Question 1

Which of the following statements regarding the purchase and redemption of mutual fund shares is false?

Accepted Answer

A) Mutual fund shares may not be purchased on margin. 
B) An investor can both purchase and sell fractional shares of mutual funds. 
C) When an investor redeems his shares, the mutual fund must pay for the shares within 7 business days. 
D) If an investor places an order to buy or redeem shares of a mutual fund before 4 P.M.EST on a day when the markets are open, the price will be based on the fund's net asset value (NAV), as calculated at the end of that trading day. 
A) Mutual fund shares may not be purchased on margin. 
B) An investor can both purchase and sell fractional shares of mutual funds. 
C) When an investor redeems his shares, the mutual fund must pay for the shares within 7 business days. 
D) If an investor places an order to buy or redeem shares of a mutual fund before 4 P.M.EST on a day when the markets are open, the price will be based on the fund's net asset value (NAV), as calculated at the end of that trading day.

Question 2

Under the 1988 Insider and Securities Enforcement Act, a person convicted of insider trading can be subject to:

Accepted Answer

A) up to 10 years in prison and a fine of either $1.5 million or up to 150% of the amount of profits gained or losses avoided, or both. 
B) up to 5 years in prison, a $150,000 fine, or both. 
C) up to 10 years in prison and a fine of $1,500,000 or both. 
D) up to 10 years in prison and a fine of either $1 million or up to 3 times the amount of profits gained or losses avoided, whichever is greater. 
A) up to 10 years in prison and a fine of either $1.5 million or up to 150% of the amount of profits gained or losses avoided, or both. 
B) up to 5 years in prison, a $150,000 fine, or both. 
C) up to 10 years in prison and a fine of $1,500,000 or both. 
D) up to 10 years in prison and a fine of either $1 million or up to 3 times the amount of profits gained or losses avoided, whichever is greater.

Question 3

By investing in a diversified portfolio, an investor will:

Accepted Answer

A) lower both his risk and his expected return. 
B) lower his risk without affecting his expected return. 
C) lower his risk and increase his expected return. 
D) eliminate all the market risk associated with his investment portfolio. 
A) lower both his risk and his expected return. 
B) lower his risk without affecting his expected return. 
C) lower his risk and increase his expected return. 
D) eliminate all the market risk associated with his investment portfolio.

Question 4

All government bonds and the majority of corporate bonds are traded:

Accepted Answer

A) on the floor of the NYSE. 
B) via electronic communication networks (ECNs). 
C) on regional exchanges. 
D) in the over-the-counter market. 
A) on the floor of the NYSE. 
B) via electronic communication networks (ECNs). 
C) on regional exchanges. 
D) in the over-the-counter market.

Question 5

Which of the following statements about specialists is false?

Accepted Answer

A) Specialists are market makers in assigned stocks and, as such, can profit from these investments. 
B) Specialists are required to maintain a fair and orderly market in their assigned stocks, meaning that they must buy if there is an excess of sell orders and sell out of their own portfolios if there is an excess of buy orders. 
C) Specialists are employees of the exchange on which they oversee trades. 
D) In addition to acting as market makers, specialists also act as agents and execute limit orders placed by commission brokers for their clients if the specified price is reached. 
A) Specialists are market makers in assigned stocks and, as such, can profit from these investments. 
B) Specialists are required to maintain a fair and orderly market in their assigned stocks, meaning that they must buy if there is an excess of sell orders and sell out of their own portfolios if there is an excess of buy orders. 
C) Specialists are employees of the exchange on which they oversee trades. 
D) In addition to acting as market makers, specialists also act as agents and execute limit orders placed by commission brokers for their clients if the specified price is reached.

Question 6

Newbie, a newly-minted registered representative with Savvy Investments, just had her first client walk through the door. The new account form that the client receives a copy of must contain the signatures of:
I. the client.
II. Ms. Newbie.
III. Ms. Newbie's branch manager/supervisor.

