Free FINRA Series 66 practice exam
Question 1
All of the following items are typically verified in the options agreement, EXCEPT:
A.
Investment objective
B.
Address
C.
Marital status
D.
Net worth
Question 2
An agent is contacted by an old friend to help them sell stock in their small start-up company. The transaction will occur off the books of the broker-dealer that employs the agent. so the agent notifies their employing firm in writing. A few days after the written notification is received, the agent facilitates the offering, raising a modest sum for their friend's company. After the offering, the friend pays the agent a small finder's fee. What statement is true?
A.
The agent acted unethically by performing a securities transaction outside of their firm
B.
The agent acted ethically
C.
The agent acted unethically by being paid a finder's fee
D.
The agent acted unethically by not obtaining written approval from their firm
Question 3
The following quotes are placed by four separate market makers on NASDAQ:
MM1: $52.80 / $53.00 (8 x 7)\\
MM2: $52.50 / $52.95 (3 x 8)\\
MM3: $52.60 / $52.85 (8 x 2)\\
MM4: $52.70 / $53.15 (7 x 2)
What is the inside market?
A.
$52.50 / $53.15 (3 x 2)
B.
$52.70 / $52.85 (7 x 2)
C.
$52.80 / $52.85 (8 x 2)
D.
$52.80 / $53.00 (8 x 7)
Question 4
The average PE ratio for S&P stocks is 23.85. Which PE ratio most likely represents the PE ratio of a value company?
A.
5.96
B.
14.02
C.
20.09
D.
41.08
Question 5
An investment adviser is appointed as trustee over a family trust. The trust agreement mandates a low-to-moderate risk tolerance regarding the asset's portfolio management. A few months after appointment as trustee, the adviser reinvests the proceeds from a recent Treasury bond redemption and into a volatile small-cap stock fund. According to the provisions of the Uniform Prudent Investors Act, what statement is true?
A.
This action is ethical if the adviser consulted with the trust grantor before making the investment
B.
This action is unethical because the adviser should have reinvested the bond redemption proceeds into another similar security
C.
This action is ethical if the small-cap stock fund comprises a small portion of the trust portfolio
D.
This action is unethical because the small-cap stock fund is riskier than the established risk tolerance
Question 6
An investor is a long-time customer of a large broker-dealer. They consistently place numerous trades through their registered agent who they have a good working relationship with. The investor requests the agent purchase a security that does not trade actively. The agent takes the order and spends the next several days searching for a seller in the market. They locate a seller, execute a transaction on behalf of the investor, and charge a substantial commission. The commission is reported on the client's trade confirmation, which they receive by the end of the day via email. What statement is true?
A.
The agent should not have charged the substantial commission
B.
The agent should have informed the client of the commission prior to the trade
C.
The agent acted ethically and complied with securities laws
D.
The agent should have obtained principal approval prior to charging the commission
Question 7
All of the following circumstances results in an assignment of contract, EXCEPT:
A.
5 partners leave a partnership out of a total of 7 equal partners
B.
Addition of 10 new partners with equal share to a partnership with 2 current partners
C.
2 partners leave a partnership out of a total of 10 equal partners
D.
10 partners leave a partnership out of a total of 12 equal partners
Question 8
Prohibited practices performed by agents and/or broker-dealers according to NASAA rules include which of the following?
A.
Recommending growth stocks to an investor with capital appreciation goals
B.
A broker-dealer lending money to a client through their margin account
C.
An agent engaging in selling away from their broker-dealer
D.
An agent refusing to recommend unsuitable securities to a client
Question 9
A firm would categorize which of the following as a current liability on their balance sheet?
A.
Real estate
B.
Equipment
C.
Intellectual property
D.
Wages payable
Question 10
Which of the following characteristics generally describe digital assets?
- I. An asset that is stored digitally\\
- II. Non-fungibility\\
- III. Existence and ownership is recorded on the blockchain\\
- IV. Backed by another asset or commodity
A.
I and III
B.
I, II, III, and IV
C.
II and IV
D.
I, II, and III
Question 11
Which of the following forms are NOT utilized for withdrawing the registration of a person?
A.
Form U5
B.
