Which of the following institutions does NOT issue securities?
a. The Federal Home Loan Bank
b. The Federal Farm Credit Bank
c. The Federal Reserve Board
d. The Federal National Mortgage Association
c. The Federal Reserve Board
The Federal Home Loan Bank issues securities and uses the funds to provide liquidity to savings and loan institutions. The Federal Farm Credit Bank issues securities and uses the funds to make loans to agricultural borrowers.
Which TWO of the following choices are methods of underwriting municipal securities?
I. Standby
II. Negotiated
III. Competitive
IV. Fill-or-kill
a. I and III
b. I and IV
c. II and III
d. II and IV
c. II and III
A municipal issuer will choose an underwriter either through a negotiated offering or competitive bidding process. A standby underwriting is associated with a rights offering of common stock. Fill-or-kill is a type of order placed to buy or
Which TWO of the following securities are typically sold at a discount?
I .TIPS
II. Treasury bills
III. Bankers' acceptances
IV. Collateralized mortgage obligations
a. I and III
b. I and IV
c. II and III
d. II and IV
c. II and III
Treasury bills and bankers' acceptances are typically sold at a discount. The amount of interest is based on the difference between the purchase price and the face value.
An underwriting syndicate that offered a new issue at $21 could stabilize the offering at which TWO of the following prices?
I. $20.90
II. $21.01
III. $21.20
IV. $20.20
a. I and III
b. I and IV
c. II and III
d. II and IV
b. I and IV
An underwriter can stabilize a new issue at or below the offering price. The underwriter could stabilize at $20.90 and $20.20.
Which TWO of the following statements are TRUE concerning a company that becomes delisted from the NYSE or Nasdaq?
I. It may be quoted on the OTC Bulletin Board
II. It may only be quoted in the OTC Pink market
III. Firm quotes would no longer be available
b. I and IV
A company that fails to meet the maintenance requirements of securities listed on the NYSE or Nasdaq will become delisted. When this occurs, the company may be quoted (but not listed) on the OTC Bulletin Board or in the OTC Pink Market (also c
A client sells short 1,000 shares of KPL at $46 a share. If the client covers the short sale 14 months later and then, on the same day, delivers the stock to close out the short position at $35 a share, what will he report for tax purposes?
a. A short-ter
a. A short-term capital gain
Any resulting gain or loss on a short sale is typically treated as short-term, since the investor is not holding an asset (i.e., does not establish a holding period for the security). The customer closed out the short position
A corporation is NOT considered to be in default if it fails to pay interest on which of the following bonds?
a. Second mortgage bond
b. Debenture
c. Subordinated debenture
d. Income bond
d. Income bond
For an income (adjustment) bond, an issuer is only expected to pay interest if it has sufficient income. However, on all of the other debt securities, interest must be paid regardless of the corporation's income. The mortgage bond is secure
JULY 20XX
S M T W T F S
1 2 3 4 5 6
7 8 9 10 11 12 13
14 15 16 17 18 19 20
21 22 23 24 25 26 27
28 29 30 31
Use the calendar to answer this question.
If a customer bought stock in a margin account on July 3, what will the settlement date be in a regular-w
c. July 8
Monday, July 8 is the settlement date. Thursday, July 4 is a legal holiday and should not be counted. Therefore, two business days after the trade date of Wednesday, July 3 is Monday, July 8. The fact that the stock is purchased in a margin acco
A customer wishes to open an account with a brokerage firm to trade options. The customer provides all the necessary new account information required but refuses to provide financial information. The brokerage firm:
a. May not open the account under any c
c. Must record the customer's refusal on its records and use whatever information it can obtain on its own in determining whether it should accept the account for options trading
A 7% convertible bond has a conversion ratio of 40. The bond has a nondilutive feature and the common is selling at $43 a share. If the company distributes a 10% stock dividend, which of the following statements is TRUE regarding the convertible bond?
a.
d. The conversion price decreases to $22.73 and the conversion ratio increases to 44
A nondilutive feature requires that the conversion features be adjusted should there be a stock split or stock dividend. The conversion ratio will be increased and the co
Which of the following is NOT considered a don't know (DK) trade?
a. There is a disagreement on the price of the trade
b. There is a mismatch on the size of the trade
c. There is no record of the trade at one of the firms
d. The buyer is suspicious of ins
d. The buyer is suspicious of insider trading
Don't know (DK) trades occur when the contrabrokers disagree or have conflicting details of a trade. While insider trading is illegal, suspicion of insider trading would not cause a DK notice to be sent.
