Kaplan Q's 1
Which of the following statements is correct concerning the pricing of American depositary receipts (ADRs)? A. ADR pricing is dollar-based and fluctuates throughout the day. B. ADR pricing is dollar-based using an end of day net asset value (NAV). C. ADR pricing is dollar-based using an end of day public offering price (POP). D. ADRs are priced in foreign currency.
A. ADR pricing is dollar-based and fluctuates throughout the day.
Portfolio diversifying might be used to reduce which of the following risks? A. Business risk B. Inflation risk C. Interest-rate risk D. Market risk
A. Business risk
Which of the following sets of FINRA rules focuses on how member violations will be handled? A. Code of Procedures B. Uniform Practice Code C. Conduct Rules D. Code of Arbitration
A. Code of Procedures
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 II C. I and IV D. II and IV
A. II and III
Which of the following are true regarding mutual fund sales charges? I. They are used to defray fund expenses, such as operating costs and salaries. II. They are set by the fund's transfer agent. III. They are not an expense to the fund, but to the investor. IV. They are used to compensate the fund's underwriter and sales representatives. A. III and IV B. I and II C. I and IV D. II and III
A. III and IV
All of the following are stages of money laundering except A. Initiation B. layering C. integration D. placement
A. Initiation
Which of the following is true for mutual funds and those who invest in them? A. Investors must be provided with specific information when purchasing mutual funds. B. All securities purchases entail risk, which is the only disclosure that need be made for mutual funds. C. There are no disclosure requirements regarding information to investors for mutual funds. D. Mutual fund investors are required to attest that they have researched the securities in a portfolio before purchasing a fund's shares.
A. Investors must be provided with specific information when purchasing mutual funds.
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 eployees
Which of the following sell transactions is not subject to the holding period restriction specified in SEC Rule 144? A. Stock acquired in the OTC market by a corporate affiliate B. Unregistered stock acquired by a corporate affiliate in a stock option program C. Stock acquired by a corporate affiliate in a private placement D. Unregistered stock acquired by a nonaffiliate under an investment letter
A. Stock acquired in the OTC market by a corporate affiliate
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 be employed as a paid adviser to a member firm. D. The individual may still serve as an officer or director of a member firm but have no sales function.
A. The individual may associate with another member firm with SEC permission.
In a 20% stock dividend, what happens to the number of shares and the share price? A. The share price goes down, and the number of shares goes up. B. The share price goes up, 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.
A. The share price goes down, and the number of shares goes up.
An issuer that is already a publicly traded company wants to register new securities without selling any of the shares until later when it anticipates it will be retooling all of its existing manufacturing plants. Which of the following applies? A. This can be accomplished by utilizing a shelf registration specifically designed to register shares presently to be sold later. B. This can be accomplished by utilizing a new initial public offering, which is necessary for registration of all new shares. C. This cannot be done because newly registered securities must be made available for sale immediately. D. This can be accomplished by utilizing an additional issue offering, which is specifically for publically traded companies wanting to register new shares to be issued later.
A. This can be accomplished by utilizing a shelf registration specifically designed to register shares presently to be sold later.
Records of advertising, customer confirmations, customer order tickets, and U-5 forms need to be retained for how many years? A. Three years B. Six years C. Four years D. Five years
A. Three years
Of the following strategies, which is considered most risky in a strong bull market? A. Writing calls B. Buying puts C. Buying calls D. Writing puts
A. Writing calls
The violation of selling mutual fund shares just below the point where the customer would qualify for lower sales charges and not informing the customer that they may qualify for lower sales charges is A. a breakpoint sale. B. supporting. C. pegging. D. capping.
A. a breakpoint sale.
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. a wash sale. B. pegging. C. marking the close. D. matched orders.
A. a wash sale.
Records relating to a Currency Transaction Report (CTR) must be retained for A. five years. B. three years. C. six years. D. four years.
A. five years.
Your client has $50,000 to invest. His objective is a lifetime monthly income that he can receive after he retires. Part of his customer profile stresses that he has had uncomfortable experiences in the past with the stock market and is not inclined to invest in anything that is subject to market fluctuations, opting for principal protection instead. Based on the client's profile, which of the following would be the best recommendation? A. Fixed annuity B. Variable annuity C. Mutual fund portfolio consisting of blue-chip stocks D. treasury bond fund
A. fixed annuity
If long one equity call option, the owner A. has the right to purchase 100 shares of the underlying stock. B. incurs an obligation to sell 100 shares of the underlying stock. C. has the right to sell 100 shares of the underlying stock. D. incurs an obligation to purchase 100 shares of the underlying stock.
