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| Section | Weight | Objectives |
|---|---|---|
| Topic 1: Obtains and Verifies Customers' Purchase and Sales Instructions | 10% | - Order processing and transaction procedures
|
| Topic 2: Opens Accounts After Obtaining and Evaluating Customer Financial Profile | 16% | - Customer account types and documentation
|
| Topic 3: Seeks Business for the Broker-Dealer from Customers and Potential Customers | 24% | - Prospecting and communication with clients
|
| Topic 4: Provides Customers with Information About Investments | 50% | - Investment company securities and variable contracts
|
1. The "catch-up provision" that has been established for both the traditional and Roth IRAs applies to
people of what age?
A) 50 and older
B) 60 and older
C) 62 and older
D) 55 and older
2. Which of the following is not required to be included in a management company's prospectus?
A) a statement of the investment objective of the company
B) the potential risks to which the company's investors are exposed
C) the financial statements of the company
D) the various fees charged by the company
3. Which of the following statements regarding a mutual fund's expenses are true?
A) A mutual fund's record maintenance fees cannot exceed 0.25% of average net assets.
B) A mutual fund that has a front-end load cannot also charge 12b-1 fees.
C) The expense ratio of a mutual fund cannot exceed 1.0%.
D) A mutual fund family is prohibited from charging a fee when an investor exchanges his shares of one of
its funds for another.
4. Your nephew has asked you to help him formulate a financial plan for his family. Scott is 27 years old and
has been employed as an associate with a law firm for two years. Sarah, his wife, is 26 years old and
works in the human resources department of a large corporation. The couple is childless now, but they
plan to begin a family in a few years. Together, they have accumulated $10,000 in a savings account and
recently inherited $40,000 cash. They expect to be able to start saving at least $5,000 annually since their
incomes more than meet their current needs. They each have employer-provided health insurance and
retirement plans. Both have excellent upward mobility potential in their careers. They currently pay taxes
at the marginal rate of 15%. Scott tells you that although they regularly read some of the more popular
financial investment magazines, neither feels particularly knowledgeable about the world of investments.
Based on this information, which of the following statements is true?
A) A greater than average percentage of their money should be invested in municipal bonds to minimize
their currently high tax bill.
B) Purchasing power risk is not an issue in their situation.
C) A greater than average percentage of their money should be invested in money market mutual funds to
meet their needs for liquidity.
D) Although some money should be allocated to bond funds for diversification purposes, bond funds
should be underweighted in favor of stock funds.
5. Which of the following is exempt from registering as an investment company under the Investment
Company Act of 1940?
A) a unit investment trust
B) a non-diversified mutual fund
C) a company that sells its securities only to accredited investors
D) a company that has no sales charges or management fees
Solutions:
| Question # 1 Answer: A | Question # 2 Answer: C | Question # 3 Answer: A | Question # 4 Answer: D | Question # 5 Answer: C |
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