HESI A2: Chemistry (Quiz 3) Welcome to your Series 65 Practice Exam 5 This test is designed to prepare you mentally for the actual Series 65 Exam with the same number of (130 questions) and the same time allowed (180 minutes) as the actual exam. The Series 65 Exam is breakdown into four (4) Parts. Here are the Four (4) Domains of Series 65 Exam with the weightage and number of questions in this practice exam: 1. Economic Factors and Business Information [20 Questions] - 15% 2. Investment Vehicle Characteristics [32 Questions] - 25% 3. Client Investment Recommendations and Strategies [39 Questions] - 30% 4. Laws, Regulations, and Guidelines, including Prohibition on Unethical Business Practices [39 Questions] - 30% Please click NEXT to start your Free Series 65 PRACTICE EXAM right away. Best of Luck! 1. During an economic downturn, one would expect to see A) higher unemployment B) manufacturer’s inventories to decline C) bond prices fall D) a rising CPI None 2. Which of the following statements about the consumer price index (CPI) is NOT true? A) The CPI measures the increase or decrease in the level of consumer prices with respect to the level of wholesale prices upon which consumer prices depend. B) The CPI measures the rate of increase or decrease in a broad range of prices, such as food, housing, medical care, and clothing. C) The CPI measures the increase in the general price level of a basket of consumer goods. D) The CPI is computed monthly. None 3. Your client calls you after reading a story in the business section of his local newspaper. It seems that the article focused on changes to the core CPI and the client wants to know how that is different from the normal CPI. You should explain that it is A) the Consumer Price Index excluding energy and food prices B) the total of the leading indicators, excluding stock prices C) the figure used to determine annual increases, if any, to Social Security benefits D) the Consumer Price Index excluding housing and automobiles None 4. Core inflation is best described as an inflation rate A) the central bank views as acceptable. B) for producers’ raw materials. C) that excludes certain volatile goods prices. D) that includes food and energy prices. None 5. Stock market indices have a variety of uses. Which of the following is least accurate regarding the use of stock market indices? A) They act as the basis of ETFs. B) They help in portfolio performance measurement. C) They act as a market barometer. D) They are a lagging indicator of an economy’s corporate performance. None 6. An economic indicator that has turning points which tend to occur after the turning points in the business cycle is classified as a A) trailing indicator. B) lagging indicator. C) coincident indicator. D) leading indicator. None 7. A business reporter claims that we are suffering from inertial inflation. This means A) the business cycle is heading toward a trough. B) the current rate of inflation will remain at this level until economic shocks cause it to change. C) the economy is about to enter a deflationary period. D) prices are increasing at a steady rate. None 8. As current interest rates go up, the market price of existing corporate bonds bearing lower interest rates will A) decrease B) change in unpredictable ways C) increase D) stay the same None 9. In the secondary market, U.S.Treasury bond prices are most influenced by A) the Treasury Department B) the prime rate C) the primary dealers D) the inflation rate None 10. Ana is a bond analyst who notices a wider credit spread between Treasury bonds and AAA corporate debt. From this, she would be most likely to infer A) the economy is weakening. B) interest rates on Treasury bonds are increasing. C) corporate bond prices are increasing. D) corporate earnings are reaching record highs. None 11. A bond analyst reports that there is currently an inverted yield curve. That would mean A) the closer the bond is to its maturity date, the higher the yield. B) the closer the bond is to its maturity date, the lower the yield. C) the further the bond is from its maturity date, the higher the yield. D) bonds with intermediate maturities have the highest yields. None 12. Yield curve analysis plays an important role as a benchmarking and forecasting tool for the future direction of interest rates. In most cases, this analysis involves examining A) bonds of varying quality of similar maturities. B) bonds of a single issuer over varying maturities. C) bonds of similar quality over varying maturities. D) bonds of varying quality over a number of maturities. None 13. While listening to a commentator on cable TV, you hear the statement "the flight to quality has ended." What would you expect the effect of this to be? A) Yield spreads are widening. B) Pessimism is spreading. C) Airline stocks are in for a beating. D) Yield spreads are narrowing. None 14. An inverted yield curve results in part by A) declining interest rates B) investors buying short-term bonds and selling long-term bonds C) rising interest rates D) investors buying long-term bonds and selling short-term bonds None 15. In the investment industry, the term spread has many different meanings. When used in a discussion about bonds, which of the following would be most appropriate? A) Inverse spread B) Calendar spread C) Debit spread D) Credit spread None 16. A common measurement used to evaluate attitudes regarding future economic conditions is the difference in yields between U.S. Treasury bonds and corporate bonds. This is known as A) business cycle. B) Consumer Price Index. C) yield spread. D) yield curve. None 17. During an economic recession, which of the following items will most likely increase? A) Bond prices B) Interest rates C) Inflation D) Consumer confidence and profits None 18. Which of the following would probably not be an attractive investment during periods of rising inflation? A) Gold B) Oil stocks C) Real estate D) Corporate bonds None 19. Which of the following would probably NOT be an attractive investment during periods of rising inflation? A) Real estate B) Gold C) Corporate bonds D) Oil stocks None 20. A bond