Green Light Exam 2

A Regulation D offering may be sold to a maximum of: A. 15 nonaccredited investors B. 15 accredited investors C. 35 nonaccredited investors D35 accredited investors

C

A call premium is best described as the amount the: A. Investor pays above the par value B. Investor will receive if the bond is sold above the par value C. Issuer pays above 100 to retire bonds prior to maturity D. Bondholder receives at maturity

C

A facility is created by the issuance of industrial development revenue bonds. The bonds are backed by: A. The local municipal district in which the facility is domiciled B. The state in which the facility is domiciled C. The corporation that leases the facility D. Both the corporation that leases the facility and the municipality

C

A security with a high beta: A. Outperforms the market when it is gaining and losing B. Underperforms the market when it is gaining and losing C. Outperforms the market when its gaining and underperforms the market when its losing D. Underperforms the market when its gaining and outperforms the market when its losing

C

An investor, age 52, with funds in a 401(k) plan, is leaving her employer and wants to transfer the funds to an IRA account at your firm. Which of the following statements is TRUE? A. There will be a 10% penalty B. There will be a 50% penalty C. There will be no penalty D. There will be no penalty but the amount transferred will be taxable

C

A client owns stock that's trading at $52.50 and wants to sell her shares, but only if she can sell at $54.00 or higher. She should place which of the following orders? A. A sell limit B. A sell stop C. A sell stop-limit D. A buy stop

A

A corporate bond that has no specific collateral backing and is guaranteed by the "full faith and credit" of the issuing corporation is called a(n): A. Debenture B. Guaranteed bond C. Income bond D. Equipment trust certificate

A

A corporation wishes to open a cash account. Which of the following documents is required? A. A corporate resolution B. A copy of the corporate charter C. A hypothecation agreement D. A risk disclosure document

A

A customer executing a short sale anticipates: A. A decrease in the market value of a security B. An increase in the market value of a security C. No change in the market value of a security D. Either a large increase or decrease in the market value of a security

A

A member of the Federal Reserve System is seeking to borrow funds from another member bank. The interest rate that's charged on the loan is referred to as the: A. Fed funds rate B. Discount rate C. Call rate D. Prime rate

A

A rise in the prices of several key goods and services would be an indicator of: A. Inflation B. A recession C. A weak dollar D. Political instability

A

A sales breakpoint of a mutual fund is: A. The minimum dollar amount of a purchase of a mutual fund where a volume discount is given B. The minimum share amount of a purchase of a mutual fund where a volume discount is given C. The point at which a letter of intent can be obtained D. The point at which a letter of intent can be backdated

A

All of the following statements are TRUE regarding private securities transactions that are executed by an associated person of a member firm, EXCEPT: A. The transactions may not involve private placements, even if the activity is otherwise acceptable B. If a registered person will be compensated, the firm must approve of the transactions in writing C. If a registered person will not be compensated, the firm must be notified of the person's participation D. A registered person's personal transactions in mutual funds are not covered by this rule

A

Deposits of cash that are held at a bank are insured by which of the following? A. The Federal Deposit Insurance Corporation (FDIC) B. The Internal Revenue Service (IRS) C. The Securities Investors Protection Corporation (SIPC) D. The Securities Exchange Commission (SEC)

A

The BG mutual fund has a NAV of $11.72 and an offering price of $12.67. What is the sales charge for this fund? A. 7.5% B. 8.10% C. 8.50% D. 9%

A

The practice of selling dividends is prohibited because: A. The amount of the dividend is already included in the price the customer pays for the fund B. The investor must pay a capital gains tax on any fund distribution C. The dividend is tax-free D. This would constitute making a recommendation on nonpublic information

A

When a broker-dealer is not acting for its own account but is making securities transactions for the accounts of others, the firm is acting as a(n): A. Broker B. Principal C. Underwriter D. Dealer

A

Which entity maintains a record of the shareholders that are eligible to receive additional shares after a stock split? A. The transfer agent B. A qualified custodian C. The issuer D. The Depository Trust Company (DTC)

A

Which of the following activities by a market maker is NOT prohibited by FINRA's Anti-Intimidation/Coordination Interpretation? A. The market maker setting its own bid and ask prices in a Nasdaq security B. The market maker attempting to influence another firm to adjust its quotation C. The market maker attempting to influence another firm to alter its ask price D. The market maker coordinating quotations with another broker-dealer

A

Which of the following is TRUE concerning the beneficiary of a Coverdell ESA? A. Contributions can be made until age 18 and must be used by age 30. B. Contributions can be made until age 25 and must be used by age 30. C. Contributions can be made until age 18 and used at any age. D. Contributions can be made until age 25 and used at any age.

A

Which of the following is responsible for updating state securities laws? A. NASAA B. FINRA C. SEC D. Nasdaq

A

Which of the following statements about Regulation T is correct? A. Regulation T is set by the FRB B. Regulation T requires payment by settlement date C. Regulation T is set by FINRA D. Regulation T is set by the SEC

A

Which of the following statements is TRUE about revenue bonds? A. Interest is usually paid from the earnings of the facility for which the bond was issued B. Interest is subject to federal taxes C. Revenue bonds are considered safer than general obligation bonds D. The state public utility commission must approve each interest payment

A

Which one of the following persons is permitted to purchase an equity IPO in her personal account? A. The cousin of a registered representative B. The mother-in-law of a registered representative C. A portfolio manager of a mutual fund D. A person employed by an insurance company who buys and sells securities

A

n which of the following situations can a registered person of a broker-dealer borrow funds from a customer without approval of her firm? A. The customer is the brother-in-law of the registered person B. The customer is an institutional investor C. The customer is a personal friend of the registered person's sister D. The loan is based on a business relationship that's independent from the member firm-customer relationship

A

An investor notices a specific stock is trading at a higher price on one exchange than on another. If the investor takes advantage of this difference, it's referred to as: A. Front running B. Arbitrage C. Insider trading D. Trading ahead

B

Exchange-traded notes are most susceptible to which risks? A. Regulatory and interest-rate risk B. Credit and market risk CLegislative and business risk DCurrency and political risk

B

Class A shares of an open-end investment company are different from Class B shares in that: A. Class A shares are common shares, while Class B shares are preferred shares B. Class A shares have a front-end sales charge, while Class B shares have a contingent deferred sales charge C. Class A shares pay quarterly dividends, while Class B shares pay a monthly dividend D. Class A shares can be purchased directly from the fund, while Class B shares are offered through broker-dealers

B

A 529A or ABLE account provides which of the following? A. Taxable qualified withdrawals B. Tax-free growth on qualified withdrawals C. Pre-tax contributions D. Growth that's taxed at a lower rate

B

A bond has a 6% coupon and is trading with an 8.34% basis. The bond is trading at which of the following price levels? A. Par B. A discount C. A premium D. Cannot be determined

B

A corporation that has issued common or preferred stock has created: A. Debt obligations B. Outstanding equity C. A current tax liability D. A leveraged position

B

A customer contacts her registered representative to buy an OTC stock. Rather than buying it directly from a market maker, the broker-dealer contacts another broker-dealer, who buys it from a market maker creating two levels of transaction fees. This is known as: A. Free-riding and withholding B. Interpositioning C. Backing away D. Churning

B

A disciplinary action concerning a registered representative (RR) is reported by the firm through which of the following? A. CRD B. Form U4 C. Form U5 D. BrokerCheck®

B

A portfolio manager has recently taken his client's equity holdings out of technology stocks and moved them into manufacturing stocks. The manager has historically moved client funds from one industry to another during defined periods. What is this type of strategy called? A. Dollar cost averaging B. Sector rotation C. Asset rebalancing D. Portfolio rebalancing

B

A withdrawal from an IRA may be made prior to age 59 1/2 without incurring a 10% penalty tax in which of the following situations? A. To purchase a vacation home B. To pay for the college tuition of the investor's daughter C. As a result of the permanent and total disability of the investor's spouse. D. To cover the costs of the funeral of the investor's father.

B

FINRA requires a registered representative to notify his broker-dealer if he's involved in which of the following activities? A. Volunteering as youth basketball team's coach B. Driving on a part-time basis for a ridesharing company on the weekends C. Winning over $15,000 from gambling at a casino D. Selling non-proprietary mutual fund products through his firm

B

If an annuitant cancels her variable annuity during the accumulation period, she may be required to pay which of the following? A. A penalty to the IRS B. A surrender charge C. An additional management fee D. An additional administrative fee

B

If an investor owns Treasury bonds that will mature in 20 years, she is exposed to: A. Credit risk B. Inflationary risk C. Political risk D. Capital risk

B

It is most beneficial to the holder of a call if the price of the underlying security is: A. Falling B. Rising C. Remaining the same D. Fluctuating

B

Repurchase agreements (repos) and reverse repos would MOST likely be used by: A. A municipality borrowing to build a new highway B. Institutions that have a need to borrow on a short-term basis, or have money to lend on a short-term basis C. Corporations issuing stock to raise money D. Importers and exporters in connection with foreign trade that represents money to be paid in the future and is guaranteed by a bank

B

What is the required annual income for a married couple to be considered an accredited investor under Regulation D? A. $100,000 B. $300,000 C. $1 million D. $5 million

B

When executing customer orders, best execution rules require the broker-dealer to: A. Obtain the lowest price available in the market at the time B. Use reasonable diligence to obtain the best price possible C. Obtain a price that balances the customer's interests with the firm's need to make a profit D. Always use an automated execution system

B

Which of the following statements best describes the difference between Settlement date and Regulation T payment date? A. Regulation T payment date is the date the two broker-dealers exchange security and money and Settlement date is the date the customers must pay their broker-dealer. B. Settlement date is the date the two broker-dealers exchange security and money and Regulation T payment date is the date the customers must pay their broker-dealer. C. Settlement date is for cash accounts and Regulation T payment date is for margin accounts. D. Settlement date is for margin accounts and Regulation T payment date is for cash accounts.

B

Which of the following statements is TRUE concerning filing a registration application with FINRA? A. It is acceptable not to answer certain questions due to privacy concerns. B. It is a violation for an application to be incomplete or misleading. C. If a person has already been registered and changes firms, a new application is not required. D. All registered persons are required to update their application every two years.

B

Which of the following statements regarding exchange-traded funds (ETFs) is TRUE? A. ETF shares cannot be traded in the secondary market. B. ETFs typically have lower fees than actively managed portfolios. C. ETF shares are priced once per day and sold at their net asset value (NAV). D. ETFs don't pay cash dividends to their shareholders.

B

An registered person has received a letter from a customer which includes a complaint about a recent new issue that declined substantially on its first day of trading. The customer purchased the shares based on a recommendation by the registered person and now claims that the recommendation was unsuitable. Which of the following statements is TRUE? A. The firm must keep a copy of the complaint for six years. B. The principal must review the complaint and submit a written response to the customer. C. A memo must be prepared describing any action taken in response to the complaint. D. The firm must promptly enter into arbitration (or mediation) with the customer to determine whether a reimbursement is warranted.

C

Broker-dealers must provide a privacy notice to every consumer: A. When the account is opened B. When the first trade occurs C. Before disclosing nonpublic, personal information D. If requested

C

By using a dollar-cost averaging investment strategy, an investor will generally find the: A. Average price of securities being purchased are less than the average cost of the securities over a long period B. Average cost of securities purchased is more than the average price of the securities purchased over a short period C. Average price of the securities purchased will be more than the average cost of the securities over a long period D. Average cost of the securities will be equal to the average price of the securities over a long period

C

Federal and state registration requirements apply to all of the following, EXCEPT: A. Publicly traded limited partnerships B. Preferred stock C. Municipal securities D. Open-end investment companies

C

If a bond is currently selling for less than par value, then: A. The current yield is lower than the nominal yield B. The current yield is equal to the nominal yield C. The current yield is higher than the nominal yield D. Interest rates are currently lower than when the bond was originally issued

C

If a newly hired person is employed by a broker-dealer and will be offering mutual fund shares, she can become FINRA registered by: A. Passing the SIE Exam only B. Passing the Series 6 Exam only C. Passing the SIE Exam and the Series 6 Exam D. Passing the SIE Exam and the Series 63 Exam

C

Jim sits on the board of directors of a corporation. He has told his neighbor that his company will soon announce a revolutionary new product that should double the company's revenues. As a result, his neighbor purchases the stock. Jim does not purchase shares of the company. Who may be liable for violating insider trading restrictions? A. Only the neighbor, since she is the person who bought the stock. B. Only Jim, since he is the one who violated his duty to his shareholders. C. Both Jim as the tipper and the neighbor as the tippee. D. Unless the neighbor profits on the transaction, neither person is in violation.

C

Listed equity options cease trading at: A. 11:00 a.m. Eastern Time on the expiration date B. 2:30 p.m. Eastern Time on the expiration date C. 4:00 p.m. Eastern Time on the expiration date D. 5:30 p.m. Eastern Time on the expiration date

C

Many investors prefer to receive variable annuity payments under the straight-life payout option because it: A. Is the most conservative method for receiving payments B. Allows for a beneficiary for the entire payout period C. Provides the maximum cash flow of all payout options D. Provides an equal amount each month for the investor's lifetime

C

Prior to the maturity of a variable-rate demand obligation, an investor has the right to receive the: A. Current market value B. Par value C. Par value plus accrued interest D. Par value less accrued interest

C

Three basis points are equal to: A. 3% B. 3/10th of 1% C. 3/100th of 1% D. 3/1000th of 1%

C

Under the New Issue Rule, all of the following persons are defined as restricted persons, EXCEPT: A. The portfolio manager of an investment company B. A registered person of a broker-dealer C. The brother of a registered person of a broker-dealer who has an account with a different broker-dealer D. The parents of a registered person of a broker-dealer who reside in the same house as the registered person

C

What is the real interest rate for a bond that's yielding 6%, while the level of inflation is 2%, and the prime rate is 5%? A. 6% B. 5% C. 4% D. 3%

C

What's required on Form U5? A. Notary stamp B. Disciplinary actions that are taken by a regulator C. The reason for termination D. Signature of the registered representative

C

When an ETF is purchased, what is the transaction cost paid by the client? A. A sales charge B. A load C. A commission D. A fee

C

When illicit funds have entered the banking system undetected and appear to be legitimate, the funds are referred to as: A. Structured B. Layered C. Integrated D. Properly washed

C

Which of the following is the rate that's charged on overnight loans between commercial banks? A. Prime rate B. Discount rate C. Federal funds rate D. Call rate

C

A 529 plan may be offered by which of the following methods? A. Directly sold only B. Sold by an adviser only C. Sold by an employee who is not associated with a brokerage firm D. Sold directly or by an adviser

D

A broker-dealer executes but does not process transactions. If the firm processing the transactions knows the identity of the customers, this arrangement is known as a(n): A. Prime broker B. Clearing broker C. Omnibus account D. Fully disclosed account

D

A broker-dealer's customer is attempting to raise money for a new business venture. The customer's registered representative (RR) agrees to assist by referring other clients and, in return, the RR will receive free services from the new business venture. This arrangement is: A. Normal business practice B. Acceptable as long as the free services are considered fair and reasonable C. Acceptable if the firm was provided prior written notice D. Acceptable if the firm was provided prior written notice and it maintains records of all transactions on the firm's books

D

According to the Customer Identification Program, broker-dealers are required to verify each customer's identity: A. Before the account is opened B. Before the privacy notice is given C. Before the first trade D. Within a reasonable period

D

An investor has purchased 10,000 shares of a mutual fund for a total investment of $860,000. The investor has also received $20,000 in dividends and reinvested these funds back into the fund. What's the investor's total cost basis for the mutual fund shares? A. $860,000 B. It depends on the market price when the investor ultimately redeems the shares. C. $20,000 D. $880,000

D

An investor purchases 1,000 shares of ABC stock at $30 per share and receives an annual dividend of $1.20. After one year, the stock's market value has increased to $36 per share. What is the investor's total return? A. 4% B. 17% C. 20% D. 24%

D

During a recession when inflation is low, which of the following actions is the Federal Reserve expected to take? A. Increase taxes B. Raise the federal funds rate C. Increase the reserve requirement for banks D. Buy bonds in the open market

D

ERISA stipulates that employers with qualified plans are not permitted to exclude employees who have worked for the employer at least one year and: A. Are age 18 or older B. Are age 21 or older C. Are age 18 or older and have worked a minimum of 1,000 hours during the year D. Are age 21 or older and have worked a minimum of 1,000 hours during the year

D

For a person who has a variable life insurance policy, which of the following risks is of the greatest concern? A. Credit risk B. Interest rate risk C. Inflation risk D. Market risk

D

How are in-the-money S&P 500 Index call options settled at expiration? A. Delivery of the same number of S&P 500 Index put options B. Delivery of S&P 500 exchange-traded fund (ETF) shares C. Delivery of the stocks that make up the S&P 500 Index D. Delivery of cash

D

If a person fails a qualification exam on her third attempt, for how long is she required to wait before retaking that same exam? A. 30 days B. 90 days C. Two years D. Six months

D

If an investor buys 1 XYZ Aug 40 put for $5 and also buys 100 shares of XYZ for $40 per share, what's her breakeven point? A. $5 B. $35 C. $40 D. $45

D

If an issuer's convertible bonds are converted by bondholders, what is the effect on the issuer's outstanding common stock? A. It will no have no effect. B. It will decrease the number of outstanding shares. C. It will provide existing shareholders with a larger dividend. D. It will increase the number of outstanding shares.

D

Joan owns 100 shares of XYZ, which is currently trading at $57 per share. She wishes to liquidate the position when she can receive $6,000 from the trade. Which of the following orders is the BEST choice to fulfill Joan's intentions? A. Sell Stop @ 57 B. Sell Stop @ 60 C. Sell Limit @ 57 D. Sell Limit @ 60

D

The time at which an employee is eligible to receive at least some of the retirement benefits that have been contributed to the plan by the employer is referred to as: A. Eligibility B. Qualification C. Contributory D. Vested

D

Which of the following choices is a characteristic of preferred stock? A. It has no fixed dividend. B. It has a dividend that is guaranteed. C. The board of directors are not required to declare the dividends. D. It carries no voting rights.

D

Which of the following is typically completed prior to determining whether to issue a revenue bond? A. Registration statement B. Referendum certification C. Prospectus D. Feasibility study

D

Which of the following is/are characteristics of direct participation programs (DPPs)? A. Transparency and liquidity B. The ability to invest in reporting companies directly C. Returns that are correlated with the market and higher than average returns D. Steady returns and non-correlated investments

D

Which of the following statements is TRUE for a bond trading at par? A. The bond will trade at a yield basis equal to the prevailing prime funds rate B. Due to the effect of compounding, the bond will trade at a basis above its coupon rate C. Due to the time value effect of discounting, the bond will trade at a basis less than its coupon rate D. The basis and coupon will be identical

D

Which of the following statements is TRUE regarding REITs? A. Their shares are exempt from the Securities Act of 1933. B. They're regulated investment companies. C. They're able to pass through losses to their investors. D. Their shares may be traded on an exchange.

D

Which of the following statements regarding warrants and rights are TRUE? A. Both warrants and rights are short-term. B. Warrants are short-term, while rights are long-term. C. Both warrants and rights are long-term. D. Warrants are long-term, while rights are short-term.

D

Which of the following will reduce sales charges? A. Churning B. Switching shares C. Breakpoint sales D. Rights of accumulation

D

Which organization is charged with the responsibility of regulating the blue-sky laws? A. SEC B. MSRB C. FINRA D. State securities regulators

D