Series 7 - Final 3
A customer subscribes to a $10,000 limited partnership interest. The commission is $1,000. The up-front costs are $500 for legal expenditures, and $500 for organization costs. What is the customer's beginning tax basis? A. $10,000 B. $9,500 C. $9,000 D. $8,000
A. $10,000
A customer sells 1 ABC Jul 90 Put at $5 when the market price of ABC is $89. The market falls to $82 and the customer is exercised. The customer then sells the stock in the market. The loss is: A. $300 B. $500 C. $800 D. $1,100
A. $300
A customer buys $20,000 of ABC stock in March of 20XX. On December 31, 20XX, the stock is valued at $16,000. The customer will be able to deduct how much on this year's tax return? A. 0 B. $1,000 C. $3,000 D. $4,000
A. 0 The loss is not "recognized" for tax purposes until the securities are sold. Thus, none of the loss is deductible on this year's tax return.
Which contract will likely have the highest premium when ABC closes at $85? A. ABC Jan 80 Call B. ABC Jan 80 Put C. ABC Jan 85 Call D. ABC Jan 85 Put
A. ABC Jan 80 Call The contract with the highest premium is likely to be the one that is the most "in the money." Here, only 1 contract is "in the money" - the 80 call is "in the money" by 5 points. The 80 put is "out the money" by 5 points, while both the 85 call and put are "at the money."
Which of the following stocks would be considered cyclical? A. Automobile manufacturer B. Pharmaceutical manufacturer C. Gold mining company D. Computer software developer
A. Automobile manufacturer
A 60-year old man, whose investment objectives are income and capital gains, wishes to buy securities that allow for liquidity during the trading day. The BEST recommendation would be: A. ETFs B. ETNs C. UITs D. Mutual Funds
A. ETFs
The determination of which stocks are marginable is made by (the): A. FRB B. SEC C. FINRA D. SIPC
A. FRB
Regulation SHO: I. requires every sell order to be marked either "long sale" or "short sale" II. requires every buy order to be marked either "long purchase" or "short purchase" III. places limits on "naked" short sales of equity securities IV. places limits on "covered" short sales of equity securities A. I and III B. I and IV C. II and III D. II and IV
A. I and III
Which statements are TRUE regarding bids placed at the Treasury Auction? I Non-competitive bids are always filled II Non-competitive bids are not always filled III Individuals may place non-competitive bids IV Individuals may not place non-competitive bids A. I and III B. I and IV C. II and III D. II and IV
A. I and III
In a leveraged buy out: I a public company is taken "private" II a private company is taken "public" III financing for the takeover is provided by a commercial bank or by issuing junk bonds IV financing for the takeover is provided by issuing common stock A. I and III B. I and IV C. II and III D. II and IV
A. I and III A public company is taken private, and the financing for the takeover is provided by a commercial bank or by issuing junk bonds.
Trades of foreign currencies in the interbank market settle: I Spot II Cash III Forward IV Future A. I and III B. III and IV C. I and IV D. II and III
A. I and III Spot and forward
Interest income from all of the following securities is fully taxable by Federal, State, and Local government EXCEPT: A. Municipal Bonds B. Federal National Mortgage Association Debentures C. Industrial Development Bonds D. Corporate AAA-rated Bonds
A. Municipal Bonds
ABC Corporation has declared a cash dividend to stockholders of record on Friday, December 10th. The last day to buy ABC shares BEFORE they go ex dividend is? A. Tuesday, December 7th B. Wednesday, December 8th C. Thursday, December 9th D. Friday, December 10th
A. Tuesday, December 7th The regular way ex date is 2 business days prior to the record date for cash dividends. The record date is Friday, December 10th, therefore the ex date is Wednesday, December 8th. To buy the shares before they go ex dividend, the shares must be purchased before December 8th, meaning they must be purchased on Tuesday, December 7th.
A trade where a security is purchased in the First Market and sold in the Fourth Market at the same time, is most likely a(n): A. arbitrage transaction B. proceeds transaction C. exchange distribution D. secondary distribution
A. arbitrage transaction
A customer's account shows the following: LONG 100 ABC Common 100 DEF Common MARKET VALUE $15,000 - 100 ABC Common $20,000 - 100 DEF Common DEBIT $20,000 SMA $4,000 The customer sells the ABC position. The SMA account will be: A. credited by $7,500 B. debited by $7,500 C. credited by $15,000 D. debited by $15,000
A. credited by $7,500 Long Market Value - Debit = Equity Long Market Value - Debit = Equity % $35,000 $20,000 $15,000 43% If stock is sold out of a restricted account, 50% of the proceeds are credited to SMA and can be borrowed out. The other 50% must be retained in the account (the retention requirement). If $15,000 of stock is sold, then 50% or $7,500 is credited to the SMA account.
A debt of a neighboring area that is the responsibility of the taxpayers in a municipality is a(n): A. overlapping debt B. double barreled debt C. industrial development debt D. moral obligation debt
A. overlapping debt
A bank qualified municipal issue is one which: A. qualifies for an 80% deduction of its related interest carrying expenses by the bank B. has a qualified legal opinion rendered by a qualified bond counsel C. qualifies for the 80% dividend exclusion under IRS rules D. is eligible for bank trust department investment
A. qualifies for an 80% deduction of its related interest carrying expenses by the bank
A bond issue where every bond has the same issue date, interest rate, and maturity is a: A. term bond offering B. series bond offering C. serial bond offering D. combined serial and term bond offering
A. term bond offering
When a customer buys a new stock issue from a syndicate member, the customer pays: A. the Public Offering Price B. the Public Offering Price plus a commission C. a negotiated price that can be at or below the Public Offering Price D. any price because this is a negotiated market offering
A. the Public Offering Price New stock issues are sold under a prospectus that states the Public Offering Price, which is inclusive of any compensation to the underwriter (the spread). Additional commissions or charges above the P.O.P. are not allowed.
A customer's margin account shows: LONG 100 ABC @ $50 100 XRX @ $40 SHORT 100 PDQ @ $80 200 ERF @ $70 Debit Balance = $4,000 Credit Balance = $33,000 What is the equity in the combined account? A. $5,000 B. $16,000 C. $29,000 D. $33,000
B. $16,000 The equity in the combined account is: Long Market Value - Debit = $9,000 - $4,000 = $5,000 equity in long positions Credit - Short Market Value = $33,000 - $22,000 = $11,000 equity in short positions The combined equity is $16,000.
On the same day in a margin account, a customer sells 5 ABC January 40 Calls @ $6 and buys 10 ABC January 50 Calls @ $1 when the market price of ABC is at $43. The maximum potential loss is: A. $2,000 B. $3,000 C. $5,500 D. unlimited
B. $3,000
A customer buys 1 ABC Jul 45 Put at $4 when the market price of ABC is $46. The customer's maximum potential gain is: A. $400 B. $4,100 C. $4,900 D. unlimited
B. $4,100
A customer buys 1 ABC Jan 55 Put @ $9 when the market price of ABC is $50. The put is exercised when the market price is $40. For tax purposes, the sale proceeds are: A. $3,100 B. $4,600 C. $4,900 D. $6,400
B. $4,600
On the same day in a margin account, a customer sells short 100 shares of ABC at $46 and buys 1 ABC Jan 45 Call @ $2.50. The customer will break even at: A. $20.50 per share B. $43.50 per share C. $47.50 per share D. $48.50 per share
B. $43.50 per share Shork Stock/Long Call B/E = Short Sale Price - Premium
A customer buys 1 ABC Jan 100 Call @ $8 and sells 1 ABC Jan 120 Call @ $3 when the market price of ABC is $105. The maximum potential loss is: A. $300 B. $500 C. $1,500 D. unlimited
B. $500 The customer has purchased a long call spread. The positions are: Buy 1 ABC Jan 100 Call @ $8 Sell 1 ABC Jan 120 Call @ $3 $5 Debit If the market falls below $100, both calls expire "out the money" and the customer loses the net 5 points paid in premiums.
On the same day, a customer sells 1 ABC Jan 50 Call @ $5 and buys 1 ABC Jan 60 Call @ $2. The customer will breakeven if ABC stock is at which of the following prices at expiration? A. $52 B. $53 C. $55 D. $58
B. $53 Short Call Spread B/E = Short Strike Price + Credit
A customer buys 100 shares of ABC at $87 and buys 1 ABC Jan 85 Put @ $4. ABC goes to $72 and the customer exercises the put. The customer's loss is: A. $400 B. $600 C. $1,500 D. $1,900
B. $600 The customer buys the stock at $87 and sells it for $85 by exercising the put for a $2 loss. She paid $4 per share in premiums for the put contract, so the total loss is $6 points.
