Simulated Exam - Series 65 Practice Exam 2
C) Report the problem immediately to his supervisor.
An agent receives a notice of execution for 500 shares on a customer's order for only 400 shares. Which of the following actions should he take? A) Promptly sell the 100-share overage at the best available price. B) Promptly report the execution of 500 shares to the customer and waive commissions on the overage. C) Report the problem immediately to his supervisor. D) Break the trade within five minutes, enter a corrected order, and place the transaction on the error log.
D) a liquidity constraint.
An individual investor specifies to her investment adviser representative that her portfolio must produce a minimum amount of cash each year. This would be considered A) a tax constraint. B) a legal and regulatory constraint. C) a unique circumstance. D) a liquidity constraint.
C) I, II, III, and IV
An interest in which of the following is a security under the Uniform Securities Act? Evidence of indebtedness Certificate of deposit for a security Oil and gas drilling program Cattle feeding program A) II and III B) III only C) I, II, III, and IV D) I only
B) a letter of intent.
An investor who initially makes a small investment in a mutual fund may have the advantage of a lower sales charge on investments made over a 13-month period through A) an investment letter. B) a letter of intent. C) a redemption letter. D) a syndicate letter.
B) I, II and IV
Broker-dealers operating on the premises of a financial institution must disclose, orally and in writing, that the securities products purchased or sold in a transaction with the broker-dealer I. are not insured by the Federal Deposit Insurance Corporation (FDIC). II. are not deposits or other obligations of the financial institution and are not guaranteed by the financial institution. III. are insured by the Securities Investor Protection Corporation (SIPC). IV. are subject to investment risks, including possible loss of the principal invested. A) I, II and III B) I, II and IV C) III and IV D) II and IV
B) Growth
Buying stocks with high P/E ratios normally reflects which of the following investment styles? A) Turnaround B) Growth C) Special situations D) Value
B) accounts payable.
Current liabilities on a company's balance sheet would include A) accounts receivable. B) accounts payable. C) prepaid rent. D) mortgage payable.
C) higher unemployment.
During an economic downturn, one would expect to see A) bond prices fall. B) manufacturers' inventories to decline. C) higher unemployment. D) a rising CPI.
B) rate the stock as a sell.
During the analysis of XYZ stock, a technical analyst concludes that XYZ's support level has been broken. Being a technician, the most appropriate decision should be to A) purchase additional shares of the stock. B) rate the stock as a sell. C) rate the stock as a hold. D) rate the stock as a buy.
B) Decrease
If a company successfully gets the owners of its long-term bond issue paying 7% annual interest to exchange them on a dollar-for-dollar basis with the company's preferred stock paying a 7% annual dividend, what is the effect on EPS? A) Not enough information B) Decrease C) Increase D) No effect
D) 40%
If a company with 10 million shares outstanding with total earnings of $50 million pays a $2 dividend, the dividend payout ratio is A) 25% B) 20% C) 4% D) 40%
B) the present value would be lower
If the required rate of return is higher than anticipated in a present value calculation, the effect would be that A) the present value would be higher B) the present value would be lower C) the future value would be higher D) the yield to maturity would increase
A) the record date.
One of the rights of being a common stockholder is the ability to vote on important corporate matters, such as the election of members to the board of directors. The date that determines which shareholders are eligible to vote is A) the record date. B) the ex-dividend date. C) the election date. D) the last day of the company's fiscal year.
C) lead.
Someone who wishes to invest in precious metals would consider any of the following except A) platinum. B) gold. C) lead. D) silver.
D) Warrants
The term derivative would apply to which of the following? A) REITs B) UITs C) DPPs D) Warrants
D) 12%
Twelve years ago, an investor placed $2,500 into an account. The account is now worth $10,000. Using the Rule of 72, you can determine that the approximate annual return was A) 36% B) 400% C) 6% D) 12%
B) failing to state nonmaterial facts
Under the antifraud provisions of the Uniform Securities Act, agents are prohibited from all of these except A) engaging in any practice that the Administrator defines by rule as unethical B) failing to state nonmaterial facts C) employing any device, scheme, or artifice to defraud D) engaging in any fraudulent or deceitful practice in the normal course of business
B) Weak
Which form of the efficient market hypothesis (EMH) suggests that fundamental analysis and insider information may produce above-market returns? A) Semi-weak B) Weak C) Strong D) Semi-strong
C) I, II, and III
Which of the following are considered associated persons of a broker-dealer under the Securities Exchange Act of 1934? Any employee of a broker-dealer, except for clerical or ministerial employees Any officer, partner, or manager associated with the broker-dealer Any employee, other than a clerical or ministerial employee, who is supervised by, supervises, or is under common supervision of the broker-dealer A) II and III B) I and II C) I, II, and III D) I and III
C) I and III
Which of the following statements regarding ADRs are true? They are issued by large domestic commercial banks. They are issued by foreign banks. They facilitate U.S. trading in foreign securities. They facilitate a foreign investor who wants to trade U.S. securities. A) I and IV B) II and III C) I and III D) II and IV
C) Warrants are often issued with other securities to make the offering more attractive.
Which of the following statements regarding warrants is true? A) Warrants are safer than corporate bonds. B) Warrants' terms are generally shorter than rights' terms. C) Warrants are often issued with other securities to make the offering more attractive. D) Warrants give the holder a perpetual interest in the issuer's stock.
C) Child
Who is obligated for the payment of taxes in an UTMA account? A) Donor B) Custodian C) Child D) Parent
C) monthly payments will continue until death.
A 68-year-old individual, who purchased a single premium immediate fixed annuity, elected monthly payments for life with a 10-year certain settlement option. If the individual lives to the age of 80, A) monthly payments will continue to the beneficiary(s) for 10 years after the annuitant's death. B) monthly payments will cease at age 78. C) monthly payments will continue until death. D) monthly payments will remain fixed until age 78 and then reduce until death.
C) unsuitable primarily because of the customer's age, objectives, and risk tolerance
A 78-year-old retiree has a $100,000 CD maturing and is dissatisfied with current yields on CDs. Aside from Social Security and a monthly pension, the $100,000 is his total liquid net worth. The agent recommends investing the funds in a single premium immediate variable annuity and allocating funds to the separate account as follows: Medical Technology − $10,000 High Yield Corporate − $40,000 Growth & Income − $50,000 The agent's recommendation is A) unsuitable primarily because of the customer's probable liquidity needs B) suitable, provided the customer agrees with the recommendation C) unsuitable primarily because of the customer's age, objectives, and risk tolerance D) suitable because it appears probable to increase the value of his holdings, as well as to generate increased income
A) the annualized return of a bond if it is held to maturity.
A bond's yield to maturity is A) the annualized return of a bond if it is held to maturity. B) set at issuance and printed on the face of the bond. C) determined by dividing the coupon rate by the bond's current market price. D) the annualized return of a bond if it is held to call date.
B) The agent should explain the risks of investing, and if the client still insists, place the order and mark it unsolicited.
A client approaches an agent about investing in a risky security and insists on doing so, even when told by the agent that the security is not suitable for that client. What should the agent do? A) The agent should contact a supervisor and accept the order only with the supervisor's approval. B) The agent should explain the risks of investing, and if the client still insists, place the order and mark it unsolicited. C) The agent should refuse the transaction because it is unsuitable for the client. D) The agent should suggest that the client engage the services of another broker-dealer.
B) pays past and current preferred dividends before paying dividends on common stock.
A company that has issued cumulative preferred stock A) forces conversion of the preferred that is trading at a discount to par, thereby eliminating the need to pay past-due dividends. B) pays past and current preferred dividends before paying dividends on common stock. C) pays the current dividends on the preferred, but not the past dividends on the preferred, before paying a dividend on the common. D) pays the preferred dividend before paying the coupons due on its outstanding bonds.
