S 66 STUDY GUIDE
SHARPE RATIO
(total return - risk free return)/Standard deviation Measures incremental return earned for taking on incremental risk.
A portfolio manager generates a 20% rate of return on a "small cap" portfolio, compared to a 15% rate of return on the benchmark portfolio and a 10% rate of return on the Standard and Poor's 500 index over the same period. The active rate of return on the portfolio is: A. 5% B. 10% C. 15% D. 20%
A. 5% Achieved rate minus benchmark. 20%-15%=5%
Which of the following individuals is defined as an "agent" under the Uniform Securities Act? A. An indvidual who represents an isser in sales of non-exempt securities B. A person who effects securities trades for his own account as a regular course of business C. A person who has no place of business in the state who offers a security to an existing customer who is not a resident of that state D. An individual who represents a broker-dealer in reporting completed trades to customers and answering customer account inquiries.
A. An individual who represents an issuer in sales of non-exempt securities.
A customer who wishes to sell securities will receive the: A. Bid price B. Ask price C. midpoint between the bid and the ask D. price of last reported trade
A. Bid price Bid is highest price buyer will pay
An investor who places the majority of assets in a single stock exposes the portfolio to: A. Business risk B. Liquidity risk C. Inflation risk D. Market risk
A. Business risk Business risk is the risk that a specific issuer performs poorly due to business conditions - and its securities decline in price because of this. If a majority of a portfolio is in one stock, then the portfolio is highly exposed to this risk. As more and more stocks are added, this risk is diversified away.
The index that is composed of companies in developed countries outside of the United State is the: A. EAFE B. ADRs C. S&P 500 D. Russell 2,000
A. EAFE EAFE stands for Europe, Australia, and Far East. It consists of companies of developed countries in these areas - so these are all companies outside of North America.
The difference between a C corporation and an S corporation is: A. Flow-through tax status B. Enterprise life C. Limited liability D. Business intent
A. Flow-through tax status C corporations are taxable while S corporations are not. Thus, S corporations permit income adn loss to flow through directly to the shareholders. Both have an unlimited life; both limit liability for shareholders to amount invested; both are formed for a business purpose. (I think of an S as being flowing like a river)
a 4% coupon is being offered on a 3% basis. If interest rates for similar bonds rise above 3% the basis for this bond will: A. Increase B. Decrease C. Be unaffected D. Be volatile
A. Increase Basis is also YTM (Yield to Maturity)
An investment adviser representative has worked with a client and his spouse for 10 years and has an excellent relationship with the couple. The representative has been notified that the husband is unconscious and is in the hospital. the account has several open orders that have not yet been executed. What can the representative do regarding the disposition of these orders? A. Instructions can be taken from the customer's spouse B. Instructions can be taken from the customer's attorney C. Instructions can be taken from any relative of the customer that has knowledge of the customer's financial dealings D. Instructions regarding these open orders can be accepted from the customer's tax accountant.
A. Instructions can be taken from the customer's spouse
An investor believes that interest rates will be flat or falling into the future; and that prices may deflate. The MOST appropriate investment is: A. Long term U.S. Government Bonds B. Real estate C. Gold D. Large Cap Stocks
A. Long term U.S. Government Bonds fixed income will go up as interest rates fall.
The best income tax filing status for a married couple where one spouse earns substantially all of the income is: A. Married filing jointly B. Married filing separately C. Head of household D. Single filing 2 returns
A. Married filing jointly For married couples, where one spouse earns the majority of the income, the lowest tax liability is "married filing jointly". This occurs because the higher income gets averaged down when it is added to the lower income.
A 20-year, 5% bond id quoted by a dealer on a 6% basis. The bond is callable in 10 years at par. To calculate the dollar price for the bond, the dealer would use the: A. redemption date to find the number of years over which the discount would be earned. B. Call date to find the number of years over which the discount would be earned C. redmpetion date to find the number of years over which the premium would be lost D. Call date to find the number of years ove which the premium would be lost.
