Questions missed on the Pre-Test
If a client wishes the assets in her account to pass directly to specific beneficiaries after her death, her account should be titled
TOD (transfer on death) provides that, upon the death of the account holder, the assets pass to the named beneficiary or beneficiaries without going through probate.
What is the risk measure associated with the capital market line (CML)?
In the context of the CML, the measure of risk is total risk, or standard deviation. Beta (systematic risk) is used to measure risk for the security market line (SML).
A married couple has lived in the same home for 40 years and now, with the children all gone, they've decided to sell and move to a retirement village. They purchased the home for $80,000 and have accepted a contract for $800,000. The tax consequences of this sale is
220: As long as a homeowner has lived in the primary residence at least 2 of the previous 5 years, the first $250,000 of profit on a home sale is excluded from tax. In the event it is a married couple, as in this question, the exclusion is doubled to $500,000. The profit on the sale was $720,000 ($800,000 minus the cost of $80,000) and the exclusion of $500,000 reduces the reportable gain to $220,000.
A grantor retained annuity trust is a planning tool designed to pass assets to beneficiaries (usually children) in a way to minimize
A GRAT is an estate planning tool designed to pass assets to beneficiaries (usually children) in a way to minimize gift and/or estate taxes. Because incidents of ownership remain with the grantor, all income is taxed to the grantor.
Your client wishes to begin a self-funded retirement plan that will enable him to make contributions until he is 75 years of age with no required minimum distributions. Which of the following would be your recommendation?
A Roth IRA would be your best choice in this instance. Unlike the traditional IRA and qualified retirement plans, a Roth IRA has no required age to begin distributions. You must begin distribution of a traditional IRA and 401(k) by no later than April 1 of the year following the year you turn 72. With a Roth, because the withdrawals will be tax exempt, the IRS does not care when you begin taking your money out. Therefore, with no required distribution age, you can make contributions for as long as you have earned income. The term self-funded plan will always refer to an IRA.
Which of the following investment vehicles provides for redemption by the issuer?
A UIT typically issues redeemable securities (or "units"), like a mutual fund, which means that the UIT will buy back an investor's "units," at the investor's request, at their approximate net asset value.
Which of the following stocks would probably be most appealing to a value investor?
A stock with a relatively low P/E ratio
The investment adviser has discretionary authority over the client's account.
All investment adviser advertising must reflect fees, state actual market conditions during the referenced period, and disclose the specific group of clients to which it applies. However, advertising that reflects past performance must show a minimum period of 1 year
When does a customer have to receive the OCC Options Disclosure Document?
Before accepting the customer's first order to trade options covered by the ODD
Which of the following are discretionary orders?
Discretion authorizes a representative to choose the security, the amount of shares, or whether to buy or sell. Time or price alone is not a discretionary decision.
Which method is used in evaluating investor performance
Dollar-weighted return
Which term refers to the taxation, expenditures, and debt management of the federal government?
Fiscal policy
KPT, Inc., is preparing to report its net income for the past year. An increase in which of the following causes a decrease in the reported net income?
Increases in tac rates, and an increase in bank loans, the test tricked me into cash dividends, but I must remember that to think that cash dividends are paid out of retain earnings.
Active government manipulation of the economy through tax and budget policies is referred to as
Keynesian economics is the body of economic thought that believes that active government intervention in the marketplace is the only method of insuring economic growth and stability, and that the government should manipulate the economy through adjusting levels of government expenditure and taxation.
Which of the following is a method for determining the internal rate of return by portfolio managers without the influence of additional investor deposits or withdrawals to or from the portfolio?
Time-weighted return
When investors tend to increase their investments in debt securities into those on the long end of the spectrum rather than those with short-term maturities, it generally leads to
an inverted yield curve, Investors buying long-term debt rather than short-term debt will have the effect of driving the prices of long-term instruments up and, as a result, their yields down. This will give us the inverted or negative yield curve.
When a U.S. resident investor purchases foreign bonds,
appreciation of both the bonds and the foreign currency benefits the domestic investor. Because currency bond is denominated in local currency. an increase in that currency's value versus the U.S. dollar means the semiannual interest payments will translate into more dollars.
new issues under the Securities Exchange Act of 1934?
can not be purchased on credit for the first 30 days
Formula methods of investing that involve selling equities in rising markets and buying them in falling markets would include
constant dollar plan constant ratio plan
A corporation with a 10%, $100 par cumulative preferred paid $5 to preferred stockholders last year. This year the company wants to pay common dividends. How much must it pay each preferred share outstanding before paying common shareholders?
