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Last Updated: Jun 11, 2026
No. of Questions: 325 Questions & Answers with Testing Engine
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1. Your cousin has recently attended a seminar on the benefits of diversification. Based on what he learned,
he decided to sell the shares he had in a large stock growth fund and put 50% of his money in hotel stocks
and 50% in airline stocks. Based on this information, you can tell him:
A) that he's less diversified than he was before, but can expect a higher rate of return.
B) none of the above.
C) that he's wise beyond his years.
D) that he's less diversified than he was before.
2. Which of the following investments would have the least interest rate risk?
A) a 20-year, AAA-rated municipal bond
B) a 3-year Treasury STRIP
C) a 15-year, AAA-rated corporate bond
D) a 6-month Treasury bill
3. Which of the following would not be required to display prominently the name of the member firm issuing
it?
I. sales literature distributed to an institutional investor
II. correspondence by a registered representative with her client
III. an advertisement to recruit new registered representatives
A) I and II only
B) III only
C) I, II, and III
D) I only
4. The Howey Decision did what?
A) provided for fixed annuities to be excluded from the definition of a security.
B) defined an investment contract as any investment of money in a common enterprise with the
expectation of earning a profit from the efforts of others.
C) determined that certificates of deposit issued by a bank and insured by the FDIC did not qualify as
securities, as defined by the Securities Exchange Act of 1934.
D) stipulated that all general partnerships were investment contracts and, therefore, securities, as defined
by the Securities Exchange Act of 1934.
5. The Invest4U Mutual Fund is a regulated investment company under Internal Revenue Code Subchapter
M. This means that:
A) Invest4U must submit an annually-updated prospectus to the IRS as well as to the SEC.
B) Invest4U is a non-diversified management company.
C) Invest4U does not itself have to pay taxes on any dividend or capital gain income it receives and
distributes to its shareholders.
D) Invest4U is a UIT.
Solutions:
| Question # 1 Answer: D | Question # 2 Answer: D | Question # 3 Answer: B | Question # 4 Answer: B | Question # 5 Answer: C |
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