Series 65 (Uniform Investment Adviser Law Exam) Free Trial
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Question 1 of 15
1. Question
Which of the following statements is true regarding qualified retirement plans?
I. Qualified retirement plans are tax-evaded savings plans that aren’t given legislative reprieve from certain taxes
II. These advantages were placed on the plans to dissuade workers to save for retirement
III. There are limits placed upon the amount of income that may be tax deferred. Each plan’s contribution limit varies
IV. Qualified retirement plans are typically call-defined contribution planCorrect
Qualified retirement plans
Qualified retirement plans are tax-advantaged savings plans that are given legislative reprieve from certain taxes. These advantages were placed on the plans to encourage workers to save for retirement. Examples of such benefits include reduction of taxable income, tax-deferred earnings and growth, and in some cases, tax-free earnings and growth. Because of the tax-advantaged nature of the retirement plans, there are limits placed upon the amount of income that may be tax deferred. Each plan’s contribution limit varies. To prevent abuse of tax-advantaged retirement plans by wealthy individuals, the legislation that allows for the use of retirement plans requires that the contributions to the plans be earned income and not capital gains or interest received. Qualified retirement plans are typically call-defined contribution plans.Incorrect
Qualified retirement plans
Qualified retirement plans are tax-advantaged savings plans that are given legislative reprieve from certain taxes. These advantages were placed on the plans to encourage workers to save for retirement. Examples of such benefits include reduction of taxable income, tax-deferred earnings and growth, and in some cases, tax-free earnings and growth. Because of the tax-advantaged nature of the retirement plans, there are limits placed upon the amount of income that may be tax deferred. Each plan’s contribution limit varies. To prevent abuse of tax-advantaged retirement plans by wealthy individuals, the legislation that allows for the use of retirement plans requires that the contributions to the plans be earned income and not capital gains or interest received. Qualified retirement plans are typically call-defined contribution plans. -
Question 2 of 15
2. Question
Which of the following statements is true regarding Uniform gift to Minors Act accounts and Uniform Transfer to Minors Act accounts?
I. The Uniform Gift to Minors Act created a way in which property could be legally given to minors
II. The regulations governing Uniform Transfer to Minors tend to be less flexible than those governing Uniform Gift to Minors
III. When the law was modified to the Transfer language, properties other than gifts were allowed to be transferred to the account of the minor
IV. he custodian on the account is required until the child reaches the age of majorityCorrect
Uniform Gift to Minors Act accounts and Uniform Transfer to Minors Act accounts
The Uniform Gift to Minors Act created a way in which property could be legally given to minors. These types of accounts were later replaced by the Uniform Transfer to Minors Act. The regulations governing Uniform Transfer to Minors tend to be more flexible than those governing Uniform Gift to Minors. When the law was modified to the Transfer language, properties other than gifts were allowed to be transferred to the account of the minor. These two types of accounts are custodial accounts, thus requiring a custodian to buy and sell securities in the account, exercise rights and warrants in the account, and make decisions to buy, sell, or hold the securities placed in the minor’s account. The custodian on the account is required until the child reaches the age of majority.Incorrect
Uniform Gift to Minors Act accounts and Uniform Transfer to Minors Act accounts
The Uniform Gift to Minors Act created a way in which property could be legally given to minors. These types of accounts were later replaced by the Uniform Transfer to Minors Act. The regulations governing Uniform Transfer to Minors tend to be more flexible than those governing Uniform Gift to Minors. When the law was modified to the Transfer language, properties other than gifts were allowed to be transferred to the account of the minor. These two types of accounts are custodial accounts, thus requiring a custodian to buy and sell securities in the account, exercise rights and warrants in the account, and make decisions to buy, sell, or hold the securities placed in the minor’s account. The custodian on the account is required until the child reaches the age of majority. -
Question 3 of 15
3. Question
Which of the following statements is true regarding market order, limit order, and stop order?