$15
An early distribution from a traditional IRA can avoid the 10% tax penalty in all of the following cases EXCEPT
A)reaching age 59½ B)payments made under IRS Rule 72(t) C)death except a QDRO - QDRO is only in a qualified plan
ERISA regulations apply to the retirement plans of which of the following?
ABC Corporation, listed on the NYSE DEF Corporation, privately held among nine shareholders.,. Watch out sam. ERISA applies only to the private sector and not to the public sector (government employee) plans.
When an Administrator acts summarily to postpone or suspend a registration of a security, which of the following statements is (are) TRUE under the Uniform Securities Act?
Acting summarily means acting without prior notice. An Administrator who has grounds may postpone or suspend a registration by issuing a stop order. The registrant must be promptly notified of the action and of the opportunity for a hearing. The hearing must be held within 15 days of a written request, and the suspension will remain in effect until final disposition.
It is generally accepted that agents and IARs will give greater consideration to which of the following when making recommendations to their senior clients?
All of these are important suitability considerations for all customers. But when it comes to seniors, it is felt that life stage (including whether the customer is employed, retired, or nearing retirement) and current retirement savings relate particularly to seniors.
The alternative asset investments class is least associated with which of the following characteristics?
Alternative assets are most often characterized by inefficient pricing, providing potential abnormal returns or alpha returns. That is the prime reason for their popularity, especially with institutional investors.
Which of the following pooled investment vehicles would not generally be considered an alternative investment?
An ETF tracking an index. The "plain vanilla" exchange traded fund tracking an index is not considered an alternative investment while the others are.
When an investment adviser prepares a financial plan and distributes research reports prepared by several different third parties, which of the following statements is TRUE?
An adviser may not use specific research reports that are prepared by an outside third party without disclosure of the source.
If the dollar weakens, which of the following statements is TRUE?
An increase in U.S. interest rates might strengthen the dollar.
Which of the following is not correct regarding the capital asset pricing model (CAPM)?
CAPM accounts for the impact of systematic risk (as measured by beta) only and does not take into consideration unsystematic risk, which is assumed to have been diversified away.
When viewing a corporation's balance sheet, you would expect to see all of the following included in owner's equity except
CASH: In a balance sheet you will find. par value of the outstanding preferred stock; par value of the outstanding common stock; any excess paid in over the par value of the common stock at issuance, known as paid-in capital or paid-in surplus; retained earnings (years ago referred to as earned surplus); and if the company has re-acquired any of its common stock (Treasury stock), the cost of that purchase is subtracted from retained earnings.
Holders of these qualifications CFA® , CIC, ChFC®, CFP®, ,and PFS, may be granted a waiver from taking the Series 65. However, that waiver would not apply to an individual holding which of the following designations?
CLU@
Holders of which stock type would be most likely to receive preemptive rights?
Common stock
What does a bond's yield to maturity (YTM) indicate?
Discounted rate that equates a bond's cash flow to its current price
If a customer purchases shares in a municipal bond fund, which of the following statements are true?
Dividends are not subject to federal income tax, Capital gains distributions are subject to federal capital gains tax. Dividends distributed by municipal bond funds are federal tax free (and in some cases, state tax free as well) in alignment with the tax rules of how the fund's investment income was earned. However, any capital gains distribution resulting from the sale of bonds held long term by the fund is subject to capital gains taxation to the shareholder.
Which of the following is price-weighted rather than cap-weighted?
Dow Jones Industrial Average. Of the major averages/indexes, the DJI is the only one which is price-weighted. All of the others are cap weighted.
Which of the following are fiduciaries?
Executor of an estate Administrator of a trust Custodian of an UGMA account Investment adviser representative granted with discretionary authority over the account Each of these persons is in a relationship of trust to the customer and is therefore a fiduciary.
Which of the following statements regarding the growth style of investing is correct?
Growth managers focus on the denominator in the P/E ratio, searching for firms and industries where high expected earnings growth will drive the stock price up even higher. High P/E ratios are one of the keynotes of growth investing. The other choices here all relate to the value style.
Which of the following statements regarding REITs are TRUE?
Hybrid REITs own properties as well as making loans on others. Most REITs are easily traded in the secondary market.
Which of the following is guaranteed by a variable life policy?
