Question 1

Which of the following statements regarding the taxes associated with a variable life insurance policy is false?

Accepted Answer

A) Earnings on a variable life insurance policy grow tax-free. 
B) Payments to beneficiaries upon the death of the policyholder are taxed as ordinary income. 
C) One variable life policy can be exchanged for another variable life policy without triggering any tax consequences under Section 1035 of the tax code. 
D) If a policyholder withdraws some of the cash value associated with the policy, taxes need only be paid on the amount that exceeds the total amount of the premiums paid to date. 
A) Earnings on a variable life insurance policy grow tax-free. 
B) Payments to beneficiaries upon the death of the policyholder are taxed as ordinary income. 
C) One variable life policy can be exchanged for another variable life policy without triggering any tax consequences under Section 1035 of the tax code. 
D) If a policyholder withdraws some of the cash value associated with the policy, taxes need only be paid on the amount that exceeds the total amount of the premiums paid to date.

Question 2

Common stock and preferred stock differ in that:

Accepted Answer

A) the firm is legally mandated to make the dividend payments on its preferred stock; there is no legal obligation to make dividend payments on its common stock. 
B) common stock pays a fixed dividend while the dividend associated with preferred stock will typically increase as the earnings of the firm increases. 
C) preferred stockholders have more voting rights than the common stockholders of the firm. 
D) preferred stockholders will receive their part of the proceeds if the firm is liquidated before the common shareholders receive anything. 
A) the firm is legally mandated to make the dividend payments on its preferred stock; there is no legal obligation to make dividend payments on its common stock. 
B) common stock pays a fixed dividend while the dividend associated with preferred stock will typically increase as the earnings of the firm increases. 
C) preferred stockholders have more voting rights than the common stockholders of the firm. 
D) preferred stockholders will receive their part of the proceeds if the firm is liquidated before the common shareholders receive anything.

Question 3

An advertisement that provides performance data for which of the following mutual funds would not need to include a statement warning that the principal value of the investment will fluctuate such that the investor's shares may be worth either more or less when redeemed than what the investor originally paid for them?

Accepted Answer

A) a U.S. government bond fund 
B) a money market fund 
C) a municipal bond fund 
D) Neither choices A nor B would need to include the stated warning. 
A) a U.S. government bond fund 
B) a money market fund 
C) a municipal bond fund 
D) Neither choices A nor B would need to include the stated warning.

Question 4

The primary difference between dealers and brokers is that:

Accepted Answer

A) dealers operate exclusively in the primary market whereas brokers operate only in the secondary market. 
B) dealers operate only in the bond market, while brokers conduct trades in stocks, bonds and options. 
C) dealers are market makers, who buy and sell out of their own inventory of securities, while brokers are matchmakers, who match buyers with sellers. 
D) Both Choices B and C describe differences between dealers and brokers. 
A) dealers operate exclusively in the primary market whereas brokers operate only in the secondary market. 
B) dealers operate only in the bond market, while brokers conduct trades in stocks, bonds and options. 
C) dealers are market makers, who buy and sell out of their own inventory of securities, while brokers are matchmakers, who match buyers with sellers. 
D) Both Choices B and C describe differences between dealers and brokers.

Question 5

Uncle Scrooge (uncharacteristically) wants to set up a Section 529 college savings plan for his nephew, Louie. If he does so:

Accepted Answer

A) he can contribute at most $2,000 a year. 
B) his contributions will be tax deductible. 
C) any withdrawals that Louie makes to cover tuition, books, and room and board will be free from both federal and state taxes. 
D) and Louie decides not to go to college, Uncle Scrooge can name Louie's brother, Huey, as the beneficiary of the plan without any tax consequences. 
A) he can contribute at most $2,000 a year. 
B) his contributions will be tax deductible. 
C) any withdrawals that Louie makes to cover tuition, books, and room and board will be free from both federal and state taxes. 
D) and Louie decides not to go to college, Uncle Scrooge can name Louie's brother, Huey, as the beneficiary of the plan without any tax consequences.

