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A limited partner has a $10,000 basis in a partnership. During the year, he receives a $6,000 cash distribution and a $9,000 loss. The limited partner's basis at the end of the year is:

0

Duties of the designated market maker on the NYSE include which of the following responsibilities? 1. Maintaining a fair and orderly market in selected securities 2. Appointing floor brokers 3. Resolving trade imbalances 4. Arbitrating disputes between member firms

1, 3 only

A municipal bond that was issued at par is purchased by an individual in the secondary market at a price of 90. What is the tax consequence if the bond is held to maturity?

100 ordinary income

A married couple with a three-year-old child would like to purchase an investment that will be suitable to help pay for the child's college education. Which TWO of the following choices are the most suitable alternatives? 1. A CMO tranche scheduled to mature in 15 years 2. A STRIP scheduled to mature in 15 years 3. An ETF based on the S&P 500 Index 4. A money-market fund

2, 3

An investor has been making payments to a variable annuity for the last 20 years. The investor decides to annuitize and selects a straight-life payout. Which TWO of the following statements are TRUE? 1. The investment risk is assumed by the insurance company 2. The investment risk is assumed by the customer 3. The amount of the payment to the customer is guaranteed by the insurance company 4. The amount of the payment to the customer is not guaranteed

2,4

Which TWO of the following statements are TRUE regarding the Code of Arbitration? 1. If a public customer is involved, all arbitrators must come from outsides the securities industry 2. Arbitration decisions are binding and may not be appealed 3. Rule violations will be settled between FINRA and a registered representative by arbitration 4. Arbitration is more cost-effective than litigating the matter in court

2,4

How many days must pass before a member of a syndicate may extend credit for a customer on a security that was part of a new issue?

30 days

A client purchases $800,000 of stock in a margin account and deposits the Regulation T margin requirement. If the current value of the stock is $700,000 and the broker-dealer declares bankruptcy, SIPC would cover:

300,000

An investor writes 5 uncovered ABC May 35 puts for a premium of 3 per contract, when ABC has a market price of $36. At what market price will the investor break even?

32

An investor purchases a 20-year 5.30% bond at par value that will yield 5.75% if called at the first call date in five years. The yield to maturity on the bond is: 5.30% More than 5.30% Between 5.30% and 5.75% 5.75%

5.3%

Mr. Jones purchases 100 shares of XYZ at $80 per share and writes an XYZ June 85 call receiving a $3 premium. What is Mr. Jones' maximum potential loss?

7,700

A customer who needs a return of capital in three-to-five years would be LEAST suited for which of the following securities? A covered call writing program A direct participation program An exchange-traded note A bond mutual fund

A direct participation program

A corporation is in the 34% tax bracket. Which of the following choices provides the best return if the corporation wants to invest some of its surplus cash? A preferred stock paying a 7.50% dividend A corporate bond yielding 8% A common stock yielding 6% A municipal bond yielding 6%

A preferred stock paying 7.5% dividend

Which of the following statements is NOT TRUE regarding dividends? A growth company normally has a low dividend payout ratio A stock dividend creates a current tax liability when received A blue-chip company has a long history of paying dividends The market price of a preferred stock is influenced by its dividend payout

A stock Divided creates a current tax liability when received

Which of the following choices is NOT governed by MSRB rules? An issuer of general obligation bonds The head of the municipal finance department of a broker-dealer A bank that underwrites revenue bonds An online broker-dealer that accepts only unsolicited orders for municipal bonds

An issuer of general obligation bonds

Cash dividends declared by a corporation:

Are a current liability to the corporation when declared

If a municipal bond has a basis of 5.25, and its coupon rate is 4 3/4%, the bond is selling:

Below par

Mr. Smith is short 1,000 shares of ABC Corporation at $100. Mr. Smith enters GTC orders to buy either 1,000 shares of ABC at $95 if it declines, or buy 1,000 shares at $105 stop if it should go up. ABC Corporation declines to $95 but Mr. Smith is able to buy only 300 shares. The order should be revised to: Buy 700 at $95 and buy 700 at $105 stop Buy 700 at $95 and buy 1,000 at $105 stop Buy 1,000 at $95 and buy 700 at $105 stop Buy 1300 at 95 and 1300 at $105 stop

Buy 700 at $95 and buy 700 at $105 stop

A level debt service bond issue is one in which:

Combined annual interest and principal payments are equal

A customer has a nondiscretionary account at a broker-dealer. The customer owns 1,000 shares of a stock that is the subject of a news article detailing an SEC investigation. Which of the following actions is MOST appropriate for the registered representative to take?

Contact the costumer and ask her to place an order to sell the securities

Accrued interest on new municipal bonds is calculated from the:

Dated Date

In mutual fund advertising, it is NOT permissible to state that: A fund does not charge a 12b-1 fee Dollar cost averaging assures long-term growth Funds of competitors have higher expense ratios The investment adviser has 20 years' experience

Dollar cost averaging assured long-term growth

Which TWO of the following investors are considered equity owners of a corporation? Holders of common stock Holders of warrants Holders of preferred stock Holders of rights

Holders of common stock Holders of Preferred stock

A pension fund manager wants to protect the fund's diversified stock portfolio against a market downturn. To best meet this objective, he should write:

Index Options

All of the following statements regarding commercial paper are TRUE, EXCEPT it: May be placed (sold) by a broker-dealer May be placed directly by the corporation Is issued by a corporation for cash flow purposes Is backed by a pledge of a corporation's specific assets

Is backed by a pledge os a corporations specific assets

All of the following characteristics are TRUE of REITs, EXCEPT they: Are not exempt from the Securities Act of 1933 Are not regulated investment companies May not pass losses through to the investors May not be traded on an exchange

May not be traded on an exchange

Given the following choices, in which security would a pension fund manager LEAST likely invest? Treasury notes AA-rated corporate bonds Blue-chip stocks Municipal bonds

Municipal bonds

An individual is annuitizing his variable annuity and choosing the highest permissible assumed interest rate. Which of the following statements is MOST likely TRUE regarding future annuity payments? Payments will most likely increase over time Payments will most likely decrease over time Payments will most likely stay the same over time

Payments will most likely decrease over time

Mr. Smith purchases 100 shares of MNP @ 30 and also purchases 1 MNP May 30 put @ 3. Mr. Smith is:

Protected from a decline in the market until the option expires

All of the following statements are TRUE about closed-end investment companies, EXCEPT that the: Number of outstanding shares is constant Shares are sold at the current market price Shares may not sell below the current net asset value Shares may be listed on the NYSE

Shares may not sell below the current net asset value

Which of the following statements is NOT TRUE regarding closed-end investment companies? The number of outstanding shares is constant Shares are sold at the current market price Shares may not sell below the current net asset value Shares may be listed on the NYSE

Shares may not sell below the current net asset value

Which of the following statements is TRUE if a yield-based call option is exercised? The writer delivers Treasury bonds The writer receives Treasury bonds The writer pays the in-the-money amount The writer receives the in-the-money amount

The writer pays the in-the-money amount

An investor places an order to buy shares of a mutual fund after that investment company has determined its net asset value for the day. The RR instructs the fund company to purchase the shares at that day's NAV for the investor. Which of the following statements concerning this potential trade is TRUE? This is a sales practice violation known as late trading This is an acceptable practice known as market timing The RR would need to have prior written approval by a principal of the firm to execute this order The investor may only purchase Class B shares in this case, since Class A shares are not available under this arrangement

This is a sales practice violation known as late trading

An investor's goal is to buy a security that establishes a fixed return, for a long period, with no reinvestment risk. Which of the following securities BEST suits the investor's needs? Treasury bonds Common stock Highly rated corporate bonds Treasury STRIPS

Treasury STRIPS

You are a registered representative at a member firm. Which of the following persons are bound by industry rules when opening an account at another member firm?

Your Spouse and Minor child

An OTC market maker will NOT use which of the following factors to justify the amount of his markup? Current price Dollar value of the trade His cost Availability of the securities

his cost

A customer has an existing account at a broker-dealer and now wishes to trade options. Who must approve the account for options trading?

the registered options principal

An investor establishes a short margin account and sells 1,000 shares of ABC short at 30. The value of the securities declines and SMA is created. All of the following factors will affect SMA, EXCEPT: The value of the securities continues to decrease The value of the securities increases Cash is withdrawn from the account Using the selling power of the account

the value of the securities increases