Series 66
.An IA is registered in 10 states. Regarding financial requirements, IA must meet those of A. The state in which their principal office is located B. The state with the most stringent financial requirements C. The SEC D. Each state in which they have a place of business
A
.Which one of these factors is NOT relevant in determining if someone is an IA? A. Frequency of Advice B. Specific or general advice C. Receives compensation for advice D. Holds themselves out to the public
A
A diverse portfolio would hold tangible assets to address which risk? A. Inflation B. Market C. Risk adjusted return D. Liquidity
A
An investor who is short 100sh of XYZ and would like to protect against risk would A. Buy a call B. Buy a put C. Sell a call D. Sell a put
A
What do an S corp. and a general partnership have in common? A. The company enjoys not paying tax (something to that effect) B. ease of transfer of ownership C. They both provide limited liability D. ease of formation and continuation
A
Which of these describes a market maker? A. a broker/dealer who stands ready to buy or sell at least the standard unit of a specific stock traded in the over-the-countermarket B. a broker/dealer who stands ready to buy or sell at least the standard unit of a specific stock traded on a listed exchange C. an investment banker who participates in a firmunderwriting D. a subscriber to the NASDAQ system
A
An important measure of a company's liquidity is to determine the company's current assets, less their inventory and divide this by their current liabilities. This is called A, Current ratio B. Quick ratio C. Working Capital D. Capital in excess of par
B
Mary and Joe, age 55, and retired have a small inheritance that pays their living expenses, however they do not have enough for retirement. Which of the following should an agent recommend? A. investment in bonds B. bonds and equity C. equity D. money market
B
Which of the following statements regarding e-mail communications are correct? I. They are sometimes referred to as electronic communications II. Customer complaints received by e-mail are not considered to be inwriting III. Once received and reviewed, they may be discarded IV. They must be retained in the same fashion as any other record A. I and I B. I and IV C. II and III D. III and IV
B
Your client has won the lottery and is considering whether to take a lump sum payment or receive periodic payments. This an example of A. Holding period return B. Time value of money C. Opportunity cost D. Risk adjusted return
B
A characteristic of the S&P Index Fund is: A. It significantly out performs the market. B. It has a high dividend payout rate. C. It has low management. D. It has moderate turnover.
C
Which of these efficient market hypotheses dictates that future performance cannot be based upon historical data? A. weak B. Moderate C. Strong D. Semi-strong
C
Which of these portfolio allocations below would you expect to show the least volatility over the next year? A B C D STOCK 50% 30% 10% 0% BOND 50% 70% 90% 100% High return 35.4% 37.2% 34.3% 32.7% Low return 4.4% 6.5% 7.2% 8.5% Avg. return 15.8% 16.2% 15.5% 15.2% Std. Dev. 11.25 10.75 10.15 10.34
C
Which of the following payout options from a nonqualified annuity would assure the annuitant the largest monthly payment? A. Unit refund B. Straight life with period certain C. Joint with last survivor D. Straight life
D
Which of the following would be most appropriate in an IRA? A. Life Insurance B. Art collection C. Municipal Bond D. Gold coins minted by the U. S. Treasury
D
Which two are most associated with a Treasurybond? I Credit risk II Liquidity risk III I Reinvestment risk IV Interest rate risk A. I and II B. I and IV C. II and III D. III and IV
D
3. The method of computing long-term returns that takes into consideration time value of money is A. internal rate of return B. after-tax return C. real rate of return D. risk-adjusted return
A
A Savings and Loan association, organized in State A and authorized to do business in State B, has an offering of common stock being made in State B. In order for an individual selling the offering to be excluded from the definition of agent in State B, the individual A. would have to be employed by the Savings and Loan B. would have to be employed by a broker/dealer registered in the other state C. would have to be employed by a broker/dealer registered in this state D. could not sell without being an agent
A
A broker/dealer operating on the premises of a bank would have to make certain disclosures in an advertisement for all of the following, EXCEPT A. Was a radio spot of 30 seconds or less B. Was a television spot of 30 seconds or less C. Was published in a general circulation magazine D. Was only sent to existing customers of the bank
A
A client enters an order as follows: Sell stop 100 shares of LTC at 45 limit 45.50. Following the entry of that order, trades occur in the following sequence: 47; 46; 45.12; 44.97; 45.28; 45.97; 46.05. More than likely, the client received A. 45.97 B. 46.05 C. 45.28 D. 44.97
A
A state registered IA is acquired by a federally covered IA and all of the clients' accounts are then transferred to the federally covered IA. According to the Uniform Securities Act, this would be A. Allowed, provided the clients have given written consent B. Allowed, provided the clients have given oral consent C. Prohibited D. Allowed, as long as clients do not object
A
An IA is a trustee of a trust with two or more beneficiaries. According to the Prudent Investor Rule, which of the following istrue? A. the Trustee should take into consideration the beneficiaries and actimpartially. B. the Trustee should NOT take into consideration the beneficiaries and act according tohis investment philosophy as stated in the trust agreement. C. the Trustee should pro rata the assets and manages each according to thebeneficiaries needs D. The trustee should take into consideration the person with the lowest risk tolerance and manage accordingly.
