Exam 11.24

Which of the following is an effect of advance refunding on a municipal bond issue? A) Lowered rating. B) Cancellation. C) Defeasement. D) Redemption.

Defeasement.

Which of the following responsibilities did the MSRB receive through the Securities Acts Amendments of 1975? Regulation of municipal issuers. Establishment of recordkeeping requirements for municipal broker/dealers. Enforcement of any municipal regulations it adopts. Creation of regulations for participants in the municipal securities secondary market.

Establishment of recordkeeping requirements for municipal broker/dealers. Creation of regulations for participants in the municipal securities secondary market.

In a new municipal bond offering, which of the following orders is placed after the bid is awarded and credits the entire syndicate with the takedown? A) Group. B) Presale. C) Designated. D) Member.

Group.

Under the 5% markup policy, which of the following determines the amount of markup in a principal transaction? A) Lowest bid. B) Lowest ask. C) Highest ask. D) Highest bid.

Lowest ask. Markups are always based on the lowest ask. Markdowns are always based on the highest bid.

All of the following are oil and gas program sharing arrangements EXCEPT: A) reversionary working interest. B) disproportionate sharing. C) functional allocation. D) all or none underwriting arrangement.

all or none underwriting arrangement.

A customer long stock who wishes to reduce risk and generate income should: A) sell a put. B) buy a call. C) buy a put. D) sell a call.

sell a call.

The difference between the syndicate bid and the reoffering price on a competitive bid of a new municipal underwriting is the: A) spread. B) discount. C) scale. D) selling concession.

spread.

All of the following may be included in an advertisement for a CMO issue EXCEPT a: A) generic description of the CMO tranche. B) disclosure of the CMO's coupon rate and final maturity date. C) statement that the CMO is guaranteed by the U.S. government. D) disclosure that payment assumptions may or may not be met.

statement that the CMO is guaranteed by the U.S. government.

The Three Contact Rule does NOT apply to the purchase or sale of a non-Nasdaq security provided there is at least: A) 2 priced quotations available electronically . B) 1 priced quotation available electronically. C) 3 priced quotations available electronically . D) 4 priced quotations available electronically .

2 priced quotations available electronically .

A technical analyst would be most interested in which of the following? A) 200-day moving averages. B) PE ratios. C) Working capital. D) Quick ratios.

200-day moving averages.

One of your customers buys a new issue municipal revenue bond on March 19. The trade settles on March 24, and the bond pays interest on February 1 and August 1. If the dated date of the bond is March 1, how many days of accrued interest are due? A) 19. B) 23. C) 55. D) 24.

23.

If a customer buys 1 ABC Jan 60 put at 6 and writes 1 ABC Jan 75 put at 13, the maximum loss is: A) 1500. B) 800. C) 700. D) 900.

800. This is a credit spread (more premium was received than was paid). The maximum gain to a seller is the premium received (net credit of 7). In a spread, the maximum gain plus the maximum loss equal the difference in strike prices (75 − 60 = 15). Therefore, 15 less the maximum gain of 7 equals the maximum loss of 8 multiplied by $100, or $800.

An example of a taxable bond issued by a municipal government is: A) A Build America Bond (BAB). B) A general obligation bond (GO). C) A tax anticipation note (TAN). D) Series EE bonds.

A Build America Bond (BAB).

If a Nasdaq market maker is selling stock to a customer from inventory and the firm has held the shares to be sold for several months, what price should the dealer use as a basis for a markup? A) Broker/dealer's own current offer price. B) Price at which it purchased the securities. C) Offer price shown in the electronic "OTC Pink" on the day of the current sale. D) Best offering price quoted in the interdealer market.

Best offering price quoted in the interdealer market.

A customer sold 100 shares of QRS short when the stock was trading at 19. If QRS is now trading at 14, and he wants to protect his gain, which of the following orders should he place? A) Sell stop at 13.75. B) Buy stop at 14.25. C) Sell limit at 14. D) Buy limit at 14.

Buy stop at 14.25.

A Japanese manufacturer sells recorders to a U.S. retailing firm. The manufacturer is to receive $1 million (U.S. dollars) in 90 days. How can he best protect himself against a decline in the dollar? A) Buy yen calls. B) Sell yen calls. C) Sell yen puts. D) Buy yen puts.

Buy yen calls.

Your broker/dealer acts as a prime broker for ABC fund. In this arrangement, your broker/dealer is likely to be providing which of the following services? Execution of all transactions for the fund portfolio Clearing services Lending for trades done on margin Ensuring that all exchange-trading rules are complied by

Clearing services Lending for trades done on margin

Which of the following violations could bar an agent from employment in the securities industry? A) Failing to qualify by examination as an agent. B) Associating with a known felon. C) Being convicted of a traffic violation. D) Conviction for the misdemeanor of petty theft of money from a client.

Conviction for the misdemeanor of petty theft of money from a client.

If a customer is in a low federal income tax bracket and his main investment objective is current income, which of the following securities should the agent recommend? A) Investment-grade corporate bond. B) U.S. government bond. C) Zero-coupon bond. D) City of Milwaukee GO bond.

Investment-grade corporate bond.

Which of the following are TRUE of a municipal bond broker's broker? Protects customer identity. Must disclose the identity of customers. Has no inventory. Maintains an inventory.

Protects customer identity. Has no inventory.

Which of the following statements regarding the Code of Arbitration are TRUE? Simplified arbitration is available for claims of $50,000 or less. Simplified arbitration is available for claims of $25,000 or less. The statute of limitations for filing a claim is 3 years from the event. The statute of limitations for filing a claim is 6 years from the event.

Simplified arbitration is available for claims of $50,000 or less. The statute of limitations for filing a claim is 6 years from the event.

FINRA requires that each registered representative and principal receive compliance training on an annual basis. Regarding the FINRA requirement, which of the following statements are TRUE? The meeting delivery method can be individually or in groups. Webcast must be live and may not be recorded. Participants must be able to ask questions in a live format. The meeting can be in person or by Webcast.

The meeting delivery method can be individually or in groups. The meeting can be in person or by Webcast.

A specialist (designated market maker) is permitted to do all of the following EXCEPT: A) represent a bid and offer simultaneously. B) accept a not-held order. C) accept a limit order. D) accept a stop order.

accept a not-held order.

During the 20-day cooling-off period for an initial public offering, all of the following are permitted EXCEPT: A) accepting a deposit from a customer to purchase the new issue. B) publishing a tombstone advertisement. C) mailing a red herring to a customer. D) accepting indications of interest.

accepting a deposit from a customer to purchase the new issue.

If an indenture has a closed-end provision, this means that A) the bonds must be called before maturity B) a sinking fund must be established C) additional issues have no lien on the revenue stream D) additional issues will have junior liens

additional issues will have junior liens

If a Japanese exporter wants to hedge a recent sale of stereo equipment to a U.S. buyer, and the exporter will be paid in U.S. dollars upon delivery of the goods, the best hedge would be to: A) buy Japanese yen calls. B) buy Japanese yen puts. C) sell Japanese yen calls. D) sell Japanese yen puts.

buy Japanese yen calls.

The MSRB is authorized to adopt rules concerning all of the following EXCEPT the: A) sale of new issues to related portfolios. B) regulation of municipal securities advertising. C) form and content of price quotations. D) information to be provided by municipal issuers.

information to be provided by municipal issuers.

Private placements A) may be advertised under all circumstances B) may never be advertised under any circumstance C) may be advertised if all of those solicited are accredited investors D) can only be advertised when 35 or fewer of the investors are nonaccredited

may be advertised if all of those solicited are accredited investors

Libby sees a tombstone advertisement for a new issue of Southwest Barge subordinated convertible debentures. The bonds will carry an 11-1/4% coupon, are convertible into common stock at $10.50, and are being issued to the public at 100. The proceeds of the issue will be used specifically for purchasing new Southwest barges. Libby's concerns about the issue could include: A) she should not be concerned as the bonds will be first in liquidation. B) the issue may be junior-in-lien to another security issue. C) the new barges might sink, and the collateral would be gone. D) the company might demand that she accept common stock for her bond.

the issue may be junior-in-lien to another security issue.

An informal network of market makers that offers to trade securities NOT listed on an exchange is called: A) National Daily Quotation Service. B) National Association of Securities Dealers Automated Quotations. C) Archipelago Exchange (ArcaEx). D) the over-the-counter market.

the over-the-counter market.

A customer sells securities and uses the proceeds to buy more securities at the same cost. Under the 5% markup policy, the markup is calculated on: A) each side separately. B) the sell side only. C) the total of both sides. D) the buy side only.

the total of both sides.

When a customer enters a sell order and the customer is in possession of the certificates, a broker/dealer must determine all of the following EXCEPT: A) whether the transfer agent has accepted the securities. B) the location of the securities. C) whether the securities are in deliverable form. D) whether the client can make delivery promptly .

whether the transfer agent has accepted the securities.

If a bond is sold to a customer at par, under MSRB rules, all of the following must be disclosed to the customer on his confirmation EXCEPT A) number of bonds purchased B) total monies due C) yield based on price D) information on call features

yield based on price