I. There are many tools at an investor’s disposal when trading securities
II.Limit orders help investors time their transactions according to market movements without having to constantly watch the security for the right price
III. A limit order will execute a buy or sell if the price reaches the desired level but will not execute if the price fluctuates past the desired level
IV. Stop orders, unlike limit orders, don’t help the investor with timingCorrect
Market order, limit order, and stop order
There are many tools at an investor’s disposal when trading securities. If an investor desires to trade immediately at the current level of the market, he or she will place a market order and accept the next price for which they can buy or sell the desired security. No restrictions are placed on market orders. Limit orders help investors time their transactions according to market movements without having to constantly watch the security for the right price. A limit order will execute a buy or sell if the price reaches the desired level but will not execute if the price fluctuates past the desired levels. Stop orders, similar to limit orders, help the investor with timing. The stop level is essentially a trigger point in the securities price. Unlike a limit, however, once desired level is reached, the very next price will be accepted regardless of the next price.Incorrect
Market order, limit order, and stop order
There are many tools at an investor’s disposal when trading securities. If an investor desires to trade immediately at the current level of the market, he or she will place a market order and accept the next price for which they can buy or sell the desired security. No restrictions are placed on market orders. Limit orders help investors time their transactions according to market movements without having to constantly watch the security for the right price. A limit order will execute a buy or sell if the price reaches the desired level but will not execute if the price fluctuates past the desired levels. Stop orders, similar to limit orders, help the investor with timing. The stop level is essentially a trigger point in the securities price. Unlike a limit, however, once desired level is reached, the very next price will be accepted regardless of the next price. -
Question 4 of 15
4. Question
Which of the following statements is true holding period return?
Correct
Holding period return
Holding period return describes the return that an asset or portfolio experiences during the length of time the investor held the investments. All dividends, interest, and capital gains received during that period of time are included in the return calculation. This provides the investor with an accurate view of the performance of the security. Holding period return is essentially a calculation of total return but as related to a specific holding period, whereas total return is measured annually. Given this fact, holding period return is not annualized. Nonannualized returns are often difficult to compare to other returns. This should be remembered when using the holding period return method of performance evaluation.Incorrect
Holding period return
Holding period return describes the return that an asset or portfolio experiences during the length of time the investor held the investments. All dividends, interest, and capital gains received during that period of time are included in the return calculation. This provides the investor with an accurate view of the performance of the security. Holding period return is essentially a calculation of total return but as related to a specific holding period, whereas total return is measured annually. Given this fact, holding period return is not annualized. Nonannualized returns are often difficult to compare to other returns. This should be remembered when using the holding period return method of performance evaluation. -
Question 5 of 15
5. Question
Which of the following statements is false uniform Securities Act?
Correct
Uniform Securities Act
The Uniform Securities Act is a legislative attempt to bring uniformity to state securities laws that are widely varied, also known as blue-sky laws. The Uniform Securities Act, or USA, outlines civil and criminal liabilities for abuse of the uniform laws. Each state’s securities laws are overseen by an administrator. The administrator, or the office of the administrator, has jurisdiction of all activities that occur in the state concerning the securities industry. The blue-sky laws not only bring uniformity to multiple states’ laws but also provides for consumer investor protection. Many terms that are often unclear to unsophisticated investors are defined under the Uniform Securities Act, helping those investors make more-informed decisions.Incorrect
Uniform Securities Act
The Uniform Securities Act is a legislative attempt to bring uniformity to state securities laws that are widely varied, also known as blue-sky laws. The Uniform Securities Act, or USA, outlines civil and criminal liabilities for abuse of the uniform laws. Each state’s securities laws are overseen by an administrator. The administrator, or the office of the administrator, has jurisdiction of all activities that occur in the state concerning the securities industry. The blue-sky laws not only bring uniformity to multiple states’ laws but also provides for consumer investor protection. Many terms that are often unclear to unsophisticated investors are defined under the Uniform Securities Act, helping those investors make more-informed decisions. -
Question 6 of 15
6. Question
Which of the following statements is true regarding fundamental and technical analysis?
I. Fundamental and technical analyses are two methods that encourage the observation of trends when making investment decisions
II. Fundamental analysis focuses on the historical performance of the issuing company
III. Financial analysis uses balance sheets, income statements and various ratios to determine how a stock will perform
IV. Technical analysis requires the study of the company’s financial history rather than the company’s stockCorrect
Fundamental and technical analysis
Fundamental and technical analyses are two methods that encourage the observation of trends when making investment decisions. Fundamental analysis focuses on the historical performance of the issuing company. It takes into consideration the various financial records of a company in order to predict stock movement. Financial analysis uses balance sheets, income statements and various ratios to determine how a stock will perform. Technical analysis requires the study of the company’s stock rather than the company’s financial history. Technical analysts study the historical performance of a stock’s price and then create charts.Incorrect
Fundamental and technical analysis
Fundamental and technical analyses are two methods that encourage the observation of trends when making investment decisions. Fundamental analysis focuses on the historical performance of the issuing company. It takes into consideration the various financial records of a company in order to predict stock movement. Financial analysis uses balance sheets, income statements and various ratios to determine how a stock will perform. Technical analysis requires the study of the company’s stock rather than the company’s financial history. Technical analysts study the historical performance of a stock’s price and then create charts. -
Question 7 of 15
7. Question
Which of the following statements is true regarding hedge funds?
