STC SIE Course - Progress Exams/Custom

Chapter 6 An investor has purchased 1,000 shares of a mutual fund for a total investment of $50,000. The investor has also received $3,000 in dividends and $500 of interest and reinvested these distributions back into the fund. What's the investor's total cost basis for the mutual fund shares? A-$50,000 B-$53,500 C-$3,000 D-$3,500

$53,500

Chapter Four A U.S. government bond is selling in the market at 95.28. The dollar value of this bond is: U.S. government bonds are quoted as a percentage of par with a fraction in 32nds of a point. Therefore, a T-bond quoted at 95.28 is equal to 95 28/32. By converting the fraction to a decimal, the quote becomes which is 95.875% of the par value of $1,000. $1,000 x 95.875% = $958.75.

$958.75

Chapter 7 XYZ Mutual Fund, an open-end investment company, has an NAV of $20 and a public offering price of $21.40. The prospectus states that the sales charge for purchases of fund shares of $25,000 through $49,999 is 4%. Approximately how many shares can the customer buy for $35,000? A-1,600 shares B-1,635 shares C-1,680 shares D-1,750 shares

1,680 shares To compute the number of shares that can be purchased, first determine how much of the investment will go to the sales charge. This amount is $1,400 ($35,000 investment x 4% sales charge). This leaves $33,600 for purchasing shares. The investor will purchase 1,680 shares ($33,600 divided by $20 NAV per share). You do not divide by the public offering price since it includes a sales charge and you have already deducted $1,400 in sales charges.

Chapter Five For corporate bonds, accrued interest is calculated based on: A-Actual calendar days in every month and 365 days in the year B-30 days in every month and 360 days in the year C-Actual calendar days in every month and 360 days in the year D-30 days in every month and 365 days in the year

30 days in every month and 360 days in the year

Chapter 6 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: A-5.30% B-More than 5.30% C-Between 5.30% and 5.75% D-5.75%

5.30%

Chapter 7 Which of the following is considered a solicited order? A-An RR contacts a customer to purchase a specific security. B-An RR contacts a customer to provide him with a recommendation. C-A customer contacts an RR to purchase a security that was recommended by his neighbor. D-A customer contacts an RR to purchase a security after receiving a research report.

An RR contacts a customer to purchase a specific security.

Progress Exam 02A A fund which invests in companies that pay high dividends is: A-A growth fund B-An equity income fund C-A sector fund D-A no-load fund

An equity income fund A mutual fund investor who is most interested in current yield (i.e., regular dividend checks) as an investment objective will most likely purchase an equity income fund. A growth fund invests in companies that are growing rapidly and pay out a small percentage of earnings in dividends. Investors who are seeking capital gains will most likely purchase a growth fund. A no-load fund is an open-end investment company that does not have a sales charge and whose investment objectives may be income or capital gains. A sector fund is a mutual fund that invests primarily in a particular industry or geographical area, such as the energy or high technology industries.

Progress Exam 02A Which of the following securities are based on the credit rating of the issuer? A-An exchange-traded fund (ETF) B-A mutual fund that contains only non-investment-grade securities C-A closed-end bond fund D-An exchange-traded note (ETN)

An exchange-traded note (ETN Exchange-traded notes (ETNs) are a type of unsecured debt security. ETNs carry issuer risk that is tied to the creditworthiness of the financial institution backing the note. If the issuer's financial condition deteriorates, it can impact the value of the ETN negatively, regardless of how its underlying index performs. The credit rating of the securities included in a mutual fund, closed-end bond fund company, or ETF has an impact on these types of securities. These securities are not affected by the ratings of the company that is issuing the fund or ETF.

Chapter Five Which of the following approvals is required before a municipality can begin making payments on a moral obligation bond? A-Approval by a majority of legal age voters B-Approval by the state legislature C-Approval by the bond trustee D-Approval by the appropriate state agency

Approval by the state legislature

Chapter Five Which of the following securities is an example of a collateralized time draft A-Commercial paper B-American Depositary Receipts C-Bankers' acceptances D-Eurodollars

Bankers' acceptances

Chapter Four Which of the following statements is TRUE if interest rates rise?

Both bond and bond fund prices will fall.

