Free FINRA Series 65 practice exam
Question 1
A client of yours just received a $200,000 inheritance and plans to invest the funds in the market. They hope to grow the funds to $800,000 and use them to retire early. Assuming you believe their portfolio can consistently attain an annualized rate of return of 10%, how long will it take to grow the funds according to the client's plan?
A.
7.20 years
B.
10.08 years
C.
14.40 years
D.
25.92 years
Question 2
According to applicable rules and regulations related to public communications of an investment adviser, which of the following statements are true?
A.
Neither SEC or NASAA rules allow investment advisers to publish testimonials
B.
Only NASAA rules allow investment advisers to publish testimonials if certain protocols are followed and disclosures are made
C.
Both SEC and NASAA rules allow investment advisers to publish testimonials without restriction
D.
Only SEC rules allow investment advisers to publish testimonials if certain protocols are followed and disclosures are made
Question 3
On a firm's annual financial disclosures, the CFO reports a number of changes to the firm's current assets. Which of the following is NOT considered a current asset?
A.
Inventory
B.
Intellectual property
C.
Cash
D.
Accounts receivable
Question 4
Azariah Corporation owns 11% of Kirby Incorporated common stock. Azariah Corporation makes a large investment in Kirby Incorporated's preferred stock. What percent of dividends received from the preferred stock investment may Azariah Corporation exclude from taxation?
A.
45%
B.
50%
C.
65%
D.
90%
Question 5
A married couple in their early 50s are both clients of yours and are in need of investment advice. Their combined annual income is $750,000, and they currently have investment accounts with a balance of $1,000,000. Their entire portfolio is invested in money markets and bonds. If the couple maintains a moderate risk tolerance and dual investment objectives of growth and income, what portfolio allocation should you recommend?
A.
90% stocks / 5% bonds / 5% money markets
B.
55% stocks / 40% bonds / 5% money markets
C.
30% stocks / 50% bonds / 20% money markets
D.
50% stocks / 30% bonds / 20% money markets
Question 6
An 80 year old retired investor has $100,000 in one portfolio, which comprises all of their investments. They live off social security and are seeking to supplement their income with their investment portfolio. What investment objective does this investor most likely match with?
A.
Speculation
B.
Capital appreciation
C.
Preservation of capital
D.
Moderate income
Question 7
Mortality risk as associated with a variable annuity is best described as being associated with:
- I. The annuitant passing away earlier than expected\\
- II. The annuitant passing away later than expected\\
- III. The account's value less than basis\\
- IV. The account's value greater than basis
A.
II and IV
B.
I and III
C.
I and IV
D.
II and III
Question 8
An investment adviser that is dual registered as a broker-dealer plans on performing agency cross transactions from time to time. In order to do so, which requirement(s) must be met?
- I. A confirmation the transaction occurred at the national best bid and offer\\
- II. Written disclosure provided to clients documenting the details of an agency cross transaction\\
- III. An annual disclosure detailing the total number of agency cross transactions performed\\
- IV. A confirmation with trade details is provided by settlement of the trade
A.
I and III
B.
All of these choices
C.
II, III, and IV
D.
III only
Question 9
Of the following bond strategies listed, which involves purchasing bonds over time with a fixed maturity target date in the future?
A.
Bond bullet
B.
Bond ladder
C.
Bond stairwell
D.
Bond barbell
Question 10
A registered agent is accused of churning a customer's account. What best describes the activity they're being accused of?
A.
Placing numerous transactions regardless of the client's investment objective
B.
Failing to disclose standard commission rates prior to placing trades
C.
Placing numerous transactions that are inconsistent with the client's investment objective
D.
Assessing significant transaction fees when obtaining illiquid securities
Question 11
What terms and phrases are related to financial firms trading for their own account?
A.
Dealer
B.
Agency
C.
Commission
D.
Middleman
Question 12
Financial requirements related to agents include which of the following?
A.
Minimum net capital
B.
All of the above
C.
The obligation to notify the administrator of insolvency
D.
Minimum net worth
Question 13
A client is assessed a significant commission during a transaction placed with their broker-dealer. A few months later, the state administrator investigates the broker-dealer's records. Which of the following circumstances related to the large commission would NOT trigger punitive action against the firm?
A.
The security was thinly traded and difficult to locate
B.
The security was subject to significant levels of market risk
C.
The firm's net capital was at risk of declining below minimum levels
D.
The firm properly disclosed the significant commission prior to the transaction
Question 14
Both IAR A and IAR B utilize third party research reports when making recommendations to their clients. IAR A analyzes a security with a third party research report and determines it is suitable for their client. They make the recommendation to their client and provide them with a copy of the research report. IAR B analyzes another security with a different research report and determines it is suitable for their client. They make the recommendation to their client, but do not provide them with a copy of the research report. What statement is true?
A.
IAR A must disclose the source of the research report, but not IAR B
B.
IAR B must disclose the source of the research report, but not IAR A
C.
Neither IAR must disclose the source of the research report
D.
Both IARs must disclose the source of the research report
Question 15
Which of the following answers best describes an elastic good?
A.
Demand falls considerably when price rises
B.
Demand stays constant when price rises
C.
Demand becomes unpredictable as price rises
D.
