Mastery Exam 7
A margin account has a market value of $24,000 and a debit balance of $20,000. The maintenance call will be for: A) 4000. B) 6000. C) 2000. D) 8000.
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An investor sells 1,000 shares of DEF short at 50 and meets the initial margin requirement. If DEF falls to 45, what is the equity in the account? A) 35000. B) 40000. C) 30000. D) 20000.
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In order to sell stock of his company at a profit that was initially purchased in the secondary market, a corporate officer may do so after a holding period of at least: A) 3 years. B) 2 years. C) 6 months. D) 1 year.
1 year
A customer buys 1 ABC Jul 35 put at 3 when ABC is trading at 36. Maximum potential gain is: A) 3200. B) 3800. C) 3500. D) 300.
A) 3200.
All of the following municipal bonds are callable at par. Yield to call must be displayed on which of the following confirmations? A) 5.5%, 5% YTM basis, maturing 2014. B) 5.5%, at par, maturing 2010. C) 6%, 6.5% YTM basis, maturing 2010. D) 6%, 6.5% YTM basis, maturing 2014.
A) 5.5%, 5% YTM basis, maturing 2014.
A member firm is underwriting an initial public offering of common stock for ABCD Corp., a new issue that will trade on the OTCBB. A prospectus must be provided to all purchasers for how many days following the effective date? A) 90. B) 25. C) 60. D) 40.
A) 90.
Which of the following states that the pricing of a stock should take into account systematic risk as well as the expected return of a theoretical risk-free asset? A) Capital asset pricing model (CAPM) B) Modern Portfolio Theory C) Random Walk Theory D) The DOW Theory
A) Capital asset pricing model (CAPM)
If a customer wants to give a broker dealer permission to hold their mail while the customer is traveling, which of the following statements are TRUE? The customer initiates the process by written request. FINRA approval is required and granted on a case by case basis. The broker dealer may abide by the request as a courtesy to the customer in accordance with their own in-house rules regarding holding customer mail. As per FINRA's rules, once the request is made by the customer the broker dealer must abide by it. A) I and III. B) II and IV. C) II and III. D) I and IV.
A) I and III.
Mutual funds and variable annuity separate accounts share some features. What would two such features be? The customer assumes investment risk. Investment risk is assumed by the fund or insurer. The customer may vote for the investment manager of the fund or annuity. Both are traded in the secondary market. A) I and III. B) II and IV. C) I and IV. D) II and III.
A) I and III.
Securities exempt from regulation under the Trust Indenture Act of 1939 include: Treasury bonds. secured corporate bonds. corporate debentures. municipal bonds. A) I and IV. B) II and III. C) I and III. D) II and IV.
A) I and IV.
An investor is seeking tax advantages through an oil and gas DPP. With this type of partnership, he would expect to benefit most from: depreciation allowances. depletion. tax credits. intangible drilling costs. A) II and III. B) II and IV. C) I and III. D) I and IV.
A) II and III.
If an investor holds certificates of beneficial interest in a REIT, the investor: may submit them to the issuer for redemption may trade the certificates in the secondary market will receive income and capital gains distributions from the issuer will receive income and capital gains and loss distributions from the issuer. A) II and III. B) II and IV. C) I and III. D) I and IV.
A) II and III.
A municipal dollar bond is quoted at 99½ - 99¾. The municipal dealer's spread is equal to: $25.00. $2.50. 25 basis points. 2½ basis points. A) II and IV. B) II and III. C) I and IV. D) I and III.
A) II and IV.
The Federal Reserve Board (FRB) has announced actions to increase the money supply. Which of the following would you expect to see increase the soonest? A) Production. B) Pass book savings account rates. C) Corporate profits. D) Unemployment.
A) Production.
When does settlement between a dealer and the U.S. Treasury take place for newly issued T-bills purchased through the weekly T-bill auction? A) The issue date, which is Thursday of that week. B) 2 business days following the auction. C) The same day. D) The next business day.
A) The issue date, which is Thursday of that week. x
Certain circumstances would require a broker/dealer to file a Suspicious Activity Report (SAR). You recognize, as a registered representative, that one such instance would be if: A) a client sends you 6 separate personal checks, each in the amount of $2,000 to pay for a $12,000 stock purchase. B) a client wires $6,500 into an account to pay for a mutual fund purchase. C) a client withdraws $8,000 from a money market account. D) a client sells 3 mutual funds requesting the total sale proceeds of $9,000 be reinvested in another mutual fund.
A) a client sends you 6 separate personal checks, each in the amount of $2,000 to pay for a $12,000 stock purchase.
When the holder (owner) of an index option exercises the contract, the account of the holder will be A) credited the in-the-money amount. B) debited the in-the-money amount. C) credited the out-of-the-money amount. D) debited the out-of-the money amount.
A) credited the in-the-money amount.
A source of funds used to service municipal revenue special tax bond issues might be A) gasoline taxes B) property taxes C) income taxes D) ad valorem taxes
A) gasoline taxes
A decrease in business activity and sales would most likely be associated with an increase in: A) inventory levels. B) plant and equipment expenditures. C) personal income. D) building permits.
A) inventory levels.
Your broker/dealer is compiling a list of investments suitable for a qualified retirement plan. The list should not include: A) investment-grade municipal bonds. B) blue-chip common stocks. C) corporate bonds. D) Treasury bills.
A) investment-grade municipal bonds.
A municipality's statutory debt limit imposes a limit on the: A) issuance of additional GO bonds. B) raising of tax rates within the municipality. C) raising of property taxes within the municipality. D) issuance of additional revenue bonds.
A) issuance of additional GO bonds.
In late September, a customer sells 5 XYZ calls for total premiums of $750. One month later, the investor closes this position when the contract is trading at 2. The result is a: A) loss of $250. B) gain of $50. C) gain of $250. D) loss of $50.
A) loss of $250.
The MSRB has no jurisdiction or authority to regulate: A) municipal bond issuers B) municipal bond broker/dealers C) municipal bond quotes D) municipal bond registered representatives
A) municipal bond issuers
A customer enters a market order to buy 100 shares of XYZ. The broker/dealer reports the purchase price of 100 shares of XYZ at 27.50 to the customer; shortly after, it is determined that the actual price paid when the order was filled was 28. The customer A) must accept the trade at the price of 28 B) must accept the trade, with the price difference split between the firm and the customer C) is not required to accept the trade D) is only required to accept the trade at the price of 27.50
A) must accept the trade at the price of 28
An example of a security that cannot trade in the secondary market would be: A) open-end investment company shares. B) municipal bonds. C) American depositary receipts. D) government agency securities.
A) open-end investment company shares.
A registered representative recommends a variable annuity with an income rider to a client. The client's investment objectives, tax bracket, investment experience, and risk tolerance all align well with a VA recommendation. The client agrees to purchase the contract and informs the RR that he will be cashing out a VA he purchased 2 years ago to fund the new contract and will forward the check as soon as he receives it. Based on this information, the RR should A) reevaluate whether the recommendation for the VA contract is still suitable based on the client's proposed funding of the investment B) complete all paperwork to purchase the annuity contract and obtain the client's signature immediately C) contact the issuer of the client's existing VA contract to facilitate the client's surrender of the contract D) suggest to the client that perhaps a loan or refinancing his vacation home might be a better way to fund the VA contract purchase
A) reevaluate whether the recommendation for the VA contract is still suitable based on the client's proposed funding of the investment
A new registered representative wishes to accept a part-time position on weekends to help supplement his income. In order to do so, the FINRA rules require the registered representative to notify in writing: A) the member firm. B) the New York Stock Exchange. C) the Securities and Exchange Commission. D) the Financial Industry Regulatory Authority.
A) the member firm.
In examining the balance sheet of a corporation, you would expect to be able to determine: A) the net worth of the firm on the date of the balance sheet. B) net sales for each of the past 5 years. C) the corporation's gross revenues for the year. D) the amount of cash expended each quarter.
A) the net worth of the firm on the date of the balance sheet.
A customer enters an order to purchase 1000 shares of XYZ common stock at the market when the quote is 18.22 bid, 18.30 ask. If the transaction is executed at the market and the broker charges a $.10 mark-up, how will the price be reported to the consolidated tape system? A) 18.40. B) 18.32. C) 18.30. D) 18.22.
B) 18.32.
With Regulation T at 50%, an investor opens a new margin account and buys 100 shares of XYZ at 22. What is the investor's initial margin requirement? A) 2200. B) 2000. C) 1100. D) 550.
B) 2000.
A customer writes 1 Jul 40 put at 6. The put is exercised when the market price is 30. For tax purposes, what is the effective cost basis of the stock put to the writer of the contract? A) 46 B) 34 C) 30 D) 40
B) 34
When one of the partners in a partnership account dies, the registered representative (RR) must: Cancel any unexecuted orders. Freeze the account. Liquidate the account and hold all assets as cash until further instructions are received. Automatically re-title the account in the names of the remaining partners. A) I and III. B) I and II. C) II and III. D) II and IV.
B) I and II.
An investor owns 100 shares of XYZ at $5 per share. After a 1:2 reverse split, the investor will own: fewer shares. more shares. shares that are each individually worth more than before the split. shares that are each individually worth less than before the split. A) II and IV. B) I and III. C) II and III. D) I and IV.
B) I and III.
As a registered representative you might be concerned that a customer was engaged in money laundering if you observed: the customer's lack of concern for risk, commissions, and other transaction costs. the customer entering orders for stocks that were not recommended by you. excessive journal entries between unrelated accounts. the customer entering orders for stocks that were not recommended by your firm. A) I and IV. B) I and III. C) II and IV. D) II and III.
B) I and III.
An investor who has generated passive losses from DPP investments wants to offset income from other investments. This is allowable with income from: CMOs. oil and gas drilling programs. REITs. direct investments in real estate. A) I and IV. B) II and III. C) I and III. D) II and IV.
B) II and III.
Rank the following from safest to riskiest. Blue-chip stocks. Non-Nasdaq OTC securities. U.S. government agency securities. AAA rated corporate bonds. A) III, I, IV, II. B) III, IV, I, II. C) I, III, IV, II. D) IV, III, II, I.
B) III, IV, I, II.
A registered representative of a FINRA member firm intends to send a sales piece regarding municipal bonds to all of her existing retail clients numbering well over 100. Which of the following regarding the municipal sales piece is TRUE? A) Any piece regarding municipal bonds will automatically be deemed institutional communications by FINRA. B) MSRB rules require that the piece be approved by a principal and it will be regulated by FINRA as a retail communication. C) FINRA rules regarding communications with the public do not apply because the piece has to do specifically with municipal bonds. D) MSRB rules do not require that the piece be approved by a principal in any circumstance.
B) MSRB rules require that the piece be approved by a principal and it will be regulated by FINRA as a retail communication.
Your customer, divorced with 2 children and age 52, has a portfolio consisting of 80% equities, with the remaining 20% diversified among several other products. Her annual income is $115,000. Which of the following events would most likely be cause to reallocate her investments? A) Equities are rebounding slowly after a 2-year slump. B) She has been notified by her employer that due to corporate downsizing her position is being eliminated. C) The father of her children has established trust funds for each of them in the amount of $50,000 each. D) She will be remarrying a person of considerable wealth next month.
B) She has been notified by her employer that due to corporate downsizing her position is being eliminated.
When opening a custodial account under the Uniform Gift to Minors Act: A) the account may be established for more than one minor. B) gifts given cannot be reclaimed. C) the custodian and the donor must be the same individual. D) the maximum amount that may be given to the minor by an adult is limited.
B) gifts given cannot be reclaimed.
A corporation has undistributed earnings of $.25 per share. These earnings will: A) increase capital assets. B) increase retained earnings. C) decrease book value. D) increase earnings per share.
B) increase retained earnings.
Variable rate municipal bonds help protect investors from: A) liquidity risk. B) interest rate risk. C) legislative risk. D) default risk.
B) interest rate risk.
The calculation of accrued interest for a corporate bond: A) includes interest from and including the last payment date. B) is not made when a bond trades "and interest". C) includes interest through the settlement date. D) is based on an actual day month.
B) is not made when a bond trades "and interest". x
Content having to do with the business of a broker/dealer or registered representative delivered electronically to the public on social networking Websites and blogs A) is not subject to the rules and regulations addressing communications with the public because it is delivered electronically B) is subject to all rules and regulations governing communications with the public C) can only be subject to supervisory rules but not filing rules D) is never subject to supervisory rules if it is static content such as a RR's profile or background
B) is subject to all rules and regulations governing communications with the public
When a limited partnership interest is sold, gain or loss to the partner is determined by the difference between the sales proceeds and the: A) partner's share of tax preference items. B) original basis. C) total of deductible losses. D) adjusted cost basis.
B) original basis.
There are some actions taken by corporations that do not require shareholder approval. One such action would be: A) the declaration of a stock dividend. B) the declaration of a stock split. C) the issuance of convertible corporate bonds. D) issuing additional common stock.
B) the declaration of a stock split.
A customer owns 8% of the stock of a publicly traded company. His spouse owns 6% and wants to sell shares. Under the terms of Rule 144 and the definition of affiliates: A) the spouse is not considered an affiliate and therefore Rule 144 does not apply to either party. B) the spouse is considered an affiliate and is subject to the terms of Rule 144. C) the spouse is considered an affiliate, but Rule 144 does not apply. D) the spouse is not considered an affiliate and is not subject to the terms of Rule 144.
B) the spouse is considered an affiliate and is subject to the terms of Rule 144.
Equity options that are in-the-money by what amount will be automatically exercised at expiration absence any other instructions from the customer? A) $1 B) $.10 C) $.01 D) $.05
C) $.01
XYZ Corp. has issued $30 million of debentures. Each bond issued has a warrant attached enabling the holder to buy 3 shares of XYZ common at $30 per share. If all of the warrants are exercised, XYZ Corp. will receive: A) $6.6 million. B) $19.8 million. C) $2.7 million. D) $9 million.
C) $2.7 million. x
A market maker sold 100 shares of stock to a customer at 17.90 when the market maker's market was 17.25- 17.70. At the time of the trade, the inside market was 17.30- 17.60. What is the amount of the markup? A) 0.20. B) 0.65. C) 0.30. D) 0.60.
C) 0.30.
A registered representative has a recently retired couple in their late sixties as her customers. They each have modest monthly pensions and collect Social Security benefits putting them in the lowest income tax bracket. They have accumulated savings and investments totaling $175,000 that they want to reallocate now that they are both retired. Which of the following portfolio asset allocations is most suitable for their current circumstances? A) 50% domestic equities, 50% international equities B) 30% domestic equities, 30% bonds, 30% international equities, 10% cash C) 25% domestic equities, 60% bonds, 15% cash D) 10% domestic equities, 40% bonds, 10% cash, 40% international equities
C) 25% domestic equities, 60% bonds, 15% cash
A customer wishes to transfer his account positions to another broker/dealer. After validating the positions, the carrying broker/dealer is required to complete the transfer within how many business days? A) 5. B) 7. C) 3. D) 4.
C) 3.
A customer is likely to experience the greatest purchasing power risk with which of the following investments? A) Convertible preferred stock. B) Short-term Treasury note. C) A long-term AAA rated municipal bond. D) Combination fund.
C) A long-term AAA rated municipal bond.
The owner of a variable annuity contract chooses a joint life with last survivor option. In choosing this option, the annuity payments: will continue as long as one of the annuitants is alive. will continue only as long as both annuitants are alive. will be smaller than if a life with period certain option had been chosen. will be guaranteed for a minimum 10-year-time period. A) II and III. B) II, III and IV. C) I and IV. D) I and III.
C) I and IV. x
According to SEC rules, which of the following events require(s) the broker/dealer to furnish a copy of the account record to the customer? The opening of a new account. Change of customer's investment objectives. Change of customer's employment. Change of customer's name or address. A) II and III. B) I only. C) I, II, III and IV. D) I and II.
C) I, II, III and IV.
Which of the following descriptions applies to settlement of index option contracts? A) Buyers of calls and sellers of puts take delivery of underlying stock on settlement date. B) Settlement price is determined by the value of the index at the exact time of day the option is exercised. C) Index options are settled in cash when exercised. D) Exercise of index options settles in 3 business days
C) Index options are settled in cash when exercised.
Which of the following CMO tranches are retired first and offer protection from prepayment and extension risk? A) TACs. B) Z-Tranches. C) PACs. D) IOs.
C) PACs.
Regulations regarding who shall be offered coverage under a tax-qualified plan for employees falls under which ERISA requirement? A) Nondiscrimination. B) Funding. C) Reporting and disclosure. D) Vesting.
C) Reporting and disclosure. x
Your client has sold securities in a long margin account. All of the following are affected by the sale of these securities in the account EXCEPT: A) equity. B) market value. C) SMA. D) debit balance.
C) SMA.
I bonds are best characterized as being: A) Highly speculative and suitable for sophisticated investors only. B) Monthly providers of interest payments. C) Securities with a variable semi annually adjusted inflation rate based on changes in the CPI. D) Issued by municipalities.
C) Securities with a variable semi annually adjusted inflation rate based on changes in the CPI.
Your client wishes to sell XYZ short. You explain that this can be done: A) only if the stock ticks up in price first. B) only on the last trade of the day. C) at any time during the trading day. D) only on the opening trade of the day.
C) at any time during the trading day.
A trading desk wants to sell a block of corporate bonds. One characteristic that will have no affect on the marketability of those bonds is the: A) maturity. B) block size. C) bond denominations. D) rating.
C) bond denominations.
A customer buys 1,000 shares of XYZ at $47. Several months later, the stock is at $56. The customer, concerned about a possible pullback and wanting to best protect the unrealized gain, should: A) sell 10 XYZ 55 puts. B) sell 10 XYZ 60 calls. C) buy 10 XYZ 55 puts. D) buy 10 XYZ 60 calls.
C) buy 10 XYZ 55 puts.
Your client signs a discretionary account form and mails it to you. Before receiving the form, you notice that one of his stocks is dropping sharply on adverse news, but you are unable to contact him. In this situation, you: A) can enter a discretionary order if a principal of the broker/dealer has approved the order prior to entry. B) can enter a discretionary order as long as you enter it not held. C) cannot enter a discretionary order. D) can enter a discretionary order if written documentation of the situation has been made.
C) cannot enter a discretionary order.
A registered representative (RR) at your broker/dealer has not completed the regulatory element component for their continuing education within the required time frame. This RR: A) may continue to accept unsolicited orders until the CE requirement is met. B) will need the written permission of a principal to continue functioning in the capacity of a registered representative. C) cannot function as a representative until the CE requirement is met. D) will receive a mandatory 90-day suspension.
C) cannot function as a representative until the CE requirement is met.
Your client has sold 300 shares of stock. All of the following are considered good delivery EXCEPT: A) three 60-share certificates and three 40-share certificates. B) two 100-share certificates, one 60-share certificate, and one 40-share certificate. C) four 75-share certificates. D) one 300-share certificate.
C) four 75-share certificates.
A customer purchases 300 XYZ at 35 and writes 3 XYZ Oct 35 calls at 3. The customer will profit under all of the following circumstances EXCEPT: A) if XYZ remains at 35 through expiration. B) if XYZ falls below 32 at expiration. C) if XYZ rises and the calls are exercised. D) if XYZ is between 32 and 35 at expiration.
C) if XYZ rises and the calls are exercised.
The discount rate is the rate that: A) major commercial banks charge their best corporate customers. B) major commercial banks charge broker/dealers for margin account loans. C) is charged by the Federal Reserve to a member bank for short-term loans. D) banks charge each other for overnight loans and is subject to daily change.
C) is charged by the Federal Reserve to a member bank for short-term loans.
The municipal order that is the first to be confirmed (have first priority) for a new municipal issue is A) group B) member-at-the-takedown C) presale D) designated
C) presale
A corporate offering of 1 million additional shares to existing shareholders is a: A) secondary offering. B) shelf offering. C) rights offering. D) tender offer.
C) rights offering.
An independently written securities industry newsletter addresses some relevant issues about one of the investment products offered by your firm. In order to forward this newsletter to all of your clients and prospects, you must disclose that: A) your purpose in forwarding the newsletter is to provide your clients with a choice of products that are suitable for all of their portfolios. B) the product the news letter discusses can be purchased at other broker/dealers as well as your firm. C) the newsletter has been written by a third party. D) other publications might offer different opinions about the product.
C) the newsletter has been written by a third party.
A customer sells 1 XYZ Jun 50 put at 9 and simultaneously buys 1 XYZ Jun 40 put at 3. A loss will result for the customer if: A) the spread between the premiums narrows. B) the underlying security is at 48 at expiration. C) the underlying security is at 43 at expiration. D) the options expire.
