Series 65 || A Verified A+ Pass.
Dollar cost averaging plans have which of the following features? I. They are voluntary plans. II.
They entail purchasing the same number of shares each period. III. Investors are penalized for
missing subsequent investment periods. IV. The investor's personal share cost will be lower than
the share price over the period. correct answers I & IV
On April 25, a customer buys 100 XYZ at 62.25 and, on the next day, buys one XYZ July 60 put
at 1.50. At expiration, XYZ is selling at 68.38. The customer allows the put to expire and sells
the XYZ shares at 68.38. What would be his profit on the overall transactions? correct answers
463 Paid $6,225 for the long position in XYZ (100 X 62.25), also paid $150 for the put option,
for a total of $6,375 paid. Put option expires unexercised, and receives $6,838 for the sale of
XYZ (100 X 68.38). $6,838 - $6,375 = $463 profit.
ERISA section 404(c) does NOT(A) Set minimum standards for participant choice, control and
communication regarding the investment options within a plan.(B) Provide for sufficient
information and communication to allow participants to make "informed investment decisions".
(C) Prevent fiduciary-related lawsuits against sponsors of retirement plans.(D) Provide
guidelines to plan sponsors to minimize fiduciary legal liabilities. correct answers C
An investor places $10,000 into a mutual fund which reinvests dividends and capital gains. After
12 months, the investor's fund has a value of $12,000. If inflation during the period was 3%,
what is the investor's real rate of return for the year? correct answers 17% (1+nominal)
(1+inflation)-1
What is the time that an investor has actual ownership of the security called?(A) Ownership
period(B) Vesting period(C) Retention period(D) Holding period correct answers (D) Holding
period
The Uniform Prudent Investor Act sets standards by which investment advisers should manage
funds over which they exercise discretionary control and includes such things as I. Self-control
on the part of the adviser. II. Using caution based on the adviser's desires. III. Discretionary
control by the investor. IV. Managing based on the character of the account. correct answers I
and IV The Act calls for an investment adviser who has discretionary control of a client's account
to manage based on the character of the account, using a strategy that is prudent based on the
client's desires, and demonstrating self-control in the process.
Minimum net worth may be required for registration of(A) Investment adviser reps only.(B)
Broker/dealers and investment advisers.(C) Broker/dealers and agents only.(D) Investment
advisers only. correct answers B Broker/dealers and investment advisors
Which transaction must occur in a margin account?(A) Short sale of common stock(B) Opening
sale of a cash covered short put(C) Purchase of nonconvertible bonds(D) Long sale of common
stock correct answers A. Short sale of common stock
,Which of the following would most distinguish a growth from a value stock?(A) P/E ratio(B)
Sharpe Ratio(C) IRR(D) NPV correct answers A
Which of the following municipal entities does NOT issue overlapping debt?(A) School
district(B) Turnpike authority(C) Park district(D) Library district correct answers B. Turnpike
Which of the following changes to an investment adviser would be considered a change in
management that requires consent from clients to assign their advisory contracts? I. A majority
partner retires and sells his interest in the firm to his daughter. II. A shareholder of 30% of the
outstanding stock sells his stake in the firm. III. A minority shareholder buys out two other
shareholders and now owns a majority of the investment adviser's stock. IV. An investment
adviser replaces their CFO and CEO. correct answers (A)I and III Contract assignment includes
a change in majority ownership of any class of voting securities, or a change in the majority
interest of a partnership. A minority shareholder becoming a majority shareholder is a change in
majority ownership.
An investment adviser (IA) purchases stock for its own account from one of its institutional
clients. This transaction is called a/an correct answers (D) Principal transaction.
An investment adviser may share in the profits and losses of a client's account, provided that(A)
A written contract exists between the client and adviser.(B) Any advisory fees are deducted from
any profits gained.(C) Both of the above must occur.(D) Under no circumstances. correct
answers (D) Under no circumstances.
During an investigation the administrator may I. Subpoena records located in other states. II.
Subpoena witnesses from any states. III. Convict for fraud. IV. Revoke registration on behalf of
other state administrators. correct answers (A) I and II
A customer of a Canadian broker/dealer spends winters in Miami every year. The customer
trades regularly in her tax-qualified account. She is considering a permanent move to Miami.
Which of the following is true?(A) The broker/dealer and agent must already be registered in
Florida, and must maintain their existing state registrations.(B) If the customer moves to Miami,
the broker/dealer must register in the state.(C) If the customer moves to Miami, the agent must
register with the state and the broker/dealer must maintain its Florida registration.(D) If the
customer moves to Miami and opens a taxable account, the broker/dealer must register with the
SEC. correct answers D. Neither broker/dealer nor agent must register with the state unless the
customer moves to Miami and opens a taxable account. If the customer does both things, the
broker-dealer and representative must be registered with the SEC and become a member of an
SRO, such as FINRA. Also, the broker/dealer and agent must register in any state in which they
are transacting business.
