Series 65 – Uniform Investment Adviser Law Exam Investment Vehicle Characteristics 3

Question 1

What is a convertible bond?

Accepted Answer

A bond that can be exchanged for a fixed number of shares of the issuer's common stock

Answer

A bond whose interest rate converts from fixed to floating

Answer

A bond that can be exchanged for a different bond

Answer

A bond that converts to cash at a premium at maturity

Question 2

What is duration in the context of fixed income securities?

Accepted Answer

A measure of a bond's price sensitivity to interest rate changes

Answer

The number of years until a bond matures

Answer

The length of time a bond pays interest

Answer

The average time between coupon payments

Question 3

Which type of mutual fund charges a fee when shares are purchased?

Accepted Answer

Front-end load fund

Answer

No-load fund

Answer

Back-end load fund

Answer

12b-1 fund

Question 4

What is a closed-end fund?

Accepted Answer

An investment company that issues a fixed number of shares that trade on an exchange at market prices

Answer

A mutual fund that stops accepting new investors after a set date

Answer

A fund that only invests in closed companies

Answer

A fund with a fixed investment term and guaranteed return

Question 5

What distinguishes an accredited investor under U.S. securities laws?

Accepted Answer

An individual with income exceeding $200,000 annually or net worth over $1 million excluding primary residence

Answer

An investor who has passed the Series 65 exam

Answer

An investor who has traded securities for more than five years

Answer

An investor with a brokerage account valued over $500,000

Question 6

What is a put option?

Accepted Answer

The right to sell a security at a specified price before expiration

Answer

The right to buy a security at a specified price before expiration

Answer

An obligation to buy a security at the current market price

Answer

A bond that gives the issuer the right to repay early