Free NASAA Series 65 (Uniform Investment Adviser Law Examination) Practice Questions

Choice C is correct because current yield equals the annual coupon payment divided by the bond's current market price. It measures income return relative to the price paid today, without accounting for any gain or loss at maturity.
Choice A is incorrect because that describes yield to maturity (YTM), which is the internal rate of return assuming all cash flows are reinvested at the same rate.
Choice D is incorrect because that describes the coupon rate (nominal yield), which is fixed at issuance based on par value.
Choice B is incorrect because that describes a credit-adjusted or default-adjusted yield concept, not the standard current yield calculation.

Choice A is correct because systematic risk (also called market risk) affects the broad market and all securities to varying degrees; it cannot be eliminated through portfolio diversification.
Choice C is incorrect because the risk that can be eliminated through diversification is unsystematic (company-specific) risk, not systematic risk.
Choice B is incorrect because risk specific to a single company's management decisions is an example of unsystematic (business) risk.
Choice D is incorrect because the risk of a company failing to meet debt obligations is credit/default risk, a form of unsystematic risk.

Choice A is correct because a futures contract creates a legally binding obligation for both the buyer and the seller to transact the underlying asset at the agreed price on the settlement date. Neither party has the option to walk away — both are obligated.
Choice B is incorrect because a right but not an obligation describes an options contract, not a futures contract. Options give the holder the choice to exercise; futures do not.
Choice C is incorrect because a bond combined with an equity option describes a warrant or a convertible bond, not a futures contract. Futures are standalone derivative contracts based on commodities, indexes, currencies, or rates.
Choice D is incorrect because an unsecured debt instrument linked to an index describes an exchange-traded note (ETN), not a futures contract. ETNs are credit instruments; futures are exchange-traded derivative obligations.