C) urge the customer to reconsider his investment strategy
A customer within 1 year of retirement informs his agent that he wants to use the equity in his house to make enough money within the year to fully fund his retirement. According to the Uniform Securities Act, the agent should A) construct a growth-oriented portfolio B) invest in an ultraconservative portfolio of municipal bonds C) urge the customer to reconsider his investment strategy D) invest the money in high-tech securities because of their unlimited potential
C) Current liabilities
A financial analyst computing the current ratio of a company whose stock trades on the Nasdaq Stock Market would use which of the following components? A) Rent B) Accounts receivable C) Current liabilities D) Operating income
B) a universal life insurance policy.
A life insurance policy that allows the policyholder to "overfund" the premium payments is called A) a fixed premium variable life insurance policy. B) a universal life insurance policy. C) a scheduled premium variable life insurance policy. D) a decreasing term life insurance policy.
C) The time or price at which to enter an order
A nonqualified plan designed to provide additional retirement benefits limited to a select group of management or highly-compensated employees is called A) a defined benefit plan. B) a defined contribution plan. C) a SERP. D) a payroll deduction plan.
A) devoting a portion of the portfolio to securities with a negative correlation
A portfolio manager with a growth style would probably diversify by A) devoting a portion of the portfolio to securities with a negative correlation B) placing a portion of the portfolio into high-yield bonds C) concentrating in stocks in one or two industries D) attempting to build a portfolio with a very high correlation
B) Sell bonds with a short duration and buy those with a longer duration
Adam has a portfolio of bonds worth approximately $125,000. He is concerned that interest rates will increase in the near term. Which of the following would be the least desirable strategy for Adam? A) Sell long-term bonds and buy short-term bonds B) Sell bonds with a short duration and buy those with a longer duration C) Sell bonds with lower coupons and buy those with higher coupons D) Sell Treasury bonds and buy Treasury bills
D) the contract's term may not exceed one year.
All of the following statements regarding investment advisory contracts under NASAA's Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers are true except A) the contract must not permit assignment without the client's consent. B) the contract must be renewed in writing. C) the contract must detail any prepaid fees to be refunded to the client upon termination. D) the contract's term may not exceed one year.
C) committed the unethical business practice of guaranteeing against loss.
An investment adviser representative (IAR) has uncovered an unusual investment opportunity that she believes is perfect for one of her clients. When presenting the recommendation to the client, it becomes clear that the client is concerned about the potential of loss. To alleviate that concern, the IAR tells the client that she agrees to repurchase the security from the client anytime within the next 60 days at the original purchase price. In so doing, the IAR has A) committed the unethical business practice of recommending a wash sale. B) acted ethically because she has not guaranteed a profit to the client. C) committed the unethical business practice of guaranteeing against loss. D) acted ethically because her actions are in the client's best interest, not her own.
D) diversification
An investor who is in search of greater return has a portfolio overconcentrated in speculative OTC Markets Group and OTC Link stocks. This investor's risk is best reduced through A) hedging with broad-based put options B) arbitrage C) reducing his time horizon D) diversification
D) increasing consumer demand for goods and services, increasing industrial production, and rising stock markets and property values.
Expansions in the business cycle are characterized by A) an increase in want ads in newspapers and a decrease in nonfarm jobs. B) increasing college enrollments and enlistment in military service. C) higher consumer debt and rising inventories. D) increasing consumer demand for goods and services, increasing industrial production, and rising stock markets and property values.
C) information gathering.
In general, the first step an investment adviser should take with a new client is A) monitoring the portfolio. B) explaining the risks of investing. C) information gathering. D) making suitable recommendations.
D) paper losses
In order to compute a client's realized holding period return, it is not necessary to know A) value at the end of the holding period B) income received during the holding period C) the original investment D) paper losses
D) does not approve or disapprove of the issue.
