Exam 1 Retake Questions Missed Flashcards
Under which of the following circumstances will an individual be required to register with the Administrator as an investment adviser representative?
She solicits brokerage services
She supervises the accounting department of a registered investment adviser
She holds herself out as an investment adviser representative
She serves on a committee that makes investment decisions for an investment adviser’s managed accounts
She serves on a committee that makes investment decisions for an investment adviser’s managed accounts
Typically employees of an investment adviser who solicit advisory services, make investment decisions, or supervise IARs
Investment Adviser rep
All the following are characteristics of passive asset allocation strategies, EXCEPT
Low transaction costs
Minimal annual tax liabilities
Rebalancing of a portfolio when risk levels exceed the investor’s preferences
Altering a portfolio in anticipation of an economic event
Altering a portfolio in anticipation of an economic event
Nominal Yield x (100% - Tax Rate % )
After-Tax Yield
Bond Yield - Inflation Rate
Inflation-Adjusted Return
A client contacts an investment adviser representative to discuss the advantages of incorporating. What are the disadvantages of forming a C Corporation?
Double taxation
Which of the following is TRUE if the price of a discount bond falls?
The spread between the yield-to-maturity and yield-to-call will increase and the yield-to-call will rise
If a bond’s basis declines, the yield-to-maturity will
Also decline, they move in the same direction
An individual currently has $100 to invest. She has calculated that the future value of her investment will be either $130 under favorable market conditions or $80 under unfavorable market conditions. Which of the following statements about the investor’s future value projections is TRUE?
If market conditions are unfavorable, the investor will have a $20 loss.
The discount rate must be the same for both the favorable and unfavorable market conditions.
The present value of the investment is $105.
If market conditions are favorable, the investor will have a $20 gain.
If market conditions are unfavorable, the investor will have a $20 loss
All of the following statements are TRUE of a 529 plan, EXCEPT:
Withdrawals that are used for educational purposes are not subject to federal taxation.
There are no income limits placed on contributors.
Contribution amounts are unlimited.
A married couple may make a lump-sum contribution of $170,000 without incurring federal gift taxes.
Contribution amounts are unlimited
What information is required in order to determine an investment’s internal rate of return (IRR)?
The positive and negative cash flows from an investment
A corporation’s shareholders must vote for
Stock splits
Par / Conversion price
Conversion ratio
If the net present value of an investment is greater than 0
The current market value is less than the discounted cash flows
Bonds that are issued by foreign companies pay interest and principal in
the issuer’s currency
A broker-dealer that’s registered in State A is underwriting a follow-on offering for a local company whose stock is not listed on an exchange. As required, the broker-dealer is making the final prospectus available electronically to all purchasers. For how long is the broker-dealer required to deliver the prospectus to investors?
40 days
Which of the following is an example of an exempt transaction under the Securities Act of 1933?
Reg. D
If an IA is registered in many states, including the state in which its principal place of business is located, then what is true concerning the IA’s obligation to maintain a minimum financial requirement?
The IA must satisfy the requirements of only the state in which its principal place of business is located
What are the advantages of a limited liability company (LLC) compared to an S Corporation?
A simpler managerial structure
An investment adviser’s (IA’s) only client is a 3(c)(1) fund that has $110 million in assets under management (AUM). Which of the following statements regarding the registration requirements of the IA is TRUE?
The investment adviser is an exempt reporting adviser (ERA) and is not required to register with the SEC, but must notice file with the state Administrator(s) and pay a fee.
What two types of risk are associated with options and derivatives?
Opportunity risk and market risk
An investor has purchased a U.S. government bond for $1,000. The bond is now worth $850. Which TWO of the following risks is a concern to this investor?
Market risk
Credit risk
Currency risk
Opportunity risk
Market risk and opportunity risk
The amount of money an issuer receives in a stock offering in excess of the par value is recorded on the balance sheet as
Capital surplus
Under what circumstances may the Administrator of State X issue a cease-and-desist order on behalf of the Administrator of State Y?
Never
How does an Administrator determine whether excessive trading has occurred in a customer’s account?
The suitability of solicited trades in the account
If a company’s total assets remain the same but stockholders’ equity decreases, which of the following statements is TRUE?
Total liabilities increase
An agent of a broker-dealer intends to sell shares of a security, but the transaction does not involve his firm. If he proceeds with the transactions, in which of the following situations will he NOT be accused of selling away?
The agent notifies his firm and awaits approval (if required)
If the economy is experiencing rising inflation, this will generally lead to
A decrease in bond prices
Which of the following will a syndicator of a blind pool real estate investment trust include in the investment policy statement?
A statement which breaks down the contributions made by limited partners
An IAR is discussing investment objectives with one of her clients. The client is convinced that the real estate market is near its bottom and is due to recover in the next 12 to 18 months. Since she has a limited amount to invest ($50,000) and wants an investment that’s diversified and liquid in the event she’s wrong, the IAR may recommend a
Real estate investment trust
All of the following will impact the value of a bond, EXCEPT:
Rising interest rates
A decrease in the company’s credit rating
An increase in the company’s dividend payment
A decrease in inflation
An increase in the company’s dividend payment
What’s the best indicator of a successful mutual fund?
Tenure of the manager
A stock that is traded on the NYSE has a high P/E ratio, a low dividend payout ratio, and a high level of retained earnings? What type of stock is it?
Growth