All of the following statements are true about overnight repurchase agreements EXCEPT there is virtually no:
A. liquidity risk
B. interest rate risk
C. risk of "principal"
D. credit risk
-B. interest rate risk.
Overnight repurchase agreements are overnight sales of government securities, with an agreement to buy back the securities the next day at a pre-set price. The difference in prices is the interest earned for the 1 day loan. These a
All of the following statements are true regarding the Federal Funds rate EXCEPT:
A. The rate is computed every business day
B. The rate is lower than the discount rate
C. The rate is set by the Federal Reserve
D. The rate is charged from one Federal Rese
-C. The rate is set by the Federal Reserve
Federal Reserve actions such as Open Market Operations strongly influence the Federal Funds rate, but the Fed itself does not set this rate.
All of the following statements are true regarding Construction Loan Notes ("CLNs") EXCEPT:
A. The use of CLNs allows the municipal issuer to reduce its interest cost when constructing a new facility
B. The maturity of CLNs is generally 2 to 3 years
C. Wh
-C. When the facility is completed, the permanent financing is added to the outstanding balance ("basis") of the CLNs.
Which statement is TRUE about a Certificate of Participation (COP)?
A. COPs are considered to be a general obligation of the issuer and payments to security holders are contingent on the governing body making an annual appropriation from budgeted funds
B.
-C. COPs are considered to be backed by a revenue pledge and payments to security holders are contingent on the governing body making an annual appropriation from budgeted funds
Which of the following would be a quote for a U.S. Government bond?
A. 99.50
B. 99-16
C. 99 1/2
D. 99 8/16
-B. 99-16.
Which money market instrument trades "and interest"?
A. Commercial Paper
B. Certificates of Deposit
C. Banker's Acceptance
D. Treasury Bills
- B. Certificates of Deposit.
During its fiscal year, New York state is experiencing a temporary cash flow shortage, expected to last for 5 months. To meet current obligations, the state would most likely issue:
A. General Obligation bonds
B. TANs
C. CLNs
D. Moral Obligation bonds
-B. TANs.
To ease a temporary cash flow shortage, municipalities will issue either TANs (Tax Anticipation Notes) or RANs (Revenue Anticipation Notes). These notes are paid off when the taxes or anticipated revenues are collected sometime in the near futur
Industrial development bonds are backed by the:
A. rental revenues paid by the corporate lessee and take on the credit rating of the corporate lessee
B. rental revenues paid by the corporate lessee and take on the credit rating of the municipal lessor
C.
-A. rental revenues paid by the corporate lessee and take on the credit rating of the corporate lessee
Industrial development bonds are backed by the rental revenues paid by the corporate lessee as well as by the guarantee of the corporate lessee. These b
Issuers will call their bonds when interest rates:
A. have increased
B. have declined
C. remain unchanged
D. are volatile
-B. have declined.
Issuers call in bonds when interest rates have declined. The issuer can retire the "old" high interest rate debt; and issue new bonds at lower current market rates; reducing its interest cost.
A representative and her client have been reviewing the asset allocation in her sizable portfolio. The customer, age 35, is invested mainly in blue chip stocks and bonds. She is looking to take a more aggressive posture in her portfolio, and the represent
-A.
The compensation amount that the firm and the representative will earn from the recommended penny stock purchases.
A wealthy retired investor is interested in buying Agency mortgage backed securities collateralized by 30-year mortgages as an investment that will give additional retirement income. When discussing this with the client, you should advise him that if mark
-A. principal will be repaid earlier than anticipated and will need to be reinvested at lower rates, generating a lower level of income.
The rate of homeowner defaults has no effect on the principal repayments to be received because the Agency guarantees
Which of the following indicators are used SOLELY to measure investor sentiment?
A. Put / Call Ratio
B. DJIA
C. Trading Volume
D. S&P 500
-A. Put / Call Ratio.
A variable life policy will remain in force:
A. for the stated term of the policy
B. until the death of the insured
C. if the policy has sufficient cash value to pay the premium
D. as long as the insured individual does not exercise his or her nonforfeitu
-C. if the policy has sufficient cash value to pay the premium
An insurance policy remains "in force" as long as the premiums are paid. If the premiums are not paid, the policy will lapse and there is no more insurance! Because variable life is permanent
Call loans made by banks to broker-dealers are secured by:
A. fully paid securities held in margin accounts for customers of the broker-dealer
B. partially paid securities held in margin accounts for customers of the broker-dealer
C. fully paid securities
-B. partially paid securities held in margin accounts for customers of the broker-dealer
Call loans are secured by customer margin securities. Fully paid customer securities cannot be pledged for these loans - they must be segregated and placed in safekee
Which statement is TRUE when the Federal Reserve enters into repurchase agreements with U.S. Government securities dealers?
A. The Federal Reserve is tightening credit
B. The Federal Reserve is selling securities to the dealer
C. The Federal reserve is pu
-D. Banks will have more money to loan out
In a REPURCHASE agreement, the Federal Reserve buys securities from the bank dealers and thus injects cash into the banks (LOOSENING CRED). The banks then have more cash which can be lent out. The Fed agrees to s
The bondholder of a municipal bond issue is the:
A. borrower of the bond proceeds
B. lender of the bond proceeds
C. guarantor of the payment of debt service on the bond issue
D. fiduciary acting for the benefit of the bondholders
-B. lender of the bond proceeds
All of the following statements are true about SEP IRAs EXCEPT:
A. the plan is established by the employer
B. the plan allows for flexible contribution amounts
C. the amount that can be contributed is significantly greater than for a Traditional IRA
D. th
-D. the contributions made are not deductible.
A SEP IRA is a "Simplified Employee Pension" plan that must be set up by the employer, with deductible contributions made by the employer. They are easier to set up and administrate than regular pension plans
Which statement is TRUE regarding the ex date for a mutual fund?
A. The ex-date is set by the Board of Directors of the Fund
B. The ex-date is set by FINRA
C. The ex-date is 1 business day prior to the record date
D. The ex-date is the day on which the Ne
-A. The ex-date is set by the Board of Directors of the Fund.
If an SPX options contract is exercised, then the:
A. holder must deliver cash to the writer the next business day
B. writer must deliver cash to the holder the next business day
C. holder must deliver the securities in the index to the writer in 2 busine
-B. writer must deliver cash to the holder the next business day
Unlike stock options, if there is an exercise of an index option, the writer must pay the holder the "in the money" amount the next business day. There is no physical delivery of the underly
All of the following investments give a rate of return that cannot be affected by "reinvestment risk" EXCEPT:
A. Treasury Bill
B. Treasury Bond
C. Treasury Strips
D. Treasury Receipts
-B. Treasury Bond.
An MFP (Municipal Finance Professional) gives $100 to the primary campaign of an elected official in which she IS entitled to vote. The official wins the primary and the MFP gives another $200 to the same official's general election campaign. Which statem
-B. Because the amount given to each campaign did not exceed $250, this will not result in a ban.
This MFP gave $100 to one campaign for the candidate (the primary) and $200 to another campaign for the same candidate (the general election), so there is no
U.S. Government Agency securities are:
A. Quoted in 1/8ths and traded with accrued interest computed on an actual day month / actual day year basis
B. Quoted in 1/8ths and traded with accrued interest computed on a 30 day month / 360 day year basis
C. Quo
D. Quoted in 1/32nds and traded with accrued interest computed on a 30 day month / 360 day year basis
Which is the BEST definition of an "annuity unit"?
A. An accounting measure used to determine the number of units the contract holder may purchase in the separate account
B. An accounting measure used to establish the contract holder's ownership interest
-C. An accounting measure upon which the amount of pay out is determined
Once a variable annuity contract is annuitized, accumulation units are converted to annuity units. These determine the annuity payments to be made.
A syndicate member takes a 20% participation in a $1,000,000 issue set up as an Eastern account. At the termination of the syndicate, $100,000 remains unsold in the account. The syndicate member sold $150,000. The syndicate member's remaining liability is
-B. $20,000.
In an Eastern account, the syndicate member's liability is his percentage of all unsold securities. The actual sales by that member have no bearing on remaining liability. Total unsold = $100,000 x 20% = $20,000 remaining liability.
A customer has a large portfolio of diversified blue chip stocks and would like to increase the income from the investments. Which of the following strategies are suitable?
A. Covered call writing
B. Naked call writing
C. Covered put writing
D. Naked put
-A. Covered call writing
Covered call writing is suitable for securities that are expected to remain relatively constant in price. If the price remains constant, the calls expire and the premium is earned, with no gain or loss on the stock position.
In a period of inflation, it would be expected that payments from a:
A.
variable annuity contract would increase
B.
variable annuity contract would decrease
C.
fixed annuity contract would increase
D.
fixed annuity contract would decrease
-A.
variable annuity contract would increase
During an inflationary period, these companies have the ability to raise prices faster than the rate of inflation, so their profitability and value goes up. The NAV of the mutual fund in the separate account ti
A customer wishes to purchase $100,000 face amount of municipal bonds that the broker-dealer does not have in inventory. Under MSRB rules, the firm should:
A. refer the customer to a municipal firm that has the bonds in inventory
B. contact at least 5 dea
-C. contact enough dealers so that a reasonable market quote is obtained.
A customer who buys a variable life policy is most susceptible to:
A. purchasing power risk
B. market risk
C. default risk
D. exchange rate risk
-B. market risk
A municipality has issued a general obligation bond. Which source of income is NOT available to pay debt service?
A. Collected current ad valorem taxes
B. Collected back due ad valorem taxes
C. Parking meter collections
D. State income taxes
-D. State income taxes
General obligation bonds are backed by the full faith, credit, and taxing power of the issuer. Ad valorem taxes, fines collected for paying taxes late, assessments of additional taxes, as well as fees collected that are not a specif
State registration (Blue Sky) requirements apply to the registration of:
A. government securities
B. corporate securities
C. state chartered bank issues
D. municipal securities
-B. corporate securities
Generally speaking, if a security is exempt from federal law, it will be exempt under state "blue sky" laws (though there are some exceptions). Governments, municipals, and state chartered bank issues are exempt under both federal
Which statement is TRUE about Keogh Plans?
A. Contributions are 100% deductible
B. Contributions are not deductible
C. Distributions are 100% tax free
D. Distributions are partially taxed, with only the amount above what was contributed being taxed
-A. Contributions are 100% deductible
Keogh contributions are tax deductible (up to $56,000 in 2019), so the original investment was made with "before tax" dollars. In addition, earnings on Keogh investments are tax deferred. Once distributions commence f
Which statement is TRUE regarding contributions to, and distributions from, non-tax qualified retirement plans?
A. Contributions are made with "before-tax" dollars
B. Distributions are 100% tax free
C. Distributions are 100% taxable
D. Distributions are p
-D. Distributions are partially tax free, with the amount above the original cost basis being taxed
Contributions to non-tax qualified plans are not tax deductible. They are made with "after-tax" dollars. Earnings accrue tax deferred. When distributions c
All of the following statements are true regarding municipal advertising EXCEPT:
A. all municipal advertising must be approved by either the Municipal Principal or General Principal prior to use
B. copies of municipal advertising must be retained by the m
-D. form letters are exempted from the advertising rules
All municipal advertising must be approved in advance of use by a municipal principal or general securities principal and copies must be retained for 4 years (note in contrast that FINRA's rule is 3
All of the following are variable annuity payment options EXCEPT:
A. Life Annuity
B. Life Annuity with Period Certain
C. Joint and Last Survivor
D. Joint Tenants with Rights of Survivorship
-D. Joint Tenants with Rights of Survivorship.
Annuity payment options include a life annuity; life annuity with a period certain (which pays for a minimum guaranteed period, regardless); and a joint and last survivor annuity (which covers 2 lifespans, su
All of the following are true statements regarding short term negotiable certificates of deposit EXCEPT:
A. trading occurs in the secondary market
B. short term negotiable CDs are non-callable
C. they are issued by banks
D. the minimum denomination is $1,
-D. the minimum denomination is $1,000
Minimum $100,000 denominations. They are non-callable and trade in the secondary market. Note, in contrast, that banks also issue long term negotiable CDs that can be callable.
Which statement is TRUE regarding money market funds?
A. Money market funds are typically sold with a nominal sales charge
B. Money market funds typically do not impose management fees
C. Fund dividends are taxable even if reinvested
D. Typical maturities
-C. Fund dividends are taxable even if reinvested
Money market funds usually do not impose sales charges but all funds impose management fees. Fund dividends are taxable, whether or not they are automatically reinvested in additional fund shares. The reas
All of the following can create a short position EXCEPT:
A. Buying a stock on one exchange and simultaneously selling it on another exchange
B. Selling stock for a customer that is not owned by that customer
C. Selling 100 shares after the client has exer
-C. Selling 100 shares after the client has exercised a call option.
Exercising a call makes a client an owner of the stock, so a sale that occurs on, or after, a call is exercised, is a long sale.
All of the following terms describe rights EXCEPT:
A. exercisable
B. negotiable
C. giftable
D. redeemable
-D. redeemable
Rights are not redeemable with the issuer.
Electronic delivery of a prospectus is NOT permitted for:
A. common stock issues
B. preferred stock issues
C. corporate debt issues
D. investment company issues
-D. investment company issues
The "access equals delivery" rule that permits electronic delivery of a prospectus (instead of paper) to those customers that have internet access is permitted for all securities offerings with the exception of investment com
A fully diversified portfolio that is matched to a broad-based market index has:
A. no risk
B. systematic risk
C. nonsystematic risk
D. both systematic and nonsystematic risk
-B. systematic risk
A portfolio that is fully diversified still has risk. It is said to only have "systematic" risk, which is the same as market risk. If the overall market drops, the portfolio will likely drop by a similar percentage.
At the account opening stage, which of the following customer actions would NOT be an indicator of potential money laundering?
A. Concern regarding the firm's government reporting requirements
B. Difficulty describing his or her work or lack of industry k
-C. Uncertainty about his or her investment objectives and needs
It is normal for a customer to be uncertain of his or her investment objectives and needs - it is the guidance of the registered representative that the customer is counting on to select the
A corporation declares a cash dividend on Wednesday, December 1st. The record date is set at Tuesday, December 21st, with the dividend payable on Friday, December 31st. Based on this information, the ex date is set at Friday, December 17th. The "tax event
-D. Friday, December 31st
For tax purposes, payments by issuers to securities holders are considered to be received as of the date the issuer sends the check. In this case, the check is sent on Friday, December 31st (payable date), therefore the income is
Which of the following open orders held by a member firm on its internal order entry system would be adjusted if the "ex" date for a cash dividend were tomorrow?
A. Sell 100 ABC @ 50 Day
B. Sell 100 ABC @ 40 Stop GTC
C. Sell 100 ABC @ 50 GTC
D. Sell 100 A
-B. Sell 100 ABC @ 40 Stop GTC
Orders that are placed lower than the current market are adjusted on ex date. Those orders are "OBLOSS"
There are 2 Sell stop orders here, but Choice D is a "Day" order, and if not executed this trading day, is canceled. Cho
Municipal bonds would NOT be an appropriate investment for which of the following?
A. Pension Plans
B. Individuals
C. Casualty Companies
D. Bank Holding Companies
-A. Pension Plans
It makes no sense to place "federally tax exempt" municipal bonds into a "tax deferred vehicle" such as a pension plan. Since the pension plan is tax deferred, one would place securities earning the highest "before tax" return, such as c
A tax deduction for a contribution to a Coverdell Education Savings Account is:
A. permitted without limitation
B. permitted only for persons earning below a statutory limit
C. not permitted unless the monies remain in the account for at least 5 years
D.
-C. not permitted unless the monies remain in the account for at least 5 years
Contributions to Coverdell Education Savings Accounts are not tax deductible - no if's, and's, or but's!
Which callable municipal bonds quoted on a yield basis would be priced to the near term "in whole" call date?
A. par bonds
B. discount bonds
C. premium bonds
D. zero-coupon bonds
-C. premium bonds
Municipal bonds trading in the secondary market at a premium must be priced to give the customer the promised yield based upon yield to call - this is the worst case basis. Using the call date assumes that the premium will be lost over t
All of the following are money market instruments EXCEPT:
A. Tax Anticipation Notes
B. Treasury Notes
C. Certificates of Deposit
D. Commercial Paper
-B. Treasury Notes.
Treasury Notes are issued in 1 to 10 year maturities, hence they are not a money market instrument. A money market instrument is issued with a maturity under 1 year. Tax Anticipation Notes, Certificates of Deposit, and Commercial Paper
Regarding the notification of a broker-dealer's financial condition to customers, a brokerage firm must send semi-annual statements which include the firm's:
A. List of lawsuits
B. Income statement
C. Net capital computation & balance sheet
D. Propreitary
C. Net capital computation & balance sheet
Broker-dealers must send their customers a semi-annual balance sheet and Net Capital computation. There is no requirement that the customer be sent the income statement, proprietary trading positions or a list of
A securities dealer is quoting ABCD stock at 12.00 - 13.00 (10 x 15). This means that the dealer is willing to:
A. buy 1,000 shares at $12 and sell 1,500 shares at $13
B. sell 1,000 shares at $12 and buy 1,500 shares at $13
C. buy 1,200 shares at $10 and
-A. buy 1,000 shares at $12 and sell 1,500 shares at $13
Securities dealers quote stocks with a bid and ask. The bid is the price at which the dealer is willing to buy from the customer (therefore, the customer is selling to the dealer at the bid). The as
All of the following information is needed to open a new cash account for a customer EXCEPT:
A. the citizenship of the customer
B. whether the customer is an officer or director of a publicly held company
C. whether the customer owns the stock of another
-C. whether the customer owns the stock of another publicly traded broker-dealer
Country of citizenship is deemed to be an essential piece of information because the PATRIOT ACT requires that a copy of the customer's passport be obtained if an account is
Variable annuities are:
A. exempt securities that are sold without a prospectus
B. non-exempt securities that must be sold with a prospectus
C. insurance products that are sold without a prospectus
D. futures products that are sold without a prospectus
-B. non-exempt securities that must be sold with a prospectus
Variable annuities differ from other products sold by insurance companies in that the purchaser bears the investment risk; as opposed to the insurance company bearing the investment risk.
A client has an options account that is qualified to buy options and sell covered calls. The client calls his representative, telling him that he wants to sell naked calls in the account. Which statement is FALSE about this?
A. The customer must be sent a
-C. The customer must cross-guarantee the account because of the increased risk level
For a qualified retirement plan contribution to be deductible from that year's tax return, the contribution must be made by no later than:
A. April 15th of that year
B. December 31st of that year
C. April 15th of following year
D. the tax filing date of t
-D. the tax filing date of the following year
Contributions to qualified retirement plans (other than IRAs) must be made no later than the date the tax return is filed (even if it is filed with an extension). On the other hand, IRA contributions must be m
Which statement is TRUE regarding variable annuities during the accumulation phase?
A. Periodic payments of fixed or varying dollar amounts can be made into the separate account
B. All payments into the contract must be made in a lump sum at the time of p
-A. Periodic payments of fixed or varying dollar amounts can be made into the separate account
During the accumulation phase of a variable annuity contract, money can be paid into the plan; but distributions cannot be taken.
When distributions commence in
Rule 144A applies to trading of:
A. restricted stock in the open market
B. private placements by qualified institutional buyers
C. restricted stock in a private securities transaction
D. private placements by individuals
-B. private placements by qualified institutional buyers
Rule 144A should not be confused with SEC Rule 144. Rule 144A allows qualified institutional buyers ("QIBs") to buy and trade between themselves large blocks of privately placed issues. Thus, issuer
Money market discount instruments are quoted on a:
A. yield basis
B. percentage of par basis in 1/8ths
C. percentage of par basis in 32nds
D. percentage of par basis in 64ths
-A. yield basis
Money market instruments are original issue discount obligations quoted on a yield basis that are priced at a discount to par (with the exception of negotiable certificate of deposit that are priced at par plus accrued interest). The disco
Under Rule 10b-5-1, pre-arranged trading plans by insiders are:
A. permitted only if the provisions cannot be altered during the plan's life
B. permitted only if the plan has been voted on and agreed to by the majority of disinterested shareholders
C. giv
-A. permitted only if the provisions cannot be altered during the plan's life
We all know that insiders are prohibited from trading based on material non-public information. In 2000, the SEC issued a "safe-harbor" rule that permits statutory insiders (off
ABLE accounts are:
A. used to save funds on a tax-deferred basis and may only be used to pay for medical expenses
B. used to save funds on a tax-deferred basis to pay for the ongoing care of disabled children below age 21
C. regulated by the MSRB
D. regul
-C. regulated by the MSRB
ABLE accounts were enacted by Congress in late 2014. ABLE stands for "Achieving a Better Life Experience Act." It allows each state to set up a "municipal fund security" regulated by the MSRB that permits an account to be establi
When the Securities and Exchange Commission sets the effective date for a new issue in registration, this means that the:
A. SEC has approved the offering for sale to the public
B. SEC has certified that the offering documents give full and fair disclosur
-C. proper documents for registration have been filed with the SEC
If the SEC sets the "effective date" for an issue in registration, this means that all proper documents have been filed with the SEC. The SEC does not approve of any new issue in registrat
For the past 5 years, an individual earning $40,000 per year, who was not covered by another retirement plan, has made annual contributions to an Individual Retirement Account. That individual has changed jobs at the same salary and has been included in t
-B. Annual contributions to the Individual Retirement Account can continue and are an adjustment to income each year
Any individual, whether or not he is covered by another retirement plan, can make an annual contribution to an Individual Retirement Accou
The trust indenture is a contract between the:
A. issuer and trustee
B. trustee and bondholder
C. issuer and bondholder
D. issuer and transfer agent
-A. issuer and trustee
The trust indenture is a contract between the issuer and trustee (since the trustee is paid by the issuer) where the trustee acts for the benefit of the bondholders.
