SIE - Chapter Quizzes Ch. 1-6
In regards to recourse loans in a DPP, which statement is TRUE? a) any principal (capital) repayment reduces the investor's basis b) any principal (capital) repayment does not affect the investor's basis c) the investor is not liable for repayment d) the lender will accept property put up as collateral for payment for the loan in case of a default
a) any principal (capital) repayment reduces the investor's basis
Under option exchange rules, when must a customer's options account be approved by a registered principal: a) before entering the first options rider b) by the settlement date of the first options order c) within 10 days from the time the account was approved for options trading d) within 15 days from the time the account was approved for options trading
a) before entering the first options rider
An investor who buys a call: a) has the right to sell 100 shares of the underlying stock b) has the right to buy 100 shares of the underlying stock c) has the obligation to sell 100 shares of the underlying stock d) has the obligation to buy 100 shares of the underlying stock
b) has the right to buy 100 shares of the underlying stock
Your customer is short WLC calls. Under the Exchange's position limit rule, his short call position is affected by holding which of the following in his account? a) long WLC calls b) long WLC puts c) short WLC puts d) long WLC common stock
b) long WLC puts
Which of the following is TRUE of cumulative voting? a) it is advantageous to majority shareholders b) minority shareholders have a better chance of electing a director of their choice c) majority shareholders can always elect the entire board of directors d) a stockholder of 400 shares with 5 persons to be elected to the board could only vote 400 shares for each director of his choice
b) minority shareholders have a better chance of electing a director of their choice
Mr. Smith is short 100 shares of ABC common stock when ABC pays a 10% stock dividend. On the morning of the ex-date Mr. Smith would: a) receive 10 additional shares of ABC common stock b) owe 10 additional shares of ABC common stock c) not be affected by the stock dividend d) owe the value of the 10 shares of ABC common stock In cash
b) owe 10 additional shares of ABC common stock
Which of the following best describes the requirement that a corporate charter requires the corporation to offer any new shares to the existing shareholders before offering the shares to the public? a) participation clause b) preemptive rights clause c) front-running clause d) dilution clause
b) preemptive rights clause
Joe calls his registered representative and is interested in investing in a new business development company. Joe is generally a conservative investor. What should the RR say to Joe? a) the RR should tell Joe that the investment is good because it satisfies his investment objectives b) the RR should tell Joe that the investment choice is not a good choice because investing in a new business development company requires high risk tolerance c) the RR should Joe that the investment choice is suitable and has the potential for substantial appreciation d) the RR should tell Joe that the investment choice is unsuitable but could be a good gamble
b) the RR should tell Joe that the investment choice is not a good choice because investing in a new business development company requires high risk tolerance
A new mutual fund investor with $300,000 to invest has two pricing options: - Options #1 has a 5% front-end sales load - Option #2 has a 2% front-end sales load with a 1% 12b-1 fee In making his decision on funds which of the following factors would be the most important? a) the investor's tax bracket b) the anticipated time frame for the investment c) the investor's risk profile d) the investor's net worth
b) the anticipated time frame for the investment
A customer wishing to exercise their preemptive rights should send the rights to the: a) rights agent b) transfer agent c) underwriter d) syndicate
b) transfer agent
A change in interest rates would most drastically affect the market values of: a) utility stocks and blue chip stocks b) utility stocks and preferred stocks c) blue chip stocks and preferred stocks d) blue chip stocks and growth stocks
b) utility stocks and preferred stocks
All of the following pay dividends EXCEPT: a) preferred stock b) warrants c) mutual fund shares d) American Depository Receipts (ADR's)
b) warrants
When a conversion takes place, what occurs? a) existing bonds are traded into the issuer for new bonds b) the issuer performs a second issue of bonds to retire an existing issue with the proceeds c) the issuer uses excess cash on hand to retire bonds prior to their original maturity date d) existing bonds are tendered to the issuer for equity securities, most frequently common stock