analyst is plotting a yield curve and notices that short-term maturities have higher yields than intermediate and long-term maturities. This is an example of A) a normal yield curve B) an algorithmic yield curve C) an inverted yield curve D) a positive yield curve None 21. Your client in the 28% federal income tax bracket currently owns some U.S. government bonds with a coupon yield of 6%. In order to receive the same income after taxes, she would need to buy municipal bonds with a coupon of A) 7.68% B) 1.68% C) 4.32% D) 6.00% None 22. A client is trying to decide between a par value corporate bond carrying a coupon rate of 6.25% per year and a par value municipal bond that pays an annual coupon rate of 4.75%. Assuming all other factors are equal and your client is in a 28% marginal income tax bracket, which bond do you tell the client to purchase and why? A) The municipal bond because its equivalent taxable yield is 6.3% B) The municipal bond because its equivalent taxable yield is 6.6% C) The corporate bond because the after-tax yield is 4.5% D) The corporate bond because the after-tax yield is 6.25% None 23. A client is in the 28% marginal federal income tax bracket, and the 3% state income tax bracket. Which of the following investments would produce the highest after-tax yield for the client? A) A U. S. Treasury note yielding 7% B) An A-rated corporate mortgage bond yielding 8.0% C) A triple-A-rated debenture yielding 7.75% D) A public purpose municipal bond yielding 6% None 24. Your client in the 25% federal income tax bracket lives in a state where his earnings place him in the 6% bracket for state income tax purposes. If he were to purchase a 4% bond issued by a political subdivision of another state, his total tax-equivalent yield would be A) 4% B) slightly more than 5.33% C) approximately 12.90% D) slightly less than 5.33% None 25. When an investor divides the coupon rate of a municipal bond by the complement of her tax rate, she is computing the bond's A) discounted cash flow. B) inflation-adjusted return. C) after-tax rate of return. D) tax-equivalent yield. None 26. Kate, age 59, has an investment portfolio exceeding $250,000. She considers herself a moderate to conservative investor. To generate additional income, she is anticipating adding bonds to her portfolio. She lives in a state that does not have an income tax and she is in the 28% federal income tax bracket. Which of the following bonds would be the best recommendation for her portfolio? A) Bond A, A-rated corporate debenture with a 6.5% coupon rate B) Bond C, CCC-rated corporate debenture with an 8% coupon rate C) Bond D, AAA-rated Treasury note with a 2.55% coupon rate D) Bond B, BBB-rated municipal bond with a 3.75% coupon rate None 27. Your client in the 25% federal income tax bracket lives in a state where his earnings place him in the 6% bracket for state income tax purposes. If he were to purchase a 4% bond issued by a political subdivision of his state, his total tax-equivalent yield would be A) slightly more than 5.33% B) approximately 12.90% C) slightly less than 5.33% D) 4% None 28. A client in the 28% marginal federal income tax bracket invests in a corporate bond with an 8% coupon. To calculate the client's after-tax rate of return, A) divide 0.08 by 0.28 B) divide 0.08 by 0.72 C) multiply 0.08 by 0.28 D) multiply 0.08 by 0.72 None 29. Your client in the 35% federal income tax bracket currently owns some corporate bonds with a coupon yield of 7%. In order to receive the same income after taxes, he would need to buy municipal bonds with a coupon of A) 7.00% B) 2.45% C) 9.45% D) 4.55% None 30. Which of the following choices offers the highest tax-equivalent yield? A) 5.8% municipal bond to an individual in the 25% tax bracket B) 5.5% municipal bond to an individual in the 28% tax bracket C) 5% municipal bond to an individual in the 35% tax bracket D) 6.2% municipal bond to a corporation in the 21% tax bracket None 31. Which of the following investments would provide the highest after-tax income to your client in the 35% federal income tax bracket? A) 6% U.S. Treasury bond B) 5% general obligation municipal bond issued by State H C) 7% bond issued by Canadian Province M D) 8% debenture issued by the LMN Corporation None 32. An investor in the 28% income tax bracket is considering purchasing either an 8% municipal bond or a 10% corporate bond. Which of the following regarding the bonds is TRUE? A) The yield difference cannot be determined. B) The corporate bond yield is higher than the municipal yield after taxes. C) The municipal yield is higher than the corporate yield on an after-tax basis. D) The yields of the bonds are equivalent on an after-tax basis. None 33. A client in the 30% tax bracket owns a 5% XYZ, Inc., debenture due to mature shortly. What yield in a municipal will give him the same after-tax return that he now has with his debenture? A) 5.30% B) 3.50% C) 1.50% D) 2% None 34. When referring to municipal bonds, the formula of (1 − tax bracket) is found in the computation of A) return on investment B) tax-equivalent yield C) current yield D) yield to maturity None 35. The most common collateral securing a Brady bond is A) an asset, or group of assets, pledged by the borrowing entity B) the credit standing of the sovereign nation issuing the Brady bond C) U.S. Treasury zero-coupon bonds with a maturity corresponding to the maturity of the individual Brady bond D) the credit standing of the banking institution acquiring the Brady bond None 36. A U.S. dollar-denominated bond issued by a non-American company (or government), sold outside the United States and the issuer's country, but for which the principal and interest are stated and paid in U.S. dollars is best described as A) a Brady bond. B) a Eurodollar bond. C) a Eurobond. D) a Yankee bond. None 37. Which of the following would best describes a Yankee bond? A) U.S. dollar-denominated bond issued by a U.S. entity inside the United States B) U.S. dollar-denominated bond issued by a non-U.S. entity inside the United States C) U.S. dollar-denominated bond issued by a non-U.S. entity outside the United