Minimum death benefit
A terminally ill client wishing to access a portion of the cash value in his whole life insurance policy while still providing a death benefit for his beneficiaries could do so by
taking out a policy loan
A FinCEN Form 112 would need to be filed when a client
makes a cash deposit in excess of $10,000
Providing liquidity in the over-the-counter (OTC) market is the primary function of
market makers
The concept of creating a model portfolio, through asset allocation principles, that both increases return and reduces risk is known as
portfolio optimization
A sudden decrease in market interest rates will have the effect of increasing the trading price of an existing bond because
the present value of the bond's future cash flows increases
Holders of certain professional qualifications like ChFC®,CFP®, ,CFA®, CIC and PFS may be granted a waiver from taking the Series 65. However, that waiver would not apply to an individual holding which of the following designations?
CLU®
Holders of certain professional qualifications may be granted a waiver from taking the Series 65. However, that waiver would not apply to an individual holding which of the following designations?
CLU®
The most common collateral securing a Brady bond is
U.S. Treasury zero-coupon bonds with a maturity corresponding to the maturity of the individual Brady bond
The Conference Board releases information about the economy on a monthly basis. Included are a number of different indicators. Economic indicators can be leading, lagging, or coincidental, which indicates the timing of their changes relative to how the economy as a whole changes. Which of the following is a lagging economic indicator?
Average prime rate: Both the S&P 500 and housing permits are leading economic indicators, as is the measure of hours worked because it reflects changes in the average workweek during the current period. The average prime rate is a lagging indicator because, in an economic downturn, the longer rates stay low, the quicker the recovery should be.
The net asset value of an international bond fund can be expected to increase if
If interest rates fall, bond prices will rise, thus increasing the NAV of a bond portfolio. If the U.S. dollar weakens, the value of other currencies will rise. This would also increase the NAV for a portfolio of international bonds.
An early distribution from a traditional IRA can avoid the 10% tax penalty in all of the following cases EXCEPT
a QDRO:
In the investment industry, the term "2&20%" most commonly refers to
the fees charged by hedge fund managers
One of your customers has a substantial savings account at the local S&L. The customer has several grandchildren and wants the flexibility of being able to change the beneficiary allocations as their financial conditions change. You should recommend that the customer investigate the use of
A Totten trust allows for the transfer of ownership of a bank account to a beneficiary or beneficiaries after the owner's death. It is the predecessor of today's POD (pay on death) and TOD (transfer on death) accounts. Beneficiary names and/or percentages can be changed at will. An irrevocable trust can't be changed; there is no flexibility. In an UTMA account, once the money is allocated, the decision is irrevocable (and who says the grandchildren are minors). The durable POA gives a designated person the authority to manage the affairs of the account and this customer wants the control.
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., A balance sheet must be submitted if the adviser collects prepaid fees of more than $1,200, 6 or more months in advance. The Form ADV will also be filed with the state Administrator, but that is state law, not a federal requirement.
A 35-year-old client purchases a variable life insurance policy. Under current regulations, the maximum sales charge permitted over the life of the policy is
A variable life insurance plan may charge a maximum sales charge of 9% over a period not to exceed 20 years.
Which of the following statements accurately captures the significance of the Sharpe ratio?
The Sharpe ratio measures the fund's return over and above the risk-free rate. The higher the Sharpe ratio, the better the risk-adjusted performance of the portfolio and the greater the implied level of active management skill.
All of the following positions expose a customer to unlimited risk EXCEPT
Short 2 XYZ uncovered puts. A put writer will lose money if the stock goes down, but the furthest it can drop is to zero. Therefore, the potential loss is not unlimited. All of the other positions expose the client to unlimited risk because a loss will occur if the stock price rises.
When determining whether to make an investment in a real estate limited partnership, Bill is concerned with the discount rate that equates the net investment cash inflows to the net investment cash outflows. Which calculation is Bill using to make this prudent investment decision?
The internal rate of return (IRR) is the discount rate that, when applied to the cash flows of an investment, equates the net cash inflows to the net cash outflows. If the IRR calculated is greater than or equal to the investor's required rate of return, then the investor should consider making the investment, all other factors being equal. If the IRR is less than the investor's required rate of return, the investment should not be made.
One of your customers has a substantial savings account at the local S&L. The customer has several grandchildren and wants the flexibility of being able to change the beneficiary allocations as their financial conditions change. You should recommend that the customer investigate the use of
a Totten trust.
