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Series 65 Exam Prep questions with 100% correct answers graded A+
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Series 65 Exam Prep questions with 100% correct answers graded A+
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Series 65 Exam PrepWhich statement is true concerning dollar cost averaging? - correct answer ✔✔Dollar cost averaging is a
way to reduce risk.
Dollar cost is a method to reduce risk because more shares are purchased in a down market (when the
shares are cheaper) and fewer shares are purchased with the same amount of money in a rising market
(when the shares are more expensive). The investors buy more when the price is low and less when the
price is high. This practice levels out the cost basis of the shares over time providing a lower average
share price, which minimizes overall investor risk. Dollar cost averaging cannot protect the investor from
a loss in a steadily declining market and is not a guarantee of a profit.
What amount of principal is needed to assure an annual income of $40,000 in perpetuity, assuming an
interest rate of 5%? - correct answer ✔✔$800,000
To calculate income payments in perpetuity divide the desired income by the assumed interest rate
($40,000/0.05 = $800,000).
When an agent terminates employment with a broker/dealer, which of the following is/are true? I. The
agent's registration is no longer effective. II. The registration remains effective as long as the agent
associates with another firm within 2 years. III. The individual is not an agent until registering with
another firm. IV. The agent must register directly with the Administrator until such time as he or she
associates with another firm. - correct answer ✔✔I and III
An agent's registration is in effect only while the agent is associated with a registered broker/dealer. To
be an agent again, the individual must make a new application for registration through a registered
broker/dealer firm.
A bond with a 6 percent coupon is trading at a discount. Based on this information an investor could
reasonably expect - correct answer ✔✔The current yield to exceed 6 percent.
If the bond is trading at a discount to par it indicates that market interest rates are greater than 6
percent; therefore, the bond's price is below par ($1,000). Because the price is now lower, the current
yield has increased. Annual interest payment/current bond price = current yield.
,A corporation offers its shareholders the privilege of obtaining its shares at a fixed price. What type of
product is the corporation issuing? - correct answer ✔✔Rights
Corporations issue rights to allow shareholders to maintain their same ownership percentage in a
corporation when new shares are issued. These shares are purchased at a fixed price (subscription price),
which is lower than the public offering price.
A corporation pays a stock dividend to - correct answer ✔✔Conserve cash.
A corporation pays a stock dividend to reward the shareholders while saving cash
XYZ Industries has outstanding 9% debentures convertible at $25. The trust indenture for the debentures
contains an "anti-dilution" clause. If the company distributes a 10% stock dividend on the common stock,
an investor who owns 10 XYZ Industries debentures would receive which of the following? - correct
answer ✔✔A notice that the conversion price of his bonds has been reduced to $22.73
A debenture convertible at 25 would convert into 40 shares ($1,000/25 = 40). A 10% stock dividend
would adjust the number of shares to 44 to keep the bondholder. $1,000/44 = 22.73, the new conversion
price.
With respect to an Investment Adviser, which of the following is true concerning consent to service of
process? - correct answer ✔✔It is filed only with the initial application for registration.
Under a defined benefit retirement plan, who determines what benefits a retired employee will receive?
- correct answer ✔✔Employer
The employer defines the benefits by the use of a formula that applies to all employees.
Which of the following is defined as a security under the Uniform Securities Act? I. Real Estate
Investment Trust; II. Credit Union account; III. Fixed life insurance contract; IV. Certificate of Interest in a
Real Estate Condominium - correct answer ✔✔I and IV
,A credit union account and fixed life insurance contracts are not securities under the Act.
Under the Uniform Securities Act, which of the following may be defined as a "person"? I. An insurance
policy; II. A minor; III. A business trust; IV. A government body - correct answer ✔✔III and IV
Business trusts and government bodies or political subdivisions are among the definitions of "a person"
under the Act. Insurance policies are not persons. Minors are excluded from the definition because they
may not legally enter a contract.
If two securities have a correlation coefficient of 0, the securities prices would - correct answer ✔✔Be
moving independent from each other.
If the correlation coefficient is 0, then the two securities would have no correlation to each other as far
as their price movement.
Guidelines of Section 404(c) of ERISA I. Disallow the use of employer securities as an investment
alternative. II. Require that participants are able to adjust among investment alternatives at least every
quarter. III. Require at least seven investment alternatives with different risk and return characteristics.
IV. Require sufficient investment alternatives to allow participants to construct a portfolio with risk and
return characteristics appropriate to their personal situation. - correct answer ✔✔II and IV
Plans must include sufficient investment options so that participants can construct a portfolio
appropriate for their personal situations. Use of certain investment options, including the securities of
the employer, trigger additional compliance measures relating to communications with participants.
Plans must offer at least three investment options.
As investment advisers, it is easy to focus on the financial aspects and not give adequate consideration to
the non-financial investment considerations of a client. Examples of such non-financial considerations
are I. The client's economic background. II. The client's attitude toward money. III. The client's ability to
endure market volatility. IV. The client's risk tolerance. - correct answer ✔✔I, II, III and IV
A client's economic background, attitude toward money itself, level of investment experience, ability to
endure the volatility of the marketplace and risk tolerance are all non-financial considerations that are
critical to investment recommendations.
, The last quotation of a U.S. government bond is 98.08. An investor purchasing the bond would pay -
correct answer ✔✔$982.50.
Bond prices are quoted at par in 32nds. The quote of 98.08 means $980.00 + 8/32, which equals $2.50,
making the bond price $982.50.
If a customer is short a stock, which of the following would lower risk and increase income? - correct
answer ✔✔Sell puts
A short stock position is bearish. You would sell puts, which is bullish and would give a partial hedge and
income.
Which of the following are expenses to consider in planning for the death of a strategic household
income earner? I. Alternative minimum tax II. College education funds III. Inheritance taxes IV. Gift taxes -
correct answer ✔✔II and III
Funding college expenses for surviving dependents and paying possible inheritance taxes on the
deceased's estate are part of death planning in a comprehensive financial plan.
Who is responsible for filing form ADV-E? - correct answer ✔✔The auditor of an IA with custody of
customer assets
Which has the best rating? - correct answer ✔✔Aaa 5 years to maturity
Moody's Aaa or S&P's AAA is top investment grade.
Which of the following is false regarding fixed indexed annuities? - correct answer ✔✔The investor will
lose money if the index has negative performance in any given year.
All elements of a fixed indexed annuity are the same as a fixed annuity except for the indexed crediting
option. The investor will never suffer negative performance in an indexed annuity.
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