A
An IAR notices, while compiling a financial report for their client, that there may be a significant tax consequence in the future. The IAR should: A. Refer the client to a qualified tax accountant B. Offer the client tax advice to fix the problem C. Present the financial report and say nothing D. Do not offer the financialreport
A
An IAR, preparing a statement of cash flow for her clients would include all of the following items EXCEPT: A. Assets B. Expenses C. Salary D. Taxes
A
An advisor (IAR) is considering purchasing a thinly traded stock for his clients' accounts and his own account as well. He should A. Purchase stock for his clients first. B. Purchase stock for himself first. C. Purchase the stock all at once for everybody and average out the price paid. D. Purchase the stock all at once for his own account and then resell it to his clients at the market price.
A
An agent whose registration took effect November 11, 2008 would find that the firstrenewal would take place A. December 31, 2008 B. November 11, 2009 C. December 31, 2009 D. January 1, 2010
A
An individual employed by a federal covered adviser would be required to become registered as an IAR in the state if A. The only clients receiving the individual's advice are large pension plans organized for employees of municipalities located in the state where that individual maintains an office. B. The only clients receiving the individual's advice are banks located in states where the individual does not maintain a place of business C. The only clients receiving the individual's advice are insurance companies located in states where the individual does not maintain a place of business. D. The only function performed by the individual is preparing the layout of a research report prepared by the firm.
A
An investment adviser representative is assuring clients of steady returns on an investment. Under the NASAA Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives and Federal Covered Advisers, this activity is A. Prohibited because the IAR is guaranteeing a profit B. Prohibited because the customer may still experience loss C. Acceptable if the security being recommended is an investment grade bond D. Acceptable if the client has been made aware of the risks.
A
An investor is looking at the past performance of a security over the past three years. In year one, it returned 8%; year two it returned 15% and year three it returned 10%. This computes to an average rate of return of 11%. This would be properly referred to as A. arithmetic mean B. geometric mean C. internal rate of return D. median return
A
If a federally registered IA has its principal office in State A and has offices in 3 other states and a client of the IAR who is registered in State A moves to a state in which the IAR is not registered then the IAR may A. Continue business as usual since the IA is federally registered B. Continue business with the client because it is less than 5clients C. Not continue business with the client until the IAR is registered in the client's new state D. Not continue business with the client until the IA is registered in the client's new state
A
If a state registered IA has its principal office in State B and three other states, the IA must: A. Meet capital requirements of State B B. Meet capital requirements in State A C. Meet SEC requirements since it is federally registered D. Meet each individual state capitalrequirement
A
In modern portfolio theory, what is an efficient portfolioset? A. efficient frontier B. indifferent frontier C. attainable set D. feasible set
A
Present value is a computation that is frequently used to determine the amount of deposit needed now to meet a future need, such as college education. If an investor uses an expected return of 8%, but the actual return over the period is 10%, the future value will be A. Higher than anticipated B. Lower than anticipated C. The same as anticipated D. Too varying to tell
A
Surrendering a whole life policy is appropriate for all of the following except: A. Cash B. Purchasing a paid up term life policy C. Purchasing a reduced coverage whole life policy D. Purchasing a non-qualified annuity
A
The CEO of XYZ, INC. offers securities of his company to the public and to its employees and receives remunerations for the sale. According to the Uniform Securities Act, the CEO A. must register as an agent of the Issuer B. must register as an agent of a B/D C. must register as an agent of a B/D and Issuer D. Is not required to register
A
The application for registration under the Investment Company Act of 1940 is filed with whom? A. SEC B. FINRA C. MSRB D. NASAA
A
What information do you need to determine the future cash flow from abond? A. Principal, rate and number of payments B. Principal and rate C. Amount of interest payments and current bond value D. Current bond value, rate and maturity date
A
Which of the following is included in Adjusted Gross Income (AGI)? A. Alimony B. Municipal Bond Interest C. Child Support D. 401k contributions
A
Which of the following pairs offers the most diversification? A. U.S. equity securities and foreign equity securities. B. Municipal GO bonds and long-term U.S. Treasurybonds. C. Large-cap stock/blue-chip stock. D. Corporate debentures/convertible bonds.
