SIE Exam Question Examples

Squidco, Inc., is issuing 100 million dollars in 4 ½% bonds maturing in 20 years. When purchased at issue, the buyers will receive an additional security that allows them to purchase 20 shares of Squidco common stock at $50 a share, anytime in the next 10 years. Squidco common is currently trading at $29.95 a share. This is an example of a A) warrant. B) call. C) follow-on offering. D) stock right.

A. A warrant *Attached to a fixed income security and attract more interest in the debt issue. Price is normally higher than the current stock price

The transfer agent for a corporation is responsible for each of the following except A) acting as an intermediary between the buy and sell sides of a transaction. B) ensuring that its securities are issued in the correct owner's name. C) canceling old and issuing new certificates. D) maintaining records of ownership.

A. Acting as an intermediary between the buy and sell sides of the transaction

If a fund sponsor allows an investor to move funds from one fund to another within its fund family, this is called A) an exchange privilege B) a 12b-1 waiver. C) a reinvestment right. D) a right of accumulation.

A. An exchange privilege *Example of exchange or conversion privilege

When a bank lends money to a broker-dealer for the purpose of lending to margin account customers, the bank is lending at which of the following rates? A) Broker call loan B) Federal funds C) Prime D) Discount

A. Broker call loan

Five years ago Thompson, an investor, ran across a board game that he enjoyed and believed the game would become very popular. He purchased 1,000 shares of the corporation that publishes the game. Unfortunately, the game was too complex for most casual game players and sales never amounted to much. Over the five years, the stock of the publisher has remained steady, but has not increased in value. This is an example of A) business risk. B) timing risk. C) social risk. D) regulatory risk.

A. Business Risk

When interest rates are falling, which bonds are most likely to expose holders to call risk? A) Callable bonds with higher coupons B) Callable bonds with lower coupons C) All bonds, regardless of whether or not they are callable D) All bonds, regardless of the coupon rate

A. Callable bonds with higher coupons

M1 is a measure of the value of A) cash and funds held in DDAs. B) M2 plus retail CDs and money markets. C) cash, cash equivalents, and DDAs. D) retail CDs and money markets.

A. Cash and funds held in DDAs

The economic indicator that reflects activity of U.S. entities without regard to where the activity takes place is A) GNP. B) FUN. C) GDP. D) CPI.

A. GNP

A deficit in the U.S. balance of payments can occur if I. interest rates in foreign countries are higher than U.S. domestic rates. II. interest rates in foreign countries are lower than U.S. domestic rates. II. U.S. consumers are purchasing (importing) foreign goods. IV. foreign consumers are purchasing (importing) U.S. goods. A) I and III B) II and III C) I and IV D) II and IV

A. I and III

Jim Davis bought 100 shares of QRS at $60 per share and then the company declared a 3:2 split. What is Davis' new cost basis and how many shares does he have now? I. Cost basis is $40 per share II. Cost basis is $90 per share III. He now has 150 shares IV. He now has 67 shares A) I and III B) II and III C) II and IV D) I and IV

A. I and III

Distinguishing between a sell stop order and a sell stop limit order, which of the following are true? I. The sell stop limit order becomes a sell limit once triggered. II. The sell stop order becomes a sell limit order once triggered. III. The sell stop limit order becomes an order to sell at the market when triggered. IV. The sell stop order becomes an order to sell at the market when triggered. A) I and IV B) II and III C) I and III D) II and IV

A. I and IV

First Amalgamated Bank of Buffalo, a large commercial bank, is a member of the Federal Reserve System. Should the bank need to increase its reserves, it could do which of these? I. Borrow from the FRB and pay the discount rate. II. Borrow from the FRB and pay the federal funds rate. III. Borrow from another member bank and pay the discount rate. IV. Borrow from another member bank and pay the federal funds rate. A) I and IV B) I and III C) II and IV D) II and III

A. I and IV

In a defined benefit plan I. the benefit amount is fixed. II. the benefit amount is variable. III. the contribution amount is fixed. IV. the contribution amount can vary. A) I and IV B) II and III C) I and III D) II and IV

A. I and IV

Which of the following orders need not be immediately filled in their entirety? I. Immediate or cancel (IOC) II. Fill or kill (FOK) III. Market at open IV. Buy stop limit A) I and IV B) I and III C) II and III D) II and IV

A. I and IV

Which of the following orders need not be immediately filled in their entirety? I. Immediate or cancel (IOC) II. Fill or kill (FOK) III. Market at open IV. Buy stop limit A) I and IV B) II and III C) II and IV D) I and III

A. I and IV

Which of the following statements regarding options are true? I. Investors who are bullish on a stock should buy calls II. Investors who are bullish on a stock should buy puts III. Investors who are bearish on a stock should sell puts IV. Investors who are bearish on a stock should buy puts a. I and IV b. I and III c. II and III d. II and IV

A. I and IV *Buying Calls is Bullish and Buying Puts is Bearish

All of the following accounts would allow all parties with access to the account to authorize withdrawals except A) individual account with a limited power of attorney (LPOA). B) tenants in common account (TIC). C) joint tenants with rights of survivorship account (JTWROS). D) individual account with a full power of attorney (FPOA).

A. Individual account with a limited power of attorney (LPOA)

Inflation is most commonly found during which phase of the business cycle? A. Expansion B. Peak C. Contraction D. Trough

A. Inflation

Rising employment due to an increase in demand for goods and services would be associated with periods of A) inflation. B) stagflation. C) deflation. D) stagnation.

A. Inflation

An issuer files a registration statement with the SEC for the sale of new securities on May 1. While reviewing the registration statement, the SEC determines that it has not been filed properly and issues a deficiency letter on May 5. The issuer submits a corrected registration statement on May 8. Which of the following is true regarding the 20-day cooling-off period? A) It is halted on the day the deficiency letter is issued and resumes where it left off on the day the corrected registration is received. B) It is halted on the day the deficiency letter is issued and must begin anew from that same date once the corrected registration is received. C) It is halted and does not resume until 20 days following the corrected registration is received. D) It continues and is not impacted by the issuance of the deficiency letter by the SE.

A. It halted on the day the deficiency letter is issued and resumes where it left off the day the corrected registration is received

A zero-coupon bond pays interest A) at maturity and is taxed annually. B) annually and is taxed at maturity. C) semi-annually and is taxed at maturity. D) semi-annually and is taxed annually.

A. Pays interest at maturity and is taxed annually. * Pays no interest until it matures; however, it is taxed. Called Phantom Income

Entering a sale of stock short without locating the shares first is an uncovered short and is a violation of A. Regulation SHO. B. Regulation SHRT. C. the uptick rule. D. short against the box.

A. Regulation SHO

Which of these is in correct order of priority for a corporate liquidation? A) Secured bond, debenture, subordinated debenture, common stock B) Subordinated debenture, participating preferred stock, common stock, convertible preferred stock C) Convertible bonds, participating preferred stock, common stock, subordinated debentures D) Guaranteed bond, secured bond, debenture, common stock Explanation

A. Secured bond, debenture, subordinated debenture, common stock *Any debt is superior to any equity, preferred is senior to common. A guaranteed bond is unsecured debt or a debenture

An investor is long MJS stock. For this investor, which of the following is true? A) The risk is that the stock falls in price. B) Maximum loss can be unlimited. C) The risk is that the stock goes up in price. D) The risk is that the stock remains stable in price.

A. The risk that the stock falls in price

Discretion given to a registered representative to make transactions applies to all of the following except A) timing and price only. B) the security for the transaction. C) whether to buy or sell. D) the number of shares or units for the transaction.

A. Timing and price only

Rank the following government-issued securities from shortest to longest maturity. A) Treasury bills, notes, and bonds B) Treasury notes, bills, and bonds C) Treasury bills, bonds, and notes D) Treasury bonds, notes, and bills

A. Treasury bills, notes, bonds

If the beneficiary of a custodian account dies, the securities in the account pass to A) the minor's estate. B) the custodian's estate. C) the parents. D) the Securities Investor Protection Corporation (SIPC) trustee's account.

A. the minor's estate

Which of the following are true of Roth IRAs but not Traditional IRAs? A) Distributions are required after reaching 72. B) Distributions are not required after reaching 72. C) Anyone with income may contribute. D) Contributions are typically deductible.

B. Distributions are not required after reaching 72

Inflation is most closely associated with which phase of the business cycle? A) Contraction B) Expansion C) Prosperity D) Recovery

B. Expansion

CDC Pharmaceutical stock is currently trading at $50 a share. The CDC Nov 55 put is trading at $7. Which of the following is true? I. The time value is $2. II. The intrinsic value is $5. III. The time value is $5. IV. The intrinsic value is $2. A) II and IV B) I and II C) I and III D) III and IV

B. I and II *Premium is $7 Intrinsic Value is $5, thus Time value is $2

The Federal Reserve's dual mandate includes which of these? I. Maintaining maximum employment II. Enforcement of price controls III. Control the value of the dollar versus other currencies IV. Price stability A) III and IV B) I and IV C) II and III D) I and II

B. I and IV

Regarding assignment of exercises notices, which of the following are true? I. The Options Clearing Corporation (OCC) assigns short BDs randomly. II. The OCC assigns short BDs using the first-in, first-out (FIFO) accounting method. III. Short BDs can assign their short customers randomly only. IV. Short BDs can assign their short customers randomly, using the FIFO accounting method or by any other fair method. A. I and III B. I and IV C. II and III D. II and IV

B. I and IV *Can use 1 of 3 methods, random, FIFO accounting or any other fair way

In order to solicit the purchase of a mutual fund, a registered representative must provide the investor with I. the summary prospectus II. the Rule 482 Prospectus III. the statutory prospectus IV. the statement of additional information a. I and II b. I or III c. II or III d. II and IV

B. I or III

For this election cycle, Big Trucks, Inc., has three open board seats. Big Trucks operates under a cumulative voting system. Your customer owns 300 participating preferred shares of Big Trucks. He has A. 900 votes he can divide anyway he wants among the three seats. B. no voting rights. C. 300 votes each for the open seats. D. 300 votes total to spread among the three open seats.

B. No Voting Rights *Preferred stock doesn't have voting rights

All of the following types of real estate investment rusts except a. mortgage b. oil and gas c. equity d. hybrid

B. Oil and Gas

Included under the term, equity security, would be A) equipment trust certificates. B) participating preferred. C) debentures. D) collateral trust certificates.

B. Participating preferred *Regardless of the adjective used, it is modifying a preferred stock

Good delivery of a stock certificate requires all of the following except A) certificates in good condition. B) proper signatures of a firm principal on the certificate. C) the correct number of shares are delivered. D) proper endorsement by all owners.

B. Proper signatures of a firm principal on the certificate

An American depositary receipt is a A) foreign security trading in U.S. markets. B) domestic security representing a foreign security in U.S. markets. C) foreign security representing a domestic security in foreign markets. D) domestic security trading in foreign markets.

B. a Domestic security representing a foreign security in U.S. markets * Domestic Security Issued in US and registered with SEC. Ownership of Non-US security

A firm that functions for the purpose of receiving and delivering payments and securities on behalf of both buyer and seller in a securities transaction is A) a broker-dealer. B) a clearing agent. C) a transfer agent. D) a depository.

B. a clearing agent

When securities are bought and sold, ownership changes hands between the buyer and the seller A) upon delivery of the trade confirmation. B) on the settlement date of the transaction. C) on the transaction date. D) at an agreed time between both parties.

B. on the settlement date of the transaction

In order to register a broker-dealer firm to do business in a state, you would register with a. the SEC b. the administrator c. NASAA d. FINRA

B. the administrator

Seabird Airlines common stock is listed on the NYSE. Appalachia Securities is an over-the-counter market maker and has a posted quote for Seabird of 55.25-55.50. If Appalachia wants to enter a new quote, the smallest incremental change is A) $ 0.05. B) $ 0.25. C) $ 0.01. D) $ 0.001.

C. $0.01

To arrive at M3, one would add to M2 which of the following? A) Savings and checking accounts B) All currency in circulation, including coins C) $100,000 and larger time deposits and repurchase agreements D) Gold and silver bars held on reserve at the FR

C. $100,000 and larger time deposits and repurchase agreements

Your customer, Leo, recently purchased one put contract on Napa Valley Spirits, Inc., stock. The strike price is $50.00 and the premium was $4.50. He later executed the contract. How much did he pay for the contract? A) $500.00 B) $5000.00 C) $450.00 D) $4,550.00 Explanation

C. $450 He paid $450 for the contract (4.50*100)

A 72-year-old customer has a $30,000 required minimum distribution (RMD) calculated to be taken from an IRA. If the customer is in the 20% income tax bracket and only withdraws $25,000 from the account, how much in taxes and penalties will be owed? A) $12,500 B) $5,000 C) $8,500 D) $10,000

C. $8,500

According to the U.S. Commerce Department, the economy is in a depression when a decline in real output of goods and services lasts A) beyond 12 months (4 quarters). B) 9 months or more (3 quarters). C) 18 months or more (6 quarters). D) 6 months or more (2 quarters).

C. 18 months or more (6 quarters)

An investment banking firm that enters into a contract with a municipality to provide advice and direction on raising capital for the municipality is a. a syndicate member b. a muni dealer c. a municipal advisor d. a bond dealer

C. A municipal dealer

A risk that is specific to a particular issue or issuer is A) cannot be reduced by diversification. B) is a systematic risk. C) a nonsystematic risk. D) impacts a broad group of securities equally.

C. A nonsystematic risk

If a shareholder does not wish to attend an annual stockholders' meeting, but still wishes to vote, the shareholder may confer a limited power of attorney on another party to vote the shares. This power is known as A) a stand-in. B) a voting power. C) a proxy. D) a substitute.

C. A proxy

The risk when investing, where one has the potential to lose all or part of the investment due to circumstances that are unrelated to the issuer's financial strength or well-being, is known as A) financial risk. B) business risk. C) capital risk. D) call risk.

C. Capital Risk *This is the definition of capital risk. For example, capital risk might be least when investing in securities backed by the federal government but much more prevalent when investing in derivative products. LO 6.d

A broker-dealer that accepts funds and securities from customers and its correspondent member firms would most likely be which of the following? A) An investment company B) A fully disclosed introducing firm C) A carrying firm D) A depository trust

C. Carrying Firm

Your broker-dealer executes trades for other broker-dealers and after execution settles those transactions for them. Your firm would be classified as which of the following? A) Fully disclosed firm B) Introducing firm C) Carrying firm D) Limited broker-dealer

C. Carrying firm

Before an order to purchase a mutual fund can be taken, an investor must be provided with I. A full prospectus II. A statement of additional information III. A Rule 482 prospectus IV. A summary prospectus A. I and IV B. II or III C. I or IV D. III and IV

C. I or IV *Either a full or a summary prospectus is required to solicit and accept a mutual fund order You can deliver both, but it's not a requirement

An investor receives a quote of 48.70—48.75 for XYZ common stock. Which of these is true? I. Purchasing the stock will cost $48.70 per share. II. Purchasing the stock will cost $48.75 per share. III. The spread is $.05. IV. The investor will receive $48.75 per share if selling. A) I and IV B) I and III C) II and III D) III and IV

C. II and III

Which of the following statements regarding a letter of intent and breakpoints are true? I. The letter of intent can be backdated for a maximum of 30 days II. The letter of intent is valid for 13 months III. The investor is legally bound to meet the terms of the agreement IV. The fund holds the additional shares in escrow a. I and II b. II and III c. II and IV d. III and IV

C. II and IV * Letter can be backdated 90 days. If default higher sales charge

An associated person of a Financial Industry Regulatory Authority (FINRA) member firm has been found guilty of forging a customer's signature on a document relating to a securities transaction. Under the Code of Procedure, FINRA could impose any of the following sanctions except A) suspension from FINRA that might cause the person extreme hardship. B) requiring the person to retake the licensing exam before resuming work. C) imprisonment for a specified period. D) a fine far in excess of the amount involved in the transaction.

C. Imprisonment for a specified period

All of the following accounts would allow all parties with access to the account to authorize withdrawals except A) individual account with a full power of attorney (FPOA). B) tenants in common account (TIC). C) individual account with a limited power of attorney (LPOA). D) joint tenants with rights of survivorship account (JTWROS).

C. Individual account with a limited power of attorney (LPOA)

All of the following would be associated with hedge funds except A) highly leveraged portfolios (borrowing to purchase securities). B) commodity speculation. C) investing in government debt securities. D) the use of short positions (selling securities the portfolio does not own).

C. Investing in government debt securities *Hedge fund managers often employ highly speculative strategies and products associated with substantial risk

The Federal Reserve is concerned that the economy is slowing. With this in mind, which of these actions would the Federal Reserve most likely engage in? A) Engage in open market sales of T-bills B) Double the reserve requirements for member banks C) Pursue an easy-money policy to lower interest rates D) Raise the margin requirements under Regulation T

C. Pursue an easy-money policy to lower interest rates

A bank is likely to do which of the following when the Federal Reserve Board (FRB) tightens the money supply? A) Lower its broker call loan rate B) Raise the hypothecation loan rate C) Raise its prime rate D) Lower its prime rate

C. Raise its prime rate

The Federal Reserve could do which of the following to slow the economy? A) Increase government spending B) Lower taxes C) Raise the discount rate D) Buy Treasury securities from banks

C. Raise the discount rate

The Federal Reserve could do which of the following to slow the economy? A) Buy Treasury securities from banks B) Increase government spending C) Raise the discount rate D) Lower taxes

C. Raise the discount rates

GDP turned negative in the first quarter of the year, and was negative again in the second quarter. It is now August and numbers have not improved. The economy is experiencing A) denial. B) depression. C) recession. D) stagflation.

C. Recession

Marsha, Jane, Cynthia, Craig, Jim, and Robert are owners of an account JTWROS. If Craig, Jim, and Robert pass away then their interest in the account A) is identified and distributed with the decedent's estate. B) is divided in half and one half of the account is distributed evenly to the decedent's beneficiaries. C) remains in the account and is now the property of the surviving tenants. D) is distributed through the probate process.

C. Remains in the account and is now the property of the surviving tenants

All of the following are bullish positions except A) long warrants. B) long calls. C) short stock. D) long stock.

C. Short Stock

Which of the following best describes how a market order to buy would fill if placed when the market price of the stock was at 40? A) The next available price below 40 B) The next available price above 40 C) The next available price D) Only at 40

C. The next available price

Which of the following best describes how a market order to sell would fill if placed when the price of the stock is a 40? A) Only at 40 B) The next available price above 40 C) The next available price D) The next available price below 40

C. The next available price

Which of the following best describes how a buy stop at 39 would fill? A) The next price below 39 after the market price falls to 39 B) The next price above 39 after the market price rises to 39 C) The next available price after the market price rises to 39 D) The next available price after the market price falls to 39

C. The next available price after the market price rises to 39

A market in which exchange-listed securities are traded in the over-the-counter (OTC) market would best be described as A) the Second Market. B) the Fourth Market. C) the Third Market. D) the First Market.

C. The third market

Discretion given to a registered representative to make transactions applies to all of the following except A) the number of shares or units for the transaction. B) the security for the transaction. C) timing and price only. D) whether to buy or sell.

C. Timing and price only

Josie Reese, one of your clients with an option account, calls and asks you to remind her when she is required to settle if she bought a call today. You would tell her A) trade date. B) trade date plus 3 business days. C) trade date plus 1 business day. D) trade date plus 2 business days.

C. Trade date plus 1 business day

Nate McCann is closing on a house tomorrow and wants to sell some securities to meet closing costs. He wants to know how soon he could get the money and what he needs to do. You should tell A) if he does the trade today he won't be able to get the money for 3 business days because regular way settlement is T + 3. B) if he does the trade today for cash settlement he would settle tomorrow. C) if he does the trade today for cash settlement he could settle today. D) if he does the trade today he won't be able to get the money for 2 business days because regular way settlement is T + 2.

C. if he does the trade today for cash settlement he could sell today

In 2011, RST Corp. had both common stock and $100 par value 4% noncumulative preferred stock, outstanding. The preferred stock, like the common stock, pays dividends on a quarterly basis. Because of financial difficulties, the company stopped paying dividends after 2011. After resolving its problems in 2015, the company resumed dividend payments in 2016. Before paying the first quarterly common stock dividend that year, the company would have to pay a quarterly dividend to the preferred stockholders of A) $4.00. B) $20.00. C) $17.00. D) $1.00.

D. $1.00 *Don't have to pay preferred stock holders back dividends because it's noncumulative. Thus, lost

A 73-year old client in the 25% income tax bracket withdraws $20,000 from her traditional IRA. Based on her life expectancy, the withdrawal should have been $30,000. How much tax will she owe? A) $10,000 B) $7,500 C) $5,000 D) $12,500

D. $12,500

Your client, Mary Quinn, wants to place an order to sell a stock in her portfolio when the current price is 45, but she is only willing to sell if she can sell for at least 47. Which order should she place? A) A sell stop limit order B) A sell stop order C) A market order D) A sell limit order

D. A sell limit order

Below which of the following S &P ratings would a bond be considered speculative A. A. B. B C. BB D. BBB

D. BBB *All ratings below BBB are considered speculative

The Federal Deposit Insurance Corporation (FDIC) protects which of the following? A) Broker-dealer clients B) Options speculators C) Insurance purchasers D) Bank depositors

D. Bank Depositors

A customer is not required to sign which of the following when opening a margin account? A) Credit agreement B) Hypothecation agreement C) Margin agreement D) Consent to loan form

D. Consent to loan form

All of the following accounts are for unincorporated businesses except A) partnership accounts. B) sole proprietorship accounts. C) limited liability company accounts. D) corporate accounts.

D. Corporate accounts

Earned income would include all the following except A) year-end bonuses. B) commission on sales for a real estate agent. C) tips. D) dividends earned on mutual funds.

D. Dividends earned on mutual funds

Regarding different types of risk, which of the following is true? A) Enactment of, or changes in, laws represent political risk. B) Changes in regulations represent political risk. C) Changes in regulations represent potential legislative risk. D) Enactment of, or changes in laws, represent potential legislative risk.

D. Enactment of, or changes in laws, represent potential legislative risk

Narcissus, Inc., a social media company, has shares selling at $50. Your customer is bearish. He would like to sell the stock short, but not until it retreats at least 10% from its current price. In order to catch the drop he could A) enter a sell long at 50. B) sell calls at strike price of 45. C) enter a buy stop at 45. D) enter a sell short at stop 45.

D. Enter a sell short at stop 45

Another term for stocks and bonds is A) voting and nonvoting. B) taxable and tax-free. C) shares and units. D) equity and debt.

D. Equity and Debt

Financial markets encompass A) derivative products such as options only. B) equity, debt, currency, but not derivative products. C) stocks and bonds only. D) equity, debt, currency, and derivative products.

D. Equity, debt, currency, and derivative products

Which of these trading strategies are employed by hedge funds but are generally prohibited to mutual funds? The act of limiting investments to a narrow group of securities The use of borrowed money to purchase portfolio securities The act of taking long positions in speculative stocks The act of taking short positions in NYSE listed stocks A) I and IV B) I and III C) II and III D) II and IV

D. II and IV *

A market order to buy must be executed when and at what available price? A) Within 24 hours, at the lowest B) Immediately, at the highest C) Within 24 hours, at the highest D) Immediately, at the lowest

D. Immediately, at the lowest

Which of the following is among the items of information that must be entered on a new account form? A) Names of other broker-dealer firms already holding accounts for the prospective customer B) What educational degree(s) the accountholder has earned C) Names and addresses of at least two of the prospective customer's neighbors as personal references D) Names of all persons who will have access to the account

D. Names of all persons who will have access to the account

Who benefits most from a defined benefit plan? A) Younger employees B) Employees with more years until retirement C) All benefit the same D) Older employees

D. Older Employees

How an account is registered determines A) control of the investments in the account only. B) ownership of the account only. C) the sole individual allowed to access the account. D) ownership and control of the investments in the account.

D. Ownership and control of the investments in the account

Which of the following rates is set by the Federal Reserve? a. Fed funds rate b. Discount rate c. Broker call rate d. Prime rate

D. Prime Rate

To contract or slow economic growth U.S. fiscal policy should be to A) cut taxes and increase government spending for programs and development. B) raise taxes and government spending for programs and development. C) cut taxes and government spending for programs and development. D) raise taxes and cut government spending for programs and development.

D. Raise taxes and cut government spending for programs and development

To tighten its monetary policy, making it more difficult for consumers to borrow money, the Federal Reserve Board (FRB) can A) lower the discount rate. B) raise the federal funds rate. C) lower the federal funds rate. D) raise the discount rate.

D. Raise the discount rate

Economists call mild, short-term contractions A) depressions. B) declines. C) troughs. D) recessions.

D. Recessions

Your client, Alice Tate, with no other positions in her margin account, is bearish on ABC stock. Which of the following transactions would you recommend? A) Buy ABC to open B) Buy ABC to close C) Sell ABC to open D) Sell ABC to close

D. Sell ABC to close

Grace Olson owns 100 shares of XYZ stock at $50 per share when the company declared a 2:1 split. Which of the following is true? A) She now has fewer shares at a higher cost basis B) She now has fewer shares at a lower cost basis C) She now has more shares at a higher cost basis D) She now has more shares at a lower cost basis

D. She now has more shares at a lower cost basis

Your client, Mrs. Watt, sold her investment in Ohm Electric Company on June 10 for $22 a share. She purchased the stock on July 10 of the previous year for $18 a share. She has realized A. a long-term capital loss. B. a long-term capital gain. C. a short-term capital loss. D. a short-term capital gain.

D. Short-term Capital Gain

The rate at which banks lend to broker-dealers for the purpose of lending money for margin loans is typically A) slightly below (a percentage point or so) other short-term lending rates. B) notably above (several percentage points) other short-term lending rates. C) notably below (several percentage points) other short-term lending rates. D) slightly above (a percentage point or so) other short-term lending rates.

D. Slightly above (a percentage point or so) other short-term lending rates

The ratings on the debt instruments of a foreign country with outstanding loans from a number of other countries worldwide have been downgraded. The impact felt due to the risk of possible default is known as A) political risk. B) interest-rate risk. C) legislative risk. D) sovereign risk.

D. Sovereign Risk

Increasing cost of goods and services and high unemployment are characteristics of A) deflation. B) inflation. C) stagnation. D) stagflation.

D. Stagflation

During the cooling-off period, underwriters may A) take orders from institutional investors only B) distribute sales literature to interested existing clients C) accept binding indications of interest from public investors D) take nonbinding indications of interest from public investors

D. Take nonbinding indications of interest from public investors

All of these are potential risks of private, nontraded, REITS except A) reliability of valuations. B) transparency. C) liquidity. D) tax treatment. Explanation

D. Tax Treatment *Nontraded REITs are taxed the same way as public (traded) REIT.

Investigations and hearings into alleged violations of FINRA's Code of Procedure are performed by A) the National Adjudicatory Council. B) the Arbitration Panel. C) the Division of Engagement. D) the Department of Enforcement.

D. The Department of Enforcement

Big Company, Inc., an NYSE listed manufacturer of large objects, has declared a 50-cent-per-share-dividend payable next month. Big Company also has options available for trade. The actual ex-dividend date will be declared by A) the OTC. B) FINRA. C) the CBOE. D) the NYSE.

D. The NYSE *Ex-dividend dates are set by the market center where trades will likely take place

Your customer, Shea, has a large portfolio of bonds and dividend paying stocks. Her primary interest is generating current income. She is trying to understand how taxes work for her T-bonds. You explain that A) the interest from her T-bonds is exempt at the federal level, but she will still owe taxes at the state and local level. B) the interest from her T-bonds is exempt at the state level, but she will still owe taxes at the local and federal level. C) the interest from her T-bonds is exempt at all levels. D) the interest from her T-bonds is exempt at the state and local level, but she will still owe taxes at the federal level.

D. The interest from her T-bonds is exempt at the state and local level, but she will still owe taxes at the federal level *Securities issued by the federal government produce interest only taxed at the federal level

An investor writes a July 25 ABC call. Which of the following is true? A. The investor has the right to purchase ABC stock at 25. B. The investor has the right to sell ABC stock at 25. C. The investor will be obligated to purchase ABC stock at 25 if the call is exercised by the owner (buyer). D. The investor will be obligated to sell the ABC stock at 25 if the call is exercised by the owner (buyer).

D. The investor will be obligated to sell the ABC stock at 25 if the call is exercised by the owner (buyer) *Strike Price is 25 and if an investor writes it means they HAVE to sell the stock when it gets 25 if the buyer exercises

When the Federal Reserve Board (FRB) utilizes the tools available to it, it is influencing A) fiscal policies. B) the amount of money raised through taxes. C) the federal budget. D) the money supply.

D. The money supply

The strike price is A) the cost per share of the contract. B) the amount the buyer of a call must pay for the shares. C) the amount the writer of a call pays the seller of the call for the shares. D) the price that will be paid for the shares if the option is exercised.

D. The price that will be paid for the shares if the option is exercised.

The Windmill Growth Fund declares a 15-cent dividend for shareholders of record as of Wednesday, November 12. The most likely ex-dividend date is A. Monday, November 10 B. Tuesday, November 11 C. Wednesday, November 12 D. Thursday, November 13

D. Thursday, November 13

Which of these statements regarding Treasury bills is correct? A) They are issued with initial maturities of 3, 12, 24, and 50 weeks. B) They have the highest interest rate risk of all Treasury securities. C) They are usually issued at a slight premium to par value. D) Treasury bills are the only type of Treasury security issued without a stated interest rate.

D. Treasury bills are the only type of treasury security issued without a statement interest rate. *Always issued at a discount without a stated interest rate.

A corporate stock is purchased on Friday, April 2, regular way. When will the trade settle? A) Wednesday, April 7 B) Friday, April 2 C) Monday, April 5 D) Tuesday, April 6

D. Tuesday April 6

If a customer had a large cash position and was interested in purchasing stock at prices below where they are today, an option strategy would be to A) write uncovered calls that are currently out of the money. B) buy out-of-the-money calls. C) place a buy stop order below the market. D) write covered puts that are currently out of the money.

D. Write covered puts that are out of the money *If the stock declines in value and short put options are exercised, the customer will buy the stock at a price lower than where the market is at the moment.

A stock's market value is directly determined by which of the following? A) Vote of the stockholders B) Board of directors C) Company's financial condition D) Supply and demand

D. supply and demand

To facilitate a public offering where securities are offered and sold to the investing public, issuers will utilize the services of all of the following except A) investment bankers. B) broker-dealers. C) U.S. stock exchanges. D) underwriters.

D. underwriters

A corporation divests itself of all of the shares of another company it owns. This is known as A) a merger. B) a spin-off. C) an acquisition. D) a recapitalization.

Dividend

MGS stock is quoted at $15.20 bid - ask 15.22 5 x 12. The spread is a. $0.02 b. $0.25 c. $0.2 d. $2

a. $0.02

Your customer is in the 30% federal tax bracket. He is considering purchasing a 7% corporate bond. The after-tax yield would be a. 4.9% b. 2.1% c. 10% d. 7%

a. 4.9% *Corporate Rate x 100% - Tax bracket = (7) (1.00-.30) = (7) (.70) = 4.9%

If left unexecuted, a good til cancel (GTC) order will automatically be canceled when? A) On the last business day of April and the last business day of October B) On the cancel date specified by the customer at the time the order is entered C) On the first business day of April and the first business day of October D) On the last business day of June and the last business day of December

a. On the last business day of April and the last business day of October

Which of the following would be a leading economic indicator a. S&P 500 Index b. Industrial production c. Duration of unemployment d. Gross domestic product (GDP)

a. S&P 500 Index

It is generally agreed upon that the most volatile interest rate in the U.S. economy is A) the federal funds rate. B) the call money rate. C) the prime rate. D) the discount rate.

a. The Federal Funds Rate

An opening transaction can be A) either a buy or a sell. B) a buy only. C) a sell only. D) a short sale only.

a. either a buy or a sell

ABC currently has the following quotes: Bid Ask Size 10.00 10.50 3 × 2 10.20 10.45 4 × 3 10.25 10.60 3 × 2 What is the inside quote of ABC? A) 10.20 - 10.45 4 × 3 B) 10.00 - 10.60 3 × 2 C) 10.25 - 10.45 3 × 3 D) 10.25 - 10.50 3 × 2

c. 10.25 - 10.45 3x 3

How long can a good 'til canceled order remain in force without being reconfirmed by the customer? A) 24 months B) 12 months C) 6 months D) 36 months

c. 6 Months

When the Federal Open Market Committee (FOMC) directs that Treasury securities be sold in the open market, this A) increases the supply of money. B) is intended to hinder contraction of the money supply. C) decreases the money supply. D) stabilizes the money supply.

c. Decreases the money supply

In a reverse split, what happens to the cost basis and number of shares? I. The cost basis goes up II. The number of shares goes down III. The cost basis goes down IV. The number of shares goes up A) III and IV B) II and III C) I and II D) I and IV

c. I and II

Exports from the United States would likely increase if I. the Japanese yen strengthened against the dollar. II. the U.S. dollar strengthened against the euro. III. the U.S. dollar weakened against the British pound. IV. the Swiss franc weakened against the dollar. A) II and IV B) I and IV C) I and III D) II and III

c. I and III.

Which of these does M2 measure? I. M1 II. M3 III. Term repos and jumbo CDs IV. Retail CDs and money markets A) II and III B) II and IV C) I and IV D) I and III

c. I and IV

You should expect which of these to occur when the dollar strengthens against other currencies? I. Imports will become more expensive II. Imports will become less expensive III. Inflation will go down IV. Inflation will rise A) I and III B) I and IV C) II and III D) II and IV

c. II and III

Select the two distinctive types of policies that impact the U.S. economy. A) Balance of payments and balance of trade B) M1 and M2 C) Monetary and fiscal D) Federal and municipal

c. Monetary and fiscal

Which of these is not considered an advantage of owning an exchange-traded fund? A) Tax efficiency B) Intraday pricing C) Pass through of losses D) Liquidity

c. Passthrough of losses *ETFs are taxed using pipeline theory and do not pass losses through to investors

A security that is a contractual obligation between two parties and whose value is based on specifics of the contract in relation to a different security is a. a contractual plan b. an investment company c. a derivate d. a hedge fund

c. a derivate *

BakeCo, an NYSE-listed food company, has decided to split off its cookie-making operation into a separate corporation. Current shareholders will receive one share of the new company, BigCookieCo, for each share of BakeCo they own as of the record date. This action is an example of A) an acquisition. B) a stock split. C) a tender offer. D) a spin-off.

d. A spin-off

A registered securities broker-dealer that does not comply with Financial Industry Regulatory Authority (FINRA) and Securities and Exchange Commission (SEC) rules and regulations is subject to each of the following sanctions except A) limits on activities, functions, or operations. B) partial or full suspension of its registration. C) censure. D) reductions in Securities Investor Protection Corporation (SIPC) coverage.

d. Reductions in Securities Investor Protection Corporation (SPIC) coverage

Your client, Jane Anderson, has owned QRS for a few years but has now turned bearish on QRS. What transaction would you recommend? A) Buy QRS to close B) Buy QRS to open C) Sell QRS to open D) Sell QRS to close

d. Sell QRS to close

Which of the following would not be considered violations? I. As soon as a customer opens a margin account and signs the loan consent agreement, the broker-dealer lends a portion of the securities in the customer's account to other customers for the purpose of selling short. II. A broker-dealer temporarily lends a customer's securities to another customer with no loan consent on file. III. A registered representative transfers funds from Mr. Smith's account to the account of his spouse, Mrs. Smith, in order to meet a margin call she has received. The intent is to move the funds back to rSmith once Mrs. Smith makes her required margin call deposit. Mr. Smith makes a deposit into his spouse's account for the purpose of meeting a margin call. A) I and III B) II and III C) II and IV D) I and IV

idDd. D.

The Federal Reserve sets which of these rates? A) Broker call B) Prime C) Discount D) Federal funds

C. Discount

Which of the following are true of Roth IRAs but not Traditional IRAs? A) Anyone with income may contribute. B) Contributions are typically deductible. C) Distributions are not required after reaching 72. D) Distributions are required after reaching 72.

C. Distributions are not required after reaching 72

Your customer, MJ, has a strong preference for investing in equity securities; however, she is hoping to increase the amount of current income her portfolio generates. Which of these is the least suitable for her? A) BuyMore, Inc., a big-box retailer with a long history of healthy dividend payments B) Long Beach Electric, a utility C) Duratech common stock, an exciting new tech manufacturer D) Generic Motors, Inc., 4 ¾% preferred stock

C. Duratech common stock, an exciting new tech manufacturer *New rapidly growing companies, tend to pay little to no dividends.

An opening transaction can be A) a buy only. B) a sell only. C) either a buy or a sell. D) a short sale only.

C. Either a buy or a sell

Regarding different types of risk, which of the following is true? A) Changes in regulations represent political risk. B) Enactment of, or changes in, laws represent political risk. C) Enactment of, or changes in laws, represent potential legislative risk. D) Changes in regulations represent potential legislative risk.

C. Enactment of, or changes in laws, represent potential legislative risk

Sam Malloy owns a small business and has built a substantial estate both with his business success and his early career as a pro athlete. He would like to begin to move assets out of his estate in a way that will allow him to benefit from the assets, but also allows for an easy transfer to his heirs when he dies. He needs to lower the size of his estate before he passes and hates the idea of a public hearing that is part of probate. Sam should A) create a last will and testament. B) establish a revocable living trust. C) establish an irrevocable living trust. D) place his assets in a transfer on death account.

C. Establish

An investor has placed money in a debt like instrument issued by a financial institution and linked to the performance of the S&P 500 Index. From the investment, which has state a maturity date but makes no interest payments, the investor anticipates receiving a cash payment minus any applicable management fees when the instrument matures. This describes which of the following investments? A. Municipal Bond B. Direct Participation Program (DPP) C. Exchange Traded Note (ETN) D. Variable Annuity

C. Exchange Traded Note (ETN)

The business cycle is best characterized as A) depression, recovery, prosperity, and peak. B) inflation, stagflation, deflation, and stagnation. C) expansion, peak, contraction, and trough. D) expansion, prosperity, contraction, and depression.

C. Expansion, peak, contraction, and trough

Which of the following organizations was created to protect investors financially from a bank failure? A) Office of Foreign Assets Control (OFAC) B) Securities Investor Protection Corporation (SIPC) C) Federal Deposit Insurance Corporation (FDIC) D) Federal Reserve Board (FRB)

C. Federal Deposit Insurance Corporation (FDIC)

The part of the federal government that acts as an independent central bank in order to manage monetary policy is the A) Comptroller of the Currency. B) Treasury Department. C) Federal Reserve. D) Department of the Interior.

C. Federal Reserve

If the U.S. dollar is weak against foreign currency, A) U.S. currency buys more foreign goods; therefore, U.S. exports will increase. B) foreign currency buys more U.S. goods; therefore, U.S. imports will increase. C) foreign currency buys more U.S. goods; therefore, U.S. exports will increase. D) U.S. currency buys less foreign goods; therefore, U.S. imports will increase.

C. Foreign currency buys more US goods; therefore, US exports increase

Your customer would like current monthly income from a very safe investment which of the following would you recommend? a. T-bonds b. FNMA c. GNMA d. T-notes

C. GNMA *Pay monthly income and principal payments and are directly backed by the US government

During periods of economic decline and contraction, one would expect A) inventories to decrease. B) production to rise. C) gross domestic product (GDP) to decrease. D) consumer demand to increase.

C. Gross Domestic Product (GDP) to decrease

During periods of economic decline and contraction, one would expect A) production to rise. B) consumer demand to increase. C) gross domestic product (GDP) to decrease. D) inventories to decrease.

C. Gross domestic product (GDP) to decrease

Irksome Inc., makes components and peripherals for smart phones. Their line of bright florescent sparkly earbuds has taken off in Asia and is starting to gain popularity in the Americas and Europe, even in countries experiencing harder economic times. Irksome is an example of a A) countercyclical company. B) defensive company. C) growth company. D) cyclical company.

C. Growth Company

A broker-dealer's registration with the Securities and Exchange Commission (SEC) conveys that the SEC A) guarantees that the member firm will abide by all securities industry rules. B) has approved the member firm's business model. C) has accepted the member firm's registration to do business. D) has made a positive determination regarding the financial strength of the member firm and has approved the member firm's business model.

C. Has accepted the member firm's registration to do business

A broker-dealer's registration with the Securities and Exchange Commission (SEC) conveys that the SEC A) has accepted the member firm's registration to do business. B) has approved the member firm's business model. C) has made a positive determination regarding the financial strength of the member firm and has approved the member firm's business model. D) guarantees that the member firm will abide by all securities industry rules.

C. Has made a positive determination regarding the financial strength of the member firm and has approved the member firm's business model

When the Federal Open Market Committee (FOMC) directs that Treasury securities be sold in the open market, this will do which of the following? A) Loosen the money supply B) Decrease interest rates on loans to consumers C) Increase interest rates on loans to consumers D) Have no impact on lending rates to consumers

C. Increase interest rates on loans to consumers

Unless otherwise specified, the size of a firm quote is A) 1,000 shares. B) 100 shares. C) 500 shares. D) 10,000 shares.

B. 100 Shares

Which of the following cannot enforce their own rules? A) FINRA B) SEC C) CBOE D) MSRB

MSRB

Another term for a defined benefit plan is A) a defined withdrawal plan. B) a pension plan. C) a traditional term plan. D) an annuity.

B. A pension plan

Deflationary periods are characterized by all of the following except A) coinciding with recessions. B) a decline in prices. C) increased consumer demand. D) rising unemployment.

C. Increased consumer demand

Types of Nonsystematic Risk

1.capital risk 2. business risk 3. financial risk 4. call risk 5. currency risk 6. liquidity risk 7. regulatory risk 8. legislative risk 9. political risk

Types of Systematic Risks

1. Market Risk 2. Interest Rate Risk 3. Reinvestment Risk 4. Inflation Risk (Purchasing Power Risk)

A corporate bond ($1,000 PAR) purchased several years ago at $825 matures. At maturity, the bondholder will receive principal in what amount? A) $1,000 face value B) $825 representing return of the purchase price C) An amount to be calculated based on the current yield at the time of maturity D) $175 representing the difference between the purchase price and PAR Explanation

A. $1,000 face value

Two weeks ago representative Pete introduced his customer Neil to the Windmill Growth Fund in response to Neil's interest in growth funds. Today the customer calls Pete to place a trade to invest $10,000 in the Windmill Growth Fund. This is A) a solicited trade B) a discretionary trade C) an unclassified trade D) an unsolicited trade Explanation

A. A solicited trade

An investor opens an account with BNZ Government Securities, a broker-dealer limiting its transactions exclusively to securities issued by the U.S. government. The account holds $250,000 of Treasury bonds, $250,000 of Treasury notes, and $50,000 in cash. If BNZ's broker-dealer business should fail, the investor would receive Securities Investor Protection Corporation (SIPC) protection in the amount of A) $0. B) all of the securities and all of the cash, because U.S. government securities do not go bankrupt. C) $50,000 of the cash and $450,000 of the securities. D) $500,000 of the securities and none of the cash.

A. $0 *Those who deal with US government securities are exempt

Skye purchased 100 shares of Moreno, Inc., for $20 a share. One year later, she sold the shares for $21 dollars. Over the year, Moreno paid a $0.25 quarterly dividend. What was Skye's gain or loss and how much investment income did she earn? A) $1 gain and $1 in income B) Cannot be determined from this information C) $2 in income D) $2 total gain

A. $1 gain and $1 in income

3. In 2011, RST Corporation had both common stock and $100 par value 4% noncumulative preferred stock outstanding. The preferred, like the common stock, pay dividends on a quarterly basis. Because of financial difficulties, the company stopped paying dividends after 2011. After resolving its problems in 2018, the company resumed dividend payments in 2016. Before paying the first quarterly common stock dividend to the preferred stockholders of: a. $1.00 b. $4.00 c. $17.00 d. $20.00

A. $1.00 *Noncumulative preferred stock isn't required to receive skipped dividends after a company stops paying dividends for some time; but it must pay the current dividend. Quarterly dividend of 4 = $1.00

An investor shorts 2 DEF January 55 puts, at a premium of two each, when the market price of DEF is 56.25. What is the investor's maximum potential loss? A) $10,600 B) Unlimited C) $5,425 D) $5,300

A. $10,00 55- 2 = 53 53 x 100 = 5300 5300

Your customer had $120,000 in ordinary income in the prior tax year. This customer also sold two stock positions- the first for a gain of $47,000, and the second for a loss of $50,000. For that tax year, the customer will pay tax on A. $117,000 in ordinary income and 0 in net gains B. $117,000 in ordinary income and $3,000 in net gains C. $120,000 in ordinary income and 0 in net gains D. $120,000 in ordinary income and $3,000 in net gains

A. $117,000 in ordinary income and 0 in net gains

The minimum initial requirement when buying 100 shares at $15 in a new account would be A) $1,500. B) $2,000. C) $375. D) $750.

A. $1500

Your customer purchased 1,000 shares of SmallCo Stock at $10 a share. SmallCo pays no dividends. Exactly one year later, the customer sold the shares for $12 a share. They realized a A) $2,000 short-term capital gain. B) $2,000 long-term capital loss. C) $2,000 short-term capital loss. D) $2,000 long-term capital gain.

A. $2,000 short-term capital gain

If a married couple have a joint account with a market value of $1 million and a debit balance of $600,000, all of which is in securities, how much coverage would this account have? A) $400,000 B) $1 million C) $600,000 D) $500,000

A. $400,000

Drew purchased 100 shares of Moreno, Inc., for $20 a share. One year later, he sold the shares for $21 dollars. Over the year, Moreno paid a $0.25 quarterly dividend. What is Drew's total return? A) 10.00%. B) $2.00. C) 5.00%. D) $1.00.

A. 10.00%

A client entering a sell limit order at 43 would accept which of these trades? A) 44 B) 42.90 C) 42 D) 42.50

A. 44

Your customer, Eleanor, purchased an InDebt Inc., 5% debenture at a price of 94. It matures in 12 years. What is the yield to maturity? A) 5.73 B) 5.32 C) 5 D) 4.69

A. 5.73 You do not have to calculate YTM for this problem. You just need to think of the inverse relationship chart since the bond is trading at a discount.

What is the penalty for not taking the required minimum distribution (RMD) for the year? A) 50% of the amount short of what should have been taken B) 10% of the annual contribution limit C) 10% of the amount that should have been taken D) 50% of the annual contribution limit

A. 50% of the amount short of what should have been taken

An investor has her registered representative enter a sell stop limit order at 50. Following the order entry, trades occur at 52, 50, 49, 51, and 53. The investor would receive A) 51 B) 50 C) 53 D) 49

A. 51 Explanation: This is really two orders. The first is to stop at 50. That is, once the stock trades at 50 or lower, the order is elected (triggered) and becomes a live working order. That order is to sell at 50 or better. Therefore, the first time the stock hits 50 (or less), is the trade at 50. That triggers the sell limit order to sell at 50 or better. The next trade is at 49 and that is not an acceptable price given the limit order set at 50. The following price, however, at 51, is the next acceptable price after the order is triggered and that is where the order would be executed.

At what minimum age can retirement withdrawals be made from an individual retirement account (IRA) without a penalty? A) 59½ years old B) 65 years old C) 72 years old D) 62 years old

A. 59 1/2

What is the penalty, if any, for overcontribution to an IRA? A) 6% B) No penalty C) 10% D) 50%

A. 6%

The Big Shoe Sneaker Company is a small manufacturer of athletic shoes. It is selling $100 million of its stock. This will be its first public offering. It will use the money to enhance both marketing and production with a plan to grow the business and obtain a Nasdaq listing in two or three years. After the initial sale of the new shares, buyers of the stock in the over-the-counter market should expect to receive the final prospectus for how many days? A) 90 B) 40 C) Buyers in the secondary market are never entitled to the IPO prospectus D) 25

A. 90 days *This is an initial public offering of an unlisted, non-Nasdaq security

Mr. Hermosillo would like to save money for his 10-year-old daughter's college tuition costs. She has her heart set on a small liberal arts school with a growing reputation in the arts. His biggest concern is the potential increase in cost over the next several years. The program best suited to hedge against the increasing cost of college tuition at the school is A. a 529 prepaid tuition program. B. a 529 college savings program. C. a Coverdell ESA account. D. a custodial account in the child's name.

A. A 529 Prepaid Tuition Program * The 529 Tuition plan is designed to pay tuitions costs at today's rate to be used later. This is best suited to cover tuition inflation.

Which of these is not correct? A) A 529 plan's assets must be used by age 30, an ESA does not. B) There are no earnings limits for those contributing to a 529 plan. C) Both a 529 College Savings Plan and an ESA may be used to pay for pre-college education expenses. D) There is no annual contribution limit for a 529 plan.

A. A 529 plan's assets must be used by age 30, an ESA does not

If the owner of an option may issue exercise instructions on the last day of trading, this is an example of: A. A European-style Option B. An American-style Option C. An expiration-style Option D. A Eurasian-Style Option

A. A European-style option *It may only be exercised on the last trading day.

Rep. Pete receives a call from his client, Neil, to place a trade. He wants to buy 200 shares of the Starshine Entertainment Company. Pete asks Neil a few questions about the trade before placing it. This is A) an unsolicited trade B) an unclassified trade C) a solicited trade D) a discretionary trade

A. An unsolicited trade

The Alta Loma High School District is asking voters to approve a bond to the fund to purchase new computers and software. The bond will mature in 40 years, and the interest and principal payments will be funded from real estate taxes. This is an example of a. a GO Bond b. A Revenue Bond C. A debenture D. An equipment bond trust

A. A GO Bond * If a municipal bond requires a vote, it is most likely a GO Bond

Modulux, Inc., a NYSE listed manufacturing company, was founded by Clarence Mod. Clarence is now 82 years old and is looking to divest his significant interest in Modulux to capitalize the Mod Family Foundation, a charity. He has enlisted the help of Seacoast Securities, a regional investment banker based in Seattle, to run the sale. This is an example of A) a secondary offering. B) an IPO. C) a CRUT. D) an APO.

A. A Secondary Offering *The shares are to be sold belong to a person, not the issuer. This is a secondary offering

Which of the following federal securities acts provides the legal framework for the registration of securities at the state level? A) Uniform Securities Act B) National Securities Markets Improvement Act of 1996 C) 1934 Securities Exchange Act D) 1933 Securities Act

A. A Uniform Securities Act

Squidco, Inc., is issuing 100 million dollars in 4 ½% bonds maturing in 20 years. When purchased at issue, the buyers will receive an additional security that allows them to purchase 20 shares of Squidco common stock at $50 per share anytime in the next 10 years. Squidco common is currently trading at $29.95 a share. This is an example of A. a warrant. B. a stock right. C. a follow-on offering. D. a call.

A. A Warrant * Issued to a fixed income security to attract more interest in debt and have price higher than current stock price

Which of the following would be a secondary market transaction? A) A broker-dealer arranges for a customer's order to be executed on the NYSE B) A broker-dealer arranges for a customer to purchase mutual fund shares C) A broker-dealer arranges for a customer to purchase an APO D) A broker-dealer arranges for a customer to purchase an IPO

A. A broker-dealer arranges for a customer's order to be executed on the NYSE

Your broker-dealer, rather than clear its own securities transactions, chooses to introduce its business to another firm that will clear, processes and handle all back-office operations for it. The firm receiving the business is known as A) a carrying firm. B) a receivership. C) a fully disclosed firm. D) a depository trust.

A. A carrying firm

An investor who is seeking income might choose a corporate bond because a. a corporate bond pays a steady income and is generally reliable b. bonds pay a higher dividend than stocks c. bonds can grow faster than the rate of inflation d. corporate bond interest is tax free

A. A corporate bond pays a steady income and is generally reliable * Depending on rating generally reliable producers of income through interest payments, but don't pay dividends or grow in value with inflation and are fully taxable

An investor who is seeking income might choose a corporate bond because A) a corporate bond pays a steady income and are generally reliable. B) bonds can grow faster than the rate of inflation. C) corporate bond interest is tax free. D) bonds pay a higher dividend than stocks.

A. A corporate bond pays a steady income and is generally reliable * Doesn't pay dividend and is reliable due to bond ratings

The most common type of direct participation program (DPP) in the securities industry is A. A limited partnership (LP) B. A real estate investment trust (REIT) C. A collateralized mortgage obligation D. An investment company

A. A limited Partnership

Borrowing money to buy securities is prohibited in all of the following accounts except A) a margin account. B) a Roth IRA. C) a custodial account. D) an individual IRA.

A. A margin account

Which of the following statements would describe the Fourth Market? A) A market for institutional investors in which large blocks of stock, both listed and unlisted, trade in transactions unassisted by broker-dealers B) These transactions take place through electronic communications networks (ECNs) which are open during normal trading hours and act solely as principals C) These transactions take place through electronic communications networks (ECNs). ECNs are open 24 hours a day and act solely as principals D) The after-hours market

A. A market for institutional investors in which large blocks of stock, both listed and unlisted, trade in transactions unassisted by broker-dealers

When a firm engages in proprietary trading, buying into and selling out of its own inventory for profit, it is acting as A) a market maker. B) an agent. C) an underwriter. D) an investment banker.

A. A market maker

Which of the following is an acceptable investment for an IRA? A) A mutual fund specializing in speculative bonds B) A universal variable life insurance contract C) A collection of medieval manuscripts and art D) Gold coins minted in Switzerland but sold in the U.S.

A. A mutual fund specializing in speculative bonds

For initial public offerings (IPOs) of common stock, all of the following would be considered restricted persons except A) a person owning at least 5% of the member firm. B) employees of the member firm. C) a member firm. D) fiduciaries acting on behalf of the underwriters.

A. A person owning at least 5% of the member firm

A new registered representative receives a memo discussing the distribution of a red herring. The registered representative knows that the memo is referencing A) a preliminary prospectus. B) a final prospectus. C) a registration statement. D) a tombstone advertisement.

A. A preliminary prospectus

Shelby Bogden, your client, purchased a 6% corporate bond with a current yield of 5%. The bond was purchased at A) a premium. B) a discount. C) below par. D) par.

A. A premium

An institutional investor selects a single Financial Industry Regulatory Authority (FINRA)/NYSE member firm to provide for financing and custody of securities while orders to buy or sell are placed with executing brokers. This is an example of A) a prime brokerage account. B) an investment advisory account. C) a managed account. D) an omnibus clearing arrangement.

A. A prime brokerage account

An investor with no existing positions in MMS stock sells 100 shares. This is A) a short bearish position. B) a long bearish position. C) a short bullish position. D) a long bullish position.

A. A short bearish position

Which of the following are required in discretionary accounts? A) Approval by a principal for discretion to be permitted in an account B) FINRA approval to open the account C) Prior approval by a principal before each discretionary trade is placed D) SEC approval to open the account

A. Approval by a principal for discretion to be permitted in an account

Contributions to an IRA can be made up to which of the following dates? A) April 15th of the year following the year the contribution is for B) December 31st of the year the contribution is for C) The extension deadline, October 15th of the year following the year the contribution is for D) April 15th of the year the contribution is for

A. April 15th of the year following the year contribution is for

A 6% corporate bond trading on a 7% basis is trading A. at a discount B. at a premium C. With a current yield above 7% D. With a coupon rate below 6%

A. At a discount *"7% basis" means the YTM is at 7%. YTM is higher than the coupon rate of 6; thus a discount

The FDIC insures customer assets held at a. banks b. broker-dealers c. depositary trusts d. investment bankers

A. Banks

Assets = liabilities + net worth is the A) basic balance sheet equation. B) fully diluted earnings ratio. C) price to book ratio. D) working capital formula.

A. Basic Balance Sheet equation

Advantages enjoyed by the limited partners in a partnership might be all of the following except A) being in a fiduciary position with responsibilities to others. B) having income and expenses flow directly through to them. C) having liability limited to the loss of the money invested. D) owning an interest in an investment managed by others.

A. Being in a fiduciary position with responsibilities to others *The fiduciary responsibility is borne by the GP's not the LP's.

An underwriter that assists a corporation on the sale of new issue without taking the security into inventory is underwriting on what type of underwriting? a. Best Efforts b. Firm Commitment c. Partial Commitment d. Full or None

A. Best Efforts

Which of the following orders can be used to close a short position in CDT stock that consists of 1,000 shares? A) Buy 1,000 shares of CDT B) Write 10 CDT call options C) Sell 1,000 shares of CDT D) Buy 10 CDT call options

A. Buy 1,000 shares of CDT

Mr. Perez dislikes Seabird Airlines because of a bad experience on a flight to Portland. He thinks the company's stock is overvalued. He is currently short 1,000 shares of the company. He is concerned with the potentially unlimited risk he is exposed to and would like to use options to hedge that risk. His best option position would be A. buy 10 Seabird Airline calls. B. buy 10 OEX (S&P 100 index) calls. C. sell 10 Seabird Coffee calls. D. buy 10 Seabird Coffee puts.

A. Buy 10 Seabird Airline Calls

Two months ago your customer sold short 200 shares of Seabird Airlines at $15 a share. Today, the stock is trading at $10 a share. In order to close out the position your customer would A) buy 200 shares of Seabird. B) borrow 200 shares of Seabird. C) realize a $5 a share loss. D) buy Seabird calls.

A. Buy 200 shares of Seabird

When the Federal Reserve Board (FRB) wants to expand (loosen) the money supply, it will A) buy Treasury securities from banks in the open market. B) sell Treasury securities to banks in the open market. C) sell corporate securities to banks in the open market. D) buy corporate securities from banks in the open market.

A. Buy Treasury securities from banks in the open market

Your customer is a larger exporter of electronic devices. They are delivering a shipment to Japan and are concerned that the value of the Japanese Yen may drop before they receive payment. In order to hedge this currency risk, your customer should: a. Buy Yen calls b. Sell Yen calls c. Buy yen puts d. Sell Yen puts

A. Buy Yen Calls *They know that the Yen is going down so they will try to hedge it with a call

To expand the overall economy, the Federal Reserve Board (FRB), acting as agent for the U.S. Treasury department, will A) buy securities via open-market operations, pushing interest rates down. B) sell securities via open-market operations, pushing interest rates up. C) buy securities via open-market operations, pushing interest rates up. D) sell securities via open-market operations, pushing interest rates down.

A. Buy securities via open-market operations, pushing interest rates down

Your customer, Ford, wrote 5 SPX (S&P 500 equity index) 2990 call options. Today, Tuesday, he received word that his options have been exercised. The SPX closed at 3000. He will have to deliver A) cash tomorrow. B) cash in two days. C) 500 shares in two days. D) 500 shares tomorrow.

A. Cash tomorrow *This is an index option. Exercise will require seller of the option to deliver cash equal to the in-the-money amount on the next business day.

A broker-dealer and its associated persons may be subjected to sanctions for violations of the Financial Industry Regulatory Authority (FINRA) and the Securities and Exchange Commission (SEC) rules. Which of the following penalties can be levied against the associated persons? A) Censure B) Limits placed on research activities C) Loss of Securities Investor Protection Corporation (SIPC) coverage D) Imprisonment

A. Censure

One of your new clients explains that she prefers investments paying income with a fixed rate of return, but also allows for the possibility of realizing greater gain potential. She would likely favor investments in A) convertible preferred shares. B) corporate bonds. C) common shares. D) adjustable rate preferred shares.

A. Convertible Preferred shares

An exchange has some degree of regulatory authority over all of the following except A) dealers in the third market. B) floor traders. C) exchange members. D) designated market makers.

A. Dealers in the third market

On Tuesday, December 10 your customer Bought 5 OEX (S&P 100 Index) 230 March calls at four. On Tuesday, March 10 the calls are in-the-money and your customer issues exercise instructions. On what days did the trade and the exercise settle? A) December 11 and March 11 B) December 12 and March 11 C) December 11 and March 12 D) December 12 and March 12

A. December 11 and March 11 (The exercise of an index option settles the next business day)

When a bond is purchased at a discount the current yield will be A) higher than the coupon rate. B) the same as the nominal rate. C) lower that the stated rate. D) lower than the fixed rate.

A. Higher than the coupon rate

All of the following would be considered tax advantages relating to a DPP investment except A. Depreciation recapture B. Depletion C. Intangible drilling costs D. Accelerated depreciation

A. Depreciation Recapture * Depreciation recapture can occur when an investor sells his interest in real estate program. Recapture has to be reported as ordinary income

Which of the following would be associated with loans made to member banks of the Federal Reserve? A) Discount rate B) Call loan rate C) Margin rate D) Prime rate

A. Discount Rate

What is a big advantage Roth IRAs have over traditional IRAs? A) Distributions are normally tax free B) There are no penalties for early distributions C) Contributions are tax free D) There are no income limits

A. Distributions are normally tax free

Another term for stock and bonds is A. equity and debt B. shares and units C. voting and non-voting D. taxable and tax free

A. Equity and Debt *These are the other terms

All of these dates are declared by the board of directors of a corporation except the A) ex-dividend date. B) record date. C) payable date. D) declaration date. Explanation The ex-dividend date is declared by the regulator that controls the trading location (exchange or OTC).

A. Ex-dividend date *Declared by trading location. NYSE Or OTC

Which of the following is not a characterization of the Securities Act of 1933? A) Exchange Act B) Paper Act C) Truth in Securities Act D) Prospectus Act Explanation

A. Exchange Act

Which segment of the business cycle would one expect to find rising interest rates and higher wages? A) Expansion B) Recession C) Contraction D) Trough

A. Expansion

Of the statements listed, which best characterizes the potential impact of factors occurring outside our domestic economy and markets? A) Factors outside the United States can have immediate and prolonged impact on our securities and trade markets and thus our domestic economy. B) Factors outside the United States never have immediate impact on our securities and trade markets, but over time can impact our domestic economy. C) Factors outside the United States can impact our securities and trade markets, but the effects are always short term and thus impact our domestic economy very little. D) Factors outside the United States have little impact on our securities and trade markets and thus our domestic economy.

A. Factors outside the US can have immediate and prolonged impact on our securities and trade markets and thus our domestic economy

Financial Industry Regulatory Authority (FINRA)'s Conduct Rules are designed to promote A) fair and ethical trade practices when dealing with the public. B) settlement of disputes between member firms without resorting to the courts. C) uniform trade practices for firms to follow when dealing with other member firms. D) efficient and just handling of trade practice violations.

A. Fair and ethical trade practices when dealing with the public

Mary owns 8% of Doyle Inc., a publically traded publishing company. She has recently married John, a doctor who owns 3% of Doyle. John wants to sell some of his shares to pay off the debt from the wedding and honeymoon. When he does so he will need to A) file Form 144 because he is a control person. B) file Form 144 because he is a doctor. C) not file Form 144 due to the spousal exception. D) not file Form 144 because only owns 3% and is not a control person.

A. File Form 144 because he is a control person *Based off of marriage he is a control person

A corporation enlists the services of a transfer agent, who would be expected to handle all of the following functions except A) filing an S-1 registration statement. B) canceling old certificates and issuing new ones. C) maintaining records of shareholder ownership. D) replacing lost or destroyed stock certificates.

A. Filing an S-1 registration statement

A corporation enlists the services of a transfer agent, who would be expected to handle all of the following functions except A) filing an S-1 registration statement. B) replacing lost or destroyed stock certificates. C) canceling old certificates and issuing new ones. D) maintaining records of shareholder ownership.

A. Filing an S-1 registration statement

Which of these is not a division of the Treasury Department with some level of oversight for the securities industry? A) Financial Industry Regulatory Authority B) Financial Crimes Enforcement Network C) IRS D) Office of the Comptroller of the Currency

A. Financial Industry Regulatory Authority

Laws increasing or decreasing taxation would be best associated with A) fiscal policy enacted by the president and Congress. B) monetary policy enacted by the president and Congress. C) monetary policy enacted by the FRB. D) fiscal policy enacted by the Federal Reserve Board (FRB).

A. Fiscal policy enacted by the president and Congress

The MSCI-EAFE Index tracks which of the following? A) Foreign equities B) Corporate bonds C) Mid-cap stocks D) Municipal bonds

A. Foreign equities

During the cooling-off period, an underwriter may do all of the following except a. gather binding indications of interest b. distribute red herrings to interested parties c. perform due diligence d. file required forms for state registration

A. Gather binding indications of interest *There are no binding indications of interest. ONLY NONBINDING INDICATIONS OF INTEREST

Which of the following would likely be classified as a countercyclical industry? A) Gold mining B) Food production C) Auto manufacturing D) Home building

A. Gold mining

The preliminary prospectus for the IPO of the Big Shoes Sneaker Company indicates that the number of shares sold may be increased as much as 15% if market demand is sufficient. This is called a A) Green Shoe option B) Shelf offering C) Secondary IPO offering D) Flex offering

A. Green Shoe Option

Which of the following describes the results of a 1 for 2 reverse stock split? A) Half as many shares at twice the original price B) Half as many shares at the same price C) Twice as many shares at the same price D) Twice as many shares at half the original price

A. Half as many shares at twice the original price

A signature endorsement on a stock certificate would not be required for good delivery if the shares were A) held in street name. B) are in custodial name. C) in trust name. D) held in safe keeping.

A. Held in a street name

Which of these would not be fully covered by SIPC insurance? A) Holding $250,000 in index funds, $200,000 in Treasury bonds, and $50,000 in gold B) Holding $300,000 in a money market and $200,000 in mutual funds C) Holding $400,000 in junk bonds and $100,000 in cash D) Holding $250,000 in cash and $250,000 in the Windmill Commodity ETF

A. Holding $250,000 in index funds, $200,000 in treasury bonds, and $50,000 in gold

Which of the following are true of long-term or short-term gains or losses? A) Holding a stock and selling above its cost basis if over 12 months later would be a long-term gain. B) Holding a stock and selling below its cost basis if held for over a year would be a short-term loss. C) Holding a stock and selling it above its cost basis if held for one year would be a long-term gain. D) Holding a stock and selling below its cost basis if held for one year would be a long-term loss.

A. Holding a stock and selling above its cost basis if over 12 months later would be a long-term gain

Investors face many different risks. Which of the following would be factors of systematic risk? I. Decreasing GDP II. Global security threats III. Call risk IV. Net sales A) I and II B) II and IV C) III and IV D) II and III

A. I and II

An investor can take advantage of intraday price changes due to normal market forces when investing in I. Closed-end funds II. Exchange traded funds III. Hedge funds IV. Open-Ended funds a. I and II b. I and IV c. II and III d. III and IV

A. I and II *Both Closed-ended funds and ETF's are based on supply and demand of the marketplace.

GEMCO Oil and Gas, a non-NMS stock, wishing to sell up to $100 million of convertible debt as market conditions permit, files a shelf registration statement with the SEC. Which of these statements are true? I. For securities offered via a shelf registration, a supplemental prospectus must be filed with the SEC before each sale. II. The registration statement is effective upon completion of the cooling-off period. III. Shelf registration allows the issuer to sell portions of a registered shelf offering over a 2-year period without having to reregister the security. IV. Shelf registration allows the issuer to sell portions of a registered shelf offering over a 4-year period without having to reregister the security. A) I and III B) II and III C) II and IV D) I and IV

A. I and III

Certain actions taken by the Federal Reserve Board (FRB) would likely have the effect of causing interest rates to increase. Which would these be? The Federal Open Market Committee (FOMC) buying securities Raising the reserve requirements Raising the discount rate Raising the prime rate A) II and III B) II and IV C) I and IV D) I and III

A. II and III

In a defined contribution plan I. the benefit amount is fixed. II. the benefit amount is variable. III. the contribution amount is fixed. IV. the contribution amount can vary. A) II and III B) I and IV C) II and IV D) I and III

A. II and III

Which of the following statements are true of an irrevocable trust? I. The grantor may change the terms of the trust II. The grantor must give up ownership of items placed in the trust III. The structure of the trust may reduce estate taxes IV. The grantor may retain ownership of items placed in the trust A) II and III B) I and IV C) I and II D) II and IV

A. II and III

A surplus in the U.S. balance of payments can occur if I. interest rates in foreign countries are higher than U.S. domestic rates. II. interest rates in foreign countries are lower than U.S. domestic rates. III. U.S. consumers are purchasing (importing) foreign goods. IV. foreign consumers are purchasing (importing) U.S. goods. A) II and IV B) I and IV C) I and III D) II and III

A. II and IV

In a proxy contest, which of the following must register with the Securities and Exchange Commission (SEC)? I. All shareholders who have been approached by solicitors II. All persons participating in proxy solicitation III. The upper management of the corporation who are also shareholders IV. All persons providing shareholders with unsolicited advice A) II and IV B) II and III C) I and III D) I and IV

A. II and IV

Under the IRC Subchapter M, if the WWF Fund only distributes 85% of its net investment income to its shareholders, then which of these is true? I. The fund must pay taxes on the undistributed 15% of net investment income. II. The fund must pay taxes on 100% of the net investment income. III. The shareholder pays no tax if the income is reinvested. IV. The shareholder must pay taxes if the income is received in cash or reinvested. A) II and IV B) I and IV C) I and III D) II and III

A. II and IV *To avoid taxation, an investment company needs to distribute at least 90% of its net investment income. WWF Fund only distributed 85% of income; thus, they must pay taxes on 100% of net investment income. Shareholders ALWAYS pay tax on taxable income regardless of cash or reinvested.

