A registered representative (RR) at a FINRA member broker/dealer has a brother who is a Certified Public Accountant (CPA), operating his own accounting firm. The 2 brothers decide that they will pay one another for business referrals in the form of a flat
prohibited because FINRA rules do not allow cash or non-cash payment for customer referrals to anyone who is not a FINRA member
-FINRA rules do not allow cash or non-cash payment for customer referrals to anyone who is not a FINRA member. The prohibition
Regarding the topic of outside business activity for associated persons of a FINRA member firm, which of the following statements is NOT TRUE?
Member firms must grant permission in writing prior to any outside business activity on the part of the associated person.
-While the member firm has the right to reject or restrict any outside business affiliations if a conflict of interest exists, their
Your next-door neighbor approaches you with a proposed security offering, knowing that you are a registered representative with a large, affluent client base. If he asks you to present this investment opportunity to your clients, you must tell him that:
you must first show the offering to your broker/dealer and receive permission to proceed with it.
-You must receive permission from your broker/dealer before you sell or offer for sale any security to your clients. To avoid a charge of selling away, you m
If a new customer is preparing to buy his first home within the next year, and his investment objective is aggressive growth, which of the following investments would be most suitable for your customer's portfolio?
T-bills
-While his profile indicates aggressive growth, the fact that he will need his funds in a year or less to purchase a home is the major consideration. With such a short time horizon, any equity investment involves too much risk, as does an investme
All of the following require prior notification by a registered representative to his broker/dealer EXCEPT
when he volunteers on the telephones for a fund-raising campaign for the local college
-Volunteer fund raising for the local college, since it is not a business or securities activity, would not require prior notification of his broker/dealer.
The practice of placing clients who trade infrequently in fee-based accounts has been identified by the SEC as
reverse churning
- If the annual fee paid would be appreciably greater than the annual commissions paid given the number of transactions the customer would normally do or could be reasonably expected to do, the fee-based account would not be appropriate a
If a registered representative wants to share in the profit or loss of a customer's account, all of the following statements are true EXCEPT:
FINRA must be notified in writing.
-All accounts must be approved by a principal, but FINRA is never notified regarding the opening of accounts. In a joint account involving a customer and a registered representative, profit and loss must be shared in pro
If an employee of an NYSE member wants to take a second job, which of the following statements is TRUE?
Prior written notice to the member firm is required
If a registered representative owns a vacation home and wants to rent it out during the summer, which of the following statements is TRUE?
No notification is required.
-Rental income is passive income. Passive investments are excluded from the notification requirements of the outside affiliations rule. Similarly, renting a vacation home is not a private securities transaction
Alpha
measure of performance on risk-adjusted basis. Active return gauges performance of investment against a market index.
Beta
Beta measures a security's volatility in relation to the overall market. Stocks with a beta greater than 1 are more volatile than the market and stocks with a beta less than 1 are less volatile than the market.
Used in CAPM (capital asset pricing model) w
Systemic Risk
The risk inherent to the entire market or an entire market segment. Systematic risk, also known as "undiversifiable risk," "volatility" or "market risk," affects the overall market, not just a particular stock or industry.
Business Risk
Business risk is the possibility a company will have lower than anticipated profits or experience a loss rather than taking a profit. Business risk is influenced by numerous factors, including sales volume, per-unit price, input costs, competition, the ov
Front Running
A person has prior knowledge of a block trade, they may not put an order in front of the block order. Block order being 10,000 shares or more.
Interpositioning
Adding another broker/dealer to the transaction when there is no benefit to the buyer or seller. When a BD inserts another into his own transactions simply to generate commissions or fees for the other BD, usually reciprocal.
Tactical Asset allocation
short-term portfolio adjustments, adjusts portfolio mix between asset classes in consideration of current market conditions.
What is a basic assumption in an active management investment style?
Some securities are mispriced and value can be captured through security selection.
-An investment manager using an active management investment style believes that by using investment expertise he can select securities that are undervalued to achieve sup
A wealthy client owns a large percentage of a thinly traded common stock. When this client wants to sell a major portion of his securities, he will immediately face:
marketability risk
-It is difficult to sell a large block of securities in a thinly traded stock without a substantial discount to market price. This is known as liquidity or marketability risk.
A portfolio manager using index options is trying to reduce which of the following types of risks?
Systematic risk
-(sometimes called systemic risk) refers to the impact the overall market has on an equity portfolio's value. Index options help insure portfolios against systematic risk. The purchase of index puts to protect a portfolio is termed portfol
Which of the following is the best example of a passive investment management style?
Exclusive use of index funds.
Passive investment management style
uses index funds because the manager does not believe that returns above the averages can be sustained for any length of time because the market is priced efficiently. Use of index funds in conjunction with specific securities in order to overweight secto
Your customer's broad-based portfolio consisting of quality equity securities has returned 4% this year. The S&P 500, a bench mark index, has returned an average 6% over the past several years. Compared to the benchmark index, the customer's portfolio has
minus 2%
If an investor practices value investing, which of the following stock types is he least likely to purchase?
A stock with an above-average price-to-earnings ratio.
Which of the following statements is NOT true?
Beta is a measure of a security's deviation from its historical average returns.
-A measure of a security's deviation from its historical average returns is the security's standard deviation.
Market timing is normally associated with which of the following portfolio management styles?
Tactical asset allocation, which attempts to capitalize on short-term market swings, is a market timing strategy.
Which of the following investments is most suitable for an investor seeking monthly income?
Money-market mutual fund.
-The money-market mutual fund is the most suitable investment for an investor seeking monthly income. The other securities offer higher long-term growth potential, but they are not designed to provide monthly income.
All of the following statements regarding dollar-cost averaging are correct EXCEPT:
dollar-cost averaging decreases the risk of loss.
-Dollar-cost averaging is a passive investment strategy using a fixed dollar amount to purchase shares no matter what the price is. The fixed dollar amount buys more shares when the price is lower and fewe
In constructing a profile for your customer, you wish to assemble information on both financial and nonfinancial investment considerations that affect your customer. Which of the following qualify as financial investment considerations?
I. Your customer's
III & IV
-Liquid net worth and expenses such as credit card payments involve concrete sums of money and cash flow and thus, are financial. Number of dependents and risk tolerance should be considered regarding suitability and making appropriate recommenda
Reinvestment risk is the chance that, after purchasing a bond, interest rates:
Fall
-Reinvestment risk is the danger that after purchasing a bond, interest rates will fall. This means that the fixed interest payments received over the remaining life of the bond will be reinvested at lower rates. The good news is that the price of th
Your client's investment portfolio is 50% growth stocks, 10% foreign stocks and 40% blue chip stocks. If the client is interested in further diversification which mutual fund would best meet that goal?
Bond Fund
-All of the current holdings are equities. To further diversify the current portfolio, the bond fund would be the best choice of those given to meet this objective.
Which of the following securities carries the highest degree of purchasing power risk?
Long-term, high-grade bond.
-The longer a fixed-income investment is held, the more vulnerable the investor is to purchasing power risk from inflation. Although preferred stock is also a fixed-income investment, convertible preferred will increase in valu
Your customer's portfolio consists of 40% long-term government bonds, 20% preferred stock, and 40% common shares of utility companies. Which of the following may have the single largest impact on the entire portfolio?
Interest rate movements
-Of the four answer choices, interest rate movement is the most likely to impact each of the portfolio components. Interest rates and bond prices have an inverse relationship, and their movement often determines whether investors m
A customer pursuing income using a defensive investment strategy while avoiding volatility would be most interested in:
short-term government bonds
-Remember to take all investor characteristics into account. Short-term government bonds will produce for the customer safe income with little price volatility.
An investment adviser who switches among investment classes based upon anticipated market changes is using a technique known as:
asset allocation
-Indexing is a passive strategy that makes no attempt to anticipate market moves. An index strategy reflects an underlying index with the adviser keeping securities in the portfolio in proportion to their weight in the underlying index. V
A new customer asks her registered representative to recommend undervalued or out-of-favor securities with relatively low prices. This portfolio management strategy is known as:
value
-Value investing is the strategy of selecting stocks that trade for less than their book value. Value investors actively seek stocks of companies with sound financial statements that they believe the market has undervalued.
Your client is interested in a direct participation program (DPP) limited partnership. Which of the following two are most likely to factor into a discussion on suitability of such an investment?
I. Beta.
II. Liquidity.
III. Duration.
IV. Age.
II & IV
-The key here is to recognize that with DPPs, the customer's age is a relevant consideration in determining suitability. DPPs are long-term and illiquid. For example, it is unlikely that DPPs would be suitable for a customer near retirement age, r
A portfolio that invests in blue-chip stocks and growth stocks can best be described as:
A growth and income portfolio
-A growth and income portfolio typically combines conservative blue-chip securities for their stability and capital preservation with growth stocks for their appreciation potential. An aggressive portfolio contains securities
Which type of risk is a mortgage-backed security most likely to experience?
Reinvestment rate risk
-A mortgage-backed security, such as a collateralized mortgage obligation (CMO), is most likely to experience reinvestment rate risk. As mortgages are paid off early and refinanced in the event of declining interest rates, the inter
A customer would diversify his portfolio geographically to avoid which of the following risks?
I. Adverse economic conditions in a particular region.
II. Legislative changes by a state.
III. Decreasing bond prices.
IV. Decreasing stock prices.
I & II
-Geographic diversification can be used to avoid such risks as economic declines in various regions and changes in legislation at the state level.
A convertible corporate bond with an 8% coupon yielding 7.1% is available, but may be called sometime this year. Which feature of this bond would probably be least attractive to your client?
Near-term call
-The near-term call would mean that no matter how attractive the bond's other features, the client may not have very long to enjoy them.
Regarding the taxation of dividends received from corporate securities, which of the following are TRUE?
I. Nonqualified dividends are taxed at the rate the investor's ordinary income will be taxed.
II. Nonqualified dividends are not taxed.
III. Qualified
I & III
-Nonqualified (ordinary) dividends are taxed at the investor's ordinary income tax rate, while qualified dividends will be taxed at a maximum rate as specified by the IRS. Whether or not the qualified dividends are taxed at the maximum rate or a l
If your client has a $21,000 net capital loss this year and he plans to apply the maximum deduction toward his ordinary income for the year, after this year he may:
deduct a maximum of $3,000 per year and carry the remaining loss forward indefinitely.
-Capital losses may be used to offset capital gains. Once all capital gains have been offset, $3,000 of net capital losses may be used to offset ordinary income annuall
If an investor is in the highest federal income tax bracket and is subject to the alternative minimum tax, which of the following securities should an agent recommend?
General obligation bond.
-Municipal bonds are suitable for the portfolio of an investor who is in a high tax bracket because the interest is exempt from federal income tax. A general obligation (GO) bond is a better recommendation than an industrial reven
A strategy designed to lock in a capital gain, not realize it currently for tax purposes but instead defer it to a later tax period, is known as
Short against the box
-selling short shares that are currently owned in the long position when a profit already exists in the long position. From that point forward, each dollar lost in the long position, if the stock should fall, is offset by a gain in t
Tax preference items are used for the purpose of computing the alternative minimum tax. They include:
I. excess intangible drilling costs (wages, fuel, repairs).
II. accelerated depreciation.
III. percentage depletion in excess of basis.
I, II and III.
All of these. are tax preference items. Note that straight line depreciation is not a tax preference item.
An investor has purchased a number of securities including municipal bonds on margin. The margin interest paid to borrow the funds to purchase the municipal bonds is
Not deductible
Interest received from municipal bonds is tax exempt and therefore the government does not allow margin interest paid to purchase them to be used as a deduction on one's income tax return.
An investor purchases 100 shares of XYZ common stock for $70 and sells it one year later for $50. Which of the following activities would violate the wash sale rule?
I. Purchasing an XYZ call option 20 days after the sale.
II. Purchasing an XYZ put option
I & III
The wash sale rule is violated when an investor sells a security at a loss and purchases the same or a substantially identical security within 30 days of the sale date. The IRS considers a call option substantially identical to the underlying stoc
Four years ago, you declared a net capital loss of $23,000 on your tax return. You have had no further capital gains or losses since then. For that year and the following 2, you took the maximum allowable income deduction. How much may you deduct from you
$3,000/$11,000.
The maximum allowable deduction against income is $3,000. You will have taken 4 such deductions against $23,000, which leaves you with $11,000 to carry forward ($23,000 - $12,000).
An investor purchases a corporate bond at 105 with a 10-year stated maturity and pays $30 of accrued interest. If he elects not to amortize the premium and holds the bond to maturity, what is his cost basis for tax purposes?
1050
While most taxpayers do elect to amortize the premium paid for a corporate bond, it is not mandatory. The investor chooses not to amortize, thus his cost basis at maturity is simply what he originally paid for the bond. Accrued interest paid does not
If a municipal bond with 10 years to maturity is purchased from the issuer for 110, and after 2 years it is sold for 110, the bondholder must report:
capital gain of two points
Municipal bonds bought at a premium must be amortized. The amount of the premium is 10 points. With 10 years to maturity, the annual amortization is 1 point. After 2 years, the bond's cost basis has been amortized down to 108. I
If a customer buys a municipal bond at 110, maturing in 8 years, but sells the bond 6 years later at 103�, the customer will have a:
$10 per bond gain.
