SERIES 62 TEST BREAKDOWN Exam
Which regulatory body primarily oversees the securities industry in the
United States?
A) Federal Reserve System
B) Securities and Exchange Commission (SEC)
C) Department of the Treasury
D) Federal Deposit Insurance Corporation (FDIC)
Answer: B
Explanation: The SEC is the primary federal agency responsible for
regulating the securities industry, enforcing federal securities laws, and
protecting investors.
Which of the following is a characteristic of preferred stock?
A) Voting rights in the company
B) Fixed dividends and priority over common stock in dividends
C) Maturity date and interest payments
D) Ownership of debt securities
Answer: B
Explanation: Preferred stock typically pays fixed dividends and has
priority over common stock for dividend payments, but generally does
not have voting rights.
Which type of debt security is issued by a municipal government?
, SERIES 62 TEST BREAKDOWN Exam
A) Corporate bond
B) Treasury bond
C) Municipal bond
D) Agency bond
Answer: C
Explanation: Municipal bonds are issued by state and local governments
to fund public projects and are exempt from federal income tax.
Money market instruments are characterized by:
A) Long-term maturity and higher yields
B) Short-term maturity and high liquidity
C) Equity ownership features
D) Derivative contracts with high leverage
Answer: B
Explanation: Money market instruments have short maturities, are
highly liquid, and are used for temporary cash management.
Which of the following is a derivative product?
A) Mutual fund
B) Common stock
C) Options
D) Corporate bond
, SERIES 62 TEST BREAKDOWN Exam
Answer: C
Explanation: Options are derivatives because their value is derived from
the value of an underlying asset, such as stock.
An exchange-traded fund (ETF) differs from a mutual fund primarily in:
A) Trading on an exchange throughout the day
B) Being actively managed
C) Having no management fees
D) Investing only in bonds
Answer: A
Explanation: ETFs are traded on stock exchanges like stocks, allowing
intraday trading, whereas mutual funds are priced once at the end of the
day.
Which alternative investment is primarily focused on investing in
privately held companies?
A) Hedge funds
B) Private equity
C) Real estate investment trusts (REITs)
D) Mutual funds
Answer: B
, SERIES 62 TEST BREAKDOWN Exam
Explanation: Private equity involves investing directly in private
companies or buyouts of public companies to take them private.
Which characteristic is typical of common stock?
A) Fixed dividend payments
B) Priority claim over assets in liquidation
C) Ownership stake with voting rights
D) Maturity date and interest payments
Answer: C
Explanation: Common stockholders own a portion of the company and
usually have voting rights but do not have fixed dividends.
What is a key risk associated with municipal bonds?
A) Default risk
B) Equity risk
C) Currency risk
D) Inflation risk only
Answer: A
Explanation: Municipal bonds carry default risk if the issuing
government faces financial difficulties, although they are generally
considered low risk.
Which regulatory body primarily oversees the securities industry in the
United States?
A) Federal Reserve System
B) Securities and Exchange Commission (SEC)
C) Department of the Treasury
D) Federal Deposit Insurance Corporation (FDIC)
Answer: B
Explanation: The SEC is the primary federal agency responsible for
regulating the securities industry, enforcing federal securities laws, and
protecting investors.
Which of the following is a characteristic of preferred stock?
A) Voting rights in the company
B) Fixed dividends and priority over common stock in dividends
C) Maturity date and interest payments
D) Ownership of debt securities
Answer: B
Explanation: Preferred stock typically pays fixed dividends and has
priority over common stock for dividend payments, but generally does
not have voting rights.
Which type of debt security is issued by a municipal government?
, SERIES 62 TEST BREAKDOWN Exam
A) Corporate bond
B) Treasury bond
C) Municipal bond
D) Agency bond
Answer: C
Explanation: Municipal bonds are issued by state and local governments
to fund public projects and are exempt from federal income tax.
Money market instruments are characterized by:
A) Long-term maturity and higher yields
B) Short-term maturity and high liquidity
C) Equity ownership features
D) Derivative contracts with high leverage
Answer: B
Explanation: Money market instruments have short maturities, are
highly liquid, and are used for temporary cash management.
Which of the following is a derivative product?
A) Mutual fund
B) Common stock
C) Options
D) Corporate bond
, SERIES 62 TEST BREAKDOWN Exam
Answer: C
Explanation: Options are derivatives because their value is derived from
the value of an underlying asset, such as stock.
An exchange-traded fund (ETF) differs from a mutual fund primarily in:
A) Trading on an exchange throughout the day
B) Being actively managed
C) Having no management fees
D) Investing only in bonds
Answer: A
Explanation: ETFs are traded on stock exchanges like stocks, allowing
intraday trading, whereas mutual funds are priced once at the end of the
day.
Which alternative investment is primarily focused on investing in
privately held companies?
A) Hedge funds
B) Private equity
C) Real estate investment trusts (REITs)
D) Mutual funds
Answer: B
, SERIES 62 TEST BREAKDOWN Exam
Explanation: Private equity involves investing directly in private
companies or buyouts of public companies to take them private.
Which characteristic is typical of common stock?
A) Fixed dividend payments
B) Priority claim over assets in liquidation
C) Ownership stake with voting rights
D) Maturity date and interest payments
Answer: C
Explanation: Common stockholders own a portion of the company and
usually have voting rights but do not have fixed dividends.
What is a key risk associated with municipal bonds?
A) Default risk
B) Equity risk
C) Currency risk
D) Inflation risk only
Answer: A
Explanation: Municipal bonds carry default risk if the issuing
government faces financial difficulties, although they are generally
considered low risk.
