INVESTMENT PRACTICE EXAM
QUESTIONS AND ANSWERS 100% PASS
2026/2027
The writer of a covered call has taken a(n)
A. aggressive position with limited losses and unlimited potential profits.
B. aggressive position with potentially unlimited profits or losses.
C. conservative investment position with unlimited potential profits.
D. conservative investment position with limited profits. - ANS D. conservative investment
position with limited profits.
Writers of option contracts
A. hope to exercise the option on favorable terms.
B. earn a profit when the option expires without being exercised.
C. have a limited liability specified in the contract.
D. earn a commission no matter what subsequently happens to the contract. - ANS B. earn a
profit when the option expires without being exercised.
If the purchaser of a futures contract fails to meet a margin call,
A. their local broker can decide to waive the call.
B. they will be given a 30 day grace period before payment is required. −
@2026 ALLRIGHTS RESERVED 1
, C. his/her contract will be sold at the current market price.
D. his/her contract will automatically be executed along with immediate delivery. - ANS C.
his/her contract will be sold at the current market price.
Which type of fund is unsuitable for tax sheltered retirement accounts?
A. municipal bond funds
B. money market funds
C. government bond funds
D. index funds - ANS A. municipal bond funds
Yield curves for corporate and government securities have similar shapes, but the corporate
rates track below the government rates.
True
False - ANS False
The required return on a bond is equal to
A. the real rate of return plus a risk premium plus an expected inflation premium.
B. the real rate plus a risk premium.
C. the risk free rate plus a risk premium plus an expected inflation premium. −
D. the real rate of return plus the coupon rate plus an inflation rate. - ANS A. the real rate of
return plus a risk premium plus an expected inflation premium.
Every commodity contract specifies all the following EXCEPT
A. the delivery month.
B. the unit size of the contract.
C. the product.
@2026 ALLRIGHTS RESERVED 2
QUESTIONS AND ANSWERS 100% PASS
2026/2027
The writer of a covered call has taken a(n)
A. aggressive position with limited losses and unlimited potential profits.
B. aggressive position with potentially unlimited profits or losses.
C. conservative investment position with unlimited potential profits.
D. conservative investment position with limited profits. - ANS D. conservative investment
position with limited profits.
Writers of option contracts
A. hope to exercise the option on favorable terms.
B. earn a profit when the option expires without being exercised.
C. have a limited liability specified in the contract.
D. earn a commission no matter what subsequently happens to the contract. - ANS B. earn a
profit when the option expires without being exercised.
If the purchaser of a futures contract fails to meet a margin call,
A. their local broker can decide to waive the call.
B. they will be given a 30 day grace period before payment is required. −
@2026 ALLRIGHTS RESERVED 1
, C. his/her contract will be sold at the current market price.
D. his/her contract will automatically be executed along with immediate delivery. - ANS C.
his/her contract will be sold at the current market price.
Which type of fund is unsuitable for tax sheltered retirement accounts?
A. municipal bond funds
B. money market funds
C. government bond funds
D. index funds - ANS A. municipal bond funds
Yield curves for corporate and government securities have similar shapes, but the corporate
rates track below the government rates.
True
False - ANS False
The required return on a bond is equal to
A. the real rate of return plus a risk premium plus an expected inflation premium.
B. the real rate plus a risk premium.
C. the risk free rate plus a risk premium plus an expected inflation premium. −
D. the real rate of return plus the coupon rate plus an inflation rate. - ANS A. the real rate of
return plus a risk premium plus an expected inflation premium.
Every commodity contract specifies all the following EXCEPT
A. the delivery month.
B. the unit size of the contract.
C. the product.
@2026 ALLRIGHTS RESERVED 2
