The Series 65 is the exam most states require before you can work as an investment adviser representative (IAR), someone who gives investment advice for a fee. It is run by NASAA, the North American Securities Administrators Association. Try these 8 free practice questions to see where you stand.
Exam at a glance
8 free Series 65 practice questions
1. An investment adviser who gives advice for a fee owes clients what kind of duty?
- A. A suitability duty only
- B. A fiduciary duty
- C. No duty once the client signs
- D. A duty only to the adviser's firm
Show answer
Answer: B. Investment advisers are fiduciaries. They must put the client's interests first and fully disclose material conflicts of interest.
2. Which measure shows how much a portfolio's returns swing around their average?
- A. Beta
- B. Alpha
- C. Standard deviation
- D. Duration
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Answer: C. Standard deviation measures total volatility around the mean. Beta measures movement relative to the overall market.
3. A stock has a beta of 1.5. If the market rises 10%, the stock would be expected to:
- A. Rise about 15%
- B. Rise about 10%
- C. Rise about 5%
- D. Fall about 15%
Show answer
Answer: A. Beta of 1.5 means the stock tends to move 1.5 times as much as the market, so 10% x 1.5 = about 15%.
4. Which ratio measures return earned per unit of total risk?
- A. Current ratio
- B. Sharpe ratio
- C. Price-to-earnings ratio
- D. Debt-to-equity ratio
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Answer: B. The Sharpe ratio is excess return over the risk-free rate divided by standard deviation.
5. Qualified withdrawals from a Roth IRA are:
- A. Fully taxable as ordinary income
- B. Taxed as capital gains
- C. Tax-free
- D. Taxed only above $10,000
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Answer: C. Roth contributions are made with after-tax money, so qualified withdrawals of contributions and earnings are tax-free.
6. When interest rates rise, prices of existing bonds generally:
- A. Rise
- B. Fall
- C. Stay the same
- D. Rise only for long-term bonds
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Answer: B. Bond prices move opposite to interest rates. Older bonds with lower coupons become less attractive, so their prices drop.
7. Spreading money across asset classes that don't move together mainly reduces:
- A. Systematic (market) risk
- B. Unsystematic (company-specific) risk
- C. Inflation
- D. Taxes
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Answer: B. Diversification lowers unsystematic risk tied to single companies or industries. Market-wide risk can't be diversified away.
8. Under the Uniform Securities Act, an adviser may generally NOT base its fee on:
- A. A percentage of assets under management
- B. A flat annual fee
- C. An hourly rate
- D. A share of capital gains in the account of an ordinary retail client
Show answer
Answer: D. Performance-based fees are generally prohibited except for qualified clients. Asset-based, flat and hourly fees are allowed.
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