Midterm

A customer is long 300 shares of COD and simultaneously short 200 shares of COD. To sell the 300 shares held long, the order ticket must be marked A) 100 shares long and 200 shares short B) short C) 200 shares long and 100 shares short D) long

A) 100 shares long and 200 shares short

Which of the following is NOT a source of payment of principal and interest on a municipal revenue bond? A) Taxes B) Sewer and water fees C) Rental revenues D) Toll bridge fees

A) Taxes

A short sale of stock will be marked to market A) daily B) monthly C) weekly D) once each year on the last business day of the year

A) daily

Moody's bond ratings are based primarily on an issuer's A) financial strength B) capitalization C) expected trading volume of a bond issue D) expected marketability of a bond issue

A) financial strength

The flow of funds on a municipal revenue issue is outlined in the A) indenture B) prospectus C) offering circular D) syndicate letter

A) indenture

Which of the following statements about warrants is NOT true? A) Warrants have an exercise price above the current market price of the common stock when issued. B) Warrants may be attached to another of the issuer's securities. C) Warrants may not be traded in the secondary market. D) Warrants have longer lifetimes than rights.

C) Warrants may not be traded in the secondary market.

When an investment banker is successful on a competitive bid corporate underwriting in which they agree to purchase the shares from the issuer, the underwriters will be handling the offering as A) a standby underwriter B) a best efforts C) a firm commitment D) an all or none

C) a firm commitment

A registered representative who learns of a customer's death should A) notify FINRA B) accept no orders to buy or sell securities unless coming from a third-party power of attorney C) cancel open orders D) liquidate the account

C) cancel open orders

Each of the following securities are issued with a fixed rate of return EXCEPT A) preferred stock B) convertible preferred stock C) common stock D) bonds

C) common stock

All of the following option strategies could be effectively used in a bear market EXCEPT a A) credit call spread B) debit put spread C) short straddle D) short call

C) short straddle

LMN Securities is the managing underwriter for a new issue of one million MIC common shares. LMN has agreed to sell as much stock as possible in the market, and MIC has agreed to take back any unsold shares. If MIC has not specified a minimum amount of capital for LMN to raise, this is what type of offering? A) All-or-none B) Standby C) Contingency D) Best efforts

D) Best efforts

Which investor has the greatest potential risk if the price of QRS goes up? A) Long 10 puts on QRS B) Short 10 puts on QRS C) Long 10 calls on QRS D) Short 10 calls on QRS

D) Short 10 calls on QRS

If a customer places an order to buy 500 ABC at 62 stop limit, after the order is elected, at which of the following prices may the order be executed? I. 61.50 II. 62 III. 62.50 IV. 63

I and II This is a stop limit order with both the stop price and limit price at 62. Once the market trades at or through 62, the order is elected and it becomes a limit order to buy at 62 or better (lower).

A customer has just opened a new account at your firm and given her lawyer limited power of attorney. Which of the following statements are TRUE? I. Confirmations of trades will be sent to the account owner. II. Confirmations will be sent to the party given the power of attorney only. III. The POA ceases upon the death of either party. IV. The POA must be renewed annually.

I and III

If a customer writes 2 ABC Feb 90 puts at 8 and buys 2 ABC Feb 80 puts at 2, which of the following statements are TRUE? I. The spread is bullish. II. The spread is bearish. III. The breakeven point is 84. IV. The breakeven point is 86.

I and III

If the market value in a long margin account increases, which of the following statements are TRUE? I. The SMA increases. II. The SMA decreases. III. The equity increases. IV. The equity decreases.

I and III

A customer wishes to open a cash account and give trading authorization to a sibling. The required documentation would include which of the following? I. New account form II. Joint account agreement III. Customer agreement IV. Limited power of attorney

I and IV

Which of the following orders are entered above the current market? I. Buy stop II. Sell stop III. Buy limit IV. Sell limit

I and IV

An investor's portfolio includes 10 bonds and 200 shares of common stock. If both positions increase by one point, what is the appreciation? A) $300 B) $210 C) $100 D) $220

A) $300 The gain would be $100 for the bonds (one point for one bond is $10 × 10 bonds) and $200 for the common stock (one point is $1 × 200 shares). The total portfolio gain is $300.

MNO is planning to raise capital through an offering of 30-year bonds. Which call price would be most beneficial to MNO? A) 102 B) 106 C) 110 D) 104

A) 102

A corporate or municipal issuer might include a put option on a newly issued bond to A) make the offering more attractive to investors B) raise additional capital by issuing more bonds in the future C) allow the issuer to redeem the bond before maturity D) increase the yield on the bond

A) make the offering more attractive to investors

Instead of signing on the back of a security sold, the registered owner could sign on a separate paper called a(n) A) stock (or bond) power B) hypothecation agreement C) due bill D) endorsement

A) stock (or bond) power

Capital gains on municipal bond transactions are A) subject to tax as would be any other capital gain B) taxed at the federal level only C) untaxed D) taxed at the state and local levels only

A) subject to tax as would be any other capital gain

In a restricted account, a customer bought $5,000 worth of securities and sold $7,000 worth of securities on the same day. The customer may A) withdraw $1,000 B) be required to deposit $2,500 on the purchase because his account is restricted C) withdraw $7,000, the proceeds of the sale D) withdraw $2,000

A) withdraw $1,000

A corporate bond valued at $1,012.50 is shown in the Standard & Poor's Bond Guide as A) 101-8/32 B) 101-1/4 C) 101-4/16 D) 101.25

B) 101-1/4

Which of the following is NOT good delivery for 300 shares of stock? A) 3 certificates for 100 shares each B) 4 certificates for 75 shares each C) 6 certificates for 50 shares each D) 3 certificates for 60 shares each and 3 certificates for 40 shares each

B) 4 certificates for 75 shares each

Initial and maintenance margin requirements for a short account are A) 70% initial, 50% maintenance B) 50% initial, 30% maintenance C) 50% initial, 50% maintenance D) 50% initial, 25% maintenance

B) 50% initial, 30% maintenance

If a registered representative opens a joint account for three people, the registered representative should obtain information on A) a single tenant of the account holders choosing B) all of the tenants C) the tenant with trading authority D) the senior tenant in the account

B) all of the tenants

Under MSRB rules, a final official statement must be A) sent to customers on or before settlement date B) delivered to customers on or before settlement date C) delivered to customers on or before trade date D) sent to customers on or before trade date

B) delivered to customers on or before settlement date

A holder of an ADR assumes all of the following risks EXCEPT A) foreign currency risk B) liquidity risk C) market risk D) political risk

B) liquidity risk

A customer long stock who wishes to reduce risk and generate income should A) buy a call B) sell a call C) sell a put D) buy a put

B) sell a call

In April, a customer buys 1 MCS Oct 50 call for 9 and sells 1 MCS Jul 50 call for 4. What will the customer's profit or loss be if he buys back the July call for $1 and sells the October call for $12? A) $100 profit B) $100 loss C) $600 profit D) $600 loss

C) $600 profit The net gain is $600 because the client paid a total of 10 (9 + 1) and received a total of 16 (12 + 4).

A customer has the following accounts: Market value: long account $35,000; short account $40,000 Balance: long account (DR) $23,000; short account (CR) $60,000 SMA: long account $3,000 Regulation T: 50% What is the equity in the combined account? A) 35000 B) 8000 C) 32000 D) 75000

C) 32000

A customer places an order to sell short 100 DEF 52.25 STOP. After placing the order, DEF trades as follows: 53, 52.60, 52.20, 52.10, 52.25. Which trade triggers the order? A) 52.6 B) 52.1 C) 52.2 D) 52.25

C) 52.2

Several investors open an account in joint tenancy. Which of the following statements regarding the account is TRUE? A) Checks need not be endorsed by all parties to the account in order to be deposited. B) Checks may be made payable to one tenant of the account. C) Mail need only be sent to one of the parties to the account. D) Only one designated account holder need sign a margin agreement or other forms pertinent to the account.

C) Mail need only be sent to one of the parties to the account.

Mr. Brown has several stock rights. Which of the following is NOT an alternative regarding these stock rights? A) Selling at the market B) Exercising C) Redeeming them from the issuer for cash D) Giving the rights to his son

C) Redeeming them from the issuer for cash

The market attitude of a customer who establishes a credit call spread is A) speculative B) bullish C) bearish D) neutral

C) bearish

An investor has an established margin account with a short market value of $8,000 and a credit balance of $13,000, with Regulation T at 50%. A maintenance call would be triggered if the short market value increased above A) 13000 B) 9000 C) 8000 D) 10000

D) 10000 CR/1.3 13,000/1.3=10,000

An investor unaffiliated with the issuer is permitted to sell restricted stock without being subject to volume restrictions after having held the shares, fully paid, for a period totaling A) 3 years B) 1 year C) 2 years D) 6 months

D) 6 months

A company without business operations that raises money through an IPO in order to have its shares publicly traded for the sole purpose of seeking out a business or combination of businesses is known as A) a growth company B) a regulation D, Private Placement company C) a special situation company D) a special purpose acquisition company (SPAC)

D) a special purpose acquisition company (SPAC)

A sale made at a profit from a customer's margin account would do all of the following EXCEPT A) increase SMA B) reduce market value C) decrease debit balance D) increase equity

D) increase equity

A school district and a municipality have coterminous debt. In relation to one another, their debt is considered A) coleverage B) statutory C) net debt D) overlapping

D) overlapping

The Securities Act of 1933 exempts all of the following securities EXCEPT A) municipal issues B) savings and loan issues C) U.S. government issues D) real estate investment trusts

D) real estate investment trusts

For U.S. investors holding American Depositary Receipts (ADRs), dividends received are A) tax-free in the country of origin B) taxed as a capital gain in the U.S. C) tax-free in both the country of origin and in the U.S. D) subject to a foreign withholding tax

D) subject to a foreign withholding tax

The delivery of which of the following to a broker/dealer would be considered a fail to deliver? I. A mutilated certificate II. A municipal bond without the legal opinion attached III. A bond trading ex-legal without a legal opinion attached IV. Certificates delivered in par value denominations totaling the amount of the transaction

I and II

Which of the following are characteristics of a REIT? I. It is traded on an exchange or over the counter. II. It is professionally managed. III. It passes through both gains and losses to investors. IV. It is a type of limited partnership.

I and II

A member firm may charge a customer for I. forwarding proxy materials II. safekeeping of securities III. collection of dividends and interest IV. providing research reports

II and III

Ratio call writing exposes an options investor to I. limited loss II. unlimited loss III. limited gain IV. unlimited gain

II and III

Which of the following statements regarding put and call features of bonds are TRUE? I. The put feature would likely be exercised if interest rates fall. II. The put feature would likely be exercised if interest rates rise. III. The issuer will likely call bonds if interest rates fall. IV. The issuer will likely call bonds if interest rates rise.

II and III

Under the Securities Act of 1933, an accredited investor is defined as one having I. an annual income of at least $1 million II. an annual income of at least $200,000 for the last two years and anticipating an income of $200,000 in the current year III. a net worth of $1 million exclusive of net equity in a primary residence IV. a net worth of $1 million

II or III