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Series 65: Simulated Exam 6 questions well answered already passed
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Series 65: Simulated Exam 6 questions well answered already passed
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Series 65: Simulated Exam 6In a DPP, a general partner is all of the following except
A. a key executive who makes day-to-day business decisions.
B. one who buys and sells the program's property.
C. one who appoints the property manager.
D. one who has limited liability. - correct answer ✔✔One who has limited liability
A general partner of a limited partnership is a key executive of the program who purchases and sells the
property and/or appoints someone to manage the property. The general partner does not have limited
liability. By not allowing the general partner to have limited liability, the program is able to rule out
limited liability as a corporate characteristic.
Which of the following statements regarding standard deviation is true?
A. Standard deviation is expressed in dollars.
B. Two investments with the same expected return will not necessarily have the same level of risk and
standard deviation.
C. The smaller the deviation from the average performance, the riskier the investment becomes.
D. Standard deviation quantifies expected return. - correct answer ✔✔Two investments with the same
expected return will not necessarily have the same level of risk and standard deviation
Two investments can have the same expected return but have significantly different deviations. The
investment with the larger standard deviation is the riskier of the 2 and will be more volatile even if the
expected returns are the same. Standard deviation measures the deviation percentage from the average
of the expected or historical returns of an investment. The larger the standard deviation, the riskier the
investment. Standard deviation is not expressed in dollars, it is expressed in percentages.
Which of the following would be considered a security under the provisions of the Uniform Securities
Act?
,A. An endowment contract issued by a life insurance company licensed to do business in the state
B. A fixed annuity contract issued by a life insurance company not authorized to do business in the state
C. A certificate of interest in a real estate limited partnership offering
D. Gold bullion - correct answer ✔✔A certificate of interest in a real estate limited partnership offering
It is always best to remember what is not a security than try to remember all of the things that are. All
insurance contracts, other than variable ones, are not securities. Commodities, including precious
metals, are not securities.
Which of the following actions would not result in the denial or revocation of the registration of a
security?
A. The registration statement was found to be both incomplete and misleading.
B. The provisions of the Uniform Securities Act were violated by persons filing the registration statement.
C. The registrant's underwriters earned underwriting fees that were considered reasonable by the
Administrator.
D. The registrant engaged in illegal business operations. - correct answer ✔✔The registrant's
underwriters earned underwriting fees that were considered reasonable by the Administrator
Underwriters may, and often do, earn lucrative underwriting fees; only fees considered excessive and
unreasonable are prohibited. A registration statement that is incomplete or a misleading registration will
result in denial of the registration. Illegal acts by the registrant (the issuer) or those filing the registration
statement will lead to denial (if found before the registration is effective) or revocation (if discovered
afterwards).
Caroline considers her investment skills to be much greater than they actually are. She takes credit for
many decisions that have positive results but blames the economy when her investments do poorly.
Caroline's behavior is an example of
A. regret aversion.
B. confirmation bias.
C. anchoring.
,D. overconfidence. - correct answer ✔✔Overconfidence
Caroline's behavior is an example of overconfidence. Confirmation bias is paying attention to information
that supports a preconceived opinion and poorly made decision, while disregarding accurate,
unsupportive information. Anchoring is making irrational decisions based on information that should
have no influence on the decision at hand. Regret aversion is when the investor prepares herself in such
a way as to avoid distress over an adverse outcome.
According to the Investment Advisers Act of 1940, the SEC must either grant investment adviser
registration or begin proceedings to determine whether registration should be denied within how many
days of filing?
A. 45
B. 90
C. 60
D. 30 - correct answer ✔✔45
The SEC is required by the Investment Advisers Act of 1940 to either grant an adviser registration or
begin proceedings to determine whether the registration should be denied within 45 days of application.
The goal of modern portfolio theory (MPT) is to construct the most efficient portfolio. An efficient
portfolio is one that offers
A. the least risk for a given amount of return
B. the highest correlation coefficient
C. the lowest Sharpe ratio
D. the most return for the most risk - correct answer ✔✔The least risk for a given amount of return
Under MPT, an efficient portfolio is one that manages risk to provide the optimum return. That is, for any
given amount of return, the portfolio achieves that return with the lowest possible risk. Conversely, it
can be stated that you receive the highest possible return with the lowest possible risk. Analysts using
MPT are seeking a high Sharpe ratio.
, When it comes to advertising by investment advisers and their representatives, which of the following
would most likely be acceptable to the SEC?
A. A paid testimonial from a nonaffiliated third party
B. Showing past performance over the most recent 12 months of a group of securities selected from all
of the adviser's recommendations
C. A like from a client on an investment adviser representative's Facebook post that announced the birth
of her most recent child
D. Offering prospective clients a free 3-month trial to the investment adviser's special investment
formula that ensures success - correct answer ✔✔A like from a client on an investment adviser
representative's Facebook post that announced the birth of her most recent child
Although the SEC Model Rule for Investment Advisers has specific requirements for testimonials, it has
been determined that a Facebook like for a non-business-related matter (such as the birth of a child, a
wedding anniversary, or vacation photos) is not considered a testimonial. The rule is tricky in that it
states that testimonials come from clients and third parties give endorsements. When showing past
performance, an investment adviser cannot cherry-pick the ones it wishes to show—all
recommendations of similar types of securities (all common stock or all bonds) must be shown. No
securities professional can ever ensure investment success; that would be considered a performance
guarantee.
Debts that will come due more than one year after the date on the balance sheet are known as
A. accounts payable.
B. current liabilities.
C. fixed (or long-term) liabilities.
D. deferred charges. - correct answer ✔✔Fixed (or long-term) liabilities
Debts that will come due more than one year after the date on the balance sheet are known as fixed (or
long-term) liabilities. Current liabilities are debts that may come due within one year from the date on
the balance sheet.
A customer's limit order to buy 500 shares of QRS at 60 is executed and the agent reports the trade
execution to the customer. One hour later, the customer notices that QRS is down 2 points and informs
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