customer must take action for recovery within three years of the occurrence of the violation, or within two years of discovery of the violation, whichever comes first
Which of the following would NOT be considered an investment adviser representative under the Uniform Securities Act? a. An individual who works for an investment adviser and provides advice b. An individual who works for an investment adviser and is compensated for transactional business c. An individual who works for an investment adviser and manages assets d. An individual who works for an investment adviser as a clerk or receptionist
d. The Uniform Securities Act specifically exempts clerical employees of an investment adviser from the definition of an investment adviser. Advisory fees may consist of both commissions and management fees. When clients begin the advisory relationship, they must receive written disclosure of any fees or commissions.
Which of the following is TRUE concerning the private placement of securities being distributed under Rule 506(c) of Regulation D? a.The securities may only be offered to accredited investors. b.The securities may only be sold to no more than 35 non-accredited investors. c.General advertising is prohibited. d.General advertising is permitted, but all investors must be accredited.
d. Under Rule 506(c) of Regulation D, issuers may raise an unlimited amount of capital and they may solicit all types of investors; however, the issuer can only accept accredited investors. In other words, general advertising/solicitation is allowed, but only accredited investors may purchase the securities. Under Regulation D, issuers may also sell securities privately through a 506(b) offering. Two key differences between 506(c) and 506(b) are that 506(b) offerings do not allow for general advertising/solicitation and the issuer may sell to an unlimited number of accredited investors, but no more than 35 non-accredited (yet still sophisticated) investors
Which of the following employees of an investment adviser are not considered a registered investment adviser representative? a. An individual who manages the investment adviser representatives b. A junior partner that makes investment recommendations c. A portfolio manager d. A senior partner
d. A senior partner An investment adviser representative (IAR) is considered any person who is associated with an investment adviser and manages client accounts or portfolios, makes investment recommendations, or gives advice about securities. The IAR definition also includes any person who determines the type of investment advice to give to clients, any person who solicits or negotiates the sale of these services, as well as any person who supervises the personnel performing these job functions. The reason that choice (d) is the answer is because it gives no indication that the senior partner has any of the responsibilities of an IAR.
Which of the following statements is TRUE regarding an omitting prospectus for an investment company? a. Investment advisers may not omit a prospectus under any circumstances b. Performance data may not be included c. An application to invest may be included d. An investor must be informed that she should read the full prospectus
d. An investor must be informed that she should read the full prospectus Certain investment company advertising may be published even if it meets the definition of a prospectus. An omitting prospectus is an exempt investment company advertisement that only includes information available in the full prospectus (such as performance). An application to invest may not be included. The customer must be informed as to how she may obtain the actual prospectus, and that the prospectus should be read prior to investing any money. An application to receive a prospectus may be included.
During the course of an investigation under the Uniform Securities Act, the Administrator finds that an investment adviser representative has engaged in fraudulent activities. The representative says that he is unaware of any fraud and was only following the directions of his firm. He produces a written recommendation list issued by his firm upon which he based his recommendations. What action would the Administrator most likely take in this situation? a. Impose a fine and prison sentence b. Impose a fine but not a prison sentence c. Bring an action in court to impose a fine and prison sentence d. Bring an action in court to impose a fine but not a prison sentence
d. Bring an action in court to impose a fine but not a prison sentence. Any person who willfully violates the Uniform Securities Act may be fined up to $5,000 and imprisoned for up to three years. However, if the person proves that he had no knowledge of the fraudulent activities or that he was not aware or could not have been reasonably aware of what was going on, then a prison sentence may not be imposed.
Jerry is a partner of an investment advisory firm and also an agent of an affiliated broker-dealer. When a recommendation is made for an advisory client to trade a security, Jerry earns a commission and the IA collects an advisory fee. The firm's fiduciary duty is satisfied if: a.The recommendations are suitable b.Jerry's registration as an agent is active c.The commission that Jerry earns is less than the advisory fee being received by the IA d.Clients are provided with a disclosure of Jerry's total compensation
d. Clients are provided with a disclosure of Jerry's total compensation. A person who is employed by an investment adviser may also act as an agent if he is employed by an affiliated broker-dealer. If an investment adviser earns a advisory fee and the agent receives compensation for executing securities transactions that result from the recommendations of his affiliated adviser the IA will satisfy its fiduciary duty by disclosing the agent's total compensation to its clients.
