Unit 5
Which of the following are municipal securities? A) Coverdale Saving Plans B) UTMA Saving Accounts C) UGMA Saving Accounts D) 529 Savings Plans
D) 529 Savings Plans
A general partner would be considered to have a conflict of interest with the limited partnership if the GP A) acts as agent making decisions for the business. B) is compensated for managing the partnership. C) manages the day-to-day business. D) borrows money from the business.
D) borrows money from the business.
Obtaining the financial status of the customer, and whether or not they meet income and net worth criteria, could be required for all of the following except A) real estate limited partnerships. B) equipment leasing limited partnerships. C) oil and gas limited partnerships. D) real estate investment trusts (REITs).
D) real estate investment trusts (REITs).
When speaking to a customer about exchange-traded funds (ETFs), a registered representative could make which of the following correct statements? A) ETFs have different potential tax consequences than mutual funds. B) ETFs cannot be bought on margin. C) ETFs cannot be purchased using traditional limit or stop orders. D) ETFs can be purchased only by paying a sales charge added to the NAV.
A) ETFs have different potential tax consequences than mutual funds.
Regarding limited partnerships, which of the following are true? I. A general partner can be held personally liable for business losses and debts. II. A limited partner can be held personally liable for business losses and debts. III. A general partner business decisions are legally binding on the partnership. IV. A limited partner business decisions are legally binding on the partnership. A) I and III B) II and III C) I and IV D) II and IV
A) I and III
When a limited partnership is liquidated (dissolved), the priority of payments to settle accounts are made from first to last in which order? I. General partners II. Limited partners III. General creditors IV. Secured creditors A) IV, III, II, I B) I, IV, III, II C) IV, III, I, II D) I, II, III, IV
A) IV, III, II, I
Which of following securities is least likely to have an active trading market? A) Limited partnership interests B) Municipal bonds C) Real estate investment trusts (REITs) D) Preferred shares
A) Limited partnership interests
Which of the following securities are nonexempt from registration under the Securities Act of 1933? A) Real estate investment trusts (REITs) and corporate equity issues B) Municipal securities and U.S. government agency issues C) U.S. government Treasury issues and REITs D) Corporate debt issues and U.S. government agency issues
A) Real estate investment trusts (REITs) and corporate equity issues
In order for a business entity to qualify as a limited partnership, the LP must have A) at least one general partner and one limited partner. B) any number of limited partners only. C) no general partners and at least one limited partner. D) any number of general partners and no limited partners.
A) at least one general partner and one limited partner.
Exchange-traded funds (ETFs) A) can be bought and sold throughout the trading day and have low expense ratios. B) pass on capital gains to investors annually but have low expense ratios. C) can be bought and sold throughout the trading day and have high expense ratios. D) pass on capital gains to investors annually and have high expense ratios.
A) can be bought and sold throughout the trading day and have low expense ratios.
An allowable deduction to compensate for decreasing natural resources in an oil and gas DPP are known as A) depletion allowances. B) depreciation deductions. C) tax credits. D) deductions for IDCs.
A) depletion allowances.
The allowable deduction for equipment used in an oil and gas direct participation program is taken as A) depreciation over the life of the program. B) a credit applied at the end of the program. C) a one-time expense applied at the end of the program. D) depletion applied when the equipment is sold.
A) depreciation over the life of the program.
Limited partnership programs are categorized as direct participation programs. The term direct participation refers to the A) flow through of profits and losses of the partnership to the individual limited partners. B) ability of any partner, limited or general, to participate in the running of the partnership. C) ability for each partner to have her vote flow through to the general partner. D) general partners directly participating in the day-to-day management of the partnership.
A) flow through of profits and losses of the partnership to the individual limited partners.
Direct participation programs (DPPs) are set up A) having the owners of the business liable for any taxes due. B) as tax-free investments with no potential write-offs. C) to pass on taxable income only to the investors, but not losses. D) to be taxed directly, much like corporations are taxed.
A) having the owners of the business liable for any taxes due.
An example of securities that are established by states to provide other government entities such as cities, towns, school districts or state agencies with a short-term investment vehicle to invest funds include A) local government investment pools (LGIPS). B) bond anticipation notes (BANs). C) tax anticipation notes (TANs). D) money market instruments.
A) local government investment pools (LGIPS).
For real estate program partners, tax deductions will be derived from A) mortgage interest paid and depreciation. B) historic rehabilitation credits received. C) income received for rents. D) government-assisted housing allowances.
A) mortgage interest paid and depreciation.
Limited partnerships A) must end on a predetermined date or can be dissolved earlier by vote. B) can either exist in perpetuity or be designated to end on a specific date. C) must exist in perpetuity. D) must end on a predetermined vote with no exceptions.
A) must end on a predetermined date or can be dissolved earlier by vote.
Under the Investment Company Act of 1940, which of the following is not considered an investment company? A) Management company B) Hedge fund C) Face-amount certificate company D) Unit investment trust
B) Hedge fund
Partners in direct participation leasing programs can receive write-offs for all the following except A) depreciation. B) depletion. C) operating expenses. D) interest expenses.
B) depletion.
A limited partnership (LP) A) is limited and can have only investors and no partners. B) has two types of partners. C) is run by investors who are the limited partners. D) has one type of partner.
B) has two types of partners.
As an investment vehicle, and regarding the tax consequences, Real Estate Investment Trusts (REITs) are organized as A) corporations. B) trusts. C) mutual funds. D) debt instruments.
B) trusts.
In a real estate limited partnership (DPP), the general partner has A) unlimited liability and a passive role. B) unlimited liability and an active role. C) limited liability and an active role. D) limited liability and a passive role.
B) unlimited liability and an active role.
Regarding the decision to dissolve a LP before its scheduled predetermined dissolution date, it would need to be A) ratified by the IRS because of the tax implications to dissolve earlier than planned. B) voted on by the limited partners holding a majority interest. C) voted on by the general partner(s) only. D) made by the general partner with the largest capital contribution with no vote required.
B) voted on by the limited partners holding a majority interest.
Which of the following is true for exchange-traded funds (ETFs)? A) The SEC has classified them as mutual funds, and they have operating costs and expenses that are lower than most mutual funds. B) The SEC has classified them as mutual funds, and they have operating costs and expenses that are higher than most mutual funds. C) The Securities and Exchange Commission (SEC) has classified them as a type of open-end fund, and they have operating costs and expenses that are lower than most mutual funds. D) The SEC has classified them as a type of open-end fund, and they have operating costs and expenses that are higher than most mutual funds.
C) The Securities and Exchange Commission (SEC) has classified them as a type of open-end fund, and they have operating costs and expenses that are lower than most mutual funds.
In a limited partnership, which of the following best describes who is responsible for tax consequences of the business? A) The business B) The general partners C) The investors D) The limited partners
C) The investors
Nolan Babbage owns several units of the Cray Leasing LP. He is frustrated by the lack of cash flow and begins consulting with the general partners on how best to market the partnership's services. Which of the following features of a limited partnership has he placed in jeopardy? A) The right to sue the general partner B) The pass-through nature of a partnership C) The limited liability of a limited partner D) The potential for profit
C) The limited liability of a limited partner
Which of the following is true when opening an out-of-state Section 529 plan? A) The student may not use it in the donor's state of residence. B) Earnings do not accumulate tax deferred. C) Withdrawals may not be free of state taxation. D) Withdrawals may not be free of federal taxation.
C) Withdrawals may not be free of state taxation.
Limited partnerships sold publicly via a prospectus offering would be expected to have A) a large group of investors, each contributing a large sum. B) a small group of investors, each contributing a small sum. C) a large group of investors, each contributing a small sum. D) a small group of investors, each contributing a large sum.
C) a large group of investors, each contributing a small sum.
Hedge funds A) are highly regulated, starting with the requirement to be registered with the SEC. B) are regulated under the Investment Company Act of 1940 with no SEC registration required. C) are not regulated under the Investment Company Act and no Securities and Exchange Commission (SEC) registration is required. D) are nonregulated but still require SEC registration.
