Practice Exam 2

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Full Power of Attorney (POA)

Gives the named 3rd party, the designee, all of the power of the owner (place trades, withdraw funds, etc.) EXCEPT the right to change the name on the account.

If a limited partner in a real estate direct participation program becomes involved in the management of the office building acquired by the partnership, what ends up happening?

That limited partner's limited liability is jeopardized. While the limited partners usually have limited liability, that benefit can be lost if a limited partner engages in certain activities, including: (1) the day-to-day management of the property (2) representing himself as a general partner (3) financial control of the partnership.

A customer is short 100 XYZ shares at 26 and long 1 XYZ 30 call at 1. What is the maximum potential gain for the customer?

The customer has hedged his short stock position from a market advance by buying the call. If the market falls, the investor can make a maximum of $26 per share if the stock price falls to zero, less the premium of 1 paid to buy the call, for a maximum gain of $2,500 (26 − 1 = 25).

In a competitive offering of municipal bonds, the issue is usually awarded to the syndicate that offers to sell the bonds with...

The lowest net interest cost to the issuer. In a competitive underwriting for municipal bonds, competing syndicates submit bids to the issuer. The issuer (or representative) examines the bids to determine which bid provides the issuer with the lowest net interest cost.

The minimum face amount of a negotiable CD (jumbo CD)

$100,000 minimum

Characteristics of the volatility market index (VIX)

*A measure of implied expectations of market volatility *Often referred to as the "FEAR" index *VIX options are traded on the CBOE *(reflects expectations of volatility in the SPX over the next 30 days)

Depletion allowances apply to:

Depletion is applicable to natural resources such as mining or timber. *It is NOT applicable to real estate Oil and gas Copper mining Timber

A U.S. company that sells stereo equipment places an order for Japanese stereo components for its inventory. Payment must be made in Japanese yen in 3 months. The U.S. company thinks that the U.S. dollar may weaken against the yen. Which of the following foreign currency option transactions would best protect the U.S. company from a weakening of the U.S. dollar against the yen?

Importers buy calls to hedge. The U.S. company is concerned that the value of the Japanese yen will rise. Therefore, the company should buy calls on the yen to lock in the lowest possible price to buy yen for payment of the contract.

Oil and gas program associated with the LEAST risk?

Income oil and gas program Ranking from least to most risk would be as follows: 1. Income (lowest risk) 2. Developmental (moderate-low risk) 3. Exploratory (highest risk)


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