Exam 12.5

On September 1, an investor sold 100 shares of KLP Corporation common stock for a loss of $1 per share. On September 15, he purchased a KLP convertible bond with a conversion price of $40. How much of the original loss may he now declare for tax purposes? A) $40. B) $100. C) $75. D) He may not declare any loss.

$75.

A customer purchases 200 shares of ABC Health Care at $60 per share and meets the initial margin requirement. If ABC announces an acquisition and its stock appreciates on the news to $75, how much cash can the customer withdraw after this market move? A) 1000. B) 0. C) 1500. D) 3000.

1500.

A customer buys a 20-year 7% bond on a 7.35 basis. The bond is callable in 6 years at 103, in 8 years at 102, in 10 years at 101, and at par beginning in the 12th year. The customer's confirm will show yield to the: A) 6-year call. B) 12-year put. C) 20-year maturity. D) 10-year call.

20-year maturity.

If a customer buys 100 XYZ at 49 and writes 1 XYZ Nov 50 call, receiving $350 in premiums, the breakeven point is: A) 45.5. B) 46.5. C) 53.5. D) 52.5.

45.5

If a customer buys 300 ABC at 53 and writes 3 ABC June 55 calls at 4, and the contracts expire unexercised the customer's cost basis in ABC stock at expiration is: A) 49. B) 51. C) 53. D) 57.

53.

A customer invests $20,000 in a DPP and signs a recourse note for $50,000. During the first year of operation, the customer receives a cash distribution from the partnership of $15,000. At year end, the customer receives a K-1 statement reporting his share of partnership losses of $75,000. How much of the loss may the customer deduct from passive income? A) 35,000. B) 75,000. C) 0. D) 55,000.

55,000.

If the dollar weakens, which of the following statements is TRUE? A) Foreign securities denominated in their domestic currency decrease in value to the U.S. investor. B) A rise in U.S. interest rates might strengthen the dollar. C) The dollar buys more foreign currency. D) U.S. exports will fall.

A rise in U.S. interest rates might strengthen the dollar.

According to the multi-tiered market making system of NYSE Euronext, a Supplemental Liquidity Provider may: never compete with the specialist. make markets in NYSE listed securities from an off-floor location. never receive rebates of transaction fees from the exchange. make a one-sided market. A) II and III. B) I and III. C) I and IV. D) II and IV.

II and IV.

Trade reports made to the Consolidated Tape: include commissions. do not include commissions. include markups. do not include markups. A) I and IV. B) II and III. C) I and III. D) II and IV.

II and IV.

Which of the following market tiers are included in Nasdaq? Nasdaq Regional exchange-listed securities. Nasdaq Global Market. Nasdaq MidCap Market. Nasdaq Capital Market. A) I and III. B) II and IV. C) I and II. D) III and IV.

II and IV.

A customer tells a broker to buy 1,500 shares of ABCD at 33.60 immediately for the full 1,500 shares. This is a(n): A) good-till-canceled order. B) fill-or-kill order. C) immediate-or-cancel order. D) all-or-none order.

fill-or-kill order.

Which of the following would make an employee ineligible to participate in a company's qualified retirement plan? A) He is not a member of the company's management team. B) He has been with the company for only 2 years. C) He is only 20 years old. D) He works only 1,200 hours a year for the company.

He is only 20 years old.

A municipal bond dealer is making a bona fide quote. Which of the following statements regarding such a quote is TRUE? The quote must have a reasonable relationship to fair market value. The quote may take into consideration any anticipated market movement. The quote cannot represent an offer to sell bonds the dealer does not currently own. The quote need not be one that the dealer is prepared to act upon (buy or sell). A) I and II B) II and III C) I and IV D) III and IV

I and II

Arbitration and mediation are 2 services provided by FINRA to settle disputes between members. Regarding these services, which of the following statements are NOT true? Mediation is mandatory; arbitration is not. Arbitration always results in a binding decision; mediation may not. If arbitration is unsuccessful, the dispute moves on to mediation. A mediator in a dispute may not serve as an arbitrator in the same dispute. A) II and IV. B) II and III. C) I and IV. D) I and III.

I and III.

Under the Securities Act of 1933, the Securities and Exchange Commission has the authority to: issue stop orders regarding a new issue registration filing. approve new issues. review standard registration forms. guarantee the accuracy of the information contained in the registration forms. A) II and IV. B) I and IV. C) II and III. D) I and III.

I and III.

In February, a customer sells 1 GHI Oct 60 put for 3 and buys 1 GHI Oct 70 put for 11. If the customer closes the Oct 70 put before expiration, which of the following statements regarding the resulting profit or loss is TRUE? A) It cannot be determined from the information given. B) It is treated as ordinary income or loss. C) It is treated as a capital gain or loss. D) It depends on the disposition of the short Oct 60 put.

It is treated as a capital gain or loss.

Active government manipulation of the economy through tax and budget policies is referred to as: A) monetarist. B) supply side. C) Keynesian. D) soft landing.

Keynesian.

Which of the following terms or phrases does NOT apply to REITs? A) Dividends taxed at full ordinary income rates. B) Redeemable. C) Secondary market. D) Managed.

Redeemable.

When XYZ stock trades at 40 and an XYZ Oct 35 call trades at 5, which of the following is TRUE? A) The option is at-the-money. B) The option is out-of-the-money. C) The option's time value equals its intrinsic value. D) The time value is zero.

The time value is zero.

Which of the following securities underlies a yield-based option? A) Income bonds. B) Revenue bonds. C) Debentures. D) Treasury securities.

Treasury securities.

f a member firm suspends a registered representative, the member firm must report the suspension to the: A) state securities Commissioner. B) news media. C) designated examining authority. D) SEC.

designated examining authority.

A customer who has just started an IRA will be vested: A) in 5 years. B) immediately. C) at age 70. D) in 2 years.

immediately.

A workable indication for a block of municipal bonds is a: A) firm offer. B) likely bid. C) likely offer. D) firm bid.

likely bid.

In the sale of open-end investment company shares, the prospectus: A) must be delivered to the client either before or during the sales solicitation. B) must be delivered before the sales solicitation . C) must be delivered at, or before, the delivery of the fund share certificate. D) is not necessary.

must be delivered to the client either before or during the sales solicitation.

You observe that a yield curve that was previously flat is moving toward having short- term interest rates lower than long-term interest rates. This new yield curve is considered to be: A) breaking out. B) adverse. C) inverted. D) normal.

normal.

When a broker/dealer makes a market, it acts as a(n): A) agent. B) underwriter. C) broker. D) principal.

principal.

The Federal Reserve System is responsible for all of the following EXCEPT: A) conducting monetary policy. B) setting the prime rate. C) acting as a coordinator of the money supply. D) acting as an agent for the U.S. Treasury.

setting the prime rate.

All of the following characteristics regarding industrial development bonds (IDBs) are true EXCEPT: A) funds from the lease are used to pay the principal and interest on the bonds. B) the bonds are normally backed by the full faith and credit of the municipality. C) the bonds are issued by municipalities or other governmental units. D) the funds are used to construct a facility for a private corporation.

the bonds are normally backed by the full faith and credit of the municipality.

All of the following sources of revenue could be used to service general obligation debt EXCEPT: A) fines. B) user charges. C) sales taxes. D) ad valorem taxes.

user charges.