Progress Exam 02A Which of the following is the best hedge for a long stock position? A-Buying a put B-Buying a call C-Selling a call D-Selling a put

Buying a put To hedge (protect) a long stock position, an investor should buy a put. If the value of the stock position declines, the put could be exercised which allows the investor to sell the stock at the option's strike price.

Chapter Three If a corporation believes that its stock is undervalued, which of the following actions will cause the share price to rise? A-Issuing additional shares B-Issuing preemptive rights C-Issuing bonds with a warrant attached D-Buying back some of the shares

Buying back some of the shares

Progress Exam 02B Which of the following terms is NOT associated with a variable annuity? A-Surrender charge B-Death benefit C-Commission D-Sales charge

Commission

Chapter 7 All of the following are likely to be found in the portfolio of a money-market fund, EXCEPT: A-Bank certificates of deposit B-Treasury bills C-Treasury bonds that have a short time to maturity D-Common stock

Common stock

Chapter Three Which of the following investments is the MOST suitable fterm-10or a person who is interested in aggressive growth? A- High-yield bond fund B- Common stock C- High-rated bond D- Preferred stock

Common stock

Chapter Three A method of voting that gives smaller, less substantial stockholders a greater degree of voting power over the larger, more substantial stockholders is: A-Statutory voting B-Cumulative voting C-Voting by proxy D-Special majority voting

Cumulative voting

Chapter Three A company in which your client owns stock is about to make a rights offering. The client informs you that he does not plan on subscribing to the offer. You would tell the client that his proportionate ownership interest in the company would: A-Decrease B-Increase C-Remain unchanged D-Depend on the market value of the stock

Decrease

Progress Exam 02A The main difference between open-end and closed-end investment companies is that open-end investment companies: A-Issue a fixed number of shares B-Determine their share prices once per day C-Have shares that can be bought and sold on an exchange D-Have shares that are sold in an IPO

Determine their share prices once per day Open-end management companies (more likely referred to as mutual funds) have shares that are purchased directly from the mutual fund and only priced once per day. On the other hand, closed-end investment company shares are initially sold in an IPO with a fixed number of shares, and then the shares trade on an exchange.

Chapter 6 A corporation will be paying a cash dividend to its shareholders. On what date will the market price of the stock be reduced? A-Declared date B-Ex-date C-Record date D-Payment date

Ex-date

Chapter Five U.S. government agency issues are: A-Exempt from federal taxes. B-Exempt from registration under the Securities Act of 1933. C-CIssued in bearer form only. D-General obligations of the federal government.

Exempt from registration under the Securities Act of 1933.

Chapter Two Which of the following organizations enforces municipal securities regulations for broker-dealers?

FINRA

Chapter One The purpose of a depository facility is to:

Hold securities in book-entry form

Chapter Five A corporation that has filed for bankruptcy is to be liquidated. Which of the following securities issued by that corporation has seniority in the liquidation process? A-Mortgage bonds B-Debenture bonds C-Common stock D-Participating preferred stock

Mortgage bonds

Chapter Five Which of the following recommendations will protect assets if there's an impending large market decline? A-Sell covered calls on all of the stocks in a portfolio B-Buy an S&P 500 ETF C-Move investments into cash and equivalents D-Invest in a managed large-cap growth fund

Move investments into cash and equivalents

Chapter 9 One benefit of direct participation programs (DPPs) is that they: A-Frequently generate immediate gains B-Offer the ability to offset passive income with passive losses C-Are low risk investments D-Offer liquidity

Offer the ability to offset passive income with passive losses

Chapter 7 The 5% markup policy applies to a: A-New issue of common stock B-Municipal bond trade C-Purchase of mutual fund shares D-Proceeds transaction

Proceeds transaction

Chapter Two The primary purpose of a self-regulatory organization (SRO) is to:

Promote fair and equitable practices among members

Chapter 6 On the ex-date of a cash dividend, the subject security would be: A-Reduced by the amount of the dividend B-Increased by the amount of the dividend C-Unchanged D-Valued at a greater amount

Reduced by the amount of the dividend

Progress Exam 02B Two years ago, an investor bought mutual fund shares. Today, if the investor intends to purchase additional shares, she can obtain a reduced sales charge by using: A-A letter of intent B-Dividend reinvestment C-Dollar cost averaging D-Rights of accumulation