One way in which incentive stock options (ISOs) differ from nonqualified stock options (NQSOs) is that
the bargain element of the ISO is an AMT preference item.
For those following the Capital Asset Pricing Model (CAPM), the Security Market Line (SML) uses all of the following
the risk-free rate, the beta of the asset, the expected return of the asset. Watch OUT....DOES NOT USE Standard Deviation like CML
GNMA mortgage-backed securities are
a direct obligation of the U.S. government
Which of the following is regulated by the Securities Exchange Act of 1934?
Regulation of exchanges
Which of the following are characteristics of a money market mutual fund?
Money market funds are offered without sales loads or redemption fees. As with all mutual funds, a prospectus is required.
Which of the following would NOT be considered evidence of custody of a client's funds or securities?
The investment adviser has discretionary authority over the client's account.
Parker and Mary have recently divorced. For Mary to receive Social Security benefits based on Parker's earnings, which of the following conditions must exist?
The marriage of these two must have lasted at least 10 years. In addition, Mary cannot be remarried (Parker can be). It is Parker who must have at least 40 quarters to earn Social Security benefits. As long as Parker is drawing benefits, and one can start before full retirement age, benefits will be available as long as all of the conditions are met.
Learn this one well. It will be on the test. Which of the following statements regarding ADRs are TRUE?
The securities are vehicles used to facilitate U.S. trading of foreign securities. Holders have foreign currency risk. ADRs are vehicles that facilitate U.S. trading of foreign securities. They are issued in English in the United States by domestic banks. Dividends are declared in the foreign currency but are payable to holders in U.S. dollars, which means that ADR holders are subject to foreign currency risk.T
Economic indicators are used by analysts in an attempt to forecast future economic conditions. Which of the following would reveal an indication of a lowering of the inflation rate?
The unemployment figure is a leading indicator, a predictor of the future. With high unemployment, there is less money to go around in the economy tending to cause a decreased demand for goods and services. This demand is one of the leading causes of inflation. Changes to interest rates are a result of inflation, not a cause or a predictor.
Broker-dealers are required to furnish clients with a fee disclosure document. All of the following are true statements about that document except
There is no requirement that the fee schedule be filed with the Administrator. It must be up-to-date and any changes must be announced in advance (usually a minimum of 30 days). There are a number of ways to disclose the fees, the firm's website is one of them.
A bond analyst who determines the value of a debt security by adding the present value of the future coupons to the present value of the maturity value is using which of the following valuation methods?
This type of question sometimes appears on the exam. There is a second answer that could be correct, but is not scored as such. In this example, a case could be made for present value, but the better choice is discounted cash flow; it is more correct.
An employer wishing to offer a retirement plan with a goal of retaining key employees would probably start with
a deferred compensation plan
If an agent chooses to appeal an Administrator's order, the agent must file for review of the order with the appropriate court
Under the USA, a registered person has up to 60 days to appeal any disciplinary finding by the state Administrator.
Which of the following is the risk that diminishes through portfolio diversification?
Unsystematic risk: Unsystematic risk (diversifiable risk) is the risk that can be reduced or even eliminated when the investor builds a well-diversified portfolio. Interest rate risk and purchasing power risk are examples of systematic (nondiversifiable risk).
Which of the following bonds is most likely to exhibit the greatest volatility due to interest rate changes? A bond with
a low coupon and a long maturity. Other things equal, a bond with a low coupon and long maturity will have the longest duration and therefore greatest price volatility.
A bond's duration is
a measure of a bond's price sensitivity to a change in interest rates (Think about the ball)
Under the Uniform Securities Act, the requirements for filing of advertising and sales literature dealing with an exempt security with the Administrator
do not apply. An exempt security or transaction is exempt from the registration requirements and the requirements for filing of advertising and sales literature. It is not exempt from the antifraud provisions of the act.
A business continuity plan should be designed to provide an investment advisory firm with policies to be followed in the event of any of the following EXCEPT
embezzlement by the firm's CFO: Although embezzlement is certainly not pleasant for the firm, it is not something that would normally lead to an interruption in the ability of the firm to service its clients.
The method of computing long-term returns that takes into consideration time value of money is
internal rate of return
When market conditions are such that a passively managed portfolio no longer meets its target allocation, the tool most commonly used to rectify the situation is
rebalancing; Periodically, (sometimes quarterly, sometimes semi-annually, and sometimes annually) passive portfolio managers will rebalance the mix of assets in their portfolio to bring them back to the target allocation.
