SIE Prep: Master Exam 1

Orders that are placed below the current market are: A. all limits B. all stops C. sell limits and buy stops D. buy limits and sell stops

D. buy limits and sell stops

An open end management company: A. continuously rebalances its portfolio to specified asset allocation percentages B. continuously trades the stocks in it portfolio to generate trading profits C. continuously liquidates appreciated positions with liquidations of depreciated positions D. continuously offers its own shares to investors

D. continuously offers its own shares to investors

In order to be regulated under subchapter M of the Internal Revenue Code, an investment company must: A. invest at least 75% of its assets in securities B. invest at least 90% of its assets in securities C. distribute at least 75% of its Net Investment Income to shareholders D. distribute at least 90% of its Net Investment Income to shareholders

D. distribute at least 90% of its Net Investment Income to shareholders

Issuance of which of the following municipal issues is subject to statutory debt limits? A. moral obligation bond B. special tax bond C. industrial revenue bond D. general obligation bond

D. general obligation bond

An equity REIT would most likely invest in all of the following EXCEPT: A. apartment B. office buildings C. shopping malls D. industrial parks

D. industrial parks

A municipal variable rate demand note is considered to be a: A. short term issue that gives the issuer the right to call the the bond from the holder on pre-set dates B. short term issue that gives the holder the right to put the bond to the issuer on pre-set dates C. long term issue that gives the issuer the right to call the bond from the holder on pre-set dates D. long term issue that gives the holder the right to put the bonds to the issuer on pre-set dates

D. long term issue that gives the holder the right to put the bonds to the issuer on pre-set dates

A closed end fund has a Net Asset Value of $10 per share. The minimum price at which the shares can be purchased is: A. $10 B. $10 plus a commission C. market price D. market price plus a commission

D. market price plus a commission A closed end fund is traded in the market like any other stock. Any purchaser would pay the prevailing market price (which can be below, at, or above Net Asset Value) and would have to pay a commission to have the trade executed. Thus, a closed end fund share is purchased at the prevailing market price plus a commission. Mutual funds are purchased at the offering price, which is inclusive of any sales charge. This would be a new prospectus issue offering so therefore no commissions are involved.

Which of the following securities is NOT eligible for trading by the federal reserve? A. prime banker's acceptances B. treasury bills C. treasury bonds D. municipal debt

D. municipal debt

A variable annuity is a: A. face amount certificate company B. open end fund C. closed end management company D. non fixed unit investment trust

D. non fixed unit investment trust

Which security of the same issuer is likely to give the highest current yield? A. warrant B. common stock C. convertible preferred stock D. non-convertible preferred stock

D. non-convertible preferred stock

REITs can invest in all of the following EXCEPT: A. mortgages B. real estate C. government securities D. oil and gas programs

D. oil and gas programs

In a falling market, which orders will be executed? A. open buy stops and open sell stops B. open buy limits and open sell limits C. open sell limits and open buy stops D. open buy limits and open sell stops

D. open buy limits and open sell stops

Which statement about investment companies is FALSE? A. an open end fund is a type of management company B. a closed end fund is a type of management company C. closed end fund shares trade throughout the day D. open end fund shares trade throughout the day

D. open end fund shares trade throughout the day

Regarding bonds with put options, which statement is TRUE? A. exercise of the put is at the option of the issuer B. exercise of the put guarantees the investor gets back his or her purchase price. C. yields on bonds with put options are higher than similar bonds without this feature D. put features are most likely to be used when rates rise

D. put features are most likely to be used when rates rise

Which statement is TRUE about tax shelters that invest in raw land? A. raw land is depreciable and qualifies for the depletion deduction B. raw land is not depreciable but does not qualify for the depletion deduction C. raw land is not depreciable and qualifies for the depletion deduction D. raw land is not depreciable and does not qualify for the depletion deduction

D. raw land is not depreciable and does not qualify for the depletion deduction

A repurchase agreement is effected between two US gov. securities dealers. The interest charged under the agreement is the: A. coupon rate of the underlying US gov. securities, paid directly from the issuer to the securities' original buyer B. coupon rate of the underlying US gov. securities, paid directly from the issuer to the securities' original seller C. repo rate, paid by the buyer of the securities to the seller D. repo rate, paid by the seller of the securities to the buyer

D. repo rate, paid by the seller of the securities to the buyer

What is a characteristic of a unit investment trust? A. high portfolio turnover B. disclosure of the identity of the investment adviser C. board of directors overseeing investments D. securities that are redeemable with the sponsor

D. securities that are redeemable with the sponsor

All of the following dates are needed to compute the total purchase price of a municipal bond traded on a yield basis in the secondary market EXCEPT: A. dated date B. maturity date C. settlement date D. interest payment date

A. dated date The dated date has no meaning for pricing a bond trading in the secondary market. It is simply the legal date of issuance of the bond, and is the date from which interest started accruing on the issue.

A corporation has issued 50,000 shares of common stock at $0.50 par. The corporation has 10,000,000 shares of treasury stock on its books. The aggregate par value of the outstanding shares is: A. $20,000,000 B. $40,000,000 C. $80,000,000 D. $100,000,000

A. $20,000,000

A Treasury Bond is quoted at 95-3. The dollar price of a $1,000 par bond is: A. $950.94 B. $953.00 C. $953.75 D. $957.75

A. $950.94 The bond is quoted at 95 and 3/32nds. 3/32nds = .09375, so the bond is quoted at 95.09375% of $1,000 par value = $950.94.

ABC corporation has declared a rights offering to stockholders of record on Tuesday, June 22nd. Under the offer, shareholders need 20 rights to subscribe to 1 new share at a price of $60. Fractional shares can be rounded up to purchase 1 full share. A customer owning 240 shares wishes to subscribe. The market price of the stock is currently $73. The customer can buy: A. 12 shares for $720 B. 12 shares for $876 C. 240 shares for $14,400 D. 240 shares for $17,520

A. 12 shares for $720 Since 20 rights are needed to buy 1 new share, the customer holding 240 shares, and therefore receiving 240 rights can buy 240 / 20 = 12 shares at $60 each = $720 total for 12 shares.

Of the choices offered, which security is least subject to purchasing power risk? A. 3 month treasury bill B. 10 year treasury note C. 30 year treasury bond D. 30 year treasury STRIP

A. 3 month treasury bill

A customer places an order to buy bonds. The order reads "Buy 5M ABC 9s M '35 @ 90 GTC." At which of the following prices may the order be executed? A. 90 or below B. 90 only C. 90 or above D. below 90 since the "all in" price of 90 must include and commission or mark up under GTC rules

A. 90 or below

Which of the following pay quarterly dividends? A. ADRs B. bonds C. preferred stock D. rights

A. ADRs

Stocks that are listed on the New York Stock Exchange can also be typically listed and traded on all of the following exchanges EXCEPT: A. American Stock Exchange B. Chicago Stock Exchange C. Boston Exchange D. Pacific Exchange

A. American Stock Exchange Stocks that are listed on the NYSE are typically NOT listed on the AMEX (now renamed the NYSE American) or NASDAQ. Each one of these is a "national" stock exchange, trading companies where there is a "national interest" in trading those stocks.

Interest income from all of the following bond issues is exempt from federal state and local tax EXCEPT: A. Hawaii B. Puerto Rico C. Guam D. Virgin Islands

A. Hawaii

Which rating applies to short term municipal issues? A. MIG 1 B. P2 C. P1 D. NP

A. MIG 1

Which of the following MUST be a closed end fund? A. NAV=$10/purchase price=$9.50 B. NAV=$10/purchase price=$10 C. NAV=$10/purchase price=$10.50 D. the fund is issued and redeemed at end of day

A. NAV=$10/purchase price=$9.50

Which statement is TRUE about shareholder rights? A. Only common shareholders have preemptive rights B. Preferred shareholders have preemptive rights C. Both common and preferred shareholders have voting rights D. Only preferred shareholders have voting rights

A. Only common shareholders have preemptive rights

Which statement is TRUE regarding preferred stock payments? A. Preferred dividends are usually higher than those paid to common B. Preferred dividends tend to grow over time C. Preferred dividends are paid quarterly D. Preferred interest is paid semi-annually

A. Preferred dividends are usually higher than those paid to common

Which of the following actions must be taken if a municipality wishes to raise its debt limit? A. Public referendum B. Court order C. Judicial edict D. Tax assessment

A. Public referendum

A registered representative receives an order to sell 100 shares of ABC stock that has been "transferred and shipped" to the customer. Before executing the order, the registered representative must: A. ascertain the location of the stock B. ascertain that the securities can be delivered in 4 business days to meet Reg. T requirements C. validate that the securities are in "good form" D. obtain physical possession of the securities

A. ascertain the location of the stock

Which statement is FALSE regarding brokered CDs? A. call features are not permitted on these instruments B. how the instrument is titled can determine whether FDIC insurance covers the investment C. there is no penalty for early withdrawal of principal D. these instruments can have maturities of up to 5 years

A. call features are not permitted on these instruments

The principal difference between an open end management company and a closed end management company is: A. capitalization B. management C. investment objective D. expense ratio

A. capitalization

A qualified legal opinion is one which: A. gives a conditional affirmation of the legality of the securities B. gives an unconditional affirmation of the legality of the securities C. is given by a qualified bond counsel D. qualifies the issue for a federal tax exemption from taxation

A. gives a conditional affirmation of the legality of the securities

The principal benefit of an oil and gas drilling program is: A. intangible drilling costs B. depreciation C. depletion D. recapture

A. intangible drilling costs

All of the following statements are true regarding treasury STRIPs EXCEPT: A. interest earned is subject to reinvestment risk B. interest income is accreted and taxed annually C. the bonds are issued at a discount D. the bonds are zero coupon obligations

A. interest earned is subject to reinvestment risk

Electronic Communications Networks (ECNs): A. match customer orders solely on an agency basis B. fill customer orders on a principal or agency basis C. charge a flat 1% sales charge for the successful execution of each order D. earn a spread for the successful execution of each order

A. match customer orders solely on an agency basis ECNs - Electronic Communications Networks - only accept orders for actively traded securities - that is, NYSE-listed and NASDAQ-listed stocks. Essentially they are electronic matching services, matching customer buy and sell orders for a very low fee (often as low as $1 per trade). ECNs do not act as dealers - only as agents, earning a fee on each successful transaction.

For bonds trading at a discount, rank the yield measures from lowest to highest? A. nominal, current, yield to maturity, yield to call B. yield to call, yield to maturity, current, nominal C. yield to maturity, nominal, yield to call, current D. current, nominal, yield to call, yield to maturity

A. nominal, current, yield to maturity, yield to call

A market maker that compensates a retail member firm for sending its customer orders to that market maker is: A. paying for order flow B. interpositioning C. engaging in a prohibited practice under SEC rules D. front running

A. paying for order flow

A proxy given to a caretaker to vote a stockholder's shares is a: A. power of attorney B. trading authorization C. discretionary authority D. voting trust

A. power of attorney

US treasury securities are subject to which of the following risks? A. purchasing power risk B. credit risk C. marketability risk D. default risk

A. purchasing power risk

Common dividends are usually declared: A. quarterly by the board of directors of the company B. semi-annually by the board of directors of the company C. quarterly by the chief executive officer of the company D. semi-annually by the chief executive officer of the company

A. quarterly by the board of directors of the company

All of the following are terms associated with preferred stock EXCEPT: A. renewable B. cumulative C. negotiable D. convertible

A. renewable

Which statement is TRUE? A. securities dealer will buy stock at the bid price and sell stock at the ask price B. a securities dealer will sell stock at the bid price and buy stock at the ask price C. a securities dealer will buy stock and sell stock at the midpoint between the bid and ask price D. a securities dealer will buy and sell stock at the price of the last reported trade

A. securities dealer will buy stock at the bid price and sell stock at the ask price

The effective federal funds rate is composed of rates offered by: A. selected commercial banks across the US B. selected thrift institutions across the US C. the designated primary US gov. securities dealers D. the US treasury

A. selected commercial banks across the US

In order to protect a gain on a long stock position, a customer should place a: A. sell stop order B. sell limit order C. not held order D. fill or kill order

A. sell stop order

A transaction is mistakenly placed in John Jones' cash account when it should have been recorded in John Jones' margin account. To correct this: A. the registered representative must create a cancel/rebill record detailing the reasons for the designation change B. no cancel/rebill record is required because both accounts are owned by the same individual C. the branch manager or compliance official must approve of the change verbally prior to initiation D. the branch manager or compliance official is not required to approve of the change since the accounts are owned by the same individual

A. the registered representative must create a cancel/rebill record detailing the reasons for the designation change

The conversion price of a convertible debenture is set at issuance at $40 per share. The common stock is now trading at $42 while the bond is trading at 110. In order for the common stock to be trading at parity to the current market price of the bond, the stock price would be: A. $40 B. $44 C. $46 D. $48

B. $44

A customer buys 100 shares of preferred at $80 per share. The par value is $100. The dividend rate is 10%. The customer will receive how much in each dividend payment? A. $400 B. $500 C. $800 D. $1,000

B. $500

The regular way ex date for cash dividends is usually set at: A. 2 business days before record date B. 1 business day before record date C. 1 business day after record date D. 2 business days after record date

B. 1 business day before record date

A customer has $20,000 to invest in a mutual fund with a NAV per share of $9.42 and a POP of $10.30. In the prospectus is the following breakpoint schedule: $0-$10,000: 8 1/2% $10,001-$25,000: 7 3/4% $25,001-over: 6 1/2% A.1,942 B. 1,959 C.2,123 D. 2,159

B. 1,959

A convertible bond is convertible into common stock at a 32:1 ratio. The common stock is currently trading at $30. The bond is currently trading at $980. What is the parity price of the common stock? A. 30.00 B. 30.63 C. 31.25 D. 32.00

B. 30.63

ABC 8% $100 par preferred is trading at $105 in the market. The current yield is: A. 6.6% B. 7.6% C. 8.6% D. 10.6%

B. 7.6%

Which of the following would be a quote for a manufacturing company bond? A. 99.50 B. 99-16 C. 99 1/2 D. 99 8/16

B. 99-16 A manufacturing company bond is a corporate bond. Corporate bonds are quoted on a percentage of par basis in 1/8ths. 99 1/2 = 99.50% of $1,000 par = $995.00 per bond. Choice B is a U.S. Government bond quote in 32nds. 99-16 = 99 16/32nds = 99.50% of $1,000 par = $995.00 per bond. Note that corporate, municipal and government bonds are not quoted in penny movements, as is the case with equities.

All of the following are money market instruments EXCEPT: A. REPOs B. ADRs C. CDs D. BAs

B. ADRs

LIBOR is the commonly used term for the: A. long term bond offered rate B. London Interbank offered rate C. last in, best offered rate D. lowest interest borrowing offered rate

B. London Interbank offered rate

The price of which of the following would be MOST affected by rising interest rates? A. Low coupon, short maturity bonds B. Low coupon, long maturity bonds C. High coupon , short maturity bonds D. High coupon, long maturity bonds

B. Low coupon, long maturity bonds

During periods of stable interest rates, which type of preferred stock will have the greatest price volatility? A. Cumulative B. Participating C. Callable D. Adjustable Rate

B. Participating

Which of the following is NOT defined as an "investment company" under the Investment Company Act of 1940? A. face amount certificate company B. REITs C. management company D. unit investment trust

B. REITs

Which statement is TRUE about the Net Asset Value per share for a mutual fund? A. The distribution of capital gains does not affect the Net Asset Value per share B. The redemption of mutual fund shares does not affect the Net Asset Value per share C. NAV is calculated every calendar day D. The distribution of dividends to mutual fund shareholders does not affect the Net Asset Value per share

B. The redemption of mutual fund shares does not affect the Net Asset Value per share

What will back a municipal revenue bond? A. Any municipal revenue collected B. The specific revenue stipulated in the bond's Official Statement C. Taxes collected by the state of issuance D. Taxes collected by the issuing municipal entity

B. The specific revenue stipulated in the bond's Official Statement A revenue bond is backed by a "revenue pledge" - these are specific revenues from an enterprise activity (such as the revenue from operating an airport financed with an airport revenue bond issue).

Customers who trade NYSE-listed securities during extended trading hours are subject to: A. You did not choose this answer. A a lower degree of price volatility than that experienced during regular trading hours B. You chose this answer B a higher degree of price volatility than that experienced during regular trading hours C. You did not choose this answer. C a similar degree of price volatility to that experienced during regular trading hours D. You did not choose this answer. D no price volatility since all executions are done at the issue's 4:00 PM closing price

B. You chose this answer B a higher degree of price volatility than that experienced during regular trading hours

Which bond does NOT have interest rate risk? A. a bond that is currently callable B. a bond that is currently puttable C. a bond with a high current coupon D. a bond with a low current coupon

B. a bond that is currently puttable

A municipality is at its statutory debt limit and cannot legally issue more debt backed by taxing power. Which of the following bonds can be issued? A. general obligation bonds B. moral obligation bonds C. double barreled bonds D. treasury bonds

B. moral obligation bonds

The advantage of a limited partnership business structure as opposed to a corporate business structure is that limited partnerships: A. are taxed at lower tax brackets than corporations B. allow for "flow through" of gain and loss, while corporations do not C. limit liability of owners while corporate shareholders have unlimited liability D. have a better "track record" for economic success than corporations

B. allow for "flow through" of gain and loss, while corporations do not

A broker dealer will sell stock at the: A. bid price B. ask price C. midpoint price D. price of the last reported trade

B. ask price The best answer is B. Securities dealers quote stocks with a bid and ask. The bid is the price at which the dealer is willing to buy from the customer (therefore, the customer is selling to the dealer at the bid). The ask is the price at which the dealer is willing to sell to the customer (therefore, the customer is buying from the dealer at the ask).

A municipal variable rate demand note is a municipal: A. note that may be retired prior to maturity on any interest payment date at the demand of the issuer B. bond that gives the holder a tender option feature, usually at par, as of the reset date C. note that requires the issuer to reset the interest rate to the market rate upon demand of the holder D. bond that allows the issuer to vary the repayment date, upon giving written notice to the holders

B. bond that gives the holder a tender option feature, usually at par, as of the reset date

A municipality is at its debt limit and wishes to sell additional bonds. Voter approval would NOT be required for the municipality to sell: A. limited tax general obligation bonds B. bonds to construct a for-profit sports facility C. bonds to construct a new high school D. unlimited tax general obligation bonds

B. bonds to construct a for-profit sports facility Voter approval is needed for a municipality to sell general obligation (G.O.) bonds (non-self supporting debt) in an amount that exceeds the municipality's constitutional limit. It makes no difference if the general obligation bonds are backed by limited or unlimited taxing power. Bonds used to construct schools would be G.O. issues.

As interest rates rise, which following statement is TRUE? A. bonds trading at small discounts fall faster in price than bonds trading at large discounts B. bonds trading at large discounts fall faster in price than bonds trading at small discounts C. premium bonds fall faster in price than discount bonds D. bonds trading at large premiums fall faster in price than bonds trading at small premiums

B. bonds trading at large discounts fall faster in price than bonds trading at small discounts

Which of the following would be considered owners of a corporation? A. only common shareholders B. both common and preferred shareholders C. right holders D. warrant holders

B. both common and preferred shareholders

The term publicly traded fund is the common name for a(n): A. open end management company B. closed end management company C. fixed UIT D. non-fixed UIT

B. closed end management company

A securities firm does a trade for a customer and charges a mark-up. In what capacity did the firm act? A. agent B. dealer C. broker D. middleman

B. dealer

A customer wishes to invest in an oil and gas program that provides both an immediate tax benefit, as well as a reasonable chance of continuing tax benefits. The best recommendation is a(n): A. exploratory program B. developmental program C. income program D. wildcat program

B. developmental program

The money that a bank has in excess of its reserves is called: A. clearing house funds B. federal funds C. money market funds D. available funds

B. federal funds

A rising rate of inflation would lead to: A. higher bond yields and higher bond prices B. higher bond yields and lower bond prices C. lower bond yields and higher bond prices D. lower bond yields and lower bond prices

