Series 65: Practice UPDATED Exam
Questions and CORRECT Answers
ABC Corporation has issued cumulative, convertible preferred stock. The provisions of the new
issue provide that:
I. Dividends must be paid on the preferred stock before any dividends may be paid on the
common stock
II. Omitted dividends will accumulate and must be paid before any dividends may be paid on the
common stock
III. ABC Corporation may call the stock at its par value
IV. The stock may be converted into common stock at any time by the preferred stockholder
A. I and II only
B. I and IV only
C. I, II, and IV only
D. I, II, III, and IV - CORRECT ANSWER - C. The preferred stock has a cumulative and
a convertible feature, but does not have a call provision.
An adviser's conservative client prefers to invest in a small number of securities without
worrying about the periodic ups and downs in their value. The client also wants to reduce the
cost of trading. The IA may recommend which of the following strategies?
A. Dollar cost averaging
B. The use of margin
C. Portfolio turnover annually
D. A buy-and-hold strategy - CORRECT ANSWER - D. With a buy-and-hold strategy, the
securities in the portfolio are held through both ups and downs in the market.
A stop order would NOT be used to:
A. Protect a gain when a long stock position appreciates
B. Limit a loss if the market price of a short position increases
C. Receive a specific price when buying or selling
, D. Limit a loss if the market price of a long stock position decreases - CORRECT
ANSWER - C. Since it becomes a market order when the stop price is hit or penetrated,
there is no guarantee as to execution price.
How long is an investment adviser (IA) required to keep the files of a client with whom it no
longer does business?
A. Until the end of the IA's fiscal year when the client's contract expired
B. Not less than three years from the end of the fiscal year when in which the IA made the last
entry
C. Not less than two years from the end of the fiscal year in which the IA made the last entry
D. Not less than five years from the end of the fiscal year in which the IA made the last entry -
CORRECT ANSWER - D. 5 Years
A U.S. manufacturer imports steel from Japan. The company manufactures the steel into parts
and exports them for sale into Japan. The yen has recently devalued. All of the following items
will decrease, EXCEPT:
A. Revenue
B. Operating expenses
C. Operating profit margin
D. Cost of goods sold - CORRECT ANSWER - B. Operating expenses are expressed in
US Dollars.
For disclosure purposes on Form ADV, a felony (as compared to a misdemeanor) is defined by
all of the following choices, EXCEPT:
A. An offense that's punishable by a prison sentence of at least one year
B. An offense that's punishable by a fine of at least $1,000
C. An offense that's punishable by a fine of at least $500
D. A general court martial - CORRECT ANSWER - C. Must be at least $1000
All of the following statements are TRUE regarding open-end and closed-end investment
companies, EXCEPT:
Questions and CORRECT Answers
ABC Corporation has issued cumulative, convertible preferred stock. The provisions of the new
issue provide that:
I. Dividends must be paid on the preferred stock before any dividends may be paid on the
common stock
II. Omitted dividends will accumulate and must be paid before any dividends may be paid on the
common stock
III. ABC Corporation may call the stock at its par value
IV. The stock may be converted into common stock at any time by the preferred stockholder
A. I and II only
B. I and IV only
C. I, II, and IV only
D. I, II, III, and IV - CORRECT ANSWER - C. The preferred stock has a cumulative and
a convertible feature, but does not have a call provision.
An adviser's conservative client prefers to invest in a small number of securities without
worrying about the periodic ups and downs in their value. The client also wants to reduce the
cost of trading. The IA may recommend which of the following strategies?
A. Dollar cost averaging
B. The use of margin
C. Portfolio turnover annually
D. A buy-and-hold strategy - CORRECT ANSWER - D. With a buy-and-hold strategy, the
securities in the portfolio are held through both ups and downs in the market.
A stop order would NOT be used to:
A. Protect a gain when a long stock position appreciates
B. Limit a loss if the market price of a short position increases
C. Receive a specific price when buying or selling
, D. Limit a loss if the market price of a long stock position decreases - CORRECT
ANSWER - C. Since it becomes a market order when the stop price is hit or penetrated,
there is no guarantee as to execution price.
How long is an investment adviser (IA) required to keep the files of a client with whom it no
longer does business?
A. Until the end of the IA's fiscal year when the client's contract expired
B. Not less than three years from the end of the fiscal year when in which the IA made the last
entry
C. Not less than two years from the end of the fiscal year in which the IA made the last entry
D. Not less than five years from the end of the fiscal year in which the IA made the last entry -
CORRECT ANSWER - D. 5 Years
A U.S. manufacturer imports steel from Japan. The company manufactures the steel into parts
and exports them for sale into Japan. The yen has recently devalued. All of the following items
will decrease, EXCEPT:
A. Revenue
B. Operating expenses
C. Operating profit margin
D. Cost of goods sold - CORRECT ANSWER - B. Operating expenses are expressed in
US Dollars.
For disclosure purposes on Form ADV, a felony (as compared to a misdemeanor) is defined by
all of the following choices, EXCEPT:
A. An offense that's punishable by a prison sentence of at least one year
B. An offense that's punishable by a fine of at least $1,000
C. An offense that's punishable by a fine of at least $500
D. A general court martial - CORRECT ANSWER - C. Must be at least $1000
All of the following statements are TRUE regarding open-end and closed-end investment
companies, EXCEPT:
