Series 66 Practice Test Questions – I

The Uniform Combined State Law Examination, or  Series 66 exam, administered by FINRA is equivalent to completing both the Series 63 and Series 65.  Together with the Series 7 exam, completion of the Series 66 qualifies applicants to register as securities agents and investment advisers.   More information about the differences from FORBES.

The Series 66 has 100 questions and applicants are given 150 minutes to complete.

1. A self-employed individual is a(n) 

A. Sole Proprietor
B. Limited Liability Company
C. Subchapter S
D. General Partnership
E. Executor

2. Robert is the administrator of his company pension 401(k) plan. He”s just hired Rupert as the investment advisor who will also share in fiduciary responsibility.  Under the Employee Retirement Income Security Act (ERISA), which one of the following documents must they keep on file?

A. The plan’s performance reports
B. An investment policy statement
C. An official statement
D. A contract of qualified plan participants

3. Susan’s partner, David, has just passed away and She seeks advice from her financial advisor, Sheila. Which of the following is NOT true regarding estates?

A. Executors are fiduciaries
B. Estates are meant to be short term
C. Estates include the total assets and liabilities of the deceased, along with all types of property, real and personal, tangible and intangible
D. Without a will, the courts appoint an executor to distribute assets, pay taxes and safeguard the property for the benefit of the estate”s heirs.

4. The measure of return for the yield to maturity of a bond is:

A. Par x $1,000
B. Total return
C. The internal rate of return
D. Call risk

5. Jack and Jill have just discovered that a Florence municipal bond will be offered to finance construction of  a bridge development in their home town of Florence, OH.  They want to purchase the bond at $1,000, but end up buying the 10% bond at $1,020. One year later, they want to sell and earn a profit when the market value is at $1,000.  What is the  total return of the Florence bond?

A. 9.98%
B. 12%
C. .0196%
D. 2%

 6. At year-end, the Federal Reserve reported moderate economic growth of 3%, a reduction in the unemployment rate to 3% and an inflation rate that was “well contained at 3%”. Under these circumstances, the real interest rate of the 10% corporate bond you own is 7% this year.

Which of the following economic factors determine the real interest rate?

A. Economic growth at 3%
B. The Fed Funds rate
C. Unemployment at 3%
D. Inflation at 3%


7. Which of the following represents the best investment for a client whose objective is growth?

A. Common stocks
B. Money market funds
C. Corporate bonds
D. Long-term CDs

8. According to Modern Portfolio Theory, the expected return is:

I. A possible return
II. Internal rate of return
III. Basic measure of risk
IV. Likelihood of occurrence
A. I and II
B. III and IV
C. I and IV
D. II and III



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Answer Key 

1. A 
Self-employed individuals are considered sole proprietors. As such, an individual has managerial control of the business, is entitled to all the profits and is personally liable for all debt.

2.  B
An investment policy statement describes the plan’s investment strategy, including long-term plan goals,  time horizons, investment philosophy, rate of return expectations, risk tolerance, and preferred asset classes. An investment advisor is required by law and fiduciary responsibility to follow this detailed plan.

3.  D
Without a will, the courts appoint an administrator to pay taxes, distribute assets and oversee the property.  All of the other choices are correct with regard to estates.

4.  C
When calculating an investment’s future value, use the formula Pn=Po(1+r); to calculate present value, or the investment amount needed today, to reach a future goal, use the formula Po=Pn/(1+r)n.  If you have the numbers for Pn or Po,to find “r”, the rate of interest on an investment. This calculation is most easily solved by trial-and-error method. The resulting figure is known as the internal rate of return (IRR).

5.  A
This question  is designed to confuse with extra details. It doesn’t matter that they wanted to buy at $1,000 when, in fact, they bought at $1,020. One year later when the market is at $1,000, their bond has depreciated.  9.98% is the answer. The total return is the interest earned (yield) plus or minus any appreciation or depreciation (growth). While the bond
earns 10% interest, it has lost nearly 1% of its value and delivers a total return of 9.98%.

($1,020-$1,000 = $20)/$1,020 = .0196%. (10% + (-.0196%) = 9.98%

6. D 
The real interest rate, also referred to as the inflation-adjusted return, incorporates  the eroding effect of inflation on an investment’s return. The formula is: Yield plus or minus inflation rate = real interest rate/inflation-adjusted return.

 7. A
Common stock is the best recommendation for clients whose investment objective is growth.  The other options represent investment vehicles that carry less risk and offer preservation of capital.

8. C 
The expected return of an investment is the possible return on that investment weighted by the likelihood that the return will occur.



checkComprehensive Series 66 Study Guide and Practice Questions

Complete Series 66 study guide prepared by a dedicated team of expert researchers.

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Series 66 Study Guide & Practice Questions

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4 thoughts on “Series 66 Practice Test Questions – I”

  1. Your answer to 5 has to be wrong – there is now way you can buy a bond at that premium and still get a yield so close to the coupon after just one year. You better double check it! Should be just under 8%

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