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Series 65: Practice Exam questions & answers already passed
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Series 65: Practice Exam questions & answers already passed
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Series 65: Practice ExamOne would not typically place convertible bonds in the portfolio of an investor
A. who is bullish on the future for a specific issuer's common stock.
B. seeking a position senior to that of common stock.
C. seeking to maximize current income.
D. seeking capital gains. - correct answer ✔✔Seeking to maximize current income
A conversion feature is a benefit to the bondholder. It allows the bondholder a choice either to continue
holding the debt represented by the bond or to convert the bond into shares of common stock of the
underlying issuer. Everything that is done in the securities industry has to be a win-win situation. The win
for the bondholder in this instance is the ability to take advantage of the capital appreciation potential
the common stock may offer. The win for the issuer is that by offering something extra to the bond
purchaser, the bond purchaser is willing to accept a lower interest rate on the bond (compared to a
nonconvertible bond), therefore giving the issuer a lower cost of capital.
In order to come under the SEC's requirement to file a Form 13F, an institutional manager must have
discretion over
A. an equity portfolio of at least $100 million.
B. an equity portfolio of at least $50 million in 13(f) securities.
C. an equity portfolio of at least $100 million in 13(f) securities.
D. more than 10% of the outstanding voting securities of a reporting company. - correct answer ✔✔An
equity portfolio of at least $100 million in 13(f) securities
Form 13F must be filed by institutional money managers with at least $100 million in 13(f) equity
securities under discretionary management.
To assist broker-dealers with compliance, NASAA prepared a fee disclosure template. Based on the
template, all of the following broker-dealer charges would be disclosed except
,A. account transfer fees.
B. account maintenance fees.
C. brokerage commissions.
D. fees for issuance of stock certificates. - correct answer ✔✔Brokerage commissions
Not included in the fee disclosure documents are commissions, markups and markdowns, and advisory
fees.
Prudent Asset Construction Enterprises (PACE) has offices in States X, Y, and Z. On their last annual
updating amendment, they reported assets under management (AUM) of $218 million. In which of the
following instances would PACE be receiving a substantial prepayment of fees?
A. $600, paid six or more months in advance
B. $1,600, paid one year in advance
C. $1,600, paid at the first of each quarter
D. $10,000, paid monthly - correct answer ✔✔$1,600, paid one year in advance
First of all, this is an SEC-registered investment adviser, so we have to go by the federal numbers. Those
are more than $1,200, six or more months in advance. The $600 would have been substantial if PACE
was state registered. Although the other two choices are above $1,200, they are not prepaid for at least
six months.
What is the current yield on ABC common stock that is selling for $60 per share with a semiannual
dividend of $0.75 per share?
A. 5.00%
B. 2.50%
C. 7.50%
D. 1.25% - correct answer ✔✔2.5%
,The formula for current yield is annual current dividend divided by current market value. The trick with
this question is that you are given a semiannual dividend as information. You must multiply the dividend
by 2 to find the annual dividend. Therefore, $ 0.75 × 2 = $1.50 annual dividend and $1.50 ÷ $60 = 2.50%.
Irving Wilson works for Wall Street Limited (WSL), a registered investment adviser. He limits his advice
exclusively to equity securities listed on the NYSE. Under the Uniform Securities Act, Irving
A. is not covered by the antifraud rules, as these are federal covered securities.
B. must register as an IAR.
C. need not register as an IAR.
D. would need registration as a federal covered IAR. - correct answer ✔✔Must register as an IAR
Because Irving works for a registered investment adviser and provides advice on securities (where they
are traded is irrelevant), he must register as an investment adviser representative (IAR), regardless of the
nature of the securities that are the subject of his advice. There is no such thing as a federal covered IAR,
only a federal covered investment adviser. If the advice relates to securities, no one is exempt from the
antifraud rules.
If a portfolio manager wished to reduce inflation risk, which of the following would be most appropriate
to add to the portfolio?
A. AAA bonds
B. Preferred stock
C. Fixed annuities
D. Tangible assets - correct answer ✔✔Tangible assets
Tangible assets—such as real estate, precious metals, and other commodities—tend to keep pace with
inflation. Fixed-dollar investments do not.
A state-registered investment adviser maintaining custody of customer funds and securities discovers
that the firm's net worth is $32,000. Which of the following steps would not be required?
, A. Reporting to the administrator the number of client accounts being served by the investment adviser
B. Returning the customer funds and securities within three business days of the discovery
C. Filing a financial report with the administrator by the close of business on the next business day
following notice
D. Notifying the administrator of the deficiency by the close of business on the next business day -
correct answer ✔✔Returning the customer funds and securities within 3 business days of the discovery
Once the firm's net worth is below $35,000, notifications and reports must be sent to the administrator.
Unless ordered by the administrator, there is no requirement to return client assets to clients.
A balance sheet shows that a corporation builds its capital structure with all of the following except
A. retained earnings.
B. cash.
C. capital stock.
D. long-term debt. - correct answer ✔✔Cash
A corporation's capital structure consists of the capital raised through the issuance of long-term debt
securities (bonds), equity securities (stocks), and money reinvested in the business (retained earnings)
Your client has a long position in a security that has had considerable appreciation since the date of
purchase. The client is concerned that speculation that the company's CEO may retire could have
negative implications for the stock. Wishing to protect those unrealized gains, which of the following
orders would be appropriate?
A. Sell limit
B. Buy limit
C. Sell stop
D. Buy stop - correct answer ✔✔Sell stop
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