Demand goes up as price rises
Question 16
A 75 year old investor at the 32% tax bracket takes a $90,000 distribution from their Traditional IRA to remodel their home. What is their tax liability?
A.
$28,800
B.
$29,050
C.
$37,800
D.
$45,000
Question 17
A broker-dealer receives compensation for acting as the contra party in a transaction where their client sold a security. What did the broker-dealer receive?
A.
Markup
B.
Advisory fee
C.
Commission
D.
Markdown
Question 18
Which of the following are components of the yield to maturity calculation for callable debt security?
- I. Redemption value\\
- II. Number of years until the bond matures\\
- III. Redemption value at call\\
- IV. Number of years until the bond is called
A.
I and III
B.
I, II, and III
C.
I and II
D.
II only
Question 19
A registered agent receives an email from their client about purchasing life insurance in the near future. They want to pay fixed premiums, have coverage for life, and are concerned about loss of purchasing power with the funds they keep if they decide to forfeit the insurance. What form of life insurance should you recommend?
A.
Universal life insurance
B.
Variable life insurance
C.
Whole life insurance
D.
Term life insurance
Question 20
General partners assume what type of liability in a limited partnership?
A.
Limited
B.
Unlimited
C.
No liability
D.
Dependent on partnership agreement
Question 21
All of the following roles related to a broker-dealer's business would involve automatic registration as an agent of the firm without the filing of a separate Form U-4. EXCEPT:
A.
Partners
B.
Managers
C.
Directors
D.
Officers
Question 22
Offering management services with performance fees is prohibited when offered to which of the following clients?
A.
A client heavily in debt, but manages to invest $1.41 million with the adviser
B.
A client living on a $50,000 salary, but just invested $1.38 million of inherited money with the adviser
C.
A client that invests $700,000 with the adviser
D.
A client making $75,000 in annual salary and invests $1.49 million with the adviser
Question 23
Assuming the economy is on the brink of recession, what statements related to economic theories are false?
- I. Demand-side economists advocate for increased government spending\\
- II. Supply-side economists advocate for increased government spending\\
- III. Demand-side economists advocate for decreased government spending\\
- IV. Supply-side economists advocate for decreased government spending
A.
II and IV
B.
I and III
C.
I and IV
D.
II and III
Question 24
An investor is considering an investment in an ADR, and asks their registered representative for additional information regarding this type of security. Which of the following statements made to the investor would be considered false or misleading?
A.
ADR holders are provided voting rights
B.
ADRs are subject to currency risk
C.
ADRs must be registered with the SEC
D.
ADRs involve US trading of a foreign security
Question 25
How is GDP measured?
A.
Constant dollars
B.
Inflated dollar
C.
Crypto-dollars
D.
Instant dollars
Question 26
An investor discusses their intention to invest a significant amount of capital in common stock investments with the help of their assigned representative. Which of the following statements made by the representative would NOT be considered false or misleading?
A.
Inflation risk is a considerable risk for common stock investments over long-term periods
B.
Longer time horizons are most appropriate for investments in common stock
C.
The more an investor allocates their assets into common stock, the more conservative the portfolio
D.
A positive correlation exists with age and common stock suitability
Question 27
In what circumstance is a capital gain reported to the IRS?
A.
Sales proceeds exceeds cost basis
B.
Sales proceeds exceeds sales charges
C.
Cost basis exceeds sales proceeds
D.
Cost basis exceeds sales charges
Question 28
XYZ Products Co. common stock is currently trading at $167. What option contract maintains the most intrinsic value?
A.
Short 155 call
B.
Short 160 call
C.
Long 165 call
D.
Short 170 call
Question 29
All of the following parties may be provided access to non-public information an adviser maintains on one of their clients without that client's approval, EXCEPT:
A.
Internal Revenue Service (IRS)
B.
Judges requesting information via court orders
C.
Police investigators via subpoena
D.
Institute of Financial Operations (IFO)
Question 30
A married couple in their 30s are both clients of yours and are in need of investment advice. Their combined annual income is $750,000, and they currently have investment accounts with a balance of $500,000. Their portfolio consists of various growth funds. They aim to add diversification to their portfolio by investing future savings in different fund types. Of the choices provided, which fund is most suitable?
A.
S&P 500 index fund
B.
Municipal bond fund
C.
Corporate bond fund
D.
Small cap equity fund
Question 31
AAA Brokerage Services Group, a broker-dealer planning to perform securities transactions in multiple states, outlines its expected business activity to its compliance officers. The firm plans on opening one office in California, while operating primarily online and over the phone in Louisiana and New Jersey. They expect to solely engage hedge funds in California and Louisiana. In New Jersey, the firm plans on primarily working with hedge funds, but expects to gain fewer than 6 wealthy individual investors residing in the state. Additionally, the firm expects those wealthy individuals to travel annually to Wyoming for a short term visit, and plans to continue its business activities with these clients while they're on their trip. What state(s) will the compliance officers of the firm recommend applying for registration?
A.
California, New Jersey, and Wyoming
B.
Louisiana and Wyoming
C.
California and New Jersey
D.
California only
Question 32
A registered representative makes a presentation to several clients regarding the benefits and risks related to common stock investments. Which of the following statements would be considered false or misleading?
A.
A common cause of business risk is competition
B.