d) existing bonds are tendered to the issuer for equity securities, most frequently common stock
An investor bought 10 XYZ May 50 put a few weeks ago. The options expire May 21st. It is April 10th, and she wants to exercise them now. However, she must wait until May 20th. The most likely reason for this is the: a) option's exercise style is American b) the broker-dealer has placed a temporary hold on the acount c) investor has exceeded the options position limits d) option's exercise style is European
d) option's exercise style is European
Which of the following is NOT a benefit of owning preferred stock rather than common stock? a) preferred could be convertible, allowing the investor a choice of conversion b) preferred shares receive earnings prior to common shares c) preferred shareholders have prior claims to the assets of the corporation if liquidation occurs d) preferred shareholders have preemptive rights ahead of common shareholders
d) preferred shareholders have preemptive rights ahead of common shareholders
Crossfire Capital is a business development company (BDC) that is about to issue new shares to the public. Which of the following is true regarding the prospectus delivery requirement to the investor? a) the investor must receive a hard copy of the prospectus b) BDCs must provide a link to the prospectus and a hard copy c) prospectus delivery is generally not required for BDC unless the offering is above $1 billion d) providing a link to the prospectus satisfies delivery requirements
d) providing a link to the prospectus satisfies delivery requirements
Mr. Smith is the holder of a put option. He instructs his broker to exercise the option. The broker submits the option exercise notice to the Options Clearing Corporation. The OCC would normally: a) by using the first-in, first-out method, select another clearing member who is short that series to satisfy the exercise notice b) deliver funds equal to that aggregate exercise price to the exercising holder, Mr. Smith, in exchange for his stock c) assign the responsibility for satisfying the notice to the clearing member which sold the options to Mr. Smith d) randomly select a clearing member who is short that series to satisfy the exercise notice
d) randomly select a clearing member who is short that series to satisfy the exercise notice
Which of the following statements is TRUE of a customer who is long a listed equity option contract and decides to exercise the option: a) the seller of the contract in the original transaction will receive an exercise notice directly from the buyer of the contract b) the buyer of the contract will notify the buyer's broker-dealer, which will directly assign the exercise to a seller of the same option at the firm c) the buyer of the contract will directly the Options Clearing Corporation (OCC), which will then assign and directly notify a seller of that same option d) the buyer of the contract will notify the buyer's broker-dealer, which will then notify the OCC, and the OCC then assigned the exercise to a broker-dealer that is responsible for assigning the exercise to a seller of the same option
d) the buyer of the contract will notify the buyer's broker-dealer, which will then notify the OCC, and the OCC then assigned the exercise to a broker-dealer that is responsible for assigning the exercise to a seller of the same option
Which of the following is correct with regard to the current yield and coupon rate of a bond? a) the current yield of a bond is set for the life of the bond b) the coupon rate of a bond fluctuates depending on the price of the bond c) the coupon rate is re-set periodically by the issuer during the life of the bond d) the current yield of a bond fluctuates on the price of the bond
d) the current yield of a bond fluctuates on the price of the bond
Which of the following best describes the nominal yield on a bond? a) annual interest divided by the market price of the bond b) annual interest divided by the original issue price of the bond c) the compound rate of return equating the present value of the bond to the future payments of Interest and principal d) the interest stated on the face of the bond
d) the interest stated on the face of the bond
If yields on all marketable fixed income bonds increase approximately 1%, which of the following is correct concerning changes in bond prices? a) there will be no changes in bond prices b) the prices of short-term and long-term bond will decrease by exactly the same amount c) the prices of short-term bonds will decrease more than the prices of long-term bonds d) the prices of long-term bonds will decrease more than the prices of short-term bonds
