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| Section | Weight | Objectives |
|---|---|---|
| Topic 1: Seeks Business for the Broker-dealer from Customers and Potential Customers | 24% | - Advertising and sales literature regulations - Prospecting and identifying customer needs - Communications with the public and regulatory rules - Telemarketing and solicitation rules |
| Topic 2: Provides Customers with Information About Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records | 50% | - Suitability rules and recommendations - Retirement plans and 529 savings plans - Recordkeeping and disclosure requirements - Investment company products: mutual funds, UITs, closed-end funds - Variable contracts: variable annuities, variable life insurance - Product features, risks, costs, and tax considerations |
| Topic 3: Opens Accounts After Obtaining and Evaluating Customers’ Financial Profile and Investment Objectives | 16% | - Account types and registration - Anti-money laundering (AML) and compliance - Customer identification and verification - Financial profile and investment objectives assessment |
| Topic 4: Obtains and Verifies Customers’ Purchase and Sales Instructions; Processes, Completes and Confirms Transactions | 10% | - Payment and settlement processes - Trade confirmations and account statements - Order entry and processing procedures - Error resolution and correction procedures |
Question 1
The totalreturn reported by a mutual fund:
A. is equal to the annual percentage increase in the dollars invested in the fund by investors.
B. is calculated as the percentage change in the net asset value of the fund.
C. is equal to the return it earned on the dividend and interest income it received from its investments.
D. includes both the dividend and interest income earned by the fund and any increase in the fund's net
asset value.
Question 2
Glamourless Fund is a value fund. As such, it invests primarily in stocks with:
A. low cash dividend yields.
B. high price-earnings ratios.
C. low earnings growth rates.
D. high betas.
Question 3
Ms. Newbie is a newly-minted registered representative. Mr. Oldman saunters into her office, becomes
infatuated with her, opens an account, and signs a document giving Ms. Newbie discretionary authority
over the account. Mr. Oldman is 68 years old, retired, lives on a fixed income, and pays taxes at the
lowest marginal tax rate available. His stated investment objectives are capital preservation and income.
Ms. Newbie invests 1/4 of his investment monies in a periodic-payment, deferred, variable annuity. Based
on these facts:
A. Although Ms. Newbie's asset allocation for Mr. Oldman is less than optimal, she is in no danger of
losing her license or any other penalty, given that she has been given discretionary authority over the
account.
B. Ms. Newbie has a reasonable sexual harassment case against Mr. Oldman for putting her in such a
position.
C. Ms. Newbie may lose her license before she gets started in the business for making an unauthorized
transaction.
D. Ms. Newbie has done a remarkable job as a newly-minted representative of allocating at least a fourth
of Mr. Oldman's funds appropriately.
Question 4
Under the rules of ERISA, all private-employer sponsored retirement plans must:
A. allow any employee to participate in the retirement plan as long as the employee is at least 21 years
old.
B. be defined contribution plans.
C. provide a specific vesting schedule under which all participants in the plan will become 100% vested
after having been in the firm's employ for seven or fewer years.
D. exclude anyone who has not been employed with the firm for at least five years.
Question 5
The Federal Reserve announces that it plans to buy $3.89 billion in Treasury securities on the open
market. All else equal, which of the following is a likely result of this Fed action?
A. Stock and bond prices should increase.
B. Money supply will increase, causing interest rates to fall.
C. Interest rates will rise, causing security prices to fall.
D. Both B and C are likely results of this Fed action.
Solutions:
| Question 1 Answer: D | Question 2 Answer: C | Question 3 Answer: C | Question 4 Answer: C | Question 5 Answer: D |
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