Liquidity risk is a significant concern for exchange-listed securities
C.
Inflation risk is a type of systematic risk
D.
Financial risk is due to the issuer over-leveraging its finances
Question 33
Which of the following statements regarding tracking statistics on securities is NOT correct?
A.
Securities with positive betas are inversely correlated with their benchmark index
B.
All of these choices
C.
Securities with positive alphas have underperformed their expected returns
D.
The Sharpe ratio calculates a security's expected return
Question 34
Which of the following is NOT considered a principle of modern portfolio theory?
A.
Investors should add non-correlated assets to increase diversification
B.
Efficient portfolios seek a high return-to-risk ratio
C.
Investors should evaluate risk on a holistic level instead of emphasizing individual securities
D.
Diversification should be attained to reduce systematic risks
Question 35
An investment in a fund utilizing the EAFE as its benchmark index is most suitable for an investor seeking:
A.
Aggressive returns tied to a specific sector
B.
Broad diversification via international investments
C.
Growth and income potential via debt and equity securities
D.
Low-risk exposure to investment grade bonds
Question 36
An investor is heavily invested in LEAP options, leveraged ETFs, and penny stocks. What investment objective best aligns with this portfolio?
A.
Speculation
B.
High yield income
C.
Aggressive growth
D.
Capital appreciation
Question 37
A company financial statement looks as follows:
$75,000 - current assets\\
$2,400,000 - long-term assets\\
$175,000 - current liabilities\\
$150,000 - long-term liabilities\\
$2,150,000 - net worth
What type of corporate financial disclosure form is this?
A.
Income statement
B.
Balance sheet
C.
Statement of operations
D.
Cash flow statement
Question 38
Ever company reported $5.50 in annual earnings per share last year, while paying a $0.84 annual dividend. What is the company's dividend payout ratio?
A.
4%
B.
15%
C.
20%
D.
60%
Question 39
An investor purchases a bond from a start-up company with only one year of profits. Which of the following risks is most applicable to this investment?
A.
Default risk
B.
Interest rate risk
C.
Reinvestment risk
D.
Purchasing power risk
Question 40
A 55-year-old investor is looking for some advice on how to invest $50,000 from an unexpected bond call. The investor has a 10-year time horizon, a moderate tolerance for risk, and an objective of income. Additionally, they believe active management is worth the cost and that the right portfolio manager can beat the market consistently. What investment is the best recommendation?
A.
High quality corporate bond fund
B.
Investment grade bond index fund
C.
High yield bond fund
D.
Government securities index fund
Question 41
The following fixed income securities are available to an investor:
- Security A: 4% coupon, 15 year bond, $20 NPV
- Security B: Zero coupon, 20 year bond, $40 NPV
- Security C: 9% coupon, 30 year bond, $5 NPV
- Security D: 12% coupon, 24 year bond, -$10 NPV
Assuming the investor is utilizing discount cash flow techniques, which is the most likely to be purchased?
A.
Security C
B.
Security B
C.
Security D
D.
Security A
Question 42
Of the following statements made by financial professionals, which would NOT be considered unethical and/or prohibited by relevant laws and regulations?
A.
A guaranteed security will never result in a loss
B.
Exempt securities avoid registration due to their low risk profiles
C.
Only registered or exempt securities may be legally offered in a state
D.
The administrator may only deem large organizations as institutions
Question 43
An investor maintains a portfolio of individual bonds and bond funds. If interest rates were to begin rising, what should they expect in regards to market values of both security types?
A.
The individual bonds increase and the bond fund decreases
B.
Both the individual bonds and bond fund decrease
C.
Both the individual bonds and bond fund increase
D.
The individual bonds decrease and the bond fund increases
Question 44
Which of the following terms and phrases are associated with a broker transaction?
A.
Dealer
B.
Trading for their own account
C.
Markdown
D.
Commission
Question 45
Which of the following statements regarding valuation ratios utilized by investors seeking stocks is correct?
A.
Price-to-book ratios are often utilized by technical analysts
B.
High PE ratios are typical for value companies
C.
A low price-to-book ratio indicates a stock may be underpriced
D.
A low PE ratio may indicate a security is overvalued
Question 46
A no-load fund is associated with all of the following, EXCEPT:
A.
Sales charge
B.
Custodian bank fee
C.
Administrative fee
D.
Management fee
Question 47
Which of the following SEC forms is filed when control or restricted shares are intended to be sold by an investor?
A.
Form S-1
B.
Form 4
C.
Form 144
D.
Form D
Question 48
An investor utilizing credit yield spreads to predict future economic activity would most likely compare:
A.
Credit and debit put spread premiums
B.
U.S. government and corporate debt yield curves
C.
Call and put spread premiums
D.
Common and preferred dividend yield curves
Question 49
Which of the following terms and phrases are associated with financial professionals earning commissions?
A.
Markup
B.
Inventory
C.
Dealer
D.
Middleman
Question 50
Which of the following option contracts is "out of the money"?
A.
Long 70 put @ $1 when the market price is $72
B.
Short 70 put @ $8 when the market price is $67
C.
Long 100 put @ $9 when the market price is $98
D.
