Progress 66 Exam 4A
A customer enters a sell stop-limit order for 100 shares at 18.50. The last round-lot sale that took place before the order was entered was 18.88. Round-lot sales that took place after the order was entered occurred at 18.25, 18.38, 18.50, and 18.63. The trade was executed at: A 18.25 B 18.38 C 18.5 D 18.63
Answer: C
Which of the following items are listed on a balance sheet? Assets Liabilities Retained earnings Operating expenses A I only B I and III only C I, II, and III only D I, II, III, and IV
Answer: C
A customer believes that a stock's price will increase in the near future. Which option position would be most appropriate? A Buy a call B Buy a put C Sell a call D Buy a put and a call
Answer: A
An investor writes an uncovered DPM Oct 55 call for a premium of 9. What is the maximum profit that the investor could realize? A $900 B $4,600 C $6,400 D An unlimited amount
Answer: A
As a group, limited partners may: A Sue the general partner B Sell assets to pay creditors C Manage the day-to-day operations of the partnership D Hire new employees
Answer: A
Mr. Brown is a client who must fulfill a $300,000 obligation in two years. He currently has the $300,000 and would like your advice as to how to invest these funds temporarily. Which of the following securities is most suitable? A U.S. government securities maturing in two years B High-grade, blue-chip equity securities C AAA municipal bonds with a 15-year average maturity D High-quality corporate debenture bonds maturing in two years
Answer: A
On October 25, Thomas purchased 10 listed ABC Corporation Jan 40 puts and paid a $5 premium on each put. The current market price of XYZ Corporation is $48 per share. What would the breakeven point be for Thomas per option? A $35 B $40 C $45 D $53
Answer: A
The top-down approach to investing generally includes the idea that: A The price of a stock is based on external factors, such as the economy, not just facts about the company itself B The management team of a company is usually a reliable gauge as to how the company will perform C A company's position in its industry is an important predictor of future performance D Investors should find companies with a history of profits and compare it to competitors
Answer: A
When recommending a hedge fund as an investment vehicle, an adviser would disclose all of the following points to her client, EXCEPT: A When the fund was registered with the SEC B The name of the general partner C The fact the fund may use leverage D The performance fees
Answer: A
Which of the following yields results in the highest inflation-adjusted rate of return? A A bond yields 8% when inflation is at 3%. B A bond yields 12% when inflation is at 8%. C A bond yields 10% when inflation is at 7%. D A bond yields 6% when inflation is at 4%.
Answer: A
A client is seeking a yield of 6.8%. An investment adviser has located two bonds with similar credit quality, duration, and the client s desired yield. After performing discounted cash flow analysis on each bond, the adviser has determined that Bond A is trading at a discount to its present value, while Bond B is trading at a premium to its present value. Which of the following statements is NOT TRUE? 1 Bond A is priced attractively and should be purchased. 2 Bond B is priced attractively and should be purchased. 3 The investor will earn an annual interest rate greater than 6.8% on Bond B. 4 The investor will earn an annual interest rate greater than 6.8% on Bond A. A I and III only B II and III only C II and IV only D II, lll, and IV only
Answer: B
An advisory client is pessimistic and believes that the economy is about to go into a recession. He instructs his adviser to sell his holdings in housing and technology stocks and purchase utilities and consumer staples. This strategy is known as: A Diversification B Sector rotation C Tax selling D Leveraging
Answer: B
Patrick invests in a diversified portfolio of income-producing equity investments. Patrick is investing to achieve the goal of early retirement. He takes all of his dividend income and uses it to pay bills. What is the main problem with this type of strategy? A By spending the dividends, Patrick incurs a current tax liability each year. B Patrick does not take advantage of compounding (reinvestment of dividends) to increase earnings. C Bills should always be paid from earnings, not investment income. D Patrick should definitely balance his portfolio with some mutual fund investments.
Answer: B
Which of the following option strategies is the BEST hedging strategy if a client is short 1,000 shares of common stock? A Sell puts short B Buy calls C Sell calls D Buy puts
Answer: B
Which of the following statements is TRUE of variable annuities? A The investment risk is borne by the insurance company. B The product must be sold with a prospectus. C Withdrawals are first treated as tax-free return of principal. D If the contract owner dies, the beneficiary receives any proceeds tax-free.
Answer: B
Which of the following would be used to determine the debt-to-equity ratio? A The income statement B The balance sheet C The cash flow statement D The statement of retained earnings
Answer: B
An investment adviser representative manages a portfolio for a client on a discretionary basis. The client's objective is conservative growth. According to prudent investor standards, which of the following statements is TRUE regarding the inclusion of options in his portfolio? A Options, although generally not appropriate in a conservative portfolio, would be permitted with the prior written consent of the client. B Options would be appropriate only if the investor has had previous experience investing in options. C Options strategies may be appropriate as part of a conservative portfolio. D Options strategies may be appropriate for conservative portfolios, provided the strategy does not include the purchase of uncovered options.
Answer: C
If the dollar is increasing against foreign currencies, which TWO of the following results would most likely occur? 1 An improvement in the U.S. balance of trade 2 A worsening of the U.S. balance of trade 3 An increase in imports into the U.S. 4 Increased exports by the U.S. A I and III B I and IV C II and III D II and IV
Answer: C
Which TWO of the following statements are NOT TRUE regarding the investment risk of a life insurance policy? 1 Whole life policy writers bear the risk that the general account return will not meet the guaranteed rate. 2 Whole life policy owners bear the risk that the general account return will not meet the guaranteed rate. 3 Variable life policy writers bear the risk of poor separate account returns. 4 Variable life policy owners bear the risk of poor separate account returns. A I and III B I and IV C II and III D II and IV
Answer: C
Which of the following choices is NOT a characteristic of equity-indexed annuities? A A guaranteed minimum rate of return B A rate of return that varies along with the underlying index C A rate of return that is determined by the subaccounts that the contract owner selects D A return that is less than that of the underlying index
Answer: C
A futures contract is different than a cash forward contract because the futures contract is: 1 A personal transaction between the buyer and the seller 2 For a standard amount of the commodity rather than for a specific amount and quality of the cash commodity 3 Not negotiated by open outcry in the trading pits and not subject to the rules of a futures exchange 4 Or may be offset on the exchange where the contract was established A I and III only B I and IV only C II and III only D II and IV only
Answer: D
During the first quarter, TJG common stock paid a $.75 dividend. The stock's price fell from $75 per share at the beginning of the quarter to $67.50 per share at the end of the period. Based on these results, what is the stock's annualized total return? A 2% B -9% C -10% D -36%
Answer: D
Investors often use financial futures to hedge portfolios against which of the following types of risk? A Business risk B Political risk C Event risk D Market risk
Answer: D
Which TWO of the following orders will be reduced when XYZ Corporation sells ex-dividend? A GTC order to sell 100 XYZ at $50 A GTC to buy 100 XYZ at $50 stop A GTC to buy 100 XYZ at $50 A GTC to sell 100 XYZ at $50 stop A I and II B II and III C II and IV D III and IV
Answer: D
Which TWO of the following statements are TRUE regarding the buyers of options? Buyers of calls have the right to buy stock. Buyers of calls have the right to sell stock. Buyers of puts have the right to buy stock. Buyers of puts have the right to sell stock. A I and III B II and III C II and IV D I and IV
Answer: D
