s7 practice exam 4
The Class A shares of the GEMCO Balanced Fund carry a sales charge of 4.5%. If the next computed net asset value per share is $32.74, purchase orders will be filled at a price of A) $34.28 per share. B) $34.21 per share. C) $32.74 per share. D) $31.27 per share.
A) 34.38 per share. Mutual funds sell at the POP. POP includes the sales charge (which is 4.5% for this specific example) The sales charge is a % of POP, NOT THE NAV. The computation of the NAV is divided by (100% - sales charge) So, the formula for this problem would be... $32.74 - (100% - 4.5%) = $32.74 - 0.055 = $34.28 per share
The writer of an in-the-money put will receive the upcoming dividend from the underlying issuer if the contract is exercised A) before the ex-date. B) on or after the ex-date. C) after the ex-date. D) on the ex-date.
A) BEFORE the ex-date. When assigned, the put writer is obligated to purchase the stock. As long as the stock is purchased PRIOR to the ex-date, the buyer becomes the owner of record ON OR BEFORE the record date, then they are entitled to the dividend.
On January 18, your customer sold 500 shares of MNO for a loss of $5 per share. If on March 1 she bought 3 MNO calls, how much of the loss could she declare for tax purposes? A) $1,500 B) $2,500 C) $1,000 D) None
B) $2,500 Since the transaction took 30 days
An investor mentions the term level load fund shares to a registered representative. The investor is referring to A) Class A shares. B) Class C shares. C) shares of a closed-end fund. D) Class B shares.
B) Class C Shares Class C shares are referred to as "level load" because the charges NEVER fluctuate. Shares are purch. at NAV (no front end load!) and there is a back-end load (CDSC), gen. for 12 motnhs. 12b-1 fees on Class C shares are HIGHER than Class A shares, and remain open until position is liquidated. Class C shares are MOST SUITABLE for investors who do not maintain a long-term position.
Svetlana calls her registered representative and places an order to write an XYZ Oct 90 call, and at the same time, write an XYZ Oct 80 put. The orders are executed at a premium of 5 for the call and 9 for the put. Which of the following best describes the customer's investment strategy? A) Mixed B) Neutral C) Bullish D) Bearish
B) Neutral When a customer writes BOTH A CALL AND PUT on the SAME underlying security, they're looking for little to no market movement, thus making it a "neutral" strategy. Technically, the customer created a SHORT COMBINATION (similar to a short straddle) and in this specific case, there is a little less risk than a pure straddle due to the SPREAD IN THE STIRKE PRICES.
Limited partners have the right to do all of the following except A) vote to remove the general partners. B) choose the assets for the partnership. C) sue the general partners for damages if he acts outside of his authority. D) inspect and copy partnership records.
B) choose assets for the partnership All of these rights, except choosing assets to be purchased for partnership. This is the function of the GENERAL partner.
An investor is long 10 XYZ 60 calls. After XYZ goes "ex" a 50% stock dividend, the adjusted position will be A) 15 XYZ Oct 40 calls, contract size 100 shares. B) 10 XYZ Oct 60 calls, contract size 150 shares. C) 10 XYZ Oct 40 calls, contract size 150 shares. D) 15 XYZ Oct 60 calls, contract size 100 shares.
C) 10 XYZ Oct 40 calls, contract size 150 shares. NUMBER OF CONTRACTS is NOT adjusted. The number of shares IS. A 50% stock dividend increases shares per contract to 150. Aggregate price per contract remains the same. With a contract size of 150 shares now, and the aggregate exercise price of $6k, the strike price is REDUCED to $40 per share. ($6k / 150 shares)
Long an ABC Apr 60 call and short an ABC Apr 70 call is A) a net credit spread. B) a calendar spread. C) a straddle. D) a net debit spread.
D) Net DEBIT spread This is a VERTICAL SPREAD. It is a DEBIT spread because of the strike prices. More money was spent on the lower strike price than received in the higher strike price call. This creates a net debit for her account.
When assets are pooled into financial instruments such as collateralized mortgage obligations (CMOs) to better facilitate selling them to the general public, the process is known as A) structuring. B) best efforts. C) diversification. D) securitization.
D) securitization Asset-backed securities represent a pool of assets that were combined into a financial instrument such as a CMO for the purpose of better facilitating sales to the general investing public. * The process of pooling assets into a single financial instrument for this purpose is known as securitization.
