s7 c20

If an investor expects the Federal Reserve Board to take action to raise interest rates significantly in the next two years, which of the following would be the most appropriate investment?

1-year Treasury bills

Which of the following risk factors is the MOST important for purchasers of long-term, high-grade bonds?

Purchasing power risk

Which of the following securities would be LEAST suitable for an investor interested in preservation of capital?

Reverse convertible bonds

Which of the following investors is LEAST likely to purchase a collateralized debt obligation (CDO)?

Robert & Susan Abramowitz, JTWROS

A registered representative has recently been arrested. Which of the following statements is TRUE?

She is not required to take any action.

An investor is seeking a balance between income and capital growth. Which of the following investment strategies MOST closely achieves this goal?

20% in a blue-chip fund, 20% in a technology fund, 20% in an emerging markets fund, 20% in a municipal bond fund, and 20% in a U.S. government bond fund

A customer who's in his early 50s recently received a sizeable bonus and his investment objective is to maximize his tax-free income. He has two children who are already attending college. Which of the following choices is the BEST method of investing the funds?

30% general obligation bonds, 20% high-yield municipal bonds, 20% hospital revenue bonds, 20% special tax bonds, and 10% housing revenue bonds

A customer is in her late 40s and is currently in the 15% tax bracket, but she's recently inherited $7 million. While visiting a broker-dealer, she informs a registered representative that she's a conservative investor and is seeking advice about how to invest the inheritance. Which of the following choices is the BEST method for investing the funds?

30% in equities, 20% in-state municipal bonds, 20% in out-of-state municipal bonds, 15% in Treasury bonds, 10% in revenue anticipation notes, and 5% in tax-exempt money-market funds

Which of following investments would be the BEST recommendation for a customer with a medium or moderate risk tolerance?

35% large-cap equity funds, 15% small-cap equity funds, 15% international equity funds, 30% bond funds, and 5% cash

A customer is in her late 40s and is currently in the 15% tax bracket, but has recently inherited $6 million. While meeting with a brokerage firm, she indicates to a registered representative that she considers herself a conservative investor and wants the RR's advice concerning investing the inheritance. Which of the following choices is the BEST method for investing the funds?

40% in equities, a 30% mixture of in-state and out-of-state municipal bonds, 15% in Treasury bonds, 15% in revenue anticipation notes

Which of following investment allocations is the BEST recommendation for a customer with an aggressive risk tolerance?

50% large-cap equity funds, 20% small-cap equity funds, 20% international equity funds, 5% bond funds, and 5% cash

Which of the following allocations would be the LEAST suitable for an investor with a thirty-year time horizon, moderate risk tolerance, and the goal of long-term growth?

50% money-market funds, 50% long-term government bond funds

An investor is looking for an investment that will generate deductions but also provide the potential for future cash flow. Which of the following is NOT an appropriate investment?

A raw land program

A 75-year-old client is looking for a high level of income for his retirement fund. He wishes to maintain a balance between income and safety of principal. Which of the following funds would MOST likely meet this requirement?

A GNMA fund

A customer wants to purchase a security that invests primarily in private companies that have difficulty raising capital in public markets. Which of of the following investments would you recommend?

A business development company (BDC)

A variable annuity would be MOST suitable for which of the following customers?

A client in a high tax bracket who is purchasing the annuity for his spouse's retirement needs

An investor has recently rolled over his 401(k) into an IRA at your firm. Which of the following securities will be MOST suitable if the investor wanted diversification and a higher return?

A hybrid REIT

A customer contends that his registered representative made unauthorized trades in his account and will take this matter to an arbitration panel. Regarding the makeup of this panel, which of the following statements is TRUE?

A majority of the arbitration panel must come from outside the securities industry

An investment banking principal has received a letter from a customer complaining about a recent new issue that declined substantially on its first day of trading. The client purchased the shares based on a recommendation by an associated person of the firm. The customer contends that the recommendation was unsuitable. Which of the following statements is TRUE?

A memo must be prepared describing any action taken in response to the complaint

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 memo must be prepared describing any action taken in response to the complaint.

A student fresh out of school, receives an inheritance of $25,000. He is concerned about what this may mean to his financial situation. The student inquires about where he should park the money while he gets some help. Which of the following is the MOST appropriate recommendation?

A money-market mutual fund

The MOST appropriate buyer(s) for a variable life insurance policy is/are:

A person with an understanding of investments who can tolerate market risk

Joanne is a 50-year-old woman who just left the job she had held for 20 years. She has a substantial amount accumulated in her 401(k), which she's rolling over into an IRA. If she's planning to use this money to retire in 12 to 15 years, which of the following investments is the most appropriate for her?

A stock fund

Which of the following communications does not qualify as a complaint under FINRA rules?

A telephone call

A conservative investor has a long-term time horizon. He wants an investment that will provide him with long-term capital appreciation, and will not be too volatile. Which of the following funds would be the MOST suitable for him?

A value fund

A couple has a portfolio of domestic equity and bond funds. They wish to diversify their portfolio further. Which of the following investments would MOST likely fulfill this goal?

An international fund

A client wants to invest $250 a month and have broad exposure to the U.S. equity market. Which of the following recommendations is the most suitable for this client?

An S&P 500 Index mutual fund

An investor with an investment objective of tax-exempt income will need access to the funds in four months. An RR should NOT recommend which of the following municipal securities?

An auction-rate security (ARS)

A registered representative has a 33-year-old client with a stable income with no foreseeable need to access money. The client is looking for a long-term investment that will offer a guaranteed rate of return, that can also share in the performance of the stock market, and offers some form of death benefit. Which of the following investments is MOST suitable for this client?

An equity-indexed annuity

If a customer intends to engage in intraday trading and has an investment objective of capital growth, she may purchase:

An exchange-traded fund (ETF)

A high net worth investor who's seeking safety of principal will MOST likely invest in:

An investment-grade corporate bond fund

Which of the following investors would be LEAST suitable for an oil and gas direct participation program (DPP)?

An investor who is concerned about the alternative minimum tax

A business development company (BDC) is MOST suitable for which of the following investors?

An investor who is seeking a speculative investment in a portfolio of distressed companies and is interested in liquidity

A person pleaded guilty to a charge of counterfeiting and bribery five years ago. He has now been released from prison and is applying for an investment banking position with your firm. Which of the following statements is TRUE regarding his eligibility for current employment in the securities industry?

He is subject to statutory disqualification and is not currently eligible to be hired

Harry pled guilty to a charge of counterfeiting and bribery five years ago. He has now been released from prison and is applying for an investment banking position with your firm. Which of the following statements is TRUE regarding his eligibility for current employment in the securities industry?

He is subject to statutory disqualification and is not currently eligible to be hired

A registered person is concerned that his boss is making inappropriate advances. This allegation must be settled by:

Any method of the registered person's choosing, including remediation through the court system

Which of the following statements is TRUE regarding the Code of Arbitration?

Arbitration is more cost-effective than litigating the matter in court.

Prior felony convictions must be disclosed on Form U4 if the conviction occurred:

At any time

A high net worth investor who's seeking safety of principal will MOST likely invest in which of the following securities?

High-grade general obligation bonds

A customer asks an RR for a recommendation as to how to invest a $150,000 inheritance. The customer would like to use the funds to start a new business within the next year. Which of the following would be the LEAST suitable recommendation for this customer?

Balanced funds

A U.S. corporation has contracted to buy machinery from a Japanese company and pay in Japanese yen. The payment date is in June. What basic option strategy will the U.S. corporation employ to protect itself against an increase in the yen?

Buy JY calls

An investor is long 100 shares of XYZ at $54 per share. The stock is currently trading at $70.The investor thinks the stock may continue to rise but is fearful of a decline and wishes to protect most of her profit. In this situation, the MOST appropriate recommendation is to:

Buy a 70 put for a premium of 4

An investor is short stock at $70. The current market price of the stock is $40 and the investor anticipates that the price will continue to decline. However, he thinks the price will temporarily rise. If he does not wish to close out his short position, his best strategy to prevent a loss is to:

Buy a call

An investor who expects an increase in volatility in the equity markets will MOST likely adopt which of the following strategies?

Buying VIX call options

A registered representative receives a sell order from his customer. When he submits the order, he accidentally transposes two of the digits in the account number and the order is processed under the wrong account. This problem is rectified:

By the branch office manager

An investor's objective is long-term growth that keeps pace with inflation without excessive volatility. The type of mutual fund that would best meet this objective is a(n):

Conservative growth fund

Your client owns a convertible bond that has been called at 104. The bond is convertible at 40 and is selling in the market at 107. The common stock is selling in the market at 41. Which of the following choices is the LEAST attractive alternative to the client?

Convert the bond to common stock and sell the common stock

Concerning arbitration, all of the following statements are TRUE, EXCEPT:

Decisions may be appealed to FINRA

If a registered representative receives information that a client has recently received a large sum of money, the proper course of action is to:

Determine if the customer's investment objectives have changed

A customer who's in his late 20s wants capital appreciation and is willing to take a moderate degree of risk in his initial investment. If the customer is also concerned about the inflationary risk to his portfolio, which of the following investments is MOST suitable?

Equities

A disciplinary action concerning a registered representative (RR) is reported by the firm through which of the following?

Form U4

An Operations Professional receives a written complaint from a customer stating that she recently received two statements, the second of which she suspects was artificially created. The first statement shows a significant decline in the value of her portfolio, while the second statement corrects errors to indicate an appreciation in the value of her portfolio. This complaint should be:

Forwarded to the appropriate supervisor and reported to FINRA within 10 business days

A client is seeking a safe investment that pays interest on a monthly basis. Which of the following securities would be an appropriate recommendation?

GNMA modified pass-through certificates

A high net worth investor who's seeking safety of principal will MOST likely invest:

In investment-grade municipal revenue bonds

An individual wants to buy an interest in an oil and gas limited partnership that has the LEAST amount of risk. The MOST suitable recommendation is a(n):

Income program

If an investor was primarily interested in safety of principal, which of the following securities would you LEAST likely recommend?

Industrial development revenue bond

A customer wants safety of income and preservation of capital. Which of the following securities is MOST suitable?

Investment-grade corporate bonds

According to SRO rules, an email message complaining about excessive commissions sent to an RR's personal electronic device:

Is a complaint and must be maintained by the broker-dealer

Which of the following positions best enables an investor to take advantage of a significant appreciation in DEF stock?

Long a DEF straddle

Which of the following positions is the most conservative strategy?

Long stock, short call

Which of the following actions by an applicant for registration are grounds for statutory disqualification?

Making false or misleading statements concerning her business relationship with a person who has been banned from the securities industry

A CMO would be suitable for an investor seeking:

Monthly income, assuming he does not need the entire principal returned at maturity

An investor has been saving for her child's college education using a 529 plan. If her child will be attending college in a few years, which of the following actions is LEAST suitable?

Moving money from money-market funds to equity funds

According to FINRA rules, an e-mail complaint:

Must be maintained for four years

A brokerage firm erroneously confirms to a customer a purchase of 100 shares of XYZ Corporation at 28.25. The firm later finds that the purchase was actually made at 28.75. The customer:

Must pay 28.75

What type of options will be used to hedge a portfolio of computer stocks?

Narrow-based index options

An individual convicted of insider trading 4 years ago has served time in federal prison. She arrives at your office looking for a position as an investment banker. You would inform her that:

She may not be hired as an investment banker for 6 years

A direct participation program in undeveloped land is considered:

Speculative

A person is completing a Form U4 to become registered and notices that the document requires his signature. The person has an aversion to signing legal documents that he doesn't fully understand. For clarification on the details of the form, he calls his brother who is a lawyer and specializes in employment law. The brother indicates that if Form U4 is signed, a person is agreeing to:

Submit potential disputes with the firm, other member firms, customers, or associated persons to arbitration rather than litigation

Which of the following securities will provide an investor with protection against purchasing-power risk?

TIPS

As a customer's tax bracket increases, an RR is likely to allocate more of a customer's portfolio to:

Tax-exempt funds

Which of the following actions should be taken if a registered representative (RR) receives a written complaint from a customer?

The RR should forward the complaint to her principal.

An investor's goal is to buy a security that establishes a fixed return, for a long period, with no reinvestment risk. Which of the following securities BEST suits the investor's needs?

Treasury STRIPS

An investor has a need for high liquidity with low principal risk. Which of the following would you recommend as a suitable investment based on this investment criteria?

Treasury bills

If an investor expects interest rates to fall significantly in the next two years, what would be the most appropriate investment?

Treasury bonds

A customer who's in his late 20s wants capital appreciation and tax-deferred growth. He's willing to take a moderate degree of risk in his initial investment, but is concerned about the inflationary risk to his portfolio. Which of the following investments is MOST suitable?

Variable annuities

As a retirement vehicle, which of the following choices would probably provide the greatest protection of purchasing power?

Variable annuities

A customer receives a verbal confirmation that her securities were sold at a price of $28.35 per share. A clerical error is subsequently discovered, and the corrected price of $27.85 per share is shown on her written confirmation. Which of the following statements is TRUE?

The client will receive $27.85 per share

A firm's suitability responsibilities for sales of variable annuities do NOT apply to recommendations in which of the following situations?

The reallocation of assets among subaccounts after the initial purchase

A registered person has been indicted for forgery that was unrelated to his employment at the member firm. Which of the following statements is TRUE?

The registered person is permitted to stay employed at the member firm but the event must be reported to FINRA

A registered representative enters an order for a client. In error, the registered representative (RR) purchases shares of the wrong security. Which of the following statements is TRUE?

The shares must be placed in the broker-dealer's error account.

An aggressive growth portfolio would be suitable for an investor:

Who is financially secure, has a high income level, and has a high tolerance for risk

Your client owns a portfolio of blue-chip equity securities and would like to increase the overall rate of return through the use of options. The most conservative strategy to achieve this objective is to:

Write covered calls

An investor that wants to hedge a portfolio of preferred stocks can buy:

Yield-based call options

A woman with a low income has saved $5,000 to invest for her young son's college education. Which of the following investments would be the MOST appropriate?

Zero-coupon bonds