In reviewing prospectuses and registration statements, the SEC A) passes on the merits of a particular security covered by a registration statement. B) guarantees the adequacy of the disclosures made in a prospectus. C) certifies the accuracy of the disclosures made in a prospectus. D) does not approve or disapprove of the issue.
B) A client is unaware that he is under secret investigation by the Department of Homeland Security. Without consulting the client, an adviser turns files over to investigators under a court order.
In which of the following situations has the investment adviser acted properly in disclosing confidential information about clients under NASAA's Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers? A) Without a client's permission, the adviser identifies the client in an interview for an article to be published in a trade magazine; the article contains no information about the client's account. B) A client is unaware that he is under secret investigation by the Department of Homeland Security. Without consulting the client, an adviser turns files over to investigators under a court order. C) A client who is running for public office is slandered by false reports regarding finances. When a reporter calls the client's adviser, he corrects misconceptions regarding the client's financial affairs without consulting the client. D) A prospective client asks for 3 current clients as references, which the adviser provides without consulting those clients because he knows they are pleased with his performance.
C) a corporate bond.
Investors looking to minimize the effects of taxation on their investments would probably receive the least benefit from A) an apartment building. B) an S&P 500 Index fund. C) a corporate bond. D) a growth stock.
A) tax preference items.
Investors who are subject to the alternative minimum tax (AMT) will lose the tax benefits normally associated with A) tax preference items. B) capital losses. C) gains associated with variable annuity portfolios. D) losses on options positions.
A) Bonds
Issuance of which of the following would most likely increase the leverage in a company's capital structure? A) Bonds B) Preferred stock C) Common stock D) Warrants
A) a fee to cover distribution expenses.
It would be most accurate to refer to a 12b-1 charge as A) a fee to cover distribution expenses. B) a front-end load. C) a fee not found in no-load funds. D) a deferred sales charge.
A) Value
Janice is investing in stocks that are temporarily neglected by the market and often have high-dividend yields. Which of the following investment styles might she be following? A) Value B) Contrarian C) Momentum D) Growth
A) He is subject to the antifraud provisions of the act.
Jonathon is employed by Frederick's Investment Advisory Service strictly to telemarket for prospective new clients. Which of the following is true under the Uniform Securities Act? A) He is subject to the antifraud provisions of the act. B) He is only subject to the antifraud provisions of the act if the prospects actually utilize the firm's services. C) He is not subject to the antifraud provisions of the act. D) He is only subject to the antifraud provisions of the act if his compensation continuously increases.
C) cash.
Looking at the balance sheet, a corporation builds its capital structure with all of the following except A) retained earnings. B) long-term debt. C) cash. D) capital stock.
C) take a short position in wheat futures.
News reports indicate that the wheat crop scheduled to be harvested in three months will be much larger than normal. To hedge, a wheat farmer would most likely A) take a long position in wheat futures. B) grow corn instead. C) take a short position in wheat futures. D) sell wheat stock short.
B) Large-cap consumer goods company
Of the following stocks, which would be the most suitable for a conservative, risk-averse investor? A) Large-cap cyclical company late in the economic cycle B) Large-cap consumer goods company C) Mid-cap software company D) Small-cap medical technology company
C) Buy stop
One of your clients currently holds a short position in DEF common stock. Which of the following types of orders is designed to offer the client protection against loss? A) Sell limit B) Buy limit C) Buy stop D) Sell stop
A) commodity returns have a low or negative correlation to the other assets in her portfolio.
One of your clients is considering allocating about 10% of her portfolio to commodities. Her current portfolio is a mix of stocks, bonds, and broad market index ETFs. Relative to her existing portfolio, you would explain to her that the primary benefit of the commodity investment is most likely A) commodity returns have a low or negative correlation to the other assets in her portfolio. B) an increase in the reliability of income generated in the portfolio. C) lower trading costs. D) increased short-term performance.