Short 100 put @ $3 when the market price is $100
Question 51
An investor wishes to further diversify their portfolio with real estate, but is concerned about their lifestyle changing in the short term. In the next few years, they could be promoted to a better paying job, or could be laid off. The investor will not have much clarity on their employment status for at least one year. In the meantime, they ask for your help in picking real estate properties for long term investments. What should you recommend?
A.
To consider unlisted, private REITs due to their exclusivity
B.
To continue forward with the plan and find good opportunities in the real estate market
C.
To consider listed REITs given their lack of liquidity risk
D.
To completely avoid this type of investment given future uncertainty
Question 52
A government employee gains access to a retirement plan with a salary deduction feature. Assets placed in the account grow tax-deferred, and are fully taxable when distributed in retirement. What type of plan is this?
A.
401(k)
B.
457
C.
Money purchase
D.
SEP IRA
Question 53
An investor does their own research, but discusses their findings with the registered representative assigned to their account prior to making any adjustments to their portfolio. They discover a high yield bond fund that's been recommended by many reputable online outlets. All of the following statements made by the representative would be considered false or misleading, EXCEPT:
A.
Capital appreciation is the primary goal of the fund
B.
The underlying investments in the fund are primarily comprised of investment grade bonds
C.
The fund's NAV can be expected to be stable
D.
This investment is suitable for more aggressive investors seeking higher levels of income
Question 54
An issuer running a profitable business is considering changing their accounting methods. In particular, they are seeking a method that accounts for revenues when they are received and expenses when they are paid. Currently, the issuer accounts for revenues and expenses when they occur, sometimes weeks or months before a cash flow event occurs. What statement is true?
A.
The issuer wants to switch to flow-based accounting
B.
The issuer wants to switch to cash-based accounting
C.
The issuer wants to switch to accrual-based accounting
D.
The issuer is prohibited from switching accounting methods
Question 55
Which of the following is NOT considered a precious metal?
A.
Platinum
B.
Palladium
C.
Gold
D.
Steel
Question 56
A 70 year old investor is looking for some advice on how to invest $75,000 from a recent inheritance. The investor has a 5 year time horizon, a low tolerance for risk, and an objective of income. Additionally, they believe active management is worth the cost and that the right portfolio manager can beat the market consistently. What investment is the best recommendation?
A.
High yield bond ETF
B.
High quality short term bond fund
C.
Money market fund
D.
Intermediate government bond index fund
Question 57
Which of the following is the most common reason for market price fluctuations for fixed income securities?
A.
Tax law changes
B.
Stock market values
C.
Interest rate changes
D.
Conversion rates of bonds
Question 58
From an issuer's perspective, what type of auditor opinion is most preferable when a financial disclosure form is audited?
A.
Unaccredited
B.
Accredited
C.
Unqualified
D.
Qualified
Question 59
Broker-dealers are subject to a number of post-registration obligations, especially in reference to recordkeeping. Which of the following methods of maintaining records is NOT considered legitimate and lawful?
A.
Printed records
B.
Rewritable disc
C.
Microfilm
D.
Non-rewritable disc
Question 60
Which type of account requires transfer to the account owner at the age of majority?
A.
Custodial accounts
B.
Trust accounts
C.
TIC accounts
D.
Guardianship accounts
Question 61
A Tennyson Inc. $1,000 par, 4.75% convertible bond is trading at 106. The conversion price is $10.00 and the common stock is trading at $16.60. What is the parity price of the stock?
A.
$10.60
B.
$13.78
C.
$18.02
D.
$21.20
Question 62
All of the following are considered forms of market manipulation, EXCEPT:
A.
Marking the open
B.
Pump and dump
C.
Trading ahead
D.
Painting the tape
Question 63
Which of the following accurately depicts the statute of limitations and maximum penalties for acts the SEC pursues criminal charges against?
A.
3 year statute of limitations, maximum $10,000 fine and 5 year jail sentence per violation
B.
3 year statute of limitations, maximum $10,000 fine and 5 year jail sentence total
C.
3 year statute of limitations, maximum $5,000 fine and 10 year jail sentence per violation
D.
5 year statute of limitations, maximum $10,000 fine and 5 year jail sentence per violation
Question 64
An investor's portfolio allocation is:
10% small cap growth funds\\
50% large cap growth funds\\
15% sector funds\\
15% emerging market funds\\
5% speculative grade corporate bonds\\
5% money markets
What investment objective does this portfolio align closest to?
A.
Speculation
B.
Aggressive growth
C.
High yield income
D.
Capital appreciation
Question 65
Which of the following statements related to QTPs is/are correct?
- I. Beneficiary changes may be made once per calendar year\\
- II. Investment allocation changes may be made once per calendar year\\
- III. State plan changes may be made once per calendar year
A.
III only
B.
I and III
C.
II only
D.
II and III
Question 66
Which of the following statements are true regarding Canadian broker-dealers operating in a US state?
A.
Canadian broker-dealers are excluded from the definition of a broker-dealer and may freely work with Canadian clients in the US
B.
Canadian broker-dealers may not engage any investors in the US
C.
Canadian broker-dealers may obtain limited registration to continue working with Canadian clients temporarily in a US state
D.
Canadian broker-dealers are subject to the same registration requirements as US-based broker-dealers
Question 67
A long IBM Aug $100 call trades at $1.00 when the market price is $97.25. Which of the following statements is true?
A.
