SIE Questions

Stability in the value of a debt portfolio is greatest when: A) interest rates are falling B) maturities of the debt securities are short C) maturities of the debt securities are long D) interest rates are rising

B) maturities of the debt securities are short

Accumulation units are most often associated with: A) life insurance B) annuities C) mutual funds D) ETFs

B) annuities - Price each day is based upon the 4 pm net asset value of the separate account

A customer complaint is formally defined as a: A) any communication from a customer or a legal representative of a customer regarding misconduct B) any written communication from a customer or legal rep of a customer regarding an allegation of a violation of one or more securities rules or federal regulations C) a written allegation of a violation submitted by a customer D) none of the above

B) any written communication from a customer or legal rep of a customer regarding an allegation of a violation of one or more securities rules or federal regulations - written allegation = formally known as complaint

Exercise of an equity put option involves the writer: A) selling the underlying instrument at the strike price B) buying the underlying instrument at the strike price C) selling the underlying instrument at the strike price less premium D) buying the underlying instrument at the strike price less premium

B) buying the underlying instrument at the strike price

The spread between bid and offer A) gets wider as the volume increases B) gets narrower as the volume increases C) is entirely up to the firm which is making a market in the stock D) is generally fixed for the trading day

B) gets narrower as the volume increases - The more actively traded a stock (high volume), the narrower the spread between the bid and ask prices

Stabilizing is a term generally used in Wall Street to refer to the practice of: A) price fixing of a new issue B) maintaining a market price at or near price near the POP of a new issue for the sole purpose if protecting the stock from declining during a new offering C) preventing losses for investors who buy IPOs D) none of the above

B) maintaining a market price at or near price near the POP of a new issue for the sole purpose if protecting the stock from declining during a new offering - Stabilizing implies keeping price steady

Your customer buys a US T-bond at 103.16. How much did he pay for the bond? A) $1,031.60 B) $103.16 C) $1,035.00 D) $10,316.00

C) $1,035.00

Corporations may do all the of the following, except: A) Issue preferred stock only B) Issue nonvoting common stock C) Sell stock out of treasury D) Repurchase its own shares

A) Issue preferred stock only - Must issue common stock first

Limited liability means that a common shareholder: A) Can never lose an amount in addition to his entire investment B) Cannot be charged any more than a designated amount in addition to his initial investment C) Is guaranteed to lose no less than a designated percentage of his investment D) Can never lose his entire investment

A) Can never lose an amount in addition to his entire investment - Investors assets are not at risk for the compnay's debts

A client who is 65-years-old has invested $10,000 in a Roth IRA. It has now grown to $14,000. He plans to retire and take a lump sum distribution. He will pay taxes on: A) $0 B) $14,000 C) $4,000 D) $10,000

A) $0 - Can be withdrawn without paying taxes on growth as long as over 59.5 and has been in IRA for at least 5 years

ABC equity security recently traded as follows: 100 shares @ $50.00 100 shares @ $50.04 200 shares @ $50.10 The current NBBO is $50.09 - $50.12. What is the bid-ask spread? A) $0.03 B) $0.04 C) $0.06 D) $0.12

A) $0.03

Your customer wants to invest in a conservative income-producing investment and is inquiring about GNMAs. She wants to know the minimum dollar amount required to purchase a pass-through certificate. You should tell her: A) $1,000 B) $10,000 C) There is no minimum; you can invest almost any sum D) $5,000

A) $1,000

An investor has purchased 10 corporate bonds at a price of 135. At the end of the day, the bonds are quoted at 136.25. How much have the bonds risen in dollars? A) $125 B) $12.50 C) $1.25 D) $.125

A) $125 - 1 bond point = $10 - $12.50 x 10 bonds = $125

What is the minimum denomination for a Fannie Mae? A) $5,000 B) $1,000 C) $2,500 D) $10,000

A) $5,000

The Trust Indenture Act of 1939 requires the corporate bond issue in excess of _, that are to be repaid during a term in excess of _ year? A) $5,000,000 ; 1 year B) $1,000,000 ; 6 months C) $5,000,000 ; 6 months D) $1,000,000 ; 1 year

A) $5,000,000 ; 1 year

a 42-year-old investor wants to put $20,000 into a plan to help meet the educational expenses of his 12-year-old son. He wants to make a lump sum deposit. Which would you recommend? A) 529 plan B) Coverdell IRA C) Roth IRA D) Growth mutual fund

A) 529 plam - Only a 529 can make a lump sum deposit

Investment advisors that have custody of client assets or require preapyment of advisory fees _ or more in advance, and in excess of _ for each client, must file an audited balance sheet with the SEC as of the end of the investment adviser's fiscal year. A) 6 months, $500 B) 6 months, $1,000 C) 12 months, $500 D) 12 months, $1,000

A) 6 months, $500

An investor buys $10,000 of 10% corporate bonds with 5 years left to maturity. The investor pays 120 for the bonds. What is the investor's current yield? A) 8.33% B) 11.1% C) 6% D) 9.2%

A) 8.33% - $100 / $1,200 = 8.33%

A REIT will not pay taxes at corporate level as long as: It receives _% of its income from real estate and distributes at least _% of its taxable income to shareholders A) 90% ; 75% B) 75% ; 75% C) 90% ; 90% D) 75% ; 90%

A) 90% ; 75%

A customer wishes to liquidate 100 shares of ABC common at the market. If the current inside market is 904.78 - 905.57, the client's transaction will occur disregarding commissions and other charges at A) 904.78 B) 905.57 C) at the last transaction price prior to entering this order D) at a price agreed to between the firm and the customer

A) 904.78 - Best inside bid is price at which client's liquidation (sell) order will be executed

Which of the following investment companies specifies what percentage of asset allocation will be stocks and bonds for the life of the fund? A) A structured fund B) A private equity fund C) A life cycle fund D) A blind pool fund

A) A structured fund

Which of the following is a system that automates and standardizes procedures for the transfer of assets in a customer account from one brokerage firm and/or bank to another? A) ACATS B) ECN C) TRACE D) WIRE

A) ACATS - Automated Client Account Transfer System

Two brothers both married with children, have opened an account with your firm as JTWROS. One brother has passed away. All of the following will not happen with regard to the account exxcept: A) All assets will become the property of the surviving party B) The account will be retitled in the name of the surviving party C) The portion of the assets belonging to the deceased will go to his estate D) The original account will become an individual account

A) All assets will become the property of the surviving party - Joint account w/ rights of survivorship

Which of the following is required on a customer confirmation? A) Amount of taxable gain or loss B) Trade capacity C) Capital gain D) Dividend date

A) Amount of taxable gain or loss

Which statement is TRUE about donations into accounts opened under the Uniform Gifts to Minors Act? A) Any adult can donate into a custodian account for a minor B) Only a relative of the minor may donate into a custodian account for a minor C) Only a parent of the minor may donate into a custodian account for a minor D) Only a minor may donate into a custodian account for a minor

A) Any adult can donate into a custodian account for a minor - The adult does not have to be related to the minor

An MSRB dispute would be settled in which of the following ways? A) Arbitration B) Litigation C) COP D) None of the above

A) Arbitration

Which of the following is an investment protection requirement that obligates a broker-dealer to exercise reasonable care to execute a customer's order in a way to obtain the most advantageous terms for the customer? A) Best execution B) Price execution C) Price improvement D) Prudent man rule

A) Best execution

An investor who may lose part or all of his investment is subject to which of the following? A) Capital risk B) Market risk C) Reinvestment risk D) Credit risk

A) Capital risk

The principal difference between an open end management company and a closed end management company is: A) Capitalization B) Management C) Investment objective D) Expense ratio

A) Capitalization - Both open-end and closed-end management companies use an investment adviser to manage a portfolio within the fund's stated objectives - Open-end funds continuously issue and redeem shares - Closed-end funds have a one-time stock issuance and the fund is closed to new investment. The shares are then listed on an exchange or NASDAQ where they trade - The expense ratio of a fund measures of the "cost" of running the fund, and applies to both open and closed end funds (the largest component of the cost of running either type of fund is the annual management fee).

As it relates to a member firm conducting business with the public, all of the following are violations, except: A) Charging a customer a larger than normal commission for executing a specific order B) Failing to execute a customer's order for a speculative security C) Stating that a new issue has been approved for sale by the SEC D) Printing "FINRA" in large type on business cards

A) Charging a customer a larger than normal commission for executing a specific order - May charge for execution but must be disclosed - Member firm must always execute a customer's order

When a corporation goes public, it is issuing: A) Common stock B) Preferred stock C) Convertible bonds D) Any of the above

A) Common stock

Which of the following is an example of the integration stage of money laundering? A) Creating complex financial transactions B) Sending cash outside the country C) Buying a business D) Exchanging small denominated cash bills for large denominated cash bills

A) Creating complex financial transactions

The nominal owner of an UGMA account is the: A) Custodian B) Minor C) Trustee D) Parent

A) Custodian

In which type of account does the nominal owner of the account enter all orders for the beneficial owner of the account? A) Custodial account B) Fiduciary account C) Authorized account D) Discretionary account

A) Custodian account - Custodian = nominal owner (custodial account)

When making markets over the counter, the firm is acting in what capacity? A) Dealer B) Both C) Neither D) Broker

A) Dealer - Market Maker = Trading for own account / acting as dealer

A long-term growth fund has a portfolio turnover ratio of 25%. How often does the fund replace its total holdings? A) Every 4 years B) Once a year C) Every 4 months D) Every 4 months

A) Every 4 years

All but which of the following are types of annuity settlement options? A) Extended term B) Installment refund C) Life with period certain D) Single life

A) Extended term

A currency transaction report (CTR) is a report that US financial institutions are required to file with which of the following? A) FINCEN B) FINRA C) NAIC D) NASD

A) FINCEN

A bank with a shortfall meeting their reserve requirement could borrow money from another bank and pay the: A) Federal funds rate B) Broker call loan rate C) Prime rate D) Discount rate

A) Federal funds rate

Which of the following actions is required when a firm receives cash in excess of $10,000 from one customer in one business day? A) File a Currency Transaction Report (CTR) B) File a Suspicious Activity Report (SAR) with the SEC C) Issue a cash transfer to the customer D) Place a five-day hold on the customer's account for the fund's received

A) File a Currency Transaction Report (CTR)

Before opening a new account for any customer, a registered representative must: A) Fill out and submit the account for principal review B) Send out a declaration of investor intent (DII) to the IRS C) Fill out a new account form and present it to the investor for his signature D) Fill out and sign a full financial declaration

A) Fill out and submit the account for principal review

Which type of security sells pools of federally backed mortgages to investors and institutions? A) GNMA B) FNMA C) FHLMC D) All of the above

A) GNMA

Which of the following is considered a Government Sponsored Enterprise? A) Ginnie Mae (GNMA) B) Tennessee Valley Authority (TVA) C) Federal National Mortgage Association (Fannie Mae) D) Sallie Mae (SLMA)

