Series 65 Practice Exam #1 2025
Questions and Answers
In projecting future cash requirements, one of the tools is a capital needs analysis. When
doing one, all of the following would be considered capital needs except
A) rolling over a 401(k) into an IRA
B) a home equity loan with a $15,000 balance
C) a $100,000 loan for law school with a due date in 10 years
D) a $20,000 loan for undergraduate school with a due date in 6 years - ANSWER✔✔-A)
rolling over a 401(k) into an IRA
A capital needs analysis attempts to determine money that would be needed in the
event of an individual's sudden passing. Included would be any outstanding debt
obligations, regardless of when they are due (they will have to be paid off sometime).
,However, an asset such as the 401(k) is not a need; it is something that will help meet
the need.
One of the prohibited practices under the Uniform Securities Act is market
manipulation. Which of the following are examples of a broker-dealer engaging in that
practice?
I. Arbitrage
II. Churning
III. Matched orders
IV. Wash trades
A) I and IV
B) II and IV
C) III and IV
D) I and II - ANSWER✔✔-C) III and IV
(Matched orders, Wash trades)
,Matched orders occur when one or more broker-dealers engage in buying and selling
between themselves for the purpose of creating the misleading appearance of increased
activity in a security. A wash trade is an attempt to manipulate a security's priceterm-52
by creating an apparent interest in the security that really does not exist. Arbitrage is
the simultaneous buying and selling of the same security in different markets to take
advantage of different prices. It is not a form of market manipulation. Churning is a
prohibited activity, but has nothing to do with the market, just a client's account.
Doug runs a sole proprietorship IA & is also a registered agent with P. Securities, Inc., a
registered broker-dealer. Doug charges his clients an hourly fee for advice, and when
they wish to purchase recommended securities, they may do so through P. Securities if
they have an account there. In those circumstances, Doug earns a commission on the
securities transaction in addition to the hourly fee he earned while making that
recommendation. Under the NASAA Model Rule on Unethical Biz Practices of IAs,
IARs, & Federal Covered Advisers,
A) this would be permitted if the compensation were disclosed to the client.
B) this would constitute a prohibited practice.
C) this would be acceptable if it were disclosed to the client and the IA fee was based on
a % of assets under management rather than an hourly basis.
, D) the trade could only be placed through P. Securities if they were the market maker in
the recommended security. - ANSWER✔✔-A) this would be permitted if the
compensation were disclosed to the client.
Investment advisers may charge fees on an hourly basis, as a percentage of assets under
management, or even as a flat annual fee. In addition, if licensed as agents of a broker-
dealer, they may also earn commissions on transactions routed through that broker-
dealer. However, disclosure to the client is required, and it must be made clear to the
advisory client that transactions may be executed at whatever broker-dealer the client
chooses.
An advantage of being a bondholder compared with owning common stock in the same
corporation is that
A) the bondholder can select the optimum time to have the issuer redeem the bond.
B) common stock has priority over the bond in the event of liquidation.
C) income payments are more reliable.
D) there is limited liability. - ANSWER✔✔-C) income payments are more reliable.
Even though bond interest is semiannual, while dividends are typically paid quarterly,
the payment of interest is an obligation that comes ahead of the payment of any
Questions and Answers
In projecting future cash requirements, one of the tools is a capital needs analysis. When
doing one, all of the following would be considered capital needs except
A) rolling over a 401(k) into an IRA
B) a home equity loan with a $15,000 balance
C) a $100,000 loan for law school with a due date in 10 years
D) a $20,000 loan for undergraduate school with a due date in 6 years - ANSWER✔✔-A)
rolling over a 401(k) into an IRA
A capital needs analysis attempts to determine money that would be needed in the
event of an individual's sudden passing. Included would be any outstanding debt
obligations, regardless of when they are due (they will have to be paid off sometime).
,However, an asset such as the 401(k) is not a need; it is something that will help meet
the need.
One of the prohibited practices under the Uniform Securities Act is market
manipulation. Which of the following are examples of a broker-dealer engaging in that
practice?
I. Arbitrage
II. Churning
III. Matched orders
IV. Wash trades
A) I and IV
B) II and IV
C) III and IV
D) I and II - ANSWER✔✔-C) III and IV
(Matched orders, Wash trades)
,Matched orders occur when one or more broker-dealers engage in buying and selling
between themselves for the purpose of creating the misleading appearance of increased
activity in a security. A wash trade is an attempt to manipulate a security's priceterm-52
by creating an apparent interest in the security that really does not exist. Arbitrage is
the simultaneous buying and selling of the same security in different markets to take
advantage of different prices. It is not a form of market manipulation. Churning is a
prohibited activity, but has nothing to do with the market, just a client's account.
Doug runs a sole proprietorship IA & is also a registered agent with P. Securities, Inc., a
registered broker-dealer. Doug charges his clients an hourly fee for advice, and when
they wish to purchase recommended securities, they may do so through P. Securities if
they have an account there. In those circumstances, Doug earns a commission on the
securities transaction in addition to the hourly fee he earned while making that
recommendation. Under the NASAA Model Rule on Unethical Biz Practices of IAs,
IARs, & Federal Covered Advisers,
A) this would be permitted if the compensation were disclosed to the client.
B) this would constitute a prohibited practice.
C) this would be acceptable if it were disclosed to the client and the IA fee was based on
a % of assets under management rather than an hourly basis.
, D) the trade could only be placed through P. Securities if they were the market maker in
the recommended security. - ANSWER✔✔-A) this would be permitted if the
compensation were disclosed to the client.
Investment advisers may charge fees on an hourly basis, as a percentage of assets under
management, or even as a flat annual fee. In addition, if licensed as agents of a broker-
dealer, they may also earn commissions on transactions routed through that broker-
dealer. However, disclosure to the client is required, and it must be made clear to the
advisory client that transactions may be executed at whatever broker-dealer the client
chooses.
An advantage of being a bondholder compared with owning common stock in the same
corporation is that
A) the bondholder can select the optimum time to have the issuer redeem the bond.
B) common stock has priority over the bond in the event of liquidation.
C) income payments are more reliable.
D) there is limited liability. - ANSWER✔✔-C) income payments are more reliable.
Even though bond interest is semiannual, while dividends are typically paid quarterly,
the payment of interest is an obligation that comes ahead of the payment of any
