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Question 1 of 10
1. Question
Under which Rule all non-accredited investors must be “sophisticated” investors?
Correct
Under Rule 506 all non-accredited investors must be “sophisticated” investors.
Incorrect
Under Rule 506 all non-accredited investors must be “sophisticated” investors.
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Question 2 of 10
2. Question
Which Form must be filled by the issuing company, when securities are sold under Rule 504, 505, or 506 of Regulation D?
Correct
Once securities are sold under Rule 504, 505, or 506 of Regulation D, the issuing company must file a Form D.
Incorrect
Once securities are sold under Rule 504, 505, or 506 of Regulation D, the issuing company must file a Form D.
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Question 3 of 10
3. Question
Which of the following statement(s) is(are) true about Form D?
I. Form D is filed with the Securities and Exchange Commission when a company has issued securities under one of the exemptions provided under Rules 504, 505, and 506 of Regulation D.
II. The information provided within Form D is limited to the names and addresses of the issuing company’s owners and those other individuals involved in the promotion and distribution of the security being offered.
III. While the Form D does not provide any financial information related to the issuing company or security, this information must be readily available and provided to investors upon request.
IV. The financial information provided must not violate antifraud regulations.Correct
Form D is filed with the Securities and Exchange Commission when a company has issued securities under one of the exemptions provided under Rules 504, 505, and 506 of Regulation D. Generally speaking, these exemptions apply to small issuances of restricted securities to accredited or sophisticated investors. The information provided within Form D is limited to the names and addresses of the issuing company’s owners and those other individuals involved in the promotion
and distribution of the security being offered. While the Form D does not provide any financial information related to the issuing company or security, this information must be readily available and provided to investors upon request.
Additionally, the financial information provided must not violate antifraud regulations.Incorrect
Form D is filed with the Securities and Exchange Commission when a company has issued securities under one of the exemptions provided under Rules 504, 505, and 506 of Regulation D. Generally speaking, these exemptions apply to small issuances of restricted securities to accredited or sophisticated investors. The information provided within Form D is limited to the names and addresses of the issuing company’s owners and those other individuals involved in the promotion
and distribution of the security being offered. While the Form D does not provide any financial information related to the issuing company or security, this information must be readily available and provided to investors upon request.
Additionally, the financial information provided must not violate antifraud regulations. -
Question 4 of 10
4. Question
Which of the following(s) is(are) included in the classifications of an accredited investor?
I. A bank
II. An insurance company
III. An investment company registered under the investment company act of 1940
IV. A small business investment company licensed by the small business administrationCorrect
The five classifications of an accredited investor are as follows:
i. a bank
ii. an insurance company
iii. an investment company registered under the Investment Company Act of 1940
iv. a Small Business Investment Company licensed by the Small Business AdministrationIncorrect
The five classifications of an accredited investor are as follows:
i. a bank
ii. an insurance company
iii. an investment company registered under the Investment Company Act of 1940
iv. a Small Business Investment Company licensed by the Small Business Administration -
Question 5 of 10
5. Question
Which of the following(s) is (are) excluded from the calculation of number of purchasers under Rules 505 and 506 of Regulation D?
I. Accredited investors
II. A natural person with net worth, excluding primary residence, in excess of $10 million
III. A natural person with individual income of $400,000 in each of the past 5 years, or $800,000 income jointly with their spouse
IV. A trust, corporation, charitable organization, or partnership with assets in excess of $5 millionCorrect
Besides accredited investors, the other three classifications of investors that are excluded from the calculation of number of purchasers under Rules 505 and 506 of Regulation D are as follows:
1. a natural person with net worth, excluding primary residence, in excess of $1 million
2. a natural person with individual income of $200,000 in each of the past 2 years, or $300,000 income jointly with their spouse
3. a trust, corporation, charitable organization, or partnership with assets in excess of $5 millionIncorrect
Besides accredited investors, the other three classifications of investors that are excluded from the calculation of number of purchasers under Rules 505 and 506 of Regulation D are as follows:
1. a natural person with net worth, excluding primary residence, in excess of $1 million
2. a natural person with individual income of $200,000 in each of the past 2 years, or $300,000 income jointly with their spouse
3. a trust, corporation, charitable organization, or partnership with assets in excess of $5 million -
Question 6 of 10
6. Question
Under Rule 135a of the Securities Act of 1933, generic advertising will not be considered as an offering of a security so long as it meets which of the following requirement(s)?