A) Ginnie Mae (GNMA)

All investors with short option positions: A) Have a contractual obligation to perform in accordance with the contract terms if the option is exercised B) Pay a premium in order to acquire the contractual rights associated with the option C) Must be considered suitable for short sales of stock in order to be permitted to engage in shorting options D) May close out the position by taking a long position in a corresponding option contract

A) Have a contractual obligation to perform in accordance with the contract terms if the option is exercised - Shorting a position = selling an optio - Obligated to perform with the contract only if the option is exercised

You are the owner of a restaurant and you would like to have a guitarist play in the lounge on Saturday evenings. You have known your representative for 15 years and know her to be a great jazz guitarist. You think she would like to play and ask her if she is available to do so. She would have to notify which of the following before accepting your offer? A) Her firm B) No one, because it is not securities related and she is on her own time C) FINRA D) NYSE

A) Her firm - Have to notify her employer before working outside the office in any capacity

A testimonial by a compensated expert, citing the results she realized following a member's recommendations, must include which of the following? I : A statement detailing the expert's credentials II : A statement that past performance is not a guarantee of future performance III : A statement that the individual is a compensated spokesperson IV : The name of the principal who approved the ad A) I, II, and III B) II and IV C) I and II D) I, II, III, and IV

A) I, II, and III

The inside market is: I : Highest offer II : Lowest offer III : Highest bid IV : Lowest bid A) II and III B) I and II C) I and IV D) I and III

A) II and III

Which of the following investors may accuse an insider trading when the insider was selling stock to avoid losses? A) Investors who were buying the stock at the same time B) Investors who were selling the stock at the same time C) Both A and B D) Neither A nor B

A) Investors who were buying the stock at the same time

Why does the Federal Reserve require commercial banks to maintain reserves with them? A) It gives the Federal Reserve more control over the money supply and interest rates B) It prevents banks from making too much profit C) It prevents banks from holding too much cash D) It allows banks to make speculative loans E) It gives the Fed Reserve the ability to increase taxes when necessary

A) It gives the Fed Reserve more control over the money supply and interest rates

Which of the following is correct regarding commercial paper? A) It has a maturity of 270 days or less B) It's issued in denominations of $1,000 or more C) It does not act as a viable substitute for short-term bank financing D) It has less default risk than T-bills

A) It has a maturity of 270 days or less - It is issued in denominations of $100,000 or more

Which of the following is correct regarding a pre-emptive right? A) It is also referred to as a "subscription right" B) It is an obligation for existing shareholders to purchase new shares of stock before they are offered to the public C) Exercising a pre-emptive right can cause dilution D) All of the above are correct

A) It is also referred to as a "subscription right" - It is not an obligation and it prevents dilution among existing shareholders

How is closed-end fund priced? A) Its price is determined by open-market supple and demand B) Its price is set as the Net Asset Value (NAV) C) The price is the average of the trading price throughout the day D) The price is fixed at the IPO price

A) Its price is determined by open-market supply and demands

A customer has a large position in GJH, a thinly traded stock whose share price has remained flat for some time. The customer contacts the agent and wants to sell his entire position. The customer is most subject to which of the following? A) Liquidity risk B) Credit risk C) Conversion risk D) Execution risk

A) Liquidity risk

An investor would expect to realize the largest capital gain by buying bonds that are: A) Long-term when rates are high B) Short-term when rates are low C) Short-term when rates are high D) Long-term when rates are low

A) Long-term when rates are high

Among the difference between an introducing broker-dealer and a clearing carrying broker-dealer is that clearing firms: A) Maintain possession and control of securities and introducing firms do not B) Are members of all major securities exchanges and introducing firms are not C) Are permitted to engage in investment banking and underwriting of new issues of securities and introducing firms are not D) All of these are differences

A) Maintain possession and control of securities and introducing firms do not

The government has two tools it can use to influence the direction of the economy. They are: A) Monetary policy and fiscal policy B) Prime rate policy and fiscal policy C) Monetary policy and prime rate policy D) Fiscal policy and money market policy

A) Monetary policy and fiscal policy

Which of the following market participants have a fiduciary responsibility to their customers? A) Municipal advisors B) Broker Dealers C) Traders D) Market Makers

A) Municipal advisors

Which of the following is a characteristic of a custodial account? A) No tax-deferred growth B) Income limitations of $110,000 per person C) Tax-deferred growth D) Tax-free withdrawals on qualified education expenses

A) No tax-deferred growth

One of the more attractive features of common stock is that: A) One cannot lose more than one's investment B) The stockholders have the right to vote on quarterly dividends C) The stockholders have the right to choose Officers D) Any of the above

A) One cannot lose more than one's investment - You cannot lose more thab you've put at risk (limited liability)

The OCC is: A) Options Clearing Corporation B) Options Counseling Committee C) Options and Claims Corporation D) Options Clearing Committee

A) Options Clearing Corporation

Which of the following is NOT a type of underwriting commitment? A) Primary commitment B) Standby commitment C) Best efforts commitment D) Firm commitment

A) Primary commitment

A Red Herring given to a client during the cooling-off period will contain all of the following, except: A) Proceeds to the company B) Use of proceeds C) Biographies of officers and directors D) A notice that all the information is subject to change

A) Proceeds to the company - And the offering price will not be listed

In response to a customer's request for information on how inflation will affect their return realized from the semiannual coupon payments, you would look at the: A) Real interest rate B) Adjusted interest rate C) Interest conversion rate D) Current interest rate

A) Real interest rate

Which of the following regulations contains rules providing exemptions from the registration requirements under the Securities Act of 1933? A) Regulation A B) Regulation G C) Regulation T D) Regulation U

A) Regulation A - Regulation U : Sets requirements for lenders, other than broker-dealers, who extend credit secured by margin stock - Regulation T : Governs extension of credit by broker-dealers and controls margin requirements for stock purchases - Regulation G : Cover securities credit extended by lenders other than banks/brokers/dealers

Which of the following is true? A) Representatives and broker dealers may not disclose any information regarding a client to a third party without the client's expressed consent or court order B) A representative may not obtain outside employment because of the potential conflict of interest C) A client may not have a numbered account for his investment account D) Broker dealers may not give gifts to employees of other broker dealers

A) Representatives and broker dealers may not disclose any information regarding a client to a third party without the client's expressed consent or court order - For C, customer may have a numbered account if his signature as owner in on file - For B, to obtain outside employment, a representative must first obtain approval from member firm

A hybrid REIT combines which of the following two types of REITs? A) Retail and Apartment B) Mortgage and Healthcare C) Commercial and Healthcare D) Retail and Healthcare

A) Retail and Apartment

Which of the following is NOT a type of offering? A) Rule 149 offering B) Subsequent primary offering C) Secondary offering D) Combined offering

A) Rule 149 offering

Which of the following subjects the investor to unlimited risk? A) Selling stock short B) Converting a bond into the underlying common stock C) Buying a speculative bond D) Selling common stock long

A) Selling stock short - No limit as to how high the stock price can go

In most cases, Federal Securities Laws: A) Supersede State securities laws B) Are subordinated to State securities laws C) Are given the same weight as State securities laws D) None of the above

A) Supersede State securities laws

Which of the following is an advantage to an annuity company for offering variable annuities? A) The company can make more money off management fees B) All of these answers are correct C) The company will pay less money out compared to a fixed rate annuity D) The company reduces the risk in the investment portfolio

A) The company can make more money off management fees

A customer and his spouse have an account registered as joint tenants in common. If the customer dies, what would happen to the account? A) The decedent's assets will be distributed according to his will B) The executor of the estate will determine how all of the assets are to be distributed C) All of the assets in the account will be distributed according to the trustee D) The spouse would get the assets in the account

A) The decedent's assets will be distributed according to his will

Which of the following is true of the DMMs on the NYSE? A) They work for themselves B) They are appointed by a vote of the company's board C) They work for the exchange D) They work for the company whose stock they trade

A) They work for themselves - Or for a specialists firm

It may be necessary for a company to repurchase some of its stock, to increase its treasury stock, for which one of the following reasons: A) To maintain control of the company B) To allow the company to pay out smaller dividends C) To increase the funding in the company's treasury D) To reassure its investors that all is well

A) To maintain control of the company - Also may want to increase its earnings per share

Front-running refers to the practice of: A) Trading ahead of a customer's block order B) Trading ahead of research reports C) Inter-poisitioning D) Trading ahead of marketable customer orders

A) Trading ahead of a customer's block order - Trading ahead is practice of trading for one's own account in front of a large customer order (10,000 or more share) because you believe the order will impact the market price of the security

A decline in the GDP must last at least how long to be considered a recession? A) Two quarters B) One quarter C) Six quarters D) Four quarters

A) Two quarters - 6 months

A no-load mutual fund may charge a 12B-1 fee that is: A) Up to 0.25 of 1% of the NAV B) Less than 0.25 of 1% of the NAV C) Up to 0.25 of 1% of the POP D) Less than 0.25 of 1% of the POP

A) Up to 0.25 of 1% of the NAV

When is the interest on an EE savings bond paid? A) When redeemed B) Annually C) Quarterly D) Monthly

A) When redeemed

Of the following, which is the correct definition for open market operations? A) When the Fed buys and sells U.S. treasury bonds on the secondary market B) When the Fed buys and sells U.S. treasury bonds on the primary market C) When the Fed buy and sells foreign bonds on the secondary market D) When the Fed buys and sells foreign bonds on the primary market

A) When the Fed buys and sells U.S. treasury bonds on the secondary market

What type of bonds are Treasury STRIPS made of? A) Zero-coupon bonds B) Income/Adjustment bonds C) Mortgage bonds D) Industrial revenue bonds

A) Zero-coupon bonds

When an investor is bearish on the broad stock market A) buying puts on the S&P 500 index is an appropriate strategy B) buying calls on the S&P 500 index is an appropriate strategy C) buying mutual funds is an appropriate strategy D) not investing in the market is an appropriate strategy

A) buying puts on the S&P 500 index is an appropriate strategy - Buying broad-based index put option will provide a hedge against the decline in the broad market

When growth is the principal objective of the investor, each of the below could be suitable EXCEPT: A) defensive issues B) emerging industries C) growth mutual fund D) Technology ETF

A) defensive issues

The least liquidity in the securities shown below would be found: A) in securities traded on the Pink Quote system B) in securities listed on regional stock exchanges C) in T-bills D) in general obligation issues

A) in securities traded on the Pink Quote system - Thinly traded, closely-held, low daily volume stocks

The so-called 5% policy pertains to A) mark ups on retail OTC transactions excepting new issues B) commissions on NYSE trades exclusively C) mark ups, mark downs, and commissions on retial secondary market trades in municipal bonds D) none of the above

A) mark ups on retail OTC transactions - FINRA markup markdown and commission policy does not apply to new issues as well as municipal bonds

When a corporate board announces a 10% stock dividend, shareholders know they will be receiving: A) more shares B) money C) both D) neither

A) more shares

In an options transactions, the premium must be paid to the _ by _. A) option writer, settlement date B) option writer, trade date C)option purchaser, settlement date D) option purchaser, trade date

A) option writer, settlement date

The primary difference between a stock dividend and a cash dividend is: A) stock dividends provide the corporate shareholder with additional shares in lieu of cash B) cash dividend are tax-free if reinvested in additional shares C) cash dividends are tax-deferred if reinvested in additional shares D) stock dividends are taxable upon recepit

A) stock dividends provide the corporate shareholder with additional shares in lieu of cash

The SIE examination gives a candidate A) the right to take one or more of the top-off representative B) the right to trade securities C) the right to engage in phone solicitations of sales prospects D) all of the above

A) the right to take one or more of the top-off representative

The owner of which of the following products is most exposed to inflationary risk? A) Blue chip industrialists B) Treasury bonds C) Utility stocks D) Treasury bills

B) Treasury bonds

Call option contracts are considered to have intrinsic value: A) when CMV exceeds price B) when exercise prie exceeds CMV C) when CMV = exercise price D) when option holder has exercised the option

A) when CMV exceeds exercise price - Ex) Option's exercise price = $20 ; underlying stock = $25 ; the intrinsic value = $5

An investor buys 10 XYZ Nov 75 calls at 4:10 on Monday, May 11. The trade will settle on: A) Thursday, May 14 B) Tuesday, May 12 C) Monday, May 11 D) Monday, May 18

B) Tuesday, May 12 - Options trade and settle the next day

A fixed annuity guarantees all of the following except: A) Income for life B) Protection from inflation C) Rate of return D) Protection from investment risk

B) Protection from inflation - If inflation, investor will have loss of value of dollar

Which of the following is NOT a corporate money instrument? A) Negotiable certificates of deposit B) Treasury bills C) Federal funds D) Commercial paper

B) Treasury bills

A customer buys 1 ABC Jan 35 put for a premium of 35 per share. The customer will break even when the stock is selling at what price per share at expiration? A) $32 B) $38 C) $3 D) $35

B) $38

The maximum coverage offered per separate customer under SIPC insurance was set by Congress at: A) $250,000 for cash and securities combined B) $500,000 for securities and cash combined C) $1,000,000 for securities and cash with no more than $250,000 for cash claims D) $500,000 for cash and securities coverage with no more than $250,000 for securities claims

B) $500,000 for securities and cash combined - Maximum CASH coverage the same as bank FDIC coverage: $250K

An investor purchased a Treasury bond at 95.03. How much did he pay for the bond? A) $9,530.00 B) $9,500.9375 C) $950.9375 D) $953.00

B) $950.9375 - 95-3/32% of $1,000 - 95.09375% / 100 = 0.9509375 - 0.9509375 x $1,000 = $950.9375

Registered persons must complete the regulatory element of their continuing education within _ of their secondary anniversary and every _ years thereafter. A) 90 days ; 3 years B) 120 days ; 3 years C) 60 days ; 2 years D) 90 days ; 2 years

B) 120 days ; 3 years - If does not complete regulatory element in prescribed period, their license will become inactive

An ABC corporate bond is quoted at 110 and is convertible into ABC common at 20 per share parity. Price for the stock is: A) 21 B) 22 C) 23 D) 24

B) 22 - 1,000(PAR) / 20(CVP) = 50(# of shares - 1,100(CMV) / 50(# of shares) = 22

XYZ has just gone public and is quoted in the NASDAQ Capital market securities market. Any investor who buys XYZ must get a prospectus for how long? A) 30 days B) 25 days C) 60 days D) 45 days

B) 25 days

Your brokerage firm has placed an ad in the local newspaper, advertising its new line of services being offered to investors. The firm must maintain the ad for how long? A) 24 months B) 36 months C) 12 months D) 18 months

B) 36 months - Must maintain advertising for at least 3 years

Under Reg T, the amount of margin that must be in the account when the account is first established is: A) 25% B) 40% C) 50% D) 75%

B) 40%

An investor buys 100 shares of XYZ 7% convertible preferred stock which are convertible into XYZ common stock at $20 per share. How many shares of common stock are there upon conversion? A) 5 B) 400 C) 500 D) 5,000

B) 500

If an individual contributes more to an IRA than is permitted, the excess contribution is subject to which of the following taxes? A) 5% excise tax B) 6% excise tax C) 10% excise tax D) 15% excise tax

B) 6% excise tax

An investor buys a 10% preferred stock at 110. What is its current yield? A) 10.4% B) 9.1% C) 10% D) 9.5%

B) 9.1%

An investor is looking for a risk-free investment. An agent should recommend which of the following to this investor? A) Preferred stock B) 90-day T-bill C) Convertible preferred stock D) Banker's acceptances

B) 90-day T-bill - BA's are money market instruments & short term - Convertible preferred stock is security with risk

Which of the following is considered zero-coupon securities? A) Municipal bonds B) Treasury bills C) Treasury bonds D) Preferred stock

B) Treasury bills

A significant number of public investors do not have a solid understanding on how common stock is offered to the public. Two methods are the secondary offering and the follow-on offering. Which of the below are true statements regarding these methods? A) Secondary offerings involve the sale of new shares other than the first time a company is going public (IPO) B) A follow-on is an offering of new shares other than the initial public offering (IPO) C) Secondary and Follow-on are two different terms for the same investment banking activity D) Secondary offerings involve the resale of outstanding shares at market bid and ask pricing

B) A follow-on is an offering of new shares other than the initial public offering (IPO) - Secondary Offering = situation in which already-issued shares are being resold into the marketplace, usually by insiders (NOT new shares) - Follow-on offering = Alternative Public Offering (APO), where a company is issuing and selling more new shares to the public

At a member firm, which of the following must be registered? A) A corporate officer whose sole function is to act as liaison between Board of directors and management B) A part-time sales assistant who occasionally takes verbal orders from customers C) A back-office margin clerk who assists the head of the margin department D) A receptionist who takes messages from customers inquiring about their accounts

B) A part-time sales assistant who occasionally takes verbal orders from customers - Must register because she is taking orders

When the market price of a company's common stock has reached triple digits ($100 or above), the Board of Directors may elevct to declare which of the below to make the shares more affordable? A) Reverse stock split B) A stock split C) A stock dividend D) Any of the above

B) A stock split - Splitting provides shareholders with more shares and the CMV of the stock will decline proportionately

Which is NOT a possible example of business planning for a disaster? A) Telling employees where to go if there's an emergency B) All of these are examples C) Classifying emergencies by level of severity and type D) Designating a person to call the police in the event of an emergency

B) All of these are examples

What are the two types of risk that exist in the stock market? A) Stock market and bond market risk B) Alpha and beta risk C) Material and immaterial risk D) Cash and derivative risk

B) Alpha and beta risk

Which of the following would NOT make an individual be considered statutorily disqualified? A) Findings by the CFTC that a person willfully violated commodity laws B) Any misdemeanor conviction C) Bar from membership in an SRO D) State order barring association with a firm engaging in insurance or banking activited

B) Any misdemeanor conviction

Economic theories believe all of the following to be true, except: A) As supply rises, prices tend to fall B) As supply rises, prices tend to rise C) A moderately increasing money supply promotes price stability D) As demand rises, prices tend to rise

B) As supply rises, prices tend to rise

A syndicate may enter a stabilizing bid: A) Whenever the price begins to decline B) At or below the offering price C) To ensure an increase from the offering price D) To cover overallotments

B) At or below the offering price

Which of the following investors would be most subject to inflationary risk? A) Sarah, 75% of whose portfolio is made up of dividend-paying stock B) Bill, whose portfolio is comprised of U.S. Treasury bonds C) Steve, whose portfolio consists mainly of U.S. Treasury bills and bank CDs D) Kim, whose portfolio is a mix of blue chip and small cap securities

B) Bill, whose portfolio is comprised of U.S. Treasury bonds - Fixed-income investors are more exposed to inflationary risk than equity investors

Which of the following is the largest options exchange in the US and focuses on options contracts for individual equities and indexes? A) AMEX B) CBOE C) NASDAQ D) NYSE

B) CBOE

The risk that the issuer will require the bond owner to sell the bond back to the issuer at a specific date and price is referred to as: A) Default risk B) Call risk C) Price risk D) Bond risk

B) Call risk

Keynesian economic theory deals with: A) Controlling the economy through regulating money supply B) Controlling the economy through budget/government spending and taxation policies C) Incentivizing responsible financial behaviors through Congressional legislation and agency resolution D) None of the above

B) Controlling the economy through budget/government spending and taxation policies

Phil has owned his company, Beta corporation, for 15 years. He is now 52 years old and plans to retire at age 64. He has five young employees and wants to establish a retirement plan that will provide him with the highest benefit. Assuming adequate cash flow, which of the following is the most suitable plan for Beta Corporation to establish? A) Age-based profit sharing plan B) Defined benefit plan C) Money purchase plan D) SIMPLE IRA

B) Defined benefit plan - Favor older owner/employees - Profit sharing plan benefits from unstable cash flows because contributions must only be substantial & recurring

Which of the following is not true regarding American Depository Receipts (ADRs)? A) They are receipts of ownership of foreign shares being held abroad in a US bank B) Each ADR represents 100 shares of foreign stock, and the ADR holder mat request delivery of the foreign shares C) ADR holders have the right to vote and to receive dividends that the foreign corporation declares for shareholders D) The foreign country may issue restrictions on the foreign ownership of stock

B) Each ADR represents 100 shares of foreign stock, and the ADR holder may request delivery of the foreign shares - Each ADR represents between 1 to 10 shares

Which type of security buys and packages mortgage loans from institutional banks? A) GNMA B) FNMA C) FHLMC D) All of the above

B) FNMA

In which type of account does a trustee enter all orders for the owners of the account? A) Custodial account B) Fiduciary account C) Authorized account D) Discretionary account

B) Fiduciary account

Which of the following forms must broker dealers, investment advisors, or issuers of securities fill out in order to terminate the registration of an individual in the appropriate jurisdiction? It is known as the Uniform Termination Notice for Securities Industry Registration. A) Form U4 B) Form U5 C) Form U6 D) Form U7

B) Form U5

An investor has a conservative attitude towards investing and is seeking to invest $50,000 into an interest-bearing instrument that will provide current income and safety. You would most likely recommend which of the following? A) Treasury bill B) GNMA pass-through certificate C) Treasury STRIP D) BA's

B) GNMA pass-through certificate - Of all listed, only GNMA will provide income (monthly interest & principal payments)

Once a company decides to raise long-term capital to meet its needs, it will do which of the following? A) Approach the money market to determine how much capital can be raised B) Hire an underwriter to advise the issuer about the type of securities C) Hire a dealer to issue stock for public purchase D) Hire a broker to issue stock for public purchase

B) Hire an underwriter to advise the issuer about the type of securities

Which of the following information would be found in the Notice of Sale? I : Rating II : Offering scale III : NIC or TIC IV : Good faith deposit A) I and II B) III and IV C) I, II, and III D) I, II, III, and IV

B) III and IV

A representative may borrow money from a client: A) If the client is the issuer of securities B) If the client is a credit union C) If the client is a wealthy individual who regularly makes private loans D) Under no circumstances

B) If the client is a credit union - If client is in business if making loans (ex: Bank/Credit union)

ABC Technologies, a very volatile stock, closes at $180 per share. Your customer has placed an order to sell 500 ABC at 165 stop limit 160 GTC. After the close, the company announces bad earnings and the stock opens at 145. What happened to your customer's order? A) It has been canceled because the stock price is below the limit price B) It has been elected and has become a limit order C) It has been elected and executed D) It has been canceled because the stock price is below the stop price

B) It has been elected and has become a limit order - Elected when stock traded through the stop price and became a limit order to sell at 160

Authorized stock is all the following, except: A) It is the maximum number of shares a company may sell B) It is arbitrarily determined at the time of incorporation and may not be changed C) It may not be sold in total or in part when company goes public D) It may be sold to investors to raise operating capital for the company

B) It is arbitrarily determined at the time of incorporation and may not be changed

All of the following are true regarding the Federal National Mortgage Association (Fannie Mae) except: A) It purchases mortgages and packages them to create mortgage-backed securities that pay interest semiannually B) It provides an investment free from federal, state, and local taxes C) It is a public for-profit corporation D) Its purpose is to earn a profit by providing mortgage capital

B) It provides an investment free from federal, state, and local taxes - Interest is taxed at all levels

An investor who is concerned with changes in interest rates would be least likely to purchase which of the following? A) Long-term warrants B) Long-term corporate bonds C) Long-term equity D) Call options

B) Long-term corporate bonds - As interest rates change, the price of long-term bonds will fluctuate the most

Which of the following responses describes an advantage of index funds? A) The protection of principal during bearish markets B) Lower management fees due to passive management of the fund C) High turnover to take advantage of market opportunities D) Higher management fees due to active management of the fund

B) Lower management fees due to passive management of the fund

The type of bond that is secured by real estate is called a: A) Real estate certificate B) Mortgage bond C) Equipment trust certificate D) Collateral trust certificate

B) Mortgage bond

Which of the following is the voice if state securities agencies responsible for efficient formation and grass-roots investor protection in the U.S.? Their fundamental mission is to protect consumers who purchase securities or investment advice, and their jurisdiction extends to a wide variety of issuers and intermediaries who offer and sell securities to the public A) NAIC B) NASAA C) NASD D) SIPC

B) NASAA - North American Securities Administration Association

Which of the following provides clearing, settlement, risk management, central counterparty services, and guarantees of completion for certain transactions for virtually all broker-to-broker trades involving equities, corporate and municipal debt, ADRs, ETFs, and UITs A) ATC B) NSCC C) OCC D) TRACE

B) NSCC - National Securities Clearing Corporation

All of the following are full disclosure documents used in the sale of securities with the exception of: A) Official Statement B) Notice of Sale C) Offering Circular D) Prospectus

B) Notice of Sale - Notice of Sale = advertisement by a municipality in order to get bids from interested broker-dealers who wish to underwrite the sale of that issuer's upcoming bond offering

Which of the following issues standardized options? A) Exchanges B) OCC C) Company D) NASDAQ

B) OCC

The money market is a place where issuers go to: A) Obtain long-term financing B) Obtain short-term financing C) Offer higher interest for a higher yield D) Exchange money market instruments to their mutual benefit

B) Obtain short-term financing - Typically under a year

Creating false activity in a security to attract new purchasers is a fraudulent practice known as: A) Trading ahead B) Painting the tape C) Active concealment D) Front running

B) Painting the tape

Which of the following is a fraudulent investment operation where the operator provides fabricated reports and generates investment returns for older investors through revenue paid by new investors, rather than from legitimate business activities or profits of financial trading? A) Pump and dump scheme B) Ponzi scheme C) Matrix scheme D) Bucket shop scheme

B) Ponzi scheme

In a firm commitment underwriting, the underwriter is acting as a(n): A) Agent B) Principal C) Intermediary D) Specialist (DMM)

B) Principal - In a firm commitment underwriting, the underwriter buys the issue outright from the issuer, with the intention of reselling the issue to the public at a profit. - Underwriter is a principal in the transaction, and is taking full financial liability.

The primary purpose of a corporate stock split is to: A) Dilute the reported earnings per share B) Reduce the market price of the stock to increase its attractiveness to investors C) Avoid paying a cash dividend to shareholders D) Lower the risk of a takeover by increasing the number of shares outstanding

B) Reduce the market price of the stock to increase its attractiveness to investors - Corporations will split their stock when the market price gets too high, making the stock more accessible to investors

All the following are rights of common stockholders, except: A) Right to elect the board of directors B) Right to vote for executive compensation C) Right to vote for a stock split D) Right to maintain their percentage of ownership in the company

B) Right to vote for executive compensation

You are long 10,000 shares of XYZ at 42 and are concerned about a market decline, you would like to take in some additional income. You should: A) Sell 10 XYZ Oct 45 puts B) Sell 100 XYZ Oct 45 calls C) Sell 100 XYZ Oct 45 puts D) Sell 10 XYZ Oct 45 calls

B) Sell 100 XYZ Oct 45 calls

If the Fed wants to prevent high inflation, which of the following actions would it most likely take? A) Lower the discount rate B) Sell T-bills to banks C) Lower the reserve requirements D) Buy T-bills from banks

B) Sell T-bills to banks

Your customer is long 100 shares of MSFT. The investor wants to protect the position without spending any additional money, what should he do? A) Buy call B) Sell call C) Sell put D) Buy put

B) Sell call

Rule 145 covers which of the following? A) Stock splits B) Stock swaps C) Reverse splits D) Changes in par value

B) Stock swaps - OR offer of another company's securities in exchange for its current stock

Which of the following orders becomes a market order for immediate execution as soon as the price of a stock passes or hits a certain price? A) Market B) Stop C) Limit D) Stop-Limit

B) Stop

Which type of government security does not pay semi-annual interest? A) T-notes B) T-bills C) T-bonds D) All of the above

B) T-bills - Issued at discount and appreciate to par

Which of the following is the maximum civil penalty that can be imposed upon an individual who commits an insider trading violation? A) The civil penalty may be an amount up to two times the profit gained or the loss avoided as a result of the insider trading violation B) The civil penalty may be an amount up to three times the profit gained or the loss avoided as a result of the insider trading violation C) The civil penalty may be an amount up to $50,000 D) The civil penalty may be an amount up to $100,000

B) The civil penalty may be an amount up to three times the profit gained or the loss avoided as a result of the insider trading violation

3) A 9% corporate bond is trading at 106 3/4. Which of the following is true? A) An investor will receive $90 on the next interest payment B) The coupon rate is higher than the basis C) The yield will be higher if the bond is called than it will be if the bond is held to maturity D) All of the above

B) The coupon rate is higher than the basis

An investor has purchased shares of a foreign company through an ADR. Which of the following is not true? A) The ADR may represent one or more shares of the company's common stock B) The dividend will be paid in US dollars C) The investor may elect to exchange the ADR for the underlying common shares D) The investor is subject to currency risk

B) The dividend will be paid in US dollars - Dividend paid in foreign currency and received by investor in US dollars

The city of Chicago is seeking to raise $100 million through the sale of GO bonds and is seeking an underwriter for the issue. Which of the following is correct? A) The issue will be awarded through a negotiation B) The issue must be advertised and provide terms for bidding C) The issue will be underwritten on a best efforts basis if the city's bonds are not in high demand D) The city is looking to the lower true interest cost to finance the issue

B) The issue must be advertised and provided terms for bidding

Which of the following is NOT required in the account title for a custodial account? A) The state B) The minor's social security number C) The name of the custodian D) UGMA

B) The minor's social security number - Listed on account but does not appear in account title

What is the cost basis of an inherited mutual fund? A) The same cost basis as the deceased B) The net asset value (NAV) of the shares when the owner dies C) The NAV 30 days after the owner's death D) The same cost basis as the deceased plus capital gains distribution

B) The net asset value (NAV) of the shares when the owner dies

The BEST definition of money laundering is: A) Using loans as collateral for other loans in a ponzi scheme B) The process of taking money that was obtained from an illicit source and engaging in behaviors designed to conceal its origin C) Ensuring that all transactions are above the $10,000 threshold so that they attract extra security D) The act of selling tangible assets like boats or airplanes in order to raise cash used in illicit transactions

B) The process of taking money that was obtained from an illicit source and engaging in behaviors designed to conceal its origin

When selling a fixed amount of a base currency to purchase a counter currency, which of the following factors is primarily used to determine how much of the counter currency the customer will receive? A) The credit rating of the counter currency's government B) The spot exchange rate C) The trade balance between the two countries D) The counter currency's inflation rate

B) The spot exchange rate

A firm has been taken to arbitration by a customer. The disputed amount is $47,400. Which of the following is true? A) There will be a hearing, and the decision may be appealed B) There will not be a hearing, and the decision may not be appealed C) There will be a hearing, and the arbitration's decision is final D) There will be a hearing with up to three arbitrators

B) There will not be a hearing, and the decision may not be appealed - There will be no hearing unless specifically requested by public customer - The decision of the arbitrator is final and binding - Claims under $50,000 will be resolved in simplified arbitration

An investor gets advance notice of a research report being issued and enters an order to purchase the security that is the subject of the research report. This is known as: A) Front running B) Trading ahead C) Insider trading D) Advance training

B) Trading ahead

Certain securities are marginable under regulation T of the Securities & Exchange Act of 1934 except: A) listed stocks B) options C) NASDAQ stocks D) all of the above are marginal under Reg. T

B) options - Regulation T does not permit margin under normal circumstances on Option contracts

The rules of the Securities Exchange Act of 1934 _ A) were passed by Congress as part of the law B) specify how the law is implemented and enforced C) were adopted behind closed doors D) were written to guarantee a return on investments

B) specify how the law is implemented and enforced

The Securities & Exchange Commission was formed as part of A) the Securities Act of 1933 B) the Securities & Exchange Act of 1934 C) the New Deal legislation D) none of the above

B) the Securities & Exchange Act of 1934

When a corporation announces that it is seeking additional equity capital through a sale of additional authorized but unissued shares A) this is a secondary distribution B) this is a primary distribution C) this is an IPO D) this is a split offering

B) this is a primary distribution

A market maker is obligated A) to maintain subject quotes during trading hours B) to maintain and honor firm quotes during trading hours C) to buy no less than one round lot from a customer at its ask price D) to sell no less rhan one round lot to a customer inside the spread

B) to maintain and honor firm quotes during trading hours - Market making firms post firm quotes during the trading day at which they are obligating themselves to do business with other firms as well as retail customers

The state of Massachusetts is seeking to raise $300 million through the sale of revenue bonds to repair the roadways. Which of the following is correct? A) These bonds will be subject to a statutory debt limit B) These bonds will be issued through negotiation C) The offering will be advertised in the daily bond buyer D) The underwriters will be required to submit sealed bids

B)These bonds will be issued through negotiation

An investor holding an 8% subordinated debenture will receive how much at maturity? A) $1,000 B) $1,080 C) $1,040 D) Depends on the purchase price

C) $1,040 - Principal payment + last semiannual interest payment

ABC Company has declared a 1-3 reverse stock split. You currently own 300 shares before the split, and the stock is worth $5. After the reverse stock split, what is your total position in ABC worth? A) $0 B) $500 C) $1,500 D) $2,000

C) $1,500

What is the minimum deposit for negotiable CD's? A) $5,000 B) $1,000,000 C) $100,000 D) $100

C) $100,000

An investor =who buys a 7% cumulative preferred stock will receive semiannual dividends of: A) $7 per share B) 7% of the corporate profits C) $3.50 per share D) 3.50% of the corporate profits

C) $3.50 per share

A school principle has deposited $15,000 in a tax-deferred annuity through a payroll deduction plan. The account has grown in value to $22,000. The principal plans to retire and take a lump sum distribution. On what amount doe she pay taxes? A) $22,000 B) $15,000 C) $7,000 D) $0

C) $7,000 - Nonqualified = after tax = pay taxes on growth

Which of the following are basic provisions of a universal life insurance policy? (1) Flexible death benefit (2) Flexible premium (3) Minimum guaranteed cash value (4) Unbundled structure A) (1) and (2) only B) (2) and (3) only C) (1), (2), and (4) only D) (1), (3), and (4) only

C) (1), (2), and (4) only

A mutual fund has been seeking to attract new customers to invest in its growth fund. They have been running an advertising campaign that markets them as a diversified mutual fund. How much of any one company can they own? A) 15% B) 5% C) 10% D) 9%

C) 10%

The Regulatory Element of FINRA's Continuing Education Porgram requires all registered individuals to complete a computer-based training session within _ days of the second anniversary of their initial registration date, and every three years thereafter A) 30 B) 60 C) 120 D) 180

C) 120

During an underwriting of a hot issue, the syndicate exercises its greenshoe provision. This will allow the syndicate to buy what additional percentage of the offering? A) 20% B) 25% C) 15% D) 10%

C) 15%

The Securities & Exchange Commission (SEC) was created by Congress in A) 1929 B) 1933 C) 1934 D) 1940

C) 1934

XYZ has 8% subordinated debentures trading in the market place at $120. They are convertible into XYZ common stock at $25 per share. What is the parity price of the common stock? A) 29 B) 31 C) 30 D) 28

C) 30 - 1,000 / 25 = 40 shares - 1,200 / 40 = $30

A firm participating in the offering of a private placement may sell the private placement no more than __ non accredited investors in any 12 month period? A) 12 B) 6 C) 35 D) 15

C) 35

If T-bonds are called in, how long of a notice does an investor receive before calling the bond? A) 4 weeks B) 1 year C) 4 months D) 30 days

C) 4 months

If a 5% stock dividend is paid to an investor who owns 800 shares of stock already, the investor will receive how many shares? A) 4 shares B) 8 shares C) 40 shares D) 80 shares

C) 40 shares

The hours of operation of the Chicago Board Options Exchange are: A) 9:30 am TO 4:00 pm CT B) 8:00 am TO 8:00 pm ET C) 8:30 am TO 3:00 pm CT D) 7:00 am TO 7:00 pm CT

C) 8:30 am TO 3:00 pm CT - NYSE hours = CBOE hours - 9:30 am TO 4:00 pm ET (NYSE)

For an insider to sell unregistered stock under an exemption from registration with the SEC, Form 144, Notice of Offering, which contains certain info, must be filed with the SEC. The insider can sell securities during the period of time in which the notice of offering is effective, which is: A) 60 days B) 6 months C) 90 days D) 12 months

C) 90 days

A bullish investor would enter which of the following orders? A) A sell limit thinking that the stock price will rise B) A sell stop below the market C) A buy stop above the market D) DNR GTC

C) A buy stop above the market

Which of the following best describes Letter of Intent: A) A written acknowledgement signed by an investor, with the investor promising to follow all industry rules B) A document informing an investor about how NAV works C) A written indication provided by the investor to purchase a set number of mutual fund shares in the future D) A signed authorization by the investor promising to repay borrowed funds

C) A written indication provided by the investor to purchase a set number of mutual fund shares in the future

Under SEC rules, the purchaser of a Regulation D private placement must complete and sign a(n): A) Subscription agreement B) Hypothecation agreement C) Accredited investor questionnaire D) Arbitration agreement

C) Accredited investor questionnaire - Private placements are typically only offered to "accredited investors." These are wealthy individuals and institutional investors - To document that the purchasers are, indeed, accredited, an "accredited investor questionnaire" must be completed and signed by the potential purchaser - This is retained by the broker-dealer or issuer selling the securities and is proof that the purchasers were accredited

All of the following are true about the Letter of Intent EXCEPT: A) It is valid for 13 months B) It may be backed for 90 days C) An investor may not redeem shares during the time the letter if intent is in effect D) An investor receives the reduced sales charge as soon as the letter is signed

C) An investor may not redeem shares during the time the letter of intent is in effect

An investor with $20,000 invested in XYZ growth fund is: A) A stockholder in XYZ B) An owner of XYZ C) An owner of undivided interest in the XYZ growth portfolio D) Both an owner of XYZ and an owner of an undivided interest in the XYZ growth portfolio

C) An owner of undivided interest in the XYZ growth portfolio - Invest in mutual fund = undivided interest not in fund company itself

Which of the following debt securities pays interest? A) Commercial paper B) T-bill C) Industrial revenue bond D) Banker's acceptance

C) Industrial revenue bond - All the other choices are issued at a discount

All but which of the following statements are correct regarding bonds and preferred stock? A) If a company declares bankruptcy, bondholders are repaid before preferred stock shareholders B) Preferred stock pays dividends; bonds pay interest C) Bonds are subject to greater interest rate risk than preferred stock D) Neither bond interest nor preferred stock dividends qualify for capital gains treatment

C) Bonds are subject to greater interest rate risk than preferred stock - Preferred stock has no fixed maturity date therefore there is unlimited interest rate risk

INTC has been hitting a lot of resistance at $30. A technical analysts who wants to buy a stock would most likely place what type of order? A) Limit order to buy at $30 B) Market Order C) Buy stop at $31 D) Buy limit at $29

C) Buy stop at $31 - Buy the stock when it breaks through resistance

FINRA has promulgated various rules and procedures pertaining to the operation of broker-dealers and departments within member firms. The M&A Department: A) Is tasked with supervising Managed accounts and Asset Allocation accounts B) Is in charge of rules governing the Member and Associated persons C) Creates the firm's procedures pertaining to Merger and Acquisition activity D) Deals with Market making and inventory Acquisition for the firm

C) Creates the firm's procedures pertaining to Merger and Acquisition activity - Assists companies in their efforts to buy another company or sell their company to an interested buyer

You have just opened up a new account for a customer. You are required to have all of the following, except the: A) Agent's name or ID number B) Principal's signature C) Customer's signature D) Customer's social security number

C) Customer's signature - When opening an account, customer not required to sign anyhting

To open a guardian account, the firm must obtain: A) Trust papers B) Power of attorney C) Declaration papers D) Affidavit of domicilie

C) Declaration paper

A potential customer that you have been trying to get to open an account with you for some time has agreed to put some money in a mutual fund you have recommended. Which of the following customer information is NOT required on the new account form? A) Address B) Social security number C) Educational information D) Investment objective

C) Educational information

Which type of security purchases mortgage loans from smaller banks and packages them into pools? A) GNMA B) FNMA C) FHLMC D) All of the above

C) FHLMC

As interest rates rise, preferred stock prices will: A) Remain unaffected B) Rise C) Fall D) Fluctuate

C) Fall - Preferred stock is a fixed income security whose prices move inversely with interest rates - As interest rates rise, preferred stock prices fall, so that the preferred will give a yield that is competitive with the current market.

All of the following indicate a downturn in the business cycle, except: A) Rising inventories B) High consumer debt C) Falling inventories D) Falling stock prices

C) Falling inventories

Which of the following risk is associated with a company's decision to use debt as part of its capital structure A) Business risk B) Tax risk C) Financial risk D) Market risk E) Credit risk F) Country risk

C) Financial risk

ABC common stock declined dramatically in value over the last quarter but the dividend it declared for payment this quarter has remained the same. The dividend yield on the stock has: A) Not changed because the board of directors has to declare the dividend amount B) Gone down because the yield is a stated rate C) Gone up as the price of ABC has fallen D) Been fixed at the time of issuance

C) Gone up as the price of ABC has fallen

The Federal Reserve Board sets all of the following except: A) Monetary Policy B) Reserve Requirement C) Governmental spending D) Discount rate

C) Governmental spending

All of the following relatives of an insider would also be insiders EXCEPT: A) Brother B) Sister-in-law C) Grandfather D) Spouse

C) Grandfather

Which of the following are bearish? I : Call Seller II : Put Seller III : Call Buyer IV : Put Buyer A) II and III B) II and IV C) I and IV D) I and II

C) I and IV

A registered representative may accept orders for a client's account from which of the following? I : Client II : Client's spouse III : Client's attorney IV : Client's investment advisor A) I and II B) I, II, and III C) I only D) I, II, III, and IV

C) I only

FINRA considers which of the following classified as retail communications? I : Video displays II : Listings in phone directories III : Circulars IV : Telemarketing scripts A) II and III B) I and II C) I, II, III, and IV D) I and III

C) I, II, III, and IV - Listed as such if could be seen by an individual investor

A syndicate manager has received the following orders for a new issue: $10,000,000 in group net orders, $15,000,000 in member orders, $10,000,000 in designated orders, and $5,000,000 in pre-sale orders If the manager is offering $20,000,000 of new bonds, which of the following groups of orders will be filled at least partially? I : Pre-sale II : Designated III : Member IV : Syndicate A) I only B) I and IV C) I, II, and IV D) All of the above

C) I, II, and IV

When is a market maker permitted to receive compensation from an issuer? A) Under no circumstances B) If the compensation is less than $1,000 C) If the compensation is connected to an investment banking transaction D) If the compensation is related to an issuer that is listed on a US exchange

C) If the compensation is connected to an investment banking transaction

What is NOT a characteristic of a 529 plan? A) State-sponsored plan B) Tax-free withdrawals on qualified educational expenses C) Income limitations of $220,000 per couple D) Tax-deferred growth

C) Income limitations of $220,000 per couple

All of the following are reasons a corporation would attach a warrant to their bond, except to: A) Save money B) Make bond more attractive C) Increase the number of shares outstanding when warrants are exercised D) Lower the coupon

C) Increase the number of shares outstanding when warrants are exercised

Which of the following takes money out of the money supply? A) Fed's purchase of securities B) Moral Suasion C) Increasing the reserve requirement D) Decreasing the discount rate

C) Increasing the reserve requirement

The SEC has been reviewing a company's registration statement and would like clarification on a few items. The SEC would most likely: A) Call the company B) Issue a stop order C) Issue a deficiency letter D) Call the lead underwriter

C) Issue a deficiency letter

A mutual fund's custodian bank does which of the following? A) Holds customer's securities B) Cancels certificates C) Maintains records for accumulation plans D) Issues certificates

C) Maintains records of accumulation plans

All but which of the following are among the three categories of firm communications that are defined and regulated by FINRA Rule 2210? A) Correspondence B) Institutional communication C) Marketing communication D) Retail communication

C) Marketing communication

What are some objectives of the Fed? A) Stabilize employment, adjust declining prices, and promote high interest rates B) Maximize employment, promote higher prices, and create low taxes C) Maximize employment, stabilize prices, and moderate interest rates D) Adjust falling employment, falling prices, and falling rates E) Maintain constant employment, constant prices, and constant interest rates

C) Maximize employment, stabilize prices, and moderate interest rates

A couple in their early thirties are seeking an investment for the $40,000 they have saved. They are planning on purchasing a new home in the next 2 years. You should most likely recommend which of the following? A) Preferred stock B) Common stock and common stock funds C) Money market funds D) Municipal bonds

C) Money market funds - Best for investor who will need access to their funds in the next few years

A Regulation A offering as amended by the JOBS Act pertains to an: A) Intrastate offering of securities B) Offering of bonds C) Offering of $50 million or less D) Offering of $3 million or less

C) Offering of $50 million or less

An investor has deposited $100,000 into a qualified retirement account over a 10-year period. The value of the account has grown to $175,000 and the investor plans to retire and take a lump sum withdrawl. The investor will pay: A) Capital gains tax on $75,000 only B) Ordinary income taxes on the $75,000 only C) Ordinary income taxes on the whole $175,000 D) Ordinary income taxes on the $100,000 and the capital gains on the $75,000

C) Ordinary income taxes on the whole $175,000 - Qualified = pre tax = all money taxed

Which of the following regulations sets out certain requirements for lenders, other than brokers and dealer, who extend secured by margin stock? A) Regulation S B) Regulation T C) Regulation U D) Regulation W

C) Regulation U

Call protection is most valuable to a bond owner when bond prices are generally: A) falling B) fluctuating C) rising D) stable

C) Rising

In the securities industry, which of the following is the ultimate industry authority regulating conduct? A) NYSE B) SRO C) SEC D) FINRA

C) SEC

Mitigation of the risk of loss in a bearish market can be achieved by customers with vulnerable long stock positions placing: A) Sell limit orders B) Buy stop orders C) Sell stop orders D) GTC orders

C) Sell stop orders

An efficient trading market is one with: A) Uniform trading procedures B) Centralized trading floor C) Small bid/Ask spreads D) Publicly disseminated trade reporting

C) Small bid/Ask spreads - Efficient markets are characterized by high trading volumes and narrow bid/ask spreads - Whether or not there is a centralized trading floor has no bearing on efficiency. For example, the U.S. Government debt trading market is an OTC screen-based trading system and it is highly efficient - Uniform trading procedures and public disclosure of trade prices help foster efficiency, but if trading volumes are low, the market will still be "inefficient."

Your brokerage firm acts as a market maker for several high volume stocks that are quoted on the NASDAQ. What is the firm's consideration for being a market maker? A) Commission B) Fees C) Spread D) 5%

C) Spread - Difference between bid and ask

Which of the following pay interest on a semiannual basis? A) STRIPS B) T-bills C) T-bonds D) Treasury stock

C) T-bonds - T-bills are bought at a discount and redeemed for par value at maturity - STRIPS are long-term zerov coupon bonds which are bought at a discount and then reedemed for par value at maturity

At withdrawl, pre-tax contributions and earnings in a traditional IRA are: A) Not taxed B) Not taxed if the investor is at least 59.5 years old C) Taxed at the investor's ordinary income rate D) Taxed at the investor's long-term capital gains rate

C) Taxed at the investor's ordinary income rate - Earnings grow tax free - Taxed upon withdrawl

The city of Miami is seeking to raise $10 million through the sale of GO bonds to repair the high schools' football field. The bonds are going to be ex-legal. Which of the following is correct? A) The bonds receive an unqualified legal opinion B) The bonds receive a qualified legal opinion C) The bonds receive no legal opinion D) The bonds' legal claim to the tax revenue is in doubt

C) The bonds receive no legal opinion - Small bond issue, no need to pay legal fees to obtain legal opinion

The term "disclaimer" is most often associated with A) The fact that no agent can guarantee a customer against loss B) The fact that unregistered securities are more risky than registered ones C) The fact that the government cannot guarantee the accuracy of the information in a prospectus D) None of the above

C) The fact that the government cannot guarantee the accuracy of the information in a prospectus - SEC reviews info in registration statement but does not approve or disapprove info

All of the below are typical features of an ETF except: A) they are marginable B) they often are sector-driven portfolios C) they are traded each day based upon 4:00 pm NAV D) none of the above are exceptions

C) they are traded each day based upon 4:00 pm NAV - ETFs trade on exchanges at market prices determined by supply and demand (like corporate stocks)

Which statement is FALSE about a SIMPLE IRA? A) The maximum annual contribution is higher than for a Traditional IRA B) The contribution is made by the employee, who gets a salary reduction for the amount contributed C) The plan is available to any size employer D) The employer must make a matching contribution

C) The plan is available to any size employer - SIMPLE IRAs are only available to small businesses with 100 or fewer employees - The plan is established by the employer and is much more simple to establish and administrate than a traditional pension plan (hence the name SIMPLE) - Each employee contributes up to $12,500 (in 2018) as a salary reduction - Employer must make a matching contribution of either 2% or 3% of the employee's salary (the 2% match option must be made regardless of whether the employee makes any contribution; the 3% match must be made only if the employee makes a contribution) - There is no flexibility regarding the employer match (must be made in good times and bad times by the company)

For a call option, the strike price is: A) The price at which the call writer must buy the underlying securities from the call holder B) The breakeven point for the holder of the option C) The price at which the call holder can buy the underlying security from the call writer D) The market value of the underlying security at which the option must be exercised

C) The price at which the call holder can buy the underlying security from the call writer - For put option, strike price is the price at which the call writer must buy the underlying securities from the call holder when the put it exercised

As the owner of a cumulative preferred stock, an investor would have all of the following rights, except: A) Voting if dividends are missed for a significant period of time B) The right to receive past dividends not paid by the corporation C) The right to exchange the preferred for the underlying common shares D) The right to receive the past dividends before common holders receive a dividend

C) The right to exchange the preferred for the underlying common shares

An investor purchases two puts. The first is a September Theta put at $35, underlying currently selling at $37. The second is November Delta put at $28, underlying currently selling at $25. Ignoring transactions costs, what is the value of the options? A) Theta: -$2 ; Delta: $3 B) Theta: $0 ; Delta: -$3 C) Theta: $0 ; Delta: $3 D) Theta: $2 ; Delta: $3

C) Theta: $0 ; Delta: $3 - Put option is OTM (out-the-money) when underlying < strike - Strike = $35 - Underlying = $37

Which of the following is NOT true of money market instruments? A) They are highly liquid fixed-income securities B) They are issued by corporations with high-credit ratings, and are thus considered safe C) They are considered risky because of short-term maturities D) They are a method used to obtain short-term financing

C) They are considered risky because of short-term maturities

Mr. and Mrs. Jones, a couple in their early fourties, enjoy watching their son play baseball on the weekends. He is planning to go to college 11 years from September and they are looking to start saving for college expenses. Which of the following would you recommend? A) Educational IRA B) Growth fund C) Treasury STRIPS D) Custodial account

C) Treasury STRIPS - Question is asking for investment recommendations, not type of account recommendations to be deposited into

During an inflationary period, the price of which of the following will fall the most? A) Preferred stock B) Treasury bills C) Treasury bonds D) Common stock

C) Treasury bonds

An investor wires $10,000 into his mutual fund on Tuesday, March 11, and the money is credited into his account at 3 pm. He will be the owner of record on: A) Friday, March 14 B) Wednesday, March 12 C) Tuesday, March 11 D) Tuesday, March 18

C) Tuesday, March 11

SIPC is an insurance organization designated to protect investors against loss: A) When their brokerage firm makes provably unsuitable recommendations B) When their brokerage firm fails to notify them of an impending stock market decline C) When their broker-dealer goes bankrupt D) When their brokerage firms loses or misplaces their securities

C) When their broker-dealer goes bankrupt - Securities Investor Protection Act of 1970 created insurance entity called SIPC to provide protection to customers of bankrupt brokerage firms in the event the customers' cash and or securities have not been found during the bankruptcy proceedings - Not investment insurance

One type of information shared with stockholders is _, which provides information needed for elections and decisions requiring a vote A) a tender offer B) an insider trade C) a proxy statement D) a quarterly report

C) a proxy statement

Regulation SHO severely restricts short selling during the cooling offer period of a follow-on offering. Which of the below is true? A) shorting stock of a company undergoing a follow on offering is prohibited during the registration period B) an investor cannot buy new shares in a follow on deal if they have sold the outstanding shares of that issuer during the cooling off period C) an investor may buy the new issue shares on the offering so long as any short sale has been covered at least one business day prior to the effective date D) none of the above

C) an investor may buy the new issue shares on the offering so long as any short sale has been covered at least one business day prior to the effective date

A warrant gives the holder a right to purchase equity shares: A) in the secondary market B) in the IPO C) at a set price from the issuer D) whenever new shares are issued

C) at a set price from the issuer

The primary purpose of a syndicate desk in the context of an equity offering is to: A) determine the list of selling shareholders B) chaperone company management during the road show C) build an order book and allocate the stock D) solicit interest from investors in the stock offering

C) build an order book and allocate the stock

The principal difference between selling syndicate and selling group would be: A) commissions earned B) Eastern vs Western liability C) commitment D) all of the above

C) commitment - Syndicate implies firm commitment - Group implies best efforts

One of the most frequently issued money market instruments is commercial paper. Typically, this investment has a maximum maturity: A) of one year B) of 90 days C) of 270 days D) of 180 days

C) of 270 days - Or 9 months

A health savings account (HSA) allows the account holder to set aside money on a/an _ basis to pay for _ medical expenses A) after-tax, qualified B) after-tax, unqualified C) pre-tax, qualified D) pre-tax, unqualified

C) pre-tax, qualified

Jane Investor has decided to sell short ABC stock. She sells 100 shares short at $78. The price of the stock decreases the next day to $75 when she buys the stock. Jane Investor has a(n) _. A) realized loss B) realized gain C) unrealized loss D) unrealized gain

D) unrealized gain

A doctor makes his maximum contribution to his Keogh plan while earning $300,000 per year. How much can he contribute to an IRA? A) $55,000 B) $17,000 C) $9,000 D) $5,500

D) $5,500 - Can always contribute to an IRA as long as he has earned an income

Tony smith, an MFP, would like to make a political contribution to a mayoral candidate in his local town. What is the maximum amount Tony can contribute in both primary election and general election combined? A) $0 B) $125 C) $250 D) $500

D) $500

An investor owns 100 shares of XYZ 8% participating preferred stock. XYZ's common stock pays a quarterly dividend of $.25. How much will the investor earn each year in dividends? A) $825 B) $90 C) $180 D) $900

D) $900

Which investment gives the LEAST protection against purchasing power risk? A) 6 month Treasury Bill B) 10 year Treasury Note C) 10 year Treasury "TIPS" D) 10 year Treasury "STRIPS"

D) 10 year Treasury "STRIPS" - Purchasing power risk is the risk that inflation will cause interest rates to increase; bond prices will fall - Treasury "TIPS" are Treasury Inflation Protection Securities - the principal amount of these securities is adjusted upwards with the rate of inflation - Even though the interest rate is fixed, the holder receives a higher interest payment, due to the increased principal amount. When the bond matures, the holder receives the higher principal amount. Thus, there is no purchasing power risk with these securities - Treasury STRIPS are zero-coupon Treasury obligations - these have the highest level of purchasing power risk - 6 month Treasury bills have a low level of purchasing power risk. Since they will mature at par in the near future, their value cannot fall very far below this if interest rates rise.