A
Which of the following retirement plans would have the least tax consequence? A. a non-qualified annuity B. IRA C. 401(k) D. 403(b)
A
A 68 year old woman is seeking preservation of capital with a secondary objective of income. Which of the following would be most appropriate? A. Savings account B. Money Market C. Certificate of Deposit D. Municipal Bond
B
A FINRA member broker/dealer, is registered in 10 states. Regarding financial requirements, the B/D must meet those of A. The state in which the principal office of the member is located B. The SEC C. FINRA D. The state with the most stringent financial requirements
B
A fiduciary of an ERISA plan is preparing an investment policy statement. Included would probably be I. specific security selection II. Methods of performance measurement III. Determination for meeting future cash flow needs IV. The summary plan document A. I, II, and III B. II and III C. II and IV D. III and IV
B
A realizes Monday that they have fallen below Net Capital requirement. They contact administrator Tuesday. When do they have to provide administrator with full financial documents? A. Tuesday B. Wednesday C. Thursday D. Friday
B
According to Efficient Market Hypothesis, information based on company financials andeconomic factors is considered to be: A Weak B Semi-strong C Strong D Exceptional
B
According to the Uniform Security Act, which of the following is not considered a person? A. Corporation B. A prodigy, worth millions, age 16 C. Joint Stock Company D. U.S. Government
B
An IA receives a check from a client made to a 3rd party. According to the U.S.A., to avoid custody the IA must forward the check to the 3rd party within A. 24 hours B. 72 hours C. 5 business days D. 10 business days
B
An IAR of a federal covered investment adviser splits his time between an office in State A and State D. The IAR has retail clients as follows: I. 16 clients in State A II. 12 clients in State B III. 6 clients in State C IV. 4 clients in State D The agent would have to register as an IAR in A. States B and C B. States A and D C. States A and C D. States A, B and C
B
An IAR works for a federally covered IA. The IA's main office is in State A. The IAR travels tosee clients in State B. Under the U.S.A. , which of the following is(are)true? I IAR need not be registered in State B II IAR need not be registered in State A since the IA is federally covered III IAR needs to be registered in State B IV IAR needs to be registered in State A A. I and II B. I and IV C. II and III D. III and IV
B
An Investment Policy Statement, which is not required by law, provided by the Plan Administrator, must include all of the following, except A. Methods for meeting future cashflows B. Identification of individual securities C. Procedures for monitoring performance D. Investment philosophy and objectives
B
An advantage of investing in a mutual fund of foreign stocks is: A. Reduction of risk of currency fluctuation B. The investor does not have to choose the foreign stocks. C. Elimination of market risk through diversification D. Reduction of foreign tax liability.
