Kaplan 3 Reinforcement
$8750 25% tax bracket + 10% penalty
A 38-year-old investor places $25,000 into a single premium deferred variable annuity. 20 years later, the account valued at $72,000 and the investor withdraws $25,000. If the investor is in the 25% marginal income tax bracket, the total tax liability is... - $6250 - Zero $ - $17,500 - $8750
$23 A conversion price of 20 means conversion ratio is 50. So 1150/50 = $23
A convertible corporate bond with a conversion price of $20 is trading at 115. The parody price of the common stock is: - $17 - $20 - $26 - $23
80% zero coupon bonds, 20% T- Notes Zero coupon bonds are suitable for future anticipated expenses such as college tuition . So are T notes with medium-term US government securities because there is no risk of principal loss
A couple with children ages 13 and 8 have $200,000 saved to put toward their children's college education. Which of the following would be most suitable for these investment dollars and objective? - 10% zero coupon bonds, 90% corporate bonds - 60% equities and equity funds, 30% T-Bills, 10% corporate bonds - 60% equities, 40% corporate bonds - 80% zero coupon bonds, 20% T-Notes
The buying power in margin account is the same as for other customers Buying power for daytraders is four times the maintenance margin excess
A customer wants to be a day trader but is interested in the term "pattern day trader" and asks you to define the term. You state that all of the following are true pattern daytraders except - in a margin account The minimum maintenance requirement is 25% - They must have a minimum of $25,000 of equity in their account on any day in which trading occurs - Buying power in margin accounts is the same as for other customers - They make four or more trades in a five business day period
An oil and gas income program Raw land is usually speculative, so income and moderate risk would be from oil and gas income program
A customer with a moderate income from a secure job is in the 28% tax bracket. She has a small diversified portfolio and has $10,000 she would like to invest in a limited partnership. If she is willing to accept only a moderate amount of risk, which of the following limited partnerships, would be the most appropriate recommendation? - Exploratory oil and gas drilling program - Oil and gas income program - New construction real estate limited partnership - Raw land real estate limited partnership
The issuing corporation and the underwriters to review and re-examine the full details of the pending underwriting and negotiate final terms to be included in the formal underwriting contract Between issuer & underwriter before effective date
A due diligence meeting occurs between - The issuing corporation and the underwriters to review and re-examine the full details of the pending underwriting and negotiate final terms to be included in the formal underwriting contract - The FINRA member firm and FINRA corporate finance department to discuss the fairness of the underwriting spread on a pending public offer - The underwriter and the SEC before the issuance of a final prospectus to insert the public offering price and make any last-minute changes at the SEC's request
At least 75% of its assets meet stated diversification requirements
A stock mutual fund wishes to advertise itself as diversified. To be able to do so, the fund must invest its total assets, such that... - It's portfolio consists of at least 15 different stock holdings - No more than 5% of its assets in any one company - At least 75% of its assets meet stated diversification requirements - It holds no more than 10% of the voting stock of company
MSRB rules prohibit dealers from entering into which of the following transactions with a mutual fund? - accepting orders from a fund to buy a new municipal issue - purchasing the funds shares to fill customers orders - acting as a brokers broker for a large block of bonds the fund wishes to sell - accepting portfolio trades from the fund as compensation for sales of the funds shares
Accepting portfolio trades from the fund as compensation for sales of the funds shares
Inventory Inventory is a current asset, not a fixed asset because the company expects to convert inventory into cash soon
All of the following appear on a corporations balance sheet as fixed assets, except: - Furniture - Computer equipment - Inventory - Real estate
Employees may use accumulated funds as collateral for a bank loan Deferred compensation is a promise made by an employer to defer a certain amount of an employee salary upon retirement. The employee has no right to the money until retirement, so cannot use it as collateral.
All of the following are true regarding nonqualified deferred compensation plans, except: - The plans need not be offered to all employees - Income taxes on compensation are not due until constructive receipt - IRS approval is not needed for deferred compensation plans - employees may use accumulated funds as collateral for a bank loan
It is an auction market OTC is negotiated . Exchanges are auction markets..
All of the following statements regarding the OTC market, are true, except: - It trades listed securities - It is an auction market - More issues trade OTC than on the exchanges - it trades unlisted securities
Unit investment trust
An unmanaged portfolio is a characteristic of - A closed end investment company - An open end investment company - A single state municipal bond fund - A unit investment trust
Quotes are as a percentage of par in 32nds
For both US treasury notes and GNMA's - interest is computed on an actual day basis - interest income is taxed at the federal level only - settlement is next business day - quotes are as a % of par in 32nds
Must be specific to the insurance contract and not associated investments
Guarantees on insurance products - Are permissible for principal values in the separate account - Are only permissible for companies with an A+ rating from AM Best - Are not allowed - must be specific to the insurance contract and not associated investments
III (are unregulated) and IV (use investment techniques, most suitable for sophisticated investors)
Hedge funds I. Are highly regulated II. Use investment techniques suitable for most investors III. Are unregulated IV. Use investment techniques most suitable for sophisticated investors - I and IV - III and IV - I and II - II and III
$11,000 Assuming the customer paid for the securities in full, they would generate $11,000 because they only needed to pay half of the value, so the other $11,000 would be considered non required cash, so it would be credited.
How much would the SMA price increase if a customer bought $22,000 worth of marginal stock in the existing margin account and fully paid for the transaction? - $5500 - $0 - $11,000 - $22,000
The syndicate members on a pro rata basis In an undivided account, liability for unsold securities, rest with each member based on its participation percentage
In an undivided syndicate, liability for unsolved Securities rests with - The syndicate members that failed to sell their allotment - The issue - The syndicate members on a pro rata basis - The syndicate manager
$0 The trades took place simultaneously so, no margin required. The sale at $60 more than covers her cost at $50.
In her margin, Cynthia exercises her DMF call at 50 and simultaneously sells the 100 shares at $60. What is the amount of margin call? - $0 - $2500 - $2800 - $3000
Systematic They protect from the overall market movement
Index options are frequently used to protect a portfolio against which of the following risk types? - Systematic - Credit - Business - inflation
Unrestricted share concentration limits Hedge funds are unregistered and have no restrictions
It would be correct to state that hedge funds typically have - Offering minimum as low as $10,000 - Unrestricted share concentration limits - Detailed disclosure requirements to the SEC - restrictions placed on their investment strategies
DPPs
Member firms are required to maintain documentation regarding suitable net worth for investors in: - High yield bonds - Variable life insurance - DPPs - REITs
Quality
Most rating services rate, which of the following? - Quality - Durability - Reinvestment risk - marketability
Liquidity risk
One of your customers has decided to commit $10,000 to fixed income. She is trying to decide if it makes more sense to invest in the bonds of a single corporate issuer or to buy an ETF tracking a corporate bond index. you could explain that the purchase of the ETF results in the greatest reduction of... - Currency risk - Liquidity risk - Interest rate risk - inflation risk
Principal repayment on partnership debt This is not an expense
One of your customers owns a limited partnership interest in an oil and gas drilling program. The program was successful in finding oil and is expected to operate at a loss for the next year. The loss flowing through to the limited partner is generated by all of these, except: - Interest payments on partnership debt - Depletion on the sale of oil removed from the ground - Accelerated depreciation taken on the drilling equipment - Principal repayment on partnership debt
Can be withdrawn anytime within the first 30 days of receipt
Pursuant to Reg T, cash dividends received in a customers margin account - Can only be withdrawn if the account is not restricted - Must be removed within 30 days of receipt - Cannot be removed - can be withdrawn anytime within the first 30 days of receipt
The issuer and the trustee acting for the bond holders
The bond resolution includes all covenants between - The issuer and the bond counsel - The bond council and the bondholders - The issue were and the trustee acting for the bondholders - The issuer and the MSRB
The FRB All decisions regarding initial margin eligibility is FRB
The determination as to whether an OTC stock is eligible for purchase on margin is made by - the FRB - the FDIC - the SEC - the FINRA
Gauge investor sentiment as being either bullish or bearish
The put / call ratio can be use to - Gauge investor sentiment, as being either bullish or bearish - Determine a stock's beta - Calculate how many options contracts are needed to hedge a short position - determine which institutional trading are trading options
Straight This means there are no added features, just the fixed dividend
The term "plain vanilla" describes which of the following preferred stock issues? - Straight - callable - Cumulative - convertible
Interest and principal on a US government issued bond
The terminology "guaranteed, full faith and credit" is most applicable to: - Interest and principal on a US government issued bond - Interest and principal on a municipal revenue bond - Interest only on a US government issued bond - Interest and principle on a corporate bond
4 years T-Notes are issued with maturities of 2, 3, 5, 7, and 10 years
United States treasury notes are intermediate length securities. Treasury notes are not issued with maturities of: - 5 years - 7 years - 4 years - 2 years
The state legislator
Whether funds should be allocated to support the debt service on a moral obligation Bond in default is usually determined by - The state legislator - The state governor - The courts - The trustee
I and II (the size of the offering and the type of underwriting commitment)
Which of the following factors is considered when determining whether underwriting compensation is fair and reasonable? I. The size of the offering II. The type of underwriting commitment III. The market conditions IV. The profitability of the underwriter - I and III - I and II - II and IV - II and III
A hedge fund Structured as limited partnerships, so they do not have to register with the SEC
Which of the following pooled investment vehicles would most likely be structured as a limited partnership? - A unit investment trust - A real estate investment trust - An ETF - a hedge fund
Short 2 XYZ uncovered puts The max loss on a short put is the market price declining to zero.
Which of the following positions does not expose a customer to unlimited risk? - Short 2 XYZ uncovered puts - Short 200 shares of XYZ - Short 2 XYZ uncovered calls - short 200 shares of ABC and short 2 XYZ puts
85 1/2 Dollar bond quotes are based on a percentage of face amount, so 85 1/2 is 85.5% of par
Which of the following quotes represents a municipal dollar bond quote? - 8.20 - 8.00 - $850 - $870 - 85 1/2 - 0.085
III (it must be delivered to purchasers at or before settlement) IV (it is generally used by underwriters to help sell the issue) The MSRB does not regulate issuers
Which of the following statements regarding an official statement are true? I. It is required by the SEC for all new issues II. It is required by the MSRP for all new issues III. It must be delivered to purchasers at or before settlement IV. It is generally used by underwriters to help sell the issue - I and IV - II and III - I and II - III and IV
The options exchange on which the option is listed
Which of the following will halt trading enlisted options when there is a trading halt in the underlying stock? - The options exchange on which the option is listed - The options clearing corporation - The SEC - The exchange on which the stock stock is listed
Sell Stop Place below the current market, become market orders to sell when the stock trades at or below the stock price. These would accelerate declines in the price of the stock.
Which of the following would accelerate a decline in a bear market? - Sell limit - Buy stop - Sell stop - Buy limit
Water and sewer revenue bond This forces them to set aside a portion of their revenue for debt retirement
Which of the following would be most likely to require a mandatory sinking or surplus fund? - Water and sewer revenue bond - tax Anticipation note - Public housing Authority - GO
45 days
You have just received a statement of claim from the Director of arbitration. One of your customers is claiming that your failure to follow his instructions led to a loss of $36,000. Under FINRA rules, you must respond within - 45 days - 60 days - The business day the claim was received - 24 business hours
Immediately
You received a signed broker to broker transfer initiation form (TIF) from an established customer desiring to transfer a specially designed part of his account to your firm, which is eligible to use the ACATS. Your firm is obligated to submit the transfer instruction to the caring member by establishing the instruction in the ACATS... - within three business days - Within two business days - Immediately - within one business day