If a mutual fund purchaser signs letter of intent in order to take advantage of a breakpoint discount, how long does he have to buy enough shares to reach the breakpoint? A) 25 months B) 90 days C) 9 months D) 13 months

D) 13 months

To avoid penalties, assets held inside a Coverdell ESA must be used by the beneficiary's: A) 18th birthday B) 25th birthday C) 29th birthday D) 30th birthday

D) 30th birthday

The maximum amount that a couple may contribute to their IRAs at any one time is: A) 100% of annual contribution limit B) 200% of annual contribution limit C) 300% of annual contribution limit D) 400% of annual contribution limit

D) 400% of annual contribution limit

A corporation in your state wants to sell 1,000,000 shares of stock at $5 per share to investors. Which of the following is NOT true under rule 147? A) 80% of corporate assets must be located in the state B) 80% of proceeds must be used in state C) 80% of the income must be derived from activity within the state D) 80% of the purchasers must be in the state

D) 80% of the purchasers must be in the state - 100% of the purchasers must be in the state

The maximum duration for a piece of commercial paper is: A) 45 days B) 10 years C) 1 year D) 9 months

D) 9 months

Which of the following could trade in the money market? A) Short-term equity B) Newly issued corporate bonds C) Newly issued options contract D) A Treasury note issued nine years ago

D) A Treasury note issued nine years ago - Less than one year to maturity

The term "issuer" most often refers to: A) A corporation seeking to raise additional capital for expansion or modernization purposes B) A business which prints up securities certificates such as bonds and stocks C) A business which has satisfied the listing requirements of one or more approved stock exchanges D) A business, a municipality, or a federal government entity which is seeking to raise capital from the sale of securities

D) A business, a municipality, or a federal government entity which is seeking to raise capital from the sale of securities - A, B, C are only partially accurate

Common dividends are all of the following except: A) A portion of the earnings of the company B) A source of income for the investor C) Generally paid quarterly D) A figure determined by subtracting the current yield from the current market price

D) A figure determined by subtracting the current yield from the current market price - Real answer : Annual Income/Current Market Price

An investor has a conservative attitude toward investing and is seeking to invest $100,000 into an investment that will provide current income and the most protection from interest rate risk. You would most likely recommend which of the following? A) Ginnie Mae pass-through certificate B) Banker's acceptance C) Treasury STRIPS D) A portfolio of T-bills

D) A portfolio of T-bills - As bills mature, the investor can roll into newly issued bills with new interest rates

Which of the following is NOT allowed as a joint account? A) A registered representative and a customer B) A registered representative and a spouse C) A registered representative and a friends D) A registered representative and his 16-year-old son

D) A registered representative and his 16-year-old son - No adult can have a joint account with a minor

Which of the following are not considered money market securities? A) T-bills B) Commercial paper C) Reverse Repos D) ADRs

D) ADRs - Money market instruments = short term debt - ADRs = ownership (equity)

How are CMOs taxed? A) Federal level B) State level C) Local level D) All levels

D) All levels

A corporation may pay a dividend in which of the following ways? Choose the most complete response. A) Stock B) Cash C) Stock of another company D) All of the above

D) All of the above

How often are the Auction Rate Securities' interest reset? A) Every 7 days B) Every 28 days C) Every 35 days D) All of the above

D) All of the above

Which of the following is true? A) If an investor buys shares just prior to the ex date, he will have his investment money returned B) After an investor's money is returned, the investor is still liable for taxes on the dividend amount C) A registered representative may not use the pending dividend payment as the sole basis for recommending a stock purchase D) All of the above

D) All of the above

Which type of issuers can issue zero-coupon bonds? A) Corporations B) Government C) Municipal D) All of the above

D) All of the above

An investment advisor will be deemed to have custody of a client assets if which of the following apply? A) The advisor has possession of client funds or securities and does not return them to the client within 3 days B) The advisor is authorized or permitted to withdraw client funds or securities C) The advisor has legal ownership or access client funds or securities D) All of the above are correct

D) All of the above are correct

Which of the following is a self-regulatory organization (SRO)? A) FINRA B) NYSE C) SIPC D) All of the above are correct

D) All of the above are correct

When reviewing the definitions of broker-dealers and investment advisors, one would find that: A) Broker-dealers can engage in securities transactions for compensation B) Investment advisors engage in providing advice relating to the advisability of investing or not investing in securities for compensation C) An investment advisory firm must have an account at a broker-dealer in order to have the recommended transactions executed D) All of these

D) All of these

Which of the following may NOT trade on the floor of the NYSE? A) Two-dollar broker B) Regular member C) Commission house broker D) Allied member

D) Allied member - Only can have electronic access to the exchange

All but which of the following are correct regarding investment advisor representatives (IARs) A) Every investment advisory firm must have at least one IAR registered to the firm B) An IAR can be a dual registrant of multiple firms in some states only C) There are currently no continuiing education requirements for IARs D) An IAR does not need to be registered to an IAR firm in order to conduct investment advisory business

D) An IAR does not need to be registered to an IAR firm in order to conduct investment advisory business - Must be registered to a firm

Which of the following could be subject to an investor's AMT? A) A limited partnership B) An open-end mutual fund C) A convertible preferred stock owned by a wealthy investor D) An industrial revenue bond

D) An industrial revenue bond - Industrial revenue bond may subject some wealthy investors to the alternative minimum tax

Which of the following may always trade in the money market? A) T-bond B) T-note C) ADR D) Banker's acceptance

D) Banker's acceptance

Common stockholders do not have the right to vote on which of the following issues? A) Election of the board of directors B) Stock splits C) Issuance of additional common shares D) Bankruptcy

D) Bankruptcy

Which bonds are issued as a physical certificate without the owner's name on them and require whoever possesses these bonds to clip the coupons to receive their interest payments as well as surrender the bond at maturity in order to receive the principal payment? A) Registered bonds B) Book entry/journal entry bonds C) Principal-only bonds D) Bearer bonds

D) Bearer bonds

An investor is long 1000 shares of OnNet.com at $30 per share. To gain the maximum protection he should: A) Sell 10 OnNet June 30 calls B) Sell 10 OnNet June 30 puts C) Buy 10 OnNet June 30 calls D) Buy 10 OnNet June 30 puts

D) Buy 10 OnNet June 30 puts

In a period of low inflation and economic recession, the Federal Reserve is expected to take which of the following actions? A) Decrease taxes B) Raise the federal funds rate C) Require banks to increase reserves D) Buy bonds in the open market

D) Buy bonds in the open market

A new investor is in the 15% tax bracket and is seeking some additional current income. Which of the following would you recommend? A) Growth fund B) Government bond fund C) Municipal bond fund D) Corporate bond fund

D) Corporate bond fund

Which one of the following interest rates is controlled by the Federal Reserve Board? A) Prime Rate B) Federal Funds Rate C) Broker Call Loan Rate D) Discount Rate

D) Discount Rate

The ex-dividend date on a closed-end mutual fund is set by the: A) Board of directors B) SEC C) Board of governors D) FINRA/NYSE

D) FINRA/NYSE - Like stock

Fiscal policy controlled by: I : President II : FOMC III : Congress IV : FRB A) I and IV B) I and II C) II and IV D) I and III

D) I and III

Pre-emptive rights and stock warrants have a number of similarities. Which of the below represent characteristics these products have in common? I : Each has a fixed price at which the holder may purchase shares of the issuer's common stock II : The fixed exercise price for both products is initially set at a level below the current market value of the common stock III : These products are tradable on securities exchanges IV : Both have relatively short-term expiration dates A) I, II, and III B) I and IV C) II and IV D) I and III

D) I and III - Both are offerings at favorable below market price - Warrants enable holder of warrant to buy more shares at an exercise price which when first set, tends to be higher than CMV at that time - Warrants are quite long while rights expire in 30 days or less - Both are tradable on organized stock exchanges

A syndicate has published a tombstone ad prior to the issue becoming effective. Which of the following must appear in the tombstone? I: A statement that the registration has not yet become effective II: A statement that the ad is not an offer to sell securities III: Contact Information IV: No commitment statement A) III and IV B) II and III C) I and II D) I, II, III, and IV

D) I, II, III, and IV

During a new issue registration, false information is included in the prospectus to buyers. Which of the following may be held liable to investors? I: Officers of the issuer II: Accountants III: Syndicate members IV: People who signed the registration statement A) I and III B) I C) I, II and III D) I, II, III, and IV

D) I, II, III, and IV

Which of the following is an associated person of a member firm? I : Registered representative II : Trader III : Director IV : Manager A) I and III B) I and II C) I, II, and IV D) I, II, III, and IV

D) I, II, III, and IV

Which of the following are true about an option? I : It is a contract between two parties that determines the time and place at which a security may be bought or sold II : The two parties are known as the buyer and the seller. The money paid by the buyer of the option is known as the option's premium III : The buyer has bought the right to buy or sell the security depending on the type of option IV : The seller has an obligation to perform under the contract, possibly to buy or sell the stock depending on the option involved A) I, III, and IV B) I, II, III, and IV C) I, II, and III D) II, III, and IV

D) II, III, and IV

Which of the following is NOT a type of order? I : All or none II : Fill or kill III : Mini/maxi IV : Best efforts A) I and II B) II and IV C) I and IV D) III and IV