A direct participation program in real estate does NOT have which of the following characteristics?
a. Passive income
b. The tax benefit of depreciation
c. Cash dividends
d. A tax rate on capital gains that is lower than ordinary income
c. Cash dividends
A direct participation program in real estate, which is also known as a real estate limited partnership (RELP), would distribute either passive income or passive losses. Both depreciation of the buildings and a lower tax rate on capital
Which of the following statements is TRUE about revenue bonds?
a. Interest is usually paid from the earnings of the facility for which the bond was issued
b. Interest is subject to federal taxes
c. Revenue bonds are considered safer than general obligatio
a. Interest is usually paid from the earnings of the facility for which the bond was issued
The interest on a revenue bond is usually paid from the earnings of the facility for which the bonds were issued. The interest is exempt from federal income tax an
During periods of tight money, when the yield curve becomes inverted, the highest yield would probably be found in:
a. Two-year Treasury notes
b. Three-month Treasury bills
c. Five-year Treasury notes
d. Thirty-year Treasury bonds
b. Three-month Treasury bills
When interest rates have increased due to a tight monetary policy, the yield curve may become inverted, causing short-term rates to be higher than long-term rates. Three-month Treasury bills, having the shortest maturity, wou
To compute equity in a margin account with both short and long positions, the formula is:
a. The long market value plus the credit balance minus the short market value minus the debit balance
b. The long market value minus the credit balance minus the sho
a. The long market value plus the credit balance minus the short market value minus the debit balance
the long market value plus the credit balance minus the short market value minus the debit balance equals the equity in both a long and short margin acco
Which of the following choices is NOT permitted to write call options on XYZ Corporation?
a. An individual who owns XYZ Corporation stock
b. XYZ Corporation
c. An individual who owns more than 5% of XYZ Corporation stock
d. All of the above
b. XYZ Corporation
Any entity is permitted to write call options except the corporation itself.
An investor sold 100 shares of STC short at $40 per share and wrote an STC Oct 40 put at 4. How much cash did the investor need to deposit?
a. $1,200
b. $1,600
c. $2,000
d. $2,800
b. $1,600
Since margin requirements are different for equities than for options, each transaction must be treated separately. The margin requirement for a short sale of stock is 50%. Since the investor sold short $4,000 (100 shares x $40) of stock, the ma
An investor is convinced that a stock will decline in value. If the investor wishes to act on that conviction, which investment strategy will allow him to take advantage of a decline with the smallest amount of cash outlay?
a. The investor should sell the
c. The investor should buy a put
The investor should buy a put. By buying a put, the investor could go into the market if the stock declined and buy the stock at a lower price. He would exercise the put and sell the stock to the writer at the exercise pri
When opening a new customer account to trade options, which of the following documents is not needed?
a. A new account agreement
b. An options account agreement
c. A hypothecation agreement
d. The approval for options trading
c. A hypothecation agreement
A customer needs all of the items listed except a hypothecation agreement. This is needed to open a margin account and gives the brokerage firm the right to pledge customer securities to a bank as collateral for a loan.
A DEF corporation convertible bond is convertible at $40. DEF common is selling at $50. At what price should the bond be selling for it to be at a 10% premium to the common?
a. 80
b. 88
c. 125
d. 137 1/2
d. 137 1/2
Since the bond is convertible at $40 a share, the bond can be converted into 25 shares of common stock ($1,000 par value divided by $40 per share). If the bond is converted, the total value of common stock will be $1,250 (25 shares x $50 market
The transfer of bonds from one party to another may be accomplished by an endorsement on the back of the bond certificate or through a:
a. Letter of credit
b. Legal opinion
c. Bid form
d. Bond power
d. Bond power
A customer who sells a security is required to sign the certificate. The usual method of endorsing a stock (or bond) certificate is to sign on the back and then mail the certificate to the broker-dealer. In order to safeguard the certificate
A customer has received a Regulation T margin call. He can meet the call by depositing in his account which TWO of the following choices?