B. higher bond yields and lower bond prices

All of the following are sources of income available for general obligation bond debt service EXCEPT: A. ad valorem taxes B. highway tolls C. license fees D. assessments

B. highway tolls

All of the following statements are true regarding a bond that is "registered to principal only" EXCEPT: A. the bond is negotiable B. interest coupons are detached from the corpus of the bond C. interest payments can be redeemed by anyone D. at maturity, the registered owner receives the face amount of the bond

B. interest coupons are detached from the corpus of the bond

All of the following statements are true about the GNMA pass-through certs EXCEPT: A. GNMA is empowered to borrow from the treasury to pay interest and principal if necessary B. interest payments are exempt from state and local tax C. certificates are issued in minimum units of $25,000 D. the credit rating is considered the highest of any agency security

B. interest payments are exempt from state and local tax

Callable preferred stock is likely to be redeemed by the issuer if: A. interest rates rise B. interest rates fall C. the common stock price rises D. the common stock price falls

B. interest rates fall

The definition of treasury stock is: A. authorized shares minus issued shares B. issued shares minus outstanding shares C. authorized shares minus outstanding shares D. capital in excess of par value minus par value

B. issued shares minus outstanding shares

The price of which of the following would be MOST affected by rising interest rates? A. low coupon, short maturity bonds B. low coupon, long maturity bonds C. high coupon, short maturity bonds D. high coupon, long maturity bonds

B. low coupon, long maturity bonds

All of the following terms apply to fixed unit investment trusts EXCEPT: A. regulated B. managed C. redeemable D. registered

B. managed

Which statement is TRUE regarding a corporation that has adopted cumulative voting? A. each stockholder must accumulate his votes and cast them for one director B. minority stockholders have a greater ability to elect the director of their choice C. each director must be elected by a majority of the shareholders D. minority stockholders are given proportionately more votes than majority stockholders

B. minority stockholders have a greater ability to elect the director of their choice

Which statement is TRUE regarding debt obligations? A. corporations issue revenue bonds B. municipalities issue revenue bonds C. revenue bonds are backed by the full faith and credit of the issuing municipality D. municipalities issue income bonds

B. municipalities issue revenue bonds

Which statement is TRUE? A. mutual fund shares can be bought on 50% margin B. mutual fund shares must be paid in full when purchased, but become marginable after being held for 30 days C. ETF shares can be bought on 25% margin D. ETF shares must be paid in full when purchased, but become marginable after being held for 30 days

B. mutual fund shares must be paid in full when purchased, but become marginable after being held for 30 days

Which of the following terms are synonymous? A. open end fund/publicly traded fund B. open end fund/mutual fund C. closed end fund/mutual fund D. closed end fund/privately traded fund

B. open end fund/mutual fund

Negotiable CDs are issued at: A. a discount and pay interest monthly B. par and pay interest at maturity C. par and pay interest monthly D. a discount and pay interest at maturity

B. par and pay interest at maturity

Common dividends are paid: A. quarterly on issued shares B. quarterly on outstanding shares C. semi-annually on issued shares D. semi-annually on outstanding shares

B. quarterly on outstanding shares

A customer has a gain on a long stock position that he wishes to protect. The appropriate order is: A. buy stop order B. sell stop order C. sell limit order D. market order

B. sell stop order The customer will "lose" the gain on a long stock position if the market begins to fall. To sell out the position in a falling market, the order must be a sell stop order (placed below the market). To sell out a long position in a rising market the order would be a sell limit order.

A customer sells stock out of his account receiving net proceeds of $28,000. The customer wishes to use the proceeds to buy ACME mutual fund shares. The fund has breakpoints at $5,000 intervals. The customer has no additional funds available for investment. You should recommend that the customer: A. reinvest $25,000 ACME fund, and use the remaining $3,000 to buy common stocks B. sign a letter of intent to buy $30,000 of ACME fund C. invest an additional $2,000 in ACME fund in addition to the proceeds from the stock sale D. refrain from investing in ACME fund until $30,000 has been accumulated

B. sign a letter of intent to buy $30,000 of ACME fund

Shareholder approval would be needed if a corporation wishes to: A. pay a cash dividend B. split its stock 2 for 1 C. repurchase shares for its treasury D. issue non-convertible securities

B. split its stock 2 for 1

Which statement is TRUE regarding treasury STRIPS? A. interest is paid annually B. the bonds are issued at a discount C. interest income is taxed at maturity D. interest earned is subject to reinvestment risk

B. the bonds are issued at a discount

What is the cost basis to the recipient of an inherited mutual fund position? A. the cost basis of the deceased person B. the net asset value as of the date of death of the deceased person C. the market value as of the date the recipient liquidates the position D. the greater of the cost basis of the deceased person or the net asset value as of the date of death

B. the net asset value as of the date of death of the deceased person

A customer places an order to buy bonds. The order reads Buy 5M ABC 9s M'35 @ 90 GTC. Which statement is TRUE about this order? A. the order will be cancelled at the end of the day if an execution is not possible B. the order must be executed at a price of 90% or better C. if executed, the customer will pay $4,500 for the bonds D. the customer is establishing a short position with this order

B. the order must be executed at a price of 90% or better Since a price is specified with no other qualifications, this is a limit order to buy $5,000 face amount ("5M") of 9% bonds maturing in 2035. Since this order was entered "GTC" - "good til canceled" - the order stays open until execution is possible. The customer is attempting to establish a long position with this order and wants to buy for 90% of par or less if possible. If executed, the customer is buying $5,000 par value of bonds at 90% = $4,500 or less.

A serial bond issue is one in which the bonds are issued on: A. the same date and mature on the same date B. the same date and mature on different dates C. different dates and mature on the same date D. different dates and mature on different dates

B. the same date and mature on different dates

A 5-year 3 1/2% Treasury Note is quoted at 101-4 - 101-8. The note pays interest on Jan 1st and Jul 1st. All of the following statements are true regarding this trade of T-Notes EXCEPT: A. interest accrues on an actual day month; actual day year basis B. the yield to maturity will be higher than the current yield C. the trade will settle in federal funds D. the trade will settle next business day if performed "regular way"

B. the yield to maturity will be higher than the current yield Because these T-Notes are trading at a premium, the yield to maturity will be lower than the current yield. The current yield does not factor in the loss of the premium over the life of the bond, whereas yield to maturity does. Government bond trades settle next business day; accrued interest is computed on an actual month/actual year basis; and trades settle through the Federal Reserve system in "Fed Funds."

Which statement is FALSE regarding brokered CDs? A. these instruments have a limited trading market B. there is a penalty for early withdrawal C. there can be a loss of principal upon an early withdrawal D. there is FDIC insurance on these products as long as the CD is titled in the customer's name

B. there is a penalty for early withdrawal

A customer gives a POA to a caretaker to vote their shares on their behalf at the company's annual meeting. Which statement is TRUE? A. this is known as a proxy and once given, it can be revoked B. this is known as a proxy which may be revoked prior to the annual meeting C. this is known as a voting trust and once given, it cannot be revoked. D. this is known as a voting trust which may be revoked prior to the annual meeting

B. this is known as a proxy which may be revoked prior to the annual meeting

Which statement is TRUE about adjustment (income) bonds? A. timing of interest payments made is not predictable and any interest payments made is not predictable in amount B. timing of interest payments made is not predictable and any interest payment made is predictable in amount C. timing of interest payments made is predictable and any interest payment made is predictable in amount D. timing of interest payments made is predictable and any interest payment made is not predictable in amount

B. timing of interest payments made is not predictable and any interest payment made is predictable in amount

A mutilated security is considered a good delivery if validated by the: A. buyer B. transfer agent C. seller D. contra-broker

B. transfer agent

Which statement is TRUE about variable annuities? A. variable annuities are fixed unit investment trusts B. variable annuities are non-fixed unit investment trusts C. variable annuities are only regulated under state insurance law D. variable annuities are held in the insurance company general account

B. variable annuities are non-fixed unit investment trusts

Which statement is FALSE about the time value and intrinsic value of rights and warrants when issued? A. warrants have time value at issuance B. warrants have intrinsic value at issuance C. rights have virtually no time value at issuance D. rights have intrinsic value at issuance

B. warrants have intrinsic value at issuance

Which statement is TRUE about the intrinsic value of rights and warrants when issued? A. warrants have no time value but significant intrinsic value B. warrants have no intrinsic value but significant time value C. rights have limited time value but no intrinsic value D. rights have intrinsic value and substantial time value

B. warrants have no intrinsic value but significant time value

The depletion deduction is NOT allowed for: A. gas B. wheat C. iron ore D. timber

B. wheat Depletion deductions are not allowed for "readily renewable" resources

The minimum denomination on a mortgage backed pass through certificate is: A. $1,000 B. $10,000 C. $25,000 D. $100,000

C. $25,000

A customer buys 5M of 3 1/4% treasury bonds at 98-8. The customer will pay how much for the bonds? A. $4,900.25 B. $4,904.00 C. $4,912.50 D. $5,000.00

C. $4,912.50

The conversion price of a convertible debenture is set at issuance at $50 per share. The common stock is now trading at $46 while the bond is trading at 110. In order for the common stock to be trading at parity to the current market price of the bond, the stock price would be: A. $46.00 B. $50.00 C. $55.00 D. $62.50

C. $55.00 Since the bond is now trading at 110 ($1,100 per bond) and each bond is convertible into 20 common shares, the parity price of the common is $1,100 / 20 = $55. Since the common is currently trading at $46, it is below parity and it does not make sense to convert.

A corporation has issued 100,000,000 shares of common stock at $1 par. The corporation has 25,000,000 shares of treasury stock on its books. The aggregate value of the outstanding shares is: A. $12,500,000 B. $25,000,000 C. $75,000,000 D. $100,000,000

C. $75,000,000

An investor purchases 1,000 mutual fund shares with a Net Asset Value of $10 each, where the fund imposes a 5% contingent deferred sales charge if the shares are redeemed within the first year. The sales charge decreases by 1% for each year the investor remains invested in the fund. If the investor were to redeem his shares during the fourth year of holding the fund, based upon the NAV of $10, he or she will receive: A. $10,000 B. $9,900 C. $9,800 D. $9,700

C. $9,800

The maximum annual 12b-1 fee permitted under FINRA rules is: A. .25% B. .50% C. .75% D. 1.00%

C. .75%

A customer has purchased 1,000 shares of ABC stock at $30 per share, paying a commission of $1 per share for the transaction. ABC stock declares a 5% stock dividend. When the dividend is paid, the tax status of the investment is: A. 1,000 shares held at a cost basis of $30 per share B. 1,000 shares held at a cost basis of $31 per share C. 1,050 shares held at a cost basis of $29.52 per share D. 1,050 shares held at a cost basis of $30 per share

C. 1,050 shares held at a cost basis of $29.52 per share

Which investment gives the greatest protection against purchasing power risk? A. 10 year double barreled bonds B. 10 year guaranteed bonds C. 10 year TIPS D. 10 year STRIPS

C. 10 year TIPS

A T-Bill has increased one percent in yield. This equals a: A. 1 basis point increase B. 10 basis points increase C. 100 basis points increase D. $10 increase

C. 100 basis points increase

A dual listed stock is one which trades in: A. the second market B. the secondary market C. 2 different US market venues D. the primary and secondary markets

C. 2 different US market venues

Ford Motor Company has issued 8% convertible debentures, convertible at a 25:1 ratio. Currently the debenture is trading at 110. The stock is trading at 38. What is the conversion price of the stock? A. 25 B. 38 C. 40 D. 44

C. 40

At which standard and poor's rating is a bond first considered to be speculative (junk bond)? A. AA B. BBB C. BB D. C

C. BB

Which of the following do NOT have an equity position? A. Convertible preferred shareholders B. Preferred shareholders C. Convertible debenture holders D. Common shareholders

C. Convertible debenture holders

What entity was created to provide clearing and settlement efficiencies by immobilizing securities and to make "book entry" changes to ownership of securities? A. FRB B. OCC C. DTC D. PSA

C. DTC: Depository Trust and Clearing Corporation is owned by U.S. banks and brokerage firms. It is the central clearing house for stock and bond transactions, and also maintains custody of both physical certificated securities and electronic book-entry securities.

If a municipality is expecting to receive federal funding for mass transit programs, it could borrow against the expected funds to be received by issuing: A. BANs B. TANs C. GANs D. CLNs

C. GANs

A corporation wishes to raise funds to build a new manufacturing facility. Which method is suitable for the issuer to obtain financing? A. Force conversion of outstanding convertible preferred B. Split the outstanding shares of common stock 2 for 1 C. Issue rights to outstanding shares of common stock D. Call outstanding convertible preferred

C. Issue rights to outstanding shares of common stock

Trades of all of the following securities will settle in Fed Funds EXCEPT: A. Treasury Bills B. Treasury Notes C. Municipal Bonds D. Agency Bonds

C. Municipal Bonds

Trades of NASDAQ listed securities that take place in all markets are consolidated and reported through the: A. Network A Tape B. Network B Tape C. Network C Tape D. Network D Tape

C. Network C Tape

The NYSE Specialist (DMM) and Floor Trader system is the model for trading used by which of the following markets? A. NASDAQ B. OTC C. PHLX D. BATS

C. PHLX

All of the following statements are true about REITs EXCEPT: A. REITs may be traded on stock exchange floors B. REITs may be traded on NASDAQ C. REITs are securities which are redeemable with the sponsor D. REITs are securities that are negotiable in the market

C. REITs are securities which are redeemable with the sponsor

All of the following statements are ture about REITs EXCEPT: A. REITs may be traded on stock exchange floors B. REITs may be traded on NASDAQ C. REITs are securities which are redeemable with the sponsor D. REITs are securities that are negotiable in the market

C. REITs are securities which are redeemable with the sponsor

Which statement is FALSE regarding REITs? A. REITs are negotiable securities B. REITs issue shares of beneficial interest representing an undivided interest in a pool of real estate investments C. REITs are similar to open-end investment companies D. REITs are registered under the Securities Act of 1933

C. REITs are similar to open-end investment companies REITs (Real Estate Investment Trusts), though not defined as a type of investment company under the 1940 Act, are similar to closed end investment companies; not open end management companies. REITs issue shares of beneficial interest with each certificate representing an undivided interest in the pool of real estate investments. REITs are registered securities under the Securities Act of 1933. REITs trade on an exchange or OTC meaning these are negotiable instruments.

Which of the following debt securities is NOT issued by a corporation? A. Mortgage Bonds B. Collateral Trust Certificates C. Revenue Bonds D. Income Bonds

C. Revenue Bonds

Under IRS rules, if a customer selling shares of stock wishes to use specific identification instead of FIFO for cost basis reporting, the broker-dealer effecting the trade must be notified of this no later than: A. Purchase Date B. Sale Date C. Settlement Date D. Year-End Date

C. Settlement Date If a customer says nothing at the time of a stock sale, IRS rules requires that FIFO be used to determine which shares are sold. If the customer wishes to use specific identification instead, this must be chosen by the customer no later than settlement date.

Which statement is FALSE regarding a $200,000 short term negotiable certificate of deposit? A. The CD is issued by a bank B. The CD has a secondary trading market C. The CD is callable D. The CD is fully FDIC insured if it is titled in the customer's name

C. The CD is callable Negotiable Certificates of Deposit are $100,000 minimum face amount certificates that are issued by banks. Short term negotiable CDs are non-callable and trade in the secondary market. Note, in contrast, that banks also issue long term negotiable CDs that can be callable. Negotiable CDs are not FDIC insured for any amount in excess of the $250,000 FDIC insurance limit per customer. Furthermore, to receive FDIC coverage, the CD must be titled in the customer's name. Since this CD is for $200,000 and is titled in the customer's name, it is fully FDIC insured.

Aggregation to qualify for a breakpoint is NOT available to: A. a group of family members in the same household that aggregates investment funds B. a single individual who has an accumulated position in a fund and who is making an additional purchase C. an investment club that purchases different mutual funds within the same fund family D. an individual who purchases funds with different investment objectives in the same fund family

C. an investment club that purchases different mutual funds within the same fund family

If a new bond is issued with a call option, when is it callable by the issuer? A. only during the period of call protection B. only on the call date C. anytime on or after the call date D. only on the semi-annual interest payment date

C. anytime on or after the call date

Which of the following can be purchased on margin? A. mutual funds B. initial public offerings of closed end funds C. closed end funds trading on the NYSE D. initial public offerings of fixed unit investment trusts

C. closed end funds trading on the NYSE

Which of the following do NOT have an equity position? A. convertible preferred shareholders B. preferred shareholders C. convertible debenture bondholders D. common shareholders

C. convertible debenture bondholders

John Jones has both a cash account and an IRA account at your firm. Mr. Jones calls and asks that 2,000 shares of DEF stock be purchased at the market in his IRA account. The trade is executed, however the transaction was recorded in Mr. Jones' cash account. The proper procedure to correct this is to: A. enter a sell order in Mr. Jones' cash account for 2,000 shares of DEF at the market and simultaneously enter a buy order for the same amount in Mr. Jones' IRA account B. obtain written permission from the trustee of the IRA account to transfer the 2,000 shares of DEF from the cash account to the IRA account C. create a written record canceling the transaction from the cash account and rebilling the transaction to the IRA account, approved by the branch manager D. obtain written permission from the customer to transfer the DEF stock position from the cash account to the IRA account

C. create a written record canceling the transaction from the cash account and rebilling the transaction to the IRA account, approved by the branch manager

Which statement is TRUE regarding money market funds? A. typically sold with a nominal sales charge B. typically do not impose management fees C. fund dividends are taxable even if reinvested D. typical maturities of securities held in the portfolio are 270 days or less

C. fund dividends are taxable even if reinvested Money market funds usually do not impose sales charges but all funds impose management fees. Fund dividends are taxable, whether or not they are automatically reinvested in additional fund shares. The reason why these funds are called "money" funds is that the securities held in the portfolios have very short maturities (less than 30 days) and turn over into cash quickly.

Which corporate bonds are NOT secured? A. first mortgage bonds B. second mortgage bonds C. guaranteed bonds D. equipment trust certificates

C. guaranteed bonds

Which of the following investments is the most illiquid? A. mutual fund B. closed-end fund C. hedge fund D. exchange traded fund

C. hedge fund

An oil and gas program that is designed to take advantage of the depletion allowance, without immediate deductions is a(n): A. exploratory program B. developmental program C. income program D. combination program

C. income program In an income program, proven reserves in the ground are purchased. No drilling is required - this work is already complete. All that is left to the program is to extract the oil from the ground and sell it. As the oil is sold, the depletion allowance shelters income.

Which of the following are the least likely purchasers of commercial paper? A. trust companies B. insurance companies C. individuals D. open-end investment companies

C. individuals

Common shareholders have all of the following rights EXCEPT the right to: A. receive a dividend if one is declared by the board of directors B. remaining assets in a liquidation of the company after all other claimants C. inspect the minutes of meetings of the board of directors D. vote for each individual proposed for election to the board of directors

C. inspect the minutes of meetings of the board of directors

Significant investment features for the purchaser of municipal bonds include all of the following EXCEPT: A. interest is currently federal tax exempt B. maturities and issues may be diversified C. interest is currently state and local tax exempt D. insured issues are available for customers wishing minimum credit risk

C. interest is currently state and local tax exempt Interest income derived from municipal bonds is currently exempt from federal income tax; however it is subject to state and local tax unless the state exempts the issue from taxation. Most states allow this only for issues that are purchased by residents of that state.

REITs can invest in all of the following EXCEPT: A. mortgages B. real estate C. limited partnerships D. other REITs

C. limited partnerships

The term 'Funded Debt" refers to: A. short term US gov. debt B. long term US gov. debt C. long term corporate debt D. short term corporate debt

C. long term corporate debt

A bond is rated BBB by S & P's, the bond is: A. highest quality investment grade B. high quality investment grade C. lowest quality investment grade D. highest level speculative grade

C. lowest quality investment grade

The typical purchaser of a banker's acceptance is a(n): A. individual investor B. foreign investor C. money fund investor D. bank depositor

C. money fund investor

Which securities will trade with accrued interest? A. treasury bills B. banker's acceptances C. negotiable certificates of deposit D. treasury receipts

C. negotiable certificates of deposit

In an oil and gas income program, there are: A. high intangible drilling costs and high depletion deductions B. high intangible drilling costs and no depletion deductions C. no intangible drilling costs and high depletion deductions D. no intangible drilling costs and no depletion deductions

C. no intangible drilling costs and high depletion deductions

Which statement is TRUE when comparing convertible preferred stock and non convertible preferred stock? A. convertible preferred shares will have a higher yield than similar non convertible shares of the same issuer B. non convertible preferred shares and convertible shares of the same issuer typically have the same yield C. non convertible preferred shares will have a higher yield than similar convertible shares of the same issuer D. non convertible preferred stockholders will benefit as the common stock price rises

C. non convertible preferred shares will have a higher yield than similar convertible shares of the same issuer

All of the following are defined as investment companies under the investment company act of 1940 EXCEPT: A. face amount certificate company B. unit investment trust C. oil and gas leasehold partnership D. management company

C. oil and gas leasehold partnership

Which of the following is a redeemable security? A. corporate debenture B. closed end fund C. open end fund D. Ginnie-Mae pass through certificates

C. open end fund

If interest rates fall, issuers most likely will call: A. all preferred issues B. any preferred issue close to maturity C. preferred issues trading at a premium D. preferred issues trading at a discount

C. preferred issues trading at a premium

A securities firm buys stock from a customer and charges a mark down. In what capacity did the firm act? A. agent B. broker C. principal D. middleman

C. principal

Which of the following securities is actively traded in the secondary market? A. open end funds B. annuities C. real estate investment trusts D. direct participation programs

C. real estate investment trusts

All of the following terms apply to publicly traded fund shares EXCEPT: A. one-time issuance B. managed C. redeemable D. negotiable

C. redeemable

Mutual fund shares are: A. negotiable and managed B. negotiable and non-managed C. redeemable and managed D. redeemable and non-managed

C. redeemable and managed

A customer holds 1,000 shares of ABC stock valued at 80 in a margin account. The debit balance in the account is $35,000. ABC declares and pays a 20% stock dividend. The tax consequence of the distribution to the investor will be: A. portfolio income when received B. capital gain when received C. reduction of cost basis per share D. passive income at time received

C. reduction of cost basis per share

All of the following are rights of a common shareholder EXCEPT the: A. right to vote B. right to receive a dividend C. right to manage D. right to transfer shares

C. right to manage

All of the following pay dividends EXCEPT: A. preferred stock B. ADRs C. rights D. REITs

C. rights

All of the following statements are true about repurchase agreements initiated by the Federal Reserve EXCEPT: A. these are commonly called "repos" B. they are used in open market operations C. the Fed is selling securities to dealers which it promises to buy back at a later date D. it is used to ease credit and lower interest rates

C. the Fed is selling securities to dealers which it promises to buy back at a later date In a Fed-dealer repurchase agreement (a "repo"), the Federal Reserve buys (not sells) government securities from the primary dealers (mainly large commercial banks) with an agreement to sell them back the next day (at a slightly higher price). This gives the bank cash that it can lend out, easing credit and lowering interest rates.

Which statement is TRUE regarding warrants? A. the exercise price of a warrant is set at a premium to the stock's current market price and the warrants are exercised when the exercise price is above the market price B. the exercise price of a warrant is set at a discount to the stock's current market price and the warrants are exercised when the exercise price is above the market price C. the exercise price of a warrant is set at a premium to the stock's current market price and the warrants are exercised when the exercise price is below the market price D. the exercise price of a warrant is set at a discount to the stock's current market price and the warrants are exercised when the exercise price is below the market price

C. the exercise price of a warrant is set at a premium to the stock's current market price and the warrants are exercised when the exercise price is below the market price

All of the following statements are true about repurchase agreements initiated by the federal reserve EXCEPT: A. these are commonly called repos B. they are used in open market operations C. the fed is selling securities to dealers which it promises to buy back at a later date D. it is used to ease credit and lower interest rates

C. the fed is selling securities to dealers which it promises to buy back at a later date

As interest rates move, which statement is TRUE regarding bond price volatility? A. the shorter the maturity, the greater the bond's price volatility B. the longer the maturity, the lesser the bond's price volatility C. the lower the coupon rate, the greater the bond's price volatility D. the higher the coupon rate, the greater the bond's price volatility

C. the lower the coupon rate, the greater the bond's price volatility

The last day that a customer can buy stock and receive dividend if they are willing to settle for cash is: A. 2 business days prior to record date B. 3 business days prior to record date C. the record date D. the payable date

C. the record date

The trading of listed securities over the counter occurs in the: A. first market B. second market C. third market D. primary market

C. third market

Which money market instrument trades flat? A. treasury bonds B. treasury notes C. treasury bills D. certificates of deposit

C. treasury bills

Which of the following is a FALSE statement regarding treasury bills? A. the maturity is 52 weeks or less B. treasury bills trade at a discount to par C. treasury bills are callable at any time at par D. payment is backed by the full faith and credit of the US gov.

C. treasury bills are callable at any time at par

If interest rates rise, which of the following US gov. debt instruments would show the greatest percentage drop in value? A. treasury bills B. treasury notes C. treasury bonds D. savings EE bonds

C. treasury bonds

A dual listed stock is one which trades in: A. the second market B. the secondary market C. two different U.S. market venues D. the primary and secondary markets

C. two different U.S. market venues

An obligation that has an interest rate that floats and that is rest on a daily or weekly basis, and that gives the holder the right to sell the obligation back to the issuer at the reset date, or at the final maturity date, is known as a(n): A. perpetuity B. collateralized debt obligation C. variable rate demand obligation D. exchange traded put option

C. variable rate demand obligation

All of the following statements about warrants are true EXCEPT: A. warrants have a longer term than rights B. warrants are issued to make corporate senior securities offerings more attractive to investors C. warrants give the holder a perpetual interest in the issuer's underlying common stock D. warrants trade separately from the stock of the company

C. warrants give the holder a perpetual interest in the issuer's underlying common stock

If a municipal bond, callable at par, is quoted on a yield basis that is lower than the nominal yield, the price of the bond to a customer would be calculated based on: A. nominal yield B. current yield C. yield to call D. yield to maturity

C. yield to call

XYZ Company has issued 10%, $100 par cumulative preferred stock. Two years ago, XYZ omitted its preferred dividend. Last year, it paid a preferred dividend of $5 per share. This year XYZ wishes to pay a common dividend. In order to make the distribution to common shareholders, each preferred share must be paid a dividend of: A. $5 B. $15 C. $20 D. $25

