Missed Questions for 7
If the ABCD Mutual Fund has a $25,000 breakpoint on its Class A shares where the sales charge decreases from 5% to 4%, which of the following purchases would likely represent a breakpoint sale?
$24,000
Due to a distribution of stock, the contract size in the JGH Oct 50 call options is 108. A customer purchasing one of these contracts for a premium of 2½ would expect to pay
$270 $2.50 per share (2½) times 108 = $270.00.
An investor places $100,000 into an oil and gas limited partnership program. To comply with FINRA rules, what is the minimum amount of the investment that must be received by the business?
$85,000 - Under FINRA Rule 2310, the maximum in total offering expenses is 15%.
An investor buys 100 shares of QRS stock at $60 and writes 1 QRS 60 call at 4 and 1 QRS 60 put at 5. If QRS stock is trading at $74 on the expiration date, the investor realizes a profit of
$900
Class A shares of the JILCO Fund are offered to the public at net asset value per share plus a sales charge of 4.25%. If the next computed net asset value per share is $39.39, an investment of $10,000 will acquire
(100% - sales charge %). The numbers are $39.39 ÷ 95.75% which equals $41.14 per share Divide the $10,000 purchase by the POP of $41.14 to arrive at 243.072 shares.
An investor is long 10 XYZ 60 calls. After XYZ goes "ex" a 50% stock dividend, the adjusted position will be
10 XYZ Oct 40 calls, contract size 150 shares. (150 shares times $40 equals $6,000).
From the viewpoint of a fundamental analyst, which of the following has little, if any, significance?
A company's stock reaching new highs or lows A fundamental analyst looks at the company's internals. That includes management changes, earnings or sales reports, but not anything to do with the trading of the company's stock.
Which of the following would be most likely to require a mandatory sinking or surplus fund?
A water and sewer revenue bond
Municipal Securities Rulemaking Board rules prohibit dealers from entering into which of the following transactions with a mutual fund?
Accepting portfolio trades from the fund as compensation for sales of the fund's shares known as reciprocal dealing between a broker-dealer and an investment company
Which of the following methods is available for mutual funds, that is not available for determining the cost basis of stock?
Average Cost Basis
A customer is short 100 shares of DFI at 35, and the market price is 35.25. If she believes a near-term rally will occur, which of the following strategies would best hedge her position?
Buy a DFI call with an exercise price of 35
Which of the following risk factors would be least important to disclose in recommending collateralized mortgage obligation (CMO) securities to public customers?
Credit risk
Securities issued by which of these agencies could be purchased for this account (UTMA)?
Federal National Mortgage Association
An investor who is long TCB stock for six months buys 1 call on TCB. If the call expires in eight months, and the investor sells the stock three months after the call expires, what does he realize on the stock?
Long-term gain or loss
An investor opens the following options position: Sell 1 RIF Sep 70 call @ 6; sell 1 RIF Sep 70 put @1. What is the investor's maximum gain, maximum loss, and breakeven point?
Maximum gain is $700; maximum loss is unlimited; breakeven points are $63 and $77. The maximum loss is unlimited because one of the positions is an uncovered call. The maximum profit is the premiums (credit) received of $700.
Which of the following is federally tax exempt for a corporation?
Municipal bond interest - tax exempt for corporations as well as for individuals
A customer purchases a municipal bond in the secondary market at 84, and he holds the bond to maturity. Because the customer must accrete the discount, what are the tax consequences at maturity?
No capital gain or loss - At maturity, the customer's cost basis has been accreted to par.
Which options strategy would likely offer some protection against the expected decline while allowing the customer to generate additional income?
Selling calls will generate income and protect the downside to the extent of the premiums received.
If an investor were to purchase a bond in the secondary market several years after the public offering, which of the following would factor in calculating the total dollar amount paid for the bond?
Settlement date & Coupon
The Municipal Securities Rulemaking Board (MSRB) is authorized to adopt rules concerning all of the following except
The MSRB does not regulate issuers.
A senior official of an issuer learns that nonpublic information was disclosed to an institutional shareholder of the issuer and/or an analyst covering the issuer at a private meeting. To avoid violating Regulation FD, the issuer must do which of the following?
The SEC has agreed that public conference calls, press releases or press conferences, and webcasts are FD-compliant methods of public disclosure. Please note that the alternative of the start of the next day's trading is based on the NYSE regardless of where the security is traded.
Which of the following would best describe working capital?
The amount of money a corporation has available to work with if it liquidates its current assets and pays off all of its current liabilities
If an investor watches the latest T-bill auction fall to 4.71% from 4.82%, the best interpretation is that
The rates on the T-bills fell, so prices rose, and the investor paid more for the bills this week than last week.
A money market mutual fund would be least likely to invest in which of the following assets?
U.S. Treasury notes - money market instruments or those with a maturity date not exceeding 397 days Treasury notes have maturity dates of 2-10 years.
A client buys 1 Jul 50 call and writes 1 Jul 60 call. This is
a debit bull spread
A call spread is the combination of
a long call and a short call.
A retired person seeking to maximize income with reasonable safety and liquidity should most likely consider investing in
an intermediate-term, high-grade corporate bond fund.
A mutual fund's expense ratio is found by dividing its expenses by its
average annual net assets.
When a mutual fund registers with the SEC under the Investment Company Act of 1940, it has the option to elect to be
diversified or nondiversified.
An investor has arranged to receive ½% of the value of her mutual fund account per month. This is an example of what type of plan?
fixed-percentage periodic withdrawal plan. The advantage of this plan is that it is unlikely the client would ever run out of money. A periodic payment plan is putting money in, not taking it out.
With respect to municipal discretionary accounts, all of the following statements are true except
if a control relationship exists between the broker-dealer and issuer, that relationship must first be terminated in order for the broker-dealer to effect transactions of the issuer's securities in their customer's discretionary account.
In the case of a real estate direct participation limited partnership program, nonrecourse financing will
increase a limited partner's original cost basis.
he visible supply includes all of the following except
municipal notes.Short-term notes are not part of the visible supply
An investor opens a long position in one XYZ Nov 140 put @7. Disregarding any commissions on settlement date, the investor
must pay $700.
municipal revenue bond has a catastrophe call feature, but otherwise, is not callable. Which of the following statements regarding the features of this bond that must be described on a customer's confirmation is true?
not be designated as callable.
The Investment Company Act of 1940 prohibits a closed-end management investment company from pursuing all of these activities except
paying dividends.
FINRA Rule 2231 describes the required frequency of customer account statements. In those cases where there is a highly active customer account, statements must be sent
quarterly
All of the following are reasons to consider adding REITs to your client's portfolio except
redemption at net asset value.
Traders in stock index options are exposed to
systematic risk
Stocks that are listed on the NYSE can also traded in all of the following except
the CBOE (Chicago Board Options Exchange).
If a customer buys 100 shares of stock and writes one out-of-the-money call against her long position, the breakeven point is
the cost of stock purchased less premium.
Holders of common shares may generally vote on
whether the company should issue additional preferred stock