The contract is $1.00 in the money
B.
The contract is $1.00 out the money
C.
The contract is $2.75 out the money
D.
The contract is $2.75 in the money
Question 68
A 43 year old investor calls you and asks for guidance on a $600,000 investment they want to make. They mention a large-cap growth fund they want to invest in, which you consider suitable for their objectives and current financial situation. However, the investor is concerned the market is at a peak and primed for a downturn. What should you recommend?
A.
Wait for the market to decline before making the investment
B.
Make the investment as the market is unpredictable
C.
Dollar cost average the investment
D.
Invest in a more conservative fund
Question 69
Which of the following is the formula for NAV?
A.
Assets + liabilities / outstanding shares
B.
Assets + liabilities / issued shares
C.
Assets - liabilities / outstanding shares
D.
Assets - liabilities / issued shares
Question 70
Solicitors seeking compensation for connecting prospective clients with advisers are prohibited from all of the following actions, EXCEPT:
A.
Presenting the risky nature of the adviser's recommendations to aggressive clients
B.
Discussing potential benefits of securities only
C.
Only disclosing the adviser's recommendations that resulted in positive returns
D.
Making an untrue, inaccurate, or misleading statement
Question 71
A customer of yours has a young child (age 4), and they want to invest funds to pay for future college costs. Assuming the customer has $15,000 to invest today and has a goal of reaching $30,000 by the time the child turns age 18, what annualized rate of return must they attain to reach their goal?
A.
3.86%
B.
5.14%
C.
9.26%
D.
10.29%
Question 72
All of the following statements related to private placement offerings as regulated by the Uniform Securities Act are correct, EXCEPT:
A.
The unregistered security cannot be sold to more than 35 non-accredited investors
B.
An unlimited number of institutional investors may be offered the security
C.
Stock purchased through these offerings is restricted
D.
No commissions may be taken on sales to retail investors
Question 73
A repurchase offer is extended to investors in an interval fund. Which of the following best describes this action?
A.
An offer to allow investors to redeem their shares minus a maximum 2% fee
B.
An offer to allow investors to purchase additional shares at a maximum 2% sales charge
C.
An offer to allow investors to redeem their shares minus a maximum 3% redemption fee
D.
An offer to allow investors to purchase additional shares at a maximum 4% sales charge
Question 74
The regulation that defines management companies, unit investment trusts, and face amount certificates:
A.
Securities Act of 1933
B.
Investment Company Act of 1940
C.
Investment Advisers Act of 1940
D.
Uniform Securities Act
Question 75
Which of the following statements related to the capital asset pricing model are incorrect?
A.
CAPM utilizes beta as its risk variable
B.
None of these choices
C.
CAPM only considers systematic risk
D.
CAPM helps determine risk-adjusted returns
Question 76
An investor learns of the short interest theory, and then incorporates the theory into their trading philosophy. Which of the following statements relating to this theory are correct?
A.
High short interest is a bearish indicator
B.
Short interest measures the number of investors with small stock positions
C.
Short interest theory is based on technical analysis
D.
All of these choices
Question 77
A 50 year old investor with a $3,000,000 portfolio specifies tax advantaged income as their investment objective. Their current asset allocation of their portfolio is:
20% growth stocks\\
20% value stocks\\
10% preferred stocks\\
20% long term corporate bonds\\
25% long term municipal bonds\\
5% money markets
Which of the following statements is most accurate?
A.
The portfolio's allocation is suitable
B.
The preferred stock should be sold and reinvested in value stocks
C.
A majority of the non-dividend paying stock should be sold and reinvested into long term municipal bonds
D.
A majority of the stock investments should be sold and reinvested in money markets
Question 78
A $1,000 par, 5% debt security has a current yield of 4.39%. What must its market price be?
A.
109
B.
114
C.
117
D.
128
Question 79
Which of the following statements regarding Coverdell ESAs is correct?
A.
Funds must be distributed or rolled over by age 18
B.
Contributions must stop at age 30
C.
Income phaseouts do not exist for Coverdell ESAs
D.
Contributions are not tax-deductible
Question 80
The state administrator takes punitive action against a person, resulting in their inability to offer securities products and services. After the notice of punitive action has been issued, what additional obligations must the administrator provide to the person?
- I. Opportunity for a hearing\\
- II. Disclosures of written facts and findings of law\\
- III. Opportunity for re-application\\
- IV. Disclosure of NASAA employee signing off on action
A.
II and IV
B.
I, II, and III
C.
I only
D.
I and II
Question 81
An individual creates and funds a non-governmental organization for charitable giving. The individual appoints themselves and a few friends to the organization's Board, which is the internal group responsible for overseeing and eventually distributing the organization's assets. Over the next decade, the organization periodically distributes funds to charitable causes identified by the Board. What type of charitable giving structure is being utilized?
A.
Donor-advised fund
B.
Estate administrator fund
C.
Private foundation
D.
Estate executor foundation
Question 82
All of the following would appear on an order ticket, EXCEPT:
A.
Size of order
B.
Market order price
C.
Time constraints of order
D.
Account number
Question 83
An agent is currently registered solely in Kentucky as a representative of OPQ Brokerage. Although all of their clients currently reside in Kentucky, one of their more profitable clients moves to Washington. What statement is NOT false?
