Series 65- Chapter 13 STC || with Accurate Answers 100%.
Which of the following will a syndicator of a blind pool real estate investment trust include in
the investment policy statement?
A. The estimated location of the real estate purchases
B. A disclosure that investment losses are guaranteed by SIPC
C. A statement which breaks down the contributions made by limited partners
D. The estimated timing of the real estate purchases correct answers C. A statement which
breaks down the contributions made by limited partners
Blind pool real estate investment trusts (REITs), which are more commonly referred to as "non-
traded" REITs, are pooled investments in real estate. However, unlike a traditional REIT, blind
pool REITs give the investment manager broad authority over investment choices. The specific
location and timing of the investments will not be disclosed in the investment policy statement.
Although the investment policy statement of a blind pool REIT will not provide significant
insight into the REIT's investments, the syndicator must disclose the break down of contributions
made by limited partners.
Which of the following statements is TRUE about ETNs?
A. ETNs may lose value even if the underlying index remains stable.
B. ETNs are suitable for investors who want to capture long-term growth.
C. ETNs are unsecured bonds and investors are secured creditors if the issuer declares
bankruptcy.
D. Similar to ETFs, ETNs are suitable for passive investors. correct answers A. ETNs may lose
value even if the underlying index remains stable.
Unlike an ETF which is backed by an independent pool of securities, an ETN is an unsecured
bond that's issued by a financial institution. That company promises to pay ETN holders the
return on some index over a certain period and return the principal of the investment at maturity.
However, if something happens to the issuing company (e.g., bankruptcy) and it's unable to
make good on its promise to pay, ETN holders could be left with a worthless investment.
A whole life insurance policy may be referred to as
:Permanent life
Term life
Ordinary life
Straight life
A. I and IV only
B. I, III, and IV only
C. I, II, and IV only
D. I and III only correct answers B. I, III, and IV only
,Whole life insurance may be called permanent, ordinary, or straight life insurance. Term
insurance is a completely different type of policy that only provides coverage for a specific
period
Which of the following statements is TRUE regarding inverse ETFs?
A. Inverse ETFs trade in tandem with their benchmark.
B. Inverse ETFs are exempt from both state and federal securities regulations.
C. Inverse ETFs are considered derivatives.
D. Inverse ETFs trade in the same direction as an index. correct answers C. Inverse ETFs are
considered derivatives.
Inverse ETFs move in the opposite direction of the benchmark or index to which they're linked.
For example, if an index is up 10%, then an inverse ETF that's linked to that index should fall by
10%. Most ETFs are not considered derivatives because they actually own the shares that make
up an index. However, inverse ETFs are different because they cannot directly hold the securities
in an index. In fact, inverse ETFs often use derivatives and futures contracts to create a return
that's opposite of an index. Since inverse ETFs don't hold the positions they're trying to track
directly, they're considered to be derivatives. Although ETFs are considered federal covered
securities (and exempt from registration) under the Uniform Securities Act, they're typically
required to be registered under the Investment Company Act of 1940 (i.e., they're not exempt
from federal securities laws).
An investor is long a 3x Bearish Inverse Leveraged Nasdaq 100 Index ETF. If the index declines
by 10%, the value of the ETF will:
A. Increase by 10%
B. Increase by 30%
C. Decrease by 10%
D. Decrease by 30% correct answers B. Increase by 30%
For inverse leveraged ETFs, their value should move in the opposite direction of the underlying
index by the given leverage factor (e.g., 3x). In this question, if the index declines by 10%, the
value of the ETF will increase by three times that amount, (i.e., 30%).
An equity-indexed annuity is a type of:
A. Fixed annuity that tracks the performance of a designated mutual fund
B. Variable annuity that tracks the S&P 500 Index
C. Fixed annuity that offers the potential for greater returns
D. Variable annuity that tracks the DJIA correct answers C. Fixed annuity that offers the
potential for greater returns
An equity-indexed annuity is a type of fixed (non-variable) annuity; therefore, SEC registration
is not required for these contracts. The owner receives a guaranteed minimum rate of return, but
has significant upside potential since the annuity's return is tied to a benchmark index (e.g., the
, S&P 500 Index. If the index underperforms, the investor will simply receive the minimum rate.
On the other hand, if the index performs well, the investor will receive the indexed return based
on contractual provisions.
Mark purchases an equity-indexed annuity contract that guarantees a 5% return with an 80%
participation rate and a 12% interest-rate cap. The index to which the funds are tied rises in value
by 10% this year. What return does Mark receive?
A. 10%
B. 5%
C. 12%
D. 8% correct answers D. 8%
In an equity-indexed annuity, the owner receives a guaranteed minimum interest rate with
potential upside based on the performance of the designated index. If the return on this index is
less than the guaranteed rate, the owner receives the minimum. If the index return is greater than
the guarantee, the owner receives the greater return up to the capped maximum. Many contracts
only pay a portion of the index return. In this example, the client is entitled to 80% of the index
return capped at a 12% maximum. The index increased by 10%, so the client's contract is
credited with 80% of that amount, or 8%.
Which of the following is the BEST feature of a variable annuity?
A. It provides tax-free income to investors at retirement
B. It provides investors with an opportunity to invest in equities and defer the taxes until
annuitization or liquidation
C. It provides additional benefits when placed inside of qualified retirement accounts
D. It provides investors with a guaranteed payment every month correct answers B. It provides
investors with an opportunity to invest in equities and defer the taxes until annuitization or
liquidation
The primary reason that investors purchase variable annuities is the ability to buy into a portfolio
of securities and to defer the payment of taxes on any appreciation. Investors are taxed only
when the annuity is surrendered, liquidated, or annuitized. Variable annuities do not provide tax-
free income or guaranteed performance. Although investors may purchase a variable annuity in a
qualified account, they will not receive additional tax benefits. Since an annuity is an insurance
product, it may provide a death benefit and a life payout option.
What are structured products?
A. A contract in which two parties agree to exchange cash flows based on different financial
instruments.
B. Securities which are created by financial institutions that customize returns and risks to fit the
needs of specific investors.
C. An investment trust that manages a portfolio of real estate investments.
