Recent Practice Exam Questions
Your customer owns 300 shares of BigCo, Inc., common stock. In the upcoming election there are three open board seats. If BigCo operates under a statutory voting system, how many votes does the customer have in that election? A) 900 votes that may be cast among the seats in any way they choose B) 900 votes, no more than 300 votes for any one seat C) 300 votes that may be cast among the seats in any way they choose D) 900 votes, no more than 450 voted for any one seat
B) 900 votes, no more than 300 votes for any one seat Holders of common stock receive one vote per share owned for each open seat. In a statutory system, they may vote up to the number of shares they own separately for each open seat.
Corporate accounts may trade on margin A) never. B) only if it is not listed as being restricted from doing so in the corporate charter. C) only if it is specifically listed as being permitted to do so in the corporate charter. D) always.
B)only if it is not listed as being restricted from doing so in the corporate charter. As long as there are no restrictions against trading on margin in the corporate charter, corporate accounts may trade on margin.
On Tuesday, December 10 your customer Bought 5 OEX (S&P 100 Index) 230 March calls at four. On Tuesday, March 10 the calls are in-the-money and your customer issues exercise instructions. On what days did the trade and the exercise settle? A) December 12 and March 12 B) December 11 and March 12 C) December 12 and March 11 D) December 11 and March
D) December 11 and March 11 All option trades settle next business days. The exercise of an Index option settles the next business day.
Which of the following records must be kept for only three years? Customer statements Customer new account forms Customer confirmations Customer order tickets A) II and III B) I and IV C) I and II D) III and IV
D) III and IV The buy and sell and quantity information on the order tickets and confirmations statements will show up on the customer's monthly or quarterly statements. Monthly and quarterly statements must be kept for six years. The confirmations and order tickets must be kept for three years.
A municipal securities dealer has just made a contribution to the mayor's reelection campaign. How long must the firm wait before it can enter competitive bids on proposed bond issues by the city? A) Six months B) Two years C) Can never underwrite a bond for the city again D) No waiting period
D) No waiting period If a potential bond issue is up for competitive bids, any firm may participate in the bidding process, because the city will select the best arrangement available. If it is a negotiated bid (not competitive), there is a two-year waiting period because a firm that has made a political contribution might have an unfair negotiating advantage over firms that have not.
The common stock of a U.S. corporation and an American depositary receipt (ADR) issued in the United States share significant exposure to all of the following types of risk except A) political risk. B) business risk. C) social risk. D) market risk.
A) political risk. An ADR represents a foreign stock and is subject to political risk, even if the ADR is issued in the U.S. The United States is considered a very stable place to invest with little political risk. Like all equities, it is subject to market risk, business risk, and social risk like any corporation.
Of the following, reinvestment risk is most closely associated with A) market risk. B) call risk. C) inflation risk. D) capital risk.
B) call risk. When interest rates fall, callable securities are likely to be called. While the investor may receive the redemption proceeds sooner than anticipated, it is often difficult to reinvest while maintaining the same level of return due to the lower interest-rate environment. This is why reinvestment risk and call risk can be viewed as being closely associated with each other.
Which of the following terms is not associated with the exchanges? A) Physical location B) Negotiated pricing C) Auction D) Listed security
B) Negotiated pricing Negotiated pricing is a characteristic of the over-the-counter markets. Prices on the exchanges are set by the auction. Exchanges are often physical locations. Securities that trade on an exchange are called listed securities.
A diversified growth fund charging 0.4% of net assets per year as a 12b-1 fee may not make which of the following statements? A) The fund will pay its investment adviser a specified percentage of funds under management. B) The fund is a no-load fund. C) The fund will have a diversified portfolio with a stated investment objective. D) The fund will have a calculated fully disclosed expense ratio.
B) The fund is a no-load fund The fund would be expected and required to make statements regarding its diversification status, its expense ratio, and the rate at which it pays its adviser. It definitely may not, however, claim to be a no-load fund if it charges a 12b-1 fee, fees charged to market the fund's shares, of more than 0.25% of net assets.
Regarding a public offering and a private placement, which of the following statements is false? A) Both are methods of offering securities for sale to investors. B) Both allow securities to be sold to individual and institutional investors. C) Both are subject to the cooling-off period of 20 days found in the Securities Act of 1933. D) Both may use the services of investment bankers to facilitate the sale of securities.
C) Both are subject to the cooling-off period of 20 days found in the Securities Act of 1933. A key difference is that private placements are generally exempt from the registration requirements of the Securities Act of 1933 (The Paper Act). They are similar in that both public offerings and private placements are methods using the services of investment bankers (underwriters) to offer securities to the public—and with each, securities can be sold to individuals, but the number of individual investors is limited with private placements.
The bid price represents I. the price the broker-dealer is willing to pay when buying a security. II. the price the customer will pay when buying a security. III. the price a customer will receive when selling a security. IV. the price the broker-dealer will receive when buying a security. A) II and IV B) II and III C) I and III D) I and II
C) I and III The broker-dealer buys at the bid and sells at the ask. The customer buys at the ask and sells at the bid.
Which of the following constitute a private securities transaction, or selling away? I. A registered representative executes a trade for a customer in securities of a type normally handled by the representative's broker-dealer. II. A registered representative's sibling has some old bonds that the representative sells as a favor through a municipal securities broker. III. A registered representative helps an old school friend issue securities for a small business under formation. IV. A registered representative helps an acquaintance sell some inherited stock certificates without the acquaintance becoming a customer of the firm.
C) III and IV A private securities transaction is any sale of securities outside the scope of the regular business of the associated person involved and of the broker-dealer firm. Such a transaction done for an immediate family member, however, does not fall under the definition.
Which of the following best describes the calculation for gains or losses for tax purposes? A) Proceeds minus dividend, plus cost basis B) Proceeds plus cost basis C) Proceeds minus cost basis D) Proceeds plus dividends, minus cost basis
C) Proceeds minus cost basis Proceeds minus cost basis equals capital gains. The dividends are not part of the calculation for capital gains.
If a bond is purchased at a discount, the yield to maturity is A) the same as the current yield. B) lower than the nominal yield. C) higher than the nominal yield. D) lower than the current yield.
C) higher than the nominal yield. A bond purchased at a discount is purchased for an amount less than the face amount of the bond. The discount increases both the current yield above the nominal rate and the yield to maturity above the current yield. The nominal rate remains unchanged.
A registered representative enters a discretionary order for her clients account. All of the following are required except A) a record of the order must be maintained. B) the order must be identified as or marked discretionary. C) the order should be included in those required to be reviewed frequently. D) the order must be approved by a principal prior to entry.
D) the order must be approved by a principal prior to entry. Each discretionary order must be identified as such at the time it is entered for execution, a principal, officer or a partner of the BROKER-DEALER must approve each order promptly and in writing, but not necessarily before order entry, a record must be kept of all transactions including discretionary ones, and as with all trading activity, it is subject to frequent and systematic review by a designated supervisor or manager.
