Kaplan Chapter 1
The U.S. balance of payments deficit would decrease in all of the following scenarios EXCEPT A) a decrease in imports of foreign goods into the United States B) a decrease in purchases of U.S. securities by foreign investors C) a decrease in dividend payments by U.S. companies to foreign investors D) an increase in exports of domestic goods from the United States
B) a decrease in purchases of U.S. securities by foreign investors
The prospectus delivery requirement, access equals delivery, is satisfied when A) a red herring is initially sent by mail to investors during the cooling-off period B) the final prospectus has been filed with the SEC and is available on the SEC's website for investors to see C) the final prospectus has been filed with FINRA and is available on FINRA's website for investors to see D) the preliminary prospectus has been filed with FINRA and is therefore available on FINRA's website for investors to see
B) the final prospectus has been filed with the SEC and is available on the SEC's website for investors to see
A broker-dealer and its associated persons may be subjected to sanctions for violations of FINRA and SEC rules. Which of the following penalties can be levied against the associated persons? A) Loss of SIPC coverage B) Limits placed on research activities C) Censure D) Imprisonment
C) Censure
Industries that tend to be highly sensitive to inflation, deflation and the ups and downs of business trends would BEST be described as A) Growth B) Keynesian C) Cyclical D) Defensive
C) Cyclical
Which of the following prospectus delivery requirements for negotiable securities sold in the secondary markets is NOT accurate? A) For an additional issue listed on an exchange or Nasdaq there is no delivery requirement. B) For an IPO if non-Nasdaq the delivery requirement is 90 days. C) For an additional issue if the security is non-Nasdaq there is no delivery requirement. D) For an IPO if listed on an exchange or Nasdaq the delivery requirement is 25 days
C) For an additional issue if the security is non-Nasdaq there is no delivery requirement.
Which of the following are methods of registering securities within a state? I. Registration by coordination II. Registration by qualification III. Registration by notification IV. Registration by application A) II and III B) I and IV C) I and II D) III and IV
C) I and II
When the Federal Open Market Committee (FOMC) directs that Treasury securities be purchased in the open market, this A) stabilizes the money supply B) is intended to hinder contraction of the money supply C) increases the supply of money D) decreases the money supply
C) Increases the supply of money
Which of the following statements is TRUE? A) Only municipalities can raise funds in the capital markets. B) Only corporations can raise funds in the capital markets. C) Municipalities, the federal government, and corporations can raise funds in the capital markets. D) Only the federal government and municipalities can raise funds in the capital markets.
C) Municipalities, the federal government, and corporations can raise funds in the capital markets.
State registration is not required if the transaction is exempt. An example of an exempt transaction would be A) one involving U.S. government bonds B) one involving municipal bonds C) one that is unsolicited D) one that is solicited
C) One that is unsolicited
An underwriter is placing a tombstone advertisement for a company's new issue. A prospective investor might expect to see all of the following information on the advertisement EXCEPT A) the names of the underwriting members B) the number of shares to be sold C) the names of the company's officers D) the type of security to be sold (stock or bond)
C) The names of the company's officers
Regarding primary offerings, which of the following is TRUE? A) A corporation can have two primary offerings—the initial public offering (IPO) and an additional public offering (APO). B) A corporation can have only one primary offering—the initial public offering (IPO). C) There is no limit to the number of primary offerings a corporation can issue. D) After its initial public offering (IPO), a corporation can have only one more primary offering—its subsequent primary offering (SPO).