A couple wants to invest for the college education of their 2 children, currently ages 1 and 3. They estimate they will need to start using the funds to pay for college in 15 years. The BEST recommendation is to invest in: A. Treasury Bills B. 10-Year Treasury Notes C. 20-Year Treasury Bonds D. 30-Year Treasury Bonds
B. 10-Year Treasury Notes
Orders on the Specialist/DMM's book are filled on a: A. Last In, First Out basis B. First In, First Out basis C. First In, Last Out basis D. Random Selection basis
B. First In, First Out basis
The ratio of pledged revenues to debt service requirements would be used to analyze which of the following municipal issues? A. School District Bonds B. Hospital Revenue Bonds C. Special Tax Bonds D. General Obligation Bonds
B. Hospital Revenue Bonds
Customer accounts that will engage in day trading strategies must: I. be provided with a disclosure document prior to account opening II. be provided with a prospectus prior to account opening III. post $2,000 equity minimum to open the account IV. post $25,000 equity minimum to open the account A. I and III B. I and IV C. II and III D. II and IV
B. I and IV
If the Federal Reserve Open Market Committee authorizes its trading desk to enter into system wide reverse repurchase agreements, the effect will be to: I increase yields II decrease yields III raise debt prices IV lower debt prices A. I and III B. I and IV C. II and III D. II and IV
B. I and IV
A trader maintains a position in a small capitalization stock that has low trading volume. The trader has a high level of which of the following risks? A. Market risk B. Liquidity risk C. Interest rate risk D. Business risk
B. Liquidity risk
"LIBOR" is the commonly used term for the: A. Long Term Bond Offered Rate B. London Interbank Offered Rate C. Last-In, Best Offered Rate D. Lowest Interest Borrowing Offered Rate
B. London Interbank Offered Rate
What risk is the greatest concern in a Rule 144A transaction? A. Inflation risk B. Marketability risk C. Interest rate risk D. Credit risk
B. Marketability risk
Under FINRA rules for transfer of accounts from firm to firm, the customer must complete an account transfer form detailing positions. Which statement is TRUE about the validation and transfer of the securities positions? A. The carrying firm has 1 business day to validate and 1 business day to transfer the account B. The carrying firm has 1 business day to validate and 3 business days to transfer the account C. The carrying firm has 3 business days to validate and 1 business day to transfer the account D. The carrying firm has 3 business days to validate and 3 business days to transfer the account
B. The carrying firm has 1 business day to validate and 3 business days to transfer the account
A municipal securities firm based in Los Angeles that effects transactions solely on an agency basis places the following advertisement in the local newspaper: "We Are Market Makers Of Large Sizes In Los Angeles General Obligation Bonds" Which statement is TRUE regarding this advertising claim? A. This is prohibited under MSRB rules because dealer ads can only be placed in trade publications B. This is prohibited under MSRB rules because the statement is materially untrue C. This is prohibited under MSRB rules because the advertisement must be approved by the MSRB prior to use D. This is permitted under MSRB rules without restriction
B. This is prohibited under MSRB rules because the statement is materially untrue Since this firm effects trades solely on an agency basis, it carries no inventory and is not a market maker. Thus, its claim to make large size markets in municipal bonds is untrue. The MSRB does not require any filing of advertising, and advertisements can be placed in any medium. However, statements made in advertising cannot be fraudulent.
All of the following are exempt securities under Securities Act of 1933 EXCEPT: A. U.S. Government Bonds B. U.S. Government Bond Trusts C. Municipal Bonds D. Small Business Investment Companies
B. U.S. Government Bond Trusts U.S. Government Bond Trusts are an investment company whose shares (actually, these are termed "units") must be registered with the SEC under the Securities Act of 1933. Government bonds, municipal bonds, and Small Business Investment Company issues are all exempt securities under the 1933 Act.
