Simulated Practice Exam and Complete Practice Exam

Which of the following applies to an open order to buy 600 XYZ at 44? 1. The order may be partially filled at the limit price or better. 2. The order is entered in the order book. 3. This is considered a market order. 4. It must be executed at the price specified or better.

1, 2, 4.

Three basic steps apply at the death of a customer in a partnership agreement

1. Cancel any open orders 2. Freeze the account 3. Await instructions from the executor of the estate

Which of the following statements regarding municipal securities quotations are true? 1. A quotation can be an indication of interest. 2. A quotation cannot be an indication of interest. 3. A quotation can be a one-sided request for a bid or offer (bids wanted and offers wanted). 4. A quotation cannot be a one-sided request for a bid or offer (bids wanted and offers wanted).

1. and 3.

A J & J Treasury bond with a 5% coupon due July 1, 2019, is purchased in a cash transaction on February 24. What is the number of days of accrued interest? A) 54 B) 63 C) 55 D) 53

A bond begins accruing interest on the prior interest payment date (January 1) and accrues up to, but not including, the settlement date (February 24). Did you notice that this was a cash transaction? That means the settlement date is the same day as the trade (February 24). Normally, Treasury securities settle T+1. If this was a regular-way trade, the accrued interest would be 55 days because settlement would have been February 25. Be careful reading the question; it is easy to skip over critical information. Because accrued interest on government bonds is computed actual days, actual year, 31 days for January plus 23 days for February, it equals 54 days.

In the partnership agreement of a limited partnership, all of the following would be disclosed except A) how the general partners will be compensated. B) the procedures for the annual election of general partners. C) what matters the limited partners can vote on under the democracy provisions. D) how the operating profits will be distributed.

B. Only in specific situations can the limited partners elect a new general partner. Such situations would include the resignation, death, incapacity, or removal of the general partner.

If a high-income customer is subject to alternative minimum tax (AMT), which of the following preference items must be added to adjusted gross income to calculate his tax liability? A) Distributions from a corporate bond mutual fund B) Income from a municipal security issued to finance parking garages C) Interest on a municipal bond issued to finance highway construction D) Interest on a private-purpose municipal bond

D. If more than 10% of a bond's proceeds go to private entities, the interest on the bond is a tax preference item for AMT purposes. Also, Industrial revenue bonds, sometimes called industrial development bonds, may be nonpublic (private lol) purpose bonds, and the proceeds are used to benefit private corporations. As such, the interest income from these bonds is a tax preference item in the alternative minimum tax calculation.

All of the following considerations apply to the 5% markup policy except A) the cost of executing the transaction. B) the customer's ability to pay. C) the availability of the security. D) the services rendered by the broker-dealer.

D. The 5% policy is a guideline for markups and commissions for exchange and over-the-counter trades. A firm cannot charge a higher commission or markup to a customer on the basis of the customer's ability to pay.

Accelerated depreciation increases charged expenses during the early years of equipment life but decreases charged expenses during the later years...

Therefore, it will decrease income in the early years and increase income in the later years.

According to the Investment Company Act of 1940, a diversified mutual fund may hold, at most, what percentage of a corporation's voting securities? A) 5% B) 75% C) 50% D) 100%

To be considered a diversified investment company, 75% of the fund's assets must be diversified, such that the mutual fund owns no more than 10% of a target company's voting securities. Additionally, within that 75% of assets, no diversified investment company may invest more than 5% of its portfolio in a single company's securities. However, there are no restrictions on the other 25%. That can all be in one stock, making 30% of the fund's assets in one company. Those assets can theoretically buy all of the outstanding voting shares of a company and control 100%.

The writer of an in-the-money put will receive the upcoming dividend from the underlying issuer if the contract is exercised A) after the ex-date. B) on the ex-date. C) before the ex-date. D) on or after the ex-date.

When assigned, the put writer is obligated to purchase the stock. Provided the stock is purchased before the ex-date, its buyer becomes the owner of record on or before the record date and is therefore entitled to the dividend. This is no different from anyone else purchasing before the ex-date. At exercise, the writer is obligated to purchase (hold).