SIE
Which of the following is equal to 175 basis points?
0.0175. It is important to note that this answer is as a pecentage. One basis point is equal to .01%, or .0001. There are 100 basis points in 1%. To convert basis points to a percentage, move the decimal two places to the left. To convert basis points to a decimal, move the decimal point four places to the left. So, 175 basis points becomes 1.75%, or 0.0175.
The general eligibility standard for ERISA plans includes which components?
Age and work service. In general, ERISA requires plan eligibility for any employee who is at least 21 years old with one year of work service with the employer.
FINRA recordkeeping requirements for customer complaints require all of the following EXCEPT
All firms are required to keep separate records of written customer complaints and follow-up action at each office of supervisory jurisdiction. There is no requirement to document or keep records of oral customer complaints.
Municipal dealer B is preparing to publish an advertisement online which will promote the enhanced facilities of your firm in the municipal securities arena. This advertisement must be
All municipal securities advertisements must be approved by either a municipal securities principal or general securities principal prior to public use. They do not have to be submitted to the MSRB.
The circumstance when short-term interest rates are higher than long-term interest rates is depicted by a(n)
An inverted yield curve occurs when short-term interest rates are higher than long-term interest rates. This condition may predict a recession.
Which of the following provisions of the Securities Act of 1933 applies to municipal securities?
Antifraud provisions regarding disclosure to potential investors. Municipal securities issuers are exempt from filing registration statements with the SEC, but cannot withhold or intentionally mislead investors with regard to information that is essential to an investment decision. The antifraud provisions of the Act of 1933 apply to municipal issuers. Insider trading provisions are found in the Securities Exchange Act of 1934, along with prohibited practices in the sale of securities like guarantees against loss.
How is interest usually paid to holders of commercial paper?
As a discount to maturity value. Commercial paper usually is issued at a discount to maturity value. The difference between the discounted issue price and maturity value is interest. The yield is the discount multiplied by the number of maturity rolls per year.
Which of the following individuals is not eligible to open a Roth IRA and make a contribution to it?
Bradley, who is age 45 and earns $500,000 a year as a banker. Anyone who works and earns compensation (or is married to a worker with compensation) can make a Roth contribution, except a person who has compensation above a threshold.
An email exchange between a representative and a customer includes the following statement made by the representative: "No worries about this investment. If its value drops by more than 20% in the next 6 months, I'll take it off your hands. It's got great long term potential". This is an example of the prohibited practice of
Broker-dealers or representatives can never guarantee their customers against loss by offering to repurchase securities if the value goes down
In a cash transaction on the record date, when does the ex-dividend date occur?
Business day following the record date. For a cash transaction, the ex-dividend date is the business day after the record date. For a non-cash transaction, the ex-dividend date is one business day before the record date.
What type of open orders must be adjusted for corporate events that affect a security's price and/or number of shares?
Buy limit orders. Corporate event adjustments are made for orders below the current market prices, including buy limit, sell stop and sell stop limit orders.
Which two statements correctly describe closed-end funds?
Closed-end funds are investment company securities that are issued once (not continuously) and then trade in the secondary market. These shares are generally not redeemable with the issuer.
Karen participates in an employer retirement plan that is 100% funded by the employer and promises to pay her a steady retirement income based on her salary and years of work service. What type of plan is it?
Defined benefit plans are 100% funded by the employer and promise to pay participants an income benefit at retirement age. The benefit may be based on a formula that takes into account salary, age and years of work service.
Dividends are typically paid
Dividends are typically paid on a quarterly basis and, therefore, must be annualized to calculate the implied dividend yield for a given public company.
What vesting schedule does ERISA require for an employee's own contributions to the plan?
ERISA requires that all of the employee's own contributions to the plan must be immediately vested.
U.S Dollars held in bank accounts abroad are known as
Eurodollar deposits.
The administrative costs of ownership in a closed-end fund are included in the fund's
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.
FINRA BrokerCheck includes which of the following information?
FINRA BrokerCheck includes bankruptcy information for the past 10 years and other licensing and registration information submitted to FINRA (Form BD and BDW for firms; Forms U4 and U5 for representatives). It does not provide details of financial information from quarterly FINRA filings or personal descriptions of representatives. It also includes information about any representative who has been active in the past 10 years, not 15 years.
A firm's anti-money laundering program must be independently tested for compliance
FINRA rules require that a firm's anti-money laundering compliance program is tested annually by a designated independent person.
According to industry rules, member firms must charge customers fair commissions or fair prices after taking into account all of the following circumstances EXCEPT:
Fair commissions and prices are based on a variety of circumstances, but do not include what the customer can afford to pay. Fair commissions and prices should be consistent for similar transactions and services.
Which of the following is TRUE of the tax implications of a contributions made to a Roth IRA?
Federal income tax deductions are not available to participants of Roth IRAs. All Roth contributions are made with after-tax money. Unlike a Traditional IRA, there is no federal income tax deduction available.
The separate account of an insurance company is managed to
Help provide inflation protection for purchasers of both life insurance and annuity products. The separate account of an insurance company separates purchase payment for variable life and annuity products from purchase payments for fixed products (general account products). The separate account is designed to offer growth to keep pace with inflation for purchasers of variable products. In exchange for growth potential, purchasers take on investment risk.
Under which of the following circumstances would the Federal Reserve be likely to take measures to ease the money supply?
High rate of unemployment. The Fed is likely to ease the money supply if the economy is slow or stagnant, as long as inflation is not high. When unemployment is high, the economy is usually in a recession or a trough, and, stimulating the economy through the easing of credit would be typical. An increase in housing starts and GDP are signs of a strengthening economy so an easy money policy is not needed. The Fed usually tightens the money supply to combat high inflation.
Which of the following parties are classified as insiders under the Securities Exchange Act of 1934?
I. A shareholder who owns 7 percent of outstanding stock of a corporation and his spouse who owns 4 percent. The Securities Exchange Act of 1934 defines insiders as corporate directors, officers, or stockholders owning more than 10% of a firm's shares. The positions of spouses are aggregated in determining the ownership percentage of a shareholder. For some higher level employees, like a VP or director of technology, they may be a corporate officer for purposes of signing contracts or speaking on behalf of the company, but they are not considered "corporate insiders" under the narrower definition in the '34 Act.
When designing its continuing education program, a firm must require that all covered persons complete
I. Firm Element training annually. III. Regulatory Element through a computer based module, and Firm Element through the method the broker-dealer has determined most appropriate. Broker-dealers must require covered persons to complete Firm Element annually. The Regulatory Element must be completed every three years (although new reps must complete it within 120 days of their second anniversary of registration). The Firm Element requirement is defined by each broker-dealer, and may be delivered through whatever means the broker-dealer has identified as appropriate in its needs analysis and training plan. Regulatory Element is delivered by the CE Council via computer-based training modules.
Which TWO of the following are TRUE of a broker-dealer's obligation to provide notice to customers of its Customer Identification Program?
I. Notice must be given when the account is opened. IV. The notice must be provided by any means that ensures the customer will be able to view it. A CIP must include account opening procedures for providing customers with adequate notice that their identities will be verified by the broker-dealer. Financial institutions may either give customers copies of the notice individually or in a manner reasonably designed to ensure that the customer is able to view it (such as a lobby sign).
Which of the following are requirements of an issuer to pursue an exempt offering under Rule 147?
I. The issuer is incorporated in the state II. 100% of the securities must be sold to state residents. For an intrastate exemption under Rule 147, the issuer's principal place of business must be in the state and 100% of the securities must be sold to state residents. Additionally, they must meet one of the following requirements: at least 80% of the asset must be located in the state, at least 80% of the revenues must be derived from the state, at least 80% of proceeds from the sale of securities must be used in the state, or a majority of the company's employees must work in the state.
Rule 144 applies to the sale of securities that
I. were acquired by investors through unregistered, private transactions II. are considered control securities because they are held by an affiliate of the issuer. Rule 144 allows public resale of restricted and control securities if a number of conditions are met. Restricted securities are those securities that have been acquired through a private placement or other exempt transaction (i.e. Regulation S for overseas offerings), and are not registered. Control securities are those held by an affiliate of the issuing company. An affiliate is a person, such as a director or large shareholder, in a relationship of control with the issuer. Control securities are not always subject to a holding period. They must satisfy a holding period only if they are also restricted. Securities acquired by non-affiliates through an open market transaction are neither restricted nor control stock, and are not subject to Rule 144.
Which two of the following statements describe closed-end funds?
II. There is a fixed number of shares III. Shares are liquidated through exchange trading. Closed-end fund shares issue a limited number of shares through IPOs. To receive cash for their shares, investors sell closed-end company shares in secondary market transactions on exchanges. They are not redeemed by their issuer, like mutual fund shares.
A broker-dealer may compensate an outside party for a business referral, in the form of finder's fee,
If the outside party is properly registered. Securities industry regulations prohibit the payment of any compensation to unregistered persons.
During a period of recession, consumers generally experience
In times of recession, interest rates are generally falling, so bond prices are rising.
Money market funds offer all of the following EXCEPT
Insured by the FDIC. Money market funds are short-term, liquid and very safe, but are not FDIC insured. Money market funds have historically held their net asset value at $1.00 per share. They pay a slightly higher interest rate than bank savings account or interest bearing checking accounts.
What type of social media content qualifies for an exception to the requirement of prior principal review?
Interactive, real-time content such as a Twitter tweet or response to a blog post does not require prior principal review, because it qualifies for an exception. However, it is subject to supervision and content standards. Static social media, on the other hand, does require prior principal review.
If the Federal Reserve determines that a tight money policy is necessary, all of the following are likely EXCEPT
Interest rates will fall. A tight money policy exists when the Federal Reserve makes credit less available to slow down the economy. This means it will tighten the money supply through raising interest rates. As interest rates go up, bond prices fall and generally the stock market will also fall. The dollar's value against foreign currency will generally move in the same direction as interest rates.
Which type of advisers must be registered with the SEC?
Large advisers (with more than $100 million in AUM) are required to register with the SEC unless they qualify for an exemption. Most mid-size and small advisers are prohibited by law from registering with the SEC.
Variable annuities are subject to which of the following securities regulations?
Like mutual funds, variable annuities are subject to most securities regulations. The Securities Act of 1933, The Securities Exchange Act of 1934, The Investment Company Act of 1940 and the Investment Advisors Acct of the 1940 apply to variable annuities.
An investor has income that was generated as a silent partner in a real estate partnership. An investment that may provide the opportunity to reduce this income for tax purposes is a
Limited partnership program. Limited partnerships and other forms of direct participation programs offer flow through of passive losses that can be used to reduce passive gains.
All of the following enforce municipal securities industry rules EXCEPT
MSRB. Enforcement and inspection for compliance with MSRB rules is done by the SEC and FINRA for brokerage firms and by the FRB, FDIC, and the Office of the Comptroller of the Currency for dealer banks.
A general partner in a limited partnership may engage in which of the following activities?
Making all investment decisions on behalf of the partnership. The GP has the authority to manage the operations and investment strategy on behalf of the limited partners. The limited partners must take no role in the management or they risk the loss of their limited liability status. General partners are prohibited from borrowing money from the partnership, competing with the partnership through another investment interest, and continuing the partnership after the departure of a GP without authorization.
MSRB rules protect
Municipal issuers from unfair practices and fraud by municipal securities firms and their representatives. MSRB Rule G-17 broadly protects municipal issuers and customers from unfair practices and fraud by municipal securities firms and their representatives.
A company with a Ba1 rating from Moody's and a BB+ rating from S&P would be classified as which of the following?
Non-investment grade. Issuers rated 'Ba1' and below by Moody's Investor Service and 'BB+' and below by S&P are referred to as non-investment grade or high yield. Due to having greater default risk, high yield bonds pay more interest than investment grade debt. Issuers rated 'Baa3' and above by Moody's Investor Service and 'BBB-' and above by S&P are referred to as investment grade.
Nonqualified withdrawals from Section 529 College Savings Plans are subject to which of the following?
Nonqualified withdrawals from Section 529 College Savings Plans are subject to full federal and state income taxation on the entire amount of the distribution that is attributable to earnings, plus a 10% penalty tax on this amount. Because the contributions to these accounts are made with after tax dollars, only the earning are subject to taxation and the penalty.
Participation in a private securities transaction
Participation in private securities transactions is not prohibited by FINRA. However, representatives must provided detailed information about the transaction and receive permission from their firm before they can participate. If the rep does not receive compensation from the transaction, then only notification is required, not permission.
With respect to a "not held order", the registered rep is selecting the
Price and/or time. A "not held" order is one where the registered rep is selecting the price and/or time only. The customer has provided all of the other instructions for the trade.
All of the following statements correctly describe quotations of U.S. Treasury Securities EXCEPT
Prices are quoted in 1/8ths. Prices of U.S. Treasury securities are quoted in 32nds. Treasury Bills are quoted at a discount from their face value, while notes and bonds are quoted with a bid/ask. The customer buys at the ask price which is always higher than the bid. A narrow bid/ask price indicates a very active trading market.
Ralph participates in a type of plan in which all contributions are made by the employer. Each year, the employer contributes a percentage of salary for all eligible employees, and the percentage varies from year to year. What type of plan is it?
Profit-sharing plans give employers the flexibility to vary the level of annual contributions based on the company's profits.
At what age must Required Minimum Distributions (RMDs) from a Roth IRA begin during an account owner's lifetime?
RMDs are never required during the account owner's lifetime
Which one of the following is not a type of communications with the public, as defined by FINRA Rule 2210?
Research reports. The three types of communications with the public are retail communications, correspondence and institutional communications. It is the audience to which communications are distributed that determines which type it is.
SEC Rule 145 addresses the
SEC Rule 145 addresses the reclassification of an issuer's securities, and all of the accompanying documentation standards for investor protection.
What is the maximum amount of cash loss that SIPC will cover if a broker-dealer goes bankrupt?
SIPC will cover up to $250,000 for customer's cash claims against a failed broker-dealer.
Rising commodity prices in the U.S. would most likely cause which of the following responses from the Federal Reserve?
Sell securities in the open market. Rising commodity prices tends to be a sign of inflation. To control potential inflation the Federal Reserve would tighten the money supply. This could be accomplished by selling securities. Purchasing securities in the open market or decreasing interest rates would have the opposite effect.
Bay Vista, a broker-dealer, sends a seminar announcement on June 1 to 500 retail investors. It follows up on July 10 by sending an event program to twelve retail investors who registered to attend. What type of communications are these?
Since these are sent to retail investors, they aren't institutional communications. The first piece is sent to more than 25 retail investors so it is retail communication. The second is sent to 25 or fewer retail investors, so it is correspondence. Note that more than 30 days have elapsed between communications, they will be considered separately.
Marketable U.S. government instruments that have their principal amounts adjusted to the Consumer Price Index to protect the holder against inflation are called
TIPS (Treasury Inflation-Protected Securities) are marketable inflation-indexed bonds that are issued by the U.S. Treasury. Their principal is adjusted to the Consumer Price Index and is multiplied by a constant coupon to generate an interest payment that protects the holder against inflation. Series I Bonds are non-marketable savings bonds that have a variable coupon rate reset every 6 months based on the current inflation rate.
How are Interest payments from bonds held in a traditional IRA account taxed?
Taxes are deferred until withdrawal. Interest payments from bonds held in a traditional IRA account accrue on a tax-deferred basis and will be fully taxed upon withdrawal.
Organizations that have regulatory oversight over variable products include all of the following EXCEPT
The FDIC is a banking regulator and does not have regulatory authority over variable products. Securities regulators and insurance regulators are charged with regulatory oversight of variable products. These regulators include the SEC, FINRA, and state insurance commissioners.
The top monetary policy making body of the Federal Reserve is the
The Federal Open Market Committee operates monetary policy for the Federal Reserve Board.
If a municipal finance professional makes a $350 contribution to the campaign of an issuer official who she is entitled to vote for,
The MSRB political contribution rule prevents municipal securities broker-dealers from engaging in any negotiated underwriting with an issuer, where the firm or a municipal finance professional of that firm, makes a contribution of more than $250 to an official of that issuer. If the professional is not eligible to vote for the issuer official, they may not contribute any cash to the official's campaign.
The organization that maintains a list of suspicious persons and checks customer identification information against known terrorist lists to identify potential money launderers is
The Office of Foreign Assets Control (OFAC), a division of the U.S. Treasury, maintains and monitors lists of known terrorists. Firms are required to collect identification information from customers to be checked against the OFAC lists when accounts are opened.
A joint account between a representative and a customer is permitted in all of the following circumstances EXCEPT
The account has received prior approval from a principal, and the representative has agreed to accept a disproportionate share of the losses. Under limited circumstances, representatives may have joint accounts with customers. Joint accounts are allowed with permission of the customer and the firm. The sharing in the account must be proportionate to each individual's contributions with the exception of joint accounts with immediate family members which does not require proportionate sharing.
In which of the following situations would it be appropriate for a registered representative to lend money to a client without receiving permission from the firm?
The client is a financial institution engaged in the business of lending money.
When a stock index option is exercised
The exercise of a stock index option is always handled in cash, never through a securities transaction. In contrast, the exercise of an equity option is handled through a separate securities transaction.
An investor establishes the following position: Long 1 XYZ 50 put at 3. All of the following statements about this contract are true EXCEPT
The investor holds the obligation to sell the stock. An investor that establishes a long put position holds the right, not the obligation, to sell the stock at the strike price, and has paid a premium to acquire this right. A class of options is all calls or all puts on the stock of a particular issuer. A series of option contracts is all options of a given type (call or put) on the same stock, with the same strike price and expiration date.
When opening an account with another broker-dealer, when must the registered representative notify the opening firm of their association with another broker-dealer?
The registered representative must provide written notice of employment with another FINRA firm prior to opening the account.
All of the following are considered prohibited guarantees against loss EXCEPT
The representative offers to sell the customer a covered call position that will offset losses of the stock position if a market downturn is experienced. Any type of price fixing or offer to repurchase securities is a prohibited guarantee against loss. Assisting a customer in establishing a hedge to protect a position is a valuable service.
Which of the following is positively impacted when inflation is rising rapidly?
The value of real estate is likely to increase during a period of increasing inflation. Stocks may increase or decrease during a period of high inflation, but are not tied to inflation as much as real estate. Prices of bonds and other fixed rate investments fall when inflation is rising. Purchasing power is eroded in inflationary times, because today's dollar will buy fewer goods in the future.
Which of the following is NOT TRUE about an investor that holds an equity LEAPS call contract?
They are subject to unlimited risk.
If an investor living in one state purchases a municipal bond issued by a different state,
They may need to pay income tax to their home state. When an investor buys an out of state municipal bond, they will generally be required to pay taxes on the interest they receive to their home state. The interest will remain exempt from federal income taxes.
Elizabeth has one Roth IRA, which she started at age 50. She is now age 62 and wants to distribute $10,000 for retirement income. What is the tax consequence of her distribution?
This is a qualified distribution. She has met both requirements: five-year holding period and after age 59 ½. The withdrawal is tax-free and there is no penalty.
Which holders of a stock, as of the record date, are entitled to receive a quarterly dividend payment?
Those who bought before the ex-dividend date
Which of the following debt instruments could be issued with a 7 year maturity?
Treasury Notes are issued with maturities of between 2 - 10 years. Treasury bills have maturities of one year or less. Treasury bonds have maturities of 30 years. Commercial paper typically has a maximum maturity of 270 days.
Two options contracts would be in the same series when they have common
Two option contracts are in the same series because they have the same expiration month and strike price.
A broker-dealer "re-hypothecates" securities that its customers hold in margin accounts. Which of the following statements best describes this practice?
Using customer securities as collateral for the broker-dealer's own borrowing. In some margins accounts, brokers are allowed to re-hypothecate margined securities, which means the broker-dealer is re-pledging the customer's securities as collateral for the broker-dealer's own borrowing. The broker-dealer can then re-loan those funds to customers for making purchases on margin.
Which of the following apply to sale of variable insurance products?
Variable products are securities because customers may lose money. They are subject to FINRA rules of suitability and the Know Your Customer rule which requires the collection of sufficient information to understand investment objectives. The anti-fraud provisions of the Securities Exchange Act of 1934 apply to the sale of all securities.
A cash dividend will be paid to shareholders of record on Thursday, June 24. What is the ex-dividend date?
Wednesday, June 23rd. The ex-dividend date normally is one business day before the dividend record date. For transactions on or after the ex-date, the buyer will not receive the dividend.
Which of the following transactions can take place in an account that has been frozen because of failure to meet a Reg T call?
When a customer account is frozen, account activity is restricted. Buy transactions may be executed only if the customer has sufficient money in the account prior to the transaction (that is, the customer must pay for any securities up-front). Sale transactions, however, are not effected. Customers are free to sell securities in a frozen account.
A customer is planning to liquidate shares owned in a public REIT. Which two of the following are TRUE?
When a customer liquidates shares in public REIT, their value is determined by market supply and demand, and may be more or less than the NAV of the shares.
An investor purchases 100 shares of XYZ stock at 72 and later buys 1 XYZ 69 put for 2.50 to protect the stock position. When the market price of ABC is 68. What is the investor's breakeven on the combined purchase?
When an investor buys a put to protect a stock purchase, the investor will breakeven when the stock price is equal to the cost of the stock plus the put premium. 72 + 2.50 = $74.50.
A customer must sign and return the options account agreement
Within 15 calendar days of account approval.
Samantha, age 81, is required to take a $12,000 RMD from her Traditional IRA. However, she makes a mistake and only distributes $8,000. Does she owe an excise tax?
Yes, she owes $2,000. Failure to take an RMD subjects the account owner or beneficiary to a 50% federal excise tax on the under-distribution amount. In this case, the under-distribution is $4,000 and the tax is $2,000.
If a customer is unwilling to provide information necessary to assess their suitability to hold certain municipal bonds,
You may accept their specific instructions to purchase the bonds for their account. No recommendations may be made if the necessary information has not been ascertained.
An investor has funded a variable annuity with a $10,000 deposit and will continue to add capital to the investment over the course of the next ten years, per the contract with the insurance company. Should the investor withdrawal their capital prior to the annuitization of this contract,
a surrender charge may be imposed by the insurance company. If an investor withdraws their capital prior to the annuitization period of a variable annuity, the insurance company will likely assess a surrender charge on the investor. This is a fee paid to the insurance company for terminating the contract earlier than contractually agreed.
A confirmation of a transaction must be provided to a customer
at or before the completion of the transaction. In other words, confirmation is required no later than at settlement.
ForeignCo, with offices in 15 countries, including the US, engages Jim Securities, Inc. as an advisor to make corporate acquisitions for cash and securities. Shortly after signing an engagement letter, ForeignCo's CFO gives Robert, a banker on the deal team, a mandate to screen for potential acquisition targets with significant business in Cuba, Venezuela and North Korea. At this point, Robert should
bring the issue to the attention of his manager, who will make a determination of whether an SAR should be filed. Although any suspicious activity, especially with countries hostile to the US, requires the submission of a Suspicious Activity Report, it is ultimately the decision of a principal or the firm's designated AML Compliance person to file such a report. In this question the best answer is that Robert should bring the attention to his superiors. If an SAR is ultimately filed with FinCEN, the client is not notified of this event.
When opening a margin account, the agreement that customers sign to pledge their securities as collateral for a loan from the broker-dealer is the
hypothecation agreement, to pledge their securities as collateral for loans from the broker-dealer for margin account purchases. The broker-dealer may then rehypothecate the securities to the bank, meaning that they are pledged to the bank as collateral for loans to the broker-dealer for lending to customers.
Certain municipal bonds are used to finance projects that are for the benefit of corporations within that municipality. These bonds are known as
private activity bonds. A private activity bond is a bond issued to finance projects that are primarily for the good of a private corporation. An example is a stadium for a sports team. Interest paid on private activity bonds is typically subject to alternative minimum tax (AMT).
A customer emails his broker-dealer requesting a return email with financial information about the firm. The broker-dealer may, in accordance with FINRA rules,
send a copy of its most recent balance sheet by email. A broker-dealer must respond to requests for financial information with its most recent balance sheet. Responses can be in electronic form only if the customer confirms, through electronic means, that electronic form is acceptable.
A client of a registered rep has moved to a state in which the rep is not registered. If the client now wishes to place a trade, the rep
should forward the order to a colleague who is registered in that state.
The SEC has declared a new public offering effective. This indicates that
the SEC has cleared the issuance for public sale. The SEC never approves or disapproves of securities. Instead, the SEC clears the distribution for public sale.
All of the following are characteristics of counter-cyclical stocks EXCEPT
their performance has no correlation to the overall performance of the economy. Counter-cyclical stocks are negatively correlated to the overall performance of the economy. In other words, they perform well when the economy is declining, and less well when the economy is strengthening. No correlation means that there is no relationship. Counter-cyclical stocks can be very effective in hedging other cyclical stocks against an economic decline as their price has a tendency to strengthen in a contracting economy.
An annuity owner, age 65, has chosen to annuitize a qualified annuity. Each monthly income payment will be
100% taxable as ordinary income. Qualified annuities are funded with pre-tax dollars. Since neither the purchase payments nor the earnings in these annuities have been taxed, monthly payments from qualified annuities are fully taxable.
When in the process of hiring a registered representative, an employing firm must check employment history for the previous
3 years. Firms are required to check the employment history of persons they will sponsor for registration for the previous three years even though the rep will disclose the last 10 years on a form U4.
Karen is the 76-year-old owner of a Traditional IRA. What is the last day of the calendar year on which she can take a Required Minimum Distribution (RMD)?
31-Dec. After the first RMD, which must be taken by April 1 of the year following the year in which the IRA owner turns age 72, subsequent RMDs must be taken annually, by the last day (December 31) of each calendar year, as long as the owner remains alive.
For which of the following investors is a variable annuity most appropriate?
A 60-year old that would like an investment that can provide a guaranteed amount of income for life with the potential to keep pace with inflation. Variable annuities are designed for retirement savings. Of these choices, the 60-year old seeking retirement income that keeps pace with inflation seems to be well-suited for this product. Investors that require full liquidity or are uncomfortable with potential loss of principal are not good candidates for variable annuities. Because of their lack of liquidity, annuities are not generally recommended for younger investors.
A discount bond issued by a broker-dealer, secured by interest and principal payments from Treasury securities, is known as a(n)
A Treasury Receipt is essentially a zero-coupon bond structured by a broker-dealer and backed by the cash flows from Treasury securities.
A corporate bond that is currently trading at 95 pays a semi-annual coupon of $25. What is the current yield?
A bond's current yield is calculated by dividing the annual interest income by the current market price. $50/$950 = 5.26%.
All of the following projects are most likely funded by revenue bonds EXCEPT
A new city elementary school. Expansions to hospitals, tolled transit, and convention centers may be financed by revenue bonds because fees are paid for their use. Public schools or other projects for the public good are financed by general obligation bonds.
An investor is interested in making annual payments to purchase an annuity that will provide income in 10 years. This investor should purchase a(n)
A periodic payment deferred annuity. In annuity terminology, multiple payments are called periodic payments. Deferred annuities pay income in the future.
According to SEC rules, fingerprinting is required for all of the following broker-dealer employees EXCEPT
A receptionist at a broker-dealer that regularly answers calls from customers. The fingerprinting requirement applies to all partners, directors, officers and employees of all persons associated with national securities exchanges, broker-dealers, registered transfer agents and registered clearing agencies. Employees that do not require fingerprinting are persons who are not engaged in the sale of securities, or do not regularly have access to the keeping, handling or processing of securities, money, or original books and records relating to securities or money.
All of the following events are reportable to FINRA within 10 business days of occurrence EXCEPT
A representative's involvement in a private business activity is not an event that is required to be reported to FINRA promptly or within 10 business days of occurrence. Events requiring reporting within 10 days usually involve a violation or a serious allegation.
Which of the following events would subject an individual to a statutory disqualification?
A statutory disqualification occurs if the individual has been convicted a felony or a securities related misdemeanor within the past 10 years.
