Series 65 – Practice Exam 5

Compute the Alpha for a portfolio with a Beta of 1.5, and average annual return over the previous 4 years of 7%, in a period when the S&P 500 Index has shown a return of 5%.

When utilizing the Sharpe Ratio to evaluate a portfolio’s return compared to expectations, the term ‘risk-free return’ is used in the formula. RFR is best described as:

Of the many money market metrics, which of the following rates is considered the most volatile?

Each of the below activities are in the Federal Reserve’s ‘toolbox’ of monetary policy techniques with the exception of:

Which of the below portfolios would likely have the greatest degree of diversification?

One of your IA clients has expressed interest in the US Government’s debt securities programs but inquires if there is an instrument which has some protection against inflation risk. You inform the client about which of the below investment opportunities:

You have built a portfolio for one of your clients with a 1.5 beta, currently with a $ 1,000,000 market value. With the increased unpredictability of the broad market and volatility running somewhat high, your client if more concerned about downside risk than in more stable times. To hedge the portfolio’s downside exposure, you discuss S&P 500 Index options with your client.

With the S&P 500 Index currently at 5000, which of the below would provide the best hedge for this client?

Diversified open-end investment companies tend to be Regulated Investment Companies under subchapter M of the Internal Revenue Code. Choose from the below selections which statements about this arrangement are not untrue:

1. The mutual fund must distribute at least 90% of its net investment income to shareholders to qualify under Sub M
2. The fund will avoid taxation to the fund on the 90% or more which is distributed to shareholders
3. The shareholder may defer income taxation if they agree to reinvest the distribution into more shares of the fund
4. This type of arrangement is referred to as the ‘pipeline’ or ‘conduit’ theory

When an annuitant is ready to retire, the insurance company request they choose a settlement or payout option. Which of these options would likely provide payments for the longest period of time after payments begin?

A married couple is looking to save for a first home and have asked you how long it would take for their lump sum investment to double in value. You inform them it depends on what rate of return their money will earn which is a function of how much risk they are willing to take. They settle on investing their principal at a reliable 6% compounded rate. Their money should double in roughly: