STC SERIES 66 FINAL PAPER 2026
CERTIFICATION EVALUATION QUESTIONS
AND SOLUTIONS GRADED A+
●● The difference between a corporation's current assets and its current
liabilities is the:.
Answer: Working capital
The amount by which a corporation's current assets exceed its current
liabilities is referred to as working capital.
●● Assuming an expected rate of return, a specific holding period, and a
sum to be invested, an IAR is able to determine an investment's:.
Answer: Future value
The future value of an investment is based on the present value of the
amount invested, using a discount rate each year, and doing so over a
given period of time. The assumption is that the annual return is
reinvested at the same rate, or is compounded over the given time
period, thereby resulting in a future value that exceeds the present value.
●● Which of the following types of risk is MOST associated with the
purchase of a five-year T-bond?.
Answer: Interest-rate
Interest-rate risk, which is also referred to as money-rate risk, is
essentially the risk that if interest rates rise, the prices of the debt
,securities will fall. If an investor needs to liquidate her debt investment
prior to maturity, rising interest rates reduce the value she would receive
if she sold the security in the secondary market. Market risk is primarily
associated with common stock. Since the secondary market for
Treasuries is very active, liquidity risk is not a factor. Although
legislative risk (changes in the law) could create diminished value for
the instruments, it is not likely to occur.
●● Disadvantages of investing in a C Corporation include which of the
following choices?
Shareholders are taxed on dividends that they receive.
The corporation is taxed on its income.
Shareholders may not deduct their share of the corporation's losses on
their personal tax returns.
Shareholders are paid last if the corporation liquidates..
Answer: I, II, III, and IV
All of the choices are disadvantages of investing in a C Corporation
●● All the following are characteristics of passive asset allocation
strategies, EXCEPT:.
Answer: Altering a portfolio in anticipation of an economic event
A passive asset allocation strategy (e.g., buy and hold) is characterized
by low transaction costs and minimal tax consequences. Systematic
rebalancing, another passive strategy, alters the portfolio on a monthly,
quarterly, or annual basis to restore an original strategic asset allocation
if market movements have changed it. On the other hand, active
,(tactical) asset allocation strategies effect changes to a portfolio's
allocation in anticipation of economic events.
●● A person has established an IA as a sole proprietorship and works as
an IAR out of his home office. To help promote and manage the IA, he
has set up a website which contains personal information about his
clients. A few weeks after setting up the website, the IAR discovers that
the website has been hacked and his customers' account information has
been stolen. What is the primary regulatory concern?.
Answer: The IA did not prepare proper cybersecurity policies,
procedures, and measures before launching the website.
Both the SEC and state Administrators require IAs to establish
cybersecurity policies in order to protect their clients. Since the website
was hacked, the regulator's primary concern is the extent of the IA's
cybersecurity measures. The regulations don't require websites to be
password protected, despite the fact that many IAs may find them
necessary to protect client information. Also, there's no requirement for
an IA to be federally covered before creating a website. Although
websites are considered advertisements and regulators must be notified,
it's unlikely that this is the primary regulatory concern.
●● A Nasdaq listed company is offering 1,000,000 shares of common
stock in State A. The Administrator in State A may:
Not require registration of the stock in State A.
Require the issuer to perform notice filing.
Require the issuer to pay a fee.
, Investigate the underwriter for possible fraud in connection with the
offering..
Answer: I and IV only
Securities that are listed on a national exchange (e.g., Nasdaq, NYSE, or
AMEX) are referred to as federal covered securities and, therefore, are
not required to be registered at the state level. Additionally, if the federal
covered security is listed on an exchange, the state may not require the
issuer to pay a fee, submit a notice filing, or provide a consent to service
of process. However, the state Administrator may investigate any broker-
dealer (including the underwriter) that participates in the offering for
fraud or deceit and file an enforcement action if it is warranted.
●● According to the Uniform Securities Act, which of the following
activities by an agent of a broker-dealer is unethical?.
Answer: Executing orders to sell securities in a client's individual and
joint account based on instructions from the client's spouse.
Unless the client's spouse has been given specific authorization,
executing these orders is unethical. An agent may exercise discretion
over the price and/or time of execution, based on verbal authorization
from the client. Agents are allowed to accept unsolicited orders to buy
and sell securities. Agents are not required to send all clients a
preliminary prospectus, but they are required to send a final prospectus
to clients who purchase non-exempt securities.
●● If an agent of a broker-dealer is granted a durable power of attorney
over a client's account, all of the following statements are TRUE,
EXCEPT.
