Sie FINAL EXAM 1 can take over and over
Which of the following would not be fully covered under SIPC?
$200,000 of BigTech Growth Fund and $300,000 in orange juice futures
Your client has an extensive portfolio of stocks and bonds. Last year, she had an income of $56,000, of which $250 a month was from a part-time job and the rest from her portfolio. How much can she contribute to a ROTH IRA for last year?
$3,000, which is not deductible from her ordinary income
Your customer, Ramona, is 45 years old. She is married and has three sons. Five years ago, she purchased a nonqualified variable annuity for $40,000. It had grown to $45,000 before she withdrew $10,000 to pay for her oldest son's college tuition. How will the withdrawal be taxed?
$5,000 tax free and $5,000 of ordinary income, plus a 10% penalty on the $5,000 of ordinary income.
Your client has an extensive portfolio of stocks and bonds. Last year, she had an income of $56,000, of which $250 a month was from a part-time job and the rest from her portfolio. How much can she contribute to a ROTH IRA for last year?
250 x 12 = 3000. You may only contribute earned income to an IRA, not investment income. The most she may contribute is $3,000 based on her earned income from the part-time job. ROTH IRA contributions are not deductible.
inal Exam 1× Test Id: 206207377 Question #77 of 85 Question ID: 1327685 Your customer, Gio, is 47 years old. He is married and has three sons. His third child, age 13, has committed to going to college at the prestigious Bookworm Institute of Los Angeles in Southern California. Gio and his spouse have noted the rapid increase in the school's tuition over the past few years and are worried about their savings keeping pace with tuition costs. They also express discomfort with the uncertainties in market returns. Which of the following is the most suitable recommendation for the customer?
A 529 prepaid tuition plan
Wanda has applied for a representative position with Great Sky Securities, a broker-dealer firm and a FINRA member. While in college, she was a bit of a trouble maker. Since completing her education four years ago, she has been a model citizen. Which of the following issues from her past may result in her disqualification from becoming a registered representative?
A conviction eight years ago for misdemeanor larceny for selling her classmates an interest in the Bay Bridge
Wanda has applied for a representative position with Great Sky Securities, a broker-dealer firm and a FINRA member. While in college, she was a bit of a trouble maker. Since completing her education four years ago, she has been a model citizen. the following issues from her past may result in her disqualification from becoming a registered representative?
A conviction eight years ago for misdemeanor larceny for selling her classmates an interest in the Bay Bridge
Regarding preferred stock, which of the following is false?
A corporation issuing common shares must issue at least one class of preferred shares.
If a representative possesses material inside information about a publicly traded company, under which of the following circumstances may he communicate this information to a customer?
After the information becomes public
How often must a representative complete the regulatory element continuing education (CE) requirement?
After the second anniversary of licensure and every three years thereafter
For common shareholders, which of the following is true?
An increase in the value of shares owned has no tax implications until sold.
Call
An option that permits its holder to purchase a specific asset at a predetermined price until a certain date OR An option that permits its holder to purchase a specific asset at a predetermined price until a certain date
municipal bond has a coupon of 4.25%, and at the present time, its yield to maturity is 4.75%. From this information, it can be determined that the municipal bond is trading
At a discount.
hopeful of rising prices (as in a stock market)
Bullish
the increase in value of an asset (such as stock or real estate) between the time it is bought and the time it is sold
Capital gains
Which of the following terms best describes a corporate debt instrument secured by a pledge from the issuer of property that consists of federal Treasury debt?
Collateral trust certificate
What is not an example of a fixed-income security?
Common stock
A letter sent to 20 retail customers in a 30-day period would be classified as what type of communication under FINRA rules?
Correspondence
Your client asks about exchange-traded notes (ETNs) for his portfolio, and during the course of the conversation, he makes several statements. Which of the following is a significant risk for ETNs?
Default risk
An investor owns a municipal bond fund. What is the tax status of distributions from the fund
Dividends will be tax free, but capital gains distributions are taxable.
The government agency charged with the collection, analysis, and dissemination of financial transactions is called the
Financial Crimes Enforcement Network.
A client and his spouse own shares in the ACE Fund as tenants in common (TIC). If each has a 50% ownership interest in the account, and one of them dies, what happens to the shares in the account?
Half of the shares would belong to his spouse, and the remaining half would be distributed to his estate.
with all primary offerings, new issue (IPO), or additional issue, underwriting proceeds go to the
Issuing company
Under the Uniform Transfers to Minors Act (UTMA), Mervyn wants to give some stock to his brother's minor son. Mervyn's brother is the legal guardian over the child. However, if Mervyn wants to name himself as custodian, which of the following needs to be done?
