Parity price =
stock price * conversion ratio
Which describes municipal bonds that trade flat?
- trading without accrued interest
- interest payments are not currently being made
What to consider when evaluating credit risk of municipal bonds..
coverage ratios, the effect of competing facilities, the mgmt. of the facility
Nominal quote:
an approximate market value given by a municipal dealer, with no bid or offer
All of the following are sources of income for a GO bond debt service...
ad valorem taxes, license fee, assessments.
NOT Highway tolls
The essential difference between an ARS and a VRDO is:
embedded put option
Short straddle:
Sale of call and put of the same stock with the same strike and expiration
Short combination:
sale of a call and a put on the same stock with different strike and/or different expirations
Settlement types for foreign currency trading:
Spot: 1 or 2 bus day settlement
Forward: mutually agreed date in the future
Agency cross transaction:
market order to buy and a market order to sell come in at the same time from 2 different customers for the same stock and amount and are matched
Proceeds transaction:
customer directs the broker to sell one stock and use the proceeds to buy another
Riskless Principal transaction
dealer receives a buy order from a customer and the dealer purchases stock into inventory and resells it to a customer ( a markup is charged)
Arbitrage
stock is bought and an equivalent security is simultaneously sold short
The CQS (Consolidated Quotations Service) shows quotes from which of the following sources for NYSE listed issues?
- NYSE DMM
- Boston Stock Exchange Specialist
- Pacific Stock Exchange Specialist
- 3rd Market Maker
Direct registration
- records the owner's name on the books of the transfer agent
- dividends and interest payments on direct registration securities are received from the issuer or transfer agent
Info needed to open a new customer account:
I Customer occupation and employer
II Whether the customer is an officer or director of a publicly held company
III The customer's country of citizenship
IV The customer's birthdate
A customer who has a fully paid long position in ABC stock goes "short against the box" for a credit to his account of $50,000. ABC is an NYSE listed stock. The customer can withdraw:
- 47,500 (minimum margin is 5% of the long side)
A short margin account shows the following balances:
Credit = $104,000
SMV = $70,000
At what market value will the account be at the minimum maintenance margin level set by the self-regulatory organizations?
104000/1.3= 80,000
The 80,000= the market value at Maintenance
Credit balance- SMV= Equity
In a firm commitment underwriting, the underwriter is acting as a:
principal
Ask price=
Bid(NAV) / 100% - Sales Charge %
Automatic reinvestment provisions will reinvest at:
NAV
To sell a variable annuity, the salesmen must be registered with:
Finra, SEC, State Insurance Commission.
NOT the State Banking Commision
Which of the following statements are TRUE regarding mutual funds and variable annuities that are in the accumulation phase?
I Distributions to mutual fund shareholders are taxable to the holder in the year the distribution is made
II Distributions to mut
1 and 4
An individual, age 40, earns $60,000 per year. He has no family and has $200,000 of life insurance. He contributes 6% of his salary to his company sponsored 401(k) annually. He informs his registered representative that he is getting a $5,000 raise. What
Increase the 401(k) contributions by $5,000 per year
Which of the following statements are TRUE regarding the amortization of the premium on a municipal bond?
I Municipal bonds purchased in the primary market at a premium must be amortized
II Municipal bonds purchased in the primary market at a premium may
I and III
A customer buys 1 ABC Jan 45 Put @ $4 when the market price of ABC is $48. The put is exercised when the market price is $40. The tax consequence is a:
sale proceeds of $4,100
If a U.S. investor buys Kingdom of Norway bonds at a discount, which statements are TRUE?
I Interest income received is exempt from Federal tax
II Interest income received is exempt from State tax
III The discount on the bond is taxable
IV A gain or loss
III and IV
The principal benefit of an oil and gas "drilling" program is
Intangible Drilling Costs
FINRA's guideline for the maximum compensation that a member can take for participating in the distribution of a direct participation program is:
10 % of POP
All of the following statements are true about Regulation A offerings EXCEPT:
A. the maximum offering amount permitted under the rule is $50,000,000 within a 12 month period
B. an offering circular must be provided to all purchasers
C. sales are limited t
C
Stabilization rules for new issues are:
covered under the Securities Exchange act of 1934:
To tender stock, the customer must be in a net ________ position
long
Under FINRA rules, a member firm is allowed to vote the stock of securities held in street name:
under no circumstances
Rank the following interest rates from highest to lowest:
I Discount Rate
II Federal Funds Rate
III Broker Loan Rate
IV Prime Rate
IV, III, I, II
Strips do not provide _________
current income
Treasury bonds give the greatest ________________
current income
A technical analyst...
makes decisions on "technical" market factors such as trading volume, breadth of market movement, and the movement of market averages.
