Series 65 – Uniform Investment Adviser Law Exam Investment Vehicle Characteristics

Question 1

What is a characteristic unique to preferred stock compared to common stock?

Accepted Answer

Preferred stockholders receive dividends before common stockholders

Answer

Preferred stockholders have priority over common stockholders in receiving dividends and in asset distribution during liquidation.

Question 2

Which type of bond is backed by the full faith and credit of the U.S. government?

Accepted Answer

U.S. Treasury bonds

Answer

U.S. Treasury bonds are direct obligations of the federal government and are backed by the full faith and credit of the United States.

Question 3

What is the primary tax advantage of municipal bonds for U.S. investors?

Accepted Answer

Interest income is generally exempt from federal income tax

Answer

Interest earned on most municipal bonds is exempt from federal income tax, and often exempt from state and local taxes in the issuing state.

Question 4

Which of the following describes a zero-coupon bond?

Accepted Answer

A bond issued at a discount that pays no periodic interest but pays face value at maturity

Answer

Zero-coupon bonds are sold at a deep discount, pay no periodic interest, and return the full face value at maturity.

Question 5

What is a real estate investment trust (REIT)?

Accepted Answer

A company that owns income-producing real estate and passes at least 90% of taxable income to shareholders

Answer

REITs must distribute at least 90% of their taxable income to shareholders as dividends, providing investors with real estate exposure and regular income.

Series 65 – Uniform Investment Adviser Law Exam Practice Test

Series 65 – Uniform Investment Adviser Law Exam Practice Test

Series 65 – Uniform Investment Adviser Law Exam Investment Vehicle Characteristics