Question 1

All government bonds and the majority of corporate bonds are traded:

Options :

A : on the floor of the NYSE.

B : via electronic communication networks (ECNs).

C : on regional exchanges.

D : in the over-the-counter market.

Answer: D

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

Which of the following is not a potential advantage associated with investing through a mutual fund?

Options :

A : lower cost associated with portfolio management

B : simplified recordkeeping

C : price discovery

D : diversification

Answer: C

Question 4

Ms. Mix always assures her clients that she will be calling them with quarterly recommendations for rebalancing their portfolios if there are any changes that she feels are appropriate. This has worked out well for her pocketbook since she has always been able to tweak each of her clients’ investment portfolios a little each quarter by recommending that they redeem their shares in one fund that hasn’t performed as well in the last quarter and use the proceeds to invest in another that has. Her clients feel cared for since she is in such regular contact with them. Is Ms. Mix violating any securities regulations with this policy of hers?

Options :

A : No. Ms. Mix is merely providing good service to her customers.

B : Yes. Mutual funds are not designed to be short-term investments.

C : It depends. There is no violation as long as her clients’ portfolios are increasing in value.

D :

Yes. Any recommendation that benefits a registered representative is deemed to be in violation of FINRA’s rules regarding fair dealing.

Answer: B

Question 5

Paul is 36 years old and is married with two children, ages eight and ten. Paul lays carpet for a living, working as an independent contractor, and earns about $35,000 a year. His wife, Paula, is 33 years old, drives a school bus and earns only $18,000 a year, but her job provides the family with low-cost health insurance. They live conservatively and barely make ends meet. Paula recently inherited $180,000, however, and the couple would like to invest it, with the goal that they can both retire when Paul turns 62. The inheritance also included an educational endowment for their children, so they will not have to worry about saving for their children’s college educations. Which of the following would not be a suitable recommendation for the allocation of their investment monies?

Options :

A : municipal bond fund

B : aggressive growth stock fund

C : Roth IRA

D : life insurance

Answer: A

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