SIE Unit 2

All of the following are nonsystematic risks EXCEPT...

purchasing power risk

For preferred shares, the annual dividend payment is...

fixed and stated as a percentage of its par value

Money market instruments are typically...

fixed-income (debt) securities with short-term maturities

An investor is short 1 XYZ January 20 call at 3. This investor...

has received $300 for writing the call contract

If long one equity call option, the owner...

has the right to purchase 100 shares of the underlying stock

Direct Participation Programs (DPPs) are set up...

having the owners of the business liable for any taxes due

Under the Investment Company Act of 1940, which of the following is NOT considered an investment company?

hedge fund

A mutual fund's share class determines...

how sales charges and related expenses are paid

The XYZ May 45 puts are trading 2.50. The Current Market Value (CMV) for XYZ stock is $42.50. The May 45 put is...

at parity

MOS stock is trading at 55. A March 55 call contract would therefore be trading...

at the money

If a call contract has no intrinsic value, it must be...

at, or out of the money

When interest rates are falling, which bonds are most likely to expose holders to call risk?

callable bonds with higher coupons

A company has distributed profits to its shareholders. This type of distribution would most likely be in the form of...

dividends

The effect of continually rising retail prices on the investment returns of one's portfolio is best described as...

inflation risk

Unique tax advantages associated with oil and gas direct participation programs are...

intangible costs and depletion allowances

Each of the following are likely benefits of owning shares of common stock EXCEPT...

interest payments

Holding a callable bond with bond protection is least impactful for the investor when...

interest rates are rising

A statutory debt limitation imposed on a municipality restricts its authority regarding...

issuing general obligation (GO) bonds

Which of the following accurately characterizes capital risk?

it can be reduced by diversification

Which of the following is TRUE regarding currency risk?

it is a nonsystematic risk and therefore, can be reduced by diversification

An investor owns a bond with a 3.5% nominal yield making semiannual interest payments. On each interest payable date, the investor can expect to receive how much...

$17.50

All of the following are TRUE of negotiable commercial paper EXCEPT...

it is typically issued by banks

An investor is long 6 MAS February 60 calls at 2.25 each. If at the time fo the February expiration, the calls expire unexercised, how much money will the investor lose?

$1,350

An investor is long a January 30 call at 2. Maximum loss for this position is...

$200

A bond with a 4% stated yield and over $1,000 par value would pay how much in annual interest?

$30

LMN Corporation has a 4% preferred class stock currently trading at $45 per share. Its annual dividend is...

$4

Your customer establishes the following position: Long 1 XYZ January 50 put at 2. You can correctly inform the custom that the maximum potential gain on the position is...

$4,800

Securities issued by the US government are backed by...

its full faith and credit, based on its power to tax the people

DEF Corporation has 4% noncumulative preferred stock outstanding. The company eliminated its dividend payments for the past 3 years but now is in position to resume paying them again. Before paying common shareholders a dividend, the company would be required to pay the preferred shareholders...

$400

Under the rules, a penny stock is defined as an unlisted, security trading at less then...

$5 per share

An investor sells short 1 MJS June 55 put at 2. The current market value of LMN is 56. Th investor's maximum loss potential is...

$5,300

An investor has purchased a bond with a 5% coupon. This investor will receive...

$50 annual interest until maturity

A customer writes an MMM January 70 put at 6. The maximum potential gain on this position is...

$600

An investor purchases 100 shares of XYZ stock at 67 and writes 1 covered call for a premium of $2.25 each. What is the investor's breakeven point?

$64.75

Your customer is long 1 October 75 put at 2. The customer's maximum gain potential is...

$7,300

An investor purchases 1 KLP October 95 put at 6.50. What is the investor's maximum potential gain with this position?

$8,850

An investor is short 1 December 15 put at 6. The investor's maximum loss on this position is...

$900

The general partner of a limited partnership has responsibility for all of the following ...

-managing the day-to-day operations -organizing the business -paying partnership's debts

A registered representative speaks to a customer about a particular 6% municipal bond quoted on a 6.5% basis. Which of the following is CORRECT?

-6% is the bond's coupon -6.5% is the bond's yield to maturity

A registered representative enters a discretionary order for her clients account. All of the following are required...

-a record of the order must be maintained -the order must be identified as or marked discretionary -the order should be included in those required to be reviewed frequently

Of the following stocks, which would be defined as penny stocks?

-Bulletin Board stock trading at $4 per share -"OTC Pink" stock trading at $4 per share

Which of the following securities can be traded throughout the day?

-ETFs -closed-end funds

All of the following are true for exchange-traded funds (ETFs)...

-ETFs can be bought or sold throughout the trading day -ETF share prices are subject to market forces like supply and demand -ETF transactions are commissionable trades

All of the following would be considered advantages of exchange traded funds as opposed to mutual funds...

-ETFs trade on exchanges -ETFs are priced continuously throughout the trading day -ETFs are marginable

Regarding Exchange-Traded Funds (ETFs), as compared to open-end (mutual) funds, which of the following are TRUE?

-ETFs transactions are subject to commissions -ETFs may trade at a price that is less than the NAV per share

The United States Congress has authorized all of the following enterprises to issue securities...

-FNMA -GNMA -FHLMC

An investor makes several statements regarding what they know about exchange-traded funds. All of them are correct...

-I can expect them to have lower expense and operating costs than mutual funds -I'll be able to buy or sell them throughout the trading day like stocks trading on an exchange -I won't have to pay any sales charges as I do with mutual funds, but I will have to pay commissions

Advantages to the investor offered by investment companies include...

-ability to invest small amounts in many different securities -increased purchasing power in the marketplace

For Treasury Bills, which of the following are TRUE?

-T-bills are issued at a discount to par -T-bills are a direct obligation of the US Government

All of the following could be found in the money market...

-T-bonds maturing in 12 months -T-bills -commercial paper

Short-term securities that generate funds for a municipality that expects alternate longer-term financing include all of the following...

-TANs -BANs -RANs

Zoe Smith wants to invest $100,000 in ABC common stock. Which of the following would be appropriate objectives when placing the order?

-a long-term hedge against inflation -the stock may appreciate in value and pay a consistent cash dividend

Each of the following makes regular interest payments...

-Treasury notes -Treasury bonds -Corporate bonds

All of the following statements are TRUE...

-a closed-end companioning may issue bonds -a bond mutual fund may not issue bonds -a closed-end company may issue preferred stock

All of the following are considered control persons (owning control stock)...

-a director on the BOD owning 2% of the outstanding shares -the corporation's CFO owning 1% of the outstanding shares -an officer of the corporation owning less than 1% the outstanding shares

Regarding limited partnerships, which of the following are TRUE...

-a general partner can be held personally liable for business losses and debts -a general partner business decisions are legally binding on the partnership

With money market securities, the risks are...

-a lower return than with longer-term instruments -the potential reinvestment of principal at different rates over short periods of time

Yield to call (YTC) calculations reflect the early redemption date and...

-acceleration of the discount gain if the bond was originally purchased at a discount -accerlated premium loss if the bond was originally purchased at a premium

Priority at dissolution for preferred shareholders means that they are paid...

-after all creditors -before common shareholders

By purchasing shares of stock in a company, investors can benefit from which of the following?

-an increase in the price of the shares -the receipt of profits to be distributed

All of the following are issuer transactions where the proceeds of the offering go to the issuing company...

-an initial public offering (IPO) -an additional public offering (APO) -a subsequent public offering (SPO)

Which of the following is TRUE for a 6% bond priced at $960 in the secondary market?

-annual interest is $60 -current yield is greater than 6%

A bond with a 4.5% stated yield might make...

-annual interest payments of $45 -semiannual interest payments of $22.50

Straight preferred shares...

-are noncumulative -have no provision for paying missed dividends later

Which of the follow gin are included in the semiannual financial reports a mutual fund must provide to its shareholders?

-balance sheet showing assets, liabilities, and net assets -income statement detailing profit and loss for the period

All of the following are types of maturities for debt instruments...

-balloon -serial -term

Regarding open-end and closed-end investment companies, all of the following are TRUE....

-both may either be diversified or non-diversified portfolios -both may offer numerous investment objectives to select from -both may avoid taxation by distributing all of their net investment income to shareholders

All of the following (re: options) are true...

-breakeven (BE) is always the same number for both buyer and seller of an option contract -the maximum loss for options buyers is the premium paid -BE is calculated using the same formula for both buyer and seller

An investor is long 1 January 15 put at 4. Calculate the following: breakeven, maximum gain, maximum loss...

-breakeven = 11 -maximum gain = $1,100 -maximum loss = $400

An investor is long 1 January 30 call at 2. Calculate the following: breakeven, maximum gain, maximum loss...

-breakeven = 32 -maximum gain = unlimited -maximum loss = $200

Two investors have engaged in the same put transaction: one, the buyer who is now long the put and the other, the seller who is now short the put. All of the following are TRUE...

-breakeven is the same number for both investors -maximum gain and loss potential for one investor are different than the others maximum gain and loss potential -one investor's maximum loss potential is the other's maximum gain potential

Options investors who are...

-bullish on a stock should buy calls -bearish on a stock should buy puts

Which option positions are bullish?

-buy a call -sell a put

A customer believes the price of MJS stock will rise but is not currently in the position to purchase the stock outright. How could the customer use options to profit form a rise in the stock's price?

-buy calls -write puts

For options investors, which of the following are TRUE?

-buyer pay the premium for the right to exercise -sellers receive the premium and incur on obligation to buy or sell

Common shareholders wanting to vote on issues at a shareholder meeting can do so in all of the following ways...

-by proxy delivered by mail -in person -by proxy delivered online

To obtain a statement of addition information (SAI) regarding a particular mutual fund, an investor could do any of the following...

-call or write to the investment company that offers the fund -request a copy from the Securities and Exchange Commission (SEC) -request one from a broker that sells the investment company shares

Bonds can be issued with additional features attached, making them more attractive to investors. All of the following can be considered such features...

-callable -puttable -convertible

In accordance with the terms of the Telephone Consumer Protection Act all fo the following statements are TRUE...

-calls made on behalf of tax-exempt nonprofit organizations are exempt from the Act -the firm must maintain a Do-Not-Call-List documenting all those who have asked to be placed on it -calls made to parties with whom the caller has an established business relationship are exempt from the Act

All of the following are nonsystematic risks...

-capital risk -business risk -call risk

At a shareholder's meeting, a mutual fund investor might be called upon to vote on any of the following...

-changes in membership in the board of directors -approval of the investment adviser's contract

All of the following are examples of legislative risk...

-changes made to the tax code regarding income tax -a luxury-tax imposed on high-priced ammenities such as automobiles or yachts -a law that would either allow or eliminate a tax deduction

All member firm communications are held to certain standards by FINRA. All of the following characterize those standards...

-charts and graphs must be balanced in showing both opportunities for gains and possible losses -professional designations and degrees may be noted but not used to imply expertise in areas where none exists -recruitment advertising must be fair and balanced in nature when expressing potential income

A mutual fund can offer all of the following to investors...

-check-writing privileges for redemptions -the ability to do transfers by telephone or online -acting as custodian for retirement accounts

Examples of investments in assets that owl due considered illiquid would be all of the following...

-classic automobiles -real estate -works of art

Intraday price changes due to normal market forces would be found with...

-closed-end fund shares -exchange-traded fund shares

All of the following would be associated with hedge funds...

-commodity speculation -highly leveraged portfolios (borrowing to purchase securities) -the use of short positions (selling securities the portfolio does not own)

All of the following options must be completed before a customer enters the first option order...

-completion of the new account form -delivery of an OCC disclosure booklet -approval by a branch office manager or registered options principal

Rule 144 imposes volume limitations on the number of shares that can be sold by...

-control persons selling registered stock hold for 1 year -control persons selling restricted stock held for 2 years

Bondholders should expect that interest payments would always be forthcoming for all of the following...

-convertible bonds -subordinated debentures -debentures

A customer investing in common equity securities could realize all of the following...

-current income via dividend declarations -potential capital appreciation -potential hedge against inflation

A bond hanging an 8% coupon is selling with an 8.25% yield to maturity. Which of the following statements are TRUE?

-current yield is higher than nominal yield -nominal yield is lower than YTM

Which fo the following is an example of an unsecured debt security?

-debenture -income bond

Municipal Revenue bonds...

-do not require voter approval -are not subject to statutory debt limits

A commons stockholder's voting rights apply to which of the following?

-election fo the board of directors -authorization or issue of more common shares

Rank the following in order of payment at the time of corporate liquidation, form first to last...

-employee wages and taxes owed -secured debtholders -subordinated debentures -preferred stock

Obtaining the financial status of the customer, and whether or not they meet income and net worth criteria, could be required for all of the following...

-equipment leasing limited partnerships -oil and gas limited partnerships -real estate limited partnerships

An investor buys 1DWQ May 70 call at 2, giving the investor the right to buy 100 shares of DWQ at $70 per share. All the specifications of the transaction are stet or standardized by the Option Clearing Corporation...

-exercise price of 70 -expiration date in May -contract size of 100 shares

An investor has just received stock rights in the mail allowing the purchase of 250 shares of stock offering at a discount. With these rights, the investor may take ANY fo the following actions...

-exercise some rights and sell the rest -sell some rights and let the rest expire unexercised -sell the rights for a portion of their value

The Investment Company Act of 1940 classified all of the following as investment companies...

-face about certificates -management companies -unit investment trusts

Each of the following is defined as an investment company...

-fixed and non fixed unit investment trusts (UITs) -a closed-end management company -an open-end management company

Which of the following are most likely to make monthly or quarterly payments for the life of the investor?

-fixed annuity -variable annuity

Each of the following activities would be deemed by market regulators to be manipulative behavior...

-front running -marking the open or the close -capping

All of the following describe mutual funds...

-funds simplify tax calculations for investors by supplying FORM 1099 -various withdrawal plans may be offered for redemption of shares -the portfolio is professionally managed

All of the following are exempt from the Federal Reserve Board (FRB) Regulation T margin requirements...

-government agency issues -treasury bills -municipal bonds

Tax credits for partners in a real estate program can come primarily from...

-government-assisted housing -historic rehabilitation properties

Regarding oil and gas DPPs, tangible drilling costs are associated with items that...

-have some salvage value at the end of the program -can be depreciated

Advantages enjoyed by the limited partners in a partnership might be all of the following...

-having income and expenses flow directly through to them -owning an interest in an investment managed by others -having liability limited to the loss of the money invested

Of the debt and equity holders listed here, in what order would claimants receive payment in the even that a corporate bankruptcy liquidation needed to occur?

-holders of secured debt -general creditors -holders of subordinated debentures -preferred stockholders

In what order would claimants receive payment in the event of a corporate bankruptcy?

-holders of secured debt -general creditors -holders of subordinated debt instruments -preferred stockholders

A member firm is assigned an exercise notice by the Option Clearing Corporation. The member firm may assign the exercise notice to one of its short customers by any of the following methods...

-in any way the tis fair and reasonable -to the customer having the oldest short position -on a random-selection basis

All of the following are terms that can be used to describe an option contracts strike price relative to the price of the underlying stock...

-in the money -out of the money -at the money

All of the following could be characterized as benefits to owning common stock...

-income potential via the receipt of dividends -capital gains via increases in share price -limited liability

Which of the following statements regarding Treasury receipts are TRUE?

-interest is paid at maturity -they are sold at a discount

The market forces that typically drive the price of a bond trading in the secondary market would include all of the following...

-interest rates -supply or availability of the bond -investor's demand for the bond

All of the following are TRUE of negotiable commercial paper...

-it is considered a money market instrument -it has a maximum 270 day maturity -the issuers typically have strong credit ratings

The two classifications of chapters for corporate bankruptcies are...

-liquidations -reorganizations

Which of the following are risks that are most likely to be faced by investors in domestic debt securities?

-liquidity risk -inflation risk

Which of the following are considered systematic risks- those that would impact all businesses?

-market risk -infaltion risk

Rules to protect the public during initial public offerings (IPOs) include all of the following...

-members cannot take advantage of their insider status to gain access to shares for their own benefit -members may not withhold shares for their own benefit -shares must be offered to the public at the public offering price

Rules to protect the investing public during the public offering process include all of the following...

-members must offer the securities at the public offering price -member firms may not withhold securities in a public offering for their own benefit -securities industry insiders may not take advantage of their insider status to gain access to new issues for their own benefit

A prospectus must be delivered to customers following a transaction in all of the following...

-mutual funds -follow-on offering of common stock by a public reporting company -unit investment trust

A broker dealer's business continuity plan to be enacted int eh event of a significant business disruption requires all of the following...

-prompt customer access to funds and securities -alternate physical location of employees if needed -data backup and recovery (hardcopy and electronic)

Before effecting an initial penny stock transaction for a new customer, the registered representative must do all of the following...

-obtain a signed risk disclosure document form the customer -confirm whether the person is an established customer -obtain a signed suitability statement form the customer

A registered representative opens a new options account for a customer. In which order must the following actions take place?

-obtain essential facts from the customer -obtain approval from the branch manager -enter the initial order -obtain signed options agreement

The buyer of an option contract can be known as all of the following...

-owner -holder -long party

All of the following regarding a trust set up for the purpose of holding commercial property, or mortgages on commercial property, are TRUE...

-ownership of these shares may provide for the receipt of dividends -these investments could not be considered open or closed-end funds -gains can pass through to the owners of these shares

Rules regarding restricted persons state that each of the following is considered immediate family...

-parents -a brother or a sister -a mother-in-law or a father-in-law

All of the following would generally be associated with a limited partnership (LP)...

-partners responsible for reporting to the IRS -tax credits for specific programs -the pass-through of gains and losses

All of the following are benefits for the limited partners in a direct participation program (DPP)...

-passive losses -flow-through of income -an investment managed by the general partner (GP)

All of the following are restricted persons...

-portfolio managers -finders and fiduciaries acting on behalf of the underwriters -employees of members

Which two of the following preference items define preferred stock?

-preferred dividends must be paid before paying common dividends -preferred stockholders are paid before common stockholders in the event of liquidation

The holders of which of the following securities are considered owners of the issuing corporation?

-preferred stock -common stock

A corporation wanting to raise cash to finance accounts receivable and seasonal inventory needs is likely to issue any of the following...

-prime paper -commercial paper -promissory notes

All of the following are types of direct participation programs (DPPs)...

-real estate -leasing -oil and gas

Common stockholders of a publicly traded corporation have which of the following rights and privileges?

-residual claim to assets at dissolution -right to receive an audited financial report on an annual basis

Which of the following WOULD be considered ordinary income for tax purposes?

-salary and commissions -rents form income properties -dividends on common stock

The Securities Act of 1933 exempts all of the follow gin securities from registration...

-savings and loan issues -municipal issue -US government issues

Which of the following are the two basic types of Section 529 plans, which are products used for funding higher eduction?

-savings plans -prepaid tuition plans

Member firms violate rules regarding sales of new equity issues to restricted persons when they do which of the following?

-sell blocks of the new issue to accounts of partners or officers of the member firm -sell to accountants or attorneys acting on behalf of the underwriters

Which of the following would be included in a mutual fund's list of expenses?

-shareholder records and service -investment advisor's fee

The market price of a company's stock could be affected by...

-the company's earnings -changes in the business cycle -FRB policies -International conflicts

An investor and his mother owns 20% and 10%, respectively of a corporation's outstanding shares, and the mother wants to sell all her holdings. According to Rule 144, which of the following statements are TRUE?

-she must file Form 144 to sell the shares -she is considered an affiliated person

Which of the following positions would vie an investor an unlimited loss potential?

-short 100 sales of IBS stock -short 1 IBS July 50 uncovered call

Opening a margin account for a client requires the client to do all of the following...

-signing the credit agreement -signing the hypothecation agreement -providing customers with a risk disclosure document

Which of the following statements regarding real estate investment trusts are TRUE?

-some REITs hold no real property but hold mortgages on commercial property instead -REITs can pay dividends to shareholders and make capital gains distributions

Penny stock rules...

-specify that established customers of the firm need not sign a suitability statement -require that prospects be given a copy of a risk disclosure document before their initial penny stock transaction

Your customer is a limited partner in a real estate partnership. This partner has the right to do all of the following....

-sue the general partner for damages resulting from any business decision made -vote with the limited partners to remove the general partner -inspect and obtain copies of all partnership records

List the order of payment form first to last in the event of a corporate liquidation...

-taxes and wages -secured and then unsecured debt -preferred shareholders -common shareholders

Regarding assignment of exercises notices, which of the following are TRUE?

-the Options Clearing Corporation (OCC) assigns short BDs randomly -short BDs can assign their short customers randomly, using the FIFO accounting method or by any other fair method

A customer buys a 10% bond with a current yield of 12% and holds the bond until 1 year before maturity. The bond is sold when current interest rates are 8%. Which of the following statements are CORRECT?

-the bond was purchased at a discount -the bond was sold at a premium

A call option reaches its expiration date and goes unexercised. This means...

-the buyer loses the premium paid -the writer gains the premium received

A put option reaches its expiration date and goes unexercised. This means...

-the buyer loses the premium paid -the writer gains the premium received

Which of the following would cause a mutual fund's NAV per share to fall?

-the fund pays a dividend to shareholders -the market value of the portfolio declines

Which fo the following would cause a change in the net asset value of a mutual fund share?

-the fund pays a small dividend -the market value of the portfolio declines

All of the following must be on the cover page or beginning of the summary prospectus of a mutual fund...

-the fund share class or classes ticker symbols -the share class or classes offered by the fund -the website where a full prospectus may be downloaded

Before making an investment, it is wise to evaluate the potential risk involved. It is safe to assume that...

-the greater the risk, the greater the potential reward -the lower the risk, the lower the potential reward

A broker dealer firm opening a corporate account MUST establish all of the following...

-the legal right of the corporation will keep when received -the names of those who will have access to or authority over the account -any limitations of the corporation has placed on account activities

Discretion given to a registered representative to make transactions applies to all of the following...

-the number of shares or units for the transaction -whether to buy or sell -the security for the transaction

When a customer signs the options agreement, this is the customer's affirmation to all of the following ...

-the option disclosure document has been read -all rules and regulations regarding options trading will be abided by -the risk of options trading as outlined in the ODD are understood

All of the following is TRUE about local government investment pools (LGIPs)...

-the pool maintains a fixed $1.00 net asset value -pools are not required to register with the SEC -LGIFs operate similarly to a money market instrument

Given bonds are interest-rate sensitive, which of the following statements regarding put and call features for bonds are TRUE?

-the put feature would likely be exercised if interest rates rise -the issuer will likely call bonds if tinniest rates fall

Which of the following regarding established customers of a broker-dealer and the purchase of penny stocks are TRUE?

-they are exempt from the suitability statement required -they are not exempt from the disclosure rules

Which of the following are TRUE regarding mutual fund sales charges?

-they are not an expense to the fund, but to they investor -they are sued to compensate the fund's underwriter and sales representatives

Which of the following are TRUE of municipal revenue bonds?

-they are not subject to statutory debt limits -they are backed by a facility's ability to generate revenue

Negotiable jumbo CDs are characterized by all of the following ...

-they trade in the secondary market -the are issued in amounts of $100,000 to $1 million -they are unsecured debt of the issuing bank

When an issuer has equipment trust certificates outstanding...

-title to the assets backing the certificates are held in trust -the assets can be repossessed and sold by the trustee

An individual owning shares of a corporations' common stock would have all of the following rights...

-to vote for those who will serve on the board of directors (BOD) -to vote when unable to be present at a shareholder meeting -to review a list of stockholders

All of the following are rights of limited partners in a DPP...

-to vote on business objectives -to inspect all books and records -to sue the general partners

Identify 2 trading strategies that a hedge fund could employ in its portfolio but a multi fund cannot...

-trading on margin to purchase portfolio securities -purchasing speculative or low rated securities

All of the following securities are backed by the full faith and credit of the US government...

-treasury bonds -treasury notes -treasury STRIPS

All of the following are identified as types of investment companies in the Investment Company Act of 1940...

-unit investment trust -mutual fund -face-amount certificate company

A bond backed by a corporation's full faith and credit is...

-unsecured -not backed by any assets

Rights of common stockholders include all of the following...

-voting for the board of directors (BOD) -transferring ownership of the stock at any time -preemptive rights

Each of the following are likely benefits of owning shares of common stock...

-voting rights -dividend payments -limited liabiltiy

Investors face many different risks. Which of the following would be factors of systematic risk?

-war -global security threats

At a shareholder's meeting, a mutual fund investor might be called upon, to vote on any of the following EXCEPT...

-whether to sell a certain company's stock out of the portfolio -changing to a new landscaper for the fund's headquarters

All of the following are TRUE for 529 plans...

-withdrawals would be tax free at the federal level if used for qualified education expenses -any adult can open a 529 plan for a student -contributions to the plan are considered gifts for tax purposes

Automatic exercise will occur at expiration for any equity option contract that is in the money by at least...

.01

An open-end management company may charge what amount annually and still advertise itself as a no-load fund?

.25%

Under the provisions of Rule 144, what percentage of outstanding stock may a control person sell every 90 days?

1

Commercial paper issued by corporations can have maturities as short or as long as...

1 day or 270 days

Money market debt instruments typically have maturities of...

1 year or less

A new customer tells you that her objective is to incur little risk because she is anticipating a new home within the next 12 months. Which of the following would be a suitable recommendation?

T-bills

Which of the following are considered money market securities at the time of issue...

T-bills

Treasury bonds mature in...

10 years or more

Under the de minims exemption, an initial public offering of common stock may be sold to an account where restricted persons have a beneficial interest as long as their interest in the account does NOT exceed...

10%

Treasury notes have maturities of...

2 to 10 years

MAS Corporation has enjoyed an extremely profitable year. It has been determined that those owning the MAS 4% preferred, participating to 6% preferred shares, will receive the full participating dividend. The participating shareholders will receive an additional dividend of...

2%

A customer owns cumulative preferred stock (par value of $100) that pays an 8% dividend. The dividend has not been paid this year and was missed in the 2 previous years. If the company wants to pay a dividend to common shareholders, how much must the company pay this customer per share first?

24

An investor has asked a mutual fund company for a copy of its Statement of Additional Information (SAI). How long does the fund have to comply with the request?

3 business days form the date of the request

An investor asks fo r copy of mutual funds Statement of Additional Information (SAI). The request must be satisfied within...

3 business days, free of charge

An investor is long a January 30 call at 2. Breakeven is...

32

What is the breakeven for a 35 put contract with a premium of 3?

32

Women who is short 1 August 35 put at 3 will breakeven at...

32

An investor is short a January 30 call at 5. Breakeven is...

35

Your customer is long 1 October 55 put at 4. The customer's maximum loss potential is...

4 points ($400)

An investor short a January 30 call at 4 has a maximum gain potential of...

4 points or $400

An affiliate holding unregistered shares can sell under Rule 144...

4 times a year

Each year a bond pays semiannual interest payments of $20. This bond has a nominal yield of...

4%

A June 40 call is trading at 3.5. For this call to be trading at parity the underlying stock would have to be trading at...

43.5

With CCD stock at 40, a September 45 call trading at 3 is out of the money by....

5 points and has no intrinsic value

6% XYZ debentures are trading for $1,200 while similarly rated bonds are being offered at 4.5%. What is the current yield not he 6% XYZ debentures?

5%

An investor purchases a bond at $900 with a 5% coupon and a 5-year maturity. The bond has a current yield of...

5.6%

Your customer is long 1 October 55 put at 4. The customer's breakeven point is...

51

A customer purchased 1 MNO Jan 50 call at 2. What is the breakeven point for both the purchaser and the seller?

52

Which of the following is NOT a T-bill maturity?

56 weeks

Restricted securities may not be sold until they have been held fully paid for...

6 months

Under Rule 144, how long must a restricted security be held before it can be sold?

6 months

For restricted stock (unregistered) held by a nonaffiliated, which of the following applies?

6-month holding period, with sales allowed freely thereafter

For restricted stock, (unregistered) held by an affiliate (insider), which of the following applies?

6-month holding period, with volume limits thereafter

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 for this bond?

6.55%

A mutual fund's public offering price is $15.23. An investor who wishes to invest $1,000 in the fund will purchase how many shares?

65.66 shares

The current yield on a bond with a coupon (nominal) rate of 7.5% currently selling at 105 1/2 is approximately...

7.1%

A non-affiliated owns 3% of an issuer's common stock. This person will be considered a control person if a spouse owns...

8% of the issuer's common stock

The sales charge for class A shares may NOT exceed...

8.5% of the total investment

Your client has a long-term investment time horizon and is willing to accept some risk to achieve a better rate of return. Of the following , which would be the least suitable recommendation?

T-bills and negotiable CDs

Tax-advantaged savings accounts for individuals with disabilities and their families are...

ABLE Accounts

Which of the following statements is correct concerning the pricing of ADRs?

ADR pricing is dollar-based and fluctuates throughout the day

Which of the following is an unsecured debt instrument...

Aaa/AAA-rated debentures

Dividend is tied to industry benchmarks such as the yield of Treasury bills...

Adjustable rate stock

A Japanese computer chip manufacture wants to attract US equity investors. Which of the following securities would help the issuer to accomplish this goal?

American Depositary Receipts

A call or put that can be exercised before expiration is a(n)...

American-style option

Which fo the following is TRUE for US Treasury issued securities?

T-bills are purchased at a discount, while T-bonds are purchased as a percentage of par

Which of the following securities is most often used to fund international trade?

Banker's Acceptance (BAs)

List the following treasury securities form the longest to the shortest maturities...

T-bonds T-notes T-bills

If a callable bond is priced at par, which of the following is TRUE?

CY equals YTC

Often redeemed by teh issuer when interest rates fall...

Callable stock

May be exchanged for shares of the corporation's common stock...

Convertible stock

Is entitled to dividends in arrears...

Cumulative stock

A prospectus must be delivered to customers following a transaction in all of the following EXCEPT...

ETFs

All of the following would be considered advantages of exchagne traded funds as opposed to mutual funds EXCEPT...

ETFs are commissionable

All of the following are true for exchange-traded funds (ETFs) EXCEPT...

ETFs are marginal securities

When speaking to a customer about exchange-traded funds (ETFs), a registered representative could make which of the following correct statements?

ETFs have different potential tax consequences tan mutual funds

Which of the following statements is TRUE regarding Exchange-traded notes?

ETNs are senior, unsecured debt securities issued by a bank of financial institution

An investor has placed money in a debt-like instrument issued bay a financial institution and linked to the performance of the S&P 500 Index. From the investment, which has a stated maturity date but makes no interest payments, the investor anticipates receiving a cash payment minus any applicable management fees when the instrument matures. This describes which of the following investments?

Exchange-traded note (ETN)

The United States Congress has authorized all of the following enterprises to issue securities EXCEPT...

FDIC

Which of the following obligations is backed by the full faith and credit of the United States Government?

GNMA

Which of the following is TRUE regarding money market securities?

T-notes and T-bonds can be considered money market instruments when they have only a year left to maturity

An investor makes several statements regarding what they know about exchange-traded funds. All of them are correct EXCEPT...

I can't buy them on margin because they represent an entire basket of stocks like mutual funds do

Regarding sales loads, management fees, and operating expenses for mutual funds, which of the following is TRUE?

all reduce investor returns because they reduce the amount of money available for the fund to invest

An example of securities that are established by states to provide other government entities such as cities, towns, school districts, or state agencies with a short term investment vehicle to invest funds include...

Local Government Investment Pools

Miguel Reyes purchased $200,000 of ABC Corporation common stock 5 years ago. At one point, the value of his investment doubled. However, as a result of a recent class action law suit, the company has been ordered to pay 50% more than the company's net worth, and ABC filed for bankruptcy. what is the maximum loss that Reyes can lose on his investment?

No more than his original investment of $200,000

If an investor is long an option contract and wishes to exercise the contract, the investor notifies the broker-dealer, who then notifies...

OCC

The performance of listed options contracts i guaranteed by which of the following?

OCC

May receive a higher-than-stated dividend unprofitable years...

Participating stock

An option contract having no intrinsic value at expiration will likely be...

allowed to expire

Short term securities that generate funds for a municipality that expects alternate longer-term financing include all of the following EXCEPT...

REITs

Each of the following is defined as an investment company EXCEPT...

Real Estate Investment Trusts (REITs)

In an effort to safeguard customer information which regulation specifies securing desktop and laptop computers and encrypting email?

Regulation S-P

No special privileges; dividends not paid are not recovered...

Straight stock

Which of the following would you expect to have the lowest expense ratio?

The ABC Corporate Bond Fund

An investor is long 1 August XYZ 30 put and XYZ has a current market value of 25. Which of the following is TRUE?

The August 30 put is in the money by 5 points

In a leasing partnership program, loans are taken to purchase equipment that is then leased to companies in return for the lease payments. This process...

allows for the loan interest and equipment depreciation to be taken as deductions that will shelter the income form the lease payments received

An income bond is...

also known as an adjustment bond and is unsecured

Which of the following securities provides US investors with a way to gain exposure to the common stock of a foreign issuer?

an ADR

An investment established by states to provide other government entities such as cities or counties a place to invest funds short term is...

an LGIP

Which of the following would be unlawful regarding use of a mutual fund prospectus?

calling an investor's attention to a section that may be interesting

Under penny stock rules, what is required for a broker-dealer to consider an investor an established customer?

at least 3 separate penny stock purchases

In order for a business entity to qualify as a limited partnership, the LP must have...

at least one general partner, and one limited partner

The options disclosure docent must be provided...

at or before the time of account approval

The time to maturity for debt instruments...

can be any length of time

Exchange-traded funds (ETFs)...

can be bought and sold throughout the trading day and have low expense ratios

An investor owns one NMS June 40 call trading at 5. If the underlying value of NMS stock is 45, the contract is trading...

at parity

An investment that allows for share in the income, gains, losses, deductions, and tax credits of the business entity to pass through to investors is know as...

a limited partnership

The most common type of direct participation program (DPP) in the securities industry is...

a limited partnership (LP)

Which of the following need not be included in the annual reports a mutual fund provided to its shareholders?

a list of the most poorly performing portfolio securities

A company has issued bonds (debt securities) to investors. For the investors, these securities represent...

a loan to the issuing company

An investor has purchased bonds having a put feature, it is likely that these bonds were issued with...

a lower coupon than similar bonds without the feature

A bond having a call feature...

can be redeemed before maturity at the issuer's option

An investor writes (sells) a July 25 ABC call. Which of the following is TRUE?

The investor will be obligated to sell the ABC stock at 25 if the calls exercised by the owner (buyer)

An unsecured promissory note issued by a bank that can be traded in the secondary market is known as...

a negotiable CD

Which of the following is a debt instrument that pays no periodic interest?

Treasury STRIP

Each of the following makes regular interest payments EXCEPT...

Treasury STRIPS

US government deposits securities with a trustee against which certificates are sold representing principal only with no regular interest payments. These are known as...

Treasury STRIPS

For Treasury receipts and STRIPS, which of the following is TRUE?

Treasury STRIPS are backed in full by the US government. Treasure receipts are not.

Debt instruments put up for auction by the US Treasury Department that offer intermediate maturities best describes...

Treasury notes

A brokerage firm places US Treasury notes and bonds in a trust at a bank and then issues securities collateralized by either the principal or interest payments those notes and bonds represent. These new securities the broker-dealer is offering are...

Treasury receipts

Which of the following are securities representing other securities held on deposit with a trustee where the principal and interest payments have been separated...

Treasury receipts and STRIPS

In safety of principal, municipal bonds are considered second only too...

US government and agency bonds

An office of a broker-dealer firm would be categorized as a restricted person if that individual attempted to purchase...

a new issue IPO at the public offering price

Treasury bond (T-bond) interest is stated as...

a percentage of par value

Treasury note (T-note) interest is stated as...

a percentage of par value

Your customer has purchased 1 February 35 call at 2 on Tuesday, December 4. This transaction will settle on...

Wednesday, December 5

A customer buys a callable 5% coupon bond at par that will mature in 10 years. Which of the following statements are TRUE?

YTC is the same as YTM

For a callable bond priced at a discount...

YTM will be lower than the YTC

Regarding different types of debt security maturities available to issuers, which of the following is accurate?

a balloon maturity uses elements of both serial and term maturities

A company's business operations are overseen by...

a board of directors elected by shareholders

A certificate stating a borrower's obligation to pay back a specific amount of money on a specific date to an investor is...

a bond

All of the following statements are TRUE EXCEPT...

a bond mutual fund may issue bonds

A convertible feature for a corporate bond allows...

a bondholder to convert a debt instrument into securities that give the investor ownership rights

A put feature attached to a bond allows...

a bondholder to put a bond back to the issuer for redemption at times that will benefit the bondholder

An investor holds a debt security backed by ad valorem taxes. This security is issued by...

a city or local municipality

A company has just conducted a stock offering, by prospectus, through an investment banker. The proceeds of the offering are used to purchase a portfolio of securities. The stock, now in the hands of the public, is freely traded int eh secondary market, and the portfolio is managed to generate maximum profit according to a specific investment objective. The company must be...

a closed-end company

Corporate shareholder structure regarding liability is different form that of a partnership. In recognizing that which of the following is TRUE?

a corporate shareholder cannot be forced to liquidate personal assets during a corporate bankruptcy

A written promise made by a corporation to pay the principals at its due date and interest on a regular basis on one of its debt issues but backed by no physical assets or titles to assets could only be...

a debenture

A customer has held an account with a broker-dealer for over 1 year. A registered representative associated with the firm recommends the purchase of an unlisted security trading at $3.50. What documentation, if any, is required prior to the trade?

a disclosure statement is required, but not a suitability statement

An investor purchases a bond in the secondary market at $950. Assuming $1,000 par value, this bond is trading at...

a discount

An investor has entered into a contract to pay an investment company a specific sum of money in exchange for the company's agreement to pay the investor a specific (larger) sum of money on a specific date in the future. The investment company must be...

a face-amount certificate company

Hedge funds are considered...

a form of private investment company and, therefore, unregulated

A private, unregulated investment company organized in such a way so as to invest and achieve high returns utilizing debt leverage and derivative products such as options and margin is best described as...

a hedge fund

An issuer has issued bonds with a call feature. It is likely that these bonds have...

a higher coupon than similar bonds without the feature

With money market securities held in one's portfolio, relative to other, longer-term debt securities, an investor should expect...

a higher degree of safety with lower returns

Limited partnerships sold publicly via a prospectus offering would be expected to have...

a large group of investors, each contributing a small sum

A balloon maturity for an issuer's debt securities is most accurately described as...

a later final maturity within a serial issue of bonds that contains a disproportionately large percentage of the principal amount of the original issue

Assuming $1,000 par value, a bond priced at $1,200 is trading at...

a premium

A pooled investment which is organized as a trust in which investors buy shares or certificates of beneficial interest, either on stock exchanges or in the over-the-counter market, is...

a real estate investment trust (REIT)

A financial institution, in order to raise cash on a short-term basis, sells some of the securities it owns, with an agreement to buy them back at a later date at a slightly higher pice. This is known as...

a repurchase agreement

All of the following are issuer transactions were the proceeds of the offering go to the issuing company EXCEPT...

a repurchase agreement (REPO)

By electing a board of directors (BOD), stockholders have...

a say in the company's management but are not involved in the day-to-day details of its operations

When Options Clearing Corporation receives a notice to exercise, it will assign that notice too...

a short broker-dealer

Limited partnerships sold through private placements involve...

a small group of investors, each contributing a large sum

Interest is best described as...

a specific rate of return the borrower pays the investor for use of the funds

An issuer has a subordinated debt issue outstanding. Which of the following is TRUE?

a subordinated debenture has a claim that is junior to all other debt but senior to preferred stock

A bondholder has invested in a certificate backed by equipment that the issuer owns and utilized in its daily operations. This issuer is most likely...

a transportation company

All of the following are terms that can be used to describe an option contracts strike price relative to the price of the underlying stock EXCEPT...

above the money

A corporate bankruptcy liquidation took place. Of the following- general creditors, secured bondholders, subordinated debenture holders, accrued taxes- who was paid first and who was paid last?

accrued taxes first, subordinated bondholders last

Past due - dividends on cumulative preferred shares...

accumulate on the company's books until paid

Hedge funds attempt too...

achieve high returns, and are, therefore, associated with high-risk investments

During times when interest rates are rising, which of the following preferred are likely to pay a higher annual dividend?

adjustable rate

While preferred shares tend to be less volatile than common shares, one type of preferred is noted as being even more stable in price than the others. This would be...

adjustable rate

A company reorganizing with the intent to emerge from a bankruptcy is likely to issue which of the following type of bonds to accomplish that goal?

adjustment bonds

Your client is about to retire and wants to rearrange his portfolio in order to have predictable income. Which of the following would NOT be a good investment vehicle?

adjustment bonds

In explaining hedge funds to an investor, a registered representative might correctly characterize them as utilizing...

advanced and complicated strategies entailing high risk

Restricted shares, those that are unregistered, meaning that they were not attained in a public offering, may be sold by a nonaffiliate...

after hold gin them for 6 months and freely thereafter

In the event that a liquidation needs to occur, subordinated debt holders...

agree to be paid back last of all debtholders

Which of the following is TRUE for debt instruments issued by the US Treasury?

all are issued in book-entry form

Different categories of preferred shares offered by an issuer...

all have preference over the issuer's common shares

Treasury bills pay...

all interest at maturity

When a customer signs the options agreement, this is the customer's affirmation to all of the following EXCEPT...

all long positions will be exercised

Which of the following may purchase an IPO of common stock?

an aunt of a registered representative

Rules regarding restricted persons state that each of the follow gin is considered immediate family EXCEPT...

an aunt or an uncle

All of the following are examples of legislative risk EXCEPT...

an environmental regulation enacted to require certain precautions be taken

An oil and gas DPP that invests in wells that are already producing is known as...

an income program

A broker-dealer has engaged in a reverse repurchase (repot) agreement. how was this done?

an initial purchase is followed by a sale later, at a higher price

Which of the following is the best description of a limited partnership?

an investment that permits both gains and losses to pass through to the investors

For which of the following investors would Class C shares be most suitable?

an investor who intends to redeem the shares within a short time

A call feature attached to a bond allows...

an issuer to call in a bond before maturity at times that will benefit the issuer

Which of the follow gin regarding open-end (mutual fund) and closed-end management investment company is TRUE?

an open-end company may sell fractional shares, but a closed-end company may not

If the portfolio of a variable annuity separate account is directly and actively managed by the insurance company, the separate account must be registered as...

an open-end management investment company

Which of the following issues only common stock?

an open-end management investment company

All of the following are considered control persons (owning control stock) EXCEPT...

an unaffiliated shareholder owning 8% of the outstanding shares

Which one of the following best describes a debenture?

an unsecured corporate debt obligation

Which of the following expressions describes the current yield of a bond?

annual interest (coupon) payment divided by current market price

Common shareholders have the right to receive an audited set of financial statements of the company's performance...

annually

An affiliate has held restricted shares fully paid for 6 months. in anticipation fo the desire to divest the shares, the affiliate should know that...

any shares sold will be subject to volume restrictions if still an affilaite

To obtain a statement of additional information (SAI) regarding a particular mutual fund an investor could do any of the following EXCEPT...

apply to the Financial Industry Regulatory Authority (FINRA)

T bonds and T notes...

are both priced as a percentage of par

Treasury bills...

are issued at a discount without a stated interest rate

Hedge funds...

are nonregulated with no SEC registration required

Transactions where the penny stock rules are applicable would be those that...

are solicited

Regarding options, it should be recognized that the maximum movement for any underlying stock price could be...

as low as zero or as high as infinity

The repayment or maturity date of a banker's acceptance is normally which of the following?

as short as 1 day or as long as 270 days

Which of the following is used to calculate a company's net worth?

assets-liabilities

At the time of maturity, an investor realizes that the overall return on the investment was actually greater than the coupon rate stated on the bond when purchased. This most likely would have occurred because the bond had initially been purchased...

at a discount

Class B metal fund shares are also known as...

back-end load shares

An investor holding a corporate issued mortgage bond is holding a debt security that is...

backed by real estate and therefore considered secured

Money market instruments guaranteed by a bank that are used to provide capital for international trade are called...

banker's acceptances

If an investor purchases a mutual fund based solely on seeing the summary prospectus, the investor must...

be able to access a full prospectus no later than confirmation of sale

Intangible drilling costs associated with oil and gas DPPs can generally...

be deducted completely in the first year of the program

An investor bought a put option and , in time, the underlying security declined below the strike price of the put. The put would probably...

be exercised

An investor is long a call option. Over time, the underlying security rises in value above the strike price, of the call. It is likely that the call would...

be exercised

When interest rates in the open market move up or down, a bond's coupon rate will...

be unaffected by the open market interest rates

An investor sells one equity call option on DGF stock. This investor is...

bearish on DGF the stock

An investor who is long MES equity put options is...

bearish on MES stock

If a prospectus is being used to close a mutual fund sale, it must be given to the investor...

before or during the sales presentation

Money market securities can be associate with which of the following characteristics?

being highly liquid

Advantages enjoyed by the limited partners in a partnership might be all of the following EXCEPT...

being in a fiduciary position with responsibilities to others

Distinguishing by the issue's term to maturity for those securities issued by the US federal government which of the following is CORRECT?

bills represent short-term issues

Securities issued by the US federal government are classified as...

bills, notes, and bonds

Which of the following shoes Treasury bills, Treasury bonds, and Treasury notes listed in ascending order of maturity?

bills, notes, bonds

Which of the following statements regarding bond interest is TRUE?

bond prices have an inverse relationship to interest rates

A corporation wanting to raise cash to finance accounts receivable and seasonal inventory needs is likely to issue any of the following EXCEPT...

bonds

A general partner would be considered to have a conflict of interest with the limited partnership if the GP...

borrows money from the business

Mr. Smith purchases 2% of MES Corporation's common stock. Four years later Mrs. Smith purchases 9% for her own account. Which of the following is TRUE?

both Mr. and Mrs. Smith are considered control persons

Two investors have engaged in the same put transactions: one, the buyer who is now long the put and the other, the seller who is now short the put. All of the following are TRUE EXCEPT...

both investors have a maximum loss potential that is limited to the premium paid

Which of the follow gin is a characteristic shared by both corporate debentures and income bonds?

both must pay principal it comes due

Regarding open-end and closed-end investment companies, all of the following are TRUE EXCEPT...

both offer an unlimited number of shares in a continuous public offering

A registered representative provides financial support and housing at her home for her grandfather. Regarding the purchase of new issues...

both persons are considered restricted

Which of the following for call option contracts is TRUE?

breakeven is the same for both parties

An investor who is long LMN equity call option is...

bullish on LMN stock

An investor sells (writes) put options on MAS stock. This investor is...

bullish on MAS the stock

An investor owns MMS call options. This investor is...

bullish, hoping the stock will rise

A company is about to introduce a new product. While confident in the product's appeal and market, it is still an unknown factor until sales results are viewed later. Investors holding stock in the company are at this time specifically exposed to...

business risk

Portfolio diversifying might be used to reduce which of the following risks?

business risk

For investors engaging in the trading option contracts, which of the following is TRUE?

buyers pay the premium for the right to exercise the contract

An investor believes the price of an exchange-listed stock will likely fall in the near term. Which of the following option strategies would best support this belief?

buying puts

Exchange-traded funds are priced...

by supply and demand where transaction prices may be higher or lower than the fund's NAV

Common shareholders wanting to vote on issues at a shareholder meeting can do so in all of the following ways EXCEPT...

by telephone or text message

Regarding options positions, which of the following statements is TRUE?

call buyers have the right to purchase the underlying, and put writes may be obligated to purchase underlying

At expiration, for those who trade call options, which of the following is TRUE?

call buyers want the contract to be in the money

Some bonds have a feature that prohibits them from being called by the issuer before a certain date. This is known as...

call protection

Of the following, reinvestment risk is most closely associated with...

call risk

As investor holding a 4.5% callable bond has it called away by the issuer when interest notes fall to 3.5%. This is an example of...

call risk, which can lead to reinvestment risk

Which of the following investors are bearish?

call writers and put buyers

An investor would expect which type of preferred stock to pay the highest stated dividend rate?

callable

An investor having no affiliate with CDS Company has just purchased shares that were sold subject to Rule 144. This investor...

can sell the shares unrestricted at any time

An investor having no affiliation with CDS Company has just purchased shares that were sold subject to Rule 144. This investor...

can sell the shares unrestricted at any time

Interest-rate risk...

cannot be reduced by diversification

Which of the following regarding capital and money markets is TRUE?

capital markets provide intermediate to long-term financing

The risk that all or a significant portion of the sum invested might be lost is known as...

capital risk

The risk when investing, when one has the potential to lose all or part of the investment due to circumstances that are unrelated to the issuer's financial strength or well-being, is known as...

capital risk

Once a dividend is initially declared by the board of directors, any future dividend payments...

carry no guarantee of payment in any amount

Index an dforeign currency options must be settled in...

cash

Preferred shares have...

characteristics of both equity and debt securities

Your customer is a limited partner in a real estate partnership in a real estate partnership. This partner has the right to do all of the following EXCEPT...

choose which properties the partnership should buy or sell

Which of the follow gin investment companies has an actively managed portfolio?

closed-end company

Which of the following investment company securities is NOT redeemable?

closed-end fund

A customer recently approved to trade options buys a put contract fo the account's initial transaction. If the customer fails to return the signed option agreement within 15 days of account approval, which of the following transactions is the customer permitted to make?

closing sale

Which of the following corporate bonds is backed by the securities of other corporations or those of a subsidiary?

collateral trust bond

A corporation has issued debt securities backed by the shares of another corporation that it owns. These debt securities are known as...

collateral trust bonds

Promissory notes are a form of...

commercial paper issued by corporations

Voting rights are a privilege generally afforded to...

common shareholders only

Which of the following securities is the underlying asset used to create an ADR?

common shares

All corporations will issue...

common stock

Examples of investments in assets that would be considered illiquid would be all of the following EXCEPT...

common stock

Which equity security allows the owner to vote for the board or directors?

common stock

Which of the following securities carries the greatest amount of risk in conjunction with a corporate liquidation?

common stock

All of the following actions must be completed before the customer enters the first option order EXCEPT...

completion of (signing of) the options agreement

Before effecting an initial penny stock transaction for a new customer, the registered representative must do all of the following EXCEPT...

confirm that a margin account has been established

MJS corporation has called its 6% preferred shares. Owners of these shares should expect that...

dividend payments will cease on the call date

Which fo the following preferred issues is most likely to fluctuate in line with the issuer's common shares?

convertible

Which of the following features of preferred stock allows the holder to reduce the risk fo inflation?

convertible

An issuer of bonds can be...

corporate and both the federal and municipal governments

Regarding bankruptcy proceedings...

courts protect both corporate and individual filers from creditors

Preferred shareholders who expect missed dividend payments to be eventually paid are most likely to own...

cumulative preferred stock

An investor in the United States is purchasing a security traded on a foreign securities exchange. The transaction on the exchange is priced in euros. The circumstances of this purchase and subsequent sale of the security exposes the investor to...

currency risk

When investing in overseas markets in foreign securities, investors should be aware of and understand...

currency risk

Which of the following is a unique risk incurred by investors in mutual funds that specialize in holding securities in the fund portfolio from foreign issuers?

currency risk

Which of the following statements is correct concerning currency risk when investing in an ADR?

currency risk is still a factor when purchasing an ADR

A court has ordered a corporation to liquidate all assets under a federal bankruptcy proceeding. Which of the following is TRUE...

debt holders are paid before stockholders

Regarding a corporate bankruptcy and the liquidation priority, which of the following is accurate?

debt securities claims are satisfied before equity securities

Common dividends may be...

declared, increased, reduced, or suspended by the board of directors

Partners in direct participation leasing programs can receive write-offs for all of the following EXCEPT...

depletion

An allowable deduction to compensate for decreasing natural resources in oil and gas DPP are known as...

depletion allowances

The allowable deduction for equipment used in oil and gas direct participation program is taken as...

depreciation over the life of the program

An LP is a type of...

direct participation program

Which of the following are TRUE?

direct payment BABs provide municipal issuers with payments form the US Treasury

What is the primary benefit for an American investor when purchasing an ADR?

diversification

Which of the following statements regarding systematic risk as it relates to an investment portfolio is TRUE?

diversification will not eliminate it

With interest rates in the market place at 7%, it could be expected that in the secondary market, a bond carrying a 5% coupon would trade...

downward in price

A common stock shareholder's residual right to corporate assets refers to which of the following?

during the dissolution of corporate assets, common shareholders will be paid if there are any funds left after debt holders and preferred shareholders are paid

Negotiable jumbo CDs are characterized by all of the following EXCEPT...

each issue generally matures in 5 to 10 years

Political risk is more associated with...

emerging economies, but could occur in even highly developed ones

Regarding differentiations types of risk, which of the following is TRUE?

enactment of, or changes in laws, represent potential legislative risk

A share of stock in the hands of a stockholder represents...

entitlement to receive profits through dividends when distributed and the right to vote for who will serve on the board of directors

An investor purchases a bond offered at par. The bond has a coupon rate...

equal to its current yield

A bank trustee holds the titles to assets a corporation has purchased and utilizes in its day-to-day business. The corporation issues debt securities backed by these assets. These securities are...

equipment trust certificates

All of the following could be found in the money market EXCEPT...

equities such as common and preferred shares

Regarding investment products, which of the following is TRUE?

equity securities represent ownership in an issuing company

Which of the following investment companies terminates business on a predetermined date?

fixed UIT

which of the following securities would most likely have the lowest expense ratio?

exchange-traded fund

Which of the following oil and gas direct participation programs might be considered the riskiest?

exploratory

Par value for a bond is also known as...

face value or the amount a bond will be redeemed for at maturity

As interest rates rise, prices of preferred stock will...

fall

A Federal Reserve member bank's deposits in excess of the amount required to be on reserve are known as...

federal funds

One of the benefits of owning a municipal bond is interest is always tax exempt at the...

federal level

A company that is extensively over leveraged using debt financing whenever available would be exposing its investors too...

financial risk

Limited partnership programs are categorized as direct participation programs. The term direct participation refers to the...

flow-through of profits and losses of the partnership to the individual limited partners

A convertible feature for preferred shares allows the owner to exchange the shares...

for a fixed number of shares of the issuing corporation's common stock

Because commons tock can be sold or given away, ti is considered to be...

freely transferrable

All of the following would generally be associated with a limited partnership (LP) EXCEPT...

freely transferrable intersets

Which is the most common way investors pay a mutual fund's sales change?

front-end load

Class A mutual fund shares are also known as...

front-end load shares

Your customer has a portfolio consisting entirely of municipal-issued securities. Therefore, the entire portfolio would have to consist of...

general obligation and revenue bonds

A the time of a limited partnership's dissolution, who is the last to be paid?

general partners

Options contracts...

give one party the right to buy or sell the underlying security

If the dollar price fo a municipal bond is 101 and the basis is 6.10, the nominal yield is...

greater than 6.10

A customer buys a 4% Treasury bond, maturing in 10 years, at a price of 96.08. The yield to maturity is...

greater than nominal yield

A limited partnership (LP)...

has 2 types of partners

An investor is long 1 July 40 call at 2. This investor...

has paid $200 for the call contract

An investor is short 1 XYZ January 60 put at 2. This investor...

has received $200 for writing the put contract

An officer of a public company busy 1,000 shares of the company's registered stock in the open market. Regarding the sale of these shares, the officer may sell...

immediately, subject to Rule 144 volume limitations

Which of the following describes the position in a call option on a stock with a strike price of 20, a premium of 7, and a current market of 26...

in the money

With CDT stock at 42, a September 40 call trading at 3 is...

in the money by 2 points

The writer of an LMN July 50 call contract notices the current market value of LMN is 51. How would this contract be defined?

in-the-money

Which of the following is NOT a type of real estate direct participation program?

income

Bondholders should expect that interest payments would always be forthcoming for all of the following EXCEPT...

income bonds

If investors have income listed as their investment objectives, they would NOT hold which of the following securities in their portfolio?

income bonds

Which of the following bonds trade flat (without interest) unless interest payments are declared by the board of directors (BOD)?

income bonds

For a real estate DPP, which of the following is TRUE?

income can be derived form rents received for the properties

An accredited investor is one who meets...

income or net worth criteria with substantial investment experience

What is one of the advantages for the investor who invests in mutual funds that include foreign securities in the fund's portfolio?

increased diversification

An investor is able to purchase a bond at $725, well below par value. Buying the bond so cheaply tells us that the investors return at maturity...

increases

All of the following are restricted persons EXCEPT...

individual owning 5% or more of a member firm

An investor who relies reality on fixed interest payments form long-term (25-30 years) bonds should be most concerned with...

inflation risk

For revenue bonds issued by a state or municipality, which of the following is TRUE?

interest will be paid only if the enterprise owned and operated by the state or municipality has sufficient earnings to cover the interest payments or the debt service reserve

US Treasury notes are US government-issued...

intermediate-term debt securities with maturities of 2-10 years

A hedge fund is permitted to do which of the following that a mutual fund is NOT permitted to do?

invest in commodities and currencies

All of the following would be associated with hedge funds EXCEPT...

investing in government debt securities

A hedge fund having a "lock-up provision" means that...

investors are required to maintain the investment for a minimum length of time

All of the following regarding a trust set up for the purpose of holding commercial property or mortgages on commercial property, are true EXCEPT...

investors may never purchase share sin theses trusts on an exchange or OTC

All of the following regarding a trust set up for the purpose of holding commercial property, or mortgages on commercial property, are TRUE EXCEPT...

investors may never purchase shares in these trusts on an exchange or OTC

All of the following is TRUE about local government investment pools (LGIPs) EXCEPT...

investors must be provided a prospectus at or before they purchase shares in the investment portfolio

Which of the following is TRUE for mutual funds and those who invest in them?

investors must be provided with specific information when purchasing mutual funds

A guaranteed bond...

is debt backed by another company, such as a parent company

Mrs. Jones is an employee of a member firm and as such is a restricted person regarding the purchase of new issues. She belongs to an investment club and has a 1% interest in the club's brokerage account. The investment club...

is not a restricted account and will be allowed to purchase equity shares of an IPO

Th beholder of an in-the-money option contract gives a "do not exercise" instruction (notice) to your broker-dealer. This notice...

is used to avoid automatic exercise at expiration

Treasury bills (T-bills) are...

issued at a discount to par, paying interest at maturity

US government securities are...

issued by the US Treasury in book-entry form

An August 15 call is written at 4. The call expires without being exercised by the owner. The writer of the call...

keeps the $400 received when the call was written

At expiration CDT stock is trading at 43. A January 40 put would be...

left to expire unexercised

A change to tax rates on dividends would be an example of...

legislative risk

A company operating in State A has just been notified that the state legislature has passed a new law on permitted emissions, and several of the company's plants in that state do not comply. As a result, operations at those facilities must cease. This is an example of...

legislative risk

A luxury tax that consumers must pay that is levied on nonessential items of a certain value or more is an example of...

legislative risk

A luxury that consumers must pay that is levied on nonessential items of a certain value or more is an example of...

legislative risk

For investors, changes made to the tax code by the IRS are known as a form of...

legislative risk

When an investor purchases a corporate bond, the investor is...

lending money to and becoming a creditor of the corporation

The growth potential in the price of preferred shares is generally considered to be...

less than that of the issuer's commons shares

An investor holds a 6% callable bond purchased at 105. If the issuer calls the bond before maturity, the yield to call realized by the investor would be...

less than the coupon

A client has established a long put position. The contract will have intrinsic value when the price of the underlying stock is...

less than the exercise price

A put will have intrinsic value if, just before expiration, the price of the underlying stock is...

less than the exercise price

Class C mutual fund shares are also known as...

level-load shares

Common shareholders have the right too...

limited access to a company's books and records

Someone who purchases shares of a corporation's common stock has...

limited liability and voting rights

At theme of dissolution, which of the following regarding a limited partnership is TRUE?

limited partners are paid before general partners

Which of the following securities is least likely to have an active trading market?

limited partnership interests

Rules to protect the investing public during the public offering process include all of the following EXCEPT...

limiting the number of shares of an IPO that may be purchased by the issuing company's employees

Regarding filing for corporate bankruptcy, which of the following is TRUE?

liquidation means that property will be taken and sold to repay all debts

Th risk that an investor might not be able to sell an investment quickly at a fair market price is know as...

liquidity or marketability risk

By virtue of a stocks listing for trading on a a US stock exchange, which of the following risks is reduced or even recognized as eliminated?

liquidity risk

One of the advantages of a security being traded on a listed stock exchange is the ready availability of buyers and sellers. This has the tendency to reduce or even eliminate...

liquidity risk

Which of the following statements about listed options is TRUE?

listed options settle on the next business day after the trade date (T+1)

The 4 basic options transactions are...

long calls, short calls, long puts, short puts

A March 25 put purchased at 1.5 has expired without being exercised. The owner of the put...

loses the $150 premium paid

A March 30 call purchased at 3 expired without being exercised. The owner of the call...

loses the $300 premium paid

All of the following could be characterized as benefits to owning common stock EXCEPT...

low dissolution priority

When a company wants to issue additional shares of stock, the preemptive right given to existing shareholders allows those shareholders too...

maintain their proportionate ownership in the corporation

A secured debt security can be backed by a corporation's...

manufacturing facilities

Characteristics common to penny stocks would include which of the following?

market price less than $5 per share and unlisted

If the stock market were to fall substantially in a single day, a portfolio consisting primarily of common and preferred stock would be most subject to...

market risk

Which of the following risks cannot be reduced by diversifying an equity portfolio?

market risk

Common stockholders owning dividend paying stocks are exposed to...

market risk and current income risk

Short-term purchases and sales of a mutual fund to take advantage of price fluctuation is known as...

market timing

Bonds can be issued, with additional features attached, making them more attractive to investors. All of the following can be considered such features EXCEPT...

maturity

An investor lending money to an entity receives back the principal amount of the loan on the ...

maturity date

A company an individual has invested in by purchasing 1,000 shares of common stock has unfortunately gone bankrupt. This investor...

may lose all that was invested but is not liable for any corporate debts that cannot be satisfied during the dissolution process

A customer has a short-term investment time horizon and a fairly certain need for funds she wishes to invest. Which of the following might meet these two investment objectives?

money market instruments

Repurchase agreements and reverse repurchase agreements are...

money market instruments

If a company files for bankruptcy, which of the following investors would be most likely to be paid first?

mortgage bonds

Secured corporate debt includes...

mortgage debt

For real estate program partners, tax deductions will be derived from...

mortgage interest paid and depreciation

All of the following are identified as types of investment companies in the Investment Company Act of 1940 EXCEPT...

municipal bond pool

Which of the following require voter approval?

municipal general obligation bonds

A state government has outstanding debt that is issued to finance toll roads, sports facilities and public housing projects. All of these issues are examples of...

municipal revenue bonds

Water and sewer facilities are most likely to use what kind of debt financing to fund expansion plans?

municipal revenue bonds

Limited partnerships...

must end on a predetermined date or can be dissolved earlier by vote

A 65-year old investor is looking to earn addition income in her securities portfolio, without much risk. Which of the following would likely be the Least acceptable trading strategy for this investor?

naked call writing

Being secured by no physical asset and backed only by a bank's good faith and credit, a bank's promise to pay principal and interest can be evidenced in which of the following securities that are traded in the secondary market?

negotiable certificates of deposit

An investor who buys and sells options on stock is...

neither an owner of nor a debtor of the company

Which of the following is NOT a money market instrument?

newly issued Treasury notes

For registered shares held by an affiliate (known as control stock), which of the following applies?

no holding period, but volume limits always apply

All investors and investments are different. Recognizing this, it is TRUE that...

no investment should be deemed suitable for every investor

Preferred shareholders have...

no voting or preemptive rights

Mutual funds that market directly to the public, using no underwriter and charging no sales charge, are called...

no-load funds

The coupon on a bond can be described as its...

nominal yield

The stated coupon on a bond is its...

nominal yield

Which of the following are fixed at the time a bond is issued?

nominal yield

A bond with 10 years to maturity and callable in 5 years at par is sold at a discount. Rank the following yields from the highest to lowest...

nominal yield current yield yield to maturity yield to call

A stock currently has a market value of $75 per share. If a put option on the stock has an exercise price of $60, the put option is...

out of the money

An investor anticipates that a fall in interest rates is imminent. This investor, now wanting to purchase bonds in order to lock in interest income, would likely buy...

noncallable bonds

Risks that are unique to a specific industry, business type, or investment type are know as...

nonsystematic risks

Municipal revenue bonds are...

not subject to statutory debt limits, and do not require voter approval

A customer who has written an option contract receives an assignment notice. This customer is...

now obligated to either buy or sell the underlying stock at the strike price

Which of the following would be least likely to directly impact a bond's yield?

number of bonds in the issue

A member firm receives an order to purchase shares in a common stock 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

Section 529 plans are considered municipal fund securities. They must therefore be sold by...

offering circular

Deductions for depletion would most likely apply to which of the following direct participation programs (DPP)?

oil and gas income program

Listed options transactions settle regular way...

on the next business day after trade date (T + 1)

How often may funds be rolled over from one state's Section 529 plan to another's?

once every 12 months

Regarding the purchase of a new equity issue, an account where a restricted person has a beneficial interest would be allowed to purchase the new shares at the public offering price...

only if the interest does not exceed 10%

Regarding CD's negotiable CDs issued by banks...

only negotiable CDs are considered money market instruments

Typically, a corporation would NOT issue...

option contracts

An equity option call buyer has the right too...

purchase stock and therefore is bullish

A preferred shareholder's priority claim on assets is the preferred shareholder's priority standing...

over common shareholders

A mutual fund has been in existence for 25 years. The prospectus must disclose the fund's performance...

over the last 1, 5 and 10 years

When the Board of Directors (BOD) declares a dividend...

owners of preferred shares must be paid before any payment is made to common shareholders

CDT Corporation has issued 4.5% callable preferred shares. If these shares are ever called in, stockholders should expect that the shares would be called in at...

par value or higher

The coupon for a bond is calculated as a percentage of...

par value, usually $1,000 for a bond

A shareholder owns preferred shares that allow for the possibility of receiving more than the stated dividend. This type of preferred share would be known as...

participating

Real estate investment trusts (REITs)...

pay dividends and pas gains through to investors but not losses

A corporation that has issued cumulative preferred stock...

pays past and current preferred dividends before paying dividends on common stock

A mutual fund can offer all of the following to investors EXCEPT...

physical custody of the fund's portfolio cash and securities

All of the following are TRUE for 529 Plans EXCEPT...

plan donors must be related to the student benefactor

An investor chooses to have a portfolio made up of domestically listed US securities only. In so doing, this investor is primarily avoiding which of the following 2 risks?

political and currency

For investors, instability within an emerging economy is generally recognized as...

political risk

Which of the follow gin would have no effect on the NAV per share of mutual fund share?

portfolio securiteit had to be sold for big capital loss

A serial bond is described as...

portions of bond principal scheduled to mature at intervals over a period of years until the entire balance has been repaid

Which of the following statements is NOT true...

preemptive rights obligate the stockholder to maintain their percentage of ownership when additional shares are issued

Which of the following is an example of an equity security?

preferred shares

Which of the following is an example of an equity security?

preferred stock

An investor buys 1 DWQ May 70 call at 2, giving the investor the right to buy 100 shares of DWQ at $70 per share. All the specifications of the transaction are set or standardized by the Options Clearing Corporation EXCEPT...

premium of 2

The Investment Company Act of 1940 classified all of the following as investment companies EXCEPT...

private investment companies

A customer investing in common equity securities could realize all of the following EXCEPT...

protection of principal investment

The general partner of a limited partnership has responsibility for all of the following EXCEPT...

providing all of the partnership capital

The Securities Act of 1933 exempts all of the following securities from registration EXCEPT...

public real estate investment trusts

An investor is convinced that CDT stock will soon decline in value for a number of reasons. Which investment strategy will allow the investor to take advantage of the anticipated decline in share value with the smallest cash investment?

purchase a put option

An investor owns a bond purchased several years ago yielding 3%, which at the time was considered a fair return. However, these fixed 3% interest payments have not kept up with the inflation rate. This situation presents the investor with...

purchasing power risk

Inflation risk is most closely associated with...

purchasing power risk

The potential that inflation will devalue the fixed dividend income payments received by preferred shareholders is known as...

purchasing power risk

When the interest rate paid on a debt security is less than the current inflation rate, the investor suffers from which of the following risks?

purchasing power risk

The Federal Reserve Bank is raising interest rates, this will...

push bond prices lower in the open market

At expiration, for those who trade put options, which of the following is TRUE?

put buyers want the contract to be in the money

What method is used to assign exercise notices to broker-dealers with short positions by Options Clearing Corporation (OCC)?

random-selection basis

Obtaining the financial status of the customer, and whether or not they meet income and net worth criteria, could be required for all of the following EXCEPT...

real estate investment trusts

Which of the following securities are nonexempt from registration under the Securities Act of 1933?

real estate investment trusts and corporate equity issues

A customer is interested in an exchange-traded fund (ETF). With regard to how they can be traded, you would want the customer to be aware that...

real-time quotes are available for ETFs, which can be purchased through the trading day

A REIT can avoid being taxed as a corporation would by...

receiving 75% or more of its income from real estate and distributing 90% or more of its net investment income to its shareholders

Rights of common stockholders include all of the following EXCEPT...

receiving audited semiannual reports

For real estate program partners, tax credits will...

reduce liability dollar for dollar

When a limited partnership is liquidated (dissolved), the priority of payments to settle accounts are made form first to last in which order?

secured creditors, general creditors, limited partners, general partners

An investor held shares of a manufacturing company where disposal fo the by-products during the manufacturing process is necessary The Environmental Protection Protection Agency (EPA) updates the rules applicable to disposing of the product. For the investor, these changes present a form of...

regulatory risk

Those holding the securities of a company where rules might change that impact or upset the way the company does business are exposed to...

regulatory risk

An investor has a bond maturing during a time when interest rates are falling. It is likely that the investor, wanting to keep the funds invested, would be most concerned with...

reinvestment risk

Call risk is most closely associated with...

reinvestment risk

Purchased 15 years ago with a coupon of 6.25%, a corporate bond in an investor's portfolio has matured. with interest rates now substantially lower at 2.75%, this investor, having no immediate need for the proceeds, is now exposed to...

reinvestment risk

The ability to take the proceeds from the redemption of one security or investment and allocate those proceeds in such a way so as to maintain the same level of return is expressed in which of the following concepts?

reinvestment risk

Twenty years ago, an investor purchased an AAA rated corporate bond with a coupon rate of 6%. The bond is about to mature when searching for a new bond, it seems that the rates being paid on a 20-year AAA bond is about 4%. This would be an example of ...

reinvestment risk

Callable preferred stock is advantageous to the issuing company because it allows the company too...

replace a higher, fixed-rate issue with a lower issue after the call date

Securities acquired through some means other than a registered public offering are known as...

restricted

Regarding corporate bond issues, which of the following statements best describes secured debt and unsecured debt?

secured debt is asset backed, while unsecured debt is not

All of the following are types of direct participation programs (DPPs) EXCEPT...

retail distribution

For municipal debt issues, which of the following is TRUE?

revenue bonds are self-supporting, while GO bonds are backed by the municipality's good faith and credit

Regarding investment risks, which of the following is TRUE?

safer investments tend to offer lower yields

A bank issues and guarantees certificates of deposit, and those that are negotiable are considered money market instruments. What makes a CD negotiable?

secondary market trading

A variable annuity's investment return each month is based on...

the performance of the separate account

The owner of a listed put equity option has the right too...

sell the stock at the strike price

An investor holding T-bonds will receive interest payments...

semiannually

T-notes pay interest...

semiannually

Treasury bonds pay interest...

semiannually and mature at par value

A corporation has issued a single bond having successive maturity dates set from 2020 through 2030. This is known as what type of bond?

serial

When an issuer schedules portions of a bond issues principal to mature at predetermined intervals over a period of years until the entire balance has been repaid, the issuer has issued what type of bond?

serial

All of the following are types of maturities for debt instruments EXCEPT...

series

Regarding transferability for common shares, which of the following is TRUE?

shares can be sold or given away without the permission of the corporation

Rules to protect the public during initial public offerings (IPOs) include all of the following EXCEPT...

shares may be held to reward others who can direct business to the member

All of the following describe mutual funds EXCEPT...

shares may be sold either on an exchange or over the counter

An investor pays $102 ($1,020) for a $1,000 par value bond. At maturity...

the premium paid decreases the return

Which position has the greatest potential risk if the price of the underlying stock goes up?

short call

Your customer has one position in her account and it poses an unlimited loss potential. Which of the following is it?

short call

Your customer wants to be in a position to buy CDS stock while taking in premium. Which of the following options positions might accomplish this?

short puts

Treasury bills (T-bills) are...

short-term debt obligations issued monthly

Banker's acceptances are...

short-term time drafts issued by banks to corporations

When a corporation issues a mortgage bond, the issue's total value...

should be less than that of the real estate it is backed by

A customer of a BD is opening a new options account. The customer must return the options agreement...

signed and not later than 15 days after the account approval

The ratings on the debt instruments of a foreign country with outstanding loans from a number of other countries worldwide have been downgraded. The impact felt due to the risk of possible default is known as...

sovereign risk

Which of the following would all be considered the same regarding yields on debt instruments?

stated, nominal, and coupon yields

Municipal securities can be issued by...

states and local governments

A company's net worth belongs to its...

stockholders

The maximum potential loss for an investor short a put option is...

strike price minus premium

Rule 144 stipulates that after holding restricted stock fully paid for 6 months, an affiliate may begin selling shares...

subject to volume restrictions within any 90-day period

There are several types of investment risks that will generally fall into 2 categories. These categories are known as...

systematic and nonsystematic risk

The risk that changes in the overall economy will have an adverse effect on individual securities regardless of the company's circumstances is known as...

systematic risk

Which fo the following are potential benefits associated with a real estate direct participation program?

tax deductions and credits

A bond has been structured so that the principal of the entire issue matures on a single date. This is what type of bond?

term

Bonds can typically be issued with...

term, serial, or balloon maturities

Sovereign risk is the risk...

that a country will default on its commercial debt obligations

What does the mortality guarantee of a variable annuity insure?

that payments will continue fo the life of the annuitant

An investor holds a November 35 call that was purchased on March 3. The investor, if wanting to exercise the contract would need to do so no later then...

the 3rd Friday of November

Listed options expire on...

the 3rd Friday of the expiration month

MMS Corporation has 7% callable preferred shares outstanding. Over the past few years, benchmark interest rtes have declined and hovered close to 3%. Which of the following is TRUE?

the 7% shares are likely to be called

The decision to pay a dividend rests with...

the BOD but is not guaranteed

An investor is long 1 XYZ May 40 call and XYZ stock has a current market value of 44. Which of the following is TRUE?

the May 40 call is in the money

Which fo the following is TRUE for exchange traded funds (ETFs)...

the SEC has clarified them as a type of open-end fund, and they have operating costs and expenses that are lower than most mutual funds

The rate on an adjustable preferred stock would most likely be indexed too...

the Treasury Bill (T-bill) rate

In order to meet federal budget needs, the types and quantity of government securities to be issued are determined by...

the US Treasury Department

Federal funds represent...

the amount by which a bank exceeds its required deposits to be held on reserve at the FRB

When shareholders owning participating preferred shares receive the additional participating amount, this was determined by...

the board of directors (BOD)

Which of the following statements regarding $1,000 par value 6.5% bond trading offered at 110 is TRUE?

the bond's current yield equals $65/$1,100 or 5.9%

A bond certificate represents...

the borrower's obligation to repay the amount it borrowed plus interest

The point at which an investor neither makes a profit nor loses money is known as...

the breakeven point

For option, each is a 2-party contract, which allows...

the buyer to exercise the contract, with the seller obligated to fulfill the terms of the contract

An investor purchases a T-bill for $9,925 that will mature at $10,000. The difference between the $9,925 paid and the $10,000 that will be received is...

the discount to par and will be considered interest received at maturity

While a branch office manager can initially approve an options account, for trading, it must ultimately be approved by...

the firm's ROP

Why is a fixed annuity NOT considered to be a security?

the fixed annuity buyer assumes no investment risk

A diversified growth fund charging .4$ of net assets per year as a 12b-1 fee may NOT, make which of the following statements?

the fund is a no-load fund

Which of the following incur a fiduciary responsibility in a limited partnership?

the general partners

Listed options can be exercised by...

the holder form the time of purchase until they expire

The coupon rate on a debt security represents...

the interest rate the issuer has agreed to pay the investor

An investor looking to speculate in penny stocks would be exempt from the suitability statement requirement under which of the following circumstances?

the investor is an established customer

An investor writes a September 65 ABC put. Which of the following is TRUE?

the investor will be obligated to purchase ABC stock at 65 if the put is exercised by the owner (buyer)

Treasury receipts are backed by...

the issuing broker-dealer

Regarding municipal general obligation (GO) bonds, which of the following is TRUE?

the lower the statutory debt limit, the safer for bondholders

With a balloon maturity...

the major portion of the principal debt is paid on the final maturity date

All of the following (re: options) are true EXCEPT...

the maximum gain for options buyers is always unlimited

All of the following must be on the cover page or beginning of the summary psopsectus of a mutual fund EXCEPT...

the name of the investment advisor

The US Federal government is...

the nation's largest borrower and considered the best credit risk

A securities firm that is NOT a FINRA member wishes to do trades with a FINRA member firm. Which of the following statements is TRUE regarding this situation?

the nonmember firm will receive no concessions, but it will buy at the public offering price and sell at the public bid price

A customer writes (sells) a call. This customer will realize the maximum gain if...

the option contract expires without being exercised

For those owning preferred classes of stock, priority of asset dissolution refers to...

the order in which preferred shareholders are paid in the event of a bankruptcy liquidation

What might happen if a limited partner begins making day-to-day business decisions for the partnership?

the partner might jeopardize the limited liability status held as an LP

In an LP, with of the following is TRUE?

the partnership entity is not responsible for paying taxes on gains

An investor owns a bond carrying a 4% coupon. Interest rates in the marketplace have been moving downward and are currently at 2.5%. given the current interest rates in the marketplace, this investor should see...

the price of the bond move higher

The market forces that typically drive the price of a bond trading in the secondary market would include all of the following EXCEPT...

the price of the issuer's stock

Mr. Smith bought in ADR in a French company at $13.03 and recently sold the shares for $24.88. How would this trading profit be taxed?

the profit is taxed as a capital gain in the US only

A customer buys an October 75 MMS put. MMS stock closes at 70. Which of the following is TRUE?

the put has intrinsic value

A customer of a broker-dealer makes it known that they would like to trade options in the account. The first step to accommodate the request is which of the following?

the registered representative should determine the suitability of options trading for the customer

It would be expected that a repurchase (repo) agreement contract would include...

the repurchase price and the maturity date

A preemptive right for existing shareholders is best described as...

the right to purchase shares in an amount that would keep a shareholder's proportionate ownership int eh corporation unchanged when a company issues additional shares

Which of the following statements best describes financial risk?

the risk that an issuer will be unable to meet interest and principal payments on debt obligations

Securities and Exchange Commission Rule 144 regulates...

the sale of control and restricted securities

A shareholder feels strongly about some of the issues to be voted on at the next shareholder meeting but is unable to attend. Which of the following is TRUE?

the shareholder can vote by proxy

The coupon payable on a bond may also be referred to...

the stated or nominal yield

An investor is long 1 May 35 call at 5. The 35 in this contract represents...

the strike price, the price the investor can purchase stock at

An investor owns 1 November 15 put at 5. The 15 in this contract represents...

the strike price, the price the investor can sell stock at

Your customer has purchased an MJS October 35 call at 4. Their proof of ownership will be...

the trade confirmation

Which of the following characteristics are typical of an exchange-traded product?

the value of an ETP is derived from other investment instruments, and it trades on a national securities exchange

The party who is short an option contract is known as...

the writer and receives the premium

Which of the following is an important risk when determining the suitability of a limited partnership DPP?

there is limited liquidity

What limit is placed on the number of outstanding shares a mutual fund may have in the hands of investors?

there is no limit

An investor in a direct participation program wishes to divest of a partnership interest purchased sometime ago. You would correctly advise that...

there is no secondary market making them highly illiquid

A hedge fund portfolio has been characterized as being highly leveraged. This means that...

there is substantial borrowing, or purchasing on margin

For collateral trust bonds, all of the following are TRUE EXCEPT...

these are unsecured debt securities

XYZ Corporation is guaranteeing a debt issue for the IHG Company. Regarding these bonds, which of the following is TRUE?

these bonds are unsecured, with the value of the guarantee being as good as the strength of XYZ

What is the tax status of a dividend paid to a US-based ADR investor?

these dividends may be taxed by both the foreign country and the US

Which of the following regarding federal funds is TRUE?

these funds may be loaned from one FRB member bank to another

What is the primary purpose of an issuer sponsoring an ADR?

these securities are created to attract a US investor base

Which of the following regarding Treasury STRIPS, receipts, bills, notes, and bond is TRUE?

they all mature at par value

Once a corporate liquidation proceeding in court is underway, common shareholders know that...

they are not guaranteed to be paid back any amount

For hedge funds organized as private investment partnerships, which of the following is TRUE?

they can limit the number of investors and require large or minimum initial investments

Which of the following is NOT TRUE regarding no-load shares?

they have fees associated with sales and redemptions

Mutal funds have all of the following characteristics EXCEPT..

they issue a set number of shares to the public

A municipality wants to issue GO bonds that will put it over its statutory limit. Which of the following is TRUE?

they may do so with voter approval

Which of the following is TRUE regarding general partners (GPs) in a limited partnership?

they should participate in the day-to-day management of the partnership

If a preferred shareholder receives a $3.50 annual dividend each year, it could be assumed that...

this is a 3.5% preferred class

Each of the following is considered a control person under SEC Rule 144 EXCEPT...

those persons who own 5% or more of the total beneficial interest of a company's common stock

An individual owning shares of a corporation's common stock would have all of the following EXCEPT...

to declare dividends

All of the following are rights of limited partners in a DPP EXCEPT...

to make day-to-day business decisions

A member firm is assigned an exercise notice by the Options Clearing Corporation. The member firm may assign the exercise notice to one of its short customers by any of the following methods EXCEPT...

to the customer having the largest short position

Listed option transactions settle...

trade date + 1 business day

Which of the following best describes the execution of ADRs?

trades are executed domestically in US dollars

All of the following securities are backed by the full faith and credit of the US government EXCEPT...

treasury receipts

As an investment vehicle, and regarding the tax consequences, REITS are organized as...

trusts

An investor holds a Treasury note with a state interest of 6%. The investor will receive...

two $30 interest payments per year

Under which of the following conditions will an investor be able to purchase mutual fund shares and pay no sales charge?

under the automatic reinvestment privilege

An investor establishes the following position: Long 1 XYZ September 40 call at 2. Utilizing this position, the maximum potential gain for the investor is...

unlimited

An investor is long a January 30 call at 2. Maximum gain for this position is...

unlimited

An investor is short a January 30 call at 5. maximum loss for the investor is...

unlimited

All of the following are benefits for the limited partners in a direct participation program (DPP) EXCEPT...

unlimited liability

In a real estate limited partnership, (DPP), the general partner has...

unlimited liability and an active role

A penny stock is best described as an...

unlisted stock valued at less than $5 per share

Investors in hedge funds should know that the funds are...

unregulated but must abide by laws that investors be accredited

Commercial paper is...

unsecured debt with a maximum maturity of 9 months

Exempt from the penny stock rules are...

unsolicited transactions

For ETFs, the phrase "tax efficiency" can best be described by which of the following concepts?

usually, for ETFs, there are no tax consequences for investors until the shares are sold

Regarding annuity products offered by insurance companies, which of the following is TRUE?

variable annuities are securities; fixed annuities are not

Regarding the decision to dissolve a LP before its scheduled predetermined dissolution date, it would need to be...

voted on by the limited partners holding a majority interest

Which of the following are considered intangible drilling costs for an oil and gas DPP?

wages and insurance

T-bills are issued (auctioned) by the US Treasury Department how often?

weekly

To the benefit of the issuer, a callable bond is likely to be called...

when interest rates fall

To the benefit of the bondholder, a potable bond is likely to be put back to the issuer...

when interest rates rise

Interest-rate sensitivity for preferred shareholders should be understood to mean that...

when interest rates rise, the prices for preferred shares can fall

Holders of subordinated debt instruments known that in the case of a corporate liquidation, they....

will be paid back last of all debtholders

Your customer has purchased $10,000 in US Treasury bonds. These securities...

will have evidence of ownership recorded in book entry form

An investor has purchased Class A mutual fund shares. The NAV (net asset value) per share of the fund is the price the investor...

will receive upon redemption of the shares

Which of the following is TRUE when opening an out-of-state Section 529 plan?

withdrawals may not be free of state taxation

When must a new options customer return a signed option account agreement form?

within 15 calendar days of the account approval

When is the option agreement completed?

within 15 days after account approval

Regarding the sale of a new issue, a customer is considered a restricted person if the person is...

working as a sales person who works for the issuing firm's underwriter

The buyer of an option contract can be known as all of the following EXCEPT...

writer

Investors who sell call and put options are known as...

writers

Of the following strategies, which is considered most risky in a strong bull market?

writing calls