SERIES 7 2.0
The investment most likely to provide inflation protection
(Investment in) common stock
In which of the following types of offerings does a brokerage firm have no financial obligation for unsold securities?
-All or none -Best efforts
Hedge funds (2 characteristics)?
-Are unregulated -use investment techniques most suitable for sophisticated investors
Because Money market instruments are designed to meet the short-term cash needs of issuing institutions, this is NOT a money market instrument?
Newly issued Treasury notes issued to meet a specific government funding requirement
US Treasury bills are issued for terms of
4, 8, 13, 26, and 52
These two provisions govern the offering of control stock to the public without filing Form 144?
5,000 shares or fewer are sold. The dollar amount is $50,000 or less.
Under the Conduct Rules, the maximum sales charge on any transaction involving an open-end investment company share is
8.5% of the offering price
Regular way settlement for US government bonds is
Next business day
One of your customers is concerned about future inflation. Which of the following mutual fund recommendations is likely to be the MOST suitable?
A common stock growth fund
False statements about the process of awarding an underwriting to a syndicate, EXCEPT
A competitive bid underwriting is the standard for general obligation municipal underwritings.
MOST suitable for an IRA?
A covered call (selling a call option on a stock owned within the IRA)
A sharing arrangement in which only deductible costs are apportioned to the investor, with the sponsor bearing all capitalized costs is called
A functional allocation
The OTC market is:
A negotiated market
Stabilizing bids may be entered at:
A price no higher than the public offering price
NOT true regarding the 5% markup policy:
A riskless transaction is not generally covered by the 5% markup policy. (They are covered)
Covered call writing normally occurs in
A stable market
The following may be included in an advertisement for a CMO issue EXCEPT:
A statement that the CMO is guaranteed by the U.S. government
A customer purchases $100,000 of original issue discount municipal bonds. How will this trade be considered for tax purposes when the bonds mature?
No capital gain
ABC and MNO both have the same market price and shares outstanding for their common stock. If ABC's P/E is higher, that would indicate that
ABC's net income is less than MNO's (Higher P/E means it's earnings (net income/shares outstanding) is lower than MNO's)
If a broker-dealer is assisting in the registration of a stock issue, a registered representative of the firm may
Accept an indication of interest
A customer should receive a current option disclosure document before or at the date of:
Account approval (Remember: ODD @ AA)
The following customer account requires the sending of monthly customer statements?
An account containing penny stocks
Which of the following municipal issues would LEAST likely involve overlapping debt?
An airport district
Who is NOT permitted to open an IRA?
An individual whose sole income consists of dividends and capital gains (Alimony before 1-1-19 is considered earned income.)
True, about the underwriting manager of a syndicate?
An underwriting syndicate may have more than one manager.
Both of the securities acts of 1933 and 1934 address fraud in the securities industry. Regarding the antifraud provisions outlined in these acts, which of the following statements is TRUE?
No securities, issuers, or transactions are exempt from the antifraud provisions of these acts
...a short-term money market instrument with a bank guarantee that is used to provide capital for exporters to foreign countries?
Bankers' acceptance
Regarding bonds (2)
Bonds are interest rate sensitive in all environments Bond prices may fall as interest rates begin to rise
Under Uniform Practice rules, all of the following deliveries are eligible for reclamation except:
Bonds delivered subject to an in-while call.
Which of the following affects the holding period of XYZ stock, a position that has been held for six months?
Buying an in-the-money put Buying an out-of-the-money put
An investor who believes the U.S. dollar will strengthen against the Canadian dollar should profit from which of the following strategies?
Buying puts on the Canadian dollar Establishing a call credit spread on the Canadian dollar
A registered principal must approve all orders
By the end of the trading day
Regarding the Code of Arbitration Procedure, True:
Simplified arbitration is available for claims of $50,000 or less, and the statute of limitations is six years from the triggering event.
Need to invest a fixed-dollar sum now that will return a fixed-dollar sum in 10 years... NOT a suitable recommendation...
CMO's
If this is missing from the delivery of a municipal bond certificate registered for principal only, it would fail to meet good delivery standards. BUT NOT THIS:
CUSIP number
During a trade halt, an investor can
Cancel an open order placed before the halt.
Limited partners have the right to do all EXCEPT:
Choose the assets for the partnership
When reviewing a money market fund portfolio, one would not expect to find
Common stovk
Which... securities issue is nonexempt, requiring registration under the Securities Act of 1933?
Corporate bonds
If a customer believes the Swiss Franc will depreciate against the US dollar. The following option strategy may best take advantage of the expected depreciation?
Uncovered call writing
A registered representative mentions a particular 6% municipal bond quoted on a 6.5% basis. Which of the following is correct?
Six percent is the bond's coupon. Six-and-a-half percent is the bonds yield to maturity.
Municipal bonds, like corporate bonds, settle...
Two business days after trade date.
Margin requirements on exempt securities (US Gov. securities and municipal securities) are set by
DEA
Nasdaq Level 1 service
Displays the inside market: highest bid and lowest ask
Characteristic that is applicable to REIT's?
Dividends from REITs are taxed as ordinary income.
In reviewing prospectuses and registration statements, the SEC
Does not approve or disapprove of the issue
...would make an employee ineligible to participate in a company's qualified retirement plan?
He is only 20 years old. (Anyone 21+, been with company at least 1 year, works 1000+ hrs per year.)
If a married couple establishes a joint tenants with right of survivorship (JTWROS) account with a balance of $1 million and the wife dies, what is the husbands estate tax liability?
He pays no estate tax
Which order types are available to customers for use in NYSE equity markets?
Immediate or Cancel (IOC) Order cancels other (OCO) (FOK & AON are no longer permitted in NYSE Equity markets)
An order designated FOK means that the order must be executed:
Immediately and in its entirety
Individuals with diversified stock holdings in their portfolios write covered calls to
Increase their rate of return on the stocks held in their portfolio.
The principal tax benefit of investing in an exploratory oil and gas drilling program is derived from
Intangible drilling costs (IDC's)
Which statements regarding Treasury receipts, are TRUE? (2)
Interest is paid at maturity Interest is taxed annually.
FINRA's 5% markup policy does NOT apply to
Issues sold by prospectus
A new municipal bond issue had a dated date of January 1, 2018. The first coupon was due on August 1, 2018. The customer bought for settlement on September 1, 2018. How many months of accrued interest must he pay at settlement?
One month (The customer did not purchase the bond until late august and owes interest only from August 1, 2018.)
Instructions for best judgement as to the right time to place the order. TRUE about this order?
It is good only for the day entered.
A mutual fund that charges 12b-1 fees may use the money to cover all EXCEPT
Management fees
A new issue of bonds is offered to the public at a price of 100 3/4. What is the MOST likely reason for the issue being priced at a premium?
Market interest rates have gone down since the underwriting commitment was signed.
All of the following statements about trading index options on the Chicago Board Options Exchange are true EXCEPT:
Market orders entered by a market maker have priority over public orders
Formula for Break even point for a Call Spread
Net Premium + lower strike price
Which of the following is the computation for the coverage ratio for a municipal revenue bond issue?
Net revenue / annual interest and principal expense
European-style foreign currency options can
Only be exercised at expiration Be traded at any time
considered insiders under the Securities Exchange Act of 1934 EXCEPT
Owners of 10% or more of the corporations DEBT securities. (Equity makes an insider not debt.)
Calculating the conversion ratio:
Par Value / Conversion price (Parity price = market price of convertible / conversion price)
The requirements of ERISA apply to pension plans established by
Private sector organizations only
The Securities Exchange Act of 1934 applies to all of the following except:
Regulation of new issues (SA of 1933 deals with new issues)
A fundamental analyst would be interested in all EXCEPT:
Reversals
This exemption provision of the securities Act of 1933 may NOT be used for an initial offering of securities?
Rule 144
What are the differences between Rule 506(b) and Rule 506(c) of Regulation D of the Securities Act of 1933? (2)
Rule 506(c) offerings can be advertised, while 506(b) cannot. Rule 506(c) offerings are limited exclusively to accredited investors, while non accredited investors can participate in Rule 506(b) offerings.