States D) U.S. dollar-denominated bond issued by a U.S. entity outside the United States None 38. When a corporation domiciled in the U.K. issues U.S. dollar-denominated bonds in the United States, it is issuing A) Eurobonds. B) ADRs. C) Ameribonds. D) Yankee bonds. None 39. When a U.S. resident investor purchases foreign bonds, A) depreciation of the bonds and appreciation of the foreign currency benefit the domestic investor. B) appreciation of both the bonds and the foreign currency benefits the domestic investor. C) depreciation of both the bonds and the foreign currency benefits the domestic investor. D) appreciation of the bonds and depreciation of the foreign currency benefit the domestic investor. None 40. The term "eurodollars" refers to A) European currency held in U.S. banks B) a worldwide currency system that is expected to someday replace existing currency systems C) obsolete currency that was formerly backed by the gold standard D) American dollars held by banks in other countries, especially in Europe None 41. An investor interested in investing in sovereign debt would most likely purchase A) bonds backed by gold sovereigns. B) European Central Bank debt issues. C) Sweden 2.5s of 2032. D) bonds issued by the Bank of the United States. None 42. Which of the following would best describe a Yankee bond? A) A U.S. dollar–denominated bond issued by a U.S. entity outside the United States. B) A U.S. dollar–denominated bond issued by a non-U.S. entity outside the United States. C) A U.S. dollar–denominated bond issued by a non-U.S. entity inside the United States D) A U.S. dollar–denominated bond issued by a U.S. entity inside the United States. None 43. Of the following securities, which is most commonly recommended to fund a child's college education? A) Zero-coupon Treasury bonds B) Investment-grade corporate bonds C) Treasury bills D) Municipal bonds None 44. The call feature available on some bonds A) allows the issuer the option to escape high interest rates if market rates decline. B) may be used to convert the bond into preferred shares. C) allows bond issuers to extend the life of the bond. D) allows the issuer to refinance the debt if interest rates rise above the call rate. None 45. If a corporate bond is a convertible bond, this means that A) the owner of the bond may exchange it for a set number of shares of stock B) the owner of the bond may exchange it for a bond paying a higher coupon rate C) the owner of the bond may exchange it for a debenture D) the corporation may redeem the bond before its maturity date None 46. Which of the following statements regarding callable bonds is correct? A) They offer lower yields than comparable noncallable bonds. B) They usually provide a call risk premium. C) They are only issued by government entities. D) They are unaffected by changes in market yields. None 47. Which of the following statements regarding convertible debentures is TRUE? A) The issuer pays a higher rate of interest, compared with a comparable nonconvertible debenture. B) The debenture holders receive a variable rate of interest. C) The issuer has the right to convert the debentures during the time period specified in the indenture. D) When compared with similar nonconvertible debentures, convertible debentures are issued with a lower coupon rate. None 48. Which of the following investments gives the investor the least exposure to reinvestment risk? A) Treasury STRIPS/zero-coupon bonds B) Preferred stock in a growth company C) Treasury notes D) Common stock in an electric utility None 49. Your customer owns $100 par 5½% callable convertible preferred stock convertible into 4 shares of common stock at $25. What should she be advised to do if the board of directors were to call all the preferred at 106 when the common stock is trading at $25.50? A) Convert her preferred stock into common stock because it is selling above parity. B) Hold the preferred stock to continue the 5½% yield. C) Present the preferred stock for the call because the call price is $4 above the parity price. D) Place irrevocable instructions to convert the preferred stock into common stock and sell short the common stock immediately. None 50. An investor interested in acquiring a convertible bond as part of his investment portfolio would A) be interested in tax advantages available to convertible debt securities B) seek to minimize changes in the bond price during periods of steady interest rates C) want the safety of a fixed-income investment along with potential capital appreciation D) want the assurance of a guaranteed dividend on the underlying common stock None 51. Which of the following statements regarding a zero-coupon corporate bond is TRUE? A) Bonds selling at a premium have a yield lower than the coupon rate. B) The investor reports the difference between the purchase price and maturity value as ordinary income at maturity. C) The investor has phantom income, which must be reported on an annual basis. D) These bonds have higher reinvestment risk as to interest than bonds paying semiannual interest. None 52. If your customer wants to set aside $40,000 for when his child starts college, but does not want to endanger the principal, you should recommend A) common stock B) zero-coupon bonds backed by the U.S. Treasury C) municipal bonds for their tax benefits D) corporate bonds with high rates of interest None 53. An individual investor specifies to her investment adviser representative that her portfolio must produce a minimum amount of cash each year. This would be considered A) a tax constraint. B) a legal and regulatory constraint. C) a unique circumstance. D) a liquidity constraint. None 54. An investment adviser has a client who wants to save for college for her child. The child will be entering college in 5 years. This would be an example of A) planning too late B) an investment constraint C) tactical asset allocation D) a capital need None 55. One of your prospective clients is considered a key employee at his place of business. This individual has a net worth of almost $6 million, currently earns in excess of $500,000 per year, and is married