A potential new customer is solicited by a registered representative to buy a new issue offering that is priced at $100 per share. The customer has $10,000 to invest and the registered representative explains to the customer that such an amount "deposited to a margin account creates $20,000 of buying power, so you will be able to buy 200 shares." This statement is: A. true in all material respects B. a misrepresentation of margin rules, since new issues must be fully paid C. allowed only if accompanied, or preceded by, a prospectus D. allowed only if the transaction was unsolicited
B. a misrepresentation of margin rules, since new issues must be fully paid
A security which gives the holder an undivided interest in a pool of mortgages is known as a(n): A. equity real estate investment trust B. pass through certificate C. first mortgage bond D. mortgage real estate investment trust
B. pass through certificate
A municipal syndicate is preparing to bid on a competitive General Obligation issue. To determine the bid, the syndicate will first determine the: A. takedown B. scale C. coupon rate D. discount or premium
B. scale The first step in determining a competitive bid is to write the scale - the interest rates at which the syndicate believes it can successfully reoffer the bonds. The spread is then factored into the interest rates to come up with the interest rates to be bid.
When an individual sells stock short that the individual owns, this is termed: A. shorting the stock B. short against the box C. long against the short D. long against short exempt
B. short against the box
The Standard and Poor's 100 Index has closed at 572.12, up 1 point from the prior day's close. The holder of 1 "deep in the money" OEX Call contract would have an approximate gain of: A. $1 B. $10 C. $100 D. $1,000
C. $100 Index option contracts have a multiplier of 100. A change of 1 equals 100 x 1 = $100.00 per contract. Since this person holds 1 contract, the change in value is 1 x $100 = $100.
A customer sells short 100 shares of PDQ at $49 and sells 1 PDQ Sep 50 Put @ $6. The breakeven point is: A. $43 B. $44 C. $55 D. $56
C. $55 Short Stock/Short Put B/E = Short Sale Price + Premium
A customer sells 1 ABC Jan 85 Put @ $6 and buys 1 ABC Jan 75 Put @ $2 when the market price of ABC is $83. The customer must deposit: A. $200 B. $400 C. $600 D. $1,000
C. $600 The customer has created a credit spread: Sell 1 ABC Jan 85 Put @ $6 Buy 1 ABC Jan 75 Put @ $2 $4 Credit The customer receives $400 in premiums for exposing himself to a potential 10 point ($1,000) loss on the options (he is obligated to buy at $85 under the short put; and can sell at $75 with the long put). The potential loss must be deposited, which is $1,000 - $400 collected = $600.
A customer sells 1 ABC Jan 50 Call @ $5.75 and 1 ABC Jan 50 Put @ $2.25 when the market price of ABC is at $50.75. The maximum potential gain is: A. $75 B. $225 C. $800 D. unlimited
C. $800
A 20-year bond is issued in 2017 with the following call schedule: Redemption Date Redemption Price 2032 104 2033 103 2034 102 2035 101 2036 100 and after This issue has how many years of "call protection"? A. 0 B. 10 C. 15 D. 20
C. 15 To make callable issues marketable to the public, investors are protected from calls for a stated period after the bonds' issuance. In this example, the bonds issued in 2017 are first callable in 2032 so the investor has 15 years of "call protection" with this issue.
A customer has a margin account with a long market value of $10,000, a $4,000 debit, and $1,000 of SMA. If the market value of the securities increases by 10%, SMA will increase by: A. 5% B. 10% C. 50% D. 100%
C. 50%
The Chairman of XYZ Corporation, while playing golf with a neighbor, casually mentions that this quarter's earnings are likely to be lower than expected. Based on this information, the neighbor sells short XYZ stock the next day. Which statement is TRUE? A. Only the Chairman has violated insider trading rules B. Only the neighbor has violated insider trading rules C. Both the neighbor and the Chairman have violated insider trading rules D. Neither the Chairman nor the neighbor has violated insider trading rules
C. Both the neighbor and the Chairman have violated insider trading rules
The interest rate charged from the banks to broker-dealers on loans where securities are collateral is the: A. Discount Rate B. Federal Funds Rate C. Broker Loan Rate D. Prime Rate
C. Broker Loan Rate
The MSRB regulates which of the following? I Municipal bank dealers II Municipal brokers III Municipal issuers A. I only B. II only C. I and II D. I, II, III
C. I and II
Under the FINRA Conduct Rules, a broker-dealer may charge a customer for which of the following services? I Collection of dividends II Safekeeping of securities III Handling the transfer and reregistering of securities IV Appraisals of securities in a customer portfolio A. I and II only B. III and IV only C. I, II, III, IV D. None of the above
C. I, II, III, IV
An issuer is required to make an 8K filing with the SEC for which of the following events? I Election of new members of the Board of Directors II Declaration of bankruptcy III Declaration of a cash dividend IV Proposal of a merger with another corporation A. II and III only B. I and IV only C. I, II, and IV D. I, II, III, IV
C. I, II, and IV
PHLX traded option contracts are available for which of the following currencies? I Euro II U.S. Dollar III Japanese Yen IV Canadian Dollar A. II only B. I and II C. I, III, IV D. I, II, III, IV
C. I, III, IV
Which of the following cover a short call contract? I Long a depository receipt for the stock II Long the cash value of the stock III Long an escrow receipt for the stock IV Long the stock A. IV only B. I and III only C. I, III, IV D. I, II, III, IV
C. I, III, IV A short call CANNOT be covered by cash because the theoretical loss is unlimited.
Eurodollars are: I European currency deposits II U.S. dollar deposits III held in foreign branches of U.S. banks IV held in U.S. branches of foreign banks A. I and III B. I and IV C. II and III D. II and IV
C. II and III
The Federal Telephone Consumer Protection Act permits: I solicited calls to be made only after 8 AM or before 9 PM in the time zone of the recipient II unsolicited calls to be made only after 8 AM or before 9 PM in the time zone of the recipient III solicited calls to be made anytime IV unsolicited calls to be made anytime A. I and III B. I and IV C. II and III D. II and IV
C. II and III
Which statements are TRUE regarding ADRs? I. Dividends are declared by the issuer of the underlying stock in U.S. dollars II. Dividends are declared by the issuer of the underlying stock in the foreign currency III. Receipt holders receive dividend payments in U.S. dollars IV. Receipt holders receive dividend payments in the foreign currency A. I and III B. I and IV C. II and III D. II and IV
C. II and III
The Trust Indenture Act of 1939 applies to: I U.S. Government Bonds II Municipal Bonds III Corporate Bonds A. I only B. II only C. III only D. I, II, III
C. III only
In determining whether there has been a violation of position limits, short calls will be aggregated with: I Short Puts II Long Calls III Long Puts A. I only B. II only C. III only D. I, II, III
C. III only Long puts and short calls constitute the "down" side of the market. Long calls and short puts constitute the "up" side of the market. Position limits are applied to each "side" of the market.
What regulation requires market centers to accept automated executions that do not discriminate against any class of users? A. OATS B. TRF C. NMS D. TRACE
C. NMS
Under IRS rules, if a customer selling shares of stock wishes to use specific identification instead of FIFO for cost basis reporting, the broker-dealer effecting the trade must be notified of this no later than: A. Trade Date B. Confirmation Date C. Settlement Date D. Statement Date
C. Settlement Date
A growth investor would consider a company's: A. Price / Earnings ratio B. Price / Book Value ratio C. Stock price appreciation rate D. Market share
C. Stock price appreciation rate
The overall economic performance of developing countries is expected to outpace that of the United States over the coming years. A customer that wishes to profit from this should receive which recommendation and accompanying risk disclosures? A. The customer should be recommended a special situations fund, as long as the customer is willing to assume regulatory risk and market risk B. The customer should be recommended a specialty fund, as long as the customer is willing to assume credit risk and extension risk C. The customer should be recommended an emerging markets fund, as long as the customer is willing to assume political risk and exchange rate risk D. The customer should be recommended a sector fund, as long as the customer is willing to assume unsystematic risk and market risk
C. The customer should be recommended an emerging markets fund, as long as the customer is willing to assume political risk and exchange rate risk
All of the following options orders to sell calls are permitted EXCEPT a(n): A. individual selling naked calls in a discretionary account B. investment company selling calls against securities in its portfolio C. corporation selling calls against its underlying stock D. custodian selling calls against securities in a custodian account
C. corporation selling calls against its underlying stock
The main risk of investing in an ETN is: A. marketability risk B. liquidity risk C. credit risk D. market risk
C. credit risk ETNs are "Exchange Traded Notes." They are an equity index linked structured product, that is listed and trades on an exchange. Because they trade, the liquidity risk aspect of structured products is eliminated. What is not eliminated, however, is credit risk. These products are only as good as the guarantee of the issuing bank. They typically have a 7 year life - and a lot can go wrong in 7 years (just ask anyone who purchased Lehman Brothers structured products or ETNs).
MBIA insures municipal bonds for the: A. loss of interest only from the time of default B. loss of principal only from the time of default C. loss of both interest and principal from the time of default D. fair market value of the securities at the time of default
C. loss of both interest and principal from the time of default
Pre-arranged trades by insiders are: A. prohibited B. permitted under Rule 10b-5 C. permitted under Rule 10b-5-1 D. permitted under Regulation FD
C. permitted under Rule 10b-5-1
Prior to opening an options account, all of the following steps must be taken EXCEPT: A. completing the new account form B. delivering the options disclosure document to the customer C. receiving the signed options agreement from the customer D. approving the first transaction in the account
C. receiving the signed options agreement from the customer
All of the following statements are true about new issue municipal selling practices EXCEPT: A. the customer must receive a confirmation showing the purchase price B. the customer must receive a copy of the Final Official Statement if one is printed C. the customer must receive a copy of the Agreement Among Underwriters D. if requested, the customer must receive the order priority provisions used by the manager
C. the customer must receive a copy of the Agreement Among Underwriters
When a customer buys a new stock issue from a syndicate member, the customer pays: A. the public offering price as stated in the prospectus plus a commission B. the public offering price as stated in the prospectus plus a mark-up C. the public offering price as stated in the prospectus without any commission D. any price since this is a negotiated market offering
C. the public offering price as stated in the prospectus without any commission
A type of brokerage account where the customer is charged a single annual fee for all account services, regardless of activity in the account, is known as a: A. fiduciary account B. active trader account C. wrap account D. omnibus account
C. wrap account
100 Basis Points equal: A. $.01 B. $.10 C. $1.00 D. $10.00
D. $10.00
ABC corporation has 18,000,000 shares outstanding. An officer of ABC wishes to sell ABC stock on November 15th under Rule 144. The prior weeks' trading volumes are: Week Ending Volume Nov. 12th 175,000 shares Nov. 5th 185,000 shares Oct. 30th 180,000 shares Oct 23rd 170,000 shares Oct. 16th 205,000 shares If the Form 144 had been filed the preceding week, how many shares could have been sold? A. 175,000 shares B. 177,500 shares C. 180,000 shares D. 185,000 shares
D. 185,000 shares
A customer buys 10 Allied Corporation 8% debentures, M '35, at 90 on Wednesday, April 19th in a regular way trade. The interest payment dates are Mar 1st and Sept 1st. How many days of accrued interest must be paid from buyer to seller on settlement? A. 50 B. 51 C. 52 D. 53
D. 53 Interest accrues on a 30 day month / 360 day year for corporate bonds, with interest accruing up to, but not including settlement. The bonds were purchased on Wednesday, April 19th. Settlement takes place 3 business days after purchase on Monday, April 24th, thus interest accrues through the 23rd of April. Since the last interest payment was made on March 1st, 30 days are due for March; and 23 are due for April; for a total of 53 days of accrued interest due.
Which of the following would be considered to be a "retail communication?" A. A direct mailing sent to 25 existing retail clients B. A research report sent to 20 prospective retail clients C. An institutional communication Which of the following would be considered to be a "retail communication?" A. A direct mailing sent to 25 existing retail clients B. A research report sent to 20 prospective retail clients C. An institutional communication D. A website maintained by a broker-dealer that provides daily market information
D. A website maintained by a broker-dealer that provides daily market information
Under FINRA rules, to ascertain which investments are suitable for a customer, the registered representative would inquire about all of the following EXCEPT: A. Investment objective B. Financial status C. Tax status D. Health status
D. Health status
If the dollar falls against foreign currencies, which of the following statements are TRUE? I Foreign currencies buy more dollars II U.S. exports are likely to rise III Foreign imports are likely to fall IV Foreign goods are more expensive in the U.S. A. I and II only B. III and IV only C. I, II, IV D. I, II, III, IV
D. I, II, III, IV
Types of real estate limited partnerships include: I Raw Land II New Construction III Condominiums IV Government Assisted Housing A. I and II only B. III and IV only C. II, III, IV D. I, II, III, IV
D. I, II, III, IV
Which of the following are components of total long term capital of a corporation? I Common at Par II Capital in Excess of Par III Long Term Bonded Debt IV Preferred Stockholders' Equity A. I and II only B. III and IV only C. I, II, III D. I, II, III, IV
D. I, II, III, IV
A breakout through a support level is: I an upside breakout II a downside breakout III bullish IV bearish A. I and III B. I and IV C. II and III D. II and IV
D. II and IV
The rate of inflation as measured by the Consumer Price Index has been rising rapidly over the last months. Ignoring other factors, the effect will be to: I raise stock market values II lower stock market values III raise bond market values IV lower bond market values A. I and III B. I and IV C. II and III D. II and IV
D. II and IV
To open a margin account for a partnership, all of the following documentation is required EXCEPT: A. New account form B. Customer's agreement C. Partnership agreement D. Joint account agreement
D. Joint account agreement
All of the following are requirements for a company to move its listing from another market to the NYSE EXCEPT: A. 2,200 shareholders B. Average monthly trading volume of 100,000 shares C. $100,000,000 aggregate market value of outstanding shares D. Minimum dividend payout of $5 per share
D. Minimum dividend payout of $5 per share
The system for automated trading of NASDAQ issues is called: A. OTCBB B. Super Display Book C. Pink Sheets D. NASDAQ System (Single Book)
D. NASDAQ System (Single Book)
The "Trade-Through" rule of Regulation NMS applies to all of the following EXCEPT: A. NYSE issues B. NYSE-MKT (AMEX) issues C. NASDAQ issues D. OTCBB issues
D. OTCBB issues
Comparing the first and second markets, which statement is FALSE? A. The First Market is an auction market B. The Second Market is a negotiated market C. The First Market has listing standards D. The Second Market has listing standards
D. The Second Market has listing standards Each exchange with a trading floor is an auction market (First Market). The over-the-counter market (Second Market) is a negotiated market. OTC equities are quoted in either the OTCBB or the Pink OTC Market. These "quotations vendors" have no listing standards. In contrast, each exchange has its own listing standards.
Which statement is BEST regarding participating preferred stock? A. The dividend rate is fixed B. The dividend rate varies depending on the decision of the Board of Directors C. The dividend rate is fixed as to maximum but not as to minimum D. The dividend rate is fixed as to minimum but not as to maximum
D. The dividend rate is fixed as to minimum but not as to maximum
A customer buys 1 ABC Jul 75 Call @ $9 and buys 1 ABC Jul 75 Put @ $6 when the market price of ABC is $77. The maximum potential gain is: A. $600 B. $900 C. $1,500 D. unlimited
D. Unlimited
Which of the following best describes the duties of a "Rights Agent"? The Rights Agent: A. ensures that all common shareholders have voting rights B. ensures that the correct number of shares are canceled and issued by the transfer agent whenever a transfer occurs C. repurchases company Treasury Stock when market conditions are favorable D. accepts shareholder subscriptions to a rights offering
D. accepts shareholder subscriptions to a rights offering
An options strategy where the maximum potential loss is equal to the difference between the increase in value of the underlying short securities position and the premiums received is a: A. naked call writer B. covered call writer C. naked put writer D. covered put writer
D. covered put writer
Market uncertainty regarding future interest rate levels would indicate that the yield curve should be: A. ascending B. descending C. inverted D. flat
D. flat Under the "market expectations" theory of yield curves, when investors expect interest rates to rise in the future, the yield curve will have an upward slope. Conversely, when investors expect interest rates to fall in the future, the yield curve will have a downward slope. If investors are uncertain as to the future direction of market interest rates, then the yield curve will be flat.
