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Question 1 of 10
1. Question
What is the condition of companies to offer and sell up to $5 million of their securities to be exempted under Rule 506?
Correct
Rule 506 allows many of the same exemptions available under Rule 505. However, under Rule 506 all non-accredited investors must be “sophisticated” investors. And Rule 505 provides an exemption for companies to offer and sell up to $5 million of their securities in a 12-month period. To qualify for this exemption, the issuing company must not publicly advertise or solicit for these securities, the investors will receive restricted securities, and the issuing company can only sell to accredited investors or up to 35 other investors who do not meet the accredited investor requirements.
Incorrect
Rule 506 allows many of the same exemptions available under Rule 505. However, under Rule 506 all non-accredited investors must be “sophisticated” investors. And Rule 505 provides an exemption for companies to offer and sell up to $5 million of their securities in a 12-month period. To qualify for this exemption, the issuing company must not publicly advertise or solicit for these securities, the investors will receive restricted securities, and the issuing company can only sell to accredited investors or up to 35 other investors who do not meet the accredited investor requirements.
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Question 2 of 10
2. Question
Which of the following is not one of the classifications of an accredited investor?
Correct
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
v.an employee benefit plan or individual retirement account which is subject to the Employee Retirement Income Security Act of 1974 (ERISA) and in which the investment decision is made by a fiduciaryIncorrect
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
v.an employee benefit plan or individual retirement account which is subject to the Employee Retirement Income Security Act of 1974 (ERISA) and in which the investment decision is made by a fiduciary -
Question 3 of 10
3. Question
Which of the following classifications of investors besides accredited investors is excluded from the calculation of number of purchasers ?
Correct
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 4 of 10
4. Question
In which case generic advertising will be considered as an offering of a security?
Correct
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,
Invitation to inquire for further informationIncorrect
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,
Invitation to inquire for further information -
Question 5 of 10
5. Question
Why is an investor’s age critical in determining a suitable investment recommendation?
Correct
An investor’s age is critical in determining a suitable investment recommendation because younger investors typically have much longer time horizons and are therefore able to take more substantial risks in order to achieve their goals. Also, as younger investors continue to save and invest the impact of dollar cost averaging can help achieve attractive returns through all market cycles. Older investors, to the contrary, typically have shorter time horizons as they near retirement or other significant life events and are more concerned with the protection of principal as their level of retirement income has already been largely determined.
Incorrect
An investor’s age is critical in determining a suitable investment recommendation because younger investors typically have much longer time horizons and are therefore able to take more substantial risks in order to achieve their goals. Also, as younger investors continue to save and invest the impact of dollar cost averaging can help achieve attractive returns through all market cycles. Older investors, to the contrary, typically have shorter time horizons as they near retirement or other significant life events and are more concerned with the protection of principal as their level of retirement income has already been largely determined.
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Question 6 of 10
6. Question
Common personal liabilities include…
Correct
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 7 of 10
7. Question
What is the drive beyond an investor’s need for insurance?
Correct
An investor’s need for insurance, which is driven by the amount of current and future liabilities, will reduce the amount of discretionary income available for investments as a portion of that income will be directed toward the insurance purchase.
Incorrect
An investor’s need for insurance, which is driven by the amount of current and future liabilities, will reduce the amount of discretionary income available for investments as a portion of that income will be directed toward the insurance purchase.
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Question 8 of 10
8. Question
What is one thing that would increase an investor’s ability to take risk with his remaining investment portfolio?
Correct
An investor’s active participation in retirement programs will increase his ability to take risk with his remaining investment portfolio because his ability to fund his retirement lifestyle will not be as severely impacted by gains or losses in his personal portfolio as an investor with a lower level of participation in a retirement program.
Incorrect
An investor’s active participation in retirement programs will increase his ability to take risk with his remaining investment portfolio because his ability to fund his retirement lifestyle will not be as severely impacted by gains or losses in his personal portfolio as an investor with a lower level of participation in a retirement program.
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Question 9 of 10
9. Question
What is the goal of a preservation of capital investment objective?
Correct
Aptly named, the goal of a preservation of capital investment objective is to preserve the initial capital investment (i.e., minimize the risk of an investment loss).
Incorrect
Aptly named, the goal of a preservation of capital investment objective is to preserve the initial capital investment (i.e., minimize the risk of an investment loss).
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Question 10 of 10
10. Question
Who can utilize the current income investment objective?
Correct
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.
Incorrect
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.