Form U6
C.
Form BDW
D.
Form ADV-W
Question 12
An unregistered individual is a trainer at a luxury gym and maintains a book of highly-wealthy clients. The individual's best friend works at a local broker-dealer. They offer the gym trainer 10% of all their commissions earned from referred clients. The unregistered gym trainer:
A.
Must be registered as a broker-dealer to receive the commissions
B.
Must be registered as an agent to receive the commissions
C.
May receive the commissions because they are only allocated an insignificant portion
D.
May receive the commissions if the state administrator grants approval
Question 13
Which of the following statements is true regarding ADRs?
A.
Dividends withheld for taxes are reflected as a US tax deduction
B.
An investment in an ADR is not subject to default risk
C.
None of these choices
D.
A weak US Dollar negatively affects a dividend-paying ADR
Question 14
A 30 year old investor at the 24% tax bracket with a $100,000 portfolio specifies high yield income as their investment objective. Their current asset allocation of their portfolio is:
15% value stocks\\
10% growth stocks\\
30% preferred stocks\\
30% speculative-grade corporate bonds\\
10% investment-grade corporate bonds\\
5% money markets
Which of the following statements is most accurate?
A.
A majority of the preferred stocks should be sold and reinvested in speculative-grade corporate bonds
B.
A majority of the value stocks should be sold and reinvested in growth stocks
C.
The portfolio's allocation is suitable
D.
A majority of the value stocks should be sold and reinvested in speculative-grade corporate bonds
Question 15
The Uniform Securities Act empowers which of the following persons to enforce state securities laws and oversee the registration of financial professionals?
A.
Federal Reserve
B.
FINRA
C.
Securities and Exchange Commission (SEC)
D.
State administrator
Question 16
An investment adviser representative maintains a book of clients they regularly offer asset management services to. One of those clients is the agent's niece, who recently inquired about opening a joint account with the IAR. According to the NASAA Model Rule on Unethical Business Practices Of Investment Advisers, Investment Adviser Representatives, And Federal Covered Advisers, what protocols must be following in order for the joint account to be opened?
A.
The IAR must obtain written approval from their firm, establish a written agreement with the niece, and share profits or losses in proportion to capital contributions
B.
The IAR must obtain written approval from their firm and establish a written agreement with the niece
C.
The IAR is prohibited from sharing an account with a client
D.
The IAR is exempt from account sharing protocols because the client is a family member
Question 17
A 35 year old investor at the 24% tax bracket with a $500,000 portfolio specifies high yield income as their investment objective. Their current asset allocation of their portfolio is:
20% value stocks\\
45% growth stocks\\
20% preferred stocks\\
5% investment grade corporate bonds\\
5% speculative grade corporate bonds\\
5% money markets
Which of the following statements is most accurate?
A.
A majority of the common stocks should be sold and reinvested in preferred stocks
B.
The portfolio's allocation is suitable
C.
A majority of the growth stocks should be sold and reinvested in speculative grade corporate bonds
D.
A majority of the growth stocks should be sold and reinvested in investment grade corporate bonds
Question 18
Holdings reports required to be submitted by access persons must include all of the following items, EXCEPT:
A.
The date the holdings report is submitted
B.
Securities owned by the access person
C.
The amount of unrealized gains or losses on securities owned
D.
Name of broker, dealer or bank where portfolio is held
Question 19
Broker-dealers are required by the Securities Exchange Act of 1934 to disclose ongoing financials, including net capital computations, using what form?
A.
Coordination report
B.
Qualification report
C.
Form BD
D.
FOCUS report
Question 20
A married couple in their 30s are both clients of yours and are in need of investment advice regarding a $100,000 inheritance just received. They have a combined annual income of $250,000 and consider themselves aggressive investors. A majority of their income goes to pay for their mortgage, saving for their children's education, and various bills. Regardless, they always have enough money left over to fully fund their retirement plans. They plan to make a home purchase in less than a year, and want to use the inheritance for a deposit on the property. What is the most suitable investment for the inheritance in the meantime?
A.
S&P 500 index fund
B.
Money market fund
C.
Balanced fund
D.
Municipal bond fund
Question 21
An agent is registered in all 50 states and currently operates a large book of business. Which of the following circumstances would require the agent to file an amendment to update Form U-4?
A.
The agent's firm receives a written customer complaint alleging fraud
B.
The agent is promoted to a position with more responsibility
C.
The agent is sued by a client over a non-securities matter
D.
The agent is paid a substantial bonus for exceeding execution goals
Question 22
An entrepreneur is planning on establishing a corporation and is comparing C-corporations to S-corporations. Which of the following statements are true?
- I. C-corporations must maintain a limited number of shareholders\\
- II. S-corporations must maintain a limited number of shareholders\\
- III. C-corporations allow for pass-through of gains and losses\\
- IV. S-corporations allow for pass-through of gains and losses
A.
II and III
B.
I and III
C.
I and IV
D.
II and IV
Question 23
Which of the following statements related to opening a margin account is true?
- I. The margin agreement must be submitted prior to account opening\\
- II. The margin agreement must be submitted promptly after the first margin trade\\
- III. The hypothecation agreement must be signed\\
- IV. The loan consent form must be signed\\
- V. The credit agreement must be signed
A.
II, IV, and V
B.
I, III, IV, and V
C.
II, III, and V
D.
I, III, and IV
Question 24
All of the following statements regarding price-to-book and price-to-earnings ratios are false, EXCEPT:
A.
Price-to-book ratios are often utilized by fundamental analysts
B.
A low PE ratio may indicate a security is overvalued
C.
Low PE ratios are typical for growth companies
D.
A low price-to-book ratio indicates a stock may be overpriced
Question 25
What type of employer-sponsored retirement plan may only be opened by small self-employed business owners with no employees?
A.
HR-10 plan
B.
Solo 401(k)
C.
SIMPLE IRA
D.
SEP IRA
Question 26
A registered representative makes a presentation to a client describing a number of securities that will be recommended. In one of the presentation's slides, the representative knowingly included an untrue statement regarding a security's returns. The recommendation is accepted by the client and they go on to make above average returns over the next several years. Due to the success of the recommendation, the client transfers all of their outside accounts to the representative's firm. What statement is true?
A.
The representative performed in an ethical manner
B.
The representative performed an unethical action, but is not subject to consequences unless the client pursues litigation
C.
The representative performed an unethical action that subjects them to civil liabilities and criminal penalties
D.
The representative performed an unethical action, but is not subject to consequences given the returns made
Question 27
Which of the following best describes an exemption from securities laws and regulations?
A.
Laws and regulations do not apply because of an ongoing specific legal exception
B.
Laws and regulations do not apply because of a state administrator's rule
C.
Laws and regulations do not apply because of a one-time specific legal exception
D.
Laws and regulations do not apply because the entity or person is not the subject of regulation
Question 28
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.
5.14%
B.
7.71%
C.
8.74%
D.
10.29%
Question 29
A wealthy investor seeking tax advantaged income would be most suitable for which of the following?
A.
Mid cap growth fund
B.
Corporate bond fund
C.
Small cap growth fund
D.
Equity income fund
Question 30
Which of the following statements is true?
A.
US Government bond interest is exempt from federal taxation
B.
None of these choices
C.
Corporate bond interest is exempt from federal taxation
D.
Municipal bond interest is exempt from federal taxation
Question 31
An investor establishes a variable annuity and contributes to the account over several decades. After annuitization, the investor is assigned an assumed interest rate (AIR). Which of the following statements related to the investor's separate account and the AIR are correct?
I. If the AIR exceeds the performance of the separate account, payouts decrease
II. If the AIR exceeds the performance of the separate account, payouts increase
III. If the AIR subceeds the performance of the separate account, payouts decrease
IV. If the AIR subceeds the performance of the separate account, payouts increase
A.
I and IV
B.
II and IV
C.
I and III
D.
II and III
Question 32
According to ERISA standards and regulations, what type of employee must be eligible for qualified plans offered by the employer?
A.
At least 18 years old and 750 hours of annual service
B.
At least 21 years old and 750 hours of annual service
C.
At least 18 years old and 1,000 hours of annual service
D.
