SERIES 7 TOP-OFF STUDY QUESTIONS

How long does it take for an option EXERCISE notice to be settled?

T + 2 AFTER THE OCC RECEIVES THE EXERCISE NOTICE

When a ticker tape displays " GE " 10000s 57.37 what does that mean?

10,000 SHARES OF GE WERE SOLD AT $57.37

If an RR requests more than _________ security holders vote for, against, or abstain from voting for any proposal, they will be REQUIRED to file as a _______________ under the "Proxy Participant Rules" BEFORE engaging in such activities. (NYSE Rule 457)

10; PARTICIPANT

Looking at this ticker tape, want is the trading activity of this stock? " WLC " 40s 44.34

4,000 SAHRES OF WLS WERE SOLD AT $44.34

A company has authorized 10,000,000 shares of common stock. 8,000,000 shares have been issued and 4,000,000 are treasury. How many outstanding shares are there?

4,000,000 SHARES OUTSTANDING... (ISSUED - TREASURY = OUTSTANDING)

Ernie sells short 500 shares of XYZ co. at at $50 per shares and XYZ pays a 15% stock dividend. How many total shares must he buy to cover his short position?

575 SHARES... 500 * .15 = 75 500 + 75 = 575

When does the EXERCISE CUT-OFF TIME happen?

5:30PM ET ON THE THIRD FRIDAY OF THE EXPIRATION MONTH

When ABC is at 72.50, an investor trading LEAPS options buys 10 ABC Jun 60 calls @23.50 and sells 10 ABC Jun 90 calls at 10. The investors breakeven is...

73.50..... **DEBIT CALL SPREAD** = (NET DEBIT + STRIKE OF LONG POSITION) (13.50 + 60 = 73.50)

When determining suitability, what is "Quantitative Suitability"

MEMBER/RR HAVE REASONABLE BASIS BELIEVING A SERIES OF TRANSACTIONS, NOT IN ISOLATION, BUT TOGETHER ARE SUITABLE FOR CUSTOMER AND NOT EXCESSIVE.

How long do EQUITY/INDEX LEAPS take to expire?

UP TO 3 YEARS... (39 MONTHS EXACTLY)

What is a HOLDING COMPANY?

a corporation that owns enough of ANOTHER CORPORATION'S VOTING SHERES, where they can INFLUENCE MGMT, POLICIES AND BOARD OF DIRECTORS.

What happens if a customer of an RR develops dementia?

A COURT ORDER WILL BE REQUIRED FOR THE RR TO TAKE ORDERS FROMS A *THIRD PARTY*

HOW LONG must options communications be retained by the firm for?

3 YEARS

What is a DIAGONAL SPREAD

A SPREAD WITH DIFFERENT EXERCISE PRICES AND DIFFERENT EXERCISE MONTHS

What is a WHEN ISSUED (WI) stock or bond?

A STOCK OR BOND THAT *HAS NOT YET COME TO MARKET*

WLL Pr 30 s $38.50 s What is the trading activity in WLL Pr?

300 SHARES ARE TRADED AT $38.50... 30 * 10 = 300 SHARES... Pr = PREFERRED STOCK... MEANS THERES 20 SHARES A ROUND LOT

In a __________________ Arrangement of a DPP, investors DO NOT KNOW the identity of the assets they invest in until AFTER PARTNERSHIP IS FORMED.

"BLIND POOL ARRANGEMENT"

A customer sells short 1,000 shares of XYZ @ 3when REG T is 50% How much must customer deposit?

$3,000... ($2.50-$5.00 RANGE = 100% OF MKT VALUE)... $3.00 * 1,000 = $3,000

A customer's margin account appears as follows: - $100,000 MV Long - $40,000 DB - $60,000 EQ The securities in this customer's account increases by $25,000 and the DB decreases by $5,000. What is now the buying power?

$55,000... ($125,000 / 2 = $62,500 - $35,000(DB) = $27,500) ($27,500 * 2 = $55,000 = BUYING POWER)

An investor has a short-term capital gain of $3,500. He is in the 24% tax bracket. What is his tax liability?

$840... $3,500 * .24 = $840

When liquidating securities to satisfy a minimum maintenance call, how much of the account must the firm liquidate?

* 4 x THE AMOUNT OF THE CALL*

Under the "Taping Rules", how long must tape recordings must be maintained for?

*3 YEARS* - THE FIRST TWO IN A READILY ACCESSABLE LOCATION

WHAT FACTORS would cause a CMO'S PRINCIPAL to be returned sooner than expected? (Implied Call/Pre-Payment Risk)

-SHARP DECLINE IN INTEREST RATESCAUSING ICREASES IN REFINANCING ACTIVITIES -MORTGAGE HOLDERS PAY OFF THEIR LOAS AHEAD OF SCHEDULE.

What is the REG T margin requirement for a Margin Account LONG?

50% OF PURCHASE PRICE OR $2,000, *WHICHEVER IS GREATER*... - IF FULL PURCHASE PRICE IS < $2,000, CUSTOMER MUST DEPOSIT *FULL AMOUNT OF PURCHASE.

Common and preferred dividends received by one corporation from another, are _________ excluded from taxable income... thereby only ______ is subject to taxation.

50%..... 50%

If a customer SELLS for MORE than they buy ON THE SAME DAY in a restricted account, the customer is allowed to W/DRAW __________ of the ______________ of the buy and sell

50%; DIFFERENCE

How many securities can make up a NARROW-BASED index option?

9 OR FEWER SECURITIES

Calculate the DOLLAR VALUE of a bond that is quoted at 99.5

995.... one point on a bond is $10

A Customer requesting a paper copy of the fund's prospectus, statement of additional information, and most recent annual reports must be furnished with them in HOW LONG?

3 BUSINESS DAYS... MY EMAIL OR FIRST CLASS MAIL... INFORMATION MUST REMAIN AVAILABLE FOR 6 MONTHS AFTER REQUEST.

What is the formula for "Current Ratio?" AND what does it MOST accurately describe? a.) Profitability b.) Coverage c.) Debt d.) Liquidity

CURRENT ASSETS / CURRENT LIABILITIES D.) MOST ACCURATELY DESCRIBES **LIQUIDITY** - STANDARD MINIMUM IS 2:1

When an investor purchases a bond, what are they paying for it?

CURRENT MARKET PRICE + ACCRUED INTEREST

What does SHORT AGAINST THE BOX mean and what is it generally done for?

CUSTOMER IS LONG SECURITY IN THEIR ACCOUNT ANS SELLS SAME SECURITY SHORT... DONE TO ARBITRAGE, OR HEDGE ANTICIPATED DECLINE IN STOCK PRICE

How do you calculate CURRENT YIELD on a Municipal Bond?

CY = ANNUAL INTEREST / MKT PRICE

A municipal securities dealer normally does NOT...? a.) Ask for bids b.) Ask for offers c.) Commit for primary underwritings d.) Schedule settlement dates

D.)

All of the following are characteristics of "Variable Rate Demand Municipal Bonds" EXCEPT..? a.) The interest rate is reset periodically b.) Bondholder may "put" the bond back to a municipal bond dealer at par plus accrued interest when interest is reset c.) They are issued in par increments of $100,000 d.) Bondholder remains fully exposed to interest rate risk

D.)

An investor wants to place an order to buy securities because odd-lot purchases are twice odd-lot sales, and thinks this is a buying opportunity. The RR should....? a.) Advise the customer to increase the order b.) Take the order telling investor that his technical analysis is excellent c.) Describe the odd-lot theory and its use in fundamental analysis d.) Properly explain odd-lot theory and advise client to rethink order

D.)

CMO's are collateralized by all of the following EXCEPT...? a.) Conventional issuers b.) FHA Mortgages c.) Fannie Maes d.) Sally Maes

D.)

ALL the following are examples of regular tock splits EXCEPT..? a.) 3:2 b.) 5:4 c.) 8:7 d.) 2:3

D.) 2:3

Which of the following CANNOT open a securities account under securities industry regulations? a.) Husband and wife b.) Two unrelated adults c.) Two business partners d.) An adult and a minor

D.) ADULT AND MINOR

SPECULATIVE investors would primarily be concerned with...? a.) Market Risk b.) Liquidity Risk c.) Regulatory Risk d.) Capital Risk

D.) CAPITAL RISK

When a market maker is asked for a quote, prices quoted are assumed to be... a.) Firm for 1,000 shares b.) Subject quotes c.) Firm for 1 to 99 shares d.) Firm for 100 shares

D.) FIRM FOR 100 SHARES

A customer is SHORT 5 ABC JUN 45 CALLS and is SHORT 5 ABC JUN 35 PUTS has put on which of the types of market strategies? a.) bullish b.) bearish c.) mixed d.) nuetral

D.) NUETRAL

Why are Hedge Funds NOT liquid?

DAILY TRADING/PRICING IS NOT OFFERED... ALLOW REDEMPTION OF INTERESTS MONTHLY/QUARTERLY/ANNUALLY

A 7% coupon bond that is trading with a yield of 8.3% means the bond is trading at a....

DISCOUNT...' YTM OR BASIS > COUPON RATE

In agreements among underwriters there are 2 types of agreements, EASTERN and WESTERN, what do they mean?

EASTERN: SIGNED JOINTLY AND SEVRALLY (UNDIVIDED LIABILITY (HELP THY NEIGHBOR)) WESTERN: SIGNED SEVERALLY BUT *NOT* JOINTLY (DIVIDED LIABILITY (NOT HELPING THY NEIGHBOR))

TRUE FALSE: Short against the box CAN be used to postpone taxation to a future date

FALSE

TRUE OR FALSE Member firms have to send proxy material to ERISA Plan Fiduciaries

FALSE

TRUE OR FALSE: A B/D may solicit transactions in muni securities for the account of an investment company for the return of shares or units.

FALSE... NO RECIPROCAL DEALINGS ARE ALLOWED

TRUE OR FALSE: Annuity contract holders are taxed on dividends EACH YEAR as ordinary income.

FALSE... **TAX-DEFERRED**

Promissory Note disputes will be resolved by....?

FINRA APPOINTED CHAIR-QUALIFIED PUBLIC ARBITRATORS

What is an "Unincorporated Organization"? and what is the main disadvantage of them?

GROUP OF 2+ INDIVIDUALS WHO VOLENTARILY ENTER INTO AGREEMENT TO FORM ORG. FOR A COMMON PURPOSE. - *UNLIMITED PERSONAL LIABILITY* (EX. HOME OWNER'S ORGANIZATION)

Premiums on corporate bonds may.... I.) Be amortized over the life of the bond II.) Taken at a loss in full at maturity

I AND II

Maintenance margin calls can be satisfied with I.) Deposit of cash equal to the call II.) Deposit of cash equal to the "loan value" III.) Deposit of securities equal to the call IV.) Deposit of securities w/ a "loan value" equal to the call

I AND IV ONLY

Debit balance in a margin account would by INCREASED by...? I.) A cash withdrawal II.) interest charged on the debit balance III.) Cost of securities purchased on a margin IV.) Wen long sale is made and no withdrawal takes place V.) Securities deposited and withdrawn

I, II, AND III ONLY... IV WOULD DECREASE DEBIT BALANCE V DOES NOT CHANGE DEBIT BALANCE

Under MSRB rules, which if the following records must be kept by a broker-dealer for 6 YEARS? I.) Account Records II.) Complaints III.) Ledgers IV.) Official Statements

I, II, AND III ONLY... NO RETENTION PERIOD REQUIRED FOR OFFICIAL STATEMENTS

Examples of government agencies that issue debt instruments are... I.) Federal Home Loan Banks II.) Federal Farm Credit Bank III.) Fannie Mae IV.) Sally Mae V.) Ginnie Mae

I, II, III, AND V ONLY

Which of the following are types of investment companies? I.) Face Amount Certificated Companies II.) Unit Investment Trusts III.) Hedge Funds IV.) Management Companies

I, II, and IV ONLY

Municipal bond dealers may borrow from another dealer's inventory. When such borrowing occurs, the borrowing dealer may... I.) Sell bonds to customers before buying them II.) Sell bonds to customers only after buying them III.) Sell bonds to institutions before buying them IV.) Buy the bonds and keep them in their inventory

I, III, AND IV ONLY

Which of the following are paid by the TENANT when a "Triple Net Lease" is used? I.) Property taxes II.) Debt service III.) Insurance IV.) Operating and maintenance expenses

I, III, AND IV ONLY

Which of the following are reasons for a municipality to issue "Refund Bonds?" I.) To lower interest costs II.) To lower the cost of the bonds for investors III.) To liberalize the bond's indenture provisions IV.) Change the maturity or amortization schedule of these bonds

I, III, AND IV ONLY

MATCH THE TERMS: I.) Sell Stops II.) Buy Stops a.) speed up the rise in stock price in a BULL market b.) Speed up the decline in stock price in a BEAR market

I.) AND B.) ; II.) AND A.)

What are the 4 types of trusts for a trust account?

I.) REVOCABLE (CHANGABLE) II.) IRREVOCABLE (UNCHANGABLE) III.) LIVING (REVOCABLE OR IRREVOCABLE, SET UP WHILE *GRANTOR IS ALIVE*) IV.) TESTAMENTARY (CREATED FROM A WILL)

All of the following factors would be relevant when investing in a Real Estate Partnership EXCEPT...? a.) Other REITs owned by potential customers b.) Potential changes in tax law c.) Qualifications of general partners d.) Anticipated changes in interest rates

A.)

MATCH THE TERMS: Mutual Fund shares are distributed by either... a.) independent distributers b.) directly by the fund I.) Load funds (underwriters) II.) No-load funds

A.) AND I.) B.) AND II.)

A sharp drop in stock prices accompanied by increasing trading volume after a length period of market decline, is described as...? a.) Climax b.) Breakthrough c.) Washout d.) Sell out

A.) CLIMAX... *SELLING CLIMAX* OCCURS AT THE END OF A BEAR MKT

In an OPEN-END fund, capitalization is _________________ a.) constantly changing b.) never changing c.) determined by supply and demand d.) comparable to an index

A.) CONSTANTLY CHANGING... SHARES ARE ISSUED AND REDEEMED DAILY

The markup is determined from the.... a.) Current market price of the security b.) Dealer's cost of the security

A.) CURRENT MARKET VALUE OF SECURITY

Who would benefit from a par call on a high coupon muni bond trading at a premium? a.) Issuer b.) Holder c.) Dealer d.) Trustee

A.) ISSUER

The BEST source for current market level information on municipal securities would be? a.) The Blue List b.) Standard and Poor's Bond Guide c.) Moody's Manual d.) NASDAQ

A.) THE BLUE LIST

Which of the following BEST describes what "Earnings Coverage" means when dealing w/ a revenue bond for a municipality? a.) Available revenue issuer can use to pay debt service b.) Funds set aside to replace or repair a facility c.) Funds issuer sets aside in a sinking fund d.) Amount of insurance to cover catastrophic events that may damage or destroy facility

A.) `

A bank acting as an AGENT may accept customer orders for which of the following? I.) Corporate Stock II.) Corporate Bonds III.) Municipal Revenue Bonds IV.) Municipal GO bonds

ALL OF THE ABOVE

Basis points on $1,000,000 T-Bills are equal to... I.) $100 on a 12 month T-Bill II.) $50 on a 180-day (6-month) T-Bill III.) $25 on a 3 month T-Bill

ALL OF THE ABOVE

Proceeds from the sale of interest in limited partnerships MAY be used for...? I.) Selling Costs II.) Offering Costs III.) Organizational Costs IV.) Acquisition Costs

ALL OF THE ABOVE

Reinvestment of dividends from an investment company... I.) Will increase the investors cost basis II.) Generally reinvested at the NAV III.) Reduce NAV on the ex-date IV.) Ex-date is determined by the fund

ALL OF THE ABOVE

Under REG S-P, "personal information" would include...? I.) Identity and contact information II.) Occupation and employer III.) Address IV.) Tax ID/SSN V.) Account type/information

ALL OF THE ABOVE

Which of the following are ADVANTAGES of investing in a Real Estate DPP? I.) Capital appreciation potential II.) Tax deductions III.) Flow through of income and expenses IV.) Limited liability

ALL OF THE ABOVE

Which of the following are TRUE regarding the accretion on Zero Coupon Municipal Bonds? I.) The amount of accretion is exempt from federal income tax, and may be exempt from state tax II.) Amount of accretion (imputed interest) must be reported annually, even though investor does not receive it until maturity III.) To determine if a ZCMB is trading at a premium/discount to its accreted value, you work from the bonds original yield IV.) They may be callable, if so, its based on the accreted value, and usually called at 102% of current accreted value

ALL OF THE ABOVE

Which of the following are TRUE regarding the terms of the "Pre-dispute Arbitration Agreement?" I.) Customer must provide firm w/ signed acknowledgement or receipt of agreement II.) All parties, agree to arbitrate and waive court claims III.) Decisions of arbitrators are final and binding and cannot be appealed IV.) Upon customer request, firm must provide a copy within *10 business days*

ALL OF THE ABOVE

Which of the following are an example of "Falsifications of Records"? I.) RR asks clients to sign a blank or partially completed form II.) RR altering existing forms w/o client's initial on the changes III.) RR actively falsifying forms by signing the clients name and initials or reproducing the signature in some way

ALL OF THE ABOVE

Which of the following are characteristics of STRIPS/Treasury Receipts/Zero Coupon Treasury Bonds? I.) They represent a portion of a trust with treasury bonds as the underlying security II.) The trust buys treasury bonds, strips them of their coupons, and offers certificates or receipts with varying securities III.) They trade at deep discounts, which are accreted and taxed annually, and are very volatile IV.) All of the interest accreted is paid at maturity

ALL OF THE ABOVE

Which of the following are characteristics of Series EE Bonds? I.) They are offered in denominations of $25-$10,000 per calendar yr II.) Registered in the investor's name (electronically) III.) Not subject to market fluctuations; no market risk IV.) Redeemable before maturity, after one year V.) Not eligible to be used as collateral for a loan (non-marketable)

ALL OF THE ABOVE

Which of the following are considered "Components of Return"? I.) Interest II.) Dividends III.) Unrealized/Realized Gains or Losses IV.) Return on Capital V.) Cost Basis

ALL OF THE ABOVE

Which of the following are considered correspondence? I.) Brochures IV.) Seminar Scripts II.) Performance Reports V.) Form Letters III.) Telemarketing Scripts VI.) Market Letters

ALL OF THE ABOVE

Which of the following are correct provisions of the REGULATION S-P Privacy Rules? I.) Provides notice to consumers about institution's privacy policy II.) restricts institution's ability to share nonpublic info about consumers to nonaffiliated third parties III.) Customers can prevent information sharing by "opting out" IV.) Requires safeguarding of customer information IV.) Info about customers can be shared with affiliates of B/D

ALL OF THE ABOVE

Which of the following are risks associated with the Municipal Bond Market...? I.) Interest rate risk V.) Reinvestment Risk II.) Market Risk VI.) Regulatory Risk III.) Credit Risk VII.) Political Risk IV.) Inflationary / Purchasing Power Risk

ALL OF THE ABOVE

Which of the following are some of the most common methods used to to compute return on investment in a tax-sheltered investment (DPP)? I.) Payback Method II.) Present Value Method III.) Internal Rate of Return IV.) Cash-on-Cash-Method

ALL OF THE ABOVE

Which of the following is CORRECT regarding DPP SEC registration procedures? I.) A general partner who organizes limited partnership and registers its securities for sale in a state is considered a "Syndicator" and must be registered w/ FINRA II.) In a "Managed Offering" LP interests are distributed by wholesalers III.) Responsibility for exercising due diligence in prospectus statements is borne by the managing underwriter IV.) A 10% maximum underwriting spread is permitted for a DPP program

ALL OF THE ABOVE

Which of the following re TRUE regarding YIELDS on municipal bonds? I.) Yield foe muni bonds, is yield to maturity II.) Nominal yield, current yield, and YTM are all equal when bond is trading at par III.) If yields increase on outstanding bonds, the price of the bond has decreased IV.) If yields decrease on outstanding bonds, the price of the bond has increased

ALL OF THE ABOVE

Which of the following are characteristics of "New Housing Authority /Public Housing Authority (PHA) Bonds?" I.) Revenue bonds issued by a housing authority II.) Interest and principal is paid from the rents collected by tenants III.) Backed by the Public Housing Administration (PHA) of the HUD IV.) Only municipal bonds backed by the US Government V.) Are ALWAYS the SAFEST type of municipal bond issued

ALL OF THE ABOVE WHEN THINKING OF PHA's THINK OF LOW INCOME/SUBSIDIZED HOUSING

Assuming no exceptions have been met, which of the following option materials require an ODD to be delivered at or prior to the time the material is sent to the customer? I.) Market Letters II.) Option Worksheets III.) Research Reports IV.) Prospecting Letters

ALL THE ABOVE

Which sectors are ETN's issued on? I.) Commodities II.) Currencies III.) Emerging Markets IV.) Strategy/Index

ALL THE ABOVE

What do FLEX OPTIONS allow investors to do?

ALLOW INVESTOR TO CUSTOMIZE EXERCISE PRICES, EXERCISE STYLES, AND EXPIRATION DATES

Define DEBIT BALANCE in a margin account.

AMOUNT OF MONEY CUSTOMER HAS BORROWED FROM THE B/D TO PURCHASE MARGINABLE SECURITIES

What is an ARBITRAGE, and whats the purpose of a RICK ARBITRAGE?

ARB: SIMULTANEOUS PURCHASE OR SALE OF THE SAME/SIMILAR SECURITY DONE IN ORDER TO TAKE ADVANTAGE OF PRICE DISPARITIIES IN DIFFERENT MARKETS... RISK ARB: TO PROFIT FROM MERGER OR AQUISITION

What is a TRUST ACCOUNT?

ARRANGEMENT WHERE PROPERTY IS MANAGED BY ONE PERSON FOR THE BENEFIT OF BENEFICIARIES... *TRUSTEE IS A FIDUCIARY*

What is the Automated Confirmation of Transaction (ACT)?

AUTOMATED SYSTEM OPERATED BY NASDAQ, COMPARES TRADE INFO AND FACILITATES REPORTING/CLEARING OF TRADES

What is the Order Audit Trail System (OATS)?

AUTOMATED SYSTEM RAN BY FINRA CAPTURING INFO ON NMS STOCKS AND OTC EQUITIES TO PROVIDE FINRA W/ ACCURATE TIME SECUENCED RECORD OF ORDERS AND TRANSACTIONS

What is SUPER DOT/UNIVERSAL TRADING PLATFORM?

AUTOMATICALLY EXECUTES MARKET AND LIMIT ORDERS **WITHIN 10 SECONDS**... ELECTRONIC SYSTEM EXECUTING ORDERS BY ROUTING THEM DIRECTLY TO THE DMM.

What would happen if overall investors STOPPED buying long-term bonds?

AVERAGE MATURITY ON NEW ISSUES WOULD BE **SHORTER** TO BE MORE ATTRACTIVE TO INVESTORS

According to FINRA rules on mutual funds, which non-cash payments would be permitted and not be required to be in the prospectus I.) Travel expenses for educational meetings for guests of associated person II.) Merchandise and prizes III.) Gifts up to $100 per person, per year IV.) A one time gift valued at $450 per person

II AND III ONLY I is acceptable but NOT FOR GUESTS IV is NOT acceptable

Current common stockholders' interest would be DILUTED by...? I.) A 3-1 split on the common stock II.) Sale of 500,000 shares of previously unissued stock by company III.) 20,000 debentures converted by their holders into common IV.) A 25% stock dividend on common

II AND III ONLY... DILUTION ONLY OCCURS WHEN ***NEW SHAREHOLDERS ARE ADDED***

Which of the following are TRUE of Zero Coupon Treasury Bonds? I.) They cannot be purchased in IRA's II.) Interest is taxable to the investor each year III.) Stripped coupons are not obligations of the US Government IV.) Interest and principal payments are guaranteed by the US Gvt

II AND IV ONLY

Which of the following are characteristics of "Subordinated Working Interest (Reversionary Interest? Sharing Agreement" in an Oil and Gas Partnership? I.) Sponsor bears all the costs related to drilling the wells II.) Sponsor does not bear any costs related to drilling the wells III.) Sponsor shares revenues as soon as oil and gas are extracted IV.) Sponsor shares revenues once costs of investment is recovered

II AND IV ONLY

Real estate/property is taxed at... a.) Market value b.) Assessed value

B.) ASSESSED VALUE, IN MILLS (1MILL = $0.001)

Which of the following is CORRECT about "Concessions?" I.) It is compensation for members of the syndicate buying and reselling bonds from the syndicate manager II.) It is compensation for bona-fide B/D's not part of the syndicate group, who buy and resell bonds from the syndicate III.) Buys bonds at offering price, less a take down discount (usually 1 1/2 points, $15) IV.) Buys bonds at offering price, less a concession (usually 1/2 point, $5)

II AND IV ONLY

Which of the following situations would require employer's consent? I.) Officer at a bank wishes to open a margin account II.) Employee of a member firm wishes to open a margin account III.) Officer at a bank wishes to open a cash account IV.) Employee of a member firm wishes to open a cash account

II AND IV ONLY

Which of the following is TRUE regarding the taxation of MUNICIPAL BOND FUNDS? a.) Investor will only pay taxes on capital gains when fund is sold b.) Distributions of capital gains are subject to taxation at the federal level, dividends are not subject to federal tax c.) All income, capital gains and dividends is exempt from federal tax d.) All income is tax-deferred until fund is sold

B.) CAPITAL GAINS ARE FEDERALLY TAXED.. DIVIDENDS ARE FEDERALLY EXEMPT

REITs pass thru ALL of the following to investors EXCEPT...? a.) Dividends b.) Capital losses c.) Capital gains d.) Interest

B.) CAPITAL LOSSES

When analyzing a bond, when yield moves from 5.4% to 5.75%, the price of the bond... a.) Increased b.) Decreased c.) Remain unchanged d.) Is unrelated

B.) DECREASED

Which rating systems (agencies) evaluate the credit quality and emphasize the default risk of MUNICIPAL Bonds? I.) A.M.'s Best II.) Standard and Poor's III.) Sallie Mae IV.) Moody's

II AND IV ONLY

investment companies are designed for a.) short-term investing b.) long-term investing

B.) LONG TERM INVESTING

A 10-year convertible bond issued by a corporation would be LEAST SUITABLE for which of the following types of funds? a.) income fund b.) money mkt fund c.) balanced fund d.) corporate bond fund

B.) MONEY MARKET FUND

Which of the following is measured by a mutual fund's expense ratio? a.) Profitability b.) Operating Costs c.) Dividend payout percentage d.) Stability

B.) OPERATING COSTS

AN advantage of owning "Zero Coupon Treasury Bonds" is a fixed or pre-determined.... a.) Tax-Deferred Growth b.) Rate of return if held to maturity c.) Tax rate d.) Coupon Rate

B.) RATE OF RETURN IF HELD TO MATURITY

In technical analysis, the term "consolidating" means the market is moving... a.) Upwards b.) Sideways c.) Downwards d.) Not at all

B.) SIDEWAYS

ALL of the following are DEFENSIVE EXCEPT...? a.) automobile repair service b.) tool and die company c.) natural gas supplier d.) supermarket chain

B.) TOOL AND DIE MANUFACTURER

Investors with a short straddle position have... a.) Loss potential equal to combined premiums received b.) Unlimited loss potential c.) Unlimited gain potential d.) Unlimited gain potential and limited loss potential

B.) UNLIMITED LOSS POTENTIAL

A small company has fuds for expansion which it will need in about 8 months. It would invest them in...? a.) Preferred stocks b.) US Treasury Bills c.) Long-term Municipals d.) Corporate Bonds

B.) US TREASURY BILLS

Under the Investment Company Act of 1940, which is NOT an investment company? a.) Unit Investment Trust b.) Variable Annuity c.) Mutual Fund d.) Face Amount Certificate

B.) VARIABLE ANNUITY IS **NOT A INVESTMENT CO.**

Your muni securities firm has an "Out Firm" quote from another dealer on a block of muni bonds. This means that... a.) Your firm must confirm final price before finalizing transaction b.) Your firm can sell these bonds before buying them c.) The bonds have not yet been issued d.) The bonds have not yet been priced

B.) YOUR FIRM CAN SELL THE BONDS *BEFORE BUYING THEM* **BECAUSE YOU KNOW THE SPECIFIC PRICE OF THE BONDS YOUR FIRM IS BUYING**

A married couple is interested in investing in fixed income securities primarily to save for their one-year-old son's college education expenses. They are not interested in earning interest income. They ask their RR for recommendations. Which of the following would be most appropriate for them? a.) High-Yield Bonds b.) Zero Coupon Bonds c.) Blue Chip Stocks d.) Equipment Trust Certificates

B.) ZERO COUPON BONDS... THEY'RE IN NEED NOT CAPITAL ACCUMULATION AND NO INTEREST INCOME.

Define HYPOTHECATION.

B/D MAKES A MARGIN LOAN TO A CUSTOMER, USING THE SECURITIES PURCHASED AS COLLATERAL.

What is the capital gain/loss REPORTED for a buyer and seller of a CALL option when the option EXPIRES?

BUYER: PREMIUM COST AS A CAPITAL LOSS SELLER: PREMIUM PAID AS CAPITAL GAIN

REG T regulates _____________________ . SEC RULE 15C3-3 regulates _________________.

BUYERS SELLERS

Which of the following securities offerings would be in compliance with REGULATION S? a.) Security offered offshore by American company to foreign investors residing in the U.S. b.) Security offered by foreign company to U.S. citizens currently residing in the U.S. c.) Security offered offshore by American company with no directed selling efforts in the U.S. d.) Pvt securities offering by a foreign company directed at U.S. residents.

C)

Auto-dialing used in conjunction w/ pre-recorded messages is prohibited when calling...? I.) Businesses II.) Residences III.) Health-care facilities IV.) Radio common carriers

II, III, AND IV ONLY

The "Certificate of Limited Partnership" MUST be AMMENDED if...? I.) Net loss for the fiscal year II.) Increase in the contributions from the limited partners III.) Change in the profit sharing agreements IV.) Error is discovered in the original certificate

II, III, AND IV ONLY

The CASHIER'S DEPARTMENT in a brokerage firm is responsible for..? I.) Transmittal of orders for execution II.) Customer account transfers III.) Broker and bank deliveries IV.) Bank loans

II, III, AND IV ONLY

The stock of a corporation will be SUSPENDED from NASDAQ trading.... I.) If the company issues non-voting common shares II.) At the request of the corporation III.) Pending an announcement IV.) If net worth of a company declines to a certain amount

II, III, AND IV ONLY

Under FINRA Rules, in the advertising of mutual funds, the ad must disclose: I.) Comparisons to funds within the same family of funds II.) Standard performance information III.) Maximum sales charges IV.) Annual operating fund expense ratio

II, III, AND IV ONLY

What do voting shareholders of an investment company fund vote on? I.) brokerage firm used by the fund II.) Investment advisory firm used by the company III.) change the investment objectives IV.) elect board of directors of the fund

II, III, AND IV ONLY

When an RR makes a recommendation IN WRITING, the recommendation MUST include: I.) Market price of the security for the last 12 months II.) Date of the recommendation III.) Current market value of the security being recommended IV.) If member makes a market in the security, if that's the case

II, III, AND IV ONLY

A Keogh plan may be referred as all of the following EXCEPT... a.) A tax-deferred investment b.) A HR-10 Plan c.) A tax-free trust d.) A self-employed retirement plan

C.)

Which of the following are characteristics of "Development Drilling Programs?" I.) Drill ne wells in areas within areas of unproven reserves II.) Drill new wells in areas of proves reserves III.) Costs of acquiring leases in these areas are more expensive IV.) Returns to investors are less under a successful developmental program

II, III, AND IV ONLY

The LOWEST rating a muni bond may have to qualify for investment grade is...? a.) A b.) Aa c.) Baa d.) Ba

C.) Baa (Baa FOR MOODY'S, OR BBB FOR S&P)

The amount of accretion on a Zero Coupon Municipal Bond is determined by...? I.) Sales price II.) Purchase price III.) Purchase date IV.) Maturity date

II, III, AND IV ONLY... NOT THE SALES PRICE

What could the number of listed options in an options contract adjusted by? I.) Cash Dividends II.) Stock Dividends III.) Stock Splits IV.) Rights Distributions

II, III, IV ONLY

An investor has a high need for liquidity w/ low principal risks to his investments. Which recommendation would be MOST suitable? a.) Treasury Bonds b.) Municipal Bonds c.) Treasury Bills d.) Corporate Bonds

C.) TREASURY BILLS

FINRA Disclosure and Reporting Events are required to be reported to FINRA "Promptly." For purposes of this disclosure, "promptly" means...? a.) Within 2 business days b.) Within 4 business days c.) Within 30 calendar days d.) Within 30 business days

C.) WITHIN 30 *CALENDAR* DAYS

What happens when a CASH DIVIDEND or interest is charged in a margin account?

CASH DIVIDEND: REDUCE DEBIT BALANCE INTEREST: INCREASES DEBIT BALANCE

In a Muni Dealer Joint Account, the dealers may.... I.) Bid on bonds out for bid in a notice of sale II.) Buy bonds for an accumulation account III.) Sell bonds IV.) Effect transactions for a related portfolio V.) Bid on bonds on behalf of customers and institutions VI.) Provide quotes that could indicate more than one market for the bonds quoted

II, III, IV, AND V ONLY

What is a "Pump and Dump"

ILLEGAL PRACTICE OF INFLATING THE PRICE OF SECURITY BY *FITICIOUS TRADING ACTIVITY OR MISLEADING STATEMENTS* ONLY TO SELL SECURITY.

What is the CHINESE WALL?

IMAGINARY BARRIER BTWN INVESTMENT BANKING DPT, RESEARCH DPT, AND TRADING/MKT MAKING DPTS. **PREVENTS INSIDER INFO FROM SPREADING**

What is the definition of FACE AMOUNT CERTIFICATES COMPANIES? (one of 3 types of investment companies)

ISSUE **DEBT CETIFICATES AT A DISCOUNT** THAT PAY PURCHASERS A STATED **FACE VALUE** AMOUNT AT MATURITY

MONEY MARKET FUNDS are considered the MOST safe and liquid mutual funds. Why?

LIQUID: INVESTOR CAN MAKE DEPOSITS OR W/DRAWLS AT ANY TIME W/OUT PENALTY SAFETY: SECURITIES ARE ALL SHORT-TERM.

What is the "Office of the Ombudsman"?

NUETRAL AND CONFIDENTIAL FORUM... FOR MEMBERS, RR's, AND INVESTORS CAN VOICE CONCERNS ABOUT OPERATIONS, ENFORCEMENT, AND OTHER FINRA ACTIVITIES AND STAFF

When a ticker tape displays, "FTR PR 4 s 75" what does that mean? . . s

PR = PREFERRED STOCK... s/s = 10 SHARES IS A ROUND LOT UNIT FOT THIS STOCK... ***40 SHARES* OF FTR *PREFERRED* WERE SOLD AT $75**

What is INFLATIONARY / purchasing power RISK?

RISK OF LOSS OF BUYING POWER DUE TO INFLATION AND INVESTMENT VALUES DECREASING... ESPECIALLY FOR FIXED INCOMES W/ LONG TERMS

What happens if one of the general partners dies in a partnership account?

RR SHOULD *FREEZE THE ACCOUNT* BECAUSE THE ACCOUNT IS *LEGALLY DISSOLVED AT THE DEATH OF THE PARTNER

Which of the following licenses limits a registered person to offering only mutual funds and/or variable products to their clients

SERIES 6

What is a 506(c) OFFERING?

SIMILAR TO A 506(b) OFFERING... BUT ISSUER *MAY SOLICIT AND USE ADS* AND CAN **ONLY SELL TO ACCREDITED INVESTORS**... ISSUER MUST TAKE *REASONABLE STEPS TO VERIFY* ACCREDITED STATUSES.

What is the deposit requirement in a CASH OR MARGIN account on a WHEN ISSUED sotck or bond?

STOCK: 25% OF COST OR $2,000, WHICHEVER IS GREATER... BOND: PAR VALUE OF BONDS PURCHASED

What is a "DUTCH AUCTION?"

SYSTEM USED BY FED RESERVE BANKSWHERE PRICES OF NEWLY ISSUED T-BILLS ARE *GRADUALLY LOWERED UNTIL IT MEETS A RESPONSIVE BID AND IS SOLD*

Money Market Funds invest in...?

T-BILLS, CD'S, COMMERCIAL PAPER, BANKER'S ACCEPTANCES, EURODOLLARS

What are "wash sales" and "matched orders"?

THE SIMULTANEOUS BUYING AND SELLING OF SECURITIES TO MISLEAD CUSTOMERS THAT THERE IS GREATER TRADING ACTIVITY... PROHIBITED

What is the purpose of a "Prepaid Tuition Plan?"

TO LOCK IN A CERTAIN NUMBER OF ACEDEMIC CREDITS OR PERIODS **AT CURRENT PRICES**

What is the formula for "Debt to Equity Ratio?" And which of the following are TRUE about it? I.) Net worth is the same as shareholder's equity II.) It is a measure of financial leverage III.) It is a measure of liquidity IV.) Used to determine if the capita structure of a company is conservative or speculative

TOTAL DEBT / NET WORTH I, II, AND IV ONLY

TRUE OR FALSE: ALL TYPES of municipal bonds are traded in the secondary market

TRUE

TRUE OR FALSE: ALL disciplinary actions taken by SRO's (FINRA, MSRB, NASAA, STOCK/OPTIONS EXCHANGES) are subject to SEC review

TRUE

TRUE OR FALSE: An investor in an oil and gas partnership bears more risk than a real estate partnership and can write off more in the early years

TRUE

TRUE OR FALSE: If a customer is short against the box and wishes to sell their long position, the sale must be done as "A SHORT SALE"

TRUE

How would you describe a LEVEL II NASDAQ quote?

USED BY *OTC TRADERS* AND GIVE QUOTES OF *EACH MARKET MAKER* FOR *ALL AUTHORIZED SECURITIES* (*FIRM* QUOTE GOOD FOR 100 SHARES)

Under FINRA RULE 5130, under the preconditions for sale... a member firm may NOT sell a new issue of common stock to any account UNLESS....

W/IN THE *PAST 12 MONTHS*, IT HAS *IN GOOD FAITH OBTAINED VERIFCATION*, THAT THE ACCOUNT IS *ELIGIBLE TO PURCHASE THE NEW ISSUE. (verified that it is not a restricted account or restricted person)

if an investor is primarily seeking capital gains, when would be the best time to buy bonds?

When INTEREST RATES ARE HIGH and are EXPECTED TO DROP

Is a rollover to or from a 403(b) plan permitted

YES... ALLOWED BY LAW, **BUT EMPLOYER IS NOT REQUIRED TO ACCEPT** SUCH REQUEST

Here are 2 positions an investor has in his portfolio: SHORT 1 ABC MAY 50 CALL LONG 1 ABC MAY 40 CALL Are these positions considered covered?

YES... THE LONG POSITION IS LOWER (OR EQUAL) IN STRIKE PRICE... SHORT CALL MSUT EXPIRE AT SAME TIME OR BEFORE THE LONG

An investor owns an options contract: SHORT 1 ABC MAY 50 CALL @ 8; ABC IS TRADING AT 55 Is this option contract in the money?

YES... THE MARKET PRICE > STRIKE PRICE

Is a member firm allowed to hold a customer's mail? If so for how long can they?

YES... W/ *WRITTEN INSTRUCTIONS FROM CUSTOMER ... MAX HOLDING PERIOD IS **3 CONSECUTIVE MONTHS**

A cash trade for the sale of US Government bonds was executed at 12 noon ET on Mon. Jun 10. Delivery of these securities are due before a.) 4:00 pm Thursday June 18 b.) 4:00 pm Tuesday June 11 c.) 2:30 Monday June 10 d.) 2:20 Monday June 17

c.) 2:30 MONDAY JUNE 10... SAME DAY AT 2:30... CASH SETTLES SAME DAY

What is a LEVERAGED BUY-OUT?

TAKEOVER of a company using its BORROWED FUNDS

When reading a ticker tape and it reads, "HC 3.25" what does it mean?

100 SHARES OF HC was sold at $3.25

What is a REG D Offering?

(PRIVATE PLACEMENT OFFERING)... PROVISION UNDER '33 ACT EXEMPTING PVT COMPANIES FROM FILING/REG. REQUIREMENTS UNDER CERTIAN CONDITIONS

A customer has $12,000 of securities and a debit balance of $6,000 Assuming REG T is 50%, what would be the NYSE minimum maintanance requirement in this account?

$3,000... ($12,000 * .25 = $3,000)

Under FINRA's "Arbitration Rules" how long before an arbitration hearing must both parties exchange any documents the intend to bring into arbitration?

**AT LEAST 20 ***CALENDAR*** DAYS

What is a "LETTER OF CREDIT" on a Municipal Bond?

**CREDIT ENHANCEMENT** THR BANK AGREES TO PAY PRINCIPAL AND INTEREST IN EVENT ISSUER IS UNABLE TO DO SO.

Limited Liability Company (LLC): are treated like a _______________ for tax purposes but there is NO LIMIT on the ___________________ in the company

- LIKE A PARTNERSHIP - NO LIMIT ON THE NUMBER OF OWNERS

Under technical analysis, what is "Volume theory?"

- MARKET IS BULLISH WHEN VOLIME IS HEAVY ON ADVANCES AND LIGHT ON DECLINES

The "Market Capitalization" of a company may be classified by... 1.) Micro Cap 2.) Small Cap 3.) Mid Cap 4.) Large Cap

1.) LESS THAN $250 MILLION 2.) $250 MILLION - $2 BILLION 3.) $2 BILLION - $10 BILLION 4.) OVER $10 BILLION

Fill in the blanks regarding Units of Delivery under MSRB Uniform Practice Rules. 1.) For BEARER bonds, the unit will be either _______________ minimum or ____________ usual. 2.) For REGISTERED bonds, the unit will be ________________ multiples thereof up to __________________ .

1.) $1,000; $5,000 2.) $1,000; $100,000

What are the steps in determining the condition of the CONDITION of a margin account?

1.) LOOK AT MKT VALUE OF THE STOCK 2.) CUT IT IN HALF 3.) COMPARE TO THE DEBIT BALANCE IN THE ACCT ex: $60k mkt value * .5 = $25k debit balance = $35k equity

Company A realized in April 2009. At that time the president received 200k shares. In April 2010, he received another 100k shares. Company A has 4,500,000 shares outstanding, and is a listed company. The following are weekly volume figures... APR 4, 2010 40,000 SHARES APR 11, 2010 49,000 SHARES APR 18, 2010 48,000 SHARES APR 24, 2010 45,000 SHARES MAY 2, 2010 43,000 SHARES Under SEC Rule 144, what is the MAXIMUM number of shares the president can sell on May 9, 2010?

46,250 SHARES... (AVG PREV. 4 WEEK'S TRADING VOLUMES)

What is the REGULATION T settlement for most securities

4th BUSINESS DATE AFTER TRADE DATE

If an investor is in the 28% federal tax bracket, what interest rate would they have to receive on a corporate bond to have the same after tax income of a municipal bond yielding 6%?

6%(.06) / .72 = 8.33%... MUNI YIELD / (100% - FED TEX RATE) = TAXABLE EQUIVELANT YIELD

Which of the following books and records is required to be maintained for *6 YEARS* by a B/D? I.) Blotters of original entry II.) Customer and general ledgers III.) Customer account information IV.) Securities records

ALL OF THE ABOVE

The benefits of investing in municipal bonds include..? I.) Interest is exempt from federal income tax II.) Interest may be exempt from state and local income taxes III.) Principal and interest payments are fixed IV.) Wide range of issuers and maturities V.) Geographic diversification

ALL OF THE ABOVE

When assessing a customer's risk tolerance, the RR should consider..? I.) Number of dependents and educational needs II.) Investment objectives III.) Net worth (assets and liabilities) IV.) Time horizon

ALL OF THE ABOVE

What does the "ASSIGNMENT AND POWER OF SUBSTITUTION" on the back of the stock certificate permit?

ALLOWS FOR THE SECURITY TO BE NEGOTABLE... OWNERS SIGNITURE MUST BE ON THE BACK AS IT APPEARS ON THE FRONT.

Accrued interest on a new issue of muni bonds is normally calculated from...? a.) The dated date of the bonds b.) The last coupon date c.) The date of purchase d.) Trade date plus 5 days

A.) DATED DATE

MOST CMO's carry which credit ratings?

AAA

When an RR leaves a brokerage firm and gets hired by another, WHAT MUST the hiring firm provide the new RR'S FORMER CUSTOMRS individually, in paper, or electronically?

AN EDUCATIONAL COMMUNICATION PREPARED BY *FINRA*

WHO is known as an INSIDER/CONTROL/AFFILIATED PERSON under the '34 ACT?

AN OFFICER, PARTNER, DIRECTOR, PRINCIPAL STOCKHOLDER (> 10% OUTSTANDING SHARES OF A COMPANY)

What is Regulation M?

AN SEC ADOPTED REGULATION ENSURING SECURITIES ARE NOT DISTRIBUTED IN A MARKET MANIPULATED MANNER, BY PERSONS HAING AN INTEREST IN AN OFFERING

What is the CURRENT YIELD ON COMMON STOCK formula?

ANNUAL DIVIDEND / MARKET PRICE = CURRENT YIELD

When must final prospectus be received by customers who purchase new issue?

AT OR BEFORE CUSTOMER'S PURCHASE CONFIRMATION

TRUE OR FALSE A Private CMO is backed jointly by the issuer and the federal government

FALSE

Which of the following MOST accurately describes the figure that results from subtracting a mutual fund portfolio's cost from it current market value? a.) NAV b.) Appreciation c.) Amortization d.) Offering Price

B. )APPRECIATION

TRUE OR FALSE: CONVERTIBLE BONDS and WARRANTS, CAN be used to cover writing (short) positions in a cash account

FALSE

ARRANGE THESE ACTIONS IN THE CORRECT ORDER, IN REGARDS TO OPENING AN OPTIONS ACCOUNT: a.) Enter a customer's order b.) obtain essential facts from customer c.) get the approval of the ROP/BOM d.) obtain a signed options account agreement e.) Options Disclosure Document (ODD)

B, E, C, A, D,

TRUE OR FALSE: Gvt AGENCY ISSUES are direct OBLIGATIONS of the federal government

FALSE

TRUE OR FALSE: IRA's are considered to be "QUALIFIED" retirement plans

FALSE

TRUE OR FALSE: If a customer does not have a residential or bisness address, or a army post box, or Fleet post office box, a POST OFFICE BOX is a valid address.

FALSE

Why would a company make an exchange offer from a bond to common stock?

COMPANY MAY NOT HAVE THE CASH TO REPAY BONDHOLDERS AT MATURITY.

ALL of the following are characteristics of yield-based/interest rate options, EXCEPT...? a.) they have a european exercise style b.) they are settled in cash c.) expiration is the third friday of ex. month d.) they have an american exercise style

D.)

TRUE OR FALSE: Insurance on a municipal bond by an issuer GUARANTEES that issuer will permanently have a good rating

FALSE

ALL of the following would be included in a muni issuer's Official Statement EXCEPT...? a.) Purpose of the bond issue b.) Redemption provisions c.) Description of the issue d.) Taxable equivalent yields

D.)

Which of the following transactions conducted by a member firm to its customers MUST abide by FINRA's 5% markup policy? a.) Primary offerings of securities b.) Mutual fund shares c.) Secondary offerings of securities d.) Riskless transactions

D.) ... DOES NOT NEED TO APPLY FOR OFFERINGS WITH A PROSPECTUS OR OFFERING CIRCULAR

An individual is allowed to invest IRA funds in all of the following EXCEPT? a.) Common Stocks b.) Money Market Funds c.) Savings Account d.) Diamonds

D.) DIAMONDS

Written verification of an investors net worth is REQUIRED for which of the following investments? a.) Variable annuities b.) UITs c.) REITs d.) DPPs

D.) DPPs

If a customer wished to REPLACE A SECURITY with a different security ON THE SAME DAY in a restricted account, the exchange MUST be _______________ , NOT share for share... also called _________________ .

DOLLAR FOR DOLLAR; SAME DAY SUBSTITUTION

ALL of the following are CORRECT regarding US Treasury bills EXCEPT..? a.) Sold at a discount basis b.) Redeemable at face value at maturity c.) Subject to federal income taxation d.) Coupon bearing obligations

D.) THEY ARE *NOT* COUPON BEARING OBLIGATIONS... THEY *ARE* SUBJECT TO FEDERAL INCOME TAXATION

What is ECONOMIC / SOCIAL RISK?

HOW DOMESTIC/ WORL AFFAIRS AND FISCAL/MONETARY POLICY AFFECTS INVESTMENTS

TRUE OR FALSE: Stock splits have an effect of P/E Ratio

FALSE

TRUE OR FALSE: Once an annuitant retires, chooses a payout option, and begins receiving annuity payments, the annuitant CAN still change his/her payout option and investments if they want/need to for any reason

FALSE... ANNUITANT MUST CAREFULLY CHOOSE PAYOUT OPTION... IT CANOT BE REVERSED OR CHANGE INVESTMENTS AFTER RETIREMENT

TRUE OR FLASE: A STOP PRDER PERMITS a B/D to exercise discretion as to the time of execution and the number of shares.

FALSE... BECAUSE IT BECOMES A MARKET ORDER

TRUE OR FALSE: Members and associated persons are allowed to be compensated with securities

FALSE... NOT ALLOWED TO BE COMPANSATED WITH SECURITIES OF ANY KIND

Filing communication with FINRA MUST include? I.) Anticipated date of first use II.) Date that approval was given III.) Date that approval has to be renewed

I AND II ONLY

How do you calculate a company's "Return on Equity?"

NET INCOME / SHAREHOLDER'S EQUITY

In a customer's account, what allows the TRANSFER of cash and securities?

LETTERN OF AUTHORIATION (LOA)

What is the TAX TREATMENT of ETN's?

NO DIVIDENDS PAID, SO NORMALLY INVESTORS JUST PAY CAPITAL GAINS TAX

For Revenue Bonds, the "Flow of Funds Provision" have two ways they can be used for the municipality. Under a "NET Revenue Pledge" list the sequence in which funds would be applied in the correct order... - Revenue maintenance fund & Renewal/replacement fund (depreci.) - Operation and Maintenance fund - Debt service fund and/or Sinking fund - Surplus fund or General fund of the municipality - Bond service account for principal or interest

OBDRS... 1.) OPERATION/MAINTENANCE FUND 2.) BOND SERVICE ACCOUNT 3.) DEBT SERVICE AND/OR SNKING FUND 4.) REVENUE MAINTEN. & RENEWAL/REPLACEMENT 5.) SURPLUS/GENERAL FUND Memory Hook: OB's are DRS (doctors)

What is a 457(b) Plan?

RETIREMENT PLAN FOR EMPLOYEES OF A STATE OR LOCAL GOVERNMENT, OR TAX-EXEMPT ORGANIZATION

What is CAPITAL RISK?

RISK OF *LOSS OF PRINCIPAL* OF ASSET OR SECURITY

TRUE OR FALSE: Contributions to a ROTH IRA are NOT tax deductible

TRUE

TRUE OR FALSE: On an Income Statement, BOND INTEREST is ALWAYS a PRE-TAX DEDUCTION.

TRUE... BECAUSE COMPANIES **HAVE TO PAY IT**

How would you describe LEVEL III NASDAQ quotes?

USED BY *NASDAQ REGISTERED MKT MAKERS* AND **ALLOWS MKT MAKERS TO CHANGE BID AND ASK QUOTES & QUOTE SIZES** FOR *SECURITIES AUTHORIZED TO ENTER QUOTES (*FIRM* QUOTES GOOD FOR 100 SHARES)

In types of underwriting agreements, what is a BEST EFFORTS AGREEMENT?

UNDERWRITING GROUP *ACTS AS AGENT*... DOES NOT BUY OR TAKE SECUITIES INTO ITS OEN INVENTORY

What is the purpose of INTEREST RATE/YIELD-BASED OPTIONS?

USED BY BOND PORTFOLIO MANAGERS TO HUDGE AGAINST MOVEMENTS IN INTEREST RATES

What does the TRUST INDENTURE ACT OF 1939 REQUIRE?

requires that CORPORATE BONDS AND DEBENTURES (not gvt or muni) to be issued with a INDENTURE OR DEED OF TRUST... PROTECTS THE BONDHOLERS.

Which of the following is correct in terms of a RIGHTS OFFERING? a.) rights holders may not gift rights to another person b.) generally have a maximum maturity of 30 days c.) issued to existing shareholders free of charge d.) holders are allowed to redeem rights for cash from issuer

c.) ISSUED TO SHAREHOLDERS FREE OF CHARGE... A AND D ARE FALSE AND THE MATURITY IS TYPICALLY 90 DAYS

From dividends and retained earnings (revenue after dividends), how do you tell if a stock is a utility stock?

if they give out about OVER 75% dividends and have LESS THAN 25% retained earnings

Assume a customer's account appears as follows: Long 10 ABC calls Long 100 shares ABC @ 100 Debit balance $7,500 SMA $2,500 How much cash can the customer w/draw?

$0... CLIENT CANNOT REMOVE ANY MONEY W/O INCURRING ANY MAINTENANCE CALL

A customer has the following in a margin account. REG T 50%. $25,000 mkt value SMA = 0 - $15,000 DB = $10,000 EQ He sells $2,000 worth of securities and does not w/draw anything. What is his adjusted SMA balance?

$1,000... ACCOUNT IS *RESTRICTED* (DB > 1/2 MKT VALUE)... SO HALF OF SALE GOES INTO SMA

A customer's account is below NYSE maintenance requirement by $35,000 and the firm decides to liquidate. What amount of securities MUST be sold to meet the call? a.) $35,000 b.) $70,000 c.) $105,000 d.) $140,000

$140,000... ($35,000 * 4 = $140,000)

Assume the customer has the following margin accounts: POSITION MKT VALUE BALANCE LONG $30,000 $16,000 DB SHORT $15,000 $18,000 CB What is the total equity regarding the following accounts?

$17,000... LONG: $30,000 - $16,000 = $14,000 SHORT: $18,000 - $25,000 = $3,000 $14,000 + $3,000 = $17,000

A customer buys 100 shares XYS W.I. (when issued) at $46 per share. What is the deposit requirement assuming REG T is 50%?

$2,000.... (THE GRREATER OF $2,000 OR 25 %)

Initial transaction in a margin account is a customer sells short 100 shares at $30. The stock declines $25. What is the customer's equity in the account?

$2,500... ($3,000 + $2,000(*min margin deposit, no exceptions, NOT 1500).... - $2,500 = $2,500)

A trader writes 10 uncovered ABC JUN 50 CALLS @4.75 when ABC stock is trading @45. If trader CLOSES out their position @2.15, what is her gain?

$2,600.... (S+$4,750 - B-$2,150)

A customer buys 100 shares of ABC at 35 in a cash acct and writes 1 ABC oct 30 call at 7. How much must be deposited in the account by the customer?

$2,800.... ($3,500 - $700 = $2,800)

A customer's account is as follows: $25,500 initial mkt value; $12,750 debit balance; $12,750 equity What is the excess equity in the account if the mkt value of the stock appreciates to $32,600?

$3,550 EXCESS EQUITY... ($32,600 / 2 = $16,300. $16,300 - $12,750 = $3,550)

In a short margin account, the customer has the following position: $30,000 short sale proceeds + $ 15,000 REG T deposit = $45.000 Credit balance - $30,000 current mkt value short = $15,000 equity How high could the mkt value of the short stock appreciate before customer receives a minimum maintenance call?

$34,625.38.... CREDIT BALANCE / 1.30

Assume your customer has 300 shares of common stock with a market value of 21.25 and 20 first mortgage bonds at par. Both increase by 3/4 of a point. What is the total increase in value?

$375.... (.75 * 300 shares = 225) (7.5 * 20 bonds = 150) (225 + 150 = 375)

The initial transaction in a margin is a customer selling short 100 shares at $60. The stock later declines to $50. What is the customer's equity in the account?

$4,000... ($6,000(proceeds) + $3,000(REG T) = $9,000(CB)... $9,000(CB) - $5,000(CMV) = $4,000(EQUITY)

Mr. Jones purchased $10,000 par value bonds with 8% coupon rate and yield of 5%. On the normal interest payment date, he will receive...?

$400... INTEREST IS PAID SEMI-ANNUALLY... (.08 * 10,000 / 2 = 400)

A customer's account is as follows... $25,000 initial mkt value; $12,500 debit balance; $12,500 equity. What is the excess equity in the account if the market value of the stock appreciates to $35,000?

$5,000 EXCESS EQUITY... ($35,000 / 2 = $17,500. $17,500 - $12,500 = $5,000)

A customer sells short 1,000 shares of ABC @ 6 when REG T is 50%. How much must the customer deposit?

$5,000... ($5-$10 RANGE = $5/SHARE)... $5.00 * 1,000 SHARES = $5,000

If you are LONG 1 OEX AUG $505 CALL... what is the CONTRACT VALUE?

$50,500 ( $505 * 100 )

A piece of property has a market value of $200,000,000 and is assessed at 50% of market value and is taxed at a rate of 5 mills. The property tax revenue to the municipality would be...?

$500,000... ($200,000,000 * 50% = $100,000,000) ($100,000,000 * 5 mills or (.005) = $500,000)

A customer buys 1 ABC JUL 60 PUT @7, and then sells 1 ABC JUL 50 PUT @2. What is the customer's maximum gain potential?

$500.... DIFFERENCE BTWN STRIKES (60 - 50) + SUM OF BOTH PREMIUMS + ( -7 + 2) = (10 - 5) * 100 = $500

A customer has a long-term capital gain (over a year and a day) of $3,500, and is in the 24% tax bracket. What is his tax liability?

$525... $3,500 * .15 = $525

Customer feels that QRS is going to remain neutral or go down in the near future and decides to sell 1 QRS May 55 call @ $2.50 when QRS is at $54.50. A bout a month later, the customer receives an exercise notice when QRS is trading at $60.75 per share. In terms of the exercise, what price will the client report for tax purposes in relation to the price that is sold to the buyer of the call?

$57.50... STRIKE PREICE + PREMIUM (FOR SALE OF CALL)

A customer sells short 1,000 shares of ABC @ 12 when REG T is 50%. How much must customer deposit?

$6,000 (> $10.00 RANGE = 50% OF MKT MALUE)... $12 * 1,000 SHARES * .50 = $6,000

In a margin account, a customer sells short 200 shares at $40. The stock later declines to $30. What is the customer's equity in the acct?

$6,000... ($8,000 + $4,000 = $12,000... $12,000 - $6,000 = $6,000)

If an investor owns 100 shares of ABC which he purchased at $8 per share and receives an 10% stock dividend, what is now the basis?

$7.27 PER SHARE... $800 / 100 SHARES + 10 = $800 / 110 = $7.27

Mr. C. Nate purchases a 15% corporate bond and at that time pays $60 dollars for accrued interest to the seller. The bond pays interest annually. How much of the first annual interest payment will he report for tax purposes?

$90... (.15 * 1000 = 150; 150 - 60 = $90)

If a client, who is an officer of a commercial bank, wants to open a margin account w/ NYSE member firm, he.... I.) Can trade during and after the time his new account papers are received and are in good order II.) Must notify the exchange by separate letter that he is an officer of a commercial bank III.) Must receive prior written consent from this employer before the account can be opened IV.) Must have duplicate confirmations and reports sent to this employer

***I ONLY***

What is the Continuous Net Settlement Company (CNS)?

*CENTRALIZES/MATCHES SETTLEMT OF SECURITIES AND MONEY BALANCES OF ITS MEMBER PARTICIPANTS*... SETTLES THRU NSCC, ELIMINATING "WINDOW TRADING"

In investment banking who/what is the OUTSIDE B/D and what do they do?

- *NOT PART OF SYNDICATE GROUP* BUT MAY HAVE CUSTOMER WHO WANTS A NEW ISSUE - *CAN REQUEST ALLOCATION OF SHARES TO CUSTOMER FROM ANY SYNDICATE MEMBER*

The 10% penalty for early w/drawls in a SIMPLE IRA are *increased* to _____________ , if made within the first _______________________ .

- 25% - FIRST 2 YEARS

What is a "Self-Liquidating Revenue Bond?"

- A PROJECT FINANCED TO GENERATE FUNDS WHICH RETIRE THE REVENUE BONDS ISSUED

What is fundamental analysis? and which of the following would be considered by a fundamental analyst? I.) Management II.) Earnings III.) Company's outlook and annual report IV.) Price/Earnings Ratios

- ANALYSIS OF A **SPECIFIC COMPANY AND ITS FACTORS** - ALL OF THE ABOVE

A "SELLING CLIMAX" normally occurs at the end of a ________ market. It is a ________________ in stock prices accompanied by ____________ volume after a lengthy market ___________ .

- AT THE END OF A BEAR MARKET - IT IS A SHARP DECLINE IN STOCK PRICES - ACCOMPANIED BY INCREASING TRADING VOLUME - AFTER A LENGHTY MARKET DECLINE

Under REG T, if a customer does not submit payment by the 4th business date after trade date, what 2 things must happen? And what are the Exceptions of this rule?

- B/D MUST EITHER GET EXTENSION FROM APPROPRIATE SRO, OR CANCEL/LIQUIDATE UNSETTLED PORTION. - DOES NOT APPLY IF CUSTOMER PURCHES *$1000 OR LESS OF A SECURITY* OR ITS A *GVT SECURITY* (GVTS ARE EXEMPT FROM REG T)

Describe CLASS B SHARES.

- BACK-END/CONTINGENT DEFERRED SALES LOAD... - *EXPENSE CHARGES ARE HIGHER THAN CLASS A*... - *SALES LOAD IS SHARGED ON DECLINING SCALE* - HAVE HIGHER 12b-1 THAN CLASS A - *SALES CHARGE BASED ON NAV AT PURCHASE OR REDEMPTION...*WHICHEVER IS LESS*

When a municipal term bond has an "AVERAGE LIFE" of LESS than its maturity date, that means part of the issue would have been ___________ by the issuer through a ________________________ .

- CALLED IN; - SINKING FUND PROVISION

When making recommendations to senior investors, what 2 things are important for the client take into consideration

- CLIENTS STATUS (RETIRED OR PLANNING TO) - POSSIBLE INFLATION RISK TO ANY PRODUCT

A "Bid Form is used for ___________________ underwritings, and an "Underwriting Agreement" is used for ___________________ underwritings

- COMPETITIVE - NEGOTIATED

What type of asset allocation should a person with LESS THAN 5 YEARS TO RETIREMENT have?

- CONSERVATIVE MIX: - 60% CASH - 25% BONDS - 10% LARGE CAP - 3% MID CAP - 2% FOREIGN STOCKS

REG BI requires broker-dealers and investment advisors to furnish *RETAIL* customers with what forms?

- FORM CRS FOR BROKER-DEALERS - FORM ADV (PART 3) FOR IA's - (they display info on service, fees and costs, conflicts of interest, disciplinary actions of FP's, and link to investor.gov)

Do funds of funds have net worth/income requirement?

- FUND OF FUND FOCUSING ON MUTUAL FUNDS: *NO INCOME/NET WORTH REQ'S* -FUND OF FUNDS FOCUSING ON LIMITED PARTNERSHIPS/HEDGE FUNDS: *REQUIRE NET WORTH/INCOME REQUIREMENT*

FINRA Rule 2165 "Financial Exploitation of specified Adults" protects the financial exploitation of what two groups of adults?

- INDIVIDUALS 65 AND OLDER - INDIVIDUALS 18 AND OLDER WHO ARE PHYSICALLY AND/OR MENTALLY HANDICAPPED

In a municipal competitive bidding, the ISSUER determines the ______________ . And the UNDERWRITER determines the ________________ , ____________ , and the _________________ .

- MATURITY DATE - SPREAD, YTM, AND NET INTEREST COST

For CASH TRANSACTIONS... delivery is required on _____________ . NYSE transactions made for cash at or before 2:00 pm are due for delivery by ___________ . Trades made after 2:00 pm are due for delivery _________________ .

- ON THE DAY OF THE TRANSACTION - BY 2:30 PM - WITHIN 30 MINS AFTER THAT TRADE

What does it mean to have "Flexible Premium Payments" in a life insurance policy?

- OWNER CAN PAY PREMIUMS OUT OF POCKET, OR HAVE PREMIUMS *DEDUCTED FROM THE CSV

What is "Dollar Cost Averaging?"

- PURCHASING EQUAL AMOUNTS OF A SPECIFIC SECURITY AT REGULAR INTERVALS

If an ETF is leveraged, what is the maintenance requirement?

-DOUBLE FOR ETF OFFERING 200% LEVERAGE -TRIPLE FOR ETF OFFERING 300% LEVERAGE

What is an INVESTMENT BANKER? And what are their primary functios?

-FIRM HIRED BY CORPORATION TO HELP W/ FINANCING MATTERS... FUNCTIONS: - *RAISE CAPITAL THRU ISSUANCE OF SECURITIES*, - *FOR NEW ISSUES, SERVES AS UNDERWRITER, SPONSOR, DISTRIBUTOR AND/OR SYNDICATE MEMBER* - *ADVISES CORPORATIONS ON MERGERS/ACQUISITIONS*

What happens when equity in a customers margin falls BELOW 50% REG T and is in the RESTRICTED level?

-MUST ABIDE BY "FED RETENTION RULES" - APPLIES TO *ALL SALES...* - 50% SALES PROCEEDS MUST BE RETAINED IN ACCOUNT, OTHER 50% IS FOR THE CUSTOMER

How does SEC REGULATION BEST INTEREST (REG BI) define a retail investor and a recommendation made to a retail investor?

-NATURAL PERSON / REPRESENTATIVE OF ONE WHO USES RECOMMENDATION FOR PERSON, FAMILY, OR HOUSEHOLD PURPOSES. - ANY SECURITIES TRANSACTION/STRATEGY INVOLVING SECURITIES

List the appropriate T-bill maturity with the auction and settlement times associated with them. 1.) Auctioned every Thursday and settle the following Tuesday (T+3) 2.) Auctioned every Monday (weekly) and settle on Thursday (T+3) 3.) Auctioned every Monday (monthly) and settle on Thursday (T+3)

1.) 1 AND 2 MONTH T-BILLS 2.) 3 AND 6 MONTH T-BILLS 3.) 12 MONTH T-BILLS

Find the STRIKE PRICES on foreign currency options with the following spot price values: 1.) SWISS FRANC --------- $1.28 2.) SWEDISH KRONA ---- $0.08258 3.) JAPANESE YEN ------- $0.01087

1.) 128 (MOVE 2 DECIMALS RIGHT) 2.) 82 (MOVE 3 DECIMALS RIGHT) 3.) 108 (MOVE 4 DECIMALS RIGHT)

What do stock index options give investors the ability to do?

1.) ANTICIPATE MARKET MOVES 2.) HEDGE A DIVERSIFIED PORTFOLIO FROM MARKET (SYSTEMIC RISK)

MATCH THE DEFINITIONS WITH THEIR TYPES OF ASSET ALLOCATIONS: 1.) Keeps assets in the portfolio at an assigned balance 2.) Involves frequent changes in asset composition in response of changes in market and economic conditions 3.) Redistributes percentage of assets in each sector of a portfolio (stocks, bonds, etc.) depending on current market performance of each sector a.) Tactical b.) Strategic c.) Dynamic

1.) B.) 2.) C.) 3.) A.)

What type of interest rate/yield-based option contracts would an investor buy if..: 1.) expects a RISE of interest rates 2.) expects a FALL of interest rates?

1.) BUY INTEREST RATE/YIELD-BASE CALL OPTIONS 2.) BUY INTEREST RATE/YIELD BASED PUT OPTIONS

Put the following creditors in order if a partnership becomes dissolved? - General partners - Secured creditors - limited partners - Unsecured creditors

1.) SECURED CREDITORS 2.) UNSECURED CREDITORS 3.) LPs - PROFIT CLAIMS, THEN CAPITAL CLAIMS 4.) GPs- PROFIT CLAIMS, THEN CAPITAL CLAIMS

When securities are acquired as a gift and... 1.) sold at a profit, the cost basis of _______________ is used 2.) sold at a loss, the cost basis of _______________________ is used

1.) THE DONOR 2.) THE SECURITIES *AT TIME OF GIFT*

Scripted seminars delivered to more than ________________________ MUST be approved by a principal of the firm, and a record of the seminar MUST be kept by the firm.

25 RETAIL INVETORS

If a municipality has a revenue of $8,000,000 and $2,000,000 of interest and principal to be repaid that year, the "Debt Service Coverage/Earnings Coverage" would be..?

4/1 or 4.... ($8mil / $2mil = 4/1) (muni revenues / annual interest and principal payments)

What is a RULE 506(b) OFFERING?

A "QUIET"PVT PLACEMENT W/O USING SOLICITATION AND ADVERTISING... - *UP TO 35 NON-ACREDITED INVESTORS CAN PARTICIPATE... UNLIMITED ACCREDITED INVESTORS* - *NON-ACCREDITED MUST BE PROVIDED PVT PLACEMENT MEMORANDUM (PPM) (DISCLOSURE)

What happens when trade comparisons between B/D's do NOT match? (price discrepancy)

A *DK (DON'T KNOW) NOTICE* IS SENT TO THE *CONFIRMING B/D*

What is the MOST CONSERVATIVE options position that can be held?

A SHORT COVERED CALL

MUTUAL FUNDS provide customers with: I.) Withdrawal plans II.) Account statements III.) Dividend reimbursement plans IV.) Prospectus

ALL OF THE ABOVE

Hedge Funds use...: I.) Leverage II.) Derivatives III.) Private Equities IV.) Currencies

ALL THE ABOVE

Under the SECURE ACT OF 2019, How long must the entire balance of an IRA be withdrawn by if the owner dies and the IRA is given to a beneficiary?

BY THE END OF THE 10TH YEAR

What is the MAXIMUM sales compensation for DPPs under FINRA Rules? a.) 8% b.) 8 1/2% c.) 10% d.) 12%

C.) 10%

How do you determine how high the mkt value of a stock SHORT could rise before the customer will receive minimum maintenance call?

CREDIT BALANCE / 1.30

what are the factors used in the calculation for zero-coupon bond accretion? I.) Purchase Date II.) Purchase Price III.) Dated Date IV.) Maturity Date a.) I and II b.) II and IV c.) I, II, III d.) I, II, III, IV

D.) ALL THE ABOVE

Which of the following bids would be considered a stabilizing bids placed by a managing underwriter during a public offering of securities? a) concurrent bids- one at the current mkt price and onw slightly above it b.) bids above public offering price, but w/in 5% of previous bid c.) bids above public offering price, but w/in 2% of previous bid d.) bids just below the public offering price

D.) BIDS BELOW THE PUBLIC OFFERING PRICE

Zero coupon bonds are used by investors primarily seeking...? a.) Interest income b.) Income from dividends c.) Accretion d.) Capital Accumulation

D.) CAPITAL ACCUMULATION

Which of the following is MOST LIKELY to fluctuate in times of STABLE interest rates? a.) Cumulative preferred b.) Participating preferred c.) Senior preferred d.) Convertible preferred

D.) CONVERTIBLE PREFERRED

When a corporation is investing its funds, which of the following types of securities provides the BEST tax incentives for the corporation? a.) Convertible fixed income debt securities b.) Treasury securities c.) Corporate debt securities d.) Corporate preferred stock

D.) CORPORATE PREFERRED STOCK... WHEN CORPS. INVEST IN OTHER CORPS. STOCKS, THE *DIVIDENDS ARE 50% TAX EXEMPT* AND PREFERRED STOCKS OFFER THE MOST DIVIDENDS

The effect of amortizing muni bond premium, is to reduce...? a.) Interest income b.) Accrued interest c.) Sales proceeds d.) Cost basis

D.) COST BASIS

TRUE OR FALSE: SEC RULE 145 requires registration with the SEC for changes in par value of stock or stock splits

FALSE

Which of the following is TRUE about the OTC market I.) FINRA regulates trading practices in the OTC market II.) The SEC directly regulates OTC transactions III.) The FRB regulates which OTC securities are marginable

I AND III ONLY... FINRA REGULATES NUMBER II

Which of the following statements are correct regarding "Daily Bond Buyer" Indexes? I.) The "Bond Buyer Index" is made of 20 GO Bonds w/ 20 year maturities and is a good indicator on the yields buyers would receive if they purchased a similar bond II.) The "Bond Buyer Index" is made of 25 specific revenue bonds each with 30 year maturities and is a good indicator average yield III.) The "Bond Buyer's Revenue Bond Index" is made of 20 GO Bonds w/ 20 year maturities and is a good indicator on the yields buyers would receive if they purchased a similar bond IV.) The "Bond Buyer's Revenue Bond Index" is made of 25 specific revenue bonds each with 30 year maturities and is a good indicator average yield

I AND IV ONLY

An investor has the following position in his portfolio: SHORT 5 XYZ FEB 30 CALL Which of the following positions would allow this investor to be COVERED? I.) LONG 5 XYZ MAR 30 CALL II.) LONG 5 XYZ JAN 30 CALL III.) LONG 1 XYZ FEB 30 CALL IV.) LONG 5 XYZ FEB 25 CALL

I AND IV ONLY... I: EQUAL STRIKE PRICE & SHORT EXPIRES BEFORE LONG POSITION IV: EQUAL EXPIRATION, LONG POSITION HAS A LOWER STRIKE PRICE

If an investor is looking for "Tax Deductions and Write-Offs," an RR should first recommend: I.) DPPs II.) Investment companies III.) Municipal Bonds IV.) Limited Partnerships

I AND IV ONLY... LACK OF LIQUIDITY; AND NO ACTIVE SECONDARY MKT

A "NEW ACCOUNT REPORT FORM" MUST ALSO CONTAIN...? I.) Whether the person is a U.S. Citizen II.) Names of other B/D firms associated w/ customer III.) Educational background of customer IV.) Tax return/bracket of previous year IV.) Designation of beneficiaries

I ONLY

Which of the following are TRUE regarding ad-valorem taxes? I.) State governments receive little to non revenue from real estate (ad-valorem) taxes II.) Real estate assessments and how they are computed vary from district to district III.) These taxes may fund revenue bonds IV.) These taxes do not fund revenue bonds

I, II AND IV ONLY

Which of the following are forms of depreciation? I.) Straight Line II.) Double-Declining Balance III.) Amortization IV.) Modified Accelerated Cost Recovery System (MACRS)

I, II AND IV ONLY

Investment income or dividends of investment companies... I.) Always taxed as ordinary income II.) Derives from dividends, interest, and short-term gains III.) Fund deducts operating expenses before paying dividend (.5-1%) IV.) Are derived from appreciation in the value of the fund

I, II, AN III ONLY

Arbitration panels MAY... I.) Subpoena witnesses and records II.) Publicize public awards III.) Issue binding awards IV.) Impose mandatory prison terms

I, II, AND III ONLY

FINRA member firms must submit **SEMI-ANNUAL SATATEMENTS** of financial condition including...? I.) Unconsolidated balance sheet II.) Subordinated loan information III.) Statement of net capital IV.) B/D's investment and inventory account

I, II, AND III ONLY

If a company issues debentures (bonds) AT PAR, what will happen? I.) Total assets would increase II.) Total liabilities would increase III.) Working capital would increase IV.) Shareholder's equity would increase

I, II, AND III ONLY

In a SECONDAYY DISTRIBUTION.... I.) redistribution of large blocks of securities held by a few owners II.) (insider selling - institutional selling) III.) proceeds are paid to sellers IV.) proceeds are paid to issuers

I, II, AND III ONLY

Index Options are affected by..? I.) changes in prices of indexed securities II.) Interest rates III.) inflation IV.) Tax increases

I, II, AND III ONLY

An investor who is VERY CONSERVATIVE and does NOT want to risk losing their principal, an RR should recommend: I.) Treasury-Bills II.) Treasury-Notes III.) Treasury-Bonds IV.) Corporate Bonds

I, II, AND III ONLY... ALL GOVERNMENT ARE FULLY BACKED BY THE FEDERAL GOVERNMENT

According to the IRS, money market funds.... I.) income is fully taxable, even if reinvested II.) must report amounts received as dividend income III.) must report income amounts received as capital gains IV.) unlikely they will generate capital gains

I, II, AND IV ONLY

Which of the following is included in the FINAL PROSPECTUS I.) Date of prospectus II.) Statement of possible stabilizing transactions III.) statement that SEC neither approves/disapproves securities IV.) penalty clauses V.) Copies of underwriting agreement and opinions of counsel

I, II, III, AND IV ONLY

Annuity contracts generally contain a "Non-Forfeiture Provision" What is that provision?

IF THE ANNUITANT STOPS MAKING PAYMENTS ON INSTALLMENT CONTRACT, THEY WILL *NOT LOSE CLAIM TO PREVIOUS INVESTMENTS*

The two issuance formats of corporate bonds are serial and series forms. In describing serial form, which of the following features do they have? I.) Different issuance dates II.) A balloon maturity III.) Different maturity dates IV.) The same maturity date

II AND III ONLY

Which of the following is TRUE regarding equipment trust certificates? I.) Default is common due to financial problems II.) They are normally Serial Issues III.) They are most commonly used by transportation companies IV.) Secured by specific corporate assets

II, III, IV ONLY

How do you calculate "At Risk Investment"

INITIAL CASH INVESTMENT + ANY RECOURSE LOANS (LOANS WHICH INVESTOR IS HELD RESPONSIBLE)

What does STABILIZING/PEGGING THE PRICE of a new issue mean?

MANAGING UNDERWRITER ATTEMPTS TO HALT A DECLINE IN THE MARKET PRICE OF NEW ISSUE... BUYS ISSUE IN THE SECONDAY MARKET WHEN IT FALLS BELOW INITIAL OFFERING PRICE

What is the formula for "Price to Earnings Ratio (P/E)?" and which of the following are TRUE about it? I.) Referred to as a "multiple at which the stock is selling" II.) P/E ratio does not change when a stock split occurs III.) When a P/E Ratio is high it could mean it is a value stock IV.) When a P/E Ratio is low it could mean it is a growth stock

MARKET PRICE / EARNINGS PER SHARE ALL OF THE ABOVE

Greg has been investing in stocks for years and now decides treasury securities in the secondary market. He enters an order to buy 10 US T-Bonds on Fri Sept. 15th. When can he expect his settlement?

MONDAY SEPT 18TH... (T + 1)

How do you calculate "Return on Assets?"

NET INCOME (NET PROFITS AFTER TAX) / TOTAL TANGIBLE ASSETS

How do you calculate "Cash Flows?"

NET INCOME + DEPRECIATION

Is a rollover from a Roth IRA to a qualified plan permitted

NO... PRIOR TO 2008... YES... AFTER 2008... (BE CAREFUL OF THIS ON THE TEST, NEW RULE)

In a few years after investing in some DPPs, depreciation deductions decline or disappear, and _________________ appears

PHANTOM INCOME

What are the EXERCISE/STRIKE PRECES determined by

PRICES OF THE UNDERLYING SECURITY

How to calculate Current Yield on Treasury Notes and Bonds?

SAME WAY AS CORPORATE BONDS.... ANNUAL INTEREST / CURENT MKT PRICE = CURRENT YIELD

Private Non-Governmental 457(b) plans for *hospitals, unions, and charitable organizations* generally LIMIT PARTICIPATION to.....

SELECT GROUP OF MANAGEMENT OR HIGHLY PAID EMPLOYEES (ERISA TITLE 1)

When entering a ________________ order, the RR MUST have reasonable assurance as to the LOCATION of the securities and the ABILITY of the customer to deliver the securities within **2 business days**

SELL LONG ORDER

When MUST Investment Companies send financial information to shareholders according to the SEC and the I.C. ACT OD 1940

SEMI-ANNUALLY

How do you calculate "Capitalization," or, "Total Capital?"

SHAREHOLDERS EQUITY + BONDS

How do spreads at a NET DEBIT (net buy/owe $ for net premiums) become profitable?

SPREADS MUST BE "CLOSED" OR "OFFSET" TO BECOME PROFITABLE... SPREAD OF THE PREMIUMS MUST WIDEN

What are BLUE SKY LAWS?

STATE SECURITIES LAWS PROHIBITING MISSREPRESENTATIONS, MISLEADING STATEMENTS, AND SALES FROM UNLISCENSED/UNREGISTERED PERSONS IN A STATE

How do you calculate a company's "Bond Ratio?"

STATED VALUE OF BONDS / CAPITALIZATION

How do you calculate a company's "Preferred Stock Ratio?"

STATED VALUE OF PREFERRED / CAPITAIZATION

What LEGAL DOCUMENT is on the BACK of a stock certificate?

THE "ASSIGNMENT AND POWER OF SUBSTITUTION" (ASSIGNMENT ALSO CALLED : "STOCK/BOND POWER")

In investment banking, what is known as the SPREAD?

THE *DIFFERENCE* BTWN THE *PROCEEDS OF AN ISSUER AND PUBLIC OFFERING PRICE*

An SMA is normally equal to...

THE *HIGHEST DAY OF EXCESS EQUITY IN THE ACCOUNT*

What is the TIME VALUE of an options contract?

THE AMOUNT OR PREMIUM LEFT OVER AFTER DEDUCTING THE INTRINSIC VALUE

If member reason to believe financial exploitation has taken place in a FINRA RULE 2165 SPECIFIED PERSON, the trusted contact person can be reached ORALLY or in WRITING

TRUE

TREU OR FALSE: ONLY AFTER a customer profile is completed by an RR can he/she make recommendations to a customer.

TRUE

TRUE OR FALSE: Commissions on FOURTH MARKET trades (financial institutions trading with each other) are generally LOWER than those of exchange transactions

TRUE

TRUE OR FALSE: ETF's CAN be purchased on a margin and sold short.

TRUE

TRUE OR FALSE: Members must inform elderly customers, even if they make an unsolicited trades w/ member firm, that they MAY be unsuitable-if thats the case

TRUE

TRUE OR FALSE: Prospectuses filed with the SEC are NOT subject to FINRA content standards

TRUE

TRUE OR FALSE: Regulatory requests, chat room proceedings, and emails MUSST be captured and reviewed by the firm

TRUE

TRUE OR FALSE: Securities purchased on a margin MUST be registered in "STREET NAME"

TRUE

What does the "Official Notice of Sale" NOT INCLUDE?

- BOND'S RATING - STSTEMENT OF GUARANTEE OF DEBT SERVICE - OFFERING YIELDS - LEGAL OPINION -RECORDS OF TAX COLLECTIONS - BOND YEARS (TO DETERMINE NET INTREST COST)

What is "The Bond Buyer?

- DAILY NEWSPAPER GIVING NEWS OF MUNI BOND MARKET, PRIMARILY INFO ABOUT **NEW ISSUES** - PUBLISHES MEASURES AND INDEXES

How is the price of a new issue of municipal bonds determined?

- DETERMINED ON "BOND BUYER WORKSHEETS" BY THE UNDERWRITER

- Drilling costs incurred on a well that does NOT produce oil are referred to as ______________, and become INTANGIBLE. - If oil is discovered and the well only produces 10 OR LESS BARRELS per day, it is called a _________________ .

- DRY HOLE COSTS - STRIPPER WELL

What are the differences between ETN's and ETF's?

- ETN's DO NOT HAVE TRACKING ERRORS LIKE ETF's - ETN's HAFE *COUNTERPARTY RISK* (LIABILITY OF ETN RESETS W/ ISSUING BANK... IF BANK DEFAULTS, HOLDER BECOMES CREDITOR.

What is the definition of the "ALPHA" of a portfolio?

- MEASURE OF EXTENT STOCK'S PRICE REACTS TO NEWS/EVENTS RELATING TO A SPECIFIC COMPANY

Under technical analysis, how do you define "Market Momentum?"

- MEASURE OF RATE OF ACCELARATION OF A PRICE MOVEMENT... - INCLUDES DEGREE OF STRENGTH/WEAKNESS W/IN AN INDUSTRY - SHOWS PRICE VOLUME TRENDS IN THE MARKET

What is the REG T margin requirement for a Margin Account SHORT?

- MINIMUM EQUITY TO OPEN ACCT IS $2,000 - MUST DEPOSIT 50% OF PROCEEDS FOR SHORT SALE OR $2,000, WHICHEVER IS GREATER (UNLESS ITS A LOW PRICED STOCK - MIN. REQ. OF $2,000 STILL HAS TO BE DEPOSITED FOR LOW PRICES STOCKS TOTALED *LESS THAN $2K.

What type of asset allocation should a person with 5 - 10 YEARS TO GOAL/RETUREMENT have?

- MODERATE MIX: - 15% CASH - 35% BONDS - 32% LARGE CAP - 10% MID CAP - 8% FOREIGN STOCKS

If there is no individualized contact, when must the FINRA educational communication be delivered? And how long does the rule apply for?

- MUST BE DELIVERED WITH THE CUSTOMER TRANSFER APPROVAL DOCUMENTATION - APPLIES FOR A PERIOD OF 3 MONTHS

What happens when a STOCK DIVIDEND is paid in a margin account?

- NUMBER OF SHARES INCREASES - MKT VALUE *PER SHARE* DECREASES - DEBIT BALANCE IS *UNCHANGED*

Where does FINRA require member firms to include a readily apparent hyperlink to BrokerCheck?

- ON INITIAL WEB PAGE BEING VIEWED BY RETAIL INVESTORS - ANY OTHER WEB PAGE INCLUDING A PROFESSIONAL PROFILE OR ONE OR MORE RR's CONDUCTING BUSINESS W/ RETAIL INVESTORS

Under technical analysis, what is the "Random Walk Theory?"

- PAST PRICE MOVEMENTS *CANNOT* BE USED TO PREDICT FUTURE PRICES OR FUTURE PRICE MOVEMENTS

What makes an investment company qualify as a "REGULATED INVESTMENT COMPANY"

- PAY OUT AT LEAST 90% OF NET INVESTMENT INCOME... I.C. IS EXEMPT FROM PAYING TAXES ON DIVIDENDS DISTRIBUTED... **MUST PAY TAX ON DIVIDENDS *NOT* DISTRIBUTED**

What is a "Bonus Annuity"?

- PROVIDE AN EXTRA 3-5% PREMIUM CREDIT AS INCENTIVE TO BUY CONTRACT... - GENERALLY COME W/ HIGHER CONTRACT COSTS AND LONGER SURRENDER PERIODS SUBJECT TO SURRENDER CHARGES

If an order is entered as BUY 100 ABC @ 40 (the @40 indicates a limit order) on the ex-date, given the following dividends, what would the order (price) be limited to? 1.) .50 Dividend 2.) .40 Dividend

1.) 39.50 (40 - .50 = 39.50) 2.) 39.60 (40 - .40 = 39.60)

Match the definitions to their corresponding LEVELS OF EMH (Efficient Market Hypothesis)/ 1.) Publicly available info is reflected in market prices 2.) Mkt prices reflect past prices and trading volumes; all investors have access to the same info; historical data 3.) All info, public or private is reflected in market prices a.) Semi-strong version of EMH b.) Weak Version of EMH c.) Strong Version of EMH

1.) A.) 2.) B.) 3.) C.)

Municipalities generally issue two types of debt, DIRECT and OVERLAPPING. What are the definitions of the two? 1.) Direct 2.) Overlapping

1.) DIRECT: DEBT FOR WHICH *MUNICIAPAL ENTITY* IS **SOLELY RESPONSIBLE** 2.) OVERLAPPING: WHERE MORE THAN 1 MUNI. ENTITY IS RESPONSIBLE... ONLY OCCURS AT **LOCAL LEVEL** AND ARE **SUPPORTED BY TAXES**

From a SELLER'S perspective, indicate which of the following characteristics of municipal bonds w/in their factors, would be MORE marketable and/or liquid.... 1.) Ratings/Quality: High vs Low ratings 2.) Maturity: Short-term vs Long-term 3.) Call Feature: Callable vs Non-callable 4.) Coupon: High coupon vs Low coupon 5.) Block Size: Large block/round lot vs Small block/odd lot 6.) Dollar Price: Bonds at par vs Bonds at discount/premium 7.) Issuer' Name: Unknown name vs Nationally Recognized 8.) Trading Flat/Default: Bonds trading flat vs Not trading flat 9.) Sinking Fund: W/ sinking fund vs W/out sinking fund 10.) Issued in: Registered form vs Bearer form

1.) HIGH QUALITY 2.) SHORT-TERM 3.) NON-CALLABLE 4.) HIGH COUPON 5.) LARGE BLOCK/ROUND LOT 6.) BONDS AT PAR 7.) NATIONALLY RECOGNIZED ISSUER 8.) NOT TRADING FLAT (flat bonds have unpaid interest) 9.) W/ SINKING FUND (SAFETY) 10.) REGISTERED FORM

For tax purposes, *QUALIFIED CASH DIVIDENDS* are taxed at ____________ at the FEDERAL level.

15%

What is the limit of a persons assets that CAN be committed for options trading?

15%-20%

An investor owns a callable convertible PREFERRED STOCK, which is convertible into common stock at $20 per share. The current mkt price of the common stock is $25 and the preferred is called at $175. What should the investor do?

100 (par) / 20 (C.Px) = 5 common shares... 5 shares * $25 (M.Px) = $125 (Parity price)... INVESTOR SHOULD HOLD THE PREFERRED AND WAIT UNTIL IT IS CALLED BECAUSE HE WILL MAKE THE MOST MONEY DOING THAT.

Registered persons must complete the regulatory element of their requirement of their continuing education requirement within...?

120 DAYS OF EITHER... - SECOND ANNIVERSARY DATE OF INITIAL REGISTRATION AND... - EVERY THREE YEARS THEREAFTER

The price at which mutual fund shares are redeemed... a.) cannot be determined at the time the order is entered b.) avg. of prev. day's close & opening price of day order is placed c.) can be figured out by contacting the mutual fund d.) determined by current supply and demand

A.)

The record date of mutual fund distributions... a.) Is determined by the mutual fund itself b.) Always falls on the third friday of each month c.) Is determined by the investment company institute d.) Is the business day after the ex-date

A.)

Which of the following is FALSE concerning WARRANTS? a.) they are issued as short term instruments b.) allow holder to purchase common stock, usually at a price higher than the market price, at the time the warrant is issued c.) freely transferrable and listed on an exchange d.) may be issued with a preferred stock or bond issue

A.)

Which of the following is FALSE of a customer who had granted limited trading authorization to a third party in writing? a.) Limited trading authorization must be reviewed semi-annually by the customer b.) Death of owner of acct would immediately terminate trading in the account c.) Confirmations/statements will be sent to the agent only if the owner waives his right to receive them in writing d.) Any checks paid out of the account must be to the order of the owner

A.)

Public orders on a DMM's book show broker A bidding for 100 shares of ABC at 42.25. Broker B is offering to sell 300 shares of ABC at 42.62. Which of the following shows the size of the market? a.) 100 by 300 b.) 300 by 100 c.) 100 by 100 d.) 300 by 300

A.) 100 BY 300

Which of the following is the implied credit rating on a CMO a.) AAA b.) AA c.) AA+ d.) A

A.) AAA

If FORM CRS is amended or revised, it must be filed with CRD within ______ days of any information becoming inaccurate. Amended and revised versions of form CRS must be delivered w/in _________ days to EACH RETAIL investor who is a client or prospect

30 DAYS; 60 DAYS

Under federal retention rules, if a customer SELLS securities in a restricted account, he is allowed to W/DRAW _____________ of sale proceeds, or SMA is _____________ with _________ of what could have been w/drawn

50%; CREDITED; 50%

Calculate the amount of DAYS interest will be accruing when interest was last paid on June 1st and the trade date is Friday, August 11th

74 DAYS... 30(JUN) + 30(JUL) + 14(AUG) = 74 (settlement date must be business day... we must include those weekend days)

What is the definition of a CALANDER/HORIZONTAL/TIME SPREAD?

A SPREAD WHICH HAS DIFFERENT EXPIRATION MONTHS... (LONG 1 ABC MAY 50 CALL; SHORT 1 ABC AUG 50 PUT)

Which of the following is NOT calculate using advance/decline measurements? a.) Turnover shares of a particular company b.) Sentiment of investors c.) Momentum of the market d.) Market Breadth

A.) ADVANCE/DECLINE MEASUREMENTS CALCULATES **PRICE MOVEMENTS...** **NOT SHARE MOVEMENT OR TURNOVER**

Ezra likes ABC common stock and buys 100 shares ABC at $30/share. He has held the stock for about 6 months. Which of the following transactions would NOT affect Ezra's holding period? a.) Buys a call on ABC common stock with a strike price of 30 b.) Buys a put on ABC common stock with a strike price of 30 c.) Sells short 100 shares of ABC d.) Liquidates his long position in ABC

A.) BUYS AN ABC CALL WITH A STRIKE PRICE OF 30.... IT WOULD **JUST SIMPLY ADD TO HIS ALREADY HELD LONG POSITION**

ALL of the following are TRUE regarding SER-IRA's EXCEPT..? a.) Fixed contributions are required annually b.) Contributions by employer are deposited directly into eligible employee's IRA c.) Employees are allowed to make contributions into separate, personal IRA up to annual contribution limit d.) Part time employees, who meet eligibility requirements must be included in the plan

A.) CONTRIBUTIONS ARE *VOLUNTARY, AND NOT REQUIRED**

All of the following are TRUE about the correspondence category of communications with the public EXCEPT: a.) Requires internal approval by principal or supervisor before use b.) Defined to be any written communication that is sent to 25 or fewer investors w/in any 30 day calendar day period. c.) Retail investors include current and prospective customers d.) Written procedures must provide for the supervision and review of correspondence by the broker-dealer firm

A.) CORRESPONDENCE DOES NOT REQUIRE PRIOR PRINCIPAL PRE-APPROVAL

A customer wants to invest in preferred stock. His main objective is to maintain consistent income from dividends. Which of the following types of preferred would be MOST suitable? a.) Cumulative b.) Participating c.) Callable d.) Convertible

A.) CUMULATIVE

What types of preferred stock can receive more than the stated dividend? a.) cumulative and participating b.) pre-emptive preferred and secured preferred c.) pre-emptive preferred only d.) secured preferred only

A.) CUMULATIVE AND PARTICIPATING

When appraising the value of a municipal bond, what is the MOST important factor to consider? a.) Current Market Value of Similar Bonds b.) Maturity Date of Similar Bonds c.) Interest Rates of Similar Bonds d.) Yield to Maturity of Similar Bonds

A.) CURRENT MARKET VALUE OF SIMILAR BONDS

When an ad for a municipal 529 plan is going to be run, it must include a toll free telephone number where investor can obtain total return info... a.) Current to most recent month's end b.) Current to most recent year end c.) For last 12 months d.) For last 6 months

A.) CURRENT TO MOST RECENT *MONTH* END

If a B/D executes a short sale in its investment account, it may borrow shares from ALL of the following EXCEPT..: a.) A customer's cash account b.) Another B/D c.) An insurance company d.) Its own stock inventory

A.) CUSTOMER'S CASH ACCOUNTS... **STOCK *CANNOT* BE BORROWED FROM *CASH ACCTS***

Mark-to-market adjustments of open short positions to reflect profits and losses must be made...? a.) Daily b.) Weekly c.) Monthly d.) At year end

A.) DAILY

A "Rate Covenant" in a muni revenue bond pledges to charge rates that are sufficient to cover, among other things, which of the following? a.) Debt service of the bonds b.) Funds needed to cover the call of the bonds c.) The effects of a possible economic recession d.) Negative impacts of possible credit ranking downgrades

A.) DEBT SERVICE = PAYMENTS OF PRINCIPAL AND INTEREST

Which of the following types of business activity does NOT characterize the secondary market for muni securities? a.) Exchange Floor Trading b.) Broker's Broker c.) Interdealer d.) Institutional

A.) EXCHANGE FLOOR TRADING... MUNI BONDS ARE ***NOT TRADED ON FLOOR OF AN EXCHANGE***

When an OTC security has been approved for margin trading, it has been approved by...? A.) FRB B.) FINRA C.) MSRB D.) SEC

A.) FRB

Which of the following is paid by the operations and maintenance fund of a municipal utility? a.) Fuel costs b.) Depreciation c.) Debt service requirements d.) Delinquent/past due tax levies

A.) FUEL COSTS... DEALS W/THE OPERATIONS

Which of the following performance indicators may be used in a retail communication of a variable insurance contract/annuity a.) Historical performance subject to SEC and FINRA standards b.) Current performance subject to SEC and FINRA standards

A.) HISTORICAL PERFORMANCE

Which statement is INCORRECT concerning securities currently issued by FNMA? a.) Interest income is exempt from all state and local taxes b.) Its common stock is traded on the NASDAQ c.) Its securities are publicly owned d.) Bonds are issued as either callable or non-callable

A.) INTEREST INCOME IS TAXABLE ON ALL LEVELS

If an investor has a "Small Nest Egg of Money," and has *little or no investment experience,* the RR should recommend: a.) Mutual Funds b.) IRA c.) Blue-Chip Common Stock d.) Long-Term Bonds

A.) MUTUAL FUNDS... OFFER DIVERSIFICATION AND PROFESSIONAL MANAGEMENT... SHOULD BE A LONG TERM COMMITMENT

Which of the following is NOT a characteristic of a Traditional IRA account? a.) Individuals over 72 may not make tax-deductible contributions b.) A penalty of 10% applies to early w/drawls on these plans c.) Taxes on earnings are deferred until owner w/draws them in retirement d.) Annual tax deduction is made available up to maximum contribution (limited or eliminated under certain circumstances)

A.) NO AGE LIMIT ON MAKING CONTRIBUTIONS... AS LONG AS RMD's ARE MADE STARTING AT 72

Customer puts on a long straddle position on ABC Jan 60 contracts w/ premium of 4. Mkt value goes to 64 and customer exercises the call, then sells ABC at market price. Assuming the put expires, what is the customer's profit or loss? a.) Customer will not realize a gain or loss on transaction b.) Customer will realize a $400 profit c.) Customer will realize a $600 loss d.) Customer will realize a $600 profit

A.) NO GAIN OR LOSS... **THE PREMIUM IS FOR BOTH CONTRACTS** (B-400 + B-6000 = -$6400 + S+$6,400 = $0)

A B/D offers variable contracts to its clients. In order to comply w/ FINRA rules, when must variable contract applications and purchase payments be forwarded to the issuer? a.) Promptly b.) Monthly c.) Semi-annually d.) Daily

A.) PROMPTLY

Which of the following is CORRECT if an RR plans to conduct an investment seminar to potential customers? a.) seminar script requires principal approval b.) seminar must be attended by a principal of the firm c.) copy of seminar must be sent to SRO prior to use d.) seminar can be held for current customers only

A.) SCRIPT REQUIRES PRINCIPAL APPROVAL

T he term "yield," as applied to munis means...? a.) Yield to maturity b.) Yield after capital gains taxes c.) Yield to call date d.) Current yield

A.) YTM

Mr ans Mrs Smith have 2 small children and want to invest in their college education. They are in a low tax bracket and have $12,000 they can invest. Of the choices offered, which would be the best? a.) Investment in zero-coupon Treasury bonds b.) Investments in Treasury notes c.) Investments in municipal bonds d.) Investments in futures on interest rates

A.) ZCTB'S ARE THE BEST HERE BECAUSE THEY CAN BE BOUGHT AT A DISCOUNT AND INTEREST WILL BE ACCRETED OVER THE LIFE OF THE BOND... - T-NOTES ARE SHORT TERM - DONT NEED INTEREST INCOME FROM MUNIS - FUTURES ARE TOO SPECULATIVE

A client buys 100 shares XYZ at $70 per share. REG T is 50%. Two weeks later the customer deposits the margin requirement. The stock appreciates to $80 per share. All of the following are TRUE regarding this situation EXCEPT: a.) Customer's equity is $1,200 and may be w/drawn b.) w/o an extension, a violation of REG T occurred c.) Margin requirement is $3,500 d.) if initial margin req. is met, the acct would have excess equity

A.)... REGULAR EQUITY *CANNOT BE W/DRAWN* ONLY EXCESS EQUITY CAN...

Contributions to a traditional IRA... I.) if in excess, will be charged a cumulative 6% excise tax II.) Must be made in cash III.) May be made up to April 15 of year following year deduction is claimed IV.) Have no age limit on making contributions, as long as owner has earned income

ALL OF THE ABOVE

If an investor wants to set aside money "For Their Own Retirement,: the RR should recommend: I.) IRAs II.) Simple IRA III.) SEP IRA IV.) Qualified Plans

ALL OF THE ABOVE

DAY TRADING ACCOUNTS are ones for pattern day traders who execute *4 + DAY TRADES W/IN 5 BUSINESS DAYS* and generally do NOT keep positions overnight. Day traders..... I.) Must have minimum equity of $25,000 II.) Most concerned with market "timing risk" III.) Least susceptible to inflationary risk because they close positions daily IV.) Buying power limit is 4 times the maintenance margin excess in the account

ALL OF THE ABOVE

In a LONG margin acct, which of the following are TRUE if mkt value DECREASES? I.) Debit balance is unchanged II.) SMA id unchanged III.) Equity decreases

ALL OF THE ABOVE

In a variable annuity, the Accumulation Unit (Pay-In Period)...? I.) Used to determine the contract owner's interest in the separate account II.) Earnings are tax deferred until annuity payments begin III.) Customer can withdraw CSV during this period IV.) Value of these units is determined by value of securities in the separate account

ALL OF THE ABOVE

EPS would be affected by.... I.) Tax losses carried forward II.) Increases or decreases of corporate income tax rates III.) Changes in the company's inventory valuations IV.) Acquisitions/disposition of other company/subsidiary (spin-off)

ALL OF THE ABOVE

In an UGMA/UTMA Accounts, the DONOR.... I.) May give any type of security, including mutual funds, must be fully paid for. No limit is placed on the size of gift. II.) Appoints custodian for the account, can name himself custodian III.) Must be an adult IV.) CANNOT make gift thru his last will / testament V.) Donor does NOT pay capital gains on donated securities

ALL OF THE ABOVE

The DONOR or UGMA/UTMA Accounts should consider which of the following..? I.) Completion of transaction occurs when securities are registered in the name of the custodian for the benefit of the minor II.) The age of whom the gift is made to III.) The gift is completely irrevocable IV.) Certain gifts permit gifts of money, life insurance, and annuities

ALL OF THE ABOVE

EXCLUDED from the definition of a "recommended strategy" include.. I.) General financial and investment information (concepts, historic comparisons, inflation effects, needs analysis, assessments) II.) Descriptive info about employer-sponsored retirement or benefit plan (participation, benefits, investment objectives of plans) III.) Asset allocation models based on general investment theory, accompanied w/ all disclosures IV.) Interactive investment materials incorporating I, II, and III

ALL OF THE ABOVE

"STABILZATION" in a securities offering is performed by the... a.) SEC b.) Managing Underwriter c.) FINRA d.) Issuer w/ oversight of the managing underwriter

B.) MANAGING UNDERWRITER

During a 20 day cooling period, which of the following would a syndicate member be able to do? a.) Take pre-sale orders on the new issue b.) Send our research reports produced by the managing underwriter c.) Send out preliminary prospectus to clients that request them d.) Accept deposit w/ indication of interest from a client

C.)

A customer wants to sell securities he has owned for a lengthy period of time, but wish to receive already-declared dividend. Co. declared dividend to shareholders of record on Thurs. Jan 15. When is the EARLIEST client can sell his shares, and still get dividend? a.) Sell w/ a cash settlement as early as Tues Jan 13 b.) Sell w/ a reg-way settlement no earlier than Mon Jan 19 c.) Sell w/ cash settlement as early as Fri Jan 16 d.) Sell w/ reg-way settlement on Thurs Jan 22

C.) CASH SETTLEMENT ON FRI JAN 16

A confirmation sent to a customer of a listed options transaction must include ALL of the following EXCEPT...? a.) premium b.) commission c.) counter party d.) settlement date

C.) COUNTER PARTY

Which of the following is NOT a factor that needs to be known when computing a muni bond's "Accreted Value?" a.) Date on which bond was purchased b.) Date of bond's maturity c.) Current market price of the bond on the open market d.) Price at which bond was purchased

C.) CURRENT MKT VALUE ON OPEN MKT

The secondary market price of a muni bond would be LEAST affected by which of the following? a.) Changes in tax law b.) Market conditions c.) Upgrade in the credit rating of the issuer d.) Election of new municipal leaders

D.)

If a customer wants to execute a transaction that the RR considers inappropriate, the RR... a.) May not execute the order, as it is not in the best interest of the customer b.) May execute the order as is c.) May execute the order but should note that the order was "Unsolicited" d.) May not execute the order until principal approval is provided

C.) MAY EXECUTE ORDER, BUT NOTE ITS "UNSOLICITED"

Political contributions made by muni securities dealers an finance professionals are determined and overseen by which of the following? a.) SEC b.) FTC c.) MSRB d.) FINRA

C.) MSRB

All the following are functions of the secondary municipal securities market EXCEPT...?' a.) Purchase and sale of bonds dealer to dealer b.) Maintenance of markets for dollar bonds c.) Maintenance of markets for bonds in default d.) Purchases and sales of new issues of muni securities e.) Dealers/traders controlling inventories and providing quotations and appraisals f.) Dealers determining selling prices of muni bonds

D.) ... THAT WOULS BE IN THE PRIMARY MARKET

TRUE OR FALSE: The "Official Statement (OS)" containing most detailed financial info about a new issue of muni bonds is REQUIRED to be given to customers and broker-dealers.

FALSE... ONLY IF MANAGER DECIDES TO ISSUE ONE, THEN IT MUST BE GIVEN TO ALL CUSTOMERS.

TRUE OR FALSE: 403(b) Plans CAN invest in Limited Partnerships.

FALSE... THEY CANNOT

What is the FINRA "Taping Rule"?

FIRMS SUBJECT TO IT MUST RECORD ALL TELEPHONE CONVERSATIONS BTWN MEMBERS/RR's AND **EXISTING AND POTENTIAL CUSTOMERS**

A buy limit order for 200 shares of XYZ is entered on the DMM's book at 21. XYZ trades ex-dividend after the order is entered. The dividend is $1.32. The order will now appear on the DMM's book at what price? a.) $19.50 b.) $19.68 c.) $19.75 d.) $22.32

B.) $19.68

When a fund acts as its OWN distributor, which of the following is true? I.) the plan may NOT be amended to increase money spent on distribution w/out shareholder approval II.) plan may be terminated w/ majority vote of outstanding voting shares and non-interested board members, giving not more than 60 days notice III.) plan can be for more than one year if approved annually thereafter IV.) plan cannot be in place for more than one year

I, III, AND III ONLY

A DVP/RVP ACCOUNT benefits a client because... I.) Eliminated principal risk (risk of default by counterparty at settlement) II.) These accounts have less tax consequences than brokerage accounts III.) Client doesn't have to have assets in the brokerage account to make trades IV.) Settlement date can be expressly agreed to by parties... generally the 1st BUSINESS day after purchase/sale

I, III, AND IV ONLY

When a member firm places a temporary hold on the disbursement of funds of a senior's or a physically/mentally handicapped person's account.... I.) It can be imposed up to 15 business days II.) It can be imposed up to 10 business days III.) Member can extend hold for up to 10 business days IV.) Member must contact all authorized individuals in the account within two business days of imposition of the hold

I, III, AND IV ONLY

Which of the following are TRUE regarding "Condominium Units?" I.) Sold to investors by developers for the purpose of renting them to others and are considered securities II.) Condo can qualify as an investment for tax purposes if the condo is used as a residence III.) Condo is considered a residence for tax purposes if its used as residence for more than 14 days or 10% of rental periods (Hobby Loss Rules) IV.) Condo cannot qualify as in investment for tax purposes if condo is used as a residence

I, III, AND IV ONLY

What types of funds could charge redemption fees? I.) Open-end funds II.) Closed-end funds III.) UIT's IV.) No-load funds

I, III, AND IV ONLY... EVERY ONE EXCEPT CLOSED-END ISSUE REDEEMABLE SHARES.

MSRB Rules state that an individual who is a qualified muni securities rep. MAY engage in...? I.) Trading activities II.) Supervising trading activities III.) Underwriting activities IV.) Selling activities

I, III, AND IV ONLY... IN ORDER TO BE IN A SUPERVISORY POSITION, A **PRINCIPAL'S LICENSE IS REQUIRED**

How does the IRS allow the methods of COST BASIS calculation? I.) FIFO-First in, first out II.) LIFO- Last in, first out III.) Specific identification method IV.) Average cost

I, III, AND IV ONLY... LIFO IS **NOT AN ALLOWED METHOD**

What would a suitable portfolio for a pension fund interested in income include? I.) Covered option writing II.) Municipal bonds III.) Government securities IV.) Corporate bonds

I, III, AND IV ONLY... LOOKING FOR INCOME.. NOT TAX-EXEMPT INCOME

Which of the following people are ALLOWED to trade on the floor of the NYSE? I.) DMM II.) Registered Representative III.) Floor Broker ($2 Broker) IV.) Competitive Trader

I, III, AND IV ONLY... RR'S ARE NOT ALLOWED

Match the five components of the spread to who receives them I.) manager's fee II.) underwriter's compensation (retention) III.) selling concession IV.) issuer proceeds V.) reallowance a.) outside broker dealer d.) selling syndicate b.) issuer e.) managing underwriter c.) selling group

I.) & E.) ; II.) &D.) ; III.) & C.) ; IV.) & B.) ; V.) & A.)

Which of the following under REG S-P would be considered a "reasonable means" for customers to be able to opt out of information sharing? I.) Customer writing a letter of notification to exercise opt out right II.) Providing customers w/ a check off box on a reply form III.) Provide toll-free number that customers can call to opt out IV.) Provide electronic means to opt out if customer has agreed to electronic delivery of information

II, III, AND IV ONLY

Examples of OVERLAPPING debt for a city or town are...? I.) An airport Authority II.) A library district III.) A park district IV.) A school district

II, III, AND IV ONLY... AIRPORT AUTHORITY IS COVERED BY USER CHARGES (REVENUE BOND)

Which of the following are characteristics of Municipal Term Bonds? I.) Issued with staggered maturity dates II.) Issued with all the same maturity dates III.) Quoted in dollars ("Dollar Bonds") (e.g. @ 99 1/2) IV.) Quoted in terms in yield to maturity (e.g. 3.4% Basis) V.) Usually have mandatory "Sinking Fund Provisions"

II, III, AND V ONLY

Which of the following investments may be made in an IRA? I.) Collectible items II.) Stocks, bonds, mutual funds, and other securities III.) Real estate IV.) Life Insurance V.) U.S. Gvt or State issued gold, silver, platinum, or palladium

II, III, AND V ONLY

Which of the following are reasons that zero-coupon bonds are more volatile than other corporate bonds? I.) Issued at a premium to par II.) accrete value from imputed interest, which isnt pait until maturity III.) Do not pay interest semi-annually IV.) Issued at a deep discount to par

II, III, IV ONLY

As required by the *33 ACT* The STATUTORY PROSPECTUS contains more detailed information from the summary prospectus as well as financial highlights and must include...? I.) Current NAV II.) Minimum Purchase Requirements III.) Quantity Discount Amounts IV.) Fund Management Fees V.) Fund Financial statements

II, III, IV, AND V ONLY

What is the 5% mark-up policy?

THE 5%GUIDELINE USED WHEN CALCULATING THE MARK-UP/DOWN IN A TRANSACTION BETWEEN A CUSTOMER AND A MARKET MAKER

In term of portfolio management, what is a bonds "DURATION"

THE DEGREE OF SENSITIVITY OF A BONDS PRICE TO SMALL CHANGES IN INTEREST RATES, AND LENGTH OF MATURITY OF THE BOND

During the 20 day cooling period, what does it mean when the managing underwriter "BLUE SKY'S THE ISSUE"

THE ISSUE IS QUALIFIED BY UNDERWRITER'S COUNSEL IN EACH STATE IT IS SOLD

When is the public offering price of a new issue determined?

THE NIGHT BEFORE OR THE MORNING OF THE INITIAL DISTRIBUTION.

In the FOREX MARKET, what is used to determine the VALUE of each currency traded?

THE SPOT/CASH PRICE OF EACH CURRENCY

How many levels of NASDAQ quotes are available

THREE QUOTES

TRUE OR FALSE Investing in a limited partnership of RAW LAND is considered to be SPECULATIVE

TRUE

TRUE OR FALSE: ALL TRANSACTIONS in a customers account must be reviewed and initialed by a principal or supervisory person of the firm

TRUE

TRUE OR FALSE: BANKS will accept mutual fund shares as a collateral for a LOAN

TRUE

TRUE OR FALSE: Communications concerning securities futures contracts must be accompanied w/ futures risk disclosure document; also if communications contain past performance, all relevant costs must be reflected in performance

TRUE

TRUE OR FALSE: Delivery of a municipal certificate W/OUT a legal opinion would NOT be considered good delivery, unless identified as "ex-legal"

TRUE

TRUE OR FALSE: High pressure sales ("Limited Time Offer" or "You have to sign up today") are PROHIBITED to ALL investors, not just especially for senior investors.

TRUE

TRUE OR FALSE: If a client has a discretionary account when a control relationship exists between an MSRB dealer and issuer, prior authorization from the client would be required before executing a transaction in the security

TRUE

TRUE OR FALSE: If a stock undergoes a reverse stock split, ALL open (GTC)orders will be CANCELLED

TRUE

TRUE OR FALSE: Investors considering investing in variable annuities, should first MAXIMIZE contributions to their before tax retirement plans such as a 401(k)

TRUE

TRUE OR FALSE: Investors must be told that using a withdrawal plan couls deplete the investor's principal

TRUE

TRUE OR FALSE: MSRB representatives may NOT act in supervisory capacity. Muni security principals act in supervisory positions and must APPROVE AND REVIEW ALL muni bond transactions

TRUE

TRUE OR FALSE: Mutual Funds are PERMITTED to invest in WARRANTS in the portfolios they manage

TRUE

TRUE OR FALSE: NASDAQ securities are subject to REAL-TIME REPORTING, where transactions must be reported W/IN 10 SECONDS, *BY THE SELLER*, for *ROUND LOT TRADES*... odd lot trades are NOT reported

TRUE

TRUE OR FALSE: NO COMMISSIONS or other compensation may be paid if the RR is suspended or expelled from FINRA

TRUE

TRUE OR FALSE: Opening an account (cash or margin) for an employee of the NYSE, requires approval of the NYSE

TRUE

TRUE OR FALSE: Prices, mark-ups/downs, and commissions on municipal securities transactions are FULLY NEGOTIABLE

TRUE

TRUE OR FALSE: Recommending purchase of securities or continuing purchases, in amounts that are inconsistent w/ the reasonable expectation that customer has the financial ability to meet such commitment is a VIOLATION of FINRA Suitability Rules/

TRUE

TRUE OR FALSE: Restricted persons MAY purchase issues of new shares if purchase is done to MAINTAIN PROPORTIONATE SHARE OF OWNERSHIP in a company in whish restricted person ALREADY HAS OWNERSHIP

TRUE

TRUE OR FALSE: Shares of stock of a SECONDARY distribution CAN be purchased on a MARGIN

TRUE

TRUE OR FALSE: THIRD PARTY POSTINGS on social media sites, are NOT treated by FINRA as the firm's communication w/ the public and are NOT required to have prior principal approval

TRUE

TRUE OR FALSE: The "BLUE LIST TOTAL" is a market indicator which showed TOTAL PAR VALUE of bonds available that day

TRUE

TRUE OR FALSE: The 5%guideline applies when a member firm is acting in principal (dealer/markup/down) AND agency (agent/commission) capacity

TRUE

TRUE OR FALSE: There is NO holding period for registered control stock under SEC RULE 144

TRUE

TRUE OR FALSE: Under FINRA Arbitration Rules, a claim alleging employment discrimination including sexual harassment does NOT have to be arbitrated

TRUE

TRUE OR FALSE: Under FINRA Arbitration Rules, these rules would NOT apply with disputes between two members of the public

TRUE

TRUE OR FALSE: Under REGULATION S under the '33 ACT, buyers of REG S securities DO NOT have to be Accredited Investors.

TRUE

TRUE OR FALSE: Under the '34 ACT, insiders CAN purchase additional shares of their own company's stock though the exercise of rights, options, and warrants

TRUE

TRUE OR FALSE: Under the anti-fraud provisions of the '33 ACT, the provisions apply to ALL SECURITIES TRANSACTIONS... even ones with EXEMPT SECURITIES

TRUE

TRUE OR FALSE: When executing muni transactions, the dealer's cost of the bonds would NOT be a factor when determining the mark-up/down of commission.

TRUE

TRUE OR FALSE: When forming a legal opinion, Bond Counsel would NOT CONSIDER the "Re-Offering Yields" of a bond issue

TRUE

TRUE OR FALSE: an options account must be REAPPROVED if there are changes in the customer's investment objectives

TRUE

TRUE OR FASLE: Access to the final prospectus (SEC website) is equivalent to the delivery of the final prospectus

TRUE

Who is the largest ECN and handles many large block trades within the fourth market

TRUE

TRUE OR FALSE A stop order DOES influence the size of the price fluctuations of a particular stock.

TRUE... THEY BECOME MARKET ORDERS WHEN THE MKT PRICE HITS THE STOP PRICE

TRUE OR FALSE: If custodian is someone OTHER THAN CHILD'S LEGAL GUARDIAN, the legal guardian CANNOT exert any control over the account.

TRUE... (if child's uncle is the custodian, the parents have no control over the account)

TRUE OR FALSE: Prospectus delivery requirements to B/D's that participate in new issue and then become market makers in the issue (act as principal)

TRUE... **FOR 90 DAYS FOR UNLISTED (OTC) SECURITIES, AND 25 DAYS FOR LISTED (EXCHANGE) SECURITIES FROM CLOSING DATE OF SYNDICATE**

TRUE OR FALSE: Customers MAY use SMA in a when the margin account is in the RESTRICTED zone (below REG T)

TRUE... AS LONG AS IT ISNT BELOW THE MINIMUM MAINTENANCE

TRUE OR FALSE: Selling concessions, discounts, and allowances may be given from FINRA members ONLY TO other FINRA members

TRUE... MAY NOT BE GIVEN TO NON-FINRA MEMBERS

TRUE OR FALSE: Traditional IRA's MAY be rolled over into a Roth IRA.

TRUE... W/ CERTAIN RESTRICTIONS... AMOUNT TRANSFERRED WILL BE TAXABLE AS INCOME TO THE OWNER (Rollovers between Roth IRA's can be done tax-free)

TRUE OR FALSE: ALL OPTIONS ADVERTISEMENTS, SALES LITERATURE, AND STANDARDIZED WORKSHEETS REQUIRE PRE-APPROVAL OF ROP AND FINRA

TRUE.... EXCEPT FOR THOSE SENT TO INSTITUTIONAL CUSTOMERS ONLY.

How long after termination of registration as an RR or AP is a person subject to the jurisdiction of FINRA?

TWO YEARS AFTER THE EFFECTIVE DATE OF TERMINATION

Which of the following are characteristics of "QUALIFIED Municipal Bond Opinion?" I.) Is absolute and unconditional II.) Indicated the bonds are "legal, valid, binding..." and qualify as tax-free III.) Specifies that validity and tax exemption are conditional IV.) Tax emption is dependent on some future event or qualification

III AND IV ONLY... QUALIFIED IS **BAD**

Which of the following is considered EARNED INCOME? And what is the difference between earned income and ordinary income I.) Annuities II.) Pensions III.) Wages IV.) Salaries

III AND IV ONLY... EARNED INCOME IS FROM GOODS AND SERVICES PROVIDED, AND ORDINARY INCOME IS UNEARNED INCOME AND IS FULLY TAXABLE

What are the margin requirements/maintenance of ETF's?

MARGINED JUST LIKE COMMON (50% REG T)... SUBJEST TO THE SAME MIN. MAITENENCE AS COMMON (25% ON A LONG ETF, 30% ON SHORT ETF)

How long and who must a member firm notify if they terminate a registered or associated person?

MEMBER FIRM MUST NOTIFY **FINRA W/IN 30 DAYS OF TERMINATION**

When determining suitability, what is the "Customer-specific Suitability Obligation"?

MEMBER/RR MUST HAVE REASONABLE BASIS THAT RECOMMENDATION IS SUITABLE FOR A PARTICULAR INVERTOR, GIVEN INVESTMENT STRATEGIES.

When determining suitability, what is the "Reasonable-Basis Suitability Obligation"?

MEMBER/RR MUST HAVE REASONABLE BASIS THAT STRATEGY/SECURITY IS SUITABLE FOR A TYPE OF CUSTOMER... MUST UNDERSTAND THE RISKS AND POTENTIAL REWARDS OF STRATEGIES.

What is the difference between an ACQUISITION and a MERGER?

MERGER- TWO INDEPENDENT CO.'s COMBINING INTO ONE W/ CASH PAYMENT OF COMMON SHARES ACQUISITION: ONE COMPANY PHYSICALLY PURCHASES ANOTHER

The secondary market for municipal bonds is considered a "THIN MARKET" because...?

MOST BONDS ARE PURCHASED AT PAR AND HELD TO MATURITY

What is the definition of an ACCREDITED INVESTOR?

NET WORTH OF $1,000,000... INCOME IN EXCESS OF $200,000 IN THE LAST 2 YEARS OR JOINT INCOME OF $300,000... - INDIVIDUALS WITH SERIES 7/65/82 LISCENSES - FAMILYB OFFICES W/ >$5MIL AUM - KNOWLEDGEABLE EMPLOYEES OF PVT FUNDS - REGISTERED IA W STATE OR SEC - LLC'S W/ > $5 MIL TOTAL ASSETS - RBIC'S... AND ENTITIES NOT MADE FOR INVESTMENTS BUT OWN > $5MIL INVESTMENTS

What is an SMA (Special Memorandum Account)?

NOTHING MORE THAN A *LEDGER REGORDING MONEY AVAILABLE TO CUSTOMER BUT NOT USED* *THERE IS **NO MONEY** IN SMA*

MATCH THE DESCTIPTION TO THE TYPE OF MORTGAGE BOND: a.) property used to secure loan cannot be used as collateral to secure future loans unless they're lesser in claim b.) pledges all mortgageable properties as collateral but does not name any specific lots c.) property can be used to secure subsequent loans and all debts hold equal claims against assets 1.) Open-end mortgage bonds 2.) Closed-end mortgage bond 3.) General mortgage bonds

a.) and 2 b.) and 3 c.) and 1

In types of underwriting agreements, what is a STAND-BY AGREEMENT?

UNDERWRITER PURCHASES/RESELLS ANY PART OF ISSUE THAT IS NOT PURCHASED BY PRE-EMPTIVE RIGHTS... *FIRM ACTS AS DEALER*

What does it mean if a customer has a CONSERVATIVE risk tolerance/investment strategy?

WANT PRESERVATION OF INITIAL CAPITAL, MINIMAL RISK, CURRENT INCOME IS DESIRED.

When offering new municipal bonds, the syndicate will sell them on a ______________________________ basis... which means the bonds still have to be printed by a printer, so it may be a while before actual physical delivery of bond to customer occurs.

WHEN, AS, AND IF ISSUED (WI)

If a customer uses the services of an IA, and wants copies of confirmations and statements sent to the IA, what must customer provide?

WRITTEN AUTHORIZATION, AND THE NAME AND ADDRESS OF THE IA

What is the buying power in this account assuming SMA is 0 and REG T is 50% $50,000 MV , $20,000DB / $30,000 equity a.) $5,000 b.) $10,000 c.) $30,000 d.) Unlimited

b.) $10,000... 30000 EQ vs. (50000 * .5 = ) 25... REQ. EQ... 5,000 EXCESS EQ.... $5,000 * 2 = $10,000 BUYING POWER

An investor buys a 7% bond that will mature in 10 years for $1080. After 8 years the bond would have an adjust cost basis of...?

$1,016 AT THE END OF 8 YEARS.... PREMIUM / YEARS TO MATURITY = X; X * 8 YRS = X'; $1,080 (PREMIUM PRICE) - X' = X'' $80 / 10 = $8 ANNUAL ADJUSTMENT... $8 * 8 YRS = $64 REDUCTION IN COST.... $1,080 - $64 = $1,016

A customer purchases $45,000 of securities, which later appreciates to $55,000. Assuming REG T is 50%, what is the customers buying power after the appreciation?

$10,000... ($10,000 OF APPRECIATION OR EXCESS EQUITY: $5,000 * 2 = $10,000)`

A convertible bond has a conversion ratio of 25:1 and is trading at 101. What is the conversion price per share?

$1000 (PAR) / 25 (#COMMON) = $40.00 = C Px (the number (mkt price) 101 is irrelevant in this question)

Consider the following customer margin account: value of securities: $40,000; debit balance: $20,000; customer equity: $20,000. What amount of the securities can by used by B/D as collateral for a loan?

$20,000... ($20,000 * 1.40 = $28,000), BUT THE LOAN TO CUSTOMER (DEBIT BALANCE) WAS $20,000, SO THE B/D CANNOT BORROW MORE THAN THAT

A customer lives in MA. He owns $7M of US Treasury Bonds w/ a 7% coupon. His federal tax bracket rate id 50%, and state tax rate is 10%. What is his total tax liability on interest received?

$245.00.... (TAXED FEDERALLY, NOT STATE OR LOCAL) ($70(annual interest per bond) * 7(7M = 7 1000 par bonds) = $490(total interest income) $490 * .50(fed tax rate) = $245 tax liability

An 8% corporate pays interest on June 1st and December 1st. Mr. Smith buys the bond any pas the previous owner $15 in accrued interest. Later, he receives the semi-annual interest payment of $40. How much of this semi-annual payment will Mr. Smith be required to report for interest income tax purposes?

$25... ($40 - $15 = $25)... AI that is paid to SELLER at purchase, is DEDUCTED from the interest received by NEW BOND OWNER... when calculating TAXABLE NET INTEREST.

A customer executes various transactions during the year, and realizes a $10,000 net capital loss. What amount an be written off against ordinary income?

$3,000

Broker-Dealer A is underwriting a new municipal bond offering under an Eastern Agreement. The B/D's allotted participation $15 million bonds (15%) out of $100 million bond offering. The offering is not completely sold, and $20 million bonds remain. How many (much) of the bonds is the B/D responsible for?

$3,000,000... $20 MILLION * .15 = $3 MILLION`

A customer buys 1 XYZ MAY 50 CALL @2 and buys 1 XYZ MAY 35 PUT @1 when XYZ is selling @$39/share. XYZ decreases to $28 and the put is sold for the in-the-money amount, and the call expires unexercised. the customers profit or loss is..?

$400 PROFIT.... (B-200) + (B-100) + (S+700) = +400

If a company making a 504 OFFERING under REG D, that offering cannot exceed...?

$5,000,000

A municipal finance professional (MFP) intends to vote in 3 elections this year. She is eligible to vote in all of them. What is the total amount of money she can contribute in all three elections?

$750

An investor invests $10,000 in real estate limited partnership. At the end of the first year, he receives a return of $4,000. He reinvests $2,000. What would be his adjusted basis?

$8,000... $10,000(investment) - 4,000(return) + $2,000(reinvest) = $8,000

Bafia is a participant in a 403(b) plan. She receives her first distribution today for $1,800. She is retired, 74 years old, and in the 25% tax bracket. What will be her tax penalty on this distribution?

$900...

The Intra corporation $3million plus received $200,000 in preferred dividends. The corporation is in the 30% tax bracket. Taxes on the entire amount of taxable income would be....?

$930,000... ($3 MILLION * .30) + ($200,000 * .15)

What is the BID price for the following T-Bill quote? BID --- 2.48 ASK --- 2.45

$975.20... (1,000 - 24.80 = $975.20)

What is the dollar value / percentage to par of a government bond quoted at 99.24?

$997.50 --- 99.75% of par of $1,000.... 99 PTS * $10 = $990 + .24 = 24/32 * $10 = $7.50 = $997.50

What is the formula for the "Acid Test Ratio (Quick Ratio)?"

(CURRENT ASSETS - INVENTORY) / CURRENT LIABILITIES - **MOST STRINGENT** FORM OF LIQUIDITY - STANDARD MINIMUM IS 1:1

What is the formula t determine equity in a margin account SHORT?

(PROCEEDS OF SHORT SALE + REG T DEPOSIT) = CREDIT BALANCE. CREDIT BALANCE - CURRENT MKT VALUE SHORT = EQUITY

What is the formula of a corporation's "Book Value/Liquidating Value/Net Tangible Assets Per Share?"

(SHAREHOLDERS EQUITY - INTANGIBLE PREFERRED STOCK) / OUTSTANDING COMMON SHARES

How is NAV calculated?

(TOTAL ASSETS OF FUND - TOTAL LIABILITIES) / OUTSTANDING SHARES

How do you calculate a company's "Common Stock Ratio?"

(VALUE OF COMMON + PAID IN SURPLUS + RETAINED EARNINGS) / CAPITALIZATION

An investor SELLS 1 ABC JUL 70 CALL @4 & BUYS 1 ABC JUL 60 CALL @7... At what mkt price will the customer breakeven?

**$63**... (7 - 4 = 3... 3 + 60 = $63)... For call spreads, you have to add the adjusted premium (after you've subtracted the smaller premium from the larger one) to the lower strike price. For put spreads, you subtract the adjusted premium from the higher strike price.

If a fund acts as its OWN distributor, how long must PLAN AGREEMENTS be kept?

****6 YEARS****

HOW LONG must all advertising, sales literature, and individually prepared reprints that are delivered to customers PRIOR TO THE DELIVERY OF ODD, be sent to FINRA, PRIOR TO FIRST USE FOR APPROVAL?

***MUAT BE SENT TO FINRA **10 CALENDAR DAYS** PRIOR TO FIRST USE FOR APPROVAL***

The required background and financial info must be sent TO CUSTOMER for verification within HOW MANY DAYS AFTER customer has been approved for options trading?

**15 *CALENDAR* DAYS** ...IF THE CUSTOMER DOES NOT RESPOND, INFO IS CONSIDERED VERIFIED

When must portfolio margin account deficiencies be met? And what happens if they are NOT met?

**3 BUSINESS DAYS** NO NEW ORDERS ARE ALLOWED, PROMPT LIQUIDATION WILL OCCUR.

HOW LONG after closing date of a syndicate must B/D's wait before extending credit to customers on the new issue (margin)

**30 DAYS** AFTER CLOSING DATE OF SYNDICATE

How long do member firms have to keep on file WRITTEN OPTIONS COMPLAINTS?

**4 YEARS** AT THEIR CURRENT, PRINCIPAL PLACE OF BUSINESS IN A CENTRAL FILE

Using the following financial info regarding Steele Co. calculate its dividend payout ratio. Total cash dividends paid to stockholders --- $10,000,000 Total amount of outstanding shares ---------- 5,000,000 Earnings per share ----------------------------- $5.00

**40%** (10,000,000 / 5,000,000 = $2 of dividends per share)... ($2.00 / $5.00 = .4)

HOW LONG does a firm have to verify New Account Report Info in a CASH ACCOUNT under the Customer Identification Program (CIP)? AND HOW LONG does client information have to be retained by the B/D after customer account is closed?

**5 *BUSINESS* DAYS** *5 YEARS AFTER ACCOUNT IS CLOSED*

How long does a principal of an OSJ have to approve applications for annuity 1035 exchanges?

**7 BUSINESS DAYS**

12b-1 Fees MUST be approved __________ by the fund's __________ and are considered to be an ___________ of the fund

**ANNUALLY**; ***SHAREHOLDERS***; *EXPENSE*

How often MUST customer account statements be sent to to the customer?

**AT LEAST ***QUARTERLY*****

What is the formula for calculating EQUITY in a MIXED margin account?

**MKT VALUE LONG - DEBIT BALANCE + CREDIT BALANCE - SHORT MKT VALUE)... from last ex... ($100,000 (cash+long) - $30,000(db) + $60,000(cb) - $35,000 = $95,000 TOTAL EQUITY)

What is a 501(c)(3) organization?

**NON-PROFIT ORGANIZATIONS** (GENERALLY CHARITABE ORGANIZATIONS) AND ARE ***EXEMPT FROM PAYING FEDERAL INCOME TAX***

When must a customer be approved for OPTIONS trading?

**PRIOR TO THE TIME THE FIRM/BOM ACCEPTS AN OPTIONS ORDER FROM THE CUSTOMER**.... **APPROVAL MUST BE SENT TO ROP WITHIN 10 BUSINESS DAYS**

Under the Investment Company Act of 1940, Investment companies MUST file financial statements w/ the SEC how often?

**QUARTERLY** OR WHENEVER THE SEC ASKS

How long after a controversy arises, is it NOT allowed to be put up for arbitration?

*6 YEARS*

What is the definition of the "Cash-on-Cash-Method" for computing return on investment in a DPP?

*ANNUAL RETURN / AMOUNT OF CASH INVESTED IN THE SHELTER* *EFFECTS OF TAXES IS DISREGARDED* - * GOOD INDICATION OF PROFITABILITY AND IS VERY SIMPLE*

What is NON-SYSTEMATIC RISK?

*COMPANY SPECIFIC RISK* *CAN BE ELIMINATED BY DIVERSIFICATION*

What is the definition if the FOURTH MARKET>

*INSTITUTIONS* TRADING *DIRECTLY TO OTHER INSTITUTIONS* (MUTUAL FUND TRADING W/ INSURANCE COMPANY)

What is a WORKOUT MARKET?

*SUBJECT QUOTE* PROVIDING ESTIMATED PRICE RANGE WHERE DEALER CAN OBTAIN SECURITY, W/IN A REASONABLE PERIOD OF TIME.. WHEN SECURITY IS NOT READILY AVAILABLE (THINLY TRADED)

What is the definition of an ETN?

*UNSECURED DEBT INSTRUMENTS*, **ISSUED BY BANKS**... BANK PROMISES TO REPAY *PRINCIPAL AMOUNT - INVESTOR FEES*, *AT FINAL MATURITY*... PERFORMANCE OF ETN IS LINKED TO SPECIFIC INDEX OR INVESTMENT STRATEGY.

What percentage of the customers DEBIT BALANCE can be used as collateral by a B/D to a bank

*UP TO 140%* OF THE CUSTOMER'S DEBIT BALANCE *IN THE FORM OF SECURITIES*... *** BUT THE B/D CANNOT BORROW MORE THAN THE AMOUNT OF THE LOAN TO THE CUSTOMER***

What is the definition of correspondence? And is principal approval required?

- "ANY WRITTEN (OR ELECTRONIC) COMMUNICATION TO 25 OR FEWER RETAIL INVESTORS W/IN *30 CALENDAR DAYS* - *PRINCIPAL APPROVAL NOT REQUIRED* IF IT DOESN NOT MAKE RECOMMENDATIONS OR PROMOTE PRODUCTS OR SERVICES

-Sometimes w/ a new issue of muni bonds, there will be an ___________________ which covers more or less than 6 MONTHS of interest depending on the _______________ of the bonds and the ______________ interest payment dates... - A ____________________ would be for LESS than 6 months - A ____________________ would be for MORE than 6 months

- "ODD" FIRST COUPON; ISSUE DATE; SEMI-ANNUAL - SHORT COUPON - LONG COUPON

Listing a limited partnership on an exchange, changes ownership from "units" to "_______________" which are actively traded, thus ______________ .

- "SHARES" - INCREASING LIQIDITY

- Investors contributing to 529 plans generally use "annual gift tax exclusion" of _____________ in per year or can aggregate it to ______________ in one year, but no further gifts may be given for ______________ . - Married couples may contribute up to _______________ for each beneficiary as long as no further gifts are made for ___________________ .

- $15,000 ; $75,000; 5 YEARS - $150,000; 5 YEARS

During a QUIET PERIOD, NO member firm may publish research reports regarding a company for...?

- **10 CALENDAR DAYS FOLLOWING DATE OF IPO** - **3 CALEDNAR DAYS FOLLOWING DATE OF SECONDARY ISSUE**

For an investment company and mutual fund, what is the job of the TRANSFER AGENT?

- **ISSUES AND REDEEMS FUND SHARES** - *SENDS STATEMENTS TO SHAREHOLDERS & KEEPS RECORDS OF REDEMPTIONS AND PURCHASES* - *DISBURSES DIVIDENDS AND CAPITAL GAINS*

- Distributions from a SIMPLE IRA *CAN* be rolled over to *any other retirement account* if the employee has participated in the plan for at least _________________________ . - If employee has participated for *less than that amt of time* the distributions may only be rolled over to _____________________ .

- *2 YEARS* - ANOTHER SIMPLE IRA

How long after becoming subject to the "Taping Rules" (FINRA Rule 3010) does the firm have to install a taping system? And how long are the taping procedures set in place for?

- *60 DAYS* - *3 YEARS*

What is the "Barbell Investment Strategy"

- *FIXED-INCOME INVESTMENT STRATEGY* WHERE INVESTORS SHOULD DIVERSIFY BONDS BY **SHORT AND LONG TERM MATURITIES

Describe CLASS C SHARES, and who benefits from them the most.

- *NO UPFRONT SALES LOAD* *NO BACK-END SALES LOAD* - **HIGHEST ANNUALN EXPENSE CHARGES** - BEST FOR *SHORT-TERM INVESTORS

What is "Technical Analysis?" and which of the following supply and demand factors would technical analysts be concerned with? I.) Trading volume and Moving averages II.) Advances and declines of advancing issues to declining issues III.) Odd lot purchases and sales IV.) Timing of purchases and sales V.) Support and resistance levels

- ANALYSIS CONCERNED W/ MARKET PRICE MOVES AND TRENDS - ALL OF THE ABOVE

In an Oil and Gas Partnership, equipment costs such as machinery, tools, pipe, and casing, are ___________ expenditures and the cost must be ___________________ over time and are NOT subject to ________________ .

- CAPITAL EXPENDITURES - MUST BE DEPRECIATED OVER TIME - NOT SUBJECT TO DEPLETION

What is a "Bank Qualified Municipal Bond?"

- Designation given to a public purpose bond offering by issuer if issuer expects *no more than $10 million par value amt. of these bonds to be issued in one year*... - When these are purchased by bank for its portfolio, they can receive an *80% tax deduction for interest cost of carry for the issue* - a.k.a. "Qualified Tax-Exempt Obligation"

What is the "General Account" in a variable annuity contract?

