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 voting rights

Answer

Preferred stockholders benefit more from capital appreciation

Answer

Preferred stockholders can convert shares to bonds

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

Municipal bonds

Answer

Corporate bonds

Answer

Agency bonds

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

Capital gains are exempt from all taxes

Answer

Dividends are tax-deferred

Answer

All income is exempt from state and local taxes

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

A bond that pays variable interest semiannually

Answer

A bond whose interest rate adjusts with inflation

Answer

A bond convertible into common stock

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

A private equity fund that buys and sells real estate

Answer

A government program to subsidize real estate development

Answer

A mutual fund that invests only in real estate stocks

Question 6

What distinguishes an exchange-traded fund (ETF) from a traditional mutual fund?

Accepted Answer

ETFs trade on exchanges throughout the day like stocks; mutual funds price only at end of day

Answer

ETFs are actively managed; mutual funds are passive

Answer

ETFs have no management fees; mutual funds do

Answer

ETFs can only hold stocks; mutual funds can hold bonds