Exam 11/22
An investor opens the following position: Write 1 CDE Oct 30 call at 3.30 Buy 1 CDE Oct 40 call at .10. The maximum gain is:
320. 3.30-.10 = 3.20x100 shares = 320
If a customer buys 1 XYZ Aug 50 put at 1, and sells 1 XYZ Aug 65 put at 10 when XYZ is at 58, the maximum potential gain is:
900
You have 4 clients each expressing interest in a variable annuity contract. Which 2 of the 4 client profiles would a VA be least suitable for? A 45-year-old employed individual with no other retirement accounts in place A 58-year-old individual near retirement who is in good health and anticipates a lengthy retirement A 32-year-old with a company-sponsored 401k plan who will need a lump sum soon to finance graduate school tuition A 60-year-old individual, nearing retirement who has both IRAs and a 401k in place, is comfortable with market risk associated with the stock market, and has a lump sum in cash available to fund the annuity
A 45-year-old employed individual with no other retirement accounts in place A 32-year-old with a company-sponsored 401k plan who will need a lump sum soon to finance graduate school tuition
A resident of New York City purchases an Albany, New York general obligation bond and receives $600 of interest from that bond during the year. How is that $600 taxed?
It is not subject to federal income tax.
Which of the following are TRUE of an official statement? It is required by the SEC for all new issues. It is required by the MSRB for all new issues. It is required to be delivered to purchasers at or before settlement. It is generally used by underwriters to help sell the issue.
It is required to be delivered to purchasers at or before settlement. It is generally used by underwriters to help sell the issue.
Which of the following describe indications of interest secured during the 20-day cooling-off period? Binding on the customer. Nonbinding on the customer. Binding on the broker/dealer. Nonbinding on the broker/dealer.
Nonbinding on the customer. Nonbinding on the broker/dealer.
What is a bank-qualified municipal issue?
One that receives preferential treatment by allowing a bank to exclude from gross income 80% of the interest expense incurred to carry the bonds.
How often will the IRS allow a Health Savings Account (HSA) to be funded via an IRA distribution without paying federal taxes or penalties on the distribution?
One time
Which of the following is applicable to the NASDAQ OMX PHLX? Regional exchange operated by Nasdaq Offers trading in equity securities and options contracts Is a completely electronic exchange with no physical trading floor Regional exchange operated by FINRA for the execution of OTC stocks only
Regional exchange operated by Nasdaq Offers trading in equity securities and options contracts
Several years after opening a brokerage account at a FINRA member firm, an individual joins another FINRA member as a research analyst. Regarding his responsibilities, which of the following is TRUE?
The individual must notify both members of his relationship with the other.
Under what circumstances may a member firm use a fictional name or DBA (doing business as) in its communications?
The name is filed with both FINRA and SEC.
Which of the following is TRUE concerning the payment of the repo rate?
The original seller pays the original buyer.
Which of the following accounts would a CMO Z-tranche be best suited for?
a professionally managed hedge fund specializing in real estate portfolio securities
A balloon maturity of municipal securities is most accurately described as:
an often later maturity within a serial issue of bonds which contains a disproportionately large percentage of the principal amount of the original issue.
A sharing arrangement in which only deductible costs are apportioned to the investor with the sponsor bearing all capitalized costs is called a(n):
functional allocation.
In the case of a real estate direct participation limited partnership program, nonrecourse financing will:
increase a limited partners original cost basis.
If a mutilated certificate has been authenticated by the transfer agent prior to delivery, the certificate:
is in good deliverable form.
Ratio call writing exposes an options investor to limited loss unlimited loss limited gain unlimited gain
unlimited loss limited gain
A customer in the 28% tax bracket owns a 9% ABC Corporation 20-year bond that currently is yielding 8.7%. He is considering buying tax-exempt securities. What is the comparable yield for a municipal bond?
0.0626 formula: interest on corporate bond × (100% − tax bracket). In this case, 8.7% × .72 = 6.264%.
Options sales literature:
must be preceded or accompanied by an OCC disclosure booklet. can include recommendations.
The holder of a yield-based call option would be more likely to profit if rates rise rates fall debt prices rise debt prices fall.
rates rise debt prices fall.
Your customer is interested in a leveraged fund and makes the following statements about leveraged funds to you. All of the statements regarding leveraged funds are true EXCEPT
there are no unusual risks associated with these funds other than those one would incur with any index tracking fund
T-bills are quoted:
on an annualized discount yield basis.
The receipt of all of the following would raise concern about the possibility of money laundering EXCEPT:
personal check.
All research reports issued by a member firm must disclose certain information. Regarding those disclosures, all of the following statements are true EXCEPT
whether the member firm has any position in the security must be disclosed
Your customer is interested in a variable annuity but is unclear on some of the details regarding different specifications and riders that can be attached to the contract. He makes the following four statements, all of which are true EXCEPT
with guaranteed minimum withdrawal benefits (GMWBs) a lifetime of periodic payments is guaranteed
All of the following statements concerning IRA contributions are true EXCEPT: A) you may contribute to this year's IRA from January 1 of this year until April 15 of next year. B) between January 1 and April 15, you may make contributions for the current year, the past year, or both. C) you may make contributions for the past year after April 15, provided you have filed an extension on a timely basis. D) if you file your tax on January 15, you may deduct your IRA contribution even if it is not made until April 15.
you may make contributions for the past year after April 15, provided you have filed an extension on a timely basis.
A customer has filed a serious complaint against your firm and is threatening to take the firm to court. When informed that he has signed a predispute arbitration agreement, he demands to see a copy of it. How long does your firm have to supply the customer with a copy of the signed agreement upon receipt of his request?
10 business days.
Which of the following ratios is normally considered adequate coverage of interest and principal charges for a municipal revenue bond?
2 to 1.
An investor in an oil and gas limited partnership program is subject to the economic consequences of all of the following EXCEPT:
nonrecourse loans.
If QRS, Inc., makes a new offering not registered with the SEC to accredited investors, this arrangement is called a(n):
private placement.
An agent has recommended investments in the XYZ fund family to his customers for 10 years. He is referred by one of his customers to a prospect who has inherited $500,000 as beneficiary of a life insurance policy. The prospect tells the agent she has never invested in the market before, is risk averse, and wants safety of principal to be the first priority with liquidity second. The agent recommends the following investments: XYZ government bond fund, B shares $200,000 XYZ large-cap growth and Income B shares $150,000 XYZ liquid reserve money market $150,000
unsuitable because it does not address the customer's two primary objectives. The customer's objectives of safety and liquidity are not satisfied by these recommendations. The government bond fund and large-cap growth and income fund are both subject to market risk and, as Class B shares, are subject to a contingent-deferred sales charge in the event the customer wishes to access the funds before the back-end load expires. The back-end load is not consistent with the customer's liquidity objective.