I. NYSE-listed stock with a market value equal to the amount of the call
II. Cash equal to the amount of the call
III
c. II and III
Stock listed on the NYSE or Nasdaq is marginable. The customer can meet the call by either depositing in his account cash equal to the amount of the call or marginable stock with a loan value equal to the dollar amount of the call. Choice (I
Jim and his brother Ed have the following accounts at a brokerage firm.
Jim's cash account with $175,000 in securities
Ed's margin account with $150,000 in equity
A cash account for Jim and Ed as JTWROS with $200,000 in securities
If the brokerage firm we
b. Full coverage for each account
SIPC provides maximum protection of $500,000 for each customer (i.e., for each different account title). Since each account has a different title, each would receive the maximum coverage and be protected for the full valu
Which of the following securities are NOT issued at a discount and mature at par?
a. Commercial paper
b. Bankers' acceptances
c. Unit investment trusts
d. Treasury bills
c. Unit investment trusts
Unit investment trusts are not usually issued at a discount. They are issued at par and mature at par. The other securities listed are all issued at a discount and mature at par.
Prior to first use, a municipal securities principal must approve which TWO of the following documents?
I. The official statement
II. The abstract of an official statement
III. The red herring
IV. The research report
a. I and III
b. I and IV
c. II and III
d. II and IV
Advertising must be approved prior to first use by a municipal securities principal. An official statement or preliminary official statement is not considered advertising. However, a dealer-prepared summary or abstract of the official stateme
What type of risk do zero-coupon bonds eliminate?
a. Credit risk
b. Purchasing power risk
c. Reinvestment risk
d. Market risk
c. Reinvestment risk
Zero-coupon bonds are issued at a discount and do not pay semiannual interest. Therefore, there are no interest payments to reinvest, eliminating reinvestment risk. When investing in fixed-income investments, one of the uncertainties
A registered representative wants to use a social networking site that permits real-time communication. Which of the following statements is TRUE?
a. The Web site must be approved by FINRA
b. The Web site must be approved by the SEC
c. This falls under th
c. This falls under the definition of a public appearance
Social media sites that permit real-time communication or interactive, electronic forums fall under the guidelines of a public appearance, according to FINRA. Examples include Facebook, Twitter, an
The investment banking department of a broker-dealer usually does NOT perform which of the following activities?
a. Underwrite new issues
b. Provide financing for industrial corporations
c. Distribute large blocks of already outstanding securities
d. Make
d. Make a secondary market for new issues
The investment banking department does not make a secondary market for new issues. This is a function of the equity trading department known as market making.
A person purchases a non-qualified variable annuity and dies at the age of 57. The tax implication is:
a. No penalty and the entire amount is taxable
b. No penalty and the difference between the amount invested and the death benefit is taxable
c. A 10% pe
b. No penalty and the difference between the amount invested and the death benefit is taxable
As a general rule, if an annuitant withdraws the proceeds of his non-qualified variable annuity prior to age 59 1/2, a 10% tax penalty applies. However, this pen
On the day prior to the ex-dividend date for an ordinary cash dividend, a holder of a call tenders an exercise notice. The investor will be:
a. Entitled to the dividend
b. Required to pay the dividend to the writer only if the writer owns the underlying s
a. Entitled to the dividend
The holder of a call will get a dividend only if the option is exercised prior to the ex-dividend date. This will result in the buyer being listed as holder of record on the books of the transfer agent.
An individual considering the purchase of an equity-indexed annuity should understand that:
a. The return over long periods of time will equal the underlying index
b. These products tend to outperform the stock market over long periods of time
c. These pr
d. The return over long periods of time will equal the greater of the participation rate of the underlying index (adjusted rate of return) or the guaranteed minimum
Equity indexed annuities (EIAs) are a hybrid product that combines the elements of fixed a
Which TWO of the following statements are TRUE regarding brokered CDs sold by registered representatives?
