STC S7 Training

A gift for what dollar amount per person, per year is exempt from gift tax?

$17,000

The formula for the net asset value =

(Market value of the portfolio + cash - liabilities) / Number of shares outstanding

What is the maximum allowable underwriting compensation for a limited partnership?

10 % of gross proceeds

A pattern day trader executes how many trades with in what time period?

4 or more trades over a five-day period

What may a BD lend a customer in a margin account?

50% which is the Reg T margin call

Which payout option in an annuity guarantees that a minimum number of payments will be made even if the annuitant dies before the period certain has elapsed?

A period certain payout

What is created when an investor is buying both or selling both a call and a put on the same underlying security, with the same expiration, and with the same strike price?

A straddle

For what purposes may a Build America Bond NOT be used to raise capital?

BABs may not be used for purposes of refunding, working capital, and private activity bonds by tax exempt municipalities.

A customer owns 2,000 shares of TBDR. She expects a decline in the market and instructs her registered representative to sell 1,500 shares of the stock. Why would order ticket be marked "sell long"?

Because she owns greater than or equal to the amount of shares she wants to sell.

What rules govern the registration of an issue in any state in which it will be offered?

Blue Sky Laws

What is a bond swap?

Bond sold at a loss and another is purchased

How can a client minimize principal risk in bonds due to fluctuating interest rates?

Buying short term debt securities

What is the P/E ratio formula?

CMV per share/ EPS

Build America Bonds

Direct payments to federal subsidies as tax credits to pay debt or capital projects

What is the difference between a Eurodollar bond and a Yankee bond?

Eurodollar bonds are issued by US entities and sold overseas whereas Yankee bonds are issued by foreign entities and sold in US markets

True or False? options can be bought on margin

False, the contracts must be paid in full

Payments on a variable annuity are based on a:

Fixed number of units with a fluctuating value of securities

What is the name of the name of the overallotment provision in the underwriting agreement which allows the syndicate to increase the number of shares by 15% over the original number of shares in the offering?

Green shoe clause

When would the NAV per share of a mutual fund decline?

If the fund pays a dividend and all shareholders choose to reinvest or take their dividends

A firm is acting as a principal/dealer if ?

It is trading for, or from, its own inventory.

What is the formula to determine total equity in a combined margin acct?

LMV + CR - DR - SMV

If the S&P 500 Index falls by 7% from the previous trading day's closing price, it is defined as a?

Level 1 Market Decline and triggers a 15-minute trading halt.

Moody's gives municipal notes three possible ratings:

MIG 1 (best quality), MIG 2 (high quality), and MIG 3 (adequate quality)

An investor sells a put and buys a put. What is his maximum gain?

Net premium

Fill in the blank: The net asset value (bid price) and offering price (asked price) are the same in a (blank) because there is (blank).

No-load fund, no sales charge

Net revenue pledge

Operating and maintenance expenses are paid prior to debt service

Conversion Price formula

Par value of bond/conversion price

What agreement defines the rights liabilities and obligations of each party?

Partner Agreement

The maximum profit a writer of an option can receive is the

Premium

How will the declaration of cash dividends on a company's balance sheet effect retained earnings and dividends payable?

Retained earnings will decrease and dividends payable will increase

Standard & Poor's uses a four-tiered rating system:

SP-1+, SP-1, SP-2, and SP-3

When a stock is selling ex-dividend (without the dividend) who is entitled to the dividend? (buyer or seller)?

Seller

This type of settlement is an extended settlement and is used when the seller is unable to deliver on a cash or regular-way settlement basis. It must be agreed to by both the buyer and the seller, and must settle at least three business days after the trade date.

Seller's option settlement

What are the short-term capital gains tax rates?

Short term gains are taxed at ordinary income rates

In a spread, whether horizontal (calendar) or vertical (price), what determines if the spread is a debit or credit spread?

The dominant leg

A bond swap will trigger a wash sale unless which features of the bond are changed?

The issuer, coupon or maturity

How do you determine the dominant leg in a spread?

The leg with the higher strike price will have the higher premium.

The most significant factor affecting the net asset value of a mutual fund on a day-to-day basis is:

The market value of the portfolio

If an individual withdraws money from an annuity during the accumulation period, what's the tax implication?

The withdrawal is considered income and taxable

How do you calculate the amount syndicate members will receive for their participation in an underwriting?

Total takedown - selling concession

True or False: An offering memorandum is a disclosure document that's similar to a prospectus

True

True or False: Issuers are prohibited from including statements that remove their liability for misstatements of material facts.

True

True or False: Shares of REITs may be traded either on an exchange or over-the-counter (OTC)

True

True or False? Municipal bearer bonds that are in default of interest, trade with unpaid coupons attached

True

True or False? One of the listing requirements of both the NYSE and Nasdaq is that a majority of the board of directors must be independent

True

True or False? To execute an order to sell short, the customer is required to have a margin account and the broker-dealer is required to locate the shares which need to be borrowed

True

True or False? Accretion is associated with increasing the value each year of an original issue discount bond.

True

True or False? Most municipal revenue bonds are net revenue pledge bonds meaning debt service is paid from net revenue (revenue - operating and maintenance expenses

True

True or False? Depletion only relates to natural resources such as oil and gas

True

True or false? If an individual's registration becomes inactive, she can avoid being required to requalify by examination if she becomes employed with another member firm within two years.

