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STC Series 66 Final -1 and 2 exam questions and answers
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STC Series 66 Final -1 and 2 exam questions and answers
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STC Series 66 Final #1 and 2exam questions and answers
A client purchases an equity-indexed annuity contract that
guarantees a 4% return or 80% of the performance of the S&P 500,
whichever is greater. The index declines over the course of the next
year. What return will your client receive? - answer 4%
An equity-indexed annuity guarantees the contract owner a
minimum interest rate or the performance of a stock index such as
the S&P 500 Index. If the return on this index is less than the
guaranteed rate, the owner receives the guaranteed rate. If the
index return is greater than the guarantee, the owner receives the
greater return. (62437)
The investment policy statement of a qualified retirement plan
states that no more than 50% of the plan's assets may be invested
in stocks. The investment manager places 65% of the plan's assets
in stocks in order to take advantage of a bull market and increase
the value of the plan's assets. Has the investment manager violated
the fiduciary responsibility provisions of ERISA? - answer Yes, since
the investment manager did not follow the stipulations of the
investment policy statement
This is an actual court case. The plan's trustees sued the investment
manager who was held liable even though the plan's assets
increased. (62146)
All of the following choices are required to be included in a trade
blotter, EXCEPT: - answer The amount of interest or dividends the
investor will receive
Broker-dealers and investment advisers are required to keep certain
books and records. One of them is a blotter, which is a daily record
of all purchases and sales of securities. The trade blotters contain
information concerning the transaction such as the account in which
the trade was executed, the trade date, the unit value and total
value of the transaction, the name and amount of securities, and
,whom the securities were bought from or sold to. Blotters are also
required when a firm receives or delivers securities as well as
receives or disburses cash.
Under the Uniform Securities Act, the statute of limitations for
criminal violations of the Act is: - answer Five years
The statute of limitations for criminal violations under the Act is five
years. (62943)
A small, single-office investment advisory firm has $4 million in
assets under management. The firm is located in Texas. According
to the Uniform Securities Act, which of the following persons
associated with the firm will NOT fall under the definition of an
investment adviser representative? - answer An in-house
accountant who tabulates investment results for client accounts
IA representatives are persons who are associated with an IA and
make recommendations, manage accounts, solicit or negotiate the
sale of IA services, or supervise any persons who engage in these
activities. Persons who perform clerical functions (e.g.,
accountants) are not considered IA representatives. There is no
requirement for a person to be an employee or to be solely
dedicated to sales to meet the definition of IA representative.
Under the Securities Exchange Act, a customer confirmation is NOT
required to disclose: - answer The time of the trade execution
The Securities Exchange Act requires broker-dealers to make
specific disclosures on customer confirmations. Some of the
required information includes the capacity in which the broker-
dealer is acting (i.e., agency or principal), the amount of
commission received by the broker-dealer for executing an agency
trade, and the settlement date of the trade. The time of the trade
execution is not required to be disclosed on a customer
confirmation; however, it may be provided if the customer makes a
specific request.
,Under the Uniform Securities Act, an Administrator may deny
registration to an agent because of findings that indicate the agent
had been convicted of a felony within the past: - answer 10 years
The Administrator may deny an agent's registration if she finds the
individual has been convicted of a felony within the past 10 years.
(62109)
NASAA's Model Rule on Unethical Business Practices of Investment
Advisers, Investment Adviser Representatives, and Federal Covered
Advisers states that any fee arrangement based on capital gains or
portfolio appreciation may only be used if which of the following
disclosures is made in writing? - answer That the arrangement may
cause the adviser to recommend strategies that encourage a client
to take greater-than-normal risks
As opposed to other fee arrangements, performance-based fees are
more likely to encourage an adviser to take greater risks with a
client's money in order to generate more fees. While performance-
based fees are generally prohibited under the Uniform Securities
Act, some state Administrators make exceptions. (67684)
Susan is a high-ranking official in the Comptroller's Office of
Zanzibar Securities. Her title is Executive Vice President. Under the
Uniform Securities Act, Susan is: - answer Not considered an agent
since she is not involved in sales or trading
Only personnel engaged in securities transactions are agents.
Officers can be considered agents, but it depends on their particular
job function. (79474)
Which of the following securities is NOT considered exempt under
the Uniform Securities Act? - answer Securities issued by an
automobile company
Under the Uniform Securities Act, any security issued by Canada or
a Canadian Province, or savings and loan association, or any
railroad company is considered an exempt security. There is an
exemption under the Act for common carriers but an automobile
company does not qualify for this exemption. (
, Value investors would be interested in companies that have -
answer Low price earnings ratios
Value investing is a method of identifying securities that are
undervalued based on company fundamentals. Value stocks tend to
have low stock prices in relationship to their earnings, a higher
dividend yield than their industry peers, and, typically, trade at a
price closer to or at a discount to the book value than their
competitors. Value investors believe that the most undervalued
companies should rebound and outperform the market. This, of
course, assumes that the company is financially sound. (63012)
As an investment adviser, you are required to record and keep a
record of every transaction in a security for a client's account
within: - answer 10 days of the end of each quarter, excluding
direct obligations of the U.S. government
Under both the Investment Advisers Act and the Uniform Securities
Act, investment advisers are required to keep a record of every
securities transaction within 10 days of the end of the quarter in
which the transaction took place. Transactions in direct obligations
of the U.S. government are excluded from this requirement.
What is the benefit of discounting the cash flows of a fixed-income
security? - answer It compares the price of a bond against the sum
of the present values of the bond's future payouts
A discounted cash flow evaluates each coupon payment and the
repayment of a bond's principal at a present value, based on a rate
of return. This makes it possible to evaluate a bond's value against
the investor's desired rate of return. The sum of each of the
discounted cash flows, plus the present value of the bond's
principal, determines the total value of the bond. By comparing this
value to the current price of the bond, the adviser will be able to
determine if the bond is an attractive investment for a client.
Based on the past performance of XYZ stock, an investment adviser
has determined that there is a 25% chance that in a bull market,
XYZ stock will return 20%. In a flat market (50% probability), the
return should be 5%. The likelihood of a bear market is 25%, and
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