Municipal bonds that are purchased at a premium must be amortized. This bond has a premium of $100, which over 8 years amounts to $12.50 per year. The cost basis of the bond at the time of the sale is $1,100 ? (6 � $12.50) or $1,025. If
Paying a premium of $10 per bond, Ms. Tracey Pringle bought 10 municipal bonds with 20 years to maturity. Ten years later, she sold the bonds for 103. For tax purposes, she has a:
$250 gain.
The cost per bond is $1,010. The amortization amount each year is 10/20 years, which equals $.50 per year. $.50 per year � 10 years = $5 per bond. After 10 years, the adjusted cost basis is $1,005 per bond. She sells the bonds for $1,030 per bo
For tax-reporting purposes, qualified dividends are considered to be what type of income?
Portfolio income includes dividends, interest, and net capital gains derived from the sale of securities.
The term for the annual reduction of a municipal bond's cost basis purchased at a premium is:
straight line amortization.
Amortization is the process by which the cost basis of a bond bought at a premium is decreased during the holding period. Because the cost basis is reduced by equal amounts every year, amortization is done on a straight line ba
If a municipal bond maturing in 10 years is bought for 110, its cost basis at the end of the sixth year is:
104
$100 premium is amortized over 10 years: $100 � 10 = $10. Then, multiply the annual amortization amount by the number of years the bond is held ($10 � 6 = $60). Finally, subtract the amount of the amortized premium from the original cost of the bond (
A customer who owns TCB stock wants to continue holding the security. The stock has fallen from 26 when he bought it on February 2 to a 52-week low of 20.75. He sells the stock on December 1 at the low and repurchases it at 21 on December 15. What is the
tax loss is not allowed
Since it was repurchased in less than 30 days, IRS will not allow the loss due to the wash sale rule. It would have been allowed had the customer bought back the security after 30 days.
Which of the following is federally tax exempt for a corporation?
Municipal bonds are tax exempt for corporations as well as for individuals. Preferred stock dividends are taxable but at a reduced rate for corporations due to the 70% dividend exclusion. That break does not apply to the dividends on foreign securities. R
Most taxes in the U.S. fit into one of two categories. They are either progressive or regressive. Which of the following taxes are known as progressive taxes?
I. Sales.
II. Cigarette.
III. Income.
IV. Estate.
III & IV
With a progressive tax, the percentage amount increases as the taxable amount increases such as income and estate taxes. Sales and cigarette taxes are regressive because all persons pay the same percentage tax regardless of their income.
A customer buys a new issue municipal bond at a discount. If held to maturity, the amount of the discount is:
accreted and is not taxed.
Original issue discounts are accreted, which allows for a step-up in cost basis. Accretion on original issue discount municipal bonds is not taxed.
A customer buys $10,000 worth of new issue municipal bonds at a price of 104 and the bonds have 10 years to maturity. Four years after purchasing the bonds, she sells them at 99. What is the tax loss on these bonds?
340
To arrive at adjusted cost basis the premium on a new issue municipal bond must be amortized (subtract). To amortize the premium annually, divide the premium amount (in this case, $400 on the total purchase of 10 bonds) by the number of years until ma
An investor has losses on the sale of municipal bonds. Which of the following is TRUE for tax purposes?
The losses can be applied against the gains on the sale of any other security.
A customer buys a municipal bond in the secondary market at 96 that has 4 years to maturity. Two years later, the customer sells the bond at 99. The tax consequences of this investment are:
2 points of ordinary income and 1 point of capital gain.
-When a municipal bond is purchased in the secondary market at a discount, the annual accretion is taxed as ordinary income. The annual accretion is 1 point per year (4 points divided by 4 years to
For dividends to be taxed as qualified dividends, the dividend paying investment must be held for
more than 60 days
An investor has accumulated 3000 shares of XYZ common stock over several years via several separate purchases. If the investor sells 1000 shares and chooses to identify the specific shares sold for tax purposes, he must:
Notify the broker dealer who handled the sell transaction within 3 business days of the trade date.
Your client owns stock in the TXR Corporation and has received dividends of $950 this year. The client has taken $450 of this and used it to purchase additional shares of TXR. For tax purposes, your client must report:
$950
-All of the dividends received must be reported. Reinvesting any or all of the money in TXR stock does not reduce the client's tax liability on dividends received.