A. has the right to purchase 100 shares of the underlying stock.
With CDT stock at 42, a September 40 call trading at 3 is A. in the money by 2 points B. in the money by 3 points C. out of the money by 2 points D. at the money
A. in the money by 2 points when a calls strike price is lower than the underlying stocks value, the call contracts in the money. the amount it is in the money is the difference between the 2-2 points (42-40)
All of the following are true of a revocable living trust except A. its primary purpose 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. its primary purpose is to avoid estate taxes for the grantor.
Which of the following risks is the risk that congress could change the laws and negatively impact a particular company or industry? A. Legislative risk B. Sovereign risk C. Regulatory risk D. Political risk
A. legislative Risk
A secured debt security can be backed by a corporation's A. manufacturing facilities. B. business reputation. C. financial stability. D. credit rating.
A. manufacturing facilities.
An investor has just received stock rights in the mail allowing the purchase of 250 shares of a stock offering at a discount. With these rights, the investor may take any of the following actions except A. purchase 125 shares at double the discount. B. sell the rights for a portion of their value. C. sell some rights and let the rest expire unexercised. D. exercise some rights and sell the rest.
A. purchase 125 shares at double the discount.
The rate on an adjustable preferred stock would most likely be indexed to A. the Treasury bill (T-bill) rate. B. the Producer Price Index (PPI). C. the Consumer Price Index (CPI). D. the Dow Jones Industrial Average (DJIA).
A. the Treasury bill (T-bill) rate.
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 or entity that the shares will be borrowed from. C. the purchaser of the securities being sold short. D. the customer who wants to sell short.
A. the broker-dealer on behalf of the short-selling customer.
A hedge fund portfolio has been characterized as being highly leveraged. This means that A. there is substantial borrowing or purchasing on margin. B. commodities and currencies are included in the portfolio. C. there are substantial investments in international markets. D. derivative products such as options are utilized.
A. there is substantial borrowing or purchasing on margin.
ABC has the following recorded on its balance sheet: Current Assets $50,000 Fixed Assets $100,000 Notes Payable $40,000 Accounts Payable $25,000 ABC's net worth is: A. $35,000 B. $85,000 C. $110,000 D. -$35,000
B. $85,000
ABC currently has the following quotes: BID 10.00 10.20 10.25 ASK 10.50 10.45 10.60 SIZE 3X2 4X3 3X2 what is the spread in ABC? A. 0.30 B. 0.20 C. 0.50 D. 0.25
B. 0.20
Commercial paper issued by corporations can have maturities as short or as long as A. 1 month or 3 months. B. 1 day or 270 days. C. 30 days or 360 days. D. 1 month or 6 months.
B. 1 day or 270 days.
Updates to the Form U4 such as a change in address, and that do not point to disciplinary action must be made promptly but no later than A. 60 days. B. 30 days. C. 10 business days. D. 90 days.
B. 30 days.
Which of the following statements is the most correct regarding customer accounts? A. Cash accounts need to be approved by a principal promptly after the first trade. B. A customer may open both a cash and margin account at the same time. C. Hypothecation agreements are required for joint cash accounts only. 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 at the same time.
Which of the following are true of Roth IRAs but not Traditional IRAs? A. Anyone with income may contribute. B. Distributions are not required after reaching 72. C. Contributions are typically deductible. D. Distributions are required after reaching 72.
B. Distributions are not required after reaching 72
A bond having an 8% coupon is selling with an 8.25% yield to maturity. Which of the following statements are true? I. Nominal yield is higher than yield to maturity (YTM). II. Current yield is higher than nominal yield. II. Nominal yield is lower than yield to maturity (YTM). IV. Current yield is lower than nominal yield. A. I and IV B. II and III C. I and III D. II and IV
B. II and III
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 would be filled immediately because the market price is already above 42 B. The order can only be filled at a price of 42 or lower C. The order would be filled between when the stock price is between 42 and 45 D. The order would be filled at the next available price after the stock price drops to 42
B. The order can only be filled at a price of 42 or lower
If a bond is trading at a discount, which of the following rates is correctly ranked from high to low? A. Nominal yield, yield to maturity, current yield, coupon rate B. Yield to call, yield to maturity, current yield, nominal yield C. Yield to call, current yield, nominal yield, coupon rate D. Coupon rate, current yield, yield to maturity, yield to call
B. Yield to call, yield to maturity, current yield, nominal yield
Your client, Soren Aland, buys a 4% XYZ corporate bond. If his current yield is 5%, he bought the bond at A. a premium. B. a discount. C. par. D. above par.
B. a discount.
When the Options Clearing Corporation (OCC) receives a notice to exercise, it will assign that notice to A. the party long the contract. B. a short broker-dealer. C. the party short the contract. D. a long broker-dealer.
