Quizes - #2

How much money may be used annually for k-12 education purposes within a Section 529 Plan?

$10,000

Which of the following types of retirement plans would be most beneficial to a young employee of a corporation?

defined contribution

The difference between par and a lower market price on a bond is called the:

discount

yield > coupon

discount

When an option is trading, all of the following are fixed EXCEPT

the premium

If the newspaper indicates that T-bill yields have gone down, this means that T-bill prices are:

up

Guaranteed cash value is a standard feature

whole life

When trading common stock, either at an exchange or over-the-counter, the typical size of the trading unit is:

100 shares

Which of the following statements regarding interest rates and price fluctuations of debt securities are TRUE?

Long-term prices fluctuate more than short-term prices. Short-term interest rates fluctuate more than long-term rates.

GMNA

$25,000 INT paid monthly backed by US treasury

fixed portfolio with high duration muni bonds aka

UIT

t notes

2-10 yr maturity

What is the conversion ratio of a convertible bond purchased at par value and convertible at $50?

20:1

An investor redeems 200 shares of ABC Fund, which has no redemption fee. If the quote is $12.05 bid $13.01 asked, what amount will the investor receive?

$2,410. INVESTOR RECEIVES BID (NAV)

ABC stock is quoted at 67.75 bid 67.85 ask. If an investor wishes to purchase one round lot from the broker-dealer, excluding commissions, the investor would pay:

$6,785.

defined contribution plans ex

- Money-purchase plans, - 401(k) plans - qualified profit-sharing plans

When comparing a short-term bond fund to a long-term bond fund, which of the following is generally true?

- The long-term fund has a higher yield. - The short-term fund is less volatile The longer a bond portfolio's average maturity, the greater the price of the fund will fluctuate when interest rates move up or down. To compensate investors for this risk, long term bonds will offer higher yields than those with shorter maturities.

credit risk

- default risk - danger of losing all or part of invested principal through default

Which of the following statements regarding Treasury bills are TRUE?

- sold at auction - mature at par

529 plans

- state imposes very high contribution limits - contributions may be subject to gift taxation - assets controlled by account owner

A customer has filed a serious complaint against your firm and is threatening to take the firm to court. When informed that he has signed a predispute arbitration agreement, he demands to see a copy of it. How many days does your firm have to supply the customer with a copy of the signed agreement upon receipt of his request?

10 days

A customer bought a bond that yields 6.5% with a 5% coupon. If the bond matures at this point, the customer will receive:

1025 Upon redemption of a bond, whatever current interest rates may be, the investor receives par ($1,000) plus the final semiannual interest payment ($25 in this case), for a total of $1,025.

A teacher has a 403(b) plan and the school system he works for has deposited $10,000 into his plan over a 12-year period. At retirement, if the teacher withdraws the total value of $16,000, on what amount does he pay tax?

16,000 - qualified plan, so whole thing is taxed at ordinary income

Which of the following would be considered money market instruments?

A Treasury bond with 11 months to maturity. A $200,000 negotiable certificate of deposit.

During the accumulation period of a variable annuity contract, an investor will receive which of the following?

A deferral of tax liability on investment income and capital gains earned in the separate account.

Which of the following is the safest from default risk?

AAA

An investor would like to make a long-term investment in a debt security whose duration is shorter than its maturity. Which of the following AAA rated bonds should his registered representative recommend?

ABC 8% ten-year bond maturing in five years. duration does not equal maturity - interest paying

Under what circumstances may an open-end investment company act as its own distributor?

If the fund is established under Section 12b-1.

investors redeem their mutual fund shares at the next calculated

NAV or bid

Which of the following stocks would be most affected by changes in interest rates?

Noncumulative preferred stock.

If a customer wishes to open a cash account, who must sign the new account form?

Only the principal.

Which of the following is a debt instrument that pays no periodic interest?