Which of the following accounts can only be opened in a cash account? I. Individual transfer on death (TOD) account II. Individual account III. Individual retirement account (IRA) IV. Individual custodial account A) III and IV B) I and IV C) I and II D) II and III

A. III and IV

Which of the following statements regarding a bond issued with a 6% coupon and now trading in the secondary market is true? A) If interest rates rise, the coupon will remain at 6%. B) If interest rates fall, the bond's current yield will rise. C) If the bond falls in price, the current yield will fall also. D) If interest rates rise, the bond's price also rises in the secondary market.

A. If interest rates rise, the coupon will remain at 6%

When the Federal Open Market Committee (FOMC) directs that Treasury securities be sold in the open market, this will do which of the following? A) Increase interest rates on loans to consumers B) Loosen the money supply C) Have no impact on lending rates to consumers D) Decrease interest rates on loans to consumers

A. Increase interest rates on loans to consumers

The Mod Family Foundation is a $500,000,000 charitable foundation headed by Clarence Mod. The foundation is seeking to purchase a large block of WeariTech, Inc., a Nasdaq listed company, for the foundation's portfolio. Seacoast Securities is assisting with this secondary market transaction. In this example, the Mod Family Foundation is A) an institutional investor. B) an issuer. C) a retail investor. D) a venture capitalis

A. Institutional Investor

When the money supply in the economy increases, A) interest rates go down, hence borrowing and spending for consumers is easier. B) interest rates go down, hence borrowing and spending for consumers is more difficult. C) interest rates go up, hence borrowing and spending for consumers is easier. D) interest rates go up, hence borrowing and spending for consumers is more difficult.

A. Interest Rates go down, hence borrowing and spending for consumers is easier

The Securities and Exchange Commission (SEC) requires that notice of corporate actions be given for all of the following except A) interest payments on the issuer's debt instruments. B) the issuance of warrants to be attached to a bond offering. C) dividend payments on the issuer's common stock. D) a reverse split on the issuer's common stock.

A. Interest payments on the issuer's debt instruments

For a fully disclosed firm, which of the following is true? A) It can execute both buy and sell orders for a customer. B) It can hold funds and securities for a customer. C) It can clear transactions (accept cash and securities for delivery) for its customers. D) It can accept checks from customers made out to fully disclosed form or the clearing firm.

A. It can execute both buy and sell orders for a customer

Which of the following statements regarding the third market is true? a. It is composed of listed securities traded OTC b. It is composed only of unlisted securities c. The services of a brokerage firm are not used d. It refers to the block trading of unlisted securities

A. It is composed of listed securities traded OTC

All of the following are true regarding the term market except A) it is unique to the U.S. securities industry. B) it includes stock exchanges. C) it is where buyers and sellers come together for the purpose of trading assets. D) it can be a physical place or an electronic venue.

A. It is unique to the U.S. securities industry

Which of the following option contracts is in the money if ABC stock is currently trading at $45 per share? A) Jan. 55 put B) Mar. 40 put C) Feb. 45 call D) Jan. 50 call

A. Jan 55 put

All of the following situations could cause a fall in the value of the US dollar in relation to the Japanese yen except a. Japanese investors buying US treasury securities b. US investors buying Japanese securities c. an increase in Japan's trade surplus over that of the United States d. a general decrease in the US interest rates

A. Japanese investors buying US treasury securities

Craig and Judy have just married. It is a second marriage for both of them and they both have kids from a prior marriage. Craig would like his portion of their account to go to his kids when he dies and Judy would like her portion to go to her kids when she dies. As new partners in marriage, while they are both alive they would both like to have full access to the account. What type of account(s) should they set up? A) Joint tenants in common (JTIC) B) Each should set up their own individual transfer on death (TOD) account with limited power of attorney (POA) C) Joint tenants with rights of survivorship (JTWROS) D) A partnership account

A. Joint tenants in common (JTIC)

What is the economic theory that says the government can and should effect individual spending by adjusting taxes and government spending? A) Keynesian B) Monetarist C) Supply side D) Reaganomics

A. Keynesian

Which of the following is added to M2 to arrive at M3? a. large time deposits b. currency in circulation c. checking accounts d. gold and silver bars in bank storage vaults

A. Large time deposits

All of these are risks associated with limited partnerships except A) limited liability risk. B) liquidity risk. C) business risk. D) audit and recapture risk.

A. Limited Liability Risk

By virtue of a stocks listing for trading on a U.S. stock exchange, which of the following risks is reduced or even recognized as eliminated? A) Liquidity risk B) Price risk C) Market risk D) Equity risk

A. Liquidity Risk

A bank is likely to do which of the following when the Federal Reserve Board (FRB) eases the money supply? A) Lower its prime rate B) Raise its broker call loan rate C) Lower the hypothecation loan rate D) Raise its prime rate

A. Lower its prime rate

When a bond is purchased at a premium, the current yield will be A) lower than the coupon rate. B) higher than the fixed rate. C) the same as the nominal rate. D) higher than the stated rate.

A. Lower than the coupon rate

Which of the following regarding monetary or fiscal policy is true? A) Monetary policy is what the Federal Reserve Board (FRB) engages in when it attempts to influence the money supply. B) Monetary policy refers to the actions that Congress takes when it attempts to influence the money supply. C) Fiscal policies are governmental budget decisions enacted by the Federal Reserve Board (FRB). D) Fiscal policies are the actions taken by the president and Congress to regulate the amount of money consumers will be able to borrow.

A. Monetary policy is what the Federal Reserve Board (FRB) engages in when it attempts to influence the money supply

Lando Entertainment, Inc., issues a bond collateralized by a trust holding the company's Las Vegas headquarters. This type of bond is called a A) mortgage bond. B) headquarters debenture. C) guaranteed bond. D) collateral trust bond.

A. Mortgage Bond * Backed by real estate

CMOs are backed by A. mortgages B. real estate C. municipal taxes D. the full faith and credit of the U.S. government

A. Mortgages * The M stands for mortgages

Which of the following securities can never be purchased on margin? A) Mutual funds B) Warrants C) Stocks that trade on NASDAQ D) OTC stocks

A. Mutual Funds

Which of the following is a benefit of 529 plans but not Coverdell Education Saving Accounts? A) No income restrictions B) Withdrawals are tax free if used for qualified education expenses C) Can be transferred to a sibling if not used by the original beneficiary D) Available for use for K-12

A. No income restrictions

Which of the following are not requirements for corporate actions? A) Notify the customer prior to the payment of the semiannual interest payment B) Notify the customer of the payment or distribution date C) Notify the customer of the declaration date D) Notify the customer of the title of the security

A. Notify the customer prior to the payment of the semiannual interest payment

American Liquidators Corporation (the ticker is LQDT) has 100 million outstanding common shares. The company would like to raise capital by selling 100 million new shares. In order to do this they must give their existing shareholders an opportunity to buy shares sufficient to maintain the shareholders percentage of ownership. In order to accomplish this they would A) offer stock rights to existing shareholders. B) offer warrants to existing shareholders. C) suggest that existing shareholders go to the market and double their existing position. D) perform a stock split.

A. Offer stock rights to existing shareholders *Offer so shareholders can maintain current percentage via stock rights offering

Which of the following direct participation programs (DPPs) is most likely to be associated with intangible costs and depletion allowances? A) Oil and gas income program B) Real estate raw land program C) Real estate existing property program D) Equipment leasing program

A. Oil and gas income program

The economy appears to be moving into a strong expansion. Which of the following companies will likely benefit the most from this expansion? A) Old Bess Steel, Inc. B) Daisy Dairy Company C) Dino Oil and Gas, Co. D) Hinckley Gold and Silver Corp.

A. Old Bess Steel, Inc

Who benefits most from a defined benefit plan? A) Older employees B) Younger employees C) Employees with more years until retirement D) All benefit the same

A. Older employees

If left unexecuted, a good til cancel (GTC) order will automatically be canceled when? A) On the last business day of April and the last business day of October B) On the last business day of June and the last business day of December C) On the cancel date specified by the customer at the time the order is entered D) On the first business day of April and the first business day of October

A. On the last business day of April and the last business day of October

Which of these statements regarding a 529 plan is correct? A) One person can be both the beneficiary and owner B) The assets in the plan belong to the beneficiary C) Contributions are limited to $2,000 annually D) The beneficiary must be below age 18

A. One person can be both the beneficiary and the owner.

A married couple have two children, both still minors. Which of the following UTMA accounts could be opened? A) Parent as custodian for one of the children B) One of the children as custodian for the sibling C) Both parents as custodians for one of the children D) Parent as custodian for both children in a single account

A. Parent as custodian for one of the children

Which of the following statements regarding a general partnership is correct? a. Partners participate in the gains and losses of the business and are fully liable for the businesses actions b. Partners participate in the gains and losses of the business and are partially shielded form the businesses liabilities c. partners participate in the gains and losses of the business and are fully shielded form the businesses liabilities d. partners participate in the gains but not the losses of the business and are fully shielded from the business liabilities

A. Partners participating in the gain and losses of the business and are fully liable for the business actions * Results of business flow through to the partners and there is no liability protection in this kind of organization

A supply-side approach to fiscal policy will use all of these tools except A) personal income tax rebates. B) decreasing tax rates on business entities. C) providing tax credits to small business. D) decreasing government regulatory costs.

A. Personal income tax rebates

An investor is purchasing $48,000 of the Windmill Alternative Energy Fund. The fund has a breakpoint of $50,000. The least appropriate action would be to A. Place the order B. Explain breakpoints C. Explain letters of intent D. Discuss combination privilege

A. Place the order *Not disclosing breakpoint would make it a breakpoint sale

In a prime brokerage account, the prime broker A) provides custody and clearing services, as well as margin loans. B) provides execution services only, while another broker clears transactions and provides any other account services required. C) subcontracts out all services to other brokers. D) provides custody and clearing, but no margin financing.

A. Provides custody and clearing services, as well as margin loans.

The Securities Act of 1933 exempts all of the following securities from registration except A) public real estate investment trusts (REITs). B) U.S. government issues. C) municipal issues. D) savings and loan issues.

A. Public real estate investment trusts (REITs) * Though some REITS may trade on exchanges and others may not, all public REITs are nonexempt securities registered with the SEC

To tighten its monetary policy, making it more difficult for consumers to borrow money, the Federal Reserve Board (FRB) can A) raise the discount rate. B) lower the federal funds rate. C) lower the discount rate. D) raise the federal funds rate.

A. Raise the discount rates

All of the following are investment income except A) running a business. B) dividends from ADRs. C) interest from a bond. D) dividends from a mutual fund.

A. Running a business

The Windmill Growth Fund is composed of many stocks from a variety of large companies. It has a stated objective of capital appreciation from holding the stock of the large companies. If you wanted to compare the performance of the fund to the market, which of these indices would be the best? A) S&P 500 B) Wilshire 5000 C) S&P 400 D) EAFE Index

A. S&P 500

All of the following would be secondary market transactions except A) securities sold to the public by the issuer. B) securities bought and sold on the NYSE. C) securities sold on both the OTC and NYSE. D) securities bought and sold on the OTC.

A. Securities sold to the public by the issuer *Acting as Primary Market

Shares must be borrowed in order to A) sell short to open a position. B) buy to open a position. C) buy to close a position. D) sell short to close a position.

A. Sell short to open a position

To meet a Regulation T margin call, a customer would have how long? A) Settlement plus two additional business days B) Trade date plus five additional calendar days C) Trade date plus two additional business days D) Settlement date plus two additional calendar days

A. Settlement date plus two additional business days

A client has just purchased a ZZZ June 35 call at eight when the stock is trading at 41. What is the contract's premium? A) Six points of intrinsic value and two points of time value B) Two points of intrinsic value and six points of time value C) Eight points of time value D) Eight points of intrinsic value Explanation

A. Six points of intrinsic value and two points of time value

Economic growth has slowed to a halt with little consumer demand, but prices for goods and services are still rising. This is known as economic A) stagflation. B) deflation. C) contraction. D) stagnation.

A. Stagflation

Occasionally our economy experiences an unusual combination of rising prices and high unemployment. Economists have given this unusual pairing what name? A) Stagflation B) Inflation C) Stagnation D) Deflation

A. Stagflation

Risk that prevails despite diversification within an asset class is A) systematic risk. B) business risk. C) call risk. D) unsystematic risk.

A. Systematic Risk

There are several types of investment risks that will generally fall into two categories. These categories are known as A) systematic and nonsystematic. B) investment and investor. C) high return and low return. D) averse and nonaverse.

A. Systematic and non systematic.

The purchase of an equity option settles______, the exercise of an equity option settles _______. A. T+1, T+2 B. T+2, T+3 C. same day, T+1 D. T+2, T+3

A. T+1, T+2

Which of the following funds would most likely fall the most in a rising interest rate environment? A) A money market fund B) A T-note fund C) A T-bill fund D) A T-bond fund

A. T-bond

An investor is long 1 August XYZ 30 put and XYZ has a current market value of 25. Which of the following is true? A. The August 30 put is in the money by 5 points. B. The August 30 put is at the money. C. The August 30 put is out of the money by 30 points. D. The August 30 put has no intrinic value.

A. The August 30 put is in the money by 5 points. *Strike price is 30 and the price is below 30 by 5 points at 25.

The most common way of measuring purchasing power risk is A) the CPI. B) the DND. C) the GDP. D) the GNP.

A. The CPI

Which of the following has the greatest influence on the money supply within the United States? A) The Federal Open Market Committee (FOMC) B) The Depository Trust Corporation (DTC) C) The Securities Exchange Commission (SEC) D) The Internal Revenue Service (IRS)

A. The Federal Open Market Committee (FOMC)

Federal Reserve member banks needing to borrow money can borrow from A) the Federal Reserve Bank at the discount rate. B) the Federal Reserve Bank at the federal funds rate. C) nonmember banks at the federal funds rate. D) member firms at the discount rate.

A. The Federal Reserve Bank at the discount rate

Which of the following entities is chiefly responsible to conduct U.S. monetary policy and maintain the stability of the financial system? A) The Federal Reserve Board (FRB) B) Securities and Exchange Commission (SEC) C) Internal Revenue Service (IRS) D) New York Stock Exchange (NYSE)

A. The Federal Reserve Board (FRB)

All of these enforce MSRB rules except A) the MSRB Enforcement Department. B) the Federal Reserve Board. C) the Securities Exchange Commission. D) FINRA.

A. The MSRB Enforcement Department

What federal law regulates the initial sale of securities to the public? a. The Securities Act of 1933 b. The Securities Exchange Act of 1934 c. The Investment Company Act of 1940 d. The Truth in Investing Act

A. The Securities Act of 1933

Which of the following statements with regard to the issuance of securities is true? A) The Securities Act of 1933 provides criminal penalties for fraud. B) Once a registration statement has been filed with the Securities and Exchange Commission (SEC) it should be expected that the securities could be sold to the public within two business days. C) The cooling-off period beginning when a registration statement is filed with the Securities and Exchange Commission (SEC) can't last longer than 20 days. D) While the Securities and Exchange Commission (SEC) is reviewing a registration statement for a new offering of securities, the underwriters are permitted to solicit and accept orders for the securities from the public.

A. The Securities Act of 1933 provides criminal penalties for fraud

The primary regulatory body for the securities industry would be which of the following? A) Securities and Exchange Commission (SEC) B) Financial Industry Regulatory Authority (FINRA) C) Municipal Securities Rule Board (MSRB) D) Federal Reserve Board (FRB)

A. The Securities and Exchange Commission *The Securities and Exchange Act of 1934

A party wishing to solicit proxy authority to vote a particular stockholder's shares must register with A) the Securities and Exchange Commission (SEC). B) the New York Stock Exchange (NYSE). C) the Financial Industry Regulatory Authority (FINRA). D) the regional exchange where the stock is traded.

A. The Securities and Exchange Commission (SEC)

Broker-dealers who transact securities business with other broker-dealers or customers must be registered with A) the Securities and Exchange Commission (SEC). B) the Federal Reserve Board (FRB). C) the Financial Industry Regulatory Authority (FINRA). D) the Options Clearing Corporation (OCC).

A. The Securities and Exchange Commission (SEC)

What is the name for the legal framework of state laws for broker-dealers, registered representatives, investment advisors and investment advisor representatives? A) The Uniform Securities Act B) The Securities and Exchange Act of 1934 C) The Investment Advisor Act D) The Securities Act of 1933

A. The Uniform Securities Act

All of the following are true for an Achieving a Better Life Experience account except A. the account must be opened before the beneficiary turns 26 B. the account owner and the beneficiary must be disabled C. the income is tax free D. the onset of the disability must have occurred before the owner turned 26

A. The account must be opened before the beneficiary turns 26 * Can be opened after 26, the disability just must be presented before age 26

A registered representative placing trades in a customer account must have discretionary authority if they choose which of the following aspects of the trade? A) The action to be taken, the asset to be traded, or the amount of the trade B) The action to be taken and the asset to be traded. C) The asset to be traded and the amount of the trade. D) The action to be taken, the asset to be traded, and the amount of the trade.

A. The action to be taken, the asset to be traded, or the amount to be traded

The Hoffman Equipment company of Anaheim, California is preparing to sell share to the public in an IPO. They plan to sell exclusively to residents of the state of California and use the proceeds to build a new showroom in Long Beach, California. This offer would need to be registered with A) the administrator of the state. B) no one, this is an exempt transaction. C) the SEC. D) MSRB.

A. The administrator of the state

Meeting the location requirements and the borrowing of securities when a customer wants to sell short is done by A) the broker-dealer on behalf of the short-selling customer. B) the customer who wants to sell short. C) the customer or entity that the shares will be borrowed from. D) the purchaser of the securities being sold short.

A. The broker-dealer on behalf of the short-selling customer

What is the spread on a stock quote? A) The difference between the bid price and the ask price or offer B) The broker-dealer's commission charges for the transaction C) The range of prices the stock has shown over the course of one trading day D) The profit margin for an individual trade

A. The difference between the bid price and the ask price or offer

Which benchmark interest rate indicates the direction of the Federal Reserve Board's monetary policy? A) The discount rate B) The prime rate C) The broker call loan rate D) The federal funds rate Explanation The discount rate, being the rate the Federal Reserve Bank (FRB) charges for short-term loans to its member banks, is generally considered a good indication of the FRBs policy to either tighten or loosen its hold on the amount of money available to banks for lending to consumers. LO 13.d

A. The discount rate

Who is responsible for meeting the desired returns on a defined contribution plan? A) The employee B) The Pension Benefit Guaranty Corporation C) The sponsor D) The custodian

A. The employee

The prospectus delivery requirement, access equals delivery, is satisfied when A) the final prospectus has been filed with the Securities and Exchange Commission (SEC) and is available on the SEC's website for investors to see. B) the final prospectus has been filed with Financial Industry Regulatory Authority (FINRA) and is available on FINRA's website for investors to see. C) a red herring is initially sent by mail to investors during the cooling-off period. D) the preliminary prospectus has been filed with FINRA and is therefore available on FINRA's website for investors to see.

A. The final prospectus has been filed with the Securities and Exchange Commission (SEC) and is available on the SEC's website for investors to see.

A customer wants to save some money for his grandson's college education in an IRA account. Which of the following regarding a Coverdell Education Savings Account (ESA) is true? A) The funds must be distributed by the time the grandchild attains age 30, unless they are rolled over. B) The maximum contribution permitted is $3,000 annually. C) The customer may take a deduction for the amount contributed. D) The customer may make annual contributions until the grandson graduates from college.

A. The funds must be distributed by the time the grandchild attains age 30, unless they are rolled over

If an associated person is expelled from the securities industry, which of the following is true? A) The individual may associate with another member firm with SEC permission. B) The individual may never associate with another member for life. C) The individual may still serve as an officer or director of a member firm but have no sales function. D) The individual may still be employed as a paid adviser to a member firm.

A. The individual may associate with another firm with SEC permission

Which of the following would cause a change in the net asset value of a mutual fund share? a. the market value of the portfolio declines b. many shares are redeemed c. securities in the portfolio are sold for a capital gain d. The fund takes a new position

A. The market value of the portfolio declines *If the market goes down so does the fund

he ABC Chemical Corporation wishes to advertise its upcoming offering of common stock in a tombstone advertisement that they, the issuer, will place. When placing the tombstone advertisement, which of the following would be least likely to appear? A) The names of the investment bankers underwriting the issue B) The name of the issuer C) The expected price range of the offering D) The total number of shares being offered

A. The names of the investment bankers underwriting the issue

Which of the following best describes how a market order to buy would fill if placed when the market price of the stock was at 40? A) The next available price B) The next available price above 40 C) The next available price below 40 D) Only at 40

A. The next available price

Which of the following best describes how a market order to sell would fill if placed when the price of the stock is a 40? A) The next available price B) Only at 40 C) The next available price below 40 D) The next available price above 40

A. The next available price

The exercise of an equity option requires that stock must be delivered A) the next business day. B) three business days after the exercise. C) that day. D) two business days after the exercise. Explanation

A. The next business day T+1

John Christensen places a buy limit order at 42 when the market price of the stock is at 45. Which of the following best describes how the order would fill? A) The order can only be filled at a price of 42 or lower B) The order would be filled at the next available price after the stock price drops to 42 C) The order would be filled between when the stock price is between 42 and 45 D) The order would be filled immediately because the market price is already above 42

A. The order can only be filled at a price of 42 or lower

An arbitration panel has found that Seacoast Securities owes $7,500 to its customer Mr. Garcia. Seacoast does not believe that the panel ruled correctly and desires to appeal the ruling. a. is not possible; there is no appeal to an arbitration award b. is filed with the NAC c. is filed with the SEC d. is filed with the courts

A. is not possible; there is no appeal to an arbitration award

Your customer places an order to buy 500 shares of Narcissus, Inc., (the ticker is NCS) at $50 per share fill-or-kill (FOK). When the order is entered, there are 450 shares available at $50 per share. What happens to the order? A) The order will be canceled and nothing is done. B) She will buy 450 shares, and the remainder of the order remains open until filled. C) She will do nothing, but the order stays open until the end of the day if more inventory becomes available. D) She will buy 450 shares, the rest of the order will be canceled

A. The order will be canceled and nothing will be done.

What might happen if a limited partner begins making day-to-day business decisions for the partnership? A) The partner might jeopardize the limited liability status held as an LP. B) The partner may still maintain the limited liability status held as an LP. C) The partner may be removed from the partnership completely. D) There would be no effect because limited partners have the right to vote.

A. The partner still might jeopardize the limited liability status held as an LP *LP's can vote on overall business objectives, but they can't vote on day to day operational business decisions, and could lose LP status if they did.

The investment return of a variable annuity comes from a. the performance of the selected subaccounts within the separate account b. the assumed rate stated in the policy documents c. computing the excess of the premiums received over the mortality experience d. the insurance company's general account

A. The performance of the selected subaccounts within the separate account * Variable annuities premium is invested in a separate account and not a general account

Which of the following are true of nonqualified plans but not true of qualified plans? A) The plan may discriminate B) All withdrawals are taxable C) The plan cannot discriminate D) All withdrawals are tax free

A. The plan may discriminate

All of the following are true of a revocable living trust except A) the primary purpose of the trust is to avoid estate taxes for the grantor. B) the grantor can remove items from the trust. C) the grantor can add items to the trust. D) the grantor is subject to the tax consequences of the trust while alive.

A. The primary purpose of the trust is to avoid estate taxes for the grantor

An investor is long MJS stock. For this investor, which of the following is true? A) The risk is that the stock falls in price. B) Maximum loss can be unlimited. C) The risk is that the stock remains stable in price. D) The risk is that the stock goes up in price.

A. The risk is that the stock falls in price

A final prospectus must include certain information. Which of the following is not required to be included? A) The underwriting contract and a list of all underwriters named in the contract B) The intended use of the proceeds for such corporate actions including expansion, mergers, or acquisitions C) A history of the business including any risks to purchasers that might be unique to that business or industry D) A statement by the SEC that the offering is neither approved or disapproved Explanation

A. The underwriting contract and a list of all underwriters named in the contract

For hedge funds organized as private investment partnerships, which of the following is true? A) They can limit the number of investors and require large or minimum initial investments. B) They can limit the number of investors and typically have no minimum initial investment requirement. C) They will allow unlimited numbers of investors and require large or minimum initial investments. D) They will allow unlimited numbers of investors and allow small initial investments. Explanation

A. They can limit the number of investors and require large or minimum initial investments

Which of the following is not true of no-load shares? a. they have fees associated with sales and redemption b. they are redeemed with no charges or fees of any kind c. they are sold by the fund with no sales charges of any kind d. they offer more return per dollar invested versus load funds if investing results are the same

A. They have fees associated with sales and redemption * They have expenses that are not considered sales charges.

Your client, Teresa Jenson, calls and wants to purchase T-bills and wants to know when payment is due. You should tell her A) trade date plus 1 business day. B) trade date plus 2 business days. C) trade date. D) trade date plus 3 business days.

A. Trade date plus 1 business day

Isaac James has some call options in his account that he would like to exercise. He wants to know when the resulting purchase of the stock would settle. You would tell him A) trade date plus 2 business days. B) trade date. C) trade date plus 3 business days. D) trade date plus 1 business day.

A. Trade date plus 2 business days (Option needs to be exercise)

Your client, Alice Tate, lives in Irvine, California, and wishes to purchase some bonds that would be both state- and federal-tax free for her. You recommend some school district bonds from Costa Mesa. She then asks when she would need to pay for the bonds. You should tell her A) trade date plus 2 business days. B) trade date plus 3 business days. C) trade date. D) trade date plus 1 business day.

A. Trade day plus 2 business days

All of the following securities are issued by the U.S. Treasury except a. treasury receipts b. STRIPS c. T-bills d. TIPS

A. Treasury Receipts *Treasury receipts are created and issued by broker-dealers acting as investment bankers.

All of the following are considered securities except? A. US minted Gold Coins B. Common Stock of XYZ corporation C. 15 British pound put contracts D. Treasury Bonds

A. US. Minted Gold Coins *Considered a commodity

Mikayla is a big fan of Seabird Coffee and is an enthusiastic investor. She currently owns 1,000 shares of the company stock and 10 call contracts on the stock as well. What is her maximum gain for this position? A) Unlimited gain on the stock and the option position B) Unlimited gain on the stock and limited gain on the option position C) Limited gain on both the option and stock position D) Limited gain on the stock and unlimited gain on the option position Explanation

A. Unlimited gain on the stock and the option position * Unlimited for this circumstance

Regarding purchases on margin, which of the following is true? A) Warrants can be purchased on margin, but rights cannot. B) Warrants and rights can both be purchased on margin. C) Rights can be purchased on margin, but warrants cannot. D) Neither rights nor warrants can be purchased on margin.

A. Warrants can be purchase on margin, but rights cannot

Which of the following is a true statement with regard to either U.S. securities laws or the description of international economic factors? A) When the U.S. dollar is strong, foreign currency buys fewer U.S. goods. B) A tombstone advertisement may be used in lieu of a prospectus in the distribution and sale of corporate securities. C) The Securities Act of 1933 regulates secondary markets and trading on exchanges. D) When a company files for bankruptcy, claims of preferred shareholders are settled before all others.

A. When the US dollar is strong, foreign currency buys fewer US goods

Evan is a 75 year old customer with $100,000 to invest. He would like the money to generate additional income. He relates that he intensely hates paying taxes and dislikes the government in general. He is, however, interested in tax-free municipal bonds. All of these are important to gather before making a recommendation except A) why he hates the government. B) the makeup of his portfolio. C) his liquid net worth. D) his current tax bracket.

A. Why he hates the government. *May be interesting, but doesn't really matter

Your customer, Mr. Hernandez, has been saving money in the 529 college savings plans for his three nephews. The oldest nephew is awarded an athletic scholarship valued at $15,000 at a major university. Mr. Hernandez may do any of the following except? A. Withdraw the value of the scholarship tax free B. Transfer the account to one of the brothers C. Withdraw the value of the scholarship penalty free D. Leave the money in the account for that nephew's future use

A. Withdraw the value of the scholarship tax free *If the money is withdrawn for nonqualified use then its subject to taxes on growth

A customer has an account with a broker-dealer who provides a group of services, such as asset allocation, portfolio management, trade executions, and administration, for a single fee. This is known as a A) wrap account. B) margin account. C) discretionary account. D) commission-based account.

A. Wrap account

If a customer had a large cash position and was interested in purchasing stock at prices below where they are today, and possibly generating some income in the process, an option strategy would be to A. write covered puts that are currently out of the money. B. write uncovered calls that are currently out of the money. C. buy out-of-the-money calls. D. place a buy stop order below the market.

A. Write covered puts that are currently out of the money. *Writing puts would generate income.

Mr. Darcy owns 5,000 shares of English Manor Properties. It is his belief that the company is unlikely to grow much over the next year. He is curious how he might generate some additional income from the position because English Manor pays a paltry dividend and asks about covered calls. You tell him that A. writing calls against his stock position is a conservative strategy for generating income. B. writing calls against his stock position is a conservative strategy but is ineffective for generating income. C. selling covered calls is very aggressive but has a solid chance of generating substantial income. D. buy puts is the best hedge against this position.

A. Writing calls against his stock position is a conservative strategy but is ineffective for generating income. *Only selling an option will generate income. Selling covered calls is an effective and very conservative way to do so.

An investor purchased an MJS Corporation 6% 20-year bond at issue for $950. Two years later, the investor sold the bond for $925. This investor experienced A) a $25 capital loss. B) a $25 interest loss. C) a $25 return on investment. D) a $925 return on investment.

A. a $25 capital loss

A state sponsored investment pool designed for municipalities with short-term cash investment needs is called A) an LGIP. B) a tax-free money market. C) a city and county money plan. D) a 457 plan.

A. an LGIP *Local Government Investment Pool

An investor has purchased a senior, unsecured debt security that trades on an exchange and is issued by a financial institution. It is backed only by that institution's good faith and credit. The security tracks the performance of a particular market index, but does not represent ownership in a pool of securities the way share ownership in a mutual fund does. This security that pays no interest and has a stated maturity date is known as A) an exchange-traded note. B) a call option or put option contract. C) an exchange-traded fund. D) a real estate investment trust.

A. an exchange traded note

A small company, in order to raise capital for expansion, wants to sell shares of stock to investors. The company has never offered ownership outside the founding partners to new investors before. This offering is known as A) an initial public offering (IPO). B) a subsequent public offering (SPO). C) an additional public offering (APO). D) a combination offering. Explanation

A. an initial public offering (IPO)

Regarding a public offering and a private placement, all of the following are true except A) both are subject to the registration requirements found in the Securities Act of 1933. B) both may utilize the services of investment bankers to facilitate the sale of securities. C) both allow securities to be sold to individual and institutional investors. D) both are methods of offering securities for sale to investors.

A. both are subject to the registration requirements found in the Securities Act of 1933

The Federal Reserve Board (FRB) does all of the following except A) enact fiscal policy. B) supervise the printing of currency. C) determine monetary policy. D) regulate and impact the money supply.

A. enact fiscal policy

The prime rate is set by A) individual banks. B) the Federal Open Market Committee (FOMC). C) the Federal Reserve Board (FRB). D) the Securities and Exchange Commission (SEC).

A. individual banks

An investor purchased and then sold a security eight months later for a gain. This gain A) is considered to be a short-term gain, and it will be taxed at the same rate as the taxpayer's other ordinary income. B) is considered to be a short-term gain, and it will be taxed at a more favorable rate than long-term gains. C) is considered to be a long-term gain, and it will be taxed at the same rate as the taxpayer's other ordinary income. D) is considered to be a long-term gain, and it will be taxed at a more favorable rate than short-term gains.

A. is considered to be a short-term gain, and it will be taxed at the same rate as the taxpayer's other ordinary income

All of these are rules set down by an exchange except A) revoking a corporate charter. B) listing and delisting of a security. C) order priority. D) capital requirements for members.

A. revoking a corporate charter

Your customer is a resident of the state of Utah. She owns bonds issued by Puerto Rico. The interest from these bonds is A) tax free at all levels for U.S. citizens. B) taxable at all levels because the bonds are not issued by a state. C) taxable at the state level only. D) taxable at the state and local level because she is not a resident of Puerto Rico, but still tax free at the Federal level.

A. tax free at all levels for US Citizens *bonds issued by or from a territory of the US have tax-free income at all levels to US Citizens

The law that provides the legal framework for state registration of securities is A) the Uniform Securities Act. B) the Securities Exchange Act of 1934. C) the Trust Indenture Act of 1939. D) the Securities Act of 1933.

A. the Uniform Securities Act

The rate that commercial money center banks charge each other for overnight loans is A) the federal funds rate. B) the prime rate. C) the broker call loan rate. D) the discount rate.

A. the federal funds rate

A registration statement disclosing material information about a new issue must be filed with the Securities Exchange Commission. The accuracy and adequacy of the registration statement is the responsibility of A) the issuer. B) the exchanges where the shares will trade. C) the underwriters. D) the Securities Exchange Commission (SEC).

A. the issuers

ABC currently has the following quotes: Bid Ask Size 10.00 10.50 3 × 2 10.20 10.45 4 × 3 10.25 10.60 3 × 2 What is the spread in ABC? A) 0.25 B) 0.20 C) 0.50 D) 0.30

B. 0.20

A trade of an equity option settles in ( ) days, while an exercise of an equity option must be completed in ( ) days. A) 2,2 B) 1,2 C) 2,1 D) 1,1

B. 1,2

The minimum initial requirement when purchasing 100 shares at $12 in a new account would be A) $360. B) $1,200. C) $2,000. D) $600.

B. $1200

If a married couple have a joint account with a market value of $1 million and a debit balance of $600,000, all of which is in securities, how much coverage would this account have? A) $600,000 B) $400,000 C) $500,000 D) $1 million

B. $400,000

An investor has a cash account with $300,000 in securities and $40,000 in cash. The investor also has a restricted long margin account containing securities with a market value of $220,000 and equity of $60,000. What is the extent of this investor's Securities Investor Protection Corporation (SIPC) coverage? A) $100,000 B) $400,000 C) $280,000 D) $620,000

B. $400,000 *Add 300,000 + 40,000 + 60,000 = 400,000

Listed options transactions settle regular way a. on the third Friday of the expiration month b. on the next business day after the trade date (T+1) c. on the third business day after trade date (T+3) d. When the option finally expires

B. (T+1)

A registered options principal (ROP) at your broker-dealer has just approved an options account for one of your new clients. How long does the client have to return the signed options agreement? A) Not later than the end of the month in which the account was approved B) 15 days C) 5 days D) 30 days

B. 15 Days

An order is entered by a customer to sell at 30 stop limit. Once the order is entered, the stock trades in the following sequence: 32, 29, 31, and 33. The order would be executed and the investor would receive a price of A) 29. B) 31. C) 30. D) 32.