B. a short broker-dealer.
All of the following information is required to be provided on the Form U-4 except A. 10-year employment history (including full- time education). B. education (degrees or designations). C. 5-year residency history. D. disclosure of criminal charges.
B. education (degrees or designations).
Automatic disqualification for registration from Financial Industry Regulatory Authority (FINRA) may occur if A. a DUI traffic violation is made by an associated person. B. misstatements are willfully made in an application for membership. C. an associated person has been charged with a felony in the past 10 years. D. an associated person has been charged with a felony in the past 5 years.
B. misstatements are willfully made in an application for membership.
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. more money flowing into the United States than out. C. other countries exporting more to the United States. D. the United States importing more than it exports.
B. more money flowing into the United States than out
All the following are lagging indicators except A. outstanding commercial loans. B. personal income. C. corporate profits. D. labor cost per unit of output.
B. personal income.
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.
B. segregate customer funds and securities from the firms' funds and securities.
An amended Form U-5 must be filed and a copy sent to the former employee within how many days of discovery of the inaccuracy? A. 25 B. 10 C. 30 D. 90
C. 30
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 fully disclosed introducing firm B. A depository trust C. A carrying firm D. An investment company
C. A carrying firm
Which of the following scenarios would not violate general standards regarding member firm communications? A. A customer is shown a brochure outlining how the use of stop orders completely prevents a customer from losing any money. B. A registered representative with a master's degree in astronomy notes that this is a benefit when choosing securities in the aerospace industry sector. C. A recruitment advertisement promises substantial training to be delivered to incoming employees. D. A graph exclusively showing penny stocks that have advanced in price more than 75% during each of the past three years is distributed to retail customers.
C. A recruitment advertisement promises substantial training to be delivered to incoming employees.
An investor in the United States is purchasing a security traded on a foreign securities exchange. The transaction on the exchange is priced in euros. The circumstances of this purchase and subsequent sale of the security exposes the investor to A. Business Risk B. financial Risk C. currency Risk D. liquidity risk
C. Currency risk
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. I and III B. III and IV C. II and III D. I and IV
C. II and III
Which of the following is a lagging indicator? A. Raw materials orders B. Increase in hours worked C. Increase in the consumer loans to personal income ratio D. Decrease in industrial production
C. Increase in the consumer loans to personal income ratio
Which of the following has the most liquidity risk? A. Listed REITs B. Treasury bonds C. Limited partnerships D. Stocks listed on NASDAQ
C. Limited partnerships
Reports of rising inventories generally occur during which period of the business cycle? A. Recovery B. Peak C. Contraction D. Expansion
C. contraction
An investor who has a short position in 500 shares of JKH common stock would eliminate that position by A. entering a closing sale order for 500 shares of JJK. B. entering an opening purchase order for 500 shares of JKH. C. entering a closing purchase order for 500 shares of JKH. D. entering a closing purchase order for 500 shares of ABC.
C. entering a closing purchase order for 500 shares of JKH
All of the following are true of negotiable commercial paper except A. it is considered a money market instrument B. it has a maximum 270-day maturity C. it is typically issued by banks D. the issuers typically have strong credit ratings
C. it is typically issued by banks
All of the following are true regarding customer account statements except A. customer statements must be sent at least quarterly, activity, or not B. customers must be alerted to report any inaccuracies or discrepancies promptly. C. monthly statements need to be sent if the account activity is the receipt of interest or dividends D. customer statements containing penny stocks must be sent monthly, even if no activity occurred in the account
C. monthly statements need to be sent if the account activity is the receipt of interest or dividends
Real estate investment trusts (REITs) A. pay interest payments to investors and pass through all gains or losses B. pay dividends but do not allow for the pass through of gains for losses C. pay dividends and pass gains through to investors but not losses D. pass through losses only to investors but not gains
C. pay dividends and pass gains through to investors but not losses
A customer investing in common equity securities could realize all of the following except A. potential capital appreciation. B. potential hedge against inflation. C. protection of principal investment. D. current income via dividend declarations.
C. protection of principal investment.
To contract the overall economy, the Federal Reserve Board (FRB), acting as agent for the U.S. Treasury department, will A. sell securities via open-market operations, pushing interest rates down. B. buy securities via open-market operations, pushing interest rates up. C. sell securities via open-market operations, pushing interest rates up. D. buy securities via open-market operations, pushing interest rates down.
