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NASAA Series 65 Uniform Investment Adviser Law Exam

1. Economic Factors and Business Information: practice questions

Our Series 65 bank has 63 questions on this topic. Here are 5 of them with answers; the full mock exam draws from every topic, like the real one.

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Question 1

Which financial statement shows a company's assets, liabilities and shareholders' equity at one point in time?

  1. The statement of comprehensive income
  2. The income statement
  3. The balance sheet
  4. The statement of cash flows
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C. The balance sheet — The balance sheet is a snapshot: assets = liabilities + shareholders' equity. The income and cash flow statements cover a period of time.

Question 2

Which statistic measures how widely returns are spread around their average?

  1. Correlation coefficient
  2. Standard deviation
  3. Median
  4. Beta
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B. Standard deviation — Standard deviation measures total volatility around the mean. Beta measures sensitivity to the market; correlation measures how two series move together.

Question 3

A client's money sits in cash instead of a balanced portfolio that would have earned 7%. The 7% given up is best described as:

  1. Liquidity risk
  2. Systematic market risk
  3. Opportunity cost
  4. Sunk cost
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C. Opportunity cost — Opportunity cost is the return given up on the next-best alternative when a choice is made.

Question 4

A correlation coefficient of -1.0 between two assets means:

  1. One of them has no volatility
  2. They always move in exactly the same direction
  3. They move in exactly opposite directions
  4. They move independently of each other
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C. They move in exactly opposite directions — Correlation runs from -1 (perfectly opposite) to +1 (perfectly together); 0 means no linear relationship. Combining negatively correlated assets reduces portfolio risk the most.

Question 5

Why is the quick ratio a stricter test of liquidity than the current ratio?

  1. It includes long-term debt as well as current liabilities in the denominator
  2. It leaves out inventory, which may be hard to turn into cash quickly
  3. It adds the value of fixed assets to current assets
  4. It counts only cash held in foreign currencies
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B. It leaves out inventory, which may be hard to turn into cash quickly — The acid-test (quick) ratio uses only the most liquid current assets: cash, marketable securities and receivables.

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