A. Redemption date to find the number of years over which the discount would be earned.
A Chinese Wall must be maintained by a broker-dealer between all of the following EXCEPT: A. Sales and Back Office Operations B. Research and Trading C. Investment Banking and Research D. Investment Banking and Sales
A. Sales and Back Office Operations Think SSG!!!
Establishing the structure of a portfolio to meet specific financial goals is called: A. Strategic allocation B. Tactical allocation C. Rebalancing D. Risk adjustment
A. Strategic allocation Strategic portfolio management is the determination of the percentage allocation to be given to each asset class and the investment vehicles within that asset class.
If a corporatio issues a new stock at a price above par value, the excess above par is termed: A. Surplus capital B. Retained earnings C. Earned Surplus D. Adjusted Par Value
A. Surplus capital If a corporation sells stock at a price above par, the par value is shown on the balance sheet as par value, while the excess funds are credited to the corporation's surplus account. Retained earnings and earned surplus are different names for the same account - corporate earnings that are not paid out as dividends are credited annually to retained earnings.
The payments received from a bond can be used to determine a bond's theoretical market price by: A. Taking the present value of the payments and adding them up B. Taking the future value of the payments and adding them up C. Finding the geometric average value of the payments D. Fidning the arithmetic average value of the payments
A. Taking the present value of the payments and adding them up.
An investment of $1,000 is projected to give an annual return of $100 for 5 years, at which point the $1,000 invested will be returned. The comparable market rate of return for 5-year investments is 5%. Based on this info, the Net Present Value of the investment: A. Will be positive B. Will be negative C. Will be zero D. Cannot be determined
A. Will be positive NPV takes projected cash flow and discounts them to today's present value...in this case since it's projected 10% and market rate is 5%. it's NPV is 5%
Under the Uniform Securities Act if it is in the public interest, the Administrator may inspect a broker dealer's books and records: A. at any time B. weekly C. monthly D. quarterly
A. at any time Under the Uniform securities act, if it is in the public interest the Admin may inspect at any time.
Many years ago, a customer opened a Coverdell ESA for his son, who is now age 16, and a savings account for his daughter, who is now age 18. The 18-year old daughter is entering college and does not have enough money in the savings account to pay for tuition. To pay for the tuition bill, the customer: A. can change the beneficiary on the Coverdell ESA from the son to the daughter B. can use funds from the Coverdell ESA with the written approval of the son C. can use funds from the Coverdell ESA with the written approval of the IRS. D. Cannot use the funds in the Coverdell ESA.
A. can change the beneficiary on the Coverdell ESA from the son to the daughter.
Your client of many years is age 65 and has been diagnosed with a short-term terminal illness. he is well off and has 2 adult children, ages 30 and 35. His investment portfolio is overweighted in small dollar low cost stocks. You should talk to the client about: A. gifting the low cost basis stock to the adult children B. selling the low cost basis stock immediately C. rebalancing the portfolio to reduce the overweighting of small dollar stocks D. selling the low cost basis stock and investing the proceeds in Treasury securities
A. gifting the low cost basis stock to the adult children. IRS has a rule that if you gift in anticipation of death in can be added to estate and not have to pay tax on appreciation
An investment strategy where a higher price is paid for a stock based upon expected returns is: A. growth investing B. value investing C. conservative investing D. passive investing
A. growth investing. expected return = expected growth
Under the Uniform Securities Act, copies of order memoranda maintained by investment advisers must contain all of the following information EXCEPT: A. name of market where trade was executed B. person who placed the order C. name of account for which order was entered D. person connected with the IA who recommended the transaction to the client.
A. name of market where trade was executed.
Investment advisers are permitted to accept which of the following from broker dealers in return for directing portfolio trades to that broker dealer? I Asset allocation software provided by the broker dealer II Recommendations of securities made by that broker dealer III Research reports provided by the broker dealer.
ALL OF THEM
An agent of a broker-dealer located in the State of New York, that has its sole office in New York, wishes to sell to a customer in New Jersey. Which statements are TRUE? I The agent must be registered in New Jersey II The agent must be registered in New York III The broker-dealer must be registered in New Jersey IV The broker-dealer must be registered in New York
ALL OF THEM If the agent wishes to sell to a customer in a neighboring state, both the BD and the agent must be registered in that state, as well as in their home state.
