SIE

Which of the following is equal to 80 basis points?

0.008 1 basis point = .01% = 0.0001

An investor owns a 6% coupon bond with $1,000 par value. At maturity, the investor will receive

1030 par value + one extra semi annual coupon (30)

A bond is trading for 102 ¾. To purchase this bond an investor will pay

2027.5 A bond point is $10, and 3/4 of a bond point = $7.50. $1,020 + 7.50 = $1,027.50

An investor sells 10 XYZ June 30 puts at 3.5. The breakeven point is

26.5

What are typical maturities in banker's acceptances (BAs)?

30 to 180 days

An investor writes 2 Feb 45 calls for 2.25. The stock price at which the investor breaks even is

47.25

When a redemption of mutual fund shares is requested, the fund must redeem shares within A) 48 hours of request B) 3 business days of request C) 5 business days of request D) 7 calendar days

7 calendar days

Which of the bonds below would subject an investor to the greatest amount of call risk?`

A 6% bond with no call premium

A mutual fund share that charges 12b-1 fees is which of the following?

A B or C

Who is the issuer of a banker's acceptance?

A borrower with a bank deposit account

What is a repurchase agreement or repo?

A contractual arrangement between two parties, in which one party agrees to sell securities to another party at a specified price with a commitment to buy the securities back at a later date for another specified price.

A zero coupon municipal security is most appropriate for which of the following investors?

A working adult who would like funds available to pay off her mortgage in 10 years so that she can retire Zero coupon bonds are purchased at a discount and mature to face value. They are most suitable for investors that would like to plan for a lump sum to be available at a defined date in the future.

When comparing ETFs and closed-end funds, which two of the following statements are TRUE? I. ETFs typically trade at a deeper discount or higher premium from NAV II. Closed-end fund shares typically trade at a deeper discount or higher premium III. Closed-end funds typically experience more volatility then ETFs IV. ETFs typically experience more volatility than closed-end funds

A) II and III Closed-end funds can commonly trade at a discount or premium of 10%- 20% of their NAV, while ETFs are normally trading within 1% of their NAV. There is much greater market volatility in the price of closed-end shares than in ETFs.

An investor is interested in purchasing an interest in a diversified portfolio of domestic and international securities at a "cheap" price. Which of the following investment opportunities may be appropriate for this investor? A) Shares of a global income fund with an NAV of $17.01 but trading at a current price of $16.44 B) Shares of an international equity closed-end fund priced at $13.33 when the NAV is $13.32 C) A purchase of world bond open ended fund at the price next calculated D) Shares of a global market index fund available at a POP of $5.00

A) Shares of a global income fund with an NAV of $17.01 but trading at a current price of $16.44 The purchase of closed-end fund shares when they are trading at a discount from their NAV is seen as an opportunity to buy assets more cheaply than their calculated value. Mutual fund shares must be purchased at their POP, so this opportunity is available only with closed-end or ETF fund shares.

Which of the following characteristics applies to an investment in a UIT? A) Investors will know the securities that comprise their units for as long as they hold the investment B) The units can be easily liquidated through exchange trading C) The investor's units have a fixed value D) Investors can add to their holdings through subsequent primary offerings of the trust

A. Investors will know the securities that comprise their units for as long as they hold the investment Investors in a UIT own units in a defined pool of securities that will be held until the date the trust is terminated. The units fluctuate in value based on the securities in the portfolio. Units can be sold back to the trust, and additional units can be purchased when there have been redemptions. The trust does not have subsequent IPOs.

Which of the following are true about Exchange Traded Funds? A) They are marginable B) They cannot be sold short C) They are actively managed D) They can only be purchased as new issues

A. They are marginable Exchange Traded Funds are a type of exchange traded products mirrors a stock index. They are not actively managed, they are supervised. ETF's can be sold short; they can be purchased as new issues or on exchanges in the secondary market, and are marginable.

The individual shares of non-U.S. companies that are listed on U.S. stock exchanges are known as

American Deposit Receipts **ADS refer to the individual shares of an ADR held by the bank, but the ADRs are actually listed on an exchange.

An investor is interested in purchasing an interest in a bond fund at a price below the asset value of the portfolio holdings. Which of the following investments may be appropriate for this investor?

An Investment grade corporate closed-end fund Closed-end fund and ETF shares trade on exchanges at premiums or discounts to their NAV. An investment grade corporate bond CEF trading at a discount to NAV fits this investor's objective. A DJIA ETF is a stock fund.

To avoid double taxation on dividends paid to shareholders, REITs must invest what portion of their total assets in real estate?

At least 75% Explanation: REITs can avoid double taxation on profits passed through as dividends to shareholders by concentrating their investments in real estate. At least 75% of total assets must be in real estate, and at least 75% of gross income must be derived from real estate. Also, they must pass through at least 90% of their gains to shareholders.

A representative is considering the recommendation of a limited partnership interest to a customer seeking portfolio diversification. The recommendation of a partnership interest should be based on A) Its ability to generate substantial tax losses to shelter income if the client is in a high tax bracket B) The overall economic benefit of owning the partnership interest, including the income and the potential for appreciation of the assets held by the partnership C) The potential for the partnership to pass through income tax credits and expense deductions to offset earnings from other successful investments D) All of these reasons are equally important in making a suitable recommendation of a limited partnership interest

B) The overall economic benefit of owning the partnership interest, including the income and the potential for appreciation of the assets held by the partnership An interest in a limited partnership should be judged on its economic merits, not its tax benefits. Of primary importance in making a suitable recommendation of a limited partnership interest are its potential to generate income and appreciation of the assets it holds.

A UIT sells units to investors A) In private placements only B) Through representatives of broker dealers with which selling agreements have been established C) Directly through the sponsor D) Through the trustee that administers the trust

B) Through representatives of broker dealers with which selling agreements have been established The units of UITs are typically distributed by the representatives of broker dealers. A broker dealer must have a selling agreement with the UIT to distribute the UIT's shares through its representatives.

A share of a growth fund has a POP of $5 and NAV of $5.25. This is a A) More information is needed to determine the type of fund share B) Closed end company share C) Unit investment trust unit D) Open end company share

B. Closed end company share Closed end company shares trade at a discount or premium from their public offering price. The POP of open end shares is always higher than the NAV (other than for money market funds) because it includes the sales charge.

The administrative costs of ownership in a closed-end fund are included in the fund's A) Management fee B) Expense ratio C) 12b-1 charges D) Surrender charges

B. Expense ratio A closed-end fund's expense ratio reflects the costs of ownership in the fund as a percentage of the net asset value. It is included in the fund's prospectus.

The document that specifies the circumstances under which a limited partnership may be terminated or dissolved is the A) Subscription Agreement B) Partnership Agreement C) Sharing Arrangement D) Certificate of Limited Partnership

B. Partnership agreement A limited partnership's partnership agreement identifies the general partner and the roles of the limited partners. It also identifies the circumstances for the dissolution or termination of the partnership to take place.

The cost basis of an asset is that asset's A) amortized value for tax purposes. B) original value for tax purposes. C) stepped up value for tax purposes. D) adjusted purchase price for tax purposes.

B. original value for tax purposes

All of the following Standard & Poor's Ratings are investment-grade EXCEPT:

BB

A hedge fund in which the fund manager is given complete authority to decide on the assets in which to invest is a

Blind pool fund

In a limited partnership a limited partner is permitted to engage in all of the following activities EXCEPT

Borrowing money from the partnership Explanation: Neither a limited nor a general partner are permitted to borrow money from the partnership.

Which of the following statements is true regarding purchases and redemptions of mutual fund shares?

Both full and fractional shares can be purchased and redeemed Investors can purchase or redeem full or fractional shares. For example, an investor may want to withdraw $10,000. If the NAV is $25.10 To realize this amount, the investor will redeem 398.41 shares (this number is adjusted if deferred sales charges apply). Mutual fund shares do not trade in the secondary market. Purchases take place at the POP next calculated; redemptions at the NAV next calculated. Redeemed shares are not reissued; they are canceled and destroyed.

Dividend and capital gains distributions are made to investors in

Both open-end funds and unit investment trusts

Hedge funds are best suited for sophisticated and institutional investors for all of the following reasons EXCEPT A) There is often a lack of transparency into their trading practices B) They may have long periods of illiquidity C) Their investment strategies are narrowly defined and highly complex D) They often require minimum investments of $100,000 or more

C. Their investment strategies are narrowoly defined and highly complex The investment strategies of hedge funds are typically not narrowly defined. Instead the fund managers are given a broad range of authority to invest in numerous types of assets and employ complex trading strategies and high degrees of leverage to magnify returns. These factors limit their suitability for typical investors. Hedge funds are generally appropriate for sophisticated and institutional investors that are qualified to understand these risks.

To partially protect a long stock position and increase income to her portfolio, an investor could do which of the following?

Correct Answer: Sell calls Explanation: Additional portfolio income can be generated by writing calls against a stock position that is currently held. The premium from the calls delivers the additional income.

An investor purchases an index 352 call for a premium of 3. At expiration the index value is 344. All the following statements are true EXCEPT

Correct Answer: The writer of the call will receive $800 at expiration Explanation: This long index call was out of the money at expiration, so was not exercised. Because the contract expired, the call writer was able to keep the premium collected without having to deliver cash at settlement.

A customer that purchases closed-end fund shares may pay all of the following EXCEPT A) Fund expenses B) Commissions to a sales representative C) Management Fees D) 12b-1 fees

D) 12b-1 fees

All of the following options are typically available to investors at the termination of a UIT EXCEPT

D) Receive a return of the principal that was invested At the termination of the trust, UIT investors will receive the value of their units, but not necessarily a full return of their principal. UITs may offer the option to roll over the proceeds into a new series of the same trust. Some UITs pay out an actual distribution of the trust securities at termination, which is called making an in-kind distribution.

An investor is a participant in a raw land limited partnership. The likely investment objective of this individual is A) capital preservation B) tax-free income C) growth and income D) capital appreciation

D) capital appreciation The investment objective of this investor is likely capital appreciation. Since the land is not developed, there will be no income, nor depreciation available on the land. Raw land cannot be depreciated.

All of the following statements regarding public, non-traded REITS are true EXCEPT A) They do not trade in the secondary market B) They are subject to registration and disclosure requirements of the Securities Act of 1933 C) They are typically illiquid D) They are usually short-term investments

D) They are usually short-term investments Public non-traded REITs are offered to investors through broker-dealers. They are typically long term, and are highly illiquid because there is no public secondary market. They offer potentially high rewards for those that can withstand the liquidity constraints. The Securities Act of 1933 requires that these REITs provide disclosure through an offering prospectus and file annual and quarterly reports with the SEC.

An investor that wants the option to invest in a portfolio of diversified common stocks that can be easily liquidated at current market prices should consider a A) Equity Growth and income CEF B) Blue Chip mutual fund C) Value mutual fund D) Convertible security CEF

Equity Growth + Income Closed End Fund Because the client would like the option to sell shares at the current market price, mutual funds are not appropriate. Closed-end fund shares can be liquidated at current market prices. Equity growth and income funds include a diverse portfolio of stocks held for growth and dividend paying potential.

Every year a mutual fund will examine its operating expenses as a function of the average dollar value of its assets under management. This item is published as the mutual funds' A) NAV B) expense ratio C) 12b-1 fee D) POP

Expense Ratio The expense ratio of a mutual fund, typically published annually, is derived by dividing its operating expenses by the average dollar value of its assets under management. These expenses are taken out of a fund's assets and consequently reduce the return to a fund's investors.

Which of the following may be traded on a stock exchange? I. Common stock II. Derivatives III. Mutual Funds IV. Bonds

I II and IV

In the formation of a limited partnership, there must be I. a minimum of two partners II. general partners that are personally liable for the debts of the partnership III. limited partners that are personally liable for the debts of the partnership IV. a subscription agreement that must be filed with the state in which the partnership is organized

I and II A limited partnership must have two partners - a general partner and a limited partner. The general partner has unlimited liability and is personally liable for the debts of the partnership and any lawsuits against it. Limited partners have liability that is limited to their investment and perhaps a share of the partnership's debt. The document filed with the state when the partnership is formed is the certificate of partnership.

A bond is quoted at 99 1/8. From this quote, which of the following can be reasonably concluded? I. The bond is a corporate bond II. The bond is a government bond III. An investor would pay $991.25 to purchase the bond at the current market price IV. An investor would pay $99.125 to purchase the bond at the current market price

I and III Corporate bonds are quoted in 1/8th increments, so a quote of 99 1/8 represents 99.125% of par ($1,000), or $991.25. Treasuries are typically quoted in 1/32nd increments (e.g. 99 10/32).

If units of a UIT are redeemed prior to the termination of the trust, the investor will receive I. the value of the units as calculated at the end of the business day II. The current value based on the time order to liquidate the shares is entered III. more or less than the original purchase price IV. no less than the original purchase price

I and III Investors that liquidate their ownership in a UIT sell their units back to the issuing trust. The value of the units is determined at the end of the business day based on the current valuation of the securities held in the portfolio. There is no guarantee that an investor will receive more than their original purchase price if their units are redeemed.

A private equity firm is most likely to invest in which of the following companies? I. Underperforming private companies II. Large and successful public companies III. Public companies that want to go private

I and III Private equity firms typically look for investment opportunities in underperforming private companies that they can take public, or in public firms they can take private.

Which of the following circumstances will cause a decrease in the NAV of mutual fund shares? I. Shares are redeemed II. The fund distributes dividends III. The value of portfolio securities falls IV. New mutual fund shares are sold

II and III The value of mutual fund shares falls when the value of securities in the portfolios decreases and when the portfolio makes dividend or capital gains distributions. There is no change in NAV when new shares are issued or when shares are redeemed. In these situations new cash coming in is offset by new shares issued; cash going out is offset by the cancellation of shares.

The typical fee compensation paid to a private equity manager is I. 1% of the invested capital II. 2% of invested capital III. 10% of the fund's net profits IV. 20% of the fund's net profits

II and IV

The frequent trading of securities within hedge funds may subject investors to

Increased short-term capital gains Explanation: Frequent trading by hedge fund managers can subject investors to increased short-term capital gains which can be costly because of the higher tax rate that applies to these distributions.

All of the following statements are true regarding callable bonds EXCEPT

Issuers choose to call bonds when current interest rates are higher than the coupon rate of the bond Issuers call bonds when current interest rates have fallen below the coupon they must pay on outstanding bonds.

Accrued interest is calculated from the

Last interest payment date up to but not including the settlement date

Which of the following types of REITs is most likely to generate interest income for investors? A) Mortgage REIT B) Hybrid REIT C) Equity REIT D) Balanced REIT

Mortgage REIT

A type of stock that offers the possibility of a higher dividend than the stated rate is

Participating preferred stock

What is the settlement date that applies to the exercise of index options?

The business day following the date of exercise Explanation: Cash settlement for index options must take place on the business day following the date of exercise.`

All of the following statements about municipal revenue bonds are TRUE EXCEPT:

The maturity of the revenue bond usually coincides with the useful life of the facility being built.

All of the following statements apply to Alternative Minimum Taxes (AMT) and municipal bonds EXCEPT

The tax that must be paid is the lower of the AMT or normal income tax calculation The alternative minimum tax (AMT) was designed to insure that persons with numerous tax deductions or credits pay a fair amount of income tax. A separate AMT calculation is made and the tax owed based on the greater of the two calculations must be paid. Private activity bonds are included in the AMT calculation. Confirmations include a notation to inform investors of bonds that may be subject to AMT.

All of the following statements about municipal revenue bonds are true EXCEPT:

They are subject to the debt limits of the issuer

All of the following statements describing REITs are true EXCEPT

They generally invest in residential real estate only Explanation: REITS generally invest their assets in commercial real estate, but also hold residential real estate mortgages. The ownership interest held by an investor reflects a share in all properties held by the fund much like ownership of mutual fund shares. REIT shares trade in the secondary market at a premium or discount to their NAV. REITs raise capital through an initial public offering.

All of the following statements about structured products are true EXCEPT

They offer a high degree of liquidity Explanation: Structured products typically do not trade after they are issued. There is generally a significant discount when they are sold before their maturity.

An investor would most likely buy a floating rate security issued by the U.S. Treasury for which of the following reasons?

To protect against interest rate volatility Floating rate securities feature an interest rate that varies or "floats" based on the performance of an underlying benchmark rate. Investors purchase them to protect against volatile interest rates, as these securities can help reduce the risk of locking in a low rate for a long period of time.

An investor in a high tax bracket is subject to federal, state and local income taxes. If the investor is seeking current income with minimum tax liability, which of the following choices is most appropriate?

US. Virgin Island Utility bonds Bonds issued by U.S. Virgin Islands and other U.S. territories and possessions are exempt from federal, state, and local taxes. Double-barreled bonds, like other municipal bonds, are exempt from federal and possibly state taxes. Private activity bonds may be subject to alternative minimum taxes. Treasury STRIPS are subject to federal income tax, and do not provide current income.

An investor who lives in the state of Minnesota purchases municipal bonds that are issued in the state of Wisconsin. The interest on the bonds

Will probably be more than the investor would have received from an investment in US government bonds.

When recommending a specific municipal bond to a client, which of the following factors is least relevant in making a suitability determination?

age of children

bonds issued by the federal gov

are not callable

Who is the owner of a bearer bond?

bearer of bond certificate

Hal buys a $50,000 certificate of deposit (CD) from his bank. Which one of the following features is the CD not likely to have?

can be resold

An investment which is a multi class debt instrument backed by a pool of mortgage pass-through securities is a(n)

collateralized mortgage obligations (CMOs).

he price at which a convertible bond can be exchanged for shares of the company's stock is known as the

conversion price not conversion ratio

An investor that holds 100 shares of XYZ stock expects little short-term movement in the stock's price but desires to generate additional income from the shares. Which strategy meets the objectives of this investor?

covered call writing Covered call writing is a strategy used by investors with long stock positions to generate additional income. By writing calls, premiums are received, and if the market price of the stock does not surpass the exercise price, the call will not be exercised

Which type of mutual fund is sold at net asset value? A) Open-end B) Front-end load C) Closed-end D) No-load

d. no load

Interest received from a Treasury Bond is taxed at the

federal level but not the state or local level.

Common stock is most often purchased to satisfy ... objective

growth

As compared to short term bonds, bonds with a longer time until maturity usually

have higher interest rates are less marketable

bearer bonds

have interest coupons attached

An 80 -year-old individual would be least likely to purchase a

hedge fund

Which of the following securities is the least liquid?

hedge funds

which type of fund is normally a no-load fund?

index

When the Federal Reserve announces a decrease in interest rates

investors are likely to move their funds from the bond market to the equity market

Brunswick issues a Series A $2.40 cumulative convertible preferred voting stock. This stock

is convertable into common stock pays dividends in arrears does NOT receive excess dividends on a pro rata basis with common stock

Which of the following is a significant risk of a raw land limited partnership program that must be disclosed by a registered representative?

lack of liquidity A raw land partnership has high appreciation potential. It does not pass through losses because there are no expenses associated with development of the land or depreciation. The lack of liquidity is a risk that must be disclosed.

Which of the bonds listed below would have the greatest price volatility?

long-term zero coupon bond Because zero coupon bonds pay no interest until maturity, their prices fluctuate more than other types of bonds in the secondary market.

The risk that stock cannot be sold easily or promptly is known as

marketability risk

All of the following are benefits of investing in mutual funds except A) minimum growth rate B) liquidity C) diversification D) professional management

minimum growth rate Mutual funds offer many advantages and conveniences to investors. They do not, however, provide a minimum growth rate or any guaranteed returns.

The secondary market for ETF's is generally

more liquid than ETNS While both ETFs and ETNs offer secondary market trading, the market for ETNs tends to be more limited than that for ETFs.

The Series I bond is best described as a

non-marketable US Government bond paying a combination of fixed interest and a variable return.

The shares of a corporation's stock that are held by the public are known as

outstanding stock

U.S. based hedge funds are subject to which of the following tax consequences on income that is distributed? A) Taxation at favorable capital gains rate B) Double taxation C) Tax exemptions at the state level D) Pass through without taxation

pass through without taxation`

A mutual fund's investment manager is paid

percentage of the assets held by the fund

What date occurs one business day after the ex-dividend date?

record date

In which of the following events will an open order price not be adjusted?

reverse split

Investment company financial statements are sent to shareholders

semi annually

The accrued interest that is calculated for settlement of a newly issued municipal bond

starts on dated date is not based on actual-day months does not include settlement date added to purchaser's price

Which of the following receive the least amount of their revenue from property taxes?

state gov

A U.S. Treasury security pays fixed coupon interest every six months and has an original maturity of 5 years. It is a

t-note t-bill - less than 1 yr t-note - 1 - 10 yr t-bond - 10+

An investor holding shares of a REIT receives a dividend. This dividend is A) taxed as a short-term capital gain B) subject to taxation at a preferred rate C) taxed as ordinary income D) taxed in the same manner as a stock held for more than 60 days

taxed as ordinary income

mutual funds are redeemed at ...

the NAV

When an individual receives a stock dividend,

the cost basis for the entire position is adjusted downward, with no tax liability for the additional shares upon receipt.

As a general rule, the higher a given debt instrument ranks in the capital structure hierarchy

the lower its risk to investors and, consequently, the lower its cost of capital to the borrower/issuer

A bond is selling at a price of 81 with all coupons since July of 2011 attached. This bond is said to be

trading flat with unpaid coupons attached

Which of the following is a characteristic of revenue bonds?

user fees

Which of the following does not pay a dividend? UITS warrants mutual funds ADR

warrants

A corporate bond valued at "300 over" comparable treasury securities is

yielding 300 basis points more than treasury securities