Find study materials for any course. Check these out:
Browse by school
Make your own
To login with Google, please enable popups
To login with Google, please enable popups
Don’t have an account?
To signup with Google, please enable popups
To signup with Google, please enable popups
Sign up withor
During a discussion with a client to determine investment objectives, a client indicates a strong desire to preserve capital. The client also would like to see some current income from their investments. Which portfolio recommendation would BEST suit this customer's stated investment objectives?[A]The RR recommends a portfolio comprised of an equal mix of junk bonds, highly-rated municipal bonds, and 30-year corporate bonds.[B]The RR recommends a portfolio comprised of money market funds, short-term debt instruments issued by the Treasury and federal agencies, and T-Bills.[C]The RR recommends a portfolio comprised of equity securities such as common and preferred stock, as well as a mutual fund focused on large-cap growth stocks.[D]The RR recommends a portfolio comprised of an international mutual fund, investments in real estate investment trusts, and individual securities issued by foreign corporations.
Of the following, which offers the MOST accurate description of a municipal bond that is considered "double-barreled"?[A]These bonds are backed by the unlimited taxing power of a municipality along with the ability of State-level appropriations in the event of default.[B]These bonds are backed by project revenues and receive additional backing in the form of the moral obligation of the State in which the municipality is located.[C]These bonds are backed by income received from securities held in a municipality's portfolio, as well as a gross revenue pledge.[D]These bonds are backed by specific revenues from a project along with the municipality's general obligation pledge.
The factor listed below which would have a direct impact on the alpha of a particular stock would be:(A)Investors on a general scale have changed their minds from being pessimistic about the market to being optimistic.(B)The company whose stock is in question has made significant changes to the management strategy for the upcoming year.(C)With recent over-buying in the technology sector, the market has now corrected itself and technology stocks have come back to reasonable levels.(D)The index where the company is listed has been on a downward trend.
All of the following would be considered bullish strategies in options except[A]short straddle[B]long call[C]short put[D]net debit call spread
Which of the following statements about preferred stock is true?(A)Preferred stock is considered an equity security.(B)Preferred stocks have maturity dates that are fixed.(C)Generally, preferred shares come with voting privileges.(D)Most preferred stock has an equal claim to company assets as common stock in the event that a company becomes insolvent.
Assume an investor sells short 100 shares of ABC and while the investor has the short stock position, ABC pays a dividend. The investor:(A)Owes the dividend to the lender of the stock.(B)Will Receive the dividend from the lender of the stock.(C)Will not be involved in the dividend situation in any way.(D)Will receive the dividend from the company and also from the lender of the stock.
A registered representative recommends that a client purchase shares of a mutual fund today rather than tomorrow because the fund shares will go ex-dividend tomorrow. The registered representative explains that if the client waits until tomorrow to purchase the shares, the client will not receive the dividend. Such a recommendation by the registered representative is:(A)Allowed, because shares purchased on or after ex-date do not receive dividends and are not in the client's best interest.(B)Prohibited, because such recommendation is selling dividends and is not in the client's best interest.(C)Not regulated because it would have no effect on the client's potential position.(D)Acceptable, provided it is first approved in writing by the registered representative's branch manager.
ABC Corporation has issued an 8% Cumulative Preferred Stock ($100 par). In 2002 ABC paid a 4% dividend, in 2003 ABC did not pay any dividend, and in 2004 ABC wants to pay a dividend to its common stockholders. ABC would first have to pay how much in dividends to its Preferred Stockholder first?(A)$4(B)$8(C)$12(D)$20
A broker explaining a Section 529 College Savings Plan to clients who are the parents of a college bound child who are interested in making advance provision for the costs of college should disclose all of the following characteristics of such plans EXCEPT:(A)Although contributions to these plans are not tax deductible for federal income tax purposes, any annual earnings and qualified withdrawals are tax free.(B)Although these plans are not mutual funds, many offer mutual funds as investment options.(C)These plans typically charge enrollment fees, annual maintenance fees, asset management fees and sales charges for broker sold plans.(D)The maximum contribution limit can be set at more than $200,000 .depending on the state and the contribution is exempt from federal gift taxes.
An investor buys 100 shares of ABC at $50 per share and sells one ABC July 55 call for a premium of $2. What is the maximum possible loss for this investor?(A)$4,500(B)$4,800(C)$5,000(D)$5,500
/What is the max possible loss?- 4,800
The price of two funds are as follows at the end of the day of Tuesday, January 15th:
NAV Offering Price Net Asset Change
Fund X 10.20 10.95 -0.04
Fund Z 11.80 12.57 -0.08
One of your clients called and entered a redemption order for 250 shares of Fund X on that Tuesday morning. What would this investor receive?
Which of the following BEST describes what earnings coverage means when dealing with a revenue bond for a municipality?(A)The term describes available revenue that the issuer can use to pay debt service.(B)The term describes the funds set aside to replace or repair the facility.(C)The term describes the funds that an issuer sets aside in a sinking fund.(D)The term describes the amount of insurance carried to cover catastrophic events that may damage or destroy the facility.
When a bond is trading at a discount, the current yield on the bond is:(A)unrelated to its yield to maturity(B)less than its yield to maturity(C)equal to its yield to maturity(D)more than its yield to maturity
An investor asks an RR for his opinion on the purchase of 500 shares of a very closely held stock. The investor thinks it has good near term investment potential. He should be advised that(A)A thin market for such a stock is a major risk factor.(B)Closely held companies have low growth potential.(C)He would have no voice in the company's affairs.(D)He should not buy stock in a closely held company.
A client wishes to diversify her portfolio of municipal bonds by quality. In order to perform this task, the RR's BEST approach would be to analyze what?(A)Each bond's credit rating(B)Each issuer's location(C)The intended use of each bond's proceeds(D)The type of bond being issued by the municipality
Which of the following securities does NOT pay interest to holders on a semi-annual basis?(A)Bonds issued by a public utility providing electricity(B)Pass-through securities issued by the Government National Mortgage Association (GNMA)(C)Notes issued by the U.S. Treasury(D)Bonds issued by a public corporation
All of the following positions have unlimited loss potential except(A)Short stock-short put(B)short straddle(C)uncovered call(D)uncovered put
One of your clients holds a preferred stock which has not paid dividends for the past two quarters. The paperwork for the preferred stock REQUIRES that dividends that were not paid must be paid prior to any dividends are paid to stockholders of common shares. What kind of preferred stock does your client hold?(A)Your client has a cumulative feature on their preferred stock.(B)Your client has a conversion feature on their preferred stock.(C)Your client has a participating feature on their preferred stock.(D)Your client has a call feature on their preferred stock.
A specified group of stocks is combined and a mathematical figure is used to indicate the value of this group of stocks as a whole. Collectively, what is this group of stocks called?(A)This describes an index of securities.(B)This describes the beta coefficient of the market.(C)This describes the alpha of the market(D)This describes a resistance level used for securities analysis.
A customer's account appears as follows:
$100,000 MV Long
$ 40,000 DB
$ 60,000 EQ
The securities in this customer's account INCREASE in value by $25,000, and the debit balance is decreased by $5,000. After these changes, what is the buying power in the account?
Instinet and the Fourth Market have all of the following characteristics except:(A)trades large blocks for institutions(B)quotes may be displayed(C)transactions are crossed on the NYSE Floor(D)commissions are lower on the large trades
Which of the following risks is NOT normally a major factor when analyzing ADRs (American Depositary Receipts)?(A)Risks associated with changes in inflation(B)Risks associated with changes to legislators and political climate(C)Risks associated with the call of such securities by the issuers(D)Risks associated with fluctuations in currency exchange rates
When an investor regularly trades in and out of five or six different stocks daily and does not maintain any positions over night would be a:(A)Programmed Trader(B)Specialist(C)Manager(D)Pattern Day Trader
Which of the following would NOT be permitted when dealing with illustrations pertaining to yields or income levels in relation to mutual funds and variable annuities?(A)Illustrations of annualized yields(B)Illustrations pertaining to current yields(C)Illustrations of projected earnings and yields(D)Illustrations of income and yields for the preceding 5-year period
Which of the following is NOT a characteristic of Notes issued by the U.S. Treasury?(A)All U.S. Treasury Notes have call features.(B)Maturities on these securities are typically intermediate.(C)Quotes on these securities are listed as a percentage of the note's par value.(D)Interest is paid on these securities semi-annually.
