Third Section

If an investor purchases treasury bills and keeps rolling them over at maturity, which of the following is true? 1. Investor will have a stable rate of return 2. investor will have a fluctuating rate of return 3. investor will maintain a stable principal 4. The investor will face a possible capital loss

2& 3

A muni would choose to finance a project with general obligation bonds for which of the following reasons: 1. Rev bonds normally require voter approval, GO bonds do not 2. The interest cost for general obligation bonds is normally lower than other bonds 3. The population of the entier municipality will benefit form the project 4. The people who benefit form the project will pay taxes to pay for the issue

2, 3, and 4

All of the following are characteristics of US Treasury Bills except 1. They have maturities up to one year 2. They trade at face value only 3. They are issued in book entry form 4. They have a minimum denominiation of $100

2.

All of the following are true about competitive bids on muni securities except: 1. most general obligation bonds are sold by a competitive bid 2. syndicate manager selects bond counsel 3. notice of sale describes bidding details 4. There is a submission deadline bids

2.

All of the following are true about government agency issues except 1. it is possible for them to be issued as registered securities 2. they represent direct obligations of federal government 3. they may be accompanied by interest coupons 4. They are an investment with a low credit risk

2.

All of the following statements concerning muni rev bonds are correct except 1. in most cases they are free of any debt limitations on the issuer 2. they are backed by taxes 3. usually their maturity scheduled reflects the life expectancy of the project financed 4. interstate authorities can issued them

2.

Characteristics of US treasury bills include which of the following? 1. They trade at market prices usually above par value 2. A maturity of one year of less 3. They have illiquid markets 4. Interest which is exempt from the federal income taxation

2.

In regard to the analysis of GO bonds, which of the following would be most likely to be reviewed: 1. Competitive facilities currently in existence 2. budgetary practices 3. Protective covenants 4. Engineering Reports

2.

MSRB has created regulations pertianing to advertising by dealers. Some of these regulations apply to the advertisement of muni bonds in the secondary market. WHich of the following is NOT correct in relation to these advertising regulations? 1. Such advertisements must be separated from other paperwork in a different file 2. Filing with the MSRB is required on all advertising 3. A principal must approve these advertisements in writing 4. When the advertisement is published, the advertising entity must ensure that pricing is valid

2.

Of the following choices, which is the BEST description of a muni rev bond's indeture? 1. bond indenture is an overview of the value of the bond over the life of the bond at various intervals 2. The bond indenture is a contractual obligation between the trustee and issuer and it includes details on necessary reserver funds and required rate schedules for the bond. 3. bond indenture ensures that the bond is legally binding and valid 4. the bond indenture is a summary of the feasibility study performed on prospective projects

2.

One of your clients is looking into investing in DPP. He is examining several different types of programs. One of the programs that he is evaluating promises a relatively high tax write-off in the immediate future with low costs for land and rights associated with the land and minerals. Of the following, which BEST describes programs with these features? 1. This would be a developemental drilling program 2. This would be an exploratory drilling program 3. This would be a balanced drilling program 4. This would be an oiland gas income program

2.

When analyzing the credit worthiness of a muni issuer, the net overall debt is the sum of which of the following 1. issued debt and GO debt 2. Direct Debt and overlapping debt 3. Self-supporting debt and GO debt 4. Self-supporting debt and direct net debt

2.

Which of the following consists of a list of new offerings expected to come to market over the 30 calendar days following? 1. list described would be the bond buyer index 2. list described would be the visible supply 3. list described would be the bloomberg offering list 4. list described would be the commodities and futures market lists

2.

Which of the following investment choices would provide an investor with income and the potential for capital appreciation? 1. Zero-Coupon Muni bonds 2. Convertible Preferred Stock 3. Corporate Bonds 4. Zero-Coupon Treasury Bonds

2.

Which of the following writes and renders a Legal Opinion on a new issue of muni bonds? 1. city attorney of the muni 2. bond counsel 3. underwriter's counsel 4. Trustee's attorney

2.

Mr. Smith has decided to be more aggressive with his investment portfolio. He is not looking for income for income. He has decided to move some of his money inot an investment that will give him maximum capital appreciation potential. Which of the following would be the MOST appropriate recommendation to Mr. Smith? 1. Defensive Common Stocks 2. Growth Common Stocks 3. Blue Chip Common Stocks 4. Utility Common Stocks

2. Because the investor is not looking for income but does want "maxium" capital appreciation and with a more aggressive approach, the best recommendation would be Growth Stocks

What are the tax consequences for the following transactions? 01-10-98 Buy 100 ABC @ 10 11-10-98 Buy 100 ABC @ 4 10-29-98 Sell 100 ABC @ 6

No gain or loss, 30 day wash sale rule

Joe Calls his registered represenattive to inform her that he is interested in investing in a new bsiness developement company. Joe is generally a conserative investor. The RR Should tell Joe that the investment choice is

Not a good choice because investing in a new business developement company requires high risk tolerance

Which of the following individuals is REQUIRED to review, and approve of, each muni bond transaction?

The Muni securities principal

Pre-refunding an issue of muni securities which has call protection usually results in an

increase in the marketbaility and quality of the bonds

The city of boston has a population of 600,000 and it has just issued GO bonds amounting to $30,000,000. Prior to this issue, the city had an outstanding debt of $60,000,000. The city is located in suffolk County and the County's outstanding debt is $2,000,000 and it is supported entirely by ad valorem property taxes. Boston has 60% of the total assessed valuation in suffolk County. Including the new bond issue, what is Boston's net direct debt per capita.

$150 $90,000,000/600,000 = $150 direct debt per capita

The Intra Corporation earned 3 million plus received $200,000 in preferred dividends. THe corporation is in the 30% tax bracket. Taxes on its entire amount of taxable income would be:

$200,000 dividend income x .50 taxable portion (50% exempt) $100,000 taxable portion of div income ($3,100,000 total taable income $3,100,000 .30 corp tax rate $930,000 tax liability

A customer executes various transactions during the year and realizes a $10,000 net capital loss. What amount can be written off against ordinary income?

$3,000

During the year, a customer has realized $10,000 in capital losses and $3,000 in capital gains. What can be done?

$3,000 is deductible, $4,000 is carried forward as a capital loss carryfoward

A company has earnings per share of $2.50 and the market price of its stock is $25. If the price-earnings ratio remains the same, what price would the stock sell at assuming the earnings per share increased to $3.00

$30 25/2.5 = 10 x 3.00 = 30

A muni industrial rev bond issue would most liekly be paid from which of the following types of income? 1. Lease rentals 2. income tax payments 3. property tax payments 4. sinking fund payments

1.

An investor seeking safety of principal and amoderate level of monthly income would most likely buy a: 1. Ginnie Mae pass through certificate 2. General Obligation Bond 3. Industrial Revenue Bond 4. Equipment trust certificate

1

A muni's broker's broker: 1. trades with dealer banks 2. trades with other muni b/ds 3. bids on new issues 4. performs trades for its own account

1 & 2

Limited Partners have which two rights in a DPP? 1. The right to inspect partnership books 2. The right to sue the General Partner for damages if the General Partner wrongfully spends the proceeds of the project 3. The gith to fix the compensation of the general partner 4. The right to all of the tax benefits from the operations of the project

1 & 2

Which of the following types of income would taxes normally be withheld by a foreign entity? 1. Dividends 2. Interest 3. Capital Gains Distributions

1 & 2

Which two of the following are true of exploratory oil and gas drilling programs? 1. the programs represent drilling on unproven properties with a high risk of not discovering reserves 2. The programs represent producing oil and gas properties purchased for additional exploration 3. The programs are suitable for high risk investors only 4. If the program is successful, potential profits realized are normally less than for other types of oil and gas programs

1 & 2

An issuer of muni securities has prepared an official statement. Under MSRB Rules, the muni securities dealer underwriting the issue has which of the following obligations? 1. he must furnish a copy of the official statement to each customer 2. He must furnish a copy of the official statement to other muni securities dealers if requested 3. he must disclose to each customer the names of syndicate members

1 & 2 only

A muni dealer is immediately reoffering some 7% bonds it has just purchased at par. Which of the following quotes would indicate prices nearest the recent purchase at par and therefore, most likely to be considered bona fide quotes under MSRB rules? 1. 6.8 less 1/2 2. 108 1/4 2. 101 1/8 4. 4.95 net

1 & 3

Of the following statements about federal farm credit bonds, which are correct? 1. These bond are typically found in book-entry form 2. The US government directly issues and backs these bonds 3. Interest income from these bonds is not subject to state taxes 4. Interest income from these bonds is not subject to federal taxes

1 & 3

Which of the following would be classified as a progressive tax? 1. income tax 2. sales tax 3. estate tax 4. gasoline tax

1 & 3

Correct statements concerning the GNMA guaranteed mortgage-backed securities include: 1. yields to maturity on these securities are generally higher than the yields on US treasury securities 2. Interest income from these securities is exempt from the federal income tax 3. Interest paid on these securities is paid either semi-annually or annually 4. The income received from pay-downs by mortgagors is considered to be a reutnr of capital and is tax exempt

1 & 4

Which of the following are true regarding T-Bills? 1. T-bills trade at a discount to par 2. T-bills have 1 year or less to maturity 3. Most T-bill issues are callable 4. T-bills are a direct obligation of the US government

1, 2 and 4 TBills are NEVER Callable

Which of the following are considered sources of debt service for a special tax bonds? 1. Gasoline taxes 2. Alcohol taxes 3. Business license taxes 4. Ad Valorem taxes

1, 2, and 3

Under which of the following conditions will th eaverage cost per share to the investor, over a period of time, always be lower than the average price per share? 1. if a fixed dollar amount is regularly invested 2. If he follows a constant dollar plan 3. if a fixed number of shares is regularly purchased 4. If the price of the stock fluctuates

1, 2, and 4

A statement concerning GO bonds that is generally true is that 1. they are issued to finance non-revenue producing projects 2. they are generally backed by particular properties owned by the issuer 3. they are not subject to voter approval 4. they are known as limited tax bonds when issued by states

1.

One of your clients is seeking safety, stability, income and principal protection for his portfolio. Which of the following would be teh MOST appropriate investment choice for this client? 1. Government Bonds 2. Preferred Stock 3. Common Stock 4. Municipal Bonds

1.

Which of the following is NOT a feature of Ginnie Maes? 1. Semi-annual payments of interest principal 2. Investors can buy GNMA products with denominations as low as $1,000 3. GNMA guarantees timely payment of the interest an dprincpal 4. Full backing by the US gov

1.

Which of the following statements related to oil and gas limited partnerships is FALSE? 1. Developemental programs typically carry a larger amount of risk than exploratory oil and gas programs 2. Exploratory programs typically do not provide investors with the same level of stability when it comes to returns as that which is found in income programs 3. In areas of proven reserves, lease acquisition is a common practice for developmental programs 4. Developed wells ahve an inherent risk that the costs associated with operation and maintenance will be greater than the reserves held in the well

1.

All of the following statements about US treasury securities are correct except: 1. they have very little interest rate risk 2. tey have almost no credit risk 3. they are regularly issued with a wide range of maturities 4. There are more of them outstanding than any other single security

1. They are subject to market and interest risk

An investor's investment objective is income. He is long 100 shares of ABC, a dividend paying stock. The last sale of stock was $50.25. As a hedge, the investor is also short a July 50 call on ABC. THe last sale of the call was $0.50. ABC declares a $ .75 a share dividend. A suitable recommendation to the investor would be to: 1. Write another short call on ABC before the ex-date 2. Close the existing short call on ABC before the ex-date 3. Buy a call on ABC on the Ex-date 4. Sell the ABC Stock

1. Stock will decline by the amount of the dividend to 49.50. Therefore, at that time the short call the investor has will be "out of the money" and the chance of it being exercised is very low. Since the objective is income, best shoice would to short another call on ABC to take in the premium income.

Indices and averages in the securities industry may be capitalization weighted or price weighted. All of the following indices and averages are capitalization weighted except 1. NYSE Composite Index 2. Dow jones Industrial Average 3. S&P 500 stock index 4. Wilshire 5000 Equity Index

2

Which of the following is a correct statement concerning the Dow Jones Industrial Average (DJIA)? 1. Stocks of two companies are added to the index each year 2. It is considered by many investors to be an indication of market direction 3. It is calculated by dividing the aggregate price of 30 selected indstrial stocks by 30 4. It includes transportation and utility stocks

2

Current Common shareholders' interest would be diluted by: 1. A 3 for 1 split of the common stock 2. A sale o f$500,000 shares of previously unissued stock by the company 3. 20,000 debentures converted by their holders into common stock 4. a 25% stock dividend on common

2 & 3

If a muni issuer has a high ratio of overall debt to property valuation 1. The muni has a large credit available for future borrowing needs 2. The muni may have limited ability to borrow for future capital needs 3. a large amount of the budget may be required to service existing debt 4. the muni will be able to handle severe economic downturns

2 & 3

WHich of the following statements are generally accurate regarding securities issued by agencies of the US government/ 1. Though these securities pay interest, only the principal is considered to be a safe and liquid 2. US government does not fully back these issues, but the issues are backed by federal agency 3. These securities pay interest and both the principal and interest payments are considered to be safe 4. The US government fully backs the issues of federal agencies

2 & 3

A regular way muni bond trade takes place on Tuesday, AUgust 13. Interest payment dates for the bond are february 15 and august 15. Which of the following statements are true? 1. Settlement occurs prior to the interest payment date 2. settlement occurs on the interest payment date 3. accrued interest must be paid by the buyer 4. No accrued interest will be paid by the buyer

2 & 4

Which two of the following are generally true when using the price-earnings ratio? 1. It is used to compare stock to other stock yields 2. It is used to compare a particular stock to other stocks, frequently within the same industry 3. The higher the P/E, the greater the value is to investors 4. The lower the P/E, the greater the value is to investors

2 & 4

All of the following could be primary dealers in US government securities except: 1. Commercial Banks 2. Thrift Institutions 3. Domestic B/d 4. Foreign D/d

2. Thrift institutions (savings & Loans) usually originate mortgage loans and are not generally primary dealers in US government securities

A corporation's net earnings are found in which of the following 1. balance sheet 2. income statement 3. current ratio 4. net working capital

2. income statement

All of the following are commonly used designation for short-term tax exempt notes except: 1. ban 2. RAN 3. AON 4. TAN

3

All of the following are true of federal loan mortgage corporation (freddie mac) bonds except 1. the interest income is subject to state income tax 2. they are issued by a us government agency 3. they are directly backed by the US government 4. They can be recorded in teh Federal Reserve Book Entry System

3

Money to pay current expenses for a muni rev bond would normally be placed in which of the following funds? 1. contingency fund 2. surplus fund 3. maintenance fund 4. sinking fund

3

One of your clients is high-level executive who is in the highest tax bracket. THe client is NOT currently subject to AMT. If this investor is looking to maximize the amount of income that they receive, which of the following is the best recommendation considering their tax status? 1. You should recommend that the client buy a portfolio of T-bonds with a yield of 7.5% 2. You should recommend that the client buy taxable corporate and muni bonds yielding 8.0% 3. You should recommend that the client buy tax-free muni bonds that are subject to AMT that are yiledling 7.0% 4. You should recommend that the client buy tax-free muni bonds that are not subject to AMT that are yiledling 6.5%

3

The AMT may be applied to shareholders of a mutual fund that has which of the following securities contain within? 1. US Treasury Bills 2. COnvertible bonds 3. Muni bonds issued for private industry purposes 4. Investments in blue chip securities

3

The official statement provided on new muni issues 1. Is required on each issue by the SEC and the securities Act of 1933 2. Is required by MSRB on all new issues exceeding certain dollar amounts 3. Is requested by underwriters from issuers for disclosure purposes and is given to retail purchasers

3

WHich of the following transactions in a discretionary account woudl ALWAYS require authorization from the customer on every transaction? 1. Transactions involving UITs focused in muni securities 2. Transactions in securities that are not investment grade 3. Transactions in securities where a control relationship exists between a member at the firm and the municipality 4. Transactions in securities where there may not be ahigh volume of trades on a regular basis

3

When an analyst is reviewing the credit worthieness of a muni GO bond, which of the statements listed below would be considered to be negative? 1 A retremiement village with declining debt 2. per capita debt which is stable in an upper income community 3. stable debt in a city with a declining population 4. increasing debt in a young city with a high growth rate

3

Which of the following, when it is executed, represents a contract between a municipal issuer and an underwriting syndicate, in a competitive bid underwriting: 1. legal opinion 2. performance bond 3. bid form 4. authorizing resolution

3

Which of the following items would a corporation be allowed to use as deductions for federal tax purposes? 1. Dividends paid on REIT owned by corporations 2. Capital-gains distributions paid by mutual funds owned by the corporation 3. Dividends received by the corporation from other corporations common stock owned by the corporation 4. Dividends received by the corporation from other corporations preferred stock owned by the corporation

3 & 4

Which of the following provide 50% tax-exempt income to corporations? 1. Municipal bonds 2. industrial convertible bonds 3. Industrial convertible preferred stock 4. common stocks

3 & 4

A client lists their primary investment objective as liquidity. An RR believes that investments in municipal securities are best suited for this client. With the primary investment objective of the client in mind, which of the following would be the MOST attractive feature in relation to recommendations of municipal by the RR to this client? 1. Market price of a particular municipal security exceeds the par value of the security by a sizeable amount 2. The market price of a particular municipal security is well below the par value of the security 3. The security has a maturity that takes place within the newt year 4. The security has a call premium that currently exceeds the market price

3.

A single 28 year old professional has income of $350,000 per year and a net worth that exceeds $1,000,000. Her investment objective is capital appreciation. WHich of the following would be the least attractive investment choice for this investor? 1. Growth Funds 2. Small cap equity stocks 3. High yield preferred stocks 4. Equities in emerging markets

3.

All of the following are relevant factors in evaluating a muni GO bond except 1. Overlapping Debt 2. Unfunded liabilities 3. Gross Revenue Pledge 4. Tax Rates and Trends

3.

All of the following are true about a muni bond attorney (bond counsel) except 1. Bond attorney renders an opion concerning the validity of the issue 2. The bond attorney delivers certain information to the issuer before the bonds are sold to the public 3. The bond attorney bears the expense of printing the bonds 4. The bond attorney is normally paid by the issuer of the bonds

3.

Assume a customer's AMT is greater than his regular tax liability. In order to compute his federal tax liability, the customer must do which of teh following? 1. pay his regular tax liability 2. pay his regular tax liability and his alternative tax liability 3. add to his regular tax, the excess of the AMT over his regular tax 4. Pay his regular tax liability reduced by his AMT

3.

Before being issued, certain muni securities require approval of voters. Of the following choices, which must be voter-approved? 1. The issuance of bonds for a toll road 2. The issuance of TANs 3. The issuance of limited tax bonds 4. The issuance of revenue bonds for a sewage treatment facility

3.

Ethel is a widow and is approaching 75 years of age. Historically, she has deposited all of her money into her bank savings account and invested in certificates of deposit (CDs) offered by her bank. The yields from her savings accounts and on CDs have gone down significantly. Ethyl would like a higher yield from her investments than what she is currently achieving so she comes in to see you, an agent at a b/d. Which of the following would be an appropriate investment strategy for Ethyl, given her history and situation? 1. Ethel should maintain an appropriate savings balance to cover unforseen circumstances and continue to invest in CDs, despite her desire for higher yields. 2. Ethel should maintain an approrpaite savings balance to cover unforseen circumstances and should consider investing in a few large-cap securities that the agent will pick for her 3. Ethel should maintain an appropriate savings balance to cover unforseen circumstances and should consider investment in a balanced mutual fund, which carries lower risk, higher yields than CDs and potential for growht 4. Ethel should maintain an apprpriate savings balance to cover unforseen circumstances and should consider investment in a corporate securities income fund, comprised of small, mid and large capitalization corporate bonds and corporate preferred stock

3.

If the amount on the balance sheet representing shareholder's equity declines as a result of a corporate transaction while assets remain unchanged, which of the following have occurred? 1. A decrease in prepaid expenses 2. An increase in total net worth accounts 3. An increase in total liabilities 4. A crease in accrued expenses

3.

All of the following statements about tax and the federal tax code are correct except: 1. wages adn salaries are considered earned income 2. dividends and interest are considered unearned income 3. income estate and gift taxes are progressive taxes 4. If personal tax rates increase, there would be a lesser demand for muni securities

4

In which of the following scenarios would the investor have a tax liability associated with capital gains? 1. An investor purchased a stock and later receives a dividend from the issuer 2. An investor purchases a stock and later gifts the stock to their child after it ahs signficantly increase din value 3. An investor sells a stock that was purchased for significantly less than the sale price 4. An investor who has invested in a limited partnership receives a distribution of cash

3.

Interest on which of the following securities is exempt from federal income tax 1. US treasury bills 2. US gov agency bonds 3. Muni bonds 4. Commercial paper

3.

One of your clients is a recently-retired individual who relies heavily upon the current return on his fixed-income portfolio for living expenses, vacations, and other expenditures. Which of teh following investments is LEAST suitabile for this indiidual? 1. US Treasury bonds with varying maturities through the end of the clients time horizon 2. Non-callable, non-covertible bonds issued by a blue-chip company with maturities ranging to the end of the client's time horizon 3. Callable, non-convertible bonds issued by a blue-chip company with maturities ranging to the end of the cliet's time horizon, but call date as early as this year 4. A balnce portfolio of non=callable, convertible bonds issued by blue-chip companies with matrities to the end of the client's time horizon and preferred stocks from the same issuers

3.

The primary obligor on a moral obligation bond defauls. Which of the following must act to approrpaite funds to make debt service payments? 1. supreme court of the state 2. governor of the state 3. Legislative branch of the state government 4. MSRB

3.

Which of the following statements about registered limited partnerships is NOT true? 1. Most funding comes from the limited partners investing in the partnership 2. The decutions taken by a limited partner may not be higher than their cost basis for their partnership interest 3. Partnership democracy allows the limited partners to a bar or remove other limited partners 4. General partners liability is unlimited

3.

Which of the following would be appropriate for an investor who feels that real estate valu will soon appreciate and wants to participate in the appreciation without exposing himself to liquidity risk? 1. Real Estate DPPs 2. The purchase of an apartment complex 3. REITs 4. The purchase of a strip mall

3.

Which of the following is incorrect concerning Government Agency Issues? 1. They are considered low risk investments 2. They may carry interest coupons 3. They are direct obligations of the federal government 4. They may be issued in registered form

3. Agency issues are direct obligations of the AGENCY not gov

A Registered Representative wants to recommend option trades to a customer. Which of the following applies to this situation? 1. The customer has opened a margin account and made the appropriate margin deposit in the account 2. The customer has submitted a written request to be able to trade options 3. It must be determined that the customer has knowledge and expertise to be reasonable to determine the risk of such transaction 4. The recommendation

3. FINRA rule 2111 requires that when a member firm makes a recommendation to a customer it must have a reasonable basis in facts that makes the recommendation suitable for the customer.

The consensus of most analysts on Wall Street is that the market is entering a very favorable period. A b/d is planning a major sales effort to recommend small growth companies to all of its customers. Which of the following is true? 1. This is allowable under FINRA rules without any restrictions 2. This is allowable provided all of the trades are immediately initial by a FINRA principal 3. This practice is inherently inconsistent with FINRA rules 4. The wholesale recommendation of certain types of securities to all of it scustomers is allowed since most of the analysist are bullish

3. Small growth companies would not be suitable for all of the b/d's customers. therefore making the blanket recommendation would violate FINRA rules

You have a new client who is a somewhat conservative investor. The client's main investment objectives include some capital appreciation and high dividend yield. Which of the following is most appropriate for this client? 1. Blue Chip Common Stock 2. Cyclical Common Stocks 3. Utility Common Stocks 4. Growth Mutual Funds

3. This investor's investment objective includes some capital appreciation but the client also wants "high Dividend" yield, so utiilty company stocks are the best choice as they generally pay above average dividend yield to theri shareholders and on a fairly consistent basis

All of the following are correct about the accrued interest on municipal bonds EXCEPT that it is 1. Added to purchase price 2. Computed from the last interest payment date through the date prior to the settlement date 3. Always less than the full coupon payment 4. Used in determining the offering price of the muni bond

4

All of the following are true about the bondbuyer 20-bond index except 1. it is a daily index 2 it is based on 20 year par bonds 3. it is based on the estimated yield of the bonds 4. it is comprised of general obligation and revenue issues

4

Which of the following instruments/asset classes would generally be considered to be the least liquid? 1. Over the counter stock 2. LIsted stock 3. General Obligation Muni bonds 4. DPP units

4

All of the following are important in analyzing the credit worthiness of a GO bonds except 1. property valuation trends 2. tax collection record 3. outstanding debt 4. rate covenants

4.

All of the following could be reasons for an issuer to refund a muni bond issue except 1. obtaining interest cost savings 2. debt restructing 3. liberalizing indenture provisions 4. reducing the market value of refunded securities

4.

An aggressive growth portfolio would be suitable for which of the following investors? 1. An investor who would also be interested in a guaranteed lifetime annuity 2. AN investor with a large amount of capital that must be kept fairly liquid 3. An investor who can invert a small amount of money at regular intervals 4. An investor who is financially secure, has high income and has a high tolerance for risk

4.

In the credit analysis of a GO bond, an increase in all of the following would be considered unfavorable EXCEPT 1. Expenditures in excess of revenues 2. Tax Rates 3. Deliquent Taxes 4. Value of taxable real property

4.

THe power authority of a muni might issue tax-exempt commercial paper for all of the following reasons except: 1. working capital 2. extraordinary expenses 3. partial payment of construction costs 4. advance refunding of outstanding bonds

4.

When an investor decides to invest in a limited partnership which of the following documents would have to be signed? 1. Partnership Agreement 2. New Account Report Form 3. Investment Letter 4. Subscription Agreement

4.

When evaluating a limited partnership as an investment, the MOST factor to consider is: 1. the tax write offs 2. whether the program is leveraged or non-leveraged 3. the general partner's fees for managing the program 4. The basic economic viability of the program

4.

Which of the following is least important in the fundamental appraisal of a stock? 1. Management 2. Earnings 3. Company Outlook 4. Trading Volume

4.

Which of the following municipal bonds would probably be refunded? 1. 5% coupon due 1/1/2010 callable 1/1/98 @ 102, 6% yield 2. 6 % coupon due 1/1/2005 callable 1/1/95 @ 100, 6% yield 3. 7% coupon due 2/1/2000, non-callable 6% yield 4. 8% coupon due 2/1/2015, callable 2/1/88 @ 100, 6% yield

4.

Which of the following projects would LEAST likely be financed by rev bonds? 1. toll roads and bridges 2. airport expansion 3. sewer system expansions 4. Construction of a new high school

4.

Which of the following is true about government agency issues? 1. They are issued in bearer form only 2. The return earned on them is exempt from federal income taxes 3. They are all direct obligations of the US government 4. They are exempt from the registration requirements of the Securities Act of 1933

4. Gov agency securities like government securities are exempt from the registration requirements of the SEC

What percentage of dividends received by ABC corporation from XYZ corporation from XYZ corporation stock is taxed for federal income tax purposes?

50%

An investor buys a treasury bond on wednesday, february 24th for cash settlement. The bonds pay interest in January 1st and July 1st. How many days of accrued interest is the seller entitled to

54 days January = 31 actual days February = 23 (does not include settlement date)

Mr. John has the opportunity to purchase either $5,000 of muni bonds issued by MN with a coupon rate of 7.6% or the same amount of bonds issued by chicago with a coupon rate of 7.9%. The amount of interest he would receive on the chicago bonds would exceed the amount he would receive on the MN bonds by what amount each year?

7.9% coupon = $79 per bond 7.6% coupon = $76 per bond 3 difference x 5 difference $15

An investor buys $40,000 of US treasury bonds with a 9% coupon rate due 7/1/18 at 104. What would represent the annual income of the bonds?

9% coupon would represent $90 annual income. $90 of annual interest per bond x 40 bonds ($40,000 principal) = $3,600 total annual interest

If a US government bond is quoted at 98.08 bid, 98.16 offered, the spread is equal to what

98/32 bid is equal to 982.50. 98 16/32 ask equals 985. Difference between these two is $2.50

In a muni bond syndicate, expenses are allocated

According to each underwriter's participation

When a muni has an "advance refunding" the bonds will be redeemed

According to their original maturity schedule

Bonds are issued by the Puerto Rico Water Improvement Authority. Interest would be exempt from the income taxes of: 1. The city of Philadelphia 2. The commonwealth of Puerto Rico 3. The state of Pennsylvania 4. The federal Governemnt

All

A muni principal approves all orders for the accounts of: 1. individuals 2. Trust departments 3. insurance companies 4. commercial banks

All of them

Cusotmer confirmations must include which of the following to comply with MSRB rules applying to trades in muni securities? 1. The name of the issuer 2. A description of the security 3. The date of the transaction 4. A designation indicating whether the securities were purchased or sold

All of them

Which of the following would a RR normally obtian from a customer when determining if Muni securities are a suitable investment for the customer? 1. Financial resources 2. previous investment experiences 3. current tax situation 4. investment objectives

All options

In the muni market, the 30 day visible supply refers to the amount of all

Bonds that are scheduled to reach the market over the next 30 days

An investor buys a muni bond which has been pre-refunded in 2006 @ 104 at a 6% bsais. The price will be

Calculated to the call date at the call price of 104

An investor has funds set aside for investments. The investor's primary objective is capital appreciation. What should you recommend to the investor?

Common Stock

Recently the economy has been in a downturn and one of your clients has been sustaining some losses. Although your client feels that over time things will recover, she asks for your advice about what she could do now to balance out her portfolio. One recommendation you could make to her would be that she move part of her portfolio into 1. Common Stocks of Gold and Silver Mining Companies 2. Blue Chip Common Stocks 3. Growth Stocks 4. No change, but hold tight until the economy recovers

Common stocks of Gold and Silver Mining COmpanies

In a triple net lease arrangement, a tenant normally pays all of the following expenses associated with the leased property Except: 1. maintenance 2. insurance 3. debt service 4. taxes

Debt Services

The bonds of the Xlant Corporation have a higher yield than the corporation's preferred stock. The inwise corporation decides to invest in Xlant's preferred stock. The reason for this decision is probably because

Dividends on preferred stock receive the 50% tax exclusion

Auctions for US treasury Securities are conducted by

Federal Reserves backs.

In an oil and gas DPP the deductible (intangible) expanese are taken by the investors. The nondeductible (tangible) costs are capitalized by the sponsor. This is a:

Functional Allocation

Excess revenues from an income generating facility financed with a revenue bond issue would be held in the

General Fund or surplus fund

The portfolio most suitable for a pension fund interested in income would be

Government securitiese, corporate bonds, and fully covered option writing

In the muni securities industry a "nominal quote" is a

Informational quote

To obtain the approval of a muni securities market letter, according to MSRB rules it must be obtained

In writing and prior to the first use of the market letter

On which of the following financial statements would an extraodrinary item appear?

Income STatement

US Treasury securities usually pay a lower rate of interest than corporate debt issues because

Interest on treasuries is exempt from state and local tax

The following article appeared in the wall street journal: "The average return to investors on 13-week bills declined to 5.634% on yesterday's sale from 5.675% last week and are the lowest since a 5.632% return last month." This article indicates that

Investors paid less for th enew bills than other purchases paid last month. yesterday's discount of 5.634% to Las month's discount of 5.632% Yeseterday's discount was a larger discount, investor would have paid less. (bigger discount = lower price)

If a corporation refiancned a 6% preferred stock issue with 6% subordinated debenture, what would be the immediate effect on the earnings per sahre on the common share?

It would raise earnings.

The responsibility for exercising due diligence relating to statements made in a limited partnerships prospectus is borne by

Managing Underwriter

The current ratio is a measure of

Liquidity

What investment is best described as a debt security that matures in one year or less that is considered close to riskless?

Money Market Instruments

A muni bond's indenture gives authority to the state legislature to appropriate funds necessary to meet payments if the city's revenues are insufficient. This could be classified as

Moral Obligation Bond

A new revenue pledge provision in a muni revenue bond issue typically provides for revenue to be allocation first to

Operations and maitenance

Shareholders equity on the balance sheet of a particular company includes all of the following except

Paid-In Capital

An investor wants to place an order to buy securities because odd-lot purchases are twice odd-lot sales, and thinks this is buying opportunity. The RR should

Properly explain the odd-lot theory and adise the client to rethink the order

A broker's recommendation to purchase a speculative security on the basis that its price will triple in six months is not fraudulent if

RR never makes the recommendation RR's are NEVER allowed to make predictions of what the future will bring regarding any security recommended

Registration of muni securities dealer with the SEC indicates the SEC has

Received from the dealer certain background organizational information NOT approved

What is the typical settlement for a US treasury Bill with a 3 month maturity that is sold at the weekly auction on Monday with Regular-Way Settlement?

Regular way settlement would be 3 business days following the auction, or the THursday following the auction

Which of the following muni securities is generally quoted as a "bid and asked" price:

Revenue term bonds

According to techincal analysis, all of the following would track investor sentiment except 1. Investment advisory census surveys 2. AMount of short selling 3. Revisions of earnings estimates by a corporation 4. Number of small investors trading on margin

Revisions of earnings estimates by a corporation

In a limited partnership, the purpose of "partnership provisions' is to

Safeguard the rights of the limited partners

All of the following are required for a muni bearer bond to be in deliverable from except: 1. legal opinion 2. the unpaid coupons attached 3. signature of the holder 4. an official or facsimile seal of the issuer

Signature of the holder

After the purchase of a muni bond at a premium, the prie of the bond is reduced by the same amount each year until maturity. This procedure is:

Strait-line Amortization

In an oil and gas program the sharing arrangement states that the sponsor will pay no part of drilling the wells, but will not share in the revenues until the investors have recovered their original investment. This type of sharing arrangement is called

Subordinated working interest

What ratio measures taxes collected vs the amount of taxes levied for a municipality?

Tax collection ratio

One of your clients has been considering the purchase of a muni bond issue. The customer is concerned about the bond's tate tax exemptions. In this situation, the best advice to give to the client would be to review the bond's official statement with a focus on what?

The bond counsel's opion

Who determines the tender price when there is a tender offer?

The issuer

A bond indenture is a contract between

The issuer and teh trustee on behalf of the investors

The Dow Jones Industrial Average is

The market price of 30 selected common stocks divided by a constant

The technical market theory which states that the small investor is usually worng, buying at market peaks and selling at market bottoms, is called

The odd lot theory

A registered representative has been strongly recommending to all of his customers that they sell out of conservative issues and buy certain highly speculative issues. Under FINRA rules

This practice is prohibited since there is high probilitiy that the recommendation will not be suitable for some of the customers

What best describes a non-callable US Government SEcurity with no fixed rate of interest and maturities of 3,6 and 12 months?

Treasury Bill

From a chratist's point of view, which of the following is/are correct? 1. Once a trend line has been established, the stock tends to move in the same trend line 2. A head and shoulders top formation indicates the reversal of an upward trend 3. THe support level is the price at which a downward trend is expected to level off

all of the above

Which of the following activities are violations of the duty of a b/d to deal fairly with his customers? 1. Recommending a low priced security without making inquiring as to the financial condition of the company 2. Inducing the purchase of a low priced security by predicting growth where information to support the recommendatio is not available and this fact is not disclosed to the customer 3. Sale of a security at a price not related to the market

all of them

Generous Muni securities Inc, a muni securities b/d permits its RR to give presents to RR's in other muni securities firms. The gifts are made because of services performed by the recipients relating to the muni securities activities of the recipient's employers. Concerning these gifts, it is correct to state, according to MSRB Rules, that they

are permitted if they do not exceed $100

In case of a muni rev bond, provisions for the flow and application of funds normally are established by the

bond indenture

Ownership is transferred when a customer sells a book-entry muni security

by instructing the appropriate clearing agencyto transfer ownership from one customer to the other

If a muni securities representative placed buy and sell orders on behal fof a customer that were excessive in size or frequency, it would be considered

churning

A partnership that is created to buy computers and then lease them to business would be best described as

equipment leasing partnership

A client request a bid for a block of municipal bonds in the secondary market. Bidders will assume, unless specified differently that the bonds

may be in registered or bearer form, accompanied by a legal opinion

GNMA pass through obligations pay interest an dprincipal

monthly

A new issue of muni bonds which has equal amounts of bonds due in each of the maturities from one to twenty years is an

serial bond issue

In a technical analysis, the term "consolidating" means that the market is moving

sideways

A qualified legal opinon indicates

something may affect teh validity or tax exemption of the bonds

Non-callable muni bonds in serial form are quoted according to their

yield to maturity