On the morning of the ex-date for a cash dividend, which order on the order book will not be reduced?
Sell limit (Sell limit and buy stop orders placed above the market are not reduced)
Is NOT a proper way for a client to file a complaint with a FINRA member firm:
Telephone
A rising advance/decline like indicates
That more stocks are rising in price than falling.
regarding OTC markets, NOT true:
The OTC market is an auction market
In a new municipal bond offering, which of the following orders is placed after the bid is awarded and credits the entire syndicate with the takedown?
group
All of the following may be cited to justify a markup on a stock sold from a broker-dealer's inventory EXCEPT:
The dealer's cost (The overall value of the transaction, the security's price, and the availability... are legitimate factors)
The opening quote for issues listed on the NYSE is set by
The designated market maker
Many mutual fund investors elect to reinvest their dividends into additional shares of the fund. When an investor does this with the dividends paid by a common stock fund,
The dividends are taxable in the year received. (Dividends from Municipal bonds or UIT are exempt from Fed Tax but dividends from stock funds are taxable in year paid)
Section 1035 of the Internal Revenue Code permits
The exchange of an annuity to another annuity, whether issued by the same or a competing company, with tax deferral on earnings continuing.
Index options differ from stock options in which of the following ways?
The exercise settlement is cash. (In contrast, exercising a stock option involves delivering the underlying stock)
Regarding a Coverdell Education Savings Account (ESA) this is TRUE
The funds must be distributed by the time the grandchild reaches age 30 unless they are rolled over.
A portion of the OTC market where companies that have been delisted for regulatory reasons are usually traded is
The grey market
Under Rule 506(c) of Regulation D, advertising is permitted when
The issue is limited to accredited investors.
The Investment Company Act of 1940 has a number of rules relating to variable life insurance policies. All of these include.. EXCEPT:
The maximum allowable sales charge is 8.5% of the premium payment.
When an investor purchases Class A shares of a mutual fund in their brokerage account at a FINRA member firm, the sales charge is apportioned to all EXCEPT
The mutual fund
Revenue bond rate covenants require the user fees to be high enough to cover all of the following obligations of the issuing authority EXCEPT:
The optional call provisions (Optional to issuer)
A customer has his broker enter an order to buy GHI stock at the opening. Though transmitted promptly, the order does not reach GHI's trading post in time to be filled at the opening. How is the order handled?
The order is canceled.
An OTC trader's quote of "60 to 63, work out," in response to a broker holding a customer order to sell a block of stock, indicates which of the following?
The quote is tentative (nominal), merely suggesting a range in which the order is likely to be filled. (The term "work out" means that the quote is approximate, or nominal.)
In an undivided syndicate, liability for unsold securities rests with
The syndicate members on a pro rata basis.
If municipal securities are offered on an inverted scale, this means:
The yields on short-term maturities are higher than the yields on long-term maturities
When comparing preemptive rights and warrants, one similarity is
Their voting privilege
Regarding yield-based (interest rate) debt options is TRUE?
They are European-style exercise.
A registered rep. Is convicted of misdemeanor DUI; therefore,
Updating of the Form U4 is not required
... concerning a variable annuity are correct EXCEPT:
Variable annuities will protect an investor against capital loss
Many businesses open brokerage accounts to invest surplus funds. The following business forms would NOT require suitability information.
a C Corporation
The SEC requires that all sell orders be identified as either long or short. A person is not considered to be long a security if he
has sold an in-the-money put option on that security simultaneously with entering the short sale order.
Closed-end investment company shares can be purchased and sold
in the secondary market
A bond offered at par has a coupon rate
equal to its current yield.
Probably the MOST significant difference between a BDC and any other investment company registered under the Investment Company Act of 1940 is that a BDC
makes available significance managerial assistance to the investments in their portfolio
All of the following kinds of orders may be turned over to the specialist (dmm) for execution EXCEPT
not-held orders
Rule 144A regulates:
the sale of restricted stock to institutional investors