A customer puts in an immediate or cancel order to buy 100 ABC Sept 50 calls. At the same time that the order reaches the floor, a market order also arrives to sell 50 ABC Sept 50 calls. There are no other sell orders on the book. What will happen?(A)The entire 100 call order will go into the book.(B)The entire 100 call order will be cancelled.(C)50 of the calls will be filled and the remainder will be cancelled.(D)50 of the calls will be filled and the remainder will go into the book.
If a long call option is exercised by the holder, the holding period on the acquired securities begins:(A)on the date the call is exercised(B)the day after the option is exercised(C)the day the call option was acquired(D)the day after the call option was acquired
Eurodollars are BEST described with which of the following statements?(A)Eurodollars are the currency of a group of European countries.(B)Eurodollars represent currency of the U.S. that is currently being held in foreign (non-U.S.) banks.(C)Eurodollars represent currency of a group of European countries that are held in domestic banks (banks in the U.S.).(D)Eurodollars represent currency that may only be traded in European markets.
One of your clients is an options trader. In looking over the financials and news for Company X, this client feels that Company X common stock will not fluctuate much in price over the next several months. Which options position listed below will provide the MOST PROFIT for this client with this consideration in mind?(A)Putting on a bullish call spread(B)Putting on a short straddle(C)Buying a put option(D)Buying a call option
REITs (Real Estate Investment Trusts) have which of the following features?
Which of the following statements about REPOs (Repurchase Agreements) is FALSE?(A)Typically REPOs denominations start at a minimum of $1,000,000.(B)REPOs are considered money market instruments.(C)REPOs are often thought of as risk-free investments.(D)REPOs typically have maturities of less than three months.
One of your clients placed a trade in their cash account without the funds to pay for the securities. No additional funds were added to the account and no extension was obtained for additional time to deposit funds. The firm liquidates the purchased position. In order to comply with Reg T guidelines, the customer's account must be frozen for what amount of time?(A)The account must be frozen for 180 days.(B)The account must be frozen for 90 days.(C)The account must be frozen for 30 days.(D)The account need not be frozen.
A registered representative has been going over investment objectives and various investment products with a client. The RR has come to the conclusion that a mutual fund comprised of various bonds is the best choice for this particular client. When the RR makes the recommendation of this type of fund, which two of the following are the MOST important things to discuss with the client?
A customer is long 100 shares of XYZ at $60 per share. He then sells 1 XYZ April 60 call at 3. The margin requirement on this transaction is:(A)$0.00(B)$250(C)$1,500(D)$1,800
If an investor is seeking capital gains and income from their investments, what type of investment would BEST suit these objectives?(A)The purchase of a block of growth stock(B)The deposit of funds into a money market account(C)The purchase of a mutual fund heavily invested in equity securities.(D)The purchase of STRIPs on U.S. Treasury Securities
What is the typical make-up of a balance sheet?(A)The overall values of outstanding bonds plus outstanding stocks is equal to the total assets of the company. (Bonds + Stocks = Total Assets)(B)The total liabilities plus the company's net worth equals the total assets of the company. (Liabilities + Net Worth = Total Assets)(C)The capitalization less its liabilities set equal to the assets of the company. (Capitalization - Liabilities = Assets)(D)The current liabilities added to the fixed liabilities of the company set equal to the assets of the company. (Fixed Liabilities + Current Liabilities = Assets)
An investor, Mrs. Smith, is seeking a mutual fund offering a high yield. Which of the following is the best choice for Mrs. Smith?(A)Aggressive Growth Fund(B)Hedge Fund(C)Income Fund(D)Emerging Growth Fund
Of the following types of orders, which would generally be used to protect an existing position or profit?
A client is contemplating investing in a mutual fund focused on domestic bonds versus investing in a mutual fund focused on international bonds. When should this investor expect to see the international fund have higher levels of income than the domestic fund?
