Practice Questions
When an ETF is purchased, what is the transaction cost paid by the client? A) A sales charge B) A load C) A commission D) A fee
A commission
A corporation wishes to open a cash account. Which of the following documents is required? A) A corporate resolution B) A copy of the corporate charter C) A hypothecation agreement D) A risk disclosure document
A corporate resolution
If a newly hired person is employed by a broker-dealer and will be offering mutual fund shares, she can become FINRA registered by: A) Passing the SIE Exam only B) Passing the Series 6 Exam only C) Passing the SIE Exam and the Series 6 Exam D) Passing the SIE Exam and the Series 63 Exam
Passing the SIE Exam and the Series 6 Exam
May a brokerage firm place a temporary hold on a securities transaction? A) Yes, for the account of any investor. B) Yes, for the account of a senior investor. C) No, since this is beyond the scope of SRO rules. D) Yes, if the customer has a margin account.
No, since this is beyond the scope of SRO rules.
For an unregistered private placement of a real estate partnership, what document provides investors with the required disclosures? A)Certificate of Limited Partnership B) Partnership Agreement C) Offering memorandum D) Prospectus
Offering memorandum An offering memorandum is considered the disclosure document for investors in an unregistered limited partnership offering. In fact, an offering memorandum is similar to a prospectus for registered offerings. The Certificate of Limited Partnership lists the general and limited partners and is filed with the state in order to establish the partnership. The partnership agreement is signed by all partners and it specifies their rights and responsibilities. (17550)
A primary offering of securities is being made for a company listed on the NYSE. Prospectuses must be delivered: A) Only on purchases made at the public offering price B) For 25 days after the deal has closed C) For 40 days after the deal has closed D) For 90 days after the deal has closed
Only on purchases made at the public offering price
A person who is responsible for supervising the margin department of a broker-dealer is required to be qualified by taking the:
Operations Professional Exam (Series 99) Margin activities are a part of the operations department of a broker-dealer. FINRA requires any person who manages or supervises any covered function in the operations department (margin) to pass the Operations Professional Exam (Series 99).
The maximum political contribution from a municipal finance professional (MFP) to a candidate for whom she may not vote is:
$0
Shares of a closed-end fund are available on the NYSE at $21.50 per share. The customer will pay:
$21.50 + a commission
The shares of a closed-end fund that trades on the NYSE has a current price of $21.70. A customer who purchases the shares will pay: A) $21.50 plus a commission B) $21.50 plus a sales charge C) $21.70 plus a commission D) $21.70 plus a sales charge
$21.70 plus a commission
What is the typical maturity for an ETN?
10-30 years
A convertible bond has a conversion price of $40 and is currently selling in the market at $950. The conversion ratio is:
1000/40 = 25
An investor purchases 1,000 shares of ABC stock at $30 per share and receives an annual dividend of $1.20. After one year, the stock's market value has increased to $36 per share. What is the investor's total return? A) 4% B) 17% C) 20% D) 24%
24 An investment's total return is calculated by adding all of the cash flow received from dividends and/or interest, plus any appreciation or minus any depreciation in the value of the investment, and dividing by the initial investment. Therefore, the total return is determined as follows: [($36,000 - $30,000) + $1,200 in dividends] = $7,200/$30,000 = 24%.
An individual may roll over a lump-sum distribution from a corporate pension plan to an IRA without tax consequences if it is done within: A) 10 days B) 30 days C) 60 days D) 90 days
60 days
The BG mutual fund has a NAV of $11.72 and an offering price of $12.67. What is the sales charge for this fund? A) 7.5% B) 8.10% C) 8.50% D) 9%
7.5%
A bond with a 6% coupon is priced at a 7.20 basis. If the bond's yield-to-maturity increases by 40 basis points, the yield would be:
7.60% If a bond is priced at a 7.20 basis, this means that it is priced to yield 7.20 or has a YTM of 7.20%. If the bond's basis increased by 40 basis points, the new yield-to-maturity is 7.60%. The fact that the bond has a 6% coupon rate is relevant for determining whether the bond is trading at a premium or discount to par value. Since the YTM is greater than 6%, the bond is trading at a discount. (37069)
Which of the following statements is TRUE concerning a client's trusted contact person? A) Each account must have a trusted contact person. B) A firm should make a reasonable attempt to obtain the trusted contact person's name and contact information. C) The client's spouse is assumed to be a trusted contact person. D) The client's closest relative is assumed to be a trusted contact person.
A firm should make a reasonable attempt to obtain the trusted contact person's name and contact information.
A change in which of the following account record information from a customer account, does NOT require the broker-dealer to send a notice to the customer? A) Annual income B) Investment objectives C) Name D) Address
Annual income Under the SEC books and records rules, a notice must be sent to a customer within 30 days if the account is updated due to a change in the name, address, or investment objectives of the customer.
According to Regulation S-P, when is a broker-dealer required to provide disclosures regarding their policies for protecting customer information?
At the time an account is opened and annually thereafter
The Bond Buyer Index is based on which of the following securities? A) Treasury bonds B) Municipal bonds C) Corporate bonds D) Mortgage bonds
B) Municipal bonds Municipal bond indices are created by The Bond Buyer. The Bond Buyer is a financial publication that specializes in the municipal market.
Options vs warrants
Both options and warrants have a strike price—if exercised, the transactions for the underlying security will occur at that set price. It is in the case of convertible bonds or preferred stock that investors can convert the security into the underlying stock with no additional payment of money. All other statements are true.
Which of the following is the rate that commercial banks charge on loans to broker-dealers for margin purposes? A) Prime rate B) Discount rate C) Federal funds rate D) Call rate
Call Rate
A not-held order: A) Is considered a discretionary order B) Can be accepted with a client's verbal authorization C) Requires prior written approval from the client D) Allows for execution over unlimited period
Can be accepted with a client's verbal authorization A not-held order is not considered a discretionary order and can be executed by a registered representative on the day it's received. Since a not-held order specifies the asset, the action, and the amount of the security to be purchased or sold, written approval is not required. Instead, a not-held order can be accepted with simply the client's verbal authorization. (37389)
vote of common shareholders is NOT required for
Cash dividend Stock dividend Stock buyback
Which of the following terms is NOT associated with a variable annuity? A) Surrender charge B) Death benefit C) Commission D) Sales charge
Commissions The term commission is associated with buying and selling individual securities, not annuities. On the other hand, the term sales charge or load is associated with buying or redeeming units of a variable annuity or shares of a mutual fund. (37362)
Funds collected from 12b-1 fees cannot be used to pay for which of the following fund expenses? A) Sales concessions paid to registered representatives B) Printing the fund's prospectus C) Commissions paid for executing trades in the fund's portfolio D) Costs associated with creating the fund's website
Commissions paid for executing trades in the fund's portfolio
The relative of an 85-year-old account holder contacts the registered representative of the account and requests that funds be transferred to her account which is also held at the same firm. If the RR suspects financial exploitation, which of the following is the BEST course of action? A) Process the transaction since both accounts are held at the same firm. B) Attempt to resolve the matter with the customer prior to placing a temporary hold. C) Immediately place a temporary hold on the account. D) Contact the attorney for the 85-year-old account holder.
Contact the attorney for the 85-year-old account holder.
Which of the following is TRUE concerning the beneficiary of a Coverdell ESA? A) Contributions can be made until age 18 and must be used by age 30. B) Contributions can be made until age 25 and must be used by age 30. C) Contributions can be made until age 18 and used at any age. D) Contributions can be made until age 25 and used at any age.
Contributions can be made until age 18 and must be used by age 30.
Which of the following securities trades in fractional units of 1/32 of a point? A) Convertible bonds B) Municipal bonds C) Treasury bonds D) Corporate bonds
Corporate and municipal bonds trade in increments of 1/8 of a point, while Treasury notes and Treasury bonds trade in increments of 1/32 of a point. A convertible bond is a type of corporate bond.
Exchange-traded notes are most susceptible to which risks? A) Regulatory and interest-rate risk B) Credit and market risk C) Legislative and business risk D) Currency and political risk
Credit and market risk
A brokerage firm purchases 600 shares of stock from a customer and places the securities into its inventory. In this case, the firm likely acted as a(n): A) Dealer B) Designated market maker C) Agent D) Underwriter
Dealer When a broker-dealer buys a security from a customer by using its own funds and places the securities into its inventory, it has acted as a dealer (principal). In this situation, the customer is charged a markdown on the transaction. If the firm bought the security for a customer or sold a security to a customer without being the other side of the transaction, it would be acting as a broker (agent) and it would charge the customer a commission. An underwriter assists an issuer in raising capital in the primary market by purchasing the securities from the issuer and selling them to customers. The firm that controls trading on an exchange for a specific stock is referred to as a designated market maker (DMM).
A corporate bond that has no specific collateral backing and is guaranteed by the "full faith and credit" of the issuing corporation is called a(n): A) Debenture B) Guaranteed bond C) Income bond D) Equipment trust certificate
Debenture
An issuer includes warrants with a bond offering that it's conducting. This is done to:
Decrease the coupon rate on the bonds When warrants are issued with bonds, the issuer can typically lower the coupon rate and reduce its interest cost. (17508)
Which of the following is a reduction in the rate of inflation?
Disinflation
Which of the following statements is TRUE regarding contributions to a 401(k) plan? A) Contributions are in after-tax dollars. B) Employee participants should be aware of the risk of investing too much in their employer's stock. C) The employer determines the investments into which the contributions are allocated. D) Contributions of an unlimited amount can be made by employees.
Employee participants should be aware of the risk of investing too much in their employer's stock.
A broker-dealer includes dividends, interest, as well as realized and unrealized gains and losses when performing calculating for:
FOCUS reports
Which of the following is typically completed prior to determining whether to issue a revenue bond? A) Registration statement B) Referendum certification C) Prospectus D) Feasibility study
Feasibility Study
The payout on a variable annuity is based on a:
Fixed number of annuity units with a fluctuating value per unit
A broker-dealer is underwriting an initial public offering (IPO) for a company that will be exchange-listed. The broker-dealer continues to deliver prospectuses: A) Only on purchases made, at the public offering price B) For 25 days after the deal has closed C) For 40 days after the deal has closed D) For 90 days after the deal has closed
For 25 days after the deal has closed
On Wednesday, March 11, a customer purchases 1,000 shares of an OTC equity security in a cash account through an online brokerage firm. The transaction will settle:
For corporate securities, regular way settlement is two business days following the trade date. In this question, the settlement occurs on Friday, March 13. The key to this question is understanding that any corporate transactions which are being executed in either cash or margin accounts will settle on a regular way basis (T + 2). However, if a question references a cash trade, a cash transaction, or a trade settling for cash, it has special treatment and will settle on the same day as the trade.
A registered person is asked by the sponsor of a limited partnership to sell partnership units to his clients. Since the partnership is not being sold through the representative's broker-dealer, the sponsor will compensate the representative directly. For this situation, which of the following statements is TRUE? A) A registered person cannot participate in this type of transaction. B) For the person to participate, the broker-dealer must give written approval for the transaction and must record the transaction on its books. C) The representative may participate if the sponsor is associated with a FINRA member. D) The representative may participate if the partnership is being sold as a private placement.
For the person to participate, the broker-dealer must give written approval for the transaction and must record the transaction on its books.
The purpose of a depository facility is to:
HOLD SECURITIES IN BOOK-ENTRY FORM The Depository Trust Corporation (DTC) is a subsidiary of the Depository Trust & Clearing Corporation (DTCC) and its primary function is to hold securities in book-entry form. This allows broker-dealers to buy and sell securities on behalf of their customers without the costs and time associated with physical certificates. A change of ownership is made from the account of the selling broker-dealer to the account of the buying broker-dealer. The DTC is not a clearing facility.
Suspicious withdrawals have recently been taken from an account that's owned by a client who is 70-years-old. The registered representative suspects that the client is unaware of these withdrawals and that the customer's niece has been withdrawing money without the customer's knowledge. Which of the following is the best course of action for the RR to ensure that the account is not being exploited?
Halt suspicious withdrawals from the account
Under what conditions may a broker-dealer trade ahead of a customer's order?
If the customer's order was executed by a different department
A member firm's response to a customer complaint may be:
In either written or oral form
A bond with a 4% coupon is priced at a 3.20 basis. If the bond's yield-to-maturity decreased by 10 basis points, the yield would be: A) 3.90% B) 3.30% C) 4.10% D) 3.10%
If a bond is priced at a 3.20 basis, this means that it is priced to yield 3.20 or has a YTM of 3.20%. If the bond's basis decreased by 10 basis points, the new yield-to-maturity is 3.10%. The fact that the bond has a 4% coupon rate is relevant for determining whether the bond is trading at a premium or discount to par value. Since the bond's YTM is less than 4%, the bond is trading at a premium. (37068)
Which of the following statements is TRUE about the SEC Customer Protection Rule? A) A broker-dealer may only hold securities in its vault. B) The customer protection rule only applies to funds and/or securities in a cash account. C) If a client sells securities and fails to deliver them within 10 business days of the settlement date, the broker-dealer must buy-in the customer. D) A creditor of a broker-dealer is considered a customer of the broker-dealer.
If a client sells securities and fails to deliver them within 10 business days of the settlement date, the broker-dealer must buy-in the customer. The only true statement is that if a client sells securities and fails to deliver them within 10 business days of the settlement date, the broker-dealer must buy-in the customer. A broker-dealer may hold securities in its vault or at a depository (e.g., the DTCC). The Customer Protection Rule applies to funds and/or securities in either cash or margin accounts. A creditor of a broker-dealer is NOT considered a customer of the broker-dealer. (37248)
A client is interested in determining the expense ratio of a mutual fund. Which of the following actions is the MOST appropriate for a registered person to take?
Inform the client that this information can be obtained by reviewing the front of the fund's prospectus
interpositioning
Interpositioning occurs when, while executing an order for a customer, a broker-dealer places another broker-dealer between itself and the market. This practice is generally prohibited, unless the customer received a better price by executing the transaction in this manner. Backing away is a violation which involves a market maker failing to honor a firm quote that it has given to another dealer.
If the responsibilities of a broker-dealer representative involve assisting in the underwriting of common stock, which exam is required?
Investment Banking Representative Exam (Series 79) A representative with a Series 79 qualification is able to advise on and/or facilitate corporate debt and equity offerings (private or public offerings); mergers and acquisitions; tender offers; financial restructurings and asset sales; divestitures or other corporate reorganizations; and business combination transactions.
Which of the following statements is NOT TRUE about a company's Form 10-K? A) It contains financial information about the company. B) It is an annual filing. C) It must be forwarded to the company's shareholders. D) It allows shareholders to vote without attending the annual meeting.
It allows shareholders to vote without attending the annual meeting.
If an issuer's convertible bonds are converted by bondholders, what is the effect on the issuer's outstanding common stock? A) It will no have no effect. B) It will decrease the number of outstanding shares. C) It will provide existing shareholders with a larger dividend. D) It will increase the number of outstanding shares.
It will increase the number of outstanding shares.
An advantage a corporation receives when it issues a convertible bond is that:
It's able to borrow money at a lower rate of interest Convertible bonds allow corporations to borrow money at a lower rate of interest (lower coupon) since the convertible feature is an attraction for investors. Investors are willing to accept the lower interest rate in exchange for the opportunity to convert the bonds into common stock. In addition, the investor has some downside protection because, even if the price of the stock falls, the convertible bond still has inherent value as a bond.
If a representative of a broker-dealer is responsible for assisting in the underwriting of general obligation bonds, which exam is required?
Municipal Securities Representative Exam (Series 52)
Which of the following activities is NOT performed by a transfer agent? A) Handling lost, destroyed, or stolen certificates B) Acting as proxy agent c) Maintaining the issuer's ownership register for each issuance of securities D) Acting as the company's paying agent for interest payments on bonds and for cash or stock dividends on equities
Maintaining the issuer's ownership register for each issuance of securities
Immediately prior to the effective date of an underwriting, an adverse event occurs that causes a sharp decline in the price of the stock. Which of the following clauses permits the underwriter to withdraw without a penalty? A) All-or-none B) Best-efforts C) Market-out D) Penalty bid
Market out A market-out clause in an underwriting agreement allows the underwriter to withdraw from the issue if certain events occur that make the sale of the issue difficult or impossible. (99564)
An investor asks a registered representative to underline the most important facts found in a preliminary prospectus. The registered representative: A) May not do this since it violates federal securities laws B) May do this with the approval of a principal at the firm C) May do this with the approval of FINRA D) May do this without restrictions or approvals
May not do this since it violates federal securities laws
A project financed through revenue bonds is experiencing difficulty in that revenues are not sufficient to meet debt service payments. If, through legislative approval, the state pays interest and principal in a timely manner, the issue is MOST LIKELY: A) Double-barreled bonds B) Moral obligation bonds C) Bond anticipation notes D) Limited tax bonds
Moral obligation bonds
Southern California Gas is issuing 5 3/4% first mortgage bonds at a price of 96.35% of their par value. The payment of interest and principal on the bond is secured by:
Property owned by Southern California Gas The bonds are first mortgage bonds, which means they are secured by property that is owned by the Southern California Gas Company. Since the company is publicly owned, the bonds are not secured by property that is owned by the state of California.
When an investor sells her mutual fund shares back to the fund, she is assessed a fee which is returned to the fund. The fee is referred to as :
Redemption fee
Two years ago, an investor bought mutual fund shares. Today, if the investor intends to purchase additional shares, she can obtain a reduced sales charge by using: A) A letter of intent B) Dividend reinvestment C) Dollar cost averaging D) Rights of accumulation
Rights of accumulation The rights of accumulation provision gives investors the ability to receive cumulative quantity discounts when purchasing additional mutual fund shares. Under the rights of accumulation provision, rather than using the original purchase price, the current market value of the investment plus any additional investments is used to determine the applicable sales charge. Once a breakpoint is reached, all future purchases qualify for the reduced sales charge. On the other hand, a letter of intent qualifies an investor for a discount that's made available through breakpoints without initially depositing the entire amount required. (37341)
Rule 144
Rule 144 and 144A regulate the process by which restricted (unregistered) securities may be resold. Regulation D sets the regulations for raising capital through private placements. Rule 147/147A establish the requirements for intrastate offerings. Rule 145 establishes the registration requirements for the reclassification of securities. (17503)
All of the following are reasons for the SEC to deny the effectiveness of an issuer's registration statement, EXCEPT: A) The securities are extremely risky and may result in losses for most investors B) The financial statements submitted in the registration statement did not conform to accepted accounting standards C) The issuer failed to discuss an obvious business risk in the registration statement D) The issuer failed to pay the required fee when the registration statement was submitted
The securities are extremely risky and may result in losses for most investors
An individual was convicted of insider trading four years ago and served out her sentence in federal prison. If she is seeking a position as a registered representative, she should be informed that: A) She can be hired, but won't be permitted to talk to clients B) She cannot be hired as an registered representative for six years C) She can only provide advice on securities distributed through private placements since the securities are exempt securities D) Any sales she executes must be preapproved in writing by a principal
She cannot be hired as an registered representative for six years
A vote of the common shareholders is required for a corporation to declare a:
Stock split
All of the following are considered a qualified institutional buyer (QIB), EXCEPT: A) A mutual fund which has $450 million of securities B) The CEO of a financial institution which has $150 million of securities C) An insurance company with $240 million of securities D) A bank which has a net worth of $40 million
The CEO of a financial institution which has $150 million of securities
Which of the following choices does NOT hold customer cash or securities? A) A broker-dealer that maintains omnibus accounts B) The Depository Trust Company C) A prime broker D) A broker-dealer
The Depository Trust Company
Which of the following government agencies is NOT involved in the housing market? A) Federal National Mortgage Association (FNMA) B) Federal Home Loan Mortgage Corporation (FHLMC) C) Federal Home Loan Banks (FHLB) D) Government National Mortgage Association (GNMA)
The Federal Home Loan Banks are not involved in the housing market. Instead, the FHLB provides liquidity to savings and loan institutions by lending them money if/when they are in need of funds.
All of the following statements are TRUE regarding private securities transactions that are executed by an associated person of a member firm, EXCEPT: A) The transactions may not involve private placements, even if the activity is otherwise acceptable B) If a registered person will be compensated, the firm must approve of the transactions in writing C) If a registered person will not be compensated, the firm must be notified of the person's participation D) A registered person's personal transactions in mutual funds are not covered by this rule
The transactions may not involve private placements, even if the activity is otherwise acceptable
The federal securities regulation that provides rules for the secondary market is:
The Securities Exchange Act of 1934
Which of the following items is NOT included in an income statement? A) The amount of goodwill B) Selling and administrative expenses C) Interest expense D) The amount of income taxes paid
The amount of goodwill The income statement of a company includes its sales (revenues), less its operating expenses (selling and administrative expenses is an example), less interest paid on its debt, which equals earnings before taxes. Taxes are then deducted to determine net income, from which dividends may be declared. It also includes nonrecurring events such as the closing of a business or extraordinary items. The amount of goodwill is found on a company's balance sheet.
A customer sells short 100 shares of XYZ at 34. The customer wishes to protect herself against a loss. Which of the following orders will prevent a loss on the short position? A) Enter a buy stop order at 34 B) Purchase an XYZ 30 call at 5 C) Enter a buy limit order at 32 D) The customer will be exposed to the possibility of loss no matter which of these additional positions or orders is used
The customer will be exposed to the possibility of loss no matter which of these additional positions or orders is used
Which of the following items is NOT found on a sell order ticket? A) If the account is discretionary, whether discretion was exercised B) The customer's original purchase price for the stock C) The location of the securities D) Whether the trade was solicited or unsolicited
The customer's original purchase price for the stock
The Founders Income Fund has declared a dividend that is payable to stockholders of record on Thursday, May 29. This mutual fund's ex-dividend will typically be on: A) Monday, May 26 B) Tuesday, May 27 C) Wednesday, May 28 D) The date that is set by the fund or its principal underwriter (sponsor)
The date that is set by the fund or its principal underwriter (sponsor)
An individual wishes to sell stock according to Rule 144 requirements. There are 3,500,000 shares outstanding. The individual decides to sell on January 30. The trading volume for the stock is as follows. Week ending January 1 20,000 shares Week ending January 8 48,000 shares Week ending January 15 30,000 shares Week ending January 22 36,000 shares Week ending January 29 40,000 shares How many shares may be sold? A) 33,500 B) 34,800 C) 35,000 D) 38,500
The individual may sell the greater of 1% of the outstanding shares or the average weekly trading volume for the preceding four weeks. The average is 38,500 [(40,000 + 36,000 + 30,000 + 48,000) divided by 4]. This is greater than 1% of the outstanding shares (1% of 3,500,000 equals 35,000).
Which of the following choices best describes the price that a mutual fund investor receives when she redeems her shares? A) The bid price of the previous day's close B) The current offering price C) The next computed bid price on the day that the shares are redeemed D) The next computed asked price on the day that the shares are redeemed
The next computed bid price on the day that the shares are redeemed
An individual considering the purchase of an equity-indexed annuity should understand that: A) The return over long periods of time will equal the underlying index B) These products tend to outperform the stock market over long periods of time C) These products do not have sales charges or surrender fees like mutual funds and should only be purchased by seniors who want a death benefit and life payout D) The return over long periods of time will equal the greater of the participation rate of the underlying index (adjusted rate of return) or the guaranteed minimum
The return over long periods of time will equal the greater of the participation rate of the underlying index (adjusted rate of return) or the guaranteed minimum
Which of the following statements is TRUE concerning electronic communication networks (ECNs)? A) They can be used only by retail investors. B) They can be used by investors who want to trade anonymously. C) They can be used only by institutional investors. D) They can be used by clients who don't want to use a broker-dealer.
They can be used by investors who want to trade anonymously. Electronic communication networks (ECNs) are securities trading systems that are designed to anonymously match buyers with sellers. These systems can be used by both institutional and retail investors. One of the benefits of their use is immediate automatic execution if a matching buy or sell order can be found on the system. ECNs do not allow investors to trade directly with one another; however, they do allow subscribers (e.g., broker-dealers) to use these systems to execute orders that they receive from their clients.
The maximum civil penalty for insider trading violations is:
Three times the amount gained or loss avoided
Which of the following statements regarding telephone solicitations is TRUE? A) RRs may not make telephone solicitations between 9 a.m. and 8 p.m. local time B) If an RR calls a potential client and the prospect asks to be placed on the do-not-call list, their number must remain on the list for two years C)Time-of-day restrictions on telephone calls by RRs do not apply to calls to an existing customer for the purposes of servicing the account D)Each RR must set up and maintain a separate do-not-call list
Time-of-day restrictions on telephone calls by RRs do not apply to calls to an existing customer for the purposes of servicing the account
A withdrawal from an IRA may be made prior to age 59 1/2 without incurring a 10% penalty tax in which of the following situations? A) To purchase a vacation home B) To pay for the college tuition of the investor's daughter C) As a result of the permanent and total disability of the investor's spouse. D) To cover the costs of the funeral of the investor's father.
To pay for the college tuition of the investor's daughter
Treasury notes
Treasury notes and bonds pay interest semi-annually. Treasury securities are only issued in book entry form. Treasury Inflation Protected Securities (TIPS) are adjusted for inflation. (17515)
An annuitant is receiving payments from a variable annuity and, at the time of his death, his beneficiary receives a lump-sum payment. The annuity payout option is:
Unit refund life annuity The annuity payout option that provides the beneficiary with a lump-sum payment at the time of the annuitant's death (which reflects the value of the remaining annuity units) is referred to as a unit refund life annuity. (37384)
The fluctuations in the value of a variable annuity will correspond with the fluctuations in the: A) Dow Jones Industrial Average B) Value of the index or average on which the payout is based C) Value of the securities held in the separate account of the annuity D) Cost of living index
Value of the securities held in the separate account of the annuity
As far as variable annuities are concerned, which of the following statements is TRUE? A) The investment risk is borne by the insurance company as in a fixed annuity B) Payments of a variable annuity can be decreased because of an increase in the expenses of the insurance company C) RRs selling variable annuities are not required to register with the SEC or FINRA D) Variable annuity nonqualified separate accounts are registered under the Investment Company Act of 1940
Variable annuity nonqualified separate accounts are registered under the Investment Company Act of 1940
While saving for her retirement, a variable annuity owner investing $1,000 per month will buy a:
Varying number of accumulation units When investors purchase a variable annuity contract, they are purchasing accumulation units. Once a contract has been annuitized, distributions are made by liquidating annuity units. Since the value of the subaccounts will fluctuate, a client investing $1,000 per month will purchase a different number of accumulation units with each purchase. (72162)
In a 529 plan, can an individual be both the donor and the beneficiary? A) Yes, if the person is of legal age. B) Yes, if the withdrawals will be used for graduate school. C) Yes, if the person has retired. D) Under no circumstances.
Yes, if the person is of legal age.
A financial services firm that charges customers based on a percentage of the assets under management is BEST defined as:
a financial adviser
A brokerage account in which the name of a trusted person is required to be requested applies to an account for which of the following? A) A senior investor B) A minor C) A margin account D) An options account
a senior investor When opening a brokerage account for a customer who is considered a specified adult, the name of a trusted person should be requested. A specified adult is defined as a senior investor (age 65 or older) or a person who is age 18 or older and who the firm reasonably believes has a mental or physical impairment that renders him unable to protect his own interests.
The primary concern for investors who use a buy-and-hold strategy to maintain their portfolios is:
allocation of assets If an investor follows a buy-and-hold approach and fails to adjust the allocation of assets as the portfolio drifts, the portfolio balance will be altered and may no longer meet the investor's objectives. Although the individual investments within the portfolio are subject to various risks, those risks don't necessarily affect the allocation of the assets.
How frequently is a firm required to notify customers regarding how to access BrokerCheck®?
annually
Under MSRB rules, firms that transact business in municipal securities are required to notify customers of the availability of a investor brochure:
annually
A client is heavily invested in an exchange-listed security and decides to liquidate the investment to purchase shares of an S&P 500 Index fund. In doing so, the investor has protected against:
business risk By diversifying his portfolio through the investments in the S&P 500 Index fund, the client is primarily reducing business risk. Business risk is the risk that a company is doing something wrong which will lead to its poor performance (i.e., poor management or the wrong product line). Liquidity was not a concern since the original investment was an exchange-listed company. Market risk is a type of systematic (non-diversifiable) risk.
When a bond is called, the bondholder receives the:
call price + accrued interest
The Securities Investor Protection Corporation (SIPC) insures all of the following accounts, EXCEPT:
commodities accounts
All of the following statements are TRUE of 529 plans, EXCEPT: A) Withdrawals that are used for educational purposes are not subject to federal taxation. B) There are no income limits placed on contributors. C) Contributions are unlimited. D) A married couple may make a lump-sum contribution of $150,000 without incurring federal gift taxes.
contributions are unlimited A single investor may contribute up to $15,000 per year ($30,000 for a couple) for each beneficiary without incurring gift taxes. An investor may also aggregate five years' worth of annual contributions and give a lump sum of $75,000 ($150,000 for a married couple) without incurring federal gift taxes. (37382)
A type of offering in which an investment banker acts in a principal capacity is a: A) Firm commitment B) Best efforts C) All-or-none D) Contingency
firm commitment
The most detailed financial information regarding a municipal securities issuer is found in the:
official statement
If an investor wants to build a bond portfolio that maintains a stable value, she should purchase bonds with:
short maturities Although short-term bonds are influenced by changing interest rates, the effect is relatively minor due to their short-term nature. For that reason, investors who want stability in their bond portfolios should invest in short-term debt. (17513)
What type of bond would MOST likely be secured by an excise tax, cigarette tax, or gasoline tax?
special tax bond