On December 10th, 2017, a mother gives a gift to her daughter of 1,000 shares of PDQ stock. The stock was purchased 6 months earlier at a cost basis per share of $48 per share. The market value at the date of the gift was $64 per share. On January 18th, 2
C. $22 per share short term capital gain on PDQ; $10 per share long term capital gain on DEF
Appreciated gifted securities assume the donor's holding period and the donor's cost basis. The PDQ securities were donated after being held for 6 months and the
Which of the following persons is "in the business" of giving investment advice?
A. A full service broker-dealer who charges higher commissions than discount brokers because of the value of recommendations made
B. An insurance agent that advertises "no-fe
B. An insurance agent that advertises "no-fee" financial planning but who sells insurance for a commission to advisory clients
If an insurance agent creates "no-fee" financial plans, and then takes commissions on insurance policies sold to these customers
An investment portfolio indexed to the S&P 500 Index produced a return for the year of 12% with a beta of +1. Investment Manager "A" has an actively managed stock portfolio that produced at return for the year of 14.8% with a beta of 1.4. The "alpha" prod
B. - 2%
Investment Manager "A" produced a 14.8% return by assuming 40% more "risk" as measured by beta than if the portfolio was invested in a benchmark stock index with a beta of 1. To compare "apples with apples," a portfolio with a beta of 1.4 should r
The BEST way to maximize the federal death tax exemption for an older husband and a younger wife who have young children is to put:
A. all the marital assets into the younger wife's name
B. all the marital assets into the older husband's name
C. all the m
D. half of the marital assets into the name of the husband and half of the marital assets into the name of the wife
_____________________________________
The estate tax exclusion ($5,490,000 in 2017) is maximized if 1/2 of the couple's assets are put in t
A value fund manager has decided that she needs to increase the fund's cash holding by liquidating some positions. To decide which positions to sell and the best time to do this, the manager would use:
A. fundamental analysis
B. technical analysis
C. a co
C. a combination of both fundamental and technical analysis
___________________________________________
Fundamental analysis is used to decide which stocks to buy or sell, based on "fundamental" factors such as earnings, dividends, products, etc. Once tha
Which of the following corporate distributions are taxable to the recipient?
I Cash dividend
II Stock dividend
III Product dividend
IV Stock split
A. I only
B. I and III
C. III and IV
D. I, II, III, IV
B. I and III
A Registered Investment Adviser has a client who has a joint account with his spouse. The client telephones and informs the RIA that he is secretly getting a divorce from his spouse, but that he wishes to continue to use the RIA's services. The RIA should
C. open an individual account for the client
Under the Investment Advisers Act of 1940, if a registered investment adviser, for the first time, decides to require prepayment of $1,200 or more of advisory fees, 6 months or more in advance of rendering services, the adviser must:
A. file an audited ba
A. file an audited balance sheet promptly with the Securities and Exchange Commission
An agent is soliciting customer orders for a new non-exempt issue that has been registered. The top officers of this company were previously associated with XYZ Company, a highly successful firm in the same industry. That firm's success was attributed to
A. I and II
An investment adviser wishes to include a clause in its advisory contract that "all controversies that may arise between the customer and us shall be determined by binding mediation." Which statement is TRUE?
A. This clause is permitted in advisory contra
C. This clause is prohibited because it requires the customer to waive his or her right to reject the mediator's settlement proposal that is permitted under Federal and State law
A primary government dealer that is short Treasury Bonds could hedge the position by:
I Buying T-Bond futures contracts
II Selling T-Bond futures contracts
III Buying T-Bond forward contracts
IV Selling T-Bond forward contracts
A. I and III
B. I and IV
C.
