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Series 66 > Investments > Flashcards

Investments Flashcards

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Series 66 flashcards
0
Q 
Which of the following options strategies are profitable in a rising market? 
A. Long call
B. Long put
C. Short call
D. Short put
A

The best answer is a and D

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1
Q 
All of the following are standardized for listed option contracts except:
A. Strike price
B. Contract size
C. Premium
D. Expiration
A

The answer is C

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2
Q 
The writer of a call on a listed stock is exercised. The writer must:
A. Deliver stock
B. Buy stock
C. Deliver cash
D. Pay cash
A

The best answer is a

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3
Q 
In November, a customer buys one ABC Jan 70 call at four dollars when the market price of ABC is $71. If ABC falls to $67 and stays there through January, the customer will:
A. Gain $400
B. Lose $400
C. Gain $6700
D. Lose $6700
A

The best answer is B

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4
Q 
The customers sells one ABC feb 50 call at seven dollars when the market price of ABC is $52. If the market value of ABC falls to $48 and stays there through February, the customer will:
A. Gain $700
B. Lose $700
C. Gain $4300
D. Lose $4300
A

The best answer is a. if the market falls to $48, the 50 call expires out the money and the writer keeps the $700 premium

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5
Q 
The customer sells one ABC Jul 40 put at six dollars when the market price of ABC is $38. The maximum potential loss to the writer is:
A. $600
B. $3400
C. $4000
D. Unlimited
A

The best answer is B $3400

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6
Q 
Buying a put on a stock position held long is a suitable strategy to protect the stock position when the market is expected to:
A. Remain stable
B. Rise sharply
C.  Fall sharply
D. Fluctuate sharply
A

The only answer is C

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7
Q 
A customer buys 100 shares of ABC start at $40 and buys one ABC oct 40 put at four dollars. ABC stock falls to $36 and just prior to expiration, the customer exercises the put, delivering the stock position. The customer:
A. Broke even
B. Lost $400
C. Gained $400
D. Lost $3600
A

The answer is B

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8
Q 
Which of the following option positions is used to hedge a short stock position?
A. Long call
B. Short call
C. Long put
D. Short put
A

The answer is a

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9
Q 
A customer sells short 100 shares of PDQ at $58 and buys one PDQ jul 60 call at three dollars. The customers maximum potential loss is:
A. $200
B.  $300
C.  $500
D.  unlimited
A

The answer is C

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10
Q 
Covered call writing is a appropriate strategy in a:
A. Declining market
B. Rising market
C. Stable market
D. Fluctuating market
A

The answer is C

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11
Q 
Which of the following strategies has unlimited loss potential?
A. Long Stocks/short call
B. Long socks/long put
C. Short Stocks/long call
D. Short stock/short put
A

The answer is D

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12
Q

The sale of covered calls is used to:
A. Hedge a long stock position in a falling market
B. Protect short stock position in the falling market
C. Generate additional income in a stable market
D. Profit if the market drops

A

The answer is C

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13
Q 
All of the following are derivatives except:
A. Options 
B. futures 
C. forwards 
D. commodities
A

The answer is D

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14
Q 
Which statements are true when comparing futures contracts to forward contracts?
A. Futures contracts are exchange traded
B. Futures contracts are traded OTC
C. Forward contracts are exchange traded
D. Forward contracts are traded OTC
A

The answer is a and D

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15
Q

Which statements are true when comparing options contracts to forward contracts?
A. A futures contract requires future delivery of the underlying physical asset
B. A futures contract does not require future delivery of the underlying physical asset
C. A options contract requires future delivery of the underlying physical asset
D. Options contract does not require future delivery of the underlying physical asset

A

The answer is a and D

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16
Q 
To hedge a adverse currency move, the currency trader that is long the currency could:
A. Buy currency calls
B. Buy currency puts
C. Buy forward contracts
D. Sell forward Contacts
A

The best answer is B and D

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17
Q 
A primary government dealer that is short treasury bonds could hedged the position by:
A. Buying T -bond futures contracts
B. Selling T-bonds futures contracts
C. Buying T bond forward contracts
D. Selling T-bond forward contracts
A

The best answer is a and C

18
Q 
In order to collar a long securities position, the customer would:
A. Buy a call on the subject security
B. Sell a call on the subject security
C. Buy a put on the subject security
D. Sell a put on the subject security
A

The best answer is B and C

19
Q

Forward contracts:
A. Can be closed by trading on a exchange
B. Cannot be closed by trading on a exchange
C. Are standardized
D. Are not standardized

A

The best answer is B and D

20
Q

Which statements are true about hedge fund?
A. Hedge funds are regulated under the investment Company act of 1940
B. Hedge funds are not regulated under the investment Company act of 1940
C. Hedge funds employ conservative strategies to hedge their positions to limit loss
D. Hedge funds employee aggressive strategies using leverage to maximize gains