Mervyn must open the account and name himself as the custodian.
Still price
Price the stock can be purchased.
An investor purchased a corporate bond at 99⅝ and sold the bond at 102¾. How much money did the investor make or lose on this transaction?
Profit of $31.25
Call
Purchase predetermined amount by until date.
an instrument of investment in the form of a document (such as a stock certificate or bond) providing evidence of its ownership
SECURITIES
In a corporate liquidation, which of the following places investors in the correct order of priority?
Secured bondholders, debentures, subordinated debentures, preferred stockholders
Regarding stockholder rights, which of the following statements is false?
Stockholders may never be part of the management of the company.
All of the following are components of understanding a customer's financial circumstances except
The customer's education is not a factor in determining their current financial circumstances
The board of directors of the Windmill Growth Fund have declared a dividend. The ex-date for the dividend will likely be on which of the following days?
The first business day after the record date
A broker-dealer member firm wants to give employees of another broker-dealer located in the same city tickets to a community theater performance worth $30 for the holiday season.
The gifts are permitted if no condition of sales or reciprocal business is expected, and the registered representative's employing firm's prior approval has been given.
A customer enters an order to buy 325 shares of Bryce Bridges, Inc., at 17. Which of the following regarding these order instructions is true?
The order can be executed at 17 or lower.
would be the accurate explanation regarding owners and writers of listed equity option call contracts?
The owner of a call has the right to exercise the contract, and the writer would then be assigned and obligated to sell shares to the owner at the strike price, if exercised.
Strike price
The price at which the stock or commodity underlying a call option (such as a warrant) or a put option can be purchased (called) or sold (put) during a specified period. The stated price per share for which underlying stock may be purchased (in the case of a call) or sold (in the case of a put)
Which of the following transactions may be made on margin?
The purchase of NYSE-listed exchange-traded fund (ETF)
You quote ABC stock to a customer 67 bid for 1,000 shares, 700 offered at 67.10. Which of the following is true?
The quote's inside spread is 0.10.
Which of the following statements regarding capital markets is false?
They are used only by the private sector.
Overprice.com, Inc. (ticker: OVER) is an NYSE-listed big box retailer. The company has a long history of steady growth and has paid a dividend every quarter for five decades. It recently announced that it expects steady growth in same-store sales and will continue paying dividends into the foreseeable future. It has also announced plans to expand into Central and South America. OVER stock is an example of
a blue-chip stock.
The sale of investment company shares in dollar amounts just below the point at which the sales charge is reduced on quantity transactions to apply the higher sales charge is called
a breakpoint sale.
A customer enters a market order. This type of order can be
a buy or sell order to be executed at the next available price.
customer enters a market order. This type of order can be
a buy or sell order to be executed at the next available price.
The Windmill Growth and Income Fund offers its shares to the public at the fund's net asset value (NAV) based on the next calculation of that figure. Based on this, you can say that the fund is
a no-load fund.
A fiduciary is
a person who has powers that are to be exercised for the benefit of another.
If a corporation is liquidated in a bankruptcy,
a shareholder's liability is limited to the amount invested.
Sweets, Inc., an NYSE-listed food company, has decided to split off its cookie-making operation into a separate corporation. Current shareholders will receive one share of the new company, BigCookieCo, for each share of Sweets, Inc., they own as of the record date. This action is an example of
a spin-off.
An IRA can be funded using all of the following except
a variable life insurance policy.
penny stock
an unlisted (not listed on a U.S. stock exchange) security trading at less than $5 per share.
Coupon rates
are not higher than nonconvertible bond rates.They are lower because of the conversion feature's value to the bondholder. The bondholders are creditors, and if the stock price rises above the conversion price, the conversion feature will greatly influence the bond's price.
An investor is selling shares of Rule 144 restricted stock after holding it for a period of three months past the required holding period. The buyers of these shares are purchasing shares of stock that
are now considered registered and no longer held to a holding period.
A company's net worth belongs to its owners (shareholders). The basic balance sheet equation is
assets equals liabilities plus net worth.
A municipal bond has a coupon of 4.25%, and at the present time, its yield to maturity is 4.75%. From this information, it can be determined that the municipal bond is trading
at a discount.
An investor is looking to increase her purchase of call options. From this, you would surmise that the customer's market outlook is
bullish.
A municipal finance professional (MFP) wants to make a contribution to the campaign for a friend running to represent the state legislative district that MFP resides in. Under the MSRB pay-to-play rule, a contribution to this candidate
cannot exceed $250.