- LIMITED INVESTMENT ACCT ESTABLISHED BY INCURANCE CO's FOR INVESTMENTS TO BE MADE FROM PREMIUMS PAID. - LIMITED BY LAW TO WHAT TYPES OF INVESTMENTS CAN BE MADE IN THE ACCT

What happens if the value in a margin account falls BELOW the restricted level and below the 25% NYSE MAINTENANCE MARGIN REQUIREMENT?

- MAINTENANCE/MARGIN CALL: *DUE ON DEMAND* - CUSTOMER DEPOSITS CAH OR FULLY PAID SECURITIES TO GET ABOVE 25%... - IF CALL IS NOT FULFILLED ON DEMAND, ACCOUNT CAN BE LIQUIDATED - MOST B/D's MAINTAIN A HOUSE 30% MARGIN REQUIREMENT TO AVOID THIS

Customers in arbitration have the option to choose between a Majority-public panel, and an Optional All Public Panel. Describe the composition of each one.

- MAJORITY-PUBLIC: CHAIR-QUALIFIED PUBLIC ARBITRATOR, A PUBLIC ARBITRATOR, AND A NON-PUBLIC (INDUSTRY) ARBITRATOR - OPTIONAL ALL PUBLIC: ALL-PUBLIC PANEL

In a margin account, what is the "MARGIN", and what is the REG T general margin requirement?

- MARGIN IS THE AMOUNT THAT CUSTOMER MUST DEPOSIT TO DO A LEVERAGED TRADE - GENERALLY 50% OF THE PURCHASE PRICE... OTHER 50% IS CALLED THE "LOAN VALUE"

How much of their contributions may an individual who IS ACTIVE in a retirement plan at work?

- MAY DEDUCT SOME IF AGI IS BELOW $76,000 (SINGLE) OR $125,000 (MARRIED FILED SERAPATE)

MIG (Moody's Investment Grade) evaluates the level of quality of ________________ . A ____________ rating is comparable to an AAA rating on a bond.

- MUNICIPAL NOTES - MIG 1

During the construction stage of a project, BEFORE a project begins to generate revenues, INTEREST PAID to bondholders comes from the ___________________ called the _________________ or the ____________________ .

- PROCEEDS OF THE BOND ISSUE - "CAPITALIZED INTEREST" - "FUNDED INTEREDT"

What is an "Equity Indexed Annuity"?

- PROVIDE ANNUITY PAYMENTS LINKED TO A SPECIFIC INDEX - GENERALLY A CAP ON PERCENTAGE RETURN... AND GUARANTEED MINIMUM RETURN

What are the TAX TREATMENTS of mutual fund withdrawal plans?

- TAXED AS **CAPITAL GAINS/LOSS FOR SALE OF SECURITIES** - TAXED AS **ORDINARY INCOME IF W/DRAWL WAS MADE FROM INVESTMENT INCOME**

- What is the "ASSESSMENT" for additional cash contributions that some oil and gas give to investors? - What happens if investors do NOT comply with the assessment?

- THE DEMAND OF PROGRAM FOR ADDITIONAL CASH FROM INVESTORS FOR ADDITIONAL DRILLING AND COMPLETIONS COSTS - THEIR SHARE OF REVENUES + EXPENSES AND PERCENTAGE OF OWNERSHIP IS REDUCED

An investor purchased a security at $20. Later it appreciates to $40. When it is $40, the investor gifts the stock to a friend. Later the stock appreciates to $60. The friend sells the stock at $60. Who is responsible for the tax basis and what is the cost basis?

- THE FRIEND WOULD BE RESPONSIBLE FOR THE TAX FROM THE INVESTORS COST OF $20 UP TO THE SALE PRICE OPF $60

What is EQUITY in a margin account and how do you CALCULATE it?

- THE PART OF THE ACCOUNT CUSTOMER ACTUALLY OWNS... *NET FINANCIAL OWNERSHIP* - CURRENT MKT VALUE - DEBIT BALANCE = EQUITY

Under technical analysis, what is "Breadth of the Market?"

- THE PERCENTAGE OF STOCKS PARTICIPATING IN A PARTICULAR MARKET MOVE.

For a corporation or company, what is the purpose of leverage?

- TO INCREASE RATE OF RETURN ON COMMON STOCK IN PROFITABLE YEARS - ACCOMODATE SUDDEN GROWTH IN SALES

Subchapter S Corporations ("S Corporation"): are treated like a ______________ , and have ____________________ of income and expenses

- TREATED LIKE A PARTNERSHIP - COMPLETE FLOW THRU OF INCOME AND EXPENSES

What is the "Official Notice of Sale" of a municipal bond issue?

- USED W/ COMPETITIVE BIDS; INVITES BIDS TO BE MADE AT A SPECIFIC TIME AND PLACE, INCLUDES ALMOST ALL DEATAILS ABOUT THE BONDS

When a customer has EXCESS EQUITY, what 3 THINGS may the customer do w/ the account

- W/DRAW CASH FROM ACCT / W/DRAW SECURITIES - BUYING POWER BECOMES 2x EXCESS EQUITY - START W/ S.M.A. LINE OF CREDIT: LINE OF CREDIT ADJUSTED TO AMOUNT OF EXCESS EQUITY

When can investment company rankings be used in retail communicaions?

- WHEN CREATED ANG PUBLISHED BY ANKING ENTITY - CREATED BY INVESTMENT COMPANY BUT BASED OFF A RANKING ENTITY

Are sales charge breakpoints available in variable annuities? If so, what are they based on?

- YES - BASED ONTOTAL AMOUNT INVESTED IN ANNUITY

When do the Recruitment Practice Rules require the FINRA educational communication be delivered to the customer

-*AT TIME OF FIRST INDIVIDUALIZED CONTACT* - IF IN WRITING: AT TIME OF 1ST INDIVIDUALIZED CONTACT - IF ELECTRONIC: PROVIDE CUSTOMER W/ HYPERLOINK AT TIME OF 1ST CONTACT - IF CONTACT IS ORAL: *3BUSINESS DAYS AFTER CONTACT* OR *W/ OTHER DOCUMENTATION...* **WHICHEVER IS EARLIER**

Here is an example of a Limited Partner's share in a real estate program... - Revenue: $600,00- - Operating Expenses: $300,000 - Manager's Fee: $100,000 - Interest: $190,000 - Depreciation: $110,000 What is the Limited Partner's... 1.) Profit or loss? 2.) Cash flow?

1.) $100,000 LOSS... (REVENUE - ALL DEDUCTIONS) ($600,000 - 700,000 = $-100,000) 2.) +$10,000... (REVENUE - DEDUCTIONS *EXCEPT DEPRECIATION).... ($600,000 - $590,000 = +$10,000)

1.) Under SEC RULE 15C3-3, what is the mandatory "buy-in period" if seller fails to deliver securities sold? 2.) Under REGULATION T, what is the mandatory "sell-out period" for a buyer who does not pay for the security bought?

1.) *10 BUSINESS DAYS* **AFTER SETTLEMENT DATE** 2.) *4 BUSINESS DAYS* AFTER **TRADE** DATE

The order protection rules under REG NMS requires that..?

1.) ACCESS TO QUOTES MUST BE IMMEDIATE AND AUTOMATIC 2.) EXECUTION OF TRADES TAKES PLACE AT A PRICE AT OR BETTER THAN NATN'L BEST BID OF OFFER(BBO)

Investment recommendations based on market capitalization for clients wanting... 1.) SAFETY/PRESERVATION... 2.) GROWTH. MID-SIZE COMPANIES... 3.) SPECULATION. SMALL COMPANIES...

1.) LARGE CAP - "BLUE CHIPS"; PRICE STABILITY, LIQUIDITY, AND DIVIDEND INCOME 2.) MID CAP - MODERATE GROWTH POTENTIAL THRU CAPITAL APPRECIATION, AGGRESSIVE GROWTH POTENTIAL 3.) SMILL/MICRO CAP - VOLATILITY, GREAT UPSIDE POTENTIAL, DOWNSIDE RISK, LIQUIDITY/CREDIT RISK

In the listing below of the following treasury bond, indicate what part of the listing the corresponding number below is. JUN '15 9 3/4's 103.08 103.12 +.03 9.05 1.) 2.) 3.) 4.) 5.) 6.)

1.) MATURITY 2.) COUPON 3.) BID 4.) ASK 5.) BID CHANGE FROM PREVIOUS DAY 6.) YTM ON ASK QUOTES ARE IN 32'nds (103.08 = 103 8/32 = 1032.50)

Under STANDARDS APPLICABLE TO COMMUNICATIONS, if an advertisement is distributes BEFORE ODD is delivered, which 3 STANDARDS MUST the advertisement adhere to?

1.) MUST BE LIMITIED TO GENERAL DESCRIPTION OF THE OPTIONS BEING DISCUSSED 1.) MUST CONTAIN CONTACT INFORMATION FOR ACQUIRING AN ODD 3.) MUST NOT CONTAIN RECCOMENDATION, PROJECTED PERFORMANCE FIGURES OR NAME SPECIFIC SECURITIES.

Write the number of arbitrators in each dollar amount scenario... 1.) $50,000 or less 2.) Between $50,000 and $100,000 3.) Over $100,000 (not requesting monetary damages)

1.) ONE ARBITRATOR 2.) ONE ARBITRATOR 3.) THREE ARBITRATORS

Once municipal bonds are awarded to a particular syndicate group, they're allocated by the managing underwriter in WHAT PRIORITY? Also, explain the definitions of the following priorities... - Members' orders at the take down -Group Net Account or Syndicate Group Account -Pre-Sale Orders - Designated Orders

1.) PRE-SALE ORDERS - bonds first go to customers who place orders prior to issuance 2.) GROUP NET/SYNDICATE GROUP ACCT - sales made for benefit of syndicate as a group. Sales credits are allocated depending on each member's pro-rata participation. Usually used w/ "hot" orders (excess demand) 3.) DESIGNATED ORDERS - from customers who "designate" member(s) of syndicate from whom they wish to buy bonds, and all sales credit can be allocated to such members 4.) MEMBERS' ORDERS AT THE TAKE DOWN - Orders placed by a syndicate member for the syndicate member Memory Hook" PGDM... Pretty Girls Demand More

With the following types of investors, indicate what their portfolios should be invested in, under the general guidelines. 1.) Older Investors (Nearing retirement or are retired) 2.) Younger Investors 3.) Middle-Aged Investors

1.) PRIMARILY FIXED INCOME SECURITIES AND SOME CASH 2.) PRIMARILTY EQUITIES AND SOME CASH LOOKING FOR CAPITAL APPRECIATION... AVOID FIXED INCOME 3.) COMBO OF FIXED INCOMES, EQUITIES, AND CASH

Protective Covenants for the issuance of revenue bonds on a project include..... 1.) Maintenance Covenant 2.) Debt Service/Rate Covenant 3.) Insurance Covenant 4.) Financial Report Covenant 5.) Consulting Covenant 6.) Anti-discrimination Covenant 7a.) Closed-End Additional Bond Covenant 7b.) Open-End Additional Bond Covenant DEFINE THESE COVENANTS...

1.) Requires facility be maintained in good operating condition 2.) Requires issuer to charge rates sufficient to cover financial requirements, plus a margin of safety 3.) Requires adequate insurance be placed on the facility, protecting investors from damage or destruction... (Catastrophe Call Covenant) 4.) Requires annual audited income statement/balance sheet 5.) Requires services of consulting engineer of good reputation be retained 6.) No discrimination will be practiced in facility's hiring policies, services provided, and rates charged 7a.) PROHIBITS sale of additional bonds payable from revenues of the project 7b.) PERMITS sale of additional bonds; sometimes a n earnings test must be met

1.) The payment of interest and principal for GOs issued by a STATE, is secured by _______________ and/or ___________________ . 2.) The payment of interest and principal for GOs issued by LOCAL GVT ENTITIES (schools, counties, cities, libraries, etc) is secured by __________________ .

1.) SALES TAX AND/OR INCOME TAX 2.) REAL ESTATE/PROPERTY TAX

Define the following municipal bond terms...: 1.) CUSIP 2.) Dated Date 3.) Debt Limit 4.) Debt Service 5.) Level Debt Service 6.) Muni Dealer Joint Account

1.) STANDARD NUMBERING SYSTEM IDENTIFYING SECURITY ISSUES 2.) DATE FOR NEW ISSUE, FOR WHEN **INTEREST ACCRUES** 3.) LEGAL MAX. DEBT INCURRING POWER OF THE ISSUER (*FOR GOs ONLY) 4.) SERIES OF PAYMENTS (PRINCIPAL & INTEREST) TO EXTINGUISH DEBT OVER A PERIOD OF TIME 5.) COMBIMED ANNUAL PAYMENTS (PRINC. & INTEREST) ARE APPROX. EQUAL (ONLY SERIAL BOND) 6.) 2+ FIRMS WHO BUY AND RESELL BLOCK OF BONDS IN THE SECONDARY MARKET

Out of each of the following choices, choose the type of trade that will have a HIGHER markup. 1.) TYPE: Stocks or Bonds 2.) AVAILABILITY: Inactive Securities or Active Securities 3.) PRICE: Lower Priced or Higher Priced 4.) AMT OF $ IN TRANS.: Small Transactions or Large Transactions 5.) NATURE OF BUSINESS: Firms w/ many services or Firms w/ few services

1.) STOCKS 2.) INACTIVE SECURITIES 3.) LOWER PRICED 4.) SMALL TRANSACTIONS 5.) FIRMS W/ MANY SERVICES

What are the two reasons WHEN/WHY would an issuer REFUND their bonds?

1.) THERE WAS A SHARP DECLINE IN INTEREST RATES 2.) REDUCE POSSIBLE DILUTION ON COMMON SHARES IF THE BONDS WERE CONVERTED

Determine the typed of payout options corresponding with their definitions. 1.) Investor/beneficiary is guaranteed payment of a certain amt ot units (NOT FIXED NUMBER OF DOLLARS) 2.) Investor receives regular payments until death, but if he dies, beneficiary will receive regular payments for pre-determined period 3.) Investor receives fixed amount set in contract, until the account is extinguished (NOT an "annuity" payout) 4.) Regular payments are made to a couple and would continue to be paid until both persons die 5.) Investor receives regular payments until death, regardless of sex or how long they live; gives the largest amount of payout 6.) Investor receives payment for set time period, then payments are halted whether investor is living or not. If investor dies, beneficiary receives balance of installments (NOT an "annuity" payout)

1.) UNIT REFUND ANNUITY 2.) LIFE ANNUITY-PERIOD CERTAIN 3.) INSTALLMENTS FOR A FIXED AMOUNT 4.) JOINT AND LAST SURVIVOR ANNUITY 5.) LIFE ANNUITY 6.) INSTALLMENTS FOR A PERIOD CERTAIN

With STOP ORDERS, how do you protect... 1.) Long Position 2.) Short Position

1.) USING A SELL STOP ORDER 2.) USING A BUY STOP ORDER

MATCH THE TERM TO THE DEFINITION a.) Certificates of Deposit CD's b.) Bankers Acceptances c.) Commercial Paper d.) T-bills 1.) The most liquid of all money mkt instruments 2.) Time deposits issued by banks 3.) Unsecured promissory note issued at a discount 4.) Used to finance foreign trade

1.) and d.) , 2.) and a.) , 3.) and c.) , 4.) and b.)

What is the EXPENSE RATIO of a company with $1 million of avg net assets and $17,500 of operating expenses?

1.75% (17,500 / 1,000,000)

What is the MARGIN REQUIREMENT on purchasing standard or traditional options in a margin account?

100%... YOU CAN BUY OPTIONS IN A MARGIN ACCOUNT... BUT YOU CANNOT BUY OPTIONS ON A MARGIN

A convertible bond is quoted at 90 and has a conversion price of $50. What is the PARITY PRICE of the common stock?

1000 (BOND PAR) / $50 (C Px) = 20 SHARES $900 (QUOTE PRICE) / 20 = $45

When does EXPIRATION of options happen?

11:59PM ET ON THE THURD FRIDAY OF THE EXPIRATION MONTH

In accordance to "Real-Time Pricing," dealers must report all trades within __________________ of the trade.

15 MINUTES

A convertible bond has a price of $50, HOW MANY SHARES OF COMMON STOCK IS PRODUCED when the bond us converted?

20 COMMON SHARES

What is the MARGIN REQUIREMENT for WRITING UNCOVERED EQUITY OPTIONS?

20% OF MARKET VALUE OF THE STOCK + PLUS THE PREMIUM OF THE OPTION

Looking at the ticker tape, what is the trading activity of this stock? " X " 2s 67.25

200 SHARES OF X SOLD AT $67.25

What is the minimum maintenance requirement in a margin account SHORT?

30% OF CURRENT MKT VALUE *SHORT* IN THE FORM OF EQUITY

ABC CO. wants to issue $20 million of debentures, each would be convertible into 20 shares of common. How many common shares are issued of all the debentures are converted

400,000 SHARES... 20 MIL / 1000 (PAR) = 20K 20K * 20 = 400K COMMON SHARES

When does CEASE TRADING on options happen?

4:00PM ET ON THE THIRD FRIDAY OF THE EXPIRATION MONTH

Under REG T, when must payment be delivered by if a customer purchases a security in a "special" cash or margin account?

4TH BUSINESS DATE AFTER TRADE DATE

What is the CURRENT YIELD on a corporate bond trading at 103 with a 7% coupon

6.8%..... (.07 * 1000 = 70 / 103 = 6.8%)

A customer purchases $50,000 Cleveland Electric 9s of 25 @ 106. What is the current yield?

8.5%... 9s MEANS 9%COUPON... OF 25 MEANS 2025 MATUR... @106 MEANS DOLLAR PRICE OF 1060... $90(ANNUAL INTEREST) / 106(MKT PRICE) = 8.5%

Assume an investor buys a treasury bond regular way on Tuesday June 3 and interest was paid last March 15. How many days of accrued interest is the seller entitled to?

81 DAYS... March 15 - 31 = 17 days + april = 30 days + May = 31 days + June 3 = 81 days

Calculate the amount of DAYS interest will be accruing when interest was last payed March 15th, and trade date is Monday, June 10th.

87 DAYS... 16(MAR) + 30(APR) + 30(MAY) + 11(JUN) (add up to... but not including settlement date)

What is the standard MAXIMUM EXPIRATION on an options contract? And on LEAPS?

9 MONTHS, 39 MONTHS FOR LEAPS

When can LEAPS be purchased on a MARGIN? What is the MARGIN REQUIREMENT?

> 9 MONTHS TO EXPIRATION... 75% OF THE PREMIUM VALUE

An investor buys 1 put option for a premium of $2.00 and later sells it for a premium of $3.00. For tax purposes that $1.00 net received will be treated as...?

A CAPITAL GAIN

When is the settlement for WHEN/AS/IF ISSUED SECURITIES?

A DATE AGREED UPON BY 2 PARTIES... *USUALLY 2 BUSINESS DAYS **AFTER SECURITY GOES REGULAR WAY***... **REG T SAYS NO LATER THAN 4th BUSINESS DATE AFTER SECURITY GOES REGULAR WAY*

What is an option SPREAD position?

A LONG AND SHORT (BUY AND SELL) POSITION OF THE AME UNDERLYING STOCK... IN EITHER A CALL OR PUT... BUT W/ DIFFERERENT EXPIRATION MONTHS AND/OR DIFFERENT STRIKE PRIECS

What is a FUND OF FUNDS?

A POOLED INVESTMENT PRODUCT THAT INVESTS IN OTHER POOLED INVESTMENT PRODUCTS.

What is the MOST SPECULATIVE options position that can be held?

A SHORT UNCOVERED (NAKED) CALL

What is a Progressive Tax>

A TAX THAT INCREASES AS INCOME INCREASES (INCOME, GIFT, ESTATE TAXES)

Which of the following would NOT be true about the characteristics of automated execution systems used for securities transactions? a.) They are used only by institutional investors b.) They expedite the execution of most transactions c.) Market and limit orders are allowed to be entered d.) Execution is generally instantaneous

A. )

A client purchased 200 shares of ABC for $22,500 2 years ago. Over the 2 years the client sold ABC call options for a total of $1,500. All of the calls expired worthless. For tax purposes, the cost basis of the 200 shares of ABS is...? a.) $22,500 b.) $21,000 c.) $23,250 d.) $24,000

A. )$22,500... COST BASIS WOULD REMAIN AT $22,500 BECAUSE THE OPTIONS WERE **NOT EXERCISED**

ALL of the following are TRUE regarding an employee of broker dealer "A" wanting to open an account at broker-dealer "B," EXCEPT..? a.) Prior approval from employing firm is required before opening an account and executing orders b.) Written notice must be sent to employing firm before opening account c.) Dealer "B" must accept orders only in fill compliance w/ written instruction provided by broker-dealer "A" d.) Dealer "B" must send duplicate copies of confirmations to dealer "A"

A.)

ALL of the following statements about US Treasury securities are CORRECT EXCEPT...? a.) They have very little interest rate risk b.) They have almost no credit risk c.) Regularly issued with a wide range of securities d.) There more of them outstanding than any other single security

A.)

An RR states to one of his customers, "ABC shares look attractive here, I recommend you buy 10,000 shares as the price of ABC will be higher by year-end." Which of the following is correct about this RR's statement? a.) There is an issue w/ the recommendation because RR is predicting price performance b.) Not enough info is provided to determine if recommendation is acceptable c.) The recommendation is acceptable as stated d.) Although recommendation contains a prediction, there is no issue. as no specific future price was stated

A.)

An issuer can essentially FORCE the conversion by outstanding callable and convertible bonds by...? a.) Calling the bonds at redemption price below parity b.) Declaring a 2-1 stock split c.) Decreasing the dividends on the common stock d.) Refunding the bond with another issue at a higher coupon

A.)

Bobby is an RR making a recommendation to client Dianne. When reviewing her info, he reviews her SSN, tax status, investment goals/objectives, and her other investments. Which of the following is TRUE? a.) SSN and Tax ID is not relevant when determining suitability of an investment when making recommendation b.) The tax status is not a relevant factor c.) Because Dianne already gave her investment objectives, it is not important for Bobby to review them d.) Because she indicated she's low risk tolerance, Bobby should only recommend treasuries and CD's

A.)

For purposes of a REG D offering, which would NOT be considered an accredited investor? a.) Investor who frees up just under 50% of his net worth and uses it to purchase $175,000 of the offering b.) One of the issuer's executive officers c.) Investor who made $350,000 in each of past 5 years d.) Husband and wife w. $1,000,000 in joint net worth, excluding the value of their residence

A.)

Of the following, which would cause the GREATEST increase in credit risk to an issue of Dallas/Fort Worth Airport Authority Bonds? a.) Airport traffic is substantially reduced by nearby competing airports b.) Authority called the bonds at the earliest call date c.) Interest rates have recently increased d.) Ratings on the bonds were recently reduced but the bonds remain investment grade

A.)

On the annual IRS Form 1099-B issued by B/Ds to the IRS and its customers, all of the following info on securities sales transactions must be reported, EXCEPT..? a.) Applicable taxable gain or loss using the LIFO b.) Gross sales proceeds c.) Cost basis of a security purchases d.) The holding periods

A.)

Open-end investment companies are are very liquid because...? a.) Funds are always ready to tender and redeem shares b.) They list on multiple exchanges c.) They are backed by the US Government d.) Active dealer markets exist for most mutual fund issues

A.)

Over the course of a normal trading day, a muni bond dealer performs a secondary mkt transaction in a muni bond that carries insurance. What do MSRB rules dictate must occur in this case? a.) Customer must be made aware of insurance and disclosure of insurance must be made on confirmation b.) Customer must be sent an Official Statement for the bond issue prior to completion of transaction in the bond c.) Customer must receive full copy of all literature pertaining to insurance provider and specific policy in place for bond issue d.) Customer must be instructed to contact insurance provider directly to ensure coverage is changed from previous owner

A.)

Stanley is a 75-y/o investor w/ a low risk-tolerance. His RR would have the most difficult time justifying suitability of a recommendation to purchase... a.) Several U.S. Savings Bonds and a Deferred Variable Annuity invested in US Government Bonds b.) Immediate Variable Annuity invested in US government bonds c.) Well-known and low-risk mutual fund w/ income objective d.) Mutual fund focused primarily in US Government debt, including bonds, notes, and bills

A.)

The primary purpose of depreciation is which of the following? a.) Spread the cost of an asset over the recovery period of an asset b.) Decrease the cash flow of a corporation c.) Increase taxes d.) Increase net income

A.)

Under MSRB rules, which of the following must be included in a muni bond transaction confirmation? a.) Yield resulting in dollar price b.) Bond quality rating c.) Debt service coverage d.) Bond's historical price range over the past 12 months

A.)

Which of the following are TRUE of WARRANTS? a.) at issuance, mkt price of underlying stock is below exercise price b.) they are all issued as perpetual warrants c.) they pay dividends d.) at issuance, mkt price of underlying stock is above exercise price

A.)

Which of the following is FALSE when an employee of a FINRA member firm wants to open an acct at another FINRA member firm? a.) Prior written permission must be received by the employing firm prior to each transaction b.) Written notice must be sent to the employing member c.) Duplicate copies of confirmations and statements must be sent to the employing firm if requested by the employing firm d.) Employing firm must advise employee in writing of approval or disapproval of the request

A.)

Which of the following is TRUE regarding CLOSED-END mutual funds? a.) a fixed number of shares is issued and then publicly traded b.) shares are issued and redeemed daily c.) current prospectus must be provided with each sale d.) prospects must be provided when fund is purchased in the secondary market

A.)

Which of the following is TRUE regarding Planned Amortization Class (PAC) CMO's? a.) PAC's have less than average exposure to prepayment (call) risk b.) They have higher yields than other tranches c.) They do NOT have a sinking fund structure d.) They are subordinated to other tranches

A.)

A customer's margin account has a market value of $20,000, DB of $16,000, and SMA of $2,000. Based on this account, what is the NYSE minimum maintenance call? a.) $1,000 cash b.) $1,000 from SMA c.) $5,000 cash d.) $2,000 from SMA

A.) $1,000 CASH.... ACCT HAS $4,000 EQUITY, AND $5,000 MIN MAINTENANCE REQ... THE DIFFERENCE IS THE REQUIRED CALL

A dealer's quote on a U.S. Treasury Bond is " Bid 89.16, offered 89.20" What is the dollar value of the spread? a.) $1.25 b.) $0.40 c.) $12.50 d.) $4.00

A.) $1.25.... (DIFFERENCE BTWN 89.16 & 89.20 = **4/32**) (4 / 32 * $10 = $1.25)

An investor has has a non-qualified VA for 10 years. His contributions have been $26,000, and the current value of the account is $36,000. Prior to the annuitization period, the customer w/draws $15,000. What is the tax liability assuming he's in the 28% bracket? a.) $2,800 b.) $4,200 c.) $10,000 d.) $15,000

A.) $2,800.... $10,000(GAIN) * .28 = $2,800

All of the following are features of the NYSE's Super Designated Order Turnaround (DOT) System EXCEPT..? a.) Any size order can be placed b.) Orders are routed directly to the DMM c.) All NYSE traded stocks are eligible d.) Reports of transactions are instantaneously reported back to member firm

A.) ...THERE ARE ORDER SIZE LIMITATIONS

SWAPS are the exchange of one municipal bond for another municipal bond. All of the following are reasons for in investor to swap EXCEPT...? a.) To receive accrued interest b.) To upgrade a portfolio by switching into a higher rated bond c.) To extend or shorten time to maturity d.) Increase income or yield e.) Realize capital losses for tax purposes

A.) ACCRUED INTEREST WOULD *NOT* BE A REASON TO DO A MUNI BOND SWAP... (Usually done when investors take bonds selling at a loss and sell them for other ones to look like they lost money and reduce tax consequences)

Securities issued by US treasury and federal government agencies have the following characteristics in common EXCEPT...? a.) They are direct obligations of the federal government b.) They are redeemable only by the issuer c.) Interest bearing securities are quoted as a percentage of par d.) Non-interest bearing securities are quotes as a discount to maturity

A.) AGENCY SECURITIES ARE DIRECT OBLIGATIONS **OF THE AGENCIES** NOT THE FEDERAL GVT

A specified group of stocks is combined and a mathematical figure is used to indicate the value of this group of stocks as a whole. Collectively, what is this group of stocks called? a.) An index of securities b.) Beta coefficient of the market c.) Alpha of the market d.) Resistance level used for analysis of securities

A.) AN INDEX OF SECURITIES

According to FINRA rules an Office of Supervisory Jurisdiction (OSJ) must be examined at least...? a.) Annually b.) Quarterly c.) Semi-annually d.) Monthly

A.) ANNUALLY

Your client purchased XTX stock at 60. The stock is not at 70. He believes the price will decline to 65. He should... a.) Buy a 70 put or write a 70 call b.) Sell a straddle at 70 c.) Buy a 70 call and write a 70 put d.) Buy a straddle at 70

A.) BUY A 70 PUT... OR WRITE A 70 CALL

Investors who feel that the market is "efficient" and that predicting movements is useless would BEST be suited by a..... a.) Buy and Hold Strategy b.) Passive Investment Strategy c.) Active Investment Strategy

A.) BUY AND HOLD STRATEGY

The price at which mutual fund shares will be redeemed... a.) Cannot be determined before the order is entered b.) The avg. of prev. day's close and opening price of day of order c.) Can be ascertained by contacting the mutual fund d.) Is determined by current supply and demand in the market

A.) CANNOT BE DETERMINED BEFORE THE ORDER IS ENTERED.... **CALCULATED AT THE CLOSE OF EACH DAY**

All of the following can be voted for by a mutual fund's proxy statements EXCEPT: a.) change in a companies portfolio of securities b.) change in a company's board of directors c.) change in the investment objectives of the fund d.) change in the fund's investment adviser

A.) CHANGE IN THE COMPANY'S PORTFOLIO

An investor is LONG 5 ABC OCT 40 CALLS and wants to sell them. What type of order must the investor place? a.) Closing Sale b.) Opening Sale c.) Closing Purchase d.) Opening Purchase

A.) CLOSING SALE

A writer of a June 220 put is assigned with the index at 215. The writer will be required to: a.) deliver cash b.) receive cash c.) deliver securities d.) receive securities

A.) DELIVER CASH

When prices are sharply rising, the effect of using.... a.) FIFO would cause an increase in reportable income to the company b.) FIFO would cause a decrease in reportable income to the company c.) LIFO would cause an increase in reportable income to the company d.) FIFO would cause in increase in reportable income to the company

A.) FIFO WOULD CAUSE AN INCREASE OF REPORTABLE INCOME TO THE COMPANY

Which of the following markets do listed securities transactions that have occurred appear on the consolidated tape? I.) Fourth Market II.) Third Market III.) Foreign Market IV.) Primary Market

A.) I AND II ONLY... NEW ISSUES AND FOREIGN MARKETS DO NOT APPEAR ON THE CONSOLIDATED TAPE...

Regarding the lending and borrowing of money between customers and RR's, which of the following would NOT require written pre-approval? a.) Customer is the registered persons first cousin b.) As an outside business activity, aside from broker-customer activities, has been established and the lending agreement is solely related to this outside business activity c.) The customer has been a friend of the RR since high school, prior to the broker-customer relationship d.) Customer is unrelated to the RR, but is a paying tenant at the RR's home

A.) IMMEDIATE FAMILY MEMBERS DO NOT REQUIRE WRITTEN PRE-APPROVAL, BASICALLY EVERYTHING ELSE DOES

The "Net Earnings" of a corporation would found on which of the following? a.) Income Statement b.) Balance Sheet c.) Capital Structure Summary d.) Statement of Financial Condition

A.) INCOME STSTEMENT

If the tax-exempt status of municipal bonds was eliminated, the result would probably be... a.) A decrease in the yields of newly issued municipals b.) An increase in the yields of newly issued municipals c.) No change in the yields of newly issued municipals d.) Declared unconstitutional

A.) INCREASE IN THE YIELD OF NEWLY ISSUED MUNIS... CAUSING THE **PRICES TO GO DOWN** BECAUSE INTEREST INCOME WOULD BE FULLY TAXABLE AND WOULD HAVE TO **COMPETE W/ CORPORATE BONDS**

Several ratios are used to measure a company's short-term liquidity. They include all of the following EXCEPT...? a.) Inventory / current liabilities b.) Current assets less inventory / current liabilities c.) Current assets / Current liabilities d.) Cash plus marketable securities / Current liabilities

A.) INVENTORY IS THE **LEAST LIQUID** OF ALL ASSETS

The authority of the tax-exemption of the discount on an OID municipal bond is...? a.) IRS b.) MSRB c.) The issuer d.) SEC

A.) IRS

State securities laws (Blue Sky Laws) apply to ALL of the following EXCEPT..? a.) Margin requirements b.) Securities issued or traded within a particular state c.) Tombstone ads d.) Real Estate Investment Trusts (REITS)

A.) MARGIN REQUIREMENTS.... THESE ARE GUIDED BY FEDERAL LAWS (REG T (FEDERAL RESERVE))

A mutual fund that invests a large percentage of the fund's assets into one sector would be subject primarily to which of the following types of risk? a.) Market Risk b.) Legislative c.) Credit Risk d.) Currency

A.) MARKET RISK

Who must good for week/month orders be cancelled by? a.) Member Firm b.) Customer c.) DMM d.) Floor Broker

A.) MEMBER FIRM

What reference manual about outstanding muni bond issues contains issuer details such as coupon rates, maturities, call provisions, and ratings? a.) Moody's/Mergent Municipal and Government Manual b.) Standard and Poor's Repository c.) Bloomberg (Bloomberg services) d.) S & P Called Bond Record Book

A.) MOODY'S/MERGENT MUNI AND GVT MANUAL

How often is interest paid on US Treasury Receipts? a.) Paid when security comes due at maturity b.) On an annual basis c.) On a semi-annual basis d.) On a quarterly basis

A.) PAID AT MATURITY... ALSO KNOWN AS **ZERO COUPON BONDS**

On the ex-dividend date, an open limit buy order is usually...? a.) Reduced by the amount of the dividend b.) increased by the amount of the dividend c.) Cancelled d.) Not changed

A.) REDUCED BY THE AMOUNT OF THE DIVIDEND

The entire sale of a new issue of municipal bonds to ONE CLIENT or group of ACCREDITED INVESTORS would be considered to be a...? a.) REG D Private Placement b.) REG T Margin order c.) RED A Small offering d.) SEC Special Order

A.) REG D PRIVATE PLACEMENT OFFERING

When analyzing municipal bond credit risks, all of the following are important EXCEPT..? a.) Rise in interest rates b.) Deficit funding c.) Decline in property values d.) Increase in tax delinquencies

A.) RISE IN INTEREST RATES... WOULD HAVE NO EFFECT ON THE **CREDIT RATING**

A reason a corporation might seek ADDITIONAL financial leverage is...? a.) Sales have been growing b.) Drop on the company's profitability c.) To increase the number of stockholders d.) To decrease the company's debt load

A.) SALES HAVE BEEN GROWING... SALES INDICATE GROWTH WHICH MEANS THE **NEED FOR MORE BORROWED FUNDS TO EXPAND**

A client sells a stock short in their portfolio. The client intends to cover the short sale, but prior covering, he calls RR to ask how to achieve long-term status for capital gains purposes on the short sale. How should the RR respond? a.) RR should inform client that short sales do not qualify for long-term capital gains treatment, regardless of how long it was short for b.) Short sales only qualify for long term capital gains treatment when the purpose of short sale was to hedge a long position c.) Short sales can only qualify for long-term capital gains treatment if client is short the stock for over 6 months d.) Short sales only apply to long-term capital gains treatment, when client is short the stock for over one year

A.) SHORT SALES NEVER QUALIFY FOR LONG TERM CAPITAL GAINS TREATMENT

An investor who wishes to MINIMIZE market risk should purchase...? a.) Short-term bonds b.) High yield bonds c.) High grade bonds d.) Discount bonds

A.) SHORT-TERM BONDS

Which of the following are characteristics of a "Disproportionate Sharing Agreement" in an Oil and Gas Partnership? a.) Sponsor receives a percentage of revenues that is greater than his participation in costs b.) Sponsor receives a percentage of revenues that is lower than his participation in costs c.) Investor receives a percentage of revenues that is greater than his participation in costs d.) Investor receives a percentage of revenues that is lower than his participation in costs

A.) SPONSOR RECEIVES %/AGE OF REVENUES >> HIS PARTICIPATION IN COSTS

Under federal income tax law, which of the following is TRUE concerning a "wash sale?" a.) A tax deduction is disallowed for the loss on the sale b.) The gain is taxed at a minimum rate of 20% c.) Tax deduction is allowed for the loss on the sale d.) The gain is deferred until the next tax year

A.) TAX DEDUCTION IS DISALLOWED

A customer will be traveling overseas, and asks her B/D to hold her mail during the following periods of the year: Period 1: April 1st - May 31st Period 2: Sept 1st - Dec 31st a.) The mail can be held for period 1 only b.) The mail can be held for period 2 only c.) The mail can be held for period 1 and 2 d.) The mail cannot be held for either period

A.) THE MAIL CAN BE HELD FOR PERIOD ONE ONLY

Which of the following is NOT a factor that would affect the amount of an underwriting spread in a securities offering? a.) The profitability of the managing underwriter b.) The size of the issue c.) The type of security involved d.) The business history of the issuer

A.) THE PROFITABILITY OF THE ISSUER

ALL of the following would cover a PUT WRITER in a MARGIN ACCT, EXCEPT...? a.) the underlying stock b.) short the underlying stock c.) long a put with the same or higher strike price d.) cash equal to the aggregate value of the contract

A.) THE UNDERLYING STOCK

All of the following would cover a Put Writer in a margin account, EXCEPT..? a.) The underlying stock b.) Short the underlying stock c.) Long a put with the same or higher strike price d.) Cash equal to the aggregate value of the contract

A.) THE UNDERLYING STOCK... WHEN CUSTOMER WRITES PUT... *HES OBLIGATED TO BUY STOCK*, SO HE WOULD NEED **CASH TO BUY THEM*

Which of the following is NOT an activity performed by a Broker's Broker in the municipal securities industry? a.) Provide direct bid and asking prices to investors at the retail level b.) Provide anonymity to muni dealers who do not wish to be identified in bond trades c.) Normally only charge a fee if bond trades actually trade place d.) Act in agency capacity in regard to transactions they facilitate

A.) THEY ** DON NOT** DEAL DIRECTLY W/ PUBLIC OR RETAIL INVESTORS

Which of the following statements regarding CDOs is CORRECT? a.) They are divided into tranches based on risk b.) Backed only by mortgages c.) Considered equity securities d.) They are unsecured debt securities

A.) THEY ARE ASSET BACKED SECURITIES, DIVIDED INTO TRANCHES BASED ON RISK

Which of the following would be considered an INAPPROPRIATE investment in an IRA account? a.) Bonds of a municipality that carry a AAA-Rating b.) Bonds of a corporation that carry a A- Rating c.) Common stocks of blue-chip companies d. )Mutual funds focused on growth

A.) THEY ARE FEDERAL TAX-FREE WHICH DEFEATS THE PURPOSE OF THE TAX-DEFERRAL OF AN IRA

Which of the following is NOT TRUE of US Treasury Notes? a.) They are callable prior to maturity b.) They are issued w/ different coupon rates and various maturities c.) Interest receives is subject to federal income tax, but is exempt fro state and local tax d.) Trade in 32'nds of a point

A.) THEY ARE ONLY CALLABLE **AFTER** MATURITY

A corporation may issue refund bonds to accomplish ALL of the following EXCEPT..? a.) To increase capitalization of the company b.) To retire an existing bond issue c.) To reduce its interest costs d.) To take advantage of a substantial drop in interest rates

A.) TO INCREASE CAPITALIZATION... NOT TRUE

A CMO has 4 tranches. Interest rates have dropped significantly recently and mortgage holders are starting to prepay their loans because they are refinancing at lower rates. Which of the following tranches would be MOST affected by these prepayments? a.) Tranche 1 b.) Tranche 2 c.) Tranche 3 d.) Tranche 4

A.) TRANCHE 1...

Mr. Smith wants to invest in treasury securities and is looking for securities w/ low risk relative to the market and high liquidity. Which would be the best choice for him? a.) Treasury Bills b.) Treasury Notes c.) Treasury Bonds d.) Treasury Stock

A.) TREASURY BILLS

An investor has $50,000 cash and wants to put it in a money mkt instrument for now. She will need the funds for a home purchase one year from now but may need to access the funds sooner. What should she invest in a.) Treasury Bills b.) negotiable CD's c.) Banker's Acceptances d.) Commercial Paper

A.) TREASURY BILLS.... MOST LIQUID MONEY MKT INSTRUMENT

Which of the following is NOT calculated using "Advance/Decline Measurements?" a.) The turnover of shares of a particular company b.) The sentiment of investors c.) The momentum of the market d.) Market Breadth

A.) TURNOVER RATIOS

All of the following debt instruments trade, "and interest," EXCEPT..? a.) US Treasury Bills b.) US Treasury Notes c.) Corporate Bonds d.) Municipal Bonds

A.) US TREASURY BILLS

Which of the following is generally TRUE of the P/E Ratio? a.) It is often used to compare particular stocks to other stocks within the same industry b.) It is used to compare stocks based on yields c.) The higher the P/E, the greater of value it is to investors d.) The P/E ratio is a good indicator of future revenue growth

A.) USED TO COMPARE SPECIFIC STOCK TO OTHERS W/IN THE SAME INDUSTRY

Assume investor is SHORT 100 SHARES OF ABC, and while investor has a short stock position, ABC pays a short stock position. The investor... a.) Owes dividend to lender of the stock b.) Receives dividend from lender of the stock c.) Will not be involved with dividend situation in any way d.) Will receive dividend from company and lender of the stock

A.) WILL *OWE DIVIDIEND TO THE LENDER*

A withdrawal request from the spouse of the owner of an account at a member firm CANNOT be fulfilled UNLESS...?

ACCOUNT HOLDER PROVIDES *WRITTEN AUTHORIZATION*... CHECKS MUST BE MADE PAYABLE TO THE *OWNER NOT THE SPOUSE.

Who are REG D PVT PLACEMENTS primarily offered to?

ACCREDITED INVESTORS... look back to accredited investor definition...

What is a Joint Tenants With Rights of Survivorship account? (JTWROS)

ACCT FOR 2+ PEOPLE. UPON DEATH OF EITHER PARTY, SURVIVOR BECOMES OWNER OF SECURITIES.. SURVIVOR MUST PRESENT *DEATH CERTIFICATE/AFFIDAVIT OF DOMICILE*

What is a "GUARDIAN ACCOUNT"

ACCT OPENED FOR A CHILD OR ADULT W/ DISABILITIES, WHO CANT CONTROL FINANCES... **GUARDIAN APPT CERTIFICATE MUST BE ISSUED BY COURT** IN ORDER FOR ACCT TO BE OPENED

What is the difference between advertisements and sales literature?

ADVERTISEMENTS NO NOT HAVE A LIMITED AUDIENCE, VS SALES LITERATURE HAS A MORE TARGETED AUDIENCE

What is the OPTION ACCOUNT AGREEMENT, an WHEN must it be delivered to the firm BY THE CUSTOMER?

AGREMENT STATING CUSTOMER WILL ABIDE BY THE EXCHANGE RULES AND POSITION LIMITS... ****WITHIN 15 **CALENDAR** DAYS FROM TIME ACCOUNT IS APPROVED****

Which of the following books and records is required to be maintained for *3 YEARS* by a B/D (the first two in a readily accessible location) I.) Forms U-4 and U-5 applications for employment II.) Fingerprints of all B/D personnel, transfer agent and clearing firm III.) Customer confirmations IV.) Names and addresses of all beneficial owners of all accounts V.) Copies of orders given/received on behalf of B/D or customers

AL OF THE ABOVE

I an owner of an IRA dies, and the designated beneficiary is a SURVIVING SPOUSE... I.) Spouse may elect to become owner of the account II.) Spouse may rollover the IRA III.) Spouse may make contributions to the IRA IV.) Spouse pays taxes on any distribution

ALL OF HE ABOVE

"SHARING AGREEMENTS between sponsor (GP) and investors determine how revenues and costs will be shared or allocated. Which of the following are types of sharing agreements? I.) Overriding Royalty Sharing Agreement II.) Disproportionate Sharing Agreement III.) Subordinated Working Interest (Reversionary Interest) IV.) Functional Allocation Sharing Agreement

ALL OF THE ABOVE

A "NEW ACCOUNT REPORT FORM" MUST CONTAIN I.) Name and address (residential/business/APO/FPO) II.) E-mail address and telephone numbers III.) Annual income, net worth, occupation and name/address of employer IV. )Date of birth and SSN or tax ID (if alien, tax ID, passport, alien ID) V.) Gvt issued photo ID, trusted contact person, and name of RR

ALL OF THE ABOVE

A Bond ETF... I.) Gives investor oppertunity to invest in bonds indirectly II.) More liquid than bonds themselves III.) Low-cost way to invest in bonds IV.) Mkt price is based on supply and demand and can be different than NAV per share of the find

ALL OF THE ABOVE

A DISTRIBUTOR, is one who finances/engages in ANY ACTIVITY that directly or indirectly results in the SALE OF SHARES. This would include: I.) compensating underwriters, dealers, sales personnel II.) distributing and printing sales literature III.) advertising IV.) distributing and printing prospectuses

ALL OF THE ABOVE

A FIDUCIARY.... I.) Is anyone who has discretionary authority of a plan's mgmt or assets and paid a fee for investment advisory services II.) Must act solely in the best interest of the plan participants III.) Who violates conduct rules may be held responsible for losses to the plan IV.) Must act to participants using care, skill, prudence, and diligence

ALL OF THE ABOVE

A quotation given by a municipal securities dealer may be....? I.) Firm- commitment to buy or sell at quoted prices II.) Subject - to a prior purchase or sale III.) Subject - to a subsequent price change IV.) Nominal - information only; no commitment involved V.) Affected by interest rate moves, supply, and market price of similar bonds

ALL OF THE ABOVE

ALL retail communications and correspondence MUST... I.) Prominently disclose the member's name II.) Reflect any relationship between the member and non-members/individual who is named in the communication III.) Reflect the products and services offered by the member IV.) Disclose potential and actual conflicts of interest

ALL OF THE ABOVE

All ads, sales literature, and reprints must be kept in a file at the firm for 3 years... The file MUST contain...? I.) Name of registered principal who approved the use and date of approval II.) Copy of the communication and the dates of use III.) Info such as sources of any table, graph, chart, or illustration used in the communication IV.) Name of person who distributed the communication if it did not require principal approval

ALL OF THE ABOVE

An "Investment Analysis Tool" may ONLY be used if the retail communication with it...? I.) Describes the criteria and methodology used II.) Explains results that may vary with each use over time III.) Describes the universe of investments considered in the analysis IV.) Displays the disclosure that says investments are hypothetical on nature and do not represent/guarantee actual investment results V.) Must provide FINRA staff w/ access to analysis tool upon request

ALL OF THE ABOVE

An RR could be suspended for which of the following? I.) Failure to pay arbitration awards II.) Failure to respond to a regulatory inquiry III.) Excessively trading (churning) in a customer account IV.) Violations of anti-fraud provisions of the '34 ACT

ALL OF THE ABOVE

As the customer's profile account changes... RR must update records to reflect those changes. Updates are required for changes in customers...? I.) Employment II.) Income III.) Address IV.) Investment Objectives V.) Changes in securities positions

ALL OF THE ABOVE

Borrowing and/or lending from a customer is PROHIBITED UNLESS... I.) Customer is a member of RR's immediate family II.) Customer is a financial institution in the business of credit, loans III.) Customer and RR are both RR's of the SAME FIRM IV.) Lending arrangement is based on personal relationship outside of the B/D relationship V.) Lending is based on business relationship outside of the B/D relationship

ALL OF THE ABOVE

Call features of municipal bonds allow municipality to redeem bonds according to a *fixed price schedule,* *prior to maturity dates...* Which of the following are characteristics of the Call features? I.) They are good for the issuer and not attractive for the investor II.) Bond called at par or premium may NOT compensate investor for lost yield because of risk of reinvesting at lower yields III.) Most revenue bonds are callable, GOs are not callable IV.) Callable bonds generally have higher coupons V.) Prior notice of call is required

ALL OF THE ABOVE

Capital gains of investment companies.... I.) Are always long-term, regardless of time held II.) May be taken in the forms of cash or shares III.) Taxable each year, regardless of how they're taken IV.) Must be paid 100% to investor, at least once a year V.) When paid, reduce NAV of fund, and can be reinvested at NAV w/ no sales load

ALL OF THE ABOVE

Charges for services must be reasonable and not discriminatory between customers and MUST include: I.) Safe keeping of customer securities II.) Appraisal of securities III.) Collection of principal interest & dividends on behalf of customer IV.) Handling of exchanges and transfers on behalf of customers

ALL OF THE ABOVE

Company ABC is considering adding a 401(k) and has sought guidance from an RR. Which of the following would be correct to respond to the CEO? I.) Employees are also allowed to make after-tax contributions, but those would NOT be deductible II.) Creation of 401(k) plans are voluntary by employers III.) Pre-tax contributions may be made annually up to certain limits IV.) Funds w/drawn before 59 1/2 are subject to 10% penalty tax, except in the case of death and disability

ALL OF THE ABOVE

Complaints against a broker-dealer may be registered by which of the following...? I.) SEC II.) FINRA III.) Public Customers IV.) Other Member Firms

ALL OF THE ABOVE

Confirmations of securities transactions... I.) Must be sent to customer at or before completion of transaction II.) Must be sent to all customers whether individual or institutional III.) Must disclose whether security is callable IV.) Must disclose settlement date of transaction

ALL OF THE ABOVE

Considerations when developing an asset allocation mix for a customer would include... I.) Number of years until a specific goal can be reached II.) How much money will be needed for that goal III.) How much is available to invest now IV.) How much can be invested each month

ALL OF THE ABOVE

Customer account information.... I.) Must be sent to the customer w/in 30 days of opening acct II.) Must be furnished to each customer once every 3 years (36 months) III.) Must be updated w/in 30 days after receiving notice of change in the customer's investment objectives IV.) Must be maintained for 6 years after the account is closed

ALL OF THE ABOVE

Discretionary Accounts..... I.) Immediately Terminated upon the death of the owner of acct II.) Checks must be made payable to the owner of the account III.) Order tickets must be labelled "discretionary" IV.) Authorization is good until revoked by the customer V.) All discretionary must be reviewed by the principal of the firm

ALL OF THE ABOVE

EXEMPTIONS to the "penny stock disclosure rules" include...? I.) Transactions where customer owns >/ 5% of company II.) Transactions that satisfy reg D requirements (pvt. placement) III.) Transactions with institutional accredited investors IV.) an established customer if RR did NOT make recommendation (non-solicited)

ALL OF THE ABOVE

Electronic Communication Networks (ECN's)... I.) Are privately owned order execution systems II.) MUST register with the SEC III.) Do not maintain inventories of securities IV.) Display, match, and execute orders on listed and OTC securities away from the exchanges or market makers

ALL OF THE ABOVE

FINRA's "Code of Procedure" (Rule Series 9000) was established to *handle trade practice complaints* addressing proceedings for...? I.) Disciplining a member or a person associated with a member II.) Regulating activities of a member experiencing financial or operational difficulties III.) Summary or non-summary suspensions, cancellations, bars, prohibitions, or limitations IV.) Obtaining relief from eligibility requirements of the FINRA by-laws and FINRA rules

ALL OF THE ABOVE

FINRA's 5% Markup policy does NOT apply to...? I.) Securities listen and traded on the floor of a stock exchange II.) Securities where a prospectus/offering circular must be delivered and sold @ specific price (new issues, registered secondary distribution, open-end investment companies) III.) Government and Municipal securities IV.) Regulation "A" Offerings (i.e. small offerings)

ALL OF THE ABOVE

FIRM QUOTES means mkt makers will trade at least 100 shares at the quoted price... Which of the following are examples of a FIRM QUOTE? I.) 5-5.05 II.) It is 5-5.05 III.) We'll do it 5-5.05 IV.)5-5.05 firm

ALL OF THE ABOVE

Full Trading Authorization or Full Power of Attorney... I.) Gives right to RR to make purchase and sale decisions. II.) CAN withdraw cash or securities from the account III.) Checks must be disbursed payable to the owner of the account IV.) RR must know essential facts about the customer and agent granted power of attorney

ALL OF THE ABOVE

Hypothetical illustrations of rates of return in variable life/annuity in sales literature... I.) MAY be used to demonstrate the way a variable life insurance policy operates II.) MAY use any combo of assumed investment returns up to and including a gross rate of 12% and must include gross rate of 0% to demonstrate how lack of growth may affect policy III.) MUST reflect maximum (guaranteed) mortality and expense charges for each rate of return for the policy IV.) Preceding illustration MUST be a prominent explanation of the use of the illustration, to show how investment affects cash value and death benefit

ALL OF THE ABOVE

In a DPP, an investor's cost basis is decreased by...? I.) Distributions of property/cash to the partner by the partnership II.) Partnership losses III.) Non-deductible partnership expenses IV.) Depletion deductions for oil and gas partnerships

ALL OF THE ABOVE

In a FIDUCIARY Account.... I.) Cannot grant trading authority to a third party II.) If it wants to open margin account, it must present to B/D that margin trading is permitted III.) Must adhere to prudent investor rules, with low-risk and conservative investments IV.) Fiduciary cannot share in the profits in the account

ALL OF THE ABOVE

In handling a JTWROS account... I.) Correspondence may be made to either party, w/ both names II.) Checks must be drawn payable to both owners of the account III.) If one party dies, ownership is transferred to the survivor IV.) Orders may be placed by either party

ALL OF THE ABOVE

In order for a distribution from a Roth IRA to be considered "Qualified" (tax-free when withdrawn) it must **BE HELD FOR 5 YEARS (LIFO)...** AND...? I.) Owner reaches age 50 1/2 II.) Made as a result of death, disability of owner III.) Used for "qualified first time home buyer expenses" IV.) Used for educational expenses V.) Used for medical insurance premiums

ALL OF THE ABOVE

In terms of good delivery on municipal securities, when bonds are delivered from one muni securities to another, it is assumed that... I.) Trade will settle T + 2, and the bond is non-callable II.) Legal opinion must accompany the bond, and they will be sold in denominations of $1,000 to $5,000 III.) Seller will deliver bonds to buyer to buyer's office on settlement date IV.) Bond number, coupon rate, and maturity date must be identified on the certificate

ALL OF THE ABOVE

Independent contractors... I.) May sell securities or mutual funds II.) Considered an employee of the broker-dealer III.) Must be licensed as an RR IV.) Supervised by the registered principal of the firm

ALL OF THE ABOVE

Info provided to the media by NASDAQ includes: I.) reflects inter-dealer quotations II.) High and low prices are released III.) Reflects subject prices (not firm) IV.) Reflects the inside market

ALL OF THE ABOVE

Member firms are required to establish and maintain a "Business Continuity Plan". Each plan at a minimum MUST address...? I.) Data back-up and recovery II.) All mission control systems III.) Financial and operational assessments IV.)Regulatory reporting

ALL OF THE ABOVE

Members and associated persons MAY use a "Bond Mutual Fund Volatility Rating" when which of the following requirements are satisfied? I.) Rating does not identify or describe volatility as a "risk" rating II.) Sales lit. incorporates the most recently available rating and reflects info that, at a minimum, is current to the most recently completed calendar quarter ended prior to use III.) Methodology used to determine the rating must be based exclusively on objective, quantifiable factors. IV.) Rating and disclosure statement that accompanies the rating must be clear, concise, and understandable V.) Entity that issued rating provides detailed disclosure on its rating methodology to investors thru a toll-free #, website, or both

ALL OF THE ABOVE

Predictions and projections of performance are generally PROHIBITED... What are the exceptions of this rule? I.) Reports published by investment analysis tool that meets certain standards II.) Research reports may include price targets under certain circumstances III.) Hypothetical illustrations of mathematical principles IV.) Comparisons if all material differences are disclosed (costs, risks, taxes, with the name of the firm sponsoring the comparison

ALL OF THE ABOVE

Primary dealers in government securities include...? I.) Certain domestic broker-dealers II.) Certain foreign broker-dealers doing business in the U.S. III.) Commercial Banks IV.) Some Government Securities Trust Accounts

ALL OF THE ABOVE

Prospectus delivery requirement also apply to the delivery of: I.) Variable Annuities II.) Face Amount Certificate Companies III.) UIT's IV.) Closed-End Investment Companies V.) Contractual Plans

ALL OF THE ABOVE

The "Direct Registration System" (DRS).... I.) Provides for electronic direct registration in customer's name II.) Allows shares to be transferred electronically between transfer agent and the broker-dealer III.) Provides investors with alternate approach to holding ecurities in certificate or "street" form IV.) Investors can elect to have securities registered directly on issuer's records in book-entry form

ALL OF THE ABOVE

The CUSTODIAN of UGMA/UTMA accounts.... I.) Must turn over all custodial property when minor reaches majority II.) Must manage account in best interest of the minor, generally seeks capital growth III.) may at his discretion, use custodial property for support, education, and general use and benefit for the minor IV.) Usually permitted to receive compensation and reimbursement of expenses (unless custodian is the donor)

ALL OF THE ABOVE

The FINRA educational communication under the "Recruitment Practices Rules" highlights which of the following? I.) Whether financial incentives the RR receives may create a C.O.I. II.) Some assets may not be directly transferrable, and customer may receive costs to liquidate/move assets, or incur maintenance fees for leaving them w/ other firm III.) potential costs relating to transferring assets, differences in price structures and fees current firm imposes IV.) Differences in products and services btwn customer's current firm and recruiting firm

ALL OF THE ABOVE

The main types of REAL ESTATE the DPPs invest in are... I.) Residential property (apartments) II.) Commercial property (shopping malls) III.) Industrial property (factories) IV.) Government assisted housing (low-income, subsidized) V.) Condominium securities (Time shares) VI.) Raw land (for appreciation or capital gains)

ALL OF THE ABOVE

The services a Prime Brokerage Account offers to hedge funds, B/D's, and institutional investors are...? I.) Calculating an "absolute / total return II.) Centralize trade processing III.) Securities lending IV.) A "Prime Brokerage Agreement" is needed to open an account

ALL OF THE ABOVE

Under FINRA Rule 3160 "B/D's Conducting Business in or Networking with Financial Institutions" it requires that...? I.) Brokerage services must be conducted in a *separate distinct physical location* from where retail deposits are made, and must be clearly identified as *Brokerage services* II.) The member's name must be clearly displayed in the area where brokerage activities are conducted III.) Networking arrangements btwn bank and broker requires *written agreement* setting forth *responsibilities of both parties and the compensation arrangement* IV.) Customers must be provided w. disclosure *at or prior to time acct is opened* stating that securities trans. are *not FDIC insured, subject to investment risk, and principal return is not guaranteed* V.) Member must *promptly* notify financial institution if any person of the B/D is *terminated for cause*

ALL OF THE ABOVE

Under MSRB rules, which of the following records must by kept by a broker-dealer for 4 YEARS? I.) Correspondence II.) Advertisements III.) Sales Literature IV.) Confirmations

ALL OF THE ABOVE

Under REG S, a U.S. PERSON is defined as: I.) Any natural person resident in the U.S. II.) Any partnership/corporation incorporated under U.S. laws III.) Any estate which executor/administrator is a U.S. IV.) Any trust in which the trustee is a U.S. person V.) Any non-discretionary acct. for the benefit of a U.S. person

ALL OF THE ABOVE

Under the "Tax Reform Act of 1986," if the IRS determines a tax shelter to be abusive...? I.) The deductions are disallowed II.) Taxpayer is charged interest on back taxes III.) Taxpayer is charged penalties IV.) Taxpayer may be charged with intent to defraud

ALL OF THE ABOVE

Under the '34 ACT, which of the following persons would be considered "insiders" I.) Officers II.) Directors III.) Principal stockholders IV.) Any person who possesses non-public material information

ALL OF THE ABOVE

Under the Investment Company Act of 1940, investment companies MUST...? I.) Have minimum net worth $100,000 before they can be issued to the general public II.) 40% of the Board of Directors must be NONAFFILIATED III.) Cash/securities must be held by a custodian, like a bank

ALL OF THE ABOVE

Unregistered persons are ALLOWED to.... I.) inquire if prospect wishes to discuss investment advice w/ registered person II.) determining whether prospect wishes to receive investment advice III.) Extending invitations to firm-sponsored events IV.) General clerical and ministerial finctions

ALL OF THE ABOVE

Variable Annuities.... I.) Provide a guaranteed minimum death benefit II.) Considered to be long term investments III.) Provide possible hedge against inflation IV.) Suitable for investor w/ objective of long-term capital appreciation

ALL OF THE ABOVE

What are characteristics of BDC's? I.) Target retail clients with high risk tolerance II.) required to distribute 90% of their income as dividends III.) provide high dividend yield with higher risk, and are illiquid IV.) The three types are Credit, Market, and Leverage

ALL OF THE ABOVE

When a long sale is made in a margin account and no funds are withdrawn: I.) Market value declines II.) Debit balance declines III.) SMA increases IV.) Equity is unchanged

ALL OF THE ABOVE

When a recommendation is made to a client by a member firm, which of the following MUST be disclosed? I.) If a member firm makes a market in the security recommended II.) If the member maintains a position in the security recommended III.) If any employees of the member are directors of the company in which security was recommended IV.) If member was the manager or co-manager in the distribution of the securities recommended

ALL OF THE ABOVE

When advising a client of the EXCHANGE of a variable annuity for another, the RR should consider... I.) Whether such exchange would benefit the client II.) Possibility of surrender charges III.) If client has had another exchange in the past 36 months IV.) Suitability of the new variable annuity to the customer

ALL OF THE ABOVE

When communicating with the public concerning investment companies and variable annuities, which guidelines MUST BE FOLLOWED? I.) there must be a statement of basis or purpose for a comparison II.) data comparisons must be for the same time periods III.) when comparing investment companies, investment objectives must be similar. IV.) when putting together sales presentations, the fund's investment objectives must be disclosed

ALL OF THE ABOVE

When purchasing a variable annuity, which of the following should be considered? I.) Financial soundness of the issuer II.) The return of he annuity III.) Sales charges, cost of adding riders, and fees

ALL OF THE ABOVE

When the Bond Counsel analyzes the authority of the issuer to issue bonds, they would research... I.) Municipality's local status II.) Judicial opinions III.) The constitution of the state IV.) Legislation and procedures of the state V.) US Treasury Department Arbitrage Regulations

ALL OF THE ABOVE

Which financial statements are required in an investment company's prospectus? I.) Auditor's report prepared by an independent public accountant II.) Statements of changes in net assets over the last 3 years III.) Balance sheets and income statement IV.) Schedule of portfolio holdings and investments

ALL OF THE ABOVE

Which if the following is TRUE about REG A+ OFFERINGS? I.) Also known as Short Form Registration II.) Securities offered cannot exceed $50,000,000 in any 12 month period III.) Prospectus is NOT required IV.) Shares are free to be bought and sold once their issued, no holding period

ALL OF THE ABOVE

Which of the following MUST member firms give to customers AT LEAST ANNUALLY? I.) FINRA regulation public disclosure hotline number II.) FINRA regulation website address III.) Statement as to the availability of the investor brochure

ALL OF THE ABOVE

Which of the following are "TAXABLE EVENTS" I.) Dividend Payments II.) Capital Gains Distributions III.) Switching From one Fund to Another IV.) Redemption of Fund Shares

ALL OF THE ABOVE

Which of the following are ADVANTAGES of DPPs? I.) Income and expenses flow through to the limited partners (conduit theory), no double taxation. Form K-1 are issued to limited partners for tax purposes II.) Capital risk is normally limited to investor's initial cash investment III.) Capital costs can be depreciated IV.) Have flexibility of the types of investments available V.) Diversification of financial risk and professional management

ALL OF THE ABOVE

Which of the following are ADVANTAGES of investing in an Oil and Gas Partnership? I.) Depletion allowances based on the amount of oil, minerals, or timber SOLD II.) Intangible drilling costs III.) Flow through tax benefits AND tax deductions IV.) Depreciation deductions on equipment

ALL OF THE ABOVE

Which of the following are ALLOWABLE investments for a Keogh/HR-10 Plan? I.) Stocks IV.) Unit Investment Trusts II.) Bonds V.) Mutual Funds III.) Treasury Bonds VI.) Variable Annuities

ALL OF THE ABOVE

Which of the following are DISADVANTAGES of DPPs? I.) Lack of liquidity- investors may not sell their interest back to the partnership w/out restriction II.) Limited partners lack control over management (general partner) III.) Possible changes in the tax code, eliminating the tax advantages IV.) Loss of all or part of investment V.) Possible assessment of additional funds (oil and gas programs) VI.) Additional IRS scrutiny, and potential AMT concequences

ALL OF THE ABOVE

Which of the following are NOT required to be in a Fiduciary's "Investment Policy Statement?" I.) Specific criteria for selecting securities in investment portfolio II.) Compensation arrangements for the IA III.) Summary Plan Description- features of employer sponsored plan IV.) Tax treatment of specific investments held in the plan

ALL OF THE ABOVE

Which of the following are TRUE about Coverdell Plans? I.) Total contributions per year cannot exceed $2,000, no matter how many accounts established for the beneficiary II.) Benefits can be used to pay for higher education, elementary, and secondary education (public or private) III.) Assets in the account must be distributed by the age of 30 or else account will be assessed a 10% penalty IV.) Funds from the account may be rolled over to a sibling or other family member if not used for the intended child V.) Most appropriate for low and middle class contributors

ALL OF THE ABOVE

Which of the following are TRUE about Treasure Inflation-Protected Securities (TIPS)? I.) They are notes and bonds where interest and redemption payments are "indexed" to current inflation rate based on CPI II.) Interest is paid semi-annually on a fixed rate, but is applied to "inflation-adjusted principal value of the bond, NOT the par value III.) Principal is adjusted to CPI semi-annually IV.) Final payment on a TIP cannot be less than what investor originally paid for it

ALL OF THE ABOVE

Which of the following are TRUE about a "Money Purchase Plan?" I.) It is a defined contribution pension plan; amount of employer contribution is a fixed and known amount, regardless of performance II.) Requires a fixed percentage of compensation to be paid to each eligible employee III.) For businesses of any size or self-employed individuals; earned on a full or part-time basis IV.) Employee's retirement benefit amount is uncertain. Value in account at retirement is the amount employee has

ALL OF THE ABOVE

Which of the following are TRUE about defined contribution plans? I.) Benefits are calculated upon compensation, age, and years of service II.) An actuary actively reviews contribution amounts to ensure fund will meet future benefit obligations III.) Typically used by government employers and large companies, as they have a high cost of administration IV.) Benefits are taxable as ordinary income

ALL OF THE ABOVE

Which of the following are TRUE about the Qualification Requirements for "S Corporations?" I.) 100 or fewer shareholders II.) Issues only one class of stock III.) Other corporations are PROHIBITED from being shareholders IV.) Non-resident aliens are PROHIBITED from being shareholders

ALL OF THE ABOVE

Which of the following are TRUE about the bonds issues by the Federal Home Loan Banks (FHLB)? I.) FHLB is 12 cooperative corporate banks that US lending institutions use to finance housing/economic development in their communities II.) Notes and bonds issued in book entry form, and as non-callable III.) Exempt from state and local tax, subject to federal taxation IV.) Considered to be SAFE investments

ALL OF THE ABOVE

Which of the following are TRUE about the contributions and distributions for Prepaid Tuition Plans and 529 Plans? I.) For prepaid tuition plans, max. contribution is the amount needed to prepay the number of years or units of tuition offered by a state II.) For 529 plans, the max. contribution limit can be set at more than $300,000 depending in the state III.) Contributions are NOT tax deductible on a federal tax return IV.) Contributions grow tax free and distributions are tax free when uses for qualifies education expenses

ALL OF THE ABOVE

Which of the following are TRUE about the contributions to a SEP IRA? I.) Contributions are tax-deductible II.) Contributions are discretionary and may vary year to year III.) Employees are 100% vested in contributions made by the employer IV.) Employees may make their own additional contributions subject to certain limits

ALL OF THE ABOVE

Which of the following are TRUE about the details of the MARGIN AGREEMENT? I.) All trades are subject to the rules and regulations of SRO's (NYSE/FINRA) II.) Securities are subject to rehypothecation III.) The firm may sell out any securities in the account, with or without written notice IV.) Interest is charged on all debit balances V.) Many B/D's have a combined firm with the New Account Report Form and the Margin Agreement

ALL OF THE ABOVE

Which of the following are TRUE about the notes and bonds issued by the Federal Farm Credit System? I.) Registered in book entry form II.) Interest is exempt from state and local taxes, subject to federal income tax III.) Trades in 32nds and settle next business day in federal funds IV.) Not guaranteed by the U.S. Government V.) Bonds are traded more in the secondary market than the notes

ALL OF THE ABOVE

Which of the following are TRUE about three and six month T-Bills? I.) Sold at weekly auctions conducted by Federal Reserve Banks II.) Non-competitive orders from the public are always filed first III.) Individuals pay the average price of all competitive bids IV.) The average price of all competitive bids is called the "Competitive Tender Price"

ALL OF THE ABOVE

Which of the following are TRUE of Government Agency Issues? I.) Considered low risk or "non-risk" investments, and generally have higher yields than direct obligations of the U.S. Government. II.) Outstanding issues are in registered form/bearer form w/ interest coupons attached; new issues are not available in bearer form III.) Quoted in 32'nds as a percentage of par value IV. )Are exempt from registration requirements of the '33 act

ALL OF THE ABOVE

Which of the following are TRUE regarding "Prepaid Tuition Plans?" I.) Provide a hedge against increasing tuition costs II.) ANYONE can establish an account in the name of a student III.) Available to use for any level of education, public or private IV.) Do NOT have investment risk V.) Typically charge enrollment and administrative fees VI.) Contributions are NOT tax deductible, but annual earnings and qualified w/drawls are TAX-FREE at the FEDERAL level. VII.) Established and maintained by state governments

ALL OF THE ABOVE

Which of the following are TRUE regarding 403(b) contributions I.) Elective salary reductions can be made by the employee II.) Non0elective contributions can be made by the employer III.) After-tax contributions may be made by the employee IV.) Annual contribution limit is $19,500 (+ $6,500 if over 50)

ALL OF THE ABOVE

Which of the following are TRUE regarding 529 plans? I.) They are a good idea when considering financial aid because having it in parents name has a lower impact on the eligibility of aid II.) Contributions may be made to both a 529 plan and a Coverdell plan in the same year for the same beneficiary (gift tax exclusions apply) III.) When B/D is the primary distributor of a 529 plan, *"Official Statement/Plan Disclosure Document"* must be provided to investors.. and must be filed to MSIL to be available to the public IV.) MSRB rules require 529 ads to contain quotations of total returns, and if the dont, there needs to be a toll-free number or website that has those quotations available, *TO THE MOST RECENT MONTH'S END*

ALL OF THE ABOVE

Which of the following are TRUE regarding MSRB political contribution limits? I.) Contributions cannot exceed $250 *per election* (not year) and the municipal finance professional must be able to vote II.) If violation of rules occurs, the finance professional is prohibited from engaging in municipal securities transactions for 2 years III.) Each muni dealer must file *Form G-7* w/ MSRB **QUARTERLY** w/ info about contributions/ IV.) A candidate, to whom contributions were made to is considered an "official of the issuer," even if they lose their election

ALL OF THE ABOVE

Which of the following are TRUE regarding taxation of foreign securities, ADRs and governments? I.) Foreign companies and governments usually w/hold a percentage of customer's dividends and interest to cover foreign taxes II.) Do not w/hold capital gains III.) Customer can use amt w/held as a tax credit or itemized deduction on their tax return IV.) Dividends paid to customers (not withheld) are fully taxable

ALL OF THE ABOVE

Which of the following are TRUE regarding the ABLE Program? I.) Contributions are generally used to acquire units in a state trust and are invested consistent w/ trust's investment objectives II.) Units of the trust are generally Municipal Fund Securities III.) Contributions are NOT tax-deductible IV.) Earnings accrue FEDERAL income tax free; Distributions used for qualified disability expenses are tax-free

ALL OF THE ABOVE

Which of the following are TRUE regarding the characteristics of T-Notes and T-Bonds? I.) Issued in minimum denominations of $100 (formerly $1,000) II.) Maximum purchase amount per auction is $5 million for non-competitive III.) Fixed rate of interest paid semi-annually, exempt from state and local tax, subject to federal income tax IV.) Outstanding issues are available in registered or bearer form V.) Regular way settlement is T+1 in the secondary market

ALL OF THE ABOVE

Which of the following are TRUE under the "Tax Reform Act of 1986?" I.) Losses from passive activities may be deducted from passive income only. If passive losses exceed passive income, the excess cannot be deducted II.) Any excess passive loss is suspended and carried fwd to reduce passive activity income in future years. Suspended/unused deductions may be deducted when investor can sell their interests III.) Exemption of $25,000 is allowed for rental real estate activities, when taxpayer actively participates in the activity IV.) Real estate, when DEVELOPED (not raw), is depreciated using "Straight-Line Depreciation" and there is NO "Recapture"

ALL OF THE ABOVE

Which of the following are actions that general partners CANNOT do without approval of limited partners? I.) Admit other general or limited partners II.) Confess a judgement against, or violate partnership agreement III.) Prevent ordinary business, or compete with the partnership IV.) Assign or possess partnership property for other than partnership purposes V.) Continue business of LP on death, retirement, or insanity of a GP

ALL OF THE ABOVE

Which of the following are characteristics of "Municipal Unit Investment Trusts (Tax Exempt UITs)?" I.) Each trust is an individual entity created by an indenture II.) Since securities are issued as redeemable, the certificate can be tendered to the trustee for payment at any time III.) As the bonds mature or are called, the size of the trust is reduced IV.) There is no portfolio manager since the securities in the portfolio are fixed

ALL OF THE ABOVE

Which of the following are characteristics of Limited Partnerships? I.) Agreements must be in writing II.) Intent must be to carry on a business profit III.) Profits and losses may be shared in any percentages agreed upon IV.) "Certificate of Limited Partnership" must be filed w/ secretary of state in the state limited partnership is formed to protect interests of the limited partners

ALL OF THE ABOVE

Which of the following are characteristics of STRIPS/Treasury Receipts/Zero Coupon Treasury Bonds? I.) Purchasers are able to lock in a rate of return at a predetermined period II.) Interest and principal payments on the stripped bonds are guaranteed by the U.S. Gvt. and are of the highest quality III.) Interest is taxable annually on accrual even though investor only receives one payment at maturity IV.) Individuals normally purchase these STRIPS for retirement plans such as Keogh's or IRA's that have no current tax liability

ALL OF THE ABOVE

Which of the following are characteristics of Sallie Mae (Student Loan Marketing Association (SLMA))? I.) Purchases student loans from qualified institutions such as colleges, banks, and other financial institutions II.) Publicly traded on the NYSE (SLM) and backed by the insured loans III.) Bonds pay semi-annual interest and are quoted in 32nds. Interest income is subject to federal tax but is exempt from state and local tax IV.) Have less credit risk than corporate debt or municipal revenue bonds

ALL OF THE ABOVE

Which of the following are characteristics of TREASURY BILLS (T-BILLS) ? I.) Sold at a discount, the yield of the T-Bill is equal to the Yield. II.) Do not pay interest, and therefore there is no coupon III.) Have short term maturities (1/3/6/12 months), never more than one year IV.) Issued in minimum denominations of $100 (previously $1,000)

ALL OF THE ABOVE

Which of the following are components of REG BI? I.) Disclosure Obligation (fees, services, capacity B/D acts in) II.) Care Obligation (cost of the recommendation) III.) Conflict of Interest Obligation (ones that cannot be eliminated must be disclosed) IV.) Compliance Obligation (establish, maintain, enforce REG BI)

ALL OF THE ABOVE

Which of the following are considered "Control Relationships," and require disclosure to customers, in writing, at or before completion of a municipal securities transaction? I.) Firm acts as a financial advisor to an issuer II.) Elected official who also works for a municipal securities dealer III.) Partner of a municipal securities dealer is on the board of directors of a corporation which had industrial revenue bonds issued on its behalf

ALL OF THE ABOVE

Which of the following are contained in the "Investment Policy Statement?" I.) Investment goals and objectives and time horizon II.) Statement of purpose and responsibilities & guidelines for review III.) Risk tolerance and liquidity requirements IV.) Expected returns/ range of returns V.) Recommended allocations among asset classes as to minimize risks of large losses

ALL OF THE ABOVE

Which of the following are examples of "tax preference items" that are subject to AMT? I.) Excess of accelerated depreciation over straight-line depreciation II.) Excess of percentage depletion over the adjusted basis III.) Amount by which intangible drilling costs in a tax year exceed 65% pf taxpayer's net income from oil and gas properties IV.) Value of an incentive stock option at time of purchase for taxpayer .."is the difference btwn cost of stock purchased on exercise and the mkt value of the stock on that date V.) Tax-exempt interest on "Private Activity Municipal Bonds"

ALL OF THE ABOVE

Which of the following are examples of cash payments that MUST e disclosed in a Prospectus? I.) Discounts, concessions, fees II.) Service fees, commissions, overrides, sales loads III.) Loans IV.) Employee Benefits

ALL OF THE ABOVE

Which of the following are functions of a Municipal Bond Attorney? I.) Establish that issue qualifies for federal tax exempt interest income II.) Determine that bonds are legally issued in accordance w/ statutes of the municipal issuer III.) Prepare or examine original draft and proceedings of the issuer before they are formally adopted IV.) To examine the bonds to see they are properly executed

ALL OF THE ABOVE

Which of the following are important factors in evaluating a Real Estate DPP? I.) Market value of adjoining property II.) General Partner's management ability III.) Tax considerations IV.) Economic viability of the property

ALL OF THE ABOVE

Which of the following are issuers for Government Agency Securities? I.) Central Banks for Cooperatives II.) Federal Land Banks III.) Federal Intermediate Credit Banks IV.) Federal Home Loan Banks

ALL OF THE ABOVE

Which of the following are key characteristics of "Variable-Rate/Auction Rate demand Bonds?" I.) Issued at par in $100,000 increments II.) Muni bond dealer designated as "Remarketing Agent," resets rates and and tries to sell bonds that have been tendered by bondholders III.) If bonds cannot be remarketed, Remarketing Agent may sell bonds to large bank or insurance company. The issuer is only responsible to redeem bonds at maturity IV.) Provide bondholder w/ interest rate risk protection, because interest rates are not fixed V.) Despite high credit rankings, these bonds may be subject to liquidity risk because there may not be an active secondary mkt.

ALL OF THE ABOVE

Which of the following are securities that are EXEMPT FROM REGISTRATION under the '33 ACT? I.) Building and Loan Associations II.) Benevolent Associates III.) Banks, Savings, and Loans IV.) Commercial Paper if term is 270 days or less V.) Banker's Acceptances if term is 180 days or less

ALL OF THE ABOVE

Which of the following are securities that are EXEMPT FROM REGISTRATION under the '33 ACT? I.) U.S. Gvt. Securities II.) Municipal Securities III.) Intrastate Offerings IV.) Reg A+ Offering V.) Small business Investment Companies VI.) Reg. D Private Placements

ALL OF THE ABOVE

Which of the following are true about pink sheets? I.) Before investor buys a penny stock, RR must disclose compensation to be paid to B/D and RR, and bid and offer price II.) Penny stocks are the same thing as designated securities... which have a market price less that $5.00 III.) B/D must provide a risk disclosure statement to investors IV.) B/D must provide monthly statements reflecting market value of each penny stock

ALL OF THE ABOVE

Which of the following are types of oil and gas investment programs that are available to investors? I.) Exploratory Drilling Program II.) Development Drilling Program III.) Balanced Drilling Program IV.) Oil and Gas Income Program

ALL OF THE ABOVE

Which of the following characteristics are TRUE about Fannie Mae (Federal National Mortgage Association (FNMA))? I.) Publicly-owned, government-sponsored company which trades on the NASDAQ II.) Buys mortgages from lenders and securitizes them, and is the largest source of home mortgage funds for low/moderate/middle income home buyers in the U.S. III.) Bonds issued at a discount, pay interest semi-annually, Fully taxable at the federal, state, and local levels IV.) Securities issued are NOT guaranteed by the U.S. Gvt. V.) Bonds are issued as either callable or non-callable

ALL OF THE ABOVE

Which of the following factors are used to determine if reasonable diligence has been made by firm in getting the best possible execution price for a customer? (FINRA Rule 5310) I.) Character of the market (price, volatility, liquidity, etc.) II.) Size and type of transaction III.) Number of markets checked IV.) Accessibility of the quotation V.) Terms and conditions of the order

ALL OF THE ABOVE

Which of the following information is NOT disclosed with FINRA's BrokerCheck system? I.) SSN's, residential information, and physical descriptions II.) Proceedings/investigations which were withdrawn/vacated III.) Internal review disclosures IV.) Reason for termination V.) form U-5 disclosure info for 15 days following filing

ALL OF THE ABOVE

Which of the following information is NOT necessary on a confirmation? I.) Quality Rating II.) Debt Service Coverage III.) Commission per bond IV.) Identity of paying agent V.) Taxable equivalent yield

ALL OF THE ABOVE

Which of the following is TRUE about "Non-Qualified Deferred Compensation Plans"? I.) Frequently used by athletes and highly paid executives II.) Such plans are NOT subject to ERISA III.) Employer MAY discriminate as to who can participate in the plans IV.) It is a contractual agreement between the employer and the employee

ALL OF THE ABOVE

Which of the following is TRUE about a SELLER'S OPTION 180-DAY CONTRACT? I.) Used when a seller is unavailable or out of country for a couple months and wants to sell a security II.) Seller must deliver security NO SOONER that 2nd BUSINESS date after trade date and NO LATER than 180th CALENDAR date after trade date III.) The buyer must RECEIVE one day's written notice from seller before delivery IV.) BUYER must put up funds by the 4th BUSINESS DATE after trade date

ALL OF THE ABOVE

Which of the following is TRUE about the OTC market? I.) Prices of securities are determined by buyers ad sellers negotiating w/ market makers II.) Number of OTC securities traded is greater than all exchanges combined III.) Stocks of most banks of most banks and insurance Co's are traded OTC IV.) Facilitates trading of publicly held companies not traded on an exchange V.) Most securities have 4-letter ticker symbols

ALL OF THE ABOVE

Which of the following is TRUE about the plan information of a Non-Qualified Deferred Compensation Plan? I.) Agreements may list conditions under which some or all benefits will be forfeited (quitting or termination) II.) Business failures could lead to no payment, and to where employee becomes a general creditor of the company III.) Such plans may be indexed to inflation IV.) Employee enjoys NO right to any asset of employer until retirement, death, or disability V.) Income taxed are deferred until receipt

ALL OF THE ABOVE

Which of the following is TRUE of "Non Managed Fee-Based Accounts? I.) No advisory services are provided by the member firm II.) Customers are charged a fixed fee or percentage of the account's value rather than commissions III.) All fees and costs must be disclosed before account is established IV.) More beneficial for customers who trade frequently V.) Customers must be given full disclosure about the services and firm must have policies in place to monitor "churning"

ALL OF THE ABOVE

Which of the following is TRUE regarding "Transfer on Death (TOD)" Account? I.) Upon death of individual/last survivor, assets are passed to the beneficiaries according to written TOD agreement. II.) Eliminates the need for probate III.) TOD NOT eligible for limited partnership interests, precious metals, commodities, and variable/fixed annuities. IV.) Used for basic securities like stocks, bonds, and mutual funds. V.) Appropriate for investor who wants to leave securities for a specific person but wants to maintain control of them while alive

ALL OF THE ABOVE

Which of the following is TRUE regarding the "Subscription Agreement" of a DPP? I.) Signed application must be submitted by investor to become a LP II.) It must be approved and accepted by the general partner III.) Sale becomes final when general partner signs agreement IV.) By signing, the investor indicates he has read the prospectus

ALL OF THE ABOVE

Which of the following is TRUE regarding the interest on municipal bonds? I.) Interest is paid semi-annually II.) Most munis are exempt from federal income tax, and most are exempt from state and local taxation within the state issued III.) Federal exempt status is based on the "Reciprocal Immunity" applied by the US Supreme Court IV.) Most states tax bonds issued by other states

ALL OF THE ABOVE

Which of the following should the an RR consider when determining a customer's financial profile? I.) Number of dependents and educational needs II.) Marital status III.) Equity in their home IV.) Temperament

ALL OF THE ABOVE

Which of the following statements are CORRECT regarding "Callable Municipal Bonds?" I.) Price of a callable bond is calculated on the LOWER of the YTM or Yield to Call II.) Callable bonds trading at a premium are always priced to the call date because bondholder could have a loss of yield/principal, or reinvested at lower rates. III.) An investor looking for "Call Protection," would AVOID purchasing callable bonds at a premium if they're callable at par

ALL OF THE ABOVE

Which of the following statements are TRUE regarding good delivery of municipal bonds? I.) In order for muni B/D to make good delivery to purchaser of a muni bearer bond that's trading in default, all unpaid coupons must be attached to the certificate, not just current coupons II.) For good delivery of bearer bonds, signature of the holder is not required III.) When customer sells a book-entry muni bond, ownership is transferred by appropriate clearing agency to transfer ownership IV.) Delivery of a muni bond can be rejected for incorrect delivery instructions

ALL OF THE ABOVE

Which of the following transactions does FINRA's 5% Markup Policy apply to? I.) Transaction in which member buys security to fill order for the same security which was received from customer (Riskless and Simultaneous Transaction) II.) Transaction in which member sells a security to a customer from its own inventory III.) Transactions in which a member purchases a security from customer and puts it into its own inventory IV.) Transaction in which member acts as an agent, bringing buyer and seller together and charges a commission

ALL OF THE ABOVE

Which of the following would affect EPS? I.) Changes in methods of inventory valuation II.) Acquisition/disposition through issuance of bonds (fixed obligations) of a subsidiary III.) The spin-off of a subsidiary

ALL OF THE ABOVE

Which of the following would be factors to consider in a Real Estate DPP? I.) Forecasts in the regional economic condition II.) Changes in interest rates III.) Changes in the tax law IV.) Qualifications of the general partner

ALL OF THE ABOVE

Whish of the following are examples of "Personally Identifiable Financial Info" I.) Info customer provides to in an institution to obtain a loan, credit card or other financial product II.) info that results from financial transactions between customers and institution III.) Any financial info you collect thru an internet "cookie" IV.) Information from a consumer report

ALL OF THE ABOVE

Which of the following are characteristics of a "Functional Allocation Sharing Agreement" in an Oil and Gas Partnership? I.) Sponsor bears all of the capital or tangible costs of drilling the wells; these costs must be depreciated over time for tax purposes II.) Investors bear intangible costs which are deductible as incurred III.) Most public offerings use Functional Allocations to make the program more attractive to investors IV.) This agreement is a "Special Allocation" to the IRS, and MUST have an economic benefit aside from tax consequences or IRS could disallow this sharing arrangement

ALL OF THE ABOVE **MOST COMMONLY USED ARRANGEMENT**

An investor can "Shelter Income" by investing in which of the following? I.) Variable Annuities II.) Municipal Bonds III.) IRAs IV.) Keogh Plans V.) Direct Participation Programs (DPPs)

ALL OF THE ABOVE VARIABLES- DEFERRED INCOME MUNIS- TAX FREE INTEREST INCOME IRAs- DEFERRED INCOME KEOGH- DEFERRED INCOME DPPs- PASS THRU/CONDUIT THEORY

Which of the following are characteristics that are used to distinguish corporation from other business entities like limited partnerships? I.) Continuity of life (length of life) II.) Centralization of management III.) Limited liability IV.) Free transferability of beneficial interest

ALL OF THE ABOVE... **IF A BUSINESS HAS AT LEAST 3 OF THESE, IT WILL BE CATEGORIZED AS A CORPORATION** **A LP CANNOT HAVE MORE THAT 2 OF THESE** **CENTRALIZATION OF MGMT IS THE MOST DIFFICULT FOR LPs TO AVOID**

Which of the following characteristics are TRUE about Ginnie Mae (Government National Mortgage Association (GNMA)? I.) Gvt agency which offers investors undivided interest in a pool of mortgages (VA/FHA) guaranteed by the government II.) The "pass through" securities pass thru principal and interest from mortgage payments made by homeowners to investors monthly...those payments are guaranteed by the government III.) Are issued in minimum denominations of $1,000 IV.) Portion of the monthly payment to investor is a return of capital and is not taxed, but remaining portion is subject to federal, state and local tax

ALL OF THE ABOVE... REMEMBER... "GGG" GINNIE, GUARANTEED, BY GVT

EMMA- Electronic Municipal Market Access is the official MSRB source for...? I.) Official Statements II.) Continuing disclosure documents III.) Advanced refunding documents IV.) Real time trade price information

ALL THE ABOVE

In a PRIMARY DISTRIBUTION... I.) previously unowned/unissued shares are issued to public II.) the stock has never been held be anyone before III.) the proceeds are paid to the issuer IV.) requires SEC registration before being sold to the public

ALL THE ABOVE

In investment banking what are the responsibilities of the managing underwriter? I.) forming underwriting syndicate and selling groups II.) running books and keeping syndicate records III.) establishes underwriter's retention IV.) Allocating issue to syndicate and selling group members V.) stabilizing issue of necessary

ALL THE ABOVE

Money Market Funds.... I.) the largest expense is the management and advisory fees II.) Do not charge a sales load III.) minimum w/drawls are set at $500 IV.) NAV is normally priced at $1.00 per share

ALL THE ABOVE

Regarding its role of new issues, an investment bank CAN function as which of the following? I.) Underwriter II.) Sponsor III.) Distributor IV.) Syndicate Member

ALL THE ABOVE

The RIGISTRATION STATEMENT filed with the SEC... I.) Filed by the the managing underwriter for the corporation II.) Is not sent to investors III.) Contains full and fair disclosure of company and offering IV.) describes issuer's business and use of proceeds

ALL THE ABOVE

Under FINRA RULE 5130... a restricted person means... I.) Member Firms and Other B/D's II.) Broker Dealer and Member Firm officers and employees and their immediate family members III.) Finders and Fiduciaries (attorneys, accountants, financial consultants) and their immediate families IV.) Portfolio Managers and their immediate families

ALL THE ABOVE

Under FINRA Rule 5130, STANDBY PURCHASERS are restricted persons that are ALLOWED to purchase new issues of common shares provided that...: I.) Standby-agreement is disclosed in the prospectus II.) Standby-agreement is a written agreement III.) Managing underwriter, in writing shows that it was unable to find any other purchasers of the new issue IV.) Securities sold pursuant to the standby-agreement are subject to a 3-month "locked up period" where the new issue cannot be sold for three months

ALL THE ABOVE

Which of the following are VIOLATIONS of the '33 ACT? I.) Misstatements in a final prospectus II.) Sending sales literature w/ preliminary prospectus or altering it in any way III.) Sending excerpts of prospectus to customers IV.) accepting customer order of new issues before effective date

ALL THE ABOVE

Which of the following are characteristics of REG NMS? I.) Access to quotes must be immediate and automatic II.) Encourages competition in equity trading markets III.) executions take place at price at or better than national BBO IV.) Ensures investors are receiving the best possible price executions

ALL THE ABOVE

Which of the following are factors that determine the spread in investment banking? I.) Size of the issue II.) Type of security involved III.) Financial strength of the issuer IV.) Type of commitment made by investment banker

ALL THE ABOVE

Which of the following are factors used to determine the price of a new issue? I.) Comparison to similar issues on the market II.) Outlook and attractiveness of issue's industry classification III.) Estimate the corporation's E.P.S. for the next year IV.) Estimate of dividends per share the new issue will probably pay

ALL THE ABOVE

Which of the following are types of issuers I.) Domestic corporations II.) Foreign corporations III.) The U.S. Government IV.) State and local governments

ALL THE ABOVE

Which of the following is TRUE about the registration of municipal securities dealers? I.) Muni broker-dealers must register with the SEC II.) Muni broker-dealers must disclose background and organizational information about the firm III.) Registration does not mean that firm has been "approved" by the SEC

ALL THE ABOVE

Which of the following is TRUE of Super DOT/Universal Trading Platform? I.) ALL NYSE stocks are eligible II.) Reports are instantaneously reported back to the firm III.) Used by individuals and institutions IV.) Can be order size limitations

ALL THE ABOVE

Which of the following is true about 506(b) OFFERINGS? I.) Securities issued under Rule 506 are RESTRICTED II.) When investors purchase, they must hold the stock for 6 months III.) investors don't have to be accredited but must be sophisticated IV.) the shares of these offerings are ILLIQUID

ALL THE ABOVE

Which of the following is true about market-on-close (MOC) and limit-on-close (LOC) orders? I.) Must be entered electronically by 3:50 pm II.) Can be cancelled or reduced anytime up to 3:50 pm, or correct an error up to 3:58 pm III.) Cannot be cancelled or reduced after 3:58 pm , no exceptions IV.) Under **NYSE Rule 80b** if trading is halted for the remainder of the day, ALL MOC and LOC orders are cancelled

ALL THE ABOVE

Which of the following is true about the DMM? I.) All orders entered w/ DMM are GTC II.) DMM CAN contact potential buyers if theres an influx of sell orders III.) DMM DOES NOT handle distribution of new issues IV.) Execute odd lot orders

ALL THE ABOVE

Which of the following would affect the pricing of a PREMIUM on an option? I.) Market Price of the Underlying Stock II.) Time Until Expiration of the Option III.) Volatility of the Underlying Stock IV.) Changes in Interest Rates V.) Liquidity

ALL THE ABOVE

Which statements are CORRECT about INTERVAL FUNDS? I.) Considered a closed-end fund II.) shares do not trade on secondary market/OTC III.) Shares are re-purchased at NAV, not based on supply & demand IV.) Allowed to offer shares at price based on fund's NAV

ALL THE ABOVE

For a security to be sold in a state, the security must EITHER be...? I.) Registered in the state II.) Exempt from registration in the state III.) Federal covered security listed on natn'l securities exchange

ALL THE ABOVE (EITHER OF ABOVE)

Order tickets MUST indicate...? I.) Buy or sell VI.) Time order was entered II.) Number of shares VII.) Time executed/cancelled III.) Whether it is discretionary VIII.) Terms and conditions IV.) The security IX.) Identity of each associated person V.) Account number X.) Identity of person entering order XI.) DMM or mkt maker executing trade

ALL THE ABOVE **EXCEPT XI**

What are UGMA and UTMA accounts? And what is their purpose?

ALLOW OPENING OF A SECURITIES ACCOUNT FOR A MINOR... USED TO TRANSFER SECURITIES OR CASH TO MINOR UPON REACHING LEGAL AGE W/OUT AN ATTORNEY SETTING UP A TRUST.

What is SEC RULE 144-A and what does it allow?

ALLOWS SALE OF RESTRICTED SECURITIES **DURING 6 MONTH RESTRICTED PERIOD** *TO QUALIFIED INSTITUTIONAL BUYERS (QIB's)... NOT TO INDIVIDUAL INVESTORS

HOW OFTEN must B/D's must inform customers of any free credit balances left at the firm?

AT LEAST QUARTERLY

When must the Options Disclosure Document (ODD) / "Characteristics and Risks of Standardized Options" be furnished to a customer?

AT OR BEFORE THE TIME OF CUSTOMER ACCOUNT APPROVAL.

The factor listed below which would have a direct impact on the Alpha of a stock would be...? a.) Investors on a general scale have changed their minds from being pessimistic about the market to optimistic b.) The company whose stock that is in question has made significant changes to the management strategy for the upcoming year c.) W/ recent over-buying in the technology sector, mkt has now corrected itself, and prices have come back to reasonable levels d.) The index on which the company is listed has made a downward trend

B. )

A trader buys 10 OEX 300 call options at 4.50. The OEX index is currently trading at 290. How much must the trader pay for the option? a.) $3,000 b.) $4,500 c.) $30,000 d.) $45,000

B. ) $4,500 10*100 = 1,000 1,000 * $4.50 = $4,500

A FINRA member is holding an account in the name of a corporation. In order for corporation to transfer ownership of its shares, it must first have the signatures of... a.) All officers of the corporation b.) Person authorized to act for corporation, plus documentation of that authorization c.) Any officer of that corporation d.) At least two officers of that corporation

B.)

A customer has a portfolio of various corporate and treasury bonds. She tells her RR that she believes interest rates are going lower and wants to maintain her portfolio of bonds. RR should recommend... a.) Begin swapping he existing bonds for bonds selling at a premium b.) Extend overall maturity and increase call protection c.) Attempt to shorten overall maturity d.) Sell corporate bonds and buy treasury bonds

B.)

A husband and wife filing a joint return are separately employed. The husband's employer offers a qualified-pension plan and he's an active participant. The wife is self employed and earns $50,000 a year. Which of the following is TRUE regarding their IRA contributions? a.) Neither husband or wife is allowed to make tax-deductible contributions, but both could make after-tax contributions b.) Husband could only make after-tax contribution, while wife coulf make tax-deductible contributions c.) Neither would be allowed to make any type of contribution d.) Husband could not make any type of contribution, whereas wife could make a tax-deductible contribution

B.)

A municipal securities dealer should consider ALL of the following when determining the selling price (quote) of a muni bond EXCEPT...? a.) Prevailing or current market price b.) Acquisition price c.) Aggregate dollar amount of the transaction d.) Expenses of the transaction

B.)

A variable annuity's assumed interest rate is...? a.) Chosen by the investor at the time annuity is purchased b.) The anticipated rate of return at the time of payout of the VA contract c.) Based on the T-bill rate plus 3% d.) Based on a variable subaccount's performance history

B.)

ALL of the following are TRUE regarding Variable Annuities EXCEPT...? a.) Money invested is professionally invested in accordance w/ objective of the issuer b.) Variable annuities protect investors against capital loss c.) Often offer mutual fund shares as investment options d.) If issuer wishes to change investment objective, it must acquire approval from majority of shareholders

B.)

ALL of the following are characteristics of Defined Benefit Pension Plans, EXCEPT...? a.) Retirement benefits are taxable b.) All employees receive the same pension benefits at retirement c.) The plan contains the formula for calculating pension benefits d.) High income employees, w/ long service, near retirement benefit the most

B.)

ALL of the following transactions executed thru NASDAQ in listed securities are reported on the consolidated tape EXCEPT: a.) Agency transactions without a markup b.) Odd lot transactions without differentials c.) Principal transactions with a markup d.) Principal transaction with a markdown

B.)

All of the following statements concerning insured municipal bonds are correct EXCEPT that the...? a.) Insurer guarantees payment of all interest when due b.) Insurance guarantees a permanent AAA rating c.) Insurance increases their marketability d.) Insurer guarantees payment of principal when due

B.)

An associated person at a member firm is... a.) generally prohibited from participation in the stock market b.) generally prohibited from purchasing shares during an IPO c.) permitted to use info that has not yet been made public, to assist in investment decisions for the benefit of clients d.) permitted to use info about lg. upcoming trades, to enter in trades for friends and family prior to large order

B.)

An investor feels strongly that the tech sector will be going up significantly in the short-term. Within the sector he likes LMNO Co. at $25 a share, but realizes there's not a lot of trading volume in that stock. His second choice is PQRS Co. which has a large trading volume. Investor wants to enter an order for a block of LMNO at $25, but wants PQRS to be ordered as a back-up if he can't get ahold of LMNO. If the agent at the investor's B/D suggests an IOC order (immediate-or cancel), what would be the result? a.) Will result in the order of LMNO shares priced at or below the limit followed by the execution for remainder of LMNO at best price avail. b.) Will result in the purchase of LMNO at or below the limit, followed by the cancellation of the remainder of the order that were not avail. c.) Will result in the purchase of LMNO shares at or below the limit, followed by the completion of the order in PQRS stock d.) Will result in the purchase of all LMNO shares at or below the limit or the order will be cancelled in entirety.

B.)

An investor purchases securities and holds them for a period of years. For federal tax purposes, what does he report as his cost basis for the shares? a.) Mkt value of securities when he acquired them b.) Mkt value of securities when he acquired them plus commissions he paid to acquire them c.) Mkt value of the securities when he acquired them minus the commissions he paid to acquire them d.) Mkt value of securities on the last business day in the year in which they were acquired

B.)

In a "Leveraged Buyout," the acquiring company borrows funds... a.) Using its own assets as security for the loan b.) Using the target company's assets as security for than loan c.) Using unsecured loans d.) Using unsecured and subordinated loans

B.)

Issuers would INSURE their bonds in order to... a.) Improve the rating and creditworthiness of the bond b.) pay a lower rate of interest

B.)

Joe calls his RR to inform her that he is interested in investing in a new Business Development Company. Joe is generally a conservative investor. The RR should tell Joe that the investment choice is... a.) Good because it satisfies his investment objectives b.) Not a good choice because investing in a new BDC requires high risk tolerance c.) Is suitable and has potential for substantial appreciation d.) Unsuitable but could be a good gamble

B.)

Of the following transactions, which of the following is acceptable under FINRA Rules? a.) Couple expecting child purchase growth fund in child's name b.) In joint acct, wife enters buy order for sector fund w/out husband knowing c.) In order to max. return, client frequently buys and sells mutual fund shares d.) In phone convo, client tells RR, "buy best mutual fund available," since client cannot decide on a particular fund

B.)

Ownership is transferred when a customer sells a book-entry muni security: a.) By providing certificates to clearing agent b.) By instructing appropriate clearing agency to transfer ownership from one customer to another c.) By journal-entry from seller to buyer on your firm's books d.) By instructing transfer agent to issue a new certificate

B.)

The "Beta" of a particular fund is a measure of the..? a.) Fund's return that exceeds the current T-Bill rate b.) Volatility of the fund in relation to a designated benchmark index such as the DJIA or S & P 500 c.) Fund's current performance compared to its past performance d.) Risk of default by debt securities in the fund portfolio

B.)

The primary purpose of ERISA, in setting minimum standards and reporting retirement plans is to protect..? a.) Against an RR's mishandling of a client's portfolio b.) All employee's against employer's mishandling of retirement funds c.) Shareholders from IA's mismanagement of client's portfolio d.) Gvt employees from mismanagement of funds

B.)

Under MSRB Rules, a muni securities dealer selling muni securities to an employee of another B/D MUST...? a.) Restrict trading to a cash basis b.) Send duplicate confirmations to the other firm c.) Obtain principal's approval prior to executing each trade d.) Obtain approval from other firm prior to executing each trade

B.)

Upon exercise, the HOLDER of a stock index option on the OEX 100 receives...? a.) amount by which option is out-of-the-money * 100 b.) amount by which option is in-the-money * 100 c.) diversified securities equal to the aggregate exercise price d.) the premium paid + out-of-the-money amount * 100

B.)

When a customer buys an OTC security as a "NET TRANSACTION," this means... a.) Commission will be charged to client and will be disclosed on confirmation b.) Mark up/down had been included in the price of the transaction c.) Client is not required to pay commission or mark up/down d.) Any charges to client will be netted out of the total amt. of the transaction

B.)

When a muni bond is trading "flat," it means which of the following? a.) Bond is in default of its principal payments b.) Bond is in default of its interest payments c.) Market price of a bond has not changed over a period of time d.) There is not a mark-up on this bond when its traded

B.)

When referring to call options, the term, "outstanding long position" means..? a.) Total amount of option contracts that be purchased or sold on any one day b.) Option contract that has not yet either expired or closed thru exercise or liquidation sale c.) Investor's net position of sales over purchases d.) Total number of options contracts compared to the number of common shares available on the market

B.)

Which of the following is NOT within the normal scope of duty for a municipal Bond Counsel? a.) Performing an examination of the bond once executed b.) Review and approval of the re-offering yields of the bonds c.) Determination of the tax status and delivery of legal opinion d.) Review of documentation related to the issue as well as procedures to ensure legal compliance

B.)

Which of the following statements are INCORRECT regarding IRA contributions a.) Some people will be allowed to deduct IRA contributions from their AGI b.) Deadline for contributions is Dec 31st of the tax year c.) Contributions can be made for a tax year any time between Jan 1st of that year and Apr 15 of the following year d.) Investors may file their tax return indicating an IRA contribution, but may postpone deposit of contribution till Apr 15th

B.)

Which of the following statements is ACCURATE about the delivery of documentation to customers who own variable annuities? a.) After purchase, holders must receive Statement of Additional Info prior to making first contribution b.) If holders request paper copy of Statement of Additional Info, the document must be provided to them c.) Investment Co. must provide customers a link to electronic prospectus w/in 3 business days after annuity purchase d.) Variable annuities are considered insurance products only, so they are not required to be accompanied with a prospectus

B.)

Which of the following statements regarding SRO's is NOT TRUE? a.) SRO's are supported by their own member firms b.) SRO's pay dividends to employees c.) SRO's allow members to vote d.) SRO's set rules, regulations, and penalties

B.)

If muni bond dealer "A" borrows from muni bond dealer "B," "Firm for an hour with a five-minute recall," this means which of the following? a.) "A" has control of the bonds for the remainder of the hour after the first five minutes have elapsed. b.) "A" has control of the bonds, subject to a five-minute "fill or kill" from "B" c.) "A" has control of the bonds for an hour, after which "B" must wait 5 minutes before offering the bonds to anyone else d.) "A" may call "B" at any time w/in the next hour and get control of the bonds for five minutes

B.) "A" HAS CONTROL OF THE BONDS, SUBJECT TO A "FILL OR KILL" FROM "B"

A customer's margin account is as follows: REG T & retention req. is 50%... LONG 100 ABC @ 80 Debit Balance : $11,700 LONG 100 DEF @ 100 SMA 0 The customer SELLS 20 shares DEF for $2,000. SMA can be credited with...? a.) $0 b.) $1,000 c.) $1,400 d.) $2,000

B.) $1,000... 50% OF WHAT COULD HAVE BEEN W/DRAWN

Over the past year, an investor received $500 interest income from US T-Bonds. He is w/in the 28% tax bracket, and lives in CA, where the state tax is 9%. What is his tax liability? a.) $185.00 b.) $140.00 c.) $45.00 d.) No tax liability

B.) $140.00.... ONLY SUBJEST TO FEDERAL TAXATION

A customer purchases a "When Issued" stock in a cash account for a total of $60,000. How much must the customer deposit? a.) $2,000 b.) $15,000 c.) $30,000 d.) $60,000

B.) $15,000.... WHEN ISSUED STOCK REQUIRES 25% DEPOSIT

A company has an EPS of $2.50, and the market price of the stock is $25. If the P/E Ratio remains the same, what price would the stock sell at if the EPS increases to $3.00? a.) $25 b.) $30 c.) $36 d.) $40

B.) $30... ($25 / $2.50 = 10).... ($30 / $3.00 = 10)

An investor on a normal interest payment date owning a 7 1/2% US Treasury bond, due 2030, trading at 102 would receive...? a.) $36.75 b.) $37.50 c.) $73.52 d.) $75.00

B.) $37.50.... T-BONDS PAY SEMI-ANNUALLY... 1000(PAR) * .075 = $75.00 / 2 = $37.50

An investor is long 1 OEX Aug 500 put at 10 when the index is at 550. The index closes at 450. The investor decides to exercise the option. What will the investor get at settlement? a.) $10,000 b.) $5,000 c.) $50,000 d.) 5,000 shares

B.) $5,000

Which of the following is TRUE regarding traditional IRA's a.) Contributions an be fully deductible depending on the age of the account owner at the time of contribution b.) Contributions may be made annually up to 100% of earned income, not to exceed certain limits c.) Contributions can be made using securities such as stocks d.) Contributions beyond set limits are permissible if the individual is younger than 50 years of age

B.) (USUALLY $6,000 IS THE MAXIMUM CONTRIBUTION LIMIT)

An investor buying municipal bonds, whose major goal is LIQUIDITY would consider... a.) Long-term maturities over short-term maturities b.) Short-term maturities over long-term maturities c.) GO bonds over Revenue bonds d.) Revenue Bonds over GO Bonds

B.) **SHORT-TERM MATURITIES** OVER LONG-TERM

A corporation's directors have declared a cash dividend on a common stock and have specified a record date. Based on the above info, which of the following is INCORRECT? a.) The ex-date will be set to one day prior to the record date b.) The stock record date will be used to determine who is entitled to the dividend c.) Current liabilities of the corporation are increased by amt of dividends declared on decloration date d.) Incorrect dividend payments are adjusted with due bills

B.) ... THE **EX-DATE** DETERMINES WHON IS ENTITLED FOR A DIVIDEND

Which of the following is NOT TRUE of stock index options? a.) exercise prices are standardized b.) premiums are set and standardized c.) exercise dates are standardized d.) settlement is made in cash

B.) ... premium prices are determined by supply and demand... ex. prices and ex. dated are determined by the OCC

Unless an extension of time is granted, a customer must be "bought in" if he does not deliver securities in which he sold in his long acct w/in how many business days after the settlement date? a.) 7 b.) 10 c.) 30 d.) 90

B.) 10 BUSINESS DAYS

Copies of CUSTOMER CONFIRMATIONS must be retained by the firm for...? a.) 1 Year b.) 3 Years c.) 5 Years d.) For Life

B.) 3 YEARS

Under REG D 506(b) Offering, securities can be sold to a MAXIMUM of...? a.) 35 accredited investors b.) 35 non-accredited investors c.) Unlimited number of foreign investors d.) Unlimited number of accredited and non-accredited investors

B.) 35 NON-ACCREDITED INVESTORS

A 23 year-old customer wants to invest and provide for his qualified higher education expenses. Which of the following is his BEST alternative? a.) Section 529 prepaid tuition plan b.) Section 529 Education-savings plan c.) Series EE and Series I savings bonds d.) Coverdell educations savings account

B.) 529 EDUCATION-SAVINGS PLAN

An options holder, according to the OCC Rules, can exercise option until....? a.) 4pm ET on the business day that immediately precedes Saturday of expiration b.) 5:30pm ET on the third friday of expiration month c.) 4pm ET on the last friday of expiration month d.) 11:59 pm ET on the third friday of expiration month

B.) 5:30PM ET ON THIRD FRIDAY OF EX. MONTH

The SEC regulates ALL of the following EXCEPT...? a) Trading on stock exchanges b.) A new issue of treasury securities c.) A new issue of corporate bonds d.) Trading on the OTC market

B.) A NEW ISSUE OR TREASURY SECURITIES... THESE SECRITIES ARE EXEMPT SECURITIES

At least how often must a plan administrator of a self directed qualified retirement plan such as a sec 401(k) plan, disclose to participants investment-related info about each available investment option before participant directs his/her investment? a.) Semi-annually thereafter b.) Annually thereafter c.) Bi-annually thereafter d.) When plan participant requests the information

B.) ANNUALLY THEREAFTER

During the past 3 months, Mr. No Ledge, a customer, has acquired more than 10% of the outstanding shares of Nudele Corporation. If Mr. Ledge indicates a desire to sell these shares immediately, the RR should inform him that... a.) By exercising a put, he can sell the stock w/o any consequences b.) Any profit from the sale would have to be forfeited c.) If the stock is sold to more than 35 buyers, he can make the sale d) The position can be sold w/o consequences, by filing Form 144

B.) ANY PROFIT FROM SALE WOULD HAVE TO BE FORFEITED.... (w/ 10% of shares he is considered an affiliated person...any profit from a short swing *W/IN 6 MONTHS OF PURCHASE* is recoverable by company)

One of your clients has been buying stocks in her account, and later transferring the stock into her daughter's account, then selling the stock in her daughter's account. This client is most likely...? a.) Allocating assets b.) Attempting to avoid tax consequences c.) Laundering money d.) Engaging in wash sales

B.) ATTEMPTING TO AVOID TAX CONSEQUENCES

Which of the following handles the distribution of new issues of US Government securities? a.) Brokerage firms acting as underwriters b.) Auctions handled by the federal reserve c.) Primary distributions through broker-dealers d.) Market making by OTC traders

B.) AUCTIONS BY THE FEDERAL RESERVE

The disclosure requirements of the Securities Act of 1933 are intended to provide investors with...? a.) An objective third-party review by the SEC of all new issues b.) A basis for judging the merits of new issues of securities c.) Financial info on new issues, the accuracy of which has been verified by the SEC d.) Financial info of the B/D offering the new issue

B.) BASIS FOR JUDGING MERITS OF NEW ISSUES

In which of the following scenarios would the investor be permitted to deduct a net capital loss in the current year? a.) Investor sells ABC shares for a loss and w/in 30 days purchases call options on ABS b.) Investor sells ABC shares for a loss, and two months later, purchases call options on ABC c.) Investor sells ABC shares for a loss and 25 days later, buys a ABC convertible bond d.) Investor sells ABC shares for a gain, and 3 days later, buys more ABC shares

B.) BECAUSE HE WAITED 2 MOINTHS... NEED TO WAIT MORE THAN 30 DAYS

An investor is considering the purchase of a variable annuity contract. What should be the RR's first suitability concern? a.) Deposits may increase or decrease b.) Benefit payments may increase or decrease c.) Penalty for early w/drawls may be imposed d.) Front-end load charges may be imposed

B.) BENEFIT PAYMENTS MAY INCREASE OR DECREASE

An investor purchases ABC common shares under REG S on February 1st and she wishes to sell them to U.S. trading markets on October 1st. Regarding the potential sale of these securities, the investor... a.) Cannot sell these securities because they can only be sold in a foreign trading market b.) Cannot sell these securities because she hasn't held these securities for at least a year c.) Can sell these securities because they have been held for over 40 days d.) Can sell these securities because they have been held for 6 months

B.) CANNOT SELL THESE SECURITIES BECAUSE SHE HAS NOT HELD THEM FOR AT LEAST 1 YEAR... (6 months for SEC Rules 144/147/REG D PVT PLACEMENTS)

If an investment company is trading at a DISCOUNT to NAV, it must be.... a.) Open-end fund b.) Closed-end fund c.) High yield bond d.) Equity options

B.) CLOSED-END FUND.. CLOSED-END FIUND'S ARE NOT TIED TO NAV

An investor that covers a short position by buying an option would be making...? a.) closing sale b.) closing purchase c.) opening sale d.) opening purchase

B.) CLOSING PURCHASE

If an investor is looking for "Appreciation," and is *willing to incur risk,* an RR should first recommend: a.) Growth Common Stock b.) Common Stocks purchased/sold Short in a Margin Account c.) Foreign Common Stocks d.) Limited Partnerships

B.) COMMON STOCKS PURCHASED/SOLD *SHORT* IN A MARGIN ACCOUNT

Regarding tax-qualified, profit-sharing plans, which response below is NOT TRUE? a.) Under ERISA, such plans must meet required non-discrimination test b.) In order for a company to make profit-sharing contributions, actual company profits are not a requirement c.) Such funds which have been accumulated can only be properly distributed at or after retirement has occurred. d.) In such plans, assets must be held in trust before distribution

B.) COMPANIES WHO WISH TO CONTRIBUTE TO PROFIT-SHARING PLANS MUST HAVE A RECORDED PROFIT FOR PERIOD CONTRIBUTION IS MADE

WHICH of the following represents FUNDED DEBT? a.) US T-Note b.) Corporate Mortgage Bond c.) Municipal Bond d.) Flower Bond

B.) CORPORATE MORTGAGE BOND

If a elderly client develops dementia, the RR or relative of the client needs to acquire either... a.) Power of Attorney b.) Court Approved Guardianship

B.) COURT APPROVED GUARDIANSHIP... (P.O.A. CAN ONLY BE SIGNED IF PERSON IS IN "SOUND MIND")

U.S. Treasury securities are subject to ALL of the following risks EXCEPT..? a.) Inflationary or Purchasing Power Risk b.) Credit Risk c.) Interest Rate Risk d.) Market Risk

B.) CREDIT RISK... SINCE THE SECURITIES ARE *GUARANTEED BY THE U.S. GOVERNMENT*

If a long call option is exercised by the owner, the holding period on the acquired securities begins...? a.) On the date the call is exercised b.) Day after option is exercised c.) Day call option was acquired d. )Day after call option was acquired

B.) DAY AFTER CALL OPTION IS EXERCISED

Shares of stock PAID AS A DIVIDEND (stock dividend) by a corporation will... a.) Increase retained earnings and decrease common stock b.) Decrease retained earnings and increase common stock c.) Decrease retained earnings and decrease common stock d.) Increase retained earnings and increase common stock

B.) DECREASE RETAINED EARNINGS AND INCREASE COMMON STOCK

Which of the following would BEST describe the term, "Mark to the Market?" The difference between the..... a.) Market value and sale price of a security b.) Market value and contract value of a security c.) Market value and REG T margin requirement amount of a security d.) Market value and minimum maintenance amounts of a security

B.) DIFFERENCE BTWN MARKET VALUE AND CONTRACT VALUE OF A SECURITY....

When trade comparisons between two broker-dealers do NOT match, which of the following is sent? a.) Confirmation b.) DK Notice c.) Due Bill d.) Letter of Intent

B.) DK NOTICE

All of the following indexes/market indicators are CAPITALIZATION WEIGHTED, EXCEPT...? a.) NYSE Composite Index b.) Dow Jones Industrial Average c.) Dow Jones Composite Average d.) Value Line Index e.) S & P 500 f.) Wilshire Index

B.) DOW JONES INDUSTRIAL AVERAGE... IT IS **PRICE WEIGHTED**

Defined Benefit Plans benefit _____________________ the MOST? a.) Lower salaried employees near retirement b.) Higher salaried employees near retirement c.) Lower salaried employees not near retirement d.) Higher salaried employees not near retirement

B.) HIGHER SALARY; NEAR RETIREMENT

which of the following statements about REIT'S are CORRECT? I.) they are considered investment companies II.) they redeem securities at NAV III.) they must be registered with SEC before a public sale IV.) they're tax shelter investments because operating losses do not pass thru to shareholders a.) I and II b.) III and IV c.) I, III, and IV d.) I, II, III, and IV

B.) III AND IV

Choose the following that are CORRECT regarding how ACCRUED INTEREST is shown on a CUSTOMER'S CONFIRMATION I.) AI is deducted from the amount the seller receives II.) AI is deducted from the amount the buyer pays III.) AI is added to the amount that the seller receives IV.) AI is added to the amount the buyer pays a.) I and II b.) III and IV c.) I and IV d.) II and III

B.) III AND IV ONLY

EXPENSE RATIOS of a corporation would be determined from the corporations...? a.) Balance Sheet b.) Income Statement c.) Statement of Cash Flows d.) Form ADV Part II

B.) INCOME STATEMENT

If a corporation experiences any "extraordinary" items or expenses they would appear on their...? a.) Balance Sheet b.) Income Statement c.) Statement of Cash Flows d.) Form ADV Part II

B.) INCOME STATEMENT

In an IRA, which investment is NOT allowed? a.) IRAs may not invest in marginable stock b.) IRAs may not invest in term life policies c.) IRAs may not invest in investment companies d.) IRAs may not invest in closed-end investment company stock

B.) IRAs MAY NOT INVEST IN TERM LIFE POLICIES... **PROVIDES NO CASH VALUES AT RETIREMENT**

Bids from a secondary market joint account COULD NOT be placed on which of the following? a.) Block of muni bonds being offered via wire of muni broker b.) Issue being advertised for sale by muni issuer c.) Block of muni bonds put up for sale by a trust department d.) List of securities that currently appear on "bid-wanted" list of an insurance company

B.) ISSUE ADVERTISED FOR SALE BY MUNI ISSUER... THIS IS A PRIMARY OFFERING... NOT A SECONDARY

For the purpose of the "Customer Confirmation Rules" which of the following is NOT considered to be a customer? a.) A bank investment portfolio b.) An issuer selling a new issue of its securities c.) Casualty insurance company buying securities for its inventory d.) Individuals now residing in a foreign country

B.) ISSUER SELLING NEW ISSUE OF ITS SECURITIES

Which of the following person(s) is responsible for approval of a FINRA member firm's Business Continuity Plan? (BCP) a.) Only the firm's CEO can approve BCP b.) A registered principal at firm who holds position in senior mgmt. c.) Any registered principal at the firm d.) An Operations Professional (OP) at the firm

B.) IT COULD INCLUDE CEO.. BUT DOES NOT HAVE TO BE... MUST BE REGISTERED PRINCIPAL IN SENIOR MGMT

For tax purposes, what is the difference between the mutual fund w/drawl plan and variable annuity income payments? a.) w/drawl plan payments from a mutual fund are always taxed as ordinary income, but capital gains taxes apply to income payments from a variable annuity b.) w/drawl plan payments from a mutual fund are subject to taxes that can be ordinary income and/or capital gains depending on the w/drawls whereas the tax treatment from VA income payments will be taxable in part, as ordinary income c.) w/drawl plan payments from MF are not fully taxable but VA income payments are taxable in full d.) w/drawl plan payments from MF are taxable, but taxes never apply to VA income payments

B.) MF W/DRAWLS: INCOME TAX OR CAPITAL GAINS VA: TAXED AS ORDINARY INCOME

All of the following would cause delivery of a mutilated municipal security to be rejected EXCEPT... a.) Missing/damaged name of issuer b.) Missing/damaged CUSIP number c.) Missing/damaged maturity date and par value and coupon rate d.) Missing/damaged bond note or number

B.) MISSING CUSIP NUMBER

Which of the following it TRUE about CUMULATIVE VOTING? a.) its advantageous to majority stockholders b.) minority shareholders have a better chance of electing a director of their choice c.) majority shareholders always elect entire board of directors d.) a shareholder with 400 shares with 5 persons to be elected to the board could only vote 400 votes to the director of their choice

B.) MOST ADVANTAGEOUS TO MINORITY SHAREHOLDERS

If an investor is looking for "Tax-Free Interest Income," the RR should recommend: a.) Corporate Bonds b.) Municipal Bonds c.) Treasury Bonds d.) Limited Partnerships

B.) MUNICIPAL BONDS

First Wisconsin, a muni securities dealer, has been asked to open an acct for Mrs. Johnson. Mrs. Johnson's husband is employed by Virginia Securities Corp. which is also a muni securities dealer. According to MSRB Rules, First Wisconsin...? a.) Is not permitted to open an account for Mrs. Johnson b.) May open up an account for Mrs. Johnson, but must give written notice to Virginia Securities Corp. c.) May open up an acct for Mrs. Johnson, but must notify MSRB d.) May open up acct for Mrs. Johnson, so long as usual papers required for opening account are obtained

B.) MUST GIVE WRITTEN NOTICE TO VIRGINIA SECURITIES CORP

An RR has his license suspended for fraudulent activity. RR works for a FINRA member firm. The member firm... a.) Does not have to report this to FINRA b.) Must promptly report this to FINRA c.) Must report this to FINRA, provided the amount of money involved in the incident is in excess of $15,000 d.) None of the above

B.) MUST PROMPTLY REPORT THIS TO FINRA

A customer alleges wrongdoing on the part of the RR and files a complaint w/ the B/D. The B/D decides to settle w/out going to arbitration/trial and pays the client a total of $18,000. Which of the following is required in this situation? a.) Settlement must be disclosed on the RR's U-4 for 5 years b.) Settlement must be disclosed on RR's U-4 for remainder of his career in the financial industry c.) RR must meet w/ compliance dpt. quarterly for a period of 3 yrs to review his client activity d.) The record of the settlement must be made public on the SEC website

B.) ON RR's U-4 FIOR REMAINDER OF HIS CAREER

A customer's order for 350 shares of an OTC stock must be entered by the RR as: a.) 3 100-share orders and 1 50-share order b.) One order for 350 shares on one ticket c.) one 300-share order and one 50-share order d.) 2 orders for 175 orders each

B.) ONE ORDER FOR 350 SHARES ON ONE TICKET... (ORDERS WITH ODD AND ROUND LOTS ARE *EXECUTED ON ONE TICKET*)

The initial step in determining the overall conversion value of a convertible bond when converted to common stock begins with...? a.) Current market value of the bond b.) Par value of the bond c.) Current market value of the common stock d.) Price of the common stock at the time of issuance

B.) PAR VALUE OF THE BOND

Long term capital gains/losses are reported on...? a.) Part II on Form ADV b.) Part II on Form 8949 c.) Form 1099 d.) Form W-4

B.) PART II OF FORM 8949

A company wishing to raise new capital to expand its plant by selling shares of stock can accomplish by engaging in a(n)...? a.) agency issue b.) primary issue c.) secondary issue d.) refundng

B.) PRIMARY ISSUE

Which of the following is considered to be "Short Form Registration"? a.) Regulation D b.) Regulation A+ c.) Regulation U d.) Regulation t

B.) REGULATION A+

FANNIE MAE securitizes which of the following forms of debt to create CMO products a.) US Gvt treasury bonds b.) residential Mortgages c.) Commercial Mortgages d.) Student Loan Debt

B.) RESIDENTIAL MORTGAGES

When an investor sells a common stock and forgets to sign the assignment form on the back of the certificate, the firm will..? a.) Return certificate to the investor b.) Send the investor a stock power c.) Have the investor sign a limited power of attorney d.) Cancel the sale of the stock.

B.) SEND THE INVESTOR A STOCK POWER

ALL of the following fall under the definition of a registered investment company EXCEPT..? a.) a growth and income fund b.) seperately managed account c.) seperate account of a variable annuity d.) money market fund

B.) SEPARATELY MANAGED ACCOUNT

All of the following fall under the definition of a registered investment company EXCEPT? a.) A growth and income fund b.) A separately managed account c.) The separate account of a variable annuity d.) A money market fund

B.) SEPARATELY MANAGED ACCOUNT

An investor w/ high risk tolerance and objective of capital appreciation has $10,000 to invest from a lottery ticket. She calls RR for a short-term stock recommendation. Which of the following would be the investor's BEST match? a.) A utility stock b.) A special situation stock c.) An ADR d.) A growth stock

B.) SPECIAL SITUATION STOCK... UNDERVALUED STOCKS THAT RISE SHARPLY IN PRICE DUE TO COMPANY EVENTS (PATENT, APPROVAL OF DRUG, ETC...) KEY: **SHORT-TERM INVESTMENT**

What muni securities info center collects date on muni bonds such as call notices, official statements, and financial statements? a.) Moody's/Mergent Municipal and Government Manual b.) Standard and Poor's Repository c.) Bloomberg (Bloomberg services) d.) S & P Called Bond Record Book

B.) STANDARD AND POOR'S REPOSITORY

ALL of the following would be considered to be a plan fiduciary under ERISA, EXCEPT...? a.) Custodian in charge of plan assets b.) Tax preparer for the plan c.) Individual selecting the plan's IA d.) The plan's IA

B.) TAX PREPARER OF THE PLAN

For the WRITER of a SHORT STRADDLE, the breakeven point is the exercise price minus....? a.) the spread b.) the combined premium c.) the in-the-$ amount d.) the out-of-the-$ amount

B.) THE COMBINED PREMIUM

A sell order is placed by an agent at a firm w/ additional instructions for the order to be executed at the opening. The order is not received in a timely fashion by the floor broker, and cannot be executed at the opening. If this is the case, how is the order handled? a.) The order will become a market order b.) The order will be cancelled c.) Order is entered as a limit order w/ the opening price as the limit d.) Order will be executed at earliest time possible as a mkt order

B.) THE ORDER WILL BE CANCELLED

US Government are primarily traded by all of the following EXCEPT..? a.) Commercial Banks b.) Thrift Institutions c.) Federal Reserve Bank d.) Government Securities Trust Accounts

B.) THRIFT INSTITUTIONS.... TRADE MORTGAGE LOANS... NOT GOVERNMENT SECURITIES

A customer wishing to exercise their preemptive rights should send the rights to the..? a.) rights agent b.) transfer agent c.) underwriter d.) syndicate

B.) TRANSFER AGENT

What type of fund is considered the SAFEST, LEAST VOLATILE type of fund?

BALANCED FUND... INVEST IN A MIX OF BONDS AND PREFERRED AND COMMON... LEAST VOLATILITY AND APPRECIATION

What is the difference between regular points of a bond and BASIS POINTS?

BASIS POINTS EXPRESS CHANGES IN YIELDS OF A BOND

If institutions were moving their portfolios out of securities and into CASH, this would represent a _______________ outlook.

BEARISH

Why are expense ratios of INDEX FUNDS lower than many other funds?

BECAUSE THERE IS NO MANAGEMENT BY PORTFOLIO MANAGERS

When looking at the DMM'S order display book, how can you tell the BID PRICE, ASK PRICE, AND SIZE OF THE MKT?

BID PRICE: HIGHEST PRICE ON BUY SIDE OF PAGE ASK PRICE: LOWEST PRICE ON SELL SIDE SIZE OF MKT: NUMBER OF SHARES AT THE BIS AND THE ASK

For Revenue Bonds, the "Flow of Funds Provision" have two ways they can be used for the municipality. Under a "GROSS Revenue Pledge" list the sequence in which funds would be applied in the correct order... - Revenue maintenance fund & Renewal/replacement fund (depreci.) - Operation and Maintenance fund - Debt service fund and/or Sinking fund - Surplus fund or General fund of the municipality - Bond service account for principal or interest

BODRS.... 1.) BOND SERVICE ACCT 2.) OPERATION/MAINTENANCE FUND 3.) DEBT SERVICE AND/OR SINKING FUND 4.) REVENUE MAINTEN. & RENEWAL/REPLACEMENT 5.) SURPLUS/GENERAL FUND Memory hook: **Its really GROSS if someone has B.O.**

If an investor must ACCEPT A PAYMENT in a foreign currency, to hedge, the investor would...

BUY PUTS ON THE FOREIGN CURRENCY

A _______________ stop order could be used to take advantage of the opertunity presented by a break in the resistance level of a security

BUY STOP ORDER

What is the capital gain/loss REPORTED for the buyer and seller of a PUT option when the SOLD BY BUYER/HOLDER? OR BOUGHT BACK BUY SELLER?

BUYER: REPORT DIFFERENCE BTWN COST OF PUT AND AMOUNT YOU RECEIVE FOR SALE AS A GAIN OR LOSS. SELLER: AMOUNT YOU PAY - AMOUNT YOU RECEIVED FROM PREMIUM

What is the capital gain/loss REPORTED for a buyer and seller of a PUT option when the option EXPIRES?

BUYER: REPORT PREMIUM PAID AS A CAPITAL LOSS ON THE DATE IT EXPIRES SELLER: REPORT PREMIUM RECEIVED AS A CAPITAL GAIN ON THE DATE IT EXPIRES

What is the best UPSIDE protection with options... to protect an investor who is SHORT A STOCK?

BUYING A CALL / LONG CALL

What is the best DOWNSIDE protection with options... to protect an investor who LONG A STOCK?

BUYING A PUT / LONG PUT

An investor expects a rise in the market and buys 1 OEX JUNE 180 CALL @5. By june 5th the S&P500 closes at $196.80, and the investor exercises the option. What is the GROSS SETTLEMENT upon exercise? (AMERICAN-STYLE)

BUYS CALL @5 B-500 EXERCISES CALL B-180.00 VALUE OF INDX @ CLOSE S+196.80 = +16.80 16.80 * $100 = $1,680 G.S. (NEVER CONSIDER THE PREMIUMS IN THE CALCULATION)

An investor is long 1 SPX AUG 600 PUT @7, when the index is at 650. The index closes at 550 and investor decides to exercise the option. What is the CASH SETTLEMENT of these transactions? (EUROPEAN STYLE)

BUYS PUT @7 B-700 EXERCISES PUT S+600 VALUE OF INDX @CLOSE B-550 50*$100 = $5,000 CASH SETTLEMENT (DO NOT TAKE PREMIUM NTO CONSIDERATION)

For an investment company, what is the job of the UNDERWRITER/DISTRIBUTOR/SPONSOR?

BUYS SHARES FROM MUTUAL FUND AT NAV, SELLS THEM... - *TO PUBLIC W/ SALES CHARGE*; - * TO RETAIL DEALERS AT A DISCOUNT TO P.O.P.*

For a traditional IRA, and some other retirement plans, when must required minimum distributions begin? And what happens if they are NOT?

BY AGE 72... IF NOT TAKEN OUT... INSUFFICIENT REMAINING AMOUNT IS SUBJECT TO A 50% PENALTY

Under the "Taping Rules", when must member firms file a report w/ FINRA (or MSRB) w/ regard to supervision of their telemarketing activities?

BY THE *30th DAY OF EACH MONTH...* **FOLLOWING THE END OF THE CALENDAR QUARTER**

ALL of the following are features of tax-qualified retirement plan offered by an employer EXCEPT...? a.) In certain plans, employees can deduct contributions in the year it was contributed b.) In certain plans, employers can deduct contributions in the year it was contributed c.) Typically contributions made by the employer are taxed to the employee d.) Often , there are limitations on how much can be contributed by an employee in a year

C. )

Which of the following statements is generally accurate regarding securities issued by agencies of the UG Government? a.) Though these securities pay interest, only the principal is to be safe and liquid b.) They generally do not trade in the secondary market c.) Both principal and interest payments are considered to be safe d.) The US Government fully backs the issues of federal agencies

C. )

A "Control Relationship" exists between a firm and a municipality. In a discretionary acct for a customer at this B/D, Which of the following is ACCURATE when a purchase is taking place? a.) If transaction is taking place in secondary mkt, there is no need for disclosure of the control relationship b.) If B/D is acting in principal capacity, this is the only scenario where B/D needs to make a disclosure c.) In the event that such purchase will take place in customer's acct, B/D must obtain specific authorization from customer in order to execute trade d.) Under no circumstances, can B/D w/ such control relationship execute any trades in a customer's discretionary acct

C.)

A "Put writer" would be covered by...? a.) A long call b.) Another short put c.) Cash equal to the strike price multiplied by 100 shares d.) An escrow receipt of 100 shares of the underlying stock

C.)

A B/D customer has a long margin acct and asks RR whats the difference btwn excess equity and SMA. which is correct? a.) No difference btwn excess equity and SMA. Both represent amount of money available to customer to make purchases b.) EXC EQ. represents line of credit available in margin acct, SMA represents actual cash available in margin acct, that does not have to be there. c.) EXC EQ. represents actual cash available in margin acct not required to be there, SMA represents line of credit, which may or may not be backed by actual cash in the acct. d.) EXC EQ. represents actual cash available in margin acct not required to be there. SMA represents line of credit that is always available for the customer to use

C.)

A customer who redeems a variable annuity prior to scheduled annuity date would be taxed in which of the following ways? a.) Taxable gains and losses are deferred until retirement b.) There would be no tax consequence c.) Losses are disallowed and gains are taxed as ordinary income d.) The conduit theory (exempt from federal tax) applies to gains and losses

C.)

A customer who redeems a variable annuity prior to the scheduled annuity date would be taxed in which of the following ways...? a.) Taxable gains and losses are deferred until retirement b.) There would be no tax consequence c.) Losses are disallowed and gains are taxed as ordinary income d.) The conduit theory are applied to gains and losses

C.)

A person who has a Series 6 license would be allowed to say which of the following? a.) "Now that I am registered w/ FINRA, I can sell mutual funds in your state, b.) "The S6 registration allows me to sell only securities only that have been approved by the SEC c.) "As an RR, I am required to disclose all the material facts about the mutual funds I offer" d.) "My registration allows me to recommend some basic option strategies."

C.)

ALL of the following statements regarding non qualified deferred compensation plans are FALSE, EXCEPT...? a.) Any deferred comp must be held at a bank in escrow b.) Special bank acct must be opened in which the employee will deposit any taxes that are due when comp is received c.) Default on deferred comp plan could occur if the employer's business fails d.) Proper documentation must be sent to the IRS for review and approval

C.)

An RR decides to write a prospecting letter to potential clients. What is required of member firm before communication is sent? a.) If letter is sent to fewer than 25 prospective clients, no review or approval of any kind is necessary b.) Supervisor must approve letter, marking their initials and date on which letter was reviewed c.) Firm must have written procedures in effect covering supervision of prospecting letters d.) Prospecting letters require filing with FINRA 10 days prior to use

C.)

An investor goes to their RR w/ specific objectives. He wants investments that are considered safe and would also like income that is exempt from taxation. What is the BEST recommendation? a.) GO Bonds issued by a medium sized county b.) Revenue bonds issued by the state c.) Bonds issued by a municipality backed by US Treasury securities held in escrow d.) Discount notes issued by an agency of the federal government

C.)

An investor is 71 years old and has been maxing out his contributions to his Roth IRA account. He suddenly dies and his two children are named beneficiaries of the account. What is the most likely scenario regarding the handling of the IRA? a.) Because it is not a traditional IRA, there are no RMD's b.) The investor died prior to the RMD age, so beneficiaries do not have to take out RMD's. c.) The two children named beneficiaries will have to take RMD's d.) His estate will be subject to 50% penalty upon his passing

C.)

An investor purchases a corporate bond, which is not callable w/in the first 5 years. During year 1 of call protection, interest rates drop. Investor is keen on keeping the bond, but calls RR asking his advice, he should say... a.) Selling the bonds ad reinvesting funds in treasury bills b.) Buying another bond with shorter call protection c.) Keeping the bond and take no action d.) Waiting until year 2 of the call protection period to sell

C.)

Client has a cash acct at a B/D and one week ago, was sold out of a position for failure to make prompt payment. Client has now decided to buy 100 shares of ABC @50. The client will be required to... a.) Make required Reg T 50% deposit using reg-way settlement b.) Make required payment in full for the purchase using regular-way settlement c.) Make required payment in full for the purchase prior to entering order because account was frozen d.) Wait 90 days prior to entering order to buy the stock because the account would be frozen

C.)

Client puts an order in to buy 100 ABC at the market. Quote for ABC is Bid 28 Ask 30. Client's firm is a market maker in ABC, an OTC security. Order is executed at 30.20 net. Which of the following BEST describes the handling of this order? a.) Client was charged a $20 commission b.) Firm took a markup of $0.20 and the client will be charged an additional commission c.) Total markup of $20 was charged to the client and there will be no commission charged d.) The increase in the purchase price was illegal

C.)

MSRB Rules dictate that certain aspects of a trade may be modified w/ the agreement of both parties, while other aspects cannot be modified. Which of the following are NOT permitted to be modified, even if both parties of the trade agree? a.) Determination of who will pay for certain expenses (shipping) b.) Various factors which will determine whether or not delivery of securities will be constituted a "good delivery" c.) Info provided to on confirmations sent to both sides of the trade d.) Determination as to where and when securities will be delivered

C.)

Of the following statements, which is FALSE about mutual fund information services? a.) Many services require a paid subscription to access the info b.) Performance results listed by such services will not always follow SEC and FINRA guidelines c.) The performance of funds is often reliably projected by these funds d.) The info services can be a resource for investors to research funds

C.)

Payout options of a variable annuity are guaranteed by which of the following? a.) Pertinent state securities department of commission b.) SEC c.) The insurance company that issued the variable annuity d.) SIPC

C.)

Sarah is in her mid-20's and wants to open an IRA account. She has $5,000 to invest; her objective is growth and has a moderate risk tolerance. She has no previous investment experience, and no short-term cash needs. She asks RR how to invest these funds. What is the RR's correct response? a.) 80% in a handful of blue chips, 20% in corporate binds b.) 75% in diversifies stocks, 25% in municipal bonds c.) 75% in a growth fund, 25% in a balanced fund d.) 50% stocks, 25% bonds, 25% commodities

C.)

The following purchases are the only transactions in new margin accounts: - Customer A purchases 1,000 shares of ABC at $20 - Customer B purchases 500 shares of XYZ at $4.50 What is the total REG T required deposit for these transactions? a.) Customer A: $10,000; Customer B: $2,250 b.) Customer A: $5,000; Customer B: 1,125 c.) Customer A: $10,000; Customer B: $2,000 d.) Customer A: $2,000; Customer B: $2,250

C.)

The investment advisory contract of an investment company must be approved by which of the following? a.) The Transfer Agent b.) FINRA c.) Majority of shareholders or majority of board of directors d.) SEC

C.)

The term "spread" could be used to describe all of the following EXCEPT....? a.) The difference btwn bid and ask on a common stock b.) Difference btwn bin and ask on a corporate bond c.) Difference btwn investors cost basis and sale proceeds on a preferred stock d.) Difference btwn public offering price and proceeds to issuer on a new issue

C.)

What is the primary reason n investor should choose a fund family that offers objectives they desire, versus two different mutual fund companies? a.) client will always have more diversification b.) they will not have tax consequences when client switches goal c.) they will not incur a sales charge w/ the switch of goal d.) its always better to stick w/ one mutual fund company

C.)

When a muni securities dealer is acting as an AGENT for a customer, the dealer is required to..? a.) Charge the customer 5% or less on the transaction b.) Obtain bids for other broker dealers prior to executing transaction c.) Execute the order at a fair and reasonable price d.) Take a mark-up on the trade prior to charging the customer a commission

C.)

When making a recommendation to a customer on a municipal bond, all of the following are relevant to make the recommendation except? a.) Investor's tax status b.) Maturity of the bond c.) Cost of the bond or dealer's inventory d.) Rating of the bond

C.)

When muni bonds are issued as serial bonds, the offering yields by maturity is referred as the... a.) Bid Prices b.) Ask Prices c.) Scale d.) Coupon Rate

C.)

Which is NOT likely to be funded with a municipal "revenue bond" issue? a.) Golf courses b.) Toll road c.) Public school d.) Sewage system

C.)

Which of the following gifts would EXCEED the gifts and gratuities limitation established by FINRA? a.) An RR, who services his mother-in-law's account, pays for a three day cruise for her and her husband at a cost of $2,500 b.) A BOM of a firm who is a long-time friend of a principal at another firm, pays for a dinner and a concert for the two couples where dinner totals $400 and the concert totals $250 per ticket c.) In celebration of a clearing firm reaching 20 years in business, a firm who uses the clearing firm buys Rolex watches (valued over $2000) for 20 executives/principals of the clearing firm d.) To congratulate a customer on the birth of her first child, an RR buys the customer a $500 crib set

C.)

Which of the following is TRUE about a muni bond registered in the name of the owner? a.) It can be traded by delivery only w/out endorsement b.) Principal is paid to holders upon request c.) Principal is sent to owner upon maturity d.) Owner is protected from market loss

C.)

Which of the following is TRUE of an open-end investment company? a.) Transfer agent selects the fund's investment advisor b.) Shareholders of a given fund can vote to list on an exchange c.) Capital gains must be distributed on an annual basis d.) Undistributed capital gains are taxable to the investment compamny

C.)

Which of the following is correct regarding stock index options under ERISA regulations? a.) There are no restrictions regarding stock index options b.) Such transactions are not allowed c.) Transactions allowed if they conform w/ plan's overall objectives d.) Stock index options may only be made by individuals

C.)

Your customer is short 100 shares of XYZ stock. He has placed an order to buy stop at $62.50. Exciting news came out about XYZ and the price rallies sharply. Client asks you to cover his position. The order you should place is... a.) Buy 100 XYZ at the market, Cancel 100 XYZ at $62.50 GTC b.) Sell 100 XYZ at the market, Cancel 100 XYZ at $62.50 GTC c.) Buy 100 XYZ at the market, Cancel 100 XYZ at $62.50 stop d.) Sell 100 XYZ at the market, Cancel 100 XYZ at $62.50 stop

C.)

Your firm has securities available from an SEC REG D private placement of variable life policies. An RR wants to place in ad a=in a newspaper regarding the availability. REG D allows which of the following regarding this situation? a.) Advertising is limited to hedge fund sales literature only b.) General advertising is permitted, as long as accredited investors are the only ones allowed to invest. c.) Accredited investors that are pre-qualified for the purchased of the security may be invited to sales seminar by the RR d.) As long as RR focuses advertisements toward investors with a high net worth, advertising is acceptable

C.)

Mr. Dixon is an RR at the Dallas office of Zeno Securities Corp. He wants to sell limited partnership interests in the Southfork Land Development Co. He will only receive nominal compensation for selling the interests. Which of the following is TRUE under FINRA rules? a.) He can sell the Limited Partnerships without restriction b.) He can sell the interests only w/ prior written FINRA permission c.) If Zeno Corp approves him to sell the interests, the transaction must be supervised and recorded on Zeno's books and records d.) Zeno Corp must only be made aware of the transaction by Mr. Dixon and have no other supervisory responsibility

C.) .... CONSIDERED AN OUTSIDE BUSINESS ACTIVITY

A customer's margin acct is restricted. She SELLS $10,000 of securities and BUYS $7,000 the SAME DAY. Previous SMA balance was 0. REG T is 50%, retention req. is 50%. What amount of funds may be W/DRAWN? a.) No funds may be w/drawn b.) $3,000 may be withdrawn c.) $1,500 may be w/drawn d.) $7,000 may be w/drawn

C.) $1,500 MAY BE W/DRAWN

The owner of a non-qualifies variable annuity contract has invested $100,000 in the contract. The contract is now worth $115,000, and the owner selects a payout option. What is the investor's cost basis? a.) $0 b.) $15,000 c.) $100,000 d.) $115,000

C.) $100,000... THE AMOUNT THE INVESTOR PAID

An attorney who is not an active participant in a retirement earns $150,000 annually and his spouse is unemployed. For this couple, the max combined tax deduction for tax year 2021 allowed for IRA accounts according to the IRS rules is? a.) $13,000 b.) $6,000 c.) $12,000 d.) $6,500

C.) $12,000

In 2021, an attorney who is not an active participant in a retirement plan earns $110,000 annually, and his spouse is unemployed. The maximum tax deduction allowed under the IRS tax rules for IRAs for this couple is...? a.) $6,000 b.) $2,000 c.) $12,000 d.) $10,000

C.) $12,000

A customer buys $30,000 of ABC in a margin acct. He pays for securities in full and there is no DB. REG T is 50%. What is SMA? a.) 0 b.) $10,000 c.) $15,000 d.) $30,000

C.) $15,000.... (CMV * REG T = 30000 * .5 = $15,000)

ABC raised its cash dividend from 18 cents to 19 1/2 cents and also declared a 5% sock dividend. The record date of the CASH dividend is Thursday May 20, and the record date of the stock dividend was Wednesday May 12. Investor buys 1,000 shares of ABC on Wednesday May 12. The customer will receive a cash dividend of...? a.) $180.00 b.) $188.00 c.) $195.00 d.) $204.75

C.) $195.00

A variable annuity contract holder originally invested $20,000 in the contract. Accumulation unit value was $10 per unit at the time of investment, but is now worth $15 per unit. What is the present dollar value of the contract? a.) $20,000 b.) $25,000 c.) $30,000 d.) $35,000

C.) $30,000... 2,000 UNITS * $15 PER UNIT

If a client buys 100 shares of ABC common stock at $60, and simultaneously buys 1 ABC JUL 60 PUT @ 4, what would the investors breakeven be? a.) $60 per share b.) $56 per share c.) $64 per share d.) $4 per share

C.) $64 PER SHARE... ((B-$6000 + B-$400) / 100 = $64)

A trader is short 1 ABC Jan 65 call and short 1 ABC Jan 65 put. At what price at expiration would the trader realize the most profit? a.) $55 b.) $60 c.) $65 d.) $70

C.) $65... THIS IS A SHORT STRADDLE... INVESTOR MAKES MONEY IF STOCK PRICE DOES NOT MOVE

In appraising the value of specific muni securities, which is the MOST important factor? a.) The 30-day visible supply b.) Projection on future interest fluctuations c.) Current market prices on similar securities d.) Current inventory of these bonds by appraiser

C.) ****CURRENT MARKET VALUE OF SIMILAR SECURITIES****

If securities are not delivered in designated time period for settlement in relation to sale, which of the following is TRUE? a.) A sell-out must occur b.) Member firm where sale originated will be suspended c.) A buy-in must occur d.) member firm where sale originated must cancel trade and refund the other party

C.) **BUY-IN** MUST OCCUR

An investor purchases 10 XYZ OCT 60 calls for 6. XYZ declares a 50% stock dividend. On the ex-dividend date, the investor would be long which of the following a.) 15 XYZ OCT 80 calls covering 100 shares each b.) 15 XYZ OCT 60 calls covering 100 shares each c.) 10 XYZ OCT 40 calls covering 150 shares each d.) 10 XYZ OCT 30 calls covering 200 shares each

C.) 10 XYZ OCT 40 CALLS COVERING 150 SHARES EACH... (100 + (100 * .5) = 150)... ($60 * 1,000 / 150 = $40)

John is a big fan of ABC Co. and is constantly buying more shares to the point where he must file reports with the SEC regarding his ownership. This means he considered an "Insider" and now owns more than...? a.) 3% of the outstanding common stock of ABC b.) 8% of the outstanding common stock of ABC c.) 10% of the outstanding common stock of ABC d.) 15% of the outstanding common stock of ABC

C.) 10% OF THE OUTSTANDING COMMON SHARES OF ABC

ABC Co. wants to issue $20,000,000 of debentures, each convertible into 20 shares of common stock. How many common shares are issued of all the debentures are converted? a.) 100,000 b.) 200,000 c.) 400,000 d.) 600,000

C.) 400,000 SHARES... ($20,000,000 / $1,000(PAR) = 20,000 BONDS...) (20,000 BONDS * 20 = 400,000 SHARES)

An investor will open a margin account and deposit $32,000 cash. Assuming REG T is 50%, what dollar amount of securities may the investor purchase? a.) $32,000 b.) $16,000 c.) $64,000 d.) $50,000

C.) 64,000.... 32,000 * 2

Assume an investor buys 1 ABC May 60 call @ 6, and sells 1ABC May 70 call @ 3, when ABC is selling at $63 per share. At which price will BOTH options premiums move dollar for dollar? a.) 60 b.) 66 c.) 70 d.) 73

C.) 70..... PREMIUMS ON OPTIONS MOVE DOLLER FOR DOLLAR WHEN *BUILDING INTRINSIC VALUE* 70 IS WHEN IT WILL START BUILDING INTRINSIC VALUE

W/ the S&P 500 index at 500, a trader writes 1 SPX Jul 490 put @ 9 and buys one SPX Jul 510 call. Assuming no early assignment of either position, the position will become profitable when the index is...? a.) Below 490 b.) Above 500 c.) Above 510 d.) Above 490

C.) ABOVE 510

ALL of the following are methods of depreciation EXCEPT...? a.) Double Declining Balance b.) Straight Line c.) Amortization d.) Modified Accelerated Cost Recovery System (MACRS)

C.) AMORTIZATION... AMORTIZATION **REDUCES COST BASIS OF BONDS PURCHASED AT A PREMIUM** AND IS *NOT CONSIERED TO BE DEPRECIATED *

A new issue of muni securities is coming to market. The Bond Counsel of this issue will normally review all of the following EXCEPT...? a.) Validity of the bonds from a constitutional approach b.) Study performed to determine feasibility of the bonds c.) Approval of the issue by the legislature d.) Statutory requirements and nature thereof

C.) APPROVAL OF THE ISSUE BY LEGISLATURE

In the credit analysis of two muni issuers, a comparison of ratio of overall debt to assessed value may not be significant because....? a.) Population may be different b.) Overlapping debt is not included c.) The basis of assessment may be different d.) Tax delinquencies are not considered

C.) BASIS OF ASSESSMENT MAY BE DIFFERENT

A corporate bond is purchased at a discount. Which of the following would BEST state its future rate of return? a.) Current yield b.) Coupon rate c.) Basis or Yield to maturity d.) Stated discount

C.) BASIS OR YTM

An RR entered an order for a client using the wrong acct number, and the order was executed. When are you, the BOM required to approved the adjustment or cancellation a.) before the trade settles b.) before the end of the trading day c.) before the correction is actually made d.) before the confirmation is sent

C.) BEFORE THE CORRECTION IS ACTUALLY MADE

RR in your office accidentally entered an order for a client using the wrong acct number and the order was executed. When are you, the branch manager, required to approve the adjustment/cancellation? a.) Before the trade settles b.) Before the end of the trading day c.) Before the correction is actually made d.) Before the confirmation is sent

C.) BEFORE THE CORRECTION IS ACTUALLY MADE...

Which of the following is NOT needed to open a new customer account? a.) Name and address of employer b.) Investment objectives c.) Beneficiary for the account d.) SSN or tax ID

C.) BENEFICIARY

What online platform can you find detailed lists of securities including new muni bonds coming to market? a.) Moody's/Mergent Municipal and Government Manual b.) Standard and Poor's Repository c.) Bloomberg (Bloomberg services) d.) S & P Called Bond Record Book

C.) BLOOMBERG

Which of the following authorize the repurchase of a corporation's stock in the secondary market? a.) Common stockholders b.) Preferred stockholders c.) Board of directors d.) Common and preferred stockholders

C.) BOARD OF DIRECTORS

A customer holds the following bonds: - 9%, 25-year municipal bond callable in 8 years - 9%, 25-year municipal bond callable in 12 years Both bonds were purchased by the customer at 7.5% yield. If the yield moves downward towards 7%, which of the following is TRUE about the pricing of these bonds? a.) Changes in yields will have no effect on the price of these bonds b.) A reduction in yield, will cause the 8-yr callable to appreciate more in price c.) A reduction in yield, will cause the 12-yr callable to appreciate more in price d.) Any change in bond yields will have identical effects on both bonds

C.) BONDS W LONGER MATURITIES REACT THE GREATEST

A mutual fund investor receives his dividends in cash, but reinvests his capital gains distributions in additional shares. How is this taxed? a.) Only the dividends are taxable b.) Only the capital gains are taxable c.) Both the dividends and capital gains are taxable d.) Both the dividends and capital gains are tax-exempt

C.) BOTH ARE TAXABLE

Once RR has completed the New Account Report Form, WHO must the form be signed by? a.) RR b.) Customer c.) Branch manager / Principal

C.) BRANCH MANAGER / PRINCIPAL

Of the following orders, which would be used to obtain a specific price of execution or better? a.) Buy stops and sell stops b.) Buy limits and sell stops c.) Buy limits and sell limits d.) Buy stops and sell limits

C.) BUY LIMITS AND SELL LIMITS

An RR comes to an operations professional regarding issue w/ an acct. Proper notification of death has been given to RR, but RR sees that client has several open orders to buy and sell that remain outstanding. The OP should tell the RR...? a.) Cancel all open orders to buy, but not open orders to sell b.) Cancel all open orders to sell, but not the open orders to buy c.) Cancel all open orders, regardless of buy or sell d.) Take no action

C.) CANCEL ALL OPEN BUY AND SELL ORDERS

If a corporation refinanced by calling in a 7% preferred stock w/ money obtained from the issuance of a 7% bond issue, the immediate effect would.... a.) Cause EPS on preferred stock to increase b.) Cause EPS on preferred stock to decrease c.) Cause EPS on common stock to increase d.) Cause EPS on common stock to decrease

C.) CAUSE EPS ON *COMMON STOCK* TO INCREASE

An investor is SHORT 10 XYZ DEC 25 PUTS and wants to offset this position. What type of order must she place? a.) Closing Sale b.) Opening Sale c.) Closing Purchase d.) Opening Purchase

C.) CLOSING PURCHASE

ALL of the following would be considered BROAD BASED indexes, EXCEPT...? a.) S & P 100 Index b.) Major Market Index c.) Computer Technology Index d.) S & P 500 Index

C.) COMPUTER TECHNOLOGY INDEX... NOT BROAD BASED... ONLY WITHIN ONE INDUSTRY

Investment bankers are B/D's who provide all of the following services EXCEPT...? a.) Handles the distributions of new issues b.) Forms syndicates and selling groups c.) Conduct market making d.) Help issuers prepare registration statements for new issues

C.) CONDUCT MARKET MAKING

A broker should disclose ALL of the following of a Section 529 Pre-Paid Tuition Plan EXCEPT..? a.) These plans do not have investment risk b.) These plans provide a hedge against increases in tuition costs c.) Contributions are tax deductible for income tax purposes d.) These plans usually charge enrollment and administrative fees

C.) CONTRIBUTIONS ARE NOT TAX DEDUCTIBLE

A separate account in a variable annuity has earned higher returns than the assumed interest rate (AIR) on the policy. What effect does this have on the account? a.) AIR will be reset b.) Cash value of the policy will fall c.) Death benefit will increase d.) Policy holder may elect to suspend payments for 6 months

C.) DEATH BENEFIT WILL INCREASE

Subscription Warrants are usually issued as a part of...? a.) A common stock offering to obtain a higher par value b.) A preferred stock offering to obtain a lower par value c.) A debenture offering to obtain a lower interest rate d.) A convertible bond to obtain a higher interest rate

C.) DEBENTURE OFFERING TO OBTAIN A LOWER INTEREST RATE

If the market declines significantly, a portfolio with a beta of .7 will...? a.) Decline more than the market b.) Decline the same percentage as the market decline c.) Decline less than the market d.) Move opposite to the market

C.) DECLINE LESS THAN THE MARKET

When an RR is trying to determine of a stock is a growth stock, utility, or blue chip stock, they would most likely look at the... a.) Earnings per share b.) Current ratio c.) Dividend payout ratio d.) Advance/decline ratio

C.) DIVIDENT PAYOUT RATIO

In a NO LOAD OPEN-END FUND the bid price would be _________ than/to the ask price a.) Lower b.) Higher c.) Equal d.) in relation

C.) EQUAL

George is an RR and gets a call from his client who wants diversification but does not want to invest in mutual funds. What is the best reccomendation? a.) TIP's b.) floating rate bond fund c.) ETF'S c.) government bond fund

C.) ETF'S

When an analyst is reviewing the credit worthiness of a muni GO bond, Which of the statements below would be considered to be NEGATIVE? a.) Retirement village with declining debt b.) Per capita debt which is stable in an upper income community c.) Stable debt in a city with a declining population d.) Increasing debt in a young city with a high growth rate

C.) FEWER TAXPAYERS MEANS **LESS INCOME TO CITY** THEREFORE **POTENTIAL FOR DEFAULT**

An investor purchasing an interest in a limited partnership should consider ALL of the following EXCEPT..? a.) Possible loss of principal since certain programs are high risk and possible conflicts of interest between general and limited partners b.) General partner's management ability c.) Financial condition of other limited partners d.) Possible changes in the federal tax code e.) Projected rate of return

C.) FINANCIAL CONDITION OF OTHER LIMITED PARTNERS **WOULD NOT BE A CONSIDERATION** IN THE EVALUATION OF DPPs

Which type of underwriting in investment banking subjects the underwriter to the greatest amount of risk? a.) Best efforts underwriting agreement b.) All or none underwriting agreement c.) Firm commitment underwriting agreement d.) Standby underwriting agreement

C.) FIRM COMMITMENT

Which underwriting agreement subjects the underwriter to the LARGEST amount of risk? a.) Best Efforts Underwriting Agreement b.) All or None Underwriting Agreement c.) Firm Commitment Underwriting Agreement d.) Standby Underwriting Agreement

C.) FIRM COMMITMENT.... UNDERWRITERS ** ACTUALLY PURCHASE SECURITIES FROM ISSUER AND SELL THEM TO PUBLIC...** IF THEY CANNOT SELL SECURITIES *THEY ARE STUCK W/ THEM*

REG T requires that an option purchased in a margin account be paid for... a.) By trade date b.) First business day following trade date c.) Fourth business day following trade date d.) Seventh business day following trade date

C.) FOURTH BUSINESS DAY FOLLOWING TRADE DATE... **REG T IS ALWAYS 4 BUSINESS DAYS**

REG T governs the extension of credit to all of the following EXCEPT? a.) Listed common stock b.) NASDAQ national mkt system OTC securities c.) Government securities d.) Listed corporate bonds

C.) GOVERNMENT SECURITIES

The ratio of net overall debt to the estimated real estate valuation would be important in analyzing which of the following municipal securities? a.) Public Housing Bonds (PHAs) b.) Water Revenue Bonds c.) General Obligation Bonds d.) Tax Anticipation Notes

C.) GOs

If an investor is looking for "Capital Appreciation," he should invest in: a.) Blue-Chip Common Stock b.) Value Common Stock c.) Growth Common Stock d.) Foreign Common Stock

C.) GROWTH COMMON STOCK

What is covered of the federal government's guarantee of pass-through GNMA securities? a.) Guarantee applies only to timely payment of interest of securities b.) Guarantee applies to timely repayment of principal of securities c.) Guarantee applies to timely payment of interest and timely repayment of principal of securities d.) Government does not guarantee GNMA Securities

C.) GUARANTEE APPLIES TO BOTH TIMELY PAYMENT OF INTEREST, AND TIMELY REPAYMENT OF PRINCIPAL

Which of the following characteristics of WARRANTS are CORRECT? a.) are not allowed to be detached from original security it was issued with b.) most frequently issued with equity securities c.) typically have no intrinsic value at issuance d.) exercise does not cause dilution

C.) HAVE NO INTRINSIC VALUE AT ISSUANCE.... EXERCISE PRICE OF WARRANT IS HIGHER THAN CURRENT MKT PRICE

An owner of common shares can usually transfer ownership by doing any of the following EXCEPT..? a.) Assigning them b.) Selling them c.) Hypothecating them d.) Gifting them

C.) HYPOTHECATING THEM

ALL of the following are TRUE about IRA contributions EXCEPT...? a.) Although a tax return is filed prior to Apr 15th, an IRA contribution may be delayed to Apr 15th b.) Contributions may be made any time btwn Jan 1st and Apr 15th of the following year c.) If extension for tax return is obtained, IRA contribution may be made until date tax return is filed d.) Persons not participating in any other type of retirement plans may deduct their IRA contributions up to certain limits

C.) IF EXTENSION IS FILED FOR TAX RETURN... CONTRIBUTION MAY STILL NOT BE MADE LATER THAN APR 15th

A customer asks a B/D to send statements of financial condition. The B/D must provide this information...? a.) w/in 24 hours b.) w/in 2 business days c.) immediately d.) w/in 30 calendar days

C.) IMMEDIATELY

The effect of the FIFO accounting method on inventory valuations during a period with sharply rising prices would... a.) Reduce profits b.) Reduce tax liability c.) Increase the value of the inventory account d.) Increase the cost of goods sold

C.) INCREASE THE VALUE OF INVENTORY ACCOUNT... INCREASES THE PROFITS OF THE FIRM, BUT ALSO TAX LIABILITY

All of the following are factors considered when evaluating muni revenue bond credit risks EXCEPT..? a.) Quality of management b.) Competing facilities c.) Interest rate movements d.) Coverage ratios

C.) INTEREST RATE MOVEMENTS

what features tend to affect UTILITY STOCKS the most? a.) earnings/share EPS b.) book value of company c.) interest rates d) CPI

C.) INTEREST RATES

Operating expenses from mutual funds are paid from which of the following? a.) Gross profits earned in the most current quarter b.) Capital gains and distributions c.) Investment income or dividends d.) Percentage of the net assets of the fund

C.) INVESTMENT INCOME OR DIVIDENDS

A mutual fund sells a security at a profit which it has held in its portfolio for more than a year. It distributes this profit to investors. What would be the tax treatment of this distribution to an investor who has owned the mutual fund shares for three months? a.) Ordinary income b.) Short-term capital gain c.) Long-term capital gain d.) Tax-exempt income

C.) LONG TERM CAPITAL GAIN... DOESNT MATTER HOW LONG INVESTOR HAS HELD MUTUAL FUND SHARES

The responsibility for exercising due diligence relating to statements made in a Limited Partnership's prospectus is borne by the...? a.) National Association of Securities Dealers b.) RR selling the program c.) Managing Underwriter d.) SEC

C.) MANAGING UNDERWRITER

Which of the following would be considered "insider" information when such information is related to a publicly traded company under SEC rules? a.) CEO makes comments at a luncheon that are then released to the public b.) Proxy information distributed to the company's shareholders c.) Material information in an unreleased press report d.) An offering circular distributed to potential investors

C.) MATERIAL INFO IN AN UNRELEASED PRESS REPORT

A client lists their primary investment objective as liquidity. RR believes that investments in muni securities is best suited for this client. W/ that in mind, which would be the MOST attractive feature in relation to the RR's recommendation? a.) Mkt price of a particular muni security well exceeds par value b.) Mkt price of muni security is well below par value c.) Security has a maturity that takes place w/in the next year d.) Security has a call premium that exceeds call price

C.) MATURITY WITHIN THE NEXT YEAR

Which of the following investments is best s=described as a debt security that matures in one year or less that is considered to be close to riskless? a.) Zero Coupon Treasury Securities b.) CMO's c.) Money Market Instruments d.) Notes issued by the US Treasury

C.) MONEY MARKET INSTRUMENTS... CMO's DO NOT MATURE IN ONE YEAR OR LESS (2-4 YRS EACH TRANCHE)

Interest from which of the following securities is EXEMPT from FEDERAL income tax? a.) Treasury Bills b.) US Government agency bonds c.) Municipal bonds d.) Commercial paper

C.) MUNICIPAL BONDS

Which of the following is MOST important to the issuer when considering bids on municipal securities? a.) Coupon Rate b.) Par Value c.) Net Interest Cost d.) Reoffering Scale

C.) NET INTEREST COST (NIC)

Of the following options transactions, which MUST be labeled as "Uncovered" or "Covered" on the ticket? a.) Closing purchase b.) Opening purchase c.) Opening Sale d.) Closing Sale

C.) OPENING SALE

A customer has entered an open order to buy 200 shares of ABC. The order has not been executed when ABC announces a reverse stock split. What will happen to customer's order? a.) The order will be reduced to 100 shares b.) The order will be increased to 400 shares c.) The order will be automatically cancelled d.) Order will remain as originally entered

C.) ORDER WILL BE AUTOMATICALLY CANCELLED... **REVERSE STOCK SPLITS CALL FOR CANCELATION OF OPEN ORDERS**

A customer gives an RR and order to "BUY 100 ABC AT 35 STOP" Which of the following is true? a.) The order will only be executed at $35 per share. b.) Order will be triggered by a transaction below $35. c.) The order will be triggered by a transaction at $35 or above. d.) The order will be executed at $35 or below

C.) ORDER WILL BE TRIGGERED BY TRANSACTION AT OR BELOW $35.

On the ex-date for a 20% stock dividend, a customer with a short position of 300 shares of common stock would? a.) receive an additional 60 shares b.) not be affected by the distribution c.) owe an additional 60 shares d.) account would be debited the cash vale of 60 shares

C.) OWE AN ADDITIONAL 60 SHARES

Which of the following BEST describes the money received by a corporation during the issue of equity securities that exceeds the face value of securities being sold? a.) This would refer to the capital that the firm must keep on hand b.) The capital the corporation must use in relation to the intended use of funds specified with the scale of the new issue c.) This would refer to the paid-in capital of the corporation d.) Returns earned on funds invested in various securities in the company's portfolio

C.) PAID-IN CAPITAL OF THE CORPORATION... AKA "SURPLUS"

Without giving notice to his member firm, an RR is allowed to receive compensation from which of the following? a.) Making a presentation about kayaking, as he is an avid kayaker b.) RR speaks about investing in his neighborhood investment club c.) Passive investment income d.) Part-time job at local community college, unrelated to the financial industry

C.) PASSIVE INVESTMENT INCOME... **NOT CONSIDERED EMPLOYMENT** THEREFORE NO NOICE MUST BE GIVEN TO MEMBER FIRM

Several years ago prior to retirement, Mr. Smith purchased 500 ABC shares at $45 per share. The priced increased to $60 and then RR learned that Mr. Smith had died. Via his will, the shares were given to his daughter, Jane. Several months later, Jane sold the shares at $65. For taxation purposes what is Jane's cost basis on these shares? a.) None, since she did not pay for these shares b.) The same as her father's $45 per share c.) The price at the date of death of father, $60 per share d.) Price at the time of sale, $65

C.) PRICE AT THE DATE OF DEATH OF FATHER ($60)

A company has already "gone public" w/ an IPO, but now had a need for additional capital and decides to offer additional shares to public. For the purposes of these new issues this is considered a....? a.) Violation of SEC regulations b.) Private marketing offering c.) Primary market offering d.) Secondary market offering

C.) PRIMARY MARKET OFFERING... ANY TIME NEW SHARES BECOME PUBLIC ITS CONSIDERES A PRIMARY DISTRIBUTION

Which of the following must be delivered to clients when the account is opened, and a minimum of once per year thereafter? a.) Account statements b.) Customer confirmations c.) Privacy notes under REG S-P d.) Discretionary authorization

C.) PRIVACY NOTES UNDER REG S-P

Which of the following is TRUE regarding Federal Intermediate Credit Banks? a.) They are a direct obligation of the US Government b.) They provide loans to Veterans Administration c.) They provide loans to cover farm operating expenses d.) They provide home mortgage loans

C.) PROVIDE LOANS TO COVER FARM OPERATING EXPENSES... PART OF A FEDERAL FARM DISTRICT

A long-term, speculative-grade municipal is pre-refunded. Which of the following would generally be correct? a.) Market price of the bond will decline b.) Interest is prepaid to the bond owners c.) The bond's quality generally improves d.) The bonds are no longer eligible for purchase by banks and fiduciaries

C.) QUALITY GENERALLY IMPROVES... MONEY OF NEW ISSUE IS INVESTED IN GOVERNMENT SECURITIES

If there has been NO TRADING ACTIVITY in a customer account, customer statements of the customer's stock and bond accounts showing security and money positions must be sent at least...? a.) Annually b.) Semi-annually c.) Quarterly d.) Monthly

C.) QUARTERLY... DOESNT MATTER IF THERE IS NO TRADING ACTIVITY

REG T requires that an OPTION purchased in a margin acct be paid for... a.) by the trade date b.) By the first business date following trade date c.) By the fourth business date following trade date d.) By the seventh business date following trade date

C.) REG T IS 4TH BUSINESS DATE FOLLOWING TRADE DATE

An RR has a customer whose primary objectives are investment income and capital appreciation. Which of the following options would BEST meet the customer's objectives? a.) Growth Stock b.) Warrant c.) REIT d.) Utility Stock

C.) REIT

Securities issued under the provisions of REG D are...? a.) Registered and can be freely traded b.) Held for 30 days prior to sale c.) Restricted for 6 months d.) Sold only to residents of state of issue

C.) RESTRICTED FOR 6 MONTHS.... (D would be a choice for SEC Rule 147 (intrastate))

An investor who enters an EXPLORATORY oil and gas program could be BEST describes as...? a.) Liquidity oriented b.) Income oriented c.) Risk oriented d.) Conservative

C.) RISK ORIENTED

Under FINRA rules, who must review the acceptance of new discretionary accounts? a.) ROP who approved the account b.) RR who opened the account c.) ROP other than the ROP who approved the account d.) RR other than the RR who opened the account

C.) ROP OTHER THAN THE ROP WHO APPROVED THE ACCOUNT

ALL of the following people can trade on the floor of an exchange EXCEPT...? a.) $2 Broker b.) Specialist c.) RR d.) Competitive Trader

C.) RR's

Investor wants to invest $75,000 in four different growth funds. Each managed by a different IA firm. Which is MOST important for the investor to understand? a.) Automatic reinvestment plans available from these funds b.) Conversion privilege c.) Sales charge breakpoints d.) Withdrawal plans offered

C.) SALES CHARGE BREAKPOINTS

A single taxpayer w/ an existing IRA elects to participate in his comapny's newly-formed pension plan. His AGI is $200,000. Which of the following is TRUE about this employee's situation? a.) No contributions of any kind may be made to an IRA b.) Contributions can continue as before on a tax-deductible basis c.) After-tax contributions can be made to an IRA by the taxpayer d.) IRA must be closed and entire amount w/drawn immediately

C.) SINCE HE IS PARTICIPATING IN A WORK PENSION PLAN... ONLY AFTER-TAX CONTRIBUTIONS MAY BE MADE TO AN IRA UP TO $6,000

A muni bond has a provision for redeeming a certain number of bonds at par in 10 semi-annual instalments. This type of call feature is best described as... a.) Instalment Call b.) Option Call c.) Sinking Call d.) Catastrophic Call

C.) SINKING CALL

In which of the following scenarios would the investor have a tax liability associated with capital gains? a.) Investor purchases a stock and later receives a dividend from the issuer b.) Investor purchases a stock and late gifts the stock to their child after it depreciates in value c.) An investor sells a stock that was purchased for significantly less than the sale price d.) An investor that has invested in a limited partnership receives a distribution of cash

C.) SOLD SECURITY FOR A HIGHER PRICE THAN WHAT HE BOUGHT IT FOR

ALL the following are DEFENSIVE EXCEPT a.) tobacco company b.) food chain c.) steel company d.) natural gas company

C.) STEEL COMPANY

Monthly interest paid by CMOs is... a.) Tax-free at all levels b.) Taxable only at the state level c.) Taxable at the federal, state, and local levels d.) Taxable only at the federal level

C.) TAXABLE AT FEDERAL, STATE AND LOCAL LEVELS

A new client is considering opening a cash account at a B/D. Which of the following statements is NOT accurate regarding a cash account? a.) Purchase of common stock requires the customer pay in full b.) Purchase of bonds requires the customer pay in full c.) The customer must sign a New Account Report Form d.) Payment for purchases is required using regular-way settlement

C.) THE ONLY PERSON WHO IS REQUIRED TO SIGN A NEW ACCT REPORT FORM IS THE **BOM/PRINCIPAL**

Mrs. Smythe is in the 30% income tax bracket. She asks her RR whether muni bonds yielding 6% are better than corporate bonds yielding 7.25% w/ the pov of tax advantage only. The RR should tell her that... a.) Both will yield the same net income b.) Cannot be determined w/ the current info provided c.) The muni bond will have a higher effective yield than the corporate bond. d.) The corporate bond will have a higher effective yield than the muni bond

C.) TO BE EQUIVLANT TO 6% W/ A MUNI, THE CORPORATE YIELD WOULD HAVE TO BE 9.67%

A customer gives an RR an order to "BUY 100 ABC AT 35 STOP" Which of the following is TRUE ? a.) Order will be executed at $35 per share b.) Order will be triggered by transaction below $35 c.) Order will be triggered by transaction at or above $35 d.) Order will only be executed at $35 per share or below

C.) TRIGGERED BY TRANSACTION AT OR ABOVE $35... BUY STOPS ARE ALWAYS ENTERES *ABOVE CURRENT MKT PRICE...* **ONCE IT REACHES $35, IT WILL BECOME MKT ORDER** WHEN ABC TRADES AT OR ABOVE $35

What is it called when you buy a call/put and sell a call/put at the same time?

CALL / PUT SPREAD

If an RR discovers that a customer has filed for bankruptcy, what should the RR do?

CANCELL ALL OPEN ORDERS TO BUY AND SELL

What three forms of growth on a portfolio that is considered "Portfolio Income"

CAPITAL GAINS, DIVIDENDS, AND INTEREST

An investor buys one call option and pays a premium of $5.50. For tax purposes, that premium paid will be treated as...

CAPITAL LOSS

In terms of EPS (Earnings Per Share), what is the effect of DILUTION when issuing new shares?

CAUSES A **DECREASE IN EPS** WHEN THERES NEW ISSUES OF STOCK, EXERCISE OF OPTIONS, WARRANTS OR CONVERTIBLE SECURITIES

Customer is short 100 shares of WLC, and places an open buy stop at $94.25. After, exciting news comes out about WLC, and stock price rallies. Customer tells you to cover the short position... the order placed should be...?

CFO ORDER (CANCEL FORMER ORDER)... ***BUY AND CANCEL BUY STOP, ON THE SAME ORDER TICKET***... BUY 100 WLC MARKET CANCEL-BUY 100 WLC 94.25 STOP

What is PORTFOLIO REBALANCING?

CHANGING PORTFOLIO MAKEUP DEPENDING ON INCREASING AGE AND STRATEGY CHANGES. (ling time horizon: 90% stocks, 10% bonds; shorter time horizon, less equities, more debt)

Describe CLASS A SHARES and who would benefit from it.

CHARGE AN *UPFRONT SALES CHARGE*, CANNOT EXCEED 8.5%, LOW 12B-1 FEES... BENEFIT LONG-TERM INVESTORS THE MOST, AND INVESTORS BUYING LARGE AMOUNTS (BREAKPOINT DISCOUNTS)

Do CLOSED-END investment companies charge a sales load? Or commissions?

CHARGE COMMISSIONS

In a variable annuity contract, what is an "Expense Risk Charge"

CHARGE ISSUER CAN MAKE *UARANTEEING MAXIMUM LEVEL OF EXPENSES IT WILL INCUR ADMINISTERING CONTRACT

Which debt security has the higher amount of yield? US Treasury Security or a CMO?

CMO'S HAVE HIGHER YIELDS...THEY CARRY SUBSTANTIALLY MORE RISK.. SO THERE IS MORE YIELD

WHICH STATEMENT IS TRUE: - CMO'S are listed on exchanges and charged with commissions - CMO'S trade OTC with markups and markdowns

CMO'S TRADE OTC WITH MARKUPS AND MARKDOWNS

What is a STOP LIMIT order?

COMBO OF A STOP AND LIMIT ORDER... *FIRST ENTERED AS A STOP*, *AND THEN BECOMES LIMIT ORDER* INSTEAD OF MKT ORDER.

In investment banking, what is an ISSUER? And what do they do?

COMPANIES THAT SELL SECURITIES TO GENERAL PUBLIC TO FINANCE OPERATIONS.. REGULATED BY SEC AND MUST REPORT FINANCIAL CONDITIONS, DEVELOPMENTS, AND ACTVITIES

What is SEC RULE 144?

CONDITIONS WHERE *UNREGISTERED (RESTRICTED)* SECURITIES CAN BE RESOLD TOO PUBLIC ** W/O FILING REGISTRATION STATEMENT W/ SEC**

COMPLETE THE SENTENCE: LISTED stock trades are reported to the ______________ tape at the _____________ price without the ____________

CONSOLIDATED; EXECUTION; COMMISSION

WHEN should you decide to convert a convertible bond or preferred stock, if you wished to convert it?

CONVERT: when MARKET PRICE is ABOVE the PARITY PRICE... DO NOT CONVERT: when MKT PRICE is AT OR BELOW the PARITY PRICE

How do you COVER a SHORT CALL? How do you COVER a SHORT PUT

COVER A SHORT CALL: WITH UNDERLYING STOCK COVER A SHORT PUT: WITH MONEY...

MONEY MKT FUNDS _________ dividends to accounts ________ and pay dividends _________ .

CREDIT; **DAILY**; ****MONTHLY****

What is the formula for "Net Working Capital?"

CURRENT ASSETS - CURRENT LIABILITIES - USED TO MEET EMERGENCIES

What is the "MARKET CAPITALIZATION" of a company

CURRENT MKT PRICE OF ITS SHARES *NUMBER OF OUTSTADING SHARES

What is the CURRENT YIELD formula for a bond? and what is the current yield of a 9% bond purchased at 90?

CURRENT YIELD = ANNUAL INTEREST / MARKET PRICE CURRENT YIELD = 9% / 90 = 10%... THIS WOULD INDICATE THAT THIS BOND WAS BOUGHT AT A DISCOUNT BECAUSE... CURRENT YIELD > COUPON RATE

Which of the following documents is NOT needed before closing the account of a deceased customer? a.) Copy of the death certificate b.) Affidavit of domicile c.) Inheritance tax waiver d.) Full power of attorney

D. )FULL POWER OF ATTORNEY

A remarketing agent is a municipal bond dealer responsible for all of the following regarding "Variable Rate Demand Bond" EXCEPT..? a.) Resets the interest rate b.) Uses its best efforts to sell tendered bonds c.) Can rely on a letter of credit or standby bond purchase agreement for liquidity d.) Remarkets the bond back to the issuer

D.)

A securities analyst or B/D issuing a research report on a certain company may not provide any of the following info to the company prior to distribution of the reports EXCEPT...? a.) The stock price target b.) Rating and recommendation c.) Research summary d.) Factual information for verification

D.)

ALL of the following are REQUIREMENTS to become an RR of a member firm EXCEPT: a.) Pass a qualification exam b.) Be covered under a fidelity bond c.) Agree in writing to allow a background check d.) Agree in writing to settle all disputes about securities by lawsuit in the federal courts

D.)

All of the following are TRUE statements about "Variable Rate Demand Municipal Bonds" EXCEPT...? a.) They are long-term bonds b.) They pay short-term rates that are reset periodically c.) Bondholders may tender their bonds to the remarketing agent if they are dissatisfied with an interest rate reset d.) The only risk associated w/ these bonds is interest rate risk

D.)

All of the following are considered to be ADVANTAGES of US Treasury Bonds EXCEPT..? a.) Availability of a wide range of maturities b.) An active secondary market c.) High Loan Value d.) Interest income that is exempt from federal, state, and local taxes

D.)

All of the following are correct about accrued interest on muni bonds EXCEPT that it is...? a.) Added to the purchase price b.) Computed from last interest payment date thru the date prior to the settlement date c.) Always less than the full coupon payment d.) Used in determining the offering price of a municipal bond

D.)

All of the following influence muni credit rating agencies when analyzing revenue bond issues EXCEPT..? a.) Facility's management and financial history b.) Provisions of the indenture, including protective covenants securing the bonds c.) Likelihood of attaining adequate revenues and estimated future debt service coverage ratio d.) Supply of the securities in the issue in the secondary market

D.)

Although a new options account was approved for options trading buy the firm's ROP on July 10; on July 26, the customer has still failed to return a signed options agreement. Which of the following is correct? a.) all of the open options positions must be liquidated b.) an extension should be requested from the OCC c.) customer's account should be frozen for a 90-day period d.) customer is allowed to close existing positions, but cannot open any new options positions

D.)

An example of an "Unfunded Liability" of a municipality is...? a.) Short-term debt that will have to be refinanced b.) Long-term debt that will have to be refunded c.) Unsecured long-term debt d.) Future pension payments in which funds have not been set aside

D.)

Existing client comes in to take about her portfolio. Risk tolerance is mid-level and wants to add diversification. Her investment objective is total return and tax-advantages. Which of the following would be most appropriate recommendation by the RR? a.) Split allocation of portfolio 50/50 between corporate bond issues and muni bond funds, specific to her state of residence b.) Split allocation of portfolio 50/50 between equity mutual funds and corporate bond funds c.) Asset mic of 50% corporate bind funds, 25% cash/cash equivalents, 7.5% muni bonds, 7.5% equities, and 10% sector ETFs d.) Asset mix of 50% muni bond funds, 45% equities, and the rest in cash and cash equivelants

D.)

If the manager of a portfolio is attempting to create a portfolio which mimics the S & P 500's performance, how would this strategy be BEST described? a.) Manager is attempting a form of technical analysis b.) Manager is attempting a form of fundamental analysis c.) Manager will most likely use an active management strategy d.) Manager will most likely use a passive management strategy

D.)

In determining the net interest cost to an issuer on a competitive bid muni bond sale, any premium over par value... a.) Divided by the number of bond years b.) Multiplied by the par value of the bonds c.) Added to the spread received by winning underwriters d.) Subtracted from the interest cost computed by the municipality

D.)

Under ERISA, plan fiduciaries generally have all of the following responsibilities to plan participants EXCEPT...? a.) Diversify plan investments b.) Resolve all conflicts of interest in favor of the plan participants c.) Invest with care, skill, prudence, and diligence d.) They may be held liable for losses to the plan, but not personal fines

D.)

Under the JOBS Act, a research analyst covering an emerging growth company involved in an IPO may do ALL of the following EXCEPT..? a.) Attend meetings w/ issuer's management and investment banking personnel, including "pitch" meetings b.) At these meetings, outline and explain their research and ask questions c.) Publish research reports immediately before and after IPO "Quiet Period" w/ out the reports being considered offers d.) Solicit investment banking business

D.)

Violation of FINRA Rules on new offerings occur when underwriters and selling group members do all of the following EXCEPT: a.) sell to brokers & dealers outside selling group who position securities to sell later at a higher price b.) sell blocks of shares to the accts of partners and officers of issuer c.) maintain shares for sale to family members of selling group d.) buy the entire issue and then sell it to the public

D.)

When a fund's sales literature discloses total return statistics, it must also disclose which of the following? a.) The name of the transfer agent b.) The name of the fund's custodian c.) The B/D's web address d.) Name of the FINRA member sponsoring the sales literature

D.)

When an RR is opening up a new account for a client, which of the following would be the BEST indication of the client's tolerance to risk? a.) Number of dependents b.) Net worth c.) Tax bracket d.) Experience with investing

D.)

When the owner of a variable annuity contract elects to annuitize the contract, which of the following occurs? a.) Assumed interest rate is recalculated b.) Securities in the separate account are liquidated c.) Any gain in the separate account is subject to taxation d.) Number of annuity units will be determined by multiplying the number of accumulation units by the NAV per unit in the separate account

D.)

Which of the following best describes a "TRADER" in municipal securities? a.) Verifies comparisons and determines delivery schedules b.) Sets coupon rates and determines underwriting spreads c.) Provides an opinion on the authority of a bond issuance d.) Controls positions, provides quotations, and appraisals

D.)

Which of the following is NOT a consideration for bond counsel when researching the authority of a municipality to issue a municipal security? a.) Local statutes b.) Judicial opinions c.) State constitutions d.) Current economic conditions

D.)

Which of the following is NOT considered when evaluating a municipal GO Bond? a.) Outstanding Debt b.) Per-Capita Debt c.) Debt to Value Ratio d.) Debt Service Coverage

D.)

Which of the following is TRUE about government agency issues? a.) They are all issued in bearer form only b.) The return earned from them is exempt from federal income taxes c.) They are all direct obligations of the US Government d.) They are exempt from the registration requirements of the '33 act

D.)

Which type of distribution from a corporate pension plan is eligible for a rollover to an IRA or another corporate plan that accepts rollovers w/ no additional stipulations? a.) After-tax employee contributions b.) Minimum distributions after 72 c.) A series of payments made over a 10 year period d.) Payments representing employer contributions

D.)

wife owns a small business and has a net income of $100,000 for the year. Her husband was hired by her as an accountant and was paid $30,000. Which of the following is TRUE concerning the amount that can be contributed to an IRA by the wife and/or husband a.) Wife con contribute 20% of her earned income to the IRA b.) Husband and wife can each contribute 20% of their earned income to an IRA c.) Wife could only contribute $2,500 to her account and $2,500 to her husband's account d.) Each or either could deposit $6,000 into their own IRA

D.)

When XYZ stock is 72 1/2, and investor buys 10 XYZ June 60 calls @23 1/2, and Sells 10 XYZ June 90 calls @ 10. What is the investor's maximum profit potential? a.) $1,650 b.) $1,350 c.) $13,500 d.) $16,500`

D.) $16,500..... MAX PROFIT ON DEBIT SPREAD IS DIFFERENCE BETWEEN STRIKE PRICES ADJUSTED BY PREMIUMS... (90 - 60) - (23 1/2 - 10) = 16 1/2 * 100 * 10 = $16,500

The minimum amount required for the purchase of $20,000 worth of marginable stock in a margin account is... a.) $12,000 in cash b.) $10,000 of marginable stock c.) $20,000 in cash d.) $20,000 in marginable stock

D.) $20,000 IN MARGINABLE STOCK... CAN EITHER DEOPSIT CASH (REG T 50% = 10,000... NOT AN OPTION) OR... - *DEPOSIT SECURITIES W/ **LOAN VALUE EQUAL TO AMT OF CALL** (**SECURITIES HAVE LOAN VALUE OF 50%...) SO $20,000 OF SECURITIES IS NEEDED*

ALL of the following individuals could invest in a hedge fund EXCEPT a.) Engineer w/ annual income of $220,000 over the last three years b.) Professor w/ net worth of $1,250,000 c.) Zoologist w/ $1,000,000 of assets managed by a specific IA d.) Accountant w/ annual income of $175,000 over the last 5 years

D.) $200,000 ANNUAL INCOME REQUIRED ($300,00 FOR MARRIED COUPLES)

A customer is short 1,000 shares ABC @4 in his margin account. What is his initial margin requirement? a.) $2,000 b.) $2,500 c.) $3,000 d.) $4,000

D.) $4,000.... (FOR STOCK SELLING BELOW $5, DEPOSIT IS **$2.50 PER SHARE OR 100% MKT VALUE, WHICHEVER IS GREATER**)

A trader buys an ABC June 40 call at 3 when ABC stock is trading at 35. If the stock rises to 50 and trader exercises the call, which of the following is TRUE? a.) He realizes a reportable gain of $10 per share b.) He realizes a reportable gain of $7 per share c.) He owns a stock with a cost basis of $37 per share d.) He owns a stock with a cost basis of $43 per share

D.) $4300 / 100 SHARES = $43

In 2021, a self-employed person owns $140,000. What is this person's MAXIMUM allowable contribution to a Defined Contribution Keogh Plan? a.) $0 b.) $6,000 c.) $50,000 d.) $58,000

D.) $58,000... DEFINED CONTRIBUTION PLANS...: ***LESSER OF 100% INCOME OR $58,000*** (FORMERLY $57,000)

ALL of the following statements are CORRECT regarding variable annuities EXCEPT.../ a.) Upon owner's death, shares not w/drawn from w/drawl plan by a mutual fund shareholder become part of his estate b.) Variable annuity holders cannot determine amount of monthly payments they will receive c.) Mutual funds and the separate accts of non-qualified variable annuities are registered under the IC Act of 1940 d.) Even though issuing company keeps all dividends, the contract holder must pay taxes on them in the current year

D.) **ALL EARNINGS ARE TAX DEFERRED**

A Certificate of Limited Partnership would normally contain ALL of the following EXCEPT the...? a.) Info concerning future contributions by LPs and the manner in which new partners may be added b.) Arrangement for sharing profits c.) Definition of the general partner's role in the venture d.) Amount of losses that LPs can use for tax offsets year over year

D.) **SUCH LOSSES ARE CONTINGENT ON COMPANY PERFORMANCE**

If a corporation is in liquidation, the holder of a subordinated debenture would be paid at what time? a.) Before bank loans and before general creditors b.) Before bank loans and after general creditors c.) After bank loans and before general creditors d.) After bank loans and after general creditors

D.) AFTER BOTH

A B/D has written a research report. He is recommending a stock to the client based on the report. Which of the following does he have to tell his client? a.) If member firm owns options to purchase the stock b.) Fact that firm was co-manager of the syndicate which had made a recent offering of the stock c.) If the firm makes a market in the stock d.) All of the above

D.) ALL OF THE ABOVE

When a customer is interested in purchasing penny stocks, the B/D must disclose, either prior to transactions or w/ monthly account statements, which of the following? a.) Current market value of the stock, if quotes are available b.) An estimate of the current market value, if quotes are available c.) Amount of compensation to the B/D and stockbroker for each trade d.) All the above

D.) ALL OF THE ABOVE

The main purpose of the '34 ACT is to regulate...? a.) Sales of new issues, prospectuses, and disclosures b.) Distribution and sale of investment company shares c.) Issuance of treasury securities to the public d.) B/D's and the markets on which securities trade

D.) B/D's AND THE MKTS ON WHICH SECURITIES TRADE

George has watched the mkt price of ABC common regularly and decided he wants to buy ABC if mkt price goes up to $40, but does not want to pay more than $40. Which of the following orders would work best? a.) Buy limit order b.) Buy stop order c.) Sell stop/limit D.) Buy stop/limit

D.) BUY STOP/LIMIT ORDER

ZCBs are primarily purchased by investors looking for... a.) Interest income b.) Income from dividends c.) Accretion d.) Capital accumulation

D.) CAPITAL ACCUMULATION... ALL INTEREST IS PAID AT MATURITY... *ACCUMULATING CAPITAL*

Which of the following is correct about FINRA 5% markup guideline? a.) A maximum markup of 5% b.) A minimum markup of 5% c.) A charge of 5% on every transaction d.) Charges that are fair and reasonable

D.) CHARGES THAT ARE FAIR AND REASONABLE

The '34 ACT regulates ALL of the following EXCEPT..? a.) National stock exchanges b.) Broker-dealers c.) SRO'S d.) Commodities exchanges

D.) COMODITIES EXCHANGES... REGULATED BY THE CFTC

ALL of the following statements about Traditional IRAs are TRUE, EXCEPT...? a.) Individuals earning income are eligible to contribute b.) W/drawls are permitted at 59 1/2 without penalty c.) Tax free rollovers from a qualified plan to an IRA must be completed within 60 days d.) An individual may contribute securities into his/her IRA

D.) CONTRIBUTIONS ARE TO BE MADE IN **CASH ONLY**

A FINRA member B/D must comply w/ ALL of the requirements of FINRA Rule 4512 on customer account recordkeeping info EXCEPT: a.) The name(s) authorized person who trades in the account b.) Name of associated person responsible for the account c.) Signature of the manager, officer, partner of firm responsible d.) Date discretionary authority was requested by the customer

D.) DATE DISCRETIONARY INFO WAS REQUESTED BY THE CUSTOMER

ETNs - Exchange Traded Notes, represent which of the following? a.) Equity in the underling index in which ETN was issued b.) Equity in the bank which issued ETN c.) Debt in the underlying index in which ETN was issued d.) Debt in the bank which issued ETN

D.) DEBT IN THE **BANK WHICH ISSUED ETN**

What effect would declining interest rates have on CMO's? a.) Lengthen the average life of the CMO b.) Decrease the market price c.) increase the market price d.) Decrease the average life of the CMO

D.) DECREASE THE AVERAGE LIFE OF THE CMO

The president of XYZ Corporation owns restricted stock. Under security industry regulations, the restricted shares could be sold in ALL of the following transactions EXCEPT..? a.) A 144 offering b.) A private placement offering c.) A registered offering d.) An exchange offering

D.) EXCHANGE OFFERING

A person who reports which of the following functions must be registered as a financial and operations professional (FINOP)? a.) Accepts client's investment orders b.) Reviews and approves research reports c.) Prepares customer account statements and confirmations d.) Prepares financial statements and net capital computations

D.) FINANCIAL STATEMENTS AND NET CAPITAL COMPUTATIONS

Which of the following issues "pass-through" securities and purchases conventional residential mortgages from financial institutions? a.) Fannie Mae b.) Ginnie Mae c.) Sallie Mae d.) Freddie Mac

D.) FREDDIE MAC DEALS ONLY WITH "INSURED" LENDING INSTITUTIONS

ALL of the following are considered "Custodial Property" that can be given by a donor to a minor under the Uniform Gifts to Minors Act or UTMA EXCEPT: a.) Bearer Bonds b.) Life Insurance Policy c.) Annuity Contract d.) Futures Contract

D.) FUTURES CONTRACTS

A married couple filing a joint return w/ a combined income under $40,000 both contribute to their self-directed IRA's. Which of the following investments would be most suitable? a.) An oil and gas limited partnership b.) Common stock of a blue chip corporation c.) options d.) Growth mutual funds

D.) GROWTH MUTUAL FUNDS...PROVIDES THE MOST DIVERSIFICATION FOR AMOUTN INVESTED.. AND CONSIDERED TO BE LONG TERM

Most CMOs have all of the following risks EXCEPT...? a.) Risks that mortgages will be paid off early b.) Risks that interest rates will fluctuate and the investor will have a lower return c.) Risk that inflation will make investment less profitable d.) Risk that CMO will go into default

D.) HISTORICALLY VERY SAFE INVESTMENTS

An investor owns 300 shares of ABC acquired as follows: - Year 1 purchased 100 shares at $23 per share - Year 2 purchased 100 shares at $29 per share - Year 3 purchased 100 shares at $20 per share -Year 4 no activity If investor decides to sell 100 shares in year 5 at $35 per share, in order to REDUCE tax liabilities associated w/ sale, which of the following is the cost basis the customer SHOULD use? a.) LIFO b.) FIFO c.) Computation of average cost per shares held d.) Identifying the shares the customer intends to sell

D.) IDENTIFYING SHARES CUSTOMER INTENDS TO SELL... HE COULD USE THE 100 SHARES HELD IN YEAR 2 TO **REDUCE THE CAPITAL GAINS**

ALL of the following represent "good delivery" EXCEPT...? a.) 12 certificates of 50 shares each b.) 24 certificates of 25 shares each c.) 6 certificates for 80 shares & 6 certificates for 20 shares d.) 5 certificates for 60 shares & 6 certificates for 50 shares

D.) IF YOU WERE TO STACK 1 60 SHARE CTFCT AND 1 50 SHARE CTFCT, YOU'D GET 110 SHARES. (c: 80 shares + 20 shares = 100)

Which of the following types of funds would normally maintain a "Passive Management Approach?" (No investment manager) a.) Balanced Fund b.) Growth Fund c.) Income Fund d.) Index Fund

D.) INDEX FUND... MIRRORS INDEX... NO NEED FOR MANAGEMENT

Treasury Inflation-Indexed Securities (TIPS) pay interest semi-annually based on the... a.) Par value of the security b.) Principal value of the security c.) Pre-set dollar value at the time of issuance d.) Inflation-adjusted Principal

D.) INFLATION-ADJUSTED PRINCIPAL

An "Opening Sale Transaction" is when an investor...? a.) proposes to become a holder of an option b.) now a holder of an option and wants to liquidate position c.) intents to terminate his obligation as a writer d.) intends to become a writer

D.) INTENDS TO BECOME A WRITER

If a client has concerns about the LIQUIDITY of her investments, which of the following would be LEAST suitable for her? a.) Investing in 30-year bonds issues by a corporation b.) Investing in a mutual fund c.) Investing in securities issued in a secondary offering d.) Investing in the offering of a private placement

D.) INVESTING IN A PVT PLACEMENT OFFERING... MUST BE HELD FOR AT LEAST 6 MONTHS

If a client has concerns about the liquidity of her investments, which of the following would be LEAST suitable? a.) Investing in 30-year bonds issued by a corporation b.) Investing in a mutual fund c.) Investing in securities issued in a secondary offering d.) Investing in the offering of a private placement

D.) INVESTING IN PRIVATE PLACEMENTS

All of the following are ADVANTAGED of Accelerated Cost Recovery System (ACRS) EXCEPT...? a.) 100% of depreciable basis can be recovered b.) Salvage value is not considered c.) Used property is allowed a full write-off d.) It used Component Depreciation

D.) IT DOES NOT USE COMONENT DEPRECIATION... **USES COMPOSITE DEPRECIATION**

Why does the exercise of warrants cause dilution? a.) decreases total outstanding shares b.) increases EPS c.) decreases total revenues d.) increases total outstanding shares

D.) IT INCREASES THE AMOUNT OF TOTAL OUTSTANDING SHARES

All of the following are ADVANTAGES of Accelerated Cost Recovery System (ACRS) EXCEPT: a.) 100% of the depreciable basis can be recovered b.) Salvage value is not considered c.) Used property is allowed a full write-off d.) It uses component depreciation

D.) IT USES *COMPOSITE* DEPRECIATION

Which of the following investment funds would typically see the GREATEST amount of appreciation when the stock mkt goes up a.) money market fund b.) U.S. government securities fund c.) balanced fund d.) large cap equity fund

D.) LARGE CAP EQUITY FUND

If a client has most of his portfolio in "Fixed-Income Securities," and expects interest rates to decline in the next year, the RR should tell his customer to... a.) Switch about half of the fixed-incomes to large-cap common stocks b.) Switch some of the fixed incomes to mirror a specific index c.) To move almost all of the investments into risk-free investments like treasury bills d.) Leave the portfolio as it is

D.) LEAVE IT AS IT IS... WHEN INTEREST RATES FALL, BOND PRICES RISE, PORTFOLIO VALUE RISES

Experienced investor feels that XYZ corporation is one that may takeover ABC corporation. The market value of ABC has been appreciating. Based on this info, which would be the BEST options strategy? a.) Short straddle on XYZ Corporation b.) Long straddle on XYZ Corporation c.) Short straddle on ABC Corporation d.) Long straddle on ABC Corporation

D.) LONG STRADDLE ON ABC CORPORATION... ** LONG STRADDLE ON ***TARGET COMPANY*** WOULD BE MOST PROFITABLE**

An investor feels that ABC is one of several companies that may face a takeover by XYZ corporation. The mkt value of ABC is appreciating. Based on this info, which of the following would be the best option strategy? a.) short straddle on XYZ corporation b.) long straddle on XYZ corporation c.) short straddle on ABC corporation d.) long straddle on ABC corporation

D.) LONG STRADDLE ON ABC CORPORATRION... IF THERE IS A TAKEOVER IT IS MORE THAN LIKELY ABC'S STOCK PRICE WILL MOVE ONE WAY OR THE OTHER.

If the forecast for interest rates is to rise significantly, a municipality which must have money would borrow... a.) Without considering this factor b.) Immediate term c.) Short-term d.) Long-term

D.) LONG TERM... THEY WOULD WANT TO BORROW NOW WHILE RATES ARE LOWER, AND **LOCK-IN THAT LOWER RATE LONG-TERM*

Which of the following features is offered to BOTH investors in corporations and investors in Limited Partnerships? a.) Free transferability of beneficial interest b.) High level of market liquidity c.) The flow-through status of profits and losses d.) Management by professionals

D.) MANAGEMENT BY PROFESSIONALS

In forming a selling group, members are chosen based on... a.) personality b.) underwriting ability c.) financial strength d.) marketing ability

D.) MARKETING ABILITY

An annuity unit in a variable annuity is most like a...? a.) Pension payment b.) Insurance unit c.) IRA contribution d.) Mutual find shares or units

D.) MOST LIKE MUTUAL FUND SHARES/UNITS

All of the following statements regarding measures the "Daily Bond Buyer" publishes are correct EXCEPT...? a.) the "Placement Ratio" measures percentage of new issues sold each week to those available b.) The "30 Day Visible Supply measures total number of new issues coming to market w/in the next 30 days and is a good indicator of expected supply c.) Volume of "30 Day visible Supply" is broken down into numbers of GOs and revenue bonds sold on a competitive basis and on a negotiated basis d.) Issues of municipal notes are included in the "30 Day Visible Supply"

D.) MUNI NOTES ARE *NOT * INCLUDED

All of the securities below CAN be purchased on a margin EXCEPT..? a.) U.S. Government Securities b.) Listed Securities c.) NASDAQ Securities d.) New Issues

D.) NEW ISSUES

What are the tax consequences for the following transactions? - 01/10/98 BUY 100 ABC @10 - 11/10/98 BUY 100 ABC @ 4 - 10/29/98 SELL 100 ABC @ 6 a.) $400 long-term loss b.) $400 short-term loss c.) $600 short-term loss d.) No gain or loss

D.) NO GAIN OR LOSS... **WASH SALE RULE** CUSTOMER REPURCHASED SECURITIES THAT WERE SOLD AT A LOSS W/ IN 30 DAYS OF ESTABLISHING LOSS

What type of bonds would be attractive to an investor who wants to "lock in" the yields on long-term bonds? a.) Bonds with call premiums b.) Term bonds with a sinking fund call provision c.) Discount bonds with a par call d.) Non-callable bonds

D.) NON-CALLABLE BONDS

Under MSRB rules, muni bond confirmations must contain ALL of the following EXCEPT..? a.) Trade date b.) Settlement date c.) Whether or not bonds are callable d.) Paying agent

D.) PAYING AGENT

Assume a $1000 corporate convertible bond with a conversion price of $25 is currently trading at 80and its common stock is trading at $23.The common stock is selling at what relationship to the convertible bond a.) par b.) discount c.) parity d.) premium

D.) PREMIUM

An RR buys several State of Maine municipal bonds in an offering today for a customer. The purchase was made in which market? a.) Fourth b.) Third c.) Secondary d.) Primary

D.) PRIMARY

When compared to Fixed Annuities and Bonds, "Variable Annuities" provide investors with more... a.) return on investment b.) Reluctance to market risk c.) Regulatory Risk d.) Purchasing Power Protection

D.) PURCHASING POWER PROTECTION

One of your variable annuity clients notices that the return of the portfolio in the separate account is lower than the Assumed Investment Rate (AIR). Customer calls and asks what this means for the annuity. RR should state that customer should expect... a.) A reduction in the number of annuity units b.) An increase in the value of the annuity c.) An increase in the number of annuity units d.) A reduction in the value of the annuity

D.) REDUCTION IN THE VALUE OF THE ANNUITY

A trade on the consolidated tape display reads... ABC.SLD 52 means that..? a.) 5,200 shares were traded b.) ABC has been sold for 52 million c.) 100 shares have been traded for $52 per share d.) 100 shares were traded earlier, but the report is delayed

D.) REPORTED OUT OF SEUQUENCE... DELAYED = "SLD"

Net income divided by stockholder's equity is the...? a.) Return on Assets Ratio b.) EPS Ratio c.) Return on Invested Capital d.) Return on Equity Ratio

D.) RETURN ON EQUITY RATIO

Which of the following would be LEAST suitable for a customer most concerned with safety of principal? a.) Treasury Bills b.) Certificates of Deposit (CDs) c.) GO Bonds d.) Revenue bonds

D.) REVENUE BONDS

ALL of the following statements about a Spousal IRA are TRUE, EXCEPT...? a.) It can be used by a married couple with a non-working spouse b.) It allows for a total higher contribution between two separate IRA accounts c.) Contributions do not have to be equally divided between the two IRA accounts d.) Rollovers are allowed at any time between the spouses' accounts

D.) ROLLOVERS ARE NOT PERMITTED **BETWEEN TWO SEPARATE IRA ACCOUNT OWNERS**

A securities analyst reports that a cyclical change in NON-DURABLE goods has occurred on the downside over the last quarter. Which of the following has probably been a POOR investment over the past three months? a.) Shares in a steel company b.) Industrial revenue bonds c.) Shares in a home appliance manufacturer d.) Shares in a brewery

D.) SHARES IN A BREWERY... (NON DURABLE GOODS ARE **FOOD, CLOTHES, ETC.)

When dealing w/ registered investment companies, which of the following activities would be PROHIBITED for a securities dealer under MSRB rules? a.) Dealer facilitates a pre-sale order for the munis w/ relation to a new issue syndicate for the benefit of the registered investment Co. b.) W/out notification sent to president of investment Co. the dealer hires an executive officer of the investment Co. c.) Sale of muni revenue bonds by the dealer to registered investment Co. for the investment Co's. portfolio d.) Solicitation of muni business by dealer directed toward investment Co., and based solely on number of investment Co. shares sold

D.) SOLICITATION BASED ON NUMBER OF SALES SOLD IS CONSIDERED **RECIPROCAL DEALING** AND IS **PROHIBITED**

A customer wants to BUY 4 ABC JUL 50 CALLS and SELL 4 ABC JUL 55 CALLS. The JUL 50 calls are quoted at $4.00-$4.25 & $2.13-$3.33 for the JUL 55 calls. The customer wants to do the trade for $2 or less. This order is known as a...: a.) limit order b.) straddle c.) discretionary order d.) spread

D.) SPREAD.... in order to be a limit order, there would need to be SPECIFIC PREMIUM PRICES for BOTH buy and sell orders...

A 56-year old, self-employed individual, w/draws $50,000 from his Keogh plan. Which of the following statements are FALSE as to the tax consequences of this w/drawl? a.) Entire amount would be taxable as ordinary income b.) 10% penalty tax will be assessed on the entire amount c.) Individual does not qualify for any of the exemptions of the 10% penalty tax d.) Only the earnings portion of the w/drawl will be taxable

D.) THE ENTIRE AMOUNT WILL BE TAXED AS ORDINARY INCOME AND ASSESSED A 10% PENALTY

Which of the following is true about CDO's? a.) they are a pool of mortgages packaged and sold to investors b.) they are backed by the US Government c.) they are considered equity securities d.) they are considered asset backed securities

D.) THEY ARE ASSET BACKED SECURITIES

customer wishes to sell stock just after she receives her dividend, with a record date of friday, March 20. Assuming regular-way settlement, the earliest she can sell stock and still receive dividend is? a.) Monday March 16 b.) Tuesday March 17 c.) Wednesday March 18 d.) Thursday March 19

D.) THURSDAY MARCH 19

ALL of the following positions have UNLIMITED loss potential EXCEPT..? a.) Short stock-short put b.) Short straddle c.) Uncovered Call d.) Uncovered put

D.) UNCOVERED CALL

A customer buys 400 shares of XYZ and then receives a 10% stock dividend. Which of the following is TRUE? a.) Stock dividend is taxable to the customer as ordinary income b.) Stock dividend is taxable as a long-term capital gain c.) Stock dividend is taxable as a short-term capital gain d.) Stock dividend is used to reduce a customer's cost basis

D.) USED TO REDUCE A CUSTOMER'S COST BASIS

What types of companies are known as "Highly Leveraged" and greatly affected by changes in interest rates? a.) Transportation b.) Pharmaceutical c.) Government Agencies d.) Utilities

D.) UTILITY COMPANIES

A customer sells 1,000 shares of XYZ short @ 2. The initial margin requirement is...? a.) $0 b.) $675 c.) $2,000 d.) $2,500

D.)... THE INITIAL MARGIN REQ. FOR A STOCK PRICED FROM $0 - $2.50 IS $2.50.... (1,000 * $2.50 = $2,500)

How do you determine how low the market value of a long stock position can decline before account reaches minimum maintenance?

DEBIT BALANCE / .75

When a customer has excess equity in a margin account and chooses to withdraw cash or securities, what happens to the margin account?

DEBIT BALANCE INCREASES AND EQUITY DECREASES... TREATED LIKE A LOAN TO THE CUSTOMER.

What is "CONTIGIOUS OVERLAPPING DEBT?"

DEBT SHARED BY *DIFFERENT MUNICIPALITIES,* **SHARING THE SAME BORDERS**

What is the definition of "Intangible Drilling Costs?"

DEDUCTIBLE EXPENSES FOR LABOR, SUPPLIES, FUEL, REPAIRS, AND OTHER ITEMS WITH **NO SALVAGE VALUE**

If a customer wishes to REPLACE A SECURITY with CASH, ON THE SAME DAY in a restricted account, the customer MUST ___________________ of the value of the securities being w/drawn

DEPOSIT CASH EQUAL TO 50%

what does FUNDED DEBT MEAN?

DESCRIBES A DEBT SECURITY THAT HAS MORE THAN ONE YEAR TO MATURITY.

What are Annuity Units (Pay-Out Period)?

DETERMINE AMT TO BE PAID TO ANNUITANT EACH PAYMENT... - CHANGES IN VALUE BASED ON VALUE OF SECURITIES IN SEPARATE ACCOUNT

What is the "Spread" of a muni bond issue?

DIFFERENCE BTWN SYNDICATE COST, AVG OFFERING PRICE, AND ISSUER PROCEEDS

How do you calculate "Net Overall Debt?"

DIRECT DEBT + OVERLAPPING DEBT = NET OVERALL DEBT

If the basis price of a bond is 5.25 and the coupon rate is 4.75, the bond is trading at a...?

DISCOUNT... BELOW PAR

The most appealing aspects of investment companies, is that it offers investors....

DIVERSIFICATION, LIQUIDITY, AND PROFESSIONAL MANAGEMENT

In a MUNI BOND FUND, how are DIVIDENDS taxed? And how are CAPITAL GAINS taxed?

DIVIDENDS: STATE/LOCAL TAX (EXEMPT FROM FED) CAPITAL GAINS: FEDERAL/STATE/LOCAL TAX

What is STOPPING STOCK?

DMM GUARANTEES A *FLOOR BROKER* A *SPECIFIC PRICE ON A FIXED NUMBER OF SECURITIES FOR A LIMITED TIME* DONE FOR NYSE ONLY

What is the definition of a SEMI-AFFLUENT INVSTOR?

DO NOT MEET THE ACCREDITED/QUALIFIED STATUS, BUT DI MEET MINIMUM INVESTMENT REQS. MIN NVESTMENT REQ. $25,000... ABLE TO INVEST ONLY IN 1.) FUNDS OF FUNDS 2.) OPEN-END FUNDS

What is the purpose of the Customer Protection Rule (SEC Rule 15c3-3)?

ENSURE CUSTOMER FUNDS HELD BY B/D ARE DEPLOYED IN SAFE AREA, AND IF NOT DEPLOYED, HELD IN RESERVE BANK ACCOUNTS

For an OPEN-END investment company... the REDEMPTION PRICE is:

EQUAL TO THE NAV

What are the EXERCISE STYLES of LEAPS?

EQUITY AND OEX(S&P 100) - AMERICAN STYLE SPX(S&P 500) - EUROPEAN STYLE

HOW and WHEN do equity and index LEAPS settle?

EQUITY LEAPS: SETTLE IN **UNDERLYING STOCK** AND **T + 2** INDEX LEAPS: SETTLE IN **CASH** AND **T + 1**

Under REG S of the '33 ACT, the "Distribution Compliance Period" is the amount of time off-shore transactions must be kept BEFORE being RESOLD IN U.S.. What is the DCP for EQUITY and NON-CONVERTIBLE DEBT securities under REG S?

EQUITY: **CLASSIFIED AS *RESTRICTED* SECURITIES UNDER SEC RULE 144**, AND MUST SATISFY A **DCP OF 1 YEAR** (NOT 6 months)... NON-CONV. EBT: **40 DAYS**

What is a MARKET-OUT CLAUSE?

ESCAPE CLAUSE THAT RELEASES UNDERWRITERS FROM THEIR COMMITMENTS IF *MATERIAL ADVERSE DEVELOPMENT AFFECTS SECURITIES MARKETS*

What is the difference between normal index funds and ETF'S?

ETF's HAVE SHARES THAT TRADE LIKE COMMON STOCK SHARES.

What exercise style are foreign currency options?

EUROPEAN STYLE ONLY... THEY ARE ONLY USED FOR **HEDGING** IN THE VALUE MVMTS OF THE FOREIGN CURRENCY

What exercise style and cycle are VIX options? And how much is one point worth?

EUROPEAN-STYLE OPTIONS, ON A FEBRUARY CYCLE... 1 POINT ON VIX = $100

"Alternative Minimum Tax (AMT)" is designed to recoup some of the tax advantages by imposing a minimum tax on certain preference items. AMT would have to be paid if amount of AMT...?

EXCEEDS INVESTORS TAX LIABILITY

What happens when an investor CONVERTS mutual fund shares? What is the CHEAPEST way to do it?

EXCHANGE SHARES FROM ONE FUND TO ANOTHER AT NAV...**REQUIRES A NOMINAL CHARGE BUT NO ADDITIONAL SALES CHARGE**, MAY RESULT IN TAX GAIN OR LOSS... **CHEAPEST WAY TO TO IS IS TO STAY WITHIN THE SAME FUND FAMILY**

What is the breakeven formula on a CALL (buy or sell)?

EXERCISE PRICE + PREMIUM = CALL BREAKEVEN

What is "Backing-Away"?

FAILURE OF MKT MAKER TO MAKE GOOD ON A BID FOR MIN. QUANT. OF A SECURITY THAT MKT MAKER IS QUOTING AS A **FIRM QUOTE**

TRUE OR FALSE REITS must be registered under the INVESTMENT COMPMANY ACT OF 1940

FALSE

TRUE OR FALSE: A person who owns 10% of a company's DEBT securities IS CONSIDERED an "insider"

FALSE

TRUE OR FALSE: BLUE SKY LAWS prohibit sales of securities of non-U.S. Issuers

FALSE

TRUE OR FALSE: Broker dealers are allowed to arrange for credit (margin) for customers to purchase mutual fund shares.

FALSE

TRUE OR FALSE: Customers interested in options trading MUST submit written attestation of their options trading experience before their account can be opened

FALSE

TRUE OR FALSE: Delivery of a certificate or, w/ assignment executed by, a deceased person or a minor could be considered good delivery

FALSE

TRUE OR FALSE: ETN's are made up of a specific index and can have tracking errors.

FALSE

TRUE OR FALSE: FULLY PAID securities CAN be rehypothecated by the broker-dealer to a bank

FALSE

TRUE OR FALSE: It is APPROPRIATE for variable products to be compared with non-variable products

FALSE

TRUE OR FALSE: Low priced stocks listed on an exchange are also called penny stocks

FALSE

TRUE OR FALSE: Member firms MUST PRE-APPROVE in writing the lending or borrowing of funds if the customer is an immediate family member of a financial institution in the business of lending

FALSE

TRUE OR FALSE: Open accounts (cash or margin) for directors/officers/partners of financial institutions such as banks requires employer consent.

FALSE

TRUE OR FALSE: PUBLIC APPEARANCES in a seminar, interview, radio, etc. are required to have registered principal pre-approval before it happens

FALSE

TRUE OR FALSE: Personnel working in a B/D's research dpt CAN be supervised and compensated by the firm's investment banking department.

FALSE

TRUE OR FALSE: REITs apply for the 50% corporate tax exclusion

FALSE

TRUE OR FALSE: RRs can offer to buy back fund shares from client if the the values of them do not increase.

FALSE

TRUE OR FALSE: Retail communications may use a category/subcategory based on ASSET SIZE of the investment company/family, whether or not it has been created by a ranking entity

FALSE

TRUE OR FALSE: Shares of stock of a PRIMARY distribution, CAN be purchased on a MARGIN

FALSE

TRUE OR FALSE: T-Bills CAN be redeemed BEFORE maturity

FALSE

TRUE OR FALSE: The FINRA 5% markup policy applies to municipal bond transactions

FALSE

TRUE OR FALSE: The managing underwriter is the one who selects the bond counsel

FALSE

TRUE OR FALSE: Under MSRB rules, preliminary and official statements are considered to be advertising

FALSE

TRUE OR FALSE: US citizens trading FOREIGN securities are NOT subject to federal, state, or local taxes.

FALSE

TRUE OR FALSE: An RR MAY solicit orders for the publicly traded stock of the RR's employer.

FALSE... *ONLY UNSOLICITED ORDERS* MAY BE ACCEPTED

TRUE OR FALSE: T-Bills have REINVESTMENT RISK since they pay income to nvestors

FALSE... THEY DO NOT HAVE REINVESTMENT RISK.. AND THEY DO NOT PAY INCOME TO INVESTORS

TRUE OR FALSE: FINRA DOES have the authority to establish minimum or maximum sentences for criminal violations

FALSE... THEY DO NOT HAVE THE AUTHORITY

TRUE OR FALSE: Bond Counsel WOULD NEED legislative approval for a bond issue.

FALSE... THEY WOULD NOT NEED LEGISLATIVE APPROVAL

TRUE OR FALSE: FINRA requires a link to BrokerCheck to be provided and displayed in a member firm's apps

FALSE... UNLESS APP DISPLAYS A WEBPAGE ON THE FIRM'S WEBSITE

TRUE OR FALSE: Expenses of shipment of muni securities, including postage, insurance, draft, and collection charges, shall be paid by the BUYER

FALSE... THEY ARE TO BE PAID BY THE **SELLER**

TRUE OR FALSE: If an RR IS currently an accredited member or a national accreditation organization (CRPC, CFP), the RR CAN use that designation WITHOUT the member firm's approval.

FALSE... USE OF SUCH DESIGNATION REQUIRES FIRM'S APPROVAL.

TRUE OR FALSE: Under REGULATION S of the '33 ACT, a discretionary account held for the benefit of a NON-U.S. person *BY A DEALER IN THE U.S.* IS considered to be a U.S. person

FALSE... NOT CONSIDERED TO BE A U.S. PERSON

TRUE OR FALSE: An owner of a Roth IRA is required to make RMD's by age 72

FALSE... THER IS NO AGE REQUIREMENT ON W/DRAWALS FROM ROTH IRA's

TRUE OR FALSE: Investment clubs CAN qualify for breakpoint discounts for mutual funds

FALSE... THEY DO NOT QUALIFY

TRUE OR FALSE: Selling group members have a say in the public offering price

FALSE... THEY HAVE NO FINANCIAL RESPONSIBILITY

TRUE OR FALSE: When trading a security is halted, you can still trade options of that underlying security.

FALSE... WHEN TRADING OF A SECURITY IS HALTED, TRADING OF THE OPTION IS ALSO HALTED

TRUE OR FALSE Breakpoint Sales are permitted for brokers to solicit to clients.

FALSE... it occurs when an investor is NOT PROPERLY INFORMED about breakpoint discount. You can tell it happens when an investor makes a *PURCHASE JUST BELOW THE BREAKPOINT AMOUNT*

TRUE OR FALSE: Mutual Funds CAN be purchased on a MARGIN.

FALSE.... MUTAL FUNDS CANNOT BE PURCHASED ON A MARGIN.

TRUE OR FALSE: MUTUAL FUNDS are traded in the secondary market

FALSE...THEY DO NOT TRADE IN THE SECONDARY MARKET... ISSUE ONLY REDEEMABLE SHARES

TRUE OR FALSE: If a client gives an RR an order to buy a stock, and later that day, after the order is executed, wants to cancel the trade, the RR can cancel the trade.

FASLE... CLIENT WOULD HAVE TO GOVE AN ORDER TO RR TO SELL THE STOCK

What is a Surrender Charge in a life insurance policy?

FEE OWNER WILL INCUR WHEN SELLING, CASHING IN, OR CANCELLING AN INSURANCE OR ANNUITY POLICY.

The name for an order to buy or sell a particular security at a particular price in its entirety or not at all is called...

FILL OR KILL ORDER

For companies traded OTC, who is responsible for disseminating information about stock splits, mergers, dividends, rights offerings, spin-offs, etc.?

FINRA IS RESPONSIBLE... ON THEIR "DAILY LIST"

What does FINRA Rule 2111 (The Suitability Rule) state?

FIRM OR FP MUST HAVE REASONABLE BASIS TO BELIEVE THAT A RECOMMENDED STRATEGY IS SUITABLE TO A CUSTOMER AFTER EVALUATING ALL PROFILE FACTORS AND DUE DILIGENCE

What is a shelf registration?

FIRMS USE A *SINGLE REGISTRATION STATEMENT*TO REGISTER ALL SECURITIES IT INTENDS TO ISSUE IN THE UPCOMING *THREE YEAR PERIOD*

What is the major consideration when investing in a BOND FUND? And when is the BEST TIME to invest in one?

FLUCTUATIONS IN INTEREST RATES... BEST TIME IS WHEN RATES ARE HIGH AND EXPECTED TO DECLINE

What form do investment companies give to investors to report their gains and losses for tax purposes?

FORM 1099-DIV.... (1099-B IS FGIVEN BY **BROKERAGE FIRMS** TO REPORT GAINS AND LOSSES)... THEY ARE TAXED DIFFERENTLY

REG T also states if a customer is "sold out" of a cash account for failure to make prompt payment, the account must be ___________ for ___________ days. If a customer wishes to purchase security during this period, ________________________ must be in the account _____________ the purchase.

FROZEN FOR 90 DAYS.... CASH SUFFICIENT TO COVER TOTAL TRADE; BEFORE

What does it mean when a closed-end fund's NAV is GREATER than the ask?

FUND'S SHARES ARE SELLING AT A DISCOUNT TO THE NAV... FUND MUST BE A CLOSED-END FUND

How does the underwriter/distributor/sponsor get paid?

GETS PAID AN *UNDERWRITING CONCESSION*; WHICH IS *CONTAINED IN THE SALES LOAD*

What are "Limited Tax Bonds" (Limited Tax General Obligation Bonds)

GOs WHERE MUNICIPALITY PUTS A *STATUTORY LIMIT ON TAX RATE THAT MAY BE LEVIED* - *REQUIRE VOTER APPROVAL PRIOR TO ISSUANCE*

How do you calculate "Total Return?"

GROWTH + INCOME

What is the job of the OBO (Order Book Official) at the CBOE?

HANDLES PUBLIC LIMIT ORDER BOOK... MAY NOT TRADE FOR HIMSELF... TO SEE THAT PUBLIC ORDERS AT GIVEN PRICES ARE EXECUTED BEFORE ANY ORDERS FROM THE FLOOR AT SAME OR BETTER PRICE.

Who are PORTFOLIO MARGIN ACCOUNTS primarily used by?

HIGH NET WORTH INVESTORS, HEDGE FUNDS, ETC.

A Spousal IRA: I.) Function like a traditional IRA for a non-working spouse II.) Allow for contributions and deductions equal to a traditional IRA III.) Assets may be rolled over from IRA of one spouse to the IRA of the other spouse IV.) Function like a traditional IRA for an employed spouse

I AND II ONLY

FINRA member UNDERWRITERS can SELL SHARES AT A DISCOUNT.... I.) if buying party is a member broker dealer II.) A written agreement is in effect III.) To a customer or a non-member firm IV.) If the specific amount of the discount is disclosed to the public

I AND II ONLY

REG T regulates the credit extension by broker-dealers. Which of the following types of accounts are covered under this regulation? I.) Cash accounts II.) Margin accounts III.) Commodity accounts

I AND II ONLY

SMA can be depleted by I.) New margin purchases II.) Cash withdrawals III.) Decline in mkt value of securities in the account IV.) Stock dividends

I AND II ONLY

To be a good delivery, a bond with mutilated coupons must be authenticated by the... I.) Transfer Agent II.) Issuer III.) Broker-Dealer IV.) Custodian

I AND II ONLY

Trading practices in the OTC market of corporate securities is regulated by which of the following? I.) FINRA II.) SEC III.) SIPC IV.) FOMC

I AND II ONLY

Which of the following are TRUE regarding Municipal "Secondary Market Discounts?" I.) Bonds bought at discount in the secondary market II.) Discount would be treated is ordinary income (fully taxable) in the year the binds are sold III.) Discount is treated as a part of interest income received (tax-exempt) IV.) Beneficial to the investor

I AND II ONLY

Which of the following are characteristics of "Exploratory Drilling Programs? I.) Drill for oil and gas in areas w/out proven reserves ("Wildcatting") II.) Provide the greatest risk to investors and the greatest gains potential III.) Provide the least risk and the least gains potential IV.) Provide the greatest risk to investors and least gains potential

I AND II ONLY

Which of the following people are considered "ASSOCIATED PERSONS" I.) persons who've obtained "special knowledge licenses (S-6/7) II.) Persons serving as partners, officers, directors, branch managers III.) Employees working in a clerical or ministerial capacity IV.) persons who have passed the SIE, if employed by member firm

I AND II ONLY

Which of the following taxes are considered sources of debt for Municipal "Revenue Bonds," rather than GO bonds? I.) Special liquor and tobacco taxes II.) License taxes paid by businesses III.) Ad-valorem property taxes

I AND II ONLY

Which of the following are characteristics of "UNQUALIFIED Municipal Bond Opinion?" I.) Is absolute and unconditional II.) Indicated the bonds are "legal, valid, binding..." and qualify as tax-free III.) Specifies that validity and tax exemption are conditional IV.) Tax emption is dependent on some future event or qualification

I AND II ONLY UNQUALIFIED IS **GOOD**

An investor executes the opening sale of 1 XYZ APR 50 PUT. The investor is considered FULLY COVERED if the investor establishes which positions? I.) LONG 1 XYZ APR 55 PUT II.) LONG 1 XYZ MAY 50 PUT III.) LONG 1 XYZ JAN 45 PUT IV.) LONG 1 XYZ APR 45 PUT

I AND II ONLY... I: STRIKE PRICE OF LONG PUT IS GREATER OR EQUAL TO THE STRIKE PRICE OF THE SHORT PUT I: SHORT PUT EXPIRES AT THE SAME TIME OR BEFORE THE EXPIRATION OF THE LONG PUT

Assume a security is being distributed at a public offering price of $32. Which of the following stabilizing bids by the managing underwriter is ok? I.) $31.87 II.) $32.00 III.) $32.12 IV.) $32.25

I AND II ONLY... STABILIZING BIDS ARE OKAY IF THEY ARE *AT OR BELOW PUBLIC OFFERING PRICE*

Which of the following securities normally settle on the next bisiness day basis? I.) US Government Bonds II.) Option contracts III.) US Government Note traded on a cash basis IV.) Municipal Bonds

I AND II ONLY.... MUNIS (T + 2) CASH TRANSACTIONS (SAME DAY)

"Broker's Brokers" make their business out of keeping track of other B/Ds' inventories. Which of the following are functions of Broker's Brokers? I.) Trade for and with other broker-dealers and banks II.) Maintain their own inventory of bonds & trade their own positions III.) Provide confidentiality/anonymity and a wider exposure for bonds IV.) Deal with the public and charge commissions V.) Bid on new issues or act as underwriters

I AND III ONLY

A "Sale and Leaseback" transaction occurs when real estate property owner sells their property and leases it back from the new owner. Which of the following is TRUE regarding these transactions? I.) Rental/lease payments are deductible for the person making them II.) Rental/lease payments are not deductible for the person making them III.) The new owner can depreciate the property IV.) The new owner cannot depreciate the property

I AND III ONLY

A Fixed Annuity... I.) Pays the same predetermined dollar amount each period II.) Pays a fluctuating dollar amount each period III.) Insurance company bears the investment risk IV.) Annuitant bears the investment risk

I AND III ONLY

According to FINRA rules, which of the following would be deemed a retail communication? I.) Over a 2 week period an RR emails 27 retail clients of her top investment ideas II.) RR sends a hard copy of her investment letter to 25 institutional accts over a 5-day period III.) RR sends a blast email to mostly institutional clients; only 2% of the recipients are retail clients IV.) RR emails one institutional acct his opinion on the market

I AND III ONLY

If an investor wants to set aside funds for "Child's education," the RR should first recommend: I.) Coverdell Accounts II.) Roth IRAs III.) 529 Plans IV.) Traditional IRAs

I AND III ONLY

Under technical analysis, what is "Short Interest Theory?" I.) Since a short seller must eventually cover his short, this cushion of buyers will support a declining market, and accelerate a rising one II.) A small short interest represents a strong market, while a large short interest represents a weak market III.) A small short interest represents a weak market, while a large short interest represents a strong market

I AND III ONLY

Under the JOBs Act, the issuer or broker-dealer representing an issuer may engage in oral and written communications with... I.) Qualified Institutional Buyers (QIB's) II.) Retail investors III.) Accredited Investors IV.) Qualified Investors

I AND III ONLY

Under the recruitment Practices Rules, which of the following is TRUE regarding the delivery of the FINRA educational communication? I.) Must be delivered when the firm, directly or thru RR, individually contacts former customer of that RR to transfer assets II.) Firms are allowed to use their own format of the FINRA communication III.) Must be delivered when a former customer of new RR, absent of individual contract, transfers assets into acct assigned, or to be assigned, to the new RR of the firm

I AND III ONLY

Which of the following are characteristics of T-NOTES I.) Maturities of 2-10 years II.) Maturities of 10-30 years III.) Never issued as callable IV.) Can be issued as callable

I AND III ONLY

Which of the following are rights of a Limited Partner? I.) Inspect books and records, and receive complete accounting II.) Sell partnership assets III.) Sue or remove general partners for a good cause IV.) Take part in management of the limited partnership

I AND III ONLY

Which of the following are used to measure rate of return on DPPs? I.) Present Value II.) First in first out (FIFO) III.) Internal rate of return IV.) Double declining balance

I AND III ONLY

Which of the following is CORRECT about "Take Downs?" I.) It is compensation for members of the syndicate buying and reselling bonds from the syndicate manager II.) It is compensation for bona-fide B/D's not part of the syndicate group, who buy and resell bonds from the syndicate III.) Buys bonds at offering price, less a take down discount (usually 1 1/2 points, $15) IV.) Buys bonds at offering price, less a concession (usually 1/2 point, $5)

I AND III ONLY

Which of the following is TRUE regarding the impact Coverdell Plans have on financial aid eligibility. I.) If the account is owned by the student, it will have a low impact on financial aid eligibility II.) If account is owned by the student, it will have a high impact on financial aid eligibility III.) If the account is owned by the parent, it will have a low impact on financial aid eligibility IV.) If the account is owned by the parent, it will have a high impact on financial aid eligibility

I AND III ONLY

Which of the following is classified as a "Progressive Tax?" I.) Income tax II.) Sales tax III.) Estate tax IV.) Gasoline tax

I AND III ONLY

A muni dealer is immediately reoffering some 7% bonds it has just purchased at par. Which of the following quotes would indicate prices nearest the recent purchase at par, and therefore, most likely to be considered bona-fide quotes under MSRB Rules? I.) 6.8 Less 1/2 II.) 108 1/4 III.) 101 1/8 IV.) 4.95 Net

I AND III ONLY...

When a firm accepts orders from an IA, on behalf of a client... I.) IA is allowed to make "allocations" of orders to client accounts II.) Allocations must be received by 2 business days following trade date III.) Allocations must be received by noon on the next business day following trade date IV.) Allocations are allowed for RR's trading on behalf of customers

I AND III ONLY... (DO NOT APPLY FOR RR's TRADING ON BEHALF OF ACCOUNTS)

GNMA certificates are characterized by which of the following? I.) Payment of interest and principal is guaranteed by the US Gvt II.) Pooled farm loans are the principal revenue source for GNMA securities III.) Pooled residential mortgage loans are the principal revenue source of GNMA securities IV.) Interest paid on GNMA securities is exempt from federal income taxation

I AND III ONLY... GNMA IS SUBJECT TO FEDERAL, STATE AND LOCAL TAX

As the SPOT PRICE of a foreign currency option INCREASES... I.) The value of calls will increase II.) the value of calls will decrease III.) The value of puts will increase IV.) The value of puts will decrease

I AND IV ONLY

BROKERS... I.) Acts in agency capacity by bringing together buyers and sellers II.) Acts in principal capacity by buying/selling securities from own inventory III.) Charges mark-up or mark-down IV.) Charges a commission for their services

I AND IV ONLY

Contributions to a traditional IRA may include...? I.) Cash II.) Pensions III.) Annuities IV.) Alimony V.) Deferred Compensation

I AND IV ONLY

Corporate bonds are issued in series and serial form. When describing SERIES FORM... they have... I.) Different issuance dates II.) the same issuance dates III.) Different maturity dates IV.) The same maturity dates

I AND IV ONLY

FEE-BASED ACCOUNTS... I.) Charged a flat fee based on a percentage of assets in the account (one-time or ongoing) II.) Charged on a per-transaction basis III.) These advisers are paid paid to trade securities, and are motivated to increase the amount of transactions and clients IV.) These advisers have an incentive to grow their client's portfolio in size, and would get paid more as a result

I AND IV ONLY

In a DPP, an investor's "Adjust Basis" is increased by...? I.) Additional contributions by the partner II.) Distributions of property/cash to the partner by the partnership III.) Depletion deductions for the oil and gas partnerships IV.) Partnership income

I AND IV ONLY

Select the following characteristics associated w PRIMARY DISTRIBUTIONS. I.) Cannot be purchased on a margin II.) Can be purchased on a margin III.) Redistribution of lg. block of securities held by a few owners IV.) distribution of authorized but unowned shares to public

I AND IV ONLY

Under the Investment Company Act of 1940 Investment Companies... I.) Continually offer a prospectus annually II.) Predict and project funds and companies III.) Can use a prospectus that is more than 16 months old but not more than 2 years old IV.) must file financial statements with the SEC, when requested by the SEC

I AND IV ONLY

Which of the following are TRUE concerning a company's capital structure and leverage? I.) A conservative capital structure means there's a large % common outstanding and a small % of bonds outstanding II.) A conservative capital structure means there's a large % of bonds outstanding and a small % of common outstanding III.) A speculative capital structure means there's a large % of common outstanding and a small % of bonds outstanding IV.) A speculative capital structure means there's a large % of bonds outstanding and a small % of common outstanding

I AND IV ONLY

Which of the following is CORRECT regarding "Head and Shoulders Formations" while analyzing a stock price chart? I.) A regular head and shoulders formation indicates a bearish trend when the price of a stock starts moving downwards II.) A regular head and shoulders formation indicates a bullish trend when the price of a stock starts moving upward III.) An inverted head and shoulders formation indicates a bearish market when the price of a stock starts moving downwards IV.) An inverted head and shoulders formation indicated a bullish market when the price of a stock starts moving upwards

I AND IV ONLY

Which of the following would be considered be considered ADVANTAGES in investing in REITs? I.) There are no minimum investment requirements II.) Investors must be accredited prior to making investment III.) Have a direct correlation to the value of other financial assets IV.) Have a low correlation to the value of other financial assets

I AND IV ONLY

Which of the following communications are subject to FINRA communication rules and need prior principal approval on social media sites? I.) Communication regarding products and services of the firm II.) Sponsorship of charitable events III.) Human interest articles IV.) Employment opportunity or employer information covered by state and federal fair employment laws

I ONLY

Which of the following books and records is required to be maintained for *4 YEARS* by a B/D (the first two in a readily accessible location) I.) Customer complaints II.) Customer account information III.) Forms U-4 and U-5 IV) Customer Ledgers

I ONLY... CUSTOMER COMPLAINTS

Which of the following DOES the 5% guideline APPLY to? I.) OTC Transactions II.) New Issues III.) Registered Secondary Distributions IV.) Open-end Investment Companies V.) Exchange Traded Securities

I ONLY.... DOES **NOT** APPLY WHEN PROSPECTUS/OFFERING CIRCULAR MUST BE DELIVERED... OR ISSUES ON EXCHANGES

A "Feasibility Study" is used to determine estimated costs and revenues of a project before issuing a revenue bond. The study would consider...? I.) Construction Expenses II.) Service Charges III.) Revenues of the Project IV.) Tax consequences of the project

I, II, AND III ONLY

An associated person participating in a private securities transaction MUST...? I.) Give written notice to the firm II.) Receive WRITTEN approval or disapproval from the member firm III.) If approval is given, member firm must record transactions on its books and records and supervise person's participation IV.) Receive FINRA approval for the transactions

I, II, AND III ONLY

Money Market Funds must: I.) Have average weighted maturity of 90 days or less II.) Offer a minimal credit risk III.) Have at least 95% of assets invested in securities rated in top two categories by the NRSRO IV.) requires that 90% of income must be earned from dividends or interest

I, II, AND III ONLY

Municipal UITs are purchased by investors because... I.) Diversification of issuers II.) Geographic diversification III.) Ease in the collection of interest IV.) Tax-exempt interest

I, II, AND III ONLY

OPTIONS ARE: I.) Derivatives II.) Capital Assets III.) Short-Term Capital Gains/Losses IV.) Ordinary Income Gains/Losses

I, II, AND III ONLY

Regarding the marketability and redeemability of T-Bills... I.) Fully marketable, meaining they can be sold in the secondary market II.) They are not redeemable until maturity III.) They are not callable prior to maturity IV.) They can be callable prior to maturity

I, II, AND III ONLY

Repurchase Agreements (REPOS) have little to no... I.) Price Risk II.) Credit Risk III.) Liquidity Risk IV.) Market Risk

I, II, AND III ONLY

TRENDS in municipal markets can be determined by using I.) "30 Day Visible Supply" II.) Bond Buyer Index III.) The Blue List IV.) Standard and Poor's Repository

I, II, AND III ONLY

The "Cold Call Act" also bans "junk faxes" sent to consumers. If a fax is sent to a consumer, it MUST contain...? I.) Telephone number of the sender II.) Identity of the sender III.) Date and time the fax is sent IV.) Number of pages of the fax

I, II, AND III ONLY

The U.S.A. PATRIOT ACT requires a minimum of what information for opening an account? I.) Full and true name II.) Street address III.) SSN / Tax ID IV.) Employer information

I, II, AND III ONLY

The market price of a municipal bond may fluctuate based on changes in.... I.) Tax legislation II.) Credit Ratings III.) Market Conditions IV.) Acquisition price

I, II, AND III ONLY

Under "Safe Harbor 404(c) Provisions," plan participants... I.) MUST have ability to chose between at least *3 categories of investments that are diversified,* and *differ in risk and return levels* II.) MUST Be provided with a certain level of investor education and disclosures to facts of time horizons, returns, risks, etc. III.) MUST be informed they may make changes to chosen plan on a regular basis, no less than quarterly IV.) MAY have a plan that consists of their own company's securities

I, II, AND III ONLY

Under FINRA Arbitration Rules, what can FINRA do if a member firm refuses or does not pay an arbitration award? I.) Impose a fine II.) Suspend one or more of the member's principals III.) Suspend the firm IV.) Impose incarceration sentences on principals of the firm for no more than two years

I, II, AND III ONLY

Under FINRA Rule 5130, which of the following is ALLOWED? I.) sales/purchases from one selling group member to another, that are incidental to distribution of the new issue, that will be sold to non-restricted person at the public offering price II.) sales/purchases of shares to be sold to non-restricted customers at the public offering price by B/D that is not a member of the underwriting syndicate III.) purchases of new issues at public offering price by B/D formed as an investment partnership, provided that capital accounts of partners in partnership do not exceed in the aggregate 10% of the account IV.) purchase/sales of new issues acquired by the member as an underwriter, syndicate member or group member.

I, II, AND III ONLY

Variable annuity salespersons must be registered with...? I.) SEC II.) FINRA III.) State Insurance Department IV.) State Banking Department

I, II, AND III ONLY

What are the disadvantages of a sole proprietorship? I.) Unlimited personal liability II.) Must pay self-employment tax for themselves and employees III.) Responsible for running business, and recordkeeping responsibilities IV.) No legal filings required

I, II, AND III ONLY

When a member is acting as a BROKER, the confirmations sent to customers MUST include... I.) Source and amount of commissions received by member from all sources II.) Identity of purchaser and seller III.) Date and time of the transaction IV.) Amount of mark-up charged to customer

I, II, AND III ONLY

When an owner of an IRA dies, and the designated beneficiary is a TRUST.... I.) Trust becomes the owner of the account II.) Beneficiaries of the trust become beneficiaries of the IRA III.) Maximum payout is based on the oldest beneficiary's age IV.) Maximum payout is based on the youngest beneficiary's age

I, II, AND III ONLY

When orders are entered on the floor of an exchange, COMPETITIVE BIDDING OCCURS, and orders are executed based on...? I.) Priority (larger orders/market orders) II.) Parity (similar orders) III.) Precedence (orders received first) IV.) Premium (bonds/options trading at premium)

I, II, AND III ONLY

When using income or yield illustrations for investment companies and variable annuities, what can be used in the illustrations? I.) Historic yield II.) Annualized yield III.) Current yield IV.) Projections of future yields

I, II, AND III ONLY

Which of the following MUST B/D's verify under the CUSTOMER IDENTIFICATION PROGRAM (CIP)? I.) Every customer that does business with them II.) Check client's name to any terrorist list III.) Client's residence to embargoed countries IV.) Customer's bank account number

I, II, AND III ONLY

Which of the following are TRUE in regard to a SIMPLE IRA? I.) Meant for small business owners and their employees II.) Differing from an SEP IRA, employee is allowed to make a salary deferral of pre-tax compensation to the plan III.) Limited to small business owners with less than 100 employees IV.) Limited to small business owners with less than 150 employees

I, II, AND III ONLY

Which of the following are TRUE regarding "Sales Practice Rules for Open-End Investment Companies" I.) All transactions must be reviewed and endorsed by FINRA principal (BOM) II.) Lowest price at which underwriter may sell shares of an open-end investment company to a member is the Net Asset Value Per Share III.) FINRA member may purchase security of an open-end company if it its for its own investment, or to cover purchase orders already received IV.) FINRA member may purchase shares of an open-end company to hold in inventory and sell later to a customer at a profit or loss

I, II, AND III ONLY

Which of the following are TRUE regarding Municipal Bond Repurchase Agreements?" I.) Agreement where securities are sold by firm w/ agreement to repurchase them at a later date at an agreed upon price II.) Records of these agreement must be kept for 3 years III.) These agreements are usually short term IV.) These agreements are usually mid-to-long-term

I, II, AND III ONLY

Which of the following are TRUE regarding the definition of DPPs? I.) They are investment vehicles such as real estate partnerships and oil and gas programs II.) Allow investors certain tax advantages III.) Limited partnerships are the primary vehicle of DPPs IV.) Mutual fund class c shares are the primary vehicle for DPPs

I, II, AND III ONLY

Which of the following are TRUE regarding yields of municipal bonds? I.) Yields of bonds w/ short-term maturities react the QUICKEST to changes in price or interest rates II.) Yields of bonds w/ long-term maturities react the GREATEST to price/ interest rate fluctuations III.) If interest rates decline, bonds trading at a discount would have greatest increase in price, and bonds trading at premium would see less appreciation IV.) If interest rates decline, bonds trading at a premium would have greatest increase in price, and bonds trading at discount would see less appreciation

I, II, AND III ONLY

Which of the following are characteristics of "Pre-Refunding Bonds?" I.) Original issue will be redeemed on the earliest call date II.) Refunding can only be done within 90 days of the call date ("current refund") III.) Redemption/call price can be more than the value of the bond IV.) The new bonds must be outstanding for more than 90 days

I, II, AND III ONLY

Which of the following are characteristics of Series EE Bonds? I.) They are non-marketable federal government debt II.) Issued at face value with a fixed rate of interest, added to the EE Bond monthly III.) Interest is taxable when the bonds are redeemed IV.) Interest is taxable each year the EE bond is owned

I, II, AND III ONLY

Which of the following are included in the "PENNY STOCK DISCLOSURE RULES" I.) Determine the suitability of such investment for a customer II.) Send customer a copy of suitability recommendation III.) receive signed copy of suitability determination from customer prior to executing order IV.) receive signed copy of suitability determination after executing order

I, II, AND III ONLY

Which of the following are organizations that insure municipal bonds against default, and guarantee the payment of principal and interest? I.) National Public Finance Guarantee Corp. (Formerly MBIA) II.) Assured Guaranty Municipal Corp. III.) Build America Mutual Assurance Company IV.) FDIC

I, II, AND III ONLY

Which of the following are things that the '34 ACT does? I.) Requires ALL securities listed on a national exchange to be registered w/ the SEC. II.) Requires disclosure of info of ALL listed securities (annual reports) III.) Requires credit regulation (extension of credit) for securities transactions IV.) Regulates commodities

I, II, AND III ONLY

Which of the following is TRUE about communications about VARIABLE life insurance and annuity products? I.) Communication must clearly identify the insurance/annuity product as a variable product, and must not represent that product being offered is a mutual fund II.) Communications must not advertise these variable products as being liquid investments III.) Are allowed to guarantee minimum death benefit, schedule of payments to owner, an a fixed investment account that is guaranteed by the insurance company IV.) Are allowed to guarantee an investment return or principal protection of the separate account

I, II, AND III ONLY

Which of the following is TRUE regarding the "netting" of capital gains and losses? I.) Always net total gains against total losses, including any loss carried forward from the previous year. II.) Net losses may be written-off against ordinary income up to a maximum of $3,000 per year III.) Any loss that exceeds write-off allowance may be carried forward to the next year. Net losses may be deducted

I, II, AND III ONLY

Whish of the following is TRUE about the prospectus under the 33 ACT? I. )Prospectus does NOT include opinions of counsel II.) The act does NOT mandate that the SEC determine which securities may/may not be publicly offered III.) SEC "No Approval" Clause must appear on either the front cover or first page of prospectus IV.) Prospectus is required to include the underwriting contracts of the issue

I, II, AND III ONLY

With the "Automated Customer Account Transfer Service" (ACATS)... I.) Facilitates the transfer of customer accounts from one brokerage firm to another II.) Transfer must be completed within *3 business days* III.) Firm carrying account must verify transfer *w/in 1 business day* IV.) A brokerage firm may prohibit a customer from transferring firms

I, II, AND III ONLY

Which of the following statements are TRUE regarding mark-ups/down on muni securities under MSRB rules? I.) Mark-ups/downs must be disclosed on principal trades with retail clients only II.) Must be disclosed if member executed an offsetting principal trade in the same security on the same day III.) Must be expressed in total dollar amounts AND as a percentage of the prevailing market price IV.) Disclosure is required for transactions executed in municipal fund securities

I, II, AND III ONLY... DISCLOSURE NOT REQUIRED FOR MUNI FUND SECURITIES

Choose the items that are ESTABLISHED BY THE OCC: I.) Strike Prices II.) Expiration Months III.) Size and Type of Contracts IV.) Premiums

I, II, AND III ONLY... PREMIUMS ARE DETERMINED BY SUPPLY AND DEMAND IN THE MARKET (even tho I is true, the OCC doesn't determine the actual strike price)

Non-traditional ETF's (leveraged and inverse)... I.) More risky than traditional ETF's II.) Designed for short-term (daily) trading III.) Reset and rebalanced daily IV.) Are suitable for retail investors

I, II, AND III ONLY... THESE ARE NOT SUITABLE FOR RETAIL INVESTORS

For an investment company and mutual fund, a custodian can also serve as a(n)... I.) Transfer Agent II.) Registrar III.) Dividend Disbursing Agent IV.) Distributor

I, II, AND III ONLY... THEY CAN **NEVER BE ASSOCIATED WITH SALES OR BE CALLED A DISTRIBUTOR**

Which of following is TRUE about the definition of an investment adviser? I.) Anyone who receives compensation for investment advice must be registered under the IA Act of 1940. II.) Management fees differ for each adviser and from fund to fund III.) Is a person who is in the business of giving investment advice for compensation (mgmt or wrap-based fees) IV.) Receives compensation for the execution of transactions

I, II, AND III ONLY... IV WOULD BE CONSIDERED AN RR

To be quoted on NASDAQ, a security MUST...? I.) Have at least TWO market makers II.) Have a minimum number of stock holders III.) Have a minimum number of shares outstanding IV.) Sit thru a waiting period after registration becomes effective before it can start trading

I, II, AND III ONLY... THERE IS NO WAITING PERIOD

A young professor managing her own aggressive portfolio interested in capital appreciation, would most likely include... I.) Growth Funds II.) Small-Cap Equity Funds III.) Large-Cap Equity Funds IV.) Equities in Emerging Markets

I, II, AND IV ONLY

Considerations for excessive trading activity include: I.) Turnover Rate II.) Cost-Equity Ratio III.) Quality of the investment IV.) Use of In-and-Out Trading

I, II, AND IV ONLY

In relation to "Front Running" which of the following transactions are PERMITTED...? I.) Transactions that firm can demonstrate are unrelated to the customer block order II.) Transactions undertaken to fulfill the execution of customer's block order III.) Transactions prompted by non-public information intended to get ahead of the market IV.) Transactions executed, whole or in part, on a national securities exchange, and comply w/ mktplace rules of that exchange

I, II, AND IV ONLY

The "Contract Holder" of an annuity contract... I.) Must receive prospectus at the time of purchase II.) Must receive "Statement of Additional Information" if contract holder requests it III.) Is protected against capital loss with a minimum appreciation value IV.) Has the choice of investments, bears the investment risk

I, II, AND IV ONLY

The due diligence meeting... I.) Held at end of cooling period II.) held by issuer and investment banking team III.) public offering price is determined IV.) reviews prospectus, offering and deficiency letters

I, II, AND IV ONLY

Under "Dollar Cost Averaging," the average COST per share over a period of time will ALWAYS be LOWER than the average PRICE per share if...? I.) A fixed dollar amount is invested II.) The price of the stock fluctuates III.) The price of the stock does not fluctuate IV.) Average cost per share would be used to determine breakeven price per share

I, II, AND IV ONLY

When a DMM stops stock... I.) Customer's order price is guaranteed II.) Order must be solicited by the floor broker III.) Order must be solicited by the DMM IV.) Must be a spread of at least 2 cents

I, II, AND IV ONLY

Which of the following are CORRECT regarding the characteristics of Municipal Put Bonds? I.) Allows bondholder to put/tender bond back to issuer or agent at par on certain stated dates II.) Does not guarantee customer against loss if bonds were purchased at a premium III.) Does not guarantee customer against loss if bonds were purchased at a discount IV.) Investor would purchase this type of bond if prices decline or yields were to rise V.) Investor would purchase this type of bond if prices increase or yields were to decline

I, II, AND IV ONLY

Which of the following are TRUE regarding T-bills? I.) Sold at a deep discount to par II.) Have 1 year or less to maturity III.) Most are issued as callable IV.) Direct obligations of the US Government

I, II, AND IV ONLY

Which of the following are TRUE regarding municipal "Original Issue Discounts (OID)?" I.) Investor buys bond in an original offering II.) Can treat discount as part of interest income received, therefore tax exempt III.) Must treat discount as a capital gain and subject to full taxation IV.) Benefits the investor V.) Benefits the issuer

I, II, AND IV ONLY

Which of the following are characteristics of "Lease Revenue/Rental / Leaseback Bonds?" I.) Municipality will form an authority to sell bonds to construct a facility II.) Authority leases the facility constructed back to the city or school district III.) Security from this revenue bond comes from tax assessments IV.) Security from this revenue bond comes from the lease

I, II, AND IV ONLY

Which of the following are characteristics of "Private Activity/Private Purchase Bonds?" I.) Municipal bonds used to finance private activities such as industrial park/waste management/housing revenue bonds II.) Interest on these bonds is subject to taxation III.) Interest on these bonds is exempt from taxation IV.) Interest on these bonds is subject to Alternative Minimum Tax (AMT) preference item tax

I, II, AND IV ONLY

Which of the following books and records is required to be maintained for *LIFE* by a B/D? I.) Supporting entity docs. (minutes / stock certificate books) II.) Articles of incorporation III.) Customer account info IV.) Articles of partnership

I, II, AND IV ONLY

Which of the following are TRUE regarding Federal Farm Credit System Securities? I.) They issue notes and bonds in book entry form II.) They settle next business in federal funds III.) Exempt from federal tax and guaranteed by the government IV.) Bonds are more actively traded in the secondary mkt than notes

I, II, AND IV ONLY THEY ARE *SUBJECT TO FEDERAL INCOME TAX* BUT EXEMPT FROM STATE AND LOCAL TAX

When handling stock/bond certificates, the TRANSFER AGENT... I.) Cancels old certificates for a security II.) Issues new certificates III.) Keeps the customer's securities under its possession IV.) Resolves problems regarding lost certificates

I, II, AND IV ONLY (PHYSICAL WORK)

Who can qualify for a quantity discount with a lump-sum purchase or by signing a LOI? I.) Individuals and Married Couples as Joint Tennants II.) Corporation and a Pension Fund III.) Investment Clubs and Investment Advisers IV.) Parent of a Minor and Fiduciaries

I, II, AND IV ONLY... CLUBS AND ADVISERS CANNOT

ETN's.... I.) Are not principal protected (principal return is not guaranteed) II.) Trade like a stock and can be sold short III.) Do not have a final maturity IV.) Can be issued as callable

I, II, AND IV ONLY... ETN's DO HAVE A FINAL MATURITY

Which of the following are TRUE of UGMA/UTMA accounts? I.) The account is opened with the MINOR'S SSN. II.) Taxes due are paid by the minor III.) Property already owned by the by the minor may be in the acct IV.) Unearned income over amounts allowed by IRS (kiddie tax) will be taxed to child at parent's top marginal rate if it is higher than kid's

I, II, AND IV ONLY... ONLY NEW GIFTS ARE ALLOWED IN THE ACCOUNT.

ETF's.....: I.) Are charged commissions, just like common stock II.) Options are available on most ETF's III.) Charged a sales load IV.) Sometimes pay dividend payments V.) Generally have high expenses

I, II, AND IV ONLY.... ETFS ARE *NOT* CHARGED A SALES LOAD AND HAVE *LOW EXPENSES*

TOMBSTONE ADS, announce the availability of a new issue and are the ONLY form of advertising permitted to announce new issues... which of the following is true about them? I.) Not required to be filed w/ SEC or FINRA prior to publication II.) Contains name of issuer, underwriter, amount of issue III.) Show selling group members IV.) Show public offering price V.) Indicates where prospectus can be obtained

I, II, AND V ONLY

Which of the following are characteristics of Municipal Revenue Bonds I.) Primarily backed by user charges, lease payments, license fees, and special/excise/luxury taxes II.) Backed by protective covenants (promises to do something) III.) Voter approval is required before issuance IV.) Statutory debt limits apply V.) Flow of funds provision applies

I, II, AND V ONLY

Which of the following are characteristics of Municipal General Obligation(GO) Bonds? I.) They are backed by taxes by the taxing power of the municipality II.) Issued for facilities that benefit the public (schools/libraries) III.) Voter approval is required before issuance IV.) Statutory debt limits apply V.) Flow of funds provision applies

I, II, III , AND IV ONLY

EXEMPTIONDS from the definition of an investment adviser include..? I.) Lawyers, accountants, teachers, engineers II.) Anyone giving advice as an incidental part of their profession and does NOT charge a fee III.) Banks IV.) A lawyer, accountant, teacher, engineer who charge a separate fee for investment advice

I, II, III ONLY

Which of the following would the "Subscription Agreement" of a DPP contain? I.) Statement that investor read the prospectus and understands risks II.) Statement that general partner will act as agent of LP III.) Investors SSN or Tax ID IV.) Statement that investor has sufficient income and net worth V.) Statement of the source of funds from the investor

I, II, III, AND IV ONLY

Which types of securities sold are reported within the volumes of the ticker tapes> I.) Common Stocks IV.) Rights II.) Preferred stocks V.) Odd Lots III.) Warrants VI.) Options

I, II, III, AND IV ONLY

If a customer dies, the RR MUST... I.) Cancel all open orders II.) Freeze the account and note client is deceased III.) Obtain a death certificate IV.) Obtain Affidavit of domicile V.) Liquidate the account

I, II, III, AND IV ONLY... MUST NOT LIQUIDATE THE ACCOUNT

Which of the following are factors of UIT'S? I.) Issue only redeemable units II.) have fixed portfolio of municipal and corporate bonds III.) pay interest IV.) pay diviends V.) terminates once bonds have matured

I, II, III, AND V ONLY

WHO are QIB's? I.) Insurance Companies II.) Banks III.) Rural Business Investment Companies IV.) LLC's V.) Trust Fund VI.) Individual Investors

I, II, III, IV AND V ONLY

Which of the following endorsements would be ACCEPTBLE to the transfer agent? I.) stock in the name of an individual signed by the individual II.) stock in the name of husband and wife as joint tenants signed by the husband and wife III.) stock in the name of a partnership signed by one of the general partners IV.) stock in the name of a corporation signed by an authorized officer or officers V.) stock in the name of an estate signed by the legal representative VI.) stock held in custodian form under UGMA signed only by the minor

I, II, III, IV, AND V ONLY

Which of the following should be considered by an investor on how he/she should try to diversify a bond portfolio? I.) Geographically II.) By Maturity III.) By Purpose IV.) By Security (Safety) V.) By Quality VI.) Denominations of Bond Certificates

I, II, III, IV, AND V ONLY

The "BLUE LIST" was a daily listing of muni bonds for sale by dealers who had positions or inventories of various muni issues. It contained which of the following information? I.) Name of bond and issuing authority, and amount of bond for sale II.) Name of dealer offering the bond III.) Coupon rate and yield/price IV.) Maturity date of the bond V.) Purpose of the bond VI.) Quality rating of the bond

I, II, III, IV, AND V ONLY... DOES NOT INCLUDE QUALITY RATING OF BOND

Which of the following communications must be filed w/ FINRA *w/in 10 business days of first use*? I.) Retail communications that promote registered investment companies II.) Retail communications concerning DPP's and CMO's III.) Retail communications that promote derivative or structured products IV.) Retail communications concerning bond mutual fund volatility rankings V.) Advertising concerning government securities VI.) Final filmed version of prior filed "story board" of television or video retail communication

I, II, III, IV, AND VI ONLY.... GVT SECURITIES DO NOT REQUIRE FILING

Which of the following are defined as securities under the '33 ACT? I.) Equity securities VII.) Endowments II.) Debt securities VIII.) Insurance contract III.) Mutual Funds IX.) Fixed Annuities IV.) Unit Investment Trusts X.) ADR's V.) Real Estate Limited Partnerships VI.) Variable Annuities

I, II, III, IV, V, AND VI ONLY

WHO are CMO'S ISSUED AND COLLATERALIZED by? I.) Ginnie Mae II.) Fannie Mae III.) Freddie Mac IV.) Sally Mae V.) FHA Mortgage Loans VI.) Conventional/Private Issuers

I, II, III, V, VI ONLY... NOT SALLY MAE

On what basis is an exercise notice ASSIGNED from a member firm to a CUSTOMER I.) Random Basis II.) FIFO III.) LIFO IV.) Any other method approved by the exchange

I, II, IV ONLY

SELECT THE FOLLOWING THAT ARE ELIGIBLE FOR PORTFOLIO MARGIN ACCOUNT TRADING: I.) equity securities II.) warrants on equity securities III.) government securities IV.) equity and index-based options V.) securities futures products

I, II, IV, V ONLY... GVT SECURITIES ARE NOT ELIGIBLE

MSRB rules are subject to approval *by the SEC* and are enforced by...? I.) SEC II.) FINRA III.) NYSE IV.) US Treasury V.) Governors of the Federal Reserve Banks VI.) Comptroller of Currency VII.) FDIC

I, II, V, VI, AND VII ONLY... NOT ENFORCED BY US TREASURY AND NYSE... FINRA IS PRIMARY ENFORCER

Choose all that are CORRECT about CMO'S: I.) interest is paid in a fixed amount over the life of the CMO II.) principal is is paid in a fixed amount over the life of the CMO III.) principal is paid in a varying amount over the life of the CMO IV.) CMO'S are considered derivatives

I, III, AND IV ONLY

Contributions to a SIMPLE IRA...? I.) Are deductible to the employer II.) Are deductible to the employee III.) Employers can choose to match employee contributions up to 3% of employee's compensation IV.) Employers can choose to make non-elective straight contributions of 2% of employee's compensation

I, III, AND IV ONLY

During the 20 day cooling period... I.) Selling group is formed II.) Public offering price is determined III.) Blue sky is determined IV.) Due diligence meeting is held

I, III, AND IV ONLY

EPS may be increased by...? I.) Tax loss carried forward II.) Increase of corporate income tax rates III.) Decrease of corporate income tax rates IV.) Retirement of outstanding bonds

I, III, AND IV ONLY

FINRA has NO JURISTICTION over...? I.) Insurance II.) Real Estate Investment Trusts III.) Commodities IV.) Residential Real Estate Transactions

I, III, AND IV ONLY

Federal securities laws require clear disclosure about compensation paid to CEO's, CFO's and other high ranking executive officers of publicly traded companies. These disclosures can be found in which documents? I.) Company's annual report on form 10K II.) Taxation an income of employees on form 1099-b III.) Company's annual proxy statement IV.) Company's registration statement filed with the SEC

I, III, AND IV ONLY

In order for the executor of an estate to transfer funds, the MUST obtain...? I.) Affidavit of domicile II.) Power of attorney III.) Death certificate IV.) Will and testament of deceased customer

I, III, AND IV ONLY

Municipal "Tax-Exempt Commercial Paper" is short term "paper" (max of 270 days) and is used to..? I.) Raise working capital II.) To refund outstanding bonds III.) To cover extraordinary expenses IV.) Cover construction and maintenance costs

I, III, AND IV ONLY

SRO's... I.) Supported by its own members II.) Gvt agencies that set minimum commission rates III.) Set rules, regulations, and penalties IV.) Allows its members to vote

I, III, AND IV ONLY

The DMM can accept which of the following types of orders I.) Market orders II.) Limit orders III.) Open orders IV.) Day orders V.) Not held orders

I, III, AND IV ONLY

UNREGISTERED cold callers are limited in what they can do because they are NOT REGISTERED. However, they CAN... I.) Send investment literature to prospects II.) Pre-qualify and profile prospects III.) Set up appointments for prospects with their RR IV.) Extend invitations to firm-sponsored events

I, III, AND IV ONLY

Under the JOBS Act, RESEARCH ANALYSTS covering emerging growth companies may.... I.) Attend meetings w/issuers mgmt and investment banking personnel including "pitch" meetings II.) Solicit investment banking business III.) Publish research reports immediately before and after quiet period w/o reports being considered "offers" by SEC IV.) Outline their research and ask follow-up questions

I, III, AND IV ONLY

When a 12b-1 mutual fund is eligible to be listed in the news, FINRA requires.... I.) All 12b-1 fees must be footnoted (identified as 12b-1's) II.) Prospectus must be attached to the footnote III.) funds w/ contingent deferred sales load cannot be listed as a no-load fund IV.) funds w/ a contingent deferred sales load must be footnoted and indicate that a contingent deferred sales load may apply

I, III, AND IV ONLY

Which of the following are characteristics of "Overriding Royalty Sharing Agreement" in a Oil and Gas Partnership? I.) Sponsor does not pay any costs related to drilling costs II.) Sponsor pays all of the costs related to the drilling costs III.) Sponsor shares in revenues as soon as the first oil/gas is removed from the well IV.) Sponsor may also be the property owner

I, III, AND IV ONLY

Which of the following are characteristics of Municipal Notes? I.) They are short term municipal debt securities II.) They are long-term municipal debt securities III.) Issued for interim or temporary financing IV.) Consist of TANS, RANS, TRANS, and, BANS

I, III, AND IV ONLY

Select any scenario that VIOLATES FINRA gifts and gratuities rules... I.) RR allows his top revenue-producing customer to use his personal jet to fly to Bahamas for a week II.) RR gives $50 gift certificates to 3 customers of the firm during the year III.) RR has 2 tickets to a football game and gives them to a customer and her husband IV.) B/D is hosting a retirement investment seminar for its high net worth customers covering travel and lodging expenses

I, III, AND IV ONLY...

MSRB regulates ALL firms transacting business in municipal securities. MSRB rules apply to...? I.) Municipal securities brokers and dealers II.) Municipal securities issuers III.) Bank muni dealer departments (must be separate and identifiable unit of the bank) IV.) Financial consultants

I, III, AND IV ONLY... DOES NOT APPLY TO MUNI ISSUERS

The "Bid Form" is a document included w/ the "Official Notice of Sale" sent to customers, that becomes the contract between issuer and underwriting syndicate. The "Bid Form" includes...? I.) Signature on behalf of the submitting sealer II.) Legal opinions III.) Coupon rates IV.) Maturities

I, III, AND IV ONLY... DOES NOT INCLUDE LEGAL OPINIONS

Which of the following are TRUE about "Payroll Deduction Plans? I.) They are a type of Non-Qualified Plan II.) They are a type of Qualified Plan III.) Allow employee to voluntarily have employer take AFTER-TAX deductions from paychecks IV.) Allow employee to voluntarily have employer take PRE-TAX deductions from paychecks V.) Pays for insurance, healthcare, and other items

I, III, AND V ONLY

In a profit sharing plan...? I.) The determination to contribute and the sixe of contribution is determined by the employer II.) Deductible allowances can be carried forward to the next tax plan year III.) The contribution is dependent on company profits IV.) All funds in the plan are tax-sheltered V.) It is designed for employees to be more productive

I, III, IV, AND V ONLY

"Soft Dollar Arrangements" are ways for financial institutions like IA firms and mutual funds to pay for services rather than paying cash, offered by B/D. Which of the following arrangements has the SEC deemed ACCEPTABLE? I.) Research VI.) Holding seminars for customers II.) Computer Hardware VII.) Analytical Software III.) Office equipment VIII.) Meals IV.) Operational Overhead IX.) Telecommunication Lines V.) Reimbursement for travel expenses

I, VI, AND VII ONLY

For the following LOW-PRICED stocks, show the initial margin requirements for the SHORT SALE of the low-priced stocks I.) $0 to $2.50 II.) $2.50 to $5.00 III.) $5.00 to $$10.00 IV.) $10 and above

I.) $2.50 PER SHARE II.) 100% OF THE MARKET VALUE III.) $5.00 PER SHARE IV.) 50% OF THE MARKET VALUE

MATCH THE TERMS: I.) Margin account long II.) margin account short III.) Margin account mixed a.) for selling stock short, borrows stock from B/D b.) Long and short positions in the same account c.) For buying stock, customer borrows money

I.) & C.) ; II.) & A.) ; III.) & B.)

ARRANGE IN THE CORRECT ORDER: When a transaction is processed thru a broker dealer the order in which brokerage operations are preformed as... I.) Wire Room Order II.) Margin department III.) Cashier's department IV.)Purchase and Sale Department

I.) , IV) , II.) , III.)

How do you calculate BUYING POWER in a margin account... I.) From SMA II.) From excess equity III.) At REG T

I.) 2 x SMA (UNLESS IN MINIMUM MAINTENANCE) II.) 2 x EXCESS EQUITY III.) AMOUNT OF APPRECIATION IN THE ACCOUNT

Determine the REGULAR WAY settlements for the following securities... I.) Common Stock IV.) Municipal Bonds II.) Preferred Stock V.) Government Bonds III.) Corporate Bonds VI.) Options

I.) 2nd BUSINESS DAY II.) 2nd BUSINESS DAY III.) 2nd BUSINESS DAY IV.) 2nd BUSINESS DAY V.) 1st BUSINESS DAY VI.) 1st BUSINESS DAY

MATCH THE FOLLOWING ORDERS: I.) Final or Kill Order II.) All or None Order III.) Immediate or Cancel Order a.) Must be executed at once in its entirety or partially. If partially filed, the remaining order will be cancelled. b.) Must be filed at once in its entirety or it will be cancelled c.) Must be executed in its entirety but not immediately.

I.) AND B.) ; II.) AND A.) ; III.) AND C.)

MATCH the REG M rules with the corresponding statements that they govern. I.) Rule 101 II.) Rule 102 III.)Rule 103 IV.) Rule 104 V.) Rule 105 a.) pertains to NASDAQ passive market making b.) governs short selling in anticipation of public offering c.) covers activities of underwriters, B/D's, and others participating in a distribution d.) governs activities of issuers and selling security holders e.) governs stabilization transactions and certain post-offering activities by the underwriters

I.) AND C.) ; II.) AND D.) ; III.) AND A.) ; IV.) AND E.) ; V.) AND B.)

Match the definition with the appropriate municipal notes...: I.) Grants received by municipalities from Fed gvt (transit authority) for purchase of busses, trains, ferries, vans, etc. Dependent on congressional appropriation II.) Combination of tax and revenue note III.) Raises monies which will be paid off w/ tax receipts in the future IV.) Raises money to be paid off w/ sale of bonds in the future. Issues notes in meantime to carry it thru until long-term revenues are collected V.) Raises monies to be paid off w/ realized/received revenues a.) TAN b.) RAN c.) TRAN d.) BAN e.) GAN

I.) AND E.) (GRANT ANTICIPATION NOTES) II.) AND C.) (TAX &REVENUE ANTICIPATION NOTE) III.) AND A.) (TAX ANTICIPATION NOTE) IV.) AND D.) (BOND ANTICIPATION NOTE) V.) AND B.) (REVENUE ANTICIPATION NOTE)

Here is an example of a customer's MIXED margin account with REG T at 50% acct current mkt value balance SMA EQUITY cash $40,000 $15,000 CR 0 long $60,000 $30,000 DR $5,000 short $35,000 $45,000 CR 0 I.) Calculate equity for EACH account II.) Calculate total equity on deposit w/ the firm III.) How mush cash may the customer w/draw w/out adding equity?

I.) CASH: $40,000 + $15,000 = $55,000 (mkt value + cash on hand LONG: $60,000 - $30,000 =$30,000 (DONT look @SMA) SHORT: $45,000 - $35,000 = $10,000 II.) TOTAL EQUITY = $55,000 + $30,000 + 10,000 = $95,000 III.) W/DRAWAL AMT: $20,000.... ($15,000(CR CASH) + $5,000 (SMA LONG) + 0 (SMA SHORT) = $20,000)

DEALERS: I.) Acts in agency capacity by bringing together buyers and sellers II.) Acts in principal capacity by buying/selling securities from own inventory III.) Charges mark-up or mark-down IV.) Charges a commission for their services

II AND III ONLY

If a company's convertible bonds were converted into common stock, what effect would it have on the balance sheet? I.) Decrease of total assets II.) Decrease of total liabilities III.) Increase to shareholder's equity IV.) Increase to Working capital

II AND III ONLY

When shares of stock are being that were INHERITED... I.) Holding period is automatically short-term II.) Holding period is automatically long-term III.) IRS allows for a "step-up" in the cost basis from the original cost to the market value of the securities at the date of death of the descendent IV.) IRS allows for a "step-up" in the cost basis from the market value to the original cost of securities at the date of death of descendent

II AND III ONLY

Which of the following are CORRECT regarding "Saucer Charts?" I.) A Saucer Chart is a pattern indicating that security has top and is now moving down and is "Bearish" II.) A Saucer Chart is a pattern indicating that security has reached bottom and is not heading up and is "Bullish" III.) An Upside-Down Saucer Chart is a pattern indicating that security has reached a top and is moving down and is "Bearish" IV.) An Upside-Down Saucer Chart is a pattern indicating that a security has reached a bottom and is moving up and is "Bullish"

II AND III ONLY

Which of the following are characteristics of Municipal "Bond Funds?" I.) They are Closed-end funds II.) They are Open-end funds III.) They are continually offered and are actively managed IV.) They are offered only once and not actively managed

II AND III ONLY

Which of the following are deductions available to investors in a Real Estate DPP? I.) Principal payments II.) Depreciation deductions III.) Interest payments on the mortgage

II AND III ONLY

Which of the following determines an investors COST BASIS? I.) Interest Payments II.) Dividends III.) Stock Splits IV.) Capital gains

II AND III ONLY

Which of the following options positions represent a COMBO? I.) LONG 1 XYX MAY 40 CALL & SHORT 1 XYZ MAY 50 CALL II.) LONG 1 ABC JUL 30 CALL & LONG 1 ABC OCT 30 PUT III.) SHORT 1 EFG JAN 50 CALL & SHORT 1 EFG JAN 50 PUT IV.) SHORT 1 DIS APR 40 CALL & SHORT 1 DIS JUL 50 CALL

II AND III ONLY

Which of the following would be the minimum margin requirement for a long purchase made in a margin account? I.) $2,000 requirement, no exceptions II.) $2,000 or current initial margin, whichever is greater III.) Full dollar amount of purchase, if less than $2,000 IV.) Current initial margin only

II AND III ONLY...

Term life insurance... I.) Has no death benefit II.) Has a death benefit only III.) Has no cash values built up in it IV.) Policyholders may take out loans against the policy

II AND III ONLY... OWNERS CANNOT TAKE OUT LOANS AGAINST IT

A maintenance call can be satisfied by which of the following? I.) Listed stocks having a market value equal to the call II.) Marginable unlisted stocks having a loan value equal to the call III.) Cash equal to the amount of the call IV.) Amount of cash equal to 50% of the call

II AND III ONLY.... (I IS NOT CORRECET BECAUSE WHEN A DEPOSIT OF *SECURITIES* IS BEING USED.... IT HAS TO HAVE AN EQUAL ****LOAN VALUE**** NOT MARKET VALUE)

If an investor purchases Treasury Bills and keeps rolling them over at maturity, which of the following is TRUE? I.) Investor will have a stable rate of return II.) Investor will have a fluctuating rate of return III.) Investor will maintain a stable principal IV.) Investor will face a possible capital loss

II AND III ONLY.... RATE OF RETURN CAN ALWAYS FLUCTUATE, AND THEY DO NOT HAVE MUCH CAPITAL RISK, SO II AND III ARE THE BEST ANSWERS

Which of the following are uses of a STOP ORDER? I.) To assure execution at a specific price II.) To protect a profit on a long position for a customer III.) To limit the loss on a short position of a customer

II AND III ONLY.... WHEN STOP ORDER BECOMES MARKET ORDER... A SPECIFIC PRICE OF EXECUTION *CANNOT BE GUARANTEED*

Customers wishing to MINIMIZE RISK in a common stock portfolio can accomplish this by...? I.) The smallest percentage of securities in the portfolio are affected differently by economic conditions II.) The largest percentage of securities in the portfolio are affected differently by economic conditions III.) Smallest percentage of portfolio consists of leading common stocks IV.) Largest percentage of portfolio consists of leading common stocks

II AND IV ONLY

Which of the following statements is TRUE regarding an order entered to buy 600 shares of ABC at 45? I.) Floor broker must remain at the trading post until order is executed II.) Order is left w/ the DMM and will be entered in the DMM's book III.) Order must be executed at exact price specified in the order IV.) The order may be partially executed

II AND IV ONLY

Which of the following are correct with regards to DEFLATIONARY PERIODS on Municipal Bonds? I.) In periods of deflation, Interest rates increase, and bond prices decline II.) In periods of inflation, interest rates decrease, and bond prices increase III.) Investor would buy short-term bonds if he anticipates declining interest rates (deflation) IV.) Investor would buy long-term maturities if he anticipates declining interest rates (deflation)

II AND IV ONLY DEflation.... rates DEcline

Which of the following individuals or organizations BENEFIT from the purchase of municipal bonds and their tax-exempt status? I.) IRAs II.) High tax-bracket individuals III.) Low tax-bracket individuals IV.) Commercial Banks V.) Insurance companies VI.) Pension plans VII.) Charitable Institutions

II IV AND V ONLY

Which of the following are characteristics of "Variable-Rate/Auction-Rate Demand Bonds?" I.) Short-term municipal bonds II.) Long-term municipal bonds III.) interest rates on the bonds are reset periodically (daily, monthly, weekly, etc.) IV.) Allow bondholders to tender bonds back to muni bond dealer at par plus accrued interest, when rates are reset

II, III AND IV ONLY

Which of the following are reasons for why "Advance Refunding" is done? I.) To profit from differences of interest rates paid on outstanding bonds and paid out on gvt securities (arbitrage) II.) To restructure a debt issue III.) To remove restrictive covenants IV.) To pay the municipality's expenses V.) To reduce interest costs

II, III AND V ONLY

Which of the following is TRUE regarding the taxation of wash sales? (Wash Sale Rule) I.) If a customer sells securities at a loss, and within 30 days before or after sale, purchases a subsequently identical security, the loss is allowed in the current year for federal tax purposes. II.) If a customer sells securities at a loss, and within 30 days before or after sale, purchases a subsequently identical security, the loss is NOT allowed in the current year for federal tax purposes. III.) This rule applies to call options and convertible securities IV.) When a loss is disallowed, the loss is added to the cost of the new position. This adjustment postpones loss until new position is sold

II, III, AND IV

An order ticket sent to the floor of a stock exchange will contain WHICH of the following? I.) Commissions / mark-up/down II.) Type of order III.) Time of entry IV.) Designation of customer's account

II, III, AND IV ONLY

Disclosure of the firm's Business Continuity Plan MUST be made to customers IN WRITING... I.) Annually II.) At account opening III.) Posted on firm's website IV.) Mailed upon customer request

II, III, AND IV ONLY

Employees are eligible to participate in an SEP IRA if...? I.) Individual is 18 years of age or older II.) Individual is 21 years of age or older III.) Have worked for employer for 3 out of the last 5 preceding years IV.) Have received at least $600 of wages in the current tax year

II, III, AND IV ONLY

For a good delivery, stock certificates must be in either: I.) Odd lots II.) Round lots (units of 100 shares) III.) Multiples of 100 shares IV.) Combinations permitting 100 share units

II, III, AND IV ONLY

Member firms CAN place TEMPORARY HOLDS of the disbursement of funds in a FINRA Rule 2165 adult's account if member firm has reason to believe that financial exploitation....? I.) Has never happened II.) Has happened III.) Is happening IV.) Will happen

II, III, AND IV ONLY

PASSIVE investment management is characterized by...? I.) Exceeding the holdings of an index II.) Replicating or matching the holdings of an index III.) Buying and holding (not actively trading) IV.) Low management fees

II, III, AND IV ONLY

Permanent life insurance... I.) Provides death benefit only II.) Provides a death benefit and CSV III.) Policyholders may take out loans against the policy IV.) Market risk is the greatest risk associated w/ variable life

II, III, AND IV ONLY

Preliminary prospectus may NOT.... I.) make an estimated offering price II.) be altered in ANY way (attach business card, highlight text) III.) include/declare public offering price IV.) be used by an RR to confirm a sale

II, III, AND IV ONLY

Sallie Mae issues.... I.) Long-term equity anticipations notes II.) Long-term debentures III.) Short-term notes IV.) Notes w/ fluctuating interest rates

II, III, AND IV ONLY

When a corporation opens a cash or margin account, which documents are required of the corporation? I.) Affidavit of Domicile II.) Corporate Resolution III.) Articles of Incorporation IV.) Corporate Bylaws or Charter

II, III, AND IV ONLY

When an RR makes a written recommendation to a customer, which of the following MUST be disclosed? I.) Price of the security over the past 12 months II.) Date of the recommendation III.) That firm is a market maker in the security, if that is the case IV.) Current price of the security

II, III, AND IV ONLY

When calculating yield on a municipal bond, you would consider the... I.) Dated Date II.) Call Date III.) Maturity IV.) Coupon Rate

II, III, AND IV ONLY

Which are types of withdrawal plans for mutual funds? I.) Fixed Interval Plan II.) Fixed Percentage Plan III.)Fixed Dollar Plan IV.) Fixed Number of Shares Plan

II, III, AND IV ONLY

Which of the following advertisements do NOT require principal approval? I.) Personal websites that are not investment or securities related II.) Publicly-available websites III.) RR's personal profile on member firm's website IV.) Blogs with static content (profiles, background, wall information)

II, III, AND IV ONLY

Which of the following are ADVANTAGES of a sole proprietorship? I.) Unlimited personal liability II.) No or low Startup costs III.) Losses may be used to offset income for tax purposes IV.) Simplest way of doing business, no legal filings required

II, III, AND IV ONLY

Which of the following are characteristics of "Advance Refunding Bonds?" I.) Generally issued as callable II.) Generally non-callable III.) Generally redeemed at the original maturity date IV.) New bonds must be outstanding for more than 90 days

II, III, AND IV ONLY

Which of the following are characteristics of "Special Assessment Bonds?" I.) Classified as GO Bonds II.) Classified by Revenue Bonds III.) Issued by municipalities, principal and interest are payable from assessment on the benefited property IV.) Assessments could be collected from users of sewer, lighting, and/or electricity

II, III, AND IV ONLY

Which of the following characteristics do T-notes and T-Bonds have in common? I.) Maturities of 2-10 years II.) Pay interest semi-annually III.) Sold with fixed coupon rates IV.) Issued in minimum denominations of $100 V.) Issued as callable

II, III, AND IV ONLY

Which of the following groups have jurisdiction for hearing complaints against FINRA members? I.) NASAA - State securities law enforcers in charge with sentencing member firms if found guilty with inappropriate practices II.) Department of Enforcement/Mkt Regulation - sets a panel who must issue opinion *w/in 60 days* after hearing. Member has *25 days to appeal the opinion III.) National Adjudicatory Council - can affirm, modify, reverse, increase or reduce any sanction or impose any other sanction. IV.) SEC - final level of appeal

II, III, AND IV ONLY

Which of the following is TRUE regarding FINRA Rule 2111 ("The Suitability Rule")? I.) The rule applies to potential customers that do act of the recommendation II.) Recommendation must be documented for speculative securities (commodities, futures, leveraged ETFs, linked ETFs, etc) III.) Recommendation must be in the customer's best interest IV.) Recommending speculative securities to receive higher commissions, and margin securities for customer to buy larger quantities would be violations of this rule

II, III, AND IV ONLY

Which of the following types of organizations may 403(b) plans be administered to? I.) Corporate entities and businesses II.) Public educational systems like teachers and administrators III.) 501(c) 3 Organizations like religious, educational, or charitable organizations IV.) Certain employers of ministers

II, III, AND IV ONLY

Which of the following are TRUE about GNMA "Pass-Throughs?" I.) They pay interest on an annual or semi-annual basis II.) A portion of the payments received will be principal III.) They are issued in registered form IV.) The minimum investment is $1,000

II, III, AND IV ONLY... THEY PAY INTEREST ON A MONTHLY BASIS

Which of the following are correct regarding zero-coupon bonds? I.) Issued at a premium to par value II.) Most volatile of all fixed income securities III.) Taxed annually, even though non income was received IV.) Earnings are imputed via accretion

II, III, IV ONLY

Which of the following are factors of a DIVERSIFIED MANAGEMENT INVESTMENT COMPANY? I.) Assets are not regulated II.) not more that 5% of assets are invested in one corporation III.) does not own more than 10% outstanding stock of one company IV.) 75% of assets are regulates

II, III, IV ONLY

SMA may be increased by...? I.) Stock dividends II.) Appreciation in mkt value of securities in account III.) Cash deposits that were not required IV.) Cash dividends on stocks in the account V.) Long sale of securities (50% of sales proceeds)

II, III, IV, AND V ONLY STOCK DIVIDENDS TO NOT INCREASE SMA

Which of the following are TRUE about Coverdell Plan CONTRIBUTIONS and DISTRIBUTIONS I.) Contributions are deductible II.) Can be made until age 18 unless the beneficiary is special needs III.) Contributions must be made in cash IV.) The after-tax contribution portion of a distribution is tax-free V.) The earnings portion of a distribution NOT used for education is subject to ordinary income tax plus 10% penalty

II, III, IV, AND V ONLY... CONTRIBUTIONS ARE **NOT DEDUCTIBLE**

Which of the following gifts, gratuities would be ALLOWED for a RR to give to a customer? I.) An all expense-paid-for vacation II.) Sports tickets provided RR is attending the event III.) Sports tickets when the RR is not attending the event IV.) Charitable event or entertainment dinner if the RR attends V.) Charitable event or entertainment dinner if RR does not attend VI.) Seminars and sales meetings

II, IV, AND VI ONLY

Select all the scenarios in which FINRA's Suitability Rule would apply: I.) A broker dealer opens a new account with an RR II.) Prospect discusses investment options w/ and RR and decides to take no action III.) Prospect discusses potential investment options w/ RR and tells RR that she's interested, but doesn't open an account until the end of the week IV.) A prospect receives a sales call from an RR, and decides to open an account to place an order

III AND IV ONLY

Which of the following are characteristics of municipal bond Competitive bidding? I.) Municipality hires a managing underwriter to handle distribution of revenue bonds II.) Underwriting agreement describes terms and interest costs for the offering which are negotiated between municipality and underwriter III.) Municipality requests sealed bids from underwriters on the issue of GO Bonds IV.) Underwriter is chosen by the one with the lowest "Net interest Cost to the issuer/municipality

III AND IV ONLY

Which of the following items would a corporation be allowed to use as deductions for federal tax purposes? I.) Dividends paid REITS owned by the corporation II.) Capital gains distributions paid by mutual funds owned by the corporations III.) Dividends received by corporation from another corporation's common stock owned by the corporation IV.) Dividends received by corporation from another corporation's preferred stock owned by the corporation

III AND IV ONLY

Which of the following items on a balance sheet would be considered a LONG-TERM ASSET? I.) Notes Payable II.) Inventory III.) Property, Plant & Equipment IV.) Accounts Receivable

III ONLY

If an owner of an IRA dies, and the designated beneficiary is a NON-SPOUSE... I.) He/she may elect to become the owner of the account II.) He/she may rollover the IRA to another IRA III.) Distributions will be taxed as ordinary income in the year in which distribution is received

III ONLY... MAY NOT BECOME OWNER OR ROLLOVER

Hedge Funds... I.) are a form of investment companies II.) heavily regulated by SRO's and SEC III.) take on long and short positions IV.) are normally established as limited partnerships V.) subject investors to a higher degree of risk

III, IV, AND V ONLY

Which of the following books and records is required to be maintained for *5 YEARS* by a B/D? I.) Customer complaints II.) Customer account information III.) Monetary instruments sales records (available upon request) IV) Customer Ledgers

III.) ONLY

What is the regular way settlement of T-Bills traded in an auction? And what is the regular way settlement of T-Bills traded in the secondary market?

IN AUCTION: T+3 IN SECONDARY MKT: T+1

How is the settlement, or GROSS SETTLEMENT amount of an index option calculated?

IN THE MONEY AMOUNT OF THE CONTRACT * $100... ***AT THE CLOSE OF TRADING DAY*** **DO NOT CONSIDER PREMIUM AMOUNT IN CALC.**

LONG 1 ABC JUN 80 @10, ABC @87; what is the INTRINSIC VALUE of this option contract?

IN THE MONEY BY 7 POINTS (87 - 80)... INTRINSIC VALUE = 7 POINTS

With what currency are foreign currency options settled in at the Philadelphia Stock Exchange?

IN US DOLLARS

What is the Federal Deposit Insurance Company (FDIC)?

INDEPENDENT AGENCY OF FEDERAL GOVERNMENT... - INSURES BANKS AND THRIFT INSTITUTIONS FOR AT LEAST $250,000... - **STOCKS, BONDS, MUTUAL FUNDS, LIFE INSURANCE ARE ***NOT*** FDIC INSURED**

What is the RED HERRING/PRELIMINARY PROSPECTUS?

INITIAL VERSION OF PROSPECTUS *INCLUDED IN REGISTRATION STATEMENT SENT TO SEC* - USED TO SOLICIT INTEREST IN ISSUE BEFORE EFFECTIVE DATE.

An EXEMPTION for the Customer-Specific Suitability Obligation occurs when dealing with ____________ ______________ .

INSTITUTIONAL INVESTORS

What is a "FIDELITY BOND"?

INSURANCE PROTECTING B/D FROM THEFT OR EMBEZZLEMENT FROM EMPLOYEES... REQUIRED

What is an "Investment Analysis Tool"

INTERACTIVE TECHNOLOGICAL TOOL PRODICING SIMULATIONS THAT PRESENT LIKELYHOODS OF VARIOUS INVESTMENT OUTCOMES, IF CERTAIN INVESTMENTS/STATEGIES ARE IMPLEMENTED

What is the "Assumed Investment Rate (AIR)"?

INTEREST RATE USED TO DETERMINE PAYOUT OF AN ANNUITY CONTRACT ON THE ANNUITY DATE, *NOT GUARANTEED*

LONG 1 ABC JUN 80 @10, ABC @87; what is the TIME VALUE of this option contract?

INTRINSIC VALUE = 7 POINTS; 10 - 7 = 3... TIME VALUE = 3 POINTS

What is the definition of the "Present Value Method" for computing return on investment in a DPP?

INVESTOR MEASURES *FUTURE RETURN* IN RELATION TO *TODAY'S VALUE* (TIME VALUE OF MONEY

What is the definition of the "Payback Method" for computing return on investment in a DPP?

INVESTOR MEASURES *TIME REQUIRED* FOR *AFTER-TAX INCOME TO = AFTER-TAX CASH EXPENDITURE*

What is the definition or FORWARD PRICING?

INVESTORS GET THE NEXT CALCULATED BID AND ASK PRICE (AS OF MKT CLOSE) AFTER ORDER IS ENTERED

In types of underwriting agreements, what is a ALL OR NOTHING AGREEMENT?

ISSUE IS CANCELLED UNLESSCOMPLETELY SOLD TO PUBLIC... *ACTS AS AN AGENT*... **ESCROW ACCOUNT IS ALWAYS ESTABLISHED**

What is the definition of "Efficient Market Hypothesis?"

IT IS IMPOSSIBLE TO BEAT THE MKT BECAUSE STOCK MARKET IS EFFICEIENT, MEANING... - **CURRENT SHARE PRICES REFLECT ALL RELEVANT INFORMATION** - ** IMPOSSIBLE TO PURCHASE UNDERVALUED STOCKS, OR SELL AT INFLATED PRICES** - ***NEITHER TACTICAL OR FUNDAMENTAL ANALYSIS WILL BE ABLE TO PROUCE HIGHER THAN AVERAGE RATES OF RETURN***

What is the intrinsic value of an options contract?

IT IS THE AMOUNT (OF POINTS) THAT THE OPTIONS CONTRACT IS IN THE MONEY BY

What does "GOOD DELIVERY" mean?

IT MEANS A STOCK OR BOND CERTIFICATE IS IN A FORM PERMITTING OWNERSHIP TO BE READILT TRANSFERRED.

What is the "LEGAL OPINION' of a Municipal Bond?

LEGAL OPINION PRINTED ON BOND... STATEMENT OF INDEPENDENT LAW FIRM HIRED BY ISSUER... **STATES INTEREST INCOME IS EXEMPT FROM FEDERAL INCOME TAX**

Retail communications may NOT present any ranking that covers a period of __________________________ , unless the ranking is based on_____________________ .

LESS THAN ONE YEAR; YIELD

What is an SMA (Special Memorandum Account)?

LINE OF CREDIT EXTENDED TO THE CUSTOMER BY THE BROKER-DEALER

Investing in SMALL CAP securities requires due diligence because many small cap securities have ___________ risk.

LIQUIDITY RISK

Arbitration is generally preferred over litigation because....

LITIGATION IS MORE COSTLY

An investor is LONG 1 ABC DEC 60 CALL @ 6 when ABC declares a 50% STOCK DIVIDEND. How many shares will the option represent after the stock dividend?

LONG 1 ABC DEC 40 CALL COVERING 150 SHARES... (1 contract = 100 shares)... (100shares * .5 = 50additional shares; 50 + 100 = 150 share value per contract)... stock price = 60*100/150 = $40

An investor is LONG 1 ABC AUG 50 CALL, when ABC splits 2:1. On the ex-date the investor would be?

LONG 2 ABC AUG 25 CALL (2/1 * 100/1 = 200 SHARES)... (100(old shares) * 50(old strike price) = $5000(div)/200(new shares) = $25(NEW STRIKE PRICE))

An investor is looking for maximum profit potential and is bullish on ABC. What options position would be best for this investor?

LONG ABC CALLS

If you SHORT A PUT in your portfolio, how is the position considered COVERED, if there is a long put covering the short position ?

LONG PUT MUST BE GREATER OR EQUAL IN PRICE... AND SHORT PUT MUST EXPIRE AT SAME TIME OR BEFORE LONG PUT

Definition of a LONG STRADDLE, and the reason why an investor would establish one? And what is the maximum loss potential?

LONG STRADDLE = LONG CALL + LONG PUT... EXPECT A LARGE PRICE MOVEMENT, BUT DO NOT KNOW WHICH WAY...MAKE MONEY BY EXERCISING ONE OPTION AND LETTING THE OTHER EXPIRE... MAX LOSS: PREMIUMS PAID

Assume an investor is... LONG 1 ABC JUNE 40 CALL @ 5 & LONG 1 ABC JUNE 40 PUT @ 4 What is this position called? And what are the upside and downside breakeven points on this position?

LONG STRADDLE POSITION... UPSIDE: 40 + (5+4) = $49 DOWNSIDE = 40 - (5+4) = $31

What do MONEY MARKET FUNDS invest in?

LOW RISK *DEBT* SECURITIES W/ MATURITIES OF *12 MONTHS OR LESS*

If a quote on a stock was BID 41.13 / ASK 41.22, what is the highest price DMM can ask for when selling, and lowest price he can offer when buying?

LOWEST PRICE TO BUY: $41.14 HIGHEST PRICE TO SELL $41.21

Ina mutual fund, what is the job of the INVESTMENT MANAGER?

MANAGES THE FUND'S PORTFOLIO OF SECURITIES

What is "Marking at the Open"

MANIPULATIVE PRACTICE... ORDERS PLACED AT ARTIFICIALLY LOW OR HIGH PRICES *TO INFLUENCE OPENING PRICE OF A STOCK*

Investor purchased $1,000,000 of ABC ETF. What is the margin and maintenance requirements?

MARGIN REQ: $500,000... MAITENANCE REQ: $250,000

Write the margin requirements for each of the following LONG margin accounts: I.) Customer A: $10,000 II.) Customer B: $3,000 III.) Customer C: $1,500

MARGIN REQUIREMENTS: CUSTOMER A: $5,000 (50%) CUSTOMER B: $2,000 (>50%) CUSTOMER C: $1,500 (<$2,000, FULL FRICE)

What is SYSTEMATIC RISK?

MARKET RISK COMMON TO ALL SECURITIES OF SAME GENERAL CLASS... CANNOT BE ELIMINATED W/ DIVERSIFICATION.

What is the maximum profit and loss potential for a DEBIT SPREAD?

MAX PROFIT: DIFFERENCE BETWEEN STRIKE PRICES - NET DEBIT MAX LOSS: ORIGINAL/NET DEBIT

What is the maximum profit and loss potential when BUYING A PUT?

MAX PROFIT: LIMITED... STOCK PRICE MUST BE >/ 0 MAX LOSS: LIMITIED... PREMIUM PAID

What is the maximum profit and loss potential for a CREDIT SPREAD?

MAX PROFIT: ORIGINAL/NET CREDIT MAX LOSS: DIFFERENCE BETWEEN STRIKE PRICES AND NET CREDIT

What is the maximum profit and loss potential when SELLING A PUT?

MAX PROFIT: PREMIUM INCOME MAX LOSS: LIMITED... STRIKE PRICE - PREMIUM

What is the maximum profit and loss potential when SELLING A CALL

MAX PROFIT: PREMIUM PAYMENT RECEIVED MAX LOSS: UNLIMITED (IF UNCOVERED/NAKED) LIMITED (IF COVERED)

What is the maximum profit and loss potential when BUYING A CALL?

MAX PROFIT: UNLIMITED MAX LOSS: PREMIUM PAYMENT

When reading a ticker tape and a ".SLD" is printed besides a stock symbol ("STY.SLD"), what does that mean?

MEANS THERE WAS A *SLIGHT DELAY* IN THE REPORTING TRANSACTION... >10 SECONDS... REPORTED LATE

What is the definition of a portfolio's "BETA?" - a beta of 1 would be expected to move ______________ the market - a beta of .8 would be expected to move ____________ the market - a beta of 1.3 would be expected to move ___________ the market

MEASURE OF *VOLATILITY OF A STOCK'S PRICE* WHEN *COMPARED TO THE MARKET AS A WHOLE* - ABOUT THE SAME AS THE MARKET - LESS THAN THE MARKET - MORE THAN THE MARKET

What is a DVP(Delivery Versus Payment)/RVP (Receive Versus Payment) ACCOUNT? a.k.a. COD (Cash on Delivery account)

METHOD OF SETTLEING TRADES USED BY INSTITUTIONAL CLIENTS THAT USES *A BANK AS CUSTODIAN OF ITS ASSETS*. IT IS CONSIDERED THE *SAFEST WAY* TO SETTLE TRADES.... EXCHANGE FOR CASH AND SECURITIES HAPPENS SIMULTANEOUSLY.

What is the maintenance requirement of SHART 100 SHARES DEF ETF @26.00 (300% LEVERAGE)

MKT VALUE: $2,600... MAITENCE REQ **3 X .30 (30%) = .90... **$2,600 X .90 = $2,340 REQ MAINTENANCE**

out of ALL MONEY MARKET INSTRUMENTS, which instruments are the MOST and LEAST LIQUID?

MOST LIQUID: TREASURY BILLS LEAST LIQUID: BANKER'S ACCEPTANCES

How are annuity units calculated from accumulation units?

MULTIPLYING THE NUMBER OF ACCUMULATIONS BY THE NET ASSET VALUE PER UNIT IN THE SEPERATE ACCOUNT

Carmen is meeting with a client and talking about mutual funds and really wants to make this sale, as he thinks this fund is suitable for his client. He induces the customer with an upcoming dividend payment as a means of executing a sale. Is this allowed?

NO, THIS IS NOT ALLOWED... THIS IS KNOWN AS SELLING DIVIDENDS.

An investor owns an options contract: SHORT 1 XYZ APR 40 PUT @ 4; ABC IS TRADING AT 43 Is this option contract in the money?

NO.. IT IS OUT OF MONEY MKT Px > STRIKE Px... FOR PUT OPTION CONTRACTS... THEY ARE IN THE MONEY WHEN MKT PRICE < STRIKE PRICE

What is the MARGIN REQUIREMENT for COVERED calls and puts?

O% OR $0.00 BECAUSE THE POSITION IS COVERED

What is an EXCHANGE OFFER?

OFFER BY A COMPNAY TO EXCANGE ONE SECURITY OF A COMPANY FOR ANOTHER TYPE OF SECURITY OFFFERED BY COMPANY (exchange from bonds of bondholders for issues of common stock)

What is a TENDER OFFER?

OFFER MADE BY COMPANY TO SHAREHOLDERS *ABOVE OUBLIC OFFERING PRICE* TO *ENCOURAGE SHAREHOLDERS TO SELL THEIR SHARES BACK*

A Municipal Bond is offered... - 6.5% coupon - Due 05/01/2030 - Offered to yield 5.5% - Callable in 2023 - Yield to maturity 5.75% Which of the following above would the price of the bonds be calculated on?

OFFERED TO YIELD 5.5%... CALCULATED ON THE LOWEST POSSIBLE YIELD

On what basis is an exercise notice ASSIGNED from the OCC to a member firm (broker dealer)

ON A RANDOM BASIS

When does the holding period on stock purchased by exercising a call option begin?

ON TH DAY AFTER DATE CALL IS EXERCISED

What is an opening purchases and a closing sales for a BUYER OF AN OPTION?

OPENING: ESTABLISHING/ADDING A LONG POSITION (BUY A CALL / PUT) CLOSING: ELIMINATING/REDUCING LONG POSITION (SELL A CALL / PUT)

What are opening sales and closing purchases for a SELLER/WRITER OF AN OPTION?

OPENING: ESTABLISHING/ADDING TO A SHORT POSITION (SELL A CALL / PUT) CLOSING: ELIMINATING/REDUCING SHORT POSITION (BUY A CALL / PUT)

What is the formula for "Margin of Profit?"

OPERATING PRIFIT / NET SALES

What is the formula for "Interest Coverage/Fixed Charged Coverage?"

OPERATING PROFIT / INTEREST EXPENSE - **COVERAGE SHOULD BE 6 OR 7 TIMES EXPENSES

What is an option STRADDLE POSITION?

OPPOSITE OF SPREAD... DOUBLING DOWN ON ONE SIDE OF THE MARKET. TAKING BOTH LONG OR BOTH SHORT POSITIONS ON A STOCK,... AN EQUAL AMOUNT OF CALLS OR PUTS... WITH THE SAME EXPIRATION MONTH AND THE EXERCISE PRICE

What is the definition of a MARKET ORDER?

ORDER TO BUY OR SELL SECURITY *AT BEST POSSIBLE PRICE IN THE MKTPLACE*.. **MKT ORDERS ENDERRED AT BEGINING OF DAY ALWAYS HAVE PRIORITY OVER LIMIT ORDERS**

How are short term capital gains taxed?

ORDINARY INCOME

What is the COST BASIS of common or preferred stock?

ORIGINAL PRICE PAID **PLUS ALL ASSOCIATED COSTS (COMMISSIONS AND FEES)**

What is the COST BASIS for a bond?

ORIGINAL PRICE PAID AND **DOES NOT INCLUDE ACCRUED INTEREST

If an issuer is found to have committed fraudulent behavior under the '33 ACT, what is the customer entitled to for repayment of damages?

ORIGINAL PURCHASE PRICE + INTEREST OR ORIGINAL PURCHASE PRICE + DAMAGES (IF CUSTOMER NO LONGER OWNS SECURITY)

What is the OTCBB?`

OTC BULLETIN BOARD... DISPLAYS REAL-TIME QUOTES, LAST-SALE PRICES, AND VOLUME INFO IN *LOW-PRICE OTC EQUITIES/ADR's*... *DO NOT HAVE TO MEET LISTING REQUIREMENT*

403(b) plans may be rolled over into....

OTHER 403(b) PLANS, IRA's, AND OTHER QUALIFIED RETIREMENT PLANS

How is the investment manager paid?

PAID BY A MGMT FEE **BASED ON AVERAGE DAILY NET ASSETS OF THE FUND.** - *FEE IS DEDUCTED FROM THE GROSS INCOME OF THE FUND.

How do you calculate CONVERSION PRICE on a convertible preferred stock or bond?

PAR VALUE / #COMMON SHARES RECEIVED = CONVERSION PRICE...

What are "Equipment Leasing Limited Partnerships?"

PARTNERSHIPS FORMED TO BUY COMPUTERS, RAILROAD CARS, AIRPLANES, ETC. **AND THEN LEASE THEM TO BUSINESSES** - ALLOW INVESTORS TO RECEIVE **SHARE OF INCOME (LEASE PAYMENTS) FROM LEASE PROGRAMS**

What is the difference between PASSIVE and ACTIVE ETF's?

PASSIVE: CREATED TO *MIMIC* BENCHMARK INDEX, *TRADING IS MINIMAL* AND *RETURNS MATCH INDEX* ACTIVE: CREATED TO *OUTPERFORM* SPECIFIC INDEX, *MORE TRADING*, *MORE VOLATILE*, *MORE EXPENSIVE- HAVE PORTFOLIO MANAGER*

What is DRIP (Dividend Reinvestment Plan)?

PLAN SET UP BY FUND *FOR A FEE* THAT WILL REINVEST ALL DIVIDENDS BACK INTO FUND FOR MORE SHARES... CAN HAVE FULL OR PARTIAL REINVESTMENT.

Define REHYPOTHECATION.

PLEDGING BY A B/D *OF CUSTOMER'S SECURITIES* *TO THE BANK* IN EXCHANGE FOR A LOAN OF CASH TO B/D TO COVER MARGIN LOANS MADE TO CUSTOEMRS.

Indicate which of the following events would be considered POSITIVE with regards to the factors in determining creditworthiness of a municipal issuer... 1.) Outstanding debt: stable/low levels vs unstable/high levels 2.) Per-Capita Debt: Low levels vs high levels 3.) Debt to Value Ratio: high ratio vs low ratio 4.) Debt to property value ratio: high ratio vs low ratio 5.) Character of the economy: stable economy vs unstable economy 6.) Tax Collection Record: bad record vs good record 7.) Property Valuation Trends: Decreasing values vs increasing values 8.) Tax Rates: Decreasing rates vs Increasing rates 9.) Unfunded Liabilities: low levels vs high levels 10.) Operating Deficits: low levels vs high levels 11.) Attitude Toward Debt: Issues debt often vs Avoids debt 12.) Population: educated, young, growing vs elderly, declining 13.) Budget Practices: Fiscally irresponsible vs Conservative

POSITIVE EVENTS: 1.) LOW LEVELS 2.) LOW LEVELS 3.) LOW RATIO 4.) LOW RATIO 5.) STABLE ECONOMY 6.) GOOD TAX COLLECTION RECORD 7.) INCREASING PROPERTY VALUES 8.) DECREASING/STABLE TAX RATES 9.) LOW LEVELS OF UNFUNDED LIABILITIES 10.) LOW LEVELS OF DEFICITS 11.) AVOIDS DEBT 12.) EDUCATED, YOUNG, GROWING POPULATIONS 13.) FISCALLY CONSERVATIVE

What is SEC RULE 15C3-3?

PRESCRIBES A *MANDITORY BUY-IN PERIOD* FOR CUSTOMERS WHO *FAIL TO DELIVER SECURITUES THEY'VE SOLD

IF an RR wishes to share in the profits and losses (losses are mandatory), what must the RR obtain.

PRIOR WRITTEN AUTHORIZATION FROM **MEMBER FIRM AND CUSTOMER**

What is the ABLE Program?

PROGRAM CREATED UNDER SECTION 529A OF IRS CODE, PERMITTING A STATE/STATE AENCY TO MAINTAIN *TAX-ADVANTAGED SAVINGS PROGRAM* FOR *SUPPORTING INDIVIDUALS W/ DISABILITIES.*

What is "Free-Riding"?

PROHIBITED UNDER REG T... WHEN INVESTOR BUYS AND SELLS A SECURITY *W/OUT PAYING FOR IT*... B/D MUST *FREEZE ACCT FOR 90 DAYS*

Regarding FINRA's 10 disclosure and reporting events, HOW LONG does each member firm have to report the existence of any of the 10 events? (ex. violation of any securities law, complaints, convictions, defendants, indictments)

PROMPTLY, W/IN *30 **CALENDAR** DAYS*

What is the purpose for "Safe Harbor 404(c) Provisions?"

PROTECTION OF LIABILITY FOR EMPLOYER IF THEY MAKE POOR INVESTMENT DECISIONS RESULTING IN LOSSES IN EMPLOYEES' PLANS **IN A SELF-DIRECTED PLAN**

What does buying OEX LEAP's PUTS accomplish?

PROVIDES A **HEDGE** FOR A **LARGE PORTFOLIO OF LARGE-CAP EQUITY SECURITIES**

Under the '33 ACT, what is REGULATION S?

PROVIDES EXEMPTION FROM REGISTRATION FOR **OFFERINGS/SALES OF SECURITIES OCCURING OUT SIDE THE U.S. (off shore transactions)** - INTENDED TO HELP U.S. & FOREIGN COMPANIES RAISE CAPITAL QUICK/CHEAP W/O FULL BLOWN REGISTRATION REQUIREMENTS

What is the Consolidated Quotation Service (CQS)?

PROVIDES ON A CURRENT AND CONTINUOUS BASIS, THE *BEST BAD/ASK PRICE AND SIZE AVAILABLE* AT THAT TIME IN *ALL LISTED ELIGIBLE SECURITIES

Who (what types of orders are allowed/permitted to participate in the OPENING ROTATION of options trading?

PUBLIC MARKET AND LIMIT ORDERS ONLY.

When are the SETTLEMENT DATES for the PURCHASE and REDEMPTION of mutual fund shares?

PURCHASE: CUSTOMER MUST PAY W/IN **2 BUSINESS DAYS** REDEMPTION: CUSTOMERS MUST BE PAID W/IN ** 7 BUSINESS DAYS**

What is a Regressive Tax?

PUTS A GREATER TAX BURDEN ON THOSE WHO CAN LEAST AFFORD IT AND USE IT THE MOST (SALES TAX/GASOLINE TAX). A FLAT TAX IS CONSIDERED A REGRESSIVE TAX... PEOPLE SPEND A LARGER PORTION OF THEIR INCOME ON THESE TAXES

What is the definition of the "Internal Rate of Return" for computing return on investment in a DPP?

RATE WHICH *DISCOUNTS FUTURE CASH FLOWS* FROM AN INVESTMENT TO AN AMOUNT THAT *EQUALS THE AMOUNT INVESTED* (TIME VALUE OF MONEY)

What are RIGHTS OF ACCUMULATION (ROA)?

REDUCED SALES CHARGEON *NEW PURCHASES* WHEN **TOTAL VALUE OF ALREADY HELD SHARES... PLUS ADDITIONAL AMOUNT INVESTED... *EXCEEDS* SALES CHARGE BREAKPOINT**

Under the "Taping Rules", when can a member firm avoid being subject of the rule?

REDUCING STAFF OF RR's FROM RESTRICTED FIRMS... **IF REDUCTION HAPPINS W/IN 30 DAYS OF NOTICE OF BEING SUBJECT OF THE RULE**

If a customer BUYS a security in a restricted account, the customer is required to deposit ___________ of the purchase price.

REG T %

If a customer BUYS for MORE than they sell ON THE SAME DAY in a restricted account, the customer is required to deposit the _____________ of the _______________ of the buy and sell

REG T %; DIFFERENCE

What is the REGULAR WAY and REG T settlement times for when an options contract is BOUGHT OR SOLD?

REGULAR WAY: T + 1 (NEXT BUSINESS DAY) REG T: T + 4 (4 BUSINESS DAYS AFTER)

If a dealer sells treasury securities w/ an agreement to repurchase them a short time late, it is known as a ________________________________ .

REPURCHASE AGREEMENT (REPO)

Once an order has been entered, what MUST happen if there is any change or correction to the order?

REQUIRES APPROVAL OF BRANCH MANAGER / SUPERVISOR **BEFORE** CHANGE IS MADE

If a customer does NOT have residential/business address, or APO/FPO, what can he use as an address?

RESIDENCE/BUSINESS ADDRESS OF NEXT OF KIN OR ANOTHER INDIVIDUAL

For an investment company and Mutual fund, what does the CUSTOIAN do?

RESPONSIBLE FOR *SAFEKEEPING OF CASH AND SECURITIES* AND IS USUALLY A BANK. - THEIR MAIN FUCTION IS RECORDKEEPING AND CLERICAL SERVICES.

Under SEC RULE 144 what is the difference between restricted shares and control shares?

RESTRICTED: ACQUIRED THRU PVT PLACEMENT AND ARE *NOT REGISTERED* CONTROL: ACQUIRED BY AFFILIATED PERSON OF A COMPANY, *MAY OR MAY NOT BE REGISTERED*

Income received from an investment including any profits and losses after it has been sold is referred to as __________________ .

RETURN ON CAPITAL

What is INTEREST RATE RISK?

RISK OF LOSS OF MKT VALUE ON FIXED INCOME SECURITIESBECAUSE OF A RISE IN INTEREST RATES... ESPECIALLY W/ LONG-TERM MATURITIES

What is LIQUIDITY RISK?

RISK OF NOT BEING ABLE TO SEL SECURITY AT FAIR MARKET VALUE (DPP'S & THINLY-TRADED STOCKS)

What is CALL RISK?

RISK THAT BOND WILL BE CALLED/REDEEMED PRIOR TO MATURITY... DUE TO LOWERING INTEREST RATES... BONDHOLDER THEN REINVESTS MONEY AT A LOWER RETURN.

What is CREDIT RISK?

RISK THAT COMPANY WILL DECLARE BANKRUPTCY OR FINANCIAL OBLIGATIONS WONT BE MET.

What is REINVESTMENT RISK?

RISK THAT INTEREST RATES WILL DECLINE AND THE INCOME(DIVIDENDS/INTEREST) FROM INVESTMENT WILL EARN *LESS WHEN REINVESTED THAN ORIGINAL INVESTMENT*

What is LEGISTLATIVE / REGULATORY RISK?

RISK THAT LEGISTLATIVE CHANGES (NEW LAWS) WILL ADVERSELY AFFECT INVESTMENT

What is CURRENCY RISK?

RISKS THAT CHANGES IN THE EXCHANGE RATE WILL ADVERSELY AFFECT INVESTMENT

Where can you find a list of municipal bonds which have been called? a.) Moody's/Mergent Municipal and Government Manual b.) Standard and Poor's Repository c.) Bloomberg (Bloomberg services) d.) S & P Called Bond Record Book

S & P CALLED BOND RECORD BOOK

What is the definition of a COMBINATION? What are its maximum loss potentials?

SAME THIS AS A STRADDLE (BOTH LONG OR BOTH SHORT POSITIONS ON THE SAME SECURITY) BUT HAVE DIFFERENT EXERCISE PRICES AND/OR EXPIRATION MONTHS... SAME MAX LOSS POTENTIAL FOR LONG AND SHORT COMBOS AS LONG AND SHORT STRADDLES

What does the STANDARD DEVIATION and R-SQUARED values for a mutual fund tell you?

SD: HOW RETURN OF FUND HAS *VARIED FROM HISTORICAL AVERAGE* R-SQUARED: PERCENTAGE OF FUND'S MVMT THAT CAN BE EXPLAINED BY A BENCHMARK/INDEX.

Definition of a SHORT STRADDLE, and the reason an investor would establish this position? And what is the maximum loss potential?

SHORT STRADDLE = SHORT CALL + SHORT PUT... EXPECT THE PRICE OF A SECUTIRY TO REMAIN NUETRAL... MAKE MONEY FROM THE PREMIUMS RECEIVED... MAX LOSS: UNLIMITED... UNCOVERED POSITION

Which type of fund is considered the RISKIEST type of fund?

SPECIALIZED/SPECIAL SITUATION/SECTOR FUND.... BECAUSE OF THEIR CONCENTRATION IN ONE INDUSTRY OR SECTOR

WHEN/HOW is the SETTLEMENT VALUE of foreign currency options determined? AND What is the exercise cycle?

SPOT PRICE (cash mkt price) AT 12PM ET(noon), THE DAY BEFORE THE EXPIRATION DATE. MARCH EXERRCISE CYCLE... (MAR, JUN, SEPT, DEC)... (3..6..9..12)

What is a VERTICAL BEAR SPREAD?

SPREAD WHICH HAS DIFFERENT STRIKE PRICES... BUY THE OPTION W/ THE HIGHER STRIKE PRICE & SELL THE OPTION W/ THE LOWER STRIKE PRICE (long 1 ABC AUG 25 call; short 1 ABC AUG 20 call) OR (long 1 ABC AUG 25 put; short 1 ABC AUG 20 call)

What is a VERTICAL BULL SPREAD?

SPREAD WHISH HAS DIFFERENT STRIKE PRICES... BUY THE OPTION W/ THE LOWER STRIKE PRICE & SELL THE OPTION W/ THE HIGHER STRIKE PRICE (long 1 ABC JUL 60 call; short 1 ABC JUL 70 call) OR (long 1 ABC JUL 60 put; short 1 ABC JUL 70 put)

How do spreads at a NET CREDIT (net sell/receive money from net premiums) become profitable?

SPREADS AT A NET CREDIT ARE EXPECTED TO EXPIRE WORTHLESS SO THE INVESTOR KEEPS THE "CREDIT"...OR PREMIUM SPREAD BECOME NARROWER

What are the steps to CALCULATING THE PARITY PRICE of a bond or preferred stock?

STEP 1: CALCULATE CONVERSION RATIO PAR VALUE / CONVERSION Px = #COMMON SHARES STEP 2: USE COMMON SHARES TO FIND PARITY PRICE MKT PRICE OF BOND OR PREFERRED / #COMMON SHARES OR... IF GIVEN MKT PRICE OF COMMON STOCK... USE... #COMMON SHARES * MKT Px COMMON

What does the TICKER TAPE of a stock display?

STOCK SYMBOL, LATEST PRICE, VOLUME TRADED ON FLOOR OF EXCHANGE.(ONLY SELL SIDE OF ORDER)

An investor's portfolio contains 10 corporate bonds 200 shares of common stock. If both securities decline in value by 1/2 a point, the TOTAL DOLLAR LOSS is?

STOCK: 1/2 POINT = $.50 * 200 = $100 BONDS: 1/2 POINT = $5 * 10 = $50 TOTAL LOSS = $150

If a customer wishes to have a NUMBERED ACCOUNT, what must the customer do?

SUBMIT WRITTEN STATEMENT ATTESTING TO OWNERSHIP OF THE ACCOUNT, TO BE KEPT ON FILE W/ B/D. **NO FALSE NAMES**

What is the Fixed Income Clearing Corporation (FICC)

SUBSIDARY OF DTCC... CLEARING, INFO AND SETTLEMENT OF ***GVT SECURITIES, REPURCHASE AGREEMENTS, AND MORTGAGE-BACKED SECURITIES***

What is the NSCC?

SUBSIDARY OT DTCC...CENTRALIZED CLEARING, INFO, SETTLEMENT SERCICES TO FINANCIAL INDUSTRY (B/D's, BANKS, MUTUAL FUNDS, INSURANCE CO's) *ALL SECURITIES LISTED ON EXCHANGE ARE DTCC/NSCC ELIGIBLE*

What is "Recharacterization" in the terms of rollovers?

SWITCHING FROM A ROTH IRA TO A TRADITIONAL IRA OR VICE VERSA... **NO LONGER ALLOWED** - INDIVIDUALS HAVE UNTIL THE DUE DATE OF TAX RETURN IN YEAR OF RECHARACTERIZATION.

In the types of underwriting agreements what is a FIRM COMMITMENT?

SYNDICATE BUYS ENTIRE ISSUE AND RESELLS IT TO PUBLIC... CARRIES *GREATEST RISK* BECASUE UNDERWRITERS COULD END UP WITH UNSOLD SHARES... *FIRM ACTS AS DEALER BECAUSE IT TAKES OFFERING INTO ITS OWN INVENTORY*

What is an ad-valorem tax?

TAX "ACCORDING TO VALUE FOR GOs BACKED BY *ASSESSED VALUATIONS ON PROPERTY* AT LOCAL LEVEL

If a customer owns fully paid securities held in street name, and then they decide they want the securities to be registered, what must the B/D inform them?

THAT SECURITIES MUST BE REGISTERED IN THE PERSON'S NAME

Under the Customer Identification Program (CIP), if attempts to verify customer information by the B/D fails, what happens to the customer's account?

THE ACCOUNT WILL BE CLOSED

When does the HOLDING PERIOD begin on STOCK THAT WAS PURCHASED (long call or short put) when the option was EXERCISED?

THE DAY AFTER THE DAY THE OPTION IS EXERCISED

What is the difference between SECURED BONDS and (SUBORDINATED) DEBENTURES?

THE DEBENTURES ARE NOT CONSIDERED AS SAFE BECAUSE THEY ARE NOT BACKED BY ANY TYPE OF COLLATERAL.

What does a spread refer two

THE DIFFERENCE BETWEEN PREMIUMS OF A LONG AND SHORT OPTION CONTRACT

For Exchange-Listed Companies, who is responsible for disseminating information about stock splits, mergers, dividends, rights offerings, spin-offs, etc.?

THE EXCHANGES THEMSELVES

An investor purchased a security at $60. Later it declined to $40. When it was 40, the investor gives the gift to a friend. Later the stock declines to $20. The friend sells the stock at $20. Who can claim the loss of the sale proceeds and how much can they claim as a loss?

THE FRIEND WOULD ONLY BE ALLOWED TO CLAIM THE LOSS FROM $40 DOWN TO $20.

In terms of market movements, what does "CONSOLIDATING" mean?

THE MARKET IS MOVING SIDEWAYS

Who is the issuer, clearing agency and guarantor for ALL LISTED OPTIONS IN THE U.S.?

THE OCC (OPTIONS CLEARING CORPORATION)

What is MARKET TIMING (TIMING) RISK?

THE RISK OF ENTERING INTO AN INVESTMENT EITHER TOO EARLY OR TOO LATE...

What is BUSINESS RISK?

THE RISKS ASSOCIATED WITH A PARTICULAR BUSINESS AND THEIR UNIQUE CIRCUMSTANCES... (POOR EARNINGS, BAD BUSINESS PLAN) THAT WILL NEGATIVELY AFFECT PRICE OF THEIR STOCK

In order for a trustee to establish a MARGIN ACCOUNT, for the trust, it MUST be authorized in...?

THE TRUST AGREEMENT

What is the name of the document that specifies the area over which a condominium owner has exclusive use and the areas that are shared w/ other condominium owners??

THE UNIT DEED

Utility companies are frequently referred to as companies which "Trade on the Equity," because.....

THEY AN DO A LOT OF BUSINESS ON *BORROWED FUNDS* **W/OUT INCREASING EQUITY POSITIONS**

For an investment company/mutual fund, where are mgmt, transfer agent, and custodial fees paid by the fund from?

THEY ARE PAID OUT OF THE FUND'S ASSETS

What is the most important factor when choosing what class of shares in a mutual fund?

TIME SPENT HOLDING INVESTMENT

What is the purpose of a straddle?

TO DOUBLE DOWN ON A STOCK POSITION IN PREPERATION OF A MAJOR EVENT.

What is the purpose of an alternative order?

TO LIMIT RISK ON AN EXISTING POSITIONS... TWO ORDERS ARE ENTERED, AND EXUCUTION OF ONE OF THEM CAUSES CANCELLATION OF THE OTHER.

What is the primary purpose an investor establishing a spread?

TO LIMIT RISK... BY PLACING INVESTOR ON BOTH SIDES OF THE MARKET... also limits profit potential

What is the primary objective of the Investment Company Act of 1940?

TO PROVIDE FULL AND FAIR DISCLOSURE TO INVESTORS SO THEY CAN MAKE WELL INFORMED DECISIONS

What is the "Balance Sheet Equation?"

TOTAL ASSETS = TOTAL LIABILITIES + NET WORTH

______________________ is an investor's annual return on an investment including gains, losses, dividends, interest, and/or distributions

TOTAL RETURN

For a mutual fund, what is TOTAL RETURN and YIELD based on?

TOTAL RUTURN: DIVIDENDS, CAPITAL GAINS/LOSSES, AND CHANGES OF NAV YIELD: DIVIDENDS ONLY

What is a LEVERAGED ETF?

TRACKS BENCHMARK/INDEX... **BORROW CAPITAL TO GENERATE GREATER PERCENTAGE OF RETURN** THEY USE FUTURES AND OPTIONS... **GAINS AND LOSSES ARE MAGNIFIED**

On what basis and day do index options trade and expire?

TRADE AND EXPIRE ON A **MONTHLY** BASIS... EXPIRE ON THIRD FRIDAY OF EXPIRATION MONTH

What is the settlement schedule for transactions on ETF's?

TRADE DATE + 2 (T + 2)

What odes the Market-Maker at the CBOE do?

TRADE FOR THEIR OWN ACCOUNTS AT THEIR OWN RISK... NEVER HAVE PRIORITY OVER PUBLICORDERS AT THE SAME PRICE ON THE OBO'S BOOK.

An investor looking for SAFETY OF PRINCIPAL and SOME INCOME should consider investing in _________________ and ________________

TREASURY NOTES; TREASURY BONDS

TRUE OF FALSE: If an investor purchases a "book-entry" municipal bond, the ONLY evidence of ownership they receive is a CONFIRMATION

TRUE

TRUE OR FALSE For a RR to sell securities in a state, the RR must be registered in the state

TRUE

TRUE OR FALSE If an RR makes recommendation saying its "Government Guaranteed," simply because investment contains some Government guarantees Mortgages, the RR would be making a misrepresentation to client

TRUE

TRUE OR FALSE The size of an option's time value DECREASES over the life of the contract?

TRUE

TRUE OR FALSE Under the Customer Identification Program (CIP), the CUSTODIAN'S information in an UGMA/UTMA Account must be verified

TRUE

TRUE OR FALSE: "NON-CASH PAYMENTS, which are NOT associated with a sales target are allowed and NOT require to be in the prospectus

TRUE

TRUE OR FALSE: (NYSE Rule 457) Upon the UNSOLICITED request of a customer, an RR MAY give advice as to how to vote in a proxy contest W/OUT becoming a participant.

TRUE

TRUE OR FALSE: A fiduciary may be found to have breached their duties of they do not maintain an investment policy statement

TRUE

TRUE OR FALSE: A mutual find may satisfy its federal law delivery requirements by delivering a summary prospectus to each customer and posting their statutory prospectus on the internet.

TRUE

TRUE OR FALSE: A principal must review , prior to use, any social media site that an associated person intends to use for business purposes

TRUE

TRUE OR FALSE: A quote does NOT necessarily the best bid or offer prevailing in the marketplace

TRUE

TRUE OR FALSE: A syndicate manager MAY VIOLATE the terms of a "syndicate letter" if it is for the benefit of the syndicate account

TRUE

TRUE OR FALSE: ALL SELL orders must indicate whether the investor is *long or short*

TRUE

TRUE OR FALSE: ALL advertising and sales literature MUST be approved by a principal prior to first use under MSRB rules.

TRUE

TRUE OR FALSE: ALL disciplinary actions of SRO's are subject to the review of the SEC

TRUE

TRUE OR FALSE: Adjusted basis is important for limited partner because a limited partner can *NEVER WRITE OFF MORE THAN ADJUSTED BASIS*

TRUE

TRUE OR FALSE: After purchasing shares to stabilize, manager may ONLY resell shares at the public offering price

TRUE

TRUE OR FALSE: An order to buy or sell *AT THE OPENING* will be cancelled and returned to the broker dealer if order does not reach the trading post on the exchange floor at the opening of trading

TRUE

TRUE OR FALSE: B/D's will GUARANTEE/ENDORSE a customer's signature and that guaranty MUST be acceptable to the transfer agent.

TRUE

TRUE OR FALSE: CASH PAYMENTS made to associated persons MUST be disclosed IN THE PROSPECTUS and may only be paid by the MEMBER FIRM, NOT the offeror of fund or variable contract

TRUE

TRUE OR FALSE: If a mistake is made and a trade is erroneously reported, the CUSTOMER MUST pay/sell actual price at which the trade was executed.

TRUE

TRUE OR FALSE: If an individual has reportable tax preference items but is NOT subject to AMT, they would STILL CLAIM ITEM on their tax return, but would NOT be subject to the AMT

TRUE

TRUE OR FALSE: If the cash surrender value is paid to the policyholder, the policy is TERMINATED, and death benefit is GONE

TRUE

TRUE OR FALSE: If the owner of an IRA dies and it is given to a CHARITY, the charity will NOT pay income taxes on the inherited IRA

TRUE

TRUE OR FALSE: If trading of an option is halted, you can still exercise your option.

TRUE

TRUE OR FALSE: In an UGMA/UTMA account, there can only be ONE custodian and ONE beneficiary.

TRUE

TRUE OR FALSE: In sales lit. w/ hypothetical illustrations, member firms MAY provide personalized illustrations for an INDIVIDUAL CUSTOMER'S circumstances

TRUE

TRUE OR FALSE: Investors should look for a bond with a LOW DURATION

TRUE

TRUE OR FALSE: Issuers of new issues MAY direct sales of new shares to anyone who does not meet the definition of a "restricted person"

TRUE

TRUE OR FALSE: Limited partners MUST generally be ACCREDITED investors (with at least $1 million in net worth)

TRUE

TRUE OR FALSE: Losses incurred from a WASH SALE for tax purposes ALLOW for the new position's cost basis to be ADJUSTED based on the amount of the loss

TRUE

TRUE OR FALSE: NON-CASH payments in conjunction with sales, not associated with a sales target, are ALLOWED and are NOT REQUIRED to be in a prospectus.

TRUE

TRUE OR FALSE: ODD LOTS are in "good delivery" in ANY denomination as long as the odd lot certificates total the exact number of shares representing the odd lot

TRUE

TRUE OR FALSE: OPEN-END investment companies can ONLY issue voting common shares

TRUE

TRUE OR FALSE: Officers of Financial Institutions (President of bank/officer of financial institution) WOULD NOT BE REQUIRED to obtain authorization from the financial institution's board of directors

TRUE

TRUE OR FALSE: On the date a corporation declares a cash dividends on common stock, it becomes a CURRENT LIABILITY on the balance sheet of a corporation. When they are PAID, the effect on the balance sheet would GO BACK TO NORMAL

TRUE

TRUE OR FALSE: Quiet periods are "eliminated" for IPO's of emerging growth companies, per JOBS Act

TRUE

TRUE OR FALSE: Recommending "Speculative, Low-Priced" Securities to a customer w/out obtaining info of current securities holdings, financial info, etc. is considered a VIOLATION of FINRA rules

TRUE

TRUE OR FALSE: Revenue bonds are NOT repaid from ad-valorem taxes and are NOT backed by taxing powers of the municipality. They are intended to be self-liquidating

TRUE

TRUE OR FALSE: Speculative Accounts, should ONLY include investors who are able to lose all of their investment w/out it being detrimental to their financial situation

TRUE

TRUE OR FALSE: Under the "Tax Reform Act of 1986," any interest by a LP in a limited partnership is considered a "PASSIVE ACTIVITY," and therefore CANNOT deduct losses on income for the interests

TRUE

TRUE OR FALSE: Variable annuities are considered to be SECURITIES, NOT insurance. They're sold w/ delivery of a PROSPECTUS, and regulated under the '33 ACT.

TRUE

TRUE OR FALSE: When a municipal bond is purchased at a premium and sold prior to maturity, you would REDUCE COST BASIS BY AMT. AMMORITIZED

TRUE

TRUE OR FALSE: When a municipal purchased at a premium, and held to maturity, there will be NO TAX CONSEQUENCE

TRUE

TRUE OR FALSE: When selling a stock short, the stock can be borrowed INDEFINATELY, but the firm HAS the fright to demand for the stock to be returned

TRUE

TRUE OR FALSE: When the FIRST position an investor has in a security is a SHORT position, the holding period is ALWAYS SHORT TERM, and investors may NOT accumulate a holding period on a short position

TRUE

TRUE OR FALSE: if a customer is short against the box and wishes to tender their long position(turn in stock for takeover), they must FIRST cover their short position.

TRUE

TRUE OR FALSE: if you do not send options account agreement back to member firm within 15 calendar days, you CAN still make LIQUIDATING transactions

TRUE

TRUE OR FALSE: Bid prices on T-Bills are always HIGHER THAN ask prices

TRUE BECAUSE THEY ARE QUOTED AT THE AMOUNT OF DISCOUNT FROM FACE VALUE (Bid / 5.95 --- 1000fv - 59.50 = $940.50 bid price) (Ask / 5.80 --- 1,000fv - 58.00 = $942.00 Ask price)

TRUE OR FALSE: The gift, gratuity, and entertainment rule does NOT apply to gifts given to individua customers that are NOT in the relation to business of the B/D.

TRUE... (ex. wedding gifts, birth of child, etc.)

TRUE OR FALSE: If a prior business relationship exists with a customer, the "no call restriction" does NOT apply.

TRUE... (prior business relationship mans there has been some activity in customer's account such as a trade, interest or dividends received in THE PAST 18 MONTHS)

TRUE OR FALSE: Municipal GO Bonds are considered to be safer investments than Municipal Revenue Bonds

TRUE... BECAUSE THEY'RE BACKED BY TAXES, RATHER THAN BEING DEPENDENT ON USER CHARGES

TRUE OR FALSE: CLOSED-END FUNDS AND BDC's do NOT need to deliver to their customers a hard copy of their final prospectus to investors

TRUE... BUT IF AN INVESTOR REQUESTS IT, IT MUST E FURNISHED TO THEM

TRUE OR FALSE: Callable Municipal Bonds are REQUIRED to be priced at the LOWEST of all possible yields.

TRUE... CUSTOMERS MUST BE QUOTED "WORST CASE SCENARIO" YIELD OF A BOND (EX: 5% due 07/01/2050 offered to yield 4% callable in 2025)

TRUE OR FALSE: Prior principal approval is NOT required for interactive electronic forums (social media sites).

TRUE... HOWEVER, FIRMS MUST MAKE SURE CONTENT DOES NOT VOILATE FINRA RULES

TRUE OR FALSE: Time and price discretion orders are GOOD FOR DAY ONLY.

TRUE... IF CUSTOMER WANTS ORDER GOOD FOR MORE THAN ONE DAY... WRITTEN INSTRUCTIONS WOULD BE REQUIRED BY THE CUSTOMER

TRUE OR FALSE: There is NEVER a DEBIT BALANCE in a margin account SHORT?

TRUE... ONLY A CREDIT BALANCE.... *THAT RESULTD FROM THE **SALE OF NORROWED STOCK + REG T DEPOSIT***

TRUE OR FALSE A member firm, if it does not receive proxy statements from owner of stock by the date specified, MAY vote on behalf of the customer's shares

TRUE... AS LONG AS IT DOES NOT INVOLVE I.) A MERGER OR CONSOLIDATION II.) A PROXY CONTEST III.) APPRAISAL RIGHTS CONCERNING SECURITY

TRUE OR FALSE: When comparing investment companies, comparisons are PERMITTED

TRUE... AS LONG AS THEY ARE FAIR AND NOT MISLEADING.

TRUE OR FALSE: A ranking which reflects the relative performance of the separate account MAY be included in advertisements and sales literature

TRUE... AS LONG AS THEY COMPLY W/ SEC AND FINRA RULES

TRUE OR FALSE: It IS possible for RMD's to be DELAYED from having to be distributed from a 401(k) after participant reaches 72 years.

TRUE... AS LONG AS... - PARTICIPANT STILL IS EMPLOYED BY SPONSOR - PARTICIPANT DOES NOT OWN MORE THAN 5% OF THE COMPANY

TRUE OR FALSE: the LOWER the debt service coverage, the LOWER the price of the bond and HIGHER the yield

TRUE... BECAUSE LOWER THE RATIO MEANS MORE RISK

TRUE OR FALSE: Municipal Bonds trading at a discount are MORE volatile than bonds trading at a premium

TRUE... BECAUSE THEY ARE MORE SENSITIVE TO INTEREST RATE CHANGES

TRUE OR FALSE: Investment Companies are NOT required to provide a Statement of Additional Information to investors.

TRUE... BUT IF A CUSTOMER REQUESTS FOR ONE IT MUST BE DELIVERED TO CLIENT.

TRUE OR FALSE: Between filing date and effective date of a new issue, IT IS OKAY for B/D's that sell their own or another company's stock to ACCEPT UNSOLICITED ORDERS

TRUE... MAY ONLY ACCEPT UNSOLICITED ORDERS BEFORE EFFECTIVE DAYE AND AFTER FILING DATE

TRUE OR FALSE: ECNs are NOT exchanges and are NOT market makers.

TRUE... THEY ARE STRICTLY CLEARING CORPORATIONS

TRUE OR FALSE Expense ratios are HIGHER for Mutual Funds than UIT's

TRUE... UIT'S HAVE NO MANAGEMENT, SO EXPENSES ARE EVEN LOWER.

TRUE OR FALSE: Annuity holders have the right to vote

TRUE... VOTE FOR "BOARD OF MANAGERS" WHO MANAGE SEPARATE ACCT... PROXIES ARE SENT TO OWNERS

What is a Business Development Company (BDC)?

TYPE OF **CLOSED END IC** THAT PROVIDES *DEBT* TO SMALL AND MIDSIZE COMPANIES THAT CANNOT EASILY RAISE CAPITAL

What is the CONVERSION RATIO of a convertible bond and HOW DO YOU CALCULATE IT?

The conversion price tells you HOW MANY SHARES OF COMMON STOCK INVESTOR WOULD receive upon conversion... PAR VALUE / CONVERSION Px = #SHARES RECEIVED

What is "Marking at the Close"

UNETHICAL PRACTICE... PLACING BUY ORDER AT VERY END OF TRADING DAY AT A *PRICE HIGHER THAN PREVAILING MKT PRICE* TO SECURE PRICE AT CLOSE OF *A PRICE HIGHER THAN IT ACTUALLY IS*

How many contracts does the CBOE "RAES" SYSTEM EXECUTE AT A TIME?

UP TO 50 CONTRACTS FOR PUBLIC CUSTOMERS... **IT USED TO BE 10** SO WHATEVER YOU SEE ON TEST CHOOSE THAT ONE

What are the breakeven point formulas for COMBOS AND STRADDLES?

UPSIDE BREAKEVEN = CALL STRIKE + TOTAL PREMIUMS (BOTH) DOWNSIDE BREAKEVEN = PUT STRIKE - TOTAL PREMIUMS (BOTH)

What is "Interpositioning"?

USE OF A SECOND B/D BTWN CUSTOMER AND MKT MAKER *TO GENERATE UNNECESSARY COMMISSIONS*... PROHIBITED

How would you describe a LEVEL I NASDAQ quote?

USED BY *RR's* & GIVES **INSIDE QUOTE (*SUBJECT* QUOTE) WHICH IS THE HIGHEST BID AND LOWEST ASK** AND ARE AVAILIBLE TO *PUBLIC*

What is a "Simple Arbitration Procedure?"

USED FOR ANY DISPUTE/CLAIM INVOLVING A DOLLAR AMT **LESS THAN $50,000** *ONLY ONE ARBITRATIOR IS APPOINTED*

What type of spread is this? : LONG 1 ABC OCT 60 CALL SHORT 1 ABC OCT 50 CALL

VERTIAL BEAR CALL SPREAD

What type of spread is this and what is the net debit/credit? LONG 1 ABC JUN 40 CALL @ 4 SHORT 1 ABC JUNE 50 CALL @ 2

VERTICAL BULL CALL SPREAD, WITH A NET DEBIT OF 2

What is an investor's "COST BASIS"

WHAT INVESTOR PAID TO PURCHASE INVESTMENT... (if investor bought 100 ABC at $50, the cost basis would be $5000... DETERMINES TAX LIABILITY FOR INVESTOR *UPON REALIZATION WHEN STOCK IS SOLD*

When does an INTERNATIONAL FUND (overseas fund) produce HIGHER INCOME in U.S. DOLLAR?

WHEN **FOREIGN INTEREST RATES ARE HIGH** & WHEN ** U.S. DOLLAR IS WEAK**

What is a BUY BACK?

WHEN COMPANY REPURCHACES ITS OWN OUTSTANDING SHARES IN THE OPEN MKT (TREASURY STOCK)

What is the definition of the THIRD MARKET?

WHERE *LISTED STOCKS* ARE *TRADED OTC BY MARKET MAKERS*

What are PINK SHEETS?

WHOLESALE **INTER-DEALER QUOTES** PUBLISHED DAILY... WHICH DO NOT MEET NASDAQ REQUIREMENTS.

What does it mean if a customer has a MODERATELY AGGRESSIVE risk tolerance/investment strategy?

WILL ACCEPT HIGH RISK TO PRINCIPAL, HIGH VOLATILITY, SEEK HIGH RETURNS OVER TIME, COULD LOSE SUBSTANTIAL AMOUNT INVESTED

What does it mean if a customer has an AGGRESSIVE risk tolerance/investment strategy?

WILL ACCEPT SIGNIFICANT RISK, SIGNIFICANT VOLATILITY, TO ACHIEVE MAXIMUM RETURNS, COULD LOSE SOME-ALL MONEY INVESTED

What does it mean if a customer has a MODERATE risk tolerance/investment strategy ?

WILLING TO ACCEPT SOME RISK TO PRINCIPAL, SOME VOLATILITY, SEEK HIGHER RETURNS, COULD LOSE PORTION OF MONEY INVESTED

What does it mean if a customer has a MODERATELY CONSERVATIVE risk tolerance/investment strategy?

WISH TO ACCEPT LOW RISK TO PRINCIPAL, LOW VOLATILITY, SEEK MODEST PORTFOLIO RETURNS

What is the Depository Trust Clearing Company (DTCC)?

WORLD'S LARGEST SECURITIES DEPOSITORY... *REDUCES COSTS AND PROVIDES SETTLEMENT TO FINANCIAL MKTS*. *PROVIDES SAFEKEEPING AND TRANSFERS SECURITIES ELECTRONICALLY *

What is an "Agency Cross"

When the SAME B/D represents the buyer and seller in the same transaction".... ALLOWED

Is a Rollover of a qualified plan or traditional IRA to a ROTH IRA permitted?

YES.... BUT INCOME TAX WOULD HAVE TO BE TAKEN OUT OF PREVIOUS PLAN **BEFORE** DISTRIBUTIONS ARE PUT INTO ROTH IRA

An investor owns an options contract: LONG 1 ABC MAY 50 CALL @ 8; ABC IS TRADING AT 55 Is this option contract in the money?

YES.... THE OPTION CONTRACT ITSELF IS IN THE MONEY, EVEN THO THE INVESTOR IS NOT MAKING ANT PROFIT... MARKET PRICE > STRIKE PRICE

When quoting or recommending BONDS, an RR should indicate that ____________ and ______________ are subject to change

YIELDS AND PRICES

If the amount on the balance sheet representing Shareholder's Equity declines as a result of a corporate transaction while assets remain unchanged, which of the following must have occurred? a.) A decrease in prepaid expenses b.) An increase in total net worth accounts c.) An increase in total liabilities d.) A decrease in accrued expenses

c.) AN INCREASE IN TOTAL LIABILITIES.... *BALANCE SHEET EQUATION*

How does the IRS treat "CONSTRUCTIVE SALES"

if someone was buying a put/selling short on their LONG STOCK POSITION, its treated as the investor "SOLD" THE STOCK... 1.) RECOGNIZE GAIN as if stock sold AT ITS FAIR MKT VALUE ON DATE OF CONSTRUCTIVE SALE 2.) begin new holding period on LONG stock position, ON DATE OF CONSTRUCTIVE SALE 3.) when investor SELLS THE STOCK, REDUCE THE GAIN by GAIN ON CONSTRUCTIVE SALE

In investment banking what is the MANAGING UNDERWRITER and what do they do?

it is brokerage firm (Morgan Stanley/Meryl Lynch) who brings in other B/D's to help w/ issue known as selling syndicate members... determined thru either - *Negotiated Bidding (Equities)* - *Competitive Bidding (bonds)* - gets paid the managers fee

What is a SPIN-OFF?

when a SUBSIDARY of a company becomes INDEPENDENT OF PARENT COMPANY AND OPERATES ON ITS OWN.

A customer owns a million dollars worth of treasury bonds with a bid price of 97.01. What is the market value of these bonds? a.) $970,312.50 b.) $971,000.00 c.) $977,100.00 d.) $1,000,000.00

A.) $970,312.50..... 1000 BONDS (1,000,000 / $1,000)... (97 * $100 + (1/32 * $10) * 1000 BONDS = $970,312.50)

A customer is long 100 shares of XYZ at $60 per share. He then sells 1 XYZ Apr 60 call at 3. The margin requirement on this transaction is.. a.) $0.00 b.) $250 c.) $1,500 d.) $1,800

A.) ... IT IS CONSIDERED A COVERED LONG POSITION, THEREFORE NO DEPOSIT IS REQUIRED FOR THE SHORT OPTION

Which of the following is PERMISSIBLE under the '33 ACT? a.) Disclosing pricing formula for investment company shares in the preliminary prospectus b.) Taking order from customer to buy new issue of securities prior to effective date of registration statement c.) Knowingly making material misstatement of final prospectus d.) Giving a potential new client an out of date prospectus for any reason

A.) ... WOULD BE CONSIDERED FULL AND FAIR DISCLOSURE... ALL OTHERS WOULD BE MISSLEADING OR NOT APPROPRIATE

Mortgage REIT'S typically invest in which of the following? a.) properties handled by developers and builders b.) income producing properties c.) residential mortgage loans d.) oil and gas properties

A.) .... THEY TEND TO LEND MONEY TO BUILDERS AND DEVELOPERS AND PASS INTEREST INCOME ON TO SHAREHOLDERS

A customer wants to w/draw $40,000 worth of securities in a restricted margin account. How much must he deposit in cash? REG T is 50% and retention requirement is 50%. a.) $20,000 b.) $30,000 c.) $40,000 d.) $80,000

A.) 20,000... (50% OF $40,000 = $20,000)

Accrued interest on muni bonds is generally calculated using the day count basis, most commonly referred to as...? a.) 30/360 b.) Actual/360 b.) Actual/Actual d.) Actual/365

A.) 30/360

Which of the following is NOT permitted in a CMO advertisement? a.) A comparison of risks of investing in CD's vs. CMO's b.) A description of the initial issue tranche c.) The maturity date must be prominently displayed d.) The risks of investing in CMO'S

A.) A COMPARISON OF RISKS OF INVESTING IN CD'S VS CMO'S

MATCH THE TERMS WITH WHAT THEY WORK WITH/FROM: a.) LOI- Letter of Intent b.) ROA- Rights of Accumulation I.) Work from original amount client invested II.) Work from current mkt value if value has appreciated.. and work from original amount invested if the value has depreciated

A.) AND I.) B.) AND II.)

The negotiated underwriting of muni securities usually involves ALL of the following EXCEPT? a.) Bid Form b.) Legal Opinion c.) Underwriter's Agreement d.) Bond Purchase Contract

A.) BID FORM.... BID FORMS ARE USED IN *COMPETITIVE UNDERWRITINGS*

ABC is an emerging growth company that went public via IPO today. When may a member firm, that was co-manager of ABC's IPO publish research related to ABC Co.? a.) Immediately b.) 10 calendar days after IPO date c.) 3 calendar days after IPO date d.) It depends on the size of the offering

A.) IMMEDIATEY... EMERGING GROWTH COMPANIES ARE **NOT SUBJECT TO QUIET PERIODS**

Which of the following would be MOST important to an RR when determining a suitable recommendation to a client? a.) Investment objectives and risk tolerance b.) How many siblings a customer has c.) Info RR learned about customer from person who referred him d.) Whether or not customer is married and college educated

A.) INVESTMENT OBJECTIVES AND RISK TOLERANCE

A "Municipal Industrial Revenue Bond" issue would MOST LIKELY be paid from which of the following types of income? a.) Lease rentals b.) Income tax payments c.) Property tax payments d.) Sinking fund payments

A.) LEASE RENTALS

Which of the following is a BENEFIT of an UGMA account? a.) Lower tax potential on earnings b.) Tax deferral on contributions c.) Tax deductions for the donor d.) Elimination of tax liability

A.) LOWER TAX POTENTIAL ON EARNINGS... *MINOR IS IN A LOWER TAX BRACKET...* = LOWER TAXES

An RR performs a transaction via wire order in a customer's account. What is TRUE about such situations under FINRA rules? a.) Principal of firm is required to review and approve such transactions b.) Type of order is acceptable for discretionary accounts only c.) Prior to execution, written request is required from customer d.) Wire orders under $10,000 do not require approval

A.) PRINCIPAL APPOVAL IS REQUIRED

What determines the tax-liability to an individual who surrenders their holding of a variable annuity that is labeled as "non-qualified?" a.) Tax liability is determined by subtracting the amount which was invested in the annuity from net proceeds upon surrender. b.) Tax liability is determined by capital gains that investor accumulates in the separate account c.) Tax liability is determined by income that is generated in the separate account d.) Tax liability is determined by the holding period of securities in the separate account.

A.) SUBTRACTING AMOUNT INVESTED FROM NET PROCEEDS UPON SURRENDER

Non-cash payments made to RR's that are ALLOWED and not required to be in a prospectus are...? I.) Gifts up to $100 per person, per year II.) Merchandise and prizes III.) Travel expenses associated w/ educational meetings, but NOT for guests IV.) Lodging in connection w/ educational meetings, but NOT for guests V.) Occasional Meals

ALL OF THE ABOVE

Regarding customer confirmations under MSRB rules, **at or before completions of transaction w/ or for the account of a customer**, each B/D must send a *written confirmation* showing which of the following...? I.) The name, address, and telephone number of the dealer II.) Name of the customer III.) Whether trade is a purchase from customer, or sale to customer IV.) Par value of the securities

ALL OF THE ABOVE

Revenue bonds have become increasingly popular over the years because...? I.) They do not require a positive vote of the citizens II.) Do not count toward any constitutional or statutory limit on the amount of debt a municipality may incur III.) They are not payable from taxes IV.) Will not contribute toward any possible future increase in taxes

ALL OF THE ABOVE

Rollovers from a Traditional IRA... I.) To another IRA, Keogh, or qualified plan are permitted II.) Individual had 60 days to move funds from one to another plan III.) Will not incur tax liability if funds are moved in appropriate time IV.) Tax-free rollovers are limited to once every 12 months

ALL OF THE ABOVE

SEC RULE 144 requires...? I.) Restricted securities must be fully paid for and owned for at least 6 months II.) RR's may NOT solicit persons who haven't owned securities for at least 6 months III.) sales by affiliates may be made thru B/D transactions or mkt maker may take shares into inventory IV.) sales in any 90-day period are limited to either 1% of outstanding stock or avg. trading volume for last 4 weeks, whichever is greater V.) FORM 144 NOTICE OFFERING is effective for 90 DAYS VI.) Transactions must be reported to the SEC AT TIME OF SALE

ALL OF THE ABOVE

SUBJECT QUOTES provide *information only and are subject to change... Which of the following are examples of a SUBJECT QUOTE I.) 5-5.05 close (price @prev. day's close) II.) It is quoted 5-5.05 III.) It is 5-5.05 work out IV.) It is 5-5.05 small

ALL OF THE ABOVE

The "Certificate of Limited Partnership" MUST contain: I.) Info about future contributions by limited partners II.) Manner in which new partners may be added III.) Arrangement for sharing profits and losses IV.) Explanation of the general partner's role in the venture

ALL OF THE ABOVE

The custodian retains control of the minor's account until either: I.) Minor reaches majority II.) Custodian is removed by court order III.) The custodian dies, A successor custodian will be appointed IV.) If minor dies... proceeds are payable to minor's estate

ALL OF THE ABOVE

Under "FINRA Code Arbitration Procedures" in relation to how parties may be represented, which of the following are TRUE...? I.) Parties may represent themselves II.) parties may be represented by an attorney III.) Parties may be represented by someone who is not an attorney

ALL OF THE ABOVE

Under FINRA Rule 2111, prior to making a recommendation to a customer, the RR MUST obtain: I.) Any pertinent facts about the investor II.) Customer's tax status III.) Customer's investment objectives IV.) Customer's financial status

ALL OF THE ABOVE

Under FINRA Rules, CASH PAYMENTS made to associated persons MUST BE DISCLOSED IN PROSPECTUS, and can only be paid BY THE FIRM, not the fund. These cash payments include...? I.) Discounts, Concessions, and Fees II.) Loans III.) Employee Benefits IV.) Service Fees, Commissions, Overrides, Sales Loads

ALL OF THE ABOVE

Under MSRB rules, at or before completion of a transaction in muni securities, each frim must obtain information concerning the customer's....? I.) Financial Status II.) Tax Status III.) Investment Objectives IV.) Previous Investment Experience

ALL OF THE ABOVE

When determining future needs associated with the college education of a child, Which of the following factors are relevant? I.) Estimate of when child will begin college and the time horizon of when the child will finish college II.) Current cost of college and anticipated inflation if these costs III.) Anticipated return on investments dedicated to paying for a college education. IV.) Amount account owner intends to contribute to such plan or account on an annual basis

ALL OF THE ABOVE

When investing in a DPP, proceeds may be used to meet which expenses? I.) Selling Costs II.) Offering Costs III.) Organization Costs IV.) Acquisition Costs

ALL OF THE ABOVE

When opening an account an RR is considered to have demonstrated diligence when acquiring... I.) Investment objectives II.) Estimated income, net worth (excluding residence), liquid net worth III.) Age, marital status, and number of dependents IV.) Employment Status

ALL OF THE ABOVE

Which of the following are EXEMPTIONS to acquiring registered principal pre-approval to retail communications? I.) If another member firm has previously filed retail communication w/ FINRA, and has approval from FINRA, and new firm will not alter it II.) If the retail communication is not a research report III.) If retail communication is posted on an online interactive forum (chat rooms, blogs, etc.) IV.) If retail communication does not make any investment recommendations nor promote products/services of the firm

ALL OF THE ABOVE

Which of the following are EXEMPTIONS to the BrokerCheck hyperling rule? I.) Member firm that does no provide products to retail investors II.) directory of registered persons limited to names and contact info III.) Third party websites IV.) Social media sites like Twitter and Linked-In V.) emails or texts sent by member firm/RR to retail customers

ALL OF THE ABOVE

Which of the following are TRUE regarding 529 Plans (Education Savings Plans) I.) Value of the plan is based on the performance of investments chosen by account owner, who bears the investment risk. II.) Offered by many mutual fund companies, although they are NOT mutual funds, but do offer mutual funds as an investment III.) Offer potential higher returns than Prepaid Tuition Plans depending on the investments IV.) Earnings accumulate tax-free; qualified w/drawls used to pay for education expenses are tax-free. V.) These plans are municipal securities, exempt from federal income taxation, and exempt from SEC registration VI.) Typically charge enrollment fees, annual maintenance fees, asset management fees, and "loads" for plans sold by brokers

ALL OF THE ABOVE

Which of the following are TRUE regarding 529 plans? I.) Assets of a 529 plan can be transferred tax-free to another 529 plan for the same beneficiary, once within a 12 month period. II.) If student decides not to pursue an education, acct owner can request a refund, and earnings will be subject to a 10% penalty III.) W/drawls may only be made by the owner, NOT the beneficiary IV.) Policy penalties will not apply in the event of death, disability, or receipt of scholarship

ALL OF THE ABOVE

Which of the following are TRUE regarding TIPS? I.) Appreciation on the principal value must be reported and is subject to taxation at the time reported (phantom income) II.) TIP's are auctioned in July, October, and January III.) Because of the indexing feature, TIP's preserve investor's capital the best among all treasury securities IV.) Interest is subject to Federal income tax, but exempt from state and local tax

ALL OF THE ABOVE

Which of the following are TRUE regarding a municipal "Bond/Trust Indenture?" I.) Describes the rights and duties of the municipality and the trustee II.) Trustee represents the bondholders III.) Trust indenture includes bond's reserve fund needs and rates schedules IV.) Trust documents are prepared by the bond counsel, NOT the underwriter or syndicate

ALL OF THE ABOVE

Which of the following are TRUE regarding participants of 529 plans? I.) There can only be one student per account, but one student can have multiple accounts established for them II.) Anyone can establish an account for a student; there does not have to be a personal relationship between the parties III.) An account holder can establish multiple accounts for different beneficiaries IV.) Account holder can switch beneficiaries at any time as long as the new beneficiary is a qualified member of the ORIGINAL BENEFICIARY'S family.

ALL OF THE ABOVE

Which of the following are TRUE regarding settlement for municipal securities under the MSRB Uniform Practice Rules? I.) Regular way settlement is T + 2 II.) Cash trades settle on the same day III.) When, as, and if issued settle on a date agreed on by both parties, not earlier than T + 2 IV.) Municipal funds trades between firms are usually settled w/ "Clearing House Funds" used for transactions that settle in one day V.) If settlement is not regular way, in a secondary market trade, it would be settled by an agreement between the buyer and seller

ALL OF THE ABOVE

Which of the following are characteristics of "Build America Bonds (BAB's)?" I.) Taxable municipal bonds issued for infrastructure rebuilding II.) Cannot be used to refinance debt, and are fully taxable to investors III.) Expands the market for municipal bonds to pension plans and foreign investors IV.) Interest paid could be subsidized by the federal government, paying back muni. 35% of interest paid out V.) Interest paid could be subsidized by bondholders , who may take a federal tax credit equal to 35% of the interest expense

ALL OF THE ABOVE

Which of the following are characteristics of "Industrial Development / Industrial Revenue Bonds?" I.) Municipality approves sale of bonds on behalf of a company to construct/purchase facility that's then purchased by a private user II.) Interest and principal is payable solely by the company; Those companies are ultimately responsible for the debt. III.) Enables company to borrow at tax-free rates IV.) "Substantial Users" (persons/companies who benefit from bond issue) may be taxed on interest if the buy the bonds V.) Considered to be a risky investment

ALL OF THE ABOVE

Which of the following are characteristics of "Moral Obligation Bonds?" I.) Revenue bonds issued by a authority created by a state or municipality II.) Payment of interest and principal is not a legal obligation of the state or municipality III.) If authority cannot pay, state legislative appropriations would be required IV.) Considered to be risky investments

ALL OF THE ABOVE

Which of the following are characteristics of "Oil and Gas Income Programs?" I.) They buy properties with proven oil and gas reserves that are already producing, and do not do any drilling. II.) Will not produce any intangible drilling costs or depletion deductions for investors III.) Not a tax shelter investment IV.) Have the lowest capital risk of all drilling programs

ALL OF THE ABOVE

Which of the following are characteristics of "Pre-Refunding and Advance Refunding Bonds?" I.) Municipality issues new bonds whose proceeds are used in the future to pay off existing bonds II.) Proceeds of the new bonds are invested in US Gvt securities III.) Have a high degree of safety because the principal/interest invested in Gvt securities are pledged to pay principal and interest of the existing issue (Escrowed to Maturity) IV.) The pledge of principal and interest significantly reduces the credit risk of the existing issue

ALL OF THE ABOVE

Which of the following are characteristics of "Zero Coupon Municipal Bonds?" I.) Sold at deep discounts and mature at face value II.) GO and Revenue bonds may be issued as zero coupon bonds III.) Considered to be the most volatile of all municipal bonds IV.) Do NOT pay interest semi-annually, and are subject to accretion V.) Usually bought by investors planning ahead for child's college education or for their retirement

ALL OF THE ABOVE

Which of the following are characteristics of Freddie Mac (Federal Home Loan Mortgage Corporation (FHLMC))? I.) Publicly-owned, government-sponsored company which trades on the NYSE II.) "Pass-thru" securities pass thru interest and principal conventional mortgage payments by homeowners to investors monthly III.) Issued in minimum denominations of $25,000 IV.) Interest income is fully taxable at federal, state, and local levels

ALL OF THE ABOVE

Which of the following are considered FRAUDULANT activities under FINRA Rules? I.) Establishment of "Fictitious Accounts" in order to execute transactions that would otherwise be prohibited (Purchase of new issues, or transactions against firm policies) II.) Transactions in "Discretionary Accounts" that are in excess, or w/out actual discretionary authority from customers III.) Causing execution of transactions which are "Unauthorized" by customers, or sending confirmations to cause customers to accept transactions that were not agreed upon IV.) Unauthorized use or borrowing of customer's funds or securities

ALL OF THE ABOVE

Which of the following communications must be filed w/ FINRA at least *10 business days PRIOR to first use?* I.) New member/One year filing - initial communications not yet used II.) Delinquent Firms - Firms FINRA suspects have departed from the communications standards III.) Registered investment companies with self created rankings (variables, UIT's, ETF's, closed-end funds) IV.) Securities futures (unless submitted to another SRO) V.) Retail communications including rankings or performance comparison information, created by investment company VI.) Options retail communications used prior to delivery of the ODD

ALL OF THE ABOVE

Which of the following facts about T-Bills are TRUE: I.) They are used mainly by the U.S. Treasury to finance deficits in the federal budget II.) They are held in book entry form, and there is no certificate given to a customer who purchases one. III.) When FOMC is attempting to control reserve requirements of commercial banks, they most frequently buy and sell T-Bills IV.) A long-term policy in investing in T-Bills would result in stable principal and fluctuating rate of return

ALL OF THE ABOVE

Which of the following forms must be completed in order for a customer to open up a margin account? I.) New Account Report Form II.) Margin/Hypothecation/Customer Agreement III.) Customer Loan Consent Agreement IV.) Credit Agreement

ALL OF THE ABOVE

Which of the following is TRUE about GTC orders? I.) They are renewed twice a year in April and October II.) Some firms allow good for week/month orders III.) Permitted for round and odd lots IV.)when properly renewed, maintains position in DMM's book

ALL OF THE ABOVE

Which of the following is TRUE regarding overnight repurchase agreements? I.) Interest rate is usually comparable to the federal funds rate II.) Minimal interest rate risk III.) Provide an investment opportunity w/out price risk IV.) Provide investment opportunity w/out loss of liquidity

ALL OF THE ABOVE

Which of the following is included in the "Syndicate Letter" sent to syndicate members by the managing underwriter? I.) Duration of the underwriting II.) The members participation or commitment III.) Statement saying syndicate does not constitute a legal partnership IV.) Vote of majority of syndicate members determining bid and offering prices V.) Carte blanche given to the manager (can act w. customary authority and discretion) VI.) Priority of allocation schedule

ALL OF THE ABOVE

Which of the following is required in trade confirmations of "Corporate & Agency Debt Securities" for RETAIL customers ONLY? I.) Mark-up/down if member also executes an offsetting principal trade in the same security on same trading day II.) Mark-up/down must be disclosed in dollar amounts AND percentage of prevailing mkt price III.) Confirmation must contain a reference or hyperlink if electronic to FINRA trading data site IV.) Confirmation must contain time of execution expressed to the SECOND

ALL OF THE ABOVE

Which of the following is true regarding OEX index options on the S & P 100? I.) contract size is 100 times the exercise price of the index opton II.) settlement is made in cash III.) ex. settlement is based on the closing value of index on date exercised IV.) expiration is third friday of ex. month

ALL OF THE ABOVE

Which of the following would dissolve a limited partnership? I.) Actions from LPs such as class action suits for damages II.) Cancelling of "Certificate of LP" be secretary of state III.) Loss of a general partner IV.) Bankruptcy of a partner, or any event that makes it unlawful to continue business as a partnership

ALL OF THE ABOVE

Which of the following would you consider when determining suitability of a DPP? I.) Income, net worth, liquidity, investment experience, and tax bracket II.) Investment objectives and risk tolerance III.) Intention to hold investment for long term IV.) Understanding the risks and benefits V.) Economic viability of a DPP

ALL OF THE ABOVE... V.) IS A MAJOR CONSIDERATION

Which of the following are considered to be UNSUITABLE investment recommendations for ELDERLY investors? I.) Products w/ w/drawal penalties, or lack liquidity (deferred variable annuities, equity indexed annuities, limited partnerships) II.) Complex structured products like CMO's and CDO's III.) Variable life products or settlements IV.) Home equity loans to be used for other investments V.) Taking early w/drawals from retirement plans to invest in high risk investments

ALL OF THE ABOVE..... ARE UNSUITABLE FOR SENIORS

How much of their contributions may an individual who us NOT ACTIVE in a retirement plan at work deduct?

ALL OF THEIR CONTRIBUTIONS, SUBJECT TO CERTAIN LIMITS

What is the definition of a SERIES OF OPTIONS?

ALL OPTIONS OF THE SAME CLASS WITH THE SAME REALLY EXPIRATION MONTH AND SAME EXERCISE PRICE... (all IBM 90 calls)

What is the definition of a CLASS OF OPTIONS?

ALL OPTIONS OF THE SAME TYPE ON THE SAME UNDERLYING STOCK (all IBM calls = one class; all IBM puts = another class)

CORRESPONDENCE does NOT need ROP approval UNLESS..: I.) its delivered to more than 25 retail clients II.) makes an investment recommendation III.) promotes the services of the firm

ALL THE ABOVE

Under FINRA Rule 5130, which of the following persons are allowed to purchase new issues of common and are NOT "Restricted" I.) Investment company registered under investment company act of 1940 II.) Trust fund which has investments from 1,000+ accts and is not primarily made up of restricted persons III.) An insurance company which has 1,000+ policyholders and is not primarily made up of restricted persons IV.) An account if the beneficial interest of restricted persons does NOT exceed 10% of aggregate value of the account

ALL THE ABOVE

Under the '34 ACT, insider persons... I.) May NOT sell their company's stock short/short against the box II.) MUST report their holdings/changes of holdings to SEC III.) Prohibited from doing short swings of own company's stock IV.) CANNOT distribute UNRELEASED press report that could be considered to have insider information

ALL THE ABOVE

What is a SYNDICATE GROUP and what do they do? I.) Small group of B/D's who handle distribution of new equity securities to the general public II.) Does research and advises on required filings w/ FINRA & SEC III.) Maintains a record of orders (order book) IV.) Syndicate manager will allocate new issues to each syndicate member

ALL THE ABOVE

Which of the following are TRUE regarding "Cost Basis Information?" I.) B/Ds must report gross sales proceeds to customers and IRS on IRS Form 1099-B. II.) B/Ds must report cost basis and holding period information III.) Each purchase of a security on different dates or different prices will constitute a "Tax Lot" IV.) For tax purposes, a customer's transactions are treated as FIFO

ALL THE ABOVE

Under FINRA Rule 5130, what are the restrictions on sales of members/employees and their immediate families

ALL THOSE PEOPLE MAY ***NOT SELL/PURCHASE/HOLD NEW ISSUES OF COMMON STOCK*** *IN/TO ANY ACCOUNT* IN WHICH PERSON HAS ANNY BENFICIAL INTEREST OR.. *WHERE FIRM HAS BEEN AN UNDERWRITER, SYNDICATE OR GROUP MEMBER FOR NEW ISSUE*

What is the breakeven stock price determined by on a DEBIT SPREAD? and what are the formulas on a debit put/call spreads?

ALWAYS DETERMINED BY THE LONG(BUY) CALL = LONG Pex + NET DEBIT OF PREMIUMS PUT = LONG Pex - NET DEBIT OF PREMIUMS

If a member is NOT a market maker (agent), the confirmation to the customer MUST disclose...

AMOUNT OF MARK-UP CHARGED TO CUSTOMER... EVEN IN A RISKLESS SIMULTANEOUS TRANSACTION W/ CUSTOMER

HOW OFTEN and WHEN does a publicly traded company's 10-K Annual Audit Report Form be submitted?

ANNUALLY; AND WITHIN **90 DAYS WITHIN THE END OF COMPANY'S *FISCAL YEAR***

Distributions of a 401(k) MAY be rolled over to....?

ANOTHER QUALIFIED RETIREMENT PLAN OR IRA

What is "PERSONALLY IDENTIFIABLE FINANCIAL INFORMATION" mean?

ANY INFO CONSUMER PROVIDES TO OBTAIN A FINANCIAL PRODUCT OR INFORMATION

What is SEC RULE 145?

APPLIES TO REGISTRATION OF TRANSACTIONS WHERE "OFFER TO SELL/FOR SALE" WOULD BE MADE AS *PART OF MERGER/CONSOLIDATION/STOCK RECLASSIFICATION

How often does the investment advisory contract of an investment manager for a mutual fund be approved, and who is he/she approved by?

APPROVED BY THE MAJORITY OF BOARD OR SHAREHOLDERS... *INITIALLY FOR TWO YEARS*... **ANNUALLY THEREAFTER**

How often must registered persons complete their FIRM element of their continuing education requirements?

AT LEAST ANNUALLY

FORM CRS MUST be delivered to new AND existing RETAIL customer. For *NEW* CUSTOMERS, when must the delivery of this form be made?

AT OR BEFORE A RECOMMENDATION OF A SECURITY OR AN ACCOUNT TYPE IS MADE

WHEN will a customer receive a "Pre-Dispute Arbitration Agreement?"

AT THE TIME WHEN A NEW ACCOUNT IS OPENED

What is the Trade Reporting Facility?

AUTOMATED REPORTING/RECONCILIATION SERVICE ON ACT PLATFORM...FACILITATES POST-EXECUTION STEPS OF PRICE/VOLUME REPOTING, CLEARING OF TRADES FOR NASDAQ, NYSE SECURITIES

An investor currently owns a restricted common stock and is in the 6-month restricted period. The investor needs to sell the stock now, during the restricted period. Using SEC Rule 144-A, the stock could be sold to ANY of the following investors below EXCEPT...? a.) ABC Bank b.) A qualified investor c.) XYZ insurance company d.) A qualified institutional investor

B) A QUALIFIED INVESTOR

A customer makes an initial purchase of $40,000 of securities in a margin account and deposits the REG T requirement. Later the stock appreciates to $60,000. What is the excess equity after the appreciation in value?

$10,000 EXCESS EQUITY... ($60,000 / 2 = $30,000. $30,000 - $20,000 (DB) = $10,000)

What is the maximum penalty a hearing panel can impose for "Minor Rule Violations"?

- CENSURE AND/OR - FINE OF $2,500

What is the RTRS? And what must each broker, dealer, and municipal securities dealer do in order w/ regards to purchases and sales of municipal securirues?

- REAL TIME TRANSACTION REPORTING SYSTEM - EACH ONE MUST REPORT TO MSRB INFO OF PURCHASES AND SALES OF MUNIS **W/IN 15 MINS** OF EXECUTION OF NSCC

Define the following indexes and their characteristics: 1.) NYSE Composite Index 2.) Dow Jones Industrial Average 3.) Dow Jones Composite Average 4.) Value Line Index 5.) S & P 500 6.) Wilshire Index

1.) AFFECTED BY ALL *LISTED COMMON STOCKS (ONLY)* MOSTLY INUSTRIALS 2.) MKT PRICE OF 30 COMMONS (NORROWEST SAMPLING) INDICATION OF MARKET DIRECTION 3.) 65 COMMONS FROM INDUSTRIAL, TRANSPORTATION, AND UTILITY INDICIES 4.) APPROX. 1675 COMMONS FROM NYSE, AMEX, NASDAQ, AND OTC MARKET 5.) 500 HIGHLY CAPITALIZED CO's. FROM ALL SECTORS ( MEASURE OF AVG. MKT PERFORMANCE) 6.) BROADEST INDEX, MEASURES *DOLLAR VALUE* OF APPROX. 5,000 COMMONS IN THE U.S.

1.) Sell Limits/Buy Stops (SL/BS) are always entered and become effective______________ the current market price 2.) Buy Limits/Sell Stops (BL/SS) are always entered and become effective_________________ the current market price

1.) AT OR ABOVE 2.) AT OR BELOW

If a Municipality wished to REFUND a maturing bond issue, it may refund existing bondholders by what two ways...?

1.) CASH RECEIVED FROM NEW ISSUE OF BONDS 2.) EXCHANGE OF A NEW BOND FOR EACH OF THE ORIGINAL BONDS

If the US Dollar is strong, we expect the value of foreign currency to...? If the US Dollar is weak, we expect the value of foreign currency to...?

1.) IF USD IS STRONG, VALUE OR FOREIGN CURRENCY DECLINES... 2.) IF USD IS WEAK, VALUE OF FOREIGH CURRENCY RISES

When an investor is LONG a stock position AND WRITES COVERED CALLS against the stock, how must investor treat his income/losses for tax purposes?

1.) treat PREMIUM INCOME AS S-T CAPITAL GAIN IN YR OPTION EXPIRED... & 2.) MAINTAIN ORIGINAL COST BASIS of the long stock position

How many BASIS POINTS is a 1% change in the yield of a bond? (e.g. from 7% to 8%)

100 BASIS POINTS

Which analysis would be used for Real Estate DPP analysis? a.) Portfolio analysis b.) Cash Flow Analysis c.) Capital Analysis d.) Liquidity Analysis

B.) CASH FLOW ANALYSIS

Which of the following would be an INAPPROPRIATE statement to a 70 year old investor historically investing conservatively sticking to mostly CDs and US GVT securities and has been unhappy with the return and calls his RR to seek more yield on his investments? a.) "You should look at some of the more conservative mutual funds we have available. These may meet your objective of higher returns w/out adding significant risk to your portfolio." b.) "Because of your age and lack of investment experience, you should stick with the CDs and US GVT Bonds." c.) "because of your previous investments, I think we should stay on the conservative side and find a fund that has low levels of risk, but provides you w/ yield, income, and growth you're seeking. A balanced fund may be appropriate." d.) "You should consider some of the more conservative mutual funds , but be aware that they carry more risk of your previous investments, and you do run the risk of losing principal."

B.) DISCUSSING AGE AND INVESTMENT EXPERIENCE IN A NEGATIVE LIGHT TAPERS W/ CLIENT/FP RELATIONSHIP... BUT YOU MUST ALSO MAKE SURE RECOMMENDATION IS APPROPRIATE

For accounting purposes, a balance sheet's "Retained Earnings" is BEST describes by which of the following? a.) Applies to the dividends that corporation pays out to common stockholders b.) Applies to the earnings of the company that remain after the payment of dividends to common stockholders c.) Applies to the overall profit to the firm in any given year d.) Applies to the overall profit of the firm in any given year less any expenses

B.) EARNINGS OF COMPANY **AFTER DIVIDENDS ARE PAID**

A customer has $90,000 to invest which he will need in about 3 years to pay educational expenses for his son. All of the following would be appropriate for him EXCEPT...? a.) Treasury Bills b.) Equity Securities c.) Money Market Funds d.) Zero Coupon Bonds maturing in three years

B.) EQUITY SECURITIES

ALL of the following would be considered a benefit to investing in ETN's EXCEPT? a.) No annual tax since ETN's don not pay interest or dividends b.) Investor fees accumulate annually c.) No tracking errors d.) Participation in market sectors ordinarily not accessible to many investor

B.) ETNs DO NOT PAY ANNUAL INTEREST OR DIVIDENDS

As an RR, you're discussing a potential investment opportunity w/ a client. The investment pool of the investment opportunity is comprised of government guaranteed mortgages, and you tell the client it is government guaranteed. This statement to client is a... a.) Good description of the investment opportunity b.) Misrepresentation of the investment opportunity c.) Appropriate if the client is an accredited investor d.) Appropriate of the mortgages in the pool are not delinquent

B.) EVEN IF THE MORTGAFES IN THE POOL ARE GUARANTEED, IT DOES NOT MEAN INVESTMENT ITSELF IS GUARANTEED BY THE GOVERNMENT... THIS COULD IMPLY THAT THE PERFORMANCE OF THE INVESTMENT IS GUARANTEED

One of your clients is looking to invest in DPPs. One of the programs he's evaluating promises a relatively high tax write-off in the near future, w/ low costs of land and rights associated w/ land and minerals. Of the following, which best describes what he's looking at? a.) Developmental Drilling Program b.) Exploratory Drilling Program c.) Balanced Drilling Program d.) Oil and Gas Income Program

B.) EXPLORATORY DRILLING PROGRAM

Which of the following represents an undivided interest in a "pool" of mortgage backed securities? a.) Fannie Mae common stock b.) Ginnie Mae pass-through securities c.) Federal Intermediate Credit Bank debentures d.) Federal certificates of participation

B.) GINNE MAE PASS-THRU SECURITIES

If a corporation refinanced an 8% preferred stock issue with an 8% subordinated debenture, what would be the immediate effect on the EPS of the common stock? a.) It would lower earnings b.) It would raise earnings c.) It would have no effect on earnings d.) The effect cannot be determined

B.) IT WOULD RAISE EARNINGS

An emerging growth company is defined as a company with total annual... a.) Gross revenues of more $1 billion in its most recent fiscal year b.) Gross revenues of less than $1.07 billion in its most recent fiscal yr c.) Gross profits of less than $1 billion in its most recent fiscal year d.) Net profits of more than 1.07 billion in its most recent fiscal year

B.) LESS THAN 1.07 BILLION GROSS REVENUES

Which of the following investment choices would provide an investor with the LEAST liquidity? a.) Money Market Funds b.) Limited Partnership Participation c.) Certificate of deposit d.) Long-term Convertible Corporate Bond

B.) LIMITED PARTNERSHIP PARTICIPATION

ALL of the following statements attaining to US GVT agency issues are FALSE, EXCEPT...? a.) All are listed and traded on NYSE exclusively b.) They are generally offered w/ higher yields than US treasury securities c.) Backed by the full faith and credit of the US GVT d.) All pay interest monthly to investors

B.) LITTLE MORE RISK... WHICH MEANS LITTLE MORE RETURN

Your customer is short WLC calls. Under the exchange's position limit rule, his short call position is affected by holding which of the following in his account? a.) long WLC calls b.) long WLC puts c.) short WLC calls d.) short WLC puts

B.) LONG WLC PUTS

GNMA pass through obligations pay interest and principal...? a.) Weekly b.) Monthly c.) Semi-annually d.) Annually

B.) MONTHLY

What is the tax treatment on payments received by an annuitant during the annuity period on a non-qualified annuity> a.) Payments are subject to to tax only on the annuitants costs basis b.) Payments are taxed as ordinary income on the portion that is not attributable to the annuitant's cost basis c.) Payments are taxed entirely as ordinary income d.) Payments are tax-exempt

B.) ORDINARY INCOME ON PORTION THAT IS NOT ATTRIBUTABLE TO COST BASIS

An investor is buying a bond on the secondary mkt. Accrued interest on the bond.... a.) is owed to the buyer of the bond b.) is owed to the seller of the bond c.) neither receive accrued interest d.) paid to both buyer and seller

B.) OWED TO THE SELLER OF THE BOND... SINCE LAST INTEREST PAYMENT DATE

Which of the following is TRUE w/ federal agency issues? a.) Backed by the full faith and credit of the US Government b.) Quoted in 32'nds as percentage of par value c.) Carry lower yields than US treasury securities d.) Always callable

B.) QUOTED IN 32'NDS

Which of the following would NOT be a reason to issue revenue bonds vs GO bonds? a.) Current legislation at the state level requires self-sufficiency of projects of this nature b.) Statutory debt limitations are usually enforced on revenue bonds c.) User fees are expected to support the project once completed d.) Only certain members of the community will use the project

B.) REVENUE BONDS ARE NOT SUBJECT TO STATUTORY DEBT LIMITATIONS

Which of the following funds would be LEAST suitable for a retiree in need for a steady stream of income? a.) Bond Fund b.) Sector Fund c.) Balanced Fund d.) Growth and Income Fund

B.) SECTOR FUND....CONSIDERED VERY RISKY

Which of the following is FALSE about REG A+ OFFERINGS? a.) It is limited to $75,000,000 in any 12-month period b.) The securities issued are restricted c.) Limited partnerships can use them d.) Filing with SEC is required

B.) SECURITIES OFFERED UNDER REG A+ OFFERINGS ARE ***NOT RESTRICTED SECURITIES***

Which of the following statements is MOST associated w/ overlapping debt of a municipality? a.) Debt that is secured by revenue generating projects, but also has unlimited backing of GOs of the municipal entity b.) Debt that is shared by other issuers and is taken into consideration when determining overall debt of a municipality c.) Debt that is not included in the overall debt of a municipality; solely secured by revenues generated by the project d.) Debt of municipality that is used to pay for multiple facilities within the municipality

B.) SHARED BY OTHER ISSUERS, PART OF DETERMINING OVERALL DEBT OF A MUNICIPALITY

Upon the notification of the death of a customer, an RR should do ALL of the following EXCEPT...? a.) Cancel any open orders b.) Close out any short positions c.) Designate the account as "Deceased" d.) Await instructions from executor or administrator

B.) SHOULD NOT EXECUTE ANY BUY, SELL OR COVER ORDERS

Funds set aside for the retirement of "Term Municipal Revenue Bonds" would, pursuant to the trust indenture, be deposited into the...? a.) Debt reserve fund b.) Sinking fund c.) Maintenance fund d.) Construction fund

B.) SINKING FUND

A competitive underwriting of a municipal bond issue has all of the following characteristics EXCEPT...? a.) Generally, GOs are issued under competitive bidding b.) Bond counsel is selected by the manager of the syndicate c.) "Notice of sale" contains descriptions of the bidding procedures d.) Bids must be submitted by the bidding deadline

B.) STATE OR LOCAL GOVERNMENT APPOINTS BOND COUNSEL

If an investor was looking for capital gains and income , a good investment choice would be..? a.) Growth Stock Fund b.) Stock Mutual Fund c.) Preferred Stock d.) Corporate Bonds

B.) STOCK MUTUAL FUND... THEY *AVOID GROWTH STOCKS AND TREASURY STRIPS*

When a muni bond is purchased at premium, the premium is decreased each year by the same amount until the bond reaches maturity... This reduction in premium is known as...? a.) Double declining accretion b.) Straight line amortization c.) Current yield amortization d.) Straight line accretion

B.) STRAIGHT LINE AMORTIZATION

Interest income from US Government securities is....? a.) Exempt from federal and state income taxes b.) Exempt from state taxes, but subject to federal taxes c.) Exempt from federal taxes, but subject to state taxes d.) Subject to both federal and state income taxes

B.) SUBJECT TO FEDERAL TAX... EXEMPT FROM STATE TAX

Which of the following would NOT be related to equity securities that a corporation would distribute? a.) Preferred Stock b.) Subordinated Debentures c.) Pre-emptive Rights d.) Warrants

B.) SUBORDINATED DEBENTURES

Which of the following is FALSE about REG A+ offerings? a.) It is limited to $75,000,000 in any 12-month period b.) The securities issued are restricted c.) Limited partnerships can use them d.) Filing with SEC is required

B.) THESE SECURITIES ARE *NOT* RESTRICTED SINCE REG A+ IS **SHORT FORM REGISTRATION**

The following bond offerings have identical maturity dates. Which of would have the HIGHEST dollar purchase cost to the investor? a.) 4 7/8% coupon offered on a 5.20 basis b.) 5 1/4% coupon offered on a 5.00 basis c.) 5 1/2 coupon offered on a 5.50 basis d.) 5 /8% coupon offered on a 5.95 basis

B.) THIS ONE HAS THE LOWEST BASIS... WHICH MEANS IT HAS THE HIGHEST PRICE

A "Statement if additional information" must be delivered to any investor interested in a mutual fund or variable annuity...? a.) w/ each purchase b.) Upon request c.) w/ delivery of prospectus d.) Annually

B.) UPON REQUEST

Industry rules state that time and price orders over customer orders can be exercised by an RR over what period of time? a.) Within 5 days of receiving such orders from the customer b.) Within the day that discretion is granted c.) Within 30 calendar days d.) Until customer withdraws discretionary power

B.) WITHIN THE DAY DISCRETION IS GRANTED

If an investor tenders a mutual fund or variable annuity WITHIN 7 BUSINESS DAYS OF PURCHASE DATE....?

B/D MUST *REFUND FULL COMMISSION TO UNDERWRITER* AND *UNDERWRITER MUST REFUND TO THE FUND OR ANNUITY (all parties give up their compensation)

In investment banking who/what is the SELLING SYNDICATE and what do they do?

B/D hired by the managing underwriter who can sell DIRECTLY TO PUBLIC, or HIRE ANOTHER B/D as part of SELLING GROUP - **MAKES FINANCIAL COMMITMENT AND HAS FINANCIAL LIABILITY** - GETS PAID UNDERWRITER'S RETENTION

How is interest charged in a margin account?

BASED ON THE "BROKER/CALL LOAN RATE", WHICH INCREASE THE CUSTOMER'S DEBIT BALANCE

Why would you NEVER exercise an index option at the beginning of the trading day?

BECUASE YOU ARE STILL SUCEPTABLE TO MARKET MOVES FOR THE REMAINDE OF THE TRADING DAY/

Define the "Odd Lot Theory" under technical analysis.

BELIEVES THAT ODD LOT INVESTORS ARE ALWAYS WRONG... ** BUY WHEN ODD LOT INVESTORS ARE SELLING, AND SELL WHEN THEY ARE BUYING**

Under the "Telephone Consumer Protection Act" or "Cold Calling Act" between what times may telephone solicitations be made?

BETWEEN 8AM AND 9 PM LOCAL TIE OF *PARTY CALLED*

In an OPEN-end investment company... BID = ... ASK = ...

BID = NAV = REDEMPTION PRICE ASK = NAV + MAX SALES LOAD = OFFERING PRICE

What are municipal "Double-barreled Bonds?"

BOND BACKED BY THE FULL FAITH AND CREDIT OF REVENUES OF USER CHARGES AND THE MUNICIPALITY **CONSIDERED MORE SAFE**

What are the PAR VALUES of BONDS and PREFERRED STOCKS

BONDS: PAR VALUE = $1000 PREFERRED STOCK: PAR VALUE = $100

What is INTERPOSITIONING, and is it legal?

BRINGING IN ANOTHER B/D AND CHARGING CUSTOMER COMMISSION AND MARK UP/DOWN. **VIOLATION OF FINRA RULES**

When will an investor profit from a BULL and BEAR SPREAD

BULL SPREAD: WHEN THE MKT Px OF UNDERLYING SECURITY RISES BEAR SPREAD: WHEN MKT Px OF UNDERLYING SECURITY DECLINES

What is a "Prime Brokerage Account"?

BUNDLED PACKAGE OF SERVICES OFFERED BY B/D's TO HEDGE FUNDS, OTHER B/D's, AND INSTITUTIONAL INVESTORS THAT USE *AGRESSIVE TRADING STRATEGIES*

If an investor must MAKE A PAYMENT in a foreign currency, to hedge, the investor would...

BUY CALLS ON THE FOREIGN CURRENCY

If you think the market value of an index like the S & P 500 is going to be volatile and go DOWN IN THE SHORT TERM... what would you do

BUY CBOE VOLATILITY INDEX OPTIONS (VIX) CALLS

What is the capital gain/loss REPORTED for a buyer and seller of a CALL option when the option is CLOSED?

BUYER: COST OF CALL(PREMIUM) - AMOUNT RECEIVED AS CAPITAL GAIN/LOSS SELLER: AMOUNT PAID FOR CLOSING CALL (PREMIUM) - PREMIUM PAID TO YOU

What is the capital gain REPORTED for the buyer and seller of a CALL option when the option is EXERCISED?

BUYER: Pex + PREMIUM = COST BASIS OF STOCK PURCHASED SELLER: Pex + PREMIUM RECEIVED FOR CALL = SALE PROCEEDS FOR STOCK SOLD

What is the capital gain/loss REPORTED for a buyer and seller of a PUT option when the option is EXERCISED?

BUYER: Pex - PREMIUM PAID = SALES PROCEEDS OF STOCK SOLD SELLER: Pex - PREMIUM RECEIVED FOR SALE = COST BASIS OF STOCK PURCHASED

In which of the following scenarios would it be UNACCEPTABLE for FINRA member firm to hold a customer's mail a.) Customer leaving US on a business trip for shorter than 3 months b.) Customer provides written request to firm to forward mail to previously unknown address c.) Customer asks member firm to hold mail until further notice d.) Customer notifies firm that he will be on vacation for a month

C.) CUSTOMER MUST TELL FIRM HOW LONG THE FIRM MUST HOLD MAIL FOR.

In terms of features that would limit credit risk that would apply to a muni bond issue, which would do so MOST effectively? a.) Being backed by general obligation b.) A legal opinion that is non-qualified c.) An issue which is escrowed to maturity d.) A putable bond feature at par value at one year

C.) ISSUE WHICH IS ESCROWED TO MATURITY... THIS MEANS THE BONDS ARE *PRE-REFUNDED* AND *BACKED BY GVT SECURITIES*

A "Right of Rejection" in an "Official Notice of Sale" allows.... a.) Purchaser to refuse delivery of bonds on settlement date b.) Muni dealer to drop from syndicate c.) Issuer to refuse to accept bids d.) Syndicate manager to w/draw its bid

C.) ISSUER TO REFUSE TO ACCEPT BIDS

John and Susan are married and have 2 children, a 4 and 2 year old. Both parents work and d not need additional income. They want to conservatively invest to have funds for children's education in 12-15 years. Which of the following investments would BEST meet their goal? a.) Common Stocks b.) Laddered Treasury Notes c.) Laddered Zero-Coupon Bonds d.) Preferred Stocks

C.) LADDERED ZERO-COUPON BONDS

An ABC 10% bond closed at 101 3/8, down 3/4 from the previous day and had a current yield of 9.87%. What would have been the current yield of this bond if it was purchased the previous trading day? a.) 9.87% b.) More than 9.87% c.) Less than 9.87% d.) 10%

C.) LESS THAN 9.87%.... ***YIELDS GO IN THE OPPPSITE DIRECTION OF BOND PRICES***

ALL of the following are considered "Assets" EXCEPT...? a.) Closed-End Fund b.) Negotiable Certificate of Deposit c.) Line of Credit that has yet to be used d.) Convertible Bond

C.) LINE OF CREDIT THAT HAS YET TO BE USED... LINE OF CREDIT IS **NOT A LEGAL COMMITMENT* BY A BANK IT IS *ONLY A MORAL COMMITMENT*

Which of the following investments would be MOST appropriate for an investor in a low tax bracket who indicates that protection from inflation is their primary investment concern? a.) GNMAs b.) Tax-exempt Unit Trusts c.) Money Market Funds d.) Treasury Bonds

C.) MONEY MARKET FUNDS

Which of the following will INCREASE NAV of mutual fund shares? a.) Selling more fund shares than redeeming fund shares b.) Redeeming more fund shares than selling fund shares c.) Receiving interest income on portfolio securities d.) Distributing realized capital gains

C.) RECEIVING INTEREST INCOME FROM PORTFOLIO SECURITIES

An investment company ranking included in a retail communication MUST be, at a minimum, current to the MOST RECENT___________________ ended PRIOR ti use or submission for publication.

CALENDAR QUARTER

Of the following types of debt, which WOULD be OVERLAPPING? a.) Debt on a direct obligation bond b.) Debt of the state in which municipality is located c.) Debt on a special assessment bond d.) Debt of a local school district

D. )DEBT OF A LOCAL SCHOOL DISTRICT

The "Blue List Total" is...? a.) New issues coming to market b.) Placement ratio of new issues c.) Par value of muni securities traded daily in the secondary market d.) Par value of muni securities offered for sale in the Blue List

D.)

The following are ALL types of underwriting agreements EXCEPT..? a.) Firm commitments b.) Standby Commitments c.) All-or-none Agreement d.) Fill-or Kill Agreements

D.)

TRUE OR FALSE: Municipal dealers often take short positions in municipal bonds

FALSE... ALTHOUGH THEY *CAN*, THEY BARELY DO BECAUSE IT IS HARD TO FIND BONDS TO COVER THE SHORT POSITION (THIN MARKET)

The customer EARNS and OWES interest off of the credit balance in a margin account SHORT.

FALSE... BECAUSE CUSTOMER OWES THE STOCK

TRUE OR FALSE: Generally, variable annuities CAN be purchased an an IRA, 401(k), or other retirement acount.

FALSE... BECAUSE THERES GENARALLY NO BENEFIT... **UNLESS GUARANTEED MINIMUM DEATH BENEFIT AND LIFETIME INCOME ARE DESIRED

TRUE OR FALSE: Under REGULATION S, these off-shore transactions CAN be made to U.S. persons

FALSE... CAN *ONLY BE MADE TO FOREIGN PERSONS*, AND TRANSACTIONS CAN *ONLY BE EXECUTED ON A FOREIGH SECURITIES EXCHANGE*

TRUE OR FALSE: A municipal bond attorney CAN GUARANTEE that principal and interest will be paid on time for a bond issue

FALSE... CAN NEVER GUARANTEE

TRUE OR FALSE: Interest charges on MUNICIPAL margin account DEBIT balances are TAX DEDUCTIBLE.

FALSE... INTEREST CHARGED IS **NOT TAX DEDUCTIBLE**

TRUE OR FALSE: An investor purchasing a mutual fund will submit an order ticket.

FALSE... INVESTORS WILL SUBMIT A COMPLETED AND SIGNED **FUND APPLICATION**

TRUE OR FALSE: "Program Trading" considers FUNDAMENTAL analysis factors

FALSE... IT DOES NOT CONSIDER FUNDAMENTAL ANALYSIS FACTORS

TRUE OR FASLE: A current common stockholder's interest would be DILUTED by a stock split or stock dividend

FALSE... STOCK SPLITS OR STOCK DIVIDENDS **DO NOT DILUTE SHAREHOLDER'S INTEREST

TRUE OR FALSE: On an Income Statement, DIVIDENDS are ALWAYS a PRE-TAX DEDUCTION/

FALSE... THEY ARE AN **AFTER-TAX DEDUCTION**

TRUE OR FALSE: MARGIN TRADING and SHORT SELLING are ALLOWED in UGMA/UTMA accounts.

FALSE... THEY ARE NOT ALLOWED

Which of the following communications require FILING PRIOR TO FIRST USE and which ones require CONCURRENT FILING. I.) Options retail communication that will be sent to prospective clients prior to ODD delivery. II) Retail communications concerning registered CMO's III.) Retail communication that included a ranking made by RR of ETF's IV.) Retail communication including a ranking created by a ranking-entity of closed-end funds V.) A firm became a FINRA member today and wants to file an advertisement immediately

FILE PRIOR TO FIRST USE : I, III, AND V CONCURRENT FILING : II, AND IV

Using the following data, which 2 of the following would be CLOSED-END FUND? FUND NAV ASK A $19.75 $19.25 B $22.25 $23.12 C $27.50 $26.75 D $24.25 $ 25.00

FUNDS A AND C..... NAV IS HIGHER THAN TH ASK PRICE

What is the REORGANIZATION DEPARTMENT responsible for of a B/D?

HANDLING THE EXCHANGE OF ONE SECURITY FOR ANOTHER

Which of the following are characteristics of municipal bond negotiated bidding? I.) Municipality hires a managing underwriter to handle distribution of revenue bonds II.) Underwriting agreement describes terms and interest costs for the offering which are negotiated between municipality and underwriter III.) Municipality requests sealed bids from underwriters on the issue of GO Bonds IV.) Underwriter is chosen by the one with the lowest "Net interest Cost to the issuer/municipality

I AND II ONLY

Which of the following factors must be considered when determining whether an option contract is IN/OUT/AT THE MONEY? I.) Exercise Price II.) Underlying Stock's Price III.) Number of contracts IV.) Option Premium

I AND II ONLY

Which of the following is CORRECT regarding market makers? I.) May take long or short positions at any time II.) Must report trading volume DAILY III.) Required to report profits and losses on their inventory positions IV.) Can display/accept quotes/orders in any NMS stock priced </ $.01 if the quote/order is priced >/ $1.00

I AND II ONLY

Which of the following are correct with regards to INFLATIONARY PERIODS on Municipal Bonds? I.) In periods of inflation, Interest rates increase, and bond prices decline II.) In periods of inflation, interest rates decrease, and bond prices increase III.) Investor would buy short-term bonds if he anticipates rising interest rates (Inflation) IV.) Investor would buy long-term maturities if he anticipates rising interest rates (inflation)

I AND III ONLY INflation... INterest rates... INcrease

When handling stock/bond certificates, the REGISTRAR... I.) Maintains the stock record book II.) Registers new securities to issue III.) Must account for all shares, including preventing the over-issuance of shares IV.) Keep track of price and volume records

I AND III ONLY (BOOKKEEPING)

A muni issuer's "Official Statement" is exempt from... I.) Prospectus registration requirements of the '33 Act II.) Mutual fund regulations of the Investment Company of '40 Act III.) Regulation T margin requirements IV.) Reporting requirements of the '34 Act

I AND IV ONLY

If a customer deposits securities in a LONG margin acct, which of the following are TRUE? I.) Market value increases II.) Market value decreases III.) Debit balance increases IV.) Equity increases

I AND IV ONLY

Under FINRA RULE 5130, an immediate family member includes: I.) Parents, Spouse, Siblings, and Children II.) Aunts and Uncles III.) Grandparents IV.) In-laws

I AND IV ONLY

Which of the following is TRUE regarding SEC RULE 147 covering intrastate offerings? I.) For a period of 6 months from date of last sale, all sales and resales may be made only to residents of the same state II.) For a period of 6 months from date of last sale, All sales and resales may be made to any resident of any state III.) Are NOT exempt from standard registration requirements IV.) ARE exempt from standard registration requirements

I AND IV ONLY

Y our customer sells 1 XYZ JUL 70 CALL @4 after having purchased 100 shares of XYZ @65/share. What two factors represent the TAX CONSEQUENCES to your customer? I.) Sales proceeds for tax purposes if exercised of $74/share II.) Sales proceeds for tax purposes if exercised of $70/share III.) Cost basis of stock for tax purposes if unexercised of $61/share IV.) Cost basis of stock for tax purposes if unexercised of $65/share

I AND IV ONLY

Which of the following are characteristics of Municipal Serial Bonds? I.) Issued with staggered maturity dates II.) Issued with all the same maturity dates III.) Quoted in dollars ("Dollar Bonds") (e.g. @ 99 1/2) IV.) Quoted in terms in yield to maturity (e.g. 3.4% Basis) V.) Usually have mandatory "Sinking Fund Provision"

I AND IV ONLY (SHORTER MATURITIES HAVE LOWER YIELD)

A conditional order for open-end investment company shares CAN be accepted by an underwriter as... I.) At a specific price II.) "I want to buy if the price goes down" III.) "I want to sell if the price goes up"

I ONLY

Select all boxes that are characteristics of a KEOGH/HR-10 PLAN. I.) To be eligible, individual must be working at least 1,000 hours per year at the company II.) Designed for self-employed individuals w/ earnings from sole proprietorships, partnerships, and unincorporated entities III.) Plan is designed for employees to be productive IV.) A qualified, tax-deferred retirement plan for self-employed individuals that can be set up as a defined benefit, or defined contribution plan (like profit-sharing)

I, II AND IV ONLY

Which of the following are common considerations of whether an RR has been "churning" a customer's account? I.) Whether RR has control over customer's account (D.A.) II.) The account turnover III.) Broker's motivation for the trades IV.) Quality of the securities

I, II, AND III ONLY

Which of the following are ADVANTAGES of "Equipment Leasing Limited Partnerships? I.) Depreciation deductions II.) Interest deductions III.) Limited liability for limited partners IV.) Appreciation in value of leased equipment

I, II, AND III ONLY... DO NOT DEPEND ON APPRECIATION IN VALUE OF EQUIPMENT SINCE THE VALUES ONLY DEPRECIATE

Which of the following are characteristics of "Advance-Decline Ratio" under technical analysis? I.) Concerned w/ the number of stocks that advance in relation to the number that decline II.) Good measure of strength in a bull market III.) Good measure of strength in a bear market IV.) Measures the number of shares that have been traded or turned over

I, II, AND III ONLY... DOES NOT MEASURE # SHARES TURNED OVER

An "Official Notice of Sale" can be obtained from...? I.) The issuer II.) Financial consultant III.) The approving attorney IV.) SEC

I, II, AND III ONLY... NOT THE SEC

Limited Trading Authorization or Limited Power of Attorney... I.) Gives right to RR to make purchase and sale decisions. II.) CAN withdraw cash or securities from the account III.) Checks must be disbursed payable to the owner of the account IV.) RR must know essential facts about the customer and agent granted power of attorney

I, II, AND IV ONLY

Which of the following are TRUE about the taxation of t-bills? I.) They are exempt from state and local tax II.) They are subject to federal income tax III.) Taxed as capital gains to investors IV.) Taxed as interest income to investors

I, II, AND IV ONLY

Which of the following are TRUE regarding FINRA communications filing requirements? I.) Registered principal's CRD # must be included w/ filing II.) Communications w public are subject to routine "spot checks" III.) Option ads must be approved by FINRA IV.) Option ads must be approved by a registered options principal

I, II, AND IV ONLY

Which of the following is TRUE regarding "Accelerated Cost Recovery System (ACRS)" I.) Form of depreciation based on an asset's recovery period rather than its useful life. II.) Generally requires Composite depreciation III.) Generally requires Component depreciation IV.) Composite depreciation applies one average depreciation rate to all assets, whereas component depreciates assets based on the life of the individual asset

I, II, AND IV ONLY

What are factors of a CLOSED-END investment company? I.) shares trade on an exchange or OTC II.) NAV and bid & ask directly relate to each other III.) have a fixed capitalization (fixed # of shares issued) IV.) may issue common stock, preferred stock, and bonds

I, III, AND IV ONLY

Which of the following are TRUE about stop orders? I.) A sell stop order is placed below the current market price II.) All stop orders are executed at the stop price III.) A buy stop order is placed above the current market price IV.) A stop order becomes a market order once it hits the stop price

I, III, AND IV ONLY

Customer confirmations MUST contain...? I.) Activity such as margin interest, interest, and dividend payments II.) Original price paid for securities III.) Year to date income of the account IV.) Current securities positions in the account V.) Any and all money & debit balances

I, IV, AND V ONLY

In analyzing the creditworthiness of a municipal revenue bond, which of the following are RELEVANT? I.) Purpose of issue V.) Competing Facilities II.) Per-capita debt VI.) Tax collection record of issuer III.) Overlapping debt VII.) Interest rate movement IV.) Rate covenants VIII.) Coverage Ratios

I, IV, V, AND VIII ONLY... 11, III, AND VI ARE FOR GOs... VII IS IRRELEVANT

Which of the following gifts and gratuities would be ALLOWED under MSRB rules? I.) Reminder advertising valued at $40 II.) Two-week expense paid trip III.) Wine valued at $150 IV.) Tickets to a sporting event valued at $100 V.) Restaurant bill valued at $130 for both broker and customer VI.) Weekly gift of $50 VII.) $1,000 in cash VIII.) Accommodations for customer at an economic even recognized by IRS valued at $180

I, IV, V, AND VIII ONLY.... $100 PER PERSON, PER YEAR STILL APPLIES

MATCH THE CORRECT TERMS: I.) The NORROWER the spread... II.) The WIDER the spread... a.) The LESS actively traded the stock. b.) The MORE actively traded the stock.

I.) AND B.) ; II.) AND A.)

MATCH the different sections of the OTC market w/ the category of stock they trade: I.) OTCBB II.) NASDAQ Capital Market III.) Pink Sheet IV.) NASDAQ Global Market a.) Penny and low priced b.) Large cap; primary marketmaker (PMM) c.)Small cap d.) Low priced and ADR's

I.) AND D.); II.) AND C.); III.) AND A.); IV.) AND B.)

What does it mean if... I.) Debit balance < half of mkt value of stock II.) Debit balance > half of mkt value of stock III.) Debit balance = half of market value of stock

I.) EXCESS EQUITY II.) RESTRICTED III.) REG T

The following are classifications of securities under REG T. Define them, and indicate if hey are marginable or not. I.) Registered Securities II.) OTC Margin Securities III.) Exempt Securities IV.) Unregistered Securities

I.) LISED ON A NATIONAL EXCHANGE (MARGINABLE) II.) QUALIFIED FOR MARGIN TRADING BY THE FED RESERVE BOARD (MARGINABLE) III.) ISSED BY GVTS AND MUNICIPALITIES (MARGINABLE) IV.) NEW ISSUES, OPEN-END IC's, SECURITIES ACCOMPANIED W/ PROSPECTUS (NON-MARGINABLE)

What is a "Tenants in Common" account?

IF ONE OWNER DIES, INTEREST WILL PASS TO HIS ESTATE, *NOT THE OTHER OWNER*... NO RIGHTS OF SURVIVORSHIP... BOTH PARTIES CAN PLACE ORDERS

When can registered reps who are CURRENTLY RETIRED be paid commissions?

IF THEY ARE NO LONGER SOLICITING NEW BUSINESS AND THERES A BONA FIDE WRITTEN AGREEMENT BEFORE RR LEAVES THE FIRM

A maintenance call can be satisfied with the deposit of which of the following? I.) Listed stocks having a mkt value equal to the call II.) Marginable unlisted stocks having a loan value equal to the call III.) An amount of cash equal to the call IV.) An amount of cash equal to 50% of the call.

II AND III ONLY

A municipal syndicate to bid is composed of 5 firms. At the final pricing meeting, one of the firms dissents. Which statements are CORRECT? I.) All firms must reach a consensus agreement on the price or not to bid II.) The syndicate members who agree can bid III.) Dissenting syndicate members will drop out of syndicate

II AND III ONLY

ALL of the following are including in a municipality's "Official Notice of Sale" EXCEPT..? I.) Amount of good faith deposit required by bidders II.) Legal opinion III.) Offering yields IV.) Redemption features V.) Redemption and call featrures

II AND III ONLY

As the SPOT PRICE of a foreign currency option DECREASES... I.) The value of calls will increase II.) the value of calls will decrease III.) The value of puts will increase IV.) The value of puts will decrease

II AND III ONLY

COMMISSION BASED ACCOUNTS.... I.) Charged a flat fee based on a percentage of assets in the account (one-time or ongoing) II.) Charged on a per-transaction basis III.) These advisers are paid paid to trade securities, and are motivated to increase the amount of transactions and clients IV.) These advisers have an incentive to grow their client's portfolio in size, and would get paid more as a result

II AND III ONLY

When shares of stock or mutual fund shares that were INHERITED are being SOLD.... I.) The holding period is automatically short-term II.) the holding period is automatically long-term III.) IRS allows step-up in the cost basis from original cost to the mkt value of the securities (or NAV) at date of death of the decedent IV.) IRS allows step-up in the cost basis from original cost to the mkt value of the securities (or NAV) at date sold by decedent

II AND III ONLY

Which of the following are ADVANTAGES of a SEP IRA? I.) W/drawls may be made before age 50 1/2 II.) Have a low cost of administration III.) Contributions are tax-deductible IV.) Withdrawals are tax free

II AND III ONLY

Which of the following are characteristics of a "balanced Drilling Program?" I.) Drill in areas of only well proven areas to provide balanced income to investors II.) Drill in areas of proven and unproven areas III.) Mixes in high and low risk drilling and provides moderate returns IV.) Provides Low risk drilling costs in areas of cheaper leases to moderate the level of returns

II AND III ONLY

NAV reflects...? I.) Opening market value II.) Closing market value III.) plus dividends or interest IV.) less dividends or interest

II AND III ONLY... CLOSING MKT VALUE PLUS DIVIDENDS OR INTEREST

Throughout the process of opening a new acct for a client, suitability and investment objectives are a primary concern for RRs. In order to make recommendations regarding these subjects, RRis required to obtain certain info from the client. Which of the following fall into the category of the REQUIRED information? I.) The clients federal tax bracket for the preceding year II.) Client's level of outstanding debt III.) Market value of client's home IV.) Client's overall net worth

II AND IV

A Variable Annuity... I.) Pays the same predetermined dollar amount each period II.) Pays a fluctuating dollar amount each period III.) Insurance company bears the investment risk IV.) Annuitant bears the investment risk

II AND IV ONLY

If an investor is looking for "Income and Stability," an RR should recommend: I.) Common Stock II.) Preferred Stock III.) ADRs IV.) Bonds

II AND IV ONLY

In life insurance policies the premiums paid are...? I.) Generally paid with pre-tax dollars II.) Generally paid with after-tax dollars III.) Are tax-deductible IV.) Are not tax-deductible

II AND IV ONLY

Which of the following are characteristics of T-BONDS I.) Maturities of 2-10 years II.) Maturities of 10-30 years III.) Never issued as callable IV.) Can be issued as callable

II AND IV ONLY

Which of the following people's signatures are required when opening up a new account for a LIMITED PARTNERSHIP ACCOUNT? I.) Limited Partner(s) II.) General Partner(s)

II ONLY

Which of the following would be considered "Community Property" between a husband and wife? I.) Student loans incurred by one of the parties prior to marriage II.) Income, assets, and debts incurred after marriage III.) Securities account of one of the spouses IV.) Gifts and inheritances

II ONLY

If a customer wants to transfer his account to a different RR within the SAME FIRM...? I.) Such transfer cannot take place II.) New RR must review customer account form III.) New RR must treat customer as a new customer IV.) New RR can make recommendations after review and update are completed

II, III, AND IV ONLY

What types of investment companies can be formed with only municipal bonds in the portfilio? I.) Closed-end funds II.) Open-end funds III.) Unit Investment Trusts (UITs) IV.) Bond Funds

III AND IV ONLY

What is a BREAKPOINT?

INVESTOR RECEIVES A REDUCED SALES CHARGE BASED ON THE QUANTITY PURCHASED IN A MUTUAL FUND... MOST EFFECTIVE IN THE SAME FUND FAMILY.

What does it mean when an option holder "ASSIGNS" the option?

IT MEANS THE OPTION IS EXERCISED

What do stock index options measure?

MARKET PERFORMANCE OF A SPECIFIC INDEX AND SETTLE IN ***CASH***

What is the EXPENSE RATIO for an investment company and how is it calculated?

MEASURES "OPERATING EFFICIENCY/COST" OPERATING EXPENSES / AVG NET ASSETS = E.R.

What is the definition of a QUALIFIED INVESTOR?

NET WORTH >/ $2,100,000 >/ $1,000,000 ASSETS INVESTED UNDER *SPECIFIC INVESTMENT MANAGER*

Under Regulation S-P, when must firms deliver INITIAL PRIVACY NOTICE to customers?

NO LATER THAN WHEN RELATIONSHIP IS ESTABLISHED W/ CUSTOMER... AND THEN *ANNUALLY THEREAFTER*

Can you put on spread positions, write uncovered calls/puts, and/or put on straddle/combination positions in a CASH ACCOUNT?

NO!... YOU CAN ONLY DO THOSE ACTIONS IN A MARGIN ACCOUNT

Do zero coupon bonds pay interest payments? if not how do they make money for an investor?

NO, NO INTEREST IS PAID. THEY INREASE IN VALUE BY "ACCRETION" (IMPLIED INTREST) BECAUSE THEY ARE SOLD AT A DEEP DISCOUNT.

How are STOCK DIVIDENDS treated in terms of taxation?

NOT TREATED AS ORDINARY INCOME... THEY **REDUCE AN INVESTOR'S COST BASIS

TRUE OR FALSE: FINRA's 5% markup policy is a guideline, NOT a rule, and it applies to ALL OTC principal AND agency transactions

TRUE

TRUE OR FALSE: FIXED ASSETS are generally carried at cost - depreciation. Depreciation reduces taxable income w/out reducing cash

TRUE

TRUE OR FALSE: For securities purposes, investors can choose between FIFO and LIFO when selling stock

TRUE

TRUE OR FALSE: Gifts and transfers between spouses are NOT TAXABLE transactions at the tie of gift and are UNLIMITED.

TRUE

TRUE OR FALSE: HIGHLY leveraged DPPs (a lot of debt) usually have RECOURSE Loans

TRUE

TRUE OR FALSE: The "Cold Call Act" restrictions DO NOT APPLY to non-profit organizations.

TRUE

TRUE OR FALSE: Pre-refunding and advance refunding IMPROVES the quality rating of the original issue

TRUE... BECAUSE THEY ARE THEN BACKED BY GOVERNMENT SECURITIES

TRUE OR FALSE: Because IRA's are tax-deferred or exempt, there is NO BENEFIT FOR INVESTING in MUNICIPAL BONDS/BOND FUNDS

TRUE.... THEY ARE CALLED "INADVISABLE INVESTMENTS"

What is the breakeven formula on a PUT (buy or sell)?

EXERCISE PRICE - PREMIUM = PUT BREAKEVEN

These are some of ABC's financials from their Income Statement: - Operating Profit: $5,000,000 - Net Earnings: $3,500,000 - Retained Earnings: $1,500,000 - Total Outstanding Shares: 50,000,000 What is ABC Corp's. EPS (Earnings Per Share)?

$.07 / SHARE... EPS = NET EARNINGS / TOTAL OUTSTANDING SHARES ($3,500,000 / 50,000,000 = $.07)

The following is the current state of a customer's margin account: Mkt value: $50,000 Debit balance:$15,000 Equity Value: $35,000 A customer sells $10,000 worth of securities, what is the equity amount after the sale?

$35,000... WHEN SHARES ARE SOLD AND NO W/DRAWAL IS MADE... ***EQUITY REMAINS UNCHANGED***

A customer purchases $25,500 of securities, which later appreciate to $32,500. Assuming REG T is 50%, what is the customer's buying power after appreciation?

$7,000... (EXCESS EQUITY: $3,500 * 2 = $7,000)

For municipal bonds, what is an "ACCUMULATION ACCOUNT?"

- ACCT ESTABLISHED BY SPONSOR OF A UIT.. HOLDS BONDS TO BE PUT INTO UIT PORTFOLIO WHEN CREATED - ALL ACCUMULATION ACCT ORDERS **MUST BE DESIGNATED AS SUCH*

What type of asset allocation would a person with MORE THAN 10 YEARS TO GOAL/RETIREMENT and can tolerate risk have?

- AGGRESSIVE MIX: - 0% CASH - 15% BONDS - 55% LARGE CAP - 17% MID CAP - 13% FOREIGN STOCKS

What is a LETTER OF INTENT (LOI)?

- ALLOWS INVESTOR A*13 MONTH PERIOD* WHICH INVESTOR CAN RECEIVE A BREAKPOINT DISCOUNT CLIENT MUST BE DISCLOSED OF BREAKPOINT DISCOUNT OR BROKER IS IN VIOLATION OF FINRA RULES

What is the Cash Surrender Value in a life insurance policy?

- AMT AVAILABLE IN "CAH" UPON VOLENTARY TERMINATION OF A POLICY OR DEATH. - MAY TAKE OUT LOANS AGAINST CSV - AMT PAID IS CV - SURRENDER CHARGES OR OUTSTANDING LOAN BALANCE

What is the "Capital Pricing Asset Model?" And how do you calculate it?

- RELATIONSHIP BETWEEN EXPECTED RISK AND *EXPECTED RETURN* (HIGH RISK HIGH REWARD) - EX. RETURN = RISK FREE RATE + (BETA * (EX. MKT RETURN - RISK FREE RATE))

In investment banking who/what is the SELLING GROUP and what do they do?

- SELL NEW ISSUES TO PUBLIC OR OUTSIDE B/D - ** DO NOT MAKE FINANCIAL COMMITMENT, AND DO NOT HAVE ANY LIABILITY** - GETS PAID SELLING CONCESSION

What is the MANAGING UNDERWRITER'S responsibility in a municipal bond issue?

- SERVES AS HEAD OF SYNDICATE GROUP - DETERMINES *SCALE (OFFERING YIELDS BY MATURITY) ON SERIAL BOND ISSUES* - DETERMINES *PRICING (SET PRICE) ON TERM BONDS W/ SAME MATURITIES - CHOSEN BY EITHER NEGOTIATED BIDDING (REVENUE) OR COMPETITIOVE BIDDING (GOs)

In a "Barbell Investment Strategy," the CONSERVATIVE end holds ______________________ , while the HIGH RISK holds _______________________ .

- SHORT TERM BONDS - LONG TERM BONDS

The annuity contract holder buys the contract by paying a LUMP SUM called a ___________________ , OR by paying a series of installment payments called ________________________ .

- SINGLE PREMIUM - PERIODIC PREMIUMS

When a fund act as ITS OWN DISTRIBUTOR?

-WRITTEN PLAN describing financing; - approved by majority of SHAREHOLDERS and NON-INTERESTED BOARD MEMBERS - ***distribution of money is reviewed QUARTERLY***

All of the following are true about the taxation of non-qualified variable annuities during the accumulation period EXCEPT...? a.) Annual earnings are tax deferred b.) Distributions and w/drawls which are in excess of contributions are taxed as ordinary income c.) Distributions and w/drawls before 59 1/2 are generally are generally subject to a 10% penalty d.) Contributions are deductible in the year made