RAD MIDTERM EXAM QUESTIONS WITH A+ ANSWERS.
2025/2026 EDITION.
Terms in this set (258)
A customer of your broker- "VAs are not securities." is a FALSE claim!
dealer has invested in a variable
annuity (VA). She makes several Explanation: All annuity contracts guarantee an income
comments about them, but one of stream for life, but there is an investment component to a VA
the statements is INACCURATE that makes it different from a fixed annuity. These insurance
and needs to be corrected. company products invest in diversified portfolios offering a
Which is it? number of objectives for the investor to choose from.
Investment in the diversified portfolio (a.k.a. the separate
A) VAs are actually insurance account) means that the investor is assuming the investment risk.
company products. This is the definition of a security.
B)VAs guarantee an income stream
for life.
C) VAs are not securities.
D) Premiums are invested in a
diversified portfolio with an
investment objective that the
purchaser gets to choose.
Limited partnerships C) must end on a predetermined date or can be dissolved earlier by vote.
A) can either exist in Explanation
perpetuity or be designated Unlike with a corporate charter, which has corporate entities
to end on a specific date. existing in perpetuity, limited partnerships are scheduled to end
B)must end on a predetermined on a predetermined date. The exception
vote with no exceptions. to ending on that predetermined date would be when all
C) must end on a partnership assets are sold earlier than anticipated and a vote
predetermined date or can be to dissolve the partnership occurs.
dissolved earlier by vote.
D) must exist in perpetuity.
Placement, layering, and integration are phases of money laundering.
Test Topic: Structuring
Making
multiple deposits to stay under the radar of having a CTR filed is
STRUCTURING
The Conduct Rules deal with a broker-dealer's (and
Test Topic: Conduct Rules
representative's) relationship with the customer and the
vs. Uniform Practice Code
public. The Uniform Practice Code deals with interactions
,with other broker-dealers.
,Which of the following contracts C) Long call and short call
are in the money if the strike
price is 30 and the market price Explanation
is 40? All calls are in the money when the market price is above the strike
price.
A) Short call and long put
B)Short call and short put
C) Long call and short call
D) Long call and long put
All of the following issuers C) ABC Railroad Power Systems, Inc.
are exempt issuers except
Explanation
A) SmallTown Charitable Trust. The hint that leads to the correct response is "Inc." A for-
B)ABC Railroad Trust. profit corporation is not likely to be an exempt issuer.
C) ABC Railroad Power Systems, Common carriers (railroad), charities, and S&Ls are
Inc. exempt issuers.
D) Smalltown Savings and Loan.
Parity A call option is at parity when the premium equals intrinsic value.
A hedge fund portfolio has been B) there is substantial borrowing or purchasing on margin.
characterized as being highly
leveraged. This means that Explanation
While hedge funds can employ all these investment types and strategies,
A) there are substantial being
highly leveraged means borrowing to purchase. Borrowing to
investments in
purchase securities is typically known as buying on margin.
international markets.
B)there is substantial
borrowing or
purchasing on margin.
C) derivative products such as
options are utilized.
D) commodities and
currencies are included in
the portfolio.
All of the following may be D) call and put contracts.
purchased on margin except
Explanation
A) municipal securities. Option contracts—calls and puts—are among those securities
B)exchange-listed securities. products that cannot serve as collateral for a margin loan and,
C) Nasdaq listed stocks. therefore, may not be purchased on
D) call and put contracts. margin. In the case of options, their unpredictable intrinsic
value, diminishing time value, and limited life make them
, inappropriate for securing any kind of loan.
Which of the following is a true C) Warrants are normally issued along with a bond offering as a unit.
statement regarding warrants?
Explanation
A) Warrants are issued to existing A warrant grants its owner the right to purchase securities
shareholders on a basis of one from the issuer at a specified price, normally higher than the
right for one existing share. current market price at the time the
B)The warrant allows the holder warrants are issued and at some time in the future. A
to
exercise and purchase the stock at a warrant is usually a long-term instrument, normally five
price lower than the market. years or more until expiration. Warrants are usually offered
C) Warrants are normally in connection with other securities, such as debt instruments
issued along with a bond (bonds) or preferred stock, to make those securities more
offering as a unit. attractive.