A.
OPQ Brokerage is required to be registered in Washington, but its agents are exempt
B.
OPQ Brokerage is excluded from registration in Washington, but its agents must register
C.
Registration in Washington is required for both OPQ Brokerage and any agent working with the client
D.
OPQ Brokerage and its agents may avoid registration in Washington
Question 84
A number of analytics and tools can be used to determine if a security is worth an investment. One of those resources is discounted cash flow. Which of the following statements regarding this type of analysis is true?
- I. Future value determines the current value of future cash flows\\
- II. NPV is the difference between a security's present value and cost\\
- III. IRR is most accurate when analyzing fixed income cash flows\\
- IV. The discount rate is equal to CPI
A.
II and III
B.
I and IV
C.
I and II
D.
II only
Question 85
Which of the following statements relating to U.S. government securities is true?
A.
Treasury bills are zero coupon
B.
The US Government debt market is the smallest and least active securities market in the world
C.
US Government securities are subject to very high levels of default risk
D.
Treasury notes are zero coupon
Question 86
Municipal bonds should never be purchased in what type of account?
A.
Retirement accounts
B.
Margin accounts
C.
Trusts
D.
Partnership accounts
Question 87
An employee of an automotive company is granted incentive stock options to purchase 800 shares of company stock at $180. The options have a 4 year vesting period, annual vesting cliffs, and a term of 10 years. 5 years later, the employee exercises all of the options when the market price of the company stock is at $210. 7 months later, the stock is liquidated in the market at $215. What is the tax consequence of all these actions?
A.
$28,000 of ordinary income taxable up to 37%
B.
$28,000 of long term capital gains taxable at 15% or 20%
C.
$24,000 of ordinary income taxable up to 37% and $4,000 of long term capital gains taxable at 15% or 20%
D.
$28,000 of ordinary income taxable up to 37% and $4,000 of long term capital gains taxable at 15% or 20%
Question 88
A customer is considering investment in a stock, but finds it only trades in the OTC markets and only a few thousand trades occur daily on average. Which risk should they be concerned about?
A.
Financial risk
B.
Liquidity risk
C.
Business risk
D.
Market risk
Question 89
An investor calls their assigned representative and requests to place a trade. Their request includes a requirement to liquidate a security in their portfolio at a specified price or better. What order should the representative place?
A.
Stop
B.
Non-discretionary
C.
Market
D.
Limit
Question 90
A customer of yours makes a large contribution to a custodial account for their young child. What is this contribution considered?
A.
Not property of the minor until age 18
B.
Property of the custodian
C.
An irrevocable gift to the family
D.
An irrevocable gift to the minor
Question 91
Government sources report CPI to be 200 basis points higher than expected. Which of the following risks is most likely to be a concern?
A.
Political risk
B.
Market risk
C.
Financial risk
D.
Purchasing power risk
Question 92
Briar Distributions Company reports the following on their ongoing public finance disclosure form:
Cash: $400,000 \\
Inventory: $2,200,000 \\
Accounts receivable: $12,800,000 \\
Accounts payable: $1,000,000\\
Taxes payable: $1,200,000 \\
Mortgage bond outstanding: $10,900,000
What is the reported net working capital for Briar Distributions Company?
A.
$400,000
B.
$2,300,000
C.
$11,000,000
D.
$13,200,000
Question 93
An adviser wants to begin collecting a part of the commissions charged on the security transactions they recommend. This additional form of compensation would be in addition to the advisory fees they collect. What circumstances must exist for the adviser's actions to be legal and compliant while collecting commissions?
A.
Advisers may never collect commissions
B.
The adviser must gain NASAA approval to act in a dual capacity
C.
The adviser's trades must be executed by an affiliated broker-dealer
D.
The adviser's clients must approve of the commission collection in writing
Question 94
A customer of a broker-dealer contacts their assigned representative regarding the establishment of a new business. The customer is interested in creating an S-corporation based on recent research. Of the following statements made by the customer, what statement is false?
A.
"Shareholders cannot be considered non-resident aliens"
B.
"Shareholders maintain limited liability"
C.
"Pass-through of gains and losses are permitted"
D.
"This business form may maintain an unlimited number of shareholders"
Question 95
An investor goes through the necessary steps to open an options account at their broker-dealer. They short a put in their first and only transaction. If the options agreement is not returned in the required time period, what type of transaction are they limited to?
A.
Closing sale
B.
Opening purchase
C.
Opening sale
D.
Closing purchase
Question 96
A broker-dealer enters into a networking agreement with a credit union. Part of the agreement involves the broker-dealer renting space in the credit union's primary deposit-taking center. To comply with relevant regulations, the NASAA Model Rule for Sales of Securities at Financial Institutions requires all of the following protocols to be followed, EXCEPT:
A.
The broker-dealer must promptly notify the credit union if an agent is terminated for reason
B.
The broker-dealer must maintain a space that is distinctly separate from the deposit-taking area
C.
The broker-dealer must offer hedges on offered products that act similarly to FDIC insurance
D.
The state administrator must have access to the credit union for inspection purposes
Question 97
Typical investors of commercial paper include all of the following, EXCEPT
A.
Retail investors
B.
Institutions
C.
Insurance companies
D.
Mutual funds
Question 98
Which of the following statements regarding forward contracts are TRUE?
A.
Primarily trade on exchanges
B.
Both sides of the contract are subject to an obligation
C.
Long contracts be used to hedge against declining commodity costs
D.
Contracts are standardized
Question 99
It is reported the Federal Reserve will announce the intention to loosen the money supply in the near term future. Which of the following would be the most likely reason for this action?
A.
To reduce inflation
B.
To encourage economic growth
C.
To cool down an overheating economy
D.
To reduce spending
Question 100
Which of the following statements regarding Roth IRAs and Roth 401(k)s is correct?
A.
Only Roth 401(k)s are considered qualified plans
B.
Roth 401(k)s are subject to RMDs
C.
Roth 401(k)s are not subject to the 5 year aging period
D.
Roth IRAs are subject to RMDs
Question 101
Which of the following items would be categorized by a firm's CFO as a current liability?
A.
30 year bond outstanding
B.
Accounts payable
C.
Equipment
D.
Real estate
Question 102
Offering management services with fulcrum fees is prohibited when offered to which of the following clients?
A.
A client that invests $1.50 million with the adviser
B.
A client with a $3.76 million net worth
C.
A client that maintains a $4.84 million net worth and invests $1.26 million with the adviser
D.
A client that maintains a $850,000 net worth and invests $500,000 with the adviser
Question 103
Which of the following disclosures are NOT required on Form U-4?
A.
The registrant's bankruptcy history
B.
The registrant had previously violated securities laws
C.
The registrant's history of enjoinment from the securities industry
D.
The registrant's education history
Question 104
To open an options account, certain protocols and procedures must be followed. Rank the following steps in order from first to last:
- I. Options Disclosure Document provided\\
- II. Principal approval obtained\\
- III. Options Agreement signed and submitted\\
- IV. New account form filled out
A.
I, III, IV, II
B.
IV, I, II, III
C.
I, IV, III, II
D.
IV, III, I, II
Question 105
Which of the following tax systems is not regressive under US tax code?
A.
Excise
B.
Estate
C.
All of these choices
D.
Sales
Question 106
An exclusion from registration as an agent would be granted to all of the following persons, EXCEPT:
A.
A natural person representing an issuer while offering pre-organization certificate subscriptions to 14 retail investors
B.
A natural person representing an issuer in a private securities offering to 7 retail investors and 30 institutions
C.
A natural person representing an issuer while performing a sale of securities to an underwriter
D.
An individual representing an issuer while performing a sale to other broker-dealers only
Question 107
Kyrie places the following order: Sell 200 shares of FB at $159 Stop. This means the order will:
A.
trigger when the market price goes to 159 or below
B.
trigger when the market price goes to 159 or above
C.
fill immediately
D.
go through immediately
Question 108
Which of the following types of accounts require supplemental documentation to be opened?
A.
Trust accounts
B.
Individual accounts
C.
Custodial accounts
D.
WROS accounts
Question 109
After numerous years of economic growth, the US economy goes into recession and the stock market declines significantly. To mitigate its effects on the American people, Congress passes new laws to stimulate the economy, which are all signed by the President. Which of the following risks is most prevalent?
A.
Political risk
B.
Market risk
C.
Legislative risk
D.
Business risk
Question 110
Of the following choices provided, which would be considered a broker-dealer according to the Uniform Securities Act?
- I. A person effecting securities transactions for their own account\\
- II. A person making securities recommendations for compensation\\
- III. A person effecting securities transactions for the accounts of others\\
- IV. A natural person representing an issuer during the sale of its securities
A.
II only
B.
I, III, and IV
C.
All of these choices
D.
I and III
Question 111
A 60 year old investor with a $1,500,000 portfolio specifies safety of principal as their investment objective. Their current asset allocation of their portfolio is:
5% value stocks\\
5% growth stocks\\
15% preferred stocks\\
65% long term bonds\\
10% money markets
Which of the following statements is most accurate?
A.
The portfolio's allocation is suitable
B.
The common stock should be sold and reinvested in preferred stock
C.
A large portion of the money markets should be sold and reinvested in preferred stock
D.
A large portion of the money markets should be sold and reinvested in long term bonds
Question 112
Which of the following is NOT considered a principle of modern portfolio theory?
A.
Diversification should be attained to reduce non-systematic risks
B.
Investors should evaluate risk on a holistic level instead of emphasizing individual securities
C.
Efficient portfolios have high return potential and low risk potential
D.
Investors should add correlated assets to increase diversification
Question 113
What best describes the contents of the credit agreement (in regards to margin accounts)?
A.
When the firm can loan out customer securities
B.
How a customer can open a credit card through the firm
C.
When the firm can pledge the customer's securities
D.
The margin loan structure and how interest is computed
Question 114
A broker performs a trade involving a purchase of 250 shares of stock at a price of $140 per share on behalf of a customer. How will they be compensated?
A.
12b-1 fee
B.
Commission
C.
Markup
D.
Markdown
Question 115
An investor receives a $200,000 bonus from their work and plans to invest it for a future down payment on a house. They believe they can attain a 11% annualized return on the portfolio they've chosen. Their goal is to double the original amount of their bonus, then purchase a home. How long will it take for the investor to reach their goal?
A.
3.28 years
B.
