All of the following are the responsibilities of the registrar EXCEPT the registrar:
The transfer agent handles the mailings to shareholders - dividends, corporate reports, and voting materials. The registrar acts as a watchdog over the transfer agent and makes sure that any mistakes made by the transfer agent are corrected. The registrar
ABC Corporation has declared a rights offering to stockholders of record on Friday, December 10th. Under the offer, shareholders need 10 rights to subscribe to 1 new share at a price of $19. Fractional shares can be rounded up to purchase 1 full share. As
Since the record date is Friday, December 10th, a customer buying on Wednesday, December 1st would settle on Friday, December 3rd (2 business days later) and would be on the record books for the distribution. Therefore, the stock is trading cum rights. Th
Which statements are TRUE regarding the taxation of dividends received by investors?
I Individuals cannot exclude any dividends received from taxation
II Individuals can exclude 50% of dividends received from taxation
III Corporations cannot exclude any d
Corporations that receive dividends from investments held generally are allowed to exclude 50% of the dividends received from taxation. This exclusion does not apply to individual investors (however, individual investors get the benefit of taxation of cas
Which source could be consulted to find the trading symbol of a stock?
To find the symbol of a stock, one could consult (among other sources) the Standard and Poor's Stock Guide, which is now part of an S&P web service called Net Advantage. It gives capsule summaries of company history and performance. Of course, the easiest
In 2018, a customer buys 1 GE 8%, $1,000 par debenture, M '33, at 85. The interest payment dates are Jan 1st and Jul 1st. The yield to maturity on the bond is:
80 + ($150 discount / 15 years to maturity)
($850 + $1,000) / 2
An investor who purchases a bond with a tender option at par is best protected from which of the following risks?
An investor who purchases a bond with a tender option at par is protected from market risk. If interest rates rise, the value of a typical bond without this option would drop. The option allows the bondholder to "put" the bond back to the issuer, receivin
All of the following are true statements regarding corporate obligations EXCEPT:
Income bonds are unsecured and have a high level of risk, since payment of interest is dependent on the corporation reaching a designated earnings level. Debentures are usually term issues - all bonds having the same interest rate and maturity. Equipment
All of the following statements are true regarding mortgage bonds EXCEPT:
Mortgage bonds are term issues; all of the bonds are issued at the same date and mature on the same date. A serial structure is not required since real property is not a depreciating asset (as is the case with rolling stock pledged as collateral for equip
A corporation can redeem its debt securities prior to their maturity date by all of the following methods EXCEPT:
A corporation cannot retire its debt prior to maturity by prepaying the bondholders - there is no such thing for corporate debt securities. There are only four ways in which a corporation can redeem its debt prior to maturity. It can purchase outstanding
All of the following information about corporate bonds would be found in the Standard and Poor's Bond Guide EXCEPT:
Standard and Poor's Bond Guide is published on the web, and gives capsule summaries of every outstanding corporate issue, including recent price, rating, and yield. Trading volumes for corporate bonds come from TRACE (FINRA's Trade Reporting and Complianc
Which statement is FALSE about CMBs?
CMBs are Cash Management Bills. They are sold at auction by the Treasury on an "as needed" basis to meet unexpected cash shortfalls, so they are not part of the regular auction cycle. Because they are sold on an irregular basis, they sell at slightly high
Principal repayments on a CMO are made:
CMOs are Collateralized Mortgage Obligations. Each CMO tranche has an expected maturity, but the actual repayments are based on the rate of principal repayments that come in from the underlying mortgages - and this rate can vary. If interest rates start d
Which characteristic is NOT common to both Treasury STRIPS and Treasury Bills?
Treasury Bills and STRIPS have a minimum $100 par value; are zero coupon original issue discount obligations that do not have a stated interest rate, paying interest at maturity; and are directly backed by the U.S. Government. T-STRIPS are quoted in 32nds
Which statements are TRUE regarding the actions of the Federal Reserve in the trading of U.S. Government Debt?
I The Federal Reserve acts as a dealer
II The Federal Reserve does not act as a dealer
III The Federal Reserve deals directly with primary deale
The Federal Reserve designates a dealer as a "primary" dealer - meaning one entitled to trade with the Federal Reserve trading desk. The Federal Reserve designates a dealer as primary after the firm demonstrates over many years its capacity to purchase Tr
Who guarantees an Industrial Development Bond?
Industrial Development Bonds are issued by municipal authorities, with the revenue source being the lease payments made by a corporate lessee. Furthermore, the corporate lessee unconditionally guarantees the bonds - so they take on the credit rating of th
All of the following callable municipal bonds are trading at a 5% basis. Which is LEAST likely to be called?
An issuer is least likely to call bonds which have low interest rates (low financing cost to the issuer) and high call premiums (expensive for the issuer to call in these bonds).