D) Warrants are short-term
instruments, typically 30 to
45 days.
2025/2026 EDITION.
Terms in this set (258)
A customer of your broker- "VAs are not securities." is a FALSE claim!
dealer has invested in a variable
annuity (VA). She makes several Explanation: All annuity contracts guarantee an income
comments about them, but one of stream for life, but there is an investment component to a VA
the statements is INACCURATE that makes it different from a fixed annuity. These insurance
and needs to be corrected. company products invest in diversified portfolios offering a
Which is it? number of objectives for the investor to choose from.
Investment in the diversified portfolio (a.k.a. the separate
A) VAs are actually insurance account) means that the investor is assuming the investment risk.
company products. This is the definition of a security.
B)VAs guarantee an income stream
for life.
C) VAs are not securities.
D) Premiums are invested in a
diversified portfolio with an
investment objective that the
purchaser gets to choose.
Limited partnerships C) must end on a predetermined date or can be dissolved earlier by vote.
A) can either exist in Explanation
perpetuity or be designated Unlike with a corporate charter, which has corporate entities
to end on a specific date. existing in perpetuity, limited partnerships are scheduled to end
B)must end on a predetermined on a predetermined date. The exception
vote with no exceptions. to ending on that predetermined date would be when all
C) must end on a partnership assets are sold earlier than anticipated and a vote
predetermined date or can be to dissolve the partnership occurs.
dissolved earlier by vote.
D) must exist in perpetuity.
Placement, layering, and integration are phases of money laundering.
Test Topic: Structuring
Making
multiple deposits to stay under the radar of having a CTR filed is
STRUCTURING
The Conduct Rules deal with a broker-dealer's (and
Test Topic: Conduct Rules
representative's) relationship with the customer and the
vs. Uniform Practice Code
public. The Uniform Practice Code deals with interactions
,with other broker-dealers.
,Which of the following contracts C) Long call and short call
are in the money if the strike
price is 30 and the market price Explanation
is 40? All calls are in the money when the market price is above the strike
price.
A) Short call and long put
B)Short call and short put
C) Long call and short call
D) Long call and long put
All of the following issuers C) ABC Railroad Power Systems, Inc.
are exempt issuers except
Explanation
A) SmallTown Charitable Trust. The hint that leads to the correct response is "Inc." A for-
B)ABC Railroad Trust. profit corporation is not likely to be an exempt issuer.
C) ABC Railroad Power Systems, Common carriers (railroad), charities, and S&Ls are
Inc. exempt issuers.
D) Smalltown Savings and Loan.
Parity A call option is at parity when the premium equals intrinsic value.
A hedge fund portfolio has been B) there is substantial borrowing or purchasing on margin.
characterized as being highly
leveraged. This means that Explanation
While hedge funds can employ all these investment types and strategies,
A) there are substantial being
highly leveraged means borrowing to purchase. Borrowing to
investments in
purchase securities is typically known as buying on margin.
international markets.
B)there is substantial
borrowing or
purchasing on margin.
C) derivative products such as
options are utilized.
D) commodities and
currencies are included in
the portfolio.
All of the following may be D) call and put contracts.
purchased on margin except
Explanation
A) municipal securities. Option contracts—calls and puts—are among those securities
B)exchange-listed securities. products that cannot serve as collateral for a margin loan and,
C) Nasdaq listed stocks. therefore, may not be purchased on
D) call and put contracts. margin. In the case of options, their unpredictable intrinsic
value, diminishing time value, and limited life make them
, inappropriate for securing any kind of loan.
Which of the following is a true C) Warrants are normally issued along with a bond offering as a unit.
statement regarding warrants?
Explanation
A) Warrants are issued to existing A warrant grants its owner the right to purchase securities
shareholders on a basis of one from the issuer at a specified price, normally higher than the
right for one existing share. current market price at the time the
B)The warrant allows the holder warrants are issued and at some time in the future. A
to
exercise and purchase the stock at a warrant is usually a long-term instrument, normally five
price lower than the market. years or more until expiration. Warrants are usually offered
C) Warrants are normally in connection with other securities, such as debt instruments
issued along with a bond (bonds) or preferred stock, to make those securities more
offering as a unit. attractive.
D) Warrants are short-term
instruments, typically 30 to
45 days.