C) Unsystematic risk
One of your firm's portfolio managers is discussing risk that can be reduced during the portfolio construction process. Which of the following options might she be referring to? A) Market risk B) Credit risk C) Unsystematic risk D) Systematic risk
A) insurance companies.
Out-of-state investment advisers with no office in this state are not required to be registered if only advising A) insurance companies. B) on stocks listed on the NYSE. C) on growth issues. D) on preferred stock.
A) I, III, and IV
Sam Jones has been a successful businessman and is concerned that his youngest daughter will not be able to live within her means. To protect this from happening, Jones places a certain sum of money into a trust for the benefit of the daughter. Because Jones knows he won't live forever, he arranges for the Fidelity Bank and Trust Company to have control over the assets. In this case, Sam Jones is the grantor. Sam Jones is the trustee. Fidelity Bank and Trust Company is the trustee. Sam Jones's daughter is the beneficiary. A) I, III, and IV B) II, III, and IV C) I and III D) II and III
A) I, II, III, and IV
The Federal Reserve Board foresees the probability of an overheated economy and the resumption of double-digit inflation. Therefore, the FRB takes actions to slow down the economy, including increasing the discount rate. Which of the following are likely effects of these moves? An increase in the prime rate An increase in bond yields and an accompanying decrease in bond prices A slowdown in corporate growth A decrease in corporate earnings A) I, II, III, and IV B) I and II C) I, III, and IV D) III and IV
D) the consent to service of process.
The agreement that the Administrator can receive subpoenas on behalf of a registered agent, broker-dealer, or investment adviser involved in any securities sale that violates the Uniform Securities Act is A) the agreement to actionable offenses. B) the right of rescission. C) the right of retribution. D) the consent to service of process.
A) I and IV
The common stock of the YXZ Pharmaceutical Corporation, listed on the NYSE, is likely to be subject to business risk credit risk liquidity risk regulatory risk A) I and IV B) I and II C) II and III D) III and IV
D) The median equals $31. Explanation
The following set of data represents a sample from a normally distributed population of prices of a stock traded on the Nasdaq Stock Market over a one-month period: $28, $36, $32, $30, $34, $32. Which of the following statements about this sample is least accurate? A) The mean equals $32. B) The mode equals $32. C) The range equals $8. D) The median equals $31. Explanation
B) it represents ownership in a corporation.
The primary defining characteristic of an equity security is A) voting rights. B) it represents ownership in a corporation. C) the ability to keep pace with inflation. D) it pays dividends, usually quarterly.
C) the percentage of the portfolio invested in various asset classes remains constant
The purpose of portfolio rebalancing is used to make sure that A) the total value of the portfolio does not fall below a certain amount B) the portfolio responds to major swings in the business cycle C) the percentage of the portfolio invested in various asset classes remains constant D) the dollar amounts invested in various asset classes remain constant
B) legislative risk
The uncertainty resulting from the possibility that the value of an investment will be affected by a change in the law is known as A) market risk B) legislative risk C) business risk D) credit risk
C) probate is avoided.
There are numerous benefits to opening an account at a brokerage firm with a transfer on death (TOD) designation. One of those is A) estate taxes are reduced. B) the owner of the account may change beneficiaries with the permission of the court. C) probate is avoided. D) simplification of the transfer of assets held at multiple brokerage firms.
D) I and IV
To be in compliance with the Securities Act of 1933, the sale of which of the following securities would require delivery of a prospectus? Primary offering of a closed-end investment company registered under the Investment Company Act of 1940 Primary offering of 5-year U.S. Treasury notes sold to an individual investor Private placement sold under the provisions of Regulation D Sale of shares of an open-end investment company whose first public offering was 23 years ago A) III and IV B) I and II C) II and III D) I and IV
C) may be considered unreasonable if it is not in line with fees charged by other advisers for similar services.