B. 31

An order is entered by a customer to sell at 30 stop limit. Once the order is entered, the stock trades in the following sequence: 32, 29, 31, and 33. The order would be executed and the investor would receive a price of A) 30. B) 31. C) 29. D) 32.

B. 31

Your customer is in the 30% federal tax bracket. They consider purchasing a 7% corporate bond. Their after-tax yield would be A) 7%. B) 4.9%. C) 10%. D) 2.1%.

B. 4.9%

Yusef would like to save money for his 10-year-old daughter's college tuition costs. She has her heart set on a small liberal arts school with a growing reputation in the arts. His biggest concern is the potential increase in cost over the next several years. The program best suited to hedge against the increasing cost of college tuition at the school is a A) Coverdell ESA account. B) 529 prepaid tuition program. C) custodial account in the child's name. D) 529 college savings program.

B. 529 prepaid tuition program *Designed to cover inflation

How long can a good 'til canceled order remain in force without being reconfirmed by the customer? A) 12 months B) 6 months C) 24 months D) 36 months

B. 6 months

Two years ago Lisa Smith sold short 100 shares at $50 per share and two years later bought them back for $55 per share. The stock paid a $2.50 dividend each year. How much did Smith gain or lose per share for tax purposes? A) A $10 gain B) A $5 loss C) No gain or loss D) A $5 gain

B. A $5 loss

A newly issued treasury security that matures in 5 years is a. a T-bill b. a T-note c. a T-Bond d. a treasury receipt

B. A T-Note *They take 2-10 years to mature

Under the Investment Company Act of 1940 all of these are examples of management companies except A) A Windmill Income Fund, an exchange-listed:closed-end fund. B) A Windmill Income UIT. C) A growth fund option for a VA. D) An S&P 500 Index Trust ETF.

B. A Windmill Income UIT *Not a management company under the act. Separate entity

Which of the following would be a secondary market transaction? A) A broker-dealer arranges for a customer to purchase mutual fund shares B) A broker-dealer arranges for a customer's order to be executed on the NYSE C) A broker-dealer arranges for a customer to purchase an APO D) A broker-dealer arranges for a customer to purchase an IPO

B. A broker-dealer arranges for a customer's order to be executed on the NYSE

If a bond has a feature that allows the issuer to pay off bondholders prior to maturity, the bond has A. A put feature B. A call feature C. A conversion feature D. A presale feature

B. A call feature *Earlier than maturity means call feature

A broker-dealer that accepts funds and securities from customers and its correspondent member firms would most likely be which of the following? A) A depository trust B) A carrying firm C) A fully disclosed introducing firm D) An investment company

B. A carrying firm

If a customer wishes to open a cash account in his name only and allow a third party to make trading decisions, but not withdraw cash and securities, he must instruct his broker-dealer to open A) a cash account with full power of attorney. B) a cash account with limited power of attorney. C) a margin account. D) a cash account.

B. A cash account with limited power of attorney

Which of these securities would likely provide the greatest potential for capital appreciation? A) A preferred stock B) A common stock C) A convertible bond D) A U.S. Treasury STRIP

B. A common Stock *Growth is best here

Which of the following statements is the most correct regarding customer accounts? A) Hypothecation agreements are required for joint cash accounts only. B) A customer may open both a cash and margin account at the same time. C) Cash accounts need to be approved by a principal promptly after the first trade. D) Only margin accounts need to be approved by an authorized principal of a broker-dealer.

B. A customer may open both a cash and margin account

The U.S. balance of payments deficit would decrease in all of the following scenarios except A) a decrease in dividend payments by U.S. companies to foreign investors. B) a decrease in purchases of U.S. securities by foreign investors. C) a decrease in imports of foreign goods into the United States. D) an increase in exports of domestic goods from the United States.

B. A decrease in purchase of US securities by foreign investors

All of the following would decrease the U.S. balance of payments deficit except A) a decrease in dividend payments by U.S. companies to foreign investors. B) a decrease in purchases of U.S. securities by foreign investors. C) an increase in exports of domestic goods from the United States. D) a decrease in imports of foreign goods into the United States.

B. A decrease in purchases of US securities by foreign investors

Which of the following must be a member of the Securities Investor Protection Corporation (SIPC)? A) A firm that deals only in U.S. government bills, notes, and bonds B) A firm that deals only in over-the-counter (OTC) and exchange-listed stocks C) A firm that deals only with mutual funds D) A firm that deals only in industrial development revenue bonds

B. A firm that deals only in the over-the-counter (OTC) and exchange-listed stocks

Having been told that a firm incorporates proprietary trading in its business model buying and selling securities into and out of its own inventory you would know that it is A) a clearing agent. B) a market maker. C) a fully disclosed broker-dealer. D) an executing for commissions only.

B. A market maker

When a firm engages in proprietary trading, buying into and selling out of its own inventory for profit, it is acting as A) an underwriter. B) a market maker. C) an investment banker. D) an agent.

B. A market maker

Recent reports indicate that the gross domestic product (GDP) has been declining steadily over the past two quarters. This would suggest A) a depression. B) a recession. C) an inflationary period. D) an economic expansion.

B. A recession

The inverse relationship between interest rates and bond prices helps in understanding that interest rate fluctuations are A) an unsystematic risk for bonds. B) a systematic risk for bonds. C) the difference between credit and financial risk. D) an example of regulatory risk.

B. A systematic risk for bonds *Inverse relationship illustrates a significant risk for bonds and other fixed income investments.

An institution or a person responsible for making all investment, management, and distribution decisions in an account maintained in the best interests of another who has been legally appointed to provide these services is best described as A) an investment advisor. B) a trustee. C) a prime broker. D) a market maker.

B. A trustee

An investor notices that a bond purchased several years ago at 95 is now priced at 90. The investor sells the bond for 90, then immediately repurchases it for 90. This action is known as A) pegging. B) a wash sale. C) marking the close. D) matched orders.

B. A wash sale

In explaining hedge funds to an investor, a registered representative might correctly characterize them as utilizing A) basic investment strategies for the purpose of mitigating risk. B) advanced and complicated strategies entailing high risk. C) basic and conservative investment strategies entailing low risk. D) advanced and complicated strategies for the purpose of mitigating risk.

B. Advanced and complicated strategies entailing high risk *Hedge fund portfolios are aggressively managed for to attempt a high return

All of the following are considered money market instruments except A) commercial paper. B) American depositary receipts (ADRs). C) banker's acceptances (BAs). D) negotiable jumbo certificates of deposit (CD). Explanation

B. American depositary receipts (ADRs)

All of the following can take advantage of breakpoints except a. an individual b. an investment club c. a trust d. a corporation

B. An investment club *trust and corporations can be considered an individual

Secondary market transactions are ones in which A) an issuer is selling securities to institutional investors. B) an investor is selling securities to another investor. C) an issuer is selling securities to a public investor. D) an investor is having shares redeemed by an investment company. Explanation

B. An investor is selling securities to another investor

The SEC can do all of the following except A) revoke registration of broker-dealers. B) approve broker-dealers to participate in the securities business. C) fine broker-dealers who violate SEC regulations. D) limit activities of broker-dealers.

B. Approve broker-dealers to participate in the securities business

The SEC has the power to do all of the following except a. revoke a registration b. arrest those in violation of the regulations c. impose fines d. limit a firm's activity

B. Arrest those in violation of the regulations

A BB-rated 6% corporate callable bond that matures in 12 years that is trading at 100.25 is priced at A. Discount B. Premium C. A current yield above 7% D. With a coupon rate below 6%

B. At a premium *Above 100 (or par) is at a premium.

Which of the following money market instruments are routinely used in import/export activities? A. GNMA B. BAs C. T-bills D. Repurchase agreements

B. BA's *banker's acceptance are used strictly for this purpose

Class B Mutual fund shares are also called a. deferred load shares b. back end load shares c. CDSC shares d. reverse load shares

B. Back end load shares * Bought with no sales charge at the time of purchase. It is paid at the time of redemption or at the back end. Sales percentage is reduced through each year of ownership.

All of the following are associated with being a carrying firm except A) accepting customer funds. B) being a fully disclosed firm. C) being able to clear customer transactions. D) accepting customer securities.

B. Being a fully disclosed firm *Three different kinds of Firms: Carrying and Fully Disclosed Firms and Prime Broker

Which of these Treasury securities is in correct order of shortest to longest maturities? A) Notes, bills, bonds B) Bills, notes, bonds C) Bonds, notes, bills D) Notes, bonds, bills Explanation

B. Bills, Notes, Bonds * Bills are shortest (52 weeks), Notes (2-10 years) Bonds (Over 10 years)

Which of these risks are not normally associated with bonds? A) Purchasing power risk B) Business risk C) Interest rate risk D) Default risk

B. Business Risk *Business Risk is related to the growth prospects of a business and is associated with common stock

Your customer, Ivan, owns a diversified portfolio of large cap stocks. He would like to find a way to hedge the market risk in his portfolio. Which of these actions might you recommend to accomplish his goal? A) Tell him to do nothing because there is no way to mitigate systematic risk. B) Buy S&P 500 index puts to hedge market risk. C) Sell all his stocks and wait for a better time. D) Diversify his portfolio further.

B. Buy S&P 500 index puts to hedge market risk

Caleb McCann got a tip from his brother Nate on XYZ stock two months ago. Caleb hasn't previously been investing in the stock market but has been watching this stock since he got the tip from his brother. Caleb is now very bullish on XYZ and wants to place a trade. Which of the following would you recommend? A) Sell XYZ to open a short position B) Buy XYZ to open a long position C) Sell XYZ to close a long position D) Buy XYZ to close out a short position

B. Buy XYZ to open in a long position

ABC stock is currently trading at $63. Julia Miller would like to purchase ABC stock, but not at $63. If the price of ABC stock were to fall to $58 or less, then Miller wants to buy the stock. Which type of order should Miller place considering her objective. A. Market order B. Buy limit C. Buy stop D. Buy stop limit

B. Buy limit

An analyst is trying to determine upcoming economic activity to better determine her recommended investment strategy. She would be most interested in A) lagging indicators. B) leading indicators. C) coincident indicators. D) coterminous indicators.

B. Leading indicators

Which of the following correctly states the impact of open-market operations taken by the Federal Reserve Board (FRB)? A) By selling securities, the FRB puts money into the banking system, expanding the money supply and reducing interest rates. B) By buying securities, the FRB puts money into the banking system, expanding the money supply and reducing interest rates. C) By selling securities, the FRB takes money out of the banking system, expanding the money supply and increasing interest rates. D) By buying securities, the FRB takes money out of the banking system, expanding the money supply and increasing interest rates.

B. By buying securities, the FRB puts money into the banking system, expanding the money supply and reducing interest rates

Which of the following securities would be least likely to be issued by a corporation? A) Debentures B) Call and put options C) Preferred stock D) Common stock

B. Call and Put options *Corporations do not issue options. The OCC does.

All of the following may be purchased on margin except A) exchange-listed securities. B) call and put contracts. C) municipal securities. D) Nasdaq listed stocks.

B. Call and put contracts

An investor holding a 4.5% callable bond has it called away by the issuer when interest rates fall to 3.5%. This is an example of A) market risk, which can lead to interest-rate risk. B) call risk, which can lead to reinvestment risk. C) business risk, which can lead to financial risk. D) interest-rate risk, which can lead to financial risk. Explanation

B. Call risk, which can lead to reinvestment risk

Which of these would be unlawful regarding the use of a mutual fund prospectus? A) Failing to highlight a small section the customer has specifically asked about B) Calling an investor's attention to a section that may be interesting C) Sending a prospectus to someone who has shown no interest in the fund D) Leaving a typographical error in the text unmarked

B. Calling an investor's attention to a section that may be interesting * You may not highlight or mark on the page. You may not call attention to any portion of the mutual fund prospectus even if the client requets.

A clearing corporation agent or depository for securities transactions A) must be a broker-dealer. B) can be a commercial bank. C) can never be a corporation. D) can be a bank or corporation only if they are also a broker-dealer.

B. Can be a commercial bank

Which of the following settlement arrangements has trade and settlement occurring on the same day? A) Buyer's option B) Cash settlement C) Regular way settlement D) Seller's option

B. Cash settlement

A business entity that performs the function of receiving and delivering payments and securities on behalf of both parties to a securities transaction is called a A) broker-dealer. B) clearing agency. C) transfer agent. D) depository.

B. Clearing agent

Which of the following would be most susceptible to currency risk? A) Common stock of a small cap company in the United States B) Common stock of a large, well established company in England C) Treasury bonds D) Municipal bonds

B. Common stock of a large, well established company in England

Producers would generally report rising inventories during which period of the business cycle? A) Expansion B) Contraction C) Recovery D) Peak

B. Contraction

Which of these places the phases of the business cycle in the correct order? A) Trough, recovery, contraction, and prosperity B) Contraction, trough, expansion, and peak C) Peak, contraction, recovery, and prosperity D) Expansion, contraction, trough, and recovery

B. Contraction, trough, expansion, and peak

All of the following are acceptable choices to function as a depository and intermediary for transactions between buyers and sellers of securities except A) the Depository Trust Company (DTC). B) credit unions. C) the National Securities Clearing Corporation (NSCC). D) carrying firms.

B. Credit Unions

Which of the following is a unique risk incurred by investors in mutual funds that specialize in holding securities in the fund portfolio from foreign issuers? A) Liquidity risk B) Currency risk C) Business risk D) Call risk

B. Currency Risk

U.S. consumers are increasing their imports of foreign-made goods. On this data alone, one might expect gross domestic product (GDP) to A) remain the same. B) decrease. C) initially increase sharply and then decrease. D) increase.

B. Decrease

A customer who is short against the box may close the position by all the following except A) combining purchases of stock with stock already owned by the customer. B) depositing the fair market value of the shorted stock into his account. C) covering the short with the stock in his account. D) purchasing twice the stock in the open market.

B. Depositing the fair market value of the shorted stock into his account

A client calls a registered representative and states that she lives in New York City and is looking for a bond that would be triple tax free in New York. The registered representative tells the client that his firm has some bonds in inventory that are from the Albany New York School District that would be triple tax free for the client. Which of the following would be the registered representative's best course of action? A) Determine suitability prior to the trade and mark the trade unsolicited. B) Determine suitability prior to placing the trade and mark the trade solicited. C) No suitability determination is required because the bonds will be tax free for the client and mark the trade solicited. D) No suitability determination is required because these bonds will be tax free for the client and mark the trade unsolicited.

B. Determine suitability prior to placing the trade and mark the trade solicited

All of the following are true for exchange-traded funds (EFTS) except A. ETF's can be bought or sold throughout the trading day. B. ETFs are not marginable securities C. ETF's share prices are subject to market forces like supply and demand D. ETF transactions are commissionable trades

B. ETFs are not marginable securities * ETFs trade like all other exchange-traded products

An investor who has a short position in 500 shares of JKH common stock would eliminate that position by A) entering an opening purchase order for 500 shares of JKH. B) entering a closing purchase order for 500 shares of JKH. C) entering a closing sale order for 500 shares of JJK. D) entering a closing purchase order for 500 shares of ABC.

B. Entering a closing purchase order of 500 shares of JKH

Your firm has a number of clients who like to speculate with penny stocks; therefore, it is important to be familiar with the definitions and rules applicable to them. Which of the following statements is false? A) Before an initial penny stock transaction, a new customer must receive a copy of a risk disclosure statement and sign and date an acknowledgment of its receipt. B) Established or existing customers are exempt from the suitability statement requirements but not the risk disclosure requirements. C) A penny stock includes both listed and unlisted securities trading at less than $5 per share. D) Customers holding penny stock positions must receive a monthly account statement regardless of activity in the account.

B. Established or existing customers are exempt form the suitability statement requirement, but not the risk disclosure requirements

Which of the following securities is not backed by the full faith and credit of the U.S. Treasury? a. GNMA b. FNMA c. STRIPS d. Treasury bills

B. FNMA *Federal National Mortgage Association is a government entity. it is not directly backed by the federal government

Downturns in the business cycle or economic contractions are characterized by all of the following except A) rising numbers of bond defaults. B) falling inventories. C) rising numbers of bankruptcies. D) higher consumer debt.

B. Falling Inventories

Downturns in the business cycle or economic contractions are characterized by all of the following except A) rising numbers of bankruptcies. B) falling inventories. C) rising numbers of bond defaults. D) higher consumer debt.

B. Falling inventories

While the Municipal Securities Rule Board (MSRB) writes the rules and regulations regarding underwriting and trading for municipal securities, it does not enforce those rules. Who does? A) New York Stock Exchange (NYSE) B) Financial Industry Regulatory Authority (FINRA) C) Options Clearing Corporation (OCC) D) Federal Reserve Bank (FRB)

B. Financial Industry Regulatory Authority (finra)

The most commonly referenced indicator of economic activity is A) GNP. B) GDP. C) CPI. D) Dow.

B. GDP

Which of the following would not be considered ordinary income for tax purposes? A) Rents from income properties B) Gains gotten from the sale of securities C) Salary and commissions D) Dividends on common stock

B. Gains gotten from the sale of securities

It is expected that financial markets A) be limited to stocks and bonds and not include derivatives like options. B) have transparent pricing for assets. C) have securities prices determined by a board of directors. D) be nonregulated to allow for free trade. Explanation

B. Have transparent pricing

Under the Investment Company Act of 1940, which of the following is not considered an investment company? A) Face-amount certificate company B) Hedge fund C) Unit investment trust D) Separate account within a variable annuity

B. Hedge Fund *Under this act Face Amount Certificate Companies, Unit Investment Trust, and Management Companies are considered investment companies.

An economic event where consumers experience an extreme increase in the cost of goods in a short period is A) stagnation. B) hyperinflation. C) suprainflation. D) deflation.

B. Hyperinflation

Under Rule 144, which of the following sales are subject to volume limitations on the number of shares sold? I. Control person selling registered stock held for 1 year II. Control person selling restricted stock held for 2 years III. Nonaffiliate selling registered stock held for 1 month IV. Nonaffiliate selling restricted stock held for more than 6 months A. III and IV B. I and II C. I and III D. I and IV

B. I and II

Which of the following best describe a wrap account? I. The firm offering the account would need to be registered as both a broker-dealer and an investment advisor II. The account fee covers both transactions and advice III. The wrap fee for the account covers only where the firm acts as a broker or acts as a dealer IV. The firm may only be registered as a broker or dealer A) III and IV B) I and II C) I and IV D) II and III

B. I and II

Which of the following must be opened as a cash account? I. Custodial accounts II. Individual retirement accounts III. Joint accounts IV. Partnership accounts A) II and IV B) I and II C) I and III D) III and IV

B. I and II

Which of the following are true of traditional IRAs but not of Roth IRAs? I. Contributions may be deductible II. Contributions are always deductible III. There is a 50% penalty for failing to take the required minimum distribution (RMD) IV. There are income limits for making contributions A) II and III B) I and III C) III and IV D) I and II

B. I and III

Which of these statements regarding options are true? Investors who are bullish on a stock should buy calls. Investors who are bullish on a stock should buy puts. Investors who are bearish on a stock should sell puts. Investors who are bearish on a stock should buy puts. A) I and IV B) I and III C) II and III D) II and IV Explanation

B. I and III *Buying calls is bullish, selling calls is bearish, selling puts is bearish, buying puts is bullish

Before making an investment, it is wise to evaluate the potential risk involved. It is safe to assume that I. the greater the risk, the greater the potential reward II. the greater the risk, the lower the potential reward III. the lower the risk, the greater the potential loss IV. the lower the risk, the lower the potential reward A. I AND III B. I AND IV C. II AND III D. II AND IV

B. I and IV

Which of the following are considered tools used to implement fiscal policies? I. Government spending II. Operations of the Federal Open Market Committee (FOMC) III. Changing the reserve requirements IV. Taxation A) II and IV B) I and IV C) II and III D) I and III

B. I and IV

Which of these features does the Roth IRA include? I. There are no minimum required distributions after age 72 with a Roth IRA. II. There are higher contribution limits to a Roth IRA than to a traditional IRA. III. Withdrawal of earnings in the Roth IRA may be made without any taxation as long as a Roth IRA has been open for a minimum of one year and the participant is age 59. IV. There is the ability to contribute to both a Roth IRA and a traditional IRA. A) I and III B) I and IV C) II and I D) II and III

B. I and IV

When investors buy and sell securities to and from one another, these transactions occur A) in the primary market. B) on exchanges only. C) in the secondary market. D) in the over-the-counter (OTC) market only.

C. In the secondary market

Regarding the purchase of new equity issues by restricted persons, which statements are true? I. An investment club is permitted to buy a new equity issue at the offering price. II. An investment club is not permitted to buy a new equity issue at the offering price. III. An investment club that has eight members with equal ownership, one of which is a registered representative, is permitted to buy a new equity issue at the offering price. IV. An investment club that has 12 members with equal ownership, one of which is a registered representative, is permitted to buy a new equity issue at the offering price. A) II and IV B) I and IV C) II and III D) I and III

B. I and IV * As long as the investment club has no restricted members it can purchase something. An investment club that has restricted persons as members may still participate in an initial public offering (IPO) so long as the total ownership of the club's assets by restricted persons does not exceed 10%. 1/12 =

Five years ago your client purchased at par $100,000 of New Brunswick City GO bonds maturing in 20 years from now and callable in six months. Interest rates have gone down over the last five years. Which of these should your client do? I. Your client should recognize that the bonds have a high probability to be called. II. Your client should recognize that the bonds are unlikely to be called. III. Your client should expect the bond is trading at a large discount IV. Your client should expect the bonds are trading at a small premium. A) I and III B) I and IV C) II and III D) II and IV

B. I and IV *If interest rates have gone down, bond rates are probably high and it will probably be called. The proximity of the call date means the premium will be low

Which of the following would not be included in a mutual fund's list of expenses? I. Shareholder records and services II. Investment adviser's fee III. Broker-dealer sales charges IV. Underwriter's sales loads A. I AND II B. III AND IV C. I AND III D. II AND IV

B. II AND IV *The fund can never assume costs for and underwriter or broker-dealer. Those costs are assumed by the investor.

Certain actions taken by the Federal Reserve Board (FRB) would likely have the effect of causing interest rates to increase. Which would these be? The Federal Open Market Committee (FOMC) buying securities Raising the reserve requirements Raising the discount rate Raising the prime rate A) I and IV B) II and III C) II and IV D) I and III

B. II and III

Fiscal policy I. is the most efficient means for solving short-term economic issues. II. is not considered the most efficient means to solve short-term economic issues. III. is reflected in the budget decisions enacted by our president and Congress. IV. is reflected in the money supply decisions enacted by the Federal Reserve Board (FRB). A) I and III B) II and III C) I and IV D) II and IV

B. II and III

WRJ stock is quoted as 21 bid, 21.15 offer. For a customer order, which of the following is true? I. A purchase can be made at $21 per share if buying at the market. II. A purchase can be made at $21.15 per share if buying at the market. III. The spread is $0.15. IV. A sale can be made at $21.15 per share if selling at the market. A) III and IV B) II and III C) I and III D) I and IV

B. II and III

Which of the following actions of the Federal Reserve Board (FRB) would likely have the effect of causing interest rates to increase? I. The Federal Open Market Committee II. Raising the reserve requirement III. Raising the discount rate IV. Raising the prime rate a. I and II b. II and III c. II and IV d. III and IV

B. II and III

An investor purchased 100 shares of LMN in 2013 at a price of $40 per share. Soon after, the LMN declared a 25% stock dividend. Three years after the shares were purchased, they were sold at $50. Which of the following statements are correct? The adjusted cost basis of the shares is $30. The adjusted cost basis of the shares is $32. There is a short-term capital gain on all the shares sold. There is a long-term capital gain on all the shares sold. A) II and III B) II and IV C) I and IV D) I and III

B. II and IV

Four of the best-known indices and averages are listed as follows. How do they rank from most to fewest issues in the index? I. Dow Jones Industrial Average II. NYSE Composite Index III. Standard & Poor's 500 IV. Wilshire 5000 A) II, III, I, IV B) IV, II, III, I C) III, II, IV, I D) I, IV, III, II

B. IV, II, III, and I

A registered representative is explaining discretionary and nondiscretionary accounts to a customer. Only one of the following statements is accurate and can be made by the registered representative. Which is it? A) If I decide that the account should be a discretionary one you will no longer be able to enter orders yourself. B) In a nondiscretionary account no order can be entered without your prior approval. C) In a discretionary account you will have the opportunity to approve any order I want to enter before I enter it. D) I decide if the account should be set up as discretionary or nondiscretionary, but must do so in your best interest.

B. In a nondiscretionary account no order can be entered without your prior approval

When the Federal Open Market Committee (FOMC) directs that Treasury securities be purchased in the open market, this A) stabilizes the money supply. B) increases the supply of money. C) decreases the money supply. D) is intended to hinder contraction of the money supply.

B. Increases the supply of money

When consumer prices are increasing at a steady but reasonable rate this is considered a healthy level of A) stagnation. B) inflation. C) growth. D) wage increases.

B. Inflation

The cost of doing business is closely linked to the cost of money, which is known as A) demand. B) interest. C) supply. D) M1.

B. Interest

When the supply for money exceeds the demand, A) interest rates rise, making consumer borrowing easier. B) interest rates fall, making consumer borrowing easier. C) interest rates rise, making consumer borrowing more difficult. D) interest rates fall, making consumer borrowing more difficult.

B. Interest rates fall, making consumer borrowing easier

When the demand for money exceeds the supply, A) interest rates rise, making consumer borrowing easier. B) interest rates rise, making consumer borrowing more difficult. C) interest rates fall, making consumer borrowing easier. D) interest rates fall, making consumer borrowing more difficult.

B. Interest rates rise, making consumer borrowing more difficult

On Friday, July 1 your customer purchased 10 3% T-bonds maturing in 15 years. This trade will settle on A) July 3 B) July 5 C) July 6 D) July 2

B. July 5

One of the advantages of a security being traded on a listed stock exchange is the ready availability of buyers and sellers. This has the tendency to reduce or even eliminate a. inflation risk b. liquidity risk c. market risk d. price risk

B. Liquidity Risk

The risk that an investor might not be able to sell an investment quickly and at a fair market price is known as A) financial or default risk. B) liquidity or marketability risk. C) inflation or purchasing power risk. D) call or reinvestment risk. Explanation

B. Liquidity or marketability risk

Demand-side economics call on the federal government to do which of the following to encourage economic activity? A) Increase tax rates B) Lower personal income tax rates C) Decrease government spending D) Decrease regulation

B. Lower Personal Income Tax Rates

When the Federal Open Market Committee (FOMC) directs that Treasury securities be purchased in the open market, this will do which of the following? A) Have no impact on lending rates to consumers B) Lower interest rates on loans to consumers C) Increase interest rates on loans to consumers D) Tighten the money supply

B. Lower interest rates on loans to consumers

Large time deposits of more than $100,000 are considered to be found in what part of the money supply? A) M1 B) M3 C) M1 and M2 D) M2

B. M3

A broker-dealer designated as a clearing firm would be expected to do all of the following except A) perform back-office functions such as sending trade confirmations to customers. B) maintain a lower net capital than noncarrying broker-dealers. C) take custody of customer funds and securities. D) clear transactions for customer accounts.

B. Maintain a lower net capital than noncarrying broker-dealers

Which of the following is an example of a company in a defensive industry? A) Pan American Aircraft, an airplane producer B) Major Mills Grain Company, a grain and cereal producer C) Centipede Equipment, a heavy equipment manufacturer D) National Motors, an automobile manufacturer

B. Major Mills Grain Company, a grain and cereal producer

Each limited partner's share of partnership losses A. May be used to reduce ordinary income B. May be used to offset passive income C. Is deductible for $3,000 per year D. Cause a dollar for dollar decrease in the market value of the limited partnership units.

B. May be used to offset passive income

Which of the following regulatory bodies regulates but has no enforcement powers? A) Chicago Board Options Exchange (CBOE) B) Municipal Securities Rule Board (MSRB) C) Financial Industry Regulatory Authority (FINRA) D) Securities and Exchange Commission (SEC)

B. Municipal Securities Rule Board (MSRB)

MSRB rules apply to all of the following except A) investment bankers. B) municipalities. C) municipal dealers. D) FINRA member firms performing trades with municipal bonds.

B. Municipalities

The MSRB has jurisdiction for making rules in all of the following cases except A) broker-dealers trading municipal securities. B) municipalities selling their own securities. C) broker-dealers underwriting municipal securities. D) banks selling municipal securities.

B. Municipalities selling their own securities

Tools available to the Federal Reserve Board (FRB) include A) setting the discount rate, enacting tax laws, and setting the Fed funds rate. B) open-market operations, setting the discount rate, and setting reserve requirements. C) setting the Fed funds rate, setting the prime rate, and setting the discount rate. D) open-market operations, setting the discount rate, and enacting tax laws.

B. Open-market operations, setting the discount rate, and setting reserve requirements

Just as markets can be influenced by many factors, so can the market price of a single company's stock. While all of the following could impact a company's stock price to some extent, which would be the least likely to have a direct and immediate impact? A) Changes in the business cycle B) Political elections C) Federal Reserve Board (FRB) policies D) The company's earnings

B. Political elections

Which of these would not affect the NAV per share of a mutual fund share? A) The fund pays its monthly operating expenses like utility bills B) Portfolio securities that had to be sold for a big capital loss C) The fund receives a dividend from one of the portfolio stocks D) The portfolio's market value undergoes a large increase

B. Portfolio securities that had to be sold for a big capital loss *Selling securities out of the portfolio simply replaces securities with an equivalent amount of cash, leaving the NAV per share unchanged.

A company is considering raising capital without going through the registration process requirements mandated by the Securities Act of 1933. To be exempt from the act, which of the following offerings might they employ? A) Additional public offering (APO) B) Private (nonpublic) securities offering C) Initial public offering D) Shelf offering

B. Private (Non-public) Securities offering *Issuers wanting relief (exemption) from the registration provisions of the Securities Act of 1933 can offer securities privately. These securities offerings are often called private placements.

The federal government could use which of the following to slow the economy? A) Buy Treasury securities from banks B) Raise taxes C) Raise the federal funds rate D) Increase government spending

B. Raise Taxes

To stimulate the economy during a recession by expanding the availability of credit, the Federal Reserve Board (FRB) would do any of the following except A) lower the reserve requirement. B) raise the federal funds rate. C) lower the discount rate. D) buy U.S. government securities in open-market operations.

B. Raise the federal funds rate

Economists refer to longer, more severe contractions in the economy as A) depletions. B) recessions. C) declines. D) depressions.

B. Recessions

All of the following are benefits of using a prime broker except A) multiple executing brokers. B) research. C) consolidation of records. D) cost savings.

B. Research

A customer owns a diversified portfolio of domestic large-cap stocks. This customer would like to compare her portfolio's performance to the overall market. The best index to use as a benchmark is which of the following? A. EAFE Index B. S&P 500 Index C. Barclay's Aggregate Bond Index D. Russell 2000 index

B. S & P 500 Index

The primary regulatory body for the securities industry would be which of the following? A) Municipal Securities Rule Board (MSRB) B) Securities and Exchange Commission (SEC) C) Financial Industry Regulatory Authority (FINRA) D) Federal Reserve Board (FRB)

B. SEC

The United States Supreme Court decision that provided our current definition of a security is A) SEC v. Lorenzo B) SEC v. Howey C) County of San Francisco v. State of California D) Hawkins v. Florida

B. SEC vs Howey *The Howey decision which defines what a security is

Both the individual and institutional investor are able to easily buy and sell securities to meet their objectives through A) primary markets. B) secondary markets. C) outdoor malls. D) biennial markets.

B. Secondary Markets

BBB Corporation is liquidating under a Chapter 7 bankruptcy. What is the order of payout? A) Common shareholders, preferred shareholders, general creditors, and senior bond holders B) Secured, not Senior bond holders, general creditors, preferred stock holders, and common shareholders C) Senior bond holders, preferred shareholders, common shareholders, and general creditors D) General creditors, senior bond holders, preferred shareholders, and common shareholders Explanation

B. Secured, not Senior bond holders, general creditors, preferred stock holders, and common shareholders

Carrying firms, those that carry customer accounts, must A) maintain levels of net capital equal to or lower than noncarrying firms. B) segregate customer funds and securities from the firms' funds and securities. C) not disclose its net capital if it is higher than noncarrying firms. D) commingle customer funds and securities with the firms' funds and securities. Explanation

B. Segregate customer funds and securities from the firms' funds and securities

Correspondent firms would be likely to have relationships with which of the following types of broker-dealers? A) Market maker B) Self-clearing C) Introducing D) Fully disclosed

B. Self-clearing *A self-clearing or carrying firms hold funs and securities of the fully disclosed or introducing firm's customers and performs related functions

Which of the following transactions, if any, cannot be done in a cash account? A) Sell 100 ABC to close B) Sell 100 ABC to open C) Buy 100 ABC to open D) Any of these could be done in a cash account

B. Sell 100 ABC to open

Which of the following transactions has the least risk? A) Selling short B) Short against the box C) Buying to open D) Selling to open

B. Short against the box

Which of the following transactions has the least risk? A) Selling short B) Short against the box C) Selling to open D) Buying to open

B. Short against the box

Regarding capital gains, which of the following is true? A) Long-term gains are those realized on positions held for 2 years or more. B) Short-term gains are those realized on positions held for 12 months or less. C) Long-term gains are those realized on positions held for 10 years or more. D) Short-term gains are those realized on positions held for 9 months or less.

B. Short-term gains are those realized on positions held for 12 months or less

An investor has some stock held in street name and has just received proxy statements forwarded by the broker-dealer for an upcoming shareholders' meeting. If the investor wishes the shares to be voted as recommended by the issuer's management, which of the following must the investor do? A) Nothing in this case B) Sign and return the proxy statements by the tenth day before the meeting C) Sign and return the proxy statements by the fifth day before the meeting D) Inform the broker-dealer by letter or phone call how the shares are to be voted

B. Sign and return the proxy statements by the tenth day before the meeting

If large money center commercial banks begin to lower their prime rates, which of the following is most likely to occur? A) Smaller banks will need to increase their lending rates for creditworthy corporate customers. B) Smaller banks will lower lending rates for creditworthy corporate customers as well. C) Smaller banks will follow by lowering the discount rate. D) Smaller banks will need to offset the lower prime rate by increasing the broker call loan rate.