Question 6

Fidelity Investments has two money market funds that is available to most investors. The Fidelity Cash Reserves fund (FDRXX) is currently yielding 0.10% while its Fidelity Municipal Money Market fund (FTEXX) is yielding 0.01%. One reason for this significant difference is that:

Accepted Answer

A) the Municipal Money Market fund pays interest that is free from state and local taxes. 
B) the Municipal Money Market fund pays interest that is free from federal taxes. 
C) interest earned on the Cash Reserves fund is subject to the alternative minimum tax. 
D) the Municipal Money Market fund is insured by the FDIC, and this is not true of the Cash Reserves fund. 
A) the Municipal Money Market fund pays interest that is free from state and local taxes. 
B) the Municipal Money Market fund pays interest that is free from federal taxes. 
C) interest earned on the Cash Reserves fund is subject to the alternative minimum tax. 
D) the Municipal Money Market fund is insured by the FDIC, and this is not true of the Cash Reserves fund.

Question 7

Which of the following would be a reason for a person to receive a statutory disqualification from membership in FINRA?

Accepted Answer

A) The person is on the verge of financial insolvency. 
B) The person has been barred from membership in one of the national exchanges. 
C) The person has made a misleading statement of material fact on the membership application. 
D) All of the above are reasons for a person to receive a statutory disqualification from membership in FINRA. 
A) The person is on the verge of financial insolvency. 
B) The person has been barred from membership in one of the national exchanges. 
C) The person has made a misleading statement of material fact on the membership application. 
D) All of the above are reasons for a person to receive a statutory disqualification from membership in FINRA.

Question 8

Which of the following persons is not permitted to open an investment account?
I. a general partnership
II. a corporation
III. the executor of an estate
IV. a 16-year-old entrepreneur

Accepted Answer

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

Question 9

Which of the following statements regarding a unit investment trust (UIT) is false?

Accepted Answer

A) A UIT has a fixed number of shares. 
B) UITs are actively managed. 
C) Shares of UITs trade on exchange floors. 
D) All UITs are established with a termination date. 
A) A UIT has a fixed number of shares. 
B) UITs are actively managed. 
C) Shares of UITs trade on exchange floors. 
D) All UITs are established with a termination date.

Question 10

Which of the following is not a potential advantage associated with investing through a mutual fund?

Accepted Answer

A) lower cost associated with portfolio management 
B) simplified recordkeeping 
C) price discovery 
D) diversification 
A) lower cost associated with portfolio management 
B) simplified recordkeeping 
C) price discovery 
D) diversification

Question 11

Which of the following share classes do not have front-end loads?

Accepted Answer

A) Class A 
B) Class B 
C) Class C 
D) Neither Class B nor Class C shares have front-end loads. 
A) Class A 
B) Class B 
C) Class C 
D) Neither Class B nor Class C shares have front-end loads.

Question 12

Which of the following is not a cost associated with an investment in a variable annuity contract?

Accepted Answer

A) mortality and expense risk fee 
B) investment management fee 
C) state premium tax 
D) All of the above are costs associated with an investment in a variable annuity contract. 
A) mortality and expense risk fee 
B) investment management fee 
C) state premium tax 
D) All of the above are costs associated with an investment in a variable annuity contract.

Question 13

Newbie is a newly-minted registered representative. Mr. Oldman saunters into her office, becomes infatuated with her, opens an account, and signs a document giving Ms. Newbie discretionary authority over the account. Mr. Oldman is 68 years old, retired, lives on a fixed income, and pays taxes at the lowest marginal tax rate available. His stated investment objectives are capital preservation and income. Ms. Newbie invests ¼ of his investment monies in a periodic-payment, deferred, variable annuity. Based on these facts:

Accepted Answer

A) Ms. Newbie has done a remarkable job as a newly-minted representative of allocating at least a fourth of Mr. Oldman's funds appropriately. 
B) Ms. Newbie may lose her license before she gets started in the business for making an unauthorized transaction. 
C) Ms. Newbie has a reasonable sexual harassment case against Mr. Oldman for putting her in such a position. 
D) Although Ms. Newbie's asset allocation for Mr. Oldman is less than optimal, she is in no danger of losing her license or any other penalty, given that she has been given discretionary authority over the account. 
A) Ms. Newbie has done a remarkable job as a newly-minted representative of allocating at least a fourth of Mr. Oldman's funds appropriately. 
B) Ms. Newbie may lose her license before she gets started in the business for making an unauthorized transaction. 
C) Ms. Newbie has a reasonable sexual harassment case against Mr. Oldman for putting her in such a position. 
D) Although Ms. Newbie's asset allocation for Mr. Oldman is less than optimal, she is in no danger of losing her license or any other penalty, given that she has been given discretionary authority over the account.

Question 14

The Bank Secrecy Act (BSA) requires any financial institution to:
I. file a suspicious activity report (SAR) when a possible violation of a law is suspected.
II. inform its customer that it is filing the SAR.
III. provide any customer that is suspected of engaging in an illegal transaction the opportunity to explain himself prior to filing an SAR.
IV. obtain specified information on any party sending or receiving a wire transfer of $3,000 or more.

Accepted Answer

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

Question 15

Which of the following statements made by a registered representative selling a variable life insurance policy would be likely to result in disciplinary action?

Accepted Answer

A) "If you use the cash value of your existing life insurance policy, Ms. Client, you will be able to purchase this new policy for little or no additional cash." 
B) "Ms. Client, you should consider this as more of an investment than an insurance policy." 
C) "This variable life insurance policy offers a death benefit just like your traditional life insurance policy, Ms. Client." 
D) Both Statements A and B are likely to result in disciplinary action. 
A) "If you use the cash value of your existing life insurance policy, Ms. Client, you will be able to purchase this new policy for little or no additional cash." 
B) "Ms. Client, you should consider this as more of an investment than an insurance policy." 
C) "This variable life insurance policy offers a death benefit just like your traditional life insurance policy, Ms. Client." 
D) Both Statements A and B are likely to result in disciplinary action.

Question 16

Which of the following would offer an investor the most protection against purchasing power risk?

Accepted Answer

A) a stock mutual fund 
B) a government bond fund 
C) a high-yield bond fund 
D) a money market fund 
A) a stock mutual fund 
B) a government bond fund 
C) a high-yield bond fund 
D) a money market fund

Question 17

On Monday, August 2nd, the Board of Directors of Baldor Electric (BEZ) announced that the firm would pay a dividend of $0.17 a share. Payment will be made on Friday, October 8th to shareholders of record as of Friday, September 17th.In order to receive this dividend check, an investor would have to purchase shares of Baldor Electric before which day?

Accepted Answer

A) Monday, August 2nd. 
B) Wednesday, September 15th. 
C) Friday, September 17th. 
D) Friday, October 8th. 
A) Monday, August 2nd. 
B) Wednesday, September 15th. 
C) Friday, September 17th. 
D) Friday, October 8th.

Question 18

When a mutual fund is valuing your pre-existing holdings to see if you qualify for a reduced sales charge under its rights of accumulation program, it must use:

Accepted Answer

A) the current NAV of your holdings. 
B) the current public offering price (POP) of your holdings. 
C) the price you paid when you purchased the shares originally. 
D) none of the above. 
A) the current NAV of your holdings. 
B) the current public offering price (POP) of your holdings. 
C) the price you paid when you purchased the shares originally. 
D) none of the above.

