Free NASAA Series 66 (Uniform Combined State Law Examination) Investment Vehicle Characteristics Practice Questions
Investment vehicle characteristics on the NASAA Series 66 exam cover stocks, bonds, mutual funds, ETFs, options, annuities, alternative investments, and insurance products, including their risk, return, and tax treatment.
144 Questions
47 Easy
61 Medium
36 Hard
2026 Syllabus
Sample Questions
Question 1
Easy
An American Depositary Receipt (ADR) is best described as:
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Correct Answer: D
Solution
D is correct. An ADR is a negotiable certificate issued by a U.S. depositary bank that represents a specified number of shares in a foreign company. The underlying shares are held on deposit with a custodian in the company's home market, and the ADR itself trades in U.S. dollars on U.S. exchanges or OTC. ADRs give U.S. investors access to foreign equity ownership without the need to transact in a foreign currency or on a foreign exchange.
Question 2
Medium
Which of the following most accurately describes an American Depositary Receipt (ADR)?
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Correct Answer: C
Solution
C is correct. An ADR is a negotiable certificate issued by a U.S. depositary bank that represents a specified number of underlying foreign-company shares held on deposit abroad. ADRs trade on U.S. exchanges or OTC in U.S. dollars, and dividends are paid to ADR holders in U.S. dollars after the depositary bank converts the local currency distribution.
Question 3
Hard
A client is evaluating two passively managed vehicles that track the S&P 500: an open-end index mutual fund and an index ETF. Which of the following correctly describes the key structural differences between the two?
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Correct Answer: A
Solution
A is correct. ETFs are listed on exchanges and trade continuously during market hours at prices determined by supply and demand, which can deviate (usually slightly) from the underlying intraday NAV. Authorized participants create and redeem ETF shares in kind, exchanging baskets of the underlying securities for ETF shares rather than forcing the fund to transact in cash. This in-kind mechanism rarely triggers realized gains inside the fund, so ETFs typically distribute far fewer capital gains than open-end mutual funds, which must sell appreciated holdings at NAV to meet cash redemptions. Passive index ETFs also generally carry lower expense ratios than comparable index mutual funds.
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