D. $25

A customer has purchased 1,000 shares of ABC stock at $58 per share, paying a commission of $2 per share for the transaction. ABC stock declares a 20% stock dividend. When the dividend is paid, the tax status of the investment is: A. 1,000 shares held at a cost basis of $58 per share B. 1,000 shares held at a cost basis of $60 per share C. 1,200 shares held at a cost basis of $58 per share D. 1,200 shares held at a cost basis of $50 per share

D. 1,200 shares held at a cost basis of $50 per share

Which investment gives the LEAST protection against purchasing power risk? A. 6 month treasury bill B. 10 year treasury note C. 10 year treasury TIPS D. 10 year treasury STRIPS

D. 10 year treasury STRIPS

PDQ Company $1 par common stock currently trading at $34. PDQ is currently paying a quarterly common dividend of $0.75 per share. The current yield of PDQ stock is: A. 2.2% B. 4.4% C. 8.0% D. 8.8%

D. 8.8%

Which of the following actions taken by a corporation will raise additional capital? A. Declaration of a stock split B. Announcement of a call of all convertible preferred shares at par C. Declaration of a stock dividend D. Announcement of a rights distribution allowing existing shareholders to buy the additional stock

D. Announcement of a rights distribution allowing existing shareholders to buy the additional stock

The interest rate charged on Eurodollar loans between major international banks is: A. federal funds rate B. PRIME rate C. Eurodollar rate D. LIBOR

D. LIBOR: London interbank offered rate

In order to render an opinion on a new municipal bond issue, the bond counsel will examine all of the following EXCEPT: A. judicial edicts and municipal statutes B. state constitution and amendments C. tax code and interpretive regulations D. SEC regulations

D. SEC regulations

Accrued interest on treasury bonds is computed: A. 30/360 B. 30/actual C. actual/360 D. actual/actual

D. actual/actual

A customer places an order to buy bonds. The order reads "Buy 5M ABC 9s M '45 @ 90 Stop GTC." After the order is elected, at which of the following prices may the order be executed? A. at 90 only B. only at 90 or below C. only at 90 or above D. at market

D. at market

A company that issued first mortgage bonds is in default. If mortgage bondholders' claims are not satisfied from the sale of the property backing the bonds, then the bondholders: A. have no recourse B. can claim other property to satisfy the outstanding loans C. can attempt to sell other assets to satisfy the outstanding loans D. become general creditors for the balance due

D. become general creditors for the balance due

To tighten credit, the federal reserve will: A. sell US gov. securities to bank dealers with an agreement to buy them back at a later date B. buy US gov. securities from bank dealers with an agreement to sell them back at a later date C. sell foreign gov. securities to bank dealers with an agreement to buy them back at a later date D. buy foreign gov. securities from bank dealers with an agreement to sell them back at a later date

D. buy foreign gov. securities from bank dealers with an agreement to sell them back at a later date

An open order is on the member firm's internal order entry system to sell 400 XYZ at 50 Stop GTC. The company has declared a 25% stock dividend. On the morning of the ex date, the order on the book will be: A. sell 400 XYZ at 50 Stop GTC B. sell 500 XYZ at 50 Stop GTC C. sell 400 XYZ at 40 Stop GTC D. sell 500 XYZ at 40 Stop GTC

D. sell 500 XYZ at 40 Stop GTC

Which statement is TRUE? A. both stop and limit orders guarantee price but not execution B. both stop and limits orders guarantee execution but not price C. stop orders guarantee price but not execution while limit orders guarantee execution but not price D. stop orders guarantee execution but not price while limit orders guarantee price but not execution

D. stop orders guarantee execution but not price while limit orders guarantee price but not execution

ABC Corporation has recently completed a $20,000,000 offering of 10% debentures due in 2035. Each bond was sold with a warrant attached that allows the holder to buy 10 shares of ABC common stock at $50 per share. The market price of ABC is currently $42. All of the following statements are true EXCEPT: A. the warrants help to increase the issue's marketability B. the warrants help to lower the interest cost on the issue C. the warrants are "under water" D. the company will raise an additional $5,000,000 if the warrants are exercised

D. the company will raise an additional $5,000,000 if the warrants are exercised

ACME company has issued 8% convertible debentures, convertible at a 100:1 ratio. Currently the debenture is trading at 102. The stock is trading at $9. Which statement is TRUE? A. the conversion price is $9 and the parity price of the common stock is $9 B. the conversion price is $9 and the parity price of the common stock is $10.20 C. the conversion price is $10 and the parity price of the common stock is $9 D. the conversion price is $10 and the parity price of the common stock is $10.20

D. the conversion price is $10 and the parity price of the common stock is $10.20

A convertible debenture is convertible into common at $40 per share. If the market price of the bond rises to a 5 point premium over par, which statement is TRUE? A. the conversion ratio is 20:1 and the parity price of the stock is $40 B. the conversion ratio is 20:1 and the parity price of the stock is $42 C. the conversion ratio is 25:1 and the parity price of the stock is $40 D. the conversion ratio is 25:1 and the parity price of the stock is $42

D. the conversion ratio is 25:1 and the parity price of the stock is $42

All the following statements are true regarding the effect of the purchase of treasury stock EXCEPT: A. the number of outstanding shares is reduced B. the earnings per share is increased C. the market price of the stock will increase D. the number of authorized shares will be reduced

D. the number of authorized shares will be reduced

A closed end fund's Net Asset Value is $8.50. The market liquidation price of the fund would be: A. $8.50 minus a 12b-1 fee B. $8.50 minus a nominal commission C. $8.50 plus a maximum 5% load D. the prevailing market price

D. the prevailing market price

When discussing hedge funds with customers, the registered representative should make the customer aware of all of the following risk factors EXCEPT: A. these funds often hold illiquid investments B. hedge funds use leverage and other speculative practices C. hedge fund managers place limitations on withdrawal of funds D. these funds provide performance that is often uncorrelated to the stock market

D. these funds provide performance that is often uncorrelated to the stock market

Which of the following securities has the lowest level of credit risk? A. equipment trust certificate B. general obligation bond C. industrial revenue bond D. treasury bond

D. treasury bond

Which of the following investments is issued with a stated coupon rate and with a maximum maturity of 30 years? A. treasury notes B. treasury stock C. treasury STRIPS D. treasury bonds

D. treasury bonds

Which of the following does NOT receive dividends? A. preferred stock B. sponsored ADRs C. non sponsored ADRs D. treasury stock

D. treasury stock

If a customer buys a fully-paid security that is part of the DTC DRS program, the customer will receive: A. standard physical stock certificates B. book entry registration in the name of the client's broker-dealer C. a negotiable DRS certificate that may be deposited at any member firm D. uncertificated book entry registration

D. uncertificated book entry registration