D) III and IV

All of the following are bullish for the stock market, except: A) Falling taxes B) Increasing governmental spending C) Increasing money supply D) Increasing interest rates

D) Increasing interest rates

Which of the following is a broker in the futures market who has a direct relationship with a client, but delegates the work of the floor operation and trade execution to another futures merchant? A) Carrying broker B) Clearing broker C) Executing broker D) Introducing broker

D) Introducing broker - Clearing broker : Acts as liaison between investor & clearing corporation & ensures trade is settled appropriately - Carrying broker : Brokerage firm provides back-office support for other brokers, ensuring regulatory compliance/recording/distribution & monitor credit risk for margin accounts - Executing broker : Middlemen under Prime Brokerage service made for large active traders ; passes along execution to settlement & clearing group of prime brokerage

Which of the following statements is FALSE regarding the discount rate? A) As a monetary policy tool, it is not as powerful as open market operations B) The Federal Reserve Board can choose to raise it or lower it C) It is the rate charged on loans extended by the Fed D) It is the rate banks charge to other banks when they need more reserves

D) It is the rate banks charge to other banks when they need more reserves

A client has phoned in concerned about what will happen to his investment in a waste management company if the new EPA laws are enacted, requiring disposal companies to reduce pollution. What type of risk is he concerned with? A) Call risk B) Environmental risk C) Investment risk D) Legislative risk

D) Legislative risk - Risk that the government will do something that adversely affects an investment

What is the first step in business continuity planning? A) Document the actions that should be taken to prevent or reduce the likelihood of an event occurring B) Implement the plan, including the training of personnel and implementation of prevention steps C) Have multiple personnel review the plan D) List possible events

D) List possible events

What is the formula for a lender to set it's nominal interest rate? A) Nominal interest rate = Principal/Profit B) Nominal interest rate = Real Interest Rate + Actual Inflation Rate C) Nominal Interest Rate = Profit/Principal D) Nominal Interest Rate = Real Interest Rate + Expected Inflation Rate

D) Nominal Interest Rate = Real Interest Rate + Expected Inflation Rate

SIPC, the securities investor protection corporation is: A) An insurance entity which protects investments again market losses up to $500,000 B) An insurance entity which protects investors investments against losses up to 1/2 million dollars in market value in the event of broker-dealer bankruptcy C) A Congressional guarantee against losses in the securities markets D) None of the above

D) None of the above - SIPC protects customer ACCOUNTS in event of broker-dealer bankruptcy - Does not protect investments against loss - Cash & securities insured up to $500,000

A customer calls in asking about how to put money aside for his children. He wants to open a custodial account for his two children. What should you recommend? A) Open two accounts for both children, with him and his wife as custodian B) Open two accounts for the two children, with him being the custodian on one and his wife being custodian on the other, as one parent may only be custodian for one child C) Open one account immediately for both children D) Open two accounts, one for each child, with he or his wife as custodians for both or for either

D) Open two accounts, one for each child, with he or his wife as custodians for both or for either - one custodian and one minor for each UGMA account

In the Great Recession of 2008, how much did the stock market drop? A) 10% B) 40% C) 25% D) Over 50%

D) Over 50%

Which type of bonds require the investor to deposit coupons to receive their interest payments but have the owner's name recorded on the books of the issuer? A) Registered bonds B) Bearer bonds C) Book entry/journal entry bonds D) Principal-only bonds

D) Principal-only bonds

When will the shareholder receive the dividend? A) Trade date B) Settlement date C) Payment date D) Record date

D) Record date

Which of the following was adopted to update short sale regulations and to address concerns regarding potentially abusive naked short selling? A) Regulation BTR B) Regulation HFT C) Regulation NMS D) Regulation SHO

D) Regulation SHO

The state of Texas is seeking to raise $500 million through the sale of GO bonds. Which of the following will support the repayment of the bonds issue? A) Property taxes B) Ad valorem taxes C) User fees D) Sales tax

D) Sales tax - GO bonds from the state supported by revenue at state level - Sales & Income tax

The Securities Exchange Act of 1934 regulates which of the following markets? A) Third B) Fourth C) Primary D) Secondary

D) Secondary market

Which of the following is an order to sell a stock at a price below the current market price? A) Sell discount order B) Sell limit order C) Sell market order D) Sell stop order

D) Sell stop order

The FDIC maintains stability and public confidence in the nation's financial system by doing all but which of the following? A) Insuring deposits B) Managing receiverships C) Examining and supervising financial institutions for safety, soundness, and consumer protection D) Setting minimum standards for voluntarily established pension and health plans

D) Setting minimum standards for voluntarily established pension and health plans - That is ERISA

Which of the following strategies has unlimited loss potential? A) Long stock / Short call B) Long stock / Long put C) Short stock / Long call D) Short stock / Short put

D) Short stock / Short Put - With a long stock position, the maximum loss is the value of the stock - With a short stock position, the potential loss is unlimited - If a long call is purchased against a short stock position, the upside loss is limited - If a short put is sold against a short stock position the upside loss is still unlimited since in a rising market the short put will expire "out the money." The short stock position must be covered by purchasing the stock at the higher market price - and the price can rise an infinite amount.

Which of the following is not a violation of the rules of conduct? A) Recommending a security because of its future price appreciation B) Recommending a mutual fund based on pending dividend to an investor seeking income C) Implying that FINRA has approved the firm D) Showing a client the past performance of a mutual fund for the last 3 years since its inception

D) Showing a client the past performance of a mutual fund for the last 3 years since its inception

Which of the following is defined as the benefit provided to an asset manager by a broker-dealer as a result of commissions generated from financial transactions executed by the broker-dealer? A) 12B-1 compensation B) Administrative compensation C) Hard-dollar compensation D) Soft-dollar compensation

D) Soft-dollar compensation - Hard-dollar compensation : Cash/fees/payments made by investors to brokerage firms in return for services - 12B-1 compensation : Operational expense ; distribution fee on mutual fund

A company doing a preemptive rights offering would most likely use what type of underwriting agreement? A) Best efforts B) Firm commitment C) All or none D) Standby

D) Standby - Underwriter will "stand by" ready to purchase any shares not purchased by shareholders

Which type of securities offering allows existing shareholders to purchase additional shares in the company, typically in proportion to their current holdings? A) Private placement B) Initial public offering C) Secondary offering D) Stock rights offering

D) Stock rights offering

Collateral trust certificate use which of the following as collateral? A) Real estate B) Mortgage C) Stocks and bonds by the same company D) Stocks and bonds by another company

D) Stocks and bonds by another conmpany

All qualified dividends for ordinary income earners are: A) Taxed as ordinary income B) Tax-free income C) Taxed as special interest-free income D) Taxed at a set rate of 15%

D) Taxed at a set rate of 15%

Which act gave the NASD (now part of FINRA) the authority to regulate the OTC market? A) The NASD Act of 1929 B) The Securities Act of 1933 C) The Securities Act of 1934 D) The Maloney Act of 1938

D) The Maloney Act of 1938 - Amendment to the Securities Exchange Act of 1934

According to rule 135, as it related to generic advertising, which of the following is NOT true? A) The ad may contain information about the services a company offers B) The ad may describe the nature of the investment company's business C) The ad may contain information about exchange privileges D) The ad may contain information about the performance of past recommendations

D) The ad may contain information about the performance of past recommendations

A self-employed individual may open a SEP IRA to plan for his retirement. The maximum contribution limit to the plan is: A) $4,000 B) $8,000 C) $16,000 D) The lesser of 25% of the post-contribution income, up to $55,000

D) The lesser of 25% of the post-contribution income, up to $55,000

A particular issuer of bonds chooses to engage a managing underwriter under a negotiated, firm-commitment underwriting contract. The underwriter chooses to sell the bonds using a selling group rather than a syndicate. Who bears the financial risk of unsold bonds? A) The institutional investors B) The issuer C) The selling group members D) The managing underwriter

D) The managing underwriter - Selling group member has no obligation to buy the bonds

Every publicly-traded corporation is required to have a transfer agent and a registrar. The primary distinction between the two is: A) They are not different - they perform the same functions B) The registrar keeps the record of all stock and bond holders C) The transfer agent transmits the payment for securities from the purchaser to the seller in all secondary market trades D) The transfer agent ensures that dividend payments go out to all registered owners of record on the payment date

D) The transfer agent ensures that dividend payments go out to all registered owners of record on the payment date - Registrars make sure that a company does not issue more shares than authorized in the Charter

The maximum allowable gift to a minor under UGMA is: A) $15,000 B) $1,500 C) $30,000 D) There is no limit

D) There is no limit

A FINRA member has failed to receive a stock certificate in good form from the selling FINRA firm. Which FINRA bylaw defines good delivery? A) Rules of Fair Practice B) Code of Procedure C) Code of Arbitration D) Uniform Practice Code

D) Uniform Practice Code - Regulates the way members conduct business with other employees

A company you own common stock in has just filed for bankruptcy. As a shareholder, you will have the right to receive: A) The par value of the common shares B) New common shares in the reorganized company C) A percentage of your original investment D) Your proportional percentage of residual assets

D) Your percentage of residual assets

Reinvestment risk is least present in: A) 2% 10 Treasury Note B) 3% 10 year AA rated Municipal GO C) 4% 10 year AAA rated Corporate debenture D) Zero coupon Treasury Bond

D) Zero coupon Treasury Bond - Zero coupon instrument has no annual income to 'reinvest' so no reinvestment risk

Sweeteners as that term is used in the investment banking community refersr to issue enhancements which include: A) warrants B) insurance C) convertiblility D) any of the above

D) any of the above - Each of these when associated with a bond issue makes the bond more attractive from a client's point of view

Recommending a limited partnership DPP investment to a customer would be a defendable recommendation for a client: A) seeking flow-through tax benefits B) who is not risk averse C) who does not have an immediate need for liquidity D) any of the above

D) any of the above - Investors seeking 'tax shelter' or 'tax advantage' are often suitable for flow through benefits of DPPs

Board of Directors in the publicly-traded sphere are elected by coporate stockholders, using which of the following methods? A) statutory voting B) regular voting C) cumulative voting D) any of the above are possible voting procedures

D) any of the above are possible voting procedures - Regular and statutory are the same

Which of the following investment instruments trades on an exchange at a market price not directly related to its net asset value A) open end investment company B) private hedge fund C) put and call option contracts D) closed-end investment company

D) closed-end investment company - Only closed-end investment company has no specific relationship to the fund's underlying asset value - Trades at supply & demand pricing on exchange

Among the reasons a corporate board would declare a stock split A) is to increase corporate net worth B) is to decrease the annual dividend C) is to reduce individual shareholder's percentage ownershi[p D) is to make the stock more affordable

D) is to make the stock more affordable

Which of the following is a normally a disguised dividend, such as below-market shareholder loan? A) Stock dividend B) Credit dividend C) Ordinary dividend D) Qualified dividend E) Constructive dividend F) Liquidating dividend G) Tax dividend

E) Constructive dividend