At least 21 years old and 1,000 hours of annual service
Question 33
The SEC considers which of the following a form of advertisement?
I. Direct communication advertising adviser services to private fund clients
II. Indirect communication advertising adviser services to current clients of the adviser
III. Direct communication including an endorsement involving non-cash compensation to the promoter
IV. Indirect communication including a testimonial involving cash compensation to the promoter
A.
I only
B.
I and II only
C.
All of these choices
D.
II, III, and IV
Question 34
In what circumstance may a client's non-public information be provided to a third party without trading authorization?
A.
A reporter provides evidence of a client's illegal activity and requests for account statements to corroborate the activity
B.
Local law enforcement presents a warrant for a client's records
C.
The client's spouse requests for withdrawal confirmations to confirm the client committed adultery
D.
The client's accountant requests for tax forms to prove the client did not commit tax fraud
Question 35
The NASAA Model Rule on Investment Adviser Representative Continuing Education requires an IAR that is not dual-registered as an agent to complete what level of CE?
A.
8 total credits on a quarterly basis
B.
10 total credits on an annual basis
C.
12 total credits on an annual basis
D.
14 total credits every two years
Question 36
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 exist for Coverdell ESAs
D.
Contributions are tax-deductible
Question 37
Form CRS is most likely to be utilized to meet what regulatory requirement?
A.
Trade disclosures made to institutional clients participating in the fourth market
B.
Issuer disclosures related to offerings in the primary market
C.
Financial disclosures made by insiders when liquidating control stock
D.
Relationship disclosures made to retail clients receiving recommendations from broker-dealers and agents
Question 38
Which of the following is true regarding a variable annuity?
A.
Life annuities have higher payouts than life with period certain annuities
B.
None of these choices
C.
Life with period certain annuities have lower payouts than joint and last survivor annuities
D.
Joint with last survivor annuities have higher payouts than life annuities
Question 39
An adviser exercising discretion over client assets but not maintaining custody believes its financials have fallen below the minimum required level. To rectify the situation, the adviser plans on posting a surety bond. Assuming the adviser's net worth was last calculated at $6,000, NASAA rules require posting a surety bond of what amount?
A.
$4,000
B.
$5,000
C.
$15,000
D.
$30,000
Question 40
CPI increased by 14% in one year. Which of the following statements is true?
A.
Common stocks will be more negatively affected than long term bonds
B.
Investors are facing a type of systematic risk
C.
Rising CPI is directly related to business risk
D.
Preferred stock investments are more beneficial than common stocks in this environment
Question 41
A registered agent maintains a book of clients they regularly offer account services to. One of those clients is the agent's uncle, who recently inquired about opening a joint account with the agent. According to the NASAA Model Rule on Dishonest or Unethical Business Practices of Broker-Dealers and Agents, what protocols must be following in order for the joint account to be opened?
A.
The agent is prohibited from sharing an account with a client
B.
The agent must obtain written approval from their firm and establish a written agreement with the uncle
C.
The agent is exempt from account sharing protocols because the client is a family member
D.
The agent must obtain written approval from their firm, establish a written agreement with the uncle, and share profits or losses in proportion to capital contributions
Question 42
An issuer plans to perform a private placement of securities in order to raise capital while avoiding registration requirements. The security is offered to nine retail investors and twenty institutional investors. A small commission is collected from all investors by the broker-dealer representing the issuer. According to the provisions of the Uniform Securities Act, what statement is true?
A.
The sale of securities does not qualify for an exemption because the issuer is involved
B.
The sale of securities does not qualify for an exemption because of the commission collected
C.
The sale of securities qualifies for an exemption from registration
D.
The sale of securities does not qualify for an exemption because the security was offered to too many investors
Question 43
An agent offers an unregistered security to an investor. They believed an exemption existed on the security, and therefore executed the transaction without it being registered. Several weeks later, the agent learns the exemption did not exist. What course of action should the agent and their employing broker-dealer pursue?
A.
Only take action if the investor complains
B.
Obtain an exemption from the administrator to repurchase the security to avoid performance guarantee prohibitions
C.
Offer to buy back security at its current market value plus a state-defined interest rate, minus income received
D.
