STC SERIES 66 GREENLIGHT
EXAMS
When should a federal covered adviser (FCA) file an amendment to
its registration? - ANSWERS-Within 90 days of the end of its fiscal
year
Within 90 days after an adviser's fiscal year end, it must file an
"Annual Updating Amendment." This amendment to the adviser's
Form ADV reaffirms the eligibility information contained in the form
and updates the responses to any other item for which the information
is no longer accurate.
An investor has purchased a corn futures contract at $1.20 per bushel
and the contract delivery size is 5,000 bushels. If the price of corn has
fallen to $1.10 per bushel, what's the client's profit or loss? -
ANSWERS-$500 unrealized loss
Since the investor bought (i.e., went long) a futures contract, he wants
the price to rise. There's no exercise of a futures contract; instead, at
expiration, there's physical delivery of the commodity. At the
expiration of the contract, if the price of corn has fallen by $0.10, the
client will have an unrealized loss of $0.10 per bushel. For that
reason, the customer's total unrealized loss is $500 ($0.10 per bushel x
5,000 bushels).
The liabilities section of a personal balance sheet could include which
of the following? - ANSWERS-Remaining mortgage balance
The liabilities section of a personal balance sheet represents money
that is owed. Credit card balances, student loans, and mortgage
,obligations are all included as a person's liabilities. Choices (a), (c),
and (d) are all items that a person owns or possesses. The difference
between a person's assets and her liabilities is her net worth.
What's the name of the agreement in which an adviser discloses it's
obligation to keep customer information confidential? - ANSWERS-
The non-disclosure agreement (NDA)
An investment adviser will disclose its legal obligations regarding a
client's information on a non-disclosure (i.e., confidentiality)
agreement. If signed, an arbitration agreement forces a client to use
arbitration to settle civil lawsuits against the investment adviser.
Conflicts of interest are typically disclosed on the adviser's brochure,
rather than on a separate agreement.
In a JTWROS account, if one person dies, which of the following
statements is TRUE? - ANSWERS-With proper documentation, the
assets in the account become the property of the other person.
In a Joint Tenants with Right of Survivorship (JTWROS) account,
after the presentation of a death certificate, the ownership is
transferred to the other person who is named on the account title.
Depending on the state, additional documentation may be required. If
the account was established by two persons as Joint Tenants in
Common (JTIC), a portion of the account's assets are transferred to
the survivor and the remainder is distributed to the estate of the
deceased person.
The Modern Portfolio Theory uses which of the following to measure
volatility? - ANSWERS-Standard deviation
,The primary measure of volatility used in the Modern Portfolio
Theory is standard deviation. Standard deviation is a statistical
measures of the amount of variability or dispersion around an
average. In simple terms, volatility is a reflection of the degree to
which a security's price moves. A stock with a price that has wide
fluctuations or moves erratically is volatile. On the other hand, a stock
that maintains a relatively stable price has low volatility. Beta shows
the sensitivity of a fund's, security's, or portfolio's performance in
relation to the market as a whole. Alpha is considered a risk-adjusted
return and represents the difference between an asset's expected return
and its actual return. The Sharpe Ratio is a risk-adjusted return
measurement that indicates the amount of return earned per unit of
risk. The basic idea is to determine how much additional return is
being received for the willingness to hold a risky asset
According to the Uniform Securities Act, which of the following
persons is an agent? - ANSWERS-A CEO who sells shares of his
company's IPO to family, friends, and other retail investors
This question is about identifying when a person who represents the
issuer of securities is considered an agent. Since the CEO is
representing his company by selling its stock to the public, he is
considered an agent of the issuer. One exclusion from the definition of
an issuer agent exists when the individual effects transactions in
securities that are exempt, such as U.S. government of municipal
securities. Another exclusion from the definition is when the person is
involved in exempt transactions, including private placements, sales
to qualified purchasers, and transactions between the issuer and its
underwriter. If an individual represents a broker-dealer in effecting
securities transactions, he is always considered an agent and required
to be registered.
, An investor has set aside a large sum of money to purchase a
corporation. The legal details of the acquisition should be completed
within the next six months, but he is unsure of the exact date on which
this will happen. If the investor decides to temporarily invest his
money in Treasury bonds until he needs the funds to complete the
purchase, which TWO of the following risks are the most serious for
him?
Currency risk
Interest-rate risk
Timing risk
Credit risk - ANSWERS-II and III
In a variable annuity, the investment risk is assumed by the investor.
In fact, for variable contracts, the insurance company directs the
assets to a separate account. In a fixed annuity, the investment risk is
assumed by the insurance company. For fixed contracts, the insurance
company directs the assets to its general account.
When comparing variable annuities to fixed annuities, which TWO
statements are TRUE regarding the assumption of investment risk?
It is assumed by the investor in a variable annuity.
It is assumed by the insurance company in a variable annuity.
It is assumed by the investor in a fixed annuity.