Which statement is TRUE about a Certificate of Participation (COP)?
A. COPs are subject to statutory debt limits and have a higher credit rating than G.O. bonds of the same issuer
B. COPs are subject to statutory debt limits and have a lower credit rating
-D. COPs are not subject to statutory debt limits and have a lower credit rating than G.O. bonds of the same issuer
As municipalities reached their debt limits with G.O. bond issuance, they found it harder and harder to get voter approval to raise limits
A growth fund would likely invest in which of the following securities?
A. Common stock options
B. Public Utility stocks
C. Treasury stock
D. Treasury bonds
-A. Common stock options
Growth funds invest in common stocks and equivalent securities for capital gains caused by earnings growth of the company. A way for a growth fund to "pump up" returns would be to buy call options on stocks that are viewed as good
Which statements are TRUE about marking securities positions to market?
A. Long securities positions are marked to market daily
B. Long securities positions are marked to market weekly
C. Short securities positions are marked to market twice per day
D. Sh
-A. Long securities positions are marked to market daily
Securities positions held in margin accounts, whether long or short, are marked to market daily, based on the closing price of the security (last reported trade). If the market value of a long posit
Which statement is TRUE about variable annuities?
A.
Intra-day liquidity is provided in the marketplace
B.
Tax-free growth occurs if distributions are not taken until retirement age
C.
There is no limit on the amount that can be contributed pre-tax
D.
A g
-D.
A guaranteed death benefit is included in the purchase
Variable annuities are not traded in the marketplace. They are a contractual obligation between the purchaser and the issuing insurance company. There is no limit to the amount that can be contrib
Federal Funds are overnight loans of reserves from:
A. Federal Reserve to broker-dealers
B. broker-dealers to Federal Reserve
C. commercial bank to broker-dealer
D. commercial bank to commercial bank
-D. commercial bank to commercial bank
Federal Funds are overnight loans of reserves from commercial bank to commercial bank. The "effective" rate is an average rate for selected banks across the United States. Thrifts cannot loan Federal Funds, nor can a
Which of the following signatures must appear on the New Account Form when a customer opens a self-directed cash account online?
A. Customer
B. Manager and Registered Representative
C. Registered Representative only
D. Manager only
-D. Manager only
John Doe and Jane Smith own certificated securities in a joint account. If they wish to sell securities from the account:
A. a stock power is only required to be signed by John Doe
B. a stock power is only required to be signed by Jane Smith
C. a stock po
-C. a stock power must be signed by both John Doe and Jane Smith
To sell a physical stock certificate, there must be a signature (endorsement) either on the back of the certificate itself, or on a detachable "stock power." If the certificate is owned join
Corporate officers who wish to trade their own company's stock must comply with all of the following rules EXCEPT:
A. filing change of holding reports with the SEC
B. prohibitions on short sales of that company's stock
C. purchase restrictions through the
-C. purchase restrictions through the exercise of stock options
There is no restriction on corporate officers' buying their company's stock through the exercise of stock options. Many companies compensate their officers with stock option packages. Officer
Issuers that wish to give "earnings guidance" to research analysts must conform with the provisions of SEC:
A. Regulation SB
B. Regulation FD
C. Regulation SK
D. Regulation SP
-B. Regulation FD
Regulation FD (Fair Disclosure), passed in 2000, is basically an elaboration of the insider trading rules. It prohibits issuers from making selective disclosure of non-public information to research analysts, mutual fund managers, and ot
Municipal variable rate demand notes have a:
A. minimum value which will never go below par and are subject to market risk
B. minimum value which will never go below par and are not subject to market risk
C. maximum value which will never go above par and
-B. Minimum value which will NEVER go below par and are not subject to market risk
-Yield which will NEVER rise above the stated rate
Municipal variable rate demand notes are issued by a municipality. The interest rate is reset to the market rate weekly;
Which of the following signatures must appear on the New Account Form when a customer has provided information over the phone?
A. Customer
B. Manager and Registered Representative
C. Registered Representative only
D. Manager only
-B. Manager and Registered Representative
What term would apply to Authorized Stock?
A. Issued
B. Outstanding
C. Voting
D. Par Value
-D. Par Value
Authorized stock is the total number of shares that the company is "authorized" to sell. Par value is the term that applies to all stock, whether it is Authorized, Issued, Outstanding or Treasury.
A customer that wishes to open a new account is asked by the registered representative for a government issued photo identification. The customer gives the representative a copy of his driver's license, which the representative notes has expired 3 months
-C. As long as another non-documentary method is used to verify the customer's identity, the account can be opened
To open an account for a new customer, 4 critical pieces of information must be obtained before the account can be opened - customer name, m
A customer has decided to transfer his account from Broker-Dealer A to Broker-Dealer B. Which statement is TRUE regarding the maintenance of the customers existing account records?
A. Broker-Dealer A must retain the customer's existing account records (st
-B. Broker-Dealer A must retain the customer's existing account records (statements) for 6 years
Customer account statements must be retained for 6 years. In this case, the responsibility for retaining existing account records falls on Broker-Dealer A, be
Interest charges on customer debit balances are based on the:
A. Prime rate
B. Federal Funds rate
C. Treasury Bill rate
D. Broker Loan rate
-D. Broker Loan rate
Brokers borrow from banks using customer securities as collateral at the Broker Loan rate, also termed the Call Loan rate. The interest charged to customers on loans made by brokers is based on this rate (e.g., the interest rate charg
All of the following are true statements about variable annuities EXCEPT:
A. the portfolio funding the separate account is professionally managed
B. the portfolio is invested in other management company shares
C. dividends and capital gains must be reinve
-D. investors get an interest rate guarantee
Only fixed annuities give an interest rate guarantee.
Which statement is TRUE regarding Ginnie Mae?
A. Ginnie Mae securities are not guaranteed by the federal government
B. Interest received from Ginnie Mae debt obligations is exempt from federal income tax
C. Ginnie Mae stock is traded on the New York Stock
-D. Ginnie Mae debt obligations are traded Over-the-Counter
Ginnie Mae is a government (not a private) company and cannot be spun off because of the guarantee of the U.S. Government. GNMA debt obligations trade over-the-counter, which is true for virtuall
Revenue Anticipation Notes are a(n):
A. funded debt that is a source of permanent financing
B. funded debt that is a source of temporary funding
C. unfunded debt that is a source of permanent financing
D. unfunded debt that is a source of temporary financ
-D. unfunded debt that is a source of temporary financing
A Revenue Anticipation Note (RAN) is issued by a municipality that wishes to borrow short-term against revenues that are expected to be received in the near future. Thus, this is a source of tempor
A customer wishes to invest in an oil and gas program that provides both an immediate tax benefit, as well as a reasonable chance of continuing tax benefits. The best recommendation is a(n):
A. exploratory program
B. developmental program
C. income progra
-B. developmental program
The best choice is a developmental program, where drilling takes place near an existing field. Here, there is a greater chance of finding oil, which, when extracted and sold, would provide tax shelter in the form of the depletion
Which type of real estate limited partnership could be eligible for governmental subsidies?
A. Raw Land
B. New Construction
C. Condominiums
D. Government Assisted Housing
-D. Government Assisted Housing
Government Assisted Housing programs often qualify for government subsidies.
If a customer places an order with a registered representative and calls back 20 minutes later stating "Cancel the order!" If the trade has already been executed, it:
A. can be canceled without any further action needed
B. can only be canceled with approv
-D. cannot be canceled, but can be closed out
Because the order was executed prior to the customer's call to cancel the order, the firm would have to close out the position and any loss or profit on the close out belongs to the customer.
Which statement is TRUE regarding a Roth IRA?
A. Roth IRAs allow for tax-free distributions
B. Roth IRA contributions are tax deductible
C. Roth IRAs are subject to Required Minimum Distributions (RMDs)
D. Roth IRAs are not subject to income limitations
-A. Roth IRAs allow for tax-free distributions
Which statement is TRUE regarding oil and gas limited partnership interests?
A. The primary tax benefit of an exploratory program is the depletion deduction
B. The primary tax benefit of an income program is the depreciation deduction
C. The primary tax b
-C. The primary tax benefit of an exploratory program is the intangible drilling cost deduction
Which statement is FALSE regarding Brokered CDs?
A. These instruments have a limited trading market
B. There is a penalty for early withdrawal
C. There can be a loss of principal upon an early withdrawal
D. There is no FDIC insurance on these products
-B. There is a penalty for early withdrawal
There is no penalty for early withdrawal of funds on brokered CDs - however the amount of interest earned will be pro-rated over the shorter life of the deposit. Most of these instruments are held to maturity, s
A U.S. automobile manufacturer buys a Korean automobile manufacturer. This is a:
A. horizontal merger
B. vertical merger
C. diagonal merger
D. foreign exchange
-A. horizontal merger.
A horizontal merger is where 2 companies in the same industry merge, usually to achieve economies of scale.
Which statement is FALSE regarding Treasury Stock?
A. Treasury Stock is not entitled to dividends
B. Treasury Stock has voting rights
C. Treasury Stock buybacks decreases the number of shares outstanding
D. Treasury Stock purchases are used to increase re
-B. Treasury Stock has voting rights
Treasury stock does not vote nor receive dividends. Treasury stock is deducted from outstanding shares, and since outstanding shares are reduced, Earnings Per Share increases.
Publicly traded companies are:
A. required to use accrual accounting
B. required to use cash accounting
C. required to use cost accounting
D. have a choice of using either accrual, cash, or cost accounting
-A. required to use accrual accounting
Corporate financial records are kept using ACCRUAL accounting - a method that attempts to match revenues and expenses.
Very small non-public companies can use CASH accounting, which simply records revenues when cash
A customer wishes to open an account at a FINRA member firm, but wishes his identity to remain hidden to the employees at the branch office. Which statement is TRUE?