B. Smaller banks will lower lending rates for creditworthy corporate customers as well

A registered representative suggests a trade to a customer which the customer agrees is suitable given their investment objectives. The order is entered. This transaction is A) solicited but the order ticket need not be marked in any special way. B) solicited and the order ticket must be marked solicited. C) neither solicited or unsolicited and the order ticket should be marked as neither. D) unsolicited and the order ticket should be marked unsolicited.

B. Solicited and the order ticket must be marked solicited

The economy is showing that employment is low, there is little consumer demand, and loans for expansion and retooling are way down, showing a lack of business activity. Yet prices for consumer goods are still rising. Economists would call this a period of A) deflation. B) stagflation. C) inflation. D) stagnation.

B. Stagflation

The nation is experiencing a rapid increase in the cost of living, but wages are not keeping pace with the increase in cost. The nation is experiencing A) stagnation. B) stagflation. C) inflation. D) disinflation.

B. Stagflation

Several months of slow economic growth and rising unemployment have characterized the economy. Market analysts would describe this as a period of A) inflation. B) stagnation. C) stagflation. D) deflation.

B. Stagnation

Which of the following is a benchmark for large cap stocks? A) Wilshire 5000 B) Standard and Poor's 500 Index C) Russell 2000® Index D) Dow Jones Utilities Index

B. Standard and Poor's 500 Index

All of the following are taxable to the investor except A) cash dividends. B) stock dividends. C) semiannual interest payments. D) capital gains distributions.

B. Stock Dividends

An order that when triggered becomes a market order is called a A) market order. B) stop order. C) stop limit order. D) limit order.

B. Stop Order

Which of the following has the greatest influence on the money supply within the United States? A) The Depository Trust Corporation (DTC) B) The Federal Open Market Committee (FOMC) C) The Securities Exchange Commission (SEC) D) The Internal Revenue Service (IRS)

B. The Federal Open Market Committee (FOMC)

The monetarist theory proposes which of the following? A) The federal government can impact the economy by raising and lowering the federal funds rate. B) The Federal Reserve may impact the economy by raising and lowering the discount rate. C) The federal government impacts the economy through repurchase and reverse repurchase agreements. D) The Federal Reserve has a major impact on the economy by raising and lowering taxes.

B. The Federal Reserve may impact the economy by raising and lowering the discount rates

An investor is long XYZ May 40 CALL AND XYZ stock has a current market value of 44. Which of the following is true? A. The May 40 call is at the money. B. The May 40 call is in the money. C. The May 40 call is out of the money. D. The May 40 call has no intrinsic value .

B. The May 40 call is in the money. *Strike price is 40 and current value is 44.

Bob's Discount Brokerage has applied for FINRA membership and was denied. Bob wants to appeal this decision. The first appeal goes to A) the courts. B) the NAC. C) the DOE. D) the SEC.

B. The NAC

All Big Company, Inc., an NYSE-listed manufacturer of large objects, has declared a 50-cents-a-share dividend payable next month. All Big also has options available for trade. The actual ex-dividend date will be declared by A. the OTC. B. the NYSE. C. FINRA. D. the CBOE.

B. The NYSE *Controlled by days the market is open

The Securities Exchange Commission was authorized by A) the Securities Act of 1933. B) the Securities Exchange Act of 1934. C) the Securities Act of 1934. D) the Securities Exchange Act of 1933.

B. The Securities Exchange Act of 1934

The SEC is the primary federal securities industry regulator in the United States was created by a. the Securities Act of 1933 b. the Securities Exchange Act of 1934 c. the Investment Advisers Act of 1940 d. the Uniform Securities Act

B. The Securities Exchange Act of 1934

All of the following are self-regulatory organizations (SROs) except A) New York Stock Exchange (NYSE). B) Securities and Exchange Commission (SEC). C) Municipal Securities Rule Board (MSRB). D) Financial Industry Regulatory Authority (FINRA).

B. The Securities and Exchange Commission (SEC)

The spread a dealer makes is best described as A) the total commission. B) the ask minus the bid. C) none of these. D) the ask plus the bid.

B. The ask minus the bid

Seacoast Securities, a FINRA member firm and a large corporation, needs to secure funds to cover customers' margin purchases. Seacoast reaches an agreement to borrow from a large money-center bank for a loan that the bank can terminate with 24 hours' notice. The rate that the bank charges Seacoast for this loans is called A) the discount rate. B) the broker call loan rate. C) the federal funds rate. D) the prime rate.

B. The broker call loan rate

A customer of a Financial Industry Regulatory Authority (FINRA) member firm buys securities on margin. The customer is expected to pay a rate of interest on the margin loan based on which of the following? A) The federal funds rate B) The broker call loan rate C) The prime rate D) The discount rate

B. The broker call loan rates

The broker loan rate charged by banks is also known as A) federal funds rate. B) the call loan rate. C) prime rate. D) discount rate.

B. The call loan rate

Who must grant permission for a representative to have discretionary trading authority on an account? A) The representative and a principal B) The customer and a principal of the broker-dealer C) The customer and the representative D) The customer, the principal, and the representative Explanation

B. The customer and a principal of the broker dealer

Which benchmark interest rate indicates the direction of the Federal Reserve Board's monetary policy? A) The broker call loan rate B) The discount rate C) The prime rate D) The federal funds rate

B. The discount rate

A barometer of short-term interest rates and one that is therefore considered the most volatile interest rate in the U.S. economy is A) the prime rate. B) the federal funds rate. C) the discount rate. D) the broker call loan rate.

B. The federal funds rate

The interest rate negotiated for an uncollateralized overnight loan between two money center banks is known as A) the prime rate. B) the federal funds rate. C) the repo rate. D) the discount rate.

B. The federal funds rate

Electronic market centers designed primarily for institutional investors describes A) the OTC market. B) the fourth market. C) the third market. D) the exchanges.

B. The fourth market

An investor writers a September 65 ABC put for $3 when the stock is trading at $63. Which of the following is true? A. The intrinsic value is $3. B. The intrinsic value is $2 and the time value is $1. C. The intrinsic value is $1 and the time value is $2. D. The investor has the right to purchase ABC stock at 65.

B. The intrinsic value is $2 and the time value is $1 * Intrinsic Value + Time Value = Premium * (2) + X = $3

If the beneficiary of a custodian account dies, the securities in the account pass to A) the Securities Investor Protection Corporation (SIPC) trustee's account. B) the minor's estate. C) the parents. D) the custodian's estate.

B. The minor's estate

A GTC order is left unexecuted at the end of the trading day on the last business day of April. Which of the following is true? A) The order will be automatically renewed. B) The order will be automatically canceled. C) The order will only continue working through the opening of the next business day. D) The customer must give specific instructions to cancel the order so that it will not continue as a good working order.

B. The order will be automatically canceled

Which of these would cause a change in the net asset value of a mutual fund share? A) Securities in the portfolio are sold for a capital gain B) The market value of the portfolio declines C) The fund takes a new position D) Many shares are redeemed

B. The portfolio of the market declines

Seabird Coffee Company has just reported an unexpected increase in EBITDA this past quarter. This means they experience an increase in A) inventory turnover. B) earnings before interest, taxes, depreciation, and amortization. C) earnings available to common shareholders. D) employee benefit costs.

B. earnings before interest, taxes, depreciation, and amortization

The first step in the process of adding options trading to a customer account is A) the customer reads and understands the option risk disclosure you provided. B) the representative determines, based on reasonable grounds, the customer can understand and afford the risks of the recommendations the representative provides. C) the customer account is approved for option trading by a branch manager. D) the customer signs the option agreement.

B. The representative determines, based on reasonable grounds, the customer can understand and afford the risks of the recommendations the representative provides *This step starts everything

A cash settlement trade settles A) the regular way, but no margin borrowing is permitted. B) the same day as the trade. C) in two business days. D) the next day.

B. The same day as the trade

All of the following are key differences between general obligation (GO) bonds and revenue bonds except A) the type of issuer borrowing the funds. B) the source of interest and principal payments. C) the requirement for voter approval. D) being subject to statutory debt limits.

B. The source of interest and principal payments

Great Plains Securities, an OTC market maker, holds inventory and provides liquidity for Modulux Homes, an NYSE listed company. This is an example of A) the primary market. B) the third market. C) the fourth market. D) the force market.

B. The third market

Sparkly florescent earbuds made in the U.S. by Irksome, Inc., are suddenly popular in Asia. People from Canton to Calcutta are buying them in huge numbers. This is most likely to cause A) something, but the impact is unpredictable. B) the trade surplus to decrease, or deficit to increase . C) the trade deficit to decrease, or surplus to increase. D) no effect on the balance of trade.

B. The trade surplus to decrease, or deficit to increase

One characteristic of an open-end investment company that distinguishes it from a closed-end one is that A) there are a wide variety of objectives available for investors to select from. B) there is a continuous public offering. C) it may be either diversified or nondiversified. D) it may avoid taxation by distributing all of its net investment income to shareholders.

B. There is a continuous public offering *They key difference between closed-end and open-end companies is a continuous public offering. In a closed-end, once the IPO is over, the only way to acquire shares is in the secondary market

All of the following characteristics are true of securities issued by the Government National Mortgage Association except A) they pay monthly. B) they generate tax-free interest. C) they are called pass-through securities because the payments are made up of both interest and principal. D) they are backed by the federal government.

B. They generate tax free interest *All other statements are true

James Thomas calls and is interested in buying some GNMA certificates and wants to know when payment will be due. You should tell him A) trade date plus 1 business day. B) trade date plus 2 business days. C) trade date. D) trade date plus 3 business days.

B. Trade date plus 2 business days

Your client is buying municipal bonds and wants to know when payment is due. You should tell him A. trade date B. trade date plus 2 business days C. trade date plus 1 business day D. trade date plus 3 days

B. Trade date plus 2 business days

Your client is purchasing XYZ corporate bonds and wants to know when regular way settlement is. You should tell her A) trade date plus 3 business days. B) trade date plus 2 business days. C) trade date. D) trade date plus 1 business day.

B. Trade date plus 2 business days

Financial Industry Regulatory Authority (FINRA) regulates all matters related to investment banking, including A) trading in commodities markets. B) trading in the over-the-counter (OTC) market. C) trading in fixed annuities. D) trading in the futures markets.

B. Trading in the over-the-counter (OTC) market.

FinCEN is a bureau of what department within the federal government? A) Defense B) Treasury C) Justice D) Interior

B. Treasury

Which of these is not backed by the full faith and credit of the U.S. government? A) Treasury bills B) Treasury receipts C) Treasury bonds D) Treasury STRIPS

B. Treasury Receipts *Treasury bills, notes, bonds are ALWAYS backed by the U.S. government. STRIPS are too. Receipts aren't because they are issued by broker-dealers.

When engaging in open-market operations, taking actions to either expand or contract the money supply, the Federal Reserve Board (FRB) will buy or sell A) corporate bonds. B) Treasury securities. C) corporate equity securities. D) U.S government agency securities.

B. Treasury securities

The Options Clearing Corporation (OCC) assigns exercise notices to broker-dealers with short positions A) on a FIFO basis. B) using a random selection method. C) using any method that is considered fair and reasonable. D) on a LIFO basis. Explanation

B. Using a random selection method *The OCC assigns exercise notices to short broker dealers to those who are short on arandom basis.

Each of the following investments and practices are deemed ineligible for an IRA or any other retirement plan except A) life insurance. B) variable annuities. C) margin account trading. D) collectible fine art.

B. Variable annuities

A customer receives a voting proxy from a broker-dealer for shares owned by the customer and held in street name. The customer returns the proxy but later decides to attend and vote at the shareholder meeting in person. The voting proxy A) would need to be rescinded in writing by the broker-dealer in order for the shareholder to vote in person. B) would be revoked, and only the vote at the meeting would count. C) would be deemed the shareholders vote because it would have already been counted. D) once signed could not be replaced by a vote made in person or by another proxy executed later.

B. Would be revoked, and only the vote at the meeting would count

The Uniform Practice Code (UPC) establishes uniform trade practices pertaining to all of the following except A) don't know (DK) procedures. B) communications with the public. C) good-delivery procedures. D) settlement and ex-dates.

B. communications with the public

A bond's rating is used primarily as a measure of its A) volatility risk. B) default risk. C) purchasing power risk. D) interest rate risk.

B. default risk * Bond ratings from credit rating agencies are used to compare the relative risk of default. None of the others are issues of default.

The Federal Reserve Board (FRB) does all of the following except A) determine monetary policy. B) enact fiscal policy. C) supervise the printing of currency. D) regulate and impact the money supply.

B. enact fiscal policy * Determines monetary policy, not fiscal policy

A large-volume transaction for an institutional investor has occurred on an alternative trading system or network. Entered anonymously, the general public will see no information regarding the volume, price, or who the institutional investor was. This transaction is generally referred to as having occurred a. on the U.S. exchange b. in a dark pool c. in the over-the-counter (OTC) market d. in the third market

B. in a dark pool

Your customer retired two years ago at age 70. He recently took a job with a retailer greeting customers. He would like to contribute to a retirement plan to accumulate additional money with the view to leave something to his grandchildren. You would most likely advise him to open A) a mutual fund. B) a traditional IRA. C) a Roth IRA. D) an annuity.

C. A ROTH IRA

Before an option trade may be entered for a customer, that customer's account must be approved for option trading by A) an executive officer. B) a branch manager. C) a Registered Options Principal. D) a firm principal. Explanation

C. A Registered Options Principal

Which of the following are characteristics of the expansion phase of the business cycle? A) Higher consumer debt B) Increasing defaults C) Increase industrial production D) Rising inventories

C. Increase in industrial production

An investor purchased 100 shares of Acme Shoelace stock for $20 per share. Four years later, the investor sold the stock for $28 per share. This investor would report these transactions, on a per share basis, as A) $28 return on investment. B) $28 capital gain. C) $20 cost base, $8 capital gain. D) $20 return of capital, $28 return on investment.

C. $20 cost base, $8 capital gain

The current quote for Generic Motors stock is bid 32-ask 32.05 5 × 2. Your customer places an order to sell 300 shares. How much will they likely receive, before commission? A) $3,200 B) Cannot be determined because only 200 shares are available on this side of the quote C) $9,600 D) $9,615

C. $9600

The decision to annuitize a variable or fixed annuity may be reversed within how many days of the election? a. 30 days b. 7 days c. 0 days d. 90 days

C. 0 days *Annuitization is a one time irrevocable action

ABC currently has the following quotes: Bid Ask Size 10.00 10.50 3 × 2 10.20 10.45 4 × 3 10.25 10.60 3 × 2 What is the inside quote of ABC? A) 10.25 - 10.50 3 × 2 B) 10.00 - 10.60 3 × 2 C) 10.25 - 10.45 3 × 3 D) 10.20 - 10.45 4 × 3

C. 10.25 - 10.45 4 X 3

BCO is currently quoted bid 42 ask 42.5 10 × 12. Your customer may be able to buy A. 1,000 shares at $42/share. B. 1,200 shares at $42/share. C. 1,200 shares at $42.5/share. D. 1,000 shares at $42.5/share.

C. 1200 shares at $42.5/share

Benjamin Jackson bought 100 shares of XYZ two years ago at $10 per share. The stock paid a $0.50 dividend each year and he sold the stock for $11. What percent was his total return? A) 50% B) 10% C) 20% D) 5%

C. 20%

Your customer is long one DFG July 35 call at two. You explain to the customer that in order to breakeven, DFG stock must be trading at A) 35. B) 33. C) 37. D) 0.

C. 37

Treasury bills may be issued with all of the following maturities except a. 4 weeks b. 13 weeks c. 39 weeks d. 52 weeks

C. 39 weeks * T-bills can have 4, 13, 26, and 52 week maturities

Your customer has purchased shares of the Littleton Lumber Company (a nonlisted stock) in the secondary market. Littleton Lumbar recently completed an APO. Your customer will receive a prospectus for the APO if the purchase is within how many days of the APO date? a. 5 days b. 25 days c. 40 days d. 90 days

C. 40 days

A client and his spouse own shares in the KAPCO Fund as tenants in common. He has a 60% ownership interest in the account and the spouse has the balance. If the client dies, what happens to the shares in the account? A) 50% of the shares would belong to his spouse and the remaining half would be distributed to his estate. B) Ownership of the shares would be determined by probate court. C) 40% of the shares would belong to his spouse and the remaining balance would be distributed to his estate. D) His interest would automatically be transferred to the spouse.

C. 40% of the shares would belong to his spouse and the remaining balance would be distributed to his estate

Seabird Airlines, Inc. pays a $.40 a share quarterly dividend, and shares are currently trading at $32 a share. The current yield for Seabird is A. 1.25% B. 2.5% C. 5% D. 10%

C. 5%

Which of the following bonds would have the most price volatility? A. 3% 10 year T-note B. 2% 5 year T-note C. 5% 20 year T-bond D. 5% 15 year corporate bond

C. 5% 20 year T-bond *Due to time constraint

Individual retirement accounts allow a catch-up contribution of $1,000 to be made into the account for those who are A) over 50 years old. B) over 72 years old. C) 50 years old or over. D) 59½ years old or over.

C. 50 years old or over

In order to qaulify as conduit a mutual fund must pay out a minimum of a. 90% of gross investment income b. 90% of net expenses c. 90% of net investment income d. 95% of net investment income

C. 90% of net investment income * Must distribute 90% of net investment income in order to qualify for the tax break given to conduits

The Alta Loma High School District is asking voters to approve a bond to fund the purchase of new computers and software. The bond will mature in 40 years and the interest and principal payments will be funded from real estate taxes. This is an example of a A) an equipment trust bond. B) a debenture. C) GO bond. D) revenue bond.

C. A GO Bond *If a municipal bond requires a vote it is most likely a GO Bond

One of your clients wants to set aside some money for her nephew, who just turned 30, but she has some reservations. She does not wish his numerous creditors to have access to the money until after she dies, but she wants him to have easy access to the money at that time. You recommend that she open A) a custodial account. B) a TIC account. C) a TOD registration on an account in her name. D) a joint tenants with rights of survivorship account.

C. A TOD registration on an account in her name

An investor has purchase a bond where the issuer will repay part of the bond's principal before the final maturity date, and then pay off the major portion of the debt principal at final maturity. This is A) a serial maturity schedule. B) a term maturity schedule. C) a balloon maturity schedule. D) a series maturity schedule.

C. A balloon maturity schedule

Your customer is quite nervous about the stock market but expresses his belief that equities are still the place to save for retirement over the long term. He places a trade for 500 shares of an equity index fund. Overall your customer is likely A) a bear. B) a tiger. C) a bull. D) unsure of where the market is going.

C. A bull

Which of the following statements regarding put and call features on debt securities is not correct? A) A puttable bond is likely to be put back when interest rates are rising. B) Call features benefit the issuer. C) A callable bond is likely to be called when interest rates are rising. D) Put features benefit the bondholder.

C. A callable bond is likely to be called when interest rates are rising

Your broker-dealer, rather than clear its own securities transactions, chooses to introduce its business to another firm that will clear, processes and handle all back-office operations for it. The firm receiving the business is known as A) a receivership. B) a fully disclosed firm. C) a carrying firm. D) a depository trust.

C. A carrying firm

Your customer buys 300 shares of Steel Tools common stock on Tuesday and will be an owner of record as of the close of business that same Tuesday. This must be A) a mutual fund. B) not possible. C) a cash settlement trade. D) a quick settlement trade.0

C. A cash settlement trade

A firm that functions for the purpose of receiving and delivering payments and securities on behalf of both buyer and seller in a securities transaction is A) a depository. B) a broker-dealer. C) a clearing agent. D) a transfer agent.

C. A clearing agent

Three years ago your client, Lucy Jones, purchased 200 shares of Tremor Corporation. The shares have appreciated and she wants to take her profits. She would do this by entering a. an opening sale b. a short sale c. a closing sale d. a covering purchase

C. A closing sale

Which of the following securities would likely provide the greatest potential for capital appreciation? A. A preferred stock B. A U.S. Treasury STRIP C. A common stock D. A convertible bond

C. A common stock *Common stock goes is associated with growth

An institution or a person responsible for making all investment, management, and distribution decisions in an account maintained in the best interests of another is known as A) an investment company. B) a unit investment trust. C) a custodian. D) a fully disclosed firm.

C. A custodian

Your client, Soren Aland, buys a 4% XYZ corporate bond. If his current yield is 5%, he bought the bond at A) par. B) a premium. C) a discount. D) above par.

C. A discount

An investment established by states to provide other government entities such as cities or counties a place to invest short term is? A. an FDIC B. an Able C. an LGIP D. a REPO

C. A local government investment pool (LGIP) * Only thing that helps local governments

The Windmill Growth Fund has breakpoints at $10,000, $25,000, and $50,000. Your customer places an unsolicited purchase through you for $47,000. You place the trade as requested without question or comment. This action is A) unsolicited trade are not allowed in mutual funds. B) acceptable in all situations. C) a rules violation. D) acceptable because the transaction is unsolicited.

C. A rules violation * You must always disclose the breakpoints. If not it considered a breakpoint sale

Which of these broker-dealers would most likely have correspondent firms? A) An introducing broker-dealer B) A market maker C) A self-clearing firm D) A fully disclosed broker-dealer

C. A self-clearing firm *AKA Clearing firm or carrying firm

Earned income includes which of the following? A) Interest income earned on a bond B) Child support paid to a divorced spouse C) A year-end bonus D) Dividends earned on a mutual fund

C. A year end bonus

An investor has a long position in ABC Chemical Corp. (ABCCC), with a substantial unrealized loss. Wishing to use that loss to offset realized gains, the investor sells the stock. In reinvesting the proceeds of the sale, the investor could avoid violating the wash-sale rule by purchasing A) ABCCC convertible bonds. B) ABCCC call options. C) ABCCC put options. D) ABCCC warrants.

C. ABCCC put options

ACE, an open-end investment company, operates under the conduit, or pipeline, tax theory. Last year, it distributed 91% of all net investment income as a dividend to shareholders. Therefore, which of the following statements is true? A) ACE paid no taxes last year because it qualified as a regulated investment company under IRC Subchapter M. B) ACE paid taxes on 9% of its net investment income and capital gains last year. C) ACE paid taxes on 9% of its net investment income last year. D) ACE paid taxes on 91% of its net investment income last year.

C. ACE paid taxes on 9% of its net investment income last year * ACE will only pay taxes on any portion of the net investment income it doesn't distribute as long as it distributes 90%; thus 9% needed to be paid.

The transfer agent for a corporation is responsible for each of the following except A) canceling old and issuing new certificates. B) ensuring that its securities are issued in the correct owner's name. C) acting as an intermediary between the buy and sell sides of a transaction. D) maintaining records of ownership.

C. Acting as an intermediary between the buy and sell sides of a transaction

The customer must agree to three specific elements of a trade before the trade's execution for the trade to be nondiscretionary. Which of the following is not required? a. Action b. Asset c. Allowance d. Amount

C. Allowance

One difference between an UTMA account and an UGMA account is A) an UGMA account is tax deferred and a UTMA account is not. B) an UTMA account transfers at the age of majority, an UGMA account can go until the beneficiary turns 30 year of age. C) an UTMA account has a wider set of allowed investments. D) UTMA assets are considered an irrevocable gift, an UGMA account allows the custodian to reclaim the assets.

C. An UTMA account has a wider set of allowed investments

Seabird Airlines is selling shares to the public for the first time. The company intends to use the proceeds from the sale of its stock to purchase several new passenger aircraft. This offering is an example of A. A secondary offering B. A rights offering C. An initial public offering D. A subsequent primary offering

C. An initial Public Offering

Which of the following would not require delivery of notice? A) A 2:1 stock split B) A rights offering C) An interest payment on a corporate bond D) Payment of a cash dividend

C. An interest payment

Which of the following would not require delivery of notice? A) A rights offering B) Payment of a cash dividend C) An interest payment on a corporate bond D) A 2:1 stock split

C. An interest payment on a corporate bond

Anyone who, as part of their business, gives investment advice for compensation must register as A) a stock broker. B) an agent for the issuer. C) an investment adviser under the Investment Advisers Act of 1940. D) an underwriter.

C. An investment adviser under the Investment Advisers Act of 1940.

Modulux, Inc., a NYSE listed manufacturing company, was founded by Clarence Mod. Clarence is now 82 years old and is looking to divest his significant interest in Modulux to capitalize the Mod Family Foundation, a charity. He has enlisted the help of Seacoast Securities, a FINRA member broker-dealer based in Seattle, to run the sale. Seacoast Securities is acting as A) an issuer. B) a dealer. C) an investment banker. D) an owner.

C. An investment banker

A fiduciary would be best described as A) a beneficial owner of an individual cash or margin account. B) a guardian designated by the courts to act on behalf of those investors who are unable or unwilling to satisfy a margin call. C) any person legally appointed and authorized to represent another person, act on that person's behalf, and make whatever decisions are necessary to the prudent management of the account. D) a voting board member of the Federal Deposit Insurance Corporation (FDIC).

C. Any person legally appointed and authorized to represent another person, act on that person's behalf, and make whatever decisions are necessary to the prudent management of the account

Who can contribute to an IRA? A) Anyone with earned income under the age of 59½ B) Anyone with earned income not covered by an employer-sponsored plan C) Anyone with earned income D) Anyone with earned income under the age of 72

C. Anyone with earned income

Contributions to an IRA can be made up to which of the following dates? A) April 15th of the year the contribution is for B) The extension deadline, October 15th of the year following the year the contribution is for C) April 15th of the year following the year the contribution is for D) December 31st of the year the contribution is for

C. April 15th of the year following the year the contribution is for

An investor is long 1 January 30 call at 2. Calculate the breakeven, maximum gain, and maximum loss. A. BE 30, MG unlimited, ML 200 B. BE 32, MG 200, ML unlimited C. BE 32, MG unlimited, ML 200 D. BE 2, MG 500, ML 32

C. BE 32, MG unlimited, ML 200 * Strike Price + P = BE MG unlimited on Long Call ML is Premium 2 X 100 = 200

Class B mutual fund shares are also called A) reverse load shares. B) CDSC shares. C) back-end load shares. D) deferred-load shares.

C. Back-End Load Shares *Bought with no sales charge in the beginning. Instead, the sales charge is paid at the time of redemption

Alan and Barbara Collins have three minor children; Dan, Ellen, and Frank. Which of the following UTMA accounts could be opened? A) Alan Collins as custodian for Dan and Frank Collins B) Frank Collins as custodian for Dan Collins C) Barbara Collins as custodian for Ellen Collins D) Alan and Barbara Collins as custodians for Ellen Collins

C. Barbara Collins as a custodian for Ellen Collins

Which of the following is not a security an investor would purchase? A. Common shares of ABC Petroleum Inc B. Debt issued by ABC Petroleum C. Bitcoins D. Windmill Growth Fund

C. Bitcoins *Not a security not regulated by SEC it is a commodity

Which of the following groupings might indicate the economy is contracting? A) Bond prices are falling, stock prices are rising, and GDP is rising. B) Consumer borrowing is low, property values are high, and stock prices are falling. C) Bond defaults are rising, inventories are rising, and GDP is falling. D) Inventories are at record lows, stock prices are at record highs, and bankruptcies are falling.

C. Bond defaults are rising, inventories are rising, and GDP is falling.

Which of the following statements regarding open-end and closed-end funds is true? A) Both issue full and fractional shares. B) Both issue equity and debt securities. C) Both pay dividends when declared. D) Both are priced using the same method.

C. Both pay dividends when declared

The Securities Investors Protection Corporation protects investors from the financial failure of A) banks. B) the third market. C) broker-dealers. D) the stock market.

C. Broker-Dealers

Under the Securities Exchange Act of 1934, registration is required for A) securities. B) foreign securities exchanges. C) broker-dealers. D) initial public offerings (IPOs).

C. Broker-dealers

A company is about to introduce a new product. While confident in the product's appeal and market, it is still an unknown factor until sales results are viewed later. Investors holding stock in the company are at this time specifically exposed to A) call risk. B) financial risk. C) business risk. D) reinvestment risk.

C. Business Risk

Secondary markets exist to do all of these except A) support the existence of primary markets. B) allow investors to easily liquidate securities. C) decrease liquidity in the national markets. D) allow individual investors easy access to investment vehicles.

C. Decrease liquidity in the national markets

Pedro dislikes Seabird Coffee and thinks the company's stock is overvalued. He is currently short 1,000 shares of the company. He is concerned with the potentially unlimited risk he is exposed to and would like to use options to hedge that risk. His best option position would be A) buy 10 OEX (S&P 100 index) calls. B) buy 10 Seabird Coffee calls. C) buy 10 Seabird Coffee puts. D) sell 10 Seabird Coffee calls.

C. Buy 10 Seabird Coffee Puts *The calls gives the owner the right to exercise and buy stock at the exercise price, therefore locking the cost to replace the shares.

Caleb McCann got a tip from his brother Nate on XYZ stock two months ago. Caleb hasn't previously been investing in the stock market but has been watching this stock since he got the tip from his brother. Caleb is now very bullish on XYZ and wants to place a trade. Which of the following would you recommend? A) Buy XYZ to close out a short position B) Sell XYZ to open a short position C) Buy XYZ to open a long position D) Sell XYZ to close a long position

C. Buy XYZ to open a long position

Narcissus, Inc., a social media company, has shares selling at $52. Your customer likes the company but thinks it is currently a bit too high and would like to buy the stock if the price declines to $50 per share. Which of the following orders meets this customer's request? A) Buy puts with a 50 strike B) Buy stop at 50 C) Buy limit @ 50 D) Buy stop at 55, limit 50

C. Buy limit @ 50

Your client, Randall Stephens, has been bearish on LMN stock and sold it short several months ago. He now believes the company is in a good position for a turnaround and wants to change his strategy on LMN. What should he do to implement his new strategy? A) Sell short QRS to close his existing position B) Sell an equal number of shares to his existing position C) Buy to close his existing position and open a new long position in the stock D) Buy an equal number of shares to his existing short position

C. Buy to close his existing position and open a new long position in the stock

Which of the following positions or actions would cover a client who has shorted a call? A) Buying a put with a higher strike price B) A long stock position C) Buying a call that expires sooner D) A short stock position

C. Buyer a call that expires sooner *This is a bearish position, which requires the client to deliver stock at the strike regardless of how far the share price rises

An investor might make money in a strong bull market by A. selling shares short. B. buying equity index puts. C. buying equity index calls. D. selling equity index calls.

C. Buying equity Index Calls *Market is Bullish so buying calls is the way to go

A broker-dealer and its associated persons may be subjected to sanctions for violations of the Financial Industry Regulatory Authority (FINRA) and the Securities and Exchange Commission (SEC) rules. Which of the following penalties can be levied against the associated persons? A) Imprisonment B) Loss of Securities Investor Protection Corporation (SIPC) coverage C) Censure D) Limits placed on research activities

C. Censure

A married couple opens a new account with a broker-dealer as tenants in common. In explaining the details of the account to the couple, the registered representative would not indicate which of the following? A) In the event of death, the decedent's interest in the account goes to the decedent's estate. B) Orders may be given by either party. C) Certificates may be registered in the name of either party. D) Mail may be sent to either party with the permission of the other party.

C. Certificates may be registered in the name of either party

Which of these is not a tool used by the Federal Reserve Board (FRB) to impact the money supply? A) Changing the discount rate B) Changing the reserve requirements C) Changing the prime rate D) Open market operations of the FOMC

C. Changing the prime rate

Which of the following sets of FINRA rules focuses on how member violations will be handled? A) Conduct Rules B) Code of Arbitration C) Code of Procedures D) Uniform Practice Code

C. Code of Procedures

A corporation deposits T-bonds it owns into a trust in order to secure a loan. The loan for this type of arrangement would be facilitated by the corporation issuing A) equipment trust certificates. B) treasury guaranteed bonds. C) collateral trust bonds. D) mortgage bonds.

C. Collateral Trust Bonds

Which type of securities are most susceptible to business risk? A) Money market instruments B) Corporate bonds C) Common stock D) Treasury bonds

C. Common Stock *Most at risk for bad business decisions

Which organization or government unit sets fiscal policy? a. Federal Reserve Board (FRB) b. Government Economic Board c. Congress and the President d. Secretary of the Treasury

C. Congress and the President

All of the following accounts are for unincorporated businesses except A) partnership accounts. B) sole proprietorship accounts. C) corporate accounts. D) limited liability company accounts.

C. Corporate accounts

SIPC coverage is best described by which of the following? A) Covers up to $500,000 in cash and $500,000 in securities B) Covers $500,000 in cash and securities C) Covers up to $500,000 in cash and securities but no more than $250,000 in cash D) Covers up to $500,000 in cash and securities but no more than $250,000 in securities

C. Covers up to $500,000 in cash and securities but no more than $250,000 in cash

SIPC coverage is best described by which of the following? A) Covers $500,000 in cash and securities B) Covers up to $500,000 in cash and securities but no more than $250,000 in securities C) Covers up to $500,000 in cash and securities but no more than $250,000 in cash D) Covers up to $500,000 in cash and $500,000 in securities

C. Covers up to $500,000 in cash and securities, but no more than $250,000 in cash

Which of the following is not a measure of a company's short-term liquidity? A) Current ratio B) Acid test ratio C) Debt ratio D) Working capital

C. Debt Ratio

A customer says they have a diversified portfolio of notes and bonds. This means their portfolio consists primarily of A) limited partnerships. B) hedge funds. C) debt instruments. D) equity securities. Explanation

C. Debt instruments *Bonds are debt instruments

A security that is a contractual obligation between two parties and whose value is based on the specifics of the contract in relation to a different security is a A) hedge fund. B) contractual plan. C) derivative. D) Investment Company

C. Derivative

All of these are true regarding no-load shares except they A) are sold by the fund with no sales charges or fees of any kind. B) offer more return-per-dollar invested versus load funds if investing results are the same. C) have sales charges associated with sales and redemptions. D) are redeemed with no charges or fees of any kind.

C. Have sales charges associated with sales and redemptions * No load shares have expenses that are not considered sales charges. Some broker-dealers may charge fees for transactions, but these fees are not from the fund.