I. Interest rates in the U.S. are greater than foreign rates.
II. Interest rates in foreign countries are greater than U.S. rates.
III. The value of the U.S. Dollar is going down in relation to the currencies of other countries.
IV. The value of the U.S. Dollar is going up in relation to the currencies of other countries.
An investor should expect to see more income when the rates abroad are higher than domestically. Also, the investor should expect to see more income when the value of the U.S. Dollar is going down in relation to the value of currencies abroad.
Jimmy is a client of yours and he has some holdings in U.S. T-Bonds. Over the past year, he received $500 in interest from these bonds. His accountant has informed him that he is in the 28% tax bracket with all sources of income considered. He lives in the State of California, so his State Income Tax Rate is 9%. What kind of tax liability is Jimmy looking at in relation to the interest received from his U.S. T-Bonds?(A)Jimmy has a tax liability of $185.00 total on the interest received.(B)Jimmy has a tax liability of $140.00 total on the interest received.(C)Jimmy has a tax liability of $45.00 total on the interest received.(D)Jimmy has no tax liability on the interest received.
An investor has a large portfolio of Blue Chip common stocks and expects the market to remain stable or decline slightly. He'd like to increase the rate of return on his portfolio. Which of the following would be the best choice for this investor?(A)Buy Calls on the portfolio(B)Write Covered Calls on the portfolio(C)Establish a Call Spread(D)Write Covered Puts on the portfolio
In a margin account, "equity" is defined as:(A)the common stock in the account(B)the debt investment in the account(C)securities listed on a national exchange(D)the net financial ownership in the account
Excise taxes on cigarettes, alcohol, and gasoline secure certain securities issued by a municipality. Which of the following is the MOST appropriate statement regarding this type of municipal issue?(A)These would be BABs (Build America Bonds).(B)These would be Special or Additional Assessment Bonds.(C)These would be Special Tax Bonds.(D)These would be Tax or Bond Anticipation Notes.
A municipal bond has a provision for redeeming a certain number of bonds at par in ten semi-annual installments. This type of call feature is best described as:(A)An installment call(B)An optional call(C)A sinking call(D)A catastrophic call
An individual walks into your branch and wishes to open an account. In this account, the individual wishes to trade options and indicates that she would like to be approved for the sale of uncovered puts and calls. Industry regulations dictate that this customer must receive an Options Disclosure Document in what time frame?(A)The ODD must be provided when the margin agreement is provided and signed.(B)The ODD must be provided no later than when the confirmation of the first transaction in the account is delivered to the client.(C)The ODD must be provided to the new client no later than the third business day following their first transaction.(D)The ODD must be provided to the new client before the client is approved for options trading.
Which of the following terms represents option positions?
When a client opens an options account at a firm, regulations dictate that the firm must receive an account agreement signed by the customer in what time frame?(A)Following approval of the account, the firm must receive the signed account agreement within 15 days.(B)The firm must receive the signed account agreement prior to approval of the account.(C)Following approval of the account, the firm must receive the signed account agreement within one month.(D)The firm must receive the signed account agreement no fewer than 10 business days before approval of the account.
When a corporation is investing funds, which of the following types of securities provides the best tax incentives for the corporation?(A)Investments in convertible fixed income debt securities(B)Investments in Treasury Securities(C)Investments in corporate debt securities(D)Investments in corporate preferred stock
SEC rule 415 allows "Shelf Registration." This permits one registration statement to cover all securities to be issued during the next:(A)Six months.(B)One year.(C)Two years.(D)Three years.
One of your clients has been pleased with your recommendations and now wants to allow you, their RR, discretionary authority over their account. The client tells you that they have filled out and sent the appropriate forms to give written discretionary authority but the firm has not yet received the paperwork. An earnings report comes out on one of the securities in the customer's account and you expect a drop in price on the stock. You try to call the customer about the report, but the customer does not answer the phone. Assuming that the paperwork is in the mail, what action should you take in this situation?(A)Since the paperwork is in the mail, you should place an unsolicited order in the account to sell the security and avoid losses.(B)Though it may result in a loss in the customer's account, you should hold off on taking action until you reach the customer or receive the paperwork.(C)Since the paperwork is in the mail, you should contact the nearest family member to the client and inform them of the situation to get permission to sell the security and avoid losses.(D)You should place a discretionary order in the account and mark it as solicited so the customer avoids losses.
