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SERIES 66: Series66 (Series66) NASD Series 66
Free Practice Exam Questions (page: 2)
Updated On: 10-Jan-2026

Page 2 of 52
PDF with 251 Questions

Tiffany's brother, Jamal, is a new investor but believes that the markets are basically efficient and that he doesn't have the knack for or interest in predicting trends. He also believes in saving money on transaction costs and taxes. Jamal's investment style is best described by which of the following:

  1. Indexing
  2. Tactical asset allocation
  3. Buy and hold
  4. Diversification

Answer(s): C

Explanation:

A buy-and-hold strategy describes a passive investment approach. This approach assumes that markets are efficient and that it is impossible to time the purchase or sale of securities or to manage the balance of assets in order to take advantage of market movements. Since this is a passive strategy, there are reduced transactions costs and also reduced tax consequences. The downside to a buy-and- hold approach is that over time, the risk and reward of the asset allocation will change and may not be in alignment with the client's original risk tolerance and objectives



In 2004, inflation has risen to 4%. The Seymour Jones family has owned an 8% callable corporate bond for seven years. Calculate the 2004 real interest rate on this bond.

  1. .04%
  2. 12%
  3. 98%
  4. 4%

Answer(s): D

Explanation:

The formula for inflation-adjusted return factors the eroding effect of inflation on an investment's annual yield (8%-4%= 4%). It makes no difference that the bond is callable or that the family has owned the bond for seven years.



Samantha Peterson felt that she had made a great investment in Zip Wow, a growing company in Kalamazoo. She had purchased 10 of Zip Wow''s 11% bonds at 103 and hoped to make a profit before the bonds were called. In 2003, inflation rose from 2% to 3% and Zip Wow''s stock dropped to $12 per share. Calculate the inflation- adjusted return on one of Samantha''s bonds for 2003.

  1. $11.33
  2. 8%
  3. 10%
  4. $113.30

Answer(s): B

Explanation:

Inflation-adjusted return shows an investment's true yield by factoring out the eroding effect of inflation from an annual interest rate. It is calculated by a simple formula: Annual interest rate (yield) plus or minus the current inflation rate. Here: 11% - 3% inflation = 8% inflation-adjusted return on the bond



Which one of the following client types may NOT be taxed by the IRS based on the personal income tax brackets of the individuals in the group?

  1. S Corporation
  2. Limited Liability Company
  3. C Corporation
  4. Partnership

Answer(s): C

Explanation:

C corporations are required to pay taxes on their incomes as a corporate entities; the tax amount is NOT based on the personal tax rates of the individuals who work for the corporation or its shareholders (owners). However, shareholders are required to pay taxes on profits (dividends) at their individual income tax rate. C corporations face a double taxation and this is a key disadvantage to this type of business structure. An S corporation, if certain requirements are met, can choose to be taxed like a partnership or limited liability company. Within these entities, the individuals involved will be taxed at their personal income tax rates rather than on the profits of the entity as a whole.



As an advisor makes recommendations for the investments within a trust, who is the most important to consider:

  1. The grantor
  2. The executor
  3. The beneficiary
  4. The trustee

Answer(s): C

Explanation:

The beneficiary's financial objectives should be the primary focus for investments within the trust. The beneficiary's objectives may be quite different from that of the trustee and the investment advisor must develop an investment profile that is suitable



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