The Federal Reserve wants to slow an overheating economy and bring inflation down. Which action is contractionary monetary policy?
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This is a free 15-question Series 65 practice exam, written by the StudyPDF team from the published NASAA content outline for the Uniform Investment Adviser Law Examination. It touches all four content areas: economic factors, investment vehicles, client recommendations and strategies, and the laws and ethics that govern investment advisers. You will meet multiple choice, select all that apply and fill in the blank, including a few short calculations. Answer all 15 questions, then check your score and read the explanation for every question. Nothing here is legal, tax or investment advice.
All 15 questions at a glance
Prefer to read before you play? Every question in the sampler is listed below. Answers and explanations stay collapsed until you open them.
1.The Federal Reserve wants to slow an overheating economy and bring inflation down. Which action is contractionary monetary policy?
- A. Buying Treasury securities in the open market
- B. Lowering the reserve requirement for banks
- C. Selling Treasury securities in the open market
- D. Cutting the federal funds rate target
Answer: C. Selling Treasury securities in the open market
Selling Treasuries pulls cash out of the banking system, which shrinks the money supply and pushes interest rates up. Borrowing gets more expensive and demand cools. Buying securities, lowering reserve requirements and cutting the rate target all add money or make it cheaper, which is expansionary. Fiscal policy is a different tool, taxing and spending decided by Congress and the President, not the Fed.
2.Complete the sentence.
A stock has a beta of 1.2. The risk-free rate is 3 percent and the expected return on the market is 9 percent. The CAPM expected return on the stock is _____ percent.
Options for blank 1: 9.0, 10.2, 10.8, 12.0
Answer: 10.2
The Capital Asset Pricing Model is expected return = risk-free rate + beta x (market return - risk-free rate). That is 3 + 1.2 x (9 - 3) = 3 + 7.2 = 10.2 percent. The 10.8 option comes from multiplying beta by the full market return and forgetting the risk-free rate, and 9.0 treats the stock as if its beta were 1. Remember that beta captures only systematic risk, which is the only risk CAPM pays you for.
3.A closed-end fund has a net asset value of 20 dollars a share, but its shares trade on an exchange at 17.50. Which statement is correct?
- A. The fund must redeem shares from investors at 20 dollars
- B. The shares trade at a discount to NAV, which market supply and demand can cause
- C. The share price must equal the NAV at the close of every trading day
- D. The shares are priced once a day after the market closes
Answer: B. The shares trade at a discount to NAV, which market supply and demand can cause
A closed-end fund issues a fixed number of shares and does not redeem them. Investors trade the shares with each other on an exchange, so the price is set by supply and demand and can sit above NAV at a premium or below it at a discount. Here the discount is 2.50 on 20, or 12.5 percent. An open-end mutual fund is the opposite: it redeems at NAV and prices once a day.
4.Bond A has a duration of 7 and Bond B has a duration of 3. Market interest rates fall by 1 percentage point. Which result is the best estimate?
- A. Bond A rises about 7 percent and Bond B rises about 3 percent
- B. Bond A rises about 3 percent and Bond B rises about 7 percent
- C. Bond A falls about 7 percent and Bond B falls about 3 percent
- D. Both bonds rise about 1 percent
Answer: A. Bond A rises about 7 percent and Bond B rises about 3 percent
Duration estimates the percentage change in a bond's price for a 1 percentage point change in yield, in the opposite direction. Rates fell, so prices rise, and the bond with the longer duration moves more. That is about 7 percent for Bond A and 3 percent for Bond B. The estimate gets less accurate for big rate moves because price and yield are not perfectly linear.
5.Complete the sentence.
An investor in the 32 percent federal tax bracket owns a municipal bond yielding 4.0 percent. Ignoring state tax, a taxable bond must yield about _____ percent to match it after federal tax.
Options for blank 1: 4.0, 5.3, 5.9, 12.5
Answer: 5.9
Tax-equivalent yield is the tax-free yield divided by (1 - the tax rate). That is 4.0 / 0.68 = about 5.9 percent. The 5.3 option multiplies 4.0 by 1.32, and 12.5 divides by the bracket instead of by one minus the bracket. The higher the client's bracket, the more a tax-free yield is worth, which is why muni bonds fit high-bracket clients and rarely fit clients in low brackets or in a tax-deferred account.
6.A client says she is comfortable with big market swings, but she plans to use the money for a home down payment in about 18 months. Which factor should weigh most heavily in the adviser's risk assessment?
- A. Her stated willingness to take risk, because the client's comfort level controls
- B. The adviser's own view of where the stock market is heading this year
- C. The expected return of the highest-yielding fund the firm offers
- D. Her ability to take risk, because a short horizon and a fixed need limit how much loss she can absorb
Answer: D. Her ability to take risk, because a short horizon and a fixed need limit how much loss she can absorb
Risk tolerance has two parts. Willingness is how a client feels about losses, and ability is what the client can afford to lose given the time horizon, liquidity needs and income. When the two conflict, the lower one governs the recommendation. Money needed in 18 months leaves little time to recover from a drop, so the portfolio should lean toward stability even though she says she is comfortable. A good adviser documents that conversation.
7.An adviser wants to judge a portfolio manager's skill fairly when clients make large deposits and withdrawals during the year. Which return measure best removes the effect of those cash flows?
- A. Dollar-weighted return
- B. Holding period return on the ending balance
- C. Time-weighted return
- D. Current yield
Answer: C. Time-weighted return
A time-weighted return splits the period at every cash flow and links the sub-period returns, so the size and timing of deposits and withdrawals do not change the result. That makes it the standard for comparing managers, who do not control when clients add or remove money. A dollar-weighted return, which is the internal rate of return, does reflect those cash flows, so it measures the client's own experience instead.
8.If the market is semi-strong form efficient, which approach could still produce consistently higher returns?
- A. Technical analysis of past price charts
- B. Trading on material nonpublic information
- C. Fundamental analysis of published financial statements
- D. Using public economic data to rotate between sectors
Answer: B. Trading on material nonpublic information
Semi-strong form efficiency says prices already reflect all public information, which includes past prices, financial statements and economic data. So technical analysis, fundamental analysis of public filings and sector rotation on public data should not beat the market consistently. Only information the market does not have could, and trading on material nonpublic information is illegal insider trading. Weak form covers only past prices, and strong form says even private information is already priced in.
9.Two business partners own a building as tenants in common, 60 percent and 40 percent. The 40 percent owner dies, and her will leaves everything to her daughter. What happens to her share?
- A. It passes under her will to her daughter, who becomes a co-owner with the surviving partner
- B. It passes automatically to the surviving partner, outside her will
- C. It is divided equally between the surviving partner and her daughter
- D. It is held by the state until a court names a new owner
Answer: A. It passes under her will to her daughter, who becomes a co-owner with the surviving partner
Tenants in common each own a separate share that can be unequal, and each owner can sell it, give it away or leave it by will. There is no right of survivorship. That is the difference from joint tenants with right of survivorship and tenancy by the entirety, where a deceased owner's interest passes automatically to the survivor and the will does not control it.
10.Which of the following duties apply to a fiduciary who has discretion over the assets of a retirement plan covered by ERISA?
Select all that apply.
- A. Act solely in the interest of plan participants and their beneficiaries
- B. Guarantee that no participant's account will lose value
- C. Diversify plan investments to reduce the risk of large losses, unless it is clearly prudent not to
- D. Follow the plan documents, to the extent they are consistent with ERISA
- E. Invest at least half of plan assets in the employer's stock
Answer: A. Act solely in the interest of plan participants and their beneficiaries, C. Diversify plan investments to reduce the risk of large losses, unless it is clearly prudent not to, D. Follow the plan documents, to the extent they are consistent with ERISA
ERISA fiduciaries owe four duties: loyalty to participants and beneficiaries, prudence, diversification, and following the plan documents when those are consistent with the law. None of them is a guarantee, because markets move and a fiduciary is judged on process, not results. ERISA does not call for holding employer stock either, and heavy concentration in it is a diversification problem, not a requirement.
11.Complete the sentence.
Spreading a portfolio across many unrelated holdings mainly reduces _____ risk, while _____ risk, such as a recession that hits the whole market, cannot be diversified away.
Options for blank 1: systematic, unsystematic
Options for blank 2: systematic, unsystematic
Answer: unsystematic, systematic
Unsystematic risk belongs to one company or sector, such as a failed product, a lawsuit or a credit downgrade, and holding many different securities spreads it out. Systematic risk hits the whole market, for example interest rate moves, recessions or inflation, so every holding feels it. Beta measures exposure to systematic risk, which is why CAPM pays investors only for that kind.
12.An adviser's firm receives revenue-sharing payments from a mutual fund company. The adviser wants to recommend that company's funds to clients. What does the fiduciary standard require?
- A. Disclosing the conflict fully and fairly, and recommending the funds only when they serve the client's best interest
- B. Nothing more, as long as the funds are suitable for the client
- C. Telling clients about the payments only if they ask how the firm is paid
- D. Avoiding the fund company entirely, since any conflict of interest is prohibited
Answer: A. Disclosing the conflict fully and fairly, and recommending the funds only when they serve the client's best interest
An adviser owes a duty of care and a duty of loyalty. Conflicts are not banned, but the adviser must disclose them in enough detail that a client can understand them and decide with that knowledge, and must still put the client's interest ahead of the firm's. Suitability alone is a lower bar. Waiting for the client to ask does not meet the duty to disclose, and a blanket ban goes further than the rule does.
13.Which statement about a federal covered investment adviser is correct?
- A. A state may require the firm to register and pass the state's own review
- B. It registers with the SEC, and a state may require a notice filing and a fee but may not require the firm to register
- C. It is exempt from state antifraud law
- D. It may not have clients in a state until that state approves its Form ADV
Answer: B. It registers with the SEC, and a state may require a notice filing and a fee but may not require the firm to register
Federal law splits advisers between the SEC and the states. A federal covered adviser registers with the SEC, and the state can ask for a notice filing and a fee but cannot make the firm register there. States keep their antifraud authority, so they can still investigate and act against fraud by a federal covered adviser. The size thresholds that decide which regulator an adviser belongs to are set by law and change over time, so check the current ones.
14.Which of the following would give an investment adviser custody of a client's funds or securities?
Select all that apply.
- A. Holding the client's securities itself
- B. Having authority to deduct advisory fees directly from the client's account
- C. Having discretionary authority to buy and sell in the client's account, with no ability to withdraw anything
- D. Serving as trustee of a trust that holds the client's assets
- E. Mailing the client a quarterly performance report
Answer: A. Holding the client's securities itself, B. Having authority to deduct advisory fees directly from the client's account, D. Serving as trustee of a trust that holds the client's assets
Custody means holding client assets directly or having the ability to get at them. Holding them, deducting fees from the account and serving as trustee all qualify. Trading authority by itself is not custody, because the adviser cannot take the money out, and sending a report certainly is not. An adviser with custody generally has to keep client assets with a qualified custodian such as a bank or broker-dealer, make sure clients receive account statements from it at least quarterly, and disclose the custody on Form ADV.
15.Which of the following are consistent with an investment adviser's fiduciary duty?
Select all that apply.
- A. Buying a stock for the adviser's own account just ahead of a large client order in the same stock
- B. Allocating a block trade among client accounts under a fair policy stated in advance
- C. Recommending an investment mainly because it pays the adviser a higher commission, without telling the client
- D. Paying a higher commission for research that benefits clients, when the adviser decides in good faith the cost is reasonable and discloses the practice
- E. Seeking the best overall execution for client trades, not just the lowest commission
Answer: B. Allocating a block trade among client accounts under a fair policy stated in advance, D. Paying a higher commission for research that benefits clients, when the adviser decides in good faith the cost is reasonable and discloses the practice, E. Seeking the best overall execution for client trades, not just the lowest commission
Trading ahead of a client order is front running, and recommending a product for the adviser's higher pay without disclosure hides a conflict. Both put the adviser first. A written allocation policy treats clients fairly, and best execution looks at price, speed, certainty and total cost, not commission alone. Soft dollar research is allowed inside the safe harbor in the federal securities laws when the adviser decides in good faith that the cost is reasonable for the value received and the practice is disclosed.
What the Series 65 exam asks and how it is scored
The Series 65 is the Uniform Investment Adviser Law Examination. NASAA, the North American Securities Administrators Association, writes it, and FINRA administers it. According to FINRA, the exam has 130 scored questions plus 10 unscored questions, you get 180 minutes, and you must answer at least 92 of the 130 scored questions correctly to pass. That is about 70.8 percent. The 10 unscored questions are pretest items and you cannot tell which ones they are, so treat every question as if it counts.
NASAA publishes the content outline, and it splits the exam into four areas. Economic factors and business information is 15 percent, about 20 questions. Investment vehicle characteristics is 25 percent, about 32 questions. Client investment recommendations and strategies is 30 percent, about 39 questions. Laws, regulations and guidelines, including the ban on unethical business practices, is also 30 percent, about 39 questions. So six in ten questions are about advising clients and the rules around it, and only a smaller share is product knowledge.
The fee, the scheduling window and the rules for who must hold the Series 65 come from FINRA and from your state securities regulator, and states do not all require the same thing. Some accept the Series 66, which NASAA describes as the combined state law exam that stands in for both the Series 63 and the Series 65. Check FINRA and your state before you book, and treat nothing on this page as legal advice.
How to use this sampler and what to practice first
Fifteen questions cannot cover 130, so this sampler spreads them across the four areas: two on economic factors and risk, three on investment vehicles, six on client recommendations and portfolio theory, and four on adviser law and fiduciary duty. Take it in one sitting, without notes, then read the explanation for every question, including the ones you got right.
The Series 65 rewards a different habit than the Series 7 or the SIE. Fewer questions ask what a product is, and more ask what an adviser should do for a given client. When two answers both look reasonable, ask which one puts the client first, discloses the conflict, and fits both the client's willingness and ability to take risk. That test settles a large share of the recommendation and ethics questions.
The math is light but real. Expect a handful of short calculations such as holding period return, CAPM, tax-equivalent yield, current and quick ratios, and the price effect of duration. Write the formula before you plug in numbers, and check that the answer has the right size before you pick it. If you also need agent and broker-dealer law, that content lives in the Series 63, and the Series 7 and SIE cover products from the broker-dealer side.
How StudyPDF builds full practice exams from your own prep material
Fifteen questions can show you which of the four areas is weakest. They cannot get you ready on their own, and a generic set does not know which prep book you bought or which mistakes you keep repeating.
StudyPDF works from your material instead. Upload your Series 65 prep book, your course provider's notes or slides, or the outline you annotated yourself. Then press New material, pick a practice test, choose those files as the sources and set how long it should be. You get a test written from those exact pages, and every explanation cites where the answer comes from. Narrow one to a single area, such as custody or performance measurement, and run it again after you review.
Bo is the tutor for the rest. Ask why an answer is right and Bo explains it from your own pages, with a hint first if you want one.
You do not have to upload anything to start. Name a topic instead, for example fiduciary duty or modern portfolio theory, and you get practice questions on it. Starting is free.
Written by the StudyPDF team. Last updated August 19, 2026.
Good to know
Is this Series 65 practice exam really free?
Yes. All 15 questions, the score screen and every explanation are free to play in your browser, and there is no paywall on this page.
How many questions is the Series 65, and what score do I need to pass?
FINRA lists 130 scored questions plus 10 unscored questions, 180 minutes, and at least 92 of the 130 scored questions correct to pass. NASAA writes the exam and FINRA administers it, so confirm the current fee, scheduling window and who must take it with FINRA and your state securities regulator before you book.
Who wrote these questions, and are they real exam questions?
The StudyPDF team wrote every question and explanation from the public NASAA content outline for the Series 65. They are not real exam questions and they are not taken from any prep provider's bank. StudyPDF is not affiliated with NASAA, FINRA, the SEC or any state securities regulator, and nothing on this page is legal, tax or investment advice.
Can I get more questions like these from my own prep book?
Yes. Upload your Series 65 prep book or your course notes to StudyPDF, and Bo builds full-length practice exams from those exact pages, with explanations that cite where each answer came from. If you only have a paper copy, name a topic instead, for example custody or performance measures, and Bo writes an exam from that.