B
An agent of a B/D sells unregistered common stock to an Insurance Company that has no office in the state. According to the Uniform Securities Act, this would be: A. Prohibited because the security is unregistered B. Allowed because it is considered an exempt transaction C. Allowed because it is an exempt security D. Prohibited because the Insurance Company has no office in the state
B
An investor is looking to invest $200,000. He first researches individual companies. He then researches each individual industry in which these companies are in and notices that some industries are doing better than others. He makes his selection to invest in the individual companies within the best performing industries. This is referred to A. Top down approach B. Bottom up approach C. Due diligence D. Prudent
B
If a client takes out a loan from his whole life policy and does not pay it back, the insurance company can do which of the following: A. Reduce the cash value at the next anniversary. B. Reduce the death benefit when the client dies. C. Increase the premium amortized over the life of the policy. D. Surrender the policy
B
In the course of a bankruptcy, the asset that backed a secured debt is liquidated but it doesn't pay off all of the debt holders for that particular secured debt. What happens to these debt holders: A. They get grouped in with another group of secured debt holders secured by another asset. B. They get grouped in with the general creditors C. They get grouped in with the non-secured debtholders D. They have priority to be paid off when the next asset is liquidated
B
One respect in which an LLC differs from an S corporation is that A. an LLC can be formed with as little as a single investor B. there is no statutory limit on the number of investors in an LLC C. there is more favorable tax treatment afforded to members of an LLC D. not only income, but losses, if generated, pass through to investors in an LLC
B
Sharon Smith is an agent for a broker/dealer registered in all 50 states. Sharon receives an unsolicited order from a bank located in State X, a state in which she has no place of business. Under the Uniform Securities Act, A. Because Sharon has no place of business in State X and the client is an institution, Sharon may accept the order without registering in State X B. Sharon must be registered in State X in order to accept the order C. Because Sharon has no place of business in State X and the order is unsolicited, Sharon may accept the order without registering in State X D. Because the B/D is registered in all 50 states, Sharon must also be registered in all of them
B
The three parts of a family balance sheet are: A. Income, liabilities, net worth B. Assets, liabilities, net worth C. Income, expenses, taxes D. Assets, income, liabilities
B
When current interest rates are at 9%, you would expect a bond with a nominal yield of 8% tobe A. selling at par B. selling at a discount C. selling at a premium D. in danger of default
B
Which of the following are true? I American options may be exercised anytime II American options may be exercised only at expiration III. European options may be exercised anytime IV European options may be exercised only at expiration A. I and III B. I and IV C. II and IV D. II and III
B
. According to the Uniform Securities Act, which of the following clients may an agent borrow from? I Bank II Best Friend III B/D Iv Mortgage Broker A. I II III B. I II IV C. I and III D. I II III IV
C
A company has two outstanding bond issues, both with a coupon rate of 8%. Bond A will mature in 2 years while Bond B will mature in 15 years. If interest rates were to increase to 10%, which of the following statements is correct? A. both bonds will be selling at a premium B. bond B will be selling at a greater premium than Bond A C. bond B will be selling at a greater discount than BondA D. the company will attempt to postpone the maturity of Bond A
C
A customer has inquired about a covered call. Which option would you recommend? A. Buy a call B. Buy a put C. Sell a call D. Sell a put
C
According to the Uniform securities Act, which of the following is considered a "sale"? I Giving a security as a bonus II Making a bona fide loan of stock III Entering into a contract to sell a security A. III only B. I and II only C. I and III only D. I, II and III
C
Among the various forms a business may take, there are the sole proprietorship and the LLC. Two things they have in common are: I. Limited liability II. Flow-through of income or losses III. Ease of formation IV. Unlimited number of owners A. I and II, B. I and IV C. II and III D. III and IV
C
An IA hires a solicitor to recruit clients. According to the Investment Adviser act of '40,what records would the IA be required to keep? A. A receipt of any fee charged, signed by the client B. A written agreement between the client and the solicitor and signed by the client C. A statement that disclosures were given, signed by the client D. No records are required to be kept by the IA
C
An agent of a B/D whose home office is in state A, has a client in State B who has their mail forwarded to State C for the winter. Which of the following istrue? A. Agent must be registered in state A only B. Agent must be registered in State B only C. Agent must be registered in State A and B only D. Agent must be registered in State A. State B and State C
C
An agent, sharing in commissions with another agent, may do so only if I disclose the arrangement and receive consent from his clients II both agents are registered in the same states III both agents are registered through the same or affiliated B/D IV disclose the arrangement and receive consent from the SEC A.I and III B. I and IV C. II and III D. II and IV
C
An investor is long 100sh of XYZ. She fears a near-term correction but overall she remainsbullish. Which of the following may allow her to profit from thissituation? A. Buy a call B. Buy a put C. Sell a call D. Sell a put
C
Both an IA and an IAR register in August. They do not renew their registration until March 30th. Which of the following istrue? A. The IA's registration did not lapse but the IAR's did on Dec 31st. B. The IAR's registration did not lapse but the IA's did on Dec 31st. C. Both registrations expired Dec 31st. D. Neither registration expired.