A customer buys 100 shares of preferred at $101 per share. The par value is $100. The dividend rate is 8%. Each dividend payment will be:
400
Regarding bonds with put options, which of the following statements are TRUE?
I Exercise of the put is at the option of the bondholder
II Once the option is exercisable, the bond's price will not fall below the option price if interest rates rise
III Yiel
1 AND 11
A declining rate of inflation would lead to
higher bond prices, lower bond yields, lower interest rates
When the yield spread between U.S. Government and lower grade corporate bonds is widening, which of the following statements are TRUE?
I Yields on lower grade corporate bonds are lower than average relative to yields on U.S. Government bonds
II Yields on
II and IV
Quotes for corporate bonds found on Bloomberg are:
wholesale corporate bond prices for broker dealers
TRACE reports trades of
corporate bonds
For PO tranches: when interest rates rise, the price of the tranches...
fall
Which statements are always TRUE about Treasury Bonds?
I Treasury Bonds are traded in 32nds
II Treasury Bonds are quoted at a discount to par value
III Treasury Bonds are issued in either bearer or registered form
IV Treasury Bonds have minimum maturity o
I and IV
Treasury bonds are subject to ____________ risk
reinvestment
Interest income from municipal bonds purchased by a resident of the issuing State is:
exempt from Federal, State and Local tax
Below is a listing of municipal bonds with the same credit ratings and maturities. Which bond would have the highest yield?
A. General Obligation Bond
B. Public Purpose Revenue Bond
C. Private Purpose Revenue Bond
D. Puerto Rico Bond
C
All of the following statements are true regarding overlapping debt EXCEPT:
A. overlapping debt is the debt of other governmental units shared by taxpayers in differing political subdivisions
B. overlapping debt is apportioned among political subdivisions
C
Which of the following municipal securities would be quoted on a bid/ask price basis?
Term revenue bond
All of the following are reasons for a revenue bond issuer to make an extraordinary call EXCEPT:
A. the proceeds of the issue were never expended to build the proposed facility
B. homeowners have prepaid their mortgages at a faster than expected rate on a
D
Municipal broker dealers
do not deal with the general public and do not take inventory positions
Variable rate municipal notes avoid
market risk/interest rate risk
In a strangle option, both contracts are ________ of the money
out
Common dividend are declared and paid
quarterly
ADRs don't have...
voting and pre-emptive rights
The nominal yield of a bond:
is unaffected by changes in market interest rates
Accrued interest on a new issue corporate bond is calculated from:
dated date to settlement date
A corporation is going to tender for 75% of its 10% subordinated debentures, M '25. The price of the offer will be decided by the:
issuer
Which of the following statements are TRUE regarding CMO "Planned Amortization Classes" (PAC tranches)?
I PAC tranches reduce prepayment risk to holders of that tranche
II PAC tranches increase prepayment risk to holders of that tranche
III Principal repa
I and IV
Which of the following does not trade "flat" ?
A. Treasury Bills
B. Treasury STRIPS
C. Treasury Bonds
D. Treasury Receipts
C
IO tranches make payments that are ________ in early years and payments that are __________ in later years
larger, smaller
A municipality issues a 30-year zero-coupon bond at deep discount. The bond is callable at 103. The bond is called in Year 10 when its current accreted value is $500. The bondholder will receive:
$515
Which of the following bond issues would most likely have a mandatory sinking fund?
Hospital Revenue Bond
Trades of all of the following securities will settle in Fed Funds EXCEPT:
A. Treasury Bills
B. Treasury Notes
C. Municipal Bonds
D. Agency Bonds
Municipal Bonds. They will settle in clearing house funds.
