Kaplan SIE final
If a married couple have a joint account with a market value of $1 million and a debit balance of $600,000, all of which is in securities, how much coverage would this account have?
$400,000 A joint account has a maximum coverage of $500,000; however, in a margin account only the equity is covered, so the debit balance is subtracted from the market value, leaving $400,000 equity.
An investor is short 1 December 15 put at 6. The investor's maximum loss on this position is
$900 A put writer's maximum loss is the put's strike price (15) less the premium received (6)—in this case, 9 points. Note that this is the same as the breakeven. This maximum loss occurs when the stock price drops to zero. The investor is forced to buy the worthless stock at the option's strike price of 15 and, therefore, has lost 15 points. The investor's total loss (15), however, is reduced by the premium (6) received, making the ML 9 points ($900)
A bond has a 7% coupon and is currently offered at a price of 102. Which of the following yields could be the yield to maturity (YTM) for this bond?
6.55% For a bond trading at a premium (102), the ranking of yields from lowest to highest is yield to call (YTC), YTM, current yield, and nominal yield. Therefore, the YTM for this bond must be less than the nominal yield of 7%.
Which of the following are true of traditional IRAs but not of Roth IRAs? I. Contributions may be deductible II. Contributions are always deductible III. There is a 50% penalty for failing to take the required minimum distribution (RMD) IV. There are income limits for making contributions
I and III
Which of the following are account types that can be opened at a broker-dealer? I. credit account II. Margin account III. cash account IV. debit account
II and III
The holders of which of the following securities are considered owners of the issuing corporation? I. Mortgage bonds II. Debentures III. Preferred stock IV. Common stock
III and IV
A corporate stock is purchased on Friday, April 2, regular way. When will the trade settle?
Tuesday, April 6 For corporate securities, regular way settlement is the trade date (Friday, April 2) plus two business days; therefore, the trade will settle on Tuesday, April 6.
A common stockholder's voting rights apply to which of the following? I. Election of the board of directors (BOD) II. Declaration of dividends III. Authorization or issue of more common shares IV. Changing suppliers for raw material or parts used in production a) I and III b) II and IV c) II and III d) I and IV
a
A stock's market value is directly determined by which of the following? a) Supply and demand b) Company's financial condition c) Board of directors d) Vote of the stockholders
a
All of the following are issuer transactions where the proceeds of the offering go to the issuing company except a) a repurchase agreement (REPO). b) an additional public offering (APO). c) an initial public offering (IPO). d) a subsequent public offering (SPO).
a
Borrowing money to buy securities is prohibited in all of the following accounts except a) a margin account b) a roth IRA c) an individual IRA d) a custodial account
a
Deflationary periods are characterized by all of the following except a) increased consumer demand b) a decline in prices c) coinciding with recessions d) rising unemployment
a
Earned income includes which of the following? a) a year-end bonus b) Interest income earned on a bond c) Dividends earned on a mutual fund d) Child support paid to a divorced spouse
a
Regarding registered representatives working from their residence, commonly known as their home office, all of the following would be true except a) prospects would not be allowed to visit and be on the premises at this location. b) home office address and telephone numbers may be used for normal advertising purposes. c) the office would be subject to a premise visit and review by a principal of the firm. d) the office is subject to a premise visit by financial industry regulatory authority (FI
a
The performance of listed options contracts is guaranteed by which of the following? a) Options Clearing Corporation (OCC) b) U.S. Treasury c) Securities and Exchange Commission (SEC) d) Federal Reserve Board (FRB
a
Which of the following choices would a registered representative be able to make for a customer in a nondiscretionary account? I. The time of execution of the trade II. Which security to buy III. How much of the security to buy IV. At what price to execute the trade a) I and IV b) II and III c) II and IV d) I and II
a
Which of the following preferred stocks' price would remain most stable in an environment of changing interest rates? a) adjustable rate preferred b) Nocumulative preferred c) Straight preferred d) Participating preferred
a
Companies in defensive industries would be the manufactures of a) pharmaceuticals b) armored personnel carriers c) fighter jets d) automobiles
a defensive industries are those that make products that are not as sensitive to economic cycles because people use the same amount of these products regardless of the condition of the economy. Other examples would be food and utilities
The violation of selling mutual fund shares just below the point where the customer would qualify for lower sales charges and not informing the customer that they may qualify for lower sales charges is called
a breakpoint sale
A toy company is experiencing sudden strong demand for a game. Purchasing this company's stock may prove profitable in the short run. This company's stock might best be termed as
a special situation
Interest is best described as
a specific rate of return the borrower pays the investor for use of the funds
A select pair or group of companies organized to underwrite corporate or municipal securities is best known as
a syndicate
A company offers to repurchase outstanding debt securities it has issued directly from its bondholders for cash in what would commonly be known as
a tender offer
A corporation has a shareholders' meeting coming up wherein several controversial proposals will be made. A number of persons will be actively soliciting proxies, and the corporation plans to send out up-to-date material on the proposals to shareholders to permit them to make informed decisions. Which of the following must review this material before it is sent out? a) the regional exchange where the stock is traded b) The Securities and Exchange Commission (SEC) c) None; review not required
b
A mutual fund can offer all of the following to investors except a) the ability to do transfers by telephone or online. b) physical custody of the fund's portfolio cash and securities. c) check-writing privileges for redemptions. d) acting as custodian for retirement accounts
b
All of the following are types of direct participation programs (DPPS) except a) leasing b) retail distribution c) oil and gas d) real estate
b
All of the following would be acceptable methods for the customer opting out of allowing the broker-dealer to share their nonpublic personal information except a) calling a toll-free number. b) writing a letter. c) opting out electronically d) checking a box
b
At the time of dissolution, which of the following regarding a limited partnership is true? a) limited and general partners are paid after the IRS. b) Limited partners are paid before general partners c) limited and general partners are paid concurrently. d) Limited partners are paid after general partners
b
The MSCI-EAFE Index tracks which of the following? a) municipal bonds b) foreign equities c) corporate bonds d) mid-cap stocks
b
To meet the requirements of the know your customer rule, a registered representative would be required to gather information on all of the following except a) the customer's financial and nonfinancial investment considerations. b) if the customer graduated from college. c) what the customer's objectives are. d) all of the essential facts about the customer related to the investment
b
When making unsolicited cold calls to prospects, a registered representative must disclose all of the following to the individual called except a) the caller's name. b) the address of any securities issuer mentioned during the call. c) the address at which the caller may be contacted. d) the name of the member broker-dealer firm.
b
Which of the following is not a type of real estate direct participation program? a) new construction b) income c) raw land d) existing properties
b
Which of the following oil and gas direct participation programs might be considered the riskiest? a) combined exploratory and income b) exploratory c) raw land d) inocme
b
Which of the following would be most susceptible to currency risk? A. Common stock of a small cap company in the United States b. Common stock of a large, well established company in England c. Treasury bonds d. Municipal bonds
b
If an investor purchases a mutual fund based solely on seeing the summary prospectus, the investor must
be ale to access a full prospectus no later than the confirmation of sale
T-notes are delivered in
book entry
An individual has been a registered representative with a national firm for the past three years. Another member firm makes an attractive offer in an attempt to lure this individual to join them. In order to do so, the paperwork necessary would be
both a Form U-5 from the previous employer and a Form U-4 from the new one
Recommendations regarding investment strategies under the know your customer (KYC) rule would not apply to recommendations to
buy or sell commodities
A customer enters the following order: Sell 1,000 shares of XYZ at 23. Which of the following executions would the customer accept? a) 21.25 b) 22.90 c) 23.50 d) 22.50
c
A final prospectus contains all of the following except a) description of the management. b) history of the business. c) SEC approval. d) the use of the proceeds
c
If a bond is trading at a discount, which of the following rates is correctly ranked from high to low? a) yield to call, current yield, nominal yield, coupon rate b) Coupon rate, current yield, yield to maturity, yield to call c) Yield to call, yield to maturity, current yield, nominal yield d) Nominal yield, yield to maturity, current yield, coupon rate
c
In which of the following circumstances would a firm be denied Financial Industry Regulatory Authority (FINRA) membership? a) the firm has only been in existence for three months. b) The firm plans to only allow registered representatives to invest in equities and fixed notes for their customers. c) The firm has been expelled or suspended by the foreign equivalent of an selfregulatory organization (SRO). d) The firm has only two principals and four registered representatives.
c
The Federal Reserve could use which of the following to stimulate the economy? a) increase government spending b) Raise the federal funds rate c) Buy Treasury securities from banks d) Lower taxes
c
The Securities Act of 1933 exempts all of the following securities from registration except a) U.S. government issues. b) savings and loan issues. c) public real estate investment trusts (REITs). d) municipal issues
c
The market price of a company's common stock could be affected by I. the company's earnings. II. changes in the business cycle. III. Federal Reserve Board (FRB) policies. IV. International conflicts a) I and II b) I and III c) I, II, III and IV d) II and III
c
Which of the following are fixed at the time a bond is issued? a) Yield to call b) Yield to maturity c) Nominal yield d) Current yield
c
Which of the following best describes how a sell stop at 39 order would be filled? a) the next available price after the market price rises to 39 b) The next price below 39 after the market falls to 39 c) The next available price after the market price falls to 39 d) The next price above 39 after the market rises to 39
c
Which of the following is true regarding money market securities? a) T-bills, notes, and bonds are all considered money market securities at the time they are issued. b) Only T-notes can ever be considered money market securities. c) T-notes and T-bonds can be considered money market instruments when they have only a year left to maturity. d) Only T-bonds can ever be considered money market securities
c
Which of the following would require the filing of a suspicious activity report (SAR)? a) any transaction alone or in aggregate involving at least $3,000 and appears to serve no business or legal purpose. b) Any transaction alone or in aggregate involving at least $5,000 on a single day. c) Any transaction alone or in aggregate involving at least $5,000 and appears to serve no business or legal purpose. d) Any transaction alone or in aggregate involving at least $3,000 on a single day
c
All of the following are nonsystematic risks except a) call risk. b) business risk. c) purchasing power risk. d) capital risk.
c Purchasing power or inflation risk is a systematic risk. Capital risk, business risk, and call risk, among others, are nonsystematic risks, those that portfolio diversification can help to reduce.
What are the two basic types of return on an investment?
capital gains and income
Margin calls can be met with deposits of
cash or fully paid for marginable securities
A corporation wanting to raise cash to finance accounts receivable and seasonal inventory needs is likely to issue any of the following except a) commercial paper b) promissory notes c) prime paper d) bonds
d
A registered representative wants to place advertisements in his daughters youth athletic league quarterly sponsorship booklet. He wants to convey in the weekly bulletin at his church that he specializes in retirement planning and 529 plans. Which of the following statements regarding these advertisements is true? a) no approval is required because both the youth athletic league and the church would be recognized as bona fide non-profits. b) The piece will be regulated as correspondence because
d
All FINRA firms must have business continuity plans. Those plans must include all of the following except a) alternate methods of communicating with employees. b) alternate methods of communicating with customers. c) methods of communicating with regulators. d) alternate physical locations at least 100 miles apart in case of a disaster
d
All of the following are nonsystematic risks except a) business risk b) call risk c) capital risk d) purchasing power risk
d
Electronic delivery of documents requires all of the following except a) procedures to show that delivery took place as intended. b) procedures to deliver the information in paper form upon request. c) assurance of confidentiality of the documents and personal information. d) a recording of the customer verbally agreeing to such receipt.
d
Opening a margin account for a client requires the client to do all of the following except a) signing the credit agreement b) signing the hypothecation agreement c) receive a risk disclosure document d) signing the loan consent
d
Purchasers of common stock may generally look to all of the following risks associated with that investment except a) low priority. b) market risk. c) reduction in dividend payout. d) interest rate risk.
d
Rules to protect the investing public during the public offering process include all of the following except a) members must offer the securities at the public offering price b) securities industry insiders may not take advantage of their insider status to gain access to new issues for their own benefit. c) member firms may not withhold securities in a public offering for their own benefit. d) limiting the number of shares of an initial public offering (IPO) that may be purchased by the issuing
d
Which of the following are characteristics of a revocable living trust? I. It is established before the grantor dies II. The grantor can change beneficiaries III. The grantor can add or remove items from the trust IV. The grantor is subject to tax on income that remains in the trust a) I and II b) I only c) I, II, and III d) I, II, III, and IV
d
Which of the following bonds trade flat (without interest) unless interest payments are declared by the board of directors (BOD)? a) callable bonds b) Debentures c) Mortgage bonds d) Income bonds
d
Which of the following documents must be provided to the customer prior to approval of an options account? a) statement of additional information b) prospectus c) official statement d) options disclosure document
d
Which of the following is a true statement with regard to either U.S. securities laws or the description of international economic factors? a) when a company files for bankruptcy, claims of preferred shareholders are settled before all others. b) A tombstone advertisement may be used in lieu of a prospectus in the distribution and sale of corporate securities. c) The Securities Act of 1933 regulates secondary markets and trading on exchanges. d) When the U.S. dollar is strong, foreign currency
d
Which of the following is true of closed end funds but not of open end funds? a) pay dividends when declared by the board of directors b) Can invest in a variety of securities c) Can sell shares of common stock d) Have a fixed number of shares
d
Which of the following option positions would offer a full hedge to a long stock position? a) long call b) short call c) short put d) long put
d
Which of the following regulatory bodies regulates but has no enforcement powers? a) Financial Industry Regulatory Authority (FINRA) b) Securities and Exchange Commission (SEC) c) Chicago Board Options Exchange (CBOE) d) Municipal Securities Rule Board (MSRB)
d
Which of the following statements would describe the Fourth Market? a) the after-hours market b) These transactions take place through electronic communications networks (ECNs) which are open during normal trading hours and act solely as principals c) These transactions take place through electronic communications networks (ECNs). ECNs are open 24 hours a day and act solely as principals d) A market for institutional investors in which large blocks of stock, both listed and unlisted, trade in t
d
Your broker-dealer executes trades for other broker-dealers and after execution settles those transactions for them. Your firm would be classified as which of the following? a) limited broker dealer b) introducing firm c) fully disclosed firm d) carrying firm
d
Your customer is aware that a corporate action has taken place where the adjustment to the number of shares owned and the stock price will not be standardized but instead is unique to fit the circumstances and terms of the corporate action. Of those listed, which is most likely to be such an action? a) stock dividend payment b) Uneven reverse split c) Forward stock split d) Merger or acquisition
d
Which of the following investments would be most susceptible to inflation risk? a) value stock b) 10-year corporate bond rated BBB c) growth stock d) 30-year treasury bond
d Stocks generally have had performance that outpaces inflation. Lower quality bonds with shorter maturities would pay a higher rate than government bonds and have the potential to keep up with inflation. Treasuries have very low yields and do not keep pace with inflation.
With interest rates in the marketplace at 7%, it could be expected that in the secondary market, a bond carrying a 5% coupon would trade
downward in price
A company that is extensively overleveraged using debt financing whenever available would be exposing its investors to
financial risk
The business cycle is generally viewed as having how many stages?
four Economists recognize four stages in the business cycle: peak (prosperity), contraction (decline), trough, and expansion (recovery). Because it is a cycle, there is no set starting point or end to the business cycle, but the four stages always occur in the same order.
The country's annual economic output of all of the goods and services produced within the nation, is known as
gross domestic product
The firm element of a broker-dealer's continuing education (CE) requirement must be undergone by all registered persons who
have direct contact with the public
The cost of doing business is closely linked to the cost of money, which is known as
interest
An associated person is unable to work for any business other than his member firm without having the employing broker-dealer's
knowledge of the activity
The process of making money that appears to have come from legal activities when it in fact it came from illegal activities is called
money laundering
Which type of shares allow the investor to buy and sell the shares at NAV and have a 12b-1 fee of 0.25% or less?
no load
Mutual funds that market directly to the public, using no underwriter and charging no sales charge, are called
no-load funds
A member firm receives an order to purchase shares in a common stock initial public offering (IPO) from another broker-dealer for a customer. Regarding restricted persons, the member must
obtain a written representation that the buyer is not a restricted person
State registration is not required if the transaction is exempt. An example of an exempt transaction would be
one that is unsolicited
Distributions from IRAs are taxed at
ordinary income tax rates on the full amount of the distribution.
How an account is registered determines
ownership and control of the investments in the account
Financial Industry Regulatory Authority (FINRA) rules regarding outside business activity (OBA) require that
prior written notice to the employing firm be provided
inflation risk is most closely associated with
purchasing power risk
Securities acquired through some means other than a registered public offering are known as
restricted
To contract the overall economy, the Federal Reserve Board (FRB), acting as agent for the U.S. Treasury department, will
sell securities via open-market operations, pushing interest rates up
Which of the following has the greatest influence on the money supply within the United States?
the Federal Open Market Committee (FOMC)
what is the spread on a stock quote
the difference between the bid price and the ask price or offer
Listed options can be exercised by
the holder from the time of purchase until they expire
the seller of a put has
the obligation to buy the stock
A variable annuity's investment return each month is based on
the performance of the separate account
a breakpoint sale is
the sale of investment company shares in dollar amounts just below the point at which the sales charge is reduced on quantity transactions to incur the higher sales charge.
Your customer has purchased an MJS October 35 call at 4. Their proof of ownership will be
the trade confirmation
listed option transactions settle
trade date + 1 business day
The primary use for a revocable living trust is to
use as a substitute for a will
An investor interested in quarterly income should invest in
utility company stock
Holding customer mail is consistent with your broker-dealer's in-house rules. Considering this, if requested to do so, the broker-dealer must
verify at reasonable intervals that the customer's instructions still apply