I. These instruments are insured by the FDIC if the issuer declares bankruptcy
II. These instruments are covered by SIPC if the issuer declares bankr
b. I and IV
Long-term brokered CDs generally have maturities from 2 to 20 years and are not considered money-market securities. These instruments are issued by banks and, although sold by broker-dealers, they are insured up to certain limits by the FDIC i
Wrap Account
The term wrap account refers to the fee arrangement where one fee, usually ranging from one to three percent annually, is charged by a broker-dealer. The fee is used to cover administrative, portfolio management, and transaction costs. A wrap account is u
The American Telephone Company announced in an ad in The Wall Street Journal that it intends to call for the redemption of all its outstanding 10% callable bonds at 103 1/4 plus accrued interest. The market price of the bonds was 102 3/4 at the time of th
c. Dividends to the stockholders will be increased
The effect of the redemption will be to reduce the company's outstanding debt, thereby also reducing the interest expense. Investors will receive 103 1/4 for redeeming the bonds, which is a premium to the
In April, a customer purchased 1 ABC July 85 call for 5 and purchased 1 ABC July 90 put for 8. ABC stock is currently trading at $87. If both options are sold for the amount each is in-the-money, the investor will realize a(n):
a. $500 profit
b. $800 loss
b. $800 loss
The call is in-the-money by $200 and the put is in-the-money by $300. If the call is sold for $200, the loss on the call would be $300. If the put is sold for $300, the loss would be $500.
A breakpoint sale is BEST defined as:
a. The sale of investment company shares in dollar amounts just above the point at which the sales charge is reduced on quantity transactions
b. The sale of investment company shares in dollar amounts just below the p
b. The sale of investment company shares in dollar amounts just below the point at which the sales charge is reduced on quantity transactions
A portfolio composed of five different state G.O. issues will NOT provide an investor with protection from:
a. Economic downturns in specific geographical locations
b. Legislative changes in different states
c. Interest-rate fluctuations
d. Adverse decisi
c. Interest-rate fluctuations
A diversified portfolio will provide protection from a variety of risks, but cannot protect against fluctuating interest rates. All bonds, regardless of the issuer's location, are subject to interest-rate risk.
Which of the following parties states that a municipality may legally issue bonds?
a. FINRA
b. The MSRB
c. The SEC
d. The issuer's bond counsel
d. The issuer's bond counsel
The issuer's bond counsel writes the legal opinion. It states that the interest is exempt from federal taxation and that the issue is valid and legal. Prior to giving an opinion as to the validity and tax exemption of the issu
In what order of priority do the following investors rank if a company declares bankruptcy?
I. Convertible preferred shareholders
II. Debenture holders
III. Common shareholders
IV. Secured bondholders
a. I, III, II, IV
b. IV, II, I, III
c. III, I, IV, II
b. IV, II, I, III
In the event a corporation declares bankruptcy and must liquidate its assets, bondholders (creditors) have the first claim, followed by shareholders (owners).
For a corporation's bondholders, the first payment is made to its secured bond
Which of the following statements is TRUE concerning the tax treatment of municipal bonds?
a. If the bond was purchased at a premium, it will be accreted based on the constant yield method
b. If the bond was purchased as an original issue discount (OID),
b. If the bond was purchased as an original issue discount (OID), the discount will be accreted based on a constant yield method
A municipal bond purchased as an original issue discount (OID) is accreted (not amortized) each year for tax purposes based on
MSRB rules state that subject or nominal quotes may be given for:
a. Revenue bonds only
b. General obligation bonds only
c. Informational purposes
d. Municipal notes only
c. Informational purposes
MSRB rules state that a dealer who does not wish to buy or sell securities based on a quote given, must identify the quote as a subject or nominal quote. Such quotes can be given for informational purposes only.
