All Chapters

Question 1

In a not held order a client must specify:

Answer 1

(action) buy/sell, (asset) security, and (amount) quantity

Question 2

Ensures the accuracy and completeness of all the information given to the public.

Answer 2

Due diligence meeting

Question 3

_____ issued by insurance companies are exempt from state registration.

Answer 3

Bonds

Question 4

The minimum cooling off period for federal covered securities is:

Answer 4

20 days

Question 5

Criminal penalties for violation the Investment Advisers Act of 1940 may not exceed $_____ and/or imprisonment for ___ years.

Answer 5

$10,000; 5 years

Question 6

Selling a block of securities that are not register is a(n):

Answer 6

exempt transaction

Question 7

The minimum cooling off period for registration by coordination is:

Answer 7

10 days

Question 8

The minimum cooling off period for registration by notification is:

Answer 8

5 days

Question 9

The Russell 2000 is a _____ benchmark.

Answer 9

small-cap

Question 10

A(n) _____ trust excludes assets from the donor’s estate.

Answer 10

irrevocable trust

Question 11

A broker-dealer is considered an:

Answer 11

underwriter

Question 12

Securities Exchange Act of 1934 regulates:

Answer 12

broker-dealers, stock exchanges, transfer agents, and SROs

Question 13

A surety bond is used to:

Answer 13

cover the costs of possible legal actions

Question 14

S-Corporation gains would be exempt from _____, but would be taxable to the individual as a _____.

Answer 14

corporate taxes; capital gain

Question 15

The grantor of a trust may be the:

Answer 15

trustee and/or beneficiary if desired

Question 16

If a security is only going to be offered in one state, registration by _____ is typically used.

Answer 16

qualification

Question 17

To determine whether churning has occurred, regulators typically examine:

Answer 17

the suitability of solicited trades

Question 18

Elements that are required to project the lump sum amount that a person will need at retirement are:

Answer 18

life expectancy, inflation rates, and investment return

Question 19

Modern Portfolio Theory defines risk as the:

Answer 19

variability of expected returns about the mean

Question 20

Under CAPM risk is defined as the:

Answer 20

deviation in returns

Question 21

The biggest disadvantage investing in a growth fund is the potential loss of:

Answer 21

principal

Question 22

Retail communication containing a(n) _____, or promoting a(n) _____ of the member firm, must be pre approved by a principal.

Answer 22

investment or financial recommendation; product or service

Question 23

Retail communication containing an investment or financial recommendation or promoting a product or service of the member firm, must:

Answer 23

be pre approved by a principal

Question 24

An adviser is considered in the business of providing advice when it holds itself out as a(n) _____ or makes _____.

Answer 24

adviser; client-specific recommendations

Question 25

Form of market efficiency declaring that only insiders can regularly beat the market.

Answer 25

Semi-strong form

Question 26

Form of market efficiency declaring that no person can beat the market.

Answer 26

Strong form

Question 27

Form of market efficiency declaring that only fundamental analysis will be useful.

Answer 27

Weak form

Question 28

A security's risk-adjusted return is it's:

Answer 28

alpha

Question 29

An asset's volatility compared to the market as a whole is it's:

Answer 29

beta

Question 30

Compounding is the term that best describes the process to calculate:

Answer 30

future value

Question 31

To calculate an investment's future value a process known as _____ is used.

Answer 31

compounding

Question 32

Used to calculate the anticipated return for a portfolio of securities.

Answer 32

Expected Rate of Return

Question 33

The main concepts of Modern Portfolio Theory are:

Answer 33

Expected Return, Standard Deviation and Correlation

Question 34

In a non-qualified annuity the earnings portion is subject to tax as:

Answer 34

ordinary income

Question 35

When conducting a capital needs assessment for a client an IAR must consider:

Answer 35

Future Earnings Potential, Expenses, Life Expectancy, and Inflation Expectations

Question 36

In a qualified annuity, the entire payout is taxed as:

Answer 36

ordinary income

Question 37

Simple trusts

Answer 37

Must distribute earnings, but not principal

Question 38

Complex trusts

Answer 38

May retain earnings or distribute principal

Question 39

Stock that allows the issuing entity to demand additional funds from existing stockholders.

Answer 39

Assessable stock

Question 40

Investment services provided by means of written material or oral statements that do not meet the objectives or needs of specific clients.

Answer 40

Impersonal advisory services

Question 41

A _____ is an offer to buy back a security from a client when that security was sold in violation of the USA.

Answer 41

letter of recision

Question 42

A trade executed by a financial firm that is acting as a broker for both the buyer and seller.

Answer 42

An agency cross transaction

Question 43

If an IPO is being registered, an issuer is most likely using _____ for state registration.

Answer 43

coordination

Question 44

(Return on Investment - Risk Free Return) / Standard Deviation best describes the:

Answer 44

Sharpe Ratio

Question 45

A formula that takes total current liabilities away from total current assets is the:

Answer 45

working capital

Question 46

Dividing total current assets by total current liabilities gives the:

Answer 46

current ratio

Question 47

Subtracting inventory from total current assets and dividing it by current liabilities gives the:

Answer 47

Quick Asset Ratio (Acid Test)

Question 48

(Bonds + Preferred Stock) / (Common Stock at par + Capital Surplus + Retained Earnings)

Answer 48

Debt-to-Equity Ratio

Question 49

(Net Income - Preferred Dividends) / Number of Outstanding Common Shares

Answer 49

Earnings per Share

Question 50

Dividing the market price by earnings per share will give the:

Answer 50

Price per Earnings Ratio

Question 51

Dividend/ Discount Rate =

Answer 51

Stock's Price

Question 52

Original Principal x (1 + rate of interest) ^ compounding periods

Answer 52

Future Value

Question 53

Future Value / (1 + rate of interest) ^ compounding periods

Answer 53

Present Value

Question 54

Taxable Interest Rate x (100% - Tax Bracket)

Answer 54

After Tax Yield

Question 55

Tax-Free Interest Rate / (100% - Tax Bracket)

Answer 55

Taxable Equivalent

Question 56

(Ending Value - Beginning Value + Investment Income) / Beginning Value

Answer 56

Total Return

Question 57

According to the Investment Advisers Act, an investment adviser whose personal investing is inconsistent with recommendations made to clients generally has a(n):

Answer 57

obligation to disclose this to the customer

Question 58

A Universal Life Policy has a cash value based on:

Answer 58

the current market or a minimum interest rate, whichever is greater

Question 59

SEPs are funded by employers with:

Answer 59

tax-deductible dollars

Question 60

A measure of profitability is:

Answer 60

Earnings per Share (EPS)

Question 61

To calculate the debt-to-equity ratio the market value of the debt and shares can be found on the:

Answer 61

corporate balance sheet

Question 62

A form filed with the IRS on behalf of a limited partner is the:

Answer 62

K-1

Question 63

Point-to-point indexing compares index value on:

Answer 63

two particular dates

Question 64

In order to avoid taxation when distributing an estate, any amount that exceeds the estate tax exclusion should:

Answer 64

only be donated to charities

Question 65

When an investment adviser analyzes the market by first analyzing individual companies this is a(n):

Answer 65

bottom-up approach

Question 66

When an investment adviser analyzes the market by first analyzing the sector as a whole, this is a(n):

Answer 66

top-down approach