Rights of accumulation

Chapter Five A town has started the construction of public sewers. This project is likely paid by a(n): A-Special assessment bond B-Industrial development bond C-Moral obligation bond D-Equipment trust certificate

Special assessment bond

Chapter 7 An order that becomes a market order when a stock trades at or below (or at or above) a particular price is considered a: A-Market order B-Limit order C-Stop order D-Stop-limit order

Stop order

Chapter Five Interest on U.S. Treasury securities is: A-Subject to federal and state income tax B-Exempt from federal and state income tax C-Subject to federal income tax, but exempt from state income tax D-Subject to state income tax, but exempt from federal income tax

Subject to federal income tax, but exempt from state income tax

Chapter One Which of the following choices does NOT hold customer cash or securities?

The Depository Trust Company

Chapter One The issuer and guarantor of exchange-traded options is:

The Options Clearing Corporation

Chapter Four For a bond, what does a call provision describe to investors?

The call date and call price

Chapter Two The Investment Advisers Act of 1940 regulates which of the following?

The fee charged by an accountant for providing advice concerning securities

Chapter 6 Which of the following statements is TRUE if a cash dividend is distributed on a stock that's been sold short? A-The individual who sold short the stock receives the dividend. B-The broker-dealer that executed the transaction receives the dividend. C-The individual who sold the stock short pays the dividend to the lender. D-Any dividends are forfeited.

The individual who sold the stock short pays the dividend to the lender.

Chapter One A broker-dealer is clearing its trades through another broker-dealer but is not disclosing specific information regarding its clients. Who is responsible for maintaining the account records?

The introducing broker-dealer.

Chapter Five Which of the following statements about municipal revenue bonds is NOT TRUE? A-They are not subject to the debt limitations that apply to general obligation bonds B-The maturity of the bonds will equal the useful life of the facility being built C-They can be issued by states, political subdivisions, interstate authorities, and intrastate authorities D-The interest and principal payments are derived from the funds being generated by the facility

The maturity of the bonds will equal the useful life of the facility being built

Chapter 7 Which of the following statements is NOT TRUE concerning a customer who is short a security? A-The maximum gain is limited B-The maximum loss is limited C-The customer is bearish D-It is considered a speculative strategy

The maximum loss is limited

Chapter Four The value of the conversion feature on a convertible bond is determined by

The stock price

Chapter Three Preemptive rights provide which of the following benefits to their holders? A-The ability to vote when they cannot attend the shareholders' meeting. B-A guarantee that bonds can be purchased at a predetermined price from the issuer. C-Their proportionate ownership will not be diluted if additional shares are issued. D-That dividends will continue to be paid on their common stock.

Their proportionate ownership will not be diluted if additional shares are issued.

Chapter One Which of the following statements is TRUE concerning electronic communication networks (ECNs)?

They can be used by investors who want to trade anonymously.

Chapter Five All of the following statements are TRUE concerning both auction rate securities (ARSs) and variable-rate demand obligations (VRDOs), EXCEPT: A-Interest rates are set at specified intervals B-They are often issued by municipalities C-They are long-term securities with short-term trading features D-They have a put feature allowing the holder to redeem the security at par

They have a put feature allowing the holder to redeem the security at par

Chapter 6 The cash flow received from dividends and/or interest, plus any appreciation or depreciation in the value of an investment, is referred to as the: A-Realized gain B-Return of capital C-Total return D-Basis

Total return

Progress Exam 02A An annuitant has been receiving payments from a variable annuity for six years and, at the time of his death, his beneficiary receives a lump-sum payment. The annuity payout option is: A-Straight life annuity B-Joint and last survivor life annuity C-Unit refund life annuity D-Straight life annuity with a five-year period certain

Unit refund life annuity

Progress Exam 02A A customer purchased a premium bond which gives the issuer the ability to redeem the entire issue prior to maturity. Which yield is MOST relevant? A-Yield-to-call B-Yield-to-maturity C-Current yield D-Nominal yield

Yield-to-call The yield-to-call (YTC) represents a bond's yield if it is called or redeemed prior to maturity; however, the yield-to-maturity (YTM) represents the bond's true yield if it is held to maturity. Since a premium bond's YTC is lower than its YTM, the YTC must be used when quoting the yield to a customer. A bond's nominal yield is its coupon rate or annual return, while a bond's current yield measures what the investor will receive each year based on her (potential) purchase price.