Which of the following are characteristics of an economic downturn? A) Decreasing defaults B) Increasing industrial production C) Higher consumer debt D) Decreasing inventories

C. Higher consumer debt

FINRA is the primary regulator in the United States for broker-dealers registered representatives bankers the SEC A) II and III B) I and III C) I and II D) I and IV

C. I and II

If an arbitration agreement has not been signed, under which two of the following circumstances would a dispute between a Financial Industry Regulatory Authority (FINRA) member firm and a retail customer go to arbitration? I. The dispute cannot otherwise be resolved to the satisfaction of both parties. II. The customer requests that the dispute go to arbitration. III. The amount under dispute is less than $50,000. IV. The FINRA director of arbitration so rules. A) III and IV B) I and III C) I and II D) II and IV

C. I and II

Under Rule 144, which of these sales are subject to volume limitations on the number of shares sold? I. Control person selling registered stock held for 1 year II. Control person selling restricted stock held for 2 years III. Nonaffiliate selling registered stock held for 1 month IV. Nonaffiliate selling restricted stock held for more than 6 months A) I and IV B) III and IV C) I and II D) II and III

C. I and II *Control persons are always subject to volume limitations.

Regarding limited partnerships, which of the following are true? A general partner can be held personally liable for business losses and debts. A limited partner can be held personally liable for business losses and debts. A general partner business decisions are legally binding on the partnership. A limited partner business decisions are legally binding on the partnership. A) II and IV B) I and IV C) II and III D) I and III

C. I and III *General partners have unlimited liability, meaning that they can be held personally liable for the partnership's losses and debts. In their role to manage the partnership they make decisions that are legally binding on the partnership.

Which of these reasons would allow for a municipality to issue revenue bonds easier instead of general obligation bonds? I. Revenue bonds do not require voter approval. II. Revenue bonds generally have a higher rating than GO bonds from the same issuer. III. Revenue bonds are not constrained by a statutory debt limit. IV. Revenue bonds are supported by ad valorem taxes. A) II and IV B) II and III C) I and III D) I and IV

C. I and III Revenue bonds are designed to be self-supporting from the revenue derived from the project funded by the bonds. No voter approval necessary. Ad valorem taxes aren't a thing.

Your customer, Ellesha, places a sell stop at 50 on DEZ stock while it is trading at $53 per share. After the order is elected, Ellesha may sell her shares at which of the following prices? I. $48 II. $49 III. $50 IV. $51 A) I, II, and III B) III and IV C) I, II, III, and IV D) I and II

C. I, II, III, IV

A buy stop order at 39 could fill at which of the following prices? I. 38 II. 39 III. 40 IV. 41 A) I and II B) II and III C) I, II, III, and IV D) III and IV

C. I, II, III, and IV

Which of the following are characteristics of a revocable living trust? I. It is established before the grantor dies. II. The grantor can change beneficiaries. III. The grantor can add or remove items from the trust. IV. The grantor is subject to tax on income that remains in the trust. A) I and II B) I only C) I, II, III, and IV D) I, II, and III

C. I, II, III, and IV

An investor has opened an individual brokerage account for use in a small business and has given a business partner a power of attorney (POA) over the account. Which of the following persons may have access to the account for trading purposes? I. The attorney who administers to the business's legal needs II. The investor's partner who was given the POA III. The investor who opened the account IV. A secretary at the business, but only in an emergency A) I and III B) I and IV C) II and III D) II and IV

C. II and III

An investor has opened an individual brokerage account for use in a small business and has given a business partner a power of attorney (POA) over the account. Which of the following persons may have access to the account for trading purposes? The attorney who administers to the business's legal needs The investor's partner who was given the POA The investor who opened the account A secretary at the business, but only in an emergency A) I and III B) I and IV C) II and III D) II and IV

C. II and III

The current quote for DEF stock is 49.50 bid—ask 49.75. If an investor wanted to buy or sell DEF stock, we can conclude which of the following? I. The best price anyone in the secondary market is willing to sell at is 49.50. II. The best price anyone in the secondary market is willing to sell at is 49.75. III. The best price anyone in the secondary market is willing to buy at is 49.50. IV. The best price anyone in the secondary market is willing to buy at is 49.75. A. I and III B. I and IV C. II and III D. II and IV

C. II and III

Which of these is correct regarding the ex-date for a common stock? I. It is set by the board of directors. II. It is set by FINRA or the exchange. III. It is the first date an investor can purchase a security and not be entitled to the dividend. IV. It is the date the seller reimburses the buyer for the amount of the dividend paid. A) I and IV B) II and IV C) II and III D) I and III

C. II and III

Which of these may be found in the final prospectus that is not in the preliminary prospectus? I. Next year's sales II. Public offer price III. Release date IV. Planned use of the proceeds A) I and IV B) I and II C) II and III D) II and IV

C. II and III

Which of these would not be included in a mutual fund's list of expenses? I. Shareholder records and service II. Investment adviser's fee III. Broker-dealer sales charges IV. Underwriter's sales loads A) I and II B) I and III C) III and IV D) II and IV

C. II and IV *Always need an Investment advisors and shareholder service records

A shelf registration A) is good for four years and requires a supplemental prospectus be filed before each sale. B) is good for three years and requires a prospectus to be filed only once. C) is good for two years and requires a supplemental prospectus be filed before each sale. D) is good for four years and requires a prospectus to be filed only once.

C. Is good for two years and requires a supplemental prospectus by filed before each sale

Which of the following best describes the size of a quote? A) It tells the number of shares that were traded in the OTC market the prior day. B) It tells the number of shares that were traded on the NYSE that day. C) It tells the number of shares the broker-dealer is willing to buy or sell at that price. D) It tells the number of shares the broker-dealer has in inventory.

C. It tells the number of shares the broker-dealer is willing to buy or sell at that price

Which of the following may purchase an IPO at POP? a. Jim, a registered representative for Seacoast Securities b. Jim's brother Robert, a contractor c. Jim's niece Amber, a chef d. Jim's father Roy, a retired engineer

C. Jim's niece Amber, a chef

Selling shares not yet borrowed or located to be borrowed is A) known as closing a position with a sale and is prohibited. B) known as a short sale and is prohibited. C) known as a naked short sale and is prohibited. D) known as closing a short sale with a purchase.

C. Known as a naked short sale and is prohibited

Class A shares are best for investors with A. larger investment amounts and short time frames. B. smaller investment amounts and long time frames. C. larger investment amounts and long time frames. D. smaller investment amounts and short time frames.

C. Larger investment amounts and long time frames * The one time cost and lower expense ratios make it a better for investors with larger investments and long time frames

New Haven Farms is a producer of specialty foods. They recently received a notice that the Wetlands Maintenance and Drainages Act (The WMD Act passed indicates that a significant portion of their current land used in food production falls under the act's protection and may no longer be used for agriculture. This is an example of a. business risk b. regulatory risk c. legislative risk d. political risk

C. Legislative risk *A change in the law was put into place

Which of the following has the most liquidity risk? A) Stocks listed on NASDAQ B) Treasury bonds C) Limited partnerships D) Listed REITs

C. Limited Partnerships *Limited partnerships are generally illiquid; the other options are actively traded securities. LO 6.d

A customer wishes to sell short 1,000 shares of ABC. Prior to executing the order, the registered representative must A) have the customer pledge personal collateral to cover the sale. B) receive permission from the customer to borrow shares. C) locate shares that can be lent to effect the sale. D) receive principal permission to execute the trade.

C. Locate shares that can be lent to effect the sale

A broker-dealer firm opening a corporate account must establish all of the following except A) the names of those who will have access to or authority over the account. B) the legal right of the corporation to open a brokerage account. C) location of any account records the corporation will keep when received. D) any limitations the corporation has placed on account activities.

C. Location of any account records the corporation will keep when received

A bank is likely to do which of the following when the Federal Reserve Board (FRB) eases the money supply? A) Raise its prime rate B) Lower the hypothecation loan rate C) Lower its prime rate D) Raise its broker call loan rate

C. Lower its prime rate

Where can demand deposits, checking accounts, paper currency and coins be found in the money supply? A) M1 and M3 only B) M2 only C) M1, M2, and M3 D) M1 only

C. M1, M2, and M3

Currency held by the public, including checking accounts and time deposits less than $100,000, and money market mutual funds would best be described by economists as A) M1. B) M4. C) M2. D) M3.

C. M2

For those who follow monetary theory, which is the most complete measure of the money supply? A) M1 + M2 B) M2 C) M3 D) M1

C. M3

The city of Los Angeles is issuing a 20 year GO bonds at 8%. MSRB rules regarding this underwriting may be enforced by all of the following regulators except a. FINRA b. SEC c. MSRB d. the comptroller of the company

C. MSRB *No enforcement in that division

A broker-dealer designated as a clearing firm would be expected to do all of the following except A) take custody of customer funds and securities. B) perform back-office functions such as sending trade confirmations to customers. C) maintain a lower net capital than noncarrying broker-dealers. D) clear transactions for customer accounts.

C. Maintain a lower net capital than noncarrrying broke-dealers

Your customer has carefully researched the purchase of a stock in Green Shoe Company. After the purchase, the equity markets dropped 20%, and Green Shoe stock dropped along with it. Green Shoe gave up 15% during the drop. This is an example of? A. business risk B. interest rate risk C. market risk D. nonsystematic risk

C. Market Risk

Under the dual mandate, the Federal Reserve is most concerned with achieving A) minimum unemployment and maximum money supply. B) federal spending and debt. C) maximum employment and controlling inflation. D) maximum employment and managing taxation.

C. Maximum employment and controlling inflation

Carrying firms may not A) send trade confirmations and statements to customers. B) execute transactions for their customers. C) mix customer funds and securities with their own. D) clear and settle transactions for their customers.

C. Mix customer funds and securities with their own

All of the following are exempt issuers except A) the Southwest Railroad Co. B) the City of Alta Loma. C) Modulux, Inc., a home manufacturer. D) Alta Loma Community Foundation.

C. Modulux, Inc., a home manufacturer

Match the following statement to the best expression: A well-controlled, moderately increasing money supply leads to price stability and a healthy economy. A) Keynesian Theory B) Socialism C) Monetarist Theory D) Balance of payments

C. Monetarist Theory

Match the following statement to the best expression: A well-controlled, moderately increasing money supply leads to price stability and a healthy economy. A) Socialism B) Balance of payments C) Monetarist Theory D) Keynesian Theory

C. Monetarist Theory

There are two distinctive types of policies implemented to shape and mold the U.S. economy. They are A) federal and municipal. B) supply and demand. C) monetary and fiscal. D) corporate and governmental.

C. Monetary and fiscal

All of the following are exempt from Regulation T except A) New York City bonds. B) GNMAs. C) NYSE-listed securities. D) T-bills.

C. NYSE-listed securities

Your customer, Mr. Garcia, lives in Scottsdale, Arizona. He owns general obligation bonds issued by the city of San Juan, Puerto Rico. The interest from the bonds will be taxed at A. the federal, but not the state, level. B. the state, but not federal, level. C. neither the state nor the federal Level. D. both the state and federal levels.

C. Neither the state nor the federal level *US Tax payers pay no income tax on interest paid by US territories and municipalities of those territories

Which of the following is a leading indicator? A) Corporate profits B) Gross domestic product C) New orders for consumer goods D) Wages

C. New orders for consumer goods

Under Regulation T, when must a corporate stock transaction be paid for in full in a cash account? A) No later than trade date plus 2 business days B) No later than the day of the trade if the trade is placed before 2:00 pm ET C) No later than regular ways settlement plus 2 business days D) No later than the next business day

C. No later than regular ways settlement plus 2 business days

Underwriters have been taking indications of interest for shares of an upcoming new issue. Indications of interest are A) binding on the underwriters only to make available the shares once the effective date is reached. B) binding on all parties. C) nonbinding on all parties. D) binding only on the parties who tendered the indications to purchase the shares once the effective date is reached.

C. Nonbinding on all parties

The risk that a stock will not appreciate in value due to poor cash flow is an example of A) systematic risk. B) market risk. C) nonsystematic risk. D) sales risk.

C. Nonsystematic risk

For tax purposes, investment income is A) never taxable at ordinary income tax rates. B) always taxed at the capital gains tax rate. C) normally taxed as ordinary income. D) always taxed at the highest ordinary income tax rate.

C. Normally taxed as ordinary income

In order to clear up confusing language and highlight a fund's features, a registered representative may A. highlight the financial results in the statutory prospectus. B. highlight the breakpoint chart in the summary prospectus. C. not change a prospectus in any way. D. provide a magazine article that explains the fund prior to taking an order to purchase.

C. Not change a prospectus in any way. *You can't change that! No fooling around clowns!

American Liquidators Corporation (Ticker LQDT) has 100 million outstanding common shares. The company would like to raise capital by selling 100 million new shares. In order to accomplish, this they would A. offer warrants to existing shareholders. B. suggest that existing shareholders go to the market and double their existing position. C. offer stock rights to existing shareholders. D. perform a stock split.

C. Offer stock rights to existing shareholders *Can maintain current percentage of ownership before giving to others and will raise capital

Which type of DPP would be most likely to enable the investor to claim a deduction for depletion? A) Equipment leasing B) Oil and gas exploratory program C) Oil and gas income program D) Real estate limited partnership

C. Oil and Gas Income Program *Depletion is a tax benefit to compensate the program for the decreasing supply of oil or gas after it is taken and sold.

If left unexecuted, a good til cancel (GTC) order will automatically be canceled when? A) On the last business day of June and the last business day of December B) On the first business day of April and the first business day of October C) On the last business day of April and the last business day of October D) On the cancel date specified by the customer at the time the order is entered

C. On the last business day of April and the last business day of October

Corporate accounts may trade on margin A) always. B) only if it is specifically listed as being permitted to do so in the corporate charter. C) only if it is not listed as being restricted from doing so in the corporate charter. D) never.

C. Only if it is not listed as being restricted from doing so in the corporate chapter

How an account is registered determines A) the sole individual allowed to access the account. B) control of the investments in the account only. C) ownership and control of the investments in the account. D) ownership of the account only.

C. Ownership and control of the investments in the account

Which of these statements regarding a general partnership is correct? A) Partners participate in the gains but not the losses of the business and are fully shielded from the businesses liabilities. B) Partners participate in the gains and losses of the business and are partially shielded from the businesses liabilities. C) Partners participate in the gains and losses of the business and are fully liable for the businesses actions. D) Partners participate in the gains and losses of the business and are fully shielded from the businesses liabilities.

C. Partners participate in the gains and losses of the business and are fully liable for the businesses actions. *Results of business flow to partners and there is no liability protection in this kind of organization

Interest from a zero-coupon bond A. pays monthly and is taxed annually. B. pays annually and is taxed at maturity. C. pays at maturity and is taxed annually. D. pays and is taxed at maturity.

C. Pays at maturity and is taxed annually *Pays no interest until maturity and taxed annually and is known as a "Phantom Income"

A customer is long 400 shares of BuyStuff Inc., a big-box retailer. He borrows 400 shares to sell while maintaining his long position. This sale is called A) an effective tax strategy. B) short against the long. C) short against the box. D) a closing transaction.

C. Short against the box

Which of the following common stock characteristics would not be considered a benefit for common stock shareholders? A) The opportunity to collect income from the distribution of corporate profits B) Limited access to the corporations books and records C) Priority of claims against a company should it dissolve or be forced to liquidate assets D) Liability to the extent of one's entire investment in the case of corporate failure

C. Priority of claims against a company should it dissolve or be forced to liquidate assets.

Which of the following best describes the calculation for gains or losses for tax purposes? A) Proceeds plus dividends, minus cost basis B) Proceeds minus dividend, plus cost basis C) Proceeds minus cost basis D) Proceeds plus cost basis

C. Proceeds minus cost basis

All of the following are components of ordinary income except A. A bonus from their employer B. Interest Payments from a bond portfolio C. Profit made from the sale of a long-held security D. Consultation fees received from a client

C. Profit made from the sale of a long held security

All of the following are nonsystematic risks except A) capital risk. B) business risk. C) purchasing power risk. D) call risk.

C. Purchasing Power Risk

When The interest rate paid on a debt security is less than the current inflation rate, the current inflation rate, the investor suffers from which of the following risks? A. Liquidity Risk B. Call Risk C. Purchasing Power Risk D. Market Risk

C. Purchasing Power Risk

An investor owns a bond purchased several years ago yielding 3%, which at the time was considered a fair return. However, these fixed 3% interest payments have not kept up with the inflation rate. This situation presents the investor with A) financial risk. B) currency risk. C) purchasing power risk. D) liquidity risk.

C. Purchasing Risk

A stock power may be used to A. authorize discretionary trading. B. place an unsolicited trade. C. replace the owner's signature on the back of a certificate. D. pay for a trade.

C. Replace the owner's signature on the back of a certificate

All of the following are benefits of using a prime broker except A) consolidation of records. B) cost savings. C) research. D) multiple executing brokers.

C. Research

All of the following are types of direct participation programs (DPPS) except A) oil and gas. B) leasing. C) retail distribution. D) real estate.

C. Retail Distribution *Oil and Gas, Leasing, and Real Estate are the 3 categories under a DPP

The primary risk associated with ETNs is A) reinvestment risk. B) call risk. C) risk of default. D) business risk.

C. Risk of Default

Which of the following is a benchmark for small cap stocks? A) Dow Jones Industrial Average B) Standard and Poor's 500 Index C) Russell 2000® Index D) Wilshire 5000

C. Russell 2000 Index

Which of the following companies was created by an act of Congress and provides securities investors limited financial coverage in the event that the investor's servicing broker-dealer fails financially? A) Securities Information Center (SIC) B) Federal Deposit Insurance Corporation (FDIC) C) Securities Investor Protection Corporation (SIPC) D) The Office of Foreign Assets Control (OFAC)

C. Securities Investor Protection Corporation (SPIC)

Carrying firms, those that carry customer accounts, must A) commingle customer funds and securities with the firms' funds and securities. B) not disclose its net capital if it is higher than noncarrying firms. C) segregate customer funds and securities from the firms' funds and securities. D) maintain levels of net capital equal to or lower than noncarrying firms.

C. Segregate customer funds and securities from the firms' funds and securities

A customer is given a quote for ABC as: 17.00 - 17.25 6 × 12. This quote indicates the customer can A) purchase 1,200 shares for $17 per share. B) purchase 1,800 shares at $17.25 per year. C) sell 600 shares for $17 per share. D) sell 1,200 shares at $17.25 per share.

C. Sell 600 shares for $17.00 per share

When the Federal Reserve Board (FRB) wants to contract (tighten) the money supply, it will A) sell corporate securities to banks in the open market. B) buy corporate securities from banks in the open market. C) sell Treasury securities to banks in the open market. D) buy Treasury securities from banks in the open market.

C. Sell Treasury securities to banks in the open market

The market for Dizzy Rides Inc., is at $52 per share. Your customer would like to sell his shares for $55, and believes the stock will climb to that level in the next two to three weeks. What order should he place? A) Sell limit 55 B) Sell limit 55 AON (All or Nothing) C) Sell limit 55 GTC (Good til' Canceled) D) Sell limit 55 FOK (Fill or Kill)

C. Sell limit 55 GTC (Good till Canceled)

To contract the overall economy, the Federal Reserve Board (FRB), acting as agent for the U.S. Treasury department, will A) buy securities via open-market operations, pushing interest rates down. B) sell securities via open-market operations, pushing interest rates down. C) sell securities via open-market operations, pushing interest rates up. D) buy securities via open-market operations, pushing interest rates up.

C. Sell securities on the open-market operations, pushing interest rates up

Which of the following is true regarding short sales? A) Selling shares not yet owned is prohibited. B) Selling short means selling less shares than were purchased. C) Selling short involves selling shares not yet owned. D) Selling short involves purchasing the shares first.

C. Selling short involves selling shares not yet owned

All of these are debt-security-maturity schedules except A) serial. B) term. C) series. D) balloon.

C. Series *Term, Serial, and Balloon are all debt maturity schedules

Which of the following puts positions has unlimited risk? A. Short 5 BCC puts B. Long 500 BCC and short 5 BCC calls C. Short 500 BCC and short 5 BCC puts D. Short 500 BCC and long 5 BCC calls

C. Short 500 BCC and short BCC puts * No matter long or short, a put never has unlimited risk. However; shorting both positions doesn't cover the other, so it provides the most risk in this scenario.

An industry whose products stay in high demand, and whose companies grow, without regard to the business cycle are called A) cycling industries. B) defense industries. C) emerging industries. D) growth industries.

D. Growth industries

A customer of a BD is opening up a new options account. The customer must return the options agreement. a. Sign before the account can be approved b. before the first transaction can occur. c. signed and not later than 15 days after the account approval. d. before he will be allowed to view the options disclosure document

C. Signed and not later than 15 days after account approval. * That is the time frame for it. Disclosure is given beforehand

A registered representative suggests a trade to a customer which the customer agrees is suitable given their investment objectives. The order is entered. This transaction is A) solicited but the order ticket need not be marked in any special way. B) unsolicited and the order ticket should be marked unsolicited. C) solicited and the order ticket must be marked solicited. D) neither solicited or unsolicited and the order ticket should be marked as neither.

C. Solicited and the order ticket must be marked

An economic environment with little or no economic growth, but where inflation is present, is best described as a. deflation b. depression c. stagflation d. stagnation

C. Stagflation

A document that substitutes for the owners signatures on the back of a stock or bond certificate is called a A) signature substitution letter. B) certificate power. C) stock or bond power. D) security substitution letter.

C. Stock or bond power

Sovereign risk is the risk A) that interest rates decline in several countries simultaneously. B) of losing all one's investment due to a change in tax laws. C) that a country will default on its commercial debt obligations. D) that a dollar earned today will not be able to purchase the same goods or services it can now in the future.

C. That a country will default on its commercial debt obligations

The monetarist theory proposes which of the following? A) The Federal Reserve has a major impact on the economy by raising and lowering taxes. B) The federal government can impact the economy by raising and lowering the federal funds rate. C) The Federal Reserve may impact the economy by raising and lowering the discount rate. D) The federal government impacts the economy through repurchase and reverse repurchase agreements.

C. The Federal Reserve may impact the economy by raising and lowering the discount rate.

Which of the following entities considers appeals of decisions made in department of enforcement (DOE) actions? A) Federal Bureau of Investigation (FBI) B) Federal Reserve Board (FRB) C) The National Adjudicatory Council (NAC) D) Municipal Securities Regulatory Board (MSRB)

C. The National Adjudicatory Council (NAC)

Which of the following is true for exchange-traded funds (ETFs)? A) The SEC has classified them as a type of open-end fund, and they have operating costs and expenses that are higher than most mutual funds. B) The SEC has classified them as mutual funds, and they have operating costs and expenses that are higher than most mutual funds. C) The Securities and Exchange Commission (SEC) has classified them as a type of open-end fund, and they have operating costs and expenses that are lower than most mutual funds. D) The SEC has classified them as mutual funds, and they have operating costs and expenses that are lower than most mutual funds.

C. The SEC has classified them as an open-end fund, and they have operating costs and expenses that are lower than most mutual funds. *They don't have to purchase and sell holdings within the portfolio to accommodate investors purchasing shares or redeeming shares within the mutual fund

The Federal Reserve Board was established by a. The Securities Act of 1933 b. The Uniform Securities Act c. The Federal Reserve Act of 1913 d. The Trust Indenture Act

C. The Securities Act of 1933

Which of the following acts created the SEC? A) The Securities Act of 1933 B) The Securities Investor Protection Act of 1970 C) The Securities Exchange Act of 1934 D) The Securities Market Improvement Act of 1975

C. The Securities Exchange Act of 1934

Broker-dealers who transact securities business with other broker-dealers or customers must be registered with A) the Options Clearing Corporation (OCC). B) the Financial Industry Regulatory Authority (FINRA). C) the Securities and Exchange Commission (SEC). D) the Federal Reserve Board (FRB).

C. The Securities and Exchange Commission

A party wishing to solicit proxy authority to vote a particular stockholder's shares must register with A) the regional exchange where the stock is traded. B) the Financial Industry Regulatory Authority (FINRA). C) the Securities and Exchange Commission (SEC). D) the New York Stock Exchange (NYSE).

C. The Securities and Exchange Commission (SEC)

A market in which exchange-listed securities are traded in the over-the-counter (OTC) market would best be described as A) the Fourth Market. B) the Second Market. C) the Third Market. D) the First Market.

C. The Third Market

A registered representative has a customer buying securities, but rather than paying in full, the customer wants to borrow some of the money needed for the purchase from the broker-dealer. It is explained to the customer that in order to borrow the money, there will be interest payable based on A) the prime rate. B) the discount rate. C) the broker call loan rate. D) the federal funds rate.

C. The broker call loan rate

Seacoast Securities is a syndicate member for the initial public offering of WeariTech, Inc., WeariTech is a hot new issue in the wearable technology space. The S-1 registration statement has been filed but the effective date has not yet been released. This is A) the mandated waiting period. B) the posteffective period. C) the cooling-off period. D) the pre-filing period.

C. The cooling-off period

With a discretionary account A) a full power of attorney is needed on file to grant discretion. B) the customer may refuse any trades done by the party given the discretion. C) the customer may still enter orders. D) churning is permitted by the party given the discretion.

C. The customer may still enter orders

A shareholders' meeting for ABC Corporation will take place in eight days. A customer whose stock is being held in street name has not returned the proxy statements. Which of the following is true? A) The member firm must ascertain how the investor wishes to vote the shares. B) The member firm votes the shares as recommended by the issuer's management. C) The member firm may vote the shares as it wishes on minor matters. D) The member firm may not vote the shares under any circumstances.

C. The member firm may vote the shares as it wishes on minor matters

Which of the following best describes how a buy stop at 39 would fill? A) The next price above 39 after the market price rises to 39 B) The next price below 39 after the market price falls to 39 C) The next available price after the market price rises to 39 D) The next available price after the market price falls to 39

C. The next available price after the market rises to 39

In an LP, which of the following is true? A) Only losses but not gains flow through to the individual partners. B) Any gains realized from a limited partnership are tax exempt. C) The partnership entity is not responsible for paying taxes on gains. D) The partners are not responsible for paying taxes on gains.

C. The partnership entity is not responsible for paying taxes on gains *Both gains and losses flow through to the individual partners, meaning they are on their personal tax returns and not the partnership entity.

The investment return of a variable annuity comes from A) computing the excess of the premiums received over the mortality experience. B) the insurance company's general account. C) the performance of the selected subaccounts within a separate account. D) the assumed rate stated in the policy documents.

C. The performance of the selected subaccounts within a separate account. * Variable annuities are always at the dispense selected subaccounts

During the cooling-off period the disclosure document that may be delivered to interested parties is called the A) final prospectus. B) cool off period prospectus. C) preliminary prospectus. D) summary prospectus.

C. The preliminary prospectus

Secondary market transactions would include all of the following except A) sale of $10 million of U.S. Treasury bonds by a broker-dealer acting as a market maker. B) sale of $10 million of corporate stock by a broker-dealer acting as a market maker. C) sale of $10 million of corporate bond by a broker-dealer acting as an underwriter. D) sale of $10 million of municipal bonds by a broker-dealer acting as a market maker.

C. The sale of $10 million of corporate bond by a broker-dealer acting as an underwriter

All of the following are true of REITs except A) listed REITS are liquid investments. B) they can be registered under subchapter M. C) they are registered as investment companies. D) they can pass through gains but not losses.

C. They are registered as investment companies *REIT's have similarities but because of Investment Company Act of 1940 they aren't

Your client holds ADRs of Daikon Motors, Inc., an automobile manufacturer based in Asia. All of the following are true about the position except A. they will receive dividends in U.S. dollars. B. the security may be traded in U.S. markets. C. they have the same voting rights as an owner of the common stock. D. they have the right to request the underlying common shares be issued to them directly.

C. They have the same voting rights as an owner of the common stock * Voting proxies aren't required by by the depository banks

All of the following are true regarding market indexes except A) they can be used to compare against the performance of one's portfolio. B) they can demonstrate the overall direction of the market. C) they track single stocks rather than hypothetical portfolios. D) they are performance standards investors can monitor.

C. They track single stocks rather than hypothetical portfolios

All of the following are considered securities except A) common stock of XYZ corporation. B) Treasury bonds. C) U.S. minted gold coins. D) 15 British pound put contracts.

C. U.S. minted Gold Coins *Commodity

Which of the following sets of FINRA rules focuses on broker-dealers doing business with other broker-dealers? A) Conduct Rules B) Code of Procedures C) Uniform Practice Code D) Code of Arbitration

C. Uniform practice code

All of the following are benefits for the limited partners in a direct participation program (DPP) except a. passive losses b. flow-through income c. unlimited liability d. an investment managed by the general partner (GP)

C. Unlimited Liability

Potential risks of owning common stock include all of the following except A) low priority in liquidation. B) business risk. C) unlimited liability. D) market risk.

C. Unlimited liability

Potential risks of owning common stock include all of the following except A) market risk. B) low priority in liquidation. C) unlimited liability. D) business risk.

C. Unlimited liability

The primary use for a revocable living trust is to A) avoid tax consequences for the grantor. B) limit the grantor access to items in the estate. C) use as a substitute for a will. D) prevent the grantor from liquidating his estate prior to death.

C. Use as a substitute will

Fiscal policy seeks to encourage or discourage economic activity through the A) use of government spending and interest rate controls. B) management of money supply and government spending. C) use of government spending and taxation. D) management of money supply and taxation.

C. Use of government spending and taxation

The business cycle includes all of the following classifications except A) trough. B) peak. C) waves. D) expansion.

C. Waves

Ron buys 522 shares of Narcissus Inc., common stock in a cash account on Monday, March 19. He deposits cash in the account sufficient to cover the trade on March 20. How soon would he be able to withdraw those shares? A) Friday, March 23 B) Tuesday, March 20 C) Wednesday, March 21 D) Thursday, March 22

C. Wednesday, March 21

Your customer has purchased $10,000 in U. S. Treasury bonds. These securities A) cannot be delivered in physical certificates because they exceed the amount for paper certificate delivery. B) can be transferred in either physical or book-entry form in accordance with the purchasers request. C) will have evidence of ownership recorded in book-entry form. D) are required to be delivered in the form of physical paper certificates.

C. Will have evidence of ownership recorded in book-entry form

Under the Investment Company act of 1940 all of the following are examples of management companies except a. S&P 500 Index Trust Fund b. growth fund option for a VA C. Windmill Income UIT D. Windmill Income Fund, an exchange-listed closed-end fund

C. Windmill Income UIT * Other funds are not management companies

Three brothers open a joint account instructing you that if they die, they want the cash and securities in the account to go to the remaining parties to the account. The account should be opened A) as a tenants in common (TIC) account. B) as a custodial account. C) with rights of survivorship. D) as a transfer on death (TOD) account.

C. With rights of survivorship

Who benefits most from a defined contribution plan? A) All benefit the same B) Older employees C) Younger employees D) Employees with fewer years left to work

C. Younger employees

Modulux, Inc., a NYSE listed manufacturer, is offering 5,000,000 shares to the public, which will raise capital to build a new plant. The new technology and design should allow Modulux to increase market share significantly in the modular home business. This offer is A) an IPO. B) a venture offering. C) an APO. D) a secondary offering.

C. and APO

Under the intrastate offering rule (Rule 147), when may a resident purchaser of securities resell them to a nonresident? a. three months after the first sale made in that state b. six months after the last sale made in that state c. at least six months after the date of purchase d. none of these

C. at least six months after the date of purchase

A broker-dealer has a line of business restricted solely to the purchase and sale of securities with trade executions being handled by another member firm. Which of the following would best describe this type of firm? A) Market making B) Clearing/carrying C) Introducing/fully disclosed D) Prime/executing

C. introducing/ fully disclosed

A fully disclosed broker-dealer A) clears all of its retail customer transactions and those of other broker-dealers. B) is also known as a full-service clearing agent able to process and clear transactions. C) is one that introduces its business to a carrying firm to clear transactions. D) is like a clearing agent in that it can take custody of funds and securities.

C. is one that introduces its business to a carrying firm to clear transactions

Carrying firms may not A) send trade confirmations and statements to customers. B) clear and settle transactions for their customers. C) mix customer funds and securities with their own. D) execute transactions for their customers.

C. mix customer funds and securities with their own

The SEC regulates the trading of all of the following except A. the New York Stock Exchange B. the Chicago Board of Options Exchange C. the London Stock Exchange D. the U.S. Over the Counter market

C. the London Stock Exchange

Registered representative Thomas Jones has been found by a DOE hearing to have violate the Code of Procedure. He believes that the hearing panel did not have all the facts and wants to appeal the ruling. His appeal goes to a. the SEC b. the DOE c. the NAC d. the arbitration panel

C. the NAC

Your client is considering the Newport Land and Farming REIT and notes in the description that it is "listed." What does that mean in this context? a. The REIT is registered and likely trades on the OTC b. the REIT is registered and trades only in the primary market c. The REIT is registered and likely trades on the exchange d. the REIT is unregistered and is likely trading OTC bulletin board

C. the REIT is registered and likely trades on the exchange

Considered the most volatile of the benchmark interest rates in the economy would be A) the discount rate. B) the prime rate. C) the broker call loan rate. D) the federal funds rate.

D. The Federal funds rate

A stock trade took place on Tuesday, July 2. When would regular way settlement normally take place? A) Monday, July 8 B) Tuesday, July 2 C) Wednesday, July 3 D) Friday, July 5

D. Friday, July 5

A customer of a broker-dealer has a cash balance in an account of $175,000 and securities holdings of $125,000. The customer asks about SIPC coverage, and you explain that the current coverage is A) $100,000 securities and $100,000 cash for total coverage of $200,000. B) the cash balance only, up to $250,000. C) all of the securities and none of the cash for total coverage of $125,000. D) $175,000 cash and $125,000 securities for total coverage of $300,000.

D. $175,000 cash and $125,000 securities for total coverage of $300,000

A new customer opens a margin account and, upon account approval, does an initial transaction purchasing 100 shares of MJS common stock at $25. How much will the customer need to deposit? A) $5,000 B) $2,500 C) $1,000 D) $2,000

D. $2,000 *Rule Transaction > than 4,000 deposit 50% - between 2,000 & 4,000 deposit $2,000. and if the transaction is less than $2,000, deposit 100% of purchase price

Your customer calls with a question. The customer tells you that they received a phone call from the bond desk telling the customer that a trade to purchase 20 bonds at 100 has been executed for the customer's account. The customer would like to know how much they paid for the bonds before any commission or other charges. The answer to the customer's question is A. $2,000 B. $200,000 C. $1,000 D. $20,000

D. $20,000 * 20 bonds at 100 mean they paid $100% of par $1,000 per bond. 20 X 1000 = 20,000

Your customer calls you with a question. They tell you that they received a phone call from the bond desk telling them that they bought 20 bonds at 100. They want to know how much they paid for the bonds before any commission or other charges. You tell them A) $2,000. B) $1,000. C) $200,000. D) $20,000.

D. $20,000 *100 means they paid 100% of par (1,000) per bond. 20 x 1000 = 20,000 *Question asks how much they paid for the bonds, not the price of the bonds.

A customer enters the following order: Sell 1,000 shares of XYZ at 23. Which of the following executions would the customer accept? A) 22.90 B) 22.50 C) 21.25 D) 23.50

D. $23.50

Ms. Johansen purchased 100 shares of Natasha Publishing two years ago for $40 a share. The stock has risen to $62 a share. She is concerned that the recent death of the founder and CEO may negatively impact the stock. As a hedge she buys a 60 put on the stock for $2. Her breakeven price on this position is A. $64/share. B. $62/share. C. $58/share. D. $42/share.

D. $42/share *Formula for long stock plus long put position is the cost of the stock plus the cost of the option on share per share basis.

Your customer, Mr. Newsome, recently purchased one put contract on Napa Valley Spirits, Inc., stock. The strike price is $50 and the premium was $4.50. He later executed the contract. How much did he pay for the contract? A. $5,000 B. $500 C. $4,550 D. $450

D. $450

Darrell has an individual account at Seacoast Securities, Inc., an SIPC firm that holds $300,000 in cash; $100,000 in various stock; and $100,000 in the Seacoast Money Market Fund. If Seacoast Securities fails how much coverage does Darrell have? A) $350,000 B) $100,000 C) $250,000 D) $450,000

D. $450,000 *A money market fund is a type of security

Cooper and Belle, spouses, have a checking account at Gloria City National Bank. The balance is $450,000. What is their protection from FDIC if Gloria City Bank fails? A) There is no protection as FDIC only covers savings accounts B) $250,000—the total maximum coverage per account C) $450,000—$250,000 for Cooper and $200,000 for Belle D) $450,000—split evenly between the two people

D. $450,000 split evenly between the two people

A mutual fund has been in existence for 15 years. The prospectus must disclose the fund's performance A) for each year over the last 10 years. B) over the last 1, 5, 10, 15, 20, and 25 years. C) broken out as an average over the last 10 years. D) over the last 1, 5, and 10 years.

D. 1, 5, and 10 years *The prospectus of a mutual fund must show the fund's performance over the last 10 years. With this fund, the 15-year performance need not be shown

A basis point is valued at A) 1% of face value or $10. B) 1/1000th of 1%. C) 1% of market value. D) 1/100th of 1%.

D. 1/100th of 1%

On March 3, the board of directors of Seabird Airlines declares a $0.20 a share dividend payable to holders of record, as of March 30. Seabird stock jumps on the news from $35 a share to $40 a share on the news. The current yield of Seabird stock is A) 0.50%. B) 5.00%. C) 2.25%. D) 2.00%.

D. 2.00%

Cypress Care Nurseries, Inc., owns and operates a chain of nurseries and is headquartered in Cypress, California. The company is considering selling shares of the company to the public in California. In order to be exempt from registration with the SEC, under Rule 147 it would need to meet several criteria. Which of these is not a listed criterion under Rule 147? A) 80% of the issuer's assets are located in the state of California. B) 80% of the issuer's proceeds will be used in the state of California. C) 80% of the issuer's revenue must be generated from the state of California. D) 80% of the issuer's customers must be located in the state of California.

D. 80% of the issuer's customers must be located in the state of California

A letter of intent may be backdated to include a prior purchase up to A) 13 months. B) 6 months. C) indefinitely. D) 90 days.

D. 90 Days *The obligation under the LOI must be met within 13 months from the date of the letter

A mutual fund's public offering price is $10.50. An investor who wishes to invest $1,000 in the fund will purchase how many shares? a. 95 shares with $2.50 left b. 96 and owe $8.00 c. partial shares not allowed d. 95.238

D. 95.238 *Mutual funds can be purchased in even dollar amounts and partial shares are allowed.

A mutual fund's public offering price is $10.50. An investor who wishes to invest $1,000.00 in the fund is able to purchase A) 96 and owe $8.00. B) Partial shares are not allowed. C) 95 shares with $2.50 left. D) 95.238 shares.

D. 95.238 shares * Able to purchase in dollar and partial shares can be issued

Your customer has performed the following trades Bought 200 shares of ABC at $40 Bought 400 shares of ABC at 50 Sold 600 shares of ABC at 55 What is the result of these trades? A) A $6,000 loss B) A $6,000 gain C) A $5,000 loss D) A $5,000 gain

D. A $5,000 gain

The country's annual economic output of all of the goods and services produced within the nation, is known as A) balance of payments. B) expansion. C) indicators. D) gross domestic product.

D. Gross Domestic Product

Which of the following is a money market security? A) A TAN maturing in 14 months B) A newly issued T-note C) A short-term T-bond mutual fund D) A 30-year T-bond issued by the Treasury 29 years ago

D. A 30-ear T-bond issued by the Treasury 29 years ago *A money market security is a high quality and highly liquid security with one year or less to maturity. Both T notes and T Bonds with less than a year matuirty are Money Markets

A broker-dealer that accepts the risk of holding a particular security in its account to facilitate trading and provide liquidity in that security is best described as A) a clearing corporation. B) a holding company. C) a direct participation program. D) a market maker.

D. A Market Maker *Risky decision making and must demonstrate to FINRA that their firm can manage operational and financial risk

Your customer retired two years ago at age 70. He recently took a job with a retailer greeting customers. He would like to contribute to a retirement plan to accumulate additional money with the view to leave something to his grandchildren. You would most likely advise him to open A) an annuity. B) a mutual fund. C) a traditional IRA. D) a Roth IRA.

D. A Roth IRA

Which of the following would be a secondary market transaction? A) A broker-dealer arranges for a customer to purchase an IPO B) A broker-dealer arranges for a customer to purchase mutual fund shares C) A broker-dealer arranges for a customer to purchase an APO D) A broker-dealer arranges for a customer's order to be executed on the NYSE

D. A broker-dealer arranges for a customer's order to be executed on the NYSE

A customer enters a market order. This type of order can be A) a buy order only to be executed at the next available price. B) a sell order only to be executed at a specified price. C) a buy or sell order to be executed at a specified limit. D) a buy or sell order to be executed at the next available price.

D. A buy or sell order to be executed at the next available price

An institution or a person responsible for making all investment, management, and distribution decisions in an account maintained in the best interests of another is known as A) a unit investment trust. B) a fully disclosed firm. C) an investment company. D) a custodian.

D. A custodian

Andrea recently began working for the Seabird Coffee Company as a barista. She tells you that her company has two retirement plans she can participate in. In one plan, she contributes a portion of her salary into an account where she can choose from a set of investments. The contributions reduce her taxable income. The money grows and when she retires, or leaves the company, she can take the balance. In the other program, she does not contribute to the plan; the company pays into the plan and invests the money. When she retires, and if she qualifies, she will receive a retirement income for life from the plan based on her working income. You explain that Seabird Coffee has A) a defined benefit and a nonqualified-deferred compensation plan. B) two different defined contribution plans. C) two different defined benefit plans. D) a defined contribution and a defined benefit plan.

D. A defined contribution a defined benefit plan

A 6% corporate bond trading on a 7% basis is trading A) with a coupon rate below 6%. B) with a current yield above 7%. C) a premium. D) a discount.

D. A discount. *The teerm a "7% basis" means that YTM is 7% and when YTM is higher than the coupon rate, the bond trades at discount.

A person who is vested with legal rights and powers to be exercised for the benefit of another is known as A) a broker. B) a sponsor. C) a dealer. D) a fiduciary.

D. A fiduciary

A broker-dealer that concentrated its business efforts on proprietary trading would most likely be functioning as A) an investment banker. B) an investment adviser. C) an underwriter. D) a market maker.

D. A market maker

Lando Entertainment, Inc., issues a bond collateralized by a trust holding the company's Las Vegas headquarters. This type of bond is called A. a collateral trust bond. B. a guaranteed bond. C. a headquarters debenture. D. a mortgage bond.

D. A mortgage bond * Secured by real estate; thus mortgage bond

An institutional customer, such as a hedge fund, utilizes the services of a broker-dealer who provides custody of securities, as well as other back-office functions, while allowing the customer to establish relationships with other broker-dealers for the purpose of executing orders. This account would be known as a A) fully-disclosed account. B) clearing account. C) self-clearing account. D) prime account.

D. A prime account

An institutional investor selects a single Financial Industry Regulatory Authority (FINRA)/NYSE member firm to provide for financing and custody of securities while orders to buy or sell are placed with executing brokers. This is an example of A) an investment advisory account. B) a managed account. C) an omnibus clearing arrangement. D) a prime brokerage account.

D. A prime brokerage account *A customer (an institution) selects one member to provide custody and financing of securities and executes trades with other firms known as executing brokers

If a shareholder does not wish to attend an annual stockholders' meeting, but still wishes to vote, the shareholder may confer a limited power of attorney on another party to vote the shares. This power is known as A) a stand-in. B) a substitute. C) a voting power. D) a proxy.

D. A proxy

An investor with no existing positions in MMS stock sells 100 shares. This is A) a short bullish position. B) a long bearish position. C) a long bullish position. D) a short bearish position.

D. A short bearish position

The new Lumber Company's common stock is currently trading at $32 in the market. Hew is preparing to sell additional shares to raise money for a new mill. This is an example of a. a secondary offering b. a hybrid offering c. an initial public offering d. a subsequent primary offering

D. A subsequent primary offering

An institution or a person responsible for making all investment, management, and distribution decisions in an account maintained in the best interests of another who has been legally appointed to provide these services is best described as A) a market maker. B) a prime broker. C) an investment advisor. D) a trustee.

D. A trustee

Tax-advantaged savings accounts for individuals with disabilities and their families are A) Uniform Gift to Minors Act (UGMA). B) Uniform Transfers to Minors Act (UTMA). C) margin accounts. D) ABLE accounts.

D. ABLE Account

Hedge funds attempt to A) achieve modest returns and are, therefore, associated with being low-risk investments. B) mitigate all risk using hedging as an investment strategy. C) mitigate all risks making them suitable for most investors. D) achieve high returns and are, therefore, associated with high-risk investments.

D. Achieve high returns and are, therefore, associated with high-risk investments

A CMO consists of A) various government backed mortgages. B) bonds and money market instruments. C) different sorts of nonmortgage debt. D) an FNMA, FHLMC, and other mortgage backed securities.

D. An FNMA, FHLMC, and other mortgage backed securities * A collateralized mortgage obligation is made up of different mortgage backed securities, not mortgages directly.

Which of these business structures would pass through the results of the business to the owners and protect the owners from the liabilities of the company? A) A General partnership B) A Sole proprietorship C) A C Corporation D) An LLC

D. An LLC

A central, physical, marketplace where securities are traded through a designated market maker is A) the third market. B) the OTC. C) the pit. D) an exchange.

D. An exchange

Notice of corporate actions is required by the Securities and Exchange Commission (SEC) to be given for all of the following actions except A) a rights offering. B) a forward 10:1 stock split. C) a reverse uneven 4:5 stock split. D) an interest payment on a bond.

D. An interest payment on a bond

Anyone who, as part of their business, gives investment advice for compensation must register as A) an agent for the issuer. B) an underwriter. C) a stock broker. D) an investment adviser under the Investment Advisers Act of 1940.

D. An investment adviser under the Investment Advisers Act of 1940.0

Under the Uniform Transfers to Minors Act (UTMA), a custodian may invest in all of the following except A) U.S. Treasury notes with less than one year to maturity. B) mutual funds in growth shares. C) non-investment grade (junk) bonds. D) blue-chip stocks on margin.

D. Blue-chip stocks on margin

All of these are part of the expense ratio of a mutual fund except A) a 12b-1 fee. B) management fees. C) legal and accounting costs. D) CDSC.

D. CDSC *The contingent deferred sales charge (CDSC) is charged against the proceeds of the sale of the fund's shares, not against the fund's assets.

Margin calls can be met with deposits of A) fully paid for marginable securities only. B) either marginable or non-marginable securities. C) cash only. D) cash or fully paid for marginable securities.

D. Cash or fully paid for marginable securities

All the following are coincident indicators except A) personal income. B) trade sales. C) retail employment. D) changes in durable goods inventories.

D. Changes in durable goods inventories

Which of these would most likely require shareholder approval? A) Hiring a new CFO B) Declaring a dividend C) Firing the CEO D) Changing the corporation's name

D. Changing a corporations name

Which of the following would most likely require shareholder approval? A. Declaring a dividend B. Firing the CEO C. Hiring the CEO D. Changing the Corporations name

D. Changing the corporations name *Other problems are solved by the BOD

All of the following would most likely be found in a money market fund's portfolio except a. T-bills b. T bonds with less than one year to maturity c. negotiable CD's d. Common stock

D. Common Stock

Shares to sell short have been located in order to be borrowed. Once sold short, these shares will be known as A) closed. B) naked. C) uncovered. D) covered.

D. Covered

Which of the following is a unique risk incurred by investors in mutual funds that specialize in holding securities in the fund portfolio from foreign issuers? A) Call risk B) Liquidity risk C) Business risk D) Currency risk

D. Currency Risk

Which of the following points to a general decline in prices occurring during severe recessions and the unemployment rate is rising. A) Contraction B) Stagnation C) Stagflation D) Deflation

D. Deflation

Which of the following does not have regulatory jurisdiction over the structure or sale of 529 plans? A. SEC B. IRS C. MSRB D. Department of Education

D. Department of Education *The DofEducation does define what is or not a school, but that's as far as the 529 Plan goes.

Economists refer to longer, more severe contractions in the economy as A) declines. B) recessions. C) depletions. D) depressions.

D. Depressions

All of the following are true of Roth IRAs except A) contributions are not deductible. B) distributions are not required after reaching 72. C) anyone with earned income under a certain limit may contribute. D) distributions are required after reaching 72.

D. Distributions are required after reaching 72

A strategy that blends various types of investment in an effort to reduce nonsystematic risk is called A) capital preservation. B) dollar cost averaging. C) sector rotation. D) diversification.

D. Diversification

All of these are leading economic indicators except A) manufacturer's new orders. B) building permits. C) the stock market as measured by the S&P 500. D) duration of unemployment.

D. Duration of Unemployment

A prospectus must be delivered to customers following a transaction in all of the following except A) follow-on offering of common stock by a public reporting company. B) mutual funds. C) unit investment trust. D) ETFs.

D. EFT's *EFT's make a final and summary prospectus available on a website

Which of the following is the largest self-regulating organization (SRO)? A) SEC B) CBOE C) MSRB D) FINRA

D. FINRA

Which of the following organizations engaging in open-market operations acts as agent for the U.S. Treasury Department? A) Securities and Exchange Commission (SEC) B) U.S. Congress C) Securities Investors Protection Corporation (SIPC) D) Federal Reserve Board (FRB)

D. Federal Reserve Board (FRB)

Financial activities and large cash transactions are reported to which of the following federal agencies a. SEC b. OCC c. Federal Reserve d. FinCen

D. FinCen

A married couple have equal 50% ownership interests in a tenants in common account (TIC). If one party to the account dies, what happens to the shares in the account? A) Ownership and distribution of all shares would be determined by probate court. B) The deceased party's interest is transferred to the remaining party. C) All the shares are distributed to the heirs named in the estate of the deceased party. D) Half, or 50% of the shares, would belong to the remaining party and the balance would be distributed to the estate of the deceased party.

D. Half, or 50% of the shares, would belong to the remaining party and the balance would be distributed to the estate of the deceased party

Under the Investment Company Act of 1940, which of the following is not considered and investment company? A) Management company B) Unit investment trust C) Face-amount certificate company D) Hedge fund

D. Hedge Fund * Know from Investment Company Act of 1940

A private, unregulated investment company organized in such a way so as to invest and achieve high returns utilizing debt leverage and derivative products such as options and margin is best described as a. mutual fund b. a direct participation program (DPP) c. a real estate investment trust (REIT) d. a hedge fund

D. Hedge Fund *Just is

When a customer chooses to annuitize a variable annuity, all of the following are factors the insurance company will use in calculating the initial payout amount except a. age of the annuitant b. gender of the annuitant c. balance of the separate account d. historic inflation rate

D. Historic Inflation Rate * GAAPI: gender, age, account balance, payout option, Interest rate are taken into consideration

Which of the following are considered systematic risks—those that would impact all businesses? I. Market risk II. Inflation risk III. Regulatory risk IV. Business risk A) I and IV B) III and IV C) II and III D) I and II

D. I and II

Which of the following best describe a wrap account? I. The firm offering the account would need to be registered as both a broker-dealer and an investment advisor II. The account fee covers both transactions and advice III. The wrap fee for the account covers only where the firm acts as a broker or acts as a dealer IV. The firm may only be registered as a broker or dealer A) III and IV B) II and III C) I and IV D) I and II

D. I and II

An investor can take advantage of intraday price changes due to normal market forces when investing in which of these? I. Closed-end funds II. Exchange-traded funds III. Hedge funds IV. Open-end funds A) II and III B) III and IV C) I and IV D) I and II

D. I and II *Both closed-end funds and ETF's trade in a marketplace based on supply and demand

A firm designated as self-clearing can act in a back-office capacity for an introducing firm. not act in a back-office capacity for an introducing firm. clear and settle transactions executed by other firms. only clear transactions it executed. A) II and III B) I and IV C) II and IV D) I and III

D. I and III

Kamron owns a diversified portfolio of stocks. The portfolio holds 58 different stocks that are diversified by market capitalization and sector as well as industry. When the stock market entered a significant downward correction Kamron's portfolio also dropped. This is an example of which of these? Market risk Business risk Systematic risk Unsystematic risk A) II and III B) II and IV C) I and IV D) I and III

D. I and III

The bid price represents I. the price the broker-dealer is willing to pay when buying a security. II. the price the customer will pay when buying a security. III. the price a customer will receive when selling a security. IV. the price the broker-dealer will receive when buying a security. A) II and IV B) I and II C) II and III D) I and III

D. I and III

An investor considering the differences between purchasing open-end investment company shares or ETFs with a similar objective should understand which of these? Each time an investor purchases and sells ETFs there is a commission. The operating expense ratio for an ETF is generally very high because they usually track indexes such as the S&P 500. It is possible that an investor liquidating ETF holdings will receive less than the NAV per share. The margin requirements to purchase an ETF are higher than that for an open-end investment company. A) II and III B) I and IV C) II and IV D) I and III

D. I and III *

The SEC has established rules regarding delivery of a prospectus when a secondary market transaction occurs after the effective date. Which of these comply with those rules for initial (IPO) and additional (APO) public offerings? I. An IPO of a stock to be listed on the NYSE requires delivery for a period of 25 days. II. An IPO of a stock that will not be listed nor quoted over Nasdaq requires delivery for a period of 40 days. III. An APO of a stock listed on the NYSE requires delivery for a period of 25 days. IV. An APO of a stock that will not be listed nor quoted over Nasdaq requires delivery for a period of 40 days. A) II and III B) I and II C) III and IV D) I and IV

D. I and IV

CDC Pharmaceutical stock is currently trading at $50 a share. The CDC Nov 45 PUT is trading at one. Based on this information, which of the following is true? Time value is $1. Intrinsic value is $1. The premium must be greater than $1. Intrinsic value is zero. A) II and IV B) I and III C) II and III D) I and IV Explanation

D. I and IV *Pr = 1 thus, Time value must be one and Intrinsic value must be zero

If your client, Marvin Blackwell, places a sell stop order at 38 when ABC is trading at 40, at which of the following prices could the order be filled? I. 38 II. 39 III. 40 IV. 41 A) II and III B) III and IV C) I and II D) I, II, III, and IV

D. I, II, III, and IV

If your client, Marvin Blackwell, places a sell stop order at 38 when ABC is trading at 40, at which of the following prices could the order be filled? I. 38 II. 39 III. 40 IV. 41 A) III and IV B) I and II C) II and III D) I, II, III, and IV

D. I, II, III, and IV

Which of the following are considered sources of debt service for GO bonds? I. Personal property taxes II. Real Estate taxes III. Fees from delinquent property taxes IV. Liquor license fees A. I and IV B. II and III C. II, III, and IV D. I, II, III, IV

D. I,II, III, and IV * All pay into general fund of municipality and used to serve GO debt

The trade would need to be placed in a discretionary account if the registered representative chooses which of the following? I. The time of execution of the trade II. Which security to buy II. How much of the security to buy IV. At what price to execute the trade A) II and IV B) I and IV C) I and II D) II and III

D. II and III

What happens to the contents of a custodial account in the event of the death of the beneficial owner (the minor child)? I. The account's contents are returned to the donor(s). II. The custodian's fiduciary responsibility ceases. III. The account passes to the minor's estate. IV. The custodian remains fiduciary. A) I and IV B) I and II C) III and IV D) II and III

D. II and III

Which of the following statements are true of an irrevocable trust? I. The grantor may change the terms of the trust II. The grantor must give up ownership of items placed in the trust III. The structure of the trust may reduce estate taxes IV. The grantor may retain ownership of items placed in the trust A) I and II B) II and IV C) I and IV D) II and III

D. II and III

It would be reasonable to expect an increase in exports from the United States if which of these occurred? I. The dollar strengthened against the euro II. The yen strengthened against the dollar III. The Swiss franc weakened against the dollar IV. The dollar weakened against the British pound A) I and IV B) II and III C) I and III D) II and IV

D. II and IV

Which of the following are considered to be nonexempt offerings according to the Securities Act of 1933? I. Government securities II. Private placement III. Public offering of $60 million by a brokerage firm III. Sales of corporate bonds of $52 million a. I and II b. I and III c. II and IV d. III and IV

D. III and IV * Securities act exempts US government bonds and private placement of registration and in some cases $20 million, are also exempt under regulation A+, so an offering of $60 million and sales of corporate bonds are not exempt ; they must be registered with the SEC

In which circumstances may a FINRA member firm conduct securities business with a nonmember broker-dealer? A) If the broker-dealer is temporarily suspended and any transaction is related to ongoing business B) Under no circumstances C) If the broker-dealer is a Canadian firm without regard to registration D) If the nonmember broker-dealer is a foreign firm and properly registered in their home jurisdiction

D. If the nonmember broker-dealer is a foreign firm and properly registered in their home jurisdiction

When investors buy and sell securities to and from one another, these transactions occur A) in the over-the-counter (OTC) market only. B) on exchanges only. C) in the primary market. D) in the secondary market.

D. In the secondary market

The federal government could use which of the following to stimulate the economy? A) Buy Treasury securities from banks B) Raise the federal funds rate C) Raise taxes D) Increase government spending

D. Increase government spending

Which of the following are characteristics of the expansion phase of the business cycle? A) Rising inventories B) Increasing defaults C) Higher consumer debt D) Increase industrial production

D. Increase industrial production

An expansion in the business cycle would be characterized by A) higher consumer debt and rising inventories. B) increasing college enrollments and enlistment in military service. C) increase in want ads in newspapers and decrease in nonfarm jobs. D) increasing consumer demand for goods and services, increasing industrial production, and rising stock markets and property values.

D. Increasing consumer demand for goods and services, increasing industrial production, and rising stock markets and property values

Which of the following accounts would allow the assets of a single father's account to go directly to his daughter while avoiding probate but not a let her have access while he is alive? A) Individual with power of attorney (POA) B) Joint tenants with rights of survivorship (JTWROS) C) Tenants in common (TIC) D) Individual with transfer on death (TOD)

D. Individual with transfer on death (TOD)

An investor who relies heavily on fixed interest payments from long-term (25-30 years) bonds should be most concerned with A) reinvestment risk. B) financial risk. C) legislative risk. D) inflation risk.

D. Inflation Risk

When the money supply in the economy decreases, A) interest rates go down, hence borrowing and spending for consumers is easier. B) interest rates go up, hence borrowing and spending for consumers is easier. C) interest rates go down, hence borrowing and spending for consumers is more difficult. D) interest rates go up, hence borrowing and spending for consumers is more difficult.

D. Interest rates go up, hence borrowing and spending for consumers is more difficult

A registered representative is appointed the fiduciary for a trust account. Which of the following is true? A) Trading on margin is always permissible as a safe and efficient way to employ leverage for the account. B) A RR, as fiduciary, may share in the account's profits and charge a reasonable fee for services. C) It is expected that speculative positions should be taken to enhance the performance of the account for the benefit of the trustee. D) Investment decisions must be made in accordance with the prudent investor rule.

D. Investment decisions must be made in accordance with the prudent investor rule

Mrs. Jones is an employee of a member firm and as such is a restricted person regarding the purchase of new issues. She belongs to an investment club and has a 1% interest in the club's brokerage account. The investment club A) is a restricted account but will be allowed to purchase equity shares of an IPO. B) is not a restricted account but will not be allowed to purchase equity shares of an IPO. C) is a restricted account and will not be allowed to purchase equity shares of an IPO. D) is not a restricted account and will be allowed to purchase equity shares of an initial public offering (IPO).

D. Is not a restricted account and will be allowed to purchase equity shares of an initial public offering.

The principles of demand-side theory were laid out in the 1936 book, The General Theory of Employment, Interest, and Money written by who? A) Adam Smith B) Arthur Laffer C) Milton Friedman D) John Keynes

D. John Keynes

Craig and Judy have just married. It is a second marriage for both of them and they both have kids from a prior marriage. Craig would like his portion of their account to go to his kids when he dies and Judy would like her portion to go to her kids when she dies. As new partners in marriage, while they are both alive they would both like to have full access to the account. What type of account(s) should they set up? A) A partnership account B) Each should set up their own individual transfer on death (TOD) account with limited power of attorney (POA) C) Joint tenants with rights of survivorship (JTWROS) D) Joint tenants in common (JTIC)

D. Joint tenants in common (JTIC)

Jon owns 100 shares of the Bayside Fishing Company. Bayside has 1,000,000 shares outstanding and operates under a statutory voting system. At the next election for the board, there are two open seats. All of these are true except A) Jon has a right to freely transfer his shares. B) Jon has control of 200 votes, and he can cast up to 100 of those votes for each open seat. C) Jon owns 1/10000 of the Bayside Fishing Company. D) Jon has control of 200 votes, which he can cast any way he likes among the two open seats.

D. Jon has control of 200 votes, which he can cast any way he likes among the two open seats. *Owner's of common stock have a right to vote on several issues. In statuary voting, an owner may vote once per open seat

Match the following statement to the best term: Government intervention in the economy is a significant force in creating prosperity by engaging in activities that affect aggregate demand. A) Balance of payments B) Monetarist Theory C) Socialism D) Keynesian Theory

D. Keynesian Theory

Your customer asks to buy a bond that carries a very attractive yield. When checking the bond you see that it has a B rating from the major credit rating agencies. When communicating this information to the customer, all of these terms might be used to describe the bond except A) high-yield. B) junk bond. C) noninvestment grade. D) lower grade.

D. Lower Grade * Though a B rating is a lower investment grade, that is not a typical term used in the industry.

Where can demand deposits, checking accounts, paper currency and coins be found in the money supply? A) M2 only B) M1 and M3 only C) M1 only D) M1, M2, and M3

D. M1, M2, and M3

For those who follow monetary theory, which is the most complete measure of the money supply? A) M1 + M2 B) M2 C) M1 D) M3

D. M3

A broker-dealer designated as a carrying firm would be expected to do all of the following except A) clear transactions for customer accounts. B) perform back-office functions, such as sending trade confirmations to customers. C) take custody of customer funds and securities. D) maintain a lower net capital than noncarrying broker-dealers.

D. Maintain a lower net capital than noncarrying broker-dealers

Subject to market liquidity, which of the following orders is most likely to be executed immediately? A) All-or-none (AON) order B) Limit order C) Fill-or-kill order D) Market order

D. Market order

Different degrees of inflation can impact the economy differently. Which of the following best reflects this? A) Mild inflation can thwart business investments and slow economic growth. B) High inflation spurs the economy forward by increasing the demand for goods. C) High inflation pushes prices to their highest levels, continuously pushing the economy higher. D) Mild inflation can encourage growth and stimulate the economy.

D. Mild inflation can encourage growth and stimulate the economy

Within the money supply, which of the following are part of M2 but not M1? A) Checking accounts at commercial banks B) Currency in circulation C) Demand deposits at S&Ls D) Money market mutual funds

D. Money market mutual funds

If the U.S. balance of payments is currently running at a surplus, all of the following are likely to be occurring except A) the balance of trade shows a credit. B) the value of the U.S. dollar is currently down against other currencies. C) exports are currently exceeding imports. D) more dollars are flowing out of the United States than into the United States.

D. More dollars are flowing out of the United Sates than into the United States

A surplus in the balance of payments is best described by A) more money flowing out of the United States than into the United States. B) other countries exporting more to the United States. C) the United States importing more than it exports. D) more money flowing into the United States than out.

D. More money flowing into the US than out

The SEC has regulatory authority over all of these entities except A) exchanges. B) Securities Information Providers (SIPs). C) FINRA. D) municipalities.

D. Municipalities

For this election cycle, Big Trucks, Inc., has three open board seats. Big Trucks operates under a cumulative voting system. Your customer owns 300 participating preferred shares of Big Trucks. He has A) 900 votes he can divide anyway he wants among the three seats. B) 300 votes total to spread among the three open seats. C) 300 votes each for the open seats. D) no voting rights.

D. No voting rights *Your customer owns preferred stock. Preferred stock carries no voting rights.

A corporate bond has a stated yield set at the time of issuance. This stated yield is also known as A) the yield to maturity. B) the current yield. C) the yield to call. D) the nominal yield.

D. Nominal Yield

Risks that are unique to a specific industry, business type, or investment type are known as A) security risks. B) stock market risk. C) systematic risks. D) nonsystematic risks.

D. Nonsystematic Risks

Deanfield and Chatham Investments, LLC has recently registered as a broker-dealer with the SEC and been accepted as a FINRA member firm. They update their website to prominently display this fact at the top of their site and include large images of both organizations' logos. This is A) allowed with proper disclaimers. B) not allowed because it violates principals of marketing. C) allowed so long as it is accurate. D) not allowed because it is a misrepresentation.

D. Not allowed because its a misrepresentation *The prominence suggests some greater affiliation or approval

Regarding the purchase of new equity issues (IPOs), restricted persons may A) purchase shares of a new issue only if they are employed by a broker-dealer as a registered representative. B) purchase shares of a new issue only if they work for a bank. C) purchase shares of a new issue only in amounts that are not substantial in relation to the total number of shares being issued. D) not purchase shares of a new issue.

D. Not purchase shares of a new issue

All of the following statements regarding penny stocks are true except A) if an account holds penny stocks, broker/dealers must provide a monthly account statement to the customer. B) established customers of the firm need not sign a suitability statement. C) the SEC rules require that prospects, before their initial transaction in a penny stock, be given a copy of a risk disclosure document. D) penny stock rules apply to both solicited and unsolicited transactions.

D. Penny stock rules apply to both solicited and unsolicited transactions *Penny Stock rules only apply to solicited transactions

The Federal Reserve Board (FRB) might impact the money supply by using all of the following except A) buying or selling securities in open market. B) reserve requirements for member banks. C) discount rate. D) prime rate.

D. Prime rate

A bank is likely to do which of the following when the Federal Reserve Board (FRB) tightens the money supply? A) Raise the hypothecation loan rate B) Lower its broker call loan rate C) Lower its prime rate D) Raise its prime rate

D. Raise its prime rate

An investor holds shares of a manufacturing company where disposal of the by-products produced during the manufacturing process is necessary. The Environmental Protection Agency (EPA) updates the rules applicable to disposing of the product. For the investor, these changes present a form of A) liquidity risk. B) political risk. C) financial risk. D) regulatory risk.

D. Regulatory Risk

Of the standard Federal Reserve tools, which of these is considered the most powerful and used infrequently? A) Discount rate B) Quantitative easing C) FOMC activities D) Reserve rate

D. Reserve Rate

Which of the following regarding income is true? A) Salary or bonuses are portfolio income; interest and dividends are investment income. B) Salary, bonuses, interest, and dividends are all portfolio income. C) Salary, bonuses, interest, and dividends are all investment income. D) Salary or bonuses are earned income; interest and dividends are investment income.

D. Salary or bonuses are earned income; interest and dividends are investment income

Secondary market transactions would include all of the following except A) sale of $10 million of municipal bonds by a broker-dealer acting as a market maker. B) sale of $10 million of corporate stock by a broker-dealer acting as a market maker. C) sale of $10 million of U.S. Treasury bonds by a broker-dealer acting as a market maker. D) sale of $10 million of corporate bond by a broker-dealer acting as an underwriter.

D. Sale of $10 million of corporate bond by broker-dealer acting as an underwriter

Financial Industry Regulatory Authority (FINRA) staff must submit new rules and await approval from which of the following regulatory bodies prior to becoming effective? A) Municipal Securities Rule Board (MSRB) B) New York Stock Exchange (NYSE) C) Chicago Board Options Exchange (CBOE) D) Securities and Exchange Commission (SEC)

D. Securities and Exchange Commission (sEC)

A customer is given a quote for ABC as: 17.00 - 17.25 6 × 12. This quote indicates the customer can A) purchase 1,200 shares for $17 per share. B) sell 1,200 shares at $17.25 per share. C) purchase 1,800 shares at $17.25 per year. D) sell 600 shares for $17 per share.

D. Sell 600 shares for $17 per share

An affiliate of a corporation has purchased shares of restricted securities (fully paid for) in a private placement. Under Rule 144 the affiliate can A) sell shares immediately with no restrictions. B) sell shares immediately but is subject to volume restrictions. C) not divest of the shares until the affiliation with the issuer ceases. D) sell shares after a six-month holding period but is subject to volume restrictions. Explanation

D. Sell shares after a six-month holding period but is subject to volume restrictions

Darcy owns 5,000 shares of English Manor Properties. It is her belief that the company is unlikely to grow much over the next year. She is curious how she might generate some additional income from the position as English Manor pays a paltry dividend and she asks about covered calls. You tell her that A) writing calls against her stock position is a conservative strategy for generating income. B) buy puts is the best hedge against this position. C) writing calls against her stock position is a conservative strategy but is ineffective for generating income. D) selling covered calls is very aggressive but has a solid chance of generating substantial income.

D. Selling covered calls is very aggressive but has a solid chance of generating substantial income * Only selling generates income and covered calls is effective and conservative

Angela Quinn owns 100 shares of LMN with a cost basis of $60. LMN has a 2:1 split and she sells 100 shares the next year for $40 per share. Quinn has which of the following tax consequences? A) She has a $20 loss on the 100 shares sold. B) Because her total cost basis for all shares before and after the split didn't change, she has no gain or loss. C) She will be assessed the gain or loss at the time of the split, not at the time of the sale. D) She has a $10 gain per share on the 100 shares sold.

D. She has $10 gain per share on the 100 shares sold

Your client, Mickey, just purchased 10 July EuroDollar Put contracts at 1.10. She notices that they are European Style contracts and asks you what the means. You tell her A) she may not exercise the contracts. The contracts will exercise at expiration if they are in-the-money. B) she may only exercise the contacts in the last week before expiration. C) she may exercise the contracts whenever he wants to. D) she may only exercise the contracts on the last day of trading before expiration.