I. Hedge funds are similar in structure to mutual funds, but they are dissimilar in that they are unregulated and thus have a wider array of investment options
II. Hedge funds are characteristically very safe but speculative, using purchases on margin, short sales, and other higher-risk investment strategies to aggressively make a profit
III. Hedge funds have very limited liquidity, often keeping investors’ money for at least one year
IV. Hedge funds have unlimited liquidity, often keeping investors’ money for at least three yearsCorrect
Hedge funds
Hedge funds are similar in structure to mutual funds, but they are dissimilar in that they are unregulated (because private) and thus have a wider array of investment options. Hedge funds are characteristically very risky and speculative, using purchases on margin, short sales, and other higher-risk investment strategies to aggressively make a profit. Hedge funds’ riskiness seems to contradict their name, since hedging is the reduction of risk—but the reason for the name is that, when hedge funds historically arose, one of their main purposes was to hedge against the risk of a bear market by selling short. Hedge funds have very limited liquidity, often keeping investors’ money for at least one year. For tax purposes, hedge funds will be arranged as limited partnerships, so that they will qualify as flow- through entities. The manager of the fund (or an affiliate) will be the general partner, and the investors will be limited partners.Incorrect
Hedge funds
Hedge funds are similar in structure to mutual funds, but they are dissimilar in that they are unregulated (because private) and thus have a wider array of investment options. Hedge funds are characteristically very risky and speculative, using purchases on margin, short sales, and other higher-risk investment strategies to aggressively make a profit. Hedge funds’ riskiness seems to contradict their name, since hedging is the reduction of risk—but the reason for the name is that, when hedge funds historically arose, one of their main purposes was to hedge against the risk of a bear market by selling short. Hedge funds have very limited liquidity, often keeping investors’ money for at least one year. For tax purposes, hedge funds will be arranged as limited partnerships, so that they will qualify as flow- through entities. The manager of the fund (or an affiliate) will be the general partner, and the investors will be limited partners. -
Question 8 of 15
8. Question
Which of the following statements is/are included in factors that affect bond liquidity?
I. How well-known or widely owned they are
II. The quality of the bond issuer
III. Whether it is trading at, above, or below par
IV. Whether it has any call featuresCorrect
Factors that affect bond liquidity
The following affect bond liquidity:
• how well-known or widely owned they are
• the bond rating (higher rating easier trades)
• the quality of the bond issuer
• how mature the bond is
• how high the interest rate is
• whether it is trading at, above, or below par
• whether it has any call featuresIncorrect
Factors that affect bond liquidity
The following affect bond liquidity:
• how well-known or widely owned they are
• the bond rating (higher rating easier trades)
• the quality of the bond issuer
• how mature the bond is
• how high the interest rate is
• whether it is trading at, above, or below par
• whether it has any call features -
Question 9 of 15
9. Question
Which of the following statements is true regarding implications associated with investing in foreign governmental debt?
I. Investors in the governmental debt of foreign countries should be careless
II. Foreign countries are often characterized by cultures with which investors from the United States are not familiar
III. This can result in political and legislative risk to which the investor is unaccustomed
IV. A stable foreign government debt issue offers additional riskCorrect
Implications associated with investing in foreign governmental debt
Investors in the governmental debt of foreign countries should be cautious. Foreign countries are often characterized by cultures with which investors from the United States are not familiar. This can result in political and legislative risk to which the investor is unaccustomed. An unstable foreign government debt issue offers additional risk. If the government experiences revolution, the new government may refuse to honor the debts of the previous leadership.Incorrect
Implications associated with investing in foreign governmental debt
Investors in the governmental debt of foreign countries should be cautious. Foreign countries are often characterized by cultures with which investors from the United States are not familiar. This can result in political and legislative risk to which the investor is unaccustomed. An unstable foreign government debt issue offers additional risk. If the government experiences revolution, the new government may refuse to honor the debts of the previous leadership. -
Question 10 of 15
10. Question
Which of the following statements is true regarding Quantitative methods?
