FINRA Series 65 Exam Practice
Questions And Correct Answers
(Verified Answers) Plus Rationales 2026
Q&A | Instant Download Pdf
1. Which of the following best describes the primary role of an
investment adviser under the Investment Advisers Act of 1940?
A. To execute trades on behalf of clients
B. To act as a fiduciary for clients
C. To underwrite securities offerings
D. To guarantee investment returns
Answer: B
Rationale: Investment advisers are fiduciaries, meaning they must
act in the best interest of their clients, placing client interests above
their own.
2. Which security is MOST sensitive to changes in interest rates?
A. Short-term Treasury bills
B. Long-term zero-coupon bonds
C. Preferred stock
D. Money market funds
Answer: B
Rationale: Long-term zero-coupon bonds have the highest duration
and are therefore most sensitive to interest rate fluctuations.
3. A client in a high tax bracket would MOST likely benefit from investing
in:
A. Corporate bonds
B. Treasury bonds
C. Municipal bonds
D. Growth stocks
, Answer: C
Rationale: Municipal bonds typically provide interest income that is
exempt from federal income tax, making them attractive to high-
income investors.
4. Which of the following is considered a systematic risk?
A. Business risk
B. Liquidity risk
C. Market risk
D. Credit risk
Answer: C
Rationale: Systematic risk affects the entire market and cannot be
diversified away; market risk is the primary example.
5. Which financial statement shows a company’s assets, liabilities, and
equity at a specific point in time?
A. Income statement
B. Balance sheet
C. Cash flow statement
D. Retained earnings statement
Answer: B
Rationale: The balance sheet provides a snapshot of a company's
financial position at a specific moment.
6. What is the purpose of diversification in a portfolio?
A. To maximize returns
B. To eliminate all risk
C. To reduce unsystematic risk
D. To increase tax liability
Answer: C
Rationale: Diversification reduces unsystematic (company-specific)
risk by spreading investments across various assets.
7. Which of the following is a characteristic of a growth stock?
A. High dividend yield
B. Stable earnings
C. Rapid earnings growth
D. Low price-to-earnings ratio
Answer: C
, Rationale: Growth stocks are characterized by high expected
earnings growth and often reinvest profits instead of paying
dividends.
8. Which type of order guarantees execution but not price?
A. Limit order
B. Stop order
C. Market order
D. Fill-or-kill order
Answer: C
Rationale: A market order executes immediately at the best available
price but does not guarantee the price.
9. What does beta measure?
A. Total return
B. Systematic risk
C. Dividend yield
D. Inflation rate
Answer: B
Rationale: Beta measures a security’s volatility relative to the overall
market, indicating systematic risk.
10. Which economic indicator is considered a leading indicator?
A. GDP
B. Unemployment rate
C. Stock market performance
D. Consumer Price Index
Answer: C
Rationale: Stock market performance is a leading indicator because
it often predicts future economic activity.
11. A bond trading above par is said to be:
A. Discounted
B. Callable
C. Convertible
D. Premium
Answer: D
Rationale: A bond trading above its face value is considered a
premium bond.
Questions And Correct Answers
(Verified Answers) Plus Rationales 2026
Q&A | Instant Download Pdf
1. Which of the following best describes the primary role of an
investment adviser under the Investment Advisers Act of 1940?
A. To execute trades on behalf of clients
B. To act as a fiduciary for clients
C. To underwrite securities offerings
D. To guarantee investment returns
Answer: B
Rationale: Investment advisers are fiduciaries, meaning they must
act in the best interest of their clients, placing client interests above
their own.
2. Which security is MOST sensitive to changes in interest rates?
A. Short-term Treasury bills
B. Long-term zero-coupon bonds
C. Preferred stock
D. Money market funds
Answer: B
Rationale: Long-term zero-coupon bonds have the highest duration
and are therefore most sensitive to interest rate fluctuations.
3. A client in a high tax bracket would MOST likely benefit from investing
in:
A. Corporate bonds
B. Treasury bonds
C. Municipal bonds
D. Growth stocks
, Answer: C
Rationale: Municipal bonds typically provide interest income that is
exempt from federal income tax, making them attractive to high-
income investors.
4. Which of the following is considered a systematic risk?
A. Business risk
B. Liquidity risk
C. Market risk
D. Credit risk
Answer: C
Rationale: Systematic risk affects the entire market and cannot be
diversified away; market risk is the primary example.
5. Which financial statement shows a company’s assets, liabilities, and
equity at a specific point in time?
A. Income statement
B. Balance sheet
C. Cash flow statement
D. Retained earnings statement
Answer: B
Rationale: The balance sheet provides a snapshot of a company's
financial position at a specific moment.
6. What is the purpose of diversification in a portfolio?
A. To maximize returns
B. To eliminate all risk
C. To reduce unsystematic risk
D. To increase tax liability
Answer: C
Rationale: Diversification reduces unsystematic (company-specific)
risk by spreading investments across various assets.
7. Which of the following is a characteristic of a growth stock?
A. High dividend yield
B. Stable earnings
C. Rapid earnings growth
D. Low price-to-earnings ratio
Answer: C
, Rationale: Growth stocks are characterized by high expected
earnings growth and often reinvest profits instead of paying
dividends.
8. Which type of order guarantees execution but not price?
A. Limit order
B. Stop order
C. Market order
D. Fill-or-kill order
Answer: C
Rationale: A market order executes immediately at the best available
price but does not guarantee the price.
9. What does beta measure?
A. Total return
B. Systematic risk
C. Dividend yield
D. Inflation rate
Answer: B
Rationale: Beta measures a security’s volatility relative to the overall
market, indicating systematic risk.
10. Which economic indicator is considered a leading indicator?
A. GDP
B. Unemployment rate
C. Stock market performance
D. Consumer Price Index
Answer: C
Rationale: Stock market performance is a leading indicator because
it often predicts future economic activity.
11. A bond trading above par is said to be:
A. Discounted
B. Callable
C. Convertible
D. Premium
Answer: D
Rationale: A bond trading above its face value is considered a
premium bond.
