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| Section | Weight | Objectives |
|---|---|---|
| Topic 1: Provides Customers with Information About Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records | 50% | - Product information, suitability, recordkeeping and transfers |
| Topic 2: Seeks Business for the Broker-Dealer from Customers and Potential Customers | 24% | - Topics in communications, marketing, and solicitation activities |
| Topic 3: Opens Accounts After Obtaining and Evaluating Customers’ Financial Profile and Investment Objectives | 16% | - Account opening procedures and financial profile evaluation |
| Topic 4: Obtains and Verifies Customers’ Purchase and Sales Instructions; Processes, Completes and Confirms Transactions | 10% | - Transaction processing and verification |
1. Which of the following portfolios best represents a suitable asset allocation for a risk-averse investor?
I. Cash/money market fund: 20%; government bonds: 10%; investment-grade bonds: 15%; foreign stocks:
1 0%; blue-chip stocks: 25%; high-yield bonds: 10%; small cap stocks: 10%
II. Cash/money market fund: 30%; government bonds: 20%; investment-grade bonds: 15%; foreign stocks:
3 %; blue-chip stocks: 25%; high-yield bonds: 0%; small cap stocks: 7%
III. Cash/money market fund: 10%; government bonds: 5%; investment- grade bonds: 10%; foreign stocks:
1 5%; blue-chip stocks: 25%; high-yield bonds: 10%; small cap stocks: 25%
A) I
B) None of the above; a risk-averse investor should be entirely invested in government securities and/or
money market funds.
C) III
D) II
2. The Slippery Fund is a high-yield bond fund, which means it invests a substantial amount of its money in:
A) high-quality bonds.
B) junk bonds.
C) bonds with an AAA rating.
D) investment-grade bonds.
3. Chandler is a registered representative with GetErDone Broker-Dealers, a FINRA member-firm. His friend,
Phoebe, is employed by FlyByNight Investments, which is not a member of FINRA, or any other securities
association for that matter. Given these facts:
A) Chandler is prohibited from engaging in any financial transactions with Phoebe.
B) Chandler is prohibited from splitting any commissions with Phoebe.
C) Both A and C are true.
D) If Chandler executes any transactions for Phoebe, he is required to charge her the same commission
that he charges any member of the general public.
4. Dottie is a newly-minted, registered representative and is doing some cold calling to line up appointments
with prospects. When doing so, Dottie:
I. must not call anyone on her firm's do-not-call list.
II. must not call anyone on the FTC's national do-not-call-list.
III. must not call anyone before 7 a.m. or after 7 p.m., based on the time zone of the person being called.
IV. must provide the person called with her name, the name and contact information of her firm, and the
purpose of her call.
A) I, II, III, and IV
B) I and IV only
C) I and III only
D) I, II, and IV only
5. The stock of eBay, Inc. (EBAY) currently has a beta of 1.67. Based on this, which of the following
statements are necessarily true?
I. If the market is up 5%, an investor can expect the returns on eBay to increase by 1.67 times this amount,
or 8.35%.
II. eBay would be a particularly good investment for an investor with a short investment horizon.
III. The returns on eBay are more volatile than the returns on the market in general.
IV. eBay has more unsystematic risk than the market in general.
A) I, II, III, and IV
B) I and II only
C) I and III only
D) I only
Solutions:
| Question # 1 Answer: D | Question # 2 Answer: B | Question # 3 Answer: C | Question # 4 Answer: D | Question # 5 Answer: C |
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