Series 65 Practice Questions || with 100% Error-free
Solutions.
Which portfolio mix would you recommend to a client who is most concerned about projected
near term volatility? correct answers Choose the portfolio with the lowest SD.
A new customer has a $35,000 CD maturing in 2 weeks. With the objective of maximizing his
income on capital invested, he wishes to invest the proceeds in a mutual fund. Which of the
following types of funds should be recommended? correct answers An income fund. It is just
what the name implies; it invests for income.
Under the Uniform Securities Act, the Administrator may institute an action if an agent:
1. borrows money from his wealthy clients' accounts
2. solicits orders for nonexempt unregistered securities
3. buys and sells securities in accounts to generate a high level of commissions
4. alters market quotations to induce a client to invest in an attractive growth stock correct
answers All of the above
Which of the following is the most significant difference between corporate secured debt and
unsecured debt? correct answers Secured debt has specific collateral pledged to protect the
lender's interest.
An investment adviser who is discussing forward contracts with a client would most likely be
referring to an investment in correct answers an agricultural commodity.
Forward contracts are available in commodities.
One of your clients has named you as the trustee for a trust he has established. The beneficiary of
the trust approaches you with a request for a disbursement that is contrary to the provisions of
the trust document. In accordance with the provisions of the Uniform Prudent Investor Act, you
should correct answers follow the terms of the trust
As enumerated in the USA, exempt securities would include those issued by all of these
EXCEPT
A) a promissory note that evidences an obligation to pay cash within 9 months after the date of
issuance, is issued in denominations of at least $50,000, and receives a rating in one of the 3
highest rating categories from a nationally recognized statistical rating organization
B) a corporation based in Toronto, Ontario, whose common stock trades on the Toronto Stock
Exchange
C) a sovereign foreign government with which the United States maintains diplomatic relations
D) any credit union organized and supervised under the laws of this state correct answers a
corporation based in Toronto, Ontario, whose common stock trades on the Toronto Stock
Exchange.
Although securities issued by the Canadian government or any political subdivision are exempt,
those issued by Canadian corporations would only be exempt if trading on U.S. exchanges as
federal covered securities.
,Of the following securities, which is most commonly recommended to fund a child's college
education? correct answers Zero-coupon Treasury bonds. They provide a certain, quantifiable
sum at a certain date in the future.
The Uniform Securities Act lists a number of securities that are exempt from both the
registration and the advertising filing requirement of the Act. Included in that list would be all of
the following except
A) universal life insurance policies issued by insurance companies authorized to do business in
the state.
B) common stock issued by the Bailey Brothers Building and Loan, organized under the laws of
New York State and authorized to do business in this state.
C) securities issued by the Podunk and Western Railroad, a regulated common carrier.
D) securities issued by the XYZ Industrial Loan Association organized and supervised under the
laws of this state. correct answers universal life insurance policies issued by insurance companies
authorized to do business in the state. They are not an exempt security because they are NOT a
security.
An investment adviser representative is required to make disclosure to the client when
1. the IAR, in preparing a recommendation, uses research provided by a third party with whom
the IAR is not affiliated
2. the IAR recommends a specific insurance policy for the client's overall financial plan, where a
commission will be received on that sale
3. transactions recommended to a specific client are inconsistent with those for other clients with
objectives that are identical to that particular client
4. transactions recommended to the client are inconsistent with those for the IAR's own account
correct answers 2. the IAR recommends a specific insurance policy for the client's overall
financial plan, where a commission will be received on that sale
4. transactions recommended to the client are inconsistent with those for the IAR's own account
A married couple in their early 50s saving for retirement would most likely have which of the
following objectives? correct answers Moderate risk, moderate safety, low liquidity
Sharon Smith is an agent for Highwater Securities, 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, correct answers Sharon must be registered
in State X in order to accept the order.
Regardless of whether the security is exempt or the transaction is exempt, one must be licensed
in the state that is the domicile of a client placing an order.
During the past 2 quarters, the GDP declined by 3%, unemployment rose by 0.7%, and the
Consumer Price Index fell off by 1.3%; this economic condition is called correct answers
recession- two consecutive quarters of economic decline is termed a recession
An agent unintentionally sells nonexempt securities that have not been registered. Under the
Uniform Securities Act, the broker-dealer may write a letter and offer to buy back the security
, plus interest, minus any income received. The client gives up the right against the firm to bring
action in court if he does not respond within how many days of receipt of the letter? correct
answers 30
Under the Uniform Securities Act, investment advisory contracts correct answers must contain a
description of fees
Which of the following is not an annuity purchase option?
A) Single premium immediate annuity
B) Single premium deferred annuity
C) Periodic payment immediate annuity
D) Periodic payment deferred annuity correct answers Periodic payment immediate annuity
Jill is an investment adviser representative with FairPlay Advisers, an SEC-registered investment
advisory firm. At the recommendation of a close friend who is a client of Jill's, Tom comes in for
an interview and portfolio analysis. When examining Tom's IRA, which of the following
holdings would Jill feel the need to immediately review?
A) JKL Money Market Fund
B) DEF U.S. Government Bond Fund
C) ABC Municipal Bond Fund
D) GHI Large-Cap Equity Index Fund correct answers ABC Municipal Bond Fund
If an investment can be expected to return 8%, using the rule of 72, what is the present value
needed to have $50,000 for a child's education in 18 years? correct answers $12,500
While an application for registration as an agent of a broker-dealer is still pending, that person
would be permitted to correct answers assist registered employees of the firm by doing research
on securities they are following
An IAR is doing some research on a company. When viewing the corporation's financial
statements, prepaid expenses would most likely be found correct answers as a current asset on
the balance sheet.
A member of the investment banking department of ABC Securities is explaining some of the
advantages and disadvantages of rights and warrants to the board of directors of XYZ
Corporation. Which of the following statements could he make?
1. The exercise prices of stock rights are usually below the current market price of the underlying
security at time of issue.
2. The exercise prices of warrants are usually above the current market price of the underlying
security at time of issue.
3. Both rights and warrants may trade in the secondary market and may have prices that include a
speculative (time) value.
4. Warrants are often issued attached to a bond issue to reduce the interest costs to the issuer.
correct answers 1. The exercise prices of stock rights are usually below the current market price
of the underlying security at time of issue.