Which of the following would NOT be considered to be a Money Market Instrument?(A)Jumbo Certificates of Deposit(B)Bankers Acceptances(C)Treasury Bills(D)ADRs (American Depositary Receipts)
A broker/dealer under Reg T is not required to liquidate a customer's positions if the margin call in the account is for:(A)$1,000 or less(B)$2,000 or more(C)$5,000(D)Any unpaid amount
One of your new clients with little investing experience is trying to figure out their capital gains and losses for the year. They had capital gains of $6,000 for the year, but had capital losses totaling $10,000 as well. What can the client do in this situation?(A)The client can deduct the total amount of capital losses, $10,000, from their income and carry a percentage of that forward to the following year as a capital loss.(B)The client may make a deduction of $10,000 from gross income only.(C)The client can offset the gains with the losses for a total deduction of $4,000.(D)The client can deduct $3,000 from gross income and carry $1,000 forward as a capital loss.
MSRB Rules dictate that certain aspects of a trade may be modified with the agreement of both parties, while other aspects of a trade may not be modified. Which of the following is NOT permitted to be modified, even if all persons involved in the trade agree?(A)Determination of who will pay expenses related to shipping certificates, etc.(B)The various factors which will determine whether or not the delivery of the securities constituted a "good delivery"(C)The information which is provided on confirmations sent to both sides of the trade(D)Determination as to where and when the securities will be delivered
You are talking to a client who is making a few changes to their account information. The client recently retired. The client has a need for taxable monthly income from investments and would like to keep their investments conservative in nature. Which of the following investments would NOT be appropriate for this client?(A)The client could invest in the bonds of several conservative Blue Chip companies.(B)The client could invest in several leveraged, closed-end funds made up entirely of bonds.(C)The client could invest in the preferred stocks of several conservative Blue Chip companies.(D)The client could invest in CDs (Certificates of Deposit).
A registered representative suggests and then implements a strategy in a client's portfolio. This strategy involves the RR coming up with certain determinations in relation to an appropriate distribution of investments in the client's account and the maintenance of this mix of investments over time. Which of the following most accurately describes the strategy that has been implemented?(A)The RR is using only a technical analysis approach to allocation.(B)The RR is using capital asset pricing model to determine allocation.(C)The RR is using a form of asset allocation for the client.(D)The RR is using a strategy purely focused on diversification for the client.
One of your fellow registered representatives wishes to send out an approved worksheet on options. The worksheet must be sent out with, or preceded by, which of the following documents?(A)Documents including the appropriate disclaimers(B)Documents related to opening a margin account(C)Documents related to opening an options account(D)Documents including the ODD (Options Disclosure Document)
When an investor buys a call option, regardless of whether it is an Equity or Stock Index option, the maximum risk or loss potential to the investor is the(A)premium that was paid for the contract plus any out-of-the-money amount(B)premium that was paid for the contract less the in-the-money amount(C)premium that was paid for the contract(D)exercise price on the contract plus the premium paid for the contract
An investor who purchases a CMO (Collateralized Mortgage Obligation) can expect distributions of cash how frequently?(A)The investor can expect distributions on a weekly basis.(B)The investor can expect distributions on a monthly basis.(C)The investor can expect distributions on a quarterly basis.(D)The investor can expect distributions on a semi-annual basis.
Which of the following funds would be the least suitable for a retiree in need of a steady stream of income?(A)A bond fund(B)A sector fund(C)A balanced fund(D)A growth and income fund
Which of the following U.S. Government securities are classified as money market instruments?(A)Treasury bills(B)Treasury notes(C)Treasury bonds(D)Treasury strips
A client recently purchased a sizeable number of mutual fund shares and knows that the Net Asset Value will change daily. The customer asks the RR how the NAV number is computed. Which of the following best describes the computation to arrive at NAV per share?(A)NAV per share is calculated by finding the average value on a per share basis over the previous quarter.(B)NAV per share is calculated by subtracting the liabilities of the fund from the total assets of the fund, then dividing this number by the total number of shares currently outstanding.(C)NAV per share is calculated by taking the total value of the portfolio of the fund, adding sales charges received, and then dividing this figure by the total number of shares currently outstanding.(D)NAV per share is calculated by finding the total appreciation of the portfolio and dividing this figure by the total number of shares outstanding.