No corporation must issue any class of preferred stock. Preferred shareholders have no voting rights or preemptive rights, but they are paid before
common shareholders in the event of a corporate dissolution.LO 1.i
All of the following are true concerning convertible bonds except
coupon rates are usually higher than nonconvertible bond rates of the same issuer.
In a TIC (tenants in common) account, securities pass to the
deceased owner's estate.
Blue-chip stocks are
equity issues of financially stable, well-established companies that have demonstrated their ability to pay dividends in both good and bad times
The Uniform Practice Code
establishes standard trade practices, including settlement dates, good delivery procedures, and ex-dates.
A customer enters an order for ABC, Inc., common stock that includes instructions that it must be executed in its entirety when entered or canceled. This is known as
fill-or-kill (FOK) order.
A client buys stock on Monday, August 14, in a cash account. Under Regulation T, when is the client's payment due?
four business days
For tax purposes, all of the following are ordinary income except
gains from securities transactions
A broker-dealer registered with the Securities and Exchange Commission (SEC) conveys that the SEC
has accepted the member firm's registration to do business.
Many investors hold their securities in street name. Street name securities are
held in the name of the broker-dealer for the beneficial owner.
If a bond is purchased at a discount, the yield to maturity is
higher than the nominal yield.
All of the following are false descriptions of different securities offering types except
in a primary additional issue, underwriting proceeds go to the issuer.
Ordinary income can be defined as
income earned from interest, wages, rents, royalties, and similar income streams.
ABC Corporation's stock is trading at $35. A client has purchased a $50 strike call. The option's premium is made up of
intrinsic value plus time value.
One of the ways in which closed-end investment companies differ from open-end investment companies is in their ability to
issue bonds.
All of the following are money market instruments except
jumbo certificates of deposit. B) Treasury bills. C) ✅️warrants expiring within three months. D) Treasury notes maturing in 10 months.
An investor bought a call. He has
limited upside and limited downside.
When an investor wants to sell short 700 shares of XYZ stock, before the order is entered, the shares must be
located to be borrowed.
The primary purpose of offering preemptive stock rights is to allow the common shareholder to
maintain a proportionate share of ownership in the corporation.
The Municipal Securities Rulemaking Board (MSRB) creates rules for all of the following except
municipalities issuing municipal securities.
Offering shares at the next NAV calculation is a characteristic
mutual funds and other open-end management companies (called forward pricing).
A preferred stock dividend is stated as a percentage of
par value (normally $100).
A fund with a 12b-1 fee has a fee to cover certain distribution costs. This fee is
part of the expense ratio of the fund.
A company that has issued noncumulative preferred stock
pays current preferred dividends before paying dividends on common stock.
A customer with no other mutual fund investments wishes to invest $47,000 in the Windmill Growth Fund. If the Class A shares are eligible for a breakpoint sales charge discount at the $50,000 investment level, the action least appropriate for an agent is to
place the order as instructed.
A registered representative working for a broker-dealer member firm is taking a part-time job as an instructor to supplement current income. Regarding this activity,
prior written notice must be made to the member firm, who could reject or restrict the affiliation.
Any sale of securities outside an associated person's or the employing member firm's regular business is recognized as
private securities transaction.
A customer who is bearish on the stock market might take any of the following actions except
purchase an inverse equity index fun.
The forward pricing rule applies to
purchases, but not redemptions, of the shares of open-end investment companies.
A major difference between an open-end management investment company and a closed-end company is that the open-end investment company
sells shares through a continuous primary offering.
The Securities Exchange Act of 1934 (the people and places act) covers all of the following except
state registration of broker-dealer firms.
Under the Uniform Securities Act, each state appoints an entity to oversee state securities law called
the administrator.
The City of Chicago issued $200 million in GO debt five years ago. The bonds were issued with a 20-year maturity and carry a 5% coupon. Your client, who purchased one of these bonds on the initial offering, calls you to get a current quote. You respond that the bonds are selling at a slight premium. This means that
the nominal yield is higher than the yield to maturity.
Boot manufacturer Dustin, Inc., had registered to sell shares of its stock to the public for the first time. The company has several different uses for the money to be raised, and first among them is building a new manufacturing plant outside of El Paso, Texas. This sale would be part of
the primary market.
To receive a dividend, the owner's name must appear in the transfer agent's books by
the record date.
Capital gains are usually associated with
the sale or exchange of property, including securities.
A regular-way settlement of a stock trade settles on
the second business day following the trade date.
If a mutual fund has a public offering price equal to its NAV, it has no sales charge and is
therefore a no-load fund. LO 4.d
All of the following are among the items of information that must be entered on a new account form except
what educational degree(s) the accountholder has earned.
Underwriters in a firm commitment offer
will act as principals.