A. I and III
If a T-Bond trader is short, the risk is that price of the T-Bonds will rise. The purchase of a futures contract (right to buy at a fixed price at a future date) will protect from an upward market move. The purchase of a forward contract will
An agent of BD "A" receives a job offer from BD "B." If the agent accepts the job at BD "B," his State registration with BD "A" will:
A. remain in effect
B. be transferred automatically by CRD to BD "B"
C. automatically expire within 30 days of resignatio
D. be terminated by BD "A
A company has quarterly earnings of $3.00 per share. At the end of the year, it retained $9.00 per share. The company's dividend payout ratio is:
A. 25%
B. 33%
C. 66%
D. 75%
A. 25%
If quarterly earnings were $3 per share, then annual earnings = $12. Since $9 per share was retained, then $3 was paid as dividends. The dividend payout ratio is $3 / $12 = 25%.
Which statements are TRUE about structured products?
I The bond component pays interest based on an index rate such as the performance of the NASDAQ 100 Index
II The interest rate paid is typically capped to an annual maximum rate
III The derivative compo
D. I, II, III, IV
Which of the following is NOT defined as a federal covered adviser?
A. An adviser to insurance companies registered in the State
B. An adviser to investment companies registered with the Securities and Exchange Commission
C. An adviser that manages $100,0
A. An adviser to insurance companies registered in the State
An investment adviser wishes to offer all of the medical professionals at a local hospital a reduced advisory fee in the hopes of attracting new assets to manage. Which statement is TRUE about an adviser offering discounted rates?
A. The investment advise
D. The investment adviser can offer the discount as long as the fact that non-medical professionals that are unaffiliated with the hospital pay a higher fee is disclosed in the Form ADV Part 2A
An investment adviser representative wants to share in the gain and loss of a customer account. Under NASAA rules, this is:
A. permitted if the IAR opens a joint account with the customer; contributes capital; and shares in proportion to the capital contr
D. prohibited
If a corporation issues new stock at a price above par value, the excess above par is termed:
A. surplus capital
B. retained earnings
C. earned surplus
D. adjusted par value
A. surplus capital
A customer has a portfolio that consists of long term bonds. If market interest rates should rise, the customer will experience all of the following EXCEPT:
A. interest rate risk
B. a realized capital loss
C. opportunity cost
D. higher yields on reinveste
B. a realized capital loss
In order to have a realized capital loss, the customer must sell the bonds!
The amount of commission charged to a customer to effect a securities transaction:
I is not required to be disclosed prior to executing the transaction
II must be disclosed prior to executing the transaction
III is not required to be disclosed on the trad
B. I and IV
A customer who earns $80,000 per year is 35 years old, married to a non-working spouse, has a 5-year-old child, has no retirement savings and does not have a will. This customer receives $250,000 in a single stock as an inheritance from her deceased aunt.
D. Diversify the stock position, because it should not be in a single stock holding
Given the formula:
( Corporate Yield %) x (1 - Tax Bracket %) ='X'
X is equal to the:
A. Taxable Equivalent Yield
B. Tax-Free Equivalent Yield
C. Discount Yield
D. Yield to Maturity
B. Tax-Free Equivalent Yield
A municipal employee has a 403(b) plan in which he has invested $8,000. The plan is currently worth $14,000. The employee decides to surrender and take a partial withdrawal of $8,000. Taking into consideration the customer's tax exclusion, what is the tax
D. Since the cost basis in the account is "0," the entire distribution will be taxed as ordinary income
An older customer, age 63, that is in the lowest tax bracket, seeks an investment that will give him an income stream. The BEST recommendation would be:
A. Variable annuity
B. Municipal bond
C. Certificate of deposit
D. AAA Corporate bond
D. AAA Corporate bond
Because the customer is in a low tax bracket, you would not recommend the municipal bond.