C) are not regulated under the Investment Company Act and no Securities and Exchange Commission (SEC) registration is required.
Intangible drilling costs (IDCs) associated with oil and gas DPPs can generally A) not be deducted at all. B) be deducted up to a certain percentage in the earlier years of the program. C) be deducted completely in the first year of the program. D) not be deducted until the end of the programs life.
C) be deducted completely in the first year of the program.
Unique tax advantages associated with oil and gas direct participation programs are A) tax credits and depreciation allowances. B) tax credits and cash flow allowances. C) intangible costs and depletion allowances. D) intangible costs and cash flow allowances.
C) intangible costs and depletion allowances.
All of the following is true about local government investment pools (LGIPs) except A) LGIPs operate similarly to a money market instrument. B) the pool maintains a fixed $1 net asset value. C) investors must be provided a prospectus at or before they purchase shares in the investment portfolio. D) pools are not required to register with the Securities and Exchange Commission (SEC).
C) investors must be provided a prospectus at or before they purchase shares in the investment portfolio.
Real estate investment trusts (REITs) A) pay interest payments to investors and pass through all gains or losses. B) pass through losses only to investors but not gains. C) pay dividends and pass gains through to investors but not losses. D) pay dividends but do not allow for the pass through of gains or losses.
C) pay dividends and pass gains through to investors but not losses.
All of the following are true for 529 plans except A) withdrawals would be tax free at the federal level if used for qualified education expenses. B) contributions to the plan are considered gifts for tax purposes. C) plan donors must be related to the student benefactor. D) any adult can open a 529 plan for a student.
C) plan donors must be related to the student benefactor.
Investors in hedge funds should know that the funds are A) highly regulated, including having to abide by laws that investors be accredited. B) unregulated and, therefore, have no requirements for those who invest in them. C) unregulated but must abide by laws that investors be accredited. D) highly regulated, which is why there are no laws needed for investors to be accredited.
C) unregulated but must abide by laws that investors be accredited.
Tax-advantaged savings accounts for individuals with disabilities and their families are A) Uniform Gift to Minors Act (UGMA). B) Uniform Transfers to Minors Act (UTMA). C) margin accounts. D) ABLE accounts.
D) ABLE accounts.
All of the following would be considered advantages of exchange-traded funds (ETFs) as opposed to mutual funds except A) ETFs trade on exchanges. B) ETFs are marginable. C) ETFs are priced continuously throughout the trading day. D) ETFs are commissionable.
D) ETFs are commissionable.
A prospectus must be delivered to customers following a transaction in all of the following except A) mutual funds. B) follow-on offering of common stock by a public reporting company. C) unit investment trust. D) ETFs.
D) ETFs.
Which of the following securities would most likely have the lowest expense ratio? A) Qualified variable annuity B) Nonqualified variable annuity C) Mutual fund D) Exchange-traded fund (ETF)
D) Exchange-traded fund (ETF)
Regarding exchange-traded funds (ETFs), as compared to open-end (mutual) funds, which of the following are true? I. ETF transactions are subject to commissions. II. Expenses for ETFs tend to be very high compared to mutual funds. III. ETFs may trade at a price that is less than the NAV per share. IV. ETFs cannot be purchased on margin while mutual funds can be. A) II and III B) II and IV C) I and IV D) I and III
D) I and III
For a real estate DPP, which of the following is true? A) Neither income nor capital growth would come from rents received. B) Income will come from appreciation of the portfolio properties. C) Capital growth can be derived from rents received. D) Income can be derived from rents received for the properties.
D) Income can be derived from rents received for the properties.
An accredited investor is one who meets which of the following criteria? A) Both income and net worth B) Both the net worth and professional designations C) Only investment professionals may be designated accredited investors. D) Income, net worth, or professional designation
D) Income, net worth, or professional designation
Which of the following types of investments is least likely to be a major investment strategy for hedge funds? A) Options B) Currencies C) Selling short D) Money market instruments
D) Money market instruments
Which of the following are potential benefits associated with a real estate direct participation program? A) Intangible costs B) Dividends and interest C) Depletion allowances D) Tax deductions and credits
D) Tax deductions and credits
Which of the following is true regarding general partners (GPs) in a limited partnership? A) Their management decisions are not legally binding on the partnership. B) They may borrow money from the partnership. C) They may compete with the partnership. D) They should participate in the day-to-day management of the partnership.