Under NASAA's Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers, an investment adviser's fee A) must reflect the amount of time the adviser spends managing the client's account. B) is not subject to regulatory oversight by the Administrator if the client is considered financially sophisticated. C) may be considered unreasonable if it is not in line with fees charged by other advisers for similar services. D) may not be based on a percentage of the client's assets under management.
D) Custodial services provided by the broker-dealer
Under Section 28(e) of the Securities Exchange Act of 1934, which of the following is allowable soft-dollar compensation from a broker-dealer to an investment adviser under the safe harbor provisions? A) Vacations B) Office rental payments C) Cell phones to rapidly communicate with clients D) Custodial services provided by the broker-dealer
A) II only
Under the Investment Advisers Act of 1940, if an investment adviser's advertising describes an investment system, the description must include which of these? The length of time the system has been used The difficulties and limitations of using the system The performance history of the system A) II only B) I and III C) II and III D) I, II, and III
A) I and II
Under the Investment Company Act of 1940, the reporting requirements investment companies must comply with include which of these? Filing a report with the SEC annually, or more frequently if required Sending semiannual reports to shareholders Notifying shareholders of changes in the portfolio as those changes occur A) I and II B) I and III C) II and III D) I, II, and III
C) they cannot allow for prepaid advisory fees.
Under the USA, all of the following statements are true regarding investment advisory contracts except A) they must be in writing. B) they cannot be assigned without customer approval. C) they cannot allow for prepaid advisory fees. D) they can allow fees to be performance related only under certain limited circumstances.
D) if a broker-dealer's registration is revoked by a state, it has no effect on the agent's registration.
Under the USA, all the following statements regarding the registration of agents are true except A) a nonresident agent can solicit business in another state only if the agent and the broker-dealer are registered in that state. B) if an agent resigns and affiliates with another broker-dealer, both firms and the agent must notify the Administrator. C) an agent can only sell securities that have been registered in a state or that are exempt from registration. D) if a broker-dealer's registration is revoked by a state, it has no effect on the agent's registration.
B) the security was sold in violation of the USA
Under the Uniform Securities Act, a client who purchased securities from a broker-dealer may request that the trade be rescinded if A) the security is nonexempt and subject to the USA. B) the security was sold in violation of the USA. C) the broker-dealer charged a commission and is also registered as an investment adviser. D) the trade can be reversed prior to settlement date.
A) I, II, III, and IV
Under the Uniform Securities Act, any partner, officer, or director of a registered investment adviser is an investment adviser representative if a function of the position involves which of these? Offering advice concerning securities Managing client accounts or portfolios Determining securities recommendations for representatives to disseminate Supervising personnel engaged in advisory activities but not directly dealing with the public A) I, II, III, and IV B) I only C) I, II, and III D) I and II
D) I, II, III, and IV
Under the Uniform Securities Act, it is required to file an application with the Administrator to become a registered broker-dealer in the state. Which of these are among the disclosures that must be made on that application? The form of business organization to be used by the firm Any felonies or certain misdemeanors on the records of partners or officers Business history of the principals of the firm Financial information about the firm A) I and III B) I and II C) II, III, and IV D) I, II, III, and IV
D) A solicitor for an investment advisory firm who is compensated for the service rendered
Under the Uniform Securities Act, which of the following would be included in the definition of an investment adviser representative? A) An individual who renders fee-based advice on precious metals B) An employee, highly skilled in evaluating securities, who performs administrative or clerical functions for an investment adviser C) An agent who offers incidental advice on securities whose sole compensation is from commissions on transactions D) A solicitor for an investment advisory firm who is compensated for the service rendered
D) prices tend to increase at a steady rate until the system receives an economic shock.
Under the concept of inertial inflation, A) prices tend to remain the same until the system receives an economic shock. B) core inflation is a better measure of the actual inflation rate than the CPI. C) inflation and deflation alternate at regular intervals. D) prices tend to increase at a steady rate until the system receives an economic shock.
