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Question 1 of 10
1. Question
According to the SEC, an Investment Advisor Representative has the following functions except:
I. The individual must have less than five clients who are considered natural persons.
II. The individual must communicate with the clients of the investment advisor.
III. The individual must function beyond the limitations of and investment advisor.
IV. The individual cannot provide impersonal investment advice.Correct
According to the SEC, an investment advisor representative (IAR for short) is an individual who is under the supervision of an investment advisor. In order to qualify as an investment advisor representative, rather than fall into the category of an investment advisor, certain limitations on the capacity of the individual must be in effect, including the following:
– The individual must have more than five clients who are considered natural persons (i.e. not businesses, trusts, or other entities which do not qualify for natural person status). In addition, the clients that fall into this category must make up at least 10% of the IAR’s client base.
– The individual must communicate with the clients of the investment advisor.
– The individual cannot provide impersonal investment advice, meaning that the individual may only provide recommendations if they meet the underlying objective of the specific client.Incorrect
According to the SEC, an investment advisor representative (IAR for short) is an individual who is under the supervision of an investment advisor. In order to qualify as an investment advisor representative, rather than fall into the category of an investment advisor, certain limitations on the capacity of the individual must be in effect, including the following:
– The individual must have more than five clients who are considered natural persons (i.e. not businesses, trusts, or other entities which do not qualify for natural person status). In addition, the clients that fall into this category must make up at least 10% of the IAR’s client base.
– The individual must communicate with the clients of the investment advisor.
– The individual cannot provide impersonal investment advice, meaning that the individual may only provide recommendations if they meet the underlying objective of the specific client. 
Question 2 of 10
2. Question
Which of the following is true concerning brokers?
I. A broker acts as a middleman between the buyer of a security and the seller of a security.
II. A broker sells its own inventory to buyers.
III. Brokers own the products for which they arrange transactions.
IV. A broker has different functions from a dealer.Correct
A broker is a person or institution which acts as a middleman between the buyer of a security and the seller of a security. The broker makes his profit by charging a sales charge, or commission, for arranging the transaction. Brokers do not own any products for which they arrange transactions, but simply facilitate the transferral of ownership from a seller to a buyer.
Incorrect
A broker is a person or institution which acts as a middleman between the buyer of a security and the seller of a security. The broker makes his profit by charging a sales charge, or commission, for arranging the transaction. Brokers do not own any products for which they arrange transactions, but simply facilitate the transferral of ownership from a seller to a buyer.

Question 3 of 10
3. Question
Which of the following are true concerning quantitative methods of valuation?
I. They consist of intricate mathematical and statistical modeling.
II. Quantitative methods are also known as technical analysis.
III. They can be used to measure performance of a company based on several factors.
IV. Time value of money concept summarises the importance of using using technical analysis.Correct
Quantitative methods are methods used to better understand a company’s or sector’s behavior. These methods consist of intricate mathematical and statistical modeling. It can be used to measure performance of a company based on several factors or in the valuation of a firm based on those or other factors. Quantitative methods are also known as technical analysis.
Incorrect
Quantitative methods are methods used to better understand a company’s or sector’s behavior. These methods consist of intricate mathematical and statistical modeling. It can be used to measure performance of a company based on several factors or in the valuation of a firm based on those or other factors. Quantitative methods are also known as technical analysis.