A custoemr has $12,000 of capital losses and $4,000 of capital gains in a tax year. On that year's tax return, the investor has a: A. $3,000 capital loss deduction with no loss carryforward B. $3,000 capital loss deduction and a $5,000 loss carryforward C. $8,000 capital loss deduction with no loss carryforward D. $12,000 capital loss deduction
B. $3,000 capital loss deduction and a $5,000 loss carryforward.
A customer has invested in a Direct Participation Program and is a limited partner with a 20% interest. In November of that year, the partnership sold assets and realized a gain. It made a cash distribution to the partners using the proceeds generated from the asset sale in January. How is this reported for tax purposes on the K-1 distributed to the customer/partner? A. 20% of the gain is reported as ordinary income in the year realized B. 20% of the gain is reported as a capital gain in the year realized C. 20% of the gain is reported as ordinary income in the year distributed D. 20% of the gain is reported as a capital gain in the year distributed
B. 20% of the gain is reported as a capital gain in the year realized.
An investment adviser representative (IAR) is also a commissioned rep at a brokerage firm. The IAR has developed an asset allocation portfolio model for the client, who approves of the plan and acknowledges all fees associated with the implementation of the plan. These include a management fee and commissions on securities transactions. The IAR: A. Cannot implement the plan B. Can implement the plan C. Can implement the plan only if no commissions are charged D. Can implement the plan only if no management fee is charged
B. Can implement the plan they disclosed the fees
A non-registered agent of a broker dealer can sell: A. Warrants B. Certificates of Deposit C. Real estate partnership units D. Fixed annuities
B. Certificates of deposit bank product...no registration needed to sell.
Which of the following is the LAST step in opening a new account for a customer? A. Completing the new account form B. Executing the first transaction C. The manager signing new account form D. Completing the order ticket for first order
B. Executing the first transaction
When an agent of an investment adviser prepares a client balance sheet, which of the following is a personal possession? A. Residence B. Furniture C. Checking account D. Investments
B. Furniture A "personal possession" of a customer is an item that is typically kept in their home. These include furniture, artwork, jewelry, clothing, etc.
Which statement is TRUE about principal transactions? A. In a principal transaction, a commission is charged B. In a principal trasnaction, a mark-up or mark-down is charged C. In a principal transaction, both a commission and a mark-up or mark-down are charged D. In a principal transaction, neither a commission, nor a mark-up nor mark-down are charged
B. In a principal transaction, a mark-up or mark-down is charged
Primary market offerings are: A. Exempt transactions B. Issuer transactions C. non-issuer transactions D. Private placement transactions
B. Issuer transactions A trade in the primary market is a new issue being sold to the public for the first time. This is an issuer transaction since the sale proceeds go to the issuer.
An individual who invests in a limited partnership unit has the right to: A. Make management decisions for the partnership B. Receive payouts from the partnership C. Liquidate the partnership investment at will D. Audit the books and records of the partnership.
B. Receive payouts from the partnership. Can inspect books, can't audit them.
Pension funds are prohibited from using which investment strategy? A. Buying securities B. Selling short securities C. Selling covered call contracts D. Buying puts on stock positions
B. Selling short securities Pension funds and all retirement plans cannot trade on margin; only cash account are permitted.
A person who maintains an orderly market in a given security on a stock exchange floor is a(n): A. Floor broker B. specialist/DMM C. insider D. floor governor
B. Specialist/DMM Designated Market Maker
All of the following are "preference" items included in the alternative minimum tax computation EXCEPT: A. Excess intangible drilling costs B. Straight line depreciation C. Excess depletion D. Excess depreciation
B. Straight line depreciation anything in EXCESS
An existing customer of a broker dealer registered in State A is vacationing in State B, which statement is TRUE? A. The broker dealer may only solicit the customer in State B if it has been registered in State B. B. The broker dealer may solicit the customer in State B without registering in State B C. The broker dealer is prohibited from making any communication into a state unless it has a branch office in that state D. The broker dealer must notify the Administrator in State B prior to any solicitation in that State.
B. The broker dealer may solicit the customer in State B without registering in State B. Vacationing doesn't require register
A woman wins a $500,000 prize in the State lottery. She has the choice of taking $50,000 per year for each of the next ten years or can take a lump-sum of $300,000 today. The difference in the amounts is explained by the: A. Inflation rate B. Time value of money C. Actions taken by the Federal Reserve regarding interest rates D. Impact of fiscal policy on economic output
B. Time value of money This person can either take $300,000 today; or can choose to receive $50,000 per year for ten years ($500,000) total. The implicit interest rate that discounts the value of the payments to the lump sum is the internal rate of return. Simply put, the difference in value is accounted for by time value.
An investment adviser is a private fund adviser that is not required to register with the SEC. In order to maintain its exempt adviser status, it can only solicit investors who are: A. sophisticated B. qualified C. accredited D. registered
B. qualified.
Which statement may be made by an agent about a anew securities issue that is being registered by qualification? A. "Because this is the most difficult registration process, you are guaranteed that the issue is safe" B. "The Administrator has approved of the offering once registration is effective" C. "The security is being registered in the state" D. " The issue is selling out fast to knowledgable investors"
C. "The security is being registered in the state"
A customer wants an equity investment with a required rate of return of 7% and wants to receive a yearly dividend payment of $1.25. To meet the customer's requirement, the security must cost: A. $17.00 B. $17.78 C. $17.86 D. $18.00
C. $17.86 If the $1.25 dividend payment is dividend by the required rate of return (7%), this gives a per share price of $1.25/.07 = $17.86.
On December 10th, 2020, a mother gives a gift to her daughter of 1,000 shares of XYX stock. The stock was purchased 11 months earlier at a cost basis per share of $36 per share. The market value at the date of the gift was $50 per share. On January 18th, 2021, the mother dies and bequeaths 1,000 shares of ERF to the daughter. The market value of ERF at the date of death is $30 per share and the shares were purchased 3 months earlier by the mother at $35 per share. On February 11th, 2021, the daughter sells the XYX stock at $55 per share and sells the ERF stock at $40 per share. The tax consequence to the daughter upon selling XYX and ERF is: A. No capital gain or loss B. $19 per share short term cap gain on XYX; $10 per share short term cap gain on ERF C. $19 per share long term cap gain on XYX; $10 per share long term cap gain on ERF D. $5 per share long term cap gain on XYX; $5 per share short term cap gain on ERF.
C. $19 per share long term cap gain on XYX; $10 per share long term cap gain on ERF. Inherited securities assume new cost basis (value at DOD). ALWAYS LONG TERM.
An investment adviser is prohibited from borrowing money from which of the following customers? A. Financial institution B. Broker-Dealer C. Account with at least $100,000,000 under management D. Account of an affiliated company that is in the business of making loans
C. Account with at least $100,000,000 under management Can borrow from customers that are in the business of making loans (banks/broker dealers) Can't borrow from wealthy customers
Which of the following is NOT allowed under the Uniform Securities Act? A. A agent registered with a broker dealer also is a licensed insurance agent at a life insurance company B. An agent registered with a broker dealer is also a licensed real estate agent at a real estate company C. An agent registered with a broker dealer also is licensed as an agent for a mutual fund dealer D. An agent is registered with two affiliated broker dealers who have an office in the same location.
C. An agent registered with a broker dealer also is licensed as an agent for a mutual fund dealer
When borrowing money, the interest rate charged measures the: A. Inflation rate B. Consumption rate C. Cost of money D. Opportunity cost
C. Cost of money The interest rate charged on loans is the COST of money...
Federal securities laws supersede the provisions of the Uniform Securities in all of the following areas EXCEPT: A. Registration requirements applicable to securities offerings B. Registration requirements applicable to investmen advisers C. Investigation and bringing of enforcement actions with respect to unlawful broker dealer conduct. D. broker dealer capital, custody, financial responsibility and recordkeeping requirements
C. Investigation and bringing of enforcement actions with respect to unlawful broke dealer conduct.
A customer who is retired wants to select an invetment that is marketable, and that provides the highest rate of return. The BEST choice would be to recommend: A. Treasury Bills B. Treasury Notes C. Investment Grade Preferred Stock D. Certificatese of Deposit
C. Investment Grade Preferred Stock CDs are non negotiable, they are non marektable, so this doesn't meet client's needs. Preferred stock is marketable, and treasury securities are extremely marketable, so any of these meet requirement. However, investment grade preferred stock issued by a top shelf corporation will provide higher investment return than ultra safe T securities.
Which of the following is a (federal) covered security? A. Treasury bond B. Municipal bond C. Investment company share D. Penny stock
C. Investment company share
The SEC would revoke the registration of a federal covered adviser for all of the following reasons EXCEPT A. Has been convicted of violating the Securities Exchange Act of 1934 five years ago B. Has been convicted of a misdemeanor involving securities nine years ago. C. Is the subject of an adverse ruling in State Supreme Court in a civil lawsuit with a client D. Has been enjoined in a court of law of another state from being in the commodities business
C. Is the subject of an adverse ruling in State Supreme Court in a civil lawsuit with a client. losing a civil lawsuit will not revoke registration.
A private fund adviser: A. Must file form PF with the SEC B. Must file form ADV with the SEC C. Must file both form PF and form ADV with the SEC D. is neither required to file form PF nor form ADV with the SEC
C. Must file both form PF and form ADV with the SEC
Private Fund Advisers: A. Are not required to register with the SEC B. Must register with SEC once AUM reach $100 million C. Must register with SEC once AUM reach $150 million D. Must register with SEC once AUM reach $200 million
C. Must register with SEC once AUM reach $150 million.
For a sale of securities to be exempt under Regulation D under the securities act of 1933, there must be a limit on the: A. Dollar amount of the offering B. Number of states where the security is offered C. Number of non-accredited investors to whom the security is offered D. Number of accredited investors to whom the security is offered
C. Numner of non-accredited investors to whom the security is offered. Limit of 35... NON WEALTHY
The tax basis for an investor in a limited partnership that establishes the maximum loss deduction is: A. Original investment only B. Original investment plus partnership debt assumed. C. Original investment plus partnership debt assumed, plus partnership gains or minus partnership losses. D. Original investment minus partnership debt assumed, minus partnership gains or plus partnership losses.
C. Original investmenet plus partnership debt assumed, plus partnership gains or minus partnership losses.
Hedge fund is: A. management company as defined under the Investment Company Act of 1940 that is only open to accredited investors. B. management company that has an objective of limiting risk by hedging its portfolio positions with derivatives C. Private investment fund for sophisticated, accredited, investors. D. Private investment fund that can only invest in privately held companies.
C. Private investment fund for sophisticated, accredited, investors. PRIVATE/SOPHISTICATED TYPICALLY LIMIT TO 99
A Federal covered investment adviser registered under the Investment Advisers Act of 1940 wants to include an exculpatory clause in the advisory contract. Which statement is TRUE about this? A. The clause is permitted because this is a federal covered adviser B. The clause is permitted because it is beneficial to the client C. The clause is prohibited and unenforceable under Federal and State Law D. The clause is prohibited because it denies the adviser the right to pursue claism against the client.
C. The clause is prohibited and unenforceable under Federal and State law an "exculpatory" clause seeks to limit the adivser's liability for negligence.
A clearing broker dealer that makes markets in most NASDAQ securities has decided that holding its trading securities inventory together with its customer's securities positions would result in a substantial cost savings to the firm. As a result, the firm would be able to reduce the amount that it charges its customers for safekeeping of securities. Which statement is TRUE about this action, if taken? A. This action is permitted if the firm can demonstrate that overall costs to customers would be lowered. B. This action is called rehypothecation and is prohibited C. This ation is called comingling and is prohibited D. This action is permitted without restriction
C. This action is called comingling and is prohibited An unethical practice is commingling of customer securities with those of member firm.
