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FINRA SERIES 66 Exam (page: 3)
FINRA Series66 (Series66) NASD Series 66
Updated on: 15-Feb-2026

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SERIES 66 PDF 251 Questions

Jane and Fabbio Salvatore have just discovered that a Fabulous Florence municipal bond will be offered to support a bridge development in Fabbio''s hometown in Florence, OH. They want to purchase the bond at $1,000, but end up buying the 10% bond at $1,020. One year later, the Salvatores want to sell and earn a profit when the market value is at $1,000. Calculate the total return of the Fabulous Florence bond.

  1. 9.98%
  2. 12%
  3. .0196%
  4. 2%

Answer(s): A

Explanation:

The test will try to confuse you by adding extra details to the questions. It doesn't matter that the Salvatores wanted to buy at $1,000 when, in fact, they bought at $1,020. Furthermore, one year later when the market is at $1,000, their bond has actually depreciated. Only 9.98% could be the answer. The total return will reflect 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%



Lucky Lavallee has just opened Casino Lavallee, a small operation in Vermont with 10 slot machines, five blackjack tables and a separate room for poker games. His mother, Helene, has offered to finance part of the business in return for a share of the profits, but she is concerned about risk.
Which type of business structure would be the most suitable for Casino Lavallee?

  1. Family Limited Partnership
  2. C Corporation
  3. Limited Liability Company
  4. Estate

Answer(s): C

Explanation:

In a limited liability company (LLC), the owners are not personally liable for a company's debts. LLCs are advantageous from a tax standpoint because the owners are taxed at their personal income tax rate on their share of the profits only. Additionally, LLCs are easy to set up and have more flexible management structures than a corporation. Under a C corporation structure, Helene would not be personally responsible for the company's liabilities. However, the size of this casino does not necessarily warrant the added expense and complication of incorporating. A family limited partnership is generally formed, with a legitimate business purpose, to minimize estate and gift taxes.



At year-end 2004, the Federal Reserve reported moderate economic growth of 3%, a reduction of 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 would factor in to the real interest rate of your bond?

  1. Economic growth at 3%
  2. The Fed Funds rate
  3. Unemployment at 3%
  4. Inflation at 3%

Answer(s): D

Explanation:

The real interest rate, also referred to as the inflation-adjusted return, factors the eroding effect of inflation from an investment's return. The formula is: Yield plus or minus inflation rate = real interest rate/inflation-adjusted return. The Fed Funds rate is the market rate that banks charge each other on overnight loans of reserves



Which of the following represents the best investment for someone whose objective is growth?

  1. Common stocks
  2. Money market funds
  3. Corporate bonds
  4. Long-term CDs

Answer(s): A

Explanation:

Common stock would be a suitable recommendation for someone whose investment objective is growth. The other options represent investment vehicles that carry less risk and offer preservation of capital.



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



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