C
Following the advice of their portfolio managers, a hedge fund executes most of its securities transactions through a registered full-service broker/dealer. In order to compensate for the commissions charged, the B/D allows employees of the hedge fund to use furniture and facility at a discounted rate. Under the soft-dollar provisions of Section28(e) A. As long as the discounted rate reflected the volume of business done by the hedge fund, this would be permitted B. This would be considered allowable soft dollar compensation C. This would not be considered allowable soft dollar compensation D. This would not be considered allowable soft dollar compensation unless the employees were those who directed the transactions to the B/D
C
The CEO of XYZ is the trustee for his company's employee pension fund. He gives instructions to the IAR who manages the plan to loan the company several thousand dollars to pay off a company bad debt. The IAR should: A. Do as the trustee says. B. Do as the trustee says but document his reluctance (the IAR's) to do so in a letter. C. Not do as the trustee says because the IAR is a fiduciary. D. Require that the CEO put up some sort of collateral against theloan.
C
The FDA has changed their rule regarding testing of a new drug from 1 year to two years. This is an example of A. Market Risk B. Legislative Risk C. Regulatory Risk D. Inflation Risk
C
Three years ago, a customer bought 200 shares of ABC for $50.50 per share. Upon her death, she left the shares to her husband when ABC was trading at $68.25. If her husband sells the shares for $69.25, what is his cost basis for tax purposes? A. $19.25 B. $50.50 C. $68.25 D. $69.25
C
Under the Uniform Securities Act, when an IAR acting in the capacityof trustee of a family trust executes a transaction on behalf of the trust, it is A. An exempt transaction B. An exempt security C. A non-exempt transaction D. A violation of the trustee's fiduciary responsibility
C
Which investment is most tax efficient? A. Corporate bond fund B. Growth fund C. Index Fund d. Government Bond Fund
C
Which of the following would NASAA consider to be a substantial prepayment of fees? A. $500 covering the next 6 months B. $600 covering the next calendar quarter C. $600 covering the entire contract year D. $1,000 covering the next month
C
Which of the following would be the best way to file a tax return for a single father with two children? A. Joint tax return B. Married, filing separately C. Head of Household D. Single
C
With life insurance, a "Capital Needs Analysis" maybe helpful for all of the following,except A. Planning for an income stream B. Capital for tax purposes C. Future life insurance needs D. Completion of investment objective
C
. A husband and a wife are 55 and 57 respectively. The husband plans to retire at 62 and the wife at 65 and both are healthy. What is the appropriate time horizon for their retirement portfolio? A. 5 years B. 7 years C. 8 years D. 20+ years
D
. Over the past five years, an investor's portfolio has shown returns of 6%, 4%, 11%, 10%, and 4%. Which of the following statements is correct? I. The mean return is 7% II. The median return is 6% III. The mode is 4% IV. The range is 7% A. I, II and III B. I and II C. III and IV D. I, II, III and IV
D
. With regard to the NASAA Statement of Policy on Dishonest and Unethical Business Practices of Broker/Dealers and Agents, proscribed actions would include I. Accepting an order from a 3rd party after written trading authorization has been received II. Forwarding a written complaint from a customer to the appropriate supervisory person III. Offering to repurchase a security at its original cost if it does not increase in value IV. Borrowing money from a client who was your college roommate A. I and II B. I, II and IV C. II and IV D. III and IV
D
A Grandparent wants to provide $1000 per month in income in perpetuity per grandchild. With a 3% rate of return, what amount does the grandparent need to invest. A. $33,333 B. $40,000 C. $333,333 D. $400,000
D
A beneficiary passes away and their heirs receive the assets held in trust. They are the: A. Corpus B. Trustor C. Grantor D. Remainderman
D
A customer has purchased an index based annuity with a minimum rate of 2%. The annuity has an 80% participation rate. If the index rises 20%, what would the customer receive? A. Gain of 20% B. Loss of 20% C. Gain of 40% D. Gain of 16%
