HiTop Investments main office is located in the state of Colorado. A registered representative of the firm
sent out an e-mail to his clients, some of whom reside in other states, promoting the firm's Colorado
Municipal Bond Fund, which invests exclusively in bonds offered by the state and local governments of
Colorado. In the e-mail, the representative states, "These bonds provide income that is free from both
federal and state taxes and may also be free from local taxation, if any exists." Is this e-mail in violation of
any securities' laws?

• A. No. Since the fund invests exclusively in bonds offered by the state and local governments of Colorado,
  the representative's statement contains no misstatement of fact.
• B. Yes. Advertisements referring to a specific fund may not be distributed by electronic means.
• C. Yes. A fund that invests only in bonds offered by state and local governments of one state may not be
  sold to investors who reside in other states.
• D. Yes. The representative's statement that the "bonds provide income that is free from both federal and
  state taxes and may also be free from local taxation, if any exists," is untrue.

The premiums paid on which of the following are paid into the general account of an insurance company?
I. whole life
II. universal life
III. term life
IV. variable life

• A. I, II, III, and IV
• B. I, II, and III only
• C. I only
• D. I and III only

Mr. Cashout recently sold some mutual fund shares that he owned. The sale resulted in long-term capital
gain income of $6,000. He also sold some shares of a stock he had purchased during the year and
realized a short-term capital gain on the sale of $2,000. The sale of another individual stock resulted in a
short-term capital loss of $3,500. Mr. Cashout also had some bonds that he had bought at a premium
mature, resulting in a long-term capital loss of $500. What is Mr. Cashout's net capital gain or loss from
these transactions?

• A. a net long-term capital gain of $8,000
• B. a net short-term capital loss of $4,000
• C. a net long-term capital gain of $4,500
• D. a net long-term capital gain of $4,000

Which of the following plans allows the contributor to withdraw both his earnings and contributions
tax-free if certain conditions are met?

• A. 401(k) plan
• B. traditional IRA
• C. money purchase plan
• D. Roth IRA

Joel has a 28-year-old client who has been promoted to the elevated position of senior software engineer
with a large, well-known, software company at her relatively young age. She has come to Joel for
investment advice, explaining to him that she is risk-averse, having been influenced by parents who grew
up in a foreign country and had little, prior to immigrating to America and working hard to achieve their
dreams for themselves and their children. She has $50,000 that she wants him to invest for her, and her
primary goal is to be able to have enough
money, beyond what she expects to have in her employer's retirement program, to return to her home
country and help others achieve their dreams. Joel explains to her that she may have to invest in riskier
securities in order to achieve her goal, but his client is adamant that she wants her portfolio to be invested
to target growth with the least risk exposure possible. Given the facts:

• A. Joel should invest his client's monies in a growth fund to target her growth objective.
• B. Joel should invest his client's monies in a U.S. government bond fund since she is risk-averse.
• C. Joel should divide his client's monies among growth, aggressive growth, and foreign stock funds.
  Regardless of what she says, she has a long investment horizon and can afford to take on more risk.
• D. Joel should invest his client's monies in a fund that specializes in stocks of his client's home country to
  avoid the exchange rate risk that she will be exposed to when she returns.