It is assumed by the insurance company in a fixed annuity. -
ANSWERS-Analyzing the duration in her portfolio
Duration is a measurement of how sensitive a bond's price is to small
changes in interest rates. Bonds with longer maturities tend to be
more sensitive to interest-rate swings—in other words, the bonds have
EXAMS
When should a federal covered adviser (FCA) file an amendment to
its registration? - ANSWERS-Within 90 days of the end of its fiscal
year
Within 90 days after an adviser's fiscal year end, it must file an
"Annual Updating Amendment." This amendment to the adviser's
Form ADV reaffirms the eligibility information contained in the form
and updates the responses to any other item for which the information
is no longer accurate.
An investor has purchased a corn futures contract at $1.20 per bushel
and the contract delivery size is 5,000 bushels. If the price of corn has
fallen to $1.10 per bushel, what's the client's profit or loss? -
ANSWERS-$500 unrealized loss
Since the investor bought (i.e., went long) a futures contract, he wants
the price to rise. There's no exercise of a futures contract; instead, at
expiration, there's physical delivery of the commodity. At the
expiration of the contract, if the price of corn has fallen by $0.10, the
client will have an unrealized loss of $0.10 per bushel. For that
reason, the customer's total unrealized loss is $500 ($0.10 per bushel x
5,000 bushels).
The liabilities section of a personal balance sheet could include which
of the following? - ANSWERS-Remaining mortgage balance
The liabilities section of a personal balance sheet represents money
that is owed. Credit card balances, student loans, and mortgage
,obligations are all included as a person's liabilities. Choices (a), (c),
and (d) are all items that a person owns or possesses. The difference
between a person's assets and her liabilities is her net worth.
What's the name of the agreement in which an adviser discloses it's
obligation to keep customer information confidential? - ANSWERS-
The non-disclosure agreement (NDA)
An investment adviser will disclose its legal obligations regarding a
client's information on a non-disclosure (i.e., confidentiality)
agreement. If signed, an arbitration agreement forces a client to use
arbitration to settle civil lawsuits against the investment adviser.
Conflicts of interest are typically disclosed on the adviser's brochure,
rather than on a separate agreement.
In a JTWROS account, if one person dies, which of the following
statements is TRUE? - ANSWERS-With proper documentation, the
assets in the account become the property of the other person.
In a Joint Tenants with Right of Survivorship (JTWROS) account,
after the presentation of a death certificate, the ownership is
transferred to the other person who is named on the account title.
Depending on the state, additional documentation may be required. If
the account was established by two persons as Joint Tenants in
Common (JTIC), a portion of the account's assets are transferred to
the survivor and the remainder is distributed to the estate of the
deceased person.
The Modern Portfolio Theory uses which of the following to measure
volatility? - ANSWERS-Standard deviation
,The primary measure of volatility used in the Modern Portfolio
Theory is standard deviation. Standard deviation is a statistical
measures of the amount of variability or dispersion around an
average. In simple terms, volatility is a reflection of the degree to
which a security's price moves. A stock with a price that has wide
fluctuations or moves erratically is volatile. On the other hand, a stock
that maintains a relatively stable price has low volatility. Beta shows
the sensitivity of a fund's, security's, or portfolio's performance in
relation to the market as a whole. Alpha is considered a risk-adjusted
return and represents the difference between an asset's expected return
and its actual return. The Sharpe Ratio is a risk-adjusted return
measurement that indicates the amount of return earned per unit of
risk. The basic idea is to determine how much additional return is
being received for the willingness to hold a risky asset
According to the Uniform Securities Act, which of the following
persons is an agent? - ANSWERS-A CEO who sells shares of his
company's IPO to family, friends, and other retail investors
This question is about identifying when a person who represents the
issuer of securities is considered an agent. Since the CEO is
representing his company by selling its stock to the public, he is
considered an agent of the issuer. One exclusion from the definition of
an issuer agent exists when the individual effects transactions in
securities that are exempt, such as U.S. government of municipal
securities. Another exclusion from the definition is when the person is
involved in exempt transactions, including private placements, sales
to qualified purchasers, and transactions between the issuer and its
underwriter. If an individual represents a broker-dealer in effecting
securities transactions, he is always considered an agent and required
to be registered.
, An investor has set aside a large sum of money to purchase a
corporation. The legal details of the acquisition should be completed
within the next six months, but he is unsure of the exact date on which
this will happen. If the investor decides to temporarily invest his
money in Treasury bonds until he needs the funds to complete the
purchase, which TWO of the following risks are the most serious for
him?
Currency risk
Interest-rate risk
Timing risk
Credit risk - ANSWERS-II and III
In a variable annuity, the investment risk is assumed by the investor.
In fact, for variable contracts, the insurance company directs the
assets to a separate account. In a fixed annuity, the investment risk is
assumed by the insurance company. For fixed contracts, the insurance
company directs the assets to its general account.
When comparing variable annuities to fixed annuities, which TWO
statements are TRUE regarding the assumption of investment risk?
It is assumed by the investor in a variable annuity.
It is assumed by the insurance company in a variable annuity.
It is assumed by the investor in a fixed annuity.
It is assumed by the insurance company in a fixed annuity. -
ANSWERS-Analyzing the duration in her portfolio
Duration is a measurement of how sensitive a bond's price is to small
changes in interest rates. Bonds with longer maturities tend to be
more sensitive to interest-rate swings—in other words, the bonds have