CERTIFICATION EVALUATION QUESTIONS
AND SOLUTIONS GRADED A+
●● The difference between a corporation's current assets and its current
liabilities is the:.
Answer: Working capital
The amount by which a corporation's current assets exceed its current
liabilities is referred to as working capital.
●● Assuming an expected rate of return, a specific holding period, and a
sum to be invested, an IAR is able to determine an investment's:.
Answer: Future value
The future value of an investment is based on the present value of the
amount invested, using a discount rate each year, and doing so over a
given period of time. The assumption is that the annual return is
reinvested at the same rate, or is compounded over the given time
period, thereby resulting in a future value that exceeds the present value.
●● Which of the following types of risk is MOST associated with the
purchase of a five-year T-bond?.
Answer: Interest-rate
Interest-rate risk, which is also referred to as money-rate risk, is
essentially the risk that if interest rates rise, the prices of the debt
,securities will fall. If an investor needs to liquidate her debt investment
prior to maturity, rising interest rates reduce the value she would receive
if she sold the security in the secondary market. Market risk is primarily
associated with common stock. Since the secondary market for
Treasuries is very active, liquidity risk is not a factor. Although
legislative risk (changes in the law) could create diminished value for
the instruments, it is not likely to occur.
●● Disadvantages of investing in a C Corporation include which of the
following choices?
Shareholders are taxed on dividends that they receive.
The corporation is taxed on its income.
Shareholders may not deduct their share of the corporation's losses on
their personal tax returns.
Shareholders are paid last if the corporation liquidates..
Answer: I, II, III, and IV
All of the choices are disadvantages of investing in a C Corporation
●● All the following are characteristics of passive asset allocation
strategies, EXCEPT:.
Answer: Altering a portfolio in anticipation of an economic event
A passive asset allocation strategy (e.g., buy and hold) is characterized
by low transaction costs and minimal tax consequences. Systematic
rebalancing, another passive strategy, alters the portfolio on a monthly,
quarterly, or annual basis to restore an original strategic asset allocation
if market movements have changed it. On the other hand, active
,(tactical) asset allocation strategies effect changes to a portfolio's
allocation in anticipation of economic events.
●● A person has established an IA as a sole proprietorship and works as
an IAR out of his home office. To help promote and manage the IA, he
has set up a website which contains personal information about his
clients. A few weeks after setting up the website, the IAR discovers that
the website has been hacked and his customers' account information has
been stolen. What is the primary regulatory concern?.
Answer: The IA did not prepare proper cybersecurity policies,
procedures, and measures before launching the website.
Both the SEC and state Administrators require IAs to establish
cybersecurity policies in order to protect their clients. Since the website
was hacked, the regulator's primary concern is the extent of the IA's
cybersecurity measures. The regulations don't require websites to be
password protected, despite the fact that many IAs may find them
necessary to protect client information. Also, there's no requirement for
an IA to be federally covered before creating a website. Although
websites are considered advertisements and regulators must be notified,
it's unlikely that this is the primary regulatory concern.
●● A Nasdaq listed company is offering 1,000,000 shares of common
stock in State A. The Administrator in State A may:
Not require registration of the stock in State A.
Require the issuer to perform notice filing.
Require the issuer to pay a fee.
, Investigate the underwriter for possible fraud in connection with the
offering..
Answer: I and IV only
Securities that are listed on a national exchange (e.g., Nasdaq, NYSE, or
AMEX) are referred to as federal covered securities and, therefore, are
not required to be registered at the state level. Additionally, if the federal
covered security is listed on an exchange, the state may not require the
issuer to pay a fee, submit a notice filing, or provide a consent to service
of process. However, the state Administrator may investigate any broker-
dealer (including the underwriter) that participates in the offering for
fraud or deceit and file an enforcement action if it is warranted.
●● According to the Uniform Securities Act, which of the following
activities by an agent of a broker-dealer is unethical?.
Answer: Executing orders to sell securities in a client's individual and
joint account based on instructions from the client's spouse.
Unless the client's spouse has been given specific authorization,
executing these orders is unethical. An agent may exercise discretion
over the price and/or time of execution, based on verbal authorization
from the client. Agents are allowed to accept unsolicited orders to buy
and sell securities. Agents are not required to send all clients a
preliminary prospectus, but they are required to send a final prospectus
to clients who purchase non-exempt securities.
●● If an agent of a broker-dealer is granted a durable power of attorney
over a client's account, all of the following statements are TRUE,
EXCEPT.