D
A federally covered adviser has offices in 10 Mid-western states. Regarding recordkeeping requirements, the IA must meet those of A. The state in which their principal office is located B. The state with the most stringent financial requirements C. Each state in which they have a place of business D. The SEC
D
A federally covered advisor has its home office in State A. It solicits 5 customers in State B and holds a seminar in state C. Which of the following istrue? A. Must register in State A only B. Must register in State A and State C only C. Must register in State A, State B and State C D. Need not register in any State
D
A portfolio manager who has a value management style would seek stocks that: I. Have high earnings growth II. Have high PE ratios. III. Are undervalued. IV. Have a high dividend payout ratio A. I and IV B. I and III C. II and III D. III and IV
D
A testamentary trust may only be created with which of the following? A. An attorney B. A Certified Accounted C. A trusted family member D. By a decedent's will
D
According to Modern Portfolio Theory, investing in multiple asset classes attempts to reduce which of the following? A. Liquidity risk B. Credit risk C. Interest Rate risk D. Market risk
D
An IA delivers an Investment Adviser Brochure to a client at time of contract. According to the Uniform Security Act, this would be A. prohibited B. Allowed, provided the client is given 48 hours to cancel the contract C. Prohibited because it must be delivered at least 48 hours prior to the contract D. Allowed, provided the client is given 5 days in which to cancel the contract
D
An IA is meeting with a new prospect. Which of the following performance data could be presented? A. The 10 best performing portfolios B. The 10 worst performing portfolios C. An average of the portfolios most similar to the prospectsobjective D. All of your accounts you have managed
D
An agent overhears that XYZ, INC. will report negative earnings this quarter. According to NASAA's Statement of Policy on Ethical Behavior the agent may A. Use the information solely for the their own account B. Use the information solely for their institutional accounts C. Report this to their trading desk immediately D. Do nothing
D
An investment adviser representative prepares a detailed portfolio restructuring for a new client. The client is not impressed with the recommendation and, at least to the IAR, it appears that the rejection is more due to a lack of understanding than a valid dislike. What should be the first step taken by the IAR? A. Prepare a new set of recommendations that will hopefully be received more favorably by the client. B. Go ahead with the recommendation anyway because the client's lack of understanding should not stand in the way of potentially superior results. C. Suggest that if the client will not follow the IAR's recommendations, it would be best to find another firm to deal with. D. Attempt to educate the client as to what this portfolio is trying to accomplish for the client while at the same time recognizing that the final decision is clearly in the hands of the client
D
Brothers Jim and Joe inherited $10,000 and invested in mutual funds. Jim redeemed shares several times over the next several years and placed the money in a savings account leaving a balance of $11,000. Joe did not redeem any shares and has a balance of $50,000. Jim experienced which of the following risks? A. interest rate B. Inflation C. Liquidity D. Opportunity cost
D
If the S&P goes up 5% what is the MOST LIKELY result for XYZ with a Beta of 1.5? A. 3.33% B. 3.5% C. 6.5% D. 7.5%
D
Included in the USA's definition of exempt transaction would be any transaction by any of the following EXCEPT one by A. A sheriff B. A guardian C. A trustee in bankruptcy D. A trustee of an irrevocable trust
D
One of your clients dies. Who can you take instructions from? A. Spouse B. CPA C. Person with durable power of attorney D. Administrator of intestacy
D
The internal rate of return calculation dictates that the interest earned in a portfolio is reinvested at the: A. IRR B. Inflation rate C. US Treasury rate D. Required Return
D
When does an SEC registered corporation NOT have to file an 8k: A. Acquire a major asset. B. Change in top management. C. Change in external CPA/auditing firm D. Relocation of wholly owned subsidiary
D