The internal rate of return (IRR) represents(A) The final market value of the investment,
discounted by a risk-adjusted rate of return.(B) The discounted rate at which the net present
value of all cash flows and final market value of an investment becomes zero.(C) The present
value of an investment's future cash flows expressed in today's dollars.(D) The discounted sum
of all future cash flows plus the final market value. correct answers B
,In early October, a customer buys 100 shares of XYZ stock at $50 per share and, at the same
time, writes an XYZ April 50 call option for a premium of $8 per share. What is the term used to
describe this position?(A) A covered write(B) Either an uncovered writer position or a naked
position(C) An uncovered writer's position(D) A naked position correct answers A
What are the two types of voting processes used by corporations?(A) Proxy and cumulative(B)
Preemptive and proxy(C) Proxy and statutory(D) Statutory and cumulative correct answers D
There are two types of voting processes used by corporations: statutory voting and cumulative
voting. With statutory voting, shareholders are permitted one vote for each share owned to be
voted for each director. With cumulative voting, shareholders can multiply the number of shares
owned by the number of directorships and cast the votes in any manner desired.
Anita received equal quarterly 25 cent dividends on her Kabob stock last year. In addition, her
shares appreciated from $20 to $27. Which of the following is true? (A) Anita will be taxed on
$1 per share.(B) Anita will be taxed on $8 per share.(C) If Anita participates in a DRIP, she will
pay no taxes on the reinvested dividends.(D) Anita will be taxed on $7.25 per share. correct
answers A
Insider trading laws set guidelines for imposing penalties including civil actions in a federal
court. The maximum penalty a court can impose for insider trading violations is(A) $500,000.(B)
$100,000 fine, 5 years imprisonment, or both(C) The amount of profit gained or loss avoided.(D)
An amount up to 3 times the profit gained or loss avoided. correct answers D When the insider
trading violations are subject to civil but not criminal penalties, the maximum fine cannot exceed
three times the profit gained or loss avoided.
What annuity provision guarantees a certain expense amount for an annuity contract?(A) Dollar
limit(B) Amount guarantee(C) Mortality guarantee(D) Expense guarantee correct answers D
Several people enter into a scheme to defraud investors. Which of these participants are subject
to civil and criminal penalties? I. Agents; II. Issuers; III. Underwriters; IV. Broker/dealers(A) I
and IV(B) II and III(C) I, II and IV(D) I, II, III and IV correct answers D
An agent is relating information about a mutual fund to a prospective customer. All of the
following are prohibited statements by the agent EXCEPT(A) The fund paid dividends of $1.00
and capital gains of $.30 per share last year for a total income of $1.30 per share.(B) Mutual
funds are guaranteed to be a better investment against potential loss than an individual stock
because of their diversification.(C) The fund is a registered security and is approved by the SEC.
(D) The fund earned 12 percent for the past 2 years and is expected to continue to do the same,
although the actual return may be more or less. correct answers A
Which characteristics are associated with a "buy and hold" investment strategy? I. Higher
portfolio turnover II. Lower management costs III. Less demanding research IV. Different
investments than an active trading style correct answers C
, A natural person may be considered an accredited investor if, in each of the past 2 years, his/her
income exceeded correct answers .(C) $200,000.
A corporation uses the statutory voting method. The shareholder owns 200 shares and there are
five vacancies up for re-election. What is the maximum number of votes the shareholder may
cast for any one vacancy?(A) 1(B) 5(C) 200(D) 1,000 correct answers 200
What is the timeframe for filing relevant Suspicious Activity Reports?(A) Within 90 days of
initial discovery(B) Within 90 days of the suspicious transaction(C) Within 30 days of initial
discovery(D) Within 30 days of the suspicious transaction correct answers C
Which of the following are characteristics of TIPS? I. Fluctuating interest rate; II. Fixed interest
rate; III. Fluctuating principal; IV. Fixed principal(A) I and III(B) I and IV(C) II and III(D) II
and IV correct answers C. II and III
The business model that has a single owner and in which the owner and the company are viewed
as one and the same is called a(A) General partnership.(B) Corporation.(C) Limited partnership.
(D) Sole proprietorship. correct answers D
Which of the following apply to progressive taxation? I. Low income earners are taxed at a
higher rate than higher income earners. II. Higher income earners are taxed at a higher rate than
low income earners. III. The federal marginal tax rate increases as income rises. IV. Progressive
taxation includes marginal tax brackets.(A) I and II(B) I, II, and III(C) II and IV(D) II, III, and
IV correct answers D
Differences between an insurance company's general account and separate account include I. The
separate account is registered pursuant to the Securities Act of 1933. II. The separate account
must comply with the Dodd-Frank Act. III. The separate account is usually registered under the
Investment Company Act of 1940. IV. If it funds a tax-qualified annuity, the separate account is
exempt from registration under the Securities Act of 1933. correct answers A
Which of the following is not a pooled investment characteristic?(A) Centralized
management(B) A portfolio of assets(C) Direct flow through of expenses to the owners(D) Price
per share based on the value of portfolio assets correct answers C
A client places an order to sell short 100 shares of XYZ at 35.50 stop limit. At which trade was
the order triggered? 36, 35.75, 35.13, 34.88, 35, 35.62 correct answers D. 35.13
Incentive stock options differ from employee stock options in that: I. Only employees are
eligible to participate in incentive stock options. II. Incentive stock options are tax qualified. III.
Incentive options are written only on preferred stock. IV. Employee stock options require
shareholder approval.(A) I and II(B) I and III(C) II and III(D) II and IV correct answers I and II
Because incentive stock options are tax qualified, the plan must be approved by company
shareholders 1 year prior to the plan taking effect. Both plans deal with the employer's common
stock.
