Chapter 19 Mastery Progress Exam
On October 25, Mr. Smith purchased 5 listed XYZ Corporation July 50 calls and paid a $3 premium on each call. The current market price of XYZ Corporation is $48 per share. According to SRO rules, when will the calls expire?
10:59 p.m. Central Time, 11:59 p.m. Eastern Time on the third Friday of the month
When a firm's customer exercises a call option, the firm will submit an exercise notice to the Options Clearing Corporation. The Options Clearing Corporation, in turn, will select a firm to receive the exercise notice based on:
A random selection basis
Which of the following circumstances is NOT a reason for rejecting a municipal bond delivery?
A sudden change in market value
A transaction for a stock that is not DTCC eligible, settles on a regular-way basis. This means that settlement occurs: I. In two business days II. In four business days III. At the buyer's premises IV. At the seller's premises
I and III only
A customer owns stock of a corporation that has declared a $1 dividend to holders of record Monday, December 22. If the customer wants to sell the stock, but still be entitled to the dividend, he should sell the stock on: I. Wednesday, December 17, regular-way settlement II. Friday, December 19, regular-way settlement III. Monday, December 22, cash settlement IV. Tuesday, December 23, cash settlement
II or IV
An investor writes an S&P 500 Index option. If the option is exercised, the writer would:
Pay the cash difference between the closing index value and the exercise price
Which of the following methods is used by the Options Clearing Corporation in assigning exercise notices?
Random selection
A cash trade would settle:
On the trade date
Regular-way settlement for equity options is normally completed within:
One business day after the trade date
The settlement date between the Options Clearing Corporation and the clearing firm for options transactions is:
One business day from the trade date
Which of the following systems is used to report information on the origination, transmittal, and execution of an equity security?v
The Order Audit Trail System (OATS)
On the ex-date of a cash dividend, the subject security would be:
Reduced by the amount of the dividend
A customer, who is going on vacation, enters a GTC order to buy a stock. The order is executed. The customer tells the registered representative that he wants the stock but will not return in time to pay for the security by the payment date. The customer states he will send in a check a few days late. The registered representative should:
Request an extension
A customer buys $10,000 worth of stock in a cash account. Two business days after the transaction settles, the customer calls the broker and tells the broker he does not have sufficient funds to pay for the stock. The brokerage firm will:
Sell him out and freeze the account according to Regulation T of the FRB
A customer has sold stock, but he has failed to complete the transaction by delivering the securities. The latest date on which the broker-dealer may buy in the securities is:
Ten business days from the settlement date
Which of the following situations requires a DK (don't know) notice?
The firms disagree on the amount of shares in the trade
A client buys 100 shares of XYZ Corporation at $27 per share and writes an XYZ October 30 call at a $3 premium.The XYZ Corporation 30 call option will expire on:
The third Friday of October
Equity options expire on:
The third Friday of the expiration month at 11:59 p.m. Eastern Time
Listed equity options cease trading at:
4:00 p.m. Eastern Time on the expiration date
In a Delivery Versus Payment (DVP) and Receive Versus Payment (RVP) account, which of the following is required?
A form identifying the third-party agent for the client
A due bill is used if a trade occurs:
Before the ex-dividend date, with delivery made after the record date
The Board of Directors of a corporation is responsible for establishing all of the following dates, EXCEPT the:
Ex-date
A stock trades ex-dividend on Monday the 20th. What is the last day an investor can purchase the stock and be entitled to the dividend?
Friday the 17th
A U.S. Treasury bill is sold in the secondary market on Thursday, March 14. It has a regular-way settlement of:
Friday, March 15
On Tuesday May 1, XYX Corporation's Board of Directors announced a dividend payable on Friday, May 25 to stockholders of record on Monday, May 14. The ex-dividend date is:
Friday, May 11
On Thursday October 7th, a customer purchases 1,000 shares of stock which is listed on the NYSE. The trade would settle on:
October 11th
A customer purchases a security in a foreign market. The settlement date is determined by the:
Regulatory authority in the foreign market
Which of the following is NOT considered a don't know (DK) trade?
The buyer is suspicious of insider trading
A broker-dealer receives a confirmation for a trade that does not appear on its records. The broker-dealer should send a DK notice to:
The contrabroker
One hundred shares of DPM are bought on Nasdaq on Tuesday, July 3 for cash. When does the trade settle?
Tuesday, July 3
When purchasing a new issue of stock in a cash account, when must payment be made under Reg. T?
Two business days after the settlement date
If a broker-dealer is assigned an exercise notice on Monday, May 2, on what day will the called stock settle?
Wednesday, May 4
The record date of a company's cash dividend is Thursday, October 7. Before what date must a customer purchase this company's stock to be entitled to receive the dividend?
Wednesday, October 6
Which of the following is considered a TRACE-eligible security?
A U.S. government bond
The process of a customer instructing his bank to deliver cash when securities are received from the clearing firm, is referred to as:
Delivery versus Payment (DVP)
Which of the following choices is not a good delivery in the sale of 500 shares of common stock?
Four fifty-share certificates and ten 30-share certificates
Regarding exchange-traded options, all of the following statements are TRUE, EXCEPT:
Option trades settle on the second business day (T + 2).
If an equity option is exercised, when is the settlement date for the stock transaction?
Within two business days