Offer to buy back security at its original cost plus a state-defined interest rate, minus income received
Question 44
A 45 year old investor at the 24% tax bracket with a $1,000,000 portfolio specifies high yield income as their investment objective. Their current asset allocation of their portfolio is:
40% large-cap growth common stocks\\
20% small-cap growth common stocks\\
20% large-cap value stocks\\
5% preferred stocks\\
5% investment grade corporate bonds\\
5% speculative grade corporate bonds\\
5% money markets
Which of the following statements is most accurate?
A.
A majority of the growth stocks should be sold and reinvested in preferred stock and investment grade corporate bonds
B.
A majority of the value stocks should be sold and reinvested in speculative grade corporate bonds
C.
The portfolio's allocation is suitable
D.
A majority of the growth stocks should be sold and reinvested in preferred stock and speculative grade corporate bonds
Question 45
Sutton redeems 600 shares of a growth mutual fund with a NAV of $49.18 and a POP of $53.04. The fund has a 0.25% redemption fee. Sutton will receive:
A.
$29,434
B.
$29,508
C.
$31,742
D.
$32,777
Question 46
After years of hard work, a client of yours obtains a job with significant compensation, eventually resulting in them being considered an accredited investor. They take part in a private placement and purchase a significant amount of shares as a long-term investment. What best describes the shares they purchased?
A.
Class D shares
B.
Treasury shares
C.
Restricted shares
D.
Control shares
Question 47
An investor is utilizing several numerical values related to a security to determine its IRR and NPV. Which of the following statements regarding these performance measurements is FALSE?
A.
The investor should not purchase the security if it maintains an NPV below zero
B.
A positive NPV demonstrates the investment’s IRR exceeds the discount rate
C.
If the NPV of the investment is zero, the discount rate is equal to the IRR
D.
IRR is primarily utilized to analyze dividend-paying common stocks
Question 48
To comply with SEC and NASAA rules, access persons must submit transaction reports at what frequency?
A.
No later than 10 days after the end of the calendar year in which the transaction occurred
B.
No later than 15 days after the transaction occurred
C.
No later than 30 days after the end of the quarter in which the transaction occurred
D.
No later than 60 days after the end of the quarter in which the transaction occurred
Question 49
A 45 year old investor is looking for some advice on how to invest a $5,000 bonus they received into their IRA. The investor has a 20 year time horizon, a moderate tolerance for risk, and an objective of growth. 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.
S&P 500 index fund
B.
Russell 2000 ETF
C.
Large cap growth fund
D.
Balanced fund
Question 50
Discounted cash flow tools can be used to analyze certain securities for investment worthiness. What statement regarding DCF is considered FALSE?
A.
If the NPV of an investment is zero, the discount rate is less than its IRR
B.
IRR can be utilized to analyze preferred stock returns
C.
A positive NPV demonstrates an investment’s IRR exceeds the discount rate
D.
The investor should not purchase a security if it maintains an NPV below zero
Question 51
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.
I and III
B.
II only
C.
I, III, and IV
D.
All of these choices
Question 52
An investor's portfolio was recently allocated in the following manner:
65% stock\\
30% 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.
Strategic asset allocation
C.
Tactical asset allocation
D.
Passive asset allocation
Question 53
The tombstone contains all of the following, EXCEPT
A.
Gross proceeds of the offering
B.
Participation amounts of the syndicate members
C.
Number of shares to be sold
D.
Type of security to be sold
Question 54
Which of the following statements regarding various performance measures is correct?
A.
Time weighted return does not factor in capital additions and/or withdrawals
B.
Time weighted return is rarely utilized to measure performance of fund managers
C.
Dollar weighted return is commonly utilized to measure performance of fund managers
D.
Dollar weighted return does not factor in capital additions and/or withdrawals
Question 55
Elliot Construction Enterprises is looking to issue a long-term bond with the lowest possible interest rate and yield in order to save money and increase future profits. Which security should they issue?
A.
Commercial paper
B.
Equipment trust certificates
C.
Senior debentures
D.
Junior debentures
Question 56
Riley is an affiliate of a publicly traded company and wishes to sell a significant amount of shares. There are 5.7 million shares outstanding and the 4 week trading average is 74,000. The largest number of shares that Riley may sell is:
A.
