Series 65 Practice Test

Series 65 Equities & Derivatives Practice Questions

Equities & Derivatives makes up 3 of every 50 questions on a Tigertest Series 65 practice test. Here are 10 of the 12 questions on it, each with the answer and the reason.

Updated 2026-11-10 by the Tigertest team. Based on NASAA's Series 65 test specifications. Original questions; 50 per test, weighted like the real 130-question exam. Not affiliated with NASAA or FINRA.

1. 1. A company pays a 5% stock dividend. Immediately afterward, the total market value of a shareholder's position is:

   • A.Up by the new shares' value
   • B.About unchanged
   • C.5% higher
   • D.5% lower

   Answer: B. A stock dividend gives more shares but cuts the price per share in proportion, so the total value and ownership share stay the same. It is generally not taxed when received.

2. 2. A preferred stock pays a dividend that resets each quarter with short-term rates. Its price tends to be:

   • A.Tied to the common stock
   • B.Fixed at par by law
   • C.Very sensitive to rate changes
   • D.Fairly stable

   Answer: D. Because its dividend adjusts to market rates, a floating-rate preferred has little interest rate risk, so its price stays close to par.

3. 3. An executive received restricted stock from her employer in a private placement. Before selling, she must:

   • A.Meet a resale restriction
   • B.Get her firm's approval only
   • C.Register as an agent
   • D.Convert it to preferred

   Answer: A. Restricted securities are bought in unregistered offerings and cannot be resold freely until a holding period passes or an exemption such as Rule 144 applies.

4. 4. An employee exercises incentive stock options and holds the shares. For regular income tax, the spread at exercise is:

   • A.Taxed as a capital gain
   • B.Subject to payroll tax
   • C.Not taxed at exercise
   • D.Taxed as ordinary income

   Answer: C. An ISO exercise is not a regular income tax event if the shares are held, but the spread is an AMT preference item. A qualifying sale later gives long-term capital gain.

5. 5. When an employee exercises nonqualified stock options, the spread between the market price and the exercise price is:

   • A.Tax-free
   • B.An AMT item only
   • C.Ordinary income
   • D.A long-term capital gain

   Answer: C. With NSOs the spread at exercise is compensation, taxed as ordinary income and reported on the W-2. That amount becomes part of the shares' cost basis.

6. 6. An analyst studies a company's earnings growth, management and balance sheet to estimate its value. This is:

   • A.Fundamental analysis
   • B.Quantitative trading
   • C.Sentiment analysis
   • D.Technical analysis

   Answer: A. Fundamental analysis values a company from its financial statements, industry and management. Technical analysis studies price and volume patterns.

7. 7. A technical analyst would pay closest attention to:

   • A.The dividend payout ratio
   • B.The company's debt ratios
   • C.Management's experience
   • D.Support and resistance

   Answer: D. Technical analysts read charts: trends, moving averages, support and resistance, and volume. Ratios and management quality belong to fundamental analysis.

8. 8. A stock will pay a $2.40 dividend next year, which grows 3% a year. The investor requires 9%. Using the dividend discount model, the stock is worth:

   • A.$20
   • B.$40
   • C.$26.67
   • D.$80

   Answer: B. Constant-growth DDM: value = next dividend / (required return - growth) = $2.40 / (0.09 - 0.03) = $40. Dividing by 9% alone gives $26.67.

9. 9. A private company sells its shares to the public for the first time. This is:

   • A.A tender offer
   • B.An initial public offering
   • C.A follow-on secondary offering
   • D.A private placement

   Answer: B. In an IPO the company first offers its shares to the public. A secondary offering is a later sale, by the company or by existing holders.

10. 10. A special purpose acquisition company raises money in an IPO in order to:

    • A.Lend to small companies
    • B.Hold a fixed bond portfolio
    • C.Run a specific operating business
    • D.Buy a business not yet named

    Answer: D. A SPAC is a blank-check company: it holds IPO proceeds in trust while it searches for a private company to merge with, so investors do not know the target at the outset.