C. sell securities via open-market operations, pushing interest rates up.
Your customer has purchased $10,000 in U. S. Treasury bonds. These securities A. are required to be delivered in the form of physical paper certificates. 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. cannot be delivered in physical certificates because they exceed the amount for paper certificate delivery
C. will have evidence of ownership recorded in book-entry form.
The sales charge for Class A shares may not exceed A. 6.25% of the NAV of the shares purchased B. 8.5% of the NAV of the shares purchased C. 6.25% of the total investments D. 8.5% of the total investments
D. 8.5% of the total investments
Your client Harry Swenson is very frugal. He feels like mutual funds have too many expenses, and he doesn't believe over a long period of time that the active management of investment advisors can outperform their respective bench marks. He likes the idea of a pooled investment in the stock market rather than picking individual stocks on his own. Which of the following types of investments should you recommend? A. A closed-end fund B. An exchange-traded note (ETN) C. An open-end fund D. An exchange-traded fund (ETF)
D. An exchange-traded fund (ETF)
A registered representative has left a firm and joined another. The new firm must obtain a copy of the Form U-5 filled out by the old firm. Where might the new firm obtain a copy of the form? I. From the new employee II. From the Securities and Exchange Commission (SEC) III. From Financial Industry Regulatory Authority (FINRA)'s Central Registration Depository (CRD) IV. From the representative's former employer A. II and III B. II and IV C. I and IV D. I and III
D. I and III
Which of the following offerings is most likely exempt from the registration requirements of the Securities Act of 1933? A. Additional public offerings (APOs) B. Initial public offerings (IPOs) C. Shelf offerings D. Private (nonpublic) securities offerings
D. Private (nonpublic) securities offerings
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 is not a prohibited activity? A. Matched orders B. Churning C. Freeriding D. Short Selling
D. Short Selling
All of the following actions would cause the NAV per share of a mutual fund to decrease except A. the fund distributes capital gains. B. liabilities increase. C. the fund distributes dividends. D. a large number of shareholders make withdrawals from the fund.
D. a large number of shareholders make withdrawals from the fund.
A registered representative has a customer who is interested in using options strategies such as spreads and straddles. The registered representative's firm does not offer options transactions as part of their existing business model. As such, the registered representative directs the customer to another broker-dealer that allows for option trading. This is A. an example of selling away. B. an example of placing away. C. a private securities transaction. D. an acceptable practice.
D. an acceptable practice.
T-notes are delivered in A. registered as to principal only form. B. bearer form. C. physical certificates. D. book entry
D. book entry
The risk that all or a significant portion of the sum invested might be lost is known as A. call risk. B. market risk. C. purchasing power risk. D. capital risk.
D. capital risk
Should a registered representative enter into a private securities transaction that would entail earning compensation, the employing member will A. provide all execution services for the transaction. B. require a compensation split of least 50-50 with the associated person. C. not require any notification because the compensation makes the transaction the responsibility of the accommodating firm. D. have the opportunity to approve or disapprove of the associated person's participation.
D. have the opportunity to approve or disapprove of the associated person's participation.
All of the following regarding a trust set up for the purpose of holding commercial property, or mortgages on commercial property, are true except A. ownership of these shares may provide for the receipt of dividends. B. gains can pass through to the owners of these shares. C. these investments could not be considered open- or closed-end funds. D. investors may never purchase shares in these trusts on an exchange or over-the counter (OTC).
D. investors may never purchase shares in these trusts on an exchange or over-the counter (OTC).
A luxury tax that consumers must pay that is levied on nonessential items of a certain value or more is an example of A. regulatory risk. B. consumer risk. C. political risk. D. legislative risk.
D. legislative risk.
which of these is an equity security? A. Debentures B. mortgage bonds C. municipal bonds D. preferred stock
D. preferred stock
Jackson Raleigh a registered representative in Memphis, TN, has a client that is a pension fund manager for the Tiger Pension Fund. Mr. Raleigh creates several flyers of informational literature about the funds available in the Tiger Pension Fund and emails them to the fund manager so that the fund manager can print copies of the flyers and make them available to the participants in the pension fund. Financial Industry Regulatory Authority (FINRA) would classify these flyers as A. correspondence. B. sales literature. C. institutional communications. retail communications.
D. retail communications.
All of the following are true regarding breakpoints for mutual funds except A. breakpoints must be disclosed to potential investors. B. a breakpoint sale is considered to be a sale just below a breakpoint. C. the greater the investment, the lower the sales charge. D. the first breakpoint investors can achieve is mandated by industry rule to be at the $10,000 investment threshold.
D. the first breakpoint investors can achieve is mandated by industry rule to be at the $10,000 investment threshold.
An investor asks for a copy of mutual funds Statement of Additional Information (SAI). The request must be satisfied within A. five calendar days, with a fee for postage permissible. B. three business days, with a fee for postage permissible. C. five calendar days, free of charge. D. three business days, free of charge.
D. three business days, free of charge.