Question 1

By investing in a diversified portfolio, an investor will:

Options :

A : lower both his risk and his expected return.

B : lower his risk without affecting his expected return.

C : lower his risk and increase his expected return.

D : eliminate all the market risk associated with his investment portfolio.

Answer: B

Question 2

Mr. Cross wanders into your office with a $35,000 check that he has received from his recently-deceased wife’s insurance company and wants you to advise him how to invest it, since that is your job, as he puts it. You ask him to fill out a standard investor profile questionnaire, but he refuses to do so. You offer to fill it out for him, based on his answers to your verbal questions, but he still refuses and calls you a “nibby-nose.” Based on this, you can:

Options :

A : allocate the $35,000 any way you choose since you have an uncooperative client.

B : advise him to invest the money in a money market mutual fund instead of holding it as cash.

C : advise him to invest the money in an S&P 500 Index fund.

D : The advice provided in either Choice B or Choice C would be appropriate.

Answer: B

Question 3

Nancy invested $1,850 in the MidFee Mutual Fund, which has a 4% front -end load. The net asset value (NAV) per share of the fund at the time of her purchase was $22.20. How many shares of the fund was Nancy able to purchase?

Options :

A : 83.33

B : 80.00

C : 80.13

D : None of the above is correct.

Answer: B

Question 4

Joel has a 28-year-old client who has been promoted to the elevated position of senior software engineer with a large, well-known, software company at her relatively young age. She has come to Joel for investment advice, explaining to him that she is risk-averse, having been influenced by parents who grew up in a foreign country and had little, prior to immigrating to America and working hard to achieve their dreams for themselves and their children. She has $50,000 that she wants him to invest for her, and her primary goal is to be able to have enough money, beyond what she expects to have in her employer’s retirement program, to return to her home country and help others achieve their dreams. Joel explains to her that she may have to invest in riskier securities in order to achieve her goal, but his client is adamant that she wants her portfolio to be invested to target growth with the least risk exposure possible. Given the facts:

Options :

A : Joel should divide his client’s monies among growth, aggressive growth, and foreign stock funds. Regardless of what she says, she has a long investment horizon and can afford to take on more risk.

B : Joel should invest his client’s monies in a fund that specializes in stocks of his client’s home country to avoid the

C : Joel should invest his client’s monies in a fund that specializes in stocks of his client’s home country to avoid the exchange rate risk that she will be exposed to when she returns.

D : Joel should invest his client’s monies in a growth fund to target her growth objective.

Answer: D

Question 5

Which of the following would not have to register as an investment adviser or an investment adviser representative under the Investment Advisers Act of 1940? I. an insurance agent who sells only whole life and term life policies II. a commodity futures broker III. a bank employee who sells the bank’s customers only CDs and other bank securities that are FDIC-insured IV. a person that is registered as a broker-dealer with the SEC that also provides investment advice to its customers for additional compensation

Options :

A : I and III only

B : I, II, and III only

C : II and III only

D : I, II, III, and IV

Answer: B

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