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SERIES 66: Series66 (Series66) NASD Series 66
Free Practice Exam Questions (page: 6)
Updated On: 10-Jan-2026

Page 6 of 52
PDF with 251 Questions

Tina and Mary are sisters seeking to save enough money to contribute to their eight- year- old nephew''s college education. They enlist the assistance of Jayne, their financial advisor, who will get them on track with their goal. Jayne is committed to devising a suitable strategy for Tina and Mary.
Which of the following is NOT a factor in developing their profile?

  1. Tax situation
  2. Time horizon
  3. Wrap account fees
  4. Risk Tolerance
  5. Target financial goal

Answer(s): C

Explanation:

Wrap account programs are designed for those who trade often within their accounts and want to avoid paying commissions on every transaction. Instead, they pay a set fee, usually based on percentage of assets under management. All of the other choices are completely relevant to developing a profile for Mary and Tina's objective



A portfolio that contains an optimal mix of assets based on a client''s risk tolerance and investment goals is known as:

  1. An efficient frontier
  2. Modern Portfolio Theory
  3. Strategic asset allocation
  4. Tactical asset allocation

Answer(s): C

Explanation:

One assumption made by Modern Portfolio Theory is that a portfolio consisting of various asset classes will reduce or increase risk based on how closely correlated the returns are or, in other words, how diversified the asset classes are. Strategic asset allocation provides the best mix of assets for reaching a client's financial objectives while considering his or her personal tolerance for risk



According to Modern Portfolio Theory, expected return is the product of which two factors?

  1. A possible return
    II. Internal rate of return
    III. Basic measure of risk
    IV. Likelihood of occurrence
  2. I and II
  3. III and IV
  4. I and IV
  5. II and III

Answer(s): C

Explanation:

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



Trudy would like to invest a portion of her retirement portfolio in a mutual fund that has very low management costs and attempts to mirror the S&P 500. This investment strategy is known as:

  1. Market Timing
  2. Diversification
  3. Indexing
  4. Stock Picking

Answer(s): C

Explanation:

An indexing strategy is a passive investment approach the seeks to mirror the composition of a benchmark index such as the S&P 500. Costs are kept very low because they are only incurred as funds are added to or withdrawn from the portfolio. Management costs of an index mutual fund are kept low because the fund requires very little management and is mostly tracked by computer software



Interest rate risk represents the potential for the market value of a bond to decline if interest rates:

  1. Increase
  2. Decrease
  3. Equal the Consumer Price Index
  4. Stay the same

Answer(s): A

Explanation:

Interest rates and the price of bonds have an inverse relationship.
When interest rates fall, the market value of a bond will increase and vice versa. The Consumer Price Index is a measurement of the price of goods and services and is used to monitor inflation



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