All of the following statements regarding the tax equivalent yield of a municipal bond are true EXCEPT:
The tax equivalent yield of a municipal bond varies with the customer's tax bracket. As the customer's tax bracket increases, so does the tax equivalent yield. As the market price of the bond moves, the tax equivalent yield changes as well (since it is ba
Which of the following terms describe a special tax bond issue?
Special tax bonds are backed by taxes other than an ad valorem tax, such as liquor taxes, gasoline taxes, cigarette taxes or sales taxes. They are considered to be a non-self supporting debt since they are paid from tax collections. Self supporting debts
A municipal bond dealer buys 100M of 30 year non-callable 9% General Obligation bonds at par less 1 point. After holding the bonds in inventory for a week, the dealer reoffers the bonds on a 9.10 basis. The dealer's approximate profit or loss on this tran
The dealer purchases these bonds at par less 1 point, so the bonds were purchased at 99. Since these 9% coupon bonds were reoffered on a 9.10 basis, they must have been reoffered at a discount price. Since these are long term bonds (30 years), we can appr
In a period of falling interest rates, a bond dealer would engage in which of the following activities?
I Raise prices in interdealer quote publications such as Bloomberg for municipal bonds
II Place "request for bids" in services such as Bloomberg on app
In a period of falling interest rates, bond prices will be rising. Therefore, a dealer would raise his quoted prices in Bloomberg. If the dealer has appreciated bonds that he wishes to sell, he can place "Requests for Bids" for those bonds in Bloomberg. T
In the municipal trading market, a secondary market joint account could be formed for which of the following reasons?
I To purchase a block of bonds offered through another municipal trading firm
II To purchase a block of bonds offered by a bank
III To pu
Municipal secondary market joint accounts are formed by a number of municipal firms to either acquire or sell large blocks of bonds in the secondary (trading) market. Bloomberg gives quotes for municipal bonds in the secondary market. These accounts do no
Which of the following are participants that trade municipal bonds in the secondary market?
I Bank dealers
II General securities dealers
III Issuers
IV Municipal broker's brokers
Municipal issuers offer bonds in the primary market. Issuers do not trade their outstanding debt. Bank dealers, general securities dealers and municipal broker's brokers all trade in the secondary market.
To loosen credit the Federal Reserve will:
To inject cash into the money supply, the Fed will enter into a repurchase agreement where the Fed buys the "paper" from the dealer backed by eligible securities, with an agreement to sell it back at a later date. The bank then gets cash which it can lend
Which statements are TRUE regarding Brokered CDs?
I There is a penalty for early withdrawal
II There is no penalty for early withdrawal
III There can be a loss of principal upon an early withdrawal
IV There can be no loss of principal upon an early withdr
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. If interest rates rise after issuance, the value of the CD in the secondary market will fall
A customer buys 2 ABC Jan 60 Puts @ $4 when the market price of ABC is $59. ABC stock falls to $40 and the customer buys the stock in the market and exercises the puts. The gain is:
The customer buys the stock for $40, and exercises the put to sell at $60 for a 20 point profit. Since 4 points were paid in premiums, the net profit per contract is 16 points or $1,600. The profit on 2 contracts is $3,200.
A customer sells short 100 shares of ABC stock at $52 and buys 1 ABC Mar 55 Call @ $5. The maximum potential gain is:
If the stock falls, the customer gains on the short stock position. The customer sold the stock for $52. If it falls to "0," the customer can buy the shares for "nothing" to replace the borrowed shares sold and make 52 points. The customer lets the call e
A customer buys 100 shares of ABC stock at $56 and buys 1 ABC Oct 55 Put @ $3.50 on the same day. The maximum potential gain is:
The put is purchased as a hedge. If the market falls below $55, the put will be exercised and the customer can sell the stock at $55. The customer gains, however, if the stock price rises. Then, he or she will let the put expire "out the money" and will s
The practice of buying a put and selling a call against a long standing stock position is called a:
If a customer has a stock position that has appreciated over time, and the customer wishes to protect the position against a downward market move, the customer can buy a put against the stock, typically at a strike price a bit below the current market pri
A customer sells short 100 shares of DEF stock at $62 and sells 1 DEF Oct 60 Put @ $6. The maximum potential gain while both positions are in place is:
If the market drops, the short put is exercised and the customer must buy the stock at $60. Since the stock was sold at $62, the customer gains 2 points, in addition to collecting 6 points of premiums. Thus, the maximum gain is $800. Conversely, if the ma
A customer who is long 1 ABC Jan 60 Put wishes to create a "long put spread." The second option position that the customer must take is:
A spread consists of the purchase and sale of the same type of option, with different strike prices or expirations - therefore Choices A and B are incorrect. In a bear put spread (long put spreads are bearish strategies), the customer purchases the higher
A customer who is long 1 ABC Jan 40 Call wishes to create a "long call spread." The second option position that the customer must take is:
A spread is a buy and a sell of the same type of option. Since the customer is already long a call, he or she must be short a call to create a spread. In order for the position to be a "long call spread," the customer must be a net buyer, meaning he or sh
A customer sells 1 ABC Jan 60 Put @ $4 and buys 1 ABC Jan 70 Put @ $7 when the market price of ABC is $68. The breakeven point is:
To breakeven, the customer must recover the $300 (3 points) paid in premiums. Any gain comes from the long put position (remember this is a long put spread), therefore the breakeven point is $70 - $3 = $67. To summarize, the breakeven formula for a long p
On the same day a customer buys 1 ABC Jan 50 Call @ $2 and sells 1 ABC Jan 35 Call @ $8 when the market price of ABC is $41. The maximum potential gain is:
The customer has created a short call spread.