d) the prices of long-term bonds will decrease more than the prices of short-term bonds
Trading in a stock has been suspended. Which of the following is true regarding trading in options on that stock: a) opening transactions are permitted b) closing transactions are permitted c) investors may only write new contracts d) trading in the options is also halted
d) trading in the options is also halted
Escrow receipts are used in connection with which of the following? a) hypothecating b) dollar cost averaging c) underwriting corporate securiites d) writing call options
d) writing call options
A put has the highest value to the buyer when the underlying security is: a) rising in market value b) falling in market value c) is substantially above the exercise price d) is out-of-the-money
b) falling in market value
Which of the following best defines LEAPS options? a) long term bonds with long term staggered interest payments b) extended long term options on stocks and indexes c) long term estimated annuity securities d) options with 30 point limit moves
b) extended long term options on stocks and indexes
When general level of interest rates increase, the price of high-grade bonds will: a) rise b) fall c) remain the same d) fluctuate erratically
b) fall
An option investor decides to buy 4 ABC Aug 60 Calls @ 4 and sell 8 ABC Aug 70 Calls @ 3 when ABC is at 65. What would be the profit or loss to the customer at expiration if the market price of ABC had declined to 50? a) $800 profit b) $800 loss c) $200 profit d) $200 loss
a) $800 profit
Which of the following would represent a quote for a railroad bond? a) 106 1/2 b) 106 16/32 c) 106.50 d) 106.16
a) 106 1/2
The Eskimo Cup Company announced a 20 cent dividends payable March 15th to owners of record Thursday, February 19th and declares a 5% stock dividend payable March 15th to owners of record Friday, February 13th. An investor buys 2,000 shares regular way on Monday, February 16th. He would expect a cash divided of: a) 20 cents per share on 2,000 shares b) 20 cents per share on 2,100 shares c) 21 cents per share on 2,000 shares d) 21 cents per share on 2,1000 shares
a) 20 cents per share on 2,000 shares
Which of the following statements regarding Collateralized Debt Obligations (CDOs) is correct? a) CDOs are divided into tranches, generally based on risk b) CDOs are backed only by mortgages c) CDOs are considered equity securities d) CDOs are unsecured debt obligations
a) CDOs are divided into tranches, generally based on risk
XYZ Stock has opened at 80 and has begun to rise sharply during trading. Which of the following XYZ option contracts would show the greatest increase in value? a) XYZ July 70 call b) XYZ July 80 call c) XYZ July 70 put d) XYZ July 80 put
a) XYZ July 70 call
In which of the following situations would the delivery of a prospectus be required? a) a long-standing mutual fund sells redeemable shares on a continuous basis to investors b) a corporation with stock that was issued several years ago sells treasury stock to investors In the secondary market c) an investor buys shares of an exchange-listed, closed-end fund from another investor d) an options trader closes out an existing short position by buying an option
a) a long-standing mutual fund sells redeemable shares on a continuous basis to investors
A structured debt security backed by a pool of assets such as mortgages and auto loans where the securities are generally traded based on the Average Life of the security rather than a set maturity date is known as: a) an asset-backed security b) a Treasury bond c) a municipal bond d) a Collateral Trust Certificate
a) an asset-backed security
An American Corporation is selling office equipment to a British Corporation. The equipment will be paid for in British pounds. How would the American Corporation best hedge against currency exchange rate risk? a) by selling calls on British pounds or buying puts on British pounds b) by selling calls on American dollars or buying puts on American dollars c) by selling puts on British pounds or buying calls on British pounds d) by selling puts on American dollars or buying calls on American dollars
a) by selling calls on British pounds or buying puts on British pounds
Which of the following securities could pay a dividend in cash or in other securities? a) common stock b) mutual funds c) municipal bonds d) corporate bonds
a) common stock
A sales load is best defined as the: a) difference between the selling price and the net asset value b) commissions paid on the purchase or sale of securities c) fee paid to the investment advisor d) difference between the expense ratio and the total return of the fund
