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An IAR is calculating the internal rate of return (IRR) of a client's investment. While performing the calculation, the IAR assumes that the reinvestment rate of cash flows will equal:
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An IAR is calculating the internal rate of return (IRR) of a client's investment. While performing the calculation, the IAR assumes that the reinvestment rate of cash flows will equal:
The internal rate of return (IRR)

The internal rate of return (IRR) assumes all cash flows are invested at the internal rate of return. The IRR is the rate that makes the discounted value of cash inflows and outflows equal to zero. If an investor is choosing between two investments, she should choose the one with the higher IRR. (67741)
All of the following persons are defined in the Uniform Securities Act
Issuer, Broker dealer, and Investment advisor representative
The term registered representative is not defined in the Uniform Securities Act, although it is used in federal law. According to the Uniform Securities Act, an issuer is a person who offers securities, or plans to offer them. A broker-dealer is in the business of buying and/or selling securities either for customers or on its own behalf. An investment adviser representative is an employee of an investment adviser who gives advice to clients, sells these services, or supervises people who do. Remember, the term person in the Uniform Securities Act applies both to entities, such as companies, and individuals. (89347)
Net asset value is:
The assets of a fund, minus the fund's liabilities, divided by the number of shares issued

The net asset value (NAV) of a mutual fund represents the fund's total assets, minus its liabilities, divided by the number of shares the fund has issued (i.e., NAV = (Assets - Liabilities) ÷ Shares Issued).
For estate purposes, which of the following ensures that no grandchild will receive a different amount of the estate than another grandchild?
Per capita

A per capita distribution of an estate ensures that each member of a generation will receive the same amount as any other. Per stirpes distributions are done per branch of a family and, in some instances, members of the same generation of a family will receive different amounts from an estate. Inter vivos and testamentary are terms that are associated with trust accounts, but not estates. (15425)
Which of the following business structures allows the pass-through of income and loss to its members on a Form K-1?
Limited liability company (LLC)

Each of the answer choices provide for the pass-through of income for tax purposes to investors. However, only limited partnerships, LLCs, and S-corporations will report their income on a Form K-1. The reason that LLCs is the answer is because they refer to their owners as members. Owners of an S-corporation are referred to as shareholders, while owners of a limited partnership are referred to as partners. (18564)
A client sells an XYZ November 40 call and receives a premium of $300. What is the client's maximum loss?
An unlimited amount

When and investor sells call options and does not own the underlying stock, the call writer has an unlimited potential maximum loss. If the underlying stock's price increases, the call seller/writer may be exercised against and forced to buy the stock in the market at its current higher price and subsequently sell at the lower strike price. Theoretically, the stock's potential upside is unlimited. (67268)
Which TWO of the following factors are used in a discounted cash flow (DCF) analysis?
1 Present value of future cash flows
2 Expected rate of return earned on reinvested cash flows
3 Future value of current cash flows
4 Expected risk-free rate of return over the life of the investment
1&3

Discounted cash flow analysis uses the present value formula and applies it to an investment with multiple future cash flows (e.g., the interest and principal payments of a bond). In order to find the present value of a single cash flow, an investor needs the future cash flows, an expected rate of return (i.e., discount rate), and the number of years until the future cash flow will be received. The risk free-rate of return is used in the Capital Asset Pricing Model (CAPM) formula and is generally not required when performing a discounted cash flow analysis. (15570)
Which formula is used to perform discounted cash flow analysis for a bond
Present value

Discounted cash flow analysis is a method for estimating the current market price of a bond, project, or business. Discounted cash flow analysis involves estimating or projecting future income (i.e., cash flows) and discounting them back to their present value using the present value formula. Duration measures a bond's risk relative to interest rates and the yield-to-maturity measures a bond's rate of return. (15439)
In comparison to forward contracts, futures contracts are:
Readily transferable