Accepted Answer

A) I only 
B) I and II only 
C) II and III only 
D) I, II, and III 
A) I only 
B) I and II only 
C) II and III only 
D) I, II, and III

Question 7

One difference between a SEP-IRA and a SIMPLE IRA is that:

Accepted Answer

A) Only employers can make contributions to a SEP-IRA; both employees and employers can contribute to a SIMPLE IRA. 
B) The contributions made to a SEP-IRA are tax deductible, which is not the case with a SIMPLE IRA. 
C) The SEP-IRA has a higher contribution limit than that allowed by a traditional IRA or a Roth IRA, but the SIMPLE IRA contribution limits are the same as that of a traditional IRA or a Roth IRA. 
D) There is no difference; both names refer to the same type of IRA that is available to a small business or a self-employed individual. 
A) Only employers can make contributions to a SEP-IRA; both employees and employers can contribute to a SIMPLE IRA. 
B) The contributions made to a SEP-IRA are tax deductible, which is not the case with a SIMPLE IRA. 
C) The SEP-IRA has a higher contribution limit than that allowed by a traditional IRA or a Roth IRA, but the SIMPLE IRA contribution limits are the same as that of a traditional IRA or a Roth IRA. 
D) There is no difference; both names refer to the same type of IRA that is available to a small business or a self-employed individual.

Question 8

Which of the following securities would be exempt from SEC registration requirements?
I. a 15-year bond issued by the state of Colorado
II. an issue of preferred stock that has an aggregate par value of $5 million
III. an issue of commercial paper that has a 5-month maturity

Accepted Answer

A) I only 
B) III only 
C) I and III only 
D) I and II only 
A) I only 
B) III only 
C) I and III only 
D) I and II only

Question 9

Lana is registered as a limited representative and is employed by Everything Investments. Her duties include selling mutual funds and variable contracts products to the firm's clients. She has been particularly successful in selling variable contracts offered by OneLife insurance company. As a "thank you" for her hard work, OneLife has offered her a ticket to an upcoming play at a local dinner theatre. Given this scenario, which of the following statements applies?

Accepted Answer

A) Lana will have to pass on the offer. Lana is prohibited from receiving compensation from anyone other than Everything Investments. 
B) Lana can accept the offer as long as Everything agrees to it and as long as it is not an ongoing thing and/or preconditioned on her achieving a specified sales target. 
C) Lana can accept the offer without Everything's approval in this instance since the offer does not involve cash. 
D) Lana will have to pass on the offer. She is permitted to receive only cash compensation in an amount not to exceed $100 from an entity other than Everything, and then only with Everything's approval. 
A) Lana will have to pass on the offer. Lana is prohibited from receiving compensation from anyone other than Everything Investments. 
B) Lana can accept the offer as long as Everything agrees to it and as long as it is not an ongoing thing and/or preconditioned on her achieving a specified sales target. 
C) Lana can accept the offer without Everything's approval in this instance since the offer does not involve cash. 
D) Lana will have to pass on the offer. She is permitted to receive only cash compensation in an amount not to exceed $100 from an entity other than Everything, and then only with Everything's approval.

Question 10

Andy and Annie Raggedy own their own graphics art business that they operate out of their home and, happily, generate enough income to meet their current needs. The couple is planning on having children in the not too distant future, however, and they want to start putting money aside for their children's college education and also want to start saving for retirement more aggressively. Which of the following describes one of their primary investment objectives?

Accepted Answer

A) tax-exempt income 
B) preservation of capital 
C) current income 
D) capital appreciation 
A) tax-exempt income 
B) preservation of capital 
C) current income 
D) capital appreciation

Question 11

An ADR is:

Accepted Answer

A) a bond issued by an American firm that is denominated in dollars, but is sold to foreign investors. 
B) a receipt designating ownership of shares of a foreign stock that are held in a trust. 
C) another name for bankers' acceptances. 
D) a certificate of deposit offered by a foreign bank that is denominated in U.S. dollars. 
A) a bond issued by an American firm that is denominated in dollars, but is sold to foreign investors. 
B) a receipt designating ownership of shares of a foreign stock that are held in a trust. 
C) another name for bankers' acceptances. 
D) a certificate of deposit offered by a foreign bank that is denominated in U.S. dollars.

Question 12

NewWave Investments, a family of mutual funds, hires the star of a new motion picture about the workings of Wall Street to provide a testimonial as part of NewWave's new television ad campaign. The actor's financial adviser has, in fact, invested some of the actor's monies in NewWave's funds. NewWave provides the actor with a script in which the actor explains the concept of dollar cost averaging to the viewers. At the conclusion of the actor's explanation, the viewers are informed that the actor has been paid for his testimonial, that his experience may not be representative of that of other clients, and that past performance is no guarantee of future performance. Based on these facts:

Accepted Answer

A) NewWave has violated no rules; it has complied with all of FINRA's disclosure requirements. 
B) NewWave has violated a FINRA rule stipulating that testimonial providers can receive no payment for their testimonies. 
C) NewWave has violated a FINRA rule that prohibits testimonials of public figures from being used in advertisements. 
D) NewWave has violated a FINRA rule requiring that any testimonial that contains a technical aspect related to investing must be given by someone who has both the knowledge and experience to hold a valid opinion on the topic. 
A) NewWave has violated no rules; it has complied with all of FINRA's disclosure requirements. 
B) NewWave has violated a FINRA rule stipulating that testimonial providers can receive no payment for their testimonies. 
C) NewWave has violated a FINRA rule that prohibits testimonials of public figures from being used in advertisements. 
D) NewWave has violated a FINRA rule requiring that any testimonial that contains a technical aspect related to investing must be given by someone who has both the knowledge and experience to hold a valid opinion on the topic.

Question 13

When the U.S. dollar appreciates relative to other world currencies,
I. the prices of all domestic stocks and bonds can be expected to increase.
II. the prices of securities offered by manufacturers that import a lot of their parts can be expected to increase.
III. an increase in the purchase of U.S. securities by foreign investors can be expected.

Accepted Answer

A) I, II, and III 
B) I and II only 
C) II only 
D) III only 
A) I, II, and III 
B) I and II only 
C) II only 
D) III only

Question 14

Ken has a variable life policy and recently learned that he can borrow against its cash value to help pay for some of the expenses he's incurring while pursuing a graduate degree. Which of the following statements about the loan he can get is true?

Accepted Answer

A) Ken can borrow at most only 50% of the cash value, and only as long as he's had the policy for at least three years. 
B) Since Ken is essentially borrowing his own money, the loan is interest-free. 
C) Ken never has to repay the loan, but if he chooses not to do so, his wife, Barbie, won't get as much when he dies. 
D) Ken has been misinformed. He cannot borrow against the cash value of a variable life policy because the cash values of these policies fluctuate constantly. 
A) Ken can borrow at most only 50% of the cash value, and only as long as he's had the policy for at least three years. 
B) Since Ken is essentially borrowing his own money, the loan is interest-free. 
C) Ken never has to repay the loan, but if he chooses not to do so, his wife, Barbie, won't get as much when he dies. 
D) Ken has been misinformed. He cannot borrow against the cash value of a variable life policy because the cash values of these policies fluctuate constantly.

Question 15

Which of the following retirement plans requires the employer to match employee contributions in accordance with specific guidelines?

Accepted Answer

A) 401(k) plans 
B) SIMPLE IRAs 
C) Section 457 plans 
D) both A and B 
A) 401(k) plans 
B) SIMPLE IRAs 
C) Section 457 plans 
D) both A and B

Question 16

A passive asset allocation strategy that involves establishing specific targeted percentages for the various asset classes and rebalancing only as necessary to maintain those percentages as long as the investor's investment objectives remain unchanged is called:

Accepted Answer

A) strategic asset allocation. 
B) tactical asset allocation. 
C) interactive asset allocation. 
D) dynamic asset allocation. 
A) strategic asset allocation. 
B) tactical asset allocation. 
C) interactive asset allocation. 
D) dynamic asset allocation.

Question 17

In 2004, your Uncle Oscar purchased 300 shares of Hasbro, Inc. for $19 a share. Uncle Oscar died earlier year and left his Hasbro stock to you. The stock was selling for $44 on the day he died, but by the time you learned that you were the beneficiary of the stock, the price was $47. What is your cost basis in Hasbro?

Accepted Answer

A) $19 
B) $44 
C) $47 
D) $28 
A) $19 
B) $44 
C) $47 
D) $28

Question 18

A retirement plan under which the benefit to be paid upon retirement is specified when an employee is signed up for the plan is known as a:

Accepted Answer

A) 401(k) plan. 
B) SIMPLE-IRA. 
C) defined benefit plan. 
D) defined contribution plan. 
A) 401(k) plan. 
B) SIMPLE-IRA. 
C) defined benefit plan. 
D) defined contribution plan.

Question 19

Your client bought a variable annuity contract that has a 5% contingent deferred sales charge with a 7-year surrender period four years ago. He has been reading about bonus annuities and 1035 exchanges and has asked for your advice. You can tell him:

Accepted Answer

A) that it's a great idea, and you plan on how you're going to spend the unexpected income. 
B) that although the exchange doesn't have any tax consequences, he'll be looking at a new, longer, surrender period. 
C) that he'll have to pay the 5% deferred sales charge if he executes the exchange. 
D) both B and C. 
A) that it's a great idea, and you plan on how you're going to spend the unexpected income. 
B) that although the exchange doesn't have any tax consequences, he'll be looking at a new, longer, surrender period. 
C) that he'll have to pay the 5% deferred sales charge if he executes the exchange. 
D) both B and C.

Question 20

A plan under which employees of state and local governments can contribute part of their salaries such that those earnings will grow tax-deferred until retirement is called a:

Accepted Answer

A) profit-sharing plan. 
B) money purchase plan. 
C) Section 457 plan. 
D) Section 501 plan. 
A) profit-sharing plan. 
B) money purchase plan. 
C) Section 457 plan. 
D) Section 501 plan.

Which of the following statements regarding the purchase and redemption of mutual fund shares is false?

Under the 1988 Insider and Securities Enforcement Act, a person convicted of insider trading can be subject to:

By investing in a diversified portfolio, an investor will:

All government bonds and the majority of corporate bonds are traded:

Which of the following statements about specialists is false?

Newbie, a newly-minted registered representative with Savvy Investments, just had her first client walk through the door. The new account form that the client receives a copy of must contain the signatures of: I. the client. II. Ms. Newbie. III. Ms. Newbie's branch manager/supervisor.

One difference between a SEP-IRA and a SIMPLE IRA is that:

Which of the following securities would be exempt from SEC registration requirements? I. a 15-year bond issued by the state of Colorado II. an issue of preferred stock that has an aggregate par value of $5 million III. an issue of commercial paper that has a 5-month maturity

An ADR is:

Ken has a variable life policy and recently learned that he can borrow against its cash value to help pay for some of the expenses he's incurring while pursuing a graduate degree. Which of the following statements about the loan he can get is true?

Which of the following retirement plans requires the employer to match employee contributions in accordance with specific guidelines?

A passive asset allocation strategy that involves establishing specific targeted percentages for the various asset classes and rebalancing only as necessary to maintain those percentages as long as the investor's investment objectives remain unchanged is called:

A retirement plan under which the benefit to be paid upon retirement is specified when an employee is signed up for the plan is known as a:

Your client bought a variable annuity contract that has a 5% contingent deferred sales charge with a 7-year surrender period four years ago. He has been reading about bonus annuities and 1035 exchanges and has asked for your advice. You can tell him:

A plan under which employees of state and local governments can contribute part of their salaries such that those earnings will grow tax-deferred until retirement is called a:

Investment and Securities

Assorted Securities and Investments

Uniform Securities Act USA and State Registration Requirements

Filters

Exam 1: Investment and Bond Market

Which of the following statements regarding the purchase and redemption of mutual fund shares is false?

Under the 1988 Insider and Securities Enforcement Act, a person convicted of insider trading can be subject to:

By investing in a diversified portfolio, an investor will:

All government bonds and the majority of corporate bonds are traded:

Which of the following statements about specialists is false?

Newbie, a newly-minted registered representative with Savvy Investments, just had her first client walk through the door. The new account form that the client receives a copy of must contain the signatures of: I. the client. II. Ms. Newbie. III. Ms. Newbie's branch manager/supervisor.

One difference between a SEP-IRA and a SIMPLE IRA is that:

Which of the following securities would be exempt from SEC registration requirements? I. a 15-year bond issued by the state of Colorado II. an issue of preferred stock that has an aggregate par value of $5 million III. an issue of commercial paper that has a 5-month maturity

An ADR is:

Ken has a variable life policy and recently learned that he can borrow against its cash value to help pay for some of the expenses he's incurring while pursuing a graduate degree. Which of the following statements about the loan he can get is true?

Which of the following retirement plans requires the employer to match employee contributions in accordance with specific guidelines?

A passive asset allocation strategy that involves establishing specific targeted percentages for the various asset classes and rebalancing only as necessary to maintain those percentages as long as the investor's investment objectives remain unchanged is called:

A retirement plan under which the benefit to be paid upon retirement is specified when an employee is signed up for the plan is known as a:

Your client bought a variable annuity contract that has a 5% contingent deferred sales charge with a 7-year surrender period four years ago. He has been reading about bonus annuities and 1035 exchanges and has asked for your advice. You can tell him:

A plan under which employees of state and local governments can contribute part of their salaries such that those earnings will grow tax-deferred until retirement is called a:

Investment and Securities

Assorted Securities and Investments

Uniform Securities Act USA and State Registration Requirements

Filters