The typical purchaser of a Banker's Acceptance is a(n):
Money fund investor
Intrinsic value:
Amount by which an option contract is in the money
A customer sells short 500 shares of XYZ stock at $69 and sells 5 XYZ Jan70 Puts @ $3. The maximum loss potential is:
Unlimited
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:
covered put
Straddles are profitable in a ........ market
rising and falling
Debit spreads are profitable if the spread between the premiums _____________
widen. A debit spread is when the long position was purchased for more
On the same day in a margin account, a customer sells 5 ABC January 40 Calls @ $6 and buys 10 ABC January 50 Calls @ $1 when the market price of ABC is at $43. The maximum potential loss is:
A. $2,000
B. $3,000
C. $5,500
D. unlimited
3,000
The O.C.C. is responsible for which of the following?
I Standardization of listed options contracts
II Trading of listed options contracts
III Issuance of listed options contracts
IV Assignment of exercises of listed options contracts
I, III, IV
American style option can be _____________ at any time
exercised
Retail member firms that route orders to market makers in return for compensation earn:
payments for order flow
Which statement is TRUE regarding Super Display Book? Super Display Book is an automated trade execution system for:
NYSE Issues
Quotes found in the ADF are primarily bids and offers from:
ECN's (Electronic Communication Network)
What only trades OTC
US Gov't securities and Municipal
A customer places an order to sell 100 ABC at 21 Stop Limit, when ABC stock is trading at $23. The company is restructuring and has announced a special dividend of $.72 to be paid to shareholders of record. On the ex date, the order will:
20.28
Which of the following securities can be purchased on margin?
A. Listed Stock Option
B. Mutual Fund
C. Limited Partnership Unit
D. Listed Corporate Bond
D
When an account is frozen, which statement is TRUE?
A. No trades are permitted in the account for 90 days
B. Only liquidating trades are permitted in the account for 90 days
C. Payment in advance is required for purchases occurring in the next 90 days
D.
C
A customer has an existing margin account with the following positions:
Long: 1,000 XYZ Cmn
Mkt Value: $20,000
Long: 10 PDQ Jan 50 Calls
Mkt Value: $5,000
Debit Bal: $15,000
SMA: $1,000
How much cash can the customer withdraw (borrow) from the account?
0
Which statements are TRUE regarding the weekly Treasury Bill auction?
I The minimum non-competitive bid has no dollar limit
II The minimum non-competitive bid amount is $100
III The maximum non-competitive bid has no dollar limit
IV The maximum non-compet
II and IV
Which of the following investment company securities are redeemable?
I Open end fund shares
II Closed end fund shares
III Fixed unit investment trusts
IV Participating unit investment trusts
I, II, and IV
Underwriter of mutual fund=
sponsor
Which statement is TRUE about the taxation of dividends, interest and capital gains in the separate account during the accumulation phase?
A. All dividends, interest and capital gains are taxable in the year received
B. Dividends and interest are taxable
D
A mother, aged 60, wishes to withdraw monies from her variable annuity to pay for her son's college education. Which statement is TRUE regarding the taxation of the withdrawal?
A. The withdrawal is 100% taxable and is also subject to a 10% penalty tax
B.
C
A married couple, where both individuals work, earns in excess of $118,000 in year 2016. Both individuals are covered by qualified retirement plans. Which statement is TRUE regarding contributions to Individual Retirement Accounts for these persons?
A. A
B
The general partner will contribute no capital to the program. All costs will be carried by the limited partners. The general partner will receive 50% of revenue from the first barrel of oil produced."
This describes a(n)
Overriding Royalty Interest
Which of the following would cause the yield curve to be ascending?
A. An increase in demand for long term bonds from investors
B. An increase in the laddering of bond portfolios by investors
C. The Federal Reserve pursuing a tight monetary policy
D. Shor
D
Which of the following municipal bonds would MOST likely be refunded by the issuer?
A. 5% G.O., M '36, callable in 2016 at par
B. 6% G.O., M '36, callable in 2016 at 102
C. 7% G.O., M '36, callable in 2016 at 102
D. 8% G.O., M '36, callable in 2016 at par
D
A municipality is at its statutory debt limit and cannot legally issue more debt backed by taxing power. Which of the following bonds can be issued?
A. General obligation bonds
B. Moral obligation bonds
C. Double barreled bonds
D. Treasury bonds
B
Pitter Patter Water Authority "Flow of Funds" Statement 20XX
Water Charges: $6,000,000
Interest on Reserve Funds: $2,000,000
Gross revenues: $8,000,000
Operation and Maint: $4,000,000
Net Revenues: $4,000,000
Debt Service: $2,000,000
Addition to Reserves:
4,000,000
Municipal bonds are offered out "firm" by one dealer to another. All of the following are true regarding this EXCEPT the:
A. buying dealer has control over the bonds for a specified time period
B. buying dealer is able to renegotiate the price
C. buying d
B
Variable annuity contracts contain which of the following guarantees?
I Interest Rate Guarantee
II Investment Guarantee
III Mortality Guarantee
IV Expense Guarantee
III and IV
A variable annuity prospectus includes an AIR illustration using a 5% rate. This means that the:
Return could be less than 5 %
Which of the following statements are TRUE regarding Roth IRA?
I Contributions are tax deductible
II Contributions are not tax deductible
III Distributions are taxable
IV Distributions are not taxable
II and IV
The Chairman of a bank municipal broker-dealer is on the town council involved in a negotiated municipal bond underwriting being performed by that municipal broker-dealer. Under MSRB rules, the Chairman is considered to be a(n):
Control person
All of the following would be taxed at "earned income" except?
Interest payments. Alimony, royalty, and bonus payments are taxed as earned income
If a technical analyst believes that a stock will break through a support level, the analyst:
Believes that the stock will fall and will place a sell (short) stop order
Municipal original issue premium bonds __________ be amortized
must
Municipal market premium bonds ________ be amortized
must
egarding original issue bonds, which statements are TRUE?
I Municipal discount bonds must be accreted
II Corporate discount bonds must be accreted
III Municipal premium bonds must be amortized
IV Corporate premium bonds must be amortized
I, II, and III
If a customer redeems a mutual fund, they must be paid in ____________ days
3
A life annuity payout option may be elected by ______________________
the policy holder
The number of ______________ is fixed; ______________ may vary in a variable annuity
annuity units; annuity payment
Form that is associated with penny stocks...
15g2
Treasury bills are issued for all of the following initial maturities
4, 13, 26, 52
THe minimum maintenance margin requirement for stocks in a long margin account is
25 %
If interest rates fall, issuers most likely will call:
I low dividend rate preferred issues
II high dividend rate preferred issues
III preferred issues trading at a premium
IV preferred issues trading at a discount
II and III
Corporate bonds and stock settle _________ days after trade date.
3 business days
Which of the following are TRUE statements about discount bonds?
I Discount bonds will appreciate more rapidly as interest rates fall than will similar premium bonds
II A bond trading at a discount can indicate that market interest rates have risen
III A
I, II, and III
Which of the following statements describe Freddie Mac?
I Freddie Mac buys conventional mortgages from financial institutions
II Freddie Mac is an issuer of mortgage backed pass-through certificates
III Freddie Mac is a corporation that is publicly traded
I, II, and III
Which statements are TRUE regarding Treasury Bills?
I T-Bills are issued in fully registered form
II T-Bills are issued in book entry form
III Physical certificates are issued
IV No physical certificates are issued
II and IV
Revenue Anticipation Notes are a(n):
I funded debt
II unfunded debt
III source of permanent financing
IV source of temporary financing
II and IV
When does an investor receive payment of interest and principal on a Capital Appreciation Bond (CAB)?
Both interest and principal are paid at maturity
A broker-dealer holds a limit order to buy 100 shares of ABC stock at $20.00 for a customer. Which of the following trades are acceptable?
I The purchase of 100 shares of ABC for the firm's trading account at $19.50 prior to executing the customer's order
II, II, and IV
When comparing the 1st and 2nd market, the _____________ has listing standerds
2nd
All of the following statements are true regarding the FINRA 5% Policy EXCEPT:
A. Under the rule, a 1% mark-up can be considered to be excessive
B. The policy applies to both over-the-counter agency and principal transactions
C. The policy applies to mutu
C
A firm holds a joint cash account for a husband and wife. The wife calls the registered representative and says "Sell 500 shares of ABC out of the account immediately and send a check for the proceeds made out to my name". The representative should inform
the trade can be performed but the check must be made out to both names on the account
When opening an account to trade stocks and options, which of the following signatures are needed on the new account form(s)?
I Registered options principal signature
II General principal signature
III Registered representative signature
IV Customer signa
C
To open an account for a limited partnership, the required signatures are those of the:
general partner(s) only
All of the following are true statements about trust accounts EXCEPT:
A. a copy of the trust agreement must be obtained prior to opening the account
B. transactions in the account are limited to the types specified in the trust document
C. margin transact
D
Which of the following statements are TRUE about initial and minimum maintenance margins for stock positions in a short margin account?
I FINRA sets the 50% initial margin requirement
II The FRB sets the 50% initial margin requirement
III FINRA sets 30% m
II and III
Arrange the following from smallest to largest?
I Underwriter's Concession
II Selling Concession
III Spread
IV Reallowance
IV, II, I, III
A municipal syndicate manager wishes to bid on a $100,000,000 municipal offering, even though his syndicate normally bids on issues of up to $50,000,000. The manager may do which of the following?
I Bid on 1/2 the issue
II Require each syndicate member to
III and IV
The minimum price at which an open end fund share can be purchased is:
Mutual fund
Which of the following statements are TRUE regarding management fees imposed by mutual funds?
I Management fees are paid to the investment adviser of the fund
II Management fees are paid to the individuals selling the fund
III Management fees are deducted
I and III
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
All of the following sources of REIT income are counted towards the 75% test required by Subchapter M EXCEPT:
A. net rental income
B. interest income from mortgages
C. real estate tax refunds
D. dividend income from investments
D
A woman in the highest tax bracket has $105,000 to invest for her teenage child's college education. She wants to make sure that, if he doesn't attend college, that he will not have access to these funds. She should be advised to make the investment in a:
529 plan. NOT Coverdell ESA's because she is a high earner.
Which of the following statements are TRUE about capital gains taxes for investors who are not extremely high earners?
I The maximum tax rate on a short term capital gain is 15%
II The maximum tax rate on a short term capital gain is 39.6%
III The maximum
II and III
A general obligation bond is purchased in the secondary market at a discount and is held to maturity. The holder elects not to accrete the bond discount for tax purposes. Which statements are TRUE?
I The interest income is subject to Federal income tax
II
II and III
A married couple has a combined net worth of $7,000,000. If one dies in 2016, the taxable amount of the estate to the surviving spouse is:
0
An oil and gas program that is designed to give immediate deductions with moderate risk is a(n)?
Developmental
An "unmanaged" direct participation program is sold to investors by the
wholesaler
Which statements are TRUE regarding purchase limitations under Regulation A?
I Tier 1 offerings are subject to purchase limitations
II Tier 1 offerings are not subject to purchase limitations
III Tier 2 offerings are subject to purchase limitations
IV Tie
II and III
A lawyer is a partner at a major investment advisory firm and is paid a fee by a customer for investment advice. Which statement is TRUE?
A. The lawyer must be registered with the Securities and Exchange Commission (SEC) as an investment adviser
B. The la
A
To open a margin account for a customer:
A. no signature of the customer is required
B. a customer signature must be obtained on the hypothecation agreement prior to placing the first order in the account
C. a customer signature must be obtained on the hy
D
A registered representative presents a seminar to a group of 35 prospective retail investors about investing in mutual funds. At the seminar, he makes recommendations of various funds, based on their objectives and performance. The seminar is defined by F
Sales literature
Customer securities held in margin accounts:
A. can be commingled with other customer margin securities and used as collateral for a loan by the brokerage firm
B. can be commingled with fully paid customer securities and used as collateral for a loan by t
A
A municipal dealer places an order for $100,000 of new issue G.O. bonds, M '35 with the syndicate manager. The bonds will be placed in an "accumulation account" for a unit investment trust being established by the syndicate member. Which statement(s) is (
I and II
If the Federal Reserve Board raises the Fed Funds rate, which of the following will be the slowest to respond?
A. Discount rate
B. Prime rate
C. Passbook savings rate
D. Broker loan rate
C
A head and shoulders "bottom" formation is:
I bullish
II bearish
III a reverse upward trend
IV a reverse downward trend
I and IV
Collection ratio=
taxes collected/taxes assessed
An inverted saucer formation and a head and shoulders top formation are _______
bearish
The risk in a portfolio that can be diversified away is _______________
non-systematic risk
Broker-dealers are permitted to execute the following OTC transactions
Agency trades where the customer is charged a commission.