D. She may only exercise the contracts on the last dady of trading before expiration *European style contracts may only be exercised on the last day the contract trades before expiration

Which of the following refers to prolonged periods of slow or little economic growth, usually accompanied by high unemployment? A) Trough B) Deflation C) Stagflation D) Stagnation

D. Stagnation

Equity is to debt as A) hedge fund is to mutual fund. B) stock is to mutual fund. C) stock is to preferred stock. D) stock is to bond.

D. Stock is to bond

A stock's market value is directly determined by which of the following? A) Company's financial condition B) Vote of the stockholders C) Board of directors D) Supply and demand

D. Supply and Demand

Which of the following organizations was created to protect investors financially from a bank failure? A) Office of Foreign Assets Control (OFAC) B) Federal Reserve Board (FRB) C) Securities Investor Protection Corporation (SIPC) D) Federal Deposit Insurance Corporation (FDIC)

D. The Federal Deposit Insurance Corporation (FDIC)

A member of the Federal Reserve System wanting to increase its reserves could do so by borrowing money from A) the Federal Reserve Board (FRB) at the federal funds rate. B) another FRB member bank at the prime rate. C) another FRB member bank at the discount rate. D) the Federal Reserve Board (FRB) at the discount rate.

D. The Federal Reserve Board (FRB) at the discount rate

Which of the following acts requires the registration of most new issues? A) The Securities Investor Protection Act of 1970 B) The Securities Market Improvement Act of 1975 C) The Securities Exchange Act of 1934 D) The Securities Act of 1933

D. The Securities Act of 1933

Regarding the issuance of new securities to the public, which of the following is true? A) Registrations become effective within 10 business days of Securities and Exchange Commission (SEC) filing. B) Underwriters are permitted to accept orders for securities during the Securities and Exchange Commission (SEC) review period. C) The Securities and Exchange Commission (SEC) review of a new issues filing must always be longer than 20 days. D) The Securities Act of 1933 provides criminal penalties for fraud. Explanation The Securities Act of 1933, which provides for criminal penalties for fraud in the issuance of new securities, ensures that investors are fully informed about a security and its issuer when the security is offered to the public. The SEC review or cooling-off period must last a minimum of 20 days before the SEC releases the securities for sale to the public (effective date). Solicitations and the acceptance of orders may never occur before the effective date. LO 7.d

D. The Securities Act of 1933 provides criminal penalties for fraud

Broker-dealers and registered representatives may be subject to each of the following administrative and regulatory bodies except A) state securities administrator. B) Financial Industry Regulatory Authority (FINRA). C) NYSE. D) Securities Investor Protection Corporation (SIPC).

D. The Securities Investor Protection Corporation

All of these are true for an Achieving a Better Life Experience account except that A) the onset of the disability must have occurred before the owner turns 26. B) the account owner and beneficiary must be disabled. C) the income is tax-free. D) the account must be opened before the beneficiary turns 26.

D. The account must be opened before the beneficiary turns 26.

According to the Uniform Securities Act, who is charged with enforcing state securities laws and regulations? A) NASAA B) FINRA C) The SEC D) The administrator

D. The administrator *Administrator enforces, NASAA is an administrator

The flow of money between the United States and other countries is known as A) the surplus. B) the balance of trade. C) the payment reserves. D) the balance of payments.

D. The balance of payments

The largest component of the U.S. balance of payments is A) imports. B) foreign currency. C) exports. D) the balance of trade.

D. The balance of trade

Who must reconfirm a good 'til canceled order for it to stay in force more than six months? A) The specialist on the NYSE B) No one; they will remain in force until the customer cancels it C) The broker-deaker who accepted the order D) The customer who placed the order

D. The customer who placed the order

Who is responsible for meeting the desired returns on a defined contribution plan? A) The sponsor B) The custodian C) The Pension Benefit Guaranty Corporation D) The employee

D. The employee

All of these dates are set by the board of directors of a corporation except A) the declaration date. B) the record date. C) the payable date. D) the ex-dividend date.

D. The ex-dividend date

A registered representative enters a discretionary order for her clients account. All of the following are required except A) the order should be included in those required to be reviewed frequently. B) a record of the order must be maintained. C) the order must be identified as or marked discretionary. D) the order must be approved by a principal prior to entry.

D. The order must be approved by a principal prior to entry

All of the following are true of a revocable living trust except A) the grantor can add items to the trust. B) the grantor can remove items from the trust. C) the grantor is subject to the tax consequences of the trust while alive. D) the primary purpose of the trust is to avoid estate taxes for the grantor.

D. The primary purpose of the trust is to avoid estate taxes for the grantor

An investor is long MJS stock. For this investor, which of the following is true? A) The risk is that the stock goes up in price. B) The risk is that the stock remains stable in price. C) Maximum loss can be unlimited. D) The risk is that the stock falls in price.

D. The risk is that the stock falls in price.

Who is responsible for meeting the desired returns on a defined benefit plan? A) The custodian B) The Pension Benefit Guaranty Corporation C) The employee D) The sponsor

D. The sponsor

All of the following would be included in a notice of corporate action regarding a stock dividend except A) the declaration date. B) the record date. C) the rate of the dividend. D) the stock's issue date.

D. The stock's issue date

What is the name for the legal framework of state laws for broker-dealers, registered representatives, investment advisors and investment advisor representatives? A) The Securities Act of 1933 B) The Securities and Exchange Act of 1934 C) The Investment Advisor Act D) The Uniform Securities Act

D. The uniform Securities Act

One characteristic of an open-end investment company that distinguishes it from a closed-ended one is is that a. it may avoid taxation by distributing all of its net investment income to shareholders b. it may be either diversified or non-diversified c. there are a wide variety of objectives available for investors to select from d. There is a continuous public offering

D. There is a continuous public offering. * In a closed end once the IPO is over, the only way to acquire new shares is the secondary market

Louise Ripley is a customer of Seacoast Securities, Inc., a FINRA member firm. While she was away on a long trip, several limit and stop orders were executed. She believes that these orders were not executed properly and cost a significant loss. She has requested that Seacoast make financial amends. Seacoast maintains that it performed correctly and as instructed by Louise. An arbitration panel found Seacoast at fault in one instance and awarded Louise $2,000. Seacoast maintains they did nothing incorrectly. How long does the firm have to file an appeal? A) 60 days B) 90 days C) 30 days D) There is no appeal in an arbitration hearing

D. There is no appeal in an arbitration hearing

Keegan and Drew, spouses, have a checking account at Gloria City National Bank. The balance is $450,000. What is their protection from SIPC if Gloria City fails? A) $250,000—the total maximum coverage per account B) $450,000—$250,000 for Keegan and $200,000 for Drew C) $450,000—split evenly between the two people D) There is no coverage for Keegan and Drew

D. There is no coverage for Keegan and Drew *SPIC covers broker-dealers

Regarding a tombstone advertisement, all of the following are accurate statements except A) all such advertisements must contain an advisory stating that the ad is neither an offer to sell nor a solicitation of an offer. B) they are limited to the information that may be contained in them. C) it is the only type of advertisement permitted between the time the registration statement is filed with the SEC and the effective date. D) they are required by and filed with the SEC in order to announce a new issue to the investing public.

D. They are required y and filed with the SEC in order to announce a new issue to the investing public

Your client holds ADRs of Daikon Motors, Inc., an automobile manufacturer based in Asia. All of these are true about the position except A) they have the right to request the underlying common shares be issued to them directly. B) they will receive dividends in U.S. dollars. C) the security may be traded in U.S. markets. D) they have the same voting rights as an owner of the common stock.

D. They have the same voting rights as the owner of the common stock * ADR's are issued by a depositary bank and the bank is the registered owners of the shares. Depository banks are not required to pass voting proxies through to the ADR Holders

A company is engaging in a securities offering that is a combination of a primary and secondary offering. Which of the following is true? A) This combination is known as a split offering where the issuer receives all of the proceeds from the sale. B) This combination is known as an APO where existing shareholders receive all of the proceeds of the sale. C) This combination is known as an IPO where the issuer receives all of the proceeds from the sale. D) This combination is known as a split offering where the issuer receives some of the proceeds and existing shareholders receive some of the proceeds from the sale.

D. This combination is known as a split offering where the issuer receives some of the proceeds and existing shareholders receive some of the proceeds from the sale.

Your client, Jacob Riley, wants to purchase Treasury bonds and asks when he would need to pay for the bonds. You would tell him that regular way settlement for U.S. government bonds is A) trade date. B) trade date plus 2 business days. C) trade date plus 3 business days. D) trade date plus 1 business day.

D. Trade date plus 1 business day

When engaging in open-market operations, taking actions to either expand or contract the money supply, the Federal Reserve Board (FRB) will buy or sell A) corporate bonds. B) corporate equity securities. C) U.S government agency securities. D) Treasury securities.

D. Treasury Securities

A strong U.S. dollar leads to more A) U.S. exports and a balance of payments surplus. B) U.S. imports and a balance of payments surplus. C) U.S. exports and a balance of payments deficit. D) U.S. imports and a balance of payments deficit.

D. US imports and balance of payments deficit

How many primary offerings can a corporation issue? a. 1 primary offering b. 2 primary offerings c. 3 primary offerings d. Unlimited

D. Unlimited

A customer of your broker-dealer has invested in a variable annuity (VA). She makes several comments about them, but one of the statements is inaccurate and needs to be corrected. Which is it? A) VAs guarantee an income stream for life. B) VAs are actually insurance company products. C) Premiums are invested in a diversified portfolio with an investment objective that the purchaser gets to choose. D) VAs are not securities.

D. VAs are not securities

Last year Brownstone Properties, LP distributed $200 per unit to investors and reported a $500 business loss per unit on the K-1. For tax purposes the investors received A) a net $300 loss. B) a $500 reduction in ordinary income. C) $200 per unit of passive income. D) a $500 per unit passive loss.

D. a $500 per unit passive loss *Income and losses in an LP are always treated passive and are reported to the investor via the K-1

Which state of the business cycle is characterized by rising consumer demand and higher wages? a. Contraction b. Expansion c. Depression d. Recession

D. a Recession

A REIT is taxed as a. corporation b. a partnership c. a municipal bond d. a conduit

D. a conduit *Fall as a conduit or pipeline in tax theory

Your client, Mary Quinn, wants to place an order to sell a stock in her portfolio when the current price is 45, but she is only willing to sell if she can sell for at least 47. Which order should she place? A) A sell stop limit order B) A market order C) A sell stop order D) A sell limit order

D. a sell limit order

Your customer, Amelia, is excited about an investment she recently purchased from another firm. At maturity, in five years, she will receive her principal back plus an interest payment based upon the returns of five well-known technology companies. It pays no interest during the five years. She has likely invested in A) a VA. B) a mutual fund. C) an ETF. D) an ETN.

D. an ETN *Has maturity date and pays no interest during the time.

A REIT that owns and operates an office building in the Dallas Metroplex is an example of A) a mortgage REIT. B) a leasing REIT. C) a hybrid REIT. D) an equity REIT.

D. an Equity REIT *They own the property but don't hold a mortgage over it.

It would be appropriate to refer to any of the following as an issuer transaction except A) an SPO. B) an APO. C) an IPO. D) an REPO.

D. an REPO

A corporation that seeks to sell its own stock to raise money for buildings a new factory is an example of a. a selling group member b. an underwriter c. a market maker d. an issuer

D. an issuer

A Regulation A+ exemption covers A. an offering of $50 million or less in 12 months. B. an offering of letter stock. C. a private offering. D. an offering of $50 million or more in 12 months.

D. an offering of $50 million or more in 12 months

In order to calculate the earnings per share you would need information from A) the balance sheet and current market value. B) just the income statement. C) just the balance sheet. D) both the balance sheet and the income statement.

D. both the balance sheet and the income statement

A customer who is bullish on ABC would most likely A) sell ABC short. B) buy ABC short. C) sell ABC long. D) buy ABC long.

D. buy ABC long

When shares are held in street name, this refers to the shares being A) restricted, and thus, nontransferable. B) allowed to be sold only on the exchange where they were initially purchased. C) held at the transfer agent for the beneficial owner. D) held in the name of the broker-dealer for the beneficial owner.

D. held in the name of the broker dealer for the beneficial owner

When investors buy and sell securities to and from one another, these transactions occur A) in the primary market. B) in the over-the-counter (OTC) market only. C) on exchanges only. D) in the secondary market.

D. in the secondary market

A corporation seeking to raise funds in order to expand its manufacturing capacity would do so in A) the capital market. B) the secondary market. C) the funding market. D) the currency market.

a. The capital market

Under whose Social Security number is the custodial account established? A) The minor's B) The custodian's C) The person who established the account for the minor, whether the parent or not D) The parent, whether the parent is custodian or not

a. The minor's

Your customer, Jim, wants to deposit money into a 529 College Savings plan for his great-niece Penelope. He states four reasons why he likes the 529 plan. Unfortunately, you need to tell him he is incorrect on one point. Which of his following points is not considered a feature of a 529 College Savings Plan? A) She has to use the money by the time she turns 30, so she will not be able to put it off too long. B) The growth can be tax free if used for qualified education expenses. C) The money grows tax deferred. D) If she gets into a good prep school the money can be used for that as well as college.

a. She has to use the money by the time she turns 30, so she will not be able to put it off too long

An extended period of little or no growth in GDP, wages, and prices is a period of A) stagnation. B) inflation. C) indignation. D) stagflation.

a. Stagnation

Match the following statement to the best expression: Government should allow market forces to determine prices of all goods and that the federal government should reduce government spending as well as taxes. A) Supply-side Economic Theory B) Socialism C) Monetarist Theory D) Keynesian Theory

a. Supply-side Economic Theory

To fill a customer buy order, over-the-counter, your broker-dealer requests a quote from a market maker for 800 shares. The response is 15 bid, and ask 15.25. If the order is placed, the market maker must sell A) 800 shares at $15.25 per share. B) 800 shares at no more than $15 per share. C) 100 shares at $15.25 per share. D) 800 shares at $15 per share.

a. 800 shares at 15.25 per share

All of the following are acceptable choices to function as a depository and intermediary for transactions between buyers and sellers of securities except A) credit unions. B) the National Securities Clearing Corporation (NSCC). C) the Depository Trust Company (DTC). D) carrying firms.

a. Credit Unions

To grow or expand the economy, U.S. fiscal policy should be to A) cut taxes and increase government spending for programs and development. B) cut taxes and government spending for programs and development. C) raise taxes and government spending for programs and development. D) raise taxes and cut all government spending for programs and development.

a. Cut taxes and increase government spending for programs and development

An investor who has a short position in 500 shares of JKH common stock would eliminate that position by A) entering a closing purchase order for 500 shares of JKH. B) entering a closing sale order for 500 shares of JJK. C) entering a closing purchase order for 500 shares of ABC. D) entering an opening purchase order for 500 shares of JKH.

a. Entering a closing purchase order for 500 shares of JKH

Sam Malloy owns a small business and has built a substantial estate both with his business success and his early career as a pro athlete. He wants to set up his estate in a way that he will control the assets until he passes away or becomes incapacitated. Once that time comes, he wants control to transfer easily and he wants to avoid probate. Sam should A) establish a revocable living trust. B) create a last will and testament. C) establish an irrevocable living trust. D) place his assets in a transfer on death account.

a. Establish a revocable living trust

Which of the following best describe a wrap account? I. The firm offering the account would need to be registered as both a broker-dealer and an investment advisor II. The account fee covers both transactions and advice III. The wrap fee for the account covers only where the firm acts as a broker or acts as a dealer IV. The firm may only be registered as a broker or dealer A) I and II B) II and III C) III and IV D) I and IV

a. I and II

Your client, Bill Hearst, inherited several thousand shares of his grandfather's auto parts manufacturer, National Autoparts. He sells a portion of the position in order to raise some cash to buy a new boat. Which of these is true? I. This is a secondary market transaction. II. This is a primary market transaction. III. This is a long sale of the stock. IV. This is a short sale of the stock (he never purchased it). A) I and III B) II and IV C) I and IV D) II and III

a. I and III

In regards to fiscal policy, which of these statements is correct? I. Fiscal policy is considered the most efficient means to solve short-term economic problems. II. Fiscal policy is not considered the most efficient means to solve short-term economic problems. III. Fiscal policy refers to governmental budget decisions enacted by the U.S. President and Congress. IV. Fiscal policy refers to governmental budget decisions enacted by the U.S. President and the cabinet. A) II and III B) I and IV C) I and III D) II and IV

a. II and III

Many investors like to put a transfer on death (TOD) designation on their brokerage accounts. Which of these are benefits of doing so? I. The TOD designation avoids estate taxes. II. The TOD designation avoids probate. III. The account holder is relieved of decision making in the account. IV. There is flexibility to change beneficiaries as conditions dictate. A) II and IV B) II and III C) I and IV D) I and III

a. II and IV

When the Federal Open Market Committee (FOMC) directs that Treasury securities be purchased in the open market, this will do which of the following? A) Lower interest rates on loans to consumers B) Tighten the money supply C) Increase interest rates on loans to consumers D) Have no impact on lending rates to consumers

a. Lower interest rates on loans to consumers

To ease its monetary policy, allowing consumers to borrow more easily, the Federal Reserve Board (FRB) can A) lower the discount rate. B) raise the federal funds rate. C) raise the discount rate. D) lower the federal funds rate.

a. Lower the discount rates

Which of the following regulatory authorities relies exclusively upon other examining authorities to enforce its rules? A) Municipal Securities Rule Board (MSRB) B) Financial Industry Regulatory Authority (FINRA) C) Chicago Board Options Exchange (CBOE) D) New York Stock Exchange (NYSE)

a. Municipal Securities Rule Board (MSRB)

A bearish sentiment means that a person believes A) the security will decline in value. B) the firm appears to be slow and lumbering. C) the company will devour its competition. D) the security will increase in value.

a. The Security will decline in value

John Christensen places a buy limit order at 42 when the market price of the stock is at 45. Which of the following best describes how the order would fill? A) The order can only be filled at a price of 42 or lower B) The order would be filled between when the stock price is between 42 and 45 C) The order would be filled at the next available price after the stock price drops to 42 D) The order would be filled immediately because the market price is already above 42

a. The order can only be filled at a price of 42 or lower

Which of the following are true of nonqualified plans but not true of qualified plans? A) The plan may discriminate B) All withdrawals are tax free C) All withdrawals are taxable D) The plan cannot discriminate

a. The plan may discriminate

An investor that purchase Big City 3 1/2 % general obligation bonds of 2040 in the primary market should receive a. an official statement b. a preliminary prospects c. a final prospectus d. a statutory circular

a. an official statement

Your customer purchased 300 shares of XYZ stocks six months ago and sold the shares last week. The actions your customer took in relation to XYZ were to A) buy long and sell long. B) buy short and sell long. C) buy long and sell short. D) buy short and sell short.

a. buy long and sell long

A measure of the change in economic activity that occurs over a given time frame within the boundaries of a nation is that nation's a. gross domestic product b. gross national product c. consumer price index d. industrial production

a. gross domestic product

The measure of economic output generated from within a nation's borders is A) gross domestic product. B) gross national product. C) Consumer Price Index. D) S&P 500 Index.

a. gross domestic product

In which of the following accounts would the use of margin always be prohibited? A) Individual retirement accounts B) Fiduciary accounts C) Partnership accounts D) Corporate accounts

a. individual retirement accounts

Before executing a short sale the broker-dealer must first A) locate the shares to be borrowed. B) do all of these. C) check to see if the customer already owns the shares. D) have the customer deposit funds sufficient the cover the potential loss. Explanation

a. locate the shares to be borrowed

Tools available to the Federal Reserve Board (FRB) include A) open-market operations, setting the discount rate, and setting reserve requirements. B) setting the discount rate, enacting tax laws, and setting the Fed funds rate. C) setting the Fed funds rate, setting the prime rate, and setting the discount rate. D) open-market operations, setting the discount rate, and enacting tax laws.

a. open-market operations, setting the discount rate, and setting reserve requirements

The Federal Reserve Board (FRB) can have an impact on the money supply utilizing all of the following except A) raising or lowering the prime rate. B) buying and selling government securities in the open market. C) raising or lowering the reserve requirement. D) raising or lowering the discount rate.

a. raising or lowering the prime rate

All of the following are part of Financial Industry Regulatory Authority (FINRA)'s manual regarding employee conduct and reportable events except A) Sales Practice Code. B) Conduct Rules. C) Code of Arbitration Procedure. D) Uniform Practice Code (UPC).

a. sales practice code

The ask price represents A) the price the broker-dealer is willing to sell for. B) one of the prices set by FINRA. C) one of the prices set by the SEC. D) the price the broker-dealer is willing to buy for.

a. the price the broker-dealer is willing to sell for

ABC currently has the following quotes: Market Maker Bid Ask Size MM1 10.00 10.50 3 × 2 MM2 10.20 10.45 4 × 3 MM3 10.25 10.60 3 × 2 The inside bid good is for A) 200 shares. B) 300 shares. C) 400 shares. D) 100 shares.

b. 300 shares

A company offers to repurchase outstanding debt securities it has issued directly from its bondholders for cash in what would commonly be known as A) a hostile takeover. B) a tender offer. C) an acquisition. D) a buy back.

b. A tender offer

The trade would need to be placed in a discretionary account if the registered representative chooses which of the following? I. The time of execution of the trade II. Which security to buy III. How much of the security to buy IV. At what price to execute the trade A) II and IV B) II and III C) I and II D) I and IV

b. II and III

Your customer, Cleveland Brown, would like you to be able to place trades in his account as and when you think best. In order to trade on a discretionary basis in Mr. Brown's account, you will need authorization from which of these? I. FINRA II. A principal III. The customer IV. State administrator A. I and II B. II and III C. I and III D. I and IV

b. II and III

Which of the following economists is considered a supporter of a demand-side economics? a. Adam Smith b. John Maynard Keynes c. Arthur Laffer d. Milton Friedman

b. John Maynard Keynes

With a discretionary account A) a full power of attorney is needed on file to grant discretion. B) the customer may still enter orders. C) the customer may refuse any trades done by the party given the discretion. D) churning is permitted by the party given the discretion.

b. The customer still enters the order

Which of the following is the rate of interest charged by the Federal Reserve Bank (FRB) for short-term loans to its member banks? A) The broker call loan rate B) The discount rate C) The federal funds rate D) The prime rate

b. The discount rate

The ask price represents A) one of the prices set by FINRA. B) the price the broker-dealer is willing to sell for. C) the price the broker-dealer is willing to buy for. D) one of the prices set by the SEC.

b. The price the broker-dealer is willing to sell for

In a 20% stock dividend, what happens to the number of shares and the share price? A) The share price goes up, and the number of shares goes up. B) The share price goes down, and the number of shares goes up. C) The share price goes up, and the number of shares goes down. D) The share price goes down, and the number of shares goes down.

b. The share price goes down, and the number of shares goes up.

Your client, Ann Porter, likes fast cars and has been saving for a high-end Italian sports car. She recently saw a report that said the dollar was likely to drop in the near future. She is concerned that this might affect her plans to buy her dream car next year. You tell her A) she should not waste her money on a fancy car. B) yes, it will likely cost her more to buy the car if the dollar drops. C) yes, it will likely cost her less if the dollar drops. D) no, it should have no impact on her plans at all.

b. Yes, it will likely cost her more to buy the car if the dollar drops

An individual who purchases securities for a personal account is called A) an accredited investor. B) a retail investor. C) an institutional investor. D) a market maker.

b. a retail investor

All of the following are associated with being a carrying firm except A) being able to clear customer transactions. B) being a fully disclosed firm. C) accepting customer funds. D) accepting customer securities.

b. being a fully disclosed firm

A broker-dealer that executes trades and settles transactions for another broker-dealer is called A) a fully disclosed firm. B) a carrying firm. C) a limited broker-dealer. D) an introducing firm. Explanation

b. carrying firm

Accusations of Financial Industry Regulatory Authority (FINRA) Conduct Rule violations will heard and handled under the A) Code of Arbitration Procedure. B) Code of Procedure. C) Uniform Practice Code. D) Uniform Securities Act.

b. code of procedure

The authorities delegated to FINRA by the SEC include all of these except A) establishing testing and standards for associates of broker-dealers. B) establishing initial margin requirements. C) investigating complaints. D) establishing membership requirements.

b. establishing initial margin requirements

Should a member firm or an associated person be found in violation of Financial Industry Regulatory Authority (FINRA)'s Conduct Rules, a number of sanctions may be imposed. However, under the Code of Procedure, FINRA may not A) issue a fine to a member firm or associate. B) impose a prison sentence on the violator. C) censure the violator. D) bar an associated person from the industry forever.

b. impose a prison sentence on the violater

Selling shares not yet borrowed or located to be borrowed is A) known as a short sale and is prohibited. B) known as a naked short sale and is prohibited. C) known as closing a position with a sale and is prohibited. D) known as closing a short sale with a purchase.

b. known as a naked short sale and is prohibited

When a broker-dealer maintains an inventory in a particular stock and trades that the stock in the OTC market. It is acting as a. an agent b. a market maker c. a broker d. an underwriter

b. market maker

The Municipal Securities Rulemaking Board (MSRB) does not regulate A) the trading of state or local municipal securities. B) municipalities issuing municipal securities. C) the underwriting of municipal securities. D) the writing of municipal securities rules and regulations.

b. municipalities issuing municipal securities

Your client, Jane Anderson, has owned QRS for a few years but has now turned bearish on QRS. What transaction would you recommend? A) Buy QRS to open B) Sell QRS to close C) Buy QRS to close D) Sell QRS to open

b. sell QRS to close

Your client, Dan Brown, believes that the Seabird Coffee Company's shares are significantly overvalued and will soon drop sharply in value. In order to profit from this drop, he could A. buy calls on Seabird common stock. B. sell Seabird shares short. C. sell Seabird shares long. D. sell puts on Seabird common stock.

b. sell Seabird shares short

A customer has a significant amount of money in bank deposit accounts: $225,000 in a savings account titled in the customer's name; $240,000 in a checking account titled jointly with a spouse; and $100,000 in an account where the customer is custodian for a grandchild. Should that bank fail, the Federal Deposit Insurance Corporation (FDIC) insurance would cover A) $225,000 for the savings account, $100,000 for the custodial account, and nothing for the checking account. B) the entire $565,000. C) a total of $250,000, divided proportionately among the three accounts. D) $250,000 for the savings and checking accounts and $100,000 for the custodial account.

b. the entire $565,000 *FDIC provides deposit insurance guaranteeing the safety of a depositor's accounts in member banks up to $250,000 for each deposit ownership category in each insured bank.

Your customer calls and requests that you purchase 300 shares of Seabird Coffee Company. He recently read an article online about the company's new collaboration with Sorag coffee makers and likes the prospects of Seabird. This is an example of a. a solicited trade b. an unsolicited trade c. a discretionary trade d. a suggested trade

b. unsolicited trade

The monthly unemployment figure is considered a A) leading indicator. B) dragging indicator. C) coincident indicator. D) lagging indicator.

c. Coincident Indicator

If an associated person is barred from the securities industry, which of the following is true? A) The individual may never associate with another member for life. B) The individual may still be employed as a paid adviser to a member firm. C) The individual may associate with another member firm with SEC permission. D) The individual may still serve as an officer or director of a member firm but have no sales function.

c. The individual may associate with another member firm with SEC permission

An investor with no existing positions in MMS stock sells 100 shares. This is A) a long bearish position. B) a long bullish position. C) a short bearish position. D) a short bullish position.

c. a short bearish position

Under Financial Industry Regulatory Authority (FINRA)'s Code of Procedure, which of the following is not a sanction that could be imposed against a firm or registered person? A) Monetary fine for a firm, principal or registered representative B) The barring of an associated person from the industry C) Jail sentence for an associated person of the firm D) Suspension of FINRA membership

c. jail sentence for an associated person of the firm

Systematic risk is A) may be significantly reduced by diversification within an asset class. B) associated with equity investments. C) not reduced by diversification within an asset class. D) associated with debt instruments.

c. not reduced by diversification within an asset class

To fill a customer buy order OTC, your broker requests a quote from a market maker. That dealer responds, "15 bid, ask 15 1⁄4". If the trade order is entered, the market maker must A. sell the shares for $15. B. buy the shares for $15. C. sell the shares for $15.25. D. buy the shares for $15.25.

c. sell the shares for $15.25 *This order is to buy, so the market maker is selling. The customer sells at the bid price. With this quote, the market maker is committing to selling at the ask price of $15.25.

If an associated person is barred from the securities industry, which of the following is true? A) The individual may never associate with another member for life. B) The individual may still serve as an officer or director of a member firm but have no sales function. C) The individual may associate with another member firm with SEC permission. D) The individual may still be employed as a paid adviser to a member firm.

c. the individual may associate with another member firm with SEC permission

Where on a balance sheet would you find the estimated value of a retail company's inventory? A) Fixed assets B) Current liabilities C) Net worth D) Current assets

d. Current assets

A customer owns 1,000 shares of stock subject to a 2:3 reverse stock split. The position will now consist of A) more shares worth more per share with an increased net position value. B) more shares worth less per share with the same net position value. C) fewer shares worth less per share with a decreased net position value. D) fewer shares worth more per share with the same net position value.

d. Fewer shares worth more per share with the same net position value

Shares held in electronic form at a clearing house under a broker-dealers account are A) in trust name. B) held in safe keeping. C) are in custodial name. D) held in street name.

d. Held in a street name

An investor owning 500 shares of stock worth $40 per share receives notice that the stock will undergo a split. When the split is completed, the investor owns 400 shares of stock worth $50 per share. The split must have been I. a forward split. II. a reverse split. III. an uneven split. IV. an even split. A) I and IV B) I and III C) II and IV D) II and III

d. II an III

An investor receives a quote of 32-32.15 for XYZ common stock. Which of these is correct? I. Purchasing the stock will cost $32 per share. II. Purchasing the stock will cost $32.15 per share. III. The spread is $.15. IV. The investor will receive $32.15 per share if selling. A) III and IV B) I and IV C) I and III D) II and III

d. II and III

Ms. Chiang executes a trade to purchase 100 shares of ABC Corporation common in her cash account on Thursday, June 30. Cash must be in her account sufficient to pay for the trade by the close of business on a. July 1. b. July 2. c. July 4. d. July 5.

d. July 5

economic indicator that tends to change direction following a change in the direction of GDP is a A) coincident indicator. B) flagging indicator. C) leading indicator. D) lagging indicator.

d. Lagging Indicator

Which of the following regarding monetary or fiscal policy is true? A) Fiscal policies are governmental budget decisions enacted by the Federal Reserve Board (FRB). B) Fiscal policies are the actions taken by the president and Congress to regulate the amount of money consumers will be able to borrow. C) Monetary policy refers to the actions that Congress takes when it attempts to influence the money supply. D) Monetary policy is what the Federal Reserve Board (FRB) engages in when it attempts to influence the money supply.

d. Monetary policy is what the Federal Reserve Board (FRB) engages in when it attempts to influence the money supply

Which of the following is not part of the secondary markets? A) The exchanges B) Over-the-counter market C) Third market D) Mutual fund market

d. Mutual Fund Market

Required minimum distributions (RMDs) for IRAs must begin by A) prior to the year the participant turns 70½. B) the year after the participant turns 59½. C) prior to the year the participant turns 59½. D) the year after the participant turns 72.

d. The year after the participant turns 72

Which of the following is an acceptable investment for an IRA? A) A collection of medieval manuscripts and art B) Gold coins minted in Switzerland but sold in the U.S. C) A universal variable life insurance contract D) A mutual fund specializing in speculative bonds

d. a mutual fund specializing in speculative bonds

Your client, Mary Quinn, wants to place an order to sell a stock in her portfolio when the current price is 45, but she is only willing to sell if she can sell for at least 47. Which order should she place? A) A sell stop order B) A market order C) A sell stop limit order D) A sell limit order

d. a sell limit order

The transfer agent for a corporation is responsible for each of the following except A) canceling old and issuing new certificates. B) maintaining records of ownership. C) ensuring that its securities are issued in the correct owner's name. D) acting as an intermediary between the buy and sell sides of a transaction.

d. acting as an intermediary between the buy and sell sides of a transaction

Dewey Cheatham, a registered representative for Great Plains Securities, was found by the SEC to have committed fraud by stealing from the accounts of several elderly customers of the firm. The SEC has also found that Great Plains was negligent in its supervision of Dewey. The SEC might take all of these actions against Great Plains Securities except A) fine. B) suspend. C) censure. D) arrest.

d. arrest

All of the following are true for a designed market maker except a. is a member of the exchange b. is charged with maintaining a fair and orderly market c. maintains an inventory of the assigned stock d. guarantees the customer will get a profitable trade

d. guarantees the customer will get a profitable trade

The Federal Reserve pursues its dual mandate through A) economic policy. B) trade policy. C) fiscal policy. D) monetary policy.

d. monetary policy

Your customer places a trade to buy $1,000 shares of Seabird Airlines at a limit of 32 FOK. When the order reaches the floor of the exchange, there are 500 shares available to buy at 32. What is the likely outcome of the trade? a. 500 shares filled, 500 share orders remain until filled of canceled at the end of the day b. 500 shares filled, the rest of the order is canceled c. 500 shares filled at 32,500 at the market d. order canceled, nothing done

d. order canceled, nothing done

All the following are leading indicators except A) stock prices. B) the money supply. C) new orders. D) personal income.

d. personal income

All of the following are self-regulatory organizations (SROs) in the securities industry that are accountable for enforcing federal securities laws, as well as supervising securities practices within an assigned jurisdiction, except A) the MSRB. B) the CBOE. C) FINRA. D) the SEC.

d. the SEC *The SEC is the securities industry's primary regulator body, not a self regulatory organization

The consumer price index is a measure of A) the change in bond yields. B) the change in economic output. C) the change in the value of equities. D) the change in prices.

d. the change in prices

When an investor is long a stock, a. the investor is bearish b. buying the stock in the secondary market will close the position c. there is limited gain potential d. the investor is bullish

d. the investor is bullish

Which of the following best describes how a sell stop at 39 order would be filled? A) The next price above 39 after the market rises to 39 B) The next price below 39 after the market falls to 39 C) The next available price after the market price rises to 39 D) The next available price after the market price falls to 39

d. the next available price after the market price falls to 39

Which of the following best describes how a buy stop at 39 would fill? A) The next price below 39 after the market price falls to 39 B) The next available price after the market price falls to 39 C) The next price above 39 after the market price rises to 39 D) The next available price after the market price rises to 39

d. the next available price after the market price rises to 39