SIE Chapter 2 quiz
CALL OPTION
A call option is bought if the trader expects the price of the underlying to rise within a certain time frame.
A corporate bankruptcy liquidation took place. Of the following—general creditors, secured bondholders, subordinated debenture holders, accrued taxes—who was paid first and who was paid last? A)Secured bondholders first, accrued taxes last B)Accrued taxes first, subordinated bondholders last C)Secured bondholders first, general creditors last D)General creditors first, secured bondholders last
A corporate bankruptcy liquidation took place. Of the following—general creditors, secured B)Accrued taxes first, subordinated bondholders last Explanation The liquidation priority is as follows; taxes and wages first, followed by secured debt and then unsecured debt, including general creditors, then subordinated debt and then equity holders with preferred shareholders first, followed by common shareholders. Therefore, of those that are listed here, accrued taxes would be paid first, and subordinated bondholders last. Reference: 2.1.2 in the License Exam Manual
PUT OPTION
A put option is bought if the trader expects the price of the underlying to fall within a certain time frame.
Portfolio diversifying might be used to reduce which of the following risks? A)Business risk B)Interest-rate risk C)Inflation risk D)Market risk
A)Business risk Explanation Nonsystematic risks can be reduced using diversification. These would include business, financial, credit, and liquidity risk (among others). Market, inflation, and interest-rate risks are types of systematic risks that are considered nondiversifiable because they impact all investments and, therefore, cannot be "diversified" away or mitigated simply by diversifying. Reference: 2.2.2 in the License Exam Manual
At expiration, for those who trade put options, which of the following is TRUE? A)Put buyers want the contract to be in the money. B)Put writers want the contract to be in the money. C)Put writers want the contract to be trading with intrinsic value. D)Put buyers want the contract to be out of the money.
A)Put buyers want the contract to be in the money. Explanation At expiration, put buyers (like call buyers) want the contracts to have intrinsic value and, therefore, to be in the money. Put writers (like call writers) want the contracts to be either at or out of the money and, therefore, have no intrinsic value. Reference: 2.1.3 in the License Exam Manual
T-bills are issued (auctioned) by the U.S. Treasury Department how often? A)Weekly B)Monthly C)Bimonthly D)Only when the U.S. Treasury Department deems it necessary
A)Weekly Explanation Treasury bills (T-bills) are issued (auctioned) by the U.S. Treasury weekly. Reference: 2.1.2 in the License Exam Manual
Of the following strategies, which is considered most risky in a strong bull market? A)Writing calls B)Buying calls C)Writing puts D)Buying puts
A)Writing calls Explanation Short (writing) calls are bearish and have an unlimited maximum loss potential. In wanting the stock to go down, one's risk is that the underlying stock goes up and, in theory, could go as high as infinity. Reference: 2.1.3 in the License Exam Manual
Of the following strategies, which is considered most risky in a strong bull market? A)Writing calls B)Buying puts C)Buying calls D)Writing puts
A)Writing calls Explanation Short (writing) calls are bearish and have an unlimited maximum loss potential. In wanting the stock to go down, one's risk is that the underlying stock goes up and, in theory, could go as high as infinity. Reference: 2.1.3 in the License Exam Manual
If the portfolio of a variable annuity separate account is directly and actively managed by the insurance company, the separate account must be registered as A)an open-end management investment company B)a face-amount certificate company C)a closed-end management investment company D)an equity unit investment trust
A)an open-end management investment company Explanation If managed by the insurance company's own investment advisor, a separate account must register as an open-end company. If it is managed by a third party, it must register as a unit investment trust. Reference: 2.1.4 in the License Exam Manual
An investor sells (writes) put options on MAS stock. This investor is A)bullish on MAS the stock B)bearish on the MAS stock C)neither bullish nor bearish on the MAS stock D)both bullish and bearish on the MAS stock
A)bullish on MAS the stock Explanation Those who sell put options may be obligated to buy the stock at the strike price if the contract is exercised by the owner. Being in a position to own the stock makes the investor bullish on the stock. Reference: 2.1.3 in the License Exam Manual
Preferred shares have A)characteristics of both equity and debt securities B)only the characteristics matching those of debt securities C)only the characteristics matching those of equity securities D)characteristics of neither equity nor debt securities