with 2 teenage children. He currently has a little over $1 million in his 401(k), more than half of which is invested in his employer's common stock. The company is the beneficiary of a $1.5 million key person life insurance policy on his life. Given these facts, what is your greatest concern as his adviser? A) Inadequate funding for college savings B) Alternative minimum tax C) Inadequate life insurance coverage D) Too high a percentage of the retirement plan invested in the company's stock None 56. It would be CORRECT to state that when an investor has a shorter time horizon, A) the exposure to inflation risk is increased B) the greater the duration C) the need for liquidity is more important D) the risk level is raised None 57. A client with 25 years until retirement should invest primarily in A) private placements B) preferred stocks C) bonds D) common stocks None 58. Liquidity risk is the risk that when an investor wishes to dispose of an investment, no one will be willing to buy it, or that a very large purchase or sale would not be possible at the current price. With that in mind, which of the following would likely have the lowest degree of exposure to liquidity risk? A) Money market mutual funds B) Investment-grade municipal bonds​ C) REITs D) RELPs None 59. A benefit of waiting until the age of 70 to claim Social Security benefits is that A) the income tax rate is reduced once the claimant reaches 70. B) benefits are increased by 8% for each year from the full retirement age. C) a higher percentage of the monthly benefit is exempt from income taxes. D) Medicare benefits are increased. None 60. An elderly widow with no independent income wishes to invest the proceeds from her recently deceased husband's life insurance. Which of the following would be the most suitable recommendation? A) Municipal bonds B) Call options C) Oil and gas exploration program that you know is going to strike D) High-grade corporate bond mutual fund None 61. Relatively high portfolio volatility is most tolerable to investors with A) a diversified portfolio B) an intermediate-term time horizon C) a long-term time horizon D) a short-term time horizon None 62. A private foundation is required by statute to pay out a minimum percentage of its asset value each year as qualifying distributions. This investment constraint is best classified as A) liquidity. B) unique circumstances. C) time horizon. D) legal and regulatory. None 63. In projecting future cash requirements, one of the tools is a capital needs analysis. When doing one, all of the following would be considered capital needs EXCEPT A) a $100,000 loan for law school with a due date in 10 years B) rolling over a 401(k) into an IRA C) a home equity loan with a $15,000 balance D) a $20,000 loan for undergraduate school with a due date in 6 years None 64. An investor has just received an inheritance of $100,000 and has decided to use the money to buy a new home. Because it will take time to decide where to buy, it is expected that the purchase will not be made for another 6–9 months. If this investor placed the money into a broad market index ETF, the primary risk taken would be A) market risk B) unsystematic risk C) business risk D) interest rate risk None 65. Tamika is an investment adviser representative with Financial Engineers, LLC, a covered investment adviser. The firm uses an investment policy statement to help design financial plans for their clients. One of Tamika's current clients plans to purchase a new boat 7 months from now. When using the IPS, this would be considered A) a capital need B) an investment goal C) an investment constraint D) a financial objective None 66. Which of the following situations would most likely cause an individual's application for a disability income insurance policy to be denied? A) Being over 50 years of age B) Working in a hazardous occupation C) BMI over 26 D) Type 2 diabetes None 67. Years ago, following your advice, a client opened a 529 Plan to save for their son's college education. The child is now about 3 years from beginning his freshman year. The client, believing that the stock market is currently undervalued, wishes to reallocate the plan assets so that most of the funds are in a broad stock market index portfolio. At this time, your advice would probably be against this allocation because of A) interest rate risk B) liquidity risk C) market risk D) business risk None 68. Which of the following is least likely to be considered an investment constraint when preparing an investment policy statement? A) Tax concerns B) Legal and regulatory factors C) Risk tolerance D) Liquidity needs None 69. What would be the time horizon for a 65-year-old client who has just retired? A) It depends on the individual's available assets. B) None, because 65 is the age for retirement. C) It depends on the individual's insurance company's actuarial tables. D) It depends on the individual's life expectancy. None 70. A man divorces his spouse after 10 years of marriage and remarries. If the man is the sole provider, what part of the worker's Social Security benefits is the new spouse entitled to? A) The new spouse is entitled to more benefits than the ex-spouse. B) The new spouse is entitled to splitting the benefits with the ex-spouse. C) She will be entitled to the same Social Security benefits as the ex-spouse after 10 years of marriage. D) She is entitled to the same Social Security benefits as the ex-spouse. None 71. One problem facing agent and client alike is determining how much life insurance is necessary to meet future needs. One tool that is useful for making that determination is A) a mortality table B) a premium purchase analysis C) a life insurance capital needs analysis D) a statement of beneficiary needs None 72. Which of the following mutual funds should an investment adviser representative recommend to a client whose objective is current income with moderate risk? A) Preferred stock fund B) Money market fund C) Aggressive growth fund D) High-yield bond fund None 73. Construction of an investment policy statement (IPS) requires identifying the client's objectives and