Mastery Exam Focus
A member of a $10 million Eastern account that has a $1 million participation fails to sell $400,000 of the bonds. If, at the close of the offering, $2 million remains unsold, the member must take down: $200,000 of the unsold bonds. $100,000 of the unsold bonds. $400,000 of the unsold bonds. $1 million of the unsold bonds.
$200,000 of the unsold bonds.
Your customer tells you she is very bearish on the market and thinks she can capitalize on that view by purchasing an inverse exchange traded fund (ETF) that tracks the DJIA. In a subsequent, discussion she explains her understanding of how the fund works and makes several comments that are all accurate except one. Which is the inaccurate statement that as her RR you would want to correct? -If the DJIA decreases by 10%, this ETF is managed to increase by twice that amount. -The fund is managed to perform opposite of the DJIA, and because I'm bearish on the market owning, these fund shares align with my view. -It's like any other fund regarding potential losses in that I can't possibly lose more than I invest. -If I have a change of view I can pretty much expect to be able to sell these shares right away, not like mutual fund shares where I have to wait until they're priced again.
-If the DJIA decreases by 10%, this ETF is managed to increase by twice that amount.
A margin account has a market value of $24,000 and a debit balance of $20,000. The maintenance call will be for: 2000. 4000. 6000. 8000.
2000.
An appeal of an adverse Code of Procedure decision may be made by either party within: 25 days of the decision date. 45 days of the decision date. 30 days of the decision date. 10 days of the decision date.
25 days of the decision date.
A customer wishes to transfer his account positions to another broker/dealer. After validating the positions, the carrying broker/dealer is required to complete the transfer within how many business days? 3. 4. 5. 7.
3.
An investor sells 1,000 shares of DEF short at 50 and meets the initial margin requirement. If DEF falls to 45, what is the equity in the account? 30000. 20000. 35000. 40000.
30000
A customer writes 1 Jul 40 put at 6. The put is exercised when the market price is 30. For tax purposes, what is the effective cost basis of the stock put to the writer of the contract? 34 30 40 46
34
For an IPO (initial public offering) of common stock that will not be listed on a US exchange or traded on Nasdaq, delivery of a prospectus from member firm underwriters to purchasers is required to be made for a period of 90 days following the effective date 25 days from the time form S-1 was filed with the SEC 40 days after the last newly issued share is sold zero days, as there is no prospectus delivery requirement for common shares that are not going to be either listed on a US exchange or traded on Nasdaq
90 days following the effective date
SEC registration under the Securities Act of 1933 is not required for I. government securities II. an offering of $55 million of B rated corporate bonds III. private placements IV. an offering of $62 million of common stock
I and III
The flow of funds statement found within a municipal trust indenture: I. relates to revenue bonds only. II. relates to both general obligation and revenue bonds. III. is found within the bond resolutions. IV. is found within the official notice of sale.
I and III.
Which of the following statements may you correctly make in describing the benefits of a 403(b) plan to your customer who is a public schoolteacher? I. "Your investment choices include fixed and variable annuities and mutual funds which can include stocks and bonds." II. "The contributions you make to the plan will be made with after-tax dollars." III. "Employees over age 45 may make catch-up contributions for years missed." IV. "The contributions you make to the plan will be excluded from your gross income for the year in which they are made."
I and IV
A customer who invests in a Coverdell Education Savings Account on behalf of her 10-year-old daughter may I. make before-tax contributions on an annual basis II. receive tax-free distributions if funds are withdrawn for qualified educational expenses III. make an investment into a Section 529 Plan in the same year for the same child IV. roll the accumulated funds into a traditional IRA for another family member if funds are not used by age 30
II and III
A registered representative intends to send the same email regarding an investment strategy and product this week to her 10 retail clients currently having the highest net worth. Which of the following accurately depicts how the email will be regulated under FINRAs communications with the public rule? I. The email must be reviewed by a principal before use. II. The email can be reviewed by a principal before or after use in accordance with the firm's written procedures regarding correspondence. III. The email content must be filed with FINRA. IV. Filing the email content with FINRA is not required.
II and IV
An investor is seeking tax advantages through an oil and gas DPP. With this type of partnership, he would expect to benefit most from: I. depreciation allowances. II. depletion. III. tax credits. IV. intangible drilling costs.
II and IV.
An investor who has generated passive losses from DPP investments wants to offset income from other investments. This is allowable with income from: I. CMOs. II. oil and gas drilling programs. III. REITs. IV. direct investments in real estate.
II and IV.
You have entered an all-or-none order to purchase 1000 shares of stock for a customer. Which of the following statements CANNOT be used to describe this order? It must be filled immediately. It must be executed in its entirety. It may be a GTC order. It may be a day order.
It must be filled immediately.
All of the following statements regarding eurodollar bonds are true EXCEPT? Principal and interest are stated and paid in the foreign currency of the country of issue. They are issued and sold outside the United States. The eurodollar bond market is largely unregulated. Non-U.S. issuers and non-U.S. investors are subject to currency risk.
Principal and interest are stated and paid in the foreign currency of the country of issue
More dollars become available for lending when the Federal Reserve Board (FRB) drives interest rates down by increasing the money supply. When this occurs, increases in which of the following should be expected first? Production Corporate profits Unemployment figures Yields on demand deposit (checking) accounts
Production
The IRS allows investors to minimize tax liability when reporting sales by limiting gains or maximizing loses in anticipation of what an investors year-end tax liability might be. Given year-end tax needs can only be anticipated when a sale occurs, which of the following reporting methods allows an investor the most flexibility? Share identification First in, first out (FIFO) Average cost basis Last in, first out (LIFO)
Share identification
Your customer, divorced with 2 children and age 52, has a portfolio consisting of 80% equities, with the remaining 20% diversified among several other products. Her annual income is $115,000. Which of the following events would most likely be cause to reallocate her investments? She has been notified by her employer that due to corporate downsizing her position is being eliminated. She will be remarrying a person of considerable wealth next month. The father of her children has established trust funds for each of them in the amount of $50,000 each. Equities are rebounding slowly after a 2-year slump.
She has been notified by her employer that due to corporate downsizing her position is being eliminated.
When does settlement between a dealer and the U.S. Treasury take place for newly issued T-bills purchased through the weekly T-bill auction? The issue date, which is Thursday of that week The same day as the auction The next business day 2 business days following the auction
The issue date, which is Thursday of that week
Different securities tax consequences are an important factor to your new client. As you explore some suitable investments, you point out that one of the following securities is taxed at the federal level only. Which is it? Treasury bills. Ginnie Mae. Freddie Mac. Corporate bonds.
Treasury bills.
A registered representative interviewing a new client learns that the client has an investment objective of earning income but will only be comfortable with moderate risk to do so. The objective and risk tolerance of the client can be met by: a preferred stock fund. an aggressive growth fund. a money market fund. a high-yield bond fund.
a preferred stock fund.
A trading desk wants to sell a block of corporate bonds. One characteristic that will have no effect on the marketability of those bonds is the: bond denominations maturity dates rating block size
bond denominations
Your client has sold securities in a long margin account. All of the following are affected by the sale of these securities in the account EXCEPT: equity. SMA. market value. debit balance.
equity
A source of funds used to service municipal revenue special tax bond issues might be gasoline taxes income taxes ad valorem taxes property taxes
gasoline taxes
The calculation of accrued interest for a corporate bond: includes interest from and including the last payment date. includes interest through the settlement date. is based on an actual day month. is not made when a bond trades "and interest".
includes interest from and including the last payment date.
The SEC mandates that "enhanced disclosure" be included in the prospectus of an open-end investment company (mutual fund). All of the following are true of the "enhanced disclosure" EXCEPT it is known as the Statement of Additional Information (SAI) it must be written in plain language, understandable to the average investor the SEC mandates the order of, and the items to be addressed in the summary within the prospectus "enhanced disclosure" is presented in the form of a summary section
it is known as the Statement of Additional Information (SAI)
In late September, a customer sells 5 XYZ calls for total premiums of $750. One month later, the investor closes this position when the contract is trading at 2. The result is a: loss of $250. gain of $250. gain of $50. loss of $50
loss of $250
Designated Market Makers on the floor of the NYSE cannot handle market not-held orders odd-lot market orders stop orders limit orders
market not-held orders
The MSRB has no jurisdiction or authority to regulate: municipal bond issuers municipal bond quotes municipal bond broker/dealers municipal bond registered representatives
municipal bond issuers
In accordance with the Investment Company Act of 1940, your customer who has recently purchased shares of a mutual fund should receive financial statements at least: semiannually. monthly. quarterly. annually.
semiannually.
The term for the annual increase of cost basis of a municipal bond purchased at a discount is straight line accretion compound amortization straight-line amortization compound accretion
straight line accretion
The capital asset pricing model (CAPM) states that the pricing of a stock should take into account systematic risk as well as nonsystematic risk securities markets are efficient markets, meaning securities prices react so quickly to most investment information that no analyst is likely to outsmart the market as a whole the direction of individual stock or overall market prices is unpredictable there are three types of changes in stock prices; primary trends, secondary trends, and short-term fluctuations
the pricing of a stock should take into account systematic risk as well as nonsystematic risk
All of the following are characteristics associated with equity-linked exchange-traded notes (ETNs) EXCEPT they can be linked to a single stock or basket of stocks and are, therefore, equity securities. they can be bought and sold throughout the trading day. they have final payments at maturity linked to the return of an underlying stock or basket of stocks. they are considered to be nonconventional structured investments with unique risks.
they can be linked to a single stock or basket of stocks and are, therefore, equity securities.
The visible supply as shown in The Bond Buyer is the total dollar volume of municipal offerings expected to reach the market in the next 30 days total dollar volume of GO offerings expected to reach the market in the next 30 days percentage of new issues sold versus new issues offered for sale total dollar amount of new issues offered for sale divided by dollar amount of new issues sold
total dollar volume of municipal offerings expected to reach the market in the next 30 days