An individual is interested in an investment that offers annual income, has the potential of appreciating in value if interest rates decline and, in the event that the issuer fails to make a payment, having the missing amount added to future distributions
b. Cumulative preferred stock
Individuals generally purchase preferred stock for income. As with any security that pays a fixed rate, there is the potential for appreciation if interest rates decline. There are several types of preferred stock. Cumulative
Which of the following is TRUE regarding contingent deferred sales charges?
a. Funds that assess a contingent deferred sales charge may be represented as a no-load fund because there is no front-end fee
b. A redemption charge that reverts to the fund's po
d. A confirmation for a fund that assesses a contingent deferred sales charge must disclose that a charge may be assessed upon redemption, even if the same disclosure is made in the prospectus
Industry rules require that the following disclosure be printe
If a municipal bond has a basis of 6.35 and a coupon rate of 6.15%, the bond is selling at:
a. A discount
b. Par value
c. A premium
d. A price that cannot be determined from the information given
a. A discount
Municipal bonds may be quoted on a yield to maturity basis, which in this example is a 6.35 basis. This means the bond has a yield to maturity of 6.35%. If the nominal yield (coupon rate) is 6.15%, this means that the bond is selling at a di
If a mutual fund changes or adds a portfolio manager, the greatest effect would be on the fund's:
a. Expense ratio
b. Alpha
c. Rating
d. Beta
b. Alpha
Alpha is a measure of an investment's performance on a risk-adjusted basis. The excess return of the investment relative to the return of the benchmark index is its alpha. Simply stated, alpha is often considered to represent the value that a por
A corporation's earnings per share on its common stock, after paying preferred dividends of $3.00 per share, is $5.00 per share. The corporation also paid a dividend of $2.00 per share on the common stock. The dividend payout ratio is:
a. 25%
b. 40%
c. 60
b. 40%
Since the earnings per share on the common stock is given, the $3.00 preferred dividend can be disregarded. To find the dividend payout ratio, divide the yearly dividend on the common stock ($2.00) by the earnings per share on the common stock ($5.
Federal funds
Federal funds are excess reserves loaned by commercial banks to other commercial banks and are a leading money-market indicator.
An investor buys an 8% municipal bond in the secondary market at a 10.00 basis. If the bond is held to maturity, the investor's after-tax return will be:
a. 8%
b. Between 8% and 10%
c. 10%
d. Greater than 10%
b. Between 8% and 10%
Since the yield (10%) is higher than the coupon (8%), the bond was purchased at a discount. Since the bond was purchased in the secondary market at a discount, the interest on the bond is exempt from federal taxation but the discount
In most cases, municipal bond investors may obtain which TWO of the following choices?
I. Reduced interest-rate risk by investing in issues with different maturities
II. A federal tax exemption by investing in private activity bonds
III. A state and local
a. I and III
Municipal bond investors can obtain reduced interest-rate risk by investing in issues with different maturities. Bonds with short-term maturities will only experience a small decline in price if the general level of interest rates increases.
A registered representative is sending an email to both existing individual and potential customers promoting the broker-dealer's products and services. Which TWO of the following statements are TRUE?
I. This is considered correspondence
II. This is consi
c. II and III
This activity is considered retail communication since there is no limit mentioned in the question as to the audience expected to be reached by the RR. Retail communication is any written or electronic communication that is distributed or ma
placement ratio
The placement ratio is a means of gauging the amount of bonds that have been underwritten recently on a new-issue basis that have moved into the hands of the ultimate investor. In other words, it is the percentage of new bonds that were sold compared to t
A customer bought an 8% debenture at a 7.20 basis. If the bonds are currently trading 15 basis points higher:
a. The customer's yield to maturity has increased to 7.35%
b. The bond's coupon has increased to 8.15%
c. The bond's market price has decreased
d
c. The bond's market price has decreased
When the customer bought the bond, he established a yield to maturity of 7.20%. A 7.20 basis is used to quote a bond that is offered at a price equivalent to a YTM of 7.20%. This will remain the same over the life
Wireless Communications is offering 2,000,000 common shares (par value $.10) at $15. Which TWO of the following choices describe the financial impact on the company?