57,000
B.
58,000
C.
68,000
D.
74,000
Question 57
A customer fills out a new account form at a broker-dealer and provides the following suitability information:
Age: 40\\
Net worth: $1,200,000\\
Annual income: $250,000\\
Tax bracket: 35%\\
Investment objective:* Moderate growth
The investor receives a $20,000 bonus from work and wants to make an investment with those funds. What security is most suitable given their profile?
A.
Municipal bond fund
B.
Small cap growth fund
C.
Large cap growth fund
D.
Covered call writing
Question 58
All of the following parties associated with a broker-dealer are NOT listed on Form BD, EXCEPT:
A.
Secretary to the COO
B.
Managers of IARs interacting with clients
C.
A controlling partner
D.
An IAR with access to non-public client information
Question 59
How long after account opening does an investor have to return a signed options agreement?
A.
3 days
B.
4 days
C.
10 days
D.
15 days
Question 60
SEC rules relating to publishing an advertisement highlight all the following as prohibited actions, EXCEPT:
A.
Only displaying net returns of average client assets over past 2 years
B.
Only displaying gross returns of average client assets over past 2 years
C.
Providing performance data without specifically identifying time frames of returns
D.
Stating the SEC has approved a method of calculating returns
Question 61
A 47 year old investor calls you and asks for guidance on a $700,000 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.
Dollar cost average the investment
B.
Wait for the market to decline before making the investment
C.
Make the investment as the market is unpredictable
D.
Invest in a more conservative fund
Question 62
Share classes with longer CDSC periods are most associated with what open-end management company share class?
A.
Class D
B.
Class C
C.
Class A
D.
Class B
Question 63
Which of the following best describes the internal rate of return (IRR)?
A.
The NPV at which all future cash flows is less than zero
B.
The discount rate at which the future value of all present cash flows is equal to zero
C.
The discount rate at which the present value of all future cash flows is equal to zero
D.
The NPV at which all future cash flows is greater than zero
Question 64
Which security is least subject to reinvestment risk?
A.
Mortgage bonds
B.
STRIPS
C.
Treasury notes
D.
PTCs
Question 65
Which of the following securities is MOST suitable for an investor specifying a capital appreciation investment objective?
A.
200% leveraged S&P 500 ETF
B.
High yield income fund
C.
Mid-cap growth fund
D.
Convertible preferred stock
Question 66
All of the following are differences between ETNs and ETFs, EXCEPT:
A.
both provide ownership of the underlying securities
B.
both are debt obligations
C.
both are investment companies
D.
both lack liquidity risk
Question 67
An investor contacts their registered agent in order to place a trade in their brokerage account. Which of the following actions would require discretionary authority to be granted?
A.
"Place an order in my account to sell all shares of FFF stock if it falls by 5%"
B.
"Sell all the bonds in my account and reinvest the proceeds into 20 year CDs"
C.
"Sell 600 shares of FFF stock if it falls to $105, and make the order good until the end of the month"
D.
"Diversify my account further with the investments you think are suitable"
Question 68
An employee of a pharmaceutical company is granted incentive stock options to purchase 900 shares of company stock at $150. 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 $170. 7 months later, the stock is liquidated in the market at $175. What is the tax consequence of all these actions?
A.
$22,500 of ordinary income taxable up to 37%
B.
$22,500 of long term capital gains taxable at 15% or 20%
C.
$18,000 of ordinary income taxable up to 37% and $4,500 of long term capital gains taxable at 15% or 20%
D.
$22,500 of ordinary income taxable up to 37% and $4,500 of long term capital gains taxable at 15% or 20%
Question 69
If a customer of a broker-dealer passes away, which of the following documents is always required, regardless of situation?
A.
Letters of administration
B.
Inheritance tax waiver
C.
Letters testamentary
D.
Death certificate
Question 70
According to NASAA rules, what statements are true?
- I. Agents may take custody of client assets\\
- II. Agents may not take custody of client assets\\
- III. Broker-dealers may take custody of client assets\\
- IV. Broker-dealers may not take custody of client assets
A.
I and III
B.
II and IV
C.
I and IV
D.
II and III
Question 71
Which of the following statements related to analyzing fixed income securities is TRUE?
- I. Longer duration is associated with high price volatility\\
- II. The duration of a zero coupon bond is equal to its maturity\\
- III. A 2 month Treasury bill maintains a duration of 2 months\\
- IV. A 20 year Treasury bond maintains a duration of 20 years
A.
None of these choices
B.
II only
C.
I and II
D.
I, II, and III
Question 72
An investment adviser representative can be best described by which of the following definitions?
A.
Any individual who represents a financial firm in offering securities advice
B.
Any individual who represents a financial firm in effecting or attempting to effect purchases or sales of securities
C.
Any person who, for compensation, engages in the business of advising others on securities
D.
Any person engaged in the business of effecting transactions in securities for the account of others or for his own account
Question 73
All of the following are considered forms of market manipulation, EXCEPT:
A.
Pump and dump
B.
Trading ahead
C.
Painting the tape
D.
Marking the open
Question 74
A customer wants to provide trading authority to her father on her account, but prevent her father from withdrawing funds. What should you recommend?
A.
TOD
B.
Full POA
C.
TIC
D.
Limited POA
Question 75
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. The discount rate represents the average rate of return in the market\\
- II. NPV is the difference between a security's future value and cost\\
- III. IRR is most accurate when analyzing fixed income cash flows\\
- IV. Present value determines the current value of future cash flows
A.
II, III, and IV
B.
III only
C.
I, III and IV
D.
I, II, and IV
Question 76
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 12% 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.
4.80 years
B.
6.00 years
C.
10.50 years
D.
12.00 years
Question 77
An investor opens an account at an investment adviser. They inquire about a fulcrum fee-based account. In order to be eligible for this type of service, the investor must be considered a(n):
A.
Qualified client
B.
Institutional client
C.
Exempt client
D.
Accredited client
Question 78
Which of the following accurately represents the four pillars of Regulation BI?
A.
Minimization, care, conflict of interest, regulatory
B.
Disclosure, fiduciary, capacity, regulatory
C.
Disclosure, care, conflict of interest, compliance
D.
Transparency, obligation, capacity, compliance
Question 79
An affiliate holding unregistered shares is subject to which of the following?
A.
Volume limitations and a 6 month holding period
B.
A 6 month holding period only
C.
Volume limitations only
D.
None of these choices
Question 80
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.
Judges requesting information via court orders
B.
Federal Bureau of Investigation (FBI)
C.
Police investigators via subpoena
D.
National Association of Personal Financial Advisors (NAPFA)
Question 81
Anti-fraud rules of the Uniform Securities Act apply to all of the following circumstances, EXCEPT:
A.
The offer of a non-exempt security
B.
The offer of a security involved in an exempt transaction
C.
The offer of an exempt security
D.
The offer of a product excluded from the definition of a security
Question 82
A customer calls their broker and says "Buy 100 shares of Ford stock sometime today." What statement is true?
A.
The order does not require POA
B.
The order does not require TIC
C.
The order requires TIC
D.
The order requires POA
Question 83
A proponent of the efficient markets hypothesis believes which of the following does NOT provide any insight into future price movements, regardless of the strength of their belief?
A.
Technical analysis
B.
Private, non-public information
C.
All of these choices
D.
Fundamental analysis
Question 84
Which of the following is allowed during the 20 day cooling off period as per the rules in the Securities Act of 1933?
A.
Taking a small deposit from an institution
B.
Paying for a small online advertising campaign
C.
Soliciting an indication of interest
D.
Recommending the purchase in a private setting
Question 85
An investor is considering an investment in an equity mutual fund over investing in individual common stocks. All of the following are advantages of investing in the fund, EXCEPT:
A.
CDSCs
B.
Lower diversifiable risk
C.
Diversification
D.
Financial expertise
Question 86
A stock analyst seeks out securities that are more volatile than their benchmark index. Which of the following characteristics are they likely seeking?
A.
Stocks with betas exceeding 1
B.
Stocks with betas under 1
C.
Stocks with alphas exceeding 1
D.
Stocks with alphas under 1
Question 87
ZZZ Security Traders employs several agents located in Connecticut that work with clients from that state. Two of their married clients move to Virginia, and one of ZZZ's agents insists on maintaining the relationship with the clients. What statement is true?
A.
ZZZ Security Traders and its agents are excluded from registration in Virginia
B.
Registration in Virginia is required for both the broker-dealer and any agent working with the client
C.
ZZZ Security Traders is required to be registered in Virginia, but its agents are exempt
D.
ZZZ Security Traders is not required to be registered in Virginia, but its agents must register
Question 88
Hedge fund managers are typically compensated in which manner?
A.
AUM fees and capital gains
B.
Capital gains and commission
C.
Commission
D.
AUM fees only
Question 89
All of the following are benefits of investing in a fund of hedge funds instead of an individual hedge fund, EXCEPT:
A.
Potential higher liquidity
B.
Lower fees
C.
Diversification
D.
Lower minimum investment
Question 90
An investor tracks the annual returns of the following securities in their portfolio:
- Security 1: 10%
- Security 2: 13%
- Security 3: 18%
- Security 4: 23%
- Security 5: -9%
Assuming these are the only securities in the account and each is equally weighted, what is the median return of the portfolio?
A.
11.00%
B.
13.00%
C.
14.60%
D.
32.00%
Question 91
An investor 12 years from retirement has a lump sum of $850,000 to invest in the market. Their goal is for the account to grow to a value of $3,400,000 when they retire. Assuming no other funds are invested, what annualized rate of return must they attain to reach their goal?
A.
3.96%
B.
6.00%
C.
10.80%
D.
12.00%
Question 92
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 add correlated assets to increase diversification
C.
Efficient portfolios have high return potential and low risk potential
D.
Investors should evaluate risk on a holistic level instead of emphasizing individual securities
Question 93
After an investor fills out an account form for a new options account, which of the following should occur next?
A.
Delivery of the ODD
B.
Account approval by the ROP
C.
First trade in the account
D.
Signing of the options agreement
Question 94
Which of the following statements is true when comparing active and passive funds?
A.
Active funds typically have lower expense ratios
B.
Active funds typically have longer time horizons
C.
Passive funds typically have longer time horizons
D.
Passive funds typically have lower expense ratios
Question 95
Which of the following statements related to the Dodd Frank Wall Street Reform Act are true?
- I. Small advisers are typically state registered\\
- II. Mid-sized advisers are eligible to be federal-covered if operating in 10 or more states\\
- III. Large advisers are always SEC registered\\
- IV. Advisers to registered investment companies are always SEC registered
A.
II, III, and IV
B.
I and IV
C.
I, II, and IV
D.
I, III, and IV
Question 96
A 46 year old employee leaves their employment at a law office and immediately takes a full distribution from their HR-10 plan. What is their tax consequence?
A.
Ordinary income tax + 10% penalty
B.
Capital gains tax + 10% penalty
C.
Ordinary income tax
D.
Capital gains tax
Question 97
The following statistics are provided on the market and ABC stock:
- Market return = 11%
- Risk-free rate of return = 2%
- Beta of ABC stock = 1.00
- Standard deviation of ABC stock = 2.64
According to the capital asset pricing model, what is the expected return of ABC stock?
A.
7.27%
B.
11.00%
C.
20.80%
D.
25.76%
Question 98
An investor places a buy order for shares of ZZZ stock at $78.10 stop limit. Later in the day, the trading tape for ZZZ stock reads as follows:
$78.00... $78.06... $78.10... $78.11... $78.13 ... $78.10
At what price does the order execute?
A.
$78.06
B.
$78.10
C.
$78.11
Question 99
In which of the following circumstances would the sale of an unregistered, non-exempt security be considered compliant with relevant laws and regulations?
A.
The security is offered to 12 retail investors in a 10 month period
B.
All of these choices
C.
The security is sold in an unsolicited transaction
D.
The security is sold in an isolated issuer transaction
Question 100
Income taxes assessed by the IRS are considered what type of tax under US tax code?
A.
Regressive
B.
Active
C.
Progressive
D.
Passive
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