C) Assets = liabilities + shareholders' equity
What is the balance sheet equation? A) Assets = liabilities − shareholders' equity B) Assets = shareholders' equity − liabilities C) Assets = liabilities + shareholders' equity D) Assets = net worth
D) Administrator
What is the official designation of the person or agency that enforces the USA in each state? A) Issuer B) Transfer agent C) Registrar D) Administrator
A) the discount rate.
When a bank's reserve account is running low, it might choose to borrow from the Fed. When doing so, the bank will be charged A) the discount rate. B) the federal funds rate. C) the call loan rate. D) the prime rate.
D) keeping the money in the deceased's IRA
When a nonspouse inherits an IRA, the beneficiary can choose from all of the following options except A) withdrawing the funds over a 10-year period following the death of the owner B) withdrawing all of the funds immediately C) opening a separate inherited IRA in the name of the deceased FBO the beneficiary D) keeping the money in the deceased's IRA
A) Personally raising capital, without written authorization from the broker-dealer, for a new high-tech venture being run by the agent's former college roommate
Which of the following activities by a registered agent of a broker-dealer would constitute a prohibited practice under the Uniform Securities Act? A) Personally raising capital, without written authorization from the broker-dealer, for a new high-tech venture being run by the agent's former college roommate B) Failing to disclose a nonmaterial fact C) Informing a customer of a negative research report recently published on a stock that represents the client's largest holding D) Refusing to lend money to clients
B) Tactical asset allocation
Which of the following investment strategies reflects determining an appropriate portfolio allocation based on the short-term market movements and risk tolerance of the client? A) Strategic asset allocation B) Tactical asset allocation C) Efficient market allocation D) Top-down fundamental analysis
C) Exclusive use of index funds
Which of the following is an example of a passive investment management style? A) Investment in small capitalization technology securities B) Use of index funds in conjunction with selecting specific securities in the index to overweight certain sectors C) Exclusive use of index funds D) Value investing
A) Effecting securities transactions not recorded on the books of the employing broker-dealer without prior written authorization
Which of the following is an unethical practice for agents of broker-dealers? A) Effecting securities transactions not recorded on the books of the employing broker-dealer without prior written authorization B) Borrowing money from a commercial bank that has investment accounts at the broker-dealer C) Effecting securities transactions not recorded on the books of the employing broker-dealer with the employing broker-dealer's approval in writing D) Failing to make a bona fide public offering of all securities acquired as an underwriter
D) Constant dollars
Which of the following is considered the most accurate method of measuring GDP? A) As a function of GNP B) Actual dollars C) Eurodollars D) Constant dollars
C) The time or price at which to enter an order
Which of the following may an agent determine without written discretionary authority? A) Which security should be purchased B) How many shares of a particular security should be purchased C) The time or price at which to enter an order D) Whether to buy or sell a particular security
D) A CPA who manages investment accounts for 50 clients and charges hourly fees for the service
Which of the following parties is most likely to be considered an investment adviser under the Investment Advisers Act of 1940? A) The trust department of Citibank, which handles billions of dollars in trust assets B) An expert in fixed-income securities whose only clients are individuals and whose only recommendations deal with securities issued or guaranteed by the U.S. Treasury C) Dow Jones, Inc., publisher of The Wall Street Journal D) A CPA who manages investment accounts for 50 clients and charges hourly fees for the service
D) II and IV
Which of the following persons are required to register in a particular state? An investment adviser who manages client accounts in excess of $100 million in value An investment adviser who manages client accounts and has less than $25 million in total assets under management An adviser to investment companies registered under the Investment Company Act of 1940 An investment adviser representative with a place of business in the state A) III and IV B) I and III C) I and II D) II and IV
C) To benefit from a decline in the price of the stock
Which of the following reasons is appropriate justification for selling a stock short? A) To benefit from a rise in the price of the stock B) To cut losses on a long position C) To benefit from a decline in the price of the stock D) To seek a modest potential reward with limited risk
D) II and IV
Which of the following should be considered by an investment adviser in determining whether a specific investment is suitable for an individual investor? The past performance of the investment The investor's anticipated time horizon The amount of remuneration to the broker-dealer and to the agent The level of the investor's acceptance of risk and volatility A) I and IV B) I and III C) II and III D) II and IV
B) I and II
Which of the following statements are true of a discretionary account at a broker-dealer? It must be approved by a designated supervisory individual of the firm. It must be reviewed frequently to minimize the chances that the account has been churned. A discretionary order may be placed once the customer has placed a power of attorney in the mail. It must be approved by the Administrator of the state of residence of the client. A) I and III B) I and II C) III and IV D) II and IV
B) II and III
Which of the following statements are true? Systematic risk can be diversified away. Systematic risk cannot be diversified away. Unsystematic risk can be diversified away. Unsystematic risk cannot be diversified away. A) I and IV B) II and III C) II and IV D) I and III
D) The antifraud provisions of the Uniform Securities Act apply to exempt transactions.
