Free NASAA Series 65 (Uniform Investment Adviser Law Examination) Investment Vehicle Characteristics Practice Questions
Investment vehicle characteristics on the NASAA Series 65 exam cover stocks, bonds, mutual funds, ETFs, options, annuities, alternative investments, and insurance products, including their risk, return, and regulatory features.
Which statement about preferred stock is most accurate?
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Correct Answer: C
Solution
C is correct. Preferred stock ranks senior to common stock with respect to dividends and liquidation. Preferred dividends, once declared (or if cumulative, any arrears), must be paid before the issuer can pay any dividend on common stock.
Question 2
Medium
Which of the following best describes a futures contract?
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Correct Answer: A
Solution
Choice A is correct because a futures contract creates a legally binding obligation for both the buyer and the seller to transact the underlying asset at the agreed price on the settlement date. Neither party has the option to walk away — both are obligated.
Question 3
Hard
Which of the following cash-equivalent investments is NOT covered by FDIC insurance?
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Correct Answer: D
Solution
D is correct. Money market mutual funds are pooled investment products registered under the Investment Company Act of 1940 and are not bank deposits. They carry no FDIC insurance; instead they may be covered by SIPC (up to $500,000) if held at a broker-dealer. Although their sponsors historically aim to hold the NAV at $1.00, that target is not guaranteed and the fund can 'break the buck' when underlying holdings lose value.
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