Sell 1 ABC Jan 35 Call @ $8
Buy 1 ABC Jan 50 Call @ $2
$6 Credit
The credit of $600 is the maximum potential gain, occurring if both contracts expire. This occurs if the market falls below $35.
A customer buys a listed stock option in a regular way trade and exercises that same day. The Options Clearing Corporation will assign the exercise notice to a writer on:
An exercise notice may be placed by a customer immediately upon the purchase of a call or put contract. However, the Options Clearing Corporation will not assign the exercise notice until the purchase of the option settles - and this occurs the next busin
A Canadian Dollar option contract will be quoted in terms of:
All foreign currency option contracts traded on the Philadelphia Stock Exchange are quoted in U.S. Dollars
Upon exercise of a Japanese Yen World Currency call option, the holder will:
If there is an exercise of a foreign currency option, settlement is the same as for exercise of index options. If a PHLX World Currency option is exercised, the writer must pay the holder the "in the money" amount the next business day. There is no delive
Prior to the opening of the options exchange, an investor wishes to place an order to sell an option contract at a premium that is higher than the previous day's close. The order type to be placed is a(n):
The orders that are placed higher than the current market are "OSLOBS" - Open Sell Limits and Open Buy Stops. Thus, to sell at a price higher than the current market, an open sell limit order would be placed.
Conversely, the orders that are placed lower t
Which of the following first markets does NOT trade futures contracts
The NYSE trades stocks - it does not trade futures contracts. The NYMEX (New York Mercantile Exchange), CBOT (Chicago Board of Trade) and the CME (Chicago Mercantile Exchange) are all futures markets that do not trade securities.
On the New York Stock Exchange, which of the following persons will handle odd lot transactions?
Odd lot transactions on the NYSE are handled by designated "Odd Lot" dealers - who happen to be the Specialists (Designated Market Makers) in the assigned stocks.
A NASDAQ security is bid at $35 and offered at $35.50. An over-the-counter trader effects a trade at $35.25 and charges a commission of $.25 to the customer. The price that will show on the tape is:
Trade prices that are shown on the tape do not include commissions to customers. This trade was effected at $35.25, and this is the price that will show on the tape.
Which of the following can result in the creation of a short position?
I Buying a stock on one exchange and simultaneously selling it on another exchange
II Selling stock for a customer that is owned by that customer
III Selling stock for a customer that
Short sales are sales of borrowed shares, so Choices III and IV are clearly short sales. Choice II is a long sale - selling stock that is owned. Choice I is an arbitrage transaction, where stock is bought on one exchange and simultaneously sold short on a
Which of the following trades are reported through ACT's Trade Reporting Facilities (TRFs)?
I NASDAQ Market Center trade of a NASDAQ listed stock
II Super Display Book trade of an NYSE listed issue
III Trade of an NYSE listed issue in the Third Market
IV
The "TRF" is the Trade Reporting Facility that is operated by the ACT system. Initially, the system was used for NASDAQ only. When NASDAQ became a registered stock exchange in late 2006, separate "TRFs" were created using ACT, which allowed NASDAQ to sell
ABC corporation has set the record date for a cash dividend at Monday, July 22nd. The last day to buy the stock before it goes ex dividend is:
The last day to purchase the stock in a regular way trade and receive the dividend is 2 business days prior to record date or the 18th. Ex date - or the very first day the stock trades without the value of the dividend - is the 19th.
An over-the-counter firm has traded municipal bonds with another dealer in a regular way trade. Settlement will take place in:
Generally, regular way settlement takes place in 2 business days in clearing house funds for all trades except U.S. Government securities and options. Trades of U.S. Government securities settle next business day in Federal Funds. Trades of options settle
All of the following securities deliveries are "good" EXCEPT:
Custodian account securities cannot be assigned by the minor. The minor has no legal authority. Any assignment must be made by the custodian.