constraints. Which of the following would not be in the list of constraints? A) Time horizon B) Liquidity risk C) Taxes D) Risk tolerance None 74. Which of the following statements about investment constraints is least accurate? A) Diversification efforts can increase tax liability. B) Unwillingness to invest in tobacco stocks is a constraint. C) Being an accredited investor increases investment opportunities. D) Investors with short time horizons are not likely to worry about liquidity. None 75. A couple, ages 63 and 66, are long-time clients of your firm and are in good health. They plan to retire from gainful employment in 4 years and wish to discuss decumulation strategies. One of the important factors to consider is the time horizon for this couple. Which of the following would be the best estimate to use? A) 8 years B) 4 years C) 10 years D) 25 years None 76. Insurance agents frequently use a capital needs analysis to help determine the correct amount of life insurance needed by their clients. That analysis would look at all of these EXCEPT A) life expectancy B) future earnings C) the inflation rate D) market volatility None 77. Among the options available to replace the lost income of an employed individual who becomes unable to work due to a disability would be any of these EXCEPT A) proceeds of a life insurance policy B) Social Security disability payments C) disability income insurance D) workers' compensation None 78. Mary Huggins is the ex-wife of Charlie Huggins. They were married for 12 years and then finalized a divorce. Charlie is now 70 and has begun taking his Social Security benefits. Mary remarried last year. It would be correct to state that A) Mary is entitled to Charlie’s Social Security benefits only when she reaches full retirement age. B) Mary is entitled to Charlie’s Social Security benefits or those of her new husband, whichever is the greater. C) Mary is entitled to full spousal benefits because they were married for at least 10 years. D) Mary is not entitled to any of Charlie’s Social Security benefit. None 79. A 74-year-old widower has been your client since his early 50s. He is a well-informed investor and has always seemed capable of understanding most investment concepts you have presented. At least twice a year, the 2 of you meet to evaluate his current financial situation and objectives. In your last meeting, it seemed to you that he was distracted and somewhat forgetful. It would be appropriate for you to do all of the following EXCEPT A) take detailed notes on future conversations and meetings with him B) wait to see if there are further causes for concern about his capabilities C) ask him to invite a friend or family member to accompany him to appointments with you D) inform your supervisor of your concerns about his memory loss None 80. It would be correct to state that when an investor has a longer time horizon, A) the need for liquidity is less important B) the exposure to inflation risk is lessened C) the risk level is lowered D) the greater the initial deposit to reach a projected future goal None 81. A customer has a financial commitment of $200,000 that will come due in 2 years. In the interim, the customer wishes to invest the $200,000 to maximize income and have the money available for the obligation in 2 years. You should recommend investments in A) large-cap stocks B) municipal bonds purchased at par with 20-year maturities C) preferred stock purchased in a private placement D) government securities with two year maturities None 82. An investor who purchases stock in two technology companies with high projected earnings and growth potential but little performance history is considered A) a conservative investor B) an aggressive investor C) a defensive investor D) a passive investor None 83. Your customer, age 60, is retired and living at home with a fully paid-off mortgage. Her portfolio contains growth stocks and high-quality bonds, and she is a longtime investor and comfortable with moderate risk. Her objective is a moderate level of current income to supplement her corporate pension plan distributions and the earnings from her IRA. Which of the following mutual funds is the most suitable for this customer? A) ABC Equity Income Fund B) QRS Capital Appreciation Fund C) XYZ Biotechnology Fund D) LMN Stock Index Fund None 84. An investor concerned about preservation of capital would be most apt to purchase A) investment-grade corporate bonds B) common stock C) warrants D) call options None 85. If a customer is in the 15% federal income tax bracket and his main investment objective is current income, which of the following securities should the agent recommend? A) Zero-coupon bond. B) City of Milwaukee GO bond. C) U.S. government bond. D) Investment-grade corporate bond. None 86. For a trust account not seeking appreciation, which of the following would be recommended? A) Large-cap common and preferred stocks B) Common stock, preferred stock, and debentures C) Highly rated, fixed-income securities D) Common stock in small, highly profitable companies None 87. If your clients, spouses both age 50, are interested in long-term growth and are willing to accept a moderate amount of risk, you should recommend A) a large-cap stock fund B) a municipal bond fund C) an equity/income fund D) a money market fund None 88. Your married customers are both 42 years old, have 2 children ages 14 and 12, and have spent the past 10 years accumulating money to provide for their children's education. Their oldest child will enter college in 4 years, and the customers are very cautious investors. If they need a safe investment that provides regular income to help them meet tuition payments, which of the following mutual funds is the most suitable for these customers? A) ATF Overseas Opportunities Fund B) RST Balanced Fund C) LMN Investment-Grade Bond Fund D) ABC Stock Index Fund None 89. Your elderly client has $10,000 to invest and seeks preservation of capital and a moderate income stream. If she has never invested in mutual funds before and all of her savings are in bank CDs and saving accounts, you should recommend A) a