Principal trades where the customer is charged a mark-up or mark-down
Corporate bonds are usually ______________ bonds and are quoted on a ___________________ basis
term, percentage of par
Which CMO tranche will be offered at the lowest at the lowest yield?
a. Plain Vanilla
b. Targeted amortization class
C. Planned amortization class
D. Companion
C. B is highest yield
A final official statement , under MSRB rules, __________ be sent to a customer
must
The separate acct of a variable annuity is invested in a _________________
mutual fund
Promises made by corporate issuers to bondholders, as well as any restrictions placed on the issuer are found in the
indenture
Homeowners will extend the anticipated repayment date of mortgages:
I when interest rates fall
II when interest rates rise
III in order to refinance at higher rates
IV in order to avoid refinancing at higher rates
II and IV
Which are TRUE statements regarding short term negotiable certificates of deposit?
I The minimum denomination is $10,000
II Trading occurs in the secondary market
III Short term negotiable CDs are callable
IV They are issued by banks
II and IV
Which securities will trade with accrued interest?
A. Negotiable Certificates of Deposit
B. Treasury Bills
C. Banker's Acceptances
D. Treasury Receipts
A. Negotiable CD's
John Jones has both a cash account and an IRA account at your firm. Mr. Jones calls and asks that 2,000 shares of DEF stock be purchased at the market in his IRA account. The trade is executed, however the transaction was recorded in Mr. Jones' cash accou
C
An OTC equity trader has received a large influx of sell orders for ABC stock and, to fill them, has taken an extremely large long position in the firm's inventory account. The dealer would most likely:
A. decrease the ask price in the OTCBB
B. decrease t
B
A new customer has come into your firm to open an account. He tells you that he has recently inherited some money that he wants to invest. When completing the new account profile with the client, when you ask him for his address, he tells you that he was
B
Which statement is TRUE about a minor in a custodian account under UGMA (Uniform Gifts To Minors Act) reaching legal age?
The account must be transferred into the name of the new adult
In an underwriting, which of the following is earned by a syndicate member who sells the issue directly to the public?
A. Underwriter's Concession
B. Selling Concession
C. Spread
D. Management Fee
The best answer is A.
The spread is the gross compensation earned by the syndicate. Out of this gross amount, portions can be earned by the members of the underwriting group. The syndicate manager earns the management fee - typically the smallest portion
The syndicate manager decides to decrease the reoffering yield on a competitively bid new issue by 25 basis points. This action:
A. is prohibited under MSRB rules
B. will decrease the dollar price per bond paid by customers
C. will increase the dollar pri
C
During prolonged periods of economic expansion all of the following will occur EXCEPT:
A. interest rates can be expected to rise
B. the Federal Reserve will begin to tighten credit
C. inflationary pressures will decrease
D. business activity will increase
C. Inflationary pressures will decrease
Common dividends are paid:
I quarterly
II semi-annually
III on issued shares
IV on outstanding shares
I and IV. Quarterly and outstanding
A customer owns 1,000 common shares of ABC Corporation. Which of the following actions will dilute the shareholder's equity?
I ABC declares a 10% stock dividend
II ABC declares that it will call its convertible preferred stock, which is currently trading
II and IV
PDQ Company $10 par common stock is currently trading at $40. PDQ is currently paying a common dividend of $.20 per share quarterly. The current yield of PDQ stock is:
A. 0.5%
B. 2.0%
C. 5.0%
D. 8.0%
B. Annual income/market price
A customer has heard about the explosive growth in China and wants to make investments in Chinese companies. The customer should be informed about which risks?
I Political risk
II Exchange Rate risk
III Marketability risk
IV Default risk
I, II, III, and IV
Which characteristic is NOT common to both Treasury STRIPS and Treasury Bills?
A. Minimum $100 denominations
B. Quoted as a percent of par in 32nds
C. Pay interest at maturity
D. Guaranteed by the U.S. Government
B
Issuance of which of the following municipal issues is NOT subject to statutory debt limits?
