Series 65: Unit 23 Quiz 2

The minimum size order that would be considered a block trade is A. 500 shares B. 100,000 shares C. 10,000 shares D. 1,000 shares

$10k shares

Which of the following orders would be used to protect a short sale profit? A. A buy stop B. A sell stop C. A buy limit D. A sell short

A buy stop

In general, it could be said that an investor is exposed to the greatest potential risk of loss when maintaining A. a discretionary account B. a cash account C. a wrap fee account D. a margin account

A margin account

A broker-dealer acting as a principal in a trade would A. must disclose to clients the amount of earnings he made on principal transactions in excess of the amount he would have made had he charged a commission B. must always disclose the amount of markup on a client's confirmation statement C. add a markup to the offering price when selling shares to a client D. add a markup to the bid price when offering shares to a client

Add a markup to the offering price when selling shares to a client

When a broker-dealer acts in the capacity of a principal in a trade, the firm has acted A. as a contra party to the trade B. in an unethical manner C. for the benefit of the client D. as an agent

As a contra party to the trade

Savant Investment Managers (SIM) has a client with a long position in PQR common stock. The position has an average cost per share of $30, and with PQR currently selling at $50 per share, the client is interested in a method that will allow her to protect some of the unrealized profit without an expenditure of funds. Her representative at SIM could suggest A. entering a sell stop order at $55. B. buying PQR 45 put options. C. entering a sell stop order at $45. D. entering a buy stop order at $45.

Entering a sell stop order at $45

A customer's limit order to buy 500 shares of QRS at 60 is executed and the agent reports the trade execution to the customer. One hour later, the customer notices that QRS is down 2 points and informs the agent that he no longer wants the stock and is not planning to pay for it. The agent should tell the customer that A. he owns the stock and must submit payment B. he personally will repurchase the securities from the customer for the price paid C. the firm will repurchase the securities from the customer for the price paid D. he may sell the stock at the purchase price in the open market

He owns the stock and must submit payment

An agent of a broker-dealer has a client who lost her job but will be starting a new job in 3 weeks. The client is in need of $900 for the 3-week gap. Under what circumstances may the agent arrange a loan for the client? A. If the client has $5,000 in her brokerage account B. If the loan is repaid within 30 days C. If the client is agent's niece D. If the loan is less than $1,000

If the client has $5k in her brokerage account

A client calls her agent and very excitedly says, "I just received a confirmation for my recent purchase and notice that you didn't charge me any commission; thank you so much". What would be the appropriate response? A. If the confirmation states that the broker-dealer acted in a principal capacity, we charged you a markup instead of a commission. B. We like to do little favors periodically for our clients to keep them happy. C. You probably misread the confirmation and didn't notice the commission. D. There must be an error and I'll make sure you receive a new confirmation with the proper commission charge.

If the confirmation states that the broker-dealer acted in a principal capacity, we charged you a markup instead of a commission

A broker-dealer that operates on a fully disclosed basis is one that A. introduces its customers to the broker-dealer's clearing firm. B. makes its fee schedule available on the non-password protected portion of its website. C. always discloses if it is acting in a principal or agency capacity. D. discloses commissions and markups (or markdowns) on customer trade confirmations.

Introduces its customers to the broker-dealer's clearing firm

A client of a broker-dealer who sold 200 shares of XYZ stock short, A. is obligated to return the 200 shares borrowed. B. might consider purchasing put options on XYZ as protection. C. must repay the money borrowed to effect the short sale. D. has a bullish outlook on XYZ stock.

Is obligated to return the 200 shares borrowed

All of the following are advantages of a margin account except A. leveraging is possible B. money is borrowed C. less cash is needed to purchase securities D. losses are minimized

Losses are minimized

A broker-dealer must provide a risk disclosure document to a customer before opening which of the following accounts? A. Wrap fee B. Margin C. Joint D. Custodial

Margin

Under the Securities Exchange Act of 1934, which of the following is (are) true regarding the authority of the SEC to suspend trading? 1. The SEC may suspend all trading on a specific exchange for up to 90 days. 2. The SEC may summarily suspend trading on a particular nonexempt security for up to 10 days. 3. The SEC may suspend trading on exempt securities.

The SEC may suspend all trading on a specific exchange for up to 90 days and the SEC may summarily suspend trading on a particular nonexempt security for up to 10 days

Which of the following is the act that extended the regulation of securities to the secondary market or exchanges? A. The Securities Act of 1933 B. The Investment Company Act of 1940 C. The Securities Exchange Act of 1934 D. The Investment Advisers Act of 1940

The Securities Exchange Act of 1934

When an agent receives a customer order to purchase a specific security, an order ticket is prepared. When submitted for execution, the order ticket must contain A. the execution price. B. the customer's name. C. the customer's address. D. the account number.

The account number

An investor owns a long-term U.S. Treasury bond with a 5% coupon and 15 years to maturity. The client wishes to sell and receives a quote from a dealer of 104.22. This number represents A. the offer price B. the bid price C. the yield to maturity D. the premium

The bid price

Which of the following statements about bid and asked prices are true? 1. The bid price is the price a dealer is willing to pay to buy a security. 2. The asked price is the price a dealer is willing to accept to sell a security. 3. The bid price for a security is higher than the asked price for the security.

The bid price is the price a dealer is willing to pay to buy a security and the asked price is the price a dealer is willing to accept to sell a security

Broker-dealers provide a bid and offer price when functioning as market makers. In this context, A. the bid price represents the price the market maker is willing to pay for the stock and the offer price is the market maker's selling price. B. the bid price represents market maker's selling price and the offer price is the price the market maker is willing to pay for the stock. C. the bid and offer prices refer to the market maker's buying and selling prices including commissions. D. the bid and offer price refer to the price the market maker is willing to pay for the stock

The bid price represents the price the market maker is willing to pay for the stock and the offer price is the market maker's selling price

Jimmy Merchant is an agent with FLATT securities, a registered broker-dealer. When Jimmy submits an order ticket to purchase securities for a client, all of the following would appear except A. Jimmy's name B. the broker-dealer's name C. the current market price of the security D. the account number

The current market price of the security

Margin is borrowing money from a broker-dealer to buy a stock using the investment as collateral. In many cases, the brokerage firm then uses that collateral for a loan from a bank. Which of the following account documents authorizes the firm to pledge the customer's stock? A. The credit agreement B. The loan consent agreement C. The securities pledge agreement D. The hypothecation agreement

The hypothecation agreement