The negotiated underwriting of municipal securities usually involves all of the following EXCEPT:(A)a bid form(B)a legal opinion(C)an underwriters agreement(D)a bond purchase contract
An investor's investment objectives are related to all of the following circumstances EXCEPT:(A)time horizon(B)marital status(C)level of education(D)number of dependents
An investor, whose investment objective is speculation, would MOSTLY be concerned with which of the following?(A)Their exposure to reinvestment risk(B)Their exposure to currency risk(C)Their exposure to interest rate risk(D)Their exposure to capital risk
One of your clients refers a friend. After talking with the referred friend, she opens an account with you, deposits $20,000, and states that she wants you choose some stocks that will have good growth potential whenever you feel it is the right time to buy. The next step you should take would be to:(A)choose appropriate stocks, execute the orders, and report the transactions back to the new customer.(B)get written discretionary authorization from her prior to executing any transactions.(C)advise her that she needs to pick the stocks and enter the orders herself using the firm's online trading platform.(D)check with your original client to obtain his assessment of her risk tolerance prior to executing orders in the new client's account.
A sell order is entered by an agent at a firm with additional instructions. The instructions indicate that the order is to be executed at the opening. This order is not received in a timely fashion by the floor broker, and it cannot be executed at the opening. If this is the case, how is this order handled?(A)The order will then become a market order(B)The order will be cancelled(C)The order is then entered as a limit order with the opening price as the limit.(D)The order will be executed at the earliest time possible as a market order.
Which of the following is the MOST accurate description of "beta"?(A)Beta measures the returns that a company has against the stocks of individual companies both inside and outside of the same sector.(B)Beta measures the price-to-earnings ratio of one company in relation to the average price-to-earnings ratio of companies on a particular index.(C)Beta measures the volatility of an individual company in comparison to the volatility of the overall market.(D)Beta measures the volatility of one class of securities such as common stock against other classes of securities such as bonds, preferred stock, and derivatives.
Which of the following statements is FALSE when discussing the Federal Funds Rate?(A)Changes to the supply of money and demand for money cause fluctuations in the federal funds rate.(B)The Federal Reserve directly sets the Federal Funds Rate.(C)Historically, the discount rate has been lower than the Federal Funds Rate.(D)The calculation of the Federal Funds Rate takes place daily.
A client has a stock that is currently valued at $40 per share. The quarterly dividend of this stock is $0.10 per share. What is the current yield of this stock?(A)The current yield cannot be determined with the information provided.(B)The current yield is 0.25%.(C)The current yield is 1%.(D)The current yield is 10%.
A client is interested in becoming a limited partner of a DPP (direct participation program). He signs a subscription agreement for the DPP. This would indicate all of the following EXCEPT:(A)He has provided verification in relation to his net worth(B)He has agreed to provide the general partner of the DPP with a power of attorney in relation to matters of the DPP(C)He has indicated agreement in relation to subscription to the DPP offering(D)He has become a limited partner and received approval as such.