D) They should participate in the day-to-day management of the partnership.
Which of the following are considered intangible drilling costs (IDCs) for an oil and gas DPP? A) Wages and insurance B) Equipment and fuel C) Fuel and interest expenses D) Wages and equipment
A) Wages and insurance
An oil and gas DPP that invests in wells that are already producing is known as A) an income program. B) a leasing program. C) an exploratory program. D) a tangible program.
A) an income program.
Each of the following is defined as an investment company except A) An open-end management company. B) Real estate investment trusts (REITs). C) A closed-end management company. D) Fixed and nonfixed unit investment trusts (UITs).
B) Real estate investment trusts (REITs).
All of the following are characteristics of 529 Savings Plans except A) withdrawals are tax free if used for qualified education expenses. B) contributions may be state deductible. C) contributions are federally tax deductible. D) contributions grow tax deferred.
C) contributions are federally tax deductible.
Section 529 plans are considered municipal fund securities. They must therefore be sold by A) official statement. B) prospectus. C) investment letter. D) security memo.
A) official statement.
What is the greatest disadvantage of limited partnerships? A) May invest in real estate B) Lack of liquidity C) May invest in oil and gas drilling D) The tax consequences
B) Lack of liquidity
An LP is a type of A) debt investment. B) direct participation program. C) trust set up for investors. D) corporate business entity.
B) direct participation program.
Tax credits for partners in a real estate program can come primarily from A) any property with the potential to appreciate in value. B) historic rehabilitation and any rent-producing properties. C) income-producing properties, both residential and retail. D) government-assisted housing and historic rehabilitation properties.
D) government-assisted housing and historic rehabilitation properties.
All of the following are types of direct participation programs (DPPS) except A) oil and gas. B) leasing. C) real estate. D) retail distribution.
D) retail distribution.
All of the following are rights of limited partners in a DPP except A) to vote on business objectives. B) to inspect all books and records. C) to sue the general partners. D) to make day-to-day business decisions.
D) to make day-to-day business decisions.
Which of the following is the best description of a limited partnership? A) An investment that permits both gains and losses to pass through to the investors B) An investment that exempts individual investors from reporting gains or losses C) An investment that allows only for income to flow through to the investors D) An investment that allows for losses only to pass through as write-offs to the investors
A) An investment that permits both gains and losses to pass through to the investors
Which of the following characteristics are typical of an exchange-traded product (ETP)? A) The value of an ETP is derived from other investment instruments, and it trades on a national securities exchange. B) An ETP is an ineligible investment for retail customers, and may not be purchased on margin. C) The value of an ETP is derived by formula disclosed in the prospectus and it trades on an exchange only after normal trading hours. D) An ETP is marginable but may not be sold short.
A) The value of an ETP is derived from other investment instruments, and it trades on a national securities exchange.
Which of the following is not a characteristic associated with hedge funds? A) They are regulated under the Investment Company Act of 1940. B) They can have highly leveraged portfolios. C) They can invest in derivative products. D) They might speculate in commodities and currencies.
A) They are regulated under the Investment Company Act of 1940.
For ETFs, the phrase "tax efficiency" can best be described by which of the following concepts? A) Usually, for ETFs, there are no tax consequences for investors until the shares are sold. B) ETFs generally have reportable tax gains passed on annually. C) These exchange-traded products can be purchased on margin, allowing for a smaller initial investment. D) All transactions in ETFs are commissionable, and sales charges do not apply.
A) Usually, for ETFs, there are no tax consequences for investors until the shares are sold.
A hedge fund having a lock-up provision means that A) investors are required to maintain the investment for a minimum length of time. B) the fund organizers are fully accountable and can be sued in the courts with full ramifications. C) a minimum return is guaranteed or investments are fully refundable—locked up. D) provisions have been made to lock up new buyers so sales of shares can be made easily.
