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24 Cards in this Set
- Front
- Back
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Of the following statements, which TWO are TRUE of interest rate risk?
Long term maturities and low coupon bonds are most susceptible to this risk. Short term maturities and high coupon bonds are most susceptible to this risk. Rising interest rates will cause outstanding bond prices to fall. Lower interest rates will cause outstanding bond prices to fall. (A) I and III (B) I and IV (C) II and III (D) II and IV |
A
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Of the choices listed, which would be considered to be the most appropiate investment choices for a Senior Investor?
U.S. Government Bonds Deferred Variable Annuity U.S. Savings Bond Immediate Variable Annuity (A) I & III (B) I & IV (C) II & III (D) II & IV |
B
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A customer with a portfolio of long-term AAA corporate bonds would be most susceptible to which of the following risks?
Legislative risk. Purchasing power risk. Interest rate risk. Default risk. (A) I and II (B) III and IV (C) II and III (D) I and IV |
C
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A customer who trades securities actively and aggressively is least susceptible to which of the following risks?
(A) Market risk. (B) Timing risk. (C) Inflationary risk. (D) Default risk. |
C
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Which of the following securities would represent the greatest interest rate risk to an investor?
(A) Treasury Notes due in one year (B) Federal Land Bank Bonds due in one year (C) Certificates of Deposit (D) Treasury Bonds due in 2042 |
D
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A customer investing in a portfolio of speculative growth stocks would be most susceptible to which two of the following risks?
Interest rate risk. Purchasing power risk. Systematic risk. Default risk. (A) I and II (B) III and IV (C) I and III (D) II and IV |
B
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An investor asks an RR for his opinion on the purchase of 500 shares of a very closely held stock. The investor thinks it has good near term investment potential. He should be advised that
(A) A thin market for such a stock is a major risk factor. (B) Closely held companies have low growth potential. (C) He would have no voice in the company's affairs. (D) He should not buy stock in a closely held company. |
A
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A customer wants to follow an aggressive investment strategy. The customer would primarily invest in which of the following securities?
(A) Municipal or corporate bonds (B) Money Market funds (C) Common stocks (D) Preferred stocks |
C
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A customer is investing for his child's education. He is seeking reasonable income and growth of capital. His investment objective is best described as seeking?
(A) Capital gains only (B) Speculative profits (C) Maximum current income (D) Total return (growth plus income) |
D
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Types of risk generally associated with investments in common stock include all of the following EXCEPT:
(A) Industry (B) Call (C) Inflationary (D) Market |
B
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One of your clients has the following portfolio: - 28% LMN Utilities Incorporated - 35% OPQ Health Providers Incorporated - 32% Index ETF (Tracks S&P 100) - 5% Cash Equivalents / Money Market Funds Of the following types of risks, which is MOST important to discuss with this client regarding the current asset allocation in the portfolio?
(A) The client should be informed about risks associated with liquidity in relation to these investments. (B) The client should be informed about the political and legislative risks associated with these investments. (C) The client should be informed about the non-systematic risks that exist in relation to their portfolio. (D) The client should be informed of the credit risk which is inherent to their portfolio. |
C
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A portfolio made up of 90% equities and 10% money market instruments would be most appropriate for which of the following investors?
(A) a single 27 year old with substantial income and assets (B) a couple in their retirement years (C) a married couple with two children in college with no other assets (D) an investor concerned with preservation of capital and current income |
A
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The term "capital risk" is best described by which of the following statements?
(A) The customer will incur a loss if securities are purchased at the wrong time. (B) The full amount originally invested may not be received by the customer upon disposition of the security. (C) When the investment is liquidated purchasing power may be less than that when the money was originally invested. (D) It is the amount of regular income received from an investment which may or may not be the amount that was originally expected. |
D
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When a portfolio is established which consists of 90% equities and 10% money market instruments would be most appropriate for which of the following investors?
(A) an investor wanting preservation of capital and current income (B) a married couple with three children in or nearing college (C) a couple in their retirement years (D) a single 28 year old with sizable income and assets |
B
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A client lists their primary investment objective as liquidity. An RR believes that investments in municipal securities are best suited for this client. With the primary investment objective of the client in mind, which of the following would be the MOST attractive feature in relation to recommendations of municipal securities by the RR to this client?
(A) The market price of a particular municipal security exceeds the par value of the security by a sizeable amount. (B) The market price of a particular municipal security is well below the par value of the security. (C) The security has a maturity that takes place within the next year. (D) The security has a call premium that currently exceeds the market price. |
C
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Mr. Jones purchases a B rated corporate bond maturing in 20 years would be least concerned with which of the following risks?
(A) default risk (B) purchasing power risk (C) interest rate risk (D) liquidity risk |
D
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Of the choices listed, which would be considered to be the most inappropriate investment choices for a Senior Investor?
U.S. Government Bonds Deferred Variable Annuity U.S. Savings Bond Immediate Variable Annuity (A) I & III (B) I & IV (C) II & III (D) II & IV |
C
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A single 28 year old professional has income of $350,000 per year and a net worth that exceeds $1,000,000. Her investment objective is capital appreciation. Which of the following would be the least attractive investment choice for this investor?
(A) growth funds (B) small cap equity stocks (C) high yield preferred stocks (D) equities in emerging markets |
C
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All of the following securities are subject to reinvestment risk EXCEPT:
(A) Municipal Bonds maturing in one year (B) Non-callable Corporate Coupon Bonds (C) Callable U.S. Treasury Bonds (D) U.S. Treasury Bills |
D
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An existing client comes into the office to discuss her portfolio. The client's risk tolerance is currently mid-level and she discusses her desire to add some diversification to her portfolio during the meeting. Her primary investment objective is total return with as much tax advantage as possible. Which of the following would be the MOST appropriate recommendation by the registered representative in this case, considering the information given?
(A) The rep should advise the client to split the allocation of the portfolio 50/50 between corporate bond issues and municipal bond funds that are specific to the client's state of residence. (B) The rep should advise the client to split the allocation of the portfolio 50/50 between equity mutual funds and corporate bond mutual funds. (C) The rep should advise the client to use an asset mix of 50% corporate bond mutual funds, 25% cash and cash equivalents, 7.5% municipal bonds, 7.5% equity securities, 10% sector ETFs. (D) The rep should |
The rep should advise the client to use an asset mix of 50% municipal bond mutual funds, 45% equities and the remainder in cash and cash equivalents.
D |
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A customer has $90,000 to invest which he will need in about three years to pay educational expenses for his son. All of the following would be appropriate for the customer EXCEPT:
(A) Treasury Bills (B) Equity Securities (C) Money Market Funds (D) Zero Coupon Bonds maturing in three years |
B
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A fellow RR receives a call from one of their clients. The client has been considering the purchase of DEF Corporation common stock for some time and enters an order for 1,000 shares of DEF when the market price is $55 per share and receives an execution at that price. Toward the end of the trading day, the client calls back and states that they have changed their mind on the purchase. DEF is now trading at $51 per share. Which of the following actions or statements would be MOST appropriate by your fellow RR?
(A) The RR should offer to purchase the stock back from the client at the original purchase price of $55 per share since the original order has already been executed. (B) The RR should transfer the shares to an account where the client wishes to purchase the shares and simply label that execution with the original time of execution on this customer's confirmation. (C) The RR should inform the client that the execution has already taken place and the stock is currently owned by t |
C) The RR should inform the client that the execution has already taken place and the stock is currently owned by the client at $51 per share, so further action will require further instruction.
(D) The RR should mark the transaction as an error and cancel the original trade in the client's account. C |
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An investor, whose investment objective is speculation, would MOSTLY be concerned with which of the following?
(A) Their exposure to reinvestment risk (B) Their exposure to currency risk (C) Their exposure to interest rate risk (D) Their exposure to capital risk |
D
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Diversification of a client's portfolio can also be called:
(A) Dollar Cost Averaging (B) Technical Analysis (C) Fundamental Analysis (D) Asset Allocation |
D
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