I General obligation bond
II Special tax bond
III Industrial revenue bond
IV Moral obligation bond
II, III, and IV
A "sinking fund call" is a(n):
A. mandatory call
B. extraordinary mandatory call
C. optional call
D. extraordinary optional call
A. mandatory call
Constitutional debt limits are imposed on:
A. self-supporting debt
B. non-self supporting debt
C. self-liquidating debt
D. all of the above
B. Non-self supporting debt
Which of the following statements are TRUE regarding the premium of an option contract?
I The lesser the volatility of the underlying security, the higher the premium
II The greater the volatility of the underlying security, the higher the premium
III The
II and IV
The First Market is a(n):
A. auction market
B. negotiated market
C. unregulated market
D. primary market
A. auction market
Which of the following statements are TRUE about stop orders?
I Buy stop orders can accelerate price advances in bull markets
II Sell stop orders can accelerate price declines in bear markets
III Buy stop orders limit losses on short stock positions
IV Se
I, II, III, and IV
Which of the following individuals trades on the New York Stock Exchange Floor?
I Specialist (DMM)
II Floor Broker
III Two Dollar Broker
IV Competitive Trader
I, II, III, and IV
Last sale reports are available for trades of all of the following securities EXCEPT:
A. Municipal bonds
B. Eurodollar bonds
C. Stocks listed on a stock exchange
D. Stocks listed in the Pink Sheets
B
Which of the following securities are generally traded "Over-the Counter"?
I Treasury issues
II Municipal issues
III Corporate debt issues
IV Options
I, II, and III. Options trade on the exchanges
A customer purchases 100 shares of PDQ stock at $25. The company declares a 1:2 reverse stock split. After the reverse stock split, the:
I customer will have 50 shares
II customer will have 200 shares
III market price will be $12.50 per share
IV market pr
I and IV
If a customer discovers an error on his or her account statement, the error must be reported promptly to:
A. FINRA
B. the SEC
C. the representative that services the account
D. the member firm that maintains the account
D. the member firm
When comparing fixed fee accounts to wrap accounts:
I Fixed fee accounts generally only cover transaction costs
II Fixed fee accounts generally cover transactions costs, asset allocation and portfolio management
III Wrap accounts generally only cover tran
I and IV
A customer wishes to give a gift of securities to her nephew under the Uniform Gifts To Minors Act. When the minor reaches legal age in that state, the:
A. custodian can continue in that capacity with the express permission of the minor
B. account must be
B. Account must be transfered
A customer sells short 1,000 shares of ABC stock at $2.75 per share in an initial transaction in a new margin account. The customer must deposit:
A. $2,000
B. $2,500
C. $2,750
D. $5,000
C. 2750
A margin account shows the following:
Long Market Value = $12,000
Debit = $4,000
Which statements are TRUE about the excess equity in the account?
I Marginable stock can be purchased in an equal amount to the excess
II Marginable stock can be purchased in
II and III
As an initial transaction in a new margin account, a customer sells short 100 shares of ABC at $20 per share. After the customer deposits the appropriate margin, the credit balance in the account will be:
A. $1,000
B. $2,000
C. $3,000
D. $4,000
B. $2,000
Which statement is TRUE about the preliminary prospectus used during the period when a new issue is "in registration?"
A. Before contacting a customer by telephone about the offering, that customer must receive a copy of the preliminary prospectus
B. The
B. "In registration" is the same thing as the cooling off period. So customers may be sent a preliminary prospectus.
Which of the following statements are TRUE regarding Official Statements?
I Official Statements are required under the Securities Act of 1933
II Official Statements are requested by underwriters in order to sell the bonds
III If an Official Statement is p
II and III
When a customer buys a new stock issue from a syndicate member, the customer pays:
A. the Public Offering Price
B. the Public Offering Price plus a commission
C. a negotiated price that can be at or below the Public Offering Price
D. any price because thi
A. The POP
Which of the following investment company terms are synonymous?