Question 4 of 10
4. Question
Which of the following statements is false?
I. The internal rate of return (IRR) is the rate of expected growth.
II. The time value of money concept is the assumption that money held today is worth less than money received tomorrow.
III. Net present value (NPV) calculations show the value of a dollar today compared to the value of the same dollar in the future.
IV. If the NPV is positive, the investment being analyzed in not worth being pursued.Correct
Net present value (NPV) calculations show the value of a dollar today compared to the value of the same dollar in the future, accounting for inflation and returns (subtracting inflation from returns). If the NPV is negative, the investment being analyzed in not worth being pursued.
The time value of money concept is the assumption that money held today is worth more than money received tomorrow.Incorrect
Net present value (NPV) calculations show the value of a dollar today compared to the value of the same dollar in the future, accounting for inflation and returns (subtracting inflation from returns). If the NPV is negative, the investment being analyzed in not worth being pursued.
The time value of money concept is the assumption that money held today is worth more than money received tomorrow. 
Question 5 of 10
5. Question
The following statements are not true, except:
I. To find IRR, the investor sets the time value of money equation equal to zero.
II. A higher IRR indicates a higher probability of negative returns.
III. If the NPV is negative, the investment being analyzed in not worth being pursue.
IV. NPV is calculated as a function of the time value of money by applying a discount rate to expected future values within the time value of money equation.Correct
The internal rate of return (IRR) is the rate of expected growth. To find IRR, the investor sets the time value of money equation equal to zero. Generally, a higher IRR indicates a higher probability of positive returns.
Net present value (NPV) calculations show the value of a dollar today compared to the value of the same dollar in the future, accounting for inflation and returns (subtracting inflation from returns). If the NPV is negative, the investment being analyzed in not worth being pursued. NPV is calculated as a function of the time value of money by applying a discount rate to expected future values within the time value of money equation.Incorrect
The internal rate of return (IRR) is the rate of expected growth. To find IRR, the investor sets the time value of money equation equal to zero. Generally, a higher IRR indicates a higher probability of positive returns.
Net present value (NPV) calculations show the value of a dollar today compared to the value of the same dollar in the future, accounting for inflation and returns (subtracting inflation from returns). If the NPV is negative, the investment being analyzed in not worth being pursued. NPV is calculated as a function of the time value of money by applying a discount rate to expected future values within the time value of money equation. 
Question 6 of 10
6. Question
Which of the following statements is false?
I. Mean assists the investor in identifying trends and dealing with them.
II. Mode is the most recurrent return in a portfolio.
III. A large range is a sign of positive correlation in a portfolio.
IV. Median is the average Return Of securities in a given portfolio.Correct
Mean is the average return of all securities in a given portfolio. Median is the number representing the return that falls directly in the middle of all other returns of securities in the portfolio.
Mode is the most recurrent return in a portfolio. This measure of central tendency assists the investor in finding trends, positive or negative, and dealing with them appropriately.
A large range may also be a sign of negative correlation in the portfolio, whereas a smaller range tends to indicate positive correlation.Incorrect
Mean is the average return of all securities in a given portfolio. Median is the number representing the return that falls directly in the middle of all other returns of securities in the portfolio.
Mode is the most recurrent return in a portfolio. This measure of central tendency assists the investor in finding trends, positive or negative, and dealing with them appropriately.
A large range may also be a sign of negative correlation in the portfolio, whereas a smaller range tends to indicate positive correlation. 
Question 7 of 10
7. Question
A beta measurement above 1 indicates which of the following?
I. A higher volatility
II. Lesser value swings
III. Higher value swings
IV. Lower volatilityCorrect
A beta measurement above 1 indicates higher volatility and larger value swings. A measurement below 1 indicates lower volatility and lesser value swings.
Incorrect
A beta measurement above 1 indicates higher volatility and larger value swings. A measurement below 1 indicates lower volatility and lesser value swings.

Question 8 of 10
8. Question
The following statements are false about standard deviation excluding:
I. It measures the distance each of the returns in the portfolio falls from the mean.
II. A higher standard deviation indicates a low degree of volatility.
III. It is not a useful descriptive tool pertaining to the securities industry.
IV. Standard deviation may apply to an individual security by measuring its historical mean performance against the historical returns making up the mean.Correct
Standard deviation measures the distance each of the returns in the portfolio falls from the mean. The further spread the data is, the higher the measure of standard deviation. A higher standard deviation then indicates a high degree of volatility and thus risk. It is a very useful metric in determining the suitability of an investment for a client, risk averse or otherwise. Standard deviation may also apply to an individual security by measuring its historical mean performance against the historical returns making up the mean.
Incorrect
Standard deviation measures the distance each of the returns in the portfolio falls from the mean. The further spread the data is, the higher the measure of standard deviation. A higher standard deviation then indicates a high degree of volatility and thus risk. It is a very useful metric in determining the suitability of an investment for a client, risk averse or otherwise. Standard deviation may also apply to an individual security by measuring its historical mean performance against the historical returns making up the mean.

Question 9 of 10
9. Question
Which of the following is true about opportunity cost?
I. It is the potential benefits ceded from one opportunity in order to pursue another opportunity.
II. An investor suffers measurable opportunity cost when the chosen investment yields more returns than another investment.
III. Opportunity cost is a vague term without economic significance.
IV. A negative opportunity cost can be described as being ‘not real’.Correct
Opportunity cost is the potential benefits ceded from one opportunity in order to pursue another opportunity. While this may seem ambiguous, investors may think of it in concrete terms. To investors, opportunity cost may be the return given up on other investments when they choose a specific investment. If their chosen investment returns less than another investment, then they suffered a measurable opportunity cost measured by the differences in the returns. If, however, the investment purchased has greater returns, the opportunity cost is negative and not real.
Incorrect
Opportunity cost is the potential benefits ceded from one opportunity in order to pursue another opportunity. While this may seem ambiguous, investors may think of it in concrete terms. To investors, opportunity cost may be the return given up on other investments when they choose a specific investment. If their chosen investment returns less than another investment, then they suffered a measurable opportunity cost measured by the differences in the returns. If, however, the investment purchased has greater returns, the opportunity cost is negative and not real.

Question 10 of 10
10. Question
Arrange the following according to the correct order in which security holders are reimbursed in an event of bankruptcy.
I. Preferred stockholders
II. Secured debtors
III. Unsecured debtors
IV. Common stockholdersCorrect
In the unfortunate event of bankruptcy and liquidation of the firm’s assets, after the general creditors have been repaid, the order of liquidation, or the order in which the security holders are reimbursed, is as follows:
1. secured debtors (secured bonds)
2. unsecured debtors (unsecured bonds)
3. preferred stockholders
4. common stockholdersIncorrect
In the unfortunate event of bankruptcy and liquidation of the firm’s assets, after the general creditors have been repaid, the order of liquidation, or the order in which the security holders are reimbursed, is as follows:
1. secured debtors (secured bonds)
2. unsecured debtors (unsecured bonds)
3. preferred stockholders
4. common stockholders