3.93 years
C.
6.55 years
D.
11.46 years
Question 116
Which of the following statements are true regarding contributions to Roth IRAs?
A.
Contributions may be made in any circumstance
B.
Contributions may not be made if the investor reports substantial income
C.
Contributions may be made if the investor has reported earned income
D.
Contributions may not be made if the investor has access to a workplace plan and substantial income
Question 117
In order for a limited partnership to be registered with the state, paperwork must be filed with the appropriate authorities. When all necessary documents are processed, what is provided to confirm the legitimacy of the business?
A.
Subscription agreement
B.
Certificate of limited partnership
C.
Corporate charter
D.
Agreement of limited partnership
Question 118
Which of the following securities is most likely to experience reinvestment risk?
A.
1 year Treasury bills
B.
Ginnie Mae pass through certificates with an average expected maturity of 15 years
C.
20 year corporate debentures
D.
30 year STRIPS
Question 119
NASAA rules require the disclosure of all of the following while opening a fee-based account, EXCEPT:
A.
How the fee is calculated
B.
Time period for calculating performance
C.
Any guarantees of performance embedded in the contract
D.
The fee structure provides an incentive to the adviser to take more risk
Question 120
Issuers taking part in Regulation D offerings may sell securities to how many accredited investors?
A.
15
B.
35
C.
95
D.
unlimited
Question 121
Investors may be charged performance-based fees if meeting certain qualifications. Which of the following would qualify an investor for this fee structure?
A.
Be employed as an IAR of the firm for at least 1 year
B.
Only allow performance fees to be collected on exempt securities
C.
Collective investing via an investment club
D.
Obtain an exemption letter from the state administrator
Question 122
An investor's portfolio was recently allocated in the following manner:
60% stock\\
35% bonds\\
5% money markets
A few months later, the investor's financial adviser recommends a deviation from their allocation in order to take advantage of a short term opportunity in the stock market. What allocation style is the adviser utilizing for this change?
A.
Active asset allocation
B.
Tactical asset allocation
C.
Strategic asset allocation
D.
Passive asset allocation
Question 123
A subsidiary issues a bond which is guaranteed by its parent company. The credit rating of the bond is based upon which of the following parties?
A.
Fitch
B.
The subsidiary
C.
The Federal Reserve
D.
The parent company
Question 124
Investment advisers are strictly forbidden from performance guarantees in relation to securities advice. All of the following instances include a prohibited performance guarantee, EXCEPT:
A.
"Our best analyst ensures this stock will rise in value over the next 10 years"
B.
"We agree with the market consensus that this fund will not lose value in the long-term"
C.
"Our firm will refund your advisory fees if your portfolio underperforms"
D.
"This bond is guaranteed by an insurance company as to the principal and interest payable"
Question 125
Which of the following statements related to the initial registration of a broker-dealer is/are true?
- I. Form ADV must be filed with the state administrator\\
- II. The consent of service of process must be filed and renewed annually\\
- III. A full year's filing fee must be paid, regardless of date of registration\\
- IV. Effective registration lasts until the end of the calendar year
A.
All of these choices
B.
III and IV
C.
I and II
D.
I, III, and IV
Question 126
A customer of yours is considering the application of a power of attorney (POA) to their account. In particular, they want to give POA over their individual accounts to their spouse. If they implement a non-durable POA, what statement is true?
A.
POA ceases after incapacitation, but is reinstituted after death
B.
POA ceases after death, but not after incapacitation
C.
POA ceases after death or incapacitation
D.
POA does not cease because of incapacitation or death
Question 127
A mutual fund was originally structured, registered, and initially offered to investors 8 years ago. What past returns must be disclosed in the fund's prospectus?
A.
1-year, 5-year, and 8-year returns
B.
1-year and 5-year returns
C.
1-year, 2-year, and 8-year returns
D.
2-year, 5-year, and 8-year returns
Question 128
Which of the following best describes the discount rate?
A.
The rate member banks charge to other member banks
B.
The rate the Federal Reserve charges to member banks
C.
The rate commercial banks charge to their best customers
D.
The rate commercial banks charge to broker-dealers
Question 129
A solicitor is paid a cash referral fee for connecting a prospective client with an investment adviser. The solicitor is NOT required to comply with which of the following to ensure compliance with NASAA rules?
A.
Must be approved by the state administrator as an IAR
B.
Must deliver solicitor's brochure
C.
May not be subject to a statutory disqualifications
D.
Must maintain and follow written agreement with the adviser
Question 130
An individual maintains an agreement with a registered investment adviser related to client referrals. In order to find business for the adviser, the individual cold calls prospective clients residing in neighborhoods with high real estate market values. When connecting on a cold call, the individual does not discuss specific securities, but markets the abilities of the adviser. If a prospective client becomes an actual client, the individual collects a finder's fee from the adviser.
What statement is true?
A.
NASAA rules requires the individual to register as an IAR
B.
SEC rules require the solicitor to register as an IAR
C.
The individual is exempt from registration
D.
NASAA and SEC rules require the solicitor to register as an IAR
Pass the FINRA Series 65. Guaranteed.
Achievable is the best Series 65 exam prep course: effective, personalized, and convenient. With Achievable, you'll spend less time studying and pass your exam the first time, or your money back.