Question 1

Which of the following investment companies will always be passively managed?

Options :

A : a face-amount certificate company

B : a unit investment trust

C : a mutual fund

D : a closed-end investment company

Answer: B

Question 2

Which of the following steps in the underwriting process will occur last?

Options :

A : The underwriting syndicate is formed.

B : The selling group is organized.

C : The public offering price is set.

D : A red herring prospectus is circulated to the public.

Answer: C

Question 3

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 4

Which of the following statements regarding CMOs is false?

Options :

A : CMOs are zero-coupon bonds that are backed by real estate.

B : Relative to other bonds, CMOs are illiquid.

C : CMO investors are divided into classes, and the class determines when the investor will receive payments of principal.

D : CMOs are considered to have lower risk and, therefore, offer lower returns.

Answer: A

Question 5

Giant Investments filed a registration statement with the SEC for a new fund it wanted to introduce and has received word that the registration statement is now effective. Based on this, Jack, a registered representative with Giant Investments, can tell a client that:

Options :

A : because the SEC has recently announced the fund’s registration statement effective, the client can rest assured that it is a sound long-term investment.

B : the SEC pronouncement on the effectiveness of the registration statement means only that the SEC has deemed that enough information has been provided in the registration statement for the client to judge the quality of the investment for himself.

C : the SEC warrants that there have been no misstatements of fact in the registration statement.

D : because the SEC has recently approved the fund, it is likely to be a much safer investment than other, older funds in the same fund category.

Answer: B

Free Series-6 Mock Exam – Practice Online Confidently

Buying Options: