Series 7 - Mastery Exam
Some information found on a municipal bond confirmation is only relevant to new issues. One example of this type of information is A) the dated date. B) the in-whole call dates. C) the source of revenue backing a revenue bond. D) the name of the guaranteeing corporation if the issue is an industrial revenue bond.
A
A customer wants to know who guarantees that the contra party to a listed yield-based option on T-bonds she owns will deliver the cash if she exercises the option contract. Her registered representative should answer A) the Options Clearing Corporation (OCC) because it guarantees all listed option contracts. B) there is no guarantee with any investment or security C) the federal government because it is the issuer of the underlying security D) the FRB because the contract is based on Treasury-notes
A - 100%
A customer wishes to transfer his account positions to another broker-dealer. After validating the positions, the carrying broker-dealer is required to complete the transfer within how many business days? A) Three B) Five C) Four D) Seven
A - 100%
A speculative investor believes the market in Australian dollars will remain flat for the next several months. Which of the following positions allows the investor to take advantage of a lack of movement in the exchange rate between Australian dollars and U.S. dollars? A) A short straddle B) A long combination C) A credit put spread D) A long straddle
A - 100%
XYZ Corporation issued 7 million shares of common stock in its initial public offering. It later purchased 500,000 shares of Treasury stock. XYZ recently engaged an underwriter to raise capital by selling an additional 3 million shares through a standby rights offering. By the expiration date of the offering, only 2 million shares were sold through exercise of the rights. As a result, how many shares will XYZ have outstanding? A) 9.5 million B) 10 million C) 9 million D) 8.5 million
A - 100% the underwriter in a standby is responsible for purchasing the remaining shares that were not excercised through the rights
A customer of a broker-dealer is long 1 MMS July 60 call and short 1 MMS July 70 call. Which of the following is true? A) The position has a limited gain and loss potential. B) The position has an unlimited loss potential and a limited gain potential. C) The position has an unlimited loss potential. D) The position has an unlimited gain potential.
A- 100%
A registered representative interviewing a new client learns that the client has an investment objective of earning income and is willing to assume moderate risk to do so. The objective and risk tolerance of the client can be met by which of the following mutual funds? A) A U.S. government bond fund B) A money market fund C) A preferred stock fund D) A high-yield bond fund
B
The resale restrictions of Securities and Exchange Commission (SEC) Rule 144 would apply to A) a regional sales manager of the company who acquired the stock in the secondary market. B) an individual who owns 100 shares of the company's stock and is a registered representative of the firm who did the underwriting of the company's initial public offering (IPO). C) an individual who owns 100 shares of the company's stock and is the daughter-in-law of the company's CFO. D) the niece of the company's CEO.
B
One of the concerns of the Employee Retirement Income Security Act of 1974 (ERISA) is fair treatment of all employees. Towards that goal, ERISA established certain eligibility requirements to ensure there would be A) funding. B) nondiscrimination. C) vesting. D) rollovers to IRAs.
B- 100%
A corporate offering of 1 million additional shares to existing shareholders is a A) tender offer. B) shelf offering. C) rights offering. D) secondary offering.
C - 100%
A customer writes 1 XYZ Feb 50 put at 1 and buys 1 XYZ Feb 60 put at 7. The breakeven point is A) 56. B) 44. C) 54. D) 66.
C - 100%
The 5% markup policy applies to each of the following transactions except A) agency trades occurring on a listed exchange. B) principal transactions occurring in the OTC market. C) new issue transactions. D) agency transactions in nonexempt unlisted securities.
C - 100%
XYZ Corp. has issued $30 million of debentures. Each bond issued has a warrant attached enabling the holder to buy three shares of XYZ common at $30 per share. If all of the warrants are exercised, XYZ Corp. will receive A) $19.8 million. B) $9 million. C) $2.7 million. D) $6.6 million.
C - 100% $30,000,000/ $1000 (Par value of debt) = 30,000 warrants 30,000 warrants allows buying of 3 shares per warrant 30,000 x 3 = 90,000 shares 90,000 shares at $30 per share = $2,700,000
A statement of additional information (SAI) is available upon request to investors in each of the following investment companies except A) an exchange traded fund. B) a mutual fund. C) a unit investment trust. D) a closed-end investment company.
C - 100% Pg. 523
Asked to point out the differences between open-end funds and closed-end funds, you could state that closed-end funds A) issue redeemable shares, which are purchased in commissionable transactions in the secondary market. B) issue redeemable shares, which must be purchased at net asset value in the secondary market. C) trade in the secondary market and can trade above or below the net asset value of their investment portfolio. D) trade in the secondary market and must be purchased at the public offering price plus a sales charge.
C - 100% Priced on Supply and demand.... NAV is just a basis for us to get an idea of what it may be. CEFs are traded in secondary market OEFs are redeemed at NAV
Among the items shown on a customer confirmation for a bond transaction is the amount of accrued interest. The amount of accrued interest is A) subtracted on both the buyer's and the seller's confirmations. B) subtracted on the buyer's confirmation and added to the seller's confirmation. C) added on the buyer's confirmation and subtracted on the seller's confirmation. D) added on the buyer's confirmation and added on the seller's confirmation.
D - 100%
An investor sells 1,000 shares of DEF short at 50 and meets the initial margin requirement. If DEF falls to 45, what is the equity in the account? A) $20,000 B) $40,000 C) $35,000 D) $30,000
D - 100% CR - SMV = EQ 50% of short sale is $25,000 Since decreased by $5 per share ($5,000), equity increases by $5000
Certain order types on the order book are reduced for cash dividends on the exdividend date. These order types are A) buy limits and buy stops. B) sell stop limits and buy stops. C) sell stop limits and sell limits. D) buy limits and sell stop limits.
D- 100%
An investor purchases a Treasury Inflation Protection Securities (TIPS) bond with a 4% coupon. If during the first year the inflation rate is 9%, the approximate principal value of the security will be A) $1,040. B) $1,092. C) $1,045. D) $1,090.
D..... or B???
An exchange traded fund (ETF) differs from a mutual fund in that A) it can be sold short. B) its NAV is not computed after 4 pm ET. C) only ETFs can track an index. D) it is usually an open-end investment company.
A - 100%
An investor was able to acquire 10,000 shares of RITVA common stock on its IPO at $10 per share. Today, the stock is selling for $50 per share and the investor is nervous about the future for the market. An order is turned in to sell 100 RITVA 55 calls at a premium of 2 and buy 100 RITVA 45 puts at a premium of 2. This strategy is A) a cashless collar. B) exposing the investor to potential unlimited loss. C) a combination. D) a diagonal.
A - 100%
Of the following investors, the creditor with the lowest priority claim to the assets of a corporation during a liquidation would be the holder of its A) common stock. B) subordinated debentures. C) warrants. D) collateral trust certificates.
A - 100%
What would be the impact of a 10% stock dividend on the exdate for a retail investor that owns an option contract the following option contract? 1 ABC July 40 call A) The number of contracts owned will stay the same, and the strike price will be reduced. B) The number of contracts owned will increase by 10%, and the strike price stays the same. C) The number of contracts owned will stay the same, and the strike price increases. D) The number of contracts owned will increase by 10%, and the strike price is reduced.
A- 100%
In a new margin account, a customer buys 100 XYZ at 62 and simultaneously writes 1 XYZ Jan 65 call at 2. The margin call will be for A) $3,100. B) $2,900. C) $3,450. D) $3,300.
B - 100%
A source of funds used to service municipal revenue special tax bond issues might be A) property taxes. B) income taxes. C) gasoline taxes. D) ad valorem taxes.
C - 100% "One or more designated taxes other than ad valorem (property taxes)"
A customer writes 1 ABC July 35 put at 3 when ABC is trading at 36. Maximum potential loss is A) $3,300. B) $3,500. C) $300. D) $3,200.
D - 100%
An investor purchases a 7% general obligation GO bond on a 7.30 basis. If the bond is callable in five years at par and matures in 10 years, it is true that A) nominal yield is higher than YTC. B) nominal yield is higher than YTM. C) YTC is lower than YTM. D) yield to call (YTC) is higher than yield to maturity (YTM).
D - 100%
Jim and Pam Thomas have been married for many years. How will the estate be taxed when transferred to the remaining spouse if one of them dies? A) There is no exclusion or deferral of estate taxes at the state or local level for a surviving spouse. B) Taxes are due at the federal level only at the time the estate is transferred to the surviving spouse. C) An estate transferred to a surviving spouse is taxable at all levels at the time of transfer. D) Taxes will not be owed on the estate until the death of the surviving spouse.
D - 100%
Your new customer wishes to do an options trade as soon as possible. Which of the following is not required before he can execute a trade? A) A new account form must be completed. B) The account must be approved by a Registered Options Principal (ROP). C) The customer must be sent or given an Options Clearing Corporation (OCC) disclosure booklet. D) The customer must sign and return the options agreement.
D - 100% PG 59
A registered representative recommending an exchange traded index fund (ETF) to a client could accurately explain that, as a general rule, these funds are A) passively managed and have low tax efficiency. B) actively managed and have high tax efficiency. C) actively managed and have low expense ratios. D) passively managed and have low expense ratios.
D - 100% They are a based off the over all market performance and do not require fees
An agent has recommended investments in the XYZ fund family to his customers for 10 years. He is referred by one of his customers to a prospect who has inherited $500,000 as beneficiary of a life insurance policy. The prospect tells the agent she has never invested in the market before, is risk averse, and wants safety of principal to be the first priority with liquidity second. The agent recommends the following investments: XYZ government bond fund, B shares $200,000 XYZ large-cap growth and Income B shares $150,000 XYZ liquid reserve money market $150,000 The recommendation is A) unsuitable because it does not address the customer's two primary objectives. B) suitable because it addresses the customer's liquidity objective. C) suitable because it addresses the customer's safety objective. D) suitable because he recommended conservative investments.
A - 100%
Proper handling of customer accounts requires adhering to a number of rules. Which of the following is an example of a rule that must be followed? A) A customer whose account holds a penny stock purchased four months ago must receive a monthly statement even if no activity occurred this month. B) A customer whose account holds a penny stock purchased four months ago must receive a quarterly statement even if no activity occurred since that purchase. C) A member is required to disclose on a customer confirmation the mark-up on a transaction in corporate debt securities with an institutional customer if the dealer also executes one or more offsetting principal transaction(s) on the same trading day as the customer transaction in an aggregate trading size that meets or exceeds the size of the customer trade. D) A member shall include in a customer account statement a per share estimated value of a listed real estate investment trust (REIT) security, developed in a manner reasonably designed to ensure that the per share estimated value is reliable.
A - 100%
The flow of funds statement found within a municipal trust indenture relates to A) revenue bonds only and is found within the bond resolutions. B) both general obligation and revenue bonds and is found within the bond resolutions. C) both general obligation and revenue bonds and is found within the official notice of sale. D) revenue bonds only and is found in the official notice of sale.
A - 100%
The term for the annual increase of cost basis of a municipal bond purchased at a discount is A) accretion. B) amortization. C) basis adjustment. D) internal rate of return.
A - 100%
When the inside market (best bid and best offer) for XYZ stock was 17.30-17.60, a market maker sold 100 shares to a customer at 17.90. At the time of the trade, the market maker's quote was 17.25-17.70. What was the amount of the markup? A) 0.60 B) 0.20 C) 0.30 D) 0.65
A - 100%
Your client has sold securities in a long margin account. All of the following are affected by the sale of these securities in the account except A) equity. B) market value. C) SMA. D) debit balance.
A - 100%
Your customer sells 2 IJK October 50 calls at 4 and 2 IJK Oct 50 puts at 3. The customer will break even when the price of IJK is A) 43 and 57. B) 36 and 64. C) 47 and 54. D) 44 and 58.
A - 100%
Your customer, divorced with two children and age 52, has a portfolio consisting of 80% equities with the remaining 20% diversified among several other products. Her annual income is $115,000. Which of the following events would most likely be cause to immediately reallocate her investments? A) She has been notified by her employer that due to corporate downsizing her position is being eliminated. B) She will be remarrying a person of considerable wealth next month. C) The father of her children has established trust funds for each of them in the amount of $50,000 each. D) Equities are rebounding slowly after a two-year slump.
A - 100%
A new client, age 26, has a $15,000 inheritance to invest and notes that it is for long-term savings. He tells you that it won't be needed for many years and wants to simply see it grow over time. Given his age and the small amount to invest, you recommend a balanced fund, but which share class would be most suitable? A) Class B shares B) Class A shares C) Class A or C shares D) Class C shares
A - 100% A is not correct because it is intended for those who meet the breakpoints C is not correct because they are appropriate for investors who have short time horizons due to a lot of expenses
The dollar price used to compute the yield to call must be recorded on the confirmation of which of the following callable municipal bonds? A) 9s 25 quoted at 7.0. B) 7s 25 quoted at 9.5. C) 8s 28 quoted at 8.0. D) 6s 27 quoted at 7.5.
A - 100% For callable premium bonds quoted on a yield basis, the yield computed to the near term in-whole call is used. The confirmation shows the call date and call price as the expected maturity. The only bond shown quoted at a premium is 9s 15 quoted at 7.0. Rule G15
When a limited partnership interest is sold, gain or loss to the partner is determined by the difference between the sales proceeds and the A) adjusted cost basis. B) total of deductible losses. C) original investment minus any debt assumed by the general partner(s). D) original cost basis.
A - 100% Top of Page 325
A registered representative has a recently retired couple in their late sixties as her customers. They each have modest monthly pensions and collect Social Security benefits putting them in the lowest income tax bracket. They have accumulated savings and investments totaling $175,000 that they want to reallocate now that they are both retired. Which of the following portfolio asset allocations is most suitable for their current circumstances? A) 25% domestic equities, 60% investment grade bonds, 15% cash B) 50% domestic equities, 40% Treasury bonds, 10% Treasury bills C) 10% domestic equities, 40% bonds, 10% cash, 40% international equities D) 30% domestic equities, 30% bonds, 30% international equities, 10% cash
A.... or B
In a direct participation program limited partnership for tax purposes, A) income for the general partners is earned income, but for the limited partners it is passive income. B) income for the general partners and limited partners is considered passive income. C) income for the general partners is earned income, but for the limited partners it is tax credits. D) income for the general partners and limited partners is considered earned income.
A? or B
JGH 6.0% bonds are convertible into 25 shares of JGH common stock and are trading at 106. Later, when the JGH common is trading at $42, the bonds are called at 104. Which of the following choices would maximize the investment value for a holder of the JGH convertible bonds, once the call is announced? A) Tender the bonds for the call. B) Convert the bonds into common stock and sell the stock. C) Continue to hold the bonds and receive 6% interest. D) Sell the bonds in the market.
B
The capital asset pricing model (CAPM) states that A) there are three types of changes in stock prices; primary trends, secondary trends, and short-term fluctuations. B) the pricing of a stock should take into account systematic risk as well as nonsystematic risk. C) the direction of individual stock or overall market prices is unpredictable. D) securities markets are efficient markets, meaning securities prices react so quickly to most investment information that no analyst is likely to outsmart the market as a whole.
B
A convertible bond has a conversion price of $50 per share. If the market value of the bond rises to a 10 point premium over par, which of the following statements is true? A) Conversion ratio is 20:1 with parity price of the common at $60 B) Conversion ratio is 20:1 with parity price of the common at $55 C) Conversion ratio is 22:1 with parity price of the common at $55 D) Conversion ratio is 22:1 with parity price of the common at $60
B - 100%
A corporation has reported earnings per share of $1.00. If it pays a dividend of $.75 per share, the effect of the remaining $.25 will be to A) increase earnings per share. B) increase retained earnings. C) decrease book value. D) increase working capital.
B - 100%
A customer purchases 300 XYZ at 35 and writes 3 XYZ October 35 calls at 3. The customer will profit under all of the following circumstances except A) if XYZ is between 32 and 35 at expiration. B) if XYZ falls below 32 at expiration. C) if XYZ rises and the calls are exercised. D) if XYZ remains at 35 through expiration.
B - 100%
An example of a security that cannot trade in the secondary market would be A) brokered CDs. B) open-end investment company mutual fund shares. C) double-barreled municipal bonds. D) shares of stock of foreign companies.
B - 100%
An investor is seeking tax advantages through an oil and gas direct participation program (DPP). With this type of partnership, he would expect to benefit most from A) depletion and tax credits. B) depletion and intangible drilling costs. C) depreciation allowances and intangible drilling costs. D) depletion and depreciation allowances.
B - 100%
An investor sold short 1,000 shares of LUMN at 52 on January 10. If the investor covered the short position at 43 on January 15 of the following year, which if the following statements is true? A) Buying the same stock back within 30 days created a wash sale. B) The investor has a long-term capital gain of $9,000. C) Only $3,000 of the investor's loss is deductible against ordinary income. D) The investor has a short term capital gain.
B - 100%
Designated Market Makers (DMMs) on the floor of the NYSE cannot handle A) stop orders. B) market not-held orders. C) odd-lot market orders. D) limit orders.
B - 100%
Direct participation limited partnerships offer a number of benefits for those in high income tax brackets but there can be tax consequences that are not advantageous, one of which is A) tax deductions. B) depreciation recapture. C) tax credits. D) recourse debt assumed included in cost basis.
B - 100%
If Company DC has returned 10.4% with a beta of 1.2, what would the alpha be if the return on the Standard & Poor's 500 was 9% and the 91-day T-bill rate was 3%? A) +1.4% B) +.2% C) +2.0% D) -0.4%
B - 100%
If the placement ratio found within The Bond Buyer is high, this would indicate that A) the market for municipal bonds is weak with dealers more likely to bid on new municipal issues. B) the market for municipal bonds is strong with dealers more likely to bid on new municipal issues. C) the market for municipal bonds is strong with dealers less likely to bid on new municipal issues. D) the market for municipal bonds is weak with dealers less likely to bid on new municipal issues.
B - 100%
When one of the partners in a partnership account dies, the registered representative (RR) must A) cancel any unexecuted orders, liquidate the account, and hold all assets in cash until further instructions are received. B) cancel any unexecuted orders and freeze the account. C) allow existing orders to be executed or expire and then freeze the account until further instructions are received. D) automatically retitle the account in the names of the remaining partners.
B - 100%
When the holder (owner) of an index option exercises the contract, the account of the holder will be A) credited the out-of-the-money amount. B) credited the in-the-money amount. C) debited the out-of-the money amount. D) debited the in-the-money amount.
B - 100%
The MSRB has no jurisdiction or authority to regulate A) municipal bond broker-dealers. B) municipal bond issuers. C) municipal bond quotes. D) municipal bond registered representatives.
B - 100% It regulates BDs
The XYZ Growth Fund is an open-end investment company registered under the Investment Company Act of 1940. The fund's principal underwriter offers a schedule of reduced sales when certain investment levels are reached. Reinvestment of gains and dividends and share appreciation may be added to the current account value when determining if a subsequent purchase qualifies for the reduction. This feature is known as A) letter of intent (LOI). B) rights of accumulation. C) conversion privilege. D) breakpoints.
B - 100% LOI can not use share appreciation or reinvestment of gains to meet new sales breakpoint
One of your clients is interested in setting up an Achieving a Better Life Experience (ABLE) account for his son who was recently diagnosed with a disability at age five and is currently receiving benefits through Social Security Disability Insurance (SSDI). Regarding these accounts, you correctly explain that A) income earned by the account is not taxed, but due to his age, the son is still a minor and therefore not eligible to be the beneficiary of such an account. B) income earned by the account is not taxed, and his son is eligible to be the beneficiary of such an account. C) income earned by the account is tax deferred, but because the son already receives SSDI, he is not eligible to be the beneficiary of such an account. D) income earned by the account is tax deferred, and his son is eligible to be the beneficiary of such an account.
B - 100% Pg. 159
An issuer interested in reducing its interest cost can use the call provision to call in outstanding bond issues. The issuer is most likely to call bonds with A) a low coupon and high call premium. B) a high coupon and low call premium. C) a low coupon and low call premium. D) a high coupon and high call premium.
B - 100% Pg. 99
Your client signs a discretionary account form and tells you the signed form was mailed to your attention. Before receiving the form, you notice that one of his stocks is dropping sharply on adverse news, but you are unable to contact him. In this situation, you A) can enter a discretionary order if a principal of the broker-dealer has approved the order prior to entry. B) cannot enter a discretionary order. C) can enter a discretionary order if you are able to contact the person who was given discretionary authorization. D) can enter a discretionary order if written documentation of the situation has been made.
B - 100% The document must be RECEIVED to put in discretionary order
A syndicate is underwriting $200 million in municipal bonds and sets up a Western underwriting account with 10 syndicate members. Only one syndicate member, Atlas Municipal Securities (AMS), sells out its 10% commitment, amounting to a total of $20 million sold by them. At the syndicate settlement date, $18 million of bonds are still unsold. The financial obligation of AMS is A) $18 million divided by nine syndicate members. B) $0. C) $2 million. D) $1.8 million.
B - 100% Western = Divided = "continental divide is on the west coast"
A limited partner A) is a passive investor with a fiduciary responsibility to the partnership attempting to take part in a management role. B) can lose more than her initial investment plus any allocated interest in nonrecourse notes. C) is a passive investor with no partnership management responsibilities. D) jeopardizes limited liability status unless the general partner agrees.
C - 100%
A local school district needs to invest funds short term. They do so in a trust formed specifically for this purpose, which allows the municipal entity to purchase shares or units of the trust's investment portfolio. This investment vehicle is known as A) a real estate investment trust (REIT). B) a unit investment trust (UIT). C) a local government investment pool (LGIP). D) a bond anticipation note (BAN).
C - 100%
A registered representative recommends a variable annuity with an income rider to a client. The client's investment objectives, tax bracket, investment experience, and risk tolerance all align well with a variable annuity recommendation. The client agrees to purchase the contract and informs the registered representative that he will be cashing out a variable annuity he purchased two years ago to fund the new contract and will forward the check as soon as he receives it. Based on this information, the representative should A) contact the issuer of the client's existing variable annuity contract to facilitate the client's surrender of the contract. B) complete all paperwork to purchase the annuity contract and obtain the client's signature immediately. C) reevaluate whether the recommendation for the variable annuity contract is still suitable based on the client's proposed funding of the investment. D) suggest to the client that perhaps a loan or refinancing his vacation home might be a better way to fund the variable annuity contract purchase.
C - 100%
All of the following are characteristics associated with equity-linked exchange-linked notes except A) they have final payments at maturity linked to the return of an underlying stock or basket of stocks. B) they can be bought and sold throughout the trading day. C) they can be linked to a single stock or basket of stocks and are, therefore, equity securities. D) they are considered to be nonconventional structured investments with unique risks.
C - 100%
Fees can have a major impact on long-term performance of an investment. Your client interested in purchasing a periodic payment deferred annuity would not be concerned about A) surrender charges. B) death benefit fee. C) 12b-1 fees. D) M&E fees.
C - 100%
Flow-through is one of the characteristics of a direct participation program (DPP). In general, for tax purposes, losses cannot exceed a limited partner's cost basis. Which of the following would be a way to increase that cost basis? A) Depreciation on the partnership's assets B) Receiving tax credits C) Assumption of recourse debt D) Using the depletion allowance
C - 100%
Individuals meeting which of the following standards meet the definition of an accredited investor? A) Net worth of at least $2.1 million excluding net equity in a primary residence B) Income for the past year of at least $200,000 C) Net worth of at least $1 million excluding net equity in a primary residence D) Net worth of at least $1 million excluding net equity in all residences
C - 100%
The volatility market index (VIX) is best characterized as A) an index option traded on the NYSE. B) a measurement of the implied stability of options written on the S&P 500. C) a "fear" index, measuring the expectations of market volatility. D) a highly volatile index-tracking exchange-traded fund ETF.
C - 100%
Which of the following statements is correct? A) Interest received on GNMA securities is taxable on both the state and federal level. B) The difference between the purchase price and maturity value of a U.S Treasury bill is taxed as short-term capital gain. C) Interest received on U.S. Treasury notes and bonds is taxable on the federal, but not the state level. D) Coupon interest paid on TIPS bonds is taxable on the federal level and any increase to principal is taxed as capital gain when the bond matures.
C - 100%
Your client, age 75 and not yet retired from his job of the past 45 years, wants to continue contributing to a retirement plan for as long as possible. Which of the following plans would not allow contributions to be made for someone his age? A) Roth IRA B) SEP IRA C) Traditional IRA D) 401(k)
C - 100%
In late September, a customer sells 5 XYZ calls for total premiums of $750. One month later, the investor closes this position when the contract is trading at 2. The result is A) a gain of $250. B) a loss of $50. C) a loss of $250. D) a gain of $50.
C - 100% 750 credit Has to sell for 200 x 5 contracts = 1000 750-1000=-250
Which of the following direct participation programs typically generates a dollar-for-dollar credit against federal income taxes? A) Exploratory oil and gas drilling B) Building new residential housing C) Rehabilitating certified historic structures D) Equipment leasing to minority controlled business
C - 100% As well as government assisted housing
The visible supply as shown in The Bond Buyer is the A) the total dollar amount of new issues offered for sale divided by dollar amount of new issues sold. B) the percentage of new issues sold versus new issues offered for sale. C) the total dollar volume of municipal offerings expected to reach the market in the next 30 days. D) the total dollar volume of general obligation (GO) offerings expected to reach the market in the next 30 days.
C - 100% Bond Buyer deals with Muni Bonds
A firm has prepared a research report on the equity securities issued by the CDT Corporation. Regarding the report and its distribution from broker-dealers to clients, which of the following statements is not true? A) A broker-dealer can base a recommendation on a report prepared by another party. B) The report must disclose whether, within the last 12 months, the firm has received fees for managing or co-managing a public offering for CDT Corporation C) The report must disclose whether, within the last five years, the firm has received fees for investment banking services from CDT Corporation. D) A broker-dealer presenting the report to a client must disclose that the report was prepared by a third-party and not the broker-dealer.
C - 100% Not 5 years, 12 months
Securities exempt from regulation under the Trust Indenture Act of 1939 include A) short-term commercial paper and secured corporate bonds. B) U.S. Treasury and secured corporate bonds. C) U.S. Treasury and municipal bonds. D) corporate debentures and municipal bonds.
C - 100% Trust Indenture Act deals with Corporate issues Pg. 524
A customer is likely to experience the greatest purchasing power risk with which of the following investments? A) American Depositary Receipts (ADRs) B) A Ba-rated debenture maturing in eight years C) A 30-year U.S. Treasury bond D) A BBB-rated convertible preferred stock
C - 100% The longer the maturity the more vulnerable to purchasing power/inflation risk
A municipality's statutory debt limit imposes a limit on A) the raising of tax rates within the municipality. B) the debt coverage ratio on the municipality's bonds. C) the issuance of additional general obligation (GO) bonds. D) the raising of property taxes within the municipality.
C - 100% ????
A new registered representative is a member of your team and asks you about prospectus delivery requirements. It would be correct to state that delivery of a prospectus to a customer is not required for the purchase of A) a new issue of general obligation bonds. B) a new issue of AAA rated corporate bonds. C) a U.S. government bond mutual fund. D) a variable annuity.
C..... A- 100%
A customer asks you for a quick, accurate definition of 12b-1 fees. A good reply would be that they are A) an additional sales charge added on to fund the compensation of registered representatives who receive commissions in the form of trailers. B) not asset-based, but are pure sales charges used to cover the costs of marketing and distributing the fund shares to investors. C) often referred to as asset-based distribution fees and are used to cover the costs of marketing and distributing the fund shares to investors. They can be used to compensate registered representatives with commissions for servicing an account (trailers) and therefore are considered to be a part of the sales charges. D) often referred to as asset-based distribution fees and are used to cover the costs of marketing and distributing the fund shares to investors. They can be used to compensate registered representatives with commissions for servicing an account (trailers), but are not sales charges.
D - 100%
A customer who had invested in a Coverdell Education Savings Account (ESA) on behalf of her 10-year-old daughter for many years may A) make before-tax contributions on an annual basis. B) roll the accumulated funds into a traditional IRA set up for the custodian if funds are not used by age 30. C) receive distributions that are taxable when the funds are withdrawn for qualified educational expenses. D) make an investment into a Section 529 Plan in the same year for the same child.
D - 100%
A margin account has a market value of $24,000 and a debit balance of $20,000. The maintenance call will be for A) $8,000. B) $6,000. C) $4,000. D) $2,000.
D - 100%
A registered representative intends to send the same email regarding an investment strategy and product this week to her 10 retail clients currently having the highest net worth. Which of the following accurately depicts how the email will be regulated under the Financial Industry Regulatory Authority's (FINRA's) communications with the public rule? A) The email must be reviewed by a principal before use, but need not be filed with FINRA. B) The email must be reviewed by a principal before use and the content must be filed with FINRA. C) The email can be reviewed by a principal before or after use in accordance with the firm's written procedures regarding correspondence as long as it has been pre-filed with FINRA. D) The email can be reviewed by a principal before or after use in accordance with the firm's written procedures regarding correspondence and need not be filed with FINRA.
D - 100%
A registered representative is obligated to adhere to the prospectus delivery requirements of the Securities Act of 1933 when making a sale of A) shares of the STU open-end investment company, a fund whose portfolio makeup is exclusively U.S. Treasury issues. B) shares of the XYZ closed-end investment company, a fund whose shares trade on the Nasdaq Stock Market. C) shares of the LMN S&P 500 index EFT, traded on the NYSE. D) a new issue of B-rated industrial revenue bonds to provide funding for a new facility for the Boomer Widgets Company.
D - 100%
An appeal of an adverse Code of Procedure decision may be made by either party within A) 10 days of the decision date. B) 30 days of the decision date. C) 45 days of the decision date. D) 25 days of the decision date.
D - 100%
An investor holding shares of several funds from the CDS fund family has opted for a fixed dollar withdrawal plan to supplement her income each month. With this type of withdrawal plan, the amount received each month A) must be at least equal to the account earnings that period in order to be distributed. B) must be less than the account earnings that period in order to be distributed. C) will always be more than the account earnings that period. D) could be less than, equal to, or more than the account earnings that period.
D - 100%
An investor is interested in a limited partnership and asks his registered representative to explain the "crossover point" referred to in discussions about the tax consequences of the program. The best definition would be A) the point at which the program begins to generate taxable income instead of losses, which generally occurs quickly if not in the very first year. B) the point at which the program begins to generate losses instead of taxable income, which generally occurs in later years. C) the point at which the program begins to generate losses instead of taxable income, which generally does not occur until near the time the partnership is expected to be dissolved. D) the point at which the program begins to generate taxable income instead of losses, which generally occurs in later years.
D - 100%
An investor would like to buy a stock currently trading at $44, but is willing to pay no more than $40. Which of the following orders would be the most appropriate for a registered representative to recommend? A) Place a buy stop at $40. B) Place a market order to be triggered at $40. C) Buy a call contract with a strike price of $40. D) Place a buy limit order at $40.
D - 100%
For corporate retirement plans, which of the following characterizations is true? A) Defined benefit plans use a specified contribution, but the exact benefit at retirement is unknown. The plans favor those with shorter time left to retirement. B) Defined contribution plans use a specified contribution so that the exact benefit at retirement is known well in advance. The plans favor those with longer time left to retirement. C) Defined contribution plans use actuaries to determine contribution so that the exact benefit at retirement is known well in advance. The plans favor those with longer time left to retirement. D) Defined benefit plans use actuaries to determine the needed contributions. The plans favor those with shorter time left to retirement.
D - 100%
If an investor holds certificates of beneficial interest in a real estate investment trust (REIT), the investor A) will receive income and capital gains and loss distributions from the issuer and may sell the certificates in the secondary market to divest. B) will receive income and capital gains distributions from the issuer who will redeem the shares if the investor wants to divest. C) will receive income and capital gains and loss distributions from the issuer who will redeem the shares if the investor wants to divest. D) will receive income and capital gains distributions from the issuer and may sell the certificates in the secondary market to divest.
D - 100%
One way in which real estate investment trusts (REITs) differ from direct participation programs (DPPs) is that a REIT A) is generally traded on a stock exchange or the Nasdaq Stock Market while most DPPs trade in the over-the-counter market. B) must have at least 75% of its total assets in real estate assets and cash while it is unusual to find real estate in the portfolio of a DPP. C) must distribute all of its taxable income to shareholders annually in the form of dividends while a DPP must pass through at least 90% of its income. D) must distribute at least 90% of its taxable income to shareholders annually in the form of dividends while all of a DPP's income flows through to the investors.
D - 100%
Section 28(e) of the Securities Exchange Act of 1934 deals with A) authorizing the Federal Reserve to regulate credit in the securities markets through Reg. T. B) the registration requirements of national stock exchanges. C) the requirement to update customer account information at least every 36 months. D) a safe harbor for non-cash compensation from broker-dealers to investment advisers.
D - 100%
The calculation of accrued interest for a municipal bond A) includes interest through the settlement date. B) is based on an actual day month. C) is not made when a bond trades "and interest." D) includes interest from and including the last payment date.
D - 100%
When compared to mutual funds, which of the following statements regarding hedge funds is least accurate? Hedge funds A) can take both long and short positions. B) use derivatives to a greater extent. C) are generally only appropriate for qualified investors. D) tend to be more diversified in order to hedge risk.
D - 100%
You have several clients interested in a tax sheltered annuity (TSA), but one of them is not eligible to participate. Who is it? A) A maintenance worker at a large state university B) A minister tending to the congregation for a small church C) An administrator for a charity given tax-exempt status by the IRS D) A student enrolled full time in the local community college
D - 100%
Your customer is interested in up-to-the-minute price information for municipal securities transactions. This information is available through an approved portal within 15 minutes of a trade and is captured by which of the following? A) The National Quotation Bureau B) Morningstar C) Thompson Muni Market Monitor D) The MSRB's Real Time Transaction Reporting System (RTRS)
D - 100%
Savings incentive match plans for employees (SIMPLEs) are A) funded with pretax contributions but do not allow catch-up contributions for employees. B) funded with after-tax contributions and allow catch-up contributions for those age 70½ and older. C) funded with after-tax contributions but do not allow catch-up contributions for employees. D) funded with pretax contributions and allow catch-up contributions for those age 50 and older.
D - 100% Pg. 39
Your new client informs you that she has a variable annuity purchased several years ago and soon will begin taking distributions. The variable annuity is not part of an employer-sponsored plan or held in an IRA. She asks you how the withdrawals will be taxed. You should inform her that A) the contributions that were made with after-tax dollars are considered cost basis and will not be taxed, but earnings above cost basis will be taxed as a long-term capital gain distribution. B) if she decides to annuitize before she reaches age 59½, the taxable portion will be subject to the 10% penalty. C) because this is an annuity, all withdrawals will be taxed as ordinary income. D) the contributions that were made with after-tax dollars are considered cost basis and will not be taxed, but earnings above cost basis will be taxed as ordinary income.
D- -Never Capital Gain tax -Made with After tax dollars, so earnings above cost basis are taxed at ordinary income
