SIE (Garrity) Test #2 Review: (Part 2)

Network C trape reports

NASDAQ issues regardless of market venue where the trade took place

network a tape reports trades where

NYSE listed issues regardless of the market venue

what of the following is a first market?

NYSE trading, AMEX, or NASDAQ

Which of the following accounts can be opened by a minor?

a minor cannot open an account

Distributions from Roth IRAs are subject to a penalty if withdrawals are made within:

5 years of original contributions

A customer buys 1 ABC Jul 45 Put at $4 when the market price of ABC is $46. The customer's maximum potential gain is:

$4,100 (45 - 4 = 4100 * 1,000)

A 15-year 3 1/2% Treasury Bond is quoted at 101-4 - 101-8. The bond pays interest on Jan 1st and Jul 1st. A customer sells 5M of the bonds. How much will the customer receive, disregarding commissions and accrued interest?

$5,056.25 (101 and 4/32nds = 101.125% * 5,000 = 5,056.25)

A corporation has issued 10%, $1,000 par convertible debentures, convertible at $40. The common stock is currently trading at $45. If the bond and the common are trading at parity, a customer purchasing 5M of the bonds will pay:

$5,625 ($1,000 par / $40 conversion price = 25 shares trading at $45 (45*25 = 1,125) then 1,125 * 5 M = 5,625)

A customer buys 100 shares of XYZ at $51 and buys 1 XYZ Jan 50 Put @ $5. The breakeven point is:

$56 (long stock/ put breakeven = stock cost + prem)

A customer buys 200 shares of GE at $72 and sells 2 GE Feb 70 Calls @ $6. The breakeven point is:

$66 (paid $72 - $ 6 prem = 66)

Under the "penny stock rule," an established customer that is exempt from the rule is defined as a person who has made a deposit of funds or securities with that broker-dealer more than:

1 year previously

A customer owns 1,000 common shares of ABC Corporation. Which of the following actions will dilute the shareholders' equity?

ABC declares that it will call its convertible preferred stock, which is currently trading at a premium (dilution does not occur if there is a stock dividend or stock split)

network B tape reports...

AMEX and regional exchanged listed issues regardless of market venue

Which statement is FALSE regarding a Standard and Poor's 500 Index fund? A. The fund must weight its investments in the same manner as the Standard and Poor's 500 index is weighted B. The portfolio manager must periodically re-balance the composition of the fund if the stocks included in the index are changed C. The fund tends to have a higher portfolio turnover ratio than actively-traded funds due to the constant need to re-balance D. The management fee for such a fund is typically lower than for an actively managed fund

The fund tends to have a higher portfolio turnover ratio than actively-traded funds due to the constant need to re-balance

A customer wishes to give a gift of securities to her nephew under the Uniform Gifts To Minors Act. When the minor reaches legal age in that state, the:

account must be transferred into the name of the minor

"SPIDERS" are:

an exchange traded fund based on the standard and poor's 500 index

All of the following are considered to be "insiders" EXCEPT: A. an investor holding 11% of ABC preferred stock B. the in-house counsel of ABC Corporation C. the spouse of ABC Corporation's President D. ABC Corporation's Chief Executive Officer

an investor holding 11% of ABC preferred stock (insider = officer, director, 10% common shareholder or affiliated person)

The "death benefit" associated with a variable annuity contract:

applies prior to annuitization and means that, upon death, the insurance company will pay a beneficiary at least the amount invested in the contract

An importer wants to finance the purchase of $10,000,000 of Nigerian cocoa. The importer can use:

bankers acceptance (they are time drafts on a bank used to finance imports and exports)

The Broker Loan Rate is best described as the rate at which:

brokers borrow from banks using customer securuities as collateral

During periods of stable interest rates and increasing stock prices, which type of preferred stock will have the greatest price volatility?

convertible

Call loans made by bank to broker-dealers are secured by which of the following?

customer margin securities

All of the following statements are true regarding both mutual funds and variable annuities EXCEPT: A. the return to investors is dependent on the performance of the securities in the underlying portfolio B. the Investment Company Act of 1940 is the regulating legislation C. distributions from the underlying mutual fund are taxable to the holder in the year the distribution is made D. the underlying portfolios are managed

dist from underlying MF are taxable to the holder in the year the distribution is made

