Section 2 Practice Quiz

1. Which of the following is an example of a derivative security?

2. What type of risk involves the possibility that a bond issuer will default on payments?

3. Which type of fund primarily invests in stock securities?

4. Representatives who sell mutual fund shares are often compensated through sales charges levied upon purchasers of the shares. However, the fees paid to the professional managers hired by the fund to make the day-to-day investment decisions are referred to as:

5. Which investment is known for having limited liquidity?

6. Which of the following is an example of systemic risk?

7. Bonds initially offered for sale are typically sold at their:

8. The ability of an investor to readily sell their investment at a fair market price is called:

9. Which of the following statements about corporate equity is true?

10. Generally speaking, when control persons of a publicly traded corporation, such as Officers and Directors, wish to sell shares they own in that corporation, these sales are subject to the oversight of the SEC and are done in accordance with the following:

11. What type of risk is associated with changes in interest rates affecting bond prices?

12. Which of the following investments typically offers the highest potential for growth?

13. Systematic risk, the risk that the broad stock market will suffer a substantial decline in value, is also commonly called:

14. Which of the following investments is considered the least risky?

15. When a bond is described as ‘convertible,’ this term refers to:

16. The term ‘money market’ is frequently used in financial discussions. Which of the following best defines a money market instrument?

17. Which investment is typically associated with the highest level of risk?

18. A bond issued to fund a new toll road, which will be paid off by users of the toll road through payment of tolls and not by taxes levied on the general population, is known as a:

19. In the event a corporation goes bankrupt, which of the following statements is true?

20. A business enterprise that offers its shares to the public and invests those dollars in a variety of real estate investments is most commonly referred to as a:

21. What is the main benefit of diversifying an investment portfolio?

22. Which of the following is a characteristic of exchange-traded funds (ETFs)?

23. Moody’s and Standard & Poor’s are two of the most well-known statistical rating organizations that, among other things, rate the investment quality of bond issues. Ratings in the AAA, AA and A categories are referred to as:

24. Which investment vehicle offers tax-free growth on investments if used for qualified education expenses?

25. The value of the dollar declines due to inflation. This exposes fixed-income investments, whose annual income does not rise to keep pace with the rate of inflation, to a risk commonly referred to by investment professionals as:

26. Which of the following is a characteristic of a closed-end fund?

27. What are the best strategies to mitigate the business risk?

28. The dangers of having all your money in one investment or in one sector of the economy is referred to as:

29. Which of the following best describes a derivative?

30. How can an investor mitigate the impact of market volatility on their portfolio?

31. Which of the following best describes a mutual fund?

32. With respect to the relationship between interest rates and bond prices, the general rule of thumb in the bond market is:

33. Which of the following statements regarding options contracts is true?

34. When FINRA refers to ETPs in their rulebook, they are referring to each of the following except:

35. Which of the following is considered a debt security?