Free NASAA Series 66 (Uniform Combined State Law Examination) Client/Customer Investment Recommendations and Strategies Practice Questions
Client investment recommendations and strategies on the NASAA Series 66 exam cover asset allocation, portfolio construction, modern portfolio theory, tax planning, retirement planning, estate planning, and suitability analysis.
Sample Questions
Question 1
Easy
Which statement best describes the federal tax treatment of a 529 college savings plan?
Solution
B is correct. Under IRC Section 529, contributions are made with after-tax dollars, earnings accumulate tax-deferred, and distributions used for qualified higher-education expenses (and limited K-12 tuition) are free from federal income tax. This tax-free-growth feature is the core planning benefit of a 529 plan.
Question 2
Medium
A portfolio generated an annual return of 11% with a standard deviation of 15%. The risk-free rate over the period was 2%. What is the portfolio's Sharpe ratio?
Solution
D is correct. The Sharpe ratio is . Substituting: The ratio measures excess return per unit of total risk (standard deviation), with higher values indicating better risk-adjusted performance.
Question 3
Hard
A client is setting up an ABLE account for a 24-year-old beneficiary who became permanently disabled at age 20. Which of the following statements is most accurate regarding ABLE account rules?
Solution
Choice A is correct because under the ABLE Act (and as amended by the ABLE Age Adjustment Act, effective January 2026 extending age to 46), for 2024 the annual contribution limit is &18,000 (equal to the annual gift tax exclusion). The first &100,000 of account assets is excluded from the SSI &2,000 resource limit. The beneficiary qualifies because the disability onset was before age 26, which is the statutory threshold for ABLE eligibility (as of the original act; the age limit was extended but onset before 26 remains the current exam standard).