Series 65 · Practice questions
Free Series 65 practice questions, with the answers explained
Ten original questions at the difficulty the real exam uses, drawn from all four sections of the NASAA outline. Try each one under 83 seconds, the pace the 3-hour exam demands, before you open the answer.
A note on what these are: the actual Series 65 questions belong to NASAA and are never published, so any site offering "real exam questions" is either lying or breaking the rules. These are original questions written to test the same concepts, at the same difficulty, in the same construction style: short parallel options, distractors that are the mistakes a half-prepared candidate makes, and a plain-English explanation for each.
Question 1 · Section 1: Economic Factors and Business Information · hard
An adviser notes that the average duration of unemployment has begun to fall and that banks have lowered the prime rate. Because both statistics are lagging indicators, the adviser should conclude that:
- A. A new expansion is about to begin in the coming months
- B. The economy has reached its peak
- C. The recovery is already well underway
- D. A recession is imminent
Show the answer
C. The recovery is already well underway
Lagging indicators change direction only after the economy has already turned, so improvement in them confirms a recovery that started some time ago rather than predicting one. Reading them as a forecast of an expansion yet to come is the classic mistake; that role belongs to leading indicators such as building permits and stock prices.
Question 2 · Section 1: Economic Factors and Business Information · hard
Management restricted an auditor's access to certain records, and the auditor was unable to obtain enough evidence to reach a conclusion about the financial statements as a whole. The auditor's report will most likely contain:
- A. A qualified opinion
- B. An adverse opinion
- C. A disclaimer of opinion
- D. An unqualified opinion with an explanatory paragraph
Show the answer
C. A disclaimer of opinion
When a scope limitation is so pervasive that the auditor cannot form a view on the statements as a whole, the auditor declines to express one; that is a disclaimer of opinion. An adverse opinion is the trap: it applies when the auditor did gather the evidence and concluded the statements are materially misstated. A qualified opinion fits a limitation confined to one area, not the whole set of statements.
Question 3 · Section 2: Investment Vehicle Characteristics · medium
When an investor redeems shares of an open-end mutual fund, the redemption price is based on:
- A. The previous day's closing NAV
- B. The next NAV computed after the order is received
- C. The NAV in effect at the moment the order is entered
- D. The current bid price in the secondary market
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B. The next NAV computed after the order is received
Open-end funds use forward pricing: any purchase or redemption is filled at the next NAV calculated after the fund receives the order, normally at that day's close. An investor never knows the exact price in advance, which rules out both the prior close and a price fixed at order entry. Bid prices apply to closed-end funds and ETFs, which trade in the secondary market.
Question 4 · Section 2: Investment Vehicle Characteristics · medium
A special purpose acquisition company (SPAC) is best described as:
- A. A closed-end fund that invests in newly public companies
- B. A subsidiary formed to spin off a mature division
- C. A shell company that raises IPO proceeds to acquire an unidentified business
- D. A private fund that buys controlling stakes in distressed public companies
Show the answer
C. A shell company that raises IPO proceeds to acquire an unidentified business
A SPAC, also called a blank-check company, has no operations of its own; it raises cash in an IPO, holds it in trust, and must complete a business combination within a set deadline or return the money. Investors commit capital before knowing what will be acquired. Buying stakes in distressed companies describes a private equity strategy, and a SPAC is not a registered investment company.
Question 5 · Section 2: Investment Vehicle Characteristics · medium
Which of the following best describes a venture capital (VC) fund?
- A. A private, illiquid fund that takes equity stakes in early-stage companies
- B. A registered fund that trades intraday and holds seasoned blue-chip stocks
- C. A pooled vehicle that buys mature companies using substantial borrowed money
- D. A fund that sells stocks short and uses derivatives in falling markets
Show the answer
A. A private, illiquid fund that takes equity stakes in early-stage companies
Venture capital funds are private pools that finance startups in exchange for equity, expecting many failures to be offset by a few large successes over a multi-year horizon; investor capital is locked up for years because the holdings cannot be readily sold. Leveraged purchases of mature companies describe buyout private equity, the closest neighbor, and short-selling strategies describe certain hedge funds.
Question 6 · Section 3: Client Investment Recommendations and Strategies · medium
Adding an asset to a portfolio provides the GREATEST diversification benefit when the asset's returns have which correlation with the existing portfolio?
- A. Correlation is irrelevant to diversification
- B. +1.0
- C. +0.8
- D. 0.0 or negative
Show the answer
D. 0.0 or negative
The lower (or more negative) the correlation, the more the new asset's movements offset the portfolio's, reducing overall volatility. Perfectly correlated assets provide no diversification benefit.