government bond fund B) a T-bill C) a money market fund D) a tax-exempt bond fund None 90. You are doing an investment plan for a new client, age 55, who plans to retire at age 70. The client is somewhat risk averse and wants to preserve capital while at the same time not falling prey to possible inflation. Which of the following portfolios would probably be most suitable? A) 60% high-quality bonds; 30% large-cap stocks; 10% cash equivalents B) 90% large-cap stocks; 10% high-quality bonds C) 90% high-quality bonds; 10% large-cap stocks D) 40% high-yield bonds; 60% large-cap stocks None 91. An investment adviser representative has a 78-year-old prospect living on $26,400 per year from Social Security plus investment income. The individual's net worth is $141, 000 including the equity in her primary residence. Her net worth was higher until recently, but the aggressive fund she owns in the KAPCO family of funds is down over $20,000 in value. Which of the following would you recommend to her? A) Sell her fund shares and reinvest in a vehicle offering her deferred accumulation B) Liquidate the fund shares and put the proceeds in a bank CD C) Invest in a municipal bond fund D) Switch to a more conservative fund in the same family of funds None 92. Peterson Financial Planning is a small personal financial planning partnership in Missouri that has $10 million in assets under management. As a result of the Dodd-Frank Act, which of the following statements best describes the registration requirement for Peterson Financial Planning? A) Peterson Financial Planning is required to register as an investment adviser with the SEC but has no requirement to register with the Administrator of the Missouri Department of Securities. B) Peterson Financial Planning is required to register as an investment adviser with the SEC and to notify the Administrator of the Missouri Department of Securities of its operation. C) Peterson Financial Planning is required to register as an adviser with the Administrator of the Missouri Department of Securities. D) Peterson is required to register as an adviser with both the SEC and the Administrator of the Missouri Department of Securities. None 93. Defalcator Investment Planning (DIP) has $175 million in AUM and has offices in States A, K, and R. DIP would be required to provide a balance sheet as part of its brochure if it charged fees of A) $1,200 for the next 6 months of advisory service. B) $1,500 for the next year’s advisory service. C) $1,500 for the next 3 months of advisory service. D) $600 for the next 6 months of advisory service. None 94. If a federal covered adviser's fiscal year ends on November 30, 2017, it must file its annual updating amendment to its Form ADV no later than A) February 28, 2018 B) March 30, 2018 C) December 31, 2017 D) January 18, 2018 None 95. After diligently studying the Kaplan course, Greg Gossett completed the series of exams for the Certified Financial Planner (CFP®) designation. Now, Greg would like to expand his horizons by becoming a registered investment adviser. In order to do so, Greg would have to do all of the following EXCEPT A) pay a filing fee B) pass the Series 65 examination C) provide a consent to service of process D) submit a Form ADV None 96. An investment adviser to a private fund wishes to qualify for the exemption offered under the Uniform Securities Act when the fund has no more than 100 investors. In order to qualify, A) the private fund adviser must have less than $110 million in private fund assets under management B) the fund’s outstanding securities are owned exclusively by persons who, at the time of acquisition of such securities, are individuals with at least $5 million in investments C) neither the private fund adviser nor any of its advisory affiliates have been convicted of a felony within the past 12 years D) every investor must have either at least $1 million in assets managed by the investment adviser, or a net worth, excluding the value of the primary residence, in excess of $2.1 million None 97. When filing the consent to service of process, which of the following is TRUE? A) It must be filed annually on the dates specified by the Administrator. B) It is not required of investment adviser representatives, only investment advisers. C) It expires simultaneously with the registration on December 31. D) It is supplied with the initial registration and remains on file permanently. None 98. A consent to service of process required by an Administrator is A) a formal statement declaring that an investment adviser will comply with all advertising requirements of the USA B) an agreement to perform all services and duties that the Uniform Securities Act (USA) requires of those individuals covered by the USA C) an agreement whereby a registrant will be bound by any legal action or subpoena served on the Administrator as if it had been served on the registrant D) a legal procedure that authorizes the Administrator to issue injunctions None 99. MidWest Advisory Services has $175 million in assets under management and has offices in 10 Midwest states. Regarding recordkeeping requirements, MidWest must meet those of A) the SEC. B) each state in which it has a place of business C) the state in which its principal office is located D) the state with the most stringent financial requirements None 100. A pension consultant who advises corporate retirement plans with assets of $135 million must register with which of the following? A) SEC B) Either the state or the SEC C) Both the state and the SEC D) The state None 101. An investment adviser sends a notice offering a research report she has recently prepared to a group of 25 new members of the local Lions Club. Under the NASAA Model Rule on recordkeeping for investment advisers, the firm must keep a copy of the notice along with A) the date the Administrator approved the research report B) a memorandum describing the list and its source C) a copy of the full roster of the local chapter D) the names of those members to whom the report was sent None 102. In which of the following cases would the Uniform Securities Act require