I. Explanatory information relating to securities of investment companies generally or to the nature of investment companies, or to services offered in connection with the ownership of such securities
II. The mention or explanation of investment companies of different generic types or having various investment objectives, such as balanced funds, growth funds, income funds, leveraged funds, specialty funds, variable annuities, bond funds, and no-load funds
III. Offers, descriptions, and explanation of various products and services not constituting a security subject to registration under the act, provided that such offers, descriptions, and explanations do not relate directly to the desirability of owning or purchasing a security issued by a registered investment company
IV. Invitation to inquire for further informationCorrect
Under Rule 135a of the Securities Act of 1933, generic advertising will not be considered as an offering of a security so long as it meets at least one of the following requirements:
i. Explanatory information relating to securities of investment companies generally or to the nature of investment companies, or to services offered in connection with the ownership of such securities,
ii. The mention or explanation of investment companies of different generic types or having various investment objectives, such as balanced funds, growth funds, income funds, leveraged funds, specialty funds, variable annuities, bond funds, and no-load funds,
iii. Offers, descriptions, and explanation of various products and services not constituting a security subject to registration under the act, provided that such offers, descriptions, and explanations do not relate directly to the desirability of owning or purchasing a security issued by a registered investment company,
iv. Invitation to inquire for further information.Incorrect
Under Rule 135a of the Securities Act of 1933, generic advertising will not be considered as an offering of a security so long as it meets at least one of the following requirements:
i. Explanatory information relating to securities of investment companies generally or to the nature of investment companies, or to services offered in connection with the ownership of such securities,
ii. The mention or explanation of investment companies of different generic types or having various investment objectives, such as balanced funds, growth funds, income funds, leveraged funds, specialty funds, variable annuities, bond funds, and no-load funds,
iii. Offers, descriptions, and explanation of various products and services not constituting a security subject to registration under the act, provided that such offers, descriptions, and explanations do not relate directly to the desirability of owning or purchasing a security issued by a registered investment company,
iv. Invitation to inquire for further information. -
Question 7 of 10
7. Question
Which of the following(s) is (are) included in investor’s common personal liabilities?
I. Mortgages
II. Auto loans
III. Real estate
IV. Credit cardsCorrect
An investor’s other assets may include real estate, bank accounts, other brokerage accounts, and retirement plans, while common personal liabilities include mortgages, auto loans, and credit cards.
Incorrect
An investor’s other assets may include real estate, bank accounts, other brokerage accounts, and retirement plans, while common personal liabilities include mortgages, auto loans, and credit cards.
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Question 8 of 10
8. Question
Which of the following statement(s) is (are) true about current income?
I. The goal of a current income investment objective is to provide a source of current income.
II. The current income investment objective is typically utilized by investors who have a shorter time horizon or who may be looking to their investment portfolio to supplement their current income.
III. Corporate bonds are a common example of a security that provides current income through semiannual coupon payments.
IV. Small, unstable equity securities can also provide current income through relatively predictable and stable dividend payments.Correct
The goal of a current income investment objective is to provide a source of current income. The current income investment objective is typically utilized by investors who have a shorter time horizon or who may be looking to their investment portfolio to supplement their current income. Additionally, investors employing this strategy typically are looking to this income that is generated by the investment to fund current obligations and thus look to a minimum level of volatility as their obligations are typically more fixed in nature. If an investor did not have a need for this current income, he would be more likely to seek an investment with a different objective as current income exposes the investor to reinvestment risk, which can generate losses in markets with falling rates. Corporate bonds are a common example of a security that provides current income through semiannual coupon payments. Additionally, large, stable equity securities can also provide current income through relatively predictable and stable dividend payments. These equity securities, however, typically provide a lower level of current income than fixed income securities and expose the investor to a greater degree of principal risk.