Question 19

The total return reported by a mutual fund:

Accepted Answer

A) is calculated as the percentage change in the net asset value of the fund. 
B) is equal to the return it earned on the dividend and interest income it received from its investments. 
C) is equal to the annual percentage increase in the dollars invested in the fund by investors. 
D) includes both the dividend and interest income earned by the fund and any increase in the fund's net asset value. 
A) is calculated as the percentage change in the net asset value of the fund. 
B) is equal to the return it earned on the dividend and interest income it received from its investments. 
C) is equal to the annual percentage increase in the dollars invested in the fund by investors. 
D) includes both the dividend and interest income earned by the fund and any increase in the fund's net asset value.

Question 20

Under the Investment Company Act of 1940, an investment company is:

Accepted Answer

A) required to register with the SEC. 
B) any company that holds investment securities that have a value that is greater than 40% of the company's total assets. 
C) any issuer whose primary business involves investing, reinvesting, or trading in securities. 
D) All of the above accurately describe an investment company as defined by the Investment Company Act of 1940. 
A) required to register with the SEC. 
B) any company that holds investment securities that have a value that is greater than 40% of the company's total assets. 
C) any issuer whose primary business involves investing, reinvesting, or trading in securities. 
D) All of the above accurately describe an investment company as defined by the Investment Company Act of 1940.

Which of the following statements regarding the taxes associated with a variable life insurance policy is false?

Common stock and preferred stock differ in that:

The primary difference between dealers and brokers is that:

Uncle Scrooge (uncharacteristically) wants to set up a Section 529 college savings plan for his nephew, Louie. If he does so:

Fidelity Investments has two money market funds that is available to most investors. The Fidelity Cash Reserves fund (FDRXX) is currently yielding 0.10% while its Fidelity Municipal Money Market fund (FTEXX) is yielding 0.01%. One reason for this significant difference is that:

Which of the following would be a reason for a person to receive a statutory disqualification from membership in FINRA?

Which of the following persons is not permitted to open an investment account? I. a general partnership II. a corporation III. the executor of an estate IV. a 16-year-old entrepreneur

Which of the following statements regarding a unit investment trust (UIT) is false?

Which of the following is not a potential advantage associated with investing through a mutual fund?

Which of the following share classes do not have front-end loads?

Which of the following is not a cost associated with an investment in a variable annuity contract?

Which of the following statements made by a registered representative selling a variable life insurance policy would be likely to result in disciplinary action?

Which of the following would offer an investor the most protection against purchasing power risk?

When a mutual fund is valuing your pre-existing holdings to see if you qualify for a reduced sales charge under its rights of accumulation program, it must use:

The total return reported by a mutual fund:

Under the Investment Company Act of 1940, an investment company is:

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 taxes associated with a variable life insurance policy is false?

Common stock and preferred stock differ in that:

The primary difference between dealers and brokers is that:

Uncle Scrooge (uncharacteristically) wants to set up a Section 529 college savings plan for his nephew, Louie. If he does so:

Fidelity Investments has two money market funds that is available to most investors. The Fidelity Cash Reserves fund (FDRXX) is currently yielding 0.10% while its Fidelity Municipal Money Market fund (FTEXX) is yielding 0.01%. One reason for this significant difference is that:

Which of the following would be a reason for a person to receive a statutory disqualification from membership in FINRA?

Which of the following persons is not permitted to open an investment account? I. a general partnership II. a corporation III. the executor of an estate IV. a 16-year-old entrepreneur

Which of the following statements regarding a unit investment trust (UIT) is false?

Which of the following is not a potential advantage associated with investing through a mutual fund?

Which of the following share classes do not have front-end loads?

Which of the following is not a cost associated with an investment in a variable annuity contract?

Which of the following statements made by a registered representative selling a variable life insurance policy would be likely to result in disciplinary action?

Which of the following would offer an investor the most protection against purchasing power risk?

When a mutual fund is valuing your pre-existing holdings to see if you qualify for a reduced sales charge under its rights of accumulation program, it must use:

The total return reported by a mutual fund:

Under the Investment Company Act of 1940, an investment company is:

Investment and Securities

Assorted Securities and Investments

Uniform Securities Act USA and State Registration Requirements

Filters