Which of the following statements concerning transactions exempt from registration under the Uniform Securities Act is true? A) An unregistered, nonexempt security may be lawfully sold in a nonexempt transaction. B) The Administrator may require that a security be registered and a prospectus delivered in an exempt transaction. C) A security sold under an exempt transaction must be registered. D) The antifraud provisions of the Uniform Securities Act apply to exempt transactions.
A) GNMA
Which of the following usually does not pay interest semiannually? A) GNMA B) Treasury bond C) Public utility bond D) Treasury note
B) Agents correcting execution orders in their customer's accounts
Which of the following would be considered an unethical business practice? A) Agents exercising discretion in discretionary accounts B) Agents correcting execution orders in their customer's accounts C) Broker-dealers charging larger-than-ordinary commissions on certain transactions D) Broker-dealers sending retail clients an email 30 days in advance of a change to fees
D) I, II, and III
Which of the following would meet the USA's definition of person? An individual An unincorporated association A political subdivision A) II and III B) I and III C) I and II D) I, II, and III
A) misleading and may result in proceedings against the representative.
While making a sales presentation of a mutual fund, the registered agent states to a customer that reinvesting the dividends will ensure selling shares at a profit. Making such a statement is A) misleading and may result in proceedings against the representative. B) allowed if the representative does not use the word guarantee in the presentation. C) allowed if the representative does not put the statement in writing. D) allowed if the representative explains to the customer that reinvested dividends are still subject to federal income tax.
D) Highest education level
You are onboarding a new client. Which of the following is the least important indicator of the client's risk tolerance? A) Expected retirement date B) Current age C) Attitude toward taking a loss D) Highest education level
D) market risk
You have been following GEMCO stock for the past couple of months and notice a recent increase in the stock's volatility. In the past month, several negative reports have been published about GEMCO's product line. This has caused a drop in the market price of the stock even though the GEMCO has just reported earnings that exceeded analyst's projections. This is an example of A) purchasing power risk B) financial risk C) volatility risk D) market risk
C) 3.33 Zlotys
You recently took a trip to Warsaw, Poland, and when you received your credit card statement, you noticed that your vodka purchase for 100 Polish Zlotys resulted in a $30 charge on your statement. Based on this exchange rate, each dollar was worth approximately A) $3.33 B) 3 Zlotys C) 3.33 Zlotys D) $.33
D) taxable to the niece, the beneficiary of the plan
Your customer opens a Coverdell ESA for his niece. In order to meet qualified education expenses of $9,000, she takes a distribution of $10,000. The amount of the distribution in excess of her education expenses that represents earnings in the account will be A) automatically reinvested back into the plan B) nontaxable to either party C) taxable to the uncle, the donor to the plan D) taxable to the niece, the beneficiary of the plan