The CD and the AAA Corporate bond both provide income, which is the stated objective. However, the AAA corporate bond is top-rated and will giv
An investor has a broadly diversified portfolio of blue chip stocks. The use of index options to hedge the portfolio reduces:
A. systematic risk
B. non-systematic risk
C. interest rate risk
D. timing risk
A. systematic risk
Index options can be used to hedge a portfolio. If index puts are bought, then a drop in the market lowering the portfolio's value will be offset by a gain in the value of the index puts. This strategy hedges against market risk, also k
A willful and fraudulent violation of the Uniform Securities Act occurs if a(n):
A. deceptive sales presentation is made to a client, but no sale results
B. omission of fact is made that is not important to understanding the risks and merits of the invest
A. deceptive sales presentation is made to a client, but no sale results
A portfolio that is rebalanced annually is considered to be:
A. Active
B. Passive
C. Fixed
D. Strategic
B. Passive
A customer buys 500 shares of ABCD stock in a cash account and pays for the securities in full on settlement date. The customer requests that the broker-dealer transfer the securities into the customer's name and ship them to his home address. Which state
D. This request should be honored as given
Under the Uniform Securities Act, an investment adviser may be formed as any of the following EXCEPT a(n):
A. corporation
B. partnership
C. association
D. broker-dealer
D. broker-dealer
Which of the following can be filed electronically?
I Registration application information
II Signature requirement
III Payment of fees
IV Answer to a subpoena
A. I and III
B. III and IV
C. I, II, III
D. I, II, III, IV
C. I, II, III
An investor employing sector rotation is using a:
A. timing strategy
B. momentum strategy
C. contrarian strategy
D. value strategy
A. timing strategy
Which "soft dollar" remuneration arrangement between an investment adviser and a broker-dealer is prohibited?
A. The broker-dealer providing free asset allocation software to the adviser in return for the adviser directing trades to that broker-dealer
B.
D. The broker-dealer providing the services of an on-site research analyst to the adviser in return for the adviser directing trades to that broker-dealer
A customer invests $100,000 in an Equity Indexed Annuity contract tied to the Standard and Poor's 500 Index. The contract has a 90% participation rate and a 15% cap. Interest is credited to the contract under the annual reset method and is compounded annu
C. $125,350
The first year increase in the index of 20% with a 90% participation means that 18% would be credited to the account - however, because of the 15% cap, this is the first year credit, so the $115,000 balance is worth $115,000 after the first ye
Under the Investment Advisers Act of 1940 which of the following is (are) disclosed in an investment adviser registration?
I The approximate number of advisory clients
II The approximate market value of the portfolios managed
III The names and addresses o
C. I, II, IV
Account A consists of 90% stocks and 10% bonds. Over the years, it has generated a high return of 9% and a low return of -2%.
Account B consists of 60% stocks and 40% bonds. Over the years, it has generated a high return of 10% and a low return of 2%.
Acc
A. Account A
Which of the following are "asset classes"?
I Stocks
II Annuities
III Real Estate
IV Indexes
A. I and III
B. I and IV
C. II and III
D. II and IV
A. I and III
If an investment adviser is also a registered broker-dealer and will effect recommended trades to customers through that broker-dealer:
A. a violation of NASAA rules will occur
B. the relationship between the investment adviser and the executing broker-de
C. the relationship must be disclosed to the client, at, or prior to, the signing of the advisory contract
A parent who is a custodian in a UTMA account is prohibited from using custodial funds to pay for all of the following EXCEPT:
A. clothing needs of the minor due to a change of seasons
B. new shoes for the minor caused by a growth spurt
C. meals and snack
D. summertime equestrian training for the minor
If an unregistered agent effects transactions for a registered broker-dealer, all of the following statements are true under the Uniform Securities Act EXCEPT:
A. the broker-dealer may be subject to disciplinary action
B. the purchaser may recover the ful
C. the agent is only subject to disciplinary action if a customer complains
An example of diversification is the purchase of:
A. Treasury bonds and municipal bonds
B. domestic mutual funds and international mutual funds
C. blue chip stocks and mid-cap stocks
D. Treasury bills and money market instruments
B. domestic mutual funds and international mutual funds
A bond is rated Aaa by Moody's. The bond is:
A. Highest Quality Investment Grade
B. High Quality Investment Grade
C. Low Quality Investment Grade
D. Highest Level Speculative Grade
A. Highest Quality Investment Grade
What is the difference between Class A and Class B stock in a pooled investment vehicle?