All of the following statements about 403(b) Plans are true EXCEPT: A. Contributions are tax deductible to the employee B. Employees make voluntary contributions through their employers C. Employees of corporations may contribute to this type of plan D. Earnings on contributions by employees are tax deferred

emplyees of corps may contribute to this type of plan

Retirement plans that must comply with ERISA requirements include all of the following EXCEPT: A. Defined benefit plans B. Profit sharing plans C. Federal Government plans D. Payroll deduction savings plans

federal gov plans

A tombstone announcement shows a corporate offering of $10,000,000 of common stock at $1 par. The price per share is $50. The tombstone shows the:

gross proceeds to the issuer

The best way to ensure that a brokerage firm has an effective AML program is to:

have strong kyc procedures

A corporation would repurchase its debt for all of the following reasons EXCEPT to: A. refinance at lower interest rates B. increase its capitalization C. increase the market value of its equity issues D. reduce its sensitivity to earnings fluctuations due to cyclical conditions

increase cap

Electronic delivery of a prospectus is NOT permitted for:

investment companies

Who is responsible for preparing the Official Statement for a new municipal bond offering?

issuer

All of the following information is needed to open a new cash account EXCEPT: A. Customer name B. Customer birthdate C. Customer citizenship D. A list of external brokerage account holding

list of external brokergae account holding

which option is used to hedge a short stock positon

long call

An exploratory oil and gas limited partnership has:

low mineral right costs (and high intangible drilling costs)

Which of the following is a redeemable security?

open-end fund (they do not trade)

Which of the following ratings is applicable to commercial paper?

p-1, 2, 3 on Moody's or A-1,2,3 on standard & poor's

A registered representative takes a customer out to a dinner and a show, spending $180. This activity is:

permitted if it complies with the firm's policies and procedures

An order for a New York Stock Exchange listed issue is routed by the member firm to a Third Market Maker rather than to the exchange floor. This practice is:

permitted if the price offered by the third market maker is better

Which risk is unique to investing internationally in less-developed countries?

political risk (because less developed countries have weak political systems)

A registered representative hears from a good friend that "ACME Fund has taken a large position in ABCD stock." Based on this, the registered representative calls all of her customers with the recommendation that ABCD stock be purchased immediately. This action is:

prohibited because this is making a recommendation based on a rumor

Credit from bank to broker is controlled under:

regulation U

The primary function of the custodian bank is to:

safekeep the assets of the fund (they do not manage the fund, the investment adviser does that)

ERISA requirements regarding the investments that are suitable for a retirement account stress:

safety of principal

Under FINRA rules, all of the following are necessary to open a corporate account EXCEPT: A. New account form B. Corporate charter C. Shareholder approval D. Corporate resolution

shareholder approval

Which strategy has unlimited loss potential?

short stock / short put

A customer is 100% invested in an S&P 500 Index Fund. This portfolio has:

systematic risk

A customer buys a NASDAQ stock in a principal transaction at $79 plus a $1 mark-up. Which statement is TRUE?

the cost basis for tax purposes is $80 per share ($79 plus $1 mark up)

A client has an options account that is qualified to buy options and sell covered calls. The client calls his representative, telling him that he wants to sell naked calls in the account. Which statement is FALSE about this?

the customer must cross-guarantee the account because of the increased risk level (false because there is no req to cross guarantee because of the increased risk)

sell stop orders are

triggered as the market falls

XYZ Corporation has declared a rights offering to stockholders of record on Wednesday, November 15th, payable on Tuesday, December 5th. Under the offer, shareholders need 5 rights to subscribe to 1 new share at a price of $24. Fractional shares can be rounded up to purchase 1 full share. The last day to buy XYZ shares before they go ex rights is:

tuesday, Dec 5th (for non-cash distr, the ex date is 1 business day following the payable date. The payable date = dec 5th (last day to purchase) and the ex date is Dec 6th (the day after))

If a municipal bond is purchased regular way on Monday, January 3rd, when does the trade settle?

wednesday january 5th (2 business days)

If sales of a municipal new issue by a syndicate member are used to extinguish liability solely of that member, then this indicates the account is a(n):

western account (western syndicate accounts are fully divided in selling responsibilites)

If the actual interest rate earned in the separate account underlying a variable annuity contract is higher than the "AIR" the annuity payment:

will increase