STRIPS

A customer buys a long-term, 10% Treasury bond with a current yield of 12% and holds the bond until one year before maturity. She sells the bond when the short-term T-bill rate is 8%. Which of the following statements are CORRECT?

The bond was purchased at a discount. The bond was sold at a premium.

Three 3% bonds are listed in the newspaper. One bond will mature in one year, another bond will mature in ten years, and the third bond will mature in 20 years. If interest rates are going up, which bond will have the greatest decrease in value?

The bond with the 20-year maturity. long term bonds have greatest int rate risk

An investor who works for the city is ready to retire. The city has operated a Section 457 plan for its employees, in which he has participated. What portion of his withdrawals will be taxable?

The entire amount 457 - deferred compensation plan

If an investment company has a fixed portfolio of municipal bonds with high duration, how will substantial changes in general interest rates affect the company's portfolio?

The market value will fluctuate significantly, but the investment income will remain stable. (bc they are fixed)

Which of the following statements regarding deferred compensation plans are TRUE?

They are available to employees selected by the employer. The employer does not receive a tax deduction for the deferred payment until actually made.

Which of the following income investments would be most suitable if interest rates were expected to increase sharply within the next two years?

Treasury bills. bc short maturity

An investor in Class B shares with a 7 year contingent deferred sales charge liquidates shares four years after purchase. The CDSC is:

deducted from next computed NAV when those shares are redeemed.

A company has negative operating revenues for the year. It would NOT be required to make interest payments on which of its following issues?

adjustable bonds

During a period of suspension, a member must:

be treated as a nonmember by other members.

corporate bond quoted as QRS Zr 20

bond pays no int til maturity zr = zero 20 = 2020 aka zero coupon bond maturing in 2020

Under which of the following circumstances is an investor in a position to acquire stock?

buy call sell put

A 457 plan could cover which of the following:

city employees independent contractors providing services to the county.

zero coupon bond

duration = maturity

The rules for ensuring that money will be available in a retirement plan (for paying out to participants during their retirement) are covered by which of the following types of requirements?

funding

An investor who desires minimal credit risk and monthly interest income should consider an investment in which of the following?

ginnie mae

ERISA allows the fiduciary of a corporate retirement plan to write covered calls on the securities in the portfolio:

if this strategy is consistent with the objectives of the plan.

A customer who has just started an IRA will be vested:

immedietely

which is safer - high or low duration

low

T bill

mature in one year or less IT IS A ZERO COUPON BOND

t bonds

more than 10 yrs

Another name for Section 529 plan is

muni fund security

A FINRA member firm is found guilty of some but not all of the charges brought against it by the Department of Enforcement. An appeal:

must be made within 30 days of the decision. stays the effective date of any sanction other than a bar or expulsion.

A convertible bond of the KLP Corporation has a conversion ratio of 20. This means that:

one bond can be exchanged for 20 shares of KLP common stock. the conversion price of the bond is $50 per share.

yield < coupon

premium

What happens to outstanding fixed-income securities when interest rates decline?

prices increase

Commercial paper is a:

promissory note issued by a corporation.

TIPS

protect against purchasing power risk principal adjusted 2 times a year with CPI

Which of the following would be obligated to purchase stock should the option be exercised?

put writer

For an owner to be paid a dividend, his name should be recorded on the stock record book of the issuer's transfer agent by the:

record date.

Liquefying home equity to generate funds for investment purposes

requires communication of the unique risks associated with this investment strategy by the broker-dealer

call option

right to buy a stock (call up)

put option

right to sell a stock (think price will go down)

Which of the securities listed below is issued without a stated rate of return?

t bill Treasury bills are not issued with a stated coupon rate. Instead, they are sold through auctions at a discount to their par value of $1,000. They mature at their face amount, and the discount represents the interest earned.

Which type of marketable security pays semiannual interest?

t bond

An investor desiring safety of principal, modest returns, and having a 5-year investment horizon should choose which of the following?

t note