A. The customer's request cannot be accommodated
B. The customer must apply to FINRA to o
-C. The customer must sign a statement attesting to account ownership for such a request to be honored
FINRA requires that accounts be maintained in customer name; however it will allow a numbered account to be maintained if the firm keeps on file a writt
Municipal financial advisors:
A. are hired by the municipal securities issuer
B. are hired by the municipal securities purchaser
C. render advice to potential buyers of the issue
D. render advice on the structure of a municipal investment portfolio
-A. are hired by the municipal securities issuer
Financial advisors to municipalities are municipal broker-dealers familiar with the municipal marketplace. The financial advisor helps a municipality structure a competitive bid offering, receiving a fee fr
Which statement is TRUE regarding warrants?
A. The exercise price of a warrant is set at a premium to the stock's current market price and the warrants are exercised when the exercise price is above the market price
B. The exercise price of a warrant is s
-C. The exercise price of a warrant is set at a premium to the stock's current market price and the warrants are exercised when the exercise price is below the market price
The Federal Telephone Consumer Protection Act permits:
A. solicited calls to be made only after 9 AM or before 5 PM in the time zone of the recipient
B. unsolicited calls to be made only after 9 AM or before 5 PM in the time zone of the recipient
C. solic
-C. solicited calls to be made anytime
The Federal Telephone Consumer Protection Act of 1991 requires that UNSOLICITED calls are only PERMITTED AFTER 8:00 AM until 9:00 PM in the time zone of the recipient. SOLICITED calls can be made ANYTIME (as an examp
Maximum income limits that reduce permitted contributions do NOT apply to:
A. IRAs
B. Spousal Roth IRAs
C. Roth IRAs
D. Coverdell Education Savings Accounts
-A. IRAs
As one's income increases, permitted contributions to Roth IRAs and Coverdell Education Savings Accounts are phased out (so high earning persons cannot contribute to these accounts).
However, there is no income limit for making a contribution to
The municipal bond counsel opines on which of the following ?
A. Viability
B. Feasibility
C. Validity
D. Marketability
-C. Validity
he bond counsel examines new municipal issues for legal or tax problems and renders an opinion on the VALIDITY, LEGALITY and TAX EXEMPT STATUS of the issue. Bond counsels do not render economic opinions, which is the same as rendering an opin
When is a foreign broker-dealer permitted to solicit U.S. based clients?
A. If the foreign broker-dealer establishes an SEC-registered U.S. subsidiary
B. If the foreign broker-dealer only offers exempt securities
C. If the foreign broker-dealer only deals
-A. If the foreign broker-dealer establishes an SEC-registered U.S. subsidiary
In order for a broker-dealer to solicit in the U.S., it must be registered with the SEC.
Under Rule 15a-6, foreign broker-dealers that are NOT SEC REGISTERED are PERMITTED to:
The credit rating of a guaranteed corporate bond is based on the credit quality of the:
A. corporate issuer
B. corporate guarantor
C. FDIC
D. SIPC
-B. corporate guarantor
A husband and wife wish to open a spousal IRA. The wife works while the husband does not. What is the permitted maximum contribution to this spousal IRA for the year 2019?
A. $6,000 for the wife; $0 for the husband
B. $6,000 for the wife; $3,000 for the h
-C. $6,000 for the wife; $6,000 for the husband
For the year 2019, the maximum contribution to a spousal IRA, is $6,000 each, in two accounts, for a total of $12,000. It makes no difference if the spouse works or not.
In a competitive bid municipal underwriting, which statement is TRUE?
A. The spread must be disclosed
B. Each underwriter's name must be disclosed
C. Each underwriter's participation must be disclosed
D. The reoffering yield must be disclosed
-D. The reoffering yield must be disclosed
In a competitive bid (for G.O. bonds), only the reoffering yield and resultant dollar price is disclosed.
The purchase of a put has all of the same characteristics as selling stock short EXCEPT:
A. unlimited loss potential in a rising market
B. limited gain potential in a falling market
C. low liquidity risk if the position is to be liquidated
D. both are bea
-A. unlimited loss potential in a rising market
The purchase of a put has limited loss potential in a rising market - the maximum that can be lost is the premium paid. In a rising market, the loss potential on a short sale of stock is unlimited, since the
If interest rates fall, issuers most likely will call:
A. all preferred issues
B. preferred issues with below market interest rates
C. preferred issues with above market interest rates
D. only preferred issues with high call premiums
-C. preferred issues with above market interest rates
If interest rates fall, issuers most likely will "call in" old high rate preferred and replace it by selling new preferred at the lower current rates. The "call premium" is any amount that the issuer w
For an investor seeking a tax sheltered investment, the primary advantage of a real estate direct participation program is the:
A. high level of liquidity provided by the investment
B. ability of the program to generate losses for tax purposes but provide
-B. ability of the program to generate losses for tax purposes but provide positive cash flow
Limited partnership interests are not liquid. To avoid the corporate characteristic of "free transferability of shares," most partnership agreements place restri
Which of the following is an acronym used to describe real estate direct participation programs?
A. New Construction Real Estate Limited Partnership
B. GNMA
C. REITS
D. RELPS
-D. RELPS
Direct participation programs allow the partners to directly participate in income and loss.
Types of RELPs (Real Estate Limited Partnerships) are: New Construction; Existing Housing; Raw Land: and Condominium investments.
Which statement is TRUE about the risks associated with federal agency securities?
A. Agency securities have market risk and credit risk
B. Agency securities have market risk but virtually no credit risk
C. Agency securities have no market or credit risk
-B. Agency securities have market risk but virtually no credit risk
U.S. Government Agency Bonds (as with any fixed income security), have market (interest rate) risk. If interest rates rise, their prices will drop, with longer maturity and lower coupon i
Cash payments made to investors (except for extremely high earners) from which of the following investments are subject to the lower 15% maximum tax rate?
A. Common stocks only
B. Common and Preferred stocks
C. Convertible bonds and common stocks
D. All b
-B. Common and Preferred stocks
Dividends from both common and preferred issues qualify for this advantageous tax treatment. Interest payments received from bond investments (whether the bonds are convertible or not) do not qualify for the lower 15% tax r
In a period of deflation, which statement about fixed income securities is FALSE?
A. Issuers are more likely to sell fixed income securities
B. Issuers are likely to sell non-callable issues
C. Holders are likely to realize capital appreciation on fixed i
-D. Holders receive payments on fixed income securities that buy less in real terms
In a DEFLATIONARY period, prices fall. Therefore, MONEY BUYS "MORE" in real terms.
As deflation occurs, interest rates will drop, causing long term debt prices to rise. Be
All of the following statements regarding short term negotiable certificates of deposit are correct EXCEPT:
A. the minimum denomination is $100,000
B. short term negotiable CDs are callable
C. trading occurs in the secondary market
D. these securities are
-B. short term negotiable CDs are callable
Short term negotiable CDs are issued by banks in minimum $100,000 denominations. They are non-callable and trade in the secondary market.
Note, in contrast, that banks also issue long term negotiable CDs that can
As interest rates rise, which following statement is TRUE?
A. Bonds trading at small discounts fall faster in price than bonds trading at large discounts.
B. Bonds trading at large discounts fall faster in price than bonds trading at small discounts.
C. P
-B. Bonds trading at large discounts fall faster in price than bonds trading at small discounts.
The general rule is the lower the price of the bond, the faster that bond's price will move as market interest rates change.
All of the following investment company terms are synonymous EXCEPT:
A. Bid
B. Redemption Price
C. Net Asset Value
D. Offering Price
-D. Offering Price
Bid, Redemption Price, and Net Asset Value are all the same terms for mutual fund shares.
A customer viewing virtual trading floor information on the NYSE Website notices that he can see most, but not all, of the stocks included in the Dow Jones Industrial Average, trading on the floor. The customer asks his registered representative why this
-A. Of the 30 stocks included in a Dow Jones Industrial Average, a handful do not trade on the NYSE
Of the Dow 30 stocks, most of the issues are NYSE listed, but a handful, such as Microsoft Apple and Intel, are only traded on NASDAQ.
A mutual fund sponsor has three different income funds, holding AAA rated debt securities with similar maturities. Assuming that the expense ratios for the funds are identical, which fund would have the lowest yield from investment income?
A. Government B
-C. Municipal Bond Fund
The order from highest to lowest yield is: Corporates, Governments, Municipals.
Corporates are considered more risky than both governments and municipals, and are fully taxable, so their yield is the highest. Governments are less r
The purchase of a call has all of the same characteristics as buying stock EXCEPT:
A. unlimited gain potential in a rising market
B. limited loss potential in a falling market
C. low liquidity risk if the position is to be liquidated
D. no erosion of valu
-D. no erosion of value as the position is held
The purchase of a call has unlimited gain potential, as does the purchase of stock. The maximum loss for a call holder is the premium paid; the maximum loss for a stockholder is his investment - so loss pote
All of the following statements are true regarding defined benefit plans EXCEPT:
A. contributions made to the plan can vary from year-to-year
B. employees with the highest salaries and the fewest years to retirement benefit the most
C. benefits paid to em
-C. benefits paid to employees consists of a tax-free return of capital and a taxable return of earnings
Since a defined benefit plan is a "tax qualified" retirement plan, contributions are tax deductible and earnings "build up" tax deferred. When distrib
Order ticket information must be recorded by the member firm prior to order:
A. entry
B. execution
C. cancellation
D. confirmation
-A. entry
Under FINRA rules, order tickets (which are now electronic) must be prepared in writing prior to entry. Once an order has been executed, no alterations are permitted to the ticket unless a manager approves in writing.
A high income client who lives in California would be more likely to buy a Treasury security as an investment because the interest income is:
A. exempt from California state income tax
B. exempt from federal income tax
C. exempt from both California state
-A. exempt from California state income tax
The interest income received from U.S. Government obligations is subject to federal income tax, but is exempt from state and local income taxes (one level of government cannot tax the other's obligations).
Thus,
In which of the following types of underwriting commitments are the underwriters acting as agents?
A. Firm
B. Best Efforts
C. Bought deal
D. Stand-By
-B. Best Efforts
The types of underwriting commitments are:
-Firm commitment (underwriter acts as PRINCIPAL)
-Best Efforts, Best Efforts-All or None (underwriter acts as AGENT in both)
-Stand-By (underwriter acts as PRINCIPAL to buy unsubscribed shares in
All of the following are defined as "institutional clients" for purposes of the FINRA communications rules EXCEPT:
A. bank
B. investment company
C. insurance company
D. real estate company
-D. real estate company
An institutional communication is defined as one that is distributed to an institutional investor - a bank, savings and loan, insurance company, registered investment company, registered investment adviser, employee benefit plan wi
An oil and gas program that is designed to give immediate deductions with moderate risk is a(n)?
A. exploratory program
B. developmental program
C. income program
D. combination program
-B. developmental program
In a developmental program, a well is drilled near an existing field (a "step-out" well, since the driller is stepping out from the existing field). The cost of drilling is an "Intangible Drilling Cost" (IDC) and is 100% deductib
A variable annuity is a(n)
A. exempt security under the Securities Act of 1933
B. non-exempt security under the Securities Act of 1933 because the purchaser bears the investment risk
C. non-exempt security under the Securities Act of 1933 because the issu
-B. non-exempt security under the Securities Act of 1933 because the purchaser bears the investment risk
A client has $99,000 of inherited funds to invest and wishes to use the proceeds to buy a mutual fund that has breakpoints at $10,000 intervals. The registered representative accepts the customer purchase order without making any additional disclosures. W
-C. The representative has committed a violation known as a breakpoint sale
f the disclosure is not made, the registered representative has committed a violation known as a "breakpoint sale." A "backing away" violation is where a firm quote is given to a
Under MSRB rules, if a Final Official Statement is not yet ready at the time of settlement of the purchase of a new municipal securities issue, the customer would receive a(n):
A. apology letter
B. copy of the Prospectus
C. copy of the Preliminary Officia
-C. copy of the Preliminary Official Statement
Under MSRB rules, if a Final Official Statement is being prepared but is not yet ready at the time of settlement, the customer would receive a copy of the Preliminary Official Statement.
A client who wishes to have mail held must give a valid reason for the request:
A. each time that the customer wishes the mail to be held
B. if the time period of the hold exceeds 1 month
C. if the time period of the hold exceeds 2 months
D. if the time p
-D. if the time period of the hold exceeds 3 months, when aggregated with any hold requests received over the prior year
If a customer wishes that his or her mail be held for more than 3 months, then a valid reason must be given in the letter requesting t
All of the following are methods of depreciation EXCEPT:
A. First In; First Out
B. Double Declining Balance
C. Sum of Years Digits
D. Straight Line
-A. First In; First Out
Methods of depreciation include straight line, double declining balance (an accelerated method), and sum of the year's digits (another accelerated method).
First-in; first-out (FIFO) is a method of accounting for inventories.
The manager of an unregistered hedge fund is typically compensated by a fee based on a:
A. percentage of assets under management
B. performance fee based on profits
C. percentage of assets under management plus a performance fee based on profits
D. perfor
-C. percentage of assets under management plus a performance fee based on profits
The typical hedge fund fee is "2 and 20" - a 2% annual management fee as a percent of assets under management, plus 20% of profits.
Hedge fund managers are NOT SUBJECT to th
Which of the following Moody's MIG ratings is used for the lowest investment grade paper?
A. MIG 1
B. MIG 2
C. MIG 3
D. SG
-B. MIG 2
Moody's rates municipal anticipation notes under the "MIG" (Moody's Investment Grade) ratings scale, with MIG 1 and MIG 2 being investment grades.
The non-investment grades being MIG 3 and SG ("Speculative Grade").
In the weekly auction of Treasury Bills, which statement is TRUE?
A. Competitive bids are always filled
B. Non-competitive bids are only filled if there is sufficient supply
C. The Federal Reserve allocates securities from the lowest yields to the higher
-C. The Federal Reserve allocates securities from the lowest yields to the higher yields
In the weekly T-Bill auction, the amount of non-competitive bids is set aside from the total securities to be auctioned and is filled at the average winning rate. The
The regulator that is responsible for enforcing the Bank Secrecy Act of 1970 is:
A. SEC
B. FinCEN
C. FINRA
D. FDIC
-B. FinCEN.
FinCEN is part of the Department of Treasury and stands for the Financial Crimes Enforcement Network. While FinCEN itself was not created until 1990, the Department of Treasury was given responsibility for tracking large cash deposits over $10
A registered representative wishes to sell a municipal bond to a customer who lives in a neighboring state. Which of the following MUST be registered in the neighboring state?
A. The municipal bond only
B. The broker-dealer and the registered representati
-B. The broker-dealer and the registered representative only
Municipal bonds are an exempt security, from both federal and state registration. However, broker-dealers and their sales employees that sell these bonds must still be registered under state law
Under FINRA rules, a registered representative must obtain and retain all of the following information relating to the customer's account EXCEPT:
A. Whether the customer is an officer, director, or 5% or greater shareholder of a publicly traded company
B.
-A. Whether the customer is an officer, director, or 5% or greater shareholder of a publicly traded company
-10%, not 5%.
FINRA rules require that a registered representative ascertain whether the customer is an officer, director, or 10% shareholder of a
All of the following statements are correct when comparing bonds and preferred stock EXCEPT?
A. Payments to bondholders are subject to approval of the Board of Directors
B. Payments to preferred stockholders are subject to approval of the Board of Directo
-A. Payments to bondholders are subject to approval of the Board of Directors
Payments to bondholders are a legal obligation of the issuer. They are not a discretionary decision on the part of the Board of Directors, as is the decision to pay a dividend t
When does an investor receive payment of interest and principal on a Capital Appreciation Bond (CAB)?
A. Both interest and principal payments are made semi-annually
B. Interest is paid semi-annually and principal is paid at maturity
C. Principal is paid s
-D. Both interest and principal are paid at maturity
In a deflationary period, which statement is TRUE?
A. Equity securities are a defensive investment
B. Interest rates will likely rise
C. Fixed income securities are a defensive investment
D. Fixed income security prices will fall
-C. Fixed income securities are a defensive investment
In a deflationary period, interest rates will fall, raising the prices of fixed income securities. Thus, fixed income securities are defensive securities in times of deflation.
Equity securities' pric
All of the following are required to sell "144" stock EXCEPT:
A. seller's representation letter
B. buyer's representation letter
C. issuer's representation letter
D. broker's representation letter
-B. buyer's representation letter
The issuer must represent that the corporation is current with all required SEC filings because it is prohibited to use Rule 144 to sell if this is not the case.
The seller must represent that the securities have been hel
Which investment gives the LEAST protection against purchasing power risk?
A. 6 month Treasury Bill
B. 10 year Treasury Note
C. 10 year Treasury "TIPS"
D. 10 year Treasury "STRIPS
-D. 10 year Treasury "STRIPS"
Purchasing power risk is the risk of inflation - that the prices of goods and services rises faster than real economic growth. When there is significant inflation, interest rates rise. And this causes bond prices to fall.
Which of the following is NOT included in a competitive bid?
A. Dollar amount of bid
B. Reoffering yields
C. Stated rates of interest
D. Premiums or discounts
-B. Reoffering yields
The reoffering yields are not in the syndicate bid - the interest rates to be printed on the bonds are in the bid. Also included are any premiums or discounts from par specified in the bid; the total dollar amount being bid; and the
The sale of an "at the money" put is a:
A. bull strategy
B. bear strategy
C. neutral strategy
D. bull/neutral strategy
-D. bull/neutral strategy
The seller (writer) of a put has the obligation to buy stock at a fixed price in a falling market, in return for which the writer collects a premium. If the market stays the same, or rises, the put expires and the writer keeps th
Which of the following securities CANNOT be purchased on margin?
A. Listed stocks
B. U.S Treasuries
C. Listed stock options
D. Municipal Debt
-C. Listed stock options
Regulation T defines the marginable securities as those listed on an exchange or NASDAQ. Listed warrants (which trade alongside the common stock on the same exchange where the stock is listed) are marginable, since they typically
Contributions to Keogh Plans must be made by:
A. December 31st of the calendar year in which the contribution may be claimed on that person's tax return
B. December 31st of the calendar year after which the contribution may be claimed on that person's tax
-D. August 15th tax filing date permitted under an automatic extension of the calendar year after which the contribution may be claimed on that person's tax return
Who would be MOST likely to invest in a BDC?
A. Low risk investor seeking preservation of capital
B. Moderate risk investor seeking higher returns
C. High net worth investor seeking dividends
D. Sophisticated investor seeking a tax shelter
-C. High net worth investor seeking dividends
A BDC (Business Development Company) is a type of investment company that makes private equity investments in small, privately-held start up companies. These are higher risk investments that pay the private eq
Stand-by underwritings are a type of:
A. firm commitment underwriting used in initial public offerings
B. best efforts underwriting used in initial public offerings
C. firm commitment underwriting used in rights offerings
D. best efforts underwriting used
-C. firm commitment underwriting used in rights offerings
Stand-by underwritings are used in connection with rights offerings. If all of the new shares are not subscribed by the existing shareholders, the issuer has an underwriter stand-by on a firm commi
If the writer of a put contract is assigned, the put writer must:
A. pay the strike price for the security in next business day
B. pay the strike price for the security in 2 business days
C. deliver the security the next business day
D. deliver the securi
-B. pay the strike price for the security in 2 business days
If the writer of a put is "assigned," this means that the OCC has assigned an exercise notice to that put writer. The put writer is then obligated to buy the stock from the put holder in a regul
Currency valuation in the interbank market is affected by all of the following EXCEPT:
A. Intervention
B. Revaluation
C. Devaluation
D. Intermediation
-D. Intermediation
Currency values in the interbank market are affected by central bank intervention (e.g., the Bank of Japan bolsters the yen by making large purchases); by currency revaluation (e.g., Mexico revalues the Peso against the dollar, changing
If an SPX options contract is exercised, then the:
A. holder must deliver cash to the writer the next business day
B. writer must deliver cash to the holder the next business day
C. holder must deliver the securities in the index to the writer in 2 busine
-B. writer must deliver cash to the holder the next business day
Unlike stock options, if there is an exercise of an index option, the writer must pay the holder the "in the money" amount the next business day. There is no physical delivery of the underly
Which statement is FALSE regarding repurchase agreements?
A. Repurchase agreements typically mature in 1 to 90 days
B. Repurchase agreements are used by the Federal Reserve to influence money supply levels
C. Investors in repurchase agreements have no int
-C. Investors in repurchase agreements have no interest rate risk
Most repos are "overnight," though durations can extend for longer periods. Repos expose the dealer to INTEREST RATE RISK because, even though the agreement stipulates that the securities w
Which statement is TRUE about the tax deductibility of 529 Plan contributions?
A. Contributions are generally deductible at the federal level
B. Contributions are generally deductible at the state level
C. Contributions are generally deductible at the sta
-B. Contributions are generally deductible at the state level
529 Plan contributions are not deductible at the federal level. However, most states that have income taxes allow a deduction for contributions made to a plan established by that state (and a h
403(b) Plans are permitted to invest in all of the following EXCEPT:
A. Variable Annuities
B. Mutual Funds
C. Fixed Annuities
D. Common stocks
-D. Common stocks
403(b) plans are commonly referred to as "TDAs" - tax-deferred annuities.
403(b) plans are permitted to invest in fixed and variable annuity contracts, and are also permitted to invest in mutual funds (note that management of the investe
If a municipal securities firm wishes to advertise a given percentage yield on a security, the advertisement must:
A. disclose whether the yield is the coupon rate or yield to maturity
B. disclose whether the yield is the coupon rate or current yield
C. s
-A. disclose whether the yield is the coupon rate or yield to maturity
Any yield quoted must state whether the yield is the coupon rate, yield to maturity, or yield to call date. Current yield is thought by the MSRB to be somewhat misleading and may not b
All of the following securities can be purchased on margin EXCEPT:
A. Treasury bills
B. Structured products
C. Bankers' acceptances
D. Commercial paper
-B. Structured products
Because money market instruments are "safe," they can be margined - meaning that the brokerage firm can lend money against these securities held as collateral for the loan. Government securities, agency securities, investment grade
An officer of an issuer has received restricted stock as part of her compensation package. If she wishes to sell some of the stock under Rule 144, which statement is TRUE?
A.
The officer can sell the stock immediately without restriction
B.
The officer ca
-D.
The officer can sell the stock within 90 days and 6 months of purchase
In order to sell restricted stock under Rule 144, the stock must have been held fully paid, at risk, for at least 6 months. Once the 6 month holding period is cleared, a Form 144 c
All of the following regarding the Firm Element component of the "Continuing Education" requirement is correct EXCEPT:
A. CE is administered by the compliance department
B. CE must be completed by all registered persons
C. CE must be completed annually
D.
-D. CE must be completed by all employees
The Firm Element of the Continuing Education requirement obligates member firms to deliver annual training to all registered representatives on product, regulation, and compliance issues. The firm must maintain a
Under IRS rules, if a customer selling shares of stock wishes to use specific identification instead of FIFO for cost basis reporting, the broker-dealer effecting the trade must be notified of this no later than:
A. Trade Date
B. Confirmation Date
C. Sett
-C. Settlement Date
Which of the following information is NOT needed to open a new customer account?
A. The customer's birthdate
B. Whether the customer is an officer or director of a publicly held company
C. The customer's country of citizenship
D. Liquid net worth of the c
-D. Liquid net worth of the customer
To open a new account, the customer must be asked his or her occupation and employer, since special procedures must be followed to open an account for an employee of another brokerage firm.
The customer must be asked h
Under MSRB rules, inquiry should be made about all of the following in order to make suitable recommendations to customers EXCEPT:
A. Investment objective
B. Tax bracket
C. Investment Experience
D. Potential Inheritances
-D. Potential Inheritances
When recommending municipal bonds, asking investment objective; investment experience and tax-bracket are all important. The customer should be in a high tax bracket because income from these securities is generally free of fede
A bond trade takes place at 10:00 AM on Monday, July 10th for "cash." Settlement takes place:
A. before 2:30 PM on July 10th
B. before 2:30 PM on July 11th
C. during business hours on July 15th
D. during business hours on July 17th
-A. before 2:30 PM on July 10th
Cash settlement is same day settlement, before 2:30 PM.
Which statement is TRUE regarding indications of interest received during the "cooling off" period for a registered initial public offering?
A. The indication is binding on both parties
B. The indication is only binding on the customer
C. The indication i
-D. The indication is not binding on either party
The underwriter can cancel or change the indication. Similarly, the customer can also cancel or change his indication. These indications are not binding on either party because the issue cannot be legally
Which statement is TRUE regarding the enforcement of MSRB rules for broker-dealers?
A. Enforcement of MSRB rules for registered broker-dealers is performed by the MSRB
B. Enforcement of MSRB rules for registered broker-dealers is performed by FINRA
C. Enf
-B. Enforcement of MSRB rules for registered broker-dealers is performed by FINRA
Enforcement of MSRB rules for broker-dealers is performed by:
-FINRA
-SEC.
Enforcement of MSRB rules for separately identifiable municipal bond departments of banks is perfo
Which of the following ratings is applicable to commercial paper?
A. MIG-1
B. P-1
C. BBB
D. AAA
-B. P-1
Commercial paper is rated on a P-1,2,3, and NP ("Not Prime") scale by Moody's or an A-1,2,3 scale by Standard & Poor's.
MIG ratings are assigned by Moody's to short-term municipal notes.
"ABC" ratings are used by both Moody's and Standard and Poor
Moody's ratings measure:
A. default risk of debt issues
B. default risk of equity issues
C. market risk of debt issues
D. yields of debt issues
-A. default risk of debt issues
Moody's measures default risk of debt issues. Moody's only rates bonds, not equity securities.
All of the following actions require a filing with the SEC EXCEPT:
A. the purchase of a 5% position in one company's stock
B. an officer selling 1% of that company's stock
C. a broker-dealer's net capital computation
D. a company declaring a cash dividend
-D. a company declaring a cash dividend to stockholders
-Insiders must file with the SEC upon becoming an officer, director or 10% shareholder of that company.
-Insiders must file a report of each trade in that company's stock with the SEC within 2 busine
Which statement is FALSE about a SIMPLE IRA?
A. The maximum annual contribution is higher than for a Traditional IRA
B. The contribution is made by the employee, who gets a salary reduction for the amount contributed
C. The plan is available to any size e
-C. The plan is available to any size employer
SIMPLE IRAs are only available to small businesses with 100 or fewer employees. The plan is established by the employer and is much more simple to establish and administrate than a traditional pension plan (h
Which statement is TRUE regarding a Step-Down Certificate of Deposit?
A. Initial payments are made at an interest rate that is above the prevailing prime rate but stepped down to the Treasury rate over time
B. At a predetermined time, the interest rate is
-B. At a predetermined time, the interest rate is decreased to a rate that is at, or below, the market
With a step-down CD, you start with a higher-than-market "teaser" rate. This is used as an incentive to the client to buy the CD. Then, at a predetermin
If a municipality is expecting to receive federal funding for mass-transit programs, it could borrow against the expected funds to be received by issuing:
A. BANs
B. TANs
C. GANs
D. CLNs
-C. GANs
GANs are issued in expectation of receiving federal grant monies, usually for mass transit, energy conservation, and pollution control improvements.
What securities offering must be registered with the SEC?
A.
Rule 144
B.
Rule 144A
C.
Rule 506
D.
Rule 415
-D.
Rule 415
The securities offerings that are subject to registration include:
-Rule 415 shelf offerings
-Regulation A offerings of small dollar amounts.
All of the following communications fall under the Federal Telephone Consumer Protection Act of 1991 EXCEPT:
A. Live human callers
B. Robot callers
C. Facsimile transmission
D. Courier delivery
-D. Courier delivery
The Federal Telephone Consumer Protection Act of 1991 applies to any unsolicited offers made through the phone - whether these are made by personal contact, pre-recorded messages (robot callers), facsimile or electronic mail. It does
A municipal securities firm places the following advertisement:
"We Hold and Sell New York State 6% TANs"
Under MSRB rules, which statement is TRUE?
A. The advertisement must also show the maturity of the notes
B. The advertisement must state whether the
-B. The advertisement must state whether the percentage rate shown is the coupon or yield
Under MSRB rules, any advertisement that shows an interest rate or yield must state whether the rate of return shown is the coupon rate or the yield to maturity; and
Which of the following is NOT considered to be personal information about a customer account?
A. Approximate income and net worth on the customer new account form
B. Internet cookies from the customer's visits to the firm's website
C. Internet cookies fro
-C. Internet cookies from visits to other firms' websites
Personal information about a customer account cannot be divulged to anyone, unless so ordered by a court of law. This includes security positions in the account; customer income and net worth; and
All of the following information must be shown on a municipal bond trade confirmation EXCEPT:
A. Name, address, and telephone number of the municipal dealer
B. Whether the trade was effected on an agency or principal basis
C. Whether the bond was a Genera
-D. The name, address, and telephone number of the underwriter for the initial bond offering
Much information must be included on a municipal bond trade confirmation - name, address, and telephone number of the municipal dealer; whether the trade was effe
Which statement is TRUE regarding RMDs (Required Minimum Distributions) from IRA accounts?
A. The RMD is fixed at 10% per year
B. The RMD is based on the life expectancy of the account beneficiary
C. If the RMD is not taken, a penalty tax of 10% is applie
-B. The RMD is based on the life expectancy of the account beneficiary
The IRS creates tables that lay out the required minimum distribution amount each year; and these are based on life expectancy. Remember, RMDs do not apply to Roth IRAs.
The penalty ap
Under FINRA rules, disputes between a registered representative and a brokerage firm are handled by:
A. binding arbitration and are appealable
B. binding arbitration and are non-appealable
C. litigation and are appealable
D. litigation and are non-appeala
-B. binding arbitration and are non-appealable
Disputes between registered representatives and brokerage firms are handled by binding (non-appealable) arbitration.
The amount of the good faith check is:
A. determined by the issuer
B. determined by the underwriter
C. typically 5% of the par value of the bonds
D. typically 10% of the par value of the bonds
-A. determined by the issuer
The amount of the good faith check is determined by the issuer and this is set forth in the Official Notice of Sale. The good faith check amount that must be deposited by interested bidders is typically 1% or 2% of the par val
All of the following statements are true about SEP IRAs EXCEPT:
A. the plan is established by the employer
B. the plan is only available to companies with 100 or fewer employees
C. the annual contribution percentage can be changed
D. the maximum annual co
B. the plan is only available to companies with 100 or fewer employees
SEP IRAs allow for a very large annual contribution (25% of income statutory rate; 20% effective rate, capped at $56,000 in 2019). The employer sets the actual contribution percentage,
A customer has sold an options contract and after 15 days, still has not returned the signed Options Agreement. The customer is only allowed to make which of the following transactions in this account?
A. opening purchase
B. opening sale
C. closing purcha
-C. closing purchase
If the Options Agreement is not signed and returned within 15 days, only closing transactions are allowed. Since the customer made an opening sale (he sold the contract), this transaction is closed with a purchase.
Preferred stock market valuation is based primarily upon:
A. future earnings expectations for the issuer
B. short term market interest rate levels
C. long term market interest rate levels
D. future dividend payment expectations for the issuer
-C. long term market interest rate levels
Preferred stock prices are based on market interest rates. Preferred stock is a fixed income security, and hence, when market interest rates move, the yield on the security adjusts to the market rate. When interes
An options strategy where the maximum potential loss is equal to the difference between the increase in value of the underlying short securities position and the premiums received is a:
A. naked call writer
B. covered call writer
C. naked put writer
D. co
-D. covered put writer
A covered put writer sells a put contract against the underlying short physical security position. If the market rises, the put expires unexercised and the writer keeps the premium. However, as the market rises, the customer loses o
A securities firm buys stock from a customer and charges a mark-down. In what capacity did the firm act?
A. Agent
B. Broker
C. Principal
D. Middleman
-C. Principal
When acting as a PRINCIPAL, the firm earns a MARK-UP when selling to the customer out of inventory; or a MARK-DOWN when buying into inventory.
