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Free Series 66 – Uniform Combined State Law Exam Exam Questions and Answers
Last updated: January 14, 2025
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Series 66 – Uniform Combined State Law Exam
#Question
In financial terms, what does "leverage" refer to?
A.Using borrowed money to invest
B.Selling stocks short
C.Exchanging one asset for another
D.Reducing investment risk
Correct Answer:
A
Leverage refers to using borrowed capital to increase the potential return on an investment, allowing investors to control a larger position than they could with their own funds alone.
#Question
What is the primary purpose of an investment policy statement (IPS)?
A.To outline investment priorities and goals
B.To identify tax strategies
C.To forecast market trends
D.To guarantee returns
Correct Answer:
A
An investment policy statement (IPS) outlines an investor's objectives, strategies, and rules for managing their portfolio, ensuring alignment between investments and financial goals.
#Question
How is the net asset value (NAV) of a mutual fund typically calculated?
A.Total liabilities minus total assets
B.Total shares outstanding divided by total assets
C.Total income minus total expenses
D.Total assets minus total liabilities divided by number of shares outstanding
Correct Answer:
D
The NAV of a mutual fund is calculated by taking the total assets minus total liabilities and then dividing that amount by the number of shares outstanding, resulting in the per-share value.
#Question
Which type of order allows an investor to specify the maximum price they are willing to pay for a security?
A.Limit order
B.Stop-loss order
C.Market order
D.All-or-nothing order
Correct Answer:
A
A limit order allows an investor to specify the maximum price they are willing to pay for a security, ensuring they do not pay more than a predetermined amount.
#Question
What is the role of the Financial Industry Regulatory Authority (FINRA)?
A.To regulate securities firms
B.To insure investors' accounts
C.To determine interest rates
D.To conduct tax audits
Correct Answer:
A
FINRA is a self-regulatory organization responsible for regulating broker-dealers and securities firms dealing with the public, ensuring compliance with securities laws and ethical practices.
#Question
When a mutual fund undergoes a merger with another fund, what happens to investors?
A.They always lose money
B.Investment goals are reset
C.They are liquidated
D.Their shares are exchanged for new shares
Correct Answer:
D
When a mutual fund merges with another fund, investors typically have their shares exchanged for shares in the new fund based on the proportion of their holdings in the merged fund.
#Question
What is the primary benefit of using a traditional IRA?
A.Tax-free contributions
B.Real estate investments
C.Guaranteed returns
D.Tax-deductible contributions
Correct Answer:
D
The primary benefit of a traditional IRA is that contributions may be tax-deductible, allowing individuals to reduce their taxable income for the year in which they contribute.
Series 66 – Uniform Combined State Law Exam
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