A)characteristics of both equity and debt securities Explanation Preferred shares are equity securities, but not only do they have the characteristics of equity securities, they share some of the characteristics of debt securities as well. The most notable characteristic is that a preferred stock's annual dividend represents its fixed rate of return, like the fixed rate of return for a bond (debt security). Reference: 2.1.1 in the License Exam Manual
All of the following are identified as types of investment companies in the Investment Company Act of 1940 EXCEPT A)municipal bond pool B)face-amount certificate company C)unit investment trust D)mutual fund
A)municipal bond pool Explanation The Investment Company Act of 1940 defined face-amount certificate companies, unit investment trusts, closed-end management investment companies, and open-end management investment companies (the latter, mutual funds) as investment companies. Reference: 2.1.4 in the License Exam Manual
A shareholder owns preferred shares that allow for the possibility of receiving more than the stated dividend. This type of preferred share would be known as A)participating B)adjustable C)callable D)convertible
A)participating Explanation In addition to the fixed stated dividend, participating preferred stock offers its owners the possibility of receiving a share of corporate profits that remain after all dividends and interest due other securities are paid. Reference: 2.1.1 in the License Exam Manual
An investor pays 102 ($1,020) for a $1,000 par value bond. At maturity, A)the premium paid decreases the return B)the premium paid increases the return C)the discount received increases the return D)the discount received decreases the return
A)the premium paid decreases the return Explanation A $1,000 par value bond purchased at 102 ($1,020) is bought at a premium to par. Whenever a bond is purchased for an amount greater than will be received at maturity, the premium paid decreases the return. In this case, the additional $20 paid when the bond was initially purchased reduces the overall return from the interest payments received. Reference: 2.1.2 in the License Exam Manual
An investor owns 1 November 15 put at 5. The 15 in this contract represents A)the strike price, the price the investor can sell stock at B)the strike price, the price the investor has paid for the contract C)the premium, the price the investor can purchase stock at D)the premium, the price the investor has paid for the contract
A)the strike price, the price the investor can sell stock at Explanation For this put contract, 15 is the strike price, which represents the price at which the investor has the right to sell stock, and 5 represents the $500 premium paid for the contract. Reference: 2.1.3 in the License Exam Manual
An investor bought a put option and, in time, the underlying security declined below the strike price of the put. The put would probably A)not be exercised B)be exercised C)decline in value D)be worthless
B) be exercised Explanation This is exactly what most put option buyers are looking for. They want the stock to go down. Because the market price of the stock declining would cause the option to be in the money, the investor would either exercise the option or sell it. Reference: 2.1.3 in the License Exam Manual
Which of the following securities would most likely have the lowest expense ratio? A)Mutual fund B)Exchange-traded fund C)Qualified variable annuity D)Nonqualified variable annuity
B)Exchange-traded fund Explanation Expenses tend to be lower than those of mutual funds, and the management fee is low as well. Remember that the portfolio is designed to track an index, and just as the securities contained in the index are change infrequently, so are the securities in the fund portfolio. Reference: 2.1.8 in the License Exam Manual
Yield to call (YTC) calculations reflect the 1-early redemption date and acceleration of the discount gain if the bond was originally purchased at a premium 11-acceleration of the discount gain if the bond was originally purchased at a discount 111-accelerated premium loss if the bond was originally purchased at a premium 1V-accelerated premium loss if the bond was originally purchased at a discount A)II and IV B)II and III C)I and IV D)I and III
B)II and III 11-acceleration of the discount gain if the bond was originally purchased at a discount 111-accelerated premium loss if the bond was originally Explanation Yield to call (YTC) calculations reflect the early redemption date and consequent acceleration of the discount gain if the bond was originally purchased at a discount (less than what will be received at maturity), or the accelerated premium loss if the bond was originally purchased at a premium discount (more than what will be received at maturity). Reference: 2.1.2 in the License Exam Manu
Which of the following is best describes the trade execution of ADRs? A)Trades are executed overseas in U.S dollars. B)Trades are executed domestically in U.S dollars. C)Trades are executed domestically in a foreign currency. D)Trades are executed overseas in a foreign currency.
B)Trades are executed domestically in U.S dollars.. Explanation ADRs are often listed on a securities exchange such as the NYSE or Nasdaq and trade throughout the day. Trades in these securities are dollar denominated. ADRs trade and settle in the same fashion as a traditional U.S.-based common stock. Reference: 2.1.1 in the License Exam Manual
An investor sells (writes) put options on MAS stock. This investor is A)both bullish and bearish on the MAS stock B)bullish on MAS the stock C)bearish on the MAS stock D)neither bullish nor bearish on the MAS stock
B)bullish on MAS the stock neither bullish nor bearish on the MAS stock Explanation Those who sell put options may be obligated to buy the stock at the strike price if the contract is exercised by the owner. Being in a position to own the stock makes the investor bullish on the stock. Reference: 2.1.3 in the License Exam Manual
Of the following, reinvestment risk is most closely associated with A)capital risk B)call risk C)inflation risk D)market risk
B)call risk Explanation When interest rates fall, callable securities are likely to be called. While the investor may receive the redemption proceeds sooner than anticipated, it is often difficult to reinvest while maintaining the same level of return due to the lower interest-rate environment. This is why reinvestment risk and call risk can be viewed as being closely associated with each other. Reference: 2.2.1 in the License Exam Manual
A corporation has issued debt securities backed by the shares of another corporation that it owns. These debt securities are known as A)equipment trust certificates B)collateral trust bonds C)debentures D)mortgage bonds
B)collateral trust bonds Explanation A corporation can deposit securities it owns into a trust to be used as collateral to back its debt issues. When this is done, the securities issued are known as collateral trust bonds. Reference: 2.1.2 in the License Exam Manual
Each of the following are likely benefits of owning shares of common stock EXCEPT A)voting rights B)Interest payments C)limited liability D)dividend payments
B)interest payments Explanation Interest payments are paid to bond holders but not on common stock. Common shareholders may receive dividends if declared by the board of directors. They may also expect to vote on certain critical issues facing the company such as its leadership. Common shareholders have a liability limited to the amount invested. Reference: 2.1.1 in the License Exam Manual
All of the following are true of negotiable commercial paper EXCEPT A)it is considered a money market instrument B)it is typically issued by banks C)it has a maximum 270-day maturity D)the issuers typically have strong credit ratings
B)it is typically issued by banks Explanation Commercial paper is short-term unsecured debt issued by corporations having very good credit ratings. With a maximum 270-day maturity, it is considered a money market instrument. Reference: 2.1.2 in the License Exam Manual
Question ID: 940080 For real estate program partners, tax deductions will be derived from A)historic rehabilitation credits received B)mortgage interest paid and depreciation C)government-assisted housing allowances D)income received for rents
B)mortgage interest paid and depreciation Explanation Deductions for real estate programs come primarily from mortgage interest paid on the properties and the depreciation allowable for the properties. Reference: 2.1.5 in the License Exam Manual
Callable preferred stock is advantageous to the issuing company because it allows the company to A)issue fixed-rate securities at a yield lower than usual B)replace a higher, fixed-rate issue with a lower issue after the call date C)call in the stock at less than par value and capture the difference as income D)take advantage of higher interest rates
B)replace a higher, fixed-rate issue with a lower issue after the call date Explanation By issuing a callable preferred stock, a corporation can call in a high dividend payment issue and replace it with a lower one when interest rates have fallen. This feature allows the company to take advantage of reduced interest rates by calling in high-rate preferred issues and replacing them with lower ones. Reference: 2.1.1 in the License Exam Manual
A member firm is assigned an exercise notice by the Options Clearing Corporation. The member firm may assign the exercise notice to one of its short customers by any of the following methods EXCEPT A)on a random-selection basis B)to the customer having the largest short position C)to the customer having the oldest short position D)In any way that is fair and reasonable
B)to the customer having the largest short position Explanation While OCC can assign exercise notices using only the random-selection basis, a member firm may use any method that is fair and reasonable. The 2 most common methods are first in, first out (FIFO) and random selection. Reference: 2.1.3 in the License Exam Manual
Commercial paper is A)secured debt with a maximum maturity of 9 months B)unsecured debt with a maximum maturity of 9 months C)unsecured debt with a maximum maturity of 1 year D)secured debt with a maximum maturity of 1 year
B)unsecured debt with a maximum maturity of 9 months Explanation Issued by corporations, commercial paper, also known as prime paper or promissory notes, are unsecured money market instruments with maximum maturities of 270 days (9 months). Reference: 2.1.2 in the License Exam Manual
An investor has purchased a bond with a 5% coupon. This investor will receive A)$50 interest payable at maturity B)$5 annual interest until maturity C)$50 annual interest until maturity D)$50 semiannual interest payments
C)$50 annual interest until maturity Explanation The coupon represents the annual rate of interest payable. A bond with a 5% coupon will pay $50 interest annually (5% × $1,000 par value = $50). Reference: 2.1.2 in the License Exam Manual
Which of the following investment companies has an actively managed portfolio? A)Debt fixed UIT B)Equity fixed UIT C)Closed-end company D)Face-amount certificate company
C)Closed-end company The portfolios of both face-amount certificate companies (FACs) and unit investment trusts are nonmanaged. The closest they come to management is when the securities to make up the portfolio are selected. After that, the portfolio does not change. Closed-end companies have an investment adviser who actively manages the portfolio, buying and selling securities. Reference: 2.1.4 in the License Exam Manual
Regarding exchange-traded funds (ETFs), as compared to open-end (mutual) funds, which of the following are TRUE? 1-ETF transactions are subject to commissions. 11-Expenses for ETFs tend to be very high compared to mutual funds. 111- ETFs may trade at a price that is less than the NAV per share. 1V-ETFs cannot be purchased on margin while mutual funds can be. A)II and III B)I and IV C)I and III D)Il and IV
C)I and III 1-ETF transactions are subject to commissions. 111- ETFs may trade at a price that is less than the NAV per share. Explanation Because ETFs usually track an index, the operating expense ratios are generally lower than that of open-end companies. But that advantage can be canceled out by the commission charges when purchasing and selling an ETF. An open-end investment company must redeem shares at the NAV per share; with ETFs, pricing is based on supply and demand, making it possible to receive less than NAV. One cannot purchase open-end shares on margin, but ETFs can be. Reference: 2.1.8 in the License Exam Manual
Yield to call (YTC) calculations reflect the 1-early redemption date and acceleration of the discount gain if the bond was originally purchased at a premium acceleration of the discount gain if the bond was originally purchased at a discount accelerated premium loss if the bond was originally purchased at a premium accelerated premium loss if the bond was originally purchased at a discount A)I and IV B)I and III C)II and III D)II and IV
C)II and III Explanation Yield to call (YTC) calculations reflect the early redemption date and consequent acceleration of the discount gain if the bond was originally purchased at a discount (less than what will be received at maturity), or the accelerated premium loss if the bond was originally purchased at a premium discount (more than what will be received at maturity). Reference: 2.1.2 in the License Exam Manual
Which of the following would cause a change in the net asset value of a mutual fund share? 1-Many shares are redeemed. 11-Securities in the portfolio are sold for a capital gain. 11-The fund pays a small dividend. 1V-The market value of the portfolio declines. A)I and II B)I1 and IV C)III and IV D)II and III
C)III and IV 111-The fund pays a small dividend. 1V-The market value of the portfolio declines. Explanation Paying a dividend would reduce the net assets of the fund without reducing the number of shares outstanding, which would reduce the NAV per share. A decline in the market value of the portfolio would have the same effect. Sales and redemptions of shares change the net assets but also change the number of shares outstanding to the same degree, leaving the NAV per share unchanged. Selling securities for a capital gain simply replaces securities in the portfolio with an equivalent amount of cash, leaving the NAV unchanged. Reference: 2.1.4 in the License Exam Manual
Deductions for depletion would most likely apply to which of the following direct participation programs (DPP)? A)Equipment leasing program B)Oil and gas exploratory program C)Oil and gas income program D)Real estate limited partnership
C)Oil and gas income program Explanation The depletion allowance is a tax benefit reflecting the decreasing supply of oil or gas (or any other natural resource or mineral) after it is taken and sold. With income programs, the wells have been drilled and are already producing and, therefore, being depleted. By contrast, exploratory programs have a low expectation of success and it is therefore more likely that there will not be anything found to deplete. Reference: 2.1.5 in the License Exam Manual
Two investors have engaged in the same put transaction: one, the buyer who is now long the put and the other, the seller who is now short the put. All of the following are true EXCEPT A)breakeven is the same number for both investors B)one investor's maximum loss potential is the other's maximum gain potential C)both investors have a maximum loss potential that is limited to the premium paid D)maximum gain and loss potential for one investor are different than the others maximum gain and loss potential
C)both investors have a maximum loss potential that is limited to the premium paid Explanation All options are a 2-party contract. One investor's maximum loss potential is the other's maximum gain potential. Therefore, for each of the parties, the MG is different and the ML is different. Only buyers have a ML potential limited to the premium paid. And, finally, remember that the BE is always the same for both parties. The put buyer, who is bearish, wants the underlying stock price below the BE, while the put writer, who is bullish, wants the underlying stock price above the BE. Reference: 2.1.3 in the License Exam Manual
Of the following, reinvestment risk is most closely associated with A)market risk B)inflation risk C)call risk D)capital risk
C)call risk Explanation When interest rates fall, callable securities are likely to be called. While the investor may receive the redemption proceeds sooner than anticipated, it is often difficult to reinvest while maintaining the same level of return due to the lower interest-rate environment. This is why reinvestment risk and call risk can be viewed as being closely associated with each other. Reference: 2.2.1 in the License Exam Manual
An LP is a type of A)corporate business entity B)debt investment C)direct participation program D)trust set up for investors
C)direct participation program Explanation A limited partnership (LP) is the most common form of direct participation program (DPP). LPs are business entities allowing for the economic consequences of the business to flow through to the individual investors (partners). Reference: 2.1.5 in the License Exam Manual
Tax credits for partners in a real estate program can come primarily from A)historic rehabilitation and any rent-producing properties B)any property with the potential to appreciate in value C)government-assisted housing and historic rehabilitation properties D)income-producing properties, both residential and retail
C)government-assisted housing and historic rehabilitation properties Explanation For partners in a real estate programs, tax credits would come primarily from programs concentrating on properties designated for government-assisted housing or historic rehabilitation. These are credits offered by the federal government. Reference: 2.1.5 in the License Exam Manual
A bond certificate represents A)the borrower's right to receive interest on the amount it received B)the lender's obligation to repay the amount it borrowed plus interest C)the borrower's obligation to repay the amount it borrowed plus interest D)the lender's right to receive an ownership share in the entity it leant the funds to
C)the borrower's obligation to repay the amount it borrowed plus interest Explanation When an investor lends money to an entity, the certificate evidencing the loan is known as a bond. This certificate represents the borrower's obligation to pay the investor back the amount it borrowed plus interest. Reference: 2.1.2 in the License Exam Manual
UNDERLYING
Call and put options are derivative investments, meaning their price movements are based on the price movements of another financial product, which is often called the underlying.
IN, AT OR OUT OF THE MONEY
Call options can be in, at, or out of the money. In the money means the underlying asset price is above the call strike price. Out of the money means the underlying price is below the strike price. At the money means the underlying price and the strike price are the same. You can buy a call in any of those three phases. Your premium will be larger for an in the money option, because it already has intrinsic value.
Which of the following preferred issues is most likely to fluctuate in line with the issuer's common shares? A)Adjustable rate B)Callable C)Participating D)Convertible
D)Convertible Explanation Convertible preferred shares can be converted into shares of the issuer's common stock. In this light, the value of a convertible preferred stock is linked to the value of the common stock and the convertible preferred share price tends to fluctuate in line with the common. Reference: 2.1.1 in the License Exam Manual
When speaking to a customer about exchange-traded funds (ETFs), a registered representative could make which of the following correct statements? A)ETFs can be purchased only by paying a sales charge added to the NAV. B)ETFs cannot be bought on margin. C)ETFs cannot be purchased using traditional limit or stop orders. D)ETFs have different potential tax consequences than mutual funds.
D)ETFs have different potential tax consequences than mutual funds. Explanation The potential tax consequences of owning an ETF can be different than those experienced when owning mutual funds. While an ETF can make a capital gains distribution, they generally do not—unlike a mutual fund, which generally would make such distributions on an annual basis. ETFs can be traded like other exchange products using traditional stock-trading techniques and order types and are priced by supply and demand. Customers pay commissions, not sales charges. Reference: 2.1.8 in the License Exam Manual
Regarding oil and gas DPPs, tan¬gible drilling costs are associated with 1-items that have no salvage value at the end of the program 11-have some salvage value at the end of the program 111-can be depreciated 1V-cannot be depreciated A)I and IV B)II and IV C)I and III D)II and III
D)II and III 11-have some salvage value at the end of the program 111-can be depreciated Explanation Costs for items that will have some salvage value at the end of the program are considered tangible drilling costs. These items, such as equipment, can be depreciated and written off over the life of the program. Reference: 2.1.5 in the License Exam Manual
Of the following strategies, which is considered most risky in a strong bull market? A)Buying puts B)Writing puts C)Buying calls D)Writing calls
D)Writing calls Explanation Short (writing) calls are bearish and have an unlimited maximum loss potential. In wanting the stock to go down, one's risk is that the underlying stock goes up and, in theory, could go as high as infinity. Reference: 2.1.3 in the License Exam Manual
Treasury bills pay A)monthly interest payments B)annual interest payments C)semiannual interest payments D)all interest at maturity
D)all interest at maturity Explanation Treasury bills (T-bills) are the only Treasury security issued at a discount to par value. At maturity, par value is received. The difference between what was paid and the par value received would be considered the interest income. Reference: 2.1.2 in the License Exam Manual
Put buyers are A)both bullish and bearish B)neither bullish nor bearish C)bullish D)bearish
D)bearish Explanation Put buyers have the right to sell the stock. Being in a position to sell the stock makes them bearish. Reference: 2.1.3 in the License Exam Manual
An investor sells (writes) put options on MAS stock. This investor is A)both bullish and bearish on the MAS stock B)bearish on the MAS stock C)neither bullish nor bearish on the MAS stock D)bullish on MAS the stock
D)bullish on MAS the stock Explanation Those who sell put options may be obligated to buy the stock at the strike price if the contract is exercised by the owner. Being in a position to own the stock makes the investor bullish on the stock. Reference: 2.1.3 in the License Exam Manual
Bondholders should expect that interest payments would always be forthcoming for all of the following EXCEPT A)subordinated debentures B)debentures C)convertible bonds D)income bonds
D)income bonds Explanation Income bonds pay interest only if earnings are sufficient and the payments to be made are declared by the board of directors. This is not true of any of the other fixed-income securities listed (debentures, subordinated debentures, or convertible bonds). Reference: 2.1.2 in the License Exam Manual
A shareholder owns preferred shares that allow for the possibility of receiving more than the stated dividend. This type of preferred share would be known as A)callable B)convertible C)adjustable D)participating
D)participating Explanation In addition to the fixed stated dividend, participating preferred stock offers its owners the possibility of receiving a share of corporate profits that remain after all dividends and interest due other securities are paid. Reference: 2.1.1 in the License Exam Manual
Listed option transactions settle A)trade date + 2 calendar days B)trade date + 2 business days C)trade date + 3 calendar day D)trade date + 1 business day
D)trade date + 1 business day Explanation Listed options transaction settle on the next business day. Commonly referred to as T + 1 business day or simply T + 1. Reference: 2.1.3 in the License Exam Manual
Exempt from the penny stock rules are A)all transactions B)both solicited and unsolicited transactions C)solicited transactions D)unsolicited transactions
D)unsolicited transactions Explanation Unsolicited transactions (those not recommended by the broker-dealer or registered representative) are exempt from the penny stock rules. Solicited transactions are nonexempt and the rules therefore apply. Reference: 2.1.1 in the License Exam Manual
To the benefit of the issuer, a callable bond is likely to be called A)when interest rates rise B)when interest rates remain stable for long periods of time C)when interest rates are volatile moving both up and down over short periods of time D)when interest rates fall
D)when interest rates fall Explanation Bonds with call features are most likely to be called by an issuer when interest rates fall. For example, if an issuer has an outstanding bond paying 6% and interest rates have fallen to 4%, why pay out 6% when prevailing market rates are only 4%? Better to call in the 6% bond and reissue a new bond at the current rate of 4%. In this way, call features benefit the issuer. Reference: 2.1.2 in the License Exam Manual
EXERCISE THE OPTION
Options expiration's vary and can be short-term or long-term. It is worthwhile for the call buyer to exercise their option, and require the call writer/seller to sell them the stock at the strike price, only if the current price of the underlying is above the strike price. For example, if the stock is trading at $9 on the stock market, it is not worthwhile for the call option buyer to exercise their option to buy the stock at $10 because they can buy it for a lower price on the market.
PUTS AND CALLS : WRITTEN/SOLD
Puts and calls can also be written/sold, which generates income but gives up certain rights to the buyer of the option.
T-notes pay interest A)monthly B)annually C)semiannually D)quarterly
T-notes pay interest C)semiannually Treasury notes (T-notes) and bonds (T-bonds) pay interest on a semiannual basis. Reference: 2.1.2 in the License Exam Manual
STRIKE PRICE
The strike price is the predetermined price at which a call buyer can buy the underlying asset. For example, the buyer of a stock call option with a strike price of 10 can use the option to buy that stock at $10 before the option expires.