If a registered representative fails to complete the Regulatory Element of the Continuing Education requirement within the stated time period, that person: A. can continue to perform all of the functions of a registered representative B. can only accept unsolicited orders from customers C. can only be compensated on a salary basis; commission compensation is prohibited D. must cease performing all of the functions of a registered representative
D. must cease performing all of the functions of a registered representative
An institutional investor will open a prime brokerage account for all of the following reasons EXCEPT: A. consolidation of account positions with one broker B. lower financing costs on margined positions C. to facilitate reporting and recordkeeping of all transactions D. to achieve lower commission costs by using one executing broker
D. to achieve lower commission costs by using one executing broker
Which of the following statements are TRUE regarding callable municipal issues? I. Bonds are usually called when interest rates have declined II. Callable bond yields are higher than non-callable bond yields III. As interest rates fall, callable bonds trading at a premium will rise in value at a greater rate than non-callable issues IV. Call premiums usually fully compensate the bondholder for any lost income arising from the bonds being called
I and II
When must an "at the opening" and an "at the closing" order be filled? I. An "at the opening" order is to be filled at the opening price II. An "at the opening" order is to be filled as close to the opening time as possible III. An "at the close" order is to be filled at the closing price IV. An "at the close" order is to be filled as close to the closing time as possible
I and III
Which of the following statements are TRUE regarding corporate obligations? I. Corporate bonds are traded on the NYSE II. Corporate bonds are not traded on the NYSE III. Corporate bonds are traded over-the-counter IV. Corporate bonds are not traded over-the-counter
I and III
Which statements are TRUE about non-managed fee based accounts? I. The customer must be provided with a disclosure document prior to account opening II. The customer must be provided with a disclosure document within 15 business days of account opening III. The account must be reviewed at least annually for its appropriateness as a fee based account IV. The account must be reviewed at least bi-annually for its appropriateness as a fee based account
I and III
Which statements are TRUE when comparing statutory versus cumulative voting? I. Cumulative voting is considered to be an advantage for the small investor II. Statutory voting is considered to be an advantage for the small investor III. Cumulative voting allows for disproportionate voting weight to be placed on selected directors IV. Statutory voting allows for disproportionate voting weight to be placed on selected directors
I and III With "cumulative" voting, shareholders can accumulate votes and place them on any directorship (or combination of). "Statutory" voting cannot accumulate votes.
A due bill is required when: I. a stock is purchased before the ex date in a regular way trade II. a stock is purchased after the ex date in a regular way trade III. the trade settles before the record date IV. the trade settles after the record date
I and IV
When comparing CMO Companion Classes to Planned Amortization Classes, which statements are TRUE? I. The PAC has a more certain maturity date II. The Companion Class has a more certain maturity date III. The PAC has a higher level of prepayment risk if interest rates fall IV. The Companion Class has a higher level of prepayment risk if interest rates fall
I and IV
A customer enters an order to buy 500 shares of ABC stock at $38.00 IOC. 200 shares are filled at $38.00; 200 shares are filled at $37.50; and 100 shares are not filled. Which statements are TRUE? I. The customer must accept the partial execution II. The customer can reject the partial execution III. The trader can make subsequent attempts to fill the remainder of the order IV. The trader cannot make subsequent attempts to fill the remainder of the order
I and IV An immediate or cancel order requires the trader to execute the order in part or in full in one attempt, with the unexecuted portion of the order (if any) canceled. No additional execution attempts are allowed. The customer must accept the partial fill of this order; with the remaining 100 shares that are unfilled canceled.
Which of the following participate in the Eurodollar bond market? I. Domestic investment banks II. Foreign commercial banks III. Domestic commercial banks IV. Domestic thrift institutions
I, II, III
Which of the following statements about margin requirements are TRUE? I. Payment is required promptly, but no later than 5 business days after trade date, in either a long and short account II. $2,000 equity minimum is the same for both long and short accounts III. Maintenance margin percentages are 30% for long accounts and 25% for the short accounts IV. Initial margin percentages are the same for both long and short accounts
I, II, IV
The Federal Reserve would permit which of the following to be "primary" U.S. Government securities dealers? I. Commercial banks II. Domestic broker-dealers III. Foreign broker-dealers IV. Thrift institutions
I, II, and III
Which of the following issue agency securities? I. FNMA II. FHLMC III. FRB IV. FHLB
I, II, and IV The Federal Reserve Bank does not issue bonds. Fannie Mae (FNMA) and Freddie Mac (FHLMC) issue mortgage-backed pass through certificates. The Federal Home Loan Banks (FHLB) issues short term and long term bonds.
Under the rules of the Options Exchanges, if a customer's financial condition changes materially, then which of the following will be amended? I Options Disclosure Document II Options Agreement III New Account Form Information
II and III only
Which of the following statements are TRUE about the CBOE Order Support System? I. Orders are directed to the brokerage firm's communication post on the exchange floor II. Orders are routed directly to the trading post, bypassing the firm's communication post III. Execution notices are sent to the brokerage firm's communication post on the exchange floor IV. Execution notices are sent directly from the trading post to the brokerage firm
II and IV
Which statements are TRUE regarding DK notices? I They are sent to customers II They are sent to contra-brokers III They are used to confirm the details of the trade IV They are used to reconcile unmatched trades
II and IV