True

Investment companies that have no management fees, offer low sales charges, and invest in a fixed portfolio of securities are known as

Unit Investment Trusts

Which insurance policy allows policyholders to adjust their premiums and death benefits?

Variable Universal Life Insurance

Which insurance products all have fixed annuities?

Variable annuities, fixed annuities, and variable life insurance

What is stated in a subscription agreement for a DPP? (Select all that apply) a. the suitability standards for the program b. specify who must sign the agreement c. specify to whom the check must be made payable d. that the investors is able to meet the financial requirements of the investment (e.g., accredited investor)

a b c d

Whom will the underwriting syndicate use primarily to expand the distribution of the securities being offered?

a selling group

What is a rate covenant?

an agreement made by the municipal issuer to maintain rates high enough to cover maintenance and operating charges and to meet annual debt service requirements.

A client creates an opening sale in a LEAP and closes out the position 15 months later by buying back the option. The tax consequence is a short-term gain or loss because?

any gain or loss on a short position is treated as short-term.

According to FINRA, if an RR suspects financial exploitation of a senior investor, he should first

attempt to resolve the matter prior to placing a temporary hold on the account

Fill in the blank(s): MSRB rules require that any quote provided by municipal dealer be a __x__ or firm at time given. Nominal or subject quotes are permitted if they are __x__?

bona fide, firm at time given

What is stated in an offering memorandum for a DPP? a. Priority provisions for liquidating a limited partnership b. tax implications c. both a and b

c

What document is used to create a limited partnership?

certificate of limited partnership

when an RR excessively buys and sells in a client's account to generate high sales commissions this is known as?

churning

A customer wishes to close out a short option position by liquidating the option. The registered representative should mark the order ticket:

closing purchase

On a purchase, the confirmation shows the

cost of purchasing the security

Fill in the blank: Treasury bills are issued at (blank) and mature at (blank)

discount, par

True or False? Treasury bills trade with accrued interest

false

True or False? The hypothecation agreement and loan consent form are both required to be required to be disclosed.

false, loan consent form is not required.

If a directed order is accepted, the BD is required to (blank), but they are not required to (blank)

follow the customer's instructions, make a best execution determination.

According to Regulation T, when purchasing an option contract, the transaction must be paid for within:

four business days of the purchase

What will decrease debt service ratio?

increase in maintenance and operation expenses. issuance of additional bonds

What will increase debt service coverage ratio?

increase in revenue from a project

An individual who purchases a U.S. Treasury bond is most concerned with which TWO of the following risks?

interest-rate risk and timing risk

Explain a debit spread

investor pays more than he receives in premiums

Explain a credit spread

investor receives more than they pay in premiums

What are the long-term capital gains tax rates?

long term gains are taxed at a maximum of 20%

An investor expects a sharp decline in interest rates in the near future. To capitalize on this situation, the investor should buy discounted bonds with long maturities because?

long term, discounted bond prices are more volatile. If interest rates decline, bond prices will increase.

This document explains the risks involved with margin trading and must be provided to the customer.

margin disclosure statement

What is the debt service coverage ratio?

measures revenue available to pay debt compared the amount of revenue owed to bondholders

What are the maturities for T-bills?

one month, 3-month, 6 month, or twelve months

Section 1035 of the Internal Revenue Code:

permits the tax-free exchange of one annuity contract for another

On a sale, the confirmation shows the

proceeds when selling the security

What information would an analyst be MOST concerned with when evaluating a revenue bond?

rate covenant

When bonds are called for redemption, the bondholder can only

redeem bonds at the callable price or sell in secondary market

Revenue bonds pay higher interest than general obligation bonds because

revenue bonds are more likely to default

If an issuer is seeking an exemption from the registration provisions of the Securities Act of 1933 under Regulation D (the private placement exemption), the purchasers must

sign an investment letter attesting to the fact that resales of the securities are restricted

What are sellers of option straddles expecting?

stability

What is a married put?

stock and put purchased on the same day

Which CMO has the most prepayment risk?

support or companion tranche

In a customer's margin account, the interest charged on the debit balance is typically based on the?

the broker call rate.

A short call position obligates

the investor to sell shares if exercised against

True or False? A selling group participates in the sale of a new issue on a best-efforts basis and assumes no risk.

true

True or False? Amortization is associated with decreasing the value of a premium bond.

true

True or False? As far as rights offerings are concerned, preferred stockholders do not have the right to subscribe to the offering

true

true or false? Buy limit orders are entered below the current market value and, as a result, are reduced by the amount of the cash dividend on the ex-date.

true

According to Regulation T, securities must be paid for within

two business days of regular way settlement for corporate securities.

What is the maximum loss for a covered put (short stock + short put)? Why?

unlimited because there is no limit to how high the stock price can rise

A customer places an order to purchase an equity security and instructs the broker-dealer to execute the transaction on a specific exchange. The broker-dealer: Can accept this order and follow the customers instructions, but is not required to make a best execution determination because this type of order is (blank) and known as a (blank)

unsolicited, directed order

For retirement, which Invesment vehicle would provide the most protection to purchasing power?

variable annuities because the payout is based on value of common stock.

What are buyers of option straddles seeking?

volatility

Fill in the Blank: A tax qualified annuity has a cost basis of (blank) and grows (blank)

zero, tax deferred