A. Class A stock votes while Class B stock does not
B. Class A stock is negotiable while Class B stock is redeemable
C. Class A stock has an Up-Front sales charge whi
C. Class A stock has an Up-Front sales charge while Class B stock imposes a Contingent Deferred Sales Charge
Which of the following are permitted investments in an IRA?
I U.S. minted gold coins and gold bullion
II Partnership units
III Art
IV REITs
A. I and II only
B. III and IV only
C. I, II and IV
D. I, II, III, IV
C. I, II and IV
During periods of high inflation, the money supply typically has been:
A. expanding
B. contracting
C. oscillating
D. unchanging
A. expanding
An investment adviser has entered into a "soft dollar" agreement with a full service broker-dealer where the broker-dealer will provide the adviser with asset allocation software for free, in return for the adviser directing its order flow to the broker-d
B. direct the customer's trades to the electronic broker for execution
An investment adviser representative (IAR) actively trades his client accounts, concentrating on equity and ETF trades, normally routing the trades through ABC Brokerage, a broker-dealer affiliated with the RIA. The IAR gets a new large customer, who want
A. trading away
Investment advisers that have a broker-dealer entity are permitted to accept all of the following compensation items EXCEPT:
A. commissions on trades effected for clients
B. annual fees based on a percentage of assets under management
C. monthly fees base
C. monthly fees based on performance in the account
When borrowing money, the interest rate charged measures the:
A. inflation rate
B. consumption rate
C. cost of money
D. opportunity cost
C. cost of money
An agent who works for a broker-dealer has a customer who works near-by who frequently comes into the office to get advice in person and place trades. One day, when returning from lunch, she finds a written note from the client stating that he had stopped
D. The agent must forward the note to a supervisor for resolution
Which of the following individuals is "in the business" of rendering investment advice under the Investment Advisers Act of 1940?
A. A financial planner who advertises as charging no fee for the financial plan and who only takes commissions on recommended
A. A financial planner who advertises as charging no fee for the financial plan and who only takes commissions on recommended trades
1-year Treasury investments yield 4%; while a "high tech" common stock investment yields 25%. The equity risk premium is:
A. 0%
B. 4%
C. 21%
D. 25%
C. 21%
The "risk free" rate of return is simply that return provided by a "riskless" investment such as 1-year Treasuries. The equity risk premium is the incremental return above the risk free rate demanded by the market for the risk characteristics of th
Under the Investment Company Act of 1940, an affiliated person may:
A. borrow money from the fund
B. borrow securities from the fund
C. sell securities personally to the fund
D. buy shares of the fund
D. buy shares of the fund
An agent of a broker-dealer recommends a specific stock to a customer and says that the stock will most likely increase in value within the next couple of months. The customer invests in the stock and its market price increases substantially. Which statem
D. The only acceptable commission is that which was originally received
A husband and wife have a joint account with a member firm. The wife calls the registered representative with instructions to liquidate their 500 share position of ABC stock. The registered representative should:
A. accept and execute the order as given
B
A. accept and execute the order as given
An Investment Adviser Representative has filed a registration application with the State, which the Administrator has denied. This could happen because the IAR was convicted of a:
A. breach of the peace misdemeanor 5 years ago
B. driving under the influen
C. investment related misdemeanor 5 years ago
A new broker-dealer is attempting to attract clients and publishes the following advertisement:
"If we do not generate an investment return of 10% within 1 year, we will happily refund your money."
This statement in advertising is:
A. permitted since the
C. prohibited since this is a guarantee of performance, which cannot be made under State law
A customer's accountant telephones an investment adviser and wishes to place orders for the customer's account. Which statement is TRUE under the NASAA Statement of Policy?
A. The investment adviser can accept orders for 10 business days under the account
C. The investment adviser cannot accept any instructions from the accountant unless the customer authorizes this in writing