Question 7 · Section 3: Client Investment Recommendations and Strategies · hard
A U.S. investor holds a portfolio of euro-denominated bonds and is concerned that the euro will weaken against the dollar before the bonds mature. To hedge this specific risk, the investor could:
- A. Buy calls on the euro
- B. Sell puts on the euro
- C. Buy more euro-denominated bonds
- D. Buy puts on the euro
Show the answer
D. Buy puts on the euro
The risk is a decline in the euro. Puts on the euro rise in value as the euro falls, offsetting the currency loss on the bonds. Buying euro calls hedges the opposite exposure (a rising euro), and selling euro puts collects a premium but loses money precisely when the euro weakens.
Question 8 · Section 3: Client Investment Recommendations and Strategies · medium
The owner of a small business elects S corporation status for her company. For federal income tax purposes, the corporation's earnings are:
- A. Taxed at the corporate level and again when paid out as dividends
- B. Exempt from federal income tax at both the corporate and shareholder levels
- C. Taxed to shareholders only in years when distributions are paid
- D. Passed through to shareholders' returns whether or not distributed
Show the answer
D. Passed through to shareholders' returns whether or not distributed
An S corporation is a pass-through entity: its income is reported on the shareholders' personal returns in the year it is earned, whether or not any cash is distributed. This avoids the double taxation of a C corporation, where earnings are taxed to the corporation and again to shareholders as dividends. Pass-through treatment is not an exemption; the income is taxed once, at the shareholder level.
Question 9 · Section 4: Laws, Regulations, and Guidelines, including Prohibition on Unethical Business Practices · hard
A client phones her agent and says: 'Buy 300 shares of RST Corp. for my account today — just pick the best moment and price this afternoon.' The agent executes the order two hours later without written discretionary authority on file. The agent has:
- A. Committed unauthorized trading
- B. Exercised discretion without written authority
- C. Acted properly, provided the order ticket is marked discretionary
- D. Acted properly
Show the answer
D. Acted properly
Discretion means choosing the security, the action (buy or sell), or the amount. The client specified all three and left only the time and price to the agent, so the order is not discretionary: no written authority is needed and the ticket is not marked as a discretionary order. Had the client said 'buy something in technology for me,' written authorization would have been required first.
Question 10 · Section 4: Laws, Regulations, and Guidelines, including Prohibition on Unethical Business Practices · medium
An issuer sells its securities to accredited investors in several states under SEC Rule 506(b) of Regulation D without any general solicitation. With respect to this offering, a state securities Administrator may:
- A. Require registration of the securities by qualification
- B. Prohibit the offering on the basis of unfair terms
- C. Require a notice filing and a fee
- D. Limit the number of in-state purchasers to 35
Show the answer
C. Require a notice filing and a fee
Securities sold under Rule 506 are federal covered securities, so states may not require registration or conduct merit review. States keep the power to require a notice filing and fee and to enforce their antifraud provisions. The 35-purchaser figure is a Rule 506(b) limit on non-accredited investors, not a condition an Administrator can impose.
How did you do?
Ten questions read untimed is a warm-up, not a verdict. The exam gives you 180 minutes for 130 scored questions plus 10 unscored pretest questions mixed in, and the pass line is 92 correct. What separates candidates who know the material from candidates who pass is holding an 83-second pace for three hours while 60% of the questions come from the two heaviest sections, client recommendations and laws and regulations.
What to practice next
- Timed section drills. Twenty questions on one section, on the clock, until the misses stop repeating. That is how a weak section gets fixed.
- Full simulations. 140 questions, the 3-hour clock, unmarked pretest questions, scored against 92 of 130. Two of these at 92 or better before your exam date is the readiness test that matters, and it is the condition of our pass guarantee.
- The figures and rules. Dollar thresholds, day counts, and definitions make up a large share of Section 4. The free study sheet lists the ones tested most.
Complete Prep, $99 one-time: 1,000+ original questions, timed section drills, unlimited full 140-question simulations on the 3-hour clock, the Crash Course review, and a pass guarantee. 3 months of access.
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Are these real Series 65 exam questions?
No, and nobody's are. NASAA owns the exam content and never releases it. These are original questions written to the published NASAA outline at the exam's difficulty and in its construction style, which is what you actually need to prepare.
How many practice questions do I need before the Series 65?
Fewer than most people think, if they're timed. Candidates who pass comfortably typically complete several hundred timed questions plus two or three full-length simulations. Untimed questions read from a book don't build the pacing the exam tests.
What is the passing score on the Series 65?
92 of 130 scored questions, about 71%. The 10 unscored pretest questions are mixed in unmarked, so you'll see 140 questions in 180 minutes.
Is there a free Series 65 practice exam?
Yes. The free pulse check on this site is 10 timed, exam-difficulty questions scored by section with a pacing report. Email contacts also get one free 20-question timed sitting in the same format paying customers use.
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