A

The best answer is B and D

21
Q

Which statements is true about hedge fund fees?
A. Hedge fund managers can only charge fees based on the percentage of assets under management
B. Hedge fund managers can only charge a fixed annual fee
C. Hedge fund managers can charge performance fees that are limited in amount by the investment advisors act of 1940
D. Hedge fund managers can charge performance fees that are not limited in amount

A

The best answer is D

22
Q 
Hedge funds are not often structured as:
A. Limited partnerships
B. General partnerships
C. C corporations
D. S corporations
A

The best answer is a

23
Q 
Hedge fund investments are:
A. Liquid
B.  illiquid
C.  redeemable
D. not redeemable
A

The best answer is B and D

24
Q

Which of the following are conflicts of interest in limited partnership offerings?
A. General partners accepting loans from the partnership
B. General partners competing with the partnership
C. Limited partners competing with the partnership
D. General. partners receiving a disproportionate share of partnership income

A

The best answer is a and B

25
Q

All of the following statements are true about general partners except:
A. The general partner is considered to be the key executive in the partnership
B. The general partner assumes a limited liability
C. The general partner decides which properties to buy and sell
D. The general partner either manages or points a manager for the program

A

The best answer is B

26
Q

Which of the following are tax preference items included in the alternative minimum tax?
A. Excess depreciation
B. excess depletion
C. Excess intangible drilling costs
d. qualified private activity municipal interest income

A

The best answers all of the above

27
Q

The primary reason for a customer to make a tax shelter investment is the:
A. Economic viability of the project
B. Immediate deductions generated by the project
C. Immediate tax credits generated by the project
D. Future capital gains generated by the project

A

The best answer is a

28
Q

The alternative minimum tax is targeted at:
A. High income tax payers
B. low income tax payers
C. with a low level of text deductions d. with a high level of tax to ductions

A

The best answer is a and D

29
Q

A hedge fund limited partnership must have at least:
A. One general partner
B. One limited partner
C. one general partner and one limited partner
D. 2 limited partners

A

Best answer is C

30
Q 
The purchaser of a fixed annuity:
A. Assumes investment risk
B. Does not assume investments risk
C. Assumes purchasing power risk
D. Does not assume purchasing power risk
A

Best answer is B and C

31
Q

Which of the following are true about variable annuities?
A. Investment risk is carried by the issuer of the annuity
B. Salesman must register with both the sec and the state insurance commission
C annuity payments may be reduced because of increased expenses experienced by the insurance company
D. Variable annuities are considered to be securities regulated by the investment Company act of 1940

A

The best answer is B and D

32
Q

A “accumulation unit” of a variable annuity contract is a:
A. share of common stock representing the interest in the underlying portfolio
B. Accounting measure of the owners interest in the separate account
C. Accounting measure of the annuity
Amount to be received by the owner
D. Share a beneficial interest in the fixed portfolio

A

Best answer is B

33
Q

All Of the following are true statements about the variable annuities :
A. The portfolio funding the separate account is professionally managed
B. The portfolio is invested in other management company shares
C. Dividends and capital gains must be reinvested until annuitization occurred
D. Investors get a interest-rate guarantee

A

The best answer is D

34
Q

Variable annuity contracts contain which of the following guarantees?
A. Mortality guarantee
B. expense guarantee
C. Interest rate guarantee

A

The best answer is a and B

35
Q

Equity indexed annuity:
A. Is a insurance product
B. Is a security
C. Protects against purchasing power risk
D. Does not protect against purchasing power risk

A

The best answer is a and C

36
Q

Fees associated with EIAs are:
A. Lower than those for variable annuities
B. The same as those for variable annuities
C. Higher than those for variable annuities
D. Have no relationship to those for variable annuities

A

The best answer is C

37
Q 
Variable life insurance policies are a variation on:
A. Fixed annuities 
B. mutual funds 
C. term life policy 
D. whole life policies
A

The best answer is D

38
Q

All of the following are advantages of a variable life policy except:
A. Policy build cash value
B. Payments are flexible
C. The death benefit can increase above the stated amount
D. Owners can select investment options to meet their objectives

A

The answer is B

39
Q 
Whole life insurance:
A. Is permanent
B. Is non-permanent
C. Permits payments to be skipped
D. Does not permit payments to be skipped
A

A and D

40
Q 
The accumulation phase of a variable annuity: 
A. Payments by the customer are fixed
B. Payments by the customer vary
C. Units purchased are fixed
D. Units purchased very
A

The correct answers are a and D

41
Q

During the annuitization period of A variable annuity:
A. Payments by the insurance company are fixed
B. Payments by the insurance company vary
C. Units are fixed
D. Units vary

A

The correct answer is a and C

42
Q

When analyzing the yield spread does a widening or narrowing spread indicate a recession?

A

Widening

43
Q 
Which interest-rate levels are the highest to lowest?
Prime rate
Discount rate
Broker rate
Fed funds
A

Correct order from highest to lowest is prime, broker, discount, Fed funds

Series 66 (12 decks)

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