I. An increase in paid-in capital
II. A reduction in the long-term debt ratio
III. A redu
a. I and II
The company will receive cash from the sale of the stock, so liquidity will increase. The common stock account and the paid-in capital account, which are part of stockholders' equity, will also increase. The long-term debt ratio will fall as t
Which of the following transactions qualifies a customer as a pattern day trader?
a. 3 day trades executed in one week
b. 3 day trades executed in one day
c. 4 day trades executed in one week
d. 10 day trades executed in one month
c. 4 day trades executed in one week
A customer is considered a pattern day trader if 4 or more day trades are executed over any 5-business-day period. The minimum equity required for a pattern day trader is $25,000.
If a municipal bond is selling at a premium and is callable at par, how is the yield calculated?
a. As a percentage of the par value
b. By dividing the annual income by the current price
c. To the final maturity date
d. To the call date
d. To the call date
The yield for a municipal bond that is selling at a premium and is callable at par is calculated to the call date. The yield to call measures the yield that will be earned if the bonds are called at the call price and not held to the m
If an investor wrote an ETF call option and is exercised against, he would:
a. Receive the cash difference between the strike price on the option and the closing value of the ETF
b. Deliver the cash difference between the strike price on the option and th
d. Deliver shares of the ETF
An ETF option is similar to an equity option since the writer of an ETF call, after being exercised against (assigned), is obligated to deliver shares of the underlying ETF. On the other hand, if the writer an index option cal
A doctor, who is covered under a corporate pension plan, retires. The doctor can roll over the distribution received from the pension plan into an IRA, with no tax consequences, within:
a. 30 days
b. 60 days
c. 90 days
d. 1 year
b. 60 days
When a lump-sum withdrawal is made from a qualified retirement plan and the check made payable to the participant is deposited in an IRA, it is referred to as a rollover. If the rollover is done within 60 days, it will be tax-free. Only one rol
XYZ Corporation has 4,000,000 shares of common stock authorized and 2,500,000 shares issued, of which 100,000 shares are treasury stock. The corporation is issuing an additional 1,000,000 shares through a standby underwriting. If only 600,000 shares are s
d. Increase by 1,000,000 to 3,400,000 shares
Since 100,000 shares of the 2,500,000 shares issued is treasury stock (repurchased by the corporation), there are 2,400,000 shares outstanding prior to the new issue. On a standby underwriting, the underwriting
Which of the following choices is NOT a type of overlapping debt?
a. The issuance of debt for an adjoining road district
b. The issuance of debt for an adjoining school district
c. Debt issued between two counties
d. Debt issued between two states
d. Debt issued between two states
Debt issued between two states is not considered overlapping debt. Overlapping debt is general obligation debt of other governmental units for which residents of a particular municipality are responsible. It is the debt s
Which of the following is primarily found on a broker's broker communication system?
a. News on municipal issuers
b. Secondary market bids and offers
c. Primary offerings
d. Research recommendations
b. Secondary market bids and offers
Broker's broker communication systems are primarily used to carry bids and offers in the secondary market.
If an investor wrote one OEX March 725 put option and the option was exercised when the index was 722.00, the writer is obligated to deliver:
a. 100 shares of the OEX index
b. $300
c. $72,200
d. $72,500
b. $300
Remember, sellers of puts are bullish (which in this example means that they wants the index to rise) and will profit if the option expires unexercised. However, if the writer of a stock index option is exercised against, the writer is obligated t
A limited partner would be in jeopardy of losing her limited liability if the partner:
a. Received a portion of the project's income and deductions
b. Assisted in the decision of which properties to acquire
c. Insisted on examining the partnership's finan
b. Assisted in the decision of which properties to acquire
Limited partners have the right to receive their portion of income and losses, examine books and records, and make loans to the partnership. If they get involved in the management of the program,
Dated Date
The dated date of a municipal bond is the date that interest begins to accrue and will not affect its marketability. The marketability of a municipal bond will be affected by the rating it received by either Moody's or Standard and Poor's. The marketabili
An investor purchased stock at $40/share that currently has a market price of $60/share. The investor thinks that the long-term prospects for the stock are attractive, but that the price will decline temporarily. The customer could take advantage of the t
a. Selling a call
If the investor were to sell a call and the price declined, the call will expire and he will generate premium income. The long stock position will still be maintained, and the investor will profit if the anticipated price advance occurs.
All of the following statements are TRUE concerning preconditions for sale requirements under the New Issue Rule, EXCEPT:
a. The verification may be made through electronic communication
b. The verification may be made through oral communication
c. The ve
b. The verification may be made through oral communication
Prior to selling a new issue to an account, a firm must meet certain preconditions for sale. A firm must obtain representation from an account holder or an authorized party of an account, stating
The PSA Model is used when pricing:
a. Put options
b. Preferred stock
c. Collateralized mortgage obligations
d. Treasury notes
c. Collateralized mortgage obligations
The cash flows, future payments that a bondholder will receive, determine the market price of the bond. Collateralized mortgage obligations (CMOs) have uncertain cash flows due to the prepayments (early retirement) o
Which TWO of the following securities are considered debt obligations of municipal governments?
I. Revenue bonds issued by the Port Authority of NY and NJ
II. First mortgage bonds issued by a utility company
III. Special tax bonds issued by a city agency
a. I and III
A revenue bond and a special tax bond are both considered debt obligations of a municipal government. A special tax bond is a type of revenue bond that is backed only by a specific tax source, such as an excise tax. A mortgage bond is a type
On May 25, the president of MaxCo bought 3,000 shares of MaxCo stock in the open market at $33. Two months later, the stock has increased to $40. If the president now wants to sell the shares:
a. Permission must be granted by the MaxCo board of directors
b. The profit from the trade must be forfeited according to the short-swing profit rule
The Securities Exchange Act of 1934 prohibits insiders from making short-swing profits. A short-swing profit is a profit made on stock held by insiders for less than s
Regarding cash and margin accounts, which of the following statements is NOT TRUE?
a. In a cash account, a customer is only required to deposit 50% of a purchase
b. In a margin account, a customer is only required to deposit 50% of a purchase
c. Under Reg
a. In a cash account, a customer is only required to deposit 50% of a purchase
The provisions of Regulation T apply to both cash and margin accounts. In both accounts the required customer deposit must be made by the fourth business day after the trade da
Private label mortgage-backed securities are issued by which of the following entities?
a. The Federal National Mortgage Association
b. Real estate investment trusts
c. The Government National Mortgage Association
d. Financial institutions
d. Financial institutions
Mortgage-backed securities (MBS) may be issued by a U.S. government agency, such as the Government National Mortgage Association (GNMA or Ginne Mae), or a government-sponsored enterprise (GSE), such as the Federal National Mortga
All of the following actions create a conflict of interest for a general partner, EXCEPT if the general partner:
a. Accepting a payment not to compete with the program
b. Holding partnership monies in his personal bank account
c. Selling property that he
d. Lending money to the partnership at prevailing interest rates
A general partner is not permitted to compete with the limited partnership. Accepting a payment not to compete would be a conflict of interest. Selling property to the partnership is a defin
Which of the following investments will permit a customer to purchase publicly traded shares of a company that is MOST similar to a private equity fund?
a. An exchange-traded fund
b. A business development company
c. An exchange-traded note
d. A real esta
b. A business development company
A business development company (BDC) raises capital by selling securities to investors and is similar in structure to a closed-end investment company. A BDC will use the money it raises to invest mostly in private compani
An investor shorts a stock at $6 per share. What is the SRO minimum maintenance requirement for this position?
a. $1.50 per share
b. $1.80 per share
c. $3.00 per share
d. $5.00 per share
d. $5.00 per share
The SRO minimum maintenance requirement for a stock sold short at $5 per share or above is $5 per share or 30% of the market value, whichever is greater.
A customer buys 10 ABC January 50 calls paying a $3 premium and 10 ABC January 50 puts also paying a $3 premium when the market price of the stock is $49 per share. The buyer will need to deposit:
a. $1,000
b. $2,000
c. $4,000
d. $6,000
d. $6,000
When buying options, 100% of the purchase price (the premium) must be deposited. The customer paid a $3 ($300) premium for the call and a $3 ($300) premium for the put (a $6 premium for one straddle). The customer purchased 10 straddles and paid