A) investors are required to maintain the investment for a minimum length of time.
All of the following would be advantages of a limited partner in a DPP except A) participate in the management of the business. B) cash distributions of capital gains. C) cash distributions of earning. D) deductions for business expenses.
A) participate in the management of the business.
The general partner of a limited partnership has responsibility for all the following except A) providing all of the partnership capital. B) managing the day-to-day operations. C) organizing the business. D) paying partnership's debts.
A) providing all of the partnership capital.
A REIT can avoid being taxed as a corporation would by A) receiving 75% or more of its income from real estate and distributing 90% or more of its net investment income to its shareholders. B) receiving less than 50% of its income from real estate and distributing 50% or more of its net investment income to its shareholders. C) receiving less than 75% of its income from real estate and distributing 100% of its net investment income to its shareholders. D) receiving 100% of its income from real estate and distributing 90% or more of its net investment income to its shareholders.
A) receiving 75% or more of its income from real estate and distributing 90% or more of its net investment income to its shareholders.
Exchange-traded funds (ETFs) offer several attractive advantages over mutual funds. All of the following would be advantages that ETFs typically have over mutual funds except A) trading costs for active traders. B) lower operating cost than many mutual funds. C) intraday pricing for active traders. D) the ability to buy on margin.
A) trading costs for active traders.
Which of the following are the two basic types of Section 529 plans, which are products used for funding higher education? I. Savings plans II. Education savings accounts III. Secondary school funding plans IV. Prepaid tuition plans A) II and III B) I and IV C) I and III D) II and IV
B) I and IV
Identify two trading strategies that a hedge fund could employ in its portfolio but a mutual fund cannot. I. Limiting investments to a narrow group of securities within one industry II. Trading on margin to purchase portfolio securities III. Purchasing speculative or low rated securities IV. Selling short stocks A) I and IV B) II and IV C) I and III D) II and III
B) II and IV
Which of the following statements regarding real estate investment trusts (REITs) are true? I. Hybrid REITs typically invest in both commercial property and residential property. II. Some REITs hold no real property but hold mortgages on commercial property instead. III. Hybrid REITs can hold only residential property and mortgages on residential property. IV. REITs can pay dividends to shareholders and make capital gains distributions. A) I and IV B) II and IV C) II and III D) I and III
B) II and IV
Which of the following is not a type of real estate direct participation program? A) Raw land B) Income C) New construction D) Existing properties
B) Income
At the time of dissolution, which of the following regarding a limited partnership is true? A) Limited partners are paid after general partners. B) Limited partners are paid before general partners. C) Limited and general partners are paid concurrently. D) Limited and general partners are paid after the IRS.
B) Limited partners are paid before general partners.
Which of the following incur a fiduciary responsibility in a limited partnership? A) The limited partners B) The general partners C) Both the general and the limited partners D) Each individual partnership investor
B) The general partners
An investment that allows for a share in the income, gains, losses, deductions, and tax credits of the business entity to pass through to investors while protecting the investors from liability is known as A) a real estate investment trust (REIT). B) a limited partnership. C) an option. D) a general partnership.
B) a limited partnership.
In a leasing partnership program, loans are taken to purchase equipment that is then leased to companies in return for the lease payments. This process A) enables the partners to take tax credits against the income received from the lease payments. B) allows for the loan interest and equipment depreciation to be taken as deductions that will shelter the income from the lease payments received. C) allows for the equipment to be depreciated, adding to the income realized by the partnership. D) eliminates any possibility of sheltering the income from the lease payments received with deductions or credits.
B) allows for the loan interest and equipment depreciation to be taken as deductions that will shelter the income from the lease payments received.
Advantages enjoyed by the limited partners in a partnership might be all of the following except A) having liability limited to the loss of the money invested. B) being in a fiduciary position with responsibilities to others. C) owning an interest in an investment managed by others. D) having income and expenses flow directly through to them.
B) being in a fiduciary position with responsibilities to others.