Which of the following would be the MOST typical portfolio make up for a mutual fund that is categorized as "balanced"?(A)A portfolio consisting of bonds that are all investment grade(B)A portfolio consisting of municipal bonds with diversified ratings and maturities(C)A portfolio consisting of equity securities such as common and preferred, along with bonds from various issuers including government, municipal, and corporate(D)A portfolio consisting of large-cap "blue chip" equity securities
An investor buys 100 shares of ABC at $50 per share. Later, the investor sells 1 ABC Jul 55 call at 3. What is the investor's breakeven point as the contract nears expiration?(A)$47(B)$50(C)$53(D)$55
A market maker is quoting ABCD common stock, a NASDAQ security. The spread in this security is best described as the difference between(A)the dealer's cost and the sale price with the mark-up(B)the dealer's cost and the quoted bid price(C)the dealer's quoted bid and ask price(D)the highest bid and the highest ask of all market makers
While a client was out of town and the registered representative was not able to reach the client, the rep decided to buy a security in the customer's account even though the rep did not have discretionary authority. Later the same day, the rep sold the stock at profit. The following day the rep was able to reach the client and explain what he had done. The client was very happy and took the rep out to dinner. This practice was:(A)a violation of the rules because the rep executed unauthorized transactions in the customer's account.(B)acceptable since the client was happy with the profit.(C)a violation because the client took the rep out to dinner.(D)acceptable since the client gave the rep approval the next day.
A younger client with a moderate amount of funds is considering the purchase of a home in the near-term future. For this reason, the investor wishes to keep their assets as liquid as possible in the event that the right deal on a home comes along. As this client's registered representative, which of the following would carry the LEAST amount of liquidity and therefore be unsuitable for this client?(A)Investment in bonds and bond funds focused on municipal securities(B)Investment in equity securities such as preferred stock(C)Investment in a DPP (Direct Participation Program)(D)Investment in CDs (Certificates of Deposit) with varying short-term maturities
A client is evaluating purchasing corporate bonds versus purchasing municipal bonds. In their evaluation, the client wishes to evaluate the equivalent yield required by a corporate to compensate for the tax benefits of the municipal bonds. Which of the following is the formula used to determine tax-equivalent yield?(A)The client should multiply the tax-exempt yield of the muni by their tax rate.(B)The client should divide the tax-exempt yield of the muni by their tax rate.(C)The client should multiply the tax-exempt yield of the muni by (100% - their tax rate).(D)The client should divide the tax-exempt yield of the muni by (100% - their tax rate).
Using an annuity to fund a qualified retirement plan:(A)is unsuitable under any circumstances(B)is suitable if it is a fixed annuity but is unsuitable if it is a variable annuity(C)is unsuitable because the earnings in both the annuity and the qualified retirement plan are tax deferred and are therefore redundant(D)may be suitable because the annuity provides a guaranteed lifetime income during retirement and because of the death benefits provided.
Subscription warrants are usually issued as part of:(A)A common stock offering to obtain a higher par value(B)A preferred stock offering to obtain a lower par value(C)A debenture offering to obtain a lower interest rate(D)A convertible bond to obtain a higher interest rate
Joe is an employee of Municipal Securities Dealer A. He intends to open an account where he wishes to maintain funds and execute transactions with Municipal Securities Dealer B. All of the following are required of Municipal Securities Dealer B, EXCEPT:(A)Dealer B must abide by guidelines that are given by Dealer A in connection with Joe's transactions within the account at Dealer B.(B)Dealer B must obtain approval from Dealer A for every transaction that Joe enters at Dealer B.(C)When Dealer B receives instructions to open the account from Joe, Dealer B must send notification to Dealer A.(D)Dealer B must send duplicate confirmations to Dealer A for all transactions in the account.
A common stockholder has all of the following rights except:(A)voting(B)demand dissolution of the company's assets(C)residual claim on the company's assets(D)to examine certain books and records
When a registered representative is trying to determine if a stock is a growth stock, public utility, or blue chip, they would most likely look at the:(A)Earnings per share(B)Current Ratio(C)Dividend Payout ratio(D)Advance/Decline ratio
Which of the following is TRUE in relation to securities being pledged as collateral for loans when the securities are pledged by a customer to the broker/dealer firm?(A)This type of pledge would be called hypothecation.(B)This type of pledge would be called re-hypothecation.(C)These securities would be considered "tendered" by the issuer.(D)These securities would be considered "treasury stock" by the issuer.
All of the following are components of the calculation to find compound accreted value (CAV) on zero-coupon bonds EXCEPT?(A)the maturity date of the bond(B)the dated date of the bond(C)the bond's original yield at offering(D)the bond's current market yield
Of the following documents, which TWO require approval by the designated principal before a registered representative may send