a) difference between the selling price and the net asset value
Junk bonds are also called: a) high yield bonds b) low yield bonds c) investment grade bonds d) revenue bonds
a) high yield bonds
A corporation increases the dividend payments to common stockholders. Assume that the price of the common remains unchanged. How does this affect the dividend yield of the stock? a) increases b) decreases c) remains constant d) cannot be determined with information provided
a) increases
The yield on a convertible bond will decrease when the price of the underlying stock: a) increases b) decreases c) is at parity with the bond d) remains unchanged
a) increases
Which of the following types of bonds secures its income from fees charged to users? a) revenue bond b) general obligation bond c) collateral bond d) convertible bond
a) revenue bond
Listed options contract are standard contracts that are issued by and guaranteed by: a) the Options Clearing Corporation b) the Federal Reserve Board c) the exchange where the option is listed d) the writers of the option
a) the Options Clearing Corporation
In relation to limited partnerships, the "flow-through principal" refers to: a) the flow-through of partnership income and expenses to its members so that they can be reported on the members' individual tax returns b) a provision in the partnership agreement that before a partnership interest is offered to anyone else it must first be offered to a general or limited partner c) the right of limited partners to inspect the books and records of the limited partnership d) borrowing against the investment to create a greater asset value
a) the flow-through of partnership income and expenses to its members so that they can be reported on the members' individual tax returns
An investor buys 1 XYZ July 45 call for 4 when the stock is at 43. If the stock rises to 51 and the investor exercises the call, which of the following is TRUE? a) the stock has a cost basis of $49 per share (45+4) b) he has a $400.00 profit c) he has a $400.00 loss d) the option has a cost basis of $49 per share
a) the stock has a cost basis of $49 per share (45+4)
In a normal market, when there is a change in interest rates how do the yield to maturity and the current yield of a bond react? a) they move in the same direction b) they move in opposite directions c) they are unaffected by bond price movements d) there is no relationship to each other
a) they move in the same direction
An option holder, according to the Options Clearing Corp. rules, can exercise the option until: a) 4:00pm Eastern time on the business day that immediately precedes the Saturday of expiration b) 5:30pm Eastern time on the third Friday of the expiration month c) 4:00pm Eastern time on the last Friday of the expiration month d) 11:59pm Eastern time on the third Friday of the expiration month
b) 5:30pm Eastern time on the third Friday of the expiration month
Which of the following is a corporate bond quote? a) 7.20 - 7.00 b) 75 1/2 c) 75.25 - 75.30 d) 7.50%
b) 75 1/2
A client is seeking to invest in mortgage-backed securities that carry the lowest possible level of risk. The client would be best suited with: a) FINRA securities b) GNMA securities c) FNMA securities d) Treasury securities
b) GNMA securities
When trading equity options which two of the following would represent a bullish strategy? I. Buying a call II. Selling a call III. Buying a put IV. Selling a put a) I & III b) I & IV c) II & III d) II & IV
b) I & IV
In terms of common stock and the securities industry, which of the following BEST describes the term "proxy"? a) a document allowing discretionary trading in a customer's account b) an authorization related to voting privileges allowing absentee voters for shareholders or voting on behalf of shareholders by a broker-dealer firm c) an introducing broker that does not have clearing capabilities, so the firm clears all transactions through another firm called a clearing firm d) an abbreviated word used to describe a quotation that is approximate or is not "firm"
b) an authorization related to voting privileges allowing absentee voters for shareholders or voting on behalf of shareholders by a broker-dealer firm
When an investor buys 4 ABC August 45 calls @ 3, it is considered to be: a) an opening sale b) an opening purchase c) a closing sale d) a closing purchase
b) an opening purchase
Which of the following is incorrect regarding supervoting shares? They a) are issued by corporations b) are considered preferred stockholders c) permit a limited number of stockholders to retain control of a company d) provide shareholders with more than one vote per share as compared to another class of stock Issued by the same company
b) are considered preferred stockholders
Cash dividends paid to investors: a) are exempt from tax liability b) are subject to Federal, State, and Local tax c) reduce the cost basis of the common stock d) increase the cost basis of the common stock
b) are subject to Federal, State, and Local tax
On a fully registered bond, a customer would receive his interest in what manner? a) by sending in one of the coupons attached to the bond b) by check mailed to him semi-annually c) by presenting the bond to the paying agent d) by check mailed to him once a year
b) by check mailed to him semi-annually
Typical criteria by which sales charges are reduced by an investment company in the purchase of mutual fund shares include each of the following EXCEPT: a) investment of a large dollar amount in a specific fund or under one family of funds b) whether or not fund shares are purchased in a regular or retirement account c) reinvestment of dividend and capital gains distributions form the fund d) a letter of intent or rights of accumulation agreement
b) whether or not fund shares are purchased in a regular or retirement account
An investor has a large portfolio of Blue Chip common stocks and expects the market to remain stable or decline slightly. He's like to increase the rate of return on his portfolio. Which of the following would be the best choice for this investor? a) buy calls on the portfolio b) write covered calls on the portfolio c) establish a call spread d) writes covered puts on the portfolio
b) write covered calls on the portfolio
Which of the following statements by an RR is TRUE regarding dividends? a) "It is possible for a long-term equity anticipation security to pay dividends." b) "An investor can expect to receive dividends on the underlying security in the event that they own a call option." c) "An investor who owns an American Depository Receipt can expect to receive dividends from their investment when declared and paid." d) "When an investor owns a warrant or right, they are entitled to receive dividends in accordance with these securities."
c) "An investor who owns an American Depository Receipt can expect to receive dividends from their investment when declared and paid."
A customer purchased 100 shares of ARK stock at $60 per share. He then purchased one ARK September 80 put at 6. He exercises the put when the market price of ARK stock is $67 and has a: a) $1 profit per share b) $1 loss per share c) $14 profit per share d) $14 loss per share
c) $14 profit per share
A basis point on a bond is: a) 1% b) 10% c) 0.01% d) 0.001%
c) 0.01%
Zoltan Zippers Co. has 5,000,000 shares outstanding. It completes a 3/1 stock split and then declares a 10% stock dividend. How many shares will be outstanding after the stock dividend is completed? a) 15,000,000 b) 13,500,000 c) 16,500,000 d) 11,500,000
c) 16,500,000
ABC Inc. announced a 2-for-1 stock split. An investor owns 100 shares with a current market price of $50 per share. After the split, the investor will own: a) 50 shares at $200 per share b)50 shares at $100 per share c) 200 share at $25 per share d) 200 shares at $100 per share
c) 200 share at $25 per share
A company has authorized 10,000,000 shares of common stock. 8,000,000 shares have been issued 4,000,000 shares are treasury. This means: a) 8,000,000 shares are outstanding b) 10,000,000 shares are outstanding c) 4,000,000 shares are outstanding d) 14,000,000 shares are outstanding
c) 4,000,000 shares are outstanding
An individual in a 35% tax bracket owns shares in a municipal bond fund that yields 4%. What yield would he need from a corporate bond fund to have the same after-tax return? a) 4% b) 5% c) 6% d) 11%
c) 6%
Bob heard that the municipal bonds are tax-free investments. He wants to reduce his tax burden associated with investments, so he thinks it would be a good idea to liquidate all of his U.S. Government Securities positions and invest everything in a wide variety of municipal bonds. Which of the following would be important considerations for Bob's agent to discuss with him prior to the liquidation of other investments and full investment in municipal bonds? I. Bob's agent should discuss the tax consequences of liquidating his positions as well as the transaction costs for re-distributing all of his funds II. Bob's agent should discuss the fact that only municipal bond interest is tax-free at the federal level and can be taxable at the state and local level, depending upon the situation III. Bob's agent should discuss the fact that he doesn't get as much in commissions and transaction costs associated with trades in municipal bonds IV. Bob's agent should discuss the fact that municipal bonds often carry more risk than U.S. Government Securities a) I and II only b) II and III only c) I, II, and IV only d) I, II, III, and IV
c) I, II, and IV only
In what order do the following receive payments in the event of a corporate liquidation? I. Debenture holders II. Preferred stockholders III. Senior lien bondholders IV. Taxes a) IV, III, II, I b) III, IV, II, I c) IV, III, I, II d) IV, II, III, I
c) IV, III, I, II
An issuer of bonds sees that interest rates have gone down. The issuer wishes to redeem an existing bond issue and refund it with new bonds that have a lower coupon rate. What bond feature is necessary in order for the issuer to effectively complete their desired refunding? a) a conversion feature b) an anti-dilution feature c) a call feature d) a put feature
c) a call feature
Which of the following investment companies typically will not charge a management fee? a) an open-end investment company b) a closed-end investment company c) a unit investment trust d) a growth fund
c) a unit investment trust
Each of the following are reasons for buying a listed put option on an exchange as opposed to selling short the underlying stock, EXCEPT: a) buying a put would require a smaller capital commitment than that required for a short sale b) an investor will not be subject to unlimited loss potential when buying a put c) any time-value in the put gradually dissipates as it approaches expiration d) buying a put has lower dollar loss potential than selling short the stock
c) any time-value in the put gradually dissipates as it approaches expiration
All of the following are TRUE about the types or kinds of preferred stock EXCEPT: a) participating where shares may receive a dividend higher than the fixed dividend if the company's profits are larger than expected b) cumulative where shares accumulate dividends that were skipped in past years c) callable where shares may be redeemed by the company at a stated discount from par on certain dates d) convertible where shares may be exchanged for shares of common stock at the option of the shareholder
c) callable where shares may be redeemed by the company at a stated discount from par on certain dates
Which of the following statements is TRUE regarding the sequence of events tied to opening an option account? a) clients are permitted to start entering orders in an account prior to giving their information to the RR and prior to approval from a BOM b) clients are permitted to start entering orders in an account once they give their information to the RR, but prior to approval from a BOM c) clients are permitted to start entering orders in the account once they've given their information to the RR and the account is approved by the BOM, but prior to the firm receiving a signed option agreement from the customer d) clients are permitted to start entering orders in the account only when they've given their information, received approval by a BOM, and returned a signed option agreement to the firm
c) clients are permitted to start entering orders in the account once they've given their information to the RR and the account is approved by the BOM, but prior to the firm receiving a signed option agreement from the customer
Which of the following represents funded debt? a) U.S. Treasury note b) municipal bond c) corporate mortgage bond d) flower bond
c) corporate mortgage bond
Which best describes municipal bonds priced at par? a) all coupons yield the same return b) bonds will be issued with a face value of $100 c) coupon rate for any given year equals the yield to maturity d) bonds are offered net of accrued interest
c) coupon rate for any given year equals the yield to maturity
All of the following are benefits of investing in a REIT EXCEPT: a) income and/or growth b) professional management c) depreciation write-offs d) diversification
c) depreciation write-offs
An "exchange privilege" offered by a group of mutual funds allows the investor to: a) sell their shares on the New York Stock Exchange b) exchange shares of an open-end fund for an ETF c) exchange shares of one fund in the group for another different fund in the group at a reduced or no sales charge d) withdraw cash from investments in fund shares without losing the option of continuing to reinvest dividends and capital gains
c) exchange shares of one fund in the group for another different fund in the group at a reduced or no sales charge
A single 25-year-old investment banker has income of $300,000 and net worth in excess of a million dollars. Her investment objective is capital appreciation. All of the following would be appropriate for this investor except: a) equities in emerging markets b) small cap equity securities c) high yield preferred stocks d) aggressive growth funds
c) high yield preferred stocks
Raj decides to begin buying mutual fund shares of ABC Equity Fund.He signs a letter of intent (LOI) in the process. Which of the following is NOT an expectation that Raj should have in relation to the letter of intent? a) ABC Equity Fund will establish an escrow account and hold some of the acquired shares in escrow through the established LOI period b) breakpoint schedule pricing is available to Raj at various levels with an established expectation of total dollars invested c) if Raj doesn't meet the established expectation of investments made, he will be required to send a check for the difference between the sales load in the LOI and appropriate sales load for his level of investment d) the LOI can establish a period up to 13 months during which Raj can contribute to reach the established expectation of total dollars invested
c) if Raj doesn't meet the established expectation of investments made, he will be required to send a check for the difference between the sales load in the LOI and appropriate sales load for his level of investment
The most senior claim against assets of a corporation in the event of a corporate liquidation would be which of the following? a) preferred stock b) common stock c) mortgage bonds d) subordinated debentures
c) mortgage bonds
When an investor buys a call option, regardless of whether it is an equity or stock index option, the maximum risk or loss potential to the investor is the: a) premium that was paid for the contract plus any out-of-the-money amount b) premium that was paid for the contract less than the in-the-money amount c) premium that was paid for the contract d) exercise price on the contract plus the premium paid for the contract
c) premium that was paid for the contract
One of your clients has large holdings of a few blue-chip corporations. The investor wishes to hold onto the stock for multiple reasons, but she is uncertain about price fluctuations in the short-term future.. How can she use options to provide the most downside protection? a) she can purchase call options on the securities in her portfolio b) she can sell call options on the securities in her portfolio c) she can purchase put options on the securities in her portfolio d) she can sell put options on the securities in her portfolio
c) she can purchase put options on the securities in her portfolio
An RR has a client who purchased 500 shares of ABC Fund, an equity mutual fund, several months ago, and now wants to purchase another 500 shares of the same fund. In this scenario, it would be MOST appropriate for the RR to state that the client should consider: a) closed-end funds with the same objective in order to diversify investments b) a bond fund for diversification purposes, even if the client does not have an objective of income c) singing a letter of intent or option for a rights of accumulation agreement in order to reduce the sales load charged on additional purchases d) reviewing other mutual fund families in order to ensure that the objective of the fund chosen by the client best suits the client's needs
c) singing a letter of intent or option for a rights of accumulation agreement in order to reduce the sales load charged on additional purchases
Monthly interest received from collateralized mortgage obligations (CMOs) is: a) tax-free at all levels b) taxable only at the state level c) taxable at the federal, state, and local levels d) taxable only at the federal level
c) taxable at the federal, state, and local levels
Which of the following entities provides a physical and electronic location where listed options transactions are performed during trading hours in the U.S.? a) the Options Clearing Corporation (OCC) b) the Securities and Exchange Commission (SEC) c) the Chicago Board Options Exchange (CBOE) d) the Financial Industry Regulatory Authority (FINRA)
c) the Chicago Board Options Exchange (CBOE)
A customer performs the following transactions when DEF is trading at $54.50 per share: - Purchases 1 DEF July 55 call for 4 - Purchases 1 DEF July 60 put for 6 The market price of DEF then moves to $52.50 per share. At this point in time, the customer sells the put option for the in-the-money amount. The call remains outstanding until it expires. What is this customer's profit or loss in this scenario? a) the customer will have a gain of $250 b) the customer will have a loss of $250 c) the customer will have a gain of $800 d) the customer will have a loss of $800
c) the customer will have a gain of $800
In a limited partnership, which one of the following would represent the least potential for a conflict of interest? a) the general partner is allowed to lend money to the limited partnership b) the general partner owns leases next to leases owned by the limited partnership c) the general partner has a substantial amount of funds at risk in the limited partnership d) the general partner is allowed to borrow money from and lend money to the limited partners
c) the general partner has a substantial amount of funds at risk in the limited partnership
Which would be a counter-cyclical industry? a) the computer software industry b) the pharmaceutical industry c) the gold mining industry d) the automobile industry
c) the gold mining industry
An investor would have the greatest amount of risk with which of the following option positions? a) the investor writes an uncovered put b) the investor buys a long put c) the investor writes an uncovered call d) the investor buys a long call
c) the investor writes an uncovered call
Which of the following amounts is typically paid to the holder of a normal corporate bond at maturity? a) the market price of the bond at the time of purchase b) all interest payments c) the par or face value that is printed on the bond d) no amount is paid at maturity of a bond
c) the par or face value that is printed on the bond
Which of the following factors is the LEAST important in analyzing the investment quality of a mortgage bond? a) the collateral held by the trustee bank b) the current phase of the economic cycle c) the trustee bank holding the title to the collateral d) the credit rating issued by a nationally recognized rating agency
c) the trustee bank holding the title to the collateral
When disclosing information to a client with regard to Class B shares, which of the following is true? a) a commission will be paid with each purchase b) they are "no load" shares c) there is the potential of a deferred sales charge d) a sales charge will be imposed with the initial purchase
c) there is the potential of a deferred sales charge
What is the amount of interest payable per year on a $1,000 par value 5% bond selling at 80 and redeemable at par in 10 years? a) $10 b) $40 c) $45 d) $50
d) $50
A corporation has authorized common stock of 10,000,000 shares. 8,000,000 shares have been issued and 4,000,000 shares are treasury stock. Which of the following is true? a) 14,000,000 shares are outstanding b) 10,000,000 shares are outstanding c) 8,000,000 shares are outstanding d) 4,000,000 shares are outstanding
d) 4,000,000 shares are outstanding
A customer purchases 1 XYZ July 50 call @ 5. The customer will breakeven at which of the following market prices for the underlying security? a) 5 b) 45 c) 50 d) 55
d) 55
Blake currently owns 200 shares of ABC common stock. ABC announces a 3 for 1 stock split. After the split, how many shares of ABC will Blake own? a) 200 shares b) 300 shares c) 400 shares d) 600 shares
d) 600 shares
Collateral Mortgage Obligations are collateralized by all of the following EXCEPT: a) conventional issuers b) FHA mortgages c) Fannie Maes d) Sally Maes
d) Sally Maes
A customer wishes to sell a stock just after the stock pays a dividend with a record date of Friday, October 20th. Assuming a regular-way settlement, the earliest that the customer could sell the stock and still receive the dividend is: a) Monday, October 16th b) Tuesday, October 17th c) Wednesday, October 18th d) Thursday, October 19th
d) Thursday, October 19th
The final tranche of a CMO is generally know as: a) a companion bond b) PAC (Planned Amortization Class) c) TAC (Targeted Amortization Class) d) a Z-bond
d) a Z-bond
Zero coupon bonds are frequently used to: a) amortize the cost of the bond b) provides a steady stream of dividend income c) provide a steady stream of interest income d) accumulate capital to fund a particular investment goal
d) accumulate capital to fund a particular investment goal
Which of the following would influence the price of option premiums? a) the amount of time until the option contract expires b) the market price of the underlying stock c) the volatility of the underlying stock's price d) all of these items influence the price of option premiums
d) all of these items influence the price of option premiums
Which of the following is most likely to fluctuate in value during a period of stable interest rates? a) cumulative preferred stock b) participating preferred c) senior preferred d) convertible preferred
d) convertible preferred
Which of the following instruments/asset classes would generally be considered to be the least liquid? a) over the counter stock b) listed stock c) general obligation municipal bonds d) direct participation program units
d) direct participation program units
ADR's are used to facilitate: a) foreign trading of domestic securities b) foreign trading of U.S. Government securities c) domestic trading of U.S. Government securities d) domestic trading of foreign securities
d) domestic trading of foreign securities