When acting as a BROKER; routing the order to the best market, charging a COMMISSION for this serv
All of the following are coincident economic indicators EXCEPT:
A. Personal Income
B. Employment Duration
C. Employment Levels
D. Industrial Production
-B. Employment Duration
The coincident (right now/ current) indicators are:
-Personal Income Levels
-Index of Industrial Production
-Employment Levels
-Manufacturing and Trade Sales
-Gross Domestic Product
The lagging (where econ. was in last 6 months) in
All of the following are exempt issues under Federal Securities Acts EXCEPT:
A. Government Bonds
B. Small Business Investment Companies
C. State Chartered Bank Issues
D. Municipal Bond Funds
-D. Municipal Bond Funds
Note that when any of these securities are placed inside of an investment company (or a FUND), the investment company is a non-exempt issue that must be registered and sold with a prospectus.
All of the following would be found in a municipal bond resolution EXCEPT:
A. the issuer's duties to the bondholders
B. the nature of the obligation
C. any restrictive covenants to which the issuer must adhere
D. any costs to be paid by the issuer in conn
-D. any costs to be paid by the issuer in connection with issuing the bonds
The bond resolution (or bond contract) is the contract between the issuer and the bondholder. It spells out the nature of the obligation; the issuer's duties to the bondholders; a
An oil and gas program that provides high initial deductions and low mineral rights cost would be a(n):
A. exploratory program
B. developmental program
C. income program
D. combination program
-A. exploratory program
In an exploratory program, "wildcat" wells are drilled in unproven areas. Because the odds are finding oil are low, the mineral rights cost is low. As with all drilling programs, the IDCs (intangible drilling costs - basically the
Which statements are TRUE regarding Treasury debt instruments?
A. Treasury securities are sold by competitive bidding at auctions conducted by the Federal Reserve
B. Treasury securities are sold via negotiated offerings through investment bankers
C. Treas
-A. Treasury securities are sold by competitive bidding at auctions conducted by the Federal Reserve
U.S. Government debt is sold via competitive bidding at auctions conducted by the Federal Reserve on behalf of the U.S. Treasury.
Treasuries are issued in
An 80-year old customer with an existing individual account comes into a branch office and tells his representative that: "My son has been telling me that I need to give him a power of attorney over my account because of my advanced age, and I want to kee
-C. The representative should escalate the matter to the branch manager or compliance department of the firm
It could be that the son really is acting in the customer's best interests; or the son could be attempting to coerce the old man to give a power o
What is an acceptable way to open a brokerage account for an Investment Adviser?
A. A partnership account, with the adviser being the general partner and the adviser's clients being the limited partners
B. Separate client accounts with a power of attorney
-B. Separate client accounts with a power of attorney given by each client to the broker dealer who will then oversee the investment adviser
One way for an Investment Adviser account to be opened is for each client to open an account at a brokerage firm,
Which statement is TRUE regarding preferred stock payments?
A. Preferred dividends are usually higher than those paid to common
B. Preferred dividends tend to grow over time
C. Preferred dividends are paid quarterly
D. Preferred interest is paid semi-annu
-A. Preferred dividends are usually higher than those paid to common
Preferred dividends are typically fixed and are generally higher than those paid to common stockholders. Preferred DIVIDENDS (NOT interest) are, in most cases, paid semi-annually, as com
An order ticket to sell 100 shares of ABC short means that the seller will:
A. deliver shares that are owned on settlement date
B. deliver shares that are borrowed on settlement date
C. not deliver shares on settlement date, but will deliver a due bill in
-B. deliver shares that are borrowed on settlement date
A "Long Sale" is the sale of stock that is owned, where those shares will be delivered on settlement date.
A "Short Sale" is the sale of stock that is not owned, where borrowed shares will be deliver
Under Internal Revenue guidelines, a short term profit on securities is one which results from a
A. short sale of securities that are subsequently repurchased at a higher cost at any date in the future
B. long sale, at a price higher than the security's c
-B. long sale, at a price higher than the security's cost basis, made within one year following purchase
Under Internal Revenue rules, a profit (or loss) is considered to be short term if a position is liquidated after being held for 1 year or less. Short
Level debt service is best described as:
A. debt service increases as the years progress
B. debt service decreases as the years progress
C. principal repayments decrease as the years progress
D. principal repayments increase as the years progress
-D. principal repayments increase as the years progress
Level debt service is basically the same as a mortgage repayment schedule - each year the same dollar amount is paid, but in the early years, most of the payment is interest; and in the final years,
If interest rates are rising rapidly, which U.S. Government debt prices would be LEAST volatile?
A. Treasury Bills
B. Treasury Notes
C. Treasury Bonds
D. Treasury STRIPS
-A. Treasury Bills
The shorter the maturity, the lower the price volatility of a negotiable debt instrument. Of the choices listed, Treasury Bills have the shortest maturity. Treasury STRIPS are a zero-coupon T-Bond issue with a long maturity, and would b
The Price / Earnings Ratio is a measure of:
A. profitability
B. valuation
C. volatility
D. velocity
-B. valuation
A customer buys 100 shares of preferred at $80 per share. The par value is $100. The dividend rate is 10%. The customer will receive how much in each dividend payment?
A. $400
B. $500
C. $800
D. $1,000
-B. $500
Preferred dividends are based on a stated percentage of par value. The stated rate is 10% of $100 par = $10 annual dividend per preferred share. Since there are 100 shares, the annual dividend is $1,000. Remember, though, that preferred dividends
The purpose of OFAC (Office of Foreign Assets Control) is to:
A. set higher margin requirements for foreign nationals that wish to invest in the United States
B. monitor the activities of foreign investors in the U.S. markets
C. impose economic sanctions
-C. impose economic sanctions against hostile foreign countries and groups
A corporation issues a stock dividend. Which statement is TRUE?
A. Total stockholders' equity will increase
B. Total stockholders' equity will decrease
C. Market value per common share will increase
D. Par value per common share will remain the same
-D. Par value per common share will remain the same
When a company declares a cash dividend:
It records 2 entries:
-Retained Earnings is reduced for the dividend; and
-Current Liabilities is increased to show the dividend that is now payable.
When a compa
Which of the following actions by the Federal Reserve will tighten credit?
A. Repurchase Agreement
B. Buy securities from dealers
C. Matched Sale
D. Expand the money supply
-C. Matched Sale
To tighten credit, the Federal Reserve will sell government securities to bank dealers (draining the dealers of cash that could be lent out) with an agreement to buy them back at a later date. The sale is being "matched" to a future purch
The most complete information about the nature of a new municipal bond issue can be found in the:
A. Prospectus
B. Underwriting Agreement
C. Bond Resolution
D. Official Notice of Sale
-C. Bond Resolution
The bond resolution authorizes the municipality to sell a specific new bond issue. The resolution gives a complete description of the proposed issue and its features. The resolution is incorporated into the bond contract once the bonds
A customer asks her representative for a quote on XYZ stock, which the representative informs the customer is currently $31.00 Bid - $32.10 Ask. The customer tells the representative to buy 1,000 shares at $32.10. The representative places a marketable li
-D. The transaction can be canceled at the discretion of the customer
The customer can either accept or cancel the trade, since there was no error on the customer's part. If the firm incurs any loss because the customer cancels the trade, the firm will be
Regarding bonds with put options, which statement is TRUE?
A. Exercise of the put is at the option of the issuer
B. Once the option is exercisable, the bond's price will not fall below the option price if interest rates rise
C. Yields on bonds with put op
-B. Once the option is exercisable, the bond's price will not fall below the option price if interest rates rise
Put options are exercisable at the option of the bondholder; once the option is exercisable, the bond price cannot fall below the option price
U.S. Government agency securities are underwritten via:
A. Competitive Bid
B. Negotiated Offering
C. Dutch Auction
D. Stand-By Arrangement
-B. Negotiated Offering
Government agency securities are underwritten via negotiated offerings; not via competitive bid as is the case with U.S. Government issues. The agency assembles a selling group through which it offers the securities. It negotiates
What is the main objective of investing in Equity REITs?
A. Income and growth
B. Capital appreciation and stability
C. Tax deductions and tax credits
D. Speculation and aggressive gains
-A. Income and growth
Equity REIT investments typically generate good dividend income, because the REIT distributes most of the net rental income to shareholders. In addition, if real estate prices appreciate, there can be capital gains.
A customer sells short 100 shares of ABC at $17 as the initial transaction in a new margin account. The customer must deposit:
A. $850
B. $1,000
C. $1,700
D. $2,000
-D. $2,000
A short account has unlimited risk potential. Because of this, minimum equity is $2,000. The customer is selling short 100 shares of ABC at $17 as the initial transaction. Regulation T only requires 50% or $850. But this is not enough to meet t
To claim a private placement exemption:
A. a registration statement must be filed with the SEC
B. a Form D must be filed with the SEC
C. a Form 144 must be filed with the SEC
D. no filing is required with the SEC
-B. a Form D must be filed with the SEC
Private placements are exempt transactions under the Securities Act of 1933. No registration is required. The issuer must file a Form D with the SEC within 15 days of the offering to claim the exemption. The filing
Series EE bonds:
A. are negotiable
B. are issued in minimum denominations of $100
C. pay interest semi-annually
D. pay interest at redemption
-D. pay interest at redemption
Which of the following is NOT a component of M-2?
A. Currency in Circulation
B. Demand Deposits
C. Certificates of Deposit over $100,000
D. Time Deposits
-C. Certificates of Deposit over $100,000
The money supply measures are:
-"M-1" - Currency in circulation and checkable deposits
-"M-2" - M-1 + time deposits of $100,000 or less
-"M-3" - M-2 + time deposits of over $100,000
-"L" - M-3 + savings bonds and
In order to independently verify the identity of a corporation that wishes to open a brokerage account, which documentation is acceptable?
A. Certified articles of incorporation
B. Better Business Bureau membership certificate
C. Industry accreditation ce
-A. Certified articles of incorporation
To verify the identity of a corporation that wishes to open an account, government issued identification is required to perform the match. This would take the form of the company's certified articles of incorporatio
Which statement is TRUE about new registered stock offerings?
A. Any purchaser who received a preliminary prospectus must also receive the final prospectus
B. The final prospectus must be delivered within 10 business days of the effective date
C. Any purc
-A. Any purchaser who received a preliminary prospectus must also receive the final prospectus
When a proposed new issue securities offering is "in registration," what statement could NOT be made to an interested institutional investor?
A.
"The lead underwriters on the issue are PDQ and RFP investment banks"
B.
"The road show on the issue is schedu
-D.