An investment adviser who provides personalized financial advice may pay a fee to a nonaffiliated person to solicit clients provided that: I. There is a written contract governing the relationship between the investment adviser and the solicitor II. The solicitor is not statutorily disqualified from association with an investment adviser III. The solicitor provides each client whom he refers to the adviser with the adviser's brochure, plus a separate solicitor's written disclosure document, at the time of the solicitation IV. The investment adviser is registered either with the SEC or the appropriate state(s) a. I and II only b. II, III, and IV only c. I, II, and III only d. I, II, III, and IV
d. I, II, III, and IV
When advertising on the Internet, an agent of a broker-dealer must disclose which of the following items? I. The name of his affiliated broker-dealer II. The name of the broker-dealer that reviewed and approved the content III. The fact that the agent is working within the scope granted by the broker-dealer IV. A legend stating that he will not conduct business unless registered or exempt a. I and II only b. I, II, and III only c. I, II, and IV only d. I, II, III, and IV
d. I, II, III, and IV According to NASAA's interpretive order concerning broker-dealers, investment advisers, broker-dealer agents, and investment adviser representatives, for general dissemination of information, the name of the broker-dealer or investment adviser who approved the content as well as the one with whom the agent is affiliated must be on all Internet-based advertising. In addition, only individuals who are properly registered within the potential customer's state or exempt may follow up and respond to potential leads.
Which of the following choices is NOT a broker-dealer in State B? I. An agent in State A who contacts a client in State B II. A corporation that sells commercial paper every other week in State B III. A broker-dealer registered in State A, where its only office is located, which has only insurance companies as clients in State B IV. A bank trust department that buys and sells securities for its customers a. I only b. III only c. IV only d. I, II, III, and IV
d. I, II, III, and IV Agents, issuers, and banks are not broker-dealers. Also, a person with no place of business in a state, who deals only with institutional investors, is not a broker-dealer.
One of your clients has heard that the use of leverage can increase his portfolio's return. This client normally buys securities that have high dividend payout ratios and uses the dividends to supplement his income. He wants to open a margin account and asks you to use his existing securities as collateral to purchase additional shares of the same stocks that you have in your portfolio. You should: a.Explain to the client that this would only increase the return if interest rates increase b.Explain to the client that buying securities on margin would provide the account with downside protection c.Not recommend this strategy since buying on margin would increase the client's taxes d.Not recommend this strategy since buying on margin may not increase the return received by this client
d. Not recommend this strategy since buying on margin may not increase the return received by this client
ABC Inc., a financial services company, is registered as both a broker-dealer and an investment adviser. On a regular basis, ABC is required to provide its clients with disclosures and obtain written agreements from them regarding acting in both a broker-dealer and investment adviser capacity. In which of the following situations is ABC not required to obtain a written agreement from the client prior to effecting the transaction? a. The client sells a security, and ABC, who is acting in a principal capacity for its own account, buys the security for its own account b. The client buys a security, and ABC, who is acting in a principal capacity for its own account, sells the security to the client c. At the time of initiating her contract, the client signed a document waiving her right to receive any and all disclosure documents d. The investment adviser side of ABC makes no recommendation to the client, but the client decides to effect a securities transaction through the broker-dealer
d. The investment adviser side of ABC makes no recommendation to the client, but the client decides to effect a securities transaction through the broker-dealer Since the client in choice (d) has not used the services of the investment adviser, the disclosure rules for investment advisers do not apply. However, broker-dealers are required to disclose on trade confirmations when they act in a principal or agency capacity.
Modern Portfolio Theory (MPT) defines risk as the: a. Possibility of loss of principal b. Possibility that returns will be less than the rate of inflation c. Slope of the regression line of portfolio returns versus the market d. Variability of expected returns about the mean
d. Variability of expected returns about the mean. In MPT, risk is defined as the degree to which investment returns deviate from what was expected or predicted. It is usually measured by the standard deviation of expected returns about the mean (δ), although its square, variance (δ2), is sometimes used.
The biggest disadvantage of investing in a growth mutual fund is the potential loss of: a. Diversification b. Income c. Liquidity d. Principal
d. principal When an individual invests in a mutual fund that consists primarily of common stocks, his principal is at risk. As the market value of the mutual fund fluctuates over the life of the investment, the result may be a loss of the customer's principal or investment.
Which of the following choices is an asset class? a. An S&P Index Fund b. Diamonds c. Baseball cards d. Real estate
d. real estate An S&P Index Fund, diamonds, baseball cards, and real estate are all assets; however, real estate is the only one that represents an asset class. For example, a baseball card is an asset but the asset class to which it belongs is collectibles.
Under the Securities Act of 1933, with whom are nonexempt issuers required to file registration statements? a. FINRA b. Only the state in which the issuer is headquartered c. Only the state in which the securities will be sold d. SEC
d. the SEC