USA & REGISTRATION
This penalty may be imposed for knowingly filing false information with a state Administrator.
What is a fine, imprisonment, or both?
This type of return adjusts nominal performance for inflation.
What is real return?
This theory focuses on portfolio risk rather than individual securities.
What is Modern Portfolio Theory?
This measures a stock’s sensitivity to market movements.
What is beta?
This option style may be exercised at any time before expiration.
What is American-style?
This risk affects all investments in the market.
What is market risk?
Which individual is exempt from posting a surety bond under the Uniform Securities Act?
A. Broker-dealer
B. Investment adviser
C. Dual registrant
D. Investment adviser representative
What is D. Investment adviser representative?
A fixed annuity’s earnings are taxed how?
A. Deferred until withdrawal
B. As capital gains
C. Annually
D. AMT
What is A. Deferred until withdrawal?
Which investor type best fits MPT?
A. Risk neutral
B. Risk seeking
C. Risk averse
D. Risk indifferent
What is C. Risk averse?
Market beta is assumed to equal:
A. 1
B. 0.5
C. 0
D. 1.25
What is A. 1?
Which bond is most sensitive to interest rate changes?
A. Short-term Treasury
B. Long-term Treasury
C. Money market
D. TIPS
What is B. Long-term Treasury?
Which risk is company-specific?
A. Market
B. Business
C. Interest rate
D. Inflation
What is B. Business risk?
This exemption applies to transactions conducted by executors, trustees, or guardians acting in a legal capacity.
What is the fiduciary transaction exemption?
This is the primary reason advisers annualize short-term returns.
What is to make returns comparable?
This curve shows the highest return for each level of risk.
What is the efficient frontier?
This represents excess return beyond expected performance.
What is alpha?
This mutual fund share class is best for short holding periods.
What is Class C?
This risk results from changes in laws or regulations.
What is regulatory risk?
Which activity requires registration as an IAR under the USA?
A. Publishing impersonal newsletters
B. Incidental advice by an accountant
C. Financial planning from an in-state office
D. Managing assets for other advisers
What is C. Financial planning from an in-state office?
Which return reflects purchasing power?
A. Nominal
B. Real
C. Holding period
D. Yield to maturity
What is B. Real?
Which risk can be diversified away?
A. Market risk
B. Unsystematic risk
C. Interest rate risk
D. Inflation risk
What is B. Unsystematic risk?
Which formula calculates expected return?
A. Sharpe Ratio
B. CAPM
C. IRR
D. NPV
What is B. CAPM?
Which product provides tax-deferred growth?
A. Mutual fund
B. Fixed annuity
C. Corporate bond
D. ETF
What is B. Fixed annuity?
Which portfolio is MOST exposed to market risk?
A. 90% stocks
B. 50/50 stock/bond
C. Money market
D. T-bills
What is A. 90% stocks?
This law governs recordkeeping and fiduciary duties for investment advisers at the federal level.
What is the Investment Advisers Act of 1940?
This tax advantage applies to UGMA accounts when income is taxed at the child’s rate.
What is potentially lower taxation?
This risk remains even in a fully diversified portfolio.
What is systematic (market) risk?
This risk is priced by CAPM.
What is systematic risk?
This insurance feature allows borrowing without tax at withdrawal.
What is a policy loan?
This factor measures an investor’s ability to withstand loss.
What is risk capacity?
How long must advisers generally maintain required records?
A. 1 year
B. 3 years
C. 5 years
D. 7 years
What is C. 5 years?
Which investment typically offers tax-free federal income?
A. Corporate bond
B. Treasury bond
C. Municipal bond
D. TIPS
What is C. Municipal bond?
Which correlation offers the greatest diversification benefit?
A. +1
B. 0
C. +0.5
D.–1
What is D. –1?
A beta greater than 1 indicates what?
A. Less volatility than market
B. Equal volatility
C. More volatility
D. No correlation
What is C. More volatility?
Which asset class includes tangible goods?
A. Equities
B. Commodities
C. Bonds
D. Cash equivalents
What is B. Commodities?
Which factor is MOST important for suitability?
A. Age
B. Income
C. Objectives
D. All of the above
What is D. All of the above?
This title may not be used by an individual adviser because it implies firm registration.
What is “RIA”?
This type of bond adjusts principal for inflation.
What is TIPS?
This strategy combines a long-term core with active satellite investments.
What is core-satellite strategy?
This is the market risk premium component of CAPM.
What is (Rm − Rf)?
This feature adjusts principal for inflation.
What is TIPS?
This return reflects costs, inflation, and taxes.
What is real after-tax return?
Which person would NOT be required to report personal securities transactions?
A. Hedge fund partner
B. Joint account holder
C. 401(k) plan participant
D. Adviser principal
What is C. 401(k) plan participant?
Which return is an estimate, not a guarantee?
A. Holding period return
B. Nominal return
C. Annualized return
D. Current yield
What is C. Annualized return?
Which portfolio is inefficient under MPT?
A. On the efficient frontier
B. Below the frontier
C. With low correlation
D. Fully diversified
What is B. Below the frontier?
Positive alpha indicates what outcome?
A. Underperformance
B. Market performance
C. Outperformance
D. No volatility
What is C. Outperformance?
Which fund structure trades intraday?
A. Mutual fund
B. Unit trust
C. ETF
D. Variable annuity
What is C. ETF?
Which risk cannot be diversified away?
A. Business
B. Liquidity
C. Systematic
D. Credit
What is C. Systematic?
This NASAA rule requires plans for data backup, communication, and succession.
What is the Business Continuity and Succession Planning Rule?
This tax applies only to gains on the portion of shares actually sold.
Answer: What is capital gains tax?
This metric measures total volatility of returns.
What is standard deviation?
This is NOT considered by CAPM.
What is unsystematic risk?
This risk affects fixed-income prices when rates change.
What is interest rate risk?
This occurs when excessive trading benefits the adviser.
What is churning?
Which product is NOT a security under the USA?
A. Futures contractVariable annuity
B. Corporate bond
C. Variable annuity
D. Investment contract
What is A. Futures contract?
Which factor MOST reduces a bond investor’s real return?
A. Credit risk
B. Inflation
C. Liquidity risk
D. Call risk
What is B. Inflation?
Which model assumes unsystematic risk is eliminated?
A. MPT
B. CAPM
C. EMH
D. DCF
What is B. CAPM?
Which input is NOT used in CAPM?
A. Beta
B. Risk-free rate
C.Market return
D. Standard deviation
What is D. Standard deviation?
Which security is federally tax-exempt?
A. Municipal bond
B. Corporate bond
C. Treasury bond
D. Agency bond
What is A. Municipal bond?
Which client profile is LEAST suited for equities?
A. Young professional
B. Retiree seeking income
C. Aggressive investor
D. Long-term saver
What is B. Retiree seeking income?
This exemption applies to the transaction, not the person, and is lost if commissions are earned.
What is the fiduciary transaction exemption?
This return remains after inflation, taxes, and costs are subtracted.
What is after-tax real return?
This determines the investor’s optimal point on the efficient frontier.
What is risk tolerance?
This occurs when actual return exceeds CAPM-expected return.
What is positive alpha?
This product is regulated by the CFTC, not the SEC.
What is a futures contract?
This obligation requires advisers to act in the client’s best interest.
What is fiduciary duty?
This regulatory body oversees futures contracts rather than state securities regulators.
What is the CFTC?
This is the MOST important return concept for preserving purchasing power.
What is real return?
This statement best defines efficiency in MPT terms.
What is “no higher return without higher risk”?
This model prices securities based solely on market risk.
What is CAPM?
This feature disqualifies ERISA 404(c) protection.
What is a defined benefit plan?
This is the MOST important risk discussion when inflation exceeds yield.
What is loss of purchasing power?