I. They are used to better understand a company’s or sector’s behavior
II. These methods consist of intricate mathematical and statistical modeling
III. It can be used to measure performance of a company based on one specific factor
IV. They are also known as technical analysisCorrect
Quantitative methods
Quantitative methods are methods used to better understand a company’s or sector’s behavior. These methods consist of intricate mathematical and statistical modeling. It can be used to measure performance of a company based on several factors or in the valuation of a firm based on those or other factors. Quantitative methods are also known as technical analysis. Technical and quantitative analysis take on many forms, from abstract mathematical formulas to seeking trends in charts and comparing them with similar charts from other securitiesIncorrect
Quantitative methods
Quantitative methods are methods used to better understand a company’s or sector’s behavior. These methods consist of intricate mathematical and statistical modeling. It can be used to measure performance of a company based on several factors or in the valuation of a firm based on those or other factors. Quantitative methods are also known as technical analysis. Technical and quantitative analysis take on many forms, from abstract mathematical formulas to seeking trends in charts and comparing them with similar charts from other securities -
Question 11 of 15
11. Question
Which of the following statements is true regarding Net present value (NPV)?
I. Net present value (NPV) calculations show the value of a dollar today compared to the value of the same dollar in the future, accounting for inflation and returns
II. If the NPV is positive, the investment being analyzed in not worth being pursued
III. NPV is calculated as a function of the time value of money by applying a discount rate to expected future values within the time value of money equation
IV. This helps the investor understand if the investment is worth the opportunity cost of not purchasing another investmentCorrect
NPV
Net present value (NPV) calculations show the value of a dollar today compared to the value of the same dollar in the future, accounting for inflation and returns (subtracting inflation from returns). If the NPV is negative, the investment being analyzed in not worth being pursued. NPV is calculated as a function of the time value of money by applying a discount rate to expected future values within the time value of money equation. This helps the investor understand if the investment is worth the opportunity cost of not purchasing another investment.Incorrect
NPV
Net present value (NPV) calculations show the value of a dollar today compared to the value of the same dollar in the future, accounting for inflation and returns (subtracting inflation from returns). If the NPV is negative, the investment being analyzed in not worth being pursued. NPV is calculated as a function of the time value of money by applying a discount rate to expected future values within the time value of money equation. This helps the investor understand if the investment is worth the opportunity cost of not purchasing another investment. -
Question 12 of 15
12. Question
Which of the following statements is true regarding Range?
I. Range is the difference in the highest return of the portfolio and the lowest return of the portfolio
II. If there is a large range, there may or may not be a problem with the portfolio that needs to be addressed, depending on the investors’ time horizon and risk appetite
III. A large range may also be a sign of positive correlation in the portfolio, whereas a smaller range tends to indicate positive correlation
IV. Both of the scenarios can be problematic or show that an investor’s strategy is working, again dependent upon time horizon and risk appetiteCorrect
Range
Range is the difference in the highest return of the portfolio and the lowest return of the portfolio. It covers all numbers in between. This look at a portfolio’s performance allows the investor or adviser to statistically evaluate the range of the included securities. If there is a large range, there may or may not be a problem with the portfolio that needs to be addressed, depending on the investors’ time horizon and risk appetite. A large range may also be a sign of negative correlation in the portfolio, whereas a smaller range tends to indicate positive correlation. Both of the scenarios can be problematic or show that an investor’s strategy is working, again dependent upon time horizon and risk appetite.Incorrect
Range
Range is the difference in the highest return of the portfolio and the lowest return of the portfolio. It covers all numbers in between. This look at a portfolio’s performance allows the investor or adviser to statistically evaluate the range of the included securities. If there is a large range, there may or may not be a problem with the portfolio that needs to be addressed, depending on the investors’ time horizon and risk appetite. A large range may also be a sign of negative correlation in the portfolio, whereas a smaller range tends to indicate positive correlation. Both of the scenarios can be problematic or show that an investor’s strategy is working, again dependent upon time horizon and risk appetite. -
Question 13 of 15
13. Question
Which of the following statements is true regarding Sovereign debt?
I. Sovereign debt is debt issued by a sovereign government to foreign issuers, or what might be called external sovereign debt
II. Sovereign debt is characterized by being unsecured, for creditors cannot claim government assets in the event of default
III. The value of any given sovereign debt depends rather heavily on that nation’s particular political and economic milieu
IV. Sovereign debtors keep control over the currency in which their debt is denominatedCorrect
Sovereign debt
Sovereign debt is debt issued by a sovereign government (i.e. not a mere municipality or local government) to foreign issuers, or what might be called external sovereign debt. Sovereign debt is characterized by being unsecured, for creditors cannot claim government assets in the event of default. The value of any given sovereign debt depends rather heavily on that nation’s particular political and economic milieu, with less stable nations therefore requiring higher interest rates to persuade foreign creditors to invest in them. This can lead to crises, for unlike government debt to domestic creditors, sovereign debtors lack control over the currency in which their debt is denominated, which otherwise allows governments to resolve domestic debt issues.Incorrect
Sovereign debt
Sovereign debt is debt issued by a sovereign government (i.e. not a mere municipality or local government) to foreign issuers, or what might be called external sovereign debt. Sovereign debt is characterized by being unsecured, for creditors cannot claim government assets in the event of default. The value of any given sovereign debt depends rather heavily on that nation’s particular political and economic milieu, with less stable nations therefore requiring higher interest rates to persuade foreign creditors to invest in them. This can lead to crises, for unlike government debt to domestic creditors, sovereign debtors lack control over the currency in which their debt is denominated, which otherwise allows governments to resolve domestic debt issues. -
Question 14 of 15
14. Question
Which of the following statements is true regarding relationship of inflation to GDP?
I. Inflation is the chronologically regular, systematic decrease in the money supply or in general price levels
II. Gross domestic product (GDP) consists of the split single production of a given economy
III. If the GDP is declining, the economy is not growing, and companies are not able to expand their profits or benefit investors
IV. If GDP is racing skyward and inflation paces it, investors’ funds are losing purchasing power because of the increase in general price levelsCorrect
Relationship of inflation to GDP
Inflation is the chronologically regular, systematic increase in the money supply or in general price levels. Gross domestic product (GDP) consists of the collective total production of a given economy. If the GDP is declining, or even keeping an even pace, the economy is not growing, and companies are not able to expand their profits or benefit investors. Too much growth in GDP, however, is also not good for the economy. Inflation tends to keep pace with GDP. If GDP is racing skyward and inflation paces it, investors’ funds are losing purchasing power because of the increase in general price levels.Incorrect
Relationship of inflation to GDP
Inflation is the chronologically regular, systematic increase in the money supply or in general price levels. Gross domestic product (GDP) consists of the collective total production of a given economy. If the GDP is declining, or even keeping an even pace, the economy is not growing, and companies are not able to expand their profits or benefit investors. Too much growth in GDP, however, is also not good for the economy. Inflation tends to keep pace with GDP. If GDP is racing skyward and inflation paces it, investors’ funds are losing purchasing power because of the increase in general price levels. -
Question 15 of 15
15. Question
Which of the following statements is/are included in the Economic indicators?
I. GDP, or gross domestic product, a measure of a nation’s total output
II. business overflow such that a nation’s imports exceed its exports
III. Balance of payments, or records of dealings between a given country and all other countries with whom it has done business
IV. Employment indicators, such as the national unemployment rateCorrect
Economic indicators
The five most commonly used and generally accepted as the most useful indicators include the following:
• GDP, or gross domestic product, a measure of a nation’s total output
• Employment indicators, such as the national unemployment rate
• Trade deficit, or conditions such that a nation’s imports exceed its exports
• Balance of payments, or records of dealings between a given country and all other countries with whom it has done business
• CPI, or consumer price index, a measure of inflationIncorrect
Economic indicators
The five most commonly used and generally accepted as the most useful indicators include the following:
• GDP, or gross domestic product, a measure of a nation’s total output
• Employment indicators, such as the national unemployment rate
• Trade deficit, or conditions such that a nation’s imports exceed its exports
• Balance of payments, or records of dealings between a given country and all other countries with whom it has done business
• CPI, or consumer price index, a measure of inflation
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