Exchange-traded funds are priced A) by supply and demand insuring transaction prices equal to the fund's NAV. B) by supply and demand where transaction prices may be higher or lower than the fund's NAV. C) using forward pricing where transaction prices may be higher or lower than the fund's NAV. D) using forward pricing so that all transaction prices equal the fund's NAV.
B) by supply and demand where transaction prices may be higher or lower than the fund's NAV.
Your customer is a limited partner in a real estate partnership. This partner has the right to do all of the following except A) sue the general partner for damages resulting from any business decisions made. B) choose which properties the partnership should buy or sell. C) vote with the limited partners to remove the general partner. D) inspect and obtain copies of all partnership records.
B) choose which properties the partnership should buy or sell.
All of the following would generally be associated with a limited partnership (LP) except A) tax credits for specific programs. B) freely transferrable interests. C) partners responsible for reporting to the IRS. D) the pass through of gains and losses.
B) freely transferrable interests.
All of the following would be associated with hedge funds except A) highly leveraged portfolios (borrowing to purchase securities). B) investing in government debt securities. C) the use of short positions (selling securities the portfolio does not own). D) commodity speculation.
B) investing in government debt securities.
All of the following regarding a trust set up for the purpose of holding commercial property, or mortgages on commercial property, are true except A) these investments could not be considered open- or closed-end funds. B) investors may never purchase shares in these trusts on an exchange or over-the-counter (OTC). C) gains can pass through to the owners of these shares. D) ownership of these shares may provide for the receipt of dividends.
B) investors may never purchase shares in these trusts on an exchange or over-the-counter (OTC).
The Securities Act of 1933 exempts all of the following securities from registration except A) U.S. government issues. B) public real estate investment trusts (REITs). C) savings and loan issues. D) municipal issues.
B) public real estate investment trusts (REITs).
A customer is interested in an exchange-traded fund (ETF). With regard to how they can be traded, you would want the customer to be aware that A) calculating the NAV at the end of the day and adding a sales charge is how ETFs use forward pricing. B) real-time quotes are available for ETFs, which can be purchased throughout the trading day. C) the NAV calculated at the end of the day, plus a sales charge establishes the real-time quote for trading. D) real-time quotes are available for ETFs, which use forward pricing, the same as mutual funds do.
B) real-time quotes are available for ETFs, which can be purchased throughout the trading day.
For real estate program partners, tax credits will A) be applicable in all types of real estate programs. B) reduce tax liability dollar for dollar. C) reduce taxable income from rents received dollar for dollar. D) add to the appreciation of the real estate properties.
B) reduce tax liability dollar for dollar.
A hedge fund portfolio has been characterized as being highly leveraged. This means that A) there are substantial investments in international markets. B) there is substantial borrowing or purchasing on margin. C) derivative products such as options are utilized. D) commodities and currencies are included in the portfolio.
B) there is substantial borrowing or purchasing on margin.
Which of the following statements is true regarding Exchange-traded notes? A) Exchange-traded notes (ETNs) are junior, unsecured debt securities issued by a municipality B) Exchange-traded notes (ETNs) track performance to U.S. Treasury notes C) Exchange-traded notes (ETNs) are senior, unsecured debt securities issued by a bank or financial institution. D) Exchange-traded notes (ETNs) are backed by the good faith and credit of the United States government
C) Exchange-traded notes (ETNs) are senior, unsecured debt securities issued by a bank or financial institution.
Which of the following oil and gas direct participation programs might be considered the riskiest? A) Combined exploratory and income B) Income C) Exploratory D) Raw land
C) Exploratory
Intraday price changes due to normal market forces would be found with I. closed-end fund shares. II. exchange-traded fund shares. III. hedge fund shares. IV. open-end (mutual) fund shares. A) II and III B) I and IV C) I and II D) III and IV
C) I and II
An investor makes several statements regarding what they know about exchange-traded funds (ETFs). All of them are correct except A) I'll be able to buy or sell them throughout the trading day like stocks trading on an exchange. B) I can expect them to have lower expense and operating costs than mutual funds. C) I can't buy them on margin because they represent an entire basket of stocks like mutual funds do. D) I won't have to pay any sales charges as I do with mutual funds, but I will have to pay commissions.