registration of an investment adviser who had no place of business in the state? A) Under no circumstances is registered required if there is no place of business in the state. B) He had more than 5 institutional clients domiciled in the state. C) His website was seen by residents of the state. D) He had more than 5 noninstitutional clients who were residents of the state. None 103. The National Securities Markets Improvement Act of 1996 (NSMIA) A) defined the term ""federal covered adviser"" B) created the concept of fraud, as used in the Uniform Securities Act C) created a national market system D) overcame the restrictions of selling securities in interstate commerce None 104. The document that gives the Administrator the right to process complaints against a registrant is known as A) a consent to service of process B) an injunction C) a writ of habeas corpus D) a durable power of attorney None 105. Investment advisers who manage investment portfolios that total less than $100 million must register with A) the SEC only B) neither the SEC nor a state C) a state only D) both a state and the SEC None 106. Jefferson, Adams, and Washington (JAW) is a pension consulting firm whose only office is on Constitution Avenue in Washington, D.C. JAW has only one advisory client—a U.S. government employees pension fund with assets of $4 billion. What are this firm's registration requirements? A) It must register with the SEC because the AUM is so high. B) It may choose to register with either the D.C. Administrator or the SEC. C) It can only register with the SEC because the District of Columbia is not a state. D) It does not have to register because its only client is the U.S. government. None 107. Serenity Strategic Investments (SSI) is an investment adviser registered in four states. SSI's most previous annual updating amendment showed AUM of $108 million. Six months later, a favorable market resulted in SSI's AUM growing to $120 million. Unfortunately, several large clients left, so at the end of SSI's year, its AUM was down to $94 million. Which of the following statements is CORRECT? A) SSI may remain SEC registered as long as AUM is at $90 million or more. B) SSI must become registered with SEC within 90 days of exceeding $110 million. C) SSI has the choice of remaining state-registered or registering with the SEC. D) SSI remains state-registered because its AUM is less than $100 million. None 108. An investment adviser is eligible to register with the SEC if it A) anticipates acquiring at least $100 million in assets under management within the next 120 days B) would be required to register in at least 10 different states C) has rendered advice to more than 15 clients during the most recent 12-month period D) has more than 100 investment adviser representatives None 109. Under the Uniform Securities Act, most books and records of investment advisers must be maintained for A) 3 years, the first 2 in the firm’s principal office B) 5 years, the first 2 in the firm’s principal office C) 2 years D) 1 year None 110. Emmet opened an investment advisory service 3 years ago and raised $50 million in capital from family, friends, and contacts and then closed to new investors. If Emmet's stock picks expanded assets under management to $110 million, Emmet A) must update his registration with the state Administrator B) is not required to take any action C) must register for the first time with the state Administrator D) must register with the SEC None 111. Under the NASAA Model Rule on financial requirements for investment advisers, unless an exception exists, investment advisers who have discretionary powers but NOT custody of customer funds are usually required to have a net worth in the amount of A) $10,000.00 B) $50,000.00 C) $35,000.00 D) $5,000.00 None 112. Under both state and federal law, the executive office of the investment adviser from which the officers, partners, or managers of the investment adviser direct, control, and coordinate the activities of the investment adviser is properly referred to as A) the office of supervisory jurisdiction (OSJ) B) the home office C) the registered office D) the principal office and place of business None 113. Certain documents belonging to a federal covered investment adviser must be kept for a period of time after the enterprise closes. Those documents are A) sent to the Administrator for safekeeping B) sent to the SEC for safekeeping C) the responsibility of the investment adviser D) required to be shredded None 114. ABC Advisers, a federal covered investment adviser, is moving the firm's headquarters to a new office park in the suburbs. ABC is required to file this change with the SEC A) promptly B) within 60 days C) within 90 days D) within 30 days None 115. Under the Uniform Securities Act, all of the following are exempt from state registration as investment advisers EXCEPT A) investment adviser representatives B) investment advisers with no office in the state who only advise employee benefit plans with assets of more than $1 million C) financial planners who provide fee-based investment advisory services to clients D) publishers of financial publications that are not addressed to clients' specific individual investment situations None 116. All of the following are exempt from registration requirements with the SEC under the Investment Advisers Act of 1940 as amended by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 EXCEPT A) an adviser with 50 clients, none of whom is a private fund, all within one state, that furnishes no advice on exchange-listed securities B) investment advisers with $110 million or more in assets under management C) investment advisers whose only clients are insurance companies D) someone who gave investment advice to 11 private funds throughout the Midwest last year and has total assets under management of $120 million None 117. Under the Uniform Securities Act, which of the following is an investment adviser? A) A firm with no office in the state that has provided specific investment advice to 10 noninstitutional clients within the state during the past 12 months B) A broker-dealer who