Practice Test Series 65
what is the equation for operating margin? - ANS - net profit / revenue
what type of risk does beta calculate? - ANS - systematic risk, risk of a single security compared
to the market as a who
...
Practice Test Series 65
what is the equation for operating margin? - ANS - net profit / revenue
what type of risk does beta calculate? - ANS - systematic risk, risk of a single security compared
to the market as a whole
what type of risk is eliminated if you always hold a bond until maturity? - ANS - interest rate
risk
can preferred stock ever be called back by a company? - ANS - yes
do you have voting rights if you hold an ADR? - ANS - no
what are some things that fundamental analysts look for? - ANS - fiscal policy, money supply,
industry analysis, monetary policy, interest rates, and the economic environment.
what type of risk does a zero coupon bond not have? - ANS - reinvestment risk
what should be associated with OTC markets? - ANS - massive market, trades government
securities etc
does a corporation have to pay a production tax? - ANS - no
what is an Alien Corporation? - ANS - incorporated in a country other than the United States
what is a Foreign Corporation? - ANS - conducts business outside of the state of its incorporation
what are examples of penalty free withdrawals from a traditional IRA? - ANS - medical bills,
tuition expenses, first time home purchase, disability, beneficiary of deceased who previously
held IRA
when can a short sale take place? - ANS - Only on an up-tick or zero-uptick price movement
when you inherit a security what is your cost basis? - ANS - when the death occurs the fair value
of the security is your cost basis, and it is always a long term gain
what is a way to combat the probate court process? - ANS - setting up a trust
to determine a fair price to charge as a commission what should be considered? - ANS - the type
of security, current market price and conditions, size of the purchase, amount of time and
expense involved, and the nature of the member's business
when people are getting old what should you estimate their time horizon to be? - ANS -
reasonably long because life expectancies are high
do individuals have balance sheets? - ANS - yes
what is the difference between a market maker and a specialist? - ANS - A specialist works on
the floor of an exchange like the NYSE to maintain an orderly market in assigned stocks, when a
market maker does the same thing in OTC markets
can you convert a 401(k) directly into a roth IRA? - ANS - no, it must be in a traditional ira first
what is an example of a non qualified retirement plan? - ANS - plan 457 (government
employees)
how long do IAs have to maintain books? - ANS - Five years from the end of the fiscal year
during which the last entry was recorded
an IA would be exempt from registering if he had under how many clients int he last 12 months?
- ANS - 15
is the education of financial planners found on part 1 or part 2 of the form adv? - ANS - part 2
what is the schedule H? - ANS - requires registered investment advisors to fully disclose the
terms of their wrap fee programs
if a firm automatically deducts fees out of a customer account what must they do? - ANS - 1.
have written authorization that it is alright to automatically take fees out 2. the custodian agrees
to send the client statements at least quarterly 3. a copy of the bill and the manner in which the
fee was calculated is provided to the client and custodian at the same time.
is the administrator allowed to aid in selecting the appropriate court in which to process a
criminal trial? - ANS - no this is left up to the judicial system
if in an initial meeting the IA does not provide the client with part 2 of the form adv what are
they required to do? - ANS - give the client 5 days to cancel without penalty
what 3 conditions must be met for an IA to pay commissions to solicitors for bringing in
business? - ANS - 1. the investment advisor must be registered under the Advisors Act 2. there
must be a written agreement 3. and cash referral fees cannot be paid to a solicitor that is subject
to statutory disqualification
when does an administrator not have jurisdiction over a newsletter? - ANS - when an offer is
made in a newspaper with more than two-thirds of its circulation outside the administrator's state
how long until registration is effective after you file? - ANS - 30 days, unless the party is notified
what will high inflation do to interest rates? - ANS - interest rates will increase
if the duration is long on a bond will it be more sensitive or less sensitive to interest rate
changes? - ANS - more sensitive
which index tracks the largest amount of bonds? - ANS - Lehman Aggregate Bond Index
what index is considered to be the broadest measure of the activity and movement of the overall
stock market? - ANS - wiltshire 5000
what index tracks the stocks on the NYSE? - ANS - S&P500
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