C) I can't buy them on margin because they represent an entire basket of stocks like mutual funds do.
Regarding oil and gas DPPs, tangible drilling costs are associated with items that I. have no salvage value at the end of the program. II. have some salvage value at the end of the program. III. can be depreciated. IV. cannot be depreciated. A) I and III B) I and IV C) II and III D) II and IV
C) II and III
A hedge fund is permitted to do which of the following that a mutual fund is not permitted to do? A) Invest in equity and debt securities B) Include both stocks and bonds in its portfolio C) Invest in commodities and currencies D) Have pooled and professionally managed portfolios
C) Invest in commodities and currencies
What might happen if a limited partner begins making day-to-day business decisions for the partnership? A) The partner may be removed from the partnership completely. B) There would be no effect because limited partners have the right to vote. C) The partner might jeopardize the limited liability status held as an LP. D) The partner may still maintain the limited liability status held as an LP.
C) The partner might jeopardize the limited liability status held as an LP.
In an LP, which of the following is true? A) Only losses but not gains flow through to the individual partners. B) Any gains realized from a limited partnership are tax exempt. C) The partnership entity is not responsible for paying taxes on gains. D) The partners are not responsible for paying taxes on gains.
C) The partnership entity is not responsible for paying taxes on gains.
For hedge funds organized as private investment partnerships, which of the following is true? A) They will allow unlimited numbers of investors and require large or minimum initial investments. B) They can limit the number of investors and typically have no minimum initial investment requirement. C) They can limit the number of investors and require large or minimum initial investments. D) They will allow unlimited numbers of investors and allow small initial investments.
C) They can limit the number of investors and require large or minimum initial investments.
Hedge funds attempt to A) achieve modest returns and are, therefore, associated with being low-risk investments. B) mitigate all risks making them suitable for most investors. C) achieve high returns and are, therefore, associated with high-risk investments. D) mitigate all risk using hedging as an investment strategy.
C) achieve high returns and are, therefore, associated with high-risk investments.
An investor in a direct participation program wishes to divest of a partnership interest purchased some time ago. You would correctly advise that A) there is ample secondary market trading making them highly liquid. B) the interest in the business once purchased, can never be sold. C) there is no secondary market making them highly illiquid. D) they trade in the secondary market and entering an order to sell should suffice.
C) there is no secondary market making them highly illiquid.
All of the following are true of REITs except A) they can be registered under subchapter M. B) listed REITS are liquid investments. C) they are registered as investment companies. D) they can pass through gains but not losses.
C) they are registered as investment companies.
At the time of a limited partnership's dissolution, who is the last to be paid? A) General lenders (creditors) B) Limited partners C) Secured lenders (creditors) D) General partners
D) General partners
Deductions for depletion would most likely apply to which of the following direct participation programs (DPP)? A) Real estate limited partnership B) Oil and gas exploratory program C) Equipment leasing program D) Oil and gas income program
D) Oil and gas income program
How often may funds be rolled over from one state's Section 529 plan to another's? A) Once per semester B) As often as necessary C) No more than twice per calendar year D) Once every 12 months
D) Once every 12 months
Hedge funds are considered A) a form of mutual fund and, therefore, unregulated. B) a form of management company and, therefore, regulated. C) a form of private investment company and heavily regulated. D) a form of private investment company and, therefore, unregulated.
D) a form of private investment company and, therefore, unregulated.
Limited partnerships sold through private placements involve A) a large group of investors, each contributing a large sum. B) a small group of investors, each contributing a small sum. C) a large group of investors, each contributing a small sum. D) a small group of investors, each contributing a large sum.
D) a small group of investors, each contributing a large sum.
In explaining hedge funds to an investor, a registered representative might correctly characterize them as utilizing A) basic investment strategies for the purpose of mitigating risk. B) basic and conservative investment strategies entailing low risk. C) advanced and complicated strategies for the purpose of mitigating risk. D) advanced and complicated strategies entailing high risk.
D) advanced and complicated strategies entailing high risk.