receives no compensation for investment recommendations C) An investment adviser representative with no place of business in the state who has dealt with 7 retail clients during the most recent 12 month period D) An individual who provides financial advice over the Internet with no recommendations based on specific investment situations of individual clients None 118. The agreement that the Administrator can receive subpoenas on behalf of a registered agent, broker-dealer, or investment adviser involved in any securities sale that violates the Uniform Securities Act is A) the consent to service of process B) the agreement to actionable offenses C) the right of retribution D) the right of rescission None 119. Under the Uniform Securities Act, the recordkeeping requirements established by the Administrator for out-of-state investment advisers wishing to register in his state are subject to the limitations of A) the Securities and Exchange Act of 1934 B) the Investment Advisers Act of 1940 C) the requirements set by the Administrator of the adviser's home state D) the requirements set by each individual state None 120. All of the following information is required on the SEC registration Form ADV EXCEPT A) the personal securities holdings of the principalsof the firm B) the name of the adviser's business C) the form of business organization D) the basis on which the adviser will be compensated None 121. To register a sole proprietorship as an investment adviser in a state, the application for initial registration (Form ADV) must be filed with the appropriate party. This application must include all of the following except A) the appropriate fees. B) a consent to service of process. C) any information to be furnished or disseminated to any client or prospective client. D) a copy of the articles of incorporation for the business. None 122. In which of the following cases could revocation of the registration of an IAR lead to disciplinary action against the investment adviser employing that individual? A) The IAR was found guilty of first degree murder. B) The IAR failed to make full disclosure of a previous felony conviction on the Form U4. C) The firm supplied the IAR with a copy of its Code of Ethics and administered regular training on its contents. D) The firm was found guilty of failure to supervise. None 123. The primary responsibility for supervising the activities of an investment adviser representative who is affiliated with a federal covered investment adviser lies with A) the investment adviser representative B) the investment adviser the IAR represents C) the SEC D) the Administrator None 124. John Law is the owner of Mississippi Advisory Services (MAS), an independent financial planning organization. Law is registered as an investment adviser representative of SSC Securities and Investments, registered as a broker-dealer, and an investment adviser with the SEC. Supervision over Law's advisory activities is the responsibility of A) MAS’s CCO. B) SSC’s CCO. C) John Law. D) the SEC. None 125. The chief compliance officer (CCO) of a registered investment adviser would generally not have responsibility for the actions of A) ministerial personnel of the firm. B) an investment adviser representative of the firm. C) an agent registered with an affiliated broker-dealer. D) supervisory personnel of the firm. None 126. The Investment Advisers Act of 1940 requires every registered investment adviser to have a chief compliance officer (CCO). This individual would be responsible for ensuring compliance with the firm's Code of Ethics by all of these EXCEPT A) clerical and ministerial employees of the firm B) investment adviser representatives employed by the firm C) a nonaffiliated broker-dealer through whom the majority of the firms trades are executed D) investment adviser representatives who are independent contractors None 127. Leslie is an IAR with Financial Visions (FV), a federal covered investment adviser. Leslie operates Innovative Financial Solutions (IFS), a separate financial planning company with its own office in State W. Should Leslie be found guilty of fraudulent business activities, FV would A) be immune from State W’s Administrator’s jurisdiction because it is a federal covered adviser. B) claim that IFS is a separate entity over which FV has no responsibility. C) be subject to possible disciplinary action brought by the State W Administrator if it could be shown that FV failed to supervise Leslie’s activities. D) possibly have its State W registration suspended. None 128. The final responsibility for ensuring that investment adviser representatives are adequately supervised is that of A) the managing principal. B) the Administrator. C) the chief compliance officer. D) each investment adviser representative’s immediate supervisor. None 129. Which of the following statements regarding the SEC's power to revoke the registration of an investment adviser is TRUE? A) If it is determined that an investment adviser is insolvent, the SEC may revoke the registration. B) An investment adviser receiving substantial prepayment of fees from 50% of its clients that fails to include a copy of its balance sheet in its brochure delivered to all clients would give the SEC cause for beginning revocation proceedings. C) Revocation would occur, with appropriate notice, when a firm’s annual updating amendment was received by the SEC 120 days after the end of the registrant’s fiscal year. D) Failure to adequately supervise a person associated with the adviser could be cause for the SEC to revoke the firm’s registration. None 130. Under the Uniform Securities Act, which of the following qualifies as an investment adviser representative? A) An agent who offers incidental advice on securities as part of his sales commissions B) An individual who renders fee-based advice on precious metals C) A solicitor for an investment advisory firm who is paid a fee for his services D) An employee, although highly skilled in evaluating securities, solely performs administrative or clerical functions for an investment adviser None 1 out of 130 Time is Up! Time's upTime is Up!