C) There is no limit to the number of primary offerings a corporation can issue
A weak U.S. dollar leads to more A) U.S. exports and a balance of payments deficit B) U.S. imports and a balance of payments surplus C) U.S. exports and a balance of payments surplus D) U.S. imports and a balance of payments deficit
C) U.S. exports and a balance of payments surplus
The Securities Act of 1933 requires that A) registration with the Securities and Exchange Commission (SEC) before public sale can be made be an option for all new issues B) both exempt and nonexempt new issues be registered with the Securities and Exchange Commission (SEC) before public sale C) a new issue, unless specifically exempted from the Act, be registered with the Securities and Exchange Commission (SEC) before public sale D) all new issues be exempted from registration with the Securities and Exchange Commission (SEC) so that they may be sold to the public
C) a new issue, unless specifically exempted from the Act, be registered with the Securities and Exchange Commission (SEC) before public sale
The U.S. gross domestic product is best described as A) all services produced in the nation only B) all goods and services produced domestically but sold overseas C) all goods and services produced within the nation D) all goods produced in the nation minus the value of all services produced
C) all goods and services produced within the nation
Regarding the registration statement filed with the SEC when new securities are to be issued, all of the following are true EXCEPT A) the names and addresses of company officers and directors, their salaries, and a 5-year business history of each must be shown B) a description of how the proceeds raised from the sale will be used must be disclosed C) the accuracy and adequacy of the registration documents is the responsibility of the underwriters D) underwriters may assist the issuer in preparing and filing the registration statement
C) the accuracy and adequacy of the registration documents is the responsibility of the underwriters
The largest component of the U.S. balance of payments is A) exports B) imports C) the balance of trade D) foreign currency
C) the balance of trade
A market maker A) can only be an institution doing proprietary trading B) acts as an agent to buy and sell for public customers who will hold their own securities C) trades in a proprietary account to facilitate trading of a security and provide liquidity D) trades in a customer's account standing ready to buy or sell at their own discretion
C) trades in a proprietary account to facilitate trading of a security and provide liquidity
A firm that functions for the purpose of receiving and delivering payments and securities on behalf of both buyer and seller in a securities transaction is A) a depository B) a transfer agent C) a broker-dealer D) a clearing agent
D) A clearing agent
An offering in which one or more stockholders in the corporation are selling all or a portion of their own shares to the investing public for the first time is known as A) an initial public offering B) a subsequent offering C) a primary offering D) a secondary offering
D) A secondary offering
Which of the following choices would BEST describe a "follow-on" offering? A)An IPO that has additional shares added by the issuer on the effective date B)An offering to the employees of the issuing company C)The common stock that is issued attached to a "rights" offering D)An issue of shares by a public company that is already listed on an exchange
D) An issue of shares by a public company that is already listed on an exchange
Which regulatory body oversees trading in the over-the-counter (OTC) market? A) SEC B) NYSE C) MSRB D) FINRA
D) FINRA
Which of the following would be the interest rate charged for overnight, uncollateralized loans negotiated between two money center banks? A) Prime rate B) Repo rate C) Discount rate D) Federal funds rate
D) Federal funds rate
All the following are exempt from the Securities Act of 1933 EXCEPT: A) Debt securities issued by religious organization B) Fixed annuity contracts C) U.S. Treasury securities D) Limited partnership
D) Limited Partnership
Having been told that a firm incorporates proprietary trading in its business model buying and selling securities into and out of its own inventory, and posting a public quote for this activity, you would know that it is a A) clearing agent B) fully disclosed broker dealer C) executing for commissions only D) market maker
D) Market maker
Which of the following securities is exempt from the Securities Act of 1933 A) Preferred stock B) Debenture C) Common stock D) Municipal note
D) Municipal Note
Which of the following companies was created by an act of Congress and provides securities investors limited financial coverage in the event that the investor's servicing broker-dealer fails financially? A) OFAC B) SIC C) FDIC D) SIPC
D) SIPC
Correspondent firms would be likely to have relationships with which of the following types of broker-dealers? A) Introducing B) Market maker C) Fully disclosed D) Self-clearing
D) Self- Clearing
Regarding registration for the sale of securities, those registered under the Investment Company Act of 1940, such as mutual funds, would be considered A) federal covered securities and not required to register at the state level B) securities required to register at both the federal and the state level C) federal covered securities required to register at the state level only D) securities that are exempt from registration at all levels
A) federal covered securities and not required to register at the state level
Which of the following calls for the underwriters to buy securities from the issuer acting as an agent, not as principal? A) Firm commitment underwriting B) Best efforts underwriting C) Follow-on offering D) Initial public offering
B) Best efforts of underwriting
When the Federal Reserve Board wants to expand (loosen) the money supply, it will A) buy corporate securities from banks in the open market B) buy Treasury securities from banks in the open market C) Sell corporate securities to banks in the open market D) sell Treasury securities to banks in the open market
B) Buy treasury securities from banks in the open market
A corporation needs to build a new manufacturing facility costing several hundred million dollars. In which of the following markets could this new capital be raised? A) Government bond market B) Capital market C) Municipal bond market D) Secondary market
B) Capital Market
Which of the following BEST fits the description of a "growth" stock? A) Preferred shares in companies that back stated dividends with investments in pharmaceutical companies B) Common shares in companies that retain earnings and pays little or no dividends C) Common shares in companies that pay a high dividend on rapid growth experience D) Common or preferred shares in companies, which experience growth in unusual, nonrecurring profitable circumstances
B) Common shares in companies that retain earnings and pays little or no dividends
Reports of rising inventories generally occur during which period of the business cycle? A) Expansion B) Contraction C) Peak D) Recovery
B) Contraction
All of the following are acceptable choices to function as a depository and intermediary for transactions between buyers and sellers of securities EXCEPT A) carrying firms B) credit unions C) the Depository Trust Company D) the National Securities Clearing Corporation
B) Credit Unions
Which of the following points to a general decline in prices occurring during severe recessions and the unemployment rate is rising. A) Contraction B) Deflation C) Stagnation D) Stagflation
B) Deflation
Stagnation in the economy can be associated with A) prolonged periods of healthy economic growth B) high unemployment C) plentiful employment opportunities D) robust production
B) High unemployment
Under the Uniform Securities Act, states have which of the following 2 ways to register securities to be sold? I. Preparation II. Integration III. Coordination IV. Qualification A) II and III B) III and IV C) I and II D) I and IV
B) III and IV
Private placements are primarily sold to A) general public investors B) institutional investors C) individuals who meet the definition of accredited investor D) investment bankers
B) Institutional Investors
For the primary market, which of the following is TRUE? A) All U.S. exchanges are primary markets, where price is determined by supply and demand. B) Issuer transactions occur in the primary market, and securities are offered at a public offering price. C) All U.S. exchanges are primary markets, where securities are offered at a public offering price. D) Issuer transactions occur in the primary market, and price is determined by supply and demand.
B) Issuer transactions occur in the primary market, and securities are offered at a public offering price
All of the following are self-regulatory organizations (SROs) EXCEPT A) NYSE B) SEC C) FINRA D) MSRB
B) SEC
Rising employment due to an increase in demand for goods and services would be associated with periods of A) inflation B) deflation C) stagflation D) stagnation
A) Inflation
The requirement for a supplemental prospectus to be filed before each sale is applicable to A) shelf registration sales B) initial public offering sales C) sales of shares in the secondary market D) additional issues
A) Shelf registration sales
Regarding the issuance of new securities to the public, which of the following is TRUE? A) The Securities Act of 1933 provides criminal penalties for fraud. B) Registrations become effective within 10 business days of SEC filing. C) The SEC review of a new issues filing must always be longer than 20 days. D) Underwriters are permitted to accept orders for securities during the SEC review period.
A) The Securities Act of 1933 provides criminal penalties for fraud
Considered the most volatile of the benchmark interest rates in the economy would be A) the broker call loan rate B) the discount rate C) the prime rate D) the federal funds rate
D) The federal funds rate
A market in which exchange-listed securities are traded in the OTC market would BEST be described as the A) First Market B) Second Market C) Fourth Market D) Third Market
D) Third market
An institution or a person responsible for making all investment, management, and distribution decisions in an account maintained in the best interests of another who has been legally appointed to provide these services is BEST described as a(n) A) Investment advisor B) Market maker C) Prime broker D) Trustee
D) Trustee
A company that offers sales of another company's securities would BEST be described as a(n) A) issuer B) transfer agent C) market maker D) underwriter
D) Underwriter
Carrying firms, those that carry customer accounts, must A) not disclose its net capital if it is higher than non-carrying firms. B) maintain levels of net capital equal to or lower than non-carrying firms. C) commingle customer funds and securities with the firms' funds and securities. D) segregate customer funds and securities from the firms' funds and securities.
D) segregate customer funds and securities from the firms' funds and securities.