The risk that a portfolio's return will underperform the benchmark return is called the: A. Duration shift B. Standard deviation C. Tracking Error D. Correlation coefficient
C. Tracking error Difference between return and benchmark is tracking error...can be positive or negative
An investor buys a $50,000, 10% corporate bond maturing in 2045 for for $62,500. The bond is callable starting in the year 2020. What is the most appropriate measure for calculating yield? A. Total Return B. Current Yield C. Yield to Call D. Yield to Maturity
C. Yield to Call This investor is paying $62,500 for a 10% bond with a face value of $50,000. Thus, the investor is paying 25% more than par for the bond. Because of the premium, these bonds are currently yielding 8% ($100 annual interest /$1250 purchase price per bond = 8%). This issuer would call these bonds, since the issuer is paying 10%; yet if the issuer were to sell new bonds in the current market, it would only have to pay 8%. This bond is very likely to be called, so using the call date is appropriate.
The principal advantage of a Sole Proprietorship over a Limited Liability Company (LLC) is: A. limited liability for each individual owner B. ease of raising capital C. ease of preparing and filing tax returns D. limited liability for the firm
C. ease of preparing and filing tax returns One person...filing is easy.
Quick ratio (Acid Test)
Current assets - inventory and prepaid expenses/current liabilities
Suits alleging criminal violations of the Uniform Securities Act must be brought within: A. 1 year B. 2 years C. 3 years D. 5 years
D. 5 years CRIMINAL. Longer statute of limitations
Which asset allocation is BEST for a 35-year old single risk tolerant investor looking to achieve the highest returns? A. 25% stocks/25% bonds/25% REITs/25% Money Markets B. 50% Stocks/50% bonds C. 60% Stocks/40% bonds D. 95% Stocks/5% Money Markets
D. 95% Stocks/5% Money Markets
Which of the following are deductible from a taxable estate? A. Funeral and administrative expenses B. Claims against the estate adn mortgages against real property owned by the estate C.State death taxes D. All of the above
D. All of the above.
A 20-year, 6% bond is quoted by a dealer on a 5% basis. The bond is callable in 10 years at par. To calculate the dollar price for the bond, the dealer would use the: A. Redemption date to find the number of years over which the discount would be earned. B. Call date to find the number of years over which the discount would be earned C. Redemption date to find the number of years over which the premium would be lost. D. Call date to find the number of years over which the premium would be lost.
D. Call date to find the number of years over which the premium would be lost. This is a premium bond. To approximate the price for a long term bond, divide the coupon by the basis = 6/5 x $1,000 par = $1,200. The issue is that a premium bond is one that the issuer is likely to call - because the issuer can refund at lower current market rates. To brind a 6% coupon down to 5% yield implies that 1% will be lost each year.
A stock in a customer account has been dropping rapidly in value. The investment adviser has attempted to contact the customer to advise her to sell the security, but the adviser is unable to reach that customer. The investment adviser is prohibited from selling unless: A. Adviser contacts the customer's spouse and gets permission to sell the stock B. Adviser believes that selling the stock is in the customer's best interests C. Customer approves the executed sell order 24 hours later D. Customer had placed an existing sell order 1 year ago.
D. Customer had placed an existing sell order 1 year ago. `
The independent auditors annual report of verification of customer funds held in custody by an investment adviser, as required by the Investment Advisers Act of 1940, is filed with the SEC on: A. Form ADV Part 1 B. Form ADV Part 2 C. Form ADV-W D. Form ADV-E
D. Form ADV-E Under the rule covering advisers that take custody of funds, such advisers must submit to annual surprise audit. After completing the exam, auditor must sign and file from ADV-E as in EXAM within 120 days.
What is the benefit of investing in precious metals? A. Exchange trading B. Aesthetic value C. Price stability D. Inflation protection
D. Inflation protection think about recent crash...how many precious metal purchase you did.
What rate would NOT be used to find the presnt value of TIPS? A. Real rate of return at the time the bond was issued B. Nominal rate of the bond C. Coupon rate of the bond D. Internal rate of return of the bond's cash flows
D. Internal rate of return of the bond's cash flows.
All of the following are defined as "institutional buyers" under the Uniform Securities Act EXCEPT: A. Banks B. Insurance companies C. Investment Companies D. Investment Advisers
D. Investment Advisers BIG GUYS
A security is exempt from registration in a State if it is sold in a(n): A. Issuer transaction B. Non-issuer transaction C. Isolated issuer transaction D. Isolated non-issuer transaction
D. Isolated non-issuer transaction Isolate...meaning not often...and non issuer meaning private kinda
When comparing a "buy and hold" strategy to annual rebalancing of a portfolio consisting of 50% equities and 50% bonds, all of the following statements are true EXCEPT: A. there are negative tax implications associated with annual rebalancing that do not exist with a buy and hold strategy Incorrect answer B. You chose this answer. B. the asset allocation percentages are likely to shift over time with a buy and hold strategy but will remain relatively constant over time if the portfolio is rebalanced annually C. transaction costs associated with a buy and hold strategy are lower than for a portfolio that is rebalanced annually D. market risk of the portfolio over its life is more consistent with a buy and hold strategy than with a portfolio that is rebalanced annual
D. Market risk of the portfolio over its life is more consistent with a buy and hold strategy than with a portfolio that is rebalanced annually
In a corporate liquidation, the priority of claim to corporate assets is: A. Unpaid wages and taxes, debenture holders, mortgage bond holders, preferred stock holders. B. Unpaid wages and taxes, preferred stock holders, debenture holders, mortgage bondholders. C. Mortgage bond holders, debenture holders, unpaid wages and taxes, preferred stock holders D. Mortgage bond holders, unpaid wages and taxes, debenture holders, preferred stock holders.
D. Mortgage bond holders, unpaid wages and taxes, debenture holders, preferred stock holders
All of the following would be found in the footnotes to a company's financial statements EXCEPT: A. Inventory valuation method B. Potential legal liabilities C. Schedule of maturing debt D. Operations overview
D. Operations overview footnotes of financial statement only contain anything about $$$$
Which transaction is NOT permitted in a cash account? A. Purchase of a call B. Sale of a covered call C. Purchase of a put D. Sale of a nake put
D. Sale of a naked put. Sale of naked call/put can only be done in margin account
The code of ethics required to be written and adhered to by each investment advist must cover all of the following topics EXCEPT: A. Insider trading B. Front trading C. Trading ahead of research D. Short selling
D. Short selling Short selling is a legal practice and is not unethical
An adviser to a mutual fudn foresees an economic slowdown and believes that sit down chain restaurants are going to underperform. The adviser sells those stocks out of the fund's portfolio and holds the proceeds as cash, pending reinvestment. This is an example of A. Strategic asset allocation B. Rebalancing C. Diversification D. Tactical asset allocation
D. Tactical asset allocation
Which statement is NOT true about enforcement of the Investment Advisers Act of 1940? A. The SEC has the power to collect evidence, subpoena witnesses and to take oaths and affirmations B. The SEC can issue orders denying or revoking registration of an investment adviser C. Orders of the SEC may be appealed by filing a motion in the U.S. Court of Appeals D. The State Court in which the defendant is located has primary jurisdiction in both criminal and civil suits brought under the Act
D. The state court in which the defendant is located has primary jurisdiction in both criminal and civil suits brought under the act.
Under the uniform securites act, the administrator does NOT have jursidiction over offers of advisory services made to: A. Residents of that state by a non resident investment advsier B. Residents of that state by a resident investment adviser C. non residents of that state by a resident investment adviser D. non residents of that state by a non resident investment adviser
D. non residents of that state by a non resident investment adviser The administrator has jurisdition over any IA that has office IN THAT STATE. Does NOT have jurisdiction if adviser is not in that state.
Internal Revenue Code Section 1031: I Applies to real estate held for investment II Applies to real estate held for either personal use or for investment III Defers cpaital gains due on appreciated property if the proceeds are invested in another property IV permits a capital loss to be deducted on a depreciated property if the proceeds are invested in anothe property.
I and III
Growth companies typically have: I low dividend payout ratios II high dividend payout ratios III low P/E ratios IV high P/E ratios
I and IV
Which statements are TRUE about ETNs? I ETNs are a structured product II ETNs are an investment company product III ETNs are suitable for investors seeking income IV ETNs are suitable for investors seeking long-term capital gains
I and IV
Which statements are TRUE about variable annuity contracts? I Prior to annuitization, a separate account investment is most similar to a mutual fund investment II Prior to annuitization, a separate account investment is most similar to pension payments III After annuitization, a separate account investment is most similar to a mutual fund investment IV After annuitization, a separate account investment is most similar to pension payments
I and IV
Which statements are TRUE when comparing index options to index futures? I Index options are defined as security II Index options are not defined as a security III Index futures are defined as a security IV Index futures are not defined as a security
I and IV
Which statements are TRUE about Regulation D? I The maximum permitted offering under Rule 504 is $5,000,000 II The minimum permitted offering under Rule 504 is $5,000,000 III The maximum permitted offering under Rule 506 is $5,000,000 IV The minimum permitted offering under Rule 506 is $5,000,000
I and IV 50(4) handles UP TO $5,000,000 50(6) handles MINIMUM of $5,000,000
Under the Uniform Securities Act, registration as an investment adviser is required for a(n): I broker-dealer who renders advice on securities for a fee II broker-dealer who makes recommendations of securities to customers III investment newsletter of a general circulation IV financial planner who creates an investment plan for a fee.
I and IV ONLY COMPENSATION YO
Arrange the following in order of the market capitalization from largest to smallest of companies included in the index: I Standard and Poor's 500 Index II Standard and Poor's Mid Cap 400 Index III Russell 2000 Index
I, II, III
Investment Advisers that have separate broker dealer entities are permitted to accept which of the following compensation items? I Fixed annual fees II Fees based on a percentage of assets under management III Commissions based on trades IV Fees based on the capital appreciation of the securities in the portfolio.
I, II, III
Under the Investment Advisers Act of 1940, which of the following statements are TRUE regarding advisory contracts? I Advisory fees cannot be based upon capital gains in the account. II Advisory fees for client's with at least $1,000,000 of assets under management; or $2,100,00 net worth; can have a fee that is partly based upon capital gains III Advisory contracts must be field with SEC if they alllow for $1,200 or more of prepaid advisory fees, 6 or more months in advance of services rendered IV Advisory contracts cannot contain provisions that violate Federal Law.
I, II, and IV III must be in the balance sheet
Which of the following statements are TRUE regarding registration requirements under the Uniform Securities Act? I Minimum net capital can be required for broker dealers II Minimum net capital can be required for agents III Surety bond coverage can be required for boker dealers IV Surety bond coverage can be required for agents.
I, III, IV
Under the NASAA Statement of Policy on unethical practices, which of the following investment advisers would be able to loan monies where securities are collateral for the loan? I An investment adviser that has a registered broker-dealer that lends money to a customer through the broker-dealer affiliate II An investment adviser that is a subsidiary of a parent bank that lends money to a customer through the bank affiliate III An investment adviser that is a partnership lends money to a customer under the provisions of Regulation T of the Federal Reserve Board IV An investment adviser that is a corporation lends money to its officers
I,II, and IV Investment adviser is not permitted to lend money to a customer, unless the investment adviser does so through an affiliated "regulated lender." An affiliated broker dealer is regulated under Reg T and can lend money, as can a bank. Adviser can lend monies to officers/employees.
Which statement is TRUE? I Traditional 401(k) plans require mandatory annual employer matching contributions II Safe harbor 401(k) plans require mandatory annual employer matching contributions III Traditional 401(k) plans require 100% vesting of employer paid benefits. IV Safe harbor 401(k) plans require 100% vesting of employer paid benefits
II and IV
Which of the following securities is(are) NOT considered to have an issuer? I Collateral trust certificate II Equipment trust certificates III Fractional interests in oil and gas programs IV Certificates of interest in a gravel mining program
III and IV ONLY
Total return
Income + Cap Gain/Cost of security
A person who renders advice on fixed annuities for a fee; and who then sells the annuities, charging a commission, must register as a(n): I Investment adviser in that state II Broker dealer in that state III agent in that state
NONE OF THE ABOVE
Internal Rate of Return
computation of the real investment yield considering time value of money; calculated by finding the implicit interest rate tha tdiscounts that program's projected annual cash flows to present a value of "0"
