As inflation increases over time, the best hedge against it has historically been provided by which of the following types of securities?
[A] Common Stocks
[B] Preferred stocks
[C] Government Securities (T-Bonds, etc)
[D] Convertible bonds
[A] Common stocks
Choices B,C, and D are fixed income instruments which as vulnerable to inflation and/or purchasing risk. Common stock carries the greatest risk as well as the greatest reward potential. Historically, common stock has outperformed the oth
Which of the following indicates if the yield of a zero-coupon bond is currently trading at a premium or at a discount to its compound accreted value?
[A] Original dollar price
[B] Original yield
[C] Maturity date
[D] Dated Date
[B] Original yield
To determine if a zero coupon bond is trading at a premium or discount to its accreted value you would always have to work from its original yield
Which of the following entities or systems is used to settle the majority of equity transactions, corporate bond transactions, and muni bond transactions in the United States?
[A] The New York Stock Exchange
[B] the National Association of Securities Deal
[C] The Continuous Net Settlement (CNS) System offered by the Depository Trust & Clearing Corporation (DTCC)
The DTCC's CNS system acts as the central counterparty or clearance and settlement of virtually all broker-to-broker equity, corporate and muni/UI
The exercise price of a listed equity option would be adjusted for all of the following except?
[A] a 2:1 stock split
[B] dividends paid in cash
[C] rights issued on common stock
[D] dividends paid in stock
[B] dividends paid in cash
When a cash dividend is paid on common stock, the exercise price on options is not adjusted since there is no change in the number f shares that the customer will own or that the option will represent.
An investor is considered "uncovered" in which of the following scenarios involving option contracts? The investor:
[A] buys 1 XYZ call option with no other stock positions
[B] buys 100 shares of ABC common stock and sells 1 ABC put option
[C] buys 100 sh
[B] buys 100 shares of ABC common stock and sells 1 ABC put option
Long stock positions do not cover a short put contract. The most common way that the seller of a put contract is covered is by having finds on hand in their account that are equal to the t
Alternative Minimum Tax (AMT)
For individuals, the AMT is computer by adding tax preference items to taxable income. Among those items is interest earned on private activity Municipal bonds
How is the current value of a variable annuity's accumulation units determined?
The current value of an accumulation unit of a variable annuity is always determined from what the value of the underlying securities in the annuity's separate account
What contains the conditions and agreements of an upcoming issue of bonds by a corporation?
The bond's indenture
An investor decides to exchange to exchange her fund for another fund within the same family of funds. As a result, she realizes a gain. How is this gain treated for tax purposes?
Regardless of whether the fund falls within the same family of funds or not, the investor must report the income from the gain for the year during which the gain was realized
The IRS does not consider the switch to be a conversion, it considers it to be a
If a trader places an order to write a naked call, this transaction would be referred to as:
[A] opening covered
[B] opening uncovered
[C] closing covered
[D] closing uncovered
[B] Opening uncovered
An option order that establishes a new investment position or increases the size of an existing investment position is called an "opening" transaction. If the call is naked or uncovered, the option writer does not own the underlying
Which of the following bond offerings would be required to have a trust indenture under the Trust Indenture Act of 1939?\
[ A] US treasury bond
[B] airport authority revenue bond
[C] general obligation bond
[D] mortgage bond
[D] Mortgage bond
Since the Trust Indenture Act of 1939 is applicable only to corporate bonds, the mortgage bonds would be the only bonds required to have a trust indenture.
When helping your customer select a mutual fund all of the following would be primary considerations except:
[A] The NAV of the fund
[B] the fund's historical performance
[C] sale charges
[D] the fund's risk and volatility profile
[A] The NAV of the fund
Of the choices offered, the client and RR should be concerned with the investment risks, performance, and sales charge. The Net Asset Value is a factor but investors generally base investment decisions on objectives/risks, performa
US gov securities trading in the secondary market settle T+1 business day
...
According to anti-money laundering regulations, which o the following must be reported to federal authorities?
[A] all personal checks
[B] Wire transfers of $5,000 or more
[C] Cash deposits of more than $10,000
[D] Cash and wire transfer combined that tot
[D] Cash deposits of more than $10,000
All cash deposits of more than $10,000 must be reported to the IRS (Financial Crimes Enforcement Network)
A client enter an order for the purchase of a block of 200,000 shares of Company X. Just prior to entering the large order, the RR enters an order in their own personal account for 5,000 shares, What best describes what the RR has done?
The RR has engaged in front running on the purchase
front running is by definition, entering an order ahead of another order to benefit from fluctuations in the market due to a large volume purchase
When a 529 Education Savings Plan is set up, the withdrawals are controlled by which of the following?
The account owner
A floor broker executing an order for a public customer asks the designated market maker to guarantee a price while giving the floor broker an opportunity to obtain a better price for the customer. This is known as
[A] a stop order
[B] stopping stock
[C]
[B] stopping stock
stopping stocks is a favor that a designated market maker can do for a floor broker. The floor broker knows they have the stock sold if they are "stopped" but they can still try to get a better price in the market place.
Liquidity of Direct participation program units
DPP units can be difficult to sell because there is not an active secondary market for limited partnerships and because the limited partners (the investors) generally need the approval of the general partners before they can sell their units
Selling away
when a registered person with a member firm participates in outside securities transactions without obtaining approval of the firm, it is referred to as "Selling Away" which is a violation of FINRA rules (i.e. selling products not approved by the brokerag
Which of the following taxes would be deferred in contributions made by an individual to her 401 (k) plan?
[A] Unemployment tax at the Federal Level
[B] Income tax
[C] Medicare taxes
[D] Real estate taxes
Contributions to a 401(k) plan defer income taxes until distributions from the plan are taken. In theory, this allows the investor to pay lower income taxes because income during retirement is expected to be lower than current income levels from employmen
Rollover IRA
People have 60 days to roll funds from a 401(k) into another 401(k) plan or into a traditional IRA in order to avoid taxation and/or penalties for early distributions if he is under 59 1/2.
All of the following are considered to be "custodial property" that can be given by a donor to a minor under the uniform gifts to minors act or the uniform transfer to minors act except:
[A] Bearer bonds
[B] a life insurance policy
[C] an annuity contract
[D] a futures contract
The original UGMA only provided for gifts of cash or securities. The newer UTMA expanded the definition of "custodial property" to any type of asset including real estate and tangible and intangible personal property. However, futur
The Investment Company Act of 1940 requires that certain transactions use "forward pricing" (the valuation of mutual fund share prices as of the next computation). Which of the following transactions does NOT require "forward pricing"?
[A] Shares are purc
[D] ETF shares are purchased by a customer in the secondary market
Forward pricing is required for all purchases and redemptions of mutual fund shares. However, investors who purchase ETFs in the secondary market pay the market price at the tie of the pur
The SEC "quiet periods" for an IPO of an emerging growth company as applied to the underwriters are:
Eliminated
The SEC "quiet periods" are the periods of time surrounding a public offering of a new issue when promotional materials are generally prohibited. The periods generally start from the date a decision is made by the issued to make a public offeri
Federal Funds
Excess reserves of commercial banks which are loaned to other banks needing overnight loans to meet their reserve requirements. Generally higher than the discount rate, which is the rate that would be paid if the bank borrowed directly from a federal rese
regarding FINRA rules, if an RR will be paid to find investors for a limited partnership that is affiliated with, which of the following is true?
[A]The member firm must contact the limited partnership to notify it that the RR is employed by the member fi
[C] If the member firm approves of this activity it must record it and supervise it
RR must inform their member firms of any "private securities transactions' done away from the business activity of the BD before engaging in such activity. If the member a
A corporation ay issue refund bonds to accomplish any of the following EXCEPT
[A] to increase the capitalization of the company
[B] to retire existing bond issue
[C] to reduce its interest costs
[D] to take advantage of a substantial drop in interest rate
[A] To increase the capitalization of the company
A refund is a new bond issue that is used to retire an existing bond issue. Capitalization is the corporation's long term debt, stock, and net worth. The capitalization fo the corporation would remain unch
Of the following statements which are true about market orders made "at the opening"?
[A] Their priority is at parity with limit orders on the book
[B] their priority is above limit orders on the book
[C] they are subordinate to limit orders
[D] "at the o
[B] Their priority is above limit orders on the book
Market orders at the opening always have precedence over limit orders on the NYSE
The calculation of the contingent deferred sales load upon the redemption of a mutual fund is based on
A percentage of either the NAV at the time of purchase or the NAV at the time of redemption, whichever is less, and generally the fee may not exceed 2%
Typically, a fund calculates the amount of a back end sales load based on the lesser of the value of th
An investor who is interested in purchasing Class A mutual fund shares would have which of the following characteristics?
A moderate to large amount of money to invest
Class A mutual fund shares typically have a front-end sales load and sales charge breakpoints but generally have lower annual 12b-1 fees. Therefore, they are well suited for investors with a moderate to large
BD charge their margin customers interest on the debit balances held in the customers' margin accounts. What is the interest rate called that is the basis for margin rates charged to customers?
the current broker call rate
A warrant that is issued with a debenture
Allows the holder a long-term ability to exercise and buy a specific number of shares of common stock
A warrant is a long-term derivative security that allows the holder to buy a specific number of shares at a specific price.
Warrants differ from rights i
When a RR is determining suitability for a customer, all of the following are included in this determination EXCEPT the
[A]customer's net worth
[B]historic performance of a fund
[C]customer's risk tolerance
[D]customer's retirement or education goals
The suitability rules are also known as the :know your customer" rules. Suitability relates to the customer, not to the past performance of a prospective fund
The Depository Trust & Clearing Corporation's (DTCC's) Continuous Net Settlement (CNS) System acts as a central counterparty for clearance and settlement of broker to broker transactions in
most equity, corporate bond, and municipal bond transactions in the US
The DTCC's CNS System acts as the central counterparty for clearance and settlement of virtually all broker to broker equity, corporate, and muni bond/UIT trading in the US
When an investor is deciding whether to buy puts or sell the stock short, buying the puts offers all fo the following advantages except?
[A] the same or greater profit potential versus selling the stock short
[B] time value dissipates
[C] smaller capital
time value dissipates
Advantages to buying puts over selling the stock short include the fact that there is a smaller capital commitment but the same or greater profit potential. Your only risk is the premium paid to buy the option and therefore the premi
which fact is provided in a call provision of a callable bond?
Callable ate and the price at which the bond will be called
Call provisions allow an issuer to call bonds in if a reduced cost of borrowing is available (e.g. call high interest rate bonds to issue low interest rate bonds). Prior to this date, the bonds m
Which of the following is CORRECT about a JTWROS Account (Joint Tenants with Rights of Survivorship)?
[A]Securities transactions may be placed by any individual listed on the account.
[B]The account must be limited to two individuals only.
[C]These accoun
Securities transactions may be placed by any individual listed on the account
"Joint tenancy with a right of survivorship" registration means that upon the death of any one of the tenants (there may be more than two), his or her interest passes automatica