Unlike forward contracts, futures contracts are standardized agreements that are traded on exchanges and readily transferred. Forward contracts are not readily transferable since both parties to the original contract must agree before one of them may sell the contract to a third party. (62918)
A state pension fund is evaluating three separate investment advisers to manage the equity portion of its portfolio. Two of the advisers have had significant client growth in the past three years. The pension fund is worried that the positive in-flows of cash may distort the returns of the advisers. Which of the following measures would give the fund the BEST comparison of the three advisers' returns over that three-year period?
Time-weighted return

Time-weighted return (TWR) is a more accurate measure of a portfolio manager's performance since it eliminates the effects of cash flowing into the portfolio over a given period. It is assumed that all cash distributions are reinvested in the portfolio and the same periods are used for comparisons. The effect of varying cash inflows is eliminated by assuming a single investment at the beginning of a period and measuring the growth or loss of value to the end of that period. (74502)
Which TWO of the following are TRUE if the U.S. balance of trade deficit is decreasing? I The dollar will strengthen II The dollar will weaken III U.S. bond yields will rise IV U.S. bond yields will fallI and IV When the U.S. is running a balance of trade deficit, it is importing more than it is exporting. This means that, on balance, U.S. dollars will be used to purchase foreign currencies to pay for the net imports. This strengthens foreign currency and weakens the dollar. However, if the balance of trade deficit begins to grow smaller, there is relatively less demand for the foreign currency and the dollar will strengthen. A stronger dollar indicates stronger demand for U.S. financial assets, including bonds. Bond prices will rise and their yields will fall. (75131)The pricing of preferred stock will most closely follow the pricing ofT-bonds A preferred stock pricing will follow the pricing of debt instruments and not common stock because preferred stock pays a fixed dividend and, therefore, is purchased by investors looking for income, not capital appreciation. Since there is no indication in the question that this particular stock is callable, you need to assume that it is not. Therefore, since there is no equivalent of a maturity date, it would most closely follow the pricing of long-term debt instruments. (74416)An investment adviser is registered and located State A. One of the IAR's has three non-institutional clients and one institutional client in State B. A different IAR has four non-institutional clients in State B. If the investment adviser does NOT have an office in State B, who must register in that state?Only the investment adviser An advisory firm that has more than five non-institutional clients residing in a state is required to register in that state. Since one IAR has three clients and the other has four clients, the investment adviser has seven clients total and must register. However, since neither IAR has more than five non-institutional clients, neither one needs to register in State B. Notice that all persons (the IA and IARs) need to be registered in State A. (32391)According to the recordkeeping requirements for IAs, if a client trade is executed, which of the following items is NOT required to be included on the order memorandum?The time that the order was executed According to the NASAA Recordkeeping Requirements for Investment Advisers Model Rule, the order memoranda (order ticket) should show the terms and conditions of the order, instructions, modification, or cancellation, the person connected with the IA who recommended the transaction, and the person who placed the order. (89063)According to NASAA's Prohibited Conduct of IAs, IARs, and federal covered IAs, Model Rule, publicly distributed, written materials are defined as any written materials distributed to:35 or more persons who pay for the materials According to NASAA Model Rule 502(b)(1)(4), any written materials distributed to 35 or more persons who pay for the material are defined as publicly distributed, written materials, such as research reports. (62835)A client of a registered representative owns a small business. The business produces strong cash flow during the holiday season, but negative cash flow for the rest of the year. This may indicate a need for which of the following choices?Liquidity Since the client may need to have access to capital when the cash flow from his business is negative, the portfolio should contain some investments that are liquid. Given the liquid nature of money-market instruments, they may be suitable investments for a portion of the portfolio. (89123)According to the Uniform Securities Act, if a person has no place of business in State A and is not registered in State A, which of the following actions is permitted?Selling unlisted securities to institutions that are located in State A A person is not required to register as a broker-dealer in State A as long as it has no place of business in the state and effects securities transactions only with institutional investors that are located in State A. To sell securities to individual investors in a state, a person is generally required to register as a broker-dealer. (16969)