"Our research report shows that the expected POP is undervalued"
Choices A, B, and C are factual and non-promotional statements. Choice D is the problematic statement. Stating that the underwriters are "undervaluing" the issue is leading potential inv
The issuance of junk bonds, with the proceeds used to make a tender offer for a publicly held company, is known as a:
A. spin off
B. leveraged buy out
C. credit enhancement
D. break up
-B. leveraged buy out
In a leveraged buy out, an investor group identifies a publicly held company whose shares are underpriced; or one that it believes can be managed more effectively; and arranges for financing (usually from a commercial bank or by issu
Which statement is TRUE?
A. A registered representative is permitted to buy a new issue directly from the underwriter(s)
B. A registered representative is not prohibited from buying a new issue directly from the underwriter(s) as long as his/her employer
-C. A registered representative is permitted to buy a new issue once it starts trading in the secondary market
Once the shares start trading in the secondary market, anyone can buy them at the current market price.
A fund which invests in one type of industry or one geographic area is known as a:
A. speculative fund
B. dual purpose fund
C. special situations fund
D. specialty fund
-D. specialty fund
A specialty fund is one which invests in one type of industry or one geographic area.
Don't confuse it with a special situations fund which invests in bankrupt companies or companies in takeover situations.
A municipal bond which funds an improvement that benefits only a small portion of the community is a:
A. general obligation bond
B. double barreled bond
C. moral obligation bond
D. special assessment bond
-D. special assessment bond
Special assessment bonds are used to fund an improvement which benefits only a small portion of the community. For example: new street lights are installed in a specific area where only that area is assessed higher taxes to pay
The nominal yield of a bond:
A. increases as bond market prices decline
B. decreases as bond market prices increase
C. is unaffected by changes in market interest rates
D. will vary with the earnings of the issuer
-C. is unaffected by changes in market interest rates
The nominal yield is the stated rate of interest as a percentage of par value. It does not change as bond prices move. However, the current yield and yield to maturity will be affected by changes in bo
The Official Statement is:
A. required by the Securities Act of 1933 for all new issue municipal bonds
B. required to be delivered under the Trust Indenture Act of 1939 at or prior to settlement, if available
C. required by the MSRB for all new issue muni
-D. requested by underwriters to satisfy SEC due diligence requirements and the disclosure requirements of new issue purchasers
The Official Statement for a new municipal issue is not required under the Securities Act of 1933 since municipal issues are ex
What can an officer of a company say in a speech given at a road show during the 20-day cooling off period for an Initial Public Offering?
A. "Our issue is selling out fast, so you should place your orders now"
B. "Our company has grown its earnings by an
-B. "Our company has grown its earnings by an average of 20% yearly over the past 5 years"
Choice A is inducing the placement of a purchase order and is prohibited. Choice B is a statement of fact, so it is permitted. Choice C is speculation, and is prohi
The Securities and Exchange Commission is empowered to administer all of the following Acts EXCEPT:
A. Securities Act of 1933
B. Securities Exchange Act of 1934
C. Trust Indenture Act of 1939
D. Uniform Securities Act
-D. Uniform Securities Act
The SEC administer the Securities Act of 1933; the Securities Exchange Act of 1934; the Trust Indenture Act of 1939; and the Investment Company Act of 1940.
The Uniform Securities Act (USA) is more commonly known as the "blue sk
The FINRA suitability rule requires all of the following EXCEPT:
A. Reasonable Basis Suitability
B. Customer-Specific Suitability
C. Quantitative Suitability
D. Qualitative Suitability
-D. Qualitative Suitability
-Reasonable Basis Suitability: This is a review of the features, returns, costs and risks of the recommended product or strategy. Only those products with the best combination can be recommended to clients. In essence, this rul
Sell limit orders:
A. are used to sell securities at prices that are lower than the current market price
B. are used by clients seeking rapid executions
C. guarantee a specific execution price or better
D. guarantee a fill by the end of that trading day
-C. guarantee a specific execution price or better
Sell limit specify a minimum sale price. They are used to sell securities at prices that are higher than the current market. They may only be filled at the limit price or higher - so they do guarantee a s
Corporate dividend payments can be made in all of the following ways EXCEPT:
A. cash or company products
B. additional common shares of that company
C. additional common shares of another company
D. listed options of that company
-D. listed options of that company
A company can make a distribution of additional shares of that company (a stock dividend); or can issue a dividend consisting of shares of another company (typically a wholly owned subsidiary whose shares are distributed
Stocks that are listed on the New York Stock Exchange can also be typically listed and traded on all of the following exchanges EXCEPT:
A. American Stock Exchange
B. Chicago (Midwest) Stock Exchange
C. Boston Exchange
D. Pacific Exchange
-A. American Stock Exchange
Which of the following is the most likely purchaser of STRIPS?
A. Pension fund
B. Money market fund
C. Individual seeking current income
D. Individual wishing to avoid purchasing power risk
-A. Pension fund
Pension funds and retirement accounts are the large purchasers of STRIPS. These zero-coupon bonds are purchased at a deep discount and are held to maturity to fund future retirement liabilities. They don't pay until maturity. They have a
In an oil and gas income program, there are:
A. high intangible drilling costs and high depletion deductions
B. high intangible drilling costs and no depletion deductions
C. no intangible drilling costs and high depletion deductions
D. no intangible drill
-C. no intangible drilling costs and high depletion deductions
In an income program, proven reserves in the ground are purchased. No drilling is required - this work is already complete. All that is left to be done is to extract the oil from the ground an
Which of the following are due interest from the corporation?
A. Common Shareholders
B. Convertible Bondholders
C. Preferred Shareholders
D. Warrant Holders
-B. Convertible Bondholders
Bondholders are creditors of a company and are due interest. Convertible bondholders are creditors of a company as long as they keep their bonds and do not convert to common shares.
The maximum permitted annual contribution to a Coverdell Education Savings Account for a single beneficiary is:
A. $2,000 in a single account
B. $2,000 total in any number of accounts
C. $4,000 in a single account
D. $4,000 total in any number of accounts
-B. $2,000 total in any number of accounts
The maximum permitted annual contribution is $2,000 per beneficiary per year for Coverdell Education Savings Accounts.
The purchase of a put has all of the following advantages over selling a security short EXCEPT:
A. No loss of time value as the position is held
B. No requirement to make up dividend payments on the borrowed shares
C. Lower capital requirement
D. Less pot
-A. No loss of time value as the position is held
The advantages of using options as opposed to taking an actual stock position:
-The capital requirement is lower - the premium paid to buy a call option is less than the margin required to buy the underlyi
Common dividends are paid:
A. quarterly on issued shares
B. quarterly on outstanding shares
C. semi-annually on issued shares
D. semi-annually on outstanding shares
-B. quarterly on outstanding shares
A growth fund would likely invest in which of the following securities?
A. Non-convertible corporate bonds
B. Government bonds
C. Convertible bonds
D. Preferred stocks
-C. Convertible bonds
Growth funds would likely invest in common stocks for capital gains; they could also invest in convertible bonds, since they are an "equivalent" to the common stock.
Which of the following MUST be a closed end fund?
A. Net Asset Value = $10 / Purchase Price = $9.50
B. Net Asset Value = $10 / Purchase Price = $10
C. Net Asset Value = $10 / Purchase Price = $10.50
D. The fund is issued and redeemed at end-of-day
-A. Net Asset Value = $10 / Purchase Price = $9.50
The minimum price for a mutual fund is Net Asset value(if the fund is no-load).
While the only type of fund that can trade for less than Net Asset Value is a closed end fund.
An annuitized account in a variable annuity is most similar to:
A. a mutual fund
B. a whole life insurance unit
C. pension payments
D. an individual retirement account
-C. pension payments
Once a variable annuity separate account interest is "annuitized," the holder gets a fixed number of annuity units. Each month, the holder gets a payment equal to the fixed number of units x the unit value (which varies based upon the
During a period of stable interest rates, which type of preferred stock would show the greatest price volatility?
A. Cumulative
B. Adjustable rate
C. Participating
D. Callable
-C. Participating
A customer has heard about the explosive growth in China and wants to make investments in Chinese companies. Which risk is NOT associated with this potential investment?
A. Political risk
B. Exchange Rate risk
C. Marketability risk
D. Mortality risk
-D. Mortality risk
Mortality risk is associated with insurance products, not bonds.
A customer has a gain on a short stock position that she wishes to protect. The appropriate order is:
A. buy stop order
B. buy limit order
C. market order
D. sell stop order
-A. buy stop order
The customer will "lose" the gain on a short stock position if the market begins to rise. To buy in the position in a rising market, the order must be a buy stop order (placed above the market). To buy in a short position in a falling m
The income source backing a special tax bond issue could be all of the following EXCEPT:
A. Cigarette taxes
B. Sales taxes
C. Ad valorem taxes
D. Business taxes
-C. Ad valorem taxes
Ad valorem taxes do not back special tax bond issues. Ad valorem taxes back general obligation bonds. The definition of a special tax bond is one which is not backed by ad valorem taxes, but rather by another tax source (such as excis
An existing customer must be notified about SIPC and where SIPC can be contacted:
A. if the customer makes a written complaint to the broker-dealer
B. on each trade confirmation
C. on each statement
D. annually by the member firm
-D. annually by the member firm
At, or prior to, account opening, and annually thereafter.
Which statement is TRUE about Roth IRAs?
A. Contributions are tax deductible; distributions after age 59 1/2 are not taxed
B. Contributions are not tax deductible; distributions after age 59 1/2 are not taxed
C. Contributions are tax deductible; distribut
-B. Contributions are not tax deductible; distributions after age 59 1/2 are not taxed
Roth IRAs, unlike Traditional IRAs, do not permit a tax deduction for the amount contributed. On the other hand, when distributions are taken, unlike a Traditional IRA,
All of the following are purchase and payout options for variable annuity contracts may be employed EXCEPT:
A. Lump sum payment; Immediate annuity
B. Lump sum payment; Deferred annuity
C. Periodic payments; Immediate annuity
D. Periodic payments; Deferred
-C. Periodic payments; Immediate annuity
A registered representative solicits an order from a customer to buy 200 shares of XYZZ at $50. The customer agrees and the registered representative completes the order ticket and enters the order for execution. Once the member firm processes the order,
-A. Time of order solicitation
The required time stamps on an order ticket are time of order receipt; order entry; and order execution. There is no requirement for the time of order solicitation to be on the order ticket (remember, also, that many trades
Under FINRA rules, if a member suspects that a senior citizen is being financially exploited:
A. a temporary hold may be placed on disbursements from the account for up to 10 business days
B. a temporary hold may be placed on disbursements from the accoun
-C. any hold placed on the account, if supported by the member's review of the situation, can be extended for another 10 business days
FINRA permits member firms to place a temporary hold on disbursements from customer accounts if the firm suspects that t