C) the underlying security is at 43 at expiration.
A member of a $10 million Eastern account that has a $1 million participation fails to sell $400,000 of the bonds. If, at the close of the offering, $2 million remains unsold, the member must take down: A) $100,000 of the unsold bonds. B) $1 million of the unsold bonds. C) $400,000 of the unsold bonds. D) $200,000 of the unsold bonds.
D) $200,000 of the unsold bonds.
An appeal of an adverse Code of Procedure decision may be made by either party within: A) 25 days of the decision date. B) 10 days of the decision date. C) 30 days of the decision date. D) 45 days of the decision date.
D) 45 days of the decision date.
A customer writes 1 XYZ Feb 50 put at 1 and buys 1 XYZ Feb 60 put at 7. The breakeven point is: A) 44 B) 66 C) 56 D) 54
D) 54
XYZ Corporation issued 7 million shares of common stock in its initial public offering. It later purchased 500,000 shares of Treasury stock. XYZ recently engaged an underwriter to raise capital by selling an additional 3 million shares through a standby rights offering. By the expiration date of the offering, only 2 million shares were sold. As a result, how many shares will XYZ have outstanding? A) 9.5 million. B) 9 million. C) 10 million. D) 8.5 million.
D) 8.5 million.
Which of the following is true regarding a "summary section" and a "statement of additional information" for management investment companies? A) A statement of additional information (SAI) need not be included in the prospectus of a management company. B) Neither are required to be in the prospectus of a mutual fund. C) Both must be included in the prospectus of a management company. D) A summary section need not be included in the prospectus of a mutual fund.
D) A summary section need not be included in the prospectus of a mutual fund.x
A customer who invests in a Coverdell Education Savings Account on behalf of her 10-year-old daughter may: make before-tax contributions of $2,000 per year. receive tax-free distributions if funds are withdrawn for qualified educational expenses. make an investment into a Section 529 Plan in the same year for the same child. roll the accumulated funds into a traditional IRA for another family member if funds are not used by age 30. A) I and III. B) II and III. C) II and IV. D) I and II.
D) I and II.
If the placement ratio found within The Bond Buyer is high, then: the market for municipal bonds is strong. the market for municipal bonds is weak. dealers will be more likely to bid on new municipal issues. dealers will be less likely to bid on new municipal issues. A) II and IV. B) II and III. C) I and IV. D) I and III.
D) I and III.
SEC registration under the Securities Act of 1933 is not required for: government securities. an offering of $20 million of B rated corporate bonds. private placements. an offering of $6 million of common stock. A) I and IV. B) II and IV. C) II and III. D) I and III.
D) I and III.
The flow of funds statement found within a municipal trust indenture: relates to revenue bonds only. relates to both general obligation and revenue bonds. is found within the bond resolutions. is found within the official notice of sale. A) I and IV. B) II and IV. C) II and III. D) I and III.
D) I and III.
A DPP may be suitable for a customer with which of the following objectives? To benefit from tax credits. To offset passive income. To be able to transfer ownership of the investment interest easily. To shelter ordinary income. A) I and II. B) III and IV. C) II and III. D) I and IV.
D) I and IV.
Which of the following statements may you correctly make in describing the benefits of a 403(b) plan to your customer who is a public schoolteacher? "Your investment choices include stocks, bonds, mutual funds, and CDs." "The contributions you make to the plan will be made with after-tax dollars." "Employees over age 45 may make catch-up contributions for years missed." "The contributions you make to the plan will be excluded from your gross income for the year in which they are made." A) I and III. B) I, II, III and IV. C) II, III and IV. D) I and IV.
D) I and IV.
A convertible bond has a conversion price of $50 per share. If the market value of the bond rises to a 10 point premium over par, which of the following statements are TRUE? Conversion ratio is 20:1. Conversion ratio is 22:1. Parity price of the common is $55. Parity price of the common is $60. A) II and IV. B) I and III. C) I and IV. D) II and III.
D) II and III.
A registered representative recommending an exchange traded index fund (ETF) to a client could accurately explain that these funds: are actively managed. are passively managed. have low expense ratios. have high expense ratios. A) II and IV. B) I and III. C) I and IV. D) II and III.
D) II and III.
Which of the following are fair and equitable methods for the assignment of options contracts by a brokerage firm to a customer? LIFO. FIFO. Random. To the customer with the largest open position in that option. A) II and IV. B) I, II, III and IV. C) I and III. D) II and III.
D) II and III.
A 5% municipal bond is purchased in the secondary market on a 4% YTM basis. From this information, it can be determined that: the investor has purchased the bond at a discount. the investor has purchased the bond at a premium. accretion is required to determine the cost basis of the bond at maturity. the bond's cost basis at maturity will equal par. A) I and IV. B) II and III. C) I and III. D) II and IV.
D) II and IV.
A fund with a portfolio of stocks belonging to companies with patents pending or new products just coming to market is best described as a: A) Exchange traded fund. B) Index fund. C) Growth and Income fund. D) Special Situation fund.
D) Special Situation fund.
Your client, age 71 and not yet retired, wants to continue contributing to a retirement plan for as long as possible. Which of the following plans would not allow contributions to be made for someone his age? A) SEP IRA. B) ROTH IRA. C) 401(k). D) Traditional IRA.
D) Traditional IRA.
Different securities tax consequences are an important factor to your new client. As you explore some suitable investments, you point out that one of the following securities is taxed at the federal level only. Which is it? A) Corporate bonds. B) Ginnie Mae. C) Freddie Mac. D) Treasury bills.
D) Treasury bills.
An investor purchases a 7% GO bond on a 7.30 basis. If the bond is callable in 5 years at par and matures in 10 years, it is TRUE that: A) Nominal yield is higher than YTC. B) YTC is higher than YTM. C) Nominal yield is higher than YTM. D) YTC is lower than YTM.
D) YTC is lower than YTM.
A customer's portfolio consists of a food company stock and two utility stocks. You would characterize the customer's portfolio as being: A) diversified. B) balanced. C) cyclical. D) defensive.
D) defensive.
A new client who is self-employed and contributing to a Keogh plan expects to expand his employee staff in the near future. This client needs to know that when operating a Keogh plan, a self-employed individual must also make contributions for: A) part-time employees who have worked for 3 or more years. B) all employees scheduled to work for 1,000 hours per year or more. C) all employees. D) full-time employees who are at least 21 years old and have worked for 1 or more years
D) full-time employees who are at least 21 years old and have worked for 1 or more years x
An issuer interested in reducing its interest cost can use the call provision to call in outstanding bond issues. The issuer is most likely to call bonds with a: A) low coupon and high call premium. B) high coupon and high call premium. C) low coupon and low call premium. D) high coupon and low call premium.
D) high coupon and low call premium.
All of the following characteristics are applicable to a repurchase agreement EXCEPT: A) an agreed to repurchase price. B) it is similar to a fully collateralized loan. C) an agreed to maturity date. D) it is used to raise long-term financing.
D) it is used to raise long-term financing. x
Specialists (Designated Market Makers) on the floor of the NYSE cannot handle: A) stop orders. B) odd-lot market orders. C) limit orders. D) market not-held orders.
D) market not-held orders.
A corporation's board of directors has declared a cash dividend of .12 per share. On which of the following dates will this dividend be considered a taxable event to shareholders? A) declaration date. B) record date. C) ex-date. D) payable date.
D) payable date.
In accordance with the Investment Company Act of 1940, your customer who has recently purchased shares of a mutual fund should receive financial statements at least: A) annually. B) quarterly. C) monthly. D) semiannually.
D) semiannually.
For a municipal revenue bond, the opinion rendered by the bond counsel would attest to: A) the credit rating of the issue. B) the economic feasibility of the issue. C) the marketability of the issue. D) the legality of the issue.
D) the legality of the issue.
A technical analyst notices a head and shoulders top formation on a chart. The formation is generally an indicator of A) a breakout below the support level. B) the reversal of a downtrend. C) a breakout above the resistance level. D) the reversal of an upward trend.
D) the reversal of an upward trend. x
All of the following are characteristics associated with equity-linked exchange-traded notes (ETNs) EXCEPT A) they can be bought and sold throughout the trading day B) they are considered to be nonconventional structured investments with unique risks C) they have final payments at maturity linked to the return of an underlying stock or basket of stocks D) they are equity securities
D) they are equity securities
