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NASAA Series 65 Uniform Investment Adviser Law Exam

2. Investment Vehicle Characteristics: practice questions

Our Series 65 bank has 108 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

A breakpoint in a mutual fund is:

  1. A purchase amount at which the sales charge is reduced
  2. The date dividends are reinvested
  3. The NAV level at which the fund must sell holdings
  4. The point at which a fund closes to new investors
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A. A purchase amount at which the sales charge is reduced — Larger purchases (and rights of accumulation or letters of intent) qualify for lower front-end loads. Selling just below a breakpoint is a prohibited practice.

Question 2

A debenture is:

  1. A bond secured by a portfolio of other securities
  2. An unsecured bond backed only by the issuer's general credit
  3. A short-term note backed by a bank's irrevocable letter of credit
  4. A bond secured by a mortgage on real estate
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B. An unsecured bond backed only by the issuer's general credit — Debentures have no specific collateral. Mortgage bonds and collateral trust bonds are secured.

Question 3

Compared with an investment-grade bond of the same maturity, a high-yield bond usually has:

  1. The same yield as investment-grade bonds but less liquidity
  2. A government guarantee of principal
  3. A lower yield and lower default risk
  4. A higher yield and greater default risk
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D. A higher yield and greater default risk — Lower-rated issuers must pay more to borrow because investors demand compensation for the higher chance of default.

Question 4

Convertible preferred stock usually pays a lower dividend than straight preferred of the same issuer because:

  1. Its dividend is guaranteed by the FDIC
  2. It cannot be called by the issuer
  3. It ranks ahead of the company's bonds in a liquidation
  4. Holders can benefit if the common stock rises
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D. Holders can benefit if the common stock rises — The conversion feature has value, so investors accept a lower yield in exchange for the chance to share in common stock gains.

Question 5

Which statement about digital assets such as crypto tokens is accurate?

  1. They are all regulated as mutual funds
  2. They are all insured by the FDIC
  3. Some may be securities, and they can be highly volatile and subject to fraud and hacking
  4. Their prices are stable because the total supply of each is fixed by law
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C. Some may be securities, and they can be highly volatile and subject to fraud and hacking — Whether a digital asset is a security depends on the facts (the Howey test). Investors face volatility, custody and theft risks, and many platforms are not protected like banks.

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