Seires 7 Practice exam questions

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Which of the following is not a true statement regarding "at risk" provisions?

"At risk" provisions are not applicable to the exploration and exploitation of gas and oil.

ERISA qualified pension plan fund managers' fiduciary responsibilities regarding plan investments are determined by

"Prudent Man" rules in the state where the fund operates.

Bonds with a rating of BBB and higher are considered

"investment grade,"

A school teacher is retiring after 20 years of service. During the past 10 years, she invested $10,000 in a 403(b) through a payroll deduction offered by the school. Her account is now worth $16,000. What is her cost basis?

$0 The teacher has contributed to a qualified retirement plan; therefore, all the money she has invested is pre-tax. She has not paid taxes on any of the money yet, so her cost basis is $0, and she will be required to pay ordinary income taxes on the entire amount she withdraws.

An investor in a limited partnership has established a basis for tax purposes of $20,000. During the year, the investor's distributed share of the partnership losses was $18,000, and a cash distribution of $15,000 was received. How much of the loss can be used to offset other ordinary income?

$0 Passive loss from partnerships may not be offset against earned income or capital gain, only against passive income from other sources.

XYZ Corporation Primary Distribution: Total Issue: 1 million shares; Retained for sale by underwriters: 800,000 shares; Reserved for distribution to selling group: 200,000 shares. PER SHARE: Public Offering Price: $10.00; Manager's fee and expenses: .10; Underwriter's allowance: .70; Selling concession: .50; Proceeds to issuer: 9.20. Each underwriter will receive what fee per share for the stock he gives up to the selling group?

$0.20 The syndicate underwriter's allowance (take-down) is $0.70, but on sales made by the selling group, the syndicate members are conceding $0.50 of the $0.70 to the selling group. The syndicate is, in effect, receiving a $0.20 override on sales made by the selling group.

XYZ Corporation Primary Distribution Total issue: 1,000,000 shares; Retained for sale by underwriters: 800,000 shares; Reserved for distribution to selling group: 200,000 shares. PER SHARE: Public Offering Price: $10.00; Manager's fees and expenses: .10; Underwriter's allowance: .70; Selling Concession: .50; Proceeds to Issuer: 9.20. The underwriting spread is

$0.80 By definition, the "underwriting spread" is the difference between the public offering price per share ($10) and the proceeds to the issuer (9.20).

ABC stock is trading at $18.30 a share. The ABC June 20 put has a premium of $2.60. It has a time value of

$0.90. The June 20 put is in the money. To determine the time value, you have to determine how much of the premium is intrinsic value (in the money), 20 (strike price) - 18.30(market price of ABC) = $1.70 (intrinsic value). Premium - intrinsic value = time value, so $2.60 - $1.70 = .90.

client's margin account currently has $8,000 of equity and an SMA balance of $1,000. The customer wants to buy $4,000 of marginable stock. How much money must be deposited in the account in order to purchase the securities?

$1,000 A customer wanting to buy $4,000 of stock needs $2,000 of cash and/or SMA (cash and SMA have the same buying power). With $1,000 of SMA, the customer needs only $1,000 of cash.

Cheryl has an individual retirement account as well as a joint account with her husband at her brokerage firm. What is her maximum coverage under SIPC?

$1,000,000

Violations of SEC rules or the Act of 1934 are subject to criminal penalties, which include misleading or false statements on any report or application. The maximum penalty for an individual is

$1,000,000 fine, imprisonment for 10 years, or both.

. An 8% corporate bond maturing in 8 years is originally purchased at 106. What is the client's adjusted cost of acquisition after 6 years on a straight line basis?

$1,015 The purchase price of the bond was $1,060. The client needs to amortize the $60 over the 8 years left until maturity, therefore, $60 ÷ 8 years = $7.50/year × 6 years = $45. Finally, $1060 - $45 = $1,015 adjusted cost of acquisition.

XYZ Corp's debentures are convertible into its common stock at $50 per share. The stock has risen to $70. What is the parity price of the bond?

$1,400 An increase from $50 to $70 is 40% per share. To be at parity, the bond must also rise 40%. Therefore, the parity price of the bond is $1,400.

Revenues: $1,980,000; Operating expenses: $500,000; Interest expense: $300,000 Management fees: $100,000; Depreciation: $2,700,000 Taxable income or loss for the year from this limited partnership is

$1,620,000 loss. Total expenses = $3,600,000 ($2,700,000 plus $500,000, plus $300,000, plus $100,000). $3,600,000 minus $1,980,000 = $1,620,000 loss.

In a margin account with no existing positions or money balance, a client bought 100 shares of XYZ at 35 and wrote a call for a premium of 3. How much cash must the client deposit?

$1,700 Under Reg. T, margin accounts require an initial deposit of 50% or $2,000, whichever is greater. In this question, the client buys 100 shares at $35.00 per share for a total of $3,500. Fifty percent of $3,500 is equal to $1,750, which is less than $2,000. The Reg. T requirement would be equal to $2,000 minus the $300 that the client sold the call for, or $1,700.

A corporation has a $4 million profit. The corporation is in the 34% tax bracket. What is post-dilutive EPS? Common stock: 1,000,000 shares ($10 par) = $10,000,000; 5% preferred: 50,000 shares (100 par) = 5,000,000; 7% debentures: 5,000 bonds ($1,000 par convertible at $10) = $5,000,000

$1.59

Your broker/dealer is a member of the underwriting syndicate and re-offers 100,000 M of bank-qualified municipal debt at 99.75 net. There's a .75 point selling concession, .25 point re-allowance, and 1 point additional takedown. What's the member's profit?

$1.75 million

If a mutual fund with an offering price of $30 does not offer breakpoints, rights of accumulation, and dividend reinvestment at NAV to investors, what is its allowable maximum sales charge?

$1.88 If a mutual fund does not offer all of the following privileges - breakpoints, rights of accumulation, and dividend reinvestment at NAV - its maximum sales charge is 6.25%. ($30 x 6.25% = $1.88)

A customer opens a margin account with a $20,000 purchase. If Reg T = 50% and the customer pays in full for the purchase, what is the SMA in the account?

$10,000

Long 1,000 shares at 20, short 1,000 shares at 10. What is the minimum maintenance on these positions?

$10,000 Long 1,000 shares at 20 or 20,000 with maintenance at 25% or $5,000. For shares sold short, the minimum maintenance is the greater of 30% of the short market value or $5.00 per share. Because the short sale was at $10 per share, both the required deposit and the minimum maintenance are $5 per-share or $5,000. Therefore, the answer is $10,000 ($20,000 X .25 = $5,000; and 1,000 shares short at $5 = $5,000).

Qualified higher education expenses in a 529 plan include which of the following expenses for elementary and secondary public school?

$10,000 in tuition

An employee quits her job where she has a balance of $10,000 in her employer-provided qualified plan. If she decides to move the balance to a traditional IRA through a direct transfer, how much will be transferred from one plan administrator to another, and what is the tax consequence?

$10,000, no tax consequence

Your customer buys an XYZ September 60 put at 6 and sells one XYZ September 50 put for 1. When the market is at 56 and the options are trading at intrinsic value, what is your gain or loss

$100 loss Premium is -5 Market is +60 minus premium = +55 and -56 = +4 -5 (premium) +4 (market) = -1 X 100 = $100 loss

n investor puts $10,000 into a real estate DPP. The program put $100,000 down for the purchase of an asset valued at $1 million, with recourse financing for the remainder of the purchase from a qualified lender. What is the investor's basis?

$100,000 $10,000 is 10% of $100,000, so we assume the LP is a 10% owner. $90,000 is 10% of the $900,000 recourse debt. $10,000 +$90,000 = $100,000.

An investor purchases a 10% interest in a limited partnership with a $100,000 cash deposit. Her share of nonrecourse debt is $300,000. The limited partnership is forced to liquidate with the proceeds of the liquidation covering only $1,000,000 of the $3,000,000 debt. What is the customer's maximum potential loss?

$100,000 Because the debt is non-recourse, the LP cannot lose more than the amount invested ($100,000).

If an individual is found in violation of SEC rules for bribing a foreign official, The Act of 1934 specifies a maximum penalty of

$100,000, imprisonment for 5 years, or both.

With the underlying stock at $120, an investor writes a naked 120 put for a premium of $200. The maximum the writer can lose is

$11,800. he maximum loss for a short put occurs if the stock goes to zero. The writer is exercised, and is forced to buy worthless stock for $120 per share. Keeping the $200 premium, the maximum loss is $11,800.

Buy 200 shares of XYZ at 35. Sell 2 XYZ June 40 calls for 2. Sell 2 XYZ June 30 puts for 1.50. What is the maximum loss?

$12,300 The position should be treated as a covered call, long the stock, short the call, and a short put X 200. Long the stock at 35 = -35. Duty to buy on short put = -30 Market = -65. Premium received = +3 1/2 Breakeven is -61.50 X 200 = $12,300 loss

A client has 200 shares of common stock that have a current market value of $35 and 10 mortgage bonds at par value. Supposing the value of the stocks and bonds increased by 1⁄2 point, what would be the increase in the value of the holdings?

$150 Remember, the value of a point on a stock is $1 and the value of a point on a bond is $10. This means that 1⁄2 point on a stock is equal to $0.50 and that 1⁄2 point on a bond is equal to $5. In this question then, the 200 shares are now worth $100 more and the 10 bonds are now worth $50 more for a combined total of $150.

A mutual fund's net asset value (NAV) is listed at $18.60. The sales charge is 5%. What is the offering price?

$19.58 To find the offering price, divide the NAV by the comp lement of the sales charge. Offer Price = NAV / (100%-Sales Charge %). In this case: Offer Price = $18.60 / (100% - 5%).

An investor has an adjusted basis of $20,000 in a direct participation program. During the year $12,000 in cash distributions is received, and the investor's share of depletion is $6,000. What is the adjusted basis at the end of the year?

$2,000 oth cash distributions and depletion lower basis. $20,000 minus $18,000 ($6,000 depletion plus $12,000 cash) = $2,000.

XYZ Corporation's income statement renders the following information: Income from operations: $2,000,000 Preferred Dividends from other corporations: 100,000 XYZ Corporation has taxable income of

$2,050,000 Remember the 50% dividend exclusion that a corporation has on dividends received from stock that it owns in other corporations. Therefore, 50% of the $100,000 preferred dividend is excluded from income. The firm will only pay tax on the remaining $50,000 (in addition to their operating income of $2,000,000, of course).

When the underlying stock is trading at 23, a customer writes an uncovered put with a strike price of 25 and receives a premium of 4. What is the maximum loss to this writer?

$2,100 When a put is sold, the most that can be lost is the strike price minus the premium. In this case, that would be equal to $25 - $4 = $21 × 100 shares = $2,100.

What is the maximum fine under FINRA's Summary Compliant Procedure?

$2,500

As an initial transaction in a margin account, you sell 100 shares of XYZ at 30. The market drops to 25. What is your equity?

$2,500 In shorting stock at 30, you must deposit $2,000 under the minimum equity rule. As the market value drops from $3,000 to $2,500, your equity rises from $2,000 (initial deposit) to $2,500.

As an initial transaction in a margin account, you sell 100 shares of XYZ at 30. The market drops to 25. What is your equity?

$2,500 In shorting stock at 30, you must deposit $2,000 under the minimum equity rule. As the market value drops from $3,000 to $2,500, your equity rises from $2,000 (initial deposit) to $2,500.

The maximum penalty which can be imposed on a business entity for false or misleading information on any SEC report or application is

$2,500,000. The maximum fine for a business entity that is found guilty of violations of The Act of 1934 or SEC rules is $2,500,000. One million is the maximum fine for any person for the same activity. For a bribe, a person will be fined $100,000, and a business entity - $2 million.

If a client sells short 100 shares of ABC Corporation at 50 and ABC Corporation is a listed security, Regulation T would require an initial deposit of

$2,500. Reg. T for a short sale is 50% or $2,000, whichever is greater. In this question, 50% of the market value short is $2,500, so that is what would be required to be deposited as initial equity.

A corporation has a $4 million profit. The corporation is in the 34% tax bracket. What is pre-dilutive EPS? Common stock: 1,000,000 shares ($10 par) = $10,000,000; 5% preferred: 50,000 shares ($100 par) = $5,000,000; 7% debentures: 5,000 bonds ($1,000 par convertible at $10) = $5,000,000

$2.16 $4,000,000 (profit) minus $350,000 (interest 7% X $5 million) = $3,650,000 (pre-tax profit) X .66 (converse of 34% tax bracket) = $2,409,000 (post-tax profit) minus $250,000 (preferred dividends) = $2,159,000 earnings divided by 1,000,000 shares = $2.16 EPS

You have invested $200,000 in a direct participation program which has a $400,000 mortgage. Your K-1 shows the following: Revenue: $200,000; Operating costs: $90,000; Depreciation: $50,000; Interest: $40,000; Amortized principal: $10,000. What is taxable income?

$20,000 $200,000 less operating costs ($90,000) minus depreciation ($50,000) minus $40,000 mortgage of interest equals $180,000. $20,000 is taxable income. Amortized principal on the mortgage is not deductible.

A customer shorts one ABC Jan 65 call for a premium of 4 and holds one ABC 70 call for a premium of 1. What is the customer's maximum potential loss?

$200 On this credit spread, if the option is exercised, the customer will lose $200. This is equal to the difference in the strike prices minus the net premiums. BUY 70 call for 1 minus SELL 65 call for 4 = 5 market minus 3 premium = 2 OR Premium = +4 minus 1 = +3 Market = +65 minus 70 = -5 = -2 loss

A tax shelter is created for $800,000 with one general partner and 10 limited partners. The proceeds are used to purchase a $2,000,000 office building, taking a non-recourse note for the $1,200,000 mortgage from a qualified lender. Economic conditions later cause the occupancy rate to fall to 10% and the program is dissolved. What may an individual limited partner write off?

$200,000

An investor's mutual fund account is currently worth $48,000. The sales charge was 8½%. If she withdraws 6% per year, her monthly payments will be

$240. his is an example of fixed-percentage periodic payments, where an investor requests that a fixed percentage of shares be liquidated at fixed intervals. The 8½% sales charge has no effect on the amount the investor receives in monthly payment. $48,000 x 6%=$2,880 annual amount ($2,880/12=$240 monthly payment).

Bob wrote one XYZ July 45 put for $4.50 and one XYZ July 40 call for $2 with the market price of XYZ at 41. XYZ appreciates to 43, and Bob makes closing purchases of the put for $2.50 and the call for $3.75. What is the gain or loss?

$25 gain The position is a short combination. Bob wrote the put and call for a combined premium of $6.50 ($4.50 + $2). He purchased them back for a combined premium of $6.25 ($2.50 + $3.75 = $6.25. $6.50 - $6.25 = $0.25 X 100 = $25.

XYZ stock is trading at $1.25 per share. With Reg T at 50%, what is the required deposit to sell short 10,000 XYZ @ $1.25 per share?

$25,000 For stocks under $2.50 per share, the Rule is $2.50 per share. 10,000 x 2.50 = $25,000.

You have an option contract with a unit size of 108. The bid is 2.50. What is the total premium of this contract?

$270 If the unit size is 108 and the premium is $2.50, then multiply 108 × $2.50 ($270).

How much of a $10,000 loss in securities can be written off against non-passive income?

$3,000

A customer's margin account has available SMA of $1,000. How much would the customer have to deposit to purchase listed options with premiums totaling $4,000?

$3,000 SMA of $1 can buy $2 of stock but only $1 of options premium (which have no loan value and must be fully paid). Therefore, $4,000 of option premium, less $1,000 of SMA equals $3,000 deposit.

A customer purchases 200 shares of XYZ at $50 in a margin account and meets the Reg T requirement. The stock rises to $55 on the first day, and then declines to $40 on the second day. What are the account equity and SMA balances?

$3,000 equity, SMA $500

28 A corporation's capitalization consists of: Debenture - 7% - $1,000 par, maturity 2022: $4,000,000; Common stock - $1 par, 200,000 shares outstanding: $200,000; Capital in excess of par: $800,000; Retained earnings: $5,000,000. The corporation, for the current year, earns $1,500,000 before interest and taxes. The corporation is in the 50% tax bracket. What are the company's earnings per share?

$3.05 Corporate profit of $1,500,000 minus $280,000 interest (7% X 4 million) = $1,220,000 X 50% = $610,000 divided by 200,000 shares = $3.05.

A corporation's capital structure consists of the following: Debenture - 7% - $1,000 par, maturity 2022: $4,000,000; Common stock - $1 par, 200,000 shares outstanding: $200,000; Capital in excess of par: $800,000; Retained earnings: $5,000,000. The corporation, for the current year, earns $1,500,000 before interest and taxes and is in the 50% tax bracket. What are the company's earnings per share?

$3.05 Corporate profit of $1,500,000 minus $280,000 interest (7% X 4 million) = $1,220,000 X 50% = $610,000 divided by 200,000 shares = $3.05.

A corporation's capitalization consists of: Debenture - 7% - $1,000 par, maturity 2022: $4,000,000; Common stock - $1 par, 200,000 shares outstanding: $200,000; Capital in excess of par: $800,000; Retained earnings: $5,000,000. The corporation, for the current year, earns $1,500,000 before interest and taxes. The corporation is in the 50% tax bracket. What are the company's earnings per share?

$3.05 Corporate profit of $1,500,000 minus $280,000 interest (7% X 4 million) = $1,220,000 X 50% = $610,000 divided by 200,000 shares = $3.05.

An investor buys a 4% 10-year municipal bond at 96. Six years later, the investor sells at 99. What is the investor's gain or loss?

$30 gain Only municipal OIDs are accreted. The discount on a conventional interest paying municipal bond purchased in the secondary market is not accreted.

Compute combined equity in this account. Long market value is $80,000; Short market value is $6,000; Debit is $54,000; Credit is $10,000, and SMA is $10,000.

$30,000 Long Market value of 80,000, minus short market value of 6,000 = 74,000, minus debit of 54,000 = 20,000, plus credit of 10,000 = 30,000 Ignore SMA.

An option trader sells 1 ABC Apr 50 put for 1 and buys 1 ABC Apr 60 put for 8 with the market in ABC at 54. What are the trader's maximum profit, maximum loss, and breakeven point?

$300, $700, 53 The position is a debit put spread. Premium (max loss -7(00), max gain +3(00) and 60 minus 50 strike price equals 10. Breakeven is net premium of 7 subtracted from the higher strike price.

A customer purchases one XYZ July 50 put for $2.50 with the price of XYZ stock at 55. What is the maximum profit the customer could realize?

$4,750 50 strike price - $2.50 premium= 47.50 X 100 = $4,750 gain

You are long 200 shares of ABC at 54 and simultaneously buy 2 ABC Aug 55 puts for 3. The puts are exercised with the market at 52. What is your gain or loss?

$400 loss Premium is -3 (200). Market is a long position hedge. -54 + 55 = +1 - 3 = -2 X 200 = $400 loss. Note that the market value (market at 52) is irrelevant for this calculation.

In early October, a customer buys 100 shares of XYZ stock at $50 per share and, at the same time, writes an XYZ April 50 call option for a premium of $8 per share. Excluding commissions and dividends, what is the market price per share of XYZ stock at which the customer breaks even?

$42 Breakeven is the price paid for the stock less the premium received. $50- $8 = $42.

An investor purchases a stock for $38 a share, sells it for $35 a share, then re-acquires the same stock two weeks later at $44 a share. What is the basis?

$47 This is a question regarding the Wash Sale Rule. Since the investor sold the stock at a $3 a share loss but then re-acquired the same stock two weeks later, the loss is not usable on the customer's tax return. However, the $3 loss is reflected on the basis of the new stock by adding the $3 a share loss to the price of $44 a share; the basis is $47 a share. If the stock were sold later at, say, $52 a share, the investor would show a $5 a share capital gain.

You write an XYZ July 50 call for 6 and buy a July 60 call for 1. With XYZ at 44 and the 50 call at .12, you close your positions. What is your gain or loss?

$488 gain The spread is credit; both options are out of the money. Your gain is the premium you received $5 (6 - 1) or $500 less .12 (what you paid to buy back the short call) or $12 = $488 gain.

Opening purchase in a margin account with no other positions is 2,000 shares at $2. With Reg T at 50%, what is the minimum deposit required?

$5,000 Minimum requirement for a stock valued at $2.50 per share or lower is $2.50 per share. 2,000 shares x $2.50= $5,000.

. An investor made an opening purchase of 5 ABC Nov 70 straddles @ $7.25 ($3.25 for the calls and $4 for the put). ABC dropped to $52 and the investor sold the 5 straddles. Assuming only intrinsic value, what is the investor's profit?

$5,375 The profit is $5,375. If ABC is 52, the Nov 70 put has an intrinsic value of 18, the call is out of the money, so it has zero intrinsic value. $18 - $7.25 (premium paid) = $10.75 X 100 = $1,075 X 5 straddles = $5,375

An investor learns that he inherited a mutual fund that had a NAV of $50 per share on the date of the owner's death. Thirty days after the death of the owner, the NAV is $55. It is now 2 months since the owner died and the NAV is $60. The owner's cost basis was $20. What is the cost basis for the beneficiary?

$50 When a security is inherited, the beneficiary's cost basis is the fair market value (in this case, the NAV) of the security on the day of the deceased's death. This is called a "stepped up" basis.

Under Reg A+ Tier 2, what is the maximum amount of money that may be raised?

$50 million with no more than $15 million by affiliates

A DPP investor puts $200,000 into a tennis condominium resort development. The investor's share of the income from the operation the first year is $300,000. The share of the interest paid on the bank loan for the year is $200,000. The share of the maintenance expenses and taxes are $95,000. The share of the depreciation is $55,000. The investor is in the 28% tax bracket. How much, if any, can the investor deduct from income from other passive sources this year?

$50,000 Passive losses may only be written off against passive income. In this case, the investor's basis is the $200,000 that was invested in the DPP. Income $300,000 Less Interest -$200,000 Less Expenses & Taxes -$95,000 Less Depreciation -$55,000 = Net Loss -$50,000

A dispute between members may be submitted to simplified arbitration when the dollar amount does not exceed

$50,000.

A limited partnership has the following results: Income: $300,000; Operating costs: $200,000; Debt service: $95,000 (including interest: $90,000 and principal $5,000); Depreciation: $60,000. What would be the cash flow to a 10% limited partner?

$500 $300,000 minus $200,000, minus $95,000 equals $5,000 of which 10% is $500. Depreciation is a non-cash expense.

On Nov 10, there was an opening sale of 100 shares of XYZ at 25. On Dec 9 the shares were purchased at 30. On Jan 3, the shares were sold again for 30. What is the result?

$500 loss is deferred This is a short wash sale, an opening short, purchase for a loss, and another short sale. Therefore, the loss cannot be deducted.

An investor with no other position writes one ABC July 80 call for a premium of 10 and buys 100 shares of ABC stock for $85 per share. If the market price of ABC moves to 90 and the call is exercised, the customer would experience a

$500 profit. Premium is $1,000, paid to investor. Stock is purchased by investor for $8,500. Call exercises at 80, investor sells and receives $8,000. $1,000 received + $8,000 received = $9,000 received - $8,500 paid = $500 profit.

An investor has a net worth of $500,000. If the investor takes $2,500 out of savings to invest in an IRA and $3,000 to pay off a credit card, and buys a $5,000 stereo on store credit, the investor's net worth will then be

$500,000 Here is how to work through these transactions to see how they affect the investor's net worth. First, by moving $2,500 out of savings to invest in an IRA, the investor has simply moved a current asset to a long-term asset, so total assets remain unchanged. Second, when the investor uses $3,000 from savings to pay off a credit card, he has reduced both current assets and current liabilities by the same amount so net worth remains unchanged. Third, when the investor buys a $5,000 stereo on credit, both assets and liabilities have increased by the same amount; therefore, after all of this, the total net worth remains unchanged at $500,000. Remember, the formula for calculating net worth is total assets minus total liabilities.

P invested $10,000 into a nonqualified variable annuity 5 years ago. Today, P's annuity is worth $16,000. She decides to withdrawal the full amount out of her annuity. On what portion will P have to pay taxes?

$6,000 P isn't required to pay taxes on the original $10,000 she invested. The original $10,000 investment was paid with after-tax dollars; she would not be required to pay taxes on that portion again. P will, however, have to pay taxes on the gain of $6,000. With variable annuities, the money grows tax-deferred and is not taxed until the money is withdrawn from the annuity.

An investor writes a listed XYZ August 70 put option for 3.50 when XYZ is at 68.50. At expiration, XYZ is at 67 and the shares are put to the investor. What is the cost basis of the stock for federal tax purposes?

$6,650

$60,000 he $200,000 of revenue is reduced by all payments made. $200,000 less operating costs ($90,000) minus interest ($40,000) minus amortized principal ($10,000) equals $60,000 cash flow. Depreciation reduces taxable income, not cash flow.

Purchase an ABC May 60 call for 5. Sell an ABC May 70 call for 1. When ABC is at 72, the 60 call is at 13, and the 70 call is at 3, you close your position. What is your gain or loss?

$600 gain Premium Open: -5 and +1 = -4 Close: +13 and -3 = +10 +6 gain X 100 = $600 gain

Aglet International has a pre-tax income of $2,000,000. In addition, it received dividends of $100,000 from its stock portfolio. If the corporation's tax rate is 34%, what is its total tax liability?

$697,000 The corporate dividend exclusion is 50%. Therefore, $50,000 of the $100,000 dividends can be excluded from reported income. Such a dividend exclusion applies to common and preferred dividends received by one U.S. corporation from another. For tax purposes, pre-tax income of $2,000,000 plus the $50,000 taxable dividend total $2,050,000 multiplied by the tax bracket 34% ($2,050,000 x 34% = $697,000).

An investor buys one DEF May 60 call for a premium of 6 and sells one DEF May 70 call for a premium of 3. Using this strategy, what would be the investor's maximum gain?

$700 Premium = -3 Market = -60 (call = right to buy) + 70 (call = duty to sell) = +10 minus 3 = 7 X 100 = $700 gain.

The writer of a call option opens with a premium of 8 and closes his option position at ¼. What is the loss or gain?

$775 gain, calculated as $800 (credit received by the writer) minus $25 (debit paid by the writer when the position is closed out).

A Treasury note is quoted at 100.8. If a customer buys $8,000 par value at that price, what will be the principal dollar amount involved?

$8,020 Remember that U.S. government securities are quoted in 32nds. On a bond or note, the par value is usually $1,000 and 1 point equals $10; therefore, 8⁄32 of 1 point would be equal to 1⁄4 of 1 point, or $2.50. Since this note has an $8,000 par, however, one would have to multiply $2.50 by 8 to find that 8⁄32 of 1 point on an $8,000 par note is $20. This note has a price of $8,020.

An investor purchases 100 shares at $100 per share and, on the same day, sells a 100 call for 4.25. What is the maximum loss that could be realized by the investor?

$9,575 f the stock should fall to zero, the investor has lost his entire investment, less the premium received on the call. Maximum loss is therefore $9,575. $10,000- $425 = $9,575

The following is a summary of an investor's dollar cost averaging plan over the past 3 months: I. Amount invested = $1,000; Share price = $10; Shares purchased = 100; II. Amount invested = $1,000; Share price = $12.50; Shares purchased = 80; III. Amount invested = $1,000; Share price = $8; Shares purchased = 125. What is his cost basis per share?

$9.84 The investor owns 305 total shares with an investment of $3,000. $3,000 divided by 305 shares equals a per share cost basis of $9.84.

Sandy holds 2 XYZ Dec 60 calls. XYZ split 3:2. After the split Sandy holds 2 XYZ Dec 40 calls. A week later, she sold her calls for $3. What is the total premium she received?

$900 After a 3:2 split, the new contract size is 150 shares. $3 X 150 = $450 X 2 contracts = $900.

106 If a Customer Relationship Summary (Form CRS) is required, when must it be provided to the customer?

(B) Before or at the time of entering into an investment advisory agreement

For the year ending 12/31, a company with only common shares outstanding reported net sales of $910 million, net earnings before taxes of $99.2 million, and net earnings after taxes of $49.6 million. The earnings per share were $3.20, depreciation totaled $32 million, cash flow per share was $4.22, and book value at the year-end was $21 per share. $1.10 per share was distributed as dividends for the year and the market price of the stock at the close on 12/31 was $24. The price/earnings ratio was

95 The sale of a new issue of securities to a limited number of purchasers made without the filing of a registration statement is known as a

25 If a long sale is made in a margin account, which of the following are true? I. SMA is increased. II. Debit is decreased. III. Equity is increased. IV. Long market value is decreased.

) I, II & IV

Which of the following is necessary for a municipal security to be eligible for treatment as an original issue discount?

) The issuer initially sold the security at less than par.

An investor owns 100 shares of a mutual fund listed at 20.50 - 21.90. She has Class "B" shares that have a 3% CDSC. At what share price will her funds be redeemed if she sells them in the first year?

)$19.89 Mutual funds redeem at net asset value (NAV) less any contingent deferred charges and/or redemption fees. Her funds will be redeemed at $20.50 minus the 3% CDSC for a share price of $19.89. CDSC is the abbreviation used for Contingent Deferred Sales Charges, which is a declining scale of back-end sales charges for class B shares.

What is the lowest price that a seller is willing to accept for a security from a customer?

)Ask price

All of the following are benefits of raw land limited partnerships, EXCEPT

)Depreciation deductions.

A person who writes a covered call

)Is long the underlying stock.

55 When a revenue bond issue has a nonqualified legal opinion, it means that

)The legal opinion is not subject to any limiting qualifications.

When a member is liable for its percentage of any unsold securities, the syndicate is a(n) I. Eastern syndicate. II. Divided syndicate. III. Western syndicate. IV. Undivided syndicate.

. Eastern syndicate IV. Undivided syndicate.

Which of the following are true regarding municipal offerings? I. Revenue bonds are usually offered through competitive bidding. II. Revenue bonds are usually offered through a negotiated process. III. General obligation bonds are usually offered through competitive bidding. IV. General obligation bonds are usually offered through a negotiated process.

. II. Revenue bonds are usually offered through a negotiated process. III. General obligation bonds are usually offered through competitive bidding

Which of the following are characteristics of BABs? I. They provide tax-free interest. II. They may provide a federal subsidy to the issuer III. They may provide a tax credit to the investor. IV. They provide tax-free capital gains.

. II. They may provide a federal subsidy to the issuer III. They may provide a tax credit to the investor.

Concerning valuation of a variable annuity, which of the following are true? I. The value is expressed in units, similar to mutual fund shares. II. Units are revalued daily similar to mutual fund shares. III. The number of annuity units increases during the accumulation phase. IV. The value of a unit varies with the performance of the separate account.

. The value is expressed in units, similar to mutual fund shares. II. Units are revalued daily similar to mutual fund shares. V. The value of a unit varies with the performance of the separate account.

An issuer that currently has $150 million in outstanding capitalization and has an average daily trading volume of $1 million would have a restriction period for their add-on offering of

0 days

The loan value of an option in a long margin account is

0%. Options cannot be purchased with borrowed money because the premiums must be paid 100%. The loan value of options is zero. Options may expire worthless.

The sales load of a mutual fund is 7% with a 1.5% underwriter's concession. If the NAV is 13.20, the offering price is determined by dividing 13.20 by

0.93 To find the offering price of a mutual fund, take the NAV per share and divide by (100% minus the sales charge). So, $13.20 ÷ 0.93 = $14.19.

which of the following are mthods stock valuation accepted for tax purposes when selling a stock 1 fifo 2 weighted averge 3 random lot 4 secuity identification

1 2 4

What is the holding period to determine long-term capital gains?

1 year plus 1 day from trade date

A shareholder owns 200 shares of stock with cumulative voting rights. If there are five vacancies being voted upon, what is the maximum number of votes the shareholder may cast for any one vacancy?

1,000

The Prime Care Fund is quoted at $25 - $26.70. The prospectus shows that the maximum sales charge for purchases of $25,000 to $49,999 is 4%. Approximately how many shares can a customer buy with $40,000?

1,536 To find the answer, first calculate the sales charge. $40,000 at 4% means $1,600 will be used for sales charges, leaving $38,400 left to purchase shares. $38,400 divided by the net asset value (NAV) of $25 will purchase 1,536 shares.

A customer has sold certain securities but has not delivered them to her registered representative by the settlement date. The SEC mandatory buy-in period for customers who fail to deliver on time is

10 business days after the settlement date. The SEC mandatory buy-in for failure to deliver is 10 business days after the settlement date.

ipo no research may be reliaed for what time period

10 days from effective date

What is an underwriter's maximum sales compensation, including wholesaling costs, in a DPP offering?

10%

ABC Corporation has earnings of $5 per share and has paid a quarterly dividend of $.75. If ABC is currently trading at $30 a share, what is the current yield for ABC's stock?

10% Current yield is determined by dividing the annual dividend by the current market price. Since ABC has paid a $.75 quarterly dividend, multiply $.75 times four to get annual dividend income of $3 per share. Then, divide $3 per share by the current market price of $30 per share to get the yield of 10%.

A corporation's capitalization consists of: Debenture - 7% - $1,000 par, maturity 2022: $4,000,000; Common Stock - $1 par, 200,000 shares outstanding: $200,000; Capital in excess of par: $800,000; Retained earnings: $5,000,000. The corporation, for the year 2010, earns $1,500,000 before interest and taxes and is in the 50% tax bracket. What is the return on common equity?

10.2% Net income = $1,500,000 gross earnings - $280,000 bond interest (7% x $4m) = $1,220,000 x 50% tax = $610,000 net income. Common shareholder equity = $5,000,000 retained earnings + $800,000 capital excess par + $200,000 par value outstanding shares = $6,000,000 total common equity. $610,000 / $6,000,000 = 10.16%

10. An employee contributed $3,000 to her employer's qualified plan. What percentage of this contribution is she vested in?

100

Which of the following is FALSE regarding a Rule 147 offering?

100% of the proceeds must be invested in the state.

a 12% bond yilding 12.5% pays how much at maturity

1060

Your client purchased one XYZ Sept. 120 straddle @ $9 ($3.75 for the call and $5.25 for the put). Assuming intrinsic value only, what are the breakeven points for the straddle?

111 and 129 Breakeven is 111 and 129. Call strike price + total premium on the upside. Put strike price - total premium on the downside. Your client makes a profit if XYZ falls below 111 or rises above 129. He loses money at expiration if XYZ closes between 111 and 129.

A market order to sell at the close is placed with a registered representative. The resulting trade is executed and later confirmed to the customer at 14. The trade actually occurred at 13. What price does the customer receive?

13 The market order was filled at 13, and the customer will receive this price in spite of the confirmation error.

If XYZ stock is trading at 45.25 during the second week of March, an XYZ March 60 put will trade near which of the following?

14.75 Options trade at a premium that is equal to the intrinsic value of the option plus an amount of money paid for the time left on the option until expiration. In this question, XYZ stock is trading at $45.25 during the second week of March. The option is an XYZ March 60 put. Since the market price is below the strike price by $14.75, the option is in the money. Because the option itself is expiring in March, the only answer that makes sense is $14.75. This option has a premium equal to the intrinsic value (no time value since it is almost expired).

In a margin account, based on hypothecation rules of self-regulatory agencies and SEC Customer Protection and Custody of Securities rule, a broker may collateralize to a bank a customer's securities up to what percentage of the debit balance?

140% A broker/dealer is allowed to rehypothecate up to 140% of the customer's debit balance to a bank to secure the loan.

A mutual fund prospectus can no longer be used if financial information is older than

16 months.

Once a shelf registration is filed by the issuer, for how long may the issuer delay selling all or part of the new issue?

2 years

The owner of a variable life policy has the right to a refund of some of the sales charges if the policy is surrendered within

2 years.

An investor has $10,000 in his margin account. He wants to sell short as many shares of XYZ stock as possible. XYZ is trading at $4 per share. With Reg T at 50%, what is the maximum number of shares he can sell short with $10,000?

2,500 The required Reg T deposit for selling stock short between $2.50 and $5 per share is 100%; $10,000/$4 = 2,500 shares.

TIPS are NOT issued in which of the following maturities?

20 year

eps of 6 and a p/e ratio of 4 what is current market price

XYZ 25.25 + .25; Bid 25; Ask 25.12. If an investor wishes to purchase 1,000 shares of XYZ, excluding commission or markup, what price would be paid per share?

25.12 Customers buy at the offer and sell at the bid.

14 An investor buys a 10-year municipal bond at 107. The investor sells the bond after 3 years at 102. What is the investor's gain or loss?

29$ loss he investor reduces bond cost basis by $7 per year ($70 premium / 10 years) After 3 years, the investor's cost basis is $1,049 (1,070 - 21) Cost basis minus sale price = 1,049 - 1,020 = $2

Rich holds one XYZ May 30 call. XYZ splits 3:1. What is Rich's new option position?

3 XYZ May 10 calls

68?? Retail communications and the names of the people who prepared and approved them must be kept on file for

3 years.

Correspondence refers to any written communications distributed to 25 or fewer retail investors within what period of time?

30 days

Within how many calendar days must messages be sent to existing customers to be considered correspondence?

30 days

Day Count Basis

30/360

Current interest on municipal bonds is generally calculated using the day count basis most commonly referred to as

30/360. ccrued interest calculations on corporate and municipal bonds use a 30-day month and a 360-day calendar year. U.S. government securities use actual calendar days

34%. The dividend paid to the shareholders was $1.10 per share; however, the earnings per share were $3.20. This means that of the $3.20 earned per share, the corporation paid out approximately 1/3 to shareholders in the form of dividends ($1.10 / $3.20). The balance of the earnings was kept by the company and reflected as retained earnings.

An order is entered "buy XYZ 35 stop limit." The tape shows 35.50; 36; 34.50; 35. The order was most likely executed at which price?

34.50 A buy stop limit is placed above current market value. This order was triggered on 35.50, and executed at 34.50.

A client places an order to sell short 100 shares of XYZ at 35.50 stop limit. At which trade was the order elected? 36, 35.75, 35.13, 34.88, 35, 35.62

35.13 Sell stop and sell stop limit orders are triggered (elected) when the stock price trades at or through (below) the trigger price, which is 35.50 in this example. This stop limit order then becomes a live limit order to sell at 35.50 or better. This order is triggered at 35.13. Then it becomes a live limit order to sell at 35.50 or better. Therefore, it would be executed at 35.62.

Long-term equity appreciation participation securities or LEAPS have expirations as long as

39 months.

A customer who purchases securities in a cash or margin account must pay for the securities in

4 business days.

A coffee producer, an OTC traded company, did an add-on offering to update its roasting facility and expand into the tea market. The prospectus must be delivered within

40 days of the effective date. Non-NASDAQ OTC issuers must deliver a prospectus for 90 days after the effective date in an IPO, and 40 days from the effective date for APOs.

he Investment Company Act of 1940 states that a certain percentage of a mutual fund's board of directors be unaffiliated with the fund. This minimum percentage of unaffiliated members must be at least

40%.

In which qualified retirement plan may both the employer and employee contribute to an employee trust?

401(k)

Sell one ABC May 45 call for 4.50. Sell one ABC May 45 put for 3. Assuming intrinsic value only, at what price is there a $500 profit?

42.50 and 47.50

ell one ABC May 45 call for 4.50. Sell one ABC May 45 put for 3. Assuming intrinsic value only, at what price is there a $500 profit?

42.50 and 47.50

A dealer has an average cost of 6.50 on the inventory position of an OTC stock the firm is trading. The NASDAQ Level 1 quote for the stock is 5 - 5.50. According to the FINRA conduct rules, what price would be used when figuring the mark-up to a prospective customer?

5.50 Dealers must sell to customers at a price based upon current market value. Because the question identifies this transaction as a sale (the dealer is figuring MARK-UP), the mark-up will be based upon the best available ASK price, which is 5.50.

Under Reg A+ Tier 2, what is the maximum amount of money that may be raised?

50 million with no more than $15 million by affiliates

100 sahres @12.5 stock sold short what is requirmed minimm margin

500 stock below 17.5 a share to 5$ a share rule is 5$ a sare

ABC Equity Fund charges a 12b-1 fee. The fund's Board of Directors must be made up of at least

51% unaffiliated directors.

A customer buys 100 shares of XYZ common stock at $52 and, on the same day, buys one XYZ April 50 put at 1.50. A customer will break even with this position when the market price of the stock is

53.50. Premium is -1.50 and market is -52. Therefore, breakeven is 53.50.

How many days of accrued interest would be added to a trade on U.S. Treasury bonds paying interest on January 1 and July 1 if they were traded for settlement on Wednesday, February 24?

54 Remember, U.S. government securities use the actual calendar when calculating accrued interest. They also settle in T + 1 business day. Interest accrues up to but not including settlement. In this question, the settlement date is February 24. This means that there are 23 days of payable interest in February. The question also tells us that the interest is paid January 1 and July 1. For January, 31 days of interest are owed. When combined with the 23 days for February, the total comes to 54 days of interest owed to the seller.

After a customer's brokerage account is closed, the account information must be maintained for how many years?

6 years.

The FINRA statute of limitations for arbitration claims is

6 years.

A couple wants to gift the maximum possible to their two children this year without incurring gift tax. What is the total amount they may gift in 1 year?

60,000 The husband and wife can each gift $15,000 per recipient. As a couple, they can gift: $30,000 x 2 children = $60,000.

What is the cost of a March 120 T-Bond call with a premium of .20?

625 reasury notes and bonds are quoted in 32nds. Therefore, .20 = 20/32 (.625) of 1% of $100,000 (1 point) or $625

A customer writes an XYZ May 70 call for 1 and purchases an XYZ May 60 call for 4. At what market price is every dollar of gain on the 60 call offset by a dollar of loss on the 70 call?

70 At 70, gains are maximized. At 70, the customer has a duty to sell as an offset to the right to buy at 60.

An investor with no other position writes one ABC July 80 call for a premium of 10 and buys 100 shares of ABC stock for $85 per share. What is the client's breakeven point?

75 Since the investor purchased 100 shares of stock for $85 a share and has sold a call option for a premium of 10, the client is actually out only $75 per share.

An employee quits her job where she has a balance of $10,000 in her employer-provided qualified plan. If she requests that the plan distribution is paid to her so that she can roll the proceeds into an IRA, how much will she receive from the plan administrator, and how long does she have to complete the tax-free rollover?

8,000, 60 days Because the employee has requested a distribution check, there will be a 20% withholding, and the participant has 60 days to reinvest it in an IRA to qualify as a tax-free rollover. The full amount of $10,000 must be reinvested, or the withheld amount of 20% will be considered a taxable distribution

A corporation's stock is selling at $90 per share. The corporation pays a quarterly dividend of $2. What is the current yield?

8.9% If the quarterly dividend is $2, the annual dividend is $8. The formula for current yield is annual dividend divided by current market price or $8 ÷ $90 (8.9%).

The maximum sales charge on a variable life contract under FINRA regulations is

9% over a period of up to 20 years.

A corporation has the following: Revenue: $200,000. Operating expenses: $180,000 (includes $4,000 depreciation). Interest on notes: $11,000. Taxes (34%): $3,060. What is cash flow?

9,940 Revenue minus the total of all expenses, including interest and taxes = $5,940. Then add depreciation, a non-cash expense for $9,940.vv

A Rule 144 filing for the sale of restricted securities by control persons is subject to which of the following time limitations?

90 days

How long is a Form 144 Notice of Sale effective?

90 days

What lowers debit balance? I. Stock dividend; II. Cash dividend; III. Cash from sale of securities; IV. Cash from the purchase of securities

; II. Cash dividend; III. Cash from sale of securities;

67 An increase in the market value short of securities in a short margin account will do which of the following? I.

; II. Decrease equity

A municipality has issued a double-barreled revenue bond where the net revenues generated by the facility have proven to be insufficient to service the debt. Which of the following income sources may be used by the municipality to satisfy the obligation? I. Ad valorem tax collections; II. Fines; III. Assessments of additional taxes; IV. Collected back-due ad valorem taxes

? I. Ad valorem tax collections; II. Fines; III. Assessments of additional taxes; IV. Collected back-due ad valorem taxes

A managing underwriter acts only as an agent for the issuer in which of the following underwritings? I. All or none; II. Standby; III. Firm commitment; IV. Best efforts

? I. All or none; IV. Best efforts

What's the difference between a REIT and a DPP?

A REIT has flow through of gain only, a DPP of loss and gain.

Which of the following is a debenture?

A bond backed by the issuer's promise to repay the debt

Wilma is a very nervous investor who wants to avoid as much risk as possible, and also wishes to be able to withdraw her money from the investment when she needs it. With respect to investment suitability, which of the following investments might work well for Wilma in this situation?

A capital preservation fund

Which of the following would be considered short swing profits by the IRS?

A company insider profits on a stock trade after holding the stock for a 5-month period

According to FINRA rules, which of the following falls under the definition of an independently prepared reprint?

A copy of a magazine article on retirement planning issued by a publisher that is not affiliated with the member

Which of the following statements is INCORRECT in regard to broker/dealers?

A dealer makes a profit by charging a commission on the security transaction.

Which of the following does NOT affect a corporation's reported net income per share?

A declaration of the dividend

hich of these statements is INCORRECT concerning broker/dealers?

A firm can act in both the capacity of a broker and a dealer when selling securities from its own inventory.

A very busy executive wants to diversify by investing in a variety of mutual funds, but doesn't have time to research and choose the funds. Which of the following may be an appropriate investment for this investor?

A fund of funds

Which of the following is the definition of stopping stock on the floor of an exchange?

A guarantee of a specific price or better for a customer's order

The quick ratio is

A more stringent measure than the current ratio.

An investor in a Subchapter S corporation or a limited partnership is considered

A participant

Written verification of a customer's financial condition is required when purchasing all of the following, EXCEPT

A real estate investment trust.

What is the term for an economic downturn that lasts for 2 consecutive quarters?

A recession i A recession is 2 consecutive quarters, or 6 consecutive months of economic decline. A depression is 8 consecutive quarters, or 24 months, of decline.

Which of the following issues equipment trust certificates?

A regional airline

A municipal securities money market fund is a suitable investment for a high-income investor seeking which of the following?

A safe investment vehicle to park the money while looking for a long-term investment

Some securities are exempt from the registration and prospectus requirements of the Securities Act of 1933. All of the following securities are among this exempt class EXCEPT

A security offered for sale in only one state.

A redeemable security is

A security with no secondary trading.

The capital asset pricing model is used to determine

A security's value, considering its beta and a risk-free rate of return.

Which of the following statements is NOT true concerning simplified arbitration?

A single arbitrator conducts a hearing and renders a decision.

An order for a security trade that directs the broker to buy or sell "at the market" but only when a certain price level has been reached is known as

A stop order.

All of the following analyses of the market would be based on technical market concepts EXCEP

A study concerning the price/earnings ratio on the Dow Jones Industrial Average. Technical analysts look at charts and graphs; fundamental analysts look at financial statements. Fundamental analysts look at price/earnings ratio to determine the relationship between the market price of a stock and its earnings per share as indicated on the income statement. The advance-decline index, moving averages, and short sales versus short sale covers by specialists would all be considered worthy of review by technical analysts.

All of the following may be a suitable investment for an elderly investor whose primary investment objective is income EXCEPT

A value fund. A value fund is not an income investment. Value funds seek capital appreciation by purchasing undervalued securities and waiting for them to appreciate. Any of the other three may be suitable choices: a bond fund pays income from bond interest; an income fund pays income from stock dividends and bonds, and a Ginnie Mae fund pays income from interest and return of principal.

All the following are appropriate options that a broker/dealer can offer customers to allow them to opt out of Reg S-P Privacy Rules easily EXCEPT

A written letter.

According to FINRA Rules on Private Securities Transactions, an associated person entering into a series of private transactions without compensation must provide to the member firm all of the following EXCEPT

A written notice on each transaction.

Which of the following corporate bonds is considered safest for an investor?

AAA-rated unsecured bond

Which of the following corporate bonds is considered safest for an investor? A-rated unsecured bondb)A-rated secured bondc)AAA-rated unsecured bondd)BB-rated unsecured bond

AAA-rated unsecured bond

Which has the best rating?

Aaa 5 years to maturity

When the owner of a TOD account dies,

Account ownership transfers directly to the designated beneficiary. The account transfers directly to the beneficiary, bypassing probate. TOD accounts are always individual accounts.

Systematically increasing cost basis on an OID is called

Accretion.

Which of the following types of preferred stock might have regular changes in the dollar amount of its dividend?

Adjustable rate

A broker receives a buy and a sell order on the same security from two customers. Which must he do to execute the orders?

Agency cross

Which fund would be LEAST suitable for a retired investor?

Aggressive growth fundAggressive growth fund

The priority accorded to municipal orders taken for a new issue would be found in the

Agreement among underwriters.

Which of the following can issue Eurodollar bonds? I. Sovereign governments; II. State and local governments; III. U.S. corporations; IV. Foreign corporations

All of these entities can issue Eurodollar bonds. The U.S. government, however, cannot.

An Employee Stock Option Plan (ESOP)

Allows an employee to purchase company stock in the future at a predetermined price.

The best definition of an annuity unit is

An accounting measure that is created at the beginning of the annuity period and is used to determine the amount of future annuity payments.

A firm is acting in the capacity of a broker and receiving a commission. The firm is performing as

An agent.

Which of the following will be a violation of the Private Transactions Conduct Rule 3040?

An associated person offering securities that are not registered with the Commission

Which of the following is exempt from FINRA Rule 5130, which prohibits the purchase of IPOs by member firms and associated persons?

An associated person whose limited registration permits selling only investment company products

Which of the following does NOT describe the OTC market?

An auction market

The definition of Consumer may include all of the following statements EXCEPT

An individual who has a continuing relationship with a financial institution.

All of the following are considered "separate customer accounts" for the purpose of SIPC coverage EXCEPT

An individual's cash and margin accounts.

Which of the following is NOT subject to the short-swing profit rule?

An investor with a net worth in excess of $5,000,000 (exclusive of primary residence)

Which of the following is NOT an exempt transaction?

An issue of 5-year Treasury notes

The announcement that must be filed in connection with a Regulation D offering is

An offering memorandum

Mary Parker has a very large annual salary and is two years from retirement. She has an immediate need to shelter her income from taxes. Which of the following would best suit her objectives?

An oil and gas income program

According to FINRA rules, which of the following is a retail communication?

An online investment analysis tool available to the public

Variable annuities generally include an assumed interest rate. This is the

Annual rate of return assumed by the insurance company as a reference point to make annuity payments.

Which of the following is NOT true of Section 1035 Policy Exchanges?

Any exchange made under Section 1035 of the Internal Revenue Code must be completed within 30 days.

Which of the following statements is NOT true concerning a nonqualified deferred compensation plan?

Any investments grow on a tax-free basis.

The responsibilities of the investment adviser include all of the following EXCEPT

Appointing the officers of the fund.

All of the following are true concerning mutual fund shareholder rights EXCEPT they

Approve portfolio changes when recommended by the investment adviser.

A closed-end management company has shares that

Are not redeemable.

Alice wants a convenient way to choose an investment strategy that offers a mix of investments that is appropriate to her stage in life. Which fund should Alice choose?

Asset allocation fund An asset allocation fund follows a specified allocation model. Alice can choose from various mutual funds following different investment allocation models and select a fund that is appropriate for her circumstances.

Which of the following is NOT affected by the declaration of a dividend?

Assets

Which of the following is not affected by the declaration of a dividend?

Assets

What is the backing for a secured bond?

Assets held in an escrow account

Sell an ABC May 55 call and buy an ABC May 60 call. At what market price will every dollar of loss on the 55 call be offset by a dollar of gain on the 60 call?

At 60, this credit spread reaches maximum loss. The gain is narrowing around 55 with a maximum loss at 60.

An investor buys one DEF May 60 call for a premium of 6 and sells one DEF May 70 call for a premium of 3. Above what market price will every dollar gained on the long call be offset by a dollar lost on the short call?

At 70, gain is capped by the duty to sell.

Under Rule 144A, a qualified institutional buyer has

At least $100 million in assets under discretionary management.

When must a client receive an option's disclosure document?

At or before account approval

A registered representative wants to increase his sales and decides to increase his option business. He sends a letter to all of his customers discussing covered call writing, but he makes no specific recommendations. When must the OCC Disclosure Statement be delivered?

At or prior to the time the client receives the letter

Which of the following is a lagging indicator?

Average prime rate

A bond is considered to be speculative (a "junk bond") when its Standard and Poor's rating is no higher than

BB.

Which of the following ratings are equivalent

Baa (Moody's); BBB (S&P)

The lowest bank-qualified rating is

Baa.

The federal funds rate has been increasing consistently over the last several months. This would indicate which of the following?

Banks are having trouble meeting reserve requirements.

A client wishes to open a portfolio margin account. What must be completed prior to opening the account?

Be approved by a designated ROP for uncovered option writing; and customer must receive a copy of and sign the risk disclosure document at the time of application or earlier

If a customer is long a March 38 British Pound call and short a June 36 British Pound call, the position is known as a

Bear call spread. If you buy and sell a call, it is known as a "call spread." The strike price on the call that was purchased is 38 and the strike on the call that was sold is 36. Buy high/sell low tells you that this is a "bear call spread." Bulls would want it to be buy low/sell high!

The highest price a buyer is willing to pay for a security is known as the

Bid price.

The highest price a buyer is willing to pay for a security is known as the

Bid price. A customer selling a secondary market security will receive the bid price, which is the highest price a dealer is willing to pay.

A decision that comes from the FINRA Board of Arbitration is

Binding on all parties involved.

Moody's MIG rating would apply to which of the following?

Bond anticipation notes

The Federal Reserve Board is purchasing securities through open market operations. What are the likely effects of these transactions?

Bond prices increasing, yields decreasing

In what form are new Treasury notes typically issued?

Book entry

Which of the following discloses the assets available to common stock?

Book value per share

REITs are traded

Both in the over-the-counter market and on exchanges.

A technical analyst comparing the number of advances and declines in the market is concerned with which aspect of technical market theory?

Breadth of the market

A broad market index ETN carries all of the following risks EXCEPT

Business risk.

Which of the following is the risk that an issuer may not be able to meet interest or principal payments on fixed income securities?

Business/credit risk

Which of the following hedging positions best reduces risk?

Buy 100 shares of ABC stock and buy 1 ABC put

An investor has a portfolio of stocks that has appreciated from an original value of $38,000 to a current value of $44,000. The portfolio has a beta factor of 1.00. If the investor wishes to hedge the portfolio through the use of OEX SEP 220 options, the investor should

Buy 2 puts.

The options position limit on XYZ stock is 200,000 contracts. Bob (a high roller) is short 150,000 XYZ Dec 50 puts. Which of the following trades would put Bob in violation of position limits?

Buy 60,000 XYZ Mar 60 calls. Bob is short puts, a bullish position. If he buys 60,000 calls, he will have 210,000 contracts on the same side of the market. Buying 60,000 XYZ Dec 50 puts will reduce his position. Writing calls and buying puts are bearish positions.

. A company is building a plant in Japan using Japanese labor. The company will pay the labor force in Japanese yen in approximately 3 months. The company believes the dollar will decline against the yen. In order to best protect itself, what option position should the company choose?

Buy a Japanese yen call

If an investor is very bullish on a stock, which of the following actions would provide the greatest potential short-term gain?

Buy one call on the stock

Of the following, which is the best way to protect profits in an existing long equity position?

Buy puts Buy puts to protect the gains in a portfolio of stock that has gone up in value. If the stock price goes down, shares can be sold to the seller of the put at the strike price to protect the profits.

An investor is interested in selling her shares of ABS Corp., which trades over-the-counter. The best bid price is $3.15 from the market maker Donaldson. The best ask price is $3.30 from market maker Williamson Investments. The investor trades listed stocks on the NYSE through her broker/dealer, STAT Investments. She can sell her ABC Corp shares

By contacting her broker/dealer STAT Investments; she will get the bid price of $3.15. While it would be advantageous for the investor to contact Donaldson directly, this can only be done with LEVEL III Nasdaq access, which her broker/dealer has. So, she needs to contact her broker. She will get the $3.15 price less a commission charge. The investor has access to Level I Nasdaq, which shows the best pricing, but not the name and contact information.

124? A customer sells a book entry municipal security that is in his account. If the security is sold to another customer, how is the ownership transferred?

By instructing the appropriate clearing agency to transfer ownership on its books from one customer to the othe

A program established under the PATRIOT Act to prevent the funding of terrorism and money laundering is

CIP.

Which of the following is NOT required on confirmations?

CUSIP

Which one of the following parties to an options contract receives the premium and has the obligation to sell the underlying security at the strike price if the option is exercised?

Call writer

Which of the following preferred shares has the highest yield?

Callable

If a customer purchases securities and does not settle the account in 4 business days, the brokerage firm's first order of business is to

Cancel the trade and sell off the purchased securities.

Which of the following is NOT a concern when executing a 1035 exchange?

Capital gains tax

The manager of a bond fund has used the strategy of writing covered T-bond calls as a means of increasing the fund's yield. Distributions to shareholders from this source of income will be treated, for tax purposes, as

Capital gains.

An investor who desires current income would be least likely to buy which of the following funds?

Capital shares of a dual purpose fund n investor looking for current income would purchase an income fund, a bond fund, or a preferred stock fund. All of these produce income, either in the form of interest, dividends, or both. A dual purpose fund would be the least appropriate fund for an investor looking for income.

Which of the following would qualify as a Section 1035 exchange?

Cash Value Life Insurance Policy to a Cash Value Life Insurance Policy

Which of the following best describes the cross-over point in limited partnership programs?

Cash flow and tax benefits have declined to equality with taxable income.

A customer owns XYZ stock in her cash account, but has no funds available to trade. Nonetheless, she buys ABC stock on Monday. On Thursday, she sells XYZ stock to cover the purchase she made on Monday. This violation is called

Cash liquidation.

For SIPC coverage, the term customer account will NOT mean

Cash, margin, and convertible bond accounts, all in the same name.

The provision in the indenture of a municipal revenue bond that would be invoked in the case of condemnation of the building constituting the primary revenue source is the

Catastrophe call provision.

Which of the following sanctions may be imposed upon a representative under the Code of Procedure?

Censure, fine, expel, suspend or bar only

The term "double-barreled" is used to refer to which of the following?

Certain municipal bonds where a taxing authority guarantees debt service payments in the event that pledged revenues are insufficient

The document filed with the Secretary of State attesting to the formation of a limited partnership (DPP) is called the

Certificate of limited partnership.

Which of the following trade with accrued interest?

Certificates of deposit

For rights of accumulation, which of the following is NOT eligible for combining of accounts?

Charter members of an investment co-op

If you pay the sales price plus a commission when buying shares in an investment company, you are buying into a/an

Closed-end company.

FINRA bylaws which relate to a member firm's dealings with the public are contained in the

Code of Conduct.

The FINRA bylaw category which defines the proper methods for handling securities violations and complaints is the

Code of Procedure.

What type of annuity contract could act as a hedge against either inflation or deflation?

Combination annuity

Which of the following is an appropriate investment for a LGIP?

Commercial paper

The least-active secondary market exists in

Commercial paper.

In order of liquidation, which of the following has a residual claim to the assets of the corporation?

Common shareholders

FINRA bylaws which relate to a member firm's dealings with the public are provided for in the

Conduct Rules.

An investor is long 100 shares XYZ and sells a call. The investor is

Conservative.

The capital asset pricing model considers all of the following factors EXCEPT

Consumer Price Index.

the capital asset pricing model considers all of the following factors EXCEPT

Consumer Price Index.

According to MSRB rules, in order for a municipal bond dealer to effect transactions on a client's behalf, the dealer must

Contact enough dealers to obtain a price that is fair, reasonable, and non-discriminatory.

Which of the following statements is true regarding SIMPLE plans?

Contributions and earnings are tax-deferred until funds are withdrawn. Under SIMPLE plans, participating employees may defer up to a specified amount each year, and the employer can then contribute up to an amount equal to 3% of the employees' annual compensation. Contributions and earnings are both tax-deferred until funds are withdrawn.

Which one of the following statements regarding Coverdell Education Savings Accounts is correct?

Contributions are made with after-tax dollars and grow tax-deferred.

Which of the following is correct with regard to the withdrawal of funds from a tax-qualified retirement plan?

Contributions can be deducted from that year's taxable income.

An open-end investment company fund that charges an 8 1⁄2% sales load for single-payment plans must offer all of the following EXCEPT

Conversion privileges. In order for mutual funds to charge the maximum sales charge permitted under FINRA rules (8.5%) the fund must allow for automatic reinvestment of income distributions at NAV per share, the right of accumulation, and breakpoints (quantity discounts). The fund does not have to offer the right of conversion or exchange.

Which of the following bonds is affected by the price of the common stock?

Convertible bond

he Trust Indenture Act of 1939 establishes that

Corporate bonds have attached a trust indenture indicating security for the bond.

The primary responsibility for the payment of principal and interest on an industrial revenue bond issue rests with the

Corporate lessee.

Which of the following is NOT considered by a NASDAQ dealer when determining the mark up or mark down to charge in a principal trade?

Cost of the security held in inventory

In early May, a customer buys 100 SOP at 27 and writes one SOP Oct 30 call for 3. This is his first option transaction and takes place in his cash account. The initial option order ticket must be written as an opening

Covered sale.

a registered repreentative ust obtain awritten verifcation of an investors net worth for which of the following

DPP

The Revdex is found in which publication?

Daily Bond Buyer

Accrued interest on a new issue municipal bond is calculated from

Dated date to settlement date.

When a firm effects trades for its own account, it is acting in a principal capacity and is considered a(n)

Dealer.

What types of securities would a mutual fund called Westgo Fixed Income Fund be likely to hold in its portfolio?

Debt securities and preferred stocks

Which of the following would be of the least concern to a person analyzing the debt structure of a municipality?

Debt which has matured

Which of the following is true regarding enforcement decisions by FINRA?

Decisions may be appealed to the SEC.

The date the board of directors authorizes a dividend is the

Declaration date.

The purchase of a put has all the following advantages over selling short, EXCEPT

Decreasing time value.

BC Corporation has issued a tender offer to the shareholders of XYZ Corp. Which of the following is a permissible way for a shareholder to sell into the offer?

Deliver one round lot of the stock

An announcement in the newspaper states that the MI money supply has declined. This means that

Demand deposits, NOW accounts, and money in circulation have decreased.

Which of the following components reconcile cash flow to net income?

Depreciation and amortization

limited partnership has large depletion write offs. It is most likely a

Developmental partnership.

All of the following are features and requirements of the Living Needs Rider EXCEPT

Diagnosis must indicate that death is expected within 3 years.

A customer who is long a call may have the following benefits, EXCEPT

Diminishing time.

An active secondary market exists for all of the following EXCEPT

Direct participation programs.

If a customer is interested in maximizing the current income to be derived from a portfolio of common stock, he should be advised to concentrate on the stocks of companies with a high

Dividend payout ratio. Current income on a stock is equal to the dividend that the stock pays. If the client would like to maximize his current income, he would want to purchase stocks that have a high dividend payout ratio.

With a systematic withdrawal plan, from what source are the first payments made?

Dividends

Your client is interested in knowing the expected distributions of dividends and capital gains from their mutual fund investments. Which one of the following statements is correct?

Dividends are distributed quarterly, while capital gains are distributed once a year, usually at the end of the year.

All of the following criteria would be used to diversify a corporate bond portfolio EXCEPT

Dollar price.

Rule 144A allows

Domestic purchase of foreign securities.

Which of the following is the narrowest measure of the market?

Dow Jones Industrial Average

When is a policyholder allowed to surrender a variable annuity contract?

During the accumulation period

Where can retail investors find information on municipal bond issuers?

EMMA EMMA (Electronic Municipal Market Access) is an electronic system which provides muni bond issuer information to the public and to professionals.

A private corporation has been systematically laying off workers in an effort to reduce pension plan liabilities. The corporation is in violation of rules set by

ERISA.

When a variable annuity is sold with a level load, the sales charge is deducted from

Each deposit made into the annuity contract.

A customer of yours owns a limited partnership interest in a real estate program. The partnership has incurred some nonrecourse debt and has paid a cash distribution to the partners. How is your customer's partnership basis affected by the nonrecourse debt and the cash distribution?

Each have an effect on basis but in opposite ways.

Indications of investor sentiment tracked by a technical market analyst would include all of the following EXCEPT

Earnings per share estimate revisions

Which statement is INCORRECT with respect to a SEP plan

Employees can make contributions to the account. All contributions made under a SEP are employer contributions. An employee cannot defer a portion of his or her salary and contribute it to a SEP-IRA.

Which of the following is true regarding a nonqualified deferred compensation plan?

Employer may discriminate among employees.

Which of the following have an active secondary market?

Eurodollar CDs

How often must performance statistics in a mutual fund prospectus be updated?

Every 12 months

A customer writes an uncovered put and is exercised. The writer is entitled to the cash dividend if the exercise notice is given before the

Ex-dividend date.

When a stock is crossed on the NYSE floor and then appears on the tape after execution, the transaction is a

Exchange distribution.

Which of the following is NOT a risk of Eurodollar bonds?

Exchange rate risk

Any person for whom the member carries an account, or who has an account with any registered investment company for which the member serves as principal underwriter, and who is not an institutional investor is a(n)

Existing retail customer.

Which of the following will cause the NAV per share of a mutual fund to increase?

Existing stock holding pays dividends

An investor can be granted an extension of time by

FINRA and the transacting exchange

Persons who are found guilty of insider trading violations are subject to all of the following penalties EXCEPT

FINRA fines.

When a member offers an investment analysis tool to retail customers, it must make the investment analysis tool available to

FINRA within 10 business days of its first use by the public.

Minimum margin on municipal bonds is determined by the

FINRA.

If you were purchasing a security on installments and the investment matured at a fixed dollar amount in the future, you would own a

Face amount certificate.

21 Interest rate conditions which encourage the refunding of debt issues are

Falling rates

Interest earned on which of the following securities is subject to state and local taxes?

Federal National Mortgage Association Bonds Interest on U.S. government securities is exempt from state and local taxes as is interest paid by Federal Farm Credit Bank bonds. Interest from Federal National Mortgage Association bonds (FANNIE MAE), however, is fully taxable at both the state and federal levels.

The Customer Identification Program was implemented to

Fight the funding of terrorism and money laundering activities.

ERISA qualified pension plan administrators are required to do all of the following EXCEPT

File quarterly reports with FINRA.

All are offerings EXCEPT

Fill or kill (FOK). "Fill or kill" is a type of order used in the secondary market.

The debt/equity ratio for a corporation is a measurement of

Financial leverage.

When a market maker is asked for a quote, the prices quoted are said to be

Firm for 100 shares Market maker quotes are firm for 1 round lot or 100 shares.

One of your customers enters a limit order good for one month. Your firm has entered the order as a GTC order. The responsibility for canceling the order, if not executed by the end of that month, is that of the

Firm.

The monthly payout for a variable annuity is calculated using a

Fixed number of units with a variable value. When calculating the payout on a variable annuity, the insurance company will use many factors to determine how many units to redeem monthly. Such factors include things like age, gender, the amount in an account, the payout option selected, and the interest rate. The number of units redeemed monthly is a constant; the value of the units is variable.

XYZ Corp. has a $50,000,000 outstanding issue of convertible debentures. Each debenture is convertible into common stock at $50. The debentures are trading at 118 and 1⁄2 and the common stock is trading at 57.50. The company announces that it is calling the entire debenture issue at 101 and 3⁄4. This type of call is known as a/an

Forced conversion.

A well-known seasoned issuer is issuing securities in an APO. To meet Act of '33 disclosure requirements, the issuer may use a/an

Free-writing prospectus.

For an individual who is NOT covered by an employer-sponsored plan, IRA contributions are

Fully tax-deductible.

A beginning investor has limited funds, but wants immediate exposure to a variety of investment styles. The investor should consider which of the following funds?

Fund of funds A fund of funds invests in other mutual funds. With a small investment, an investor gains exposure to several different mutual funds with different investment objectives. Alternately, the investor would need more money to invest the required minimum in several different funds to achieve the same exposure.

Prepaid tuition plans allow the purchase of units or credits at participating colleges or universities. Which of the following statements is TRUE?

Future tuition can be secured at current prices.

Which of the following have the highest monthly payment guaranteed by the government?

GNMA T-bonds and notes pay semiannually, as does a General Obligation municipal bond. GNMA is a monthly pass-through of interest and principal with payment that is government-guaranteed.

Mortgage-backed issues are considered to be safe instruments. Which statement is INCORRECT concerning these securities?

GNMA, FNMA, and FHLMC are all fully backed by the federal government.

Which of the following needs voter approval?

You sell short 100 shares of ABC at 25 and buy an ABC June 25 call for 4. You close your position with ABC at 20 and the call premium at $1. What is your gain or loss?

Gain of $200 Premium is -4 and market is +25 = +21. Call Premium is +1 and market is -20 = -19 +21 minus 19 = +2 X 100 shares = $200 gain

In accordance with the Uniform Gifts to Minors Act, a donor may

Give an unlimited amount of cash. There are no restrictions on the amount of cash that may be given to a minor under the Act; however, gift taxes may apply if the contribution exceeds a specified annual amount. All gifts are irrevocable.

An investor fears a coming inflation trend, and wants to protect his portfolio. He would probably choose a

Gold fund

Regulation T of the Federal Reserve Board involves all of the following security transactions EXCEPT

Government debt.

Which of the following is LEAST likely to be found in the portfolio of an income fund?

Growth stock

hich of the following is NOT a secured bond?

Guaranteed bond

Which of the following is traded on the NYSE AMEX?

HOLDRs

The responsibility of a broker/dealer's cashiering department is all of the following EXCEPT

Handling the execution of a customer's orders. A cashier handles money and securities for the firm and does not handle the execution of a customer's orders.

Regarding voting rights, contract owners of variable annuities

Have voting rights similar to shareholders in mutual funds.

A man is 52 years old. He is terminating his employment at a state university. He is fully vested in a 457(b) plan. If he withdraws the money from his 457(b) plan,

He must pay income tax. He must pay income tax. There is no 10% penalty on early withdrawal from a 457(b) plan.

A public school teacher with a 403(b) plan resigned to take a new position in a different school district that also has a 403(b) plan. All of the following statements regarding her situation are correct EXCEPT

Her 403(b) plan is not portable.

Which of the following is a suitability concern regarding a fund of funds?

High expense ratio

Benefits of Local Government Investment Pools (LGIPs) include all of the following EXCEPT

High investment returns.

A bond rated A by Moody's is considered to be

High or medium investment grade.

A bond rated A by Moody's is considered to be

High or medium investment grade. Medium investment grade is A. Aaa and AAA are highest investment grade

An investor is 45 years old and is interested in obtaining the highest current income possible for his investment. He can tolerate principal fluctuations. Which of the following would best suit this individual's investment objective?

High-yield bond fund Bond funds are suitable for investors with income-oriented investment portfolio. High-yield fixed income funds could supplement a well-diversified portfolio, but are mostly suitable for aggressive long-term investors. These securities include above-average price fluctuation in return for the potentially higher yield. An aggressive growth fund is an equity fund used for long-term appreciation. A balanced fund generally offers a lower yield because it contains stocks in addition to bonds. A government bond fund offers a low yield in exchange for a low level of default risk.

An investor is interested in an income fund. The fund he selects is likely to have a portfolio that consists of

High-yield corporate securities.

An engineering report would be used for which of the following

Hospital revenue bond

All of the following are considered lagging indicators EXCEPT

Housing permits. Housing permits are leading indicators because they are the first in a series of events. After housing permits are issued, materials are purchased, construction begins, etc. When houses are sold, the buyers typically purchase durable goods such as major appliances. Appliance, employment, and automobile sales are lagging because they measure past activity.

Buy one ABC Jan 40 call and write one ABC Jan 30 call. This position I.is a Debit spread. II is a Credit spread. III. Loses money if premiums widen. IV. Loses money if premiums narrow.

I is a Credit spread. III. Loses money if premiums widen Write a 30 call, buy a 40 call is a vertical (price) spread. The short call with lower strike price will have the higher premium, so the spread is established for a credit. You make money on this position if the spread narrows (becomes less expensive) if it widens (becomes more expensive) you lose money. This is a bear call spread.

Which of the following are characteristics of an Exchange Traded Fund (ETF)? I. ETFs aren't sold directly to investors. II. ETFs provide intraday liquidity. III. ETFs are redeemable by the fund and the fund will pay the investor within seven days of redemption. IV. ETFs allow small dollar amounts of investment.

I, II and IV

A municipal securities trader's authority generally extends to which of the following? I. Buying; II. Selling; III. Positioning; IV. Pricing

I, II, III & IV A municipal securities trader's authority would allow him or her to engage in the buying, selling, positioning, and pricing of municipal securities. Positioning means to take a long or short position. A trader's long position is called his or her inventory. A short position is the number of bonds borrowed (or owed) by the trader.

A short call can be covered for margin purposes by which of the following? I. Long the underlying stock; II. An escrow receipt; III. A long call on the same security; IV. A convertible bond

I, II, III & IV A short call is a call that you have sold. In order to cover a call that you sell, you need to have the shares or something that is convertible into the shares. To be long the stock is to own the stock, a position that would cover the call. An escrow receipt is simply a receipt attesting to your ownership of the shares (although the shares are being held by the bank).

Advantages and risks of an equipment leasing program include I. High initial write-offs due to depreciation. II. Phantom income. III. Investment tax credit. IV. Dangers of equipment obsolescence.

I, II, and IV

Which of the following are of the same class? I. 1 WLL October 70 call and 1 WLL January 70 call; II. 1 WLL October 70 call and 1 WLL October 70 put; III. 1 WLL October 70 put and 1 WLL January 70 put; IV. 1 WLL January 70 put and 1 WLL January 70 call.

I. 1 WLL October 70 call and 1 WLL January 70 call; ; III. 1 WLL October 70 put and 1 WLL January 70 put;

Which of the following are considered to be technical indicators? I. 200-day moving average; II. Put/call ratio III; Short interest; IV. Confidence index

I. 200-day moving average; II. Put/call ratio III; Short interest;

Which of the following would meet the MSRB's definition of a customer? I. A bank trust officer purchasing for a trust account; II. A bank dealing in municipal bonds; III. An investment adviser handling accounts for his clients; IV. An issuer buying a security in the secondary market

I. A bank trust officer purchasing for a trust account; III. An investment adviser handling accounts for his clients; IV. An issuer buying a security in the secondary market

Which of the following disclosures must appear on investment analysis tools, reports generated by investment analysis tools, and retail communication related to investment analysis tools? I. A description of the criteria and methodology including its limitations and underlying assumptions; II. A statement that results can vary with each use and over time; III. A statement that FINRA has approved the investment analysis tool; IV. A statement that projections are hypothetical and do not reflect actual investment results.

I. A description of the criteria and methodology including its limitations and underlying assumptions; II. A statement that results can vary with each use and over time IV. A statement that projections are hypothetical and do not reflect actual investment results.

I. A description of the criteria and methodology including its limitations and underlying assumptions; II. A statement that results can vary with each use and over time; iV. A statement that projections are hypothetical and do not reflect actual investment results.

A customer asks an RR to write an evaluation about an investment in which the customer is interested. Which two of the following apply to this situation? I. A principal of the RR's firm must review the recommendation. II. The recommendation must be supported by an independent research organization. III. The recommendation must be filed with a self-regulatory organization within 10 days of its mailing. IV. The recommendation must have a reasonable basis

I. A principal of the RR's firm must review the recommendation. IV. The recommendation must have a reasonable basis.

Yield curve analysis is useful to an investor purchasing debt securities for which of the following reasons? I. Allows the comparison of rates of return as maturities are extended; II. Allows the yield on a particular debt security to be compared to the yield of similar securities on either a current or historical basis; III. Is useful in determining the market expectations for interest rates; IV. Predicts future of long-term interest rates

I. Allows the comparison of rates of return as maturities are extended; III. Is useful in determining the market expectations for interest rates;

For violations of the Securities Exchange Act of 1934 with respect to bribing a foreign official, which of the following are true? I. An individual can be subject to a $100,000 fine, imprisonment for 5 years, or both; II. A business entity can be subject to a $2,000,000 fine; III. The company can pay a fine imposed on a person if the person was acting for the company; IV. A violator can be imprisoned even if he was unaware of the regulation.

I. An individual can be subject to a $100,000 fine, imprisonment for 5 years, or both II. A business entity can be subject to a $2,000,000 fine;

3. Reductions in the maximum sales charge for investment company shares may be made available under which of the following circumstances? I. An investor purchases a substantial dollar amount of investment company shares. II. An investor elects to reinvest income dividends. III. Shares are purchased by the trustee of a company pension plan. IV. Shares are purchased by a unit investment trust as the sole investment.

I. An investor purchases a substantial dollar amount of investment company shares. II. An investor elects to reinvest income dividends. III. Shares are purchased by the trustee of a company pension plan. IV. Shares are purchased by a unit investment trust as the sole investment.

Characteristics of U.S. Treasury bills include I. Being offered and traded at a discount from face value. II. Being quoted on a yield basis. III. Being exempt from state income taxes. IV. Maturing 1 to 10 years from their issue date.

I. Being offered and traded at a discount from face value . II. Being quoted on a yield basis III. Being exempt from state income taxes.

A stock's trading range is 86-92. Which of the following statements are correct if the stock has been declining below 90? I. Breakout at 93; II. Breakout at 85; III. Support is 86; IV. Resistance is 91.

I. Breakout at 93; II. Breakout at 85; III. Support is 86

Which of the following is (are) an approved methods of redeeming mutual fund shares? I. By check writing; II. By telephone; III. By written request; IV. Through a dealer

I. By check writing; II. By telephone; III. By written request; IV. Through a dealer

A customer sells 1 XYZ July 70 call @ 4 after having purchased 200 shares of XYZ @ $65 per share. If the customer is exercised, the tax consequences are I. Cost basis of $65 per share. II. Cost basis of $69 per share. III. Sale proceeds of $70 per share. IV. Sale proceeds of $74 per

I. Cost basis of $65 per share iV. Sale proceeds of $74 per share.

Which two of the following items would normally be inserted on the bid form for a new issue of municipal securities? I. Coupon rates; II. Yield to maturity; III. Dollar amount bid; IV. Spread

I. Coupon rates; III. Dollar amount bid;

Which of the following is true of applying basic SIPC Protection? I. Customers of a failed firm are entitled to receive securities registered in their names. II. SIPC coverage is available for customer claims up to a total maximum of $500,000, $250,000 of which is available in cash. III. Remaining assets after the payment of liquidation expenses may be used to satisfy the remaining portion of customers' claims.

I. Customers of a failed firm are entitled to receive securities registered in their names. II. SIPC coverage is available for customer claims up to a total maximum of $500,000, $250,000 of which is available in cash. III. Remaining assets after the payment of liquidation expenses may be used to satisfy the remaining portion of customers' claims.

Short 1 ABC May 45 call at 1.50 and buy 1 ABC May 40 call at 3.50. This position is I. Debit. II. Bear. III. Bull. IV. Credit.

I. Debit. III. Bull Buying the lower strike price on a call spread means that your position is debit. You pay more premium than you receive. Debit call is bullish.

Which of the following lower investor basis in a DPP? I. Depletion; II. Depreciation; III. Passive gain; IV. Passive loss

I. Depletion; II. Depreciation;IV. Passive loss

The MSRB rule dealing with quotations relating to municipal securities covers I. Distribution of bids. II. Distribution of offers. III. Requests for bids. IV. Requests for offers.

I. Distribution of bids. II. Distribution of offers. III. Requests for bids. IV. Requests for offers.

Which of the following group qualifies for rights of accumulations? I. Entities such as participants in a company retirement plan; II. A trust account; III. A company's 401(k) plan; IV. An investment club

I. Entities such as participants in a company retirement plan; II. A trust account; III. A company's 401(k) plan;

Regarding a broker/dealer retail sale to a customer, how can an order be filled?

I. From inventory; II. Sell short to customer; III. Simultaneous or riskless transaction; IV. As an agent

The 1934 Act anti-fraud provisions prohibit I. Indicating to customers that an all or none municipal underwriting is a firm commitment. II. Using a manipulative technique to reduce the price of a municipal security. III. Selling serial municipal issues short. IV. Omitting material information about a municipal issue from a dealer's offering schedule.

I. Indicating to customers that an all or none municipal underwriting is a firm commitment. II. Using a manipulative technique to reduce the price of a municipal security.IV. Omitting material information about a municipal issue from a dealer's offering schedule.

All of the following are true regarding indications of interest received by an underwriter of a new public offering during the 20-day cooling off period EXCEPT I. Indications cannot be canceled by the customer. II. Indications can be canceled by the customer. III. Indications can be canceled by the underwriting firm. IV. Indications cannot be canceled by the underwriting firm.

I. Indications cannot be canceled by the customer. IV. Indications cannot be canceled by the underwriting firm.

According to MSRB rules, which of the following is used to determine investor suitability? I. Investment objectives; II. Age of customer; III. Address; IV. Tax status

I. Investment objectives; IV. Tax status

The death benefit payable during the accumulation period of an annuity contract I. Is based on the greater of the gross payments to date or the value of the account at the time of death. II. Is not payable after annuity payments have started. III. Is the annuity feature that guarantees payments for the life of the annuitant. IV. Is available only with fixed annuity contracts.

I. Is based on the greater of the gross payments to date or the value of the account at the time of death. II. Is not payable after annuity payments have started.

Which of the following is/are true regarding a private securities transaction? I. It is also known as "selling away." II. It is a violation of FINRA's Conduct Rules. III. Associated persons are allowed to participate in private securities transactions at any time. IV. It is a transaction within the normal business of the member firm.

I. It is also known as "selling away." II. It is a violation of FINRA's Conduct Rules.

Which of the following is true of the organizational structure of a balance sheet? I. It is arranged from current items at the top to long term items at the bottom. II. Liquid items appear on the left and illiquid and fixed items appear on the right. III. It follows an equation. IV. Leverage items follow equity items.

I. It is arranged from current items at the top to long term items at the bottom III. It follows an equation

A limited partnership's taxable income exceeds its cash flow. Which TWO of the following statements are correct? I. Limited partners will have "phantom income." II. The limited partnership is experiencing the crossover point. III. Limited partners will pay income tax on their proportionate share of the cash flow. IV. The General Partner is required to distribute the entire cash flow to the limited partners.

I. Limited partners will have "phantom income." II. The limited partnership is experiencing the crossover point.

According to MSRB rules, all of the following would be an advertisement, EXCEPT I. Listings of offerings. II. Market letters. III. Reprints of form letters. IV. Preliminary official statements. V. Abstract official statements. VI. Final official statements.

I. Listings of offerings. IV. Preliminary official statements. VI. Final official statements.

Shares of a growth fund are exchanged for shares of a value fund with the same principal underwriter. The exchange is performed within 24 months of the original purchase, resulting in a gain. Which is true? I. Long-term; II. Short-term; III. Capital gain; IV. No gain, no loss.

I. Long-term III. Capital gain;

Mutual fund investment income and capital gains distributions

I. May be taken in cash III. Are taxable whether taken in cash or reinvested

Which of the following is/are characteristics of the interbank system? I. Centralized II. Not regulated III. Responds to national economic policies

I. Not regulated

Which of the following statements correctly describe when a registered representative uses discretion? I. Time of execution; II. Number of shares; III. Price; IV. The growth stock

I. Number of shares The growth stock

Which of the following orders are reduced by the specialist of the NYSE on the ex-dividend date of a listed stock? I. Open buy limits; II. Open sell stops; III. Open sell limits; IV. Open buy stop limits

I. Open buy limits; II. Open sell stops;

Bond premium amortization I. Reduces the investor's cost basis. II. Increases the investor's cost basis. III. Reduces YTM and YTC. IV. Increases YTM and YTC.

I. Reduces the investor's cost basis. III. Reduces YTM and YTC.

NASDAQ Level III displays which of the following? I. Registered market makers' quote and size; II. Registered principals' quote and size; III. Registered market makers' last sale; IV. Trading volume for each issue

I. Registered market makers' quote and size; IV. Trading volume for each issue In the NASDAQ market, a registered market maker is another name for a securities dealer who has elected to buy securities for and sell securities from his or her inventory position. NASDAQ Level III is utilized by dealers to display their current price quotations, the size of the market those quotes are good for, and their trading volume. A registered principal is another name for the supervisory person in charge of compliance at a broker/dealer firm.

The main function(s) of FINRA include I. Self-regulation for the over-the-counter market; II. Self-regulation for national exchanges; III. Monitor compliance with rules of ethical practice; IV. Approve and monitor SEC rules and regulations.

I. Self-regulation for the over-the-counter market; II. Self-regulation for national exchanges; III. Monitor compliance with rules of ethical practice;

the main function(s) of FINRA include I. Self-regulation for the securities market. II. Governing member firms and associated persons. III. Monitoring compliance with securities regulations. IV. Approve and monitor SEC rules and regulations.

I. Self-regulation for the securities market. II. Governing member firms and associated persons. III. Monitoring compliance with securities

registered representative qualified to sell only municipal securities may solicit orders for which of the following? I. Sewer and water revenue bonds; II. General obligation bonds; III. Municipal unit investment trusts; IV. Open end municipal bond funds

I. Sewer and water revenue bonds ; II. General obligation bonds

A stock dividend affects which of the following? I. Assets; II. Liabilities; III. Shareholder's equity; IV. Net worth

I. Shareholder's equity; IV. Net worth

You buy a put. Four months later, you sell for a gain. Which is true? I. Short-term capital gain; II. Long-term capital gain; III. Closing sale; IV. Closing purchase

I. Short-term capital gain III. Closing sale

If the Federal Reserve Board through the FOMC (Federal Open Market Committee) lowers the discount rate, which of the following will decline? I. T-Bill discount rate; II. Federal Funds rate; III. Prime rate; IV. Lending levels at banks

I. T-Bill discount rate; II. Federal Funds rate

The type of annuity that features tax-deferred growth is I. Tax-qualified annuity. II. Variable annuity. III. Deferred annuity. IV. Fixed annuity.

I. Tax-qualified annuity. II. Variable annuity. III. Deferred annuity. IV. Fixed annuity.

Which of the following statements are true regarding the over-the-counter market? I. The Federal Reserve Board regulates which OTC securities are marginable. II. FINRA regulates trading practices in the OTC market. III. The SEC does not have regulatory authority over OTC margin transactions. IV. The FRB governs trading practice on margin trades.

I. The Federal Reserve Board regulates which OTC securities are marginable. II. FINRA regulates trading practices in the OTC market.

A customer receives a red herring from his registered representative and has indicated interest in the offering. Which two of the following are true? I. The customer is obligated to buy the stock. II. The customer is not obligated to buy the stock. III. The broker/dealer is allowed to accept a deposit to secure the customer's indication of interest. IV. The broker/dealer is not allowed to accept a deposit to secure the customer's indication of interest.

I. The customer is not obligated to buy the stock IV. The broker/dealer is not allowed to accept a deposit to secure the customer's indication of interest.

Which of the following statements is true about a municipal dealer who has an outfirm quote from another municipal dealer? I. The dealer has the right to buy the bonds at a fixed price for a certain period of time. II. The dealer must buy the bonds before the stated time period expires. III. The dealer can sell the bonds before buying them. IV. The dealer may renegotiate the price prior to the sale.

I. The dealer has the right to buy the bonds at a fixed price for a certain period of time. III. The dealer can sell the bonds before buying them.

If a registered rep fails to pay a monetary sanction under the Code of Procedure, I. The employing firm may be summarily suspended or expelled for failure to immediately terminate the rep. II. The representative's registration may be summarily revoked. III. An injunction may be placed against the representative. IV. The representative may be imprisoned.

I. The employing firm may be summarily suspended or expelled for failure to immediately terminate the rep. II. The representative's registration may be summarily revoked.

I. The employing firm may be summarily suspended or expelled for failure to immediately terminate the rep. II. The representative's registration may be summarily revoked

A registered representative associate with a municipal broker/dealer firm has received a written customer complaint. Which two of the following are required by the broker/dealer and the associated person? I. The firm would be required to send an investor brochure to the customer. II. The firm must immediately notify the MSRB and await instructions. III. The registered representatives handle the complaint on their own. IV. The registered representatives immediately tell their supervising principal.

I. The firm would be required to send an investor brochure to the customer. IV. The registered representatives immediately tell their supervising principal.

Financial Trust Inc. is issuing a closed-end bond for $15 M with a 10-year maturity. Under the Trust Indenture Act of 1939, which of the following would be true? I. The issue must have a trust document stating whether the bond is secured or unsecured. II. The bond is secured and the collateral cannot be used against another form of security. III. The bond will have priority over all other ownership claims if the company is liquidated. IV. This bond will not be a secured issue since it is a closed-ended investment.

I. The issue must have a trust document stating whether the bond is secured or unsecured. II. The bond is secured and the collateral cannot be used against another form of security. III. The bond will have priority over all other ownership claims if the company is liquidate

Which of the following are true of negotiable certificates of deposit? I. The issuing bank guarantees the instrument. II. Certificates of deposit are callable. III. Minimum denominations are $1,000. IV. They can be traded in the secondary market.

I. The issuing bank guarantees the instrument IV. They can be traded in the secondary market.

If interest rates are trending downward, which of the following are true? I. The market value of preferred stocks will increase. II. The market value of all types of fixed income securities will likely decrease. III. Values of U.S. Treasury securities will increase. IV. Values of municipal bonds will decrease.

I. The market value of preferred stocks will increase. III. Values of U.S. Treasury securities will increase.

The sale of restricted securities by an officer of the issuer would be in compliance with SEC Rule 144 if: I. The securities are fully paid for. II. The officer has owned the securities for at least 6 months. III. The broker/dealer can freely solicit orders to purchase the restricted securities. IV. The broker/dealer distributing the securities acts in an agency capacity.

I. The securities are fully paid for. II. The officer has owned the securities for at least 6 months. . IV. The broker/dealer distributing the securities acts in an agency capacity.

A firm offering of bonds by a municipal trader to a potential buying dealer is attractive to the buyer for which of the following reasons? I. The trader can control the bonds for a specific time period; II. The trader does not have to own the bonds before selling them; III. The trader can renegotiate the price.

I. The trader can control the bonds for a specific time period; II. The trader does not have to own the bonds before selling them;

I. The value is expressed in units, similar to mutual fund shares. II. Units are revalued daily similar to mutual fund shares IV. The value of a unit varies with the performance of the separate account.

Which of the following are characteristics of BABs? I. Their interest is taxable. II. Their proceeds fund debt refinancing. III. Their proceeds fund public projects. IV. Capital gains on BABs are tax-free.

I. Their interest is taxable III. Their proceeds fund public projects.

Which of the following is/are true with respect to the risk and liquidity of federal agency securities? I. They are actively traded and have good marketability. II. Federal agency securities are as secure as U.S. Treasury securities. III. The market risk is negligible. IV. In time, the longer maturities fluctuate considerably in price.

I. They are actively traded and have good marketability. IV. In time, the longer maturities fluctuate considerably in price.

hich of the following is/are true with respect to the risk and liquidity of federal agency securities? I. They are actively traded and have good marketability. II. Federal agency securities are as secure as U.S. Treasury securities. III. The market risk is negligible. IV. In time, the longer maturities fluctuate considerably in price.

I. They are actively traded and have good marketability. IV. In time, the longer maturities fluctuate considerably in price.

Dollar cost averaging plans have which of the following features? I. They are voluntary plans. II. They generally have a minimum periodic investment. III. Investors are penalized for missing subsequent investment periods. IV. Over time, the investor's person profit exceeds the average cost per share.

I. They are voluntary plans. II. They generally have a minimum periodic investment.

Which of the following statements are true regarding income bonds? I. They do not pay semiannual interest. II. Their steady income makes them attractive to retired investors. III. They may not return 100% of principal at maturity. IV. They are typically issued by utility companies.

I. They do not pay semiannual interest III. They may not return 100% of principal at maturity.

I. They do not pay semiannual interest. III. They may not return 100% of principal at maturity.

Which of the following is true regarding private securities transactions for compensation? I. They must be approved by a person's member firm. II. They must be recorded on the member firm's books. III. The member firm must supervise the person's participation. IV. Member firm does not have the authority to disapprove transactions.

I. They must be approved by a person's member firm. II. They must be recorded on the member firm's books . III. The member firm must supervise the person's participation.

Which of the following identifies uncovered put writing? I. Unlimited loss; II. Bearish on the stock; III. Bullish on the stock; IV. Unlimited gain

I. They must be maintained in a central file in the home office. III. Both written and oral complaints must be maintained.

Which of the following are true of REITs? I. They must distribute at least 90% of their earnings to qualify for special tax treatment. II. If they are publicly owned, they must be registered with the SEC. III. At least 75% of their gross income must be from real estate-related activities. IV. They are generally known as limited partnerships.

I. They must distribute at least 90% of their earnings to qualify for special tax treatment. II. If they are publicly owned, they must be registered with the SEC. III. At least 75% of their gross income must be from real estate-related activities.

When a municipal securities broker/dealer receives an ACATS from another dealer, it has I. Three days to verify account positions II. One day to verify account positions III. Four days to complete transfer of account positions IV. Three days to complete transfer of account positions.

I. Three days to verify account positions III. Four days to complete transfer of account positions

Which of the following is an exploratory well? I. Well in an unproven area; II. Well in a proven area; III. Well is a primary site; IV. Well is a secondary site

I. Well in an unproven area III. Well is a primary site

A signature guarantee is usually required for which of the following types of transactions? I. Wire transfers; II. Redemptions to addresses different than the address of record on the account; III. Redemptions on a two-party account; IV. For dollar amounts below certain limits

I. Wire transfers; II. Redemptions to addresses different than the address of record on the account

Municipal dealer X has taken a block of bonds firm for one hour from municipal dealer Y. Which of the following statements regarding the understanding between the municipal dealers are true? I. X controls the bonds for one hour; II. Y may not change the quoted price for one hour; III. X will automatically own the bonds after one hour; IV. Y may sell the bonds to anyone during the one hour period but only for a better price.

I. X controls the bonds for one hour; II. Y may not change the quoted price for one hour;

What is the major difference between an oil and gas limited partnership and a real estate limited partnership?

IDCs

Which of the following would be least suitable for a very wealthy investor seeking tax relief?

IDR

Under a Regulation S offering, when can the securities be resold to the investors in the United States? I. 40 days for equity securities II. 1 year for equity securities III. 40 days for debt securities IV. 1 year for debt securities

II. 1 year for equity securities III. 40 days for debt securities

The spread on a municipal dollar bond with a market of 87 - 7⁄8 to 88 - 3⁄4 is/are which of the following? I. 87 - 1⁄2 cents per bond; II. 7⁄8 of a point; III. $87.50 per bond; IV. $8.75 per bond

II. 7⁄8 of a point iV. $8.75 per bond The spread is the difference between the bid price and the ask price, which is 7⁄8 of a point. A point on a bond is $10; therefore, 7⁄8 of $10 is equal to $8.75 per bond.

Which of the following are characteristics of a SEP-IRA? I. A vesting schedule applies. II. A SEP-IRA is a qualified plan. III. Contributions are made by the employee. IV. The maximum allowable deductible contribution is greater than a personal IRA account.

II. A SEP-IRA is a qualified plan IV. The maximum allowable deductible contribution is greater than a personal IRA account.

Which of the following are the most important points for an investor to understand regarding a geographic fund? I. The investor may switch to another fund within the same family at POP. II. A geographic fund is most appropriate for a sophisticated investor who is already diversified. III. The sales load is 5.5%. IV. Because the fund is dependent on one region, it carries more risk.

II. A geographic fund is most appropriate for a sophisticated investor who is already diversified IV. Because the fund is dependent on one region, it carries more risk.

If you buy a XYZ July 50 put for 7 and sell a XYZ July 40 put for 1, your position is I. Bullish. II. Bearish. III. Debit. IV. Credit.

II. Bearish. III. Debit.

An option trader sells 1 ABC Apr 50 put for 1 and buys 1 ABC Apr 60 put for 8 with the market in ABC at 54. The trader will profit if I. Both options expire unexercised. II. Both options are exercised. III. The difference in premiums widens to more than 7 points. IV. The difference in premiums narrows to less than 7 points.

II. Both options are exercised. III. The difference in premiums widens to more than 7 points.

Which of the following orders are placed BELOW the current market value?

II. Buy limits IV. Sell stops Buy limits, sell stops, and sell stop limits are placed below current market value. Sell limits, buy stops, and buy stop limits are placed above current market value.

If a foreign country's currency is weakening against the U. S. dollar, what would the foreign country do to support its currency? I. Buy U.S. dollars; II. Buy the foreign currency; III. Sell the foreign currency; IV. Sell U.S. dollars

II. Buy the foreign currency IV. Sell U.S. dollars

Terms established by the Options Clearing Corporation include I. Premium. II. Contract size. III. Strike price. IV. Expiration date.

II. Contract size. III. Strike price. IV. Expiration date.

An investor is long 1 July 50 put. After writing 1 July 45 put, this position is a I. Credit spread. II. Debit spread. III. Horizontal spread. IV. Vertical spread.

II. Debit spread. IV. Vertical spread.

An increase in the market value short of securities in a short margin account will do which of the following? I. Increase equity; II. Decrease equity; III. Decrease credit balance; IV. Increase credit balance

II. Decrease equity In a short margin account, you want the value of the shares to go down in order to increase your equity. If the market value short goes up, then the equity in the account will go down. The credit balance of a short margin account consists of the short sale proceeds and the Reg. T requirement. Once created, it does not change.

Triple witching involves the expiration of which of the following four times a year? I. Equities; II. Equity options; III. Equity option indexes; IV. LEAPs

II. Equity options; III. Equity option indexes;

Which of the following are characteristics of TIPS? I. Fluctuating interest rate; II. Fixed interest rate; III. Fluctuating principal; IV. Fixed principal

II. Fixed interest rate; III. Fluctuating principal; I

Which of the following represents the inside market? I. Lowest bid; II. Highest bid; III. Lowest offered; IV. Highest offered

II. Highest bid; III. Lowest offered;

Which of the following decreases debit balances in margin accounts? I

II. Interest received; III. Withdrawal of securities;

Which of the following are used as hedges? I. Reverse BANs; II. Inverse ETFs; III. Precious metals funds; IV. ETNs

II. Inverse ETFs; III. Precious metals funds

An investor writes an XYZ May 25 put and buys an XYZ May 35 put. This position I. Is a Credit spread II. Is a debit spread. III. Loses money if premiums narrow. IV. Loses money if premiums widen.

II. Is a debit spread. III. Loses money if premiums narrow.

Commercial paper I. Can be issued to the public. II. Is generally issued at a discount. III. Can be traded. IV. Has maturity of more than 270 days.

II. Is generally issued at a discount. III. Can be traded

A sale of securities in a long margin position affects which of the following? I. Equity; II. Market value; III. Debit; IV. SMA

II. Market value; III. Debit; IV. SMA

If the SEC orders a person's registration suspension or revocation, that person I. May only remain associated with the member in a clerical or administrative capacity. II. May not receive any salary, credits or commissions that might accrue during a suspension period. III. May not remain associated with the member in any capacity. IV. May be paid monies that were earned prior to the disciplinary action.

II. May not receive any salary, credits or commissions that might accrue during a suspension period. III. May not remain associated with the member in any capacity. IV. May be paid monies that were earned prior to the disciplinary action.

Which of the following will affect SMA? I. Market decline; II. Money received; III. Interest charged; IV. Sale

II. Money received; IV. Sale

MSRB rules do not permit I. Bona fide quotes distributed as offers. II. Nominal quotes distributed as bids. III. Nominal quotes distributed as offers. IV. Nominal quotes distributed as workouts

II. Nominal quotes distributed as bids. III. Nominal quotes distributed as offers.

The custodian of a fund is responsible for which of the following functions? I. Dispersal of dividend and capital gains distributions; II. Recording the fund's physical assets; III. Distributing periodic reports; IV. Participating in the selling and distribution of the fund's shares

II. Recording the fund's physical assets; III. Distributing periodic reports; By law, mutual funds are required to have an independent custodian whose main function is to safeguard the fund's assets. The custodian also pays for new securities purchased for the fund's portfolio and receives income from the securities held in the portfolio. Although the custodian sends periodic reports to the fund's Board of Directors, it is the transfer agent who sends out distributions to shareholders and the underwriter who sells the fund's shares.

Prior to completing a trade, a broker/dealer must have which of the following, according to MSRB rules? I. Customer signature; II. Registered representative signature; III. Principal signature; IV. Customer financial status.

II. Registered representative signature; III. Principal signature; IV. Customer financial status.

If the yield curve is inverted, I. Short-term yields are less than long-term yields. II. Short-term yields are higher than long-term yields. III. Investors are lengthening maturities in their portfolios. IV. Investors are shortening maturities in their portfolios.

II. Short-term yields are higher than long-term yields. III. Investors are lengthening maturities in their portfolios.

Which of the following securities are exempt under the Securities Act of 1933? I. Real estate investment trusts (REITs); II. State and municipal securities; III. Common stock of savings and loan associations; IV. Securities issued by the federal government

II. State and municipal securities; III. Common stock of savings and loan associations; IV. Securities issued by the federal government

A corporation declares a dividend. This causes I. Stockholders' equity to increase. II. Stockholders' equity to decrease. III. Liabilities to increase. IV. Liabilities to decrease.

II. Stockholders' equity to decrease. III. Liabilities to increase

If you anticipate interest rates to decline, you would recommend a I. T-Bond yield call. II. T-Bond yield put. III. T-Bond call. IV. T-Bond put.

II. T-Bond yield put. III. T-Bond call.

II. The customer is not obligated to buy the stock V. The broker/dealer is not allowed to accept a deposit to secure the customer's indication of interest.

Who of the following are restricted persons associated with an IPO? I. An uncle of a registered representative; II. The father-in-law of a registered representative; III. A broker/dealer not involved in the syndicate; IV. A new registered representative's grandparents

II. The father-in-law of a registered representative; III. A broker/dealer not involved in the syndicate; FINRA Rule 5130 states that broker/dealers and associated persons are not allowed to purchase IPOs from a syndicate. The broker/dealer's involvement in the syndicate is irrelevant. This restriction extends to a registered representative's in-laws, siblings, children, parents and spouses. Aunts, uncles, cousins and grandparents are excluded. Additionally, anyone financially supported by the registered representative or associated person is also a restricted person.

Which of the following are characteristics of auction rate securities? I. They are money market debt instruments. II. They have regularly resetting interest rates. III. They are extremely liquid. IV. They are issued by corporations and municipalities.

II. They have regularly resetting interest rates. IV. They are issued by corporations and municipalities.

Which of these sequences accurately describes the flow of an order to purchase a stock on the NYSE in a margin account? I. Margin department; II. Wire room (order department); III. Cashiering; IV. P&S

II. Wire room (order department) IV. P&S I. Margin department; ; III. Cashiering

10? In the event of a corporate bankruptcy, in what order will the following receive payment? I. Preferred stockholders; II. Senior lien holders; III. The tax collector; IV. Debenture bondholders

III, II, IV, I In the event of a corporate liquidation, the order of priority for payments is as follows: the IRS, secured bondholders, debentures (unsecured bonds), preferred stockholders, common stockholders.

Which of the following identifies uncovered put writing? I. Unlimited loss; II. Bearish on the stock; III. Bullish on the stock; IV. Unlimited gain

III. Bullish on the stock

stock dividend affects which of the following? I. Assets; II. Liabilities; III. Shareholder's equity; IV. Net worth

III. Shareholder's equity; IV. Net worth

Which of the following statements is/are correct with regard to the senior debentures? I. The bonds are being sold to yield 9.9179% annually; II. Each bond will pay an annual interest of $121.25; III. The bonds are subject to the Trust Indenture Act of 1939.

III. The bonds are subject to the Trust Indenture Act of 1939.

"Separate account" is a term that applies to I. Whole life. II. Universal life. III. Variable life. IV. Variable annuities.

III. Variable life. IV. Variable annuities.

Which of the following are powers of the SEC? I. Fine; II. Imprison; III. Write laws; IV. Revoke registrations

III. Write laws; IV. Revoke registrations

A company whose previously issued stock is listed on the NASDAQ system brings out a new issue of stock. When will this new stock appear on the NASDAQ?

Immediately

Under MSRB rules, which of the following call provisions could affect the yield required to be shown on a customer's municipal bond confirmation?

In-whole Only in-whole or refunding provisions must be cited as lowest yields on premium bond confirms.

What are the benefits of writing covered calls?

Income and a partial hedge

Which of the following investments would be least suitable for a retired individual with limited savings?

Income bond

Conventional and Roth IRAs are different in which of the following ways?

Income eligibility limits

What type of mutual fund invests in companies that pay high dividends in relation to their market value?

Income fund

An investor is most interested in current yield from her investment. She should purchase a(n)

Income fund. An income fund's primary investment objective is current yield.

An indication of investor sentiment is found in which of the following?

Increase in stock prices

A limited partnership reaches the crossover point, and the general partner refinances using a recourse mortgage. This results in a

Increased cost basis.

An investor is skeptical that a portfolio manager can consistently outperform the market. In addition, the investor is concerned about costs. Which of the following funds best suits this investor?

Index fund An index fund will always mirror the performance of the index it mirrors, so the investor has no worries of over- or underperforming the market. Index funds also have lower expenses, due to passive portfolio management. An ETF also has low expenses, but is actively managed and therefore does not address the investor's performance concern.

All of the following are leading indicators EXCEPT

Index of industrial production.

Broker/dealers (B/Ds) are held to higher disclosure standards with regard to penny stocks. What information must be disclosed to penny stock clients?

Inside bid and offer quotation, number of shares the quote is good for, and the dealer's bid/offer if no inside bid/offer quotation is available

Quotations provided by the National Quotation Service on the pink sheets are

Interdealer quotes.

What ratio would an analyst consider when evaluating a corporation's ability to service its debt?

Interest coverage ratio

. Which statement is most correct concerning money market funds?

Interest is based on rates of the short-term investments in the fund.

Which statement is most correct concerning money market funds?

Interest is based on rates of the short-term investments in the fund.

Which of the following is not a prohibited practice?

Interpositioning with a broker's broker

MSRB rules require a registered representative to obtain all of the following information regarding a new client, EXCEPT

Investment experience.

With regard to variable life insurance policies, the largest expense for an insurance company associated with

Investment management.

The major objective for requiring the reporting of transactions in NASDAQ National Market System issues within 10 seconds is to provide current information to

Investors.

The agreement among underwriters, also known as the syndicate letter, is a document that

Is an agreement between participating broker/dealers who assume liability for any unsold shares and specifies the underwriters' responsibilities and participation percentages.

All of the following are correct regarding a variable annuity deferred sales charge EXCEPT it

Is deducted during the last 5 years of the accumulation period.

Utilizing stabilization efforts on a new stock issue

Is permitted if reported in the prospectus of the new stock issue.

An open-end investment company may do each of the following EXCEPT

Issue senior securities.

Advance refunding is

Issuing new debt to extinguish old debt at the first opportunity.

All of the following are correct about the NASDAQ system EXCEPT

It enables a subscriber to view actual transactions.

All are true about a red herring EXCEPT

It includes the price of the security.

Which of the following is true regarding an insurance company's general account?

It is conservatively invested because it holds assets associated with guaranteed insurance products.

All of the following are generally true about commercial paper EXCEPT

It is issued as interest-bearing paper. Commercial paper is sold by corporations at a discount. Although interest is calculated based on a 30-day month and a 360-day year, commercial paper has a maximum maturity of 9 months. Commercial paper is not an interest-bearing paper; therefore, it does not pay interest until maturity.

Which of the following is NOT true regarding DCA?

It is not available to large investors.

ll of the following statements are true about an individual who sells a stock which he or she owns but does not intend to deliver EXCEPT

It is used to convert a short-term gain into long-term gain.

Which of the following is true of GNMA?

It issues $25,000 bonds.

All of the following are true concerning a red herring prospectus EXCEPT

It may be accompanied by a research report.

he partnership agreement is obtained when a broker/dealer opens an account for a partnership because

It names the individual authorized to trade for the partnership.

Which of the following is NOT true regarding a nonqualified retirement plan?

It needs IRS approval.

Which of the following best describes the purpose of a balance sheet?

It summarizes what the company owns and owes

A grandfather wants to select an annuity settlement option that will provide the best benefit to both his son and granddaughter. What annuity type would best suit his needs?

Joint and last survivor

Stimulating the economy through spending policies is known as

Keynesianism.

Which of the following is of least consequence in determining the tax benefits available in a farming syndication?

Land

Disintermediation is

Large scale movement from the short to the long end of the yield curve.

121? Concerning the reporting of last-sale price information for OTC stocks, which of the following is true?

Last-sale price information is available on OTC transactions in the National Market System.

Concerning the reporting of last-sale price information for OTC stocks, which of the following is true?

Last-sale price information is available on OTC transactions in the National Market System.

A South American country nationalizes all foreign business assets within its borders. This is an example of

Legislative risk.

A broker/dealer tells a customer that an order was not executed because of a stock order that was placed ahead. The order was probably a

Limit order.

broker/dealer tells a customer that an order was not executed because of a stock order that was placed ahead. The order was probably a

Limit order.

Which of the following is related to the additional bonds test in the bond indenture?

Limitation on future bond issues

A limited partner exerts some control over partnership business activities. Which of the following are potential consequences?

Limited liability could be jeopardized.

What document sets forth the rights and duties of the partners in relation to the limited partnership?

Limited partnership agreement

Under Regulation T, credit may be extended on all of the following long positions EXCEPT

Listed options.

Under NYSE Rules, when a long sale order is prepared, the registered representative must record which of the following?

Location of the security at the time of the sale

George bought 500 shares of ABC at 41 and wrote 5 ABC June 40 straddles. At expiration, ABC closes at 37.50 and George is exercised on his short puts. After being exercised, what is George's stock position?

Long 1,000 shares ABC A put writer has the duty to buy stock at the strike price. George already owned 500 shares and had to buy another 500 shares of ABC at the 40 strike price.

Which of the following would be reviewed in accordance with SEC position limits?

Long puts and short calls

If the Federal Reserve Board switched from a tight money policy to an easy money policy, which of the following bonds would increase the most in price?

Long-term bonds

When comparing long-term bonds to short-term bonds, which of the following statements is incorrect?

Long-term bonds are usually more liquid than short-term bonds.

A client informs his broker that he would like to sell a substantial number of shares of a security that was received as a gift from his father but is concerned about incurring a sizable tax liability on the sale. The relevant information is as follows: Father's cost - $8 per share purchased in 2005; Price at time of gift - $18 per share; Date of gift - January 10, 2017; Current market value - $20 per share; Date of proposed sale - February 20, 2017; Amount of gift tax - none; donated under available exclusion. Given the above data, the sale of these securities would result in a tax liability to the client (donee) of

Long-term capital gain of $12 per share.

Funded debt of a corporation can include

Long-term loans.

Sarah wrote/sold the following straddle: 1 XYZ Oct 20 put for 5 and 1 XYZ Oct 20 call for 3. At October expiration, XYZ stock is at 29. The Oct 20 put expires and the Oct 20 call is exercised with XYZ at 29. Sarah buys stock at $29 and closes her position. What is the profit or loss?

Loss $100 Total premium received is $800. The put expires. The call breakeven is 28. The stock 29 and Sarah has to buy stock at 29 and sell it for 20; a 9 point loss. Therefore, there is a loss of $100.

Open market operations of the Federal Reserve Board cause direct changes in

M1 . M1 is part of the money supply that the Fed regulates through buying or selling governments and government agencies.

When a municipal securities dealer receives a written customer complaint concerning a transaction, which of the following must he or she do?

Make a record of the complaint and the action taken in response.

During periods of high interest rates, issuers of municipal securities wishing to retire their debt would

Make a tender offer.

Beta of 1 indicates coincidence with

Market index volatility.

The risk of not being able to sell a security in a timely manner is

Marketability risk.

Each of the following is a violation of FINRA rules EXCEPT

Marking to the market. Under FINRA rules, backing away, interpositioning, and free-riding and withholding are all considered to be violations. Marking to the market (adjusting the value of a security or portfolio to reflect current market value) is allowable. For example, broker/dealers must adjust margin accounts to ensure compliance with minimum maintenance requirements.

Which of the following most closely expresses FINRA's Five Percent Policy?

Markups/markdowns and commissions should be fair under the circumstances and should probably not exceed 5%.

Your client wrote 5 XYZ June 60 straddles @ $8.25. What is the potential maximum gain and loss?

Maximum gain is $4,125 and maximum loss is unlimited. On a short straddle, the maximum gain is the premium received, $8.25 X 100 = $825 X 5 = $4,125, and the maximum loss is unlimited.

If a mutual fund publishes investment performance charts, the information presented must include

Maximum sales charges.

Upon termination of employment, an employee's funds from a 457(b) plan

May be transferred into an IRA. Once transferred, the funds become subject to a 10% penalty for early withdrawal.

Under Regulation T, if a customer's account is frozen for 90 days, the customer

May make purchases if the full purchase price is in the account before the order is transacted.

The MSRB has rules relating to all the following EXCEPT

Minimum commissions. T he MSRB has rules related to gifts and gratuities, executions of transactions, professional advertising, and maximum commissions. It does not have any rules related to the minimum commissions that may be charged.

fThe rate covenant on a municipal revenue bond sets the

Minimum rate. he rate covenant on a municipal revenue bond sets the minimum rate that may be charged.

What type of mutual fund typically has a high degree of capital preservation but carries a risk of not producing high enough returns to keep up with inflation?

Money market fund

Which of the following is a primary difference between IRAs and SEPs?

More money can be contributed to a SEP.

A corporation with a low common stock ratio is

More vulnerable to interest rate changes.

Which annuity provision guarantees payments as long as the annuitant lives?

Mortality guarantee

Which of the following would not be in an equity REIT portfolio?

Mortgage

An investor likes the safety of a government bond fund, but will forfeit a portion of this safety for a slightly higher return. She would most likely choose which of the following?

Mortgage-backed security fund

An investor seeks a fund that will provide regular income. His best choice is a

Mortgage-backed security fund.

The first level of appeal by a respondent to a decision by the Department of Enforcement would be to the

National Adjudicatory Council.

Which of the following usually trades with accrued interest?

Negotiable CDs

A municipal new issue in which the managers have been appointed by the issuer to purchase and market the bonds is best described as a/an

Negotiated sale.

The redemption value of open-end investment company shares is based on the

Net asset value computed after the order is received.

Which of the following is not a component of the balance sheet?

Net revenue

Which of the following municipal bonds would not be tax exempt?

New Orleans Convention Center bonds

All of the following are considered money market instruments EXCEPT

Newly issued Treasury notes. Money market instruments include securities that mature in 1 year or less. Treasury notes have a maturity of up to 10 years; therefore, they are not traded in the money market. A tax anticipation note is a short-term municipal security issued in anticipation of future tax collections.

When must a trade confirmation be sent to a customer?

No later than settlement date

An investor experiences a $1,000 loss in the sale of a stock but repurchases the position within 30 days, although in a different tax year. Which of the following is true?

No loss deduction is permitted.

According to FINRA Rules, the definition of correspondence is messages that are distributed to how many prospective customers within a 30-calendar-day period?

No more than 25

A customer placed a market order. This means

No price is set, and the order is to be filled at the best available market price.

Assuming that a bond is purchased at a discount, then

Nominal yield, or stated rate, is less than YTC.

A municipal broker/dealer enters a bid wanted. This is a

Nonbinding request for a likely bid.

In a government yield auction of U.S. Treasury bills, which of the following orders will always be filled?

Noncompetitive bid

A mutual fund is listed in the paper at $18.50 - NL - +.02. How much is the sales charge on this fund?

None; this is a no-load fund.

The 5% markup applies to which of the following?

Nonexempt securities

A registered representative (RR) wishes to buy shares of an initial public offering for a new technology company that the RR's firm is distributing. Under FINRA Rules, the RR may: I. Not do so under any circumstances. II. Do so if she has a history of buying new issues. III. Not do so for her own account but may purchase shares for members of her immediate family who she materially supports. IV. Do so if her allotment is insubstantial, not disproportionate to public orders, and constitutes his or her normal investment practices.

Not do so under any circumstances

A registered representative of a NYSE firm has written a research report and wishes to mail it to a customer. The rep cana)Do so if the report agrees with the firm's current recommendations.b)Not do so without the approval of a firm officer.

Not do so without the approval of a supervisory analyst.

Which of the following is false regarding bond anticipation notes?

Notes are repaid from general tax collections and direct government obligations.

Option orders are transmitted to the CBOE trading floor via

OSS.

CQS transactions involve all the following, EXCE

OTCBB.

Regulation S addresses

Off-shore sales of restricted stock.

According to the Trust Indenture Act of 1939, a trust indenture is required

On corporate bonds.

Normally, a stock starts trading ex-dividend on the

One business day prior to the record date. Under FINRA rules, a stock goes ex-dividend 1 business day prior to the record date.

All the following receive copies of an order ticket, buy or sell, EXCEPT

Operations department.

All the following are true of the trading system for CBOE index options EXCEPT

Orders entered by market makers have priority over public orders at the same price.b)A limit order book is maintained by an Order Book Official.

The method by which a mutual fund offering price will be determined is

Outlined in the prospectus.

The term for active stock that represents the number of shares owned by the public is

Outstanding stock.

Credit analysis of an airport authority revenue bond would include all of the following EXCEPT

Overlapping debt.

mith Co is a member of an eastern municipal underwriting syndicate. Smith is committed to sell 25% of the issue, or 50,000 bonds. Smith sells 62,000 bonds, and at the end of the offering there are 8,000 unsold bonds. Smith

Owns 2,000 of the unsold bonds. In an eastern syndicate, each member is liable for any unsold bonds according to its original commitment percentage. The member's performance is irrelevant. In this case, though Smith exceeded its commitment by 12,000 shares, it is still liable for 25% of any unsold shares. If this were a western syndicate, it would have fulfilled its commitment in the offering and would have no further obligation.

An analyst comparing the stock prices of two similar market competitors would most be interested in their

P/E ratio.

The amount of money that an investor pays for newly issued common stock in excess of its par value is called

Paid in capital surplus.

The market value of a 20-year municipal bond selling at a premium is most adversely affected by

Par call in 5 years. If interest rates go down, bond prices in the secondary market will go up (i.e., the bond will be selling at a premium). If the bond is called at par, the investor will lose the difference between what was paid for the bond and its par value. The shorter the period of time to the first call date, the faster the investor will lose this money. This means that the market price of a premium bond that is callable at par will lose value as the call date approaches.

An investor begins receiving monthly annuity payments from his or her nonqualified variable annuity contract. For tax purposes, these payments are considered to be

Partly ordinary income and partly a return of capital. Nonqualified annuities are funded with after-tax dollars. During the payout period, some of the money will represent a return of cost basis and will not be taxable; another part of the money will represent earnings and be taxable at ordinary income rates.

Under NYSE rules, the final approval to open a new account is given by the

Partner or principal.

Which type of investor has increased buying power on margin that exceeds the Federal Reserve's mandates?

Pattern day trader

Which of the following will not affect a corporation's reported net income?

Payment of a cash dividend to common shareholders

not trigger payment of ACB

Permentely disablesd

All the following are leading indicators EXCEP

Personal income.

All the following are leading indicators EXCEPT

Personal income.

he term "person associated with an investment advisor" means any of the following persons EXCEPT

Persons associated with an investment advisor whose functions are clerical or ministerial in nature

A customer buys an 8 1/2% T-bond maturing in 2015. He also buys a T-bond put. Interest rates appreciate to 10%. Which of the following will occur upon sale of the bond and exercise of the put?

Position will be closed for a loss. If you buy a T-bond and a T-bond put, then interest rates rise; you cut your losses in bond price by exercise. Your loss becomes mostly premium.

When considering an investment for an ERISA account, the primary consideration is

Potential risk.

Which of the following is more likely to appear in a notice of sale rather than in an official statement?

Powers of the issuer

37? Which of the following is more likely to appear in a notice of sale rather than in an official statement?

Powers of the issuer Municipalities seeking bidders to help them underwrite new issues of muni bonds will publish a notice of sale. This is designed to help bidders prepare their bids in conformance with the issuer's specifications. The official statement, a document similar to a prospectus, is given to prospective customers who need certain information in order to make an informed investment decision.

In the sale of a new issue of municipal securities, MSRB disclosure requirements specify that a customer must be provided with a copy of the

Preliminary official statement.

If interest rates are falling, which statement is TRUE?

Premium bonds will appreciate faster than discount bonds.

A customer buys 1 Euro April 98 call and sells 1 Euro July 98 call. The position is profitable under all circumstances, EXCEPT

Premiums widen. The position is credit; the July being sold is more valuable. Credit will gain, except if premiums widen.

Your customer buys 100 shares of XYZ at 40 and writes an XYZ April 40 call for 5. What is the maximum loss?

Price paid for stock $40 - premium received $5 = $35 x 100 = $3,500

Which of the following accurately describes an ETN?

Principal at maturity is based on an index.

general obligation bonds issued by states are not secured by what form of taxes?

Property taxes

Mortality risk fees and operating expense risk fees are designed to

Protect the insurance company by offsetting unexpected costs.

In order to avoid the wash sale rule, the investor when selling a security should not

Purchase a call option on the security within 30 days prior to and after the sale.

A customer sells an over-the-counter (OTC) stock and uses the proceeds to purchase another OTC stock. FINRA's markup policy applies to

Purchase and sale combined.

Which of the following is the least likely recommendation an RR would make to a customer in a margin account?

Purchasing a municipal bond Because margin interest on a municipal bond purchase is NOT deductible, the RR should not recommend purchasing a municipal bond on margin.

An American manufacturer of office equipment has contracted to deliver $1,000,000 worth of equipment to a British corporation payable in British pounds. The American manufacturer could best protect itself from currency fluctuations by purchasing

Puts on British pounds. As an American exporter, the company is concerned that when it gets paid in British pounds, the value of those pounds may have gone down relative to the dollar. If the company is worried about downside risk on a foreign currency, it could buy a put on the foreign currency.

Which of the following is NOT correct regarding 529 plans?

Qualified withdrawals are taxed as ordinary income.

Which of the following could be an open-end fund?

RTC Balanced with NAV of $12.50 and NAV of $12.50

Depreciation is a write-off available to investors in all of the following, EXCEPT

Real estate investment trusts.

An RR must obtain a written statement of a customer's net worth before offering the customer all of the following EXCEPT

Real estate investment trusts. Due to the inherent risks involved, DPPs are not suitable for all customers. A registered representative must obtain a written statement of a customer's net worth before offering the customer an oil and gas program, an equipment leasing program, or a real estate partnership. A registered representative would not have to review the net worth of a customer prior to offering a REIT. Real estate investment trust units are very similar to mutual fund shares, however, the assets in the portfolio are invested in real estate and the shares trade in the secondary market.

In opening an options account, all the following must be completed, EXCEPT

Receiving a signed options agreement from the customer.

Which of the following statements regarding an LOI is false?

Redemptions are not allowed during the period.

An 8.5% CMO yielding 9.55% does NOT have which of the following risks?

Refinance

Which of the following transactions requires distribution of an offering circular to prospective investors?

Reg A+

Which of the following statements regarding commercial paper is false?

Registration is required by the SEC.

Which one of the following types of investment companies pays out 90% of its net investment income to its shareholders?

Regulated

A corporation can avoid registration requirements in the issuance of securities by engaging in a private placement under

Regulation D.

a corporation can avoid registration requirements in the issuance of securities by engaging in a private placement under

Regulation D.

Which of the following regulates the credit extension on securities loans by banks when the proceeds are used for the purpose of buying or carrying margin stocks?

Regulation U Regulation U regulates the amount of money that a bank can loan a customer to buy securities on margin. It is similar to Regulation T, which regulates broker/dealer loans.

When the government places an embargo on a foreign source of goods and services, this is considered a form of

Regulatory risk. Regulatory risk is associated with changes in law that can potentially affect a security, an industry or a country. This issue may also be referred to as legislative or political risk.

What type of risk involves owning bonds in a declining interest rate environment?

Reinvestment risk

Jennifer is selling securities at a loss. She will NOT be allowed to claim the loss if she

Repurchases the same securities within 30 days.

Which needs the approval of a supervisory analyst?

Research report

One way an analyst evaluates management efficiency is by reviewing the

Return on common equity.

A portfolio consisting entirely of long-term Baa rated municipal bonds would best fulfill the objective of an investor concerned with seeking

Return. If a client has a portfolio made up entirely of long-term Baa rated muni bonds, it is not well diversified, it is not very safe, and it may be hard to sell. This portfolio would best meet the need for return.

If an insured commits suicide within the first 2 years of a variable life policy issue, the insurance company

Returns the premiums paid into the policy.

A technical analyst interprets a reverse head and shoulders formation to be

Reversal of a downward trend.

The dollar is strengthening against the pound sterling. Which are the probable causes?

Rising interest rates/lowering prices

If certain requirements are met, a corporation can offer securities sold within the borders of one state using the intrastate offering exemption, also known as

Rule 147.

The Investment Company Act of 1940 requires that most investment companies register with

SEC

All the following statements are true about SIPC EXCEPT

SIPC is an agency of the U.S. government.

All of the following are agency issues backed by government-guaranteed or insured mortgages EXCEPT

SLMA. SLMA, or Sallie Mae, is the Student Loan Marketing Association (SLMA) and does not deal in mortgages. The rest do.

Which of the following is not AAA-rated?

STRIPs

Bill owns shares in a closed-end investment company. He can dispose of his shares by

Sale in the open market.

Which act is most concerned with disclosure?

Securities Act of 1933

The Act that requires financial institutions to develop, implement and monitor procedures that prevent its registered representatives and associated persons from misusing nonpublic information is the

Securities and Exchange Act of 1934.

Which of the following facts concerning UGMA accounts is incorrect?

Securities are registered in the name of the minor.

A customer buys 500 shares of XYZ at 30. The market price of XYZ increases to 50. If the customer wants to protect some of his unrealized gain against a market decline, which of the following orders might the customer enter?

Sell 48 Stop GTC Remember the acronym OBLOSS (Open buy Limit and Open Sell Stop). If the market price of the stock should decline, an open sell stop would help the customer protect some of his or her unrealized gain. "Sell 48 stop GTC" means that if the market price should fall to 48, the customer wants this to become a market order and the shares will be sold at the next market price. Although OBSOSL (Open Buy Stops and Open Sell Limits) is helpful to remember the orders that exist above the current market price, such orders would not help hedge the downside risk.

42? A customer buys 500 shares of XYZ at 30. The market price of XYZ increases to 50. If the customer wants to protect some of his unrealized gain against a market decline, which of the following orders might the customer enter?

A mutual fund portfolio manager expects interest rates to increase. He wishes to protect his Treasury bond portfolio but also wishes to generate some additional income. What would be the most appropriate action for the portfolio manager to take?

Sell T-bond calls

If a customer is short a stock, which of the following would lower risk and increase income?

Sell puts

All of the following are correct about corporate bond trade reporting EXCEPT

Sell side reports through TRACE within 10 seconds.

One of your clients bought 100 shares of TBS at 20. The stock has now risen to 55, and the client would like to protect her profit. Which of the following orders should be entered?

Sell stop at 54.88

Which of the following is a wash sale?

Selling a put or buying a call within 30 days of sale of stock

Under the "wash sale" rule, a loss on the sale of a security is deferred if, within a period beginning 30 days before the sale and ending 30 days after the sale, a customer effects which of the following transactions which remain unexercised involving that security?

Sells a put Sell a put, and if unexercised, collect premium for a gain while attempting to deduct a capital loss.

A customer has requested that an account be opened for trading options. Which of the following would the registered representative do in addition to mailing out the options agreement form?

Send an options disclosure document

An example of a non-marketable type of Treasury issue is a

Series EE bond.

Which of the following is not affected by the sale of debentures?

Shareholders' equity

A spread position is long 1 WLC Oct 60 call and

Short 1 WLC Oct 70 call. A spread is to buy a call and sell a call or to buy a put and sell a put. To be long 1 WLC Oct 60 call and to be short 1 WLC Oct 70 call would be a call spread.

Stock rights are

Short term.

A retired widow, age 71, is seeking a mutual fund to provide a moderate level of income to supplement her Social Security benefits. She is very conservative and wishes to preserve capital. Which of the following funds would be most suitable for this client?

Short-term U.S. government bond fund Government fixed income funds, offer safety, generally less volatility, and preservation of capital. In return, they offer lower yields. A gold fund is used as an inflation hedge. Stock funds are used for appreciation rather than current income.

An asset-backed security is backed by

Short-term loans on credit cards or automobiles.

58 TANs, RANs, and BANs are

Short-term municipal obligations.

#125. When interest rates are fluctuating,

Short-term rates move more sharply.

A dispute has developed between a broker at XYZ Brokerage and a client. The amount involved in the dispute is $21,500. What recourse is available to the client and what is the process?

Simplified arbitration is available and one arbitrator is appointed, hears the case from both parties, and renders a decision, which is final

An employer wants to begin a pension plan for its employees but does not want the obligation of annual contributions because of wide cash flow swings due to growth and plans for expansion. Which plan allows flexibility and still provides immediate vesting on contributions?

Simplified employee pension plan

A 30-year term municipal issue has a mandatory early debt retirement provision for the final 10 years of its life. This type of retirement is commonly known as a/an

Sinking fund.

While engaged in a distribution, a managing underwriter may do all of the following EXCEPT

Solicit purchases through an updated research report.

Which of the following large block transactions appears on the exchange tape prior to execution on the exchange floor?

Special offer

In mutual fund investments, what fund type has a single industry focus?

Specialized funds

A guaranteed bond is one that is guaranteed by another company or entity. We would typically see a guaranteed bond used in which of the following situations?

Spinoff

One method that the Securities and Exchange Commission has incorporated into the yield reporting standards that provides for greater clarity of income results is called

Standardized yield reporting.

An investor wants more detailed information than what he can find in the prospectus with respect to the calculation of the net asset value. This information can be found in the

Statement of additional information.

All of the following will decrease the debit balance in a customer's long margin account, EXCEPT

Stock dividends.

Which of the following settlement options will give the annuitant the highest periodic payment?

Straight life

The interest income for U.S. government securities is

Subject to federal income tax but exempt from state income tax.

The 60-year-old owner of a traditional IRA passes away without ever having taken any distributions. The beneficiary is 40 years old. If the beneficiary cashes in the IRA, he is

Subject to taxes but not penalties.

31In calculating the net interest cost on a new issue of municipal securities that have been bid at a premium, the dollar amount of the premium will be

Subtracted from the total interest cost.

Which of the following is NOT required to meet the educational requirements for selling a CMO to a retail client?

Suitability requirements for buying CMOs

Failure to promptly pay a fine or other monetary sanction imposed as a result of proceedings under the Code of Procedure may result in

Summary suspension or expulsion of a member notice in writing.

MSRB rules allow a representative to engage in all of the following activities with respect to municipal securities EXCEPT

Supervise other representatives.

The theory that reducing taxes and limiting government involvement in business activities stimulates economic growth is called

Supply side.

The priority of orders for a municipal new issue syndicate is normally found in the

Syndicate letter.

A general partner who puts together the administrative organization of the limited partnership and handles the registration of the securities with the states is known as the

Syndicator.

Which of the following Treasuries trades in the secondary market?

T bills

Which of the following is the most secure?

TAN

Which of the following securities has the lowest credit risk?

TIPS

Buy stop orders are used for all the following reasons EXCEPT

Take advantage of a technical breakout of a support level.

Howard is a successful lawyer interested in the technology industry. He is saving for the down payment on a home that he plans to buy next year. Howard should invest in a

Tax-free money market fund.

Which of the following joint accounts is designed specifically for married couples?

Tenancy by the Entirety

The main difference between the 30-day visible supply and the placement ratio is

The 30-day visible supply looks forward and the placement ratio records historical information.

In pricing a new issue, a municipal bond underwriter would most likely check

The 30-day visible supply.

difference between a fill or kill (FOK) order and an all or none (AON) order is that

The AON is not immediately canceled if it is not instantly executed.

According to MSRB rules, a certificate would be considered mutilated and not in good delivery form if any of the following is not ascertainable EXCEPT

The CUSIP number.

A broker goes to a designated market maker (DMM) to sell 100 XYZ. The DMM stops the broker at 31. Which of the following is true?

The DMM has guaranteed the broker a price of 31.

Arbitration proceedings against a registered representative can be initiated by

The FINRA Code of Arbitration states that any of the mentioned entities may initiate arbitration against a registered representative

Which of the following securities acts governs the variable annuity separate account?

The Investment Company Act of 1940

A client wants to discuss the assignment of his short call option on XYZ. The market price is $1.00 out of the money but the market price has been increasing steadily. He asks when he is required to deliver the stock. Which of the following is the correct means of option assignment for his call?

The Options Clearing Corporation decides which broker/dealer will deliver the securities. Then the broker/dealer will assign one of their clients by random selection. The client might not be assigned.

Which of the following is designed to prevent fraud in the issue of securities?

The Securities Act of 1933

The MSRB was created by

The Securities Amendment Act of 1975.

Regarding UGMA and UTMA, which of the following is FALSE?

The account can hold margined securities.

hen an investor sells his or her interest in a limited partnership, the gain or loss is the difference between the sale proceeds and which of the following?

The adjusted cost basis

Which of the following is true regarding the dividends that a corporation pays?

The amount of cash dividends that a corporation pays can be a significant determinant of the market value of a stock.

The bond ratio measures

The amount of corporate capitalization that comes from long-term debt.

If the Federal Reserve Board increases the discount rate, all of the following will increase, EXCEPT

The amount of loans made available by banks.

Linda inherited a 20-year Treasury bond from her grandfather. The bond has 5 more years to maturity, so which of the following is true regarding the volatility of the bond based on interest rate fluctuations?

The bond will fluctuate with interest rates, but less than a similar bond with a longer maturity.

FINRA Rule 4320 provides guidelines on the regulation of short sale delivery requirements. If a broker and the short selling client fail to deliver on a demand for the shorted security, what are the consequences imposed by the law?

The broker/dealer, client, and clearing firm are restricted from transacting in that security until the securities that are sold short are delivered in good delivery form.

customer has a margin account. A broker/dealer is in receivership. The account has $90,000 securities and $50,000 debit. Which of the following would be true?

The client would be reimbursed $40,000. $90,000 securities minus $50,000 debit equals $40,000 equity, and only equity is reimbursed when the BD is in receivership.

When a customer effects a proceeds transaction, the Five Percent Policy states

The combined proceeds to the broker/dealer on the sale and purchase should not exceed the 5% guideline based on the inside ask on the buy side.

How are funds contributed to a tax-sheltered annuity treated for taxation

The contributions are not included as income for the employee, but are taxable upon distribution.

How are funds contributed to a tax-sheltered annuity treated for taxation?

The contributions are not included as income for the employee, but are taxable upon distribution.

When comparing a convertible bond to a similar callable debenture, which of the following statements is true?

The convertible bond will have a lower stated interest rate.

A client with a restricted margin account sells $7,000 worth of securities and buys $5,000 worth of securities on the same day. Assuming no previous SMA balance and disregarding commissions, which of the following would describe the status of the account?

The customer can exercise his or her 50% guaranteed withdrawal privilege In a restricted margin account, the customer is allowed to keep half of the proceeds from the securities sale; the other half are used to pay down the debit balance in the margin account.

A customer instructs his broker/dealer to purchase 200 shares of Dunham Corporation. Two days after trade date, the customer decides that he no longer wants the shares. Which statement is correct?

The customer has entered into a legally binding contract and is obligated to pay for the stock.

A customer purchased 200 shares of XYZ 2 years ago at $40. The current market price is $50. If the customer gifts these shares to his daughter today, which statements describe the tax consequences?

The daughter will have a tax liability if she sells the shares at the current market price.

Before a dealer may request bids for certain municipal bonds, which of the following must be true?

The dealer must have the intention of selling the bonds.

A 50-year-old individual needs $20,000 for his child's education, and wishes to withdraw the necessary funds from his traditional IRA. Which of the following statements is true concerning taxation on the withdrawal?

The entire amount will be taxed as ordinary income.

If a municipal firm makes a contribution to the county assessor in the community where their office was located, which of the following occurs?

The firm would be unable to enter into a negotiated underwriting with that municipality for two years

Payment of interest and principal on debentures is secured by

The general assets of the company.

Which of the following are considered a conflict of interest in a limited partnership?

The general partner self-dealing to insure profits without regard to the limited partners

UITs have fixed portfolios, which means that

The holdings in the portfolio are fixed for the life of the trust.

A customer has purchased $15,000 worth of XYZ Corporation over a period of time. Which of the following is true about his subsequent sale of $5,000 of XYZ stock?

The investor is allowed to specify which shares are being sold to minimize his capital gain.

All of the following are advantages to purchasing call options in a diversified combination EXCEPT

The investor may limit his risk in the portfolio by the exercise of the calls.

The board of directors declares a dividend on Wednesday, Oct. 5, to shareholders of record as of Thursday, Oct. 20. If an investor purchased the stock on Thursday, Oct. 20, in a cash transaction, which of the following statements would be true?

The investor would be entitled to receive the dividend because the stock was purchased using cash settlement.

Which of the following correctly describes a bond's interest accrual period?

The last payment date up to but not including settlement date.

Which of the following statements is most correct concerning a mutual fund's contingent deferred sales charges (CDSC)?

The longer the fund shares are held, the lower the sales charge percentage.

All of the following statements are true about FINRA's 5% markup policy EXCEPT

The markup policy applies to securities sold at a specific price and with a prospectus. The 5% markup policy does not apply to new issues.

All of the following are true statements regarding a full arbitration hearings EXCEPT

The maximum award is $50,000.

Which of the following is the main difference between two mutual funds: Domestic Blue Chip A and Domestic Blue Chip B?

The method of computing sales charges

The best definition of "current yield" is

The most recent annualized dollar amount of income divided by the security's current market value and expressed as a percentage.

An investor purchasing a mutual fund will pay what price?

The next calculated public offering price after purchase

If a member and a non-member of the FINRA have a dispute, it can go to arbitration at the insistence of

The non-member.

With a variable annuity, which of the following factors are NOT involved in determining the amount of an annuitant's first annuity payment?

The number of annuity units

The exchange halts trading in a stock on which listed options are traded. Who halts trading in the options on that stock?

The options exchange

A specialist receives an order to buy XYZ 200 shares 20 stop 19. This means that

The order is triggered at or above 20 and filled at 19 or lower. Buy stop limit order: stop at 20 or above, execute at 19 or below.

The syndicator of a limited partnership acts as

The organizer of the partnership responsible for securities registration.

Which of the following is correct regarding a qualified profit-sharing plan?

The plan must be nondiscriminatory.

The NAV will not change if

The portfolio sells securities and retains the cash.

With regard to a collect on delivery order, what is the proper procedure for the receiving firm should the funds not be available to pay for the securities at delivery?

The receiving firm must promptly return the securities to the selling firm.

The Securities Exchange Act of 1934 deals with all of the following issues EXCEPT

The sale of new issues.

An investor wants to give her daughter all of the shares in her growth mutual fund. Since the initial purchase, the value of the shares has increased steadily over the life of the investment. When the shares are gifted, the cost basis of the daughter's shares will be

The same cost basis that the investor had for the shares. When a security is received as a gift, the cost basis depends on the relationship of the market value of the securities to the donor's cost basis. If the market value is higher than the donor's basis, the recipient's cost basis is equal to the donor's. If the market value is lower than the donor's cost basis, the recipient's basis is equal to the market value of the securities at the time of the gift. Next

Which of the following is true of shares of a closed-end investment company?

The shares have no redemption price.

All the following are true about convertible preferred stocks EXCEPT

The shares must be surrendered on the call price. Convertible preferred stock typically carries a lower dividend rate than nonconvertible preferred stock. It is true that when the convertible preferred shares are converted, dilution occurs since there are now more shares of common stock. The dividend payments associated with the convertible preferred stock are no longer paid once the shares are converted. A shareholder does not have to convert preferred stock into common.

A security is being offered on a When-Issued basis. However, before you place the trade, the When-Issue notice is suspended. How should you explain this to your client, who is interested in buying the stock?

The suspension terminates the When-Issued basis and now orders taken must be delivered on regular way settlement and delivery basis. The client can place the order at his convenience.

To calculate taxes due on mutual fund shares being sold using the average cost basis for the shares, what must the investor account for?

The taxes paid on dividend and capital gain reinvestments made for additional shares.

All of the following statements about a trade in a municipal security are correct EXCEPT

The trade date is the date used for calculating interest accumulation. nterest accrues up to but not including the settlement date. In this question, look for what is false about a municipal securities trade. It is true that the settlement date for a cash transaction is the trade date. It is also true that munis settle regular way (T + 2 business days).

Who obtains the CUSIP for a municipal bond issue?

The underwriter

Which of the following is NOT a characteristic of SIMPLE plans?

There are liberal loan provisions for hardships.

All of the following statements about zero-coupon corporate bonds are true EXCEPT

They are issued only in bearer form.

Which of the following is a correct statement concerning regular call options long in a customer's margin account?

They have no value for the purpose of computing the margin required.

Which of the following statements is FALSE with respect to value mutual funds?

They hold growth stocks and bonds that are deemed to be undervalued in price.

39 Which of the following statements are true of unrated municipal securities?

They may not be rated because the issuer's total debt is relatively small.

Which of the following statements about series bonds is TRUE?

They may only be redeemed by the Treasury.

All of the following statements about customer confirmations of principal transactions in municipal securities are true EXCEPT

They must disclose any dealer markup.

Which of the following statements is true about tax-qualified annuities?

They must meet IRS requirements.

Which of the following is an INCORRECT statement pertaining to stop orders?

They permit brokers to exercise discretion as to the time of execution and the total number of shares purchased.

A listed stock trading in the OTC market is referred to as the

Third Market.

The husband of an options clients also trades options, but does so in a separate account at another brokerage firm. Both of them are currently hedging short sale positions in stock VVV with options. However, the options client is long 32,000 VVV calls, while her husband is short 30,000 VVV puts. The current contract position limit for VVV stock is 60,000 contracts. Which of the following applies to this situation?

This couple's current options positions are in violation of the position limit rules . The options exchanges impose limits on the maximum number of puts and calls on a given security that may be held or written on the same side of the market by a single investor or group of investors acting in concert or under common control. These limits apply to all investors, including institutions. Married couples are viewed as acting in concert or under common control, and as such are subject to the limits even if they maintain options accounts at different brokerage firms. In this case, a violation would occur if the couple exceeded the 60,000 contract position limit for VVV stock with combined positions on the same side of the market - that is, on the bull or bear side of the market. The long calls and short puts they own are both bullish. And since they have a combined 62,000 contracts on the bull side of the market, they are in violation of the position limit rules.

The customer has no cash available to trade in his cash account. On Monday, he purchases ABC stock for $5,000. He does not deposit cash in his account by Wednesday's settlement date. On Thursday, he sells the ABC stock for $5,500 to cover the cost of his purchase. Which of the following statements is true

This is a freeriding violation.

An RR sold 100 shares of DEF, a new common stock issue, to a customer at the offering price of $10 per share. A month later, DEF is quoted at 7.75 bid, 8 asked. The customer is very upset about the decline in value so the representative offers to buy back the 100 shares personally from the customer at $9 per share. Which of the following is true?

This is a violation of FINRA rules because a registered representative cannot guarantee a customer against loss. A registered representative cannot guarantee a customer against a loss. If the current bid price is at $7.75, the registered representative could buy the shares from the customer for $7.75.

Under MSRB uniform practice rules, regular way settlement on municipal bonds is

Three business days following trade date.

A bond with a C rating is considered

To have high credit risk.

When calculating the net asset value of a mutual fund, you divide the

Total net assets by the number of outstanding shares.

The statistic that measures fund performance and includes reinvested distributions and share appreciation, net of sales charges and expenses for the period is

Total return.

rom a fundamental analyst's point of view, which of the following is least significant?

Trading volume

If a customer has a need for high liquidity and low principal risk, what type of security would be the best recommendation for their investment?

Treasury bills

The capital structure is the total of all securities issued by a corporation. Which of the following statements is INCORRECT concerning corporate securities?

Treasury stock has voting rights.

Which of the following entities does NOT issue Eurodollar bonds?

U.S. government

Which of the following are issued with a specified, fixed rate of interest?

U.S. government bonds and notes

Which of the following is considered to be a lagging indicator of economic trends?

Unemployment

Which type of investment companies do NOT charge a management fee?

Unit Investment Trusts

According to the Investment Company Act of 1940, the term "management company" applies to all of the following EXCEPT

Unit investment trusts.

Which type of policy allows the owner the greatest flexibility for premium payments?

Universal life insurance

A customer buys a June 30 put for 1 after having purchased 100 shares of the same stock for $34 per share. What is the maximum possible gain?

Unlimited

What is the most common type of corporate bond issued?

Unsecured.

In a regular way delivery of municipal bonds, accrued interest is computed

Up to but not including the settlement date.

Money to pay off general obligation debt can be derived from all of the following, EXCEPT

User fees.

An inexperienced conservative investor is selecting his first equity fund. He wants to limit his risk while acquiring equity exposure. Which fund is most suitable for this investor?

Value fund

A long-term investor who is comfortable with moderate risk believes that the best way to make money in the stock market is to buy low. The investor is skeptical of stocks that look overvalued and carry high P/E ratios. An appropriate mutual fund for this investor is

Value fund.

Which of the following does NOT fall under the classification of an investment company according to the Investment Company Act of 1940?

Variable annuities

John had been receiving monthly payments from his variable annuity for several years. Upon his death, his widowed wife received a lump-sum payment. This type of annuity was a

Variable unit refund annuity.

At which point does a registered representative come under the NYSE constitution and rules?

When employed by the firm

56? A client buys a BAT July 40 put and sells a BAT April 40 put. The client would profit if this spread position

Widens. The option position is a calendar or horizontal spread. As in all spreads, one option leg is important and is netted against the other, less important leg. July has more time value than April. The April leg was sold. The spread is debit. Debit spreads benefit from premium widening.

f a stock is purchased just before the ex-dividend date, the investor

Will have an unrealized loss on the stock.

A person transferring an IRA to another trustee via a trustee to trustee transfer

Will not be subject to any penalties or taxation.

Which index is the broadest measure of the market?

Wilshire

With regard to sales breakpoints, any schedule changes must be communicated to existing shareholders within what period of time?

Within 1 year

According to the Securities Act of 1933, when new securities are sold in an IPO of a company that qualifies for listing on the NYSE, the final prospectus is to be delivered

Within 25 days of the effective date.

Under Regulation T, the purchase of a listed option in a special cash account must be paid for

Within 4 business days. Under Reg. T, transactions must be paid for in T + 4 business days. Do not confuse the latest time that you can pay under Reg. T with FINRA's rules on regular way settlement (T + 2 business days).

Which measures a corporation's solvency?

Working capital

An investor owns 1000 shares of ABC, a biotechnology company that is still in the early stages of testing a new drug. The price of the stock dropped recently, but the investor believes that the drug the company is developing will be a blockbuster. Which of the following strategies would enable the investor to increase the overall return on his portfolio during this time?

Write 10 ABC calls

Which of the following positions carries the greatest risk?

Writing 1 ABC March 40 call Writing uncovered calls has unlimited risk: it is equivalent to a short stock position.

Writing a straddle is

Writing an equal number of puts and calls with the same strike price and expiration date, on the same underlying security.

If XYZ stock is trading at 27.50, which of the following options are in-the-money

XYZ July 25 call

A pre-refunded bond is sold on a

YTC basis.

client has discussed his interest in XYX Corporation common stock with his registered representative. The registered representative has a completed discretionary trade document on file for the client's account. The registered representative overhears a colleague speaking with a client who is interested in buying a large block of XYZ stock. The registered representative immediately places an order for the stock before the colleague places his order. Are there consequences to the trade?

Yes; the registered representative is guilty of front running and unethical behavior and will be subject to disciplinary action by FINRA.

Which of the following would be quoted on a bond confirmation when an investor purchases a bond that has been advance refunded?

Yield to call

An order reaches the floor, and the designated market maker says you are stopped at 38.50. This means

Your execution will be 38.50 or better.

You are long 100 shares of XYZ at 45 and sell an XYZ May 45 call.

Your gain is premium.

All of the following investments may be suitable for a client in need of "current income" EXCEPT

Zero-coupon bonds.

the discont rate is

a fed monetary tool

cleint wishes to buy a call aand sell a put but pay n more thatn 2 points tota what order shoud e plaved

a spread order

58?Your cost basis is $20,000. Your limited partnership reports the following: Distributive loss of $3,500; Cash distribution of 12,000; Depletion of 4,000. What is your basis?

a)$500

which of follow requires feasibility study

airport

measure performance of stock relative to its beta, rather than the overal markett

alha

The disclosure document of the options clearing corporation must be sent

at or prior to the first trade approval.

Lagging indicators include

average duration of unemployment, labor costs, commercial and industrial loans, and average prime rate. Housing starts (new housing permits) and consumer expectations for business and economic conditions are leading indicators. Personal income is a coincident indicator.

37 A customer that sells a security in the secondary market will receive the

bid

Which of the following transactions in the same security will affect the holding period of a security held for 12 months or less?

buy a put sell short

not redemmable secuiy

common stock

s-1 initialss

coo off period

If a client who is an officer of a commercial bank opens a margin account with a New York Stock Exchange member firm, she I. Can trade during and after the time her new account papers are received and are in good order; II. Must notify the Exchange by separate letter that she is an officer of a commercial bank; III. Must receive prior written consent from her employer before the account can be opened; IV. Must have duplicate confirmations and reports sent to her employer

e I. Can trade during and after the time her new account papers are received and are in good order;

An RR with a NYSE member firm cannot be engaged in any other business without the prior written consent of the

employing broker/dealer. NYSE rules require the written permission of the employing broker/dealer before an RR is able to engage in any outside business activities.

to be in complaince with investment advisr act of 1940 which of the following would be subjected to registration requirments

fincial planners

not found in prospectus

fututre earning projections

A customer has a margin account. A broker/dealer is in receivership. The account has $90,000 securities and $50,000 debit. Which of the following would be true?

he client would be reimbursed $40,000.

Which of the following statements regarding overnight repurchase agreements is incorrect?

here is no interest rate risk.

least inerest oto a fundemnetal analyst

historical prices

Leading indicators include

housing starts, as measured by building permits and new private housing units, average weekly initial claims for unemployment insurance, and machine tool orders as measured by manufacturers' new orders.

euro dollars are traded in which of foloowing markets and currencies

interbank us dollars

impiratnat for retirmed investors and retirment plan adminstators to monitor

interest rate and reinvestment risk

compared to lng term det securites, short term debt securites have less

interest rate risk

Relative to a DMM "stopping stock" on the NYSE, it can be done if I. It is for a public order. II. Permission of a floor governor is granted. III. The designated market maker is guaranteeing a price. IV. It is bought for another member's account.

it can be done if I. It is for a public order. III. The designated market maker is guaranteeing a price.

Which of the following is NOT true concerning a redemption fee?

it is a form of sales charge.

At what price do bonds go out of the syndicate for member orders on a new municipal issue?

list less the takedown

arbitration rules apply to the following expect

memebers against public customers

MIG or Moody's Investment Grade applies only to

municipal notes

All of the following are components of the leading economic indicators as published by the Department of Commerce EXCEPT

ndex of industrial production.

A client calls his registered representative (RR) to ask her to buy 500 shares of XYZ Corp because he heard a dividend has been declared, but not paid yet, and he wants to receive the dividend. How should the RR respond to the client?

nform the client of the consequences and refuse the orde

Which of the following orders may NOT be accepted by a specialist or a designated market maker (DMM)?

not held

69 A customer bought 100 shares of XYZ at 48. Within 31 days she sold her shares at 41. She then, within 30 days, wrote an XYZ May 40 put. How can she avoid deferral of her tax loss?

nothing the loss will be deferred

XYZ Industries: 6% noncumulative preferred; 9% debentures convertible at $25. The trust indenture for the debentures contains an "anti-dilution" clause. If the company distributes a 10% stock dividend on the common stock, an investor who owns 10 XYZ Industries debentures would receive

notice that the conversion price of his bonds has been reduced to $22.73. A debenture convertible at 25 would convert into 40 shares ($1,000/25 = 40). A 10% stock dividend would adjust the number of shares to 44. $1,000/44 = 22.73, the new conversion pric

equity is affected

only by cash withdrawal or receipt (market value rise or fall). "Sale without cash" (50% could be withdrawn) means that market value and debit both fall equally, and SMA rises by half of the sale.

stabalizing the bid is permitted

only by the managing underwirter or designee

broker/deaer executes trade and charges a markdown the trade was done as

principal dealers chager markups and markdeown on principal transactions

true of leaps

profits and losses fri long leaps are long erm gains and losses income from writing lng leaps is always considered shrt term cap gai

debt coverage is represented by

revenue/ debt services

63 The capital asset pricing model considers all of the following factors EXCEPT

risk free rate of return

A customer places a buy limit order at $36.50. This means that the order

s held in the specialist's book.

he SIPC (Securities Investor Protection Corporation) insures a customer's account for unreturned securities for up to

sIPC insures unreturned securities up to $500,000.

requires a prospectus

securites act of 1933

An investor buys bonds which are priced in basis points. These bonds are

serial bonds

bonds rated BB or lower are

speculative or high yield, also known as junk bonds.

Which of the following is true regarding an insurance company's general account?

t is conservatively invested because it holds assets associated with guaranteed insurance products.

Which of the following is true about a stabilizing bid?

t must be disclosed in the prospectus.

Which legislative act requires that mutual funds pay redemption proceeds within 7 calendar days?

the Investment Company Act of 1940

In order to make sure that the trader received the best execution, the trader should seek the

the NBBO, which stands for the National Best Bid and Offer, will be determined by looking at all the different markets where the security trades to determine the highest bid and the lowest ask price

Which of the following best describes cash settlement?

the customer pays for the securities on trade date.

all are true of goverment securites except

they are goverment againeves

if short interest are rising

this indicates a future strong market

what is true of adrs

throug h ecommerical bank holding the adr converst the dividned in us dollars the invstor assumes currency risk

5% rule applies to all the following except

transactions in municiple bonds

responsible for changing registration of the stock certificate

transfer agent

trade confirmation delivery is goveend by the

uniform practice cde

Under Reg D rule 506, how much money can be raised within 12 months?

unlimited

most adeverse effect fro increaseing intrest rates

utilites

principal diffrents from REITS and DPPS

utilization of tax benifits

become an insider/ he or she is requried to notify SEC

within 10 days

27 Long the stock. Sell a call. The call is exercised. The seller will receive the dividend if the call is exercised after the

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