Incorrect
The goal of a current income investment objective is to provide a source of current income. The current income investment objective is typically utilized by investors who have a shorter time horizon or who may be looking to their investment portfolio to supplement their current income. Additionally, investors employing this strategy typically are looking to this income that is generated by the investment to fund current obligations and thus look to a minimum level of volatility as their obligations are typically more fixed in nature. If an investor did not have a need for this current income, he would be more likely to seek an investment with a different objective as current income exposes the investor to reinvestment risk, which can generate losses in markets with falling rates. Corporate bonds are a common example of a security that provides current income through semiannual coupon payments. Additionally, large, stable equity securities can also provide current income through relatively predictable and stable dividend payments. These equity securities, however, typically provide a lower level of current income than fixed income securities and expose the investor to a greater degree of principal risk.
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Question 9 of 10
9. Question
Which of the following statement(s) is (are) true about capital appreciation investment objective?
I. A capital appreciation investment objective seeks to achieve a high level of return through growth in the price of the security.
II. Investors with capital appreciation investment objective would prefer that funds be reinvested into the high growth company instead of being paid out in the form of dividends.
III. Investors pursuing capital appreciation investment objective typically have longer time horizons as capital appreciation is considered to be a much riskier source of return than current income or capital preservation.
IV. Equity securities, particularly those of small and mid-cap companies, are a great example of the capital appreciation investment objective as they typically reinvest their earnings and pay out very low, if any, dividends.Correct
A capital appreciation investment objective seeks to achieve a high level of return through growth in the price of the security. As a result, investors with this objective would prefer that funds be reinvested into the high growth company instead of being paid out in the form of dividends. Investors pursuing this investment objective typically have longer time horizons as capital appreciation is considered to be a much riskier source of return than current income or capital preservation. Equity securities, particularly those of small and mid-cap companies, are a great example of the capital appreciation investment objective as they typically reinvest their earnings and pay out very low, if any, dividends. However, these securities are also considered riskier as they are less stable and business conditions and performance can fluctuate much more wildly and success can hinge on the success or failure of a single product.
Incorrect
A capital appreciation investment objective seeks to achieve a high level of return through growth in the price of the security. As a result, investors with this objective would prefer that funds be reinvested into the high growth company instead of being paid out in the form of dividends. Investors pursuing this investment objective typically have longer time horizons as capital appreciation is considered to be a much riskier source of return than current income or capital preservation. Equity securities, particularly those of small and mid-cap companies, are a great example of the capital appreciation investment objective as they typically reinvest their earnings and pay out very low, if any, dividends. However, these securities are also considered riskier as they are less stable and business conditions and performance can fluctuate much more wildly and success can hinge on the success or failure of a single product.
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Question 10 of 10
10. Question
Which of the following statement(s) is (are) true about growth and income investment objective?
I. The goal of a growth and income investment objective is to achieve investment returns through only capital appreciation.
II. The growth and income investment objective lies on the spectrum between the options of achieving returns through current income only (corporate bonds) and by capital appreciation only (small-cap equity securities).
III. The growth and income investment objective is a moderate risk objective as the current income portion of the portfolio mitigates some of the risk that results from the capital appreciation portion of the investment portfolio.
IV. One example of a growth and income investment objective is a large cap equity security that pays a consistent dividend.Correct
The goal of a growth and income investment objective is to achieve investment returns through a combination of both current income and capital appreciation. This investment objective lies on the spectrum between the options of achieving returns through current income only (corporate bonds) and by capital appreciation only (small-cap equity securities). Additionally, this growth and income investment objective is a moderate risk objective as the current income portion of the portfolio mitigates some of the risk that results from the capital appreciation portion of the investment portfolio. One example of a growth and income investment objective is a large cap equity security that pays a consistent dividend. In this example, an investor would receive current income through dividends and would see capital appreciation through changes in the price of the equity security.
Incorrect
The goal of a growth and income investment objective is to achieve investment returns through a combination of both current income and capital appreciation. This investment objective lies on the spectrum between the options of achieving returns through current income only (corporate bonds) and by capital appreciation only (small-cap equity securities). Additionally, this growth and income investment objective is a moderate risk objective as the current income portion of the portfolio mitigates some of the risk that results from the capital appreciation portion of the investment portfolio. One example of a growth and income investment objective is a large cap equity security that pays a consistent dividend. In this example, an investor would receive current income through dividends and would see capital appreciation through changes in the price of the equity security.