A. Bid; Net Asset Value
B. Bid; Public Offering Price
C. Ask; Net Asset Value
D. Ask; Redemption Price
A. Bid; Net Asset Value
A fund of hedge funds:
A. must invest at least 75% of its assets in hedge funds
B. must invest at least 90% of its assets in hedge funds
C. must invest in at least 10 different hedge funds
D. can invest in any number of hedge funds
D. A fund of hedge funds can invest in any number of funds.
The "death benefit" associated with a variable annuity contract:
I applies prior to annuitization
II applies after annuitization
III means that, upon death, the insurance company will make a lump sum payment to complete the terms of the contract
IV means
I and IV
Which of the following are characteristics of Defined Benefit Plans?
I Annual contribution amounts are fixed
II If the corporation has an unprofitable year, the contribution may be omitted
III The annual benefit amount is fixed at retirement
IV The adopti
III and IV
Which statement is FALSE about a SIMPLE IRA?
A. The maximum annual contribution is the same as 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 only available to small
A. The max contribution is the same as for a Traditional IRA
Income received from partnership investments is characterized under the tax code as:
A. earned income
B. active income
C. passive income
D. portfolio income
C. Passive income
A customer buys $100,000 of a new issue 20 year corporate bond at 95. At maturity, the customer will have:
A. no capital gain or loss
B. a $500 capital gain
C. a $5,000 capital gain
D. a $5,000 capital loss
A. No Capital gain or loss
If a put is purchased on stock that has been held short term, the stock's holding period:
A. is unaffected
B. is tolled
C. is wiped out
D. becomes long term
C. Is wiped out
Which index broadly measures activity in New York Stock Exchange, NYSE-MKT (American Stock Exchange) and NASDAQ Stock Market?
A. Value Line Index
B. Dow Jones Averages
C. Standard and Poor's 500
D. Major Market Index
A. Value line index
If the U.S. dollar appreciates against foreign currencies, which statements are TRUE?
I U.S. exports should increase
II U.S. exports should decrease
III Any trade deficit should narrow
IV Any trade deficit should widen
II and IV
A 57-year old customer, earning $85,000 per year, is currently employed as an outside salesman. He enjoys his work so much that he has no intention of retiring until at least age 75. He wants to put extra money away for his retirement at that time and can
B. Roth IRA's do not require distributions at 70.5
A customer in the highest tax bracket has $500,000 to invest. The customer is not subject to the AMT. The BEST recommendation would be an investment grade:
A. Municipal bond yielding 2.50% that is not subject to the AMT
B. Municipal bond yielding 2.70% th
B. Muni yielding 2.7%
Which of the following securities is NOT directly interest rate sensitive?
A. Utility Stocks
B. Corporate Bonds
C. Preferred Stocks
D. Growth Stocks
D
Which statement is TRUE regarding a corporation that has adopted cumulative voting?
A. Each stockholder must accumulate his votes and cast them for one director
B. Minority stockholders have the ability to elect the director of their choice
C. Each direct
B. Minority stockholders have the ability to elect the director of their choice
When comparing an ETN to a structured product, which statements are TRUE?
I ETNs can be traded at any time while structured products cannot
II Structured products can be traded at any time while ETNs cannot
III ETN income is taxable at lower rates than in
I and III
The last time to trade expiring equity options is:
A. 4:00 PM Eastern Standard Time; 3:00 PM Central Time; on the day prior to expiration
B. 4:00 PM Eastern Standard Time; 3:00 PM Central Time; on the expiration day
C. 5:30 PM Eastern Standard Time; 4:30
B
A pension fund manager has a large holding of 30-year Treasury Bonds, to fund a corporation's defined benefit pension plan liability. The manager is concerned that market interest rates are going to rise, causing Treasury Bond prices to fall. To hedge the
A. Buy TYX Calls
An NMS stock is currently quoted at $15.20 Bid - $15.40 Ask. A customer wishes to place a limit order to buy 100 shares of the stock at $15.211. The registered representative should:
A. reject the order
B. route the order to an Alternative Trading System
A. Sub-penny pricing is not allowed
A trade where a security is purchased in the First Market and sold in the Fourth Market at the same time, is most likely a(n):
A. arbitrage transaction
B. proceeds transaction
C. exchange distribution
D. secondary distribution
A. arbitrage
A change in each of the following is a coincident economic indicator EXCEPT:
A. Money Supply as measured by M-2
B. Personal income levels
C. Index of industrial production
D. Employment levels
A. Money Supply as measured by M-2