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.
-Original issue discount profit at maturity is treated as part of the tax-free interest on a municipal bond. However, for a municipal bond bought at a discount in the secondary market, the discount is considered ordinary income subject to
A municipal bond is purchased in the secondary market at 102�. The bond has 5 years to maturity. Two years later, the bond is sold for 102. The tax consequence to the investor is:
a capital gain of $5 per bond.
-Municipal bonds bought at a premium, either in the new issue or secondary market, must be amortized. The amount of the premium is 2� points or $25. As the bond has 5 years to maturity, the annual amortization amount is $5 p
If a book author receives royalty payments from a publisher, the payments will be taxable as which of the following types of income?
Earned income.
-The author received royalties as a result of an active trade or business, therefore the payments are considered earned income.
An investor purchases a municipal bond at par to yield 5.5% to maturity. Two years later, if he sells the bonds at a price equivalent to a 5% yield to maturity, the investor incurs:
a capital gain
-Yields fall as bond prices rise. Because the yield to maturity has dropped, the bond is trading at a higher price than when it was purchased. The consequence of the sale is a capital gain, because the investor sold at a premium the bond th
An investor has the following tax picture in 2006:
Tax loss carryover from 2005: $9,000
Capital gains: $15,000
Capital losses: $2,000
What is the investor's gain or loss?
$4,000 net capital gains.
-In determining an investor's capital gain or loss for the tax year, all gains and losses must be aggregated and offset against each other. In this situation, the prior year's loss carryover of $9,000 is added to the current year
If a customer buys a new issue municipal bond at a discount in the primary market, which of the following statements are TRUE?
I. The discount must be accreted.
II. The discount may not be accreted.
III. At maturity, there is a capital gain.
IV. At maturi
I and IV.
-If a new issue municipal bond is bought at a discount in the primary market, the discount must be accreted. The accretion is considered interest income, and therefore is not taxable.
If a customer purchases 5 newly issued municipal bonds for 101 and holds the bonds to maturity, the tax consequence is:
$0 gain or loss.
-If a new issue municipal bond is bought at a premium, the premium must be amortized over the life of the bond. At maturity, no capital gain or loss would occur because the premium would have been fully amortized.
An investor purchases 100 shares of CDE on December 20, 2000, for $2,000. On the same day, he purchases 100 shares of QRS for $2,000. On January 3, 2001, he sells the CDE stock for $1,700 and the QRS stock for $2,200. On January 24, 2001, he purchases 200
$200 gain in QRS.
-The investor in this question has a $200 capital gain to report on the purchase of QRS stock for $2,000 and its subsequent sale for $2,200. Because the investor repurchased the CDE stock (January 24) within 30 days of selling it (Januar
If a municipal bond is purchased at a discount which of the following is TRUE?
The discount is accreted and increases cost basis each year until maturity.
A customer purchases an XYZ municipal bond at 108. It is scheduled to mature in 16 years. After owning the bond for 10 years, he sells the bond at 102. What capital gain or loss must he report for tax purposes at the time of the sale?
$10 Loss
-If a municipal bond is purchased at a premium, the premium must be amortized over the time until maturity. An $80 premium on a 16-year municipal bond indicates that $5 will be amortized each year ($80 divided by 16 = $5). After 10 years, the tax
If an investor wants to do a tax swap, he could reasonably expect to pay more money if he buys bonds with a:
higher coupon and similar rating.
An investor will pay more for a higher coupon with the same rating. A higher coupon translates into a higher price.
A customer has realized a capital gain from the sale of a municipal bond. To reduce his tax liability, the capital gain can be offset against a capital loss in which of the following investments?
GOs
Equity securities.
Corporate bonds.
Collateralized mort
I, II, III and IV.
Any capital loss will offset a capital gain.
If a husband makes a gift of $100,000 to his wife, a U.S. citizen, how much of the gift is subject to gift taxes?
Interspousal gifts to citizens of the United States, regardless of amount, are not subject to gift taxes.
Several years ago, one of your customers bought an OID municipal bond at $960. The bond has now matured. For federal income tax purposes, the discount is:
tax free.
When buying an original issue discount (OID) municipal bond, the discount must be accreted each year and treated as interest income. Because interest income from a municipal bond is tax free at the federal level, the discount is not taxed if the
A customer buys a newly issued municipal zero-coupon original issue discount bond for 85. If the bond is held until maturity, the tax consequence:
is $0.
Municipal original issue discount bonds must be accreted. At maturity, the entire discount will have been accreted, and the cost basis will be equal to the par value. No gain or loss will occur at maturity.
If a customer buys a corporate bond at a discount in the secondary market, which of the following statements are TRUE if the bond is held to maturity?
The discount is taxable as ordinary income.
The discount is taxable as a long-term capital gain.
The int
I and III.
The discount on a corporate bond purchased in the secondary market must be accreted and is taxable as ordinary income, not as a capital gain. Furthermore, the interest income on corporate bonds is fully taxable.
Reference: 15.5.7.2
Progressive taxes would include:
personal income tax.
gift taxes.
estate taxes.
excise taxes.
I, II and III.
Progressive taxes are those taxes where the rate of taxation increases as the dollars being taxed increase. Personal income tax, while not as progressive as it was prior to the 1986 reform, is still considered a progressive tax since the hi
The effect of using the FIFO method for a sale of some of the securities that were purchased separately during a period of rising prices will be:
an increase in the taxable profits of the investor.
FIFO (first in, first out) is an inventory accounting term used to standardize the determination of which items are sold first. In this case, if different purchases are made of the same stock, and the pe
A customer purchases a 6% municipal bond in the secondary market on a 7% basis. The effective after-tax yield is
6 to 7%
In every case but one, the yield to maturity is the effective after-tax yield to a municipal-bond buyer. The one exception is a bond bought at a discount in the secondary market. In this case, the annual accretion is taxed as ordinary income. The
On September 1, an investor sold 100 shares of KLP Corporation common stock for a loss of $1 per share. On September 15, he purchased a KLP convertible bond with a conversion price of $40. How much of the original loss may he now declare for tax purposes?
$75.
Since he purchased the convertible bond less than 30 days after realizing the loss, the sale of the stock falls under the wash sale rule; Investors who sell securities at a loss, and repurchase them, including their equivalents, 30 days before or aft
Broker/dealers must report cost basis and sales proceeds
to customers and the IRS annually
Broker/dealers (BDs) are required to report both cost basis and sales proceeds to both their customers and the IRS annually.
A municipal bond is purchased at a discount in the secondary market at 90. The face amount is $10,000 and the bond has 10 years to maturity. If the bond is sold for 97 after 5 years, what is the taxable gain?
$200.
When a municipal bond is bought at a discount in the secondary market, the discount is accreted and taxable as ordinary income. Accretion increases cost basis. Therefore, 5 years later, the bond's cost basis is 95. At that point, the customer has a
All of the following statements about the taxation of municipal and corporate bonds are true EXCEPT:
corporate bondholders must amortize premium bonds annually.
If an investor purchases a corporate bond at a premium, the investor has the option of whether or not to amortize the premium. Amortization reduces both reported interest income and cost basis.Re
A customer purchases a municipal bond in the secondary market at 84 and he holds the bond to maturity. Since the customer must accrete the discount, what are the tax consequences at maturity?
No capital gain or loss.
When a municipal bond is purchased in the secondary market at a discount, the discount must be accreted for cost-basis purposes. Note that the accretion on a discount municipal purchased in the secondary market is taxable as ordin
An investor purchases 1,000 shares of ABC at $42 per share. One year later, the stock is trading at $50 per share and the investor receives 50 shares of ABC as a stock dividend. How will this dividend be currently taxed?
The shares are not subject to taxation.
If a registered representative wants to share in the profit or loss of a customer's account, all of the following statements are true EXCEPT:
FINRA must be notified in writing.
All accounts must be approved by a principal, but FINRA is never notified regarding the opening of accounts. In a joint account involving a customer and a registered representative, profit and loss must be shared in prop
In a rising market, which of the following is least volatile?
A stock with a beta of 0.5.
Beta is a measure of a stock's volatility relative to the overall market, as measured by the S&P 500. A stock with a beta of 2.0 will move twice as fast as the overall market, while a stock with a beta of 0.5 will move half as
Reinvestment risk is the chance that, after purchasing a bond, interest rates:
Reinvestment risk is the danger that after purchasing a bond, interest rates will fall. This means that the fixed interest payments received over the remaining life of the bond will be reinvested at lower rates. The good news is that the price of the bond
A customer pursuing income using a defensive investment strategy while avoiding volatility would be most interested in:
short-term government bonds.
Remember to take all investor characteristics into account. Short-term government bonds will produce for the customer safe income with little price volatility. Reference: 15.4