Associated Wealth Managers (AWM) is registered with the SEC as a registered investment adviser. As a consequence, if there have been any material changes, AWM must
send a copy of its brochure, or a summary of the changes, to all clients within 120 days of the end of its fiscal year. Whether the firm is a state or federal covered investment adviser, if there have been material changes, a copy of the IA's brochure, or a summary of the changes, must be sent to all clients no later than 120 days after the close of the IA's fiscal year.
In the investment industry, the term "2&20%" most commonly refers to
the fees charged by hedge fund managers: Hedge funds are known for their higher management fees. A typical example is 2% of the assets under management plus 20% of the profits.
When an investment adviser representative terminates employment with a federal covered investment adviser and then registers with a state-registered investment adviser in the state where the individual maintains a place of business,
the investment adviser representative must give notification of the termination, and the state-registered adviser must give notification of the employment, to the Administrator promptly: If you go to work for a federal covered investment adviser, it becomes your duty to notify the State Securities Administrator that you are working there as well as when you terminate. If you go to work for a state-registered investment adviser who has contact with the State Securities Administrator, that firm will advise the state that you work there.
Under the Securities Act of 1933, all of the following must sign a registration statement for a new issue of nonexempt securities EXCEPT
the managing underwriter of the issuer, The registration statement, which is an issuer document, must be signed by members of the board, as well as by the CEO and the CFO. It is also signed by the lawyers and accountants representing the issuer who express their opinions on the legal and accounting aspects of the proposed new issue.
During a trip to visit grandchildren, one of your clients suffers a massive heart attack and dies, intestate. Directions for handling the account could only come from
the person appointed as administrator of the estate
For those following the Capital Asset Pricing Model (CAPM), the Security Market Line (SML) uses all of the following EXCEPT
the standard deviation of the asset. It uses the risk-free rate, Beta, and expected return of the asset
The gross domestic product (GDP) for the United States is composed of
the sum of all consumer goods, capital goods, and services produced in the United States and net exports to other countries
an IAR with a covered adviser who does not maintain a place of business in a state,
there is no numerical limit on the number of clients he can have and still be exempt from registering in that state.
One of the exemptions from registration under state and federal law applies to investment advisers to private funds. One characteristic of all private funds is that
they are not registered as investment companies
TOD (transfer on death) provides that, upon the death of the account holder, the assets pass to the named beneficiary or beneficiaries without going through probate.
true
Platinum Investment in Growth Group, Inc. (PIGGI) is registered in and has its principal office in State W. PIGGI has near-term plans to open offices in State A and B. In an effort to test the waters, PIGGI mails several hundred flyers to prospects in those 2 states. Under the Uniform Securities Act,
these flyers could not be mailed until PIGGI was registered in States A and B. Any attempt to hold oneself out as offering investment advice as part of a business would require the person to be registered in the state, unless that person qualifies for an exclusion or exemption.We know that PIGGI is not a federal covered investment adviser (and therefore does not need to file its flyers with the SEC) because we are told it is registered in State W—federal covered advisers don't register in any state.
To comply with Section 404(c) of ERISA,
the plan must offer at least 3 different investment choices, such as a stable value option, an income option, and a conservative growth option
durable power of attorney
Survives Disability, but it does not survive death-b/c it's gone once you die.
Credit risk is commonly referred to as
default risk
The standard deviation of returns is the measure of the
dispersion of a security's returns from its average return: The standard deviation calculates the dispersion of a security's return from its own average return or mean.
Two contrasting styles of portfolio management are growth and value. Which of the following pairs best describes the contrast?
Earnings momentum/book value. One of the important metrics to growth managers is the rate at which the company is growing. Earnings momentum is an excellent indicator of that. On the other hand, the primary tool of the value manager is the company's financial statements. Value managers frequently look for companies whose market price is less than their book value. Perhaps you misread "low current ratio" as "low P/E ratio" (which would have been a correct contrast). This is why you have to read each word carefully.
Under the Uniform Securities Act, an investment advisory contract must contain (in writing) all of the following provisions EXCEPT
Investment advisers organized as corporations are under no obligation to inform their clients of changes to shareholders. However, if an investment adviser is a partnership, clients must be notified of any change in the membership of the partnership. Keep in mind the distinction between notification and assignment. Investment partnerships must notify clients of any change in the partnership's membership, no matter how insignificant the partner's position in the firm. However, the death of a minority partner does not constitute an assignment (transfer) of the account, although the information must be communicated to clients. A change in a majority interest in the partnership would be an assignment of the account that requires client consent.
The term "derivative" would NOT apply to which of the following?
REITs are not based on the value of something other than their own assets. Warrants (and rights) derive their value from the underlying security. Futures and forwards are contracts whose value is based on some underlying asset.
Which of the following investors would be exempt from filing Form 144 when selling securities they own?
Rule 144 regulates the sale of control or restricted securities. Securities bought in a registered public offering are not restricted and therefore an employee of the company selling registered shares need not file Form 144. Unregistered shares or securities purchased in a private placement are restricted and Rule 144 would apply.
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
The Form 8-K is used to report significant events that could affect the price of the company's stock. The SEC does not consider a relocation of a subsidiary to be of significant magnitude.
When an analyst takes a stock's actual return minus the risk-free return and divides that remainder by the stock's standard deviation, the result is
The Sharpe ratio for a stock is computed as follows: (actual return minus the risk-free rate) divided by the stock's standard deviation. You might see this expressed as: (r − RF) ÷ sd. This gives us the risk-adjusted return and the higher the Sharpe ratio, the better the investment is performing compared with the risk being taken. In the formula, the risk-free rate used is the 91-day T bill.
One of the responsibilities of the fiduciary handling a qualified retirement plan is providing an investment policy statement. Which one of the following is NOT typically included in that document?
The investment policy statement is generally a written document that sets forth the objectives and constraints on a managed portfolio. Income needs and risk tolerance are included in determining the objectives, and time horizon is a constraint. Investment selection is not stated in any policy; selections are made on the basis of the policy.
The most common form of organizational structure for venture capital investment is the
The most common structure for venture capital is the limited partnership. This is true for virtually all private equity including hedge funds.
Under the Uniform Securities Act, which of the following statements are TRUE regarding private placements?
They are offered to no more than 10 noninsitutional persons in a state in a 12-month period. They may be offered to an unlimited number of institutional investors. Institutional buyers need not be purchasing for investment.
A U.S. dollar-denominated bond issued by a non-American company (or government), sold outside the United States and the issuer's country, but for which the principal and interest are stated and paid in U.S. dollars is best described as
This is the definition of a Eurodollar bond. Yes, it is also a Eurobond, but, because the question specifies U.S. dollars, the more accurate choice is Eurodollar bond. A Yankee bond is U.S. dollar-denominated, but is issued in the United States; Eurodollar bonds are not. Brady bonds are issued only by foreign governments, usually, but not always, U.S. dollar-denominated and are available for purchase in the U.S.
A popular funding technique that involves investing the same amount at regular intervals is known as dollar cost averaging. Participating in this funding approach tends to lessen which risk?
Timing risk, sometimes called market timing risk, is the uncertainty that an investor will be buying at the market top or selling at the market bottom. In other words, at the wrong time. When one dollar cost averages, that risk is lessened because you automatically acquire more shares when the market is down and less when it is high. Is it foolproof? No, but it does take some of the timing risk away.
James Stillman is an investment adviser representative with Rock, Feller, and Standard (RFS), a covered adviser with its principal office in State O. Stillman works out of an office in State P and has 4 retail clients there. In addition, Stillman has 25 retail clients in State D, 6 retail clients in State M, and 1 retail client in State O. Stillman would be required to register as an investment adviser representative in
You must know this: State P. WHY? As an IAR for a federal covered investment adviser, Stillman is required to register only in those states in which he (Stillman) has a place of business. Although Stillman has clients in several states, the question tells us that his place of business is the office in State P. Please note that, as long as an IAR with a covered adviser does not maintain a place of business in a state, there is no numerical limit on the number of clients he can have and still be exempt from registering in that state.
While passing by the water cooler, you hear one of the experienced representatives in your office talking to a client on the phone about money in a DDA. Having never heard the term and being a willing student, after the phone call is completed, you summon up the nerve to ask the definition of those initials. Proud of you for asking, this top producer informs you that they stand for
demand deposit account; In the banking business, a checking account (and sometimes a savings account) is referred to as a demand deposit account (DDA) because the funds are accessible on demand.
Risk-adjusted return is calculated by
dividing the security's return in excess of the risk-free rate by its standard deviation. The return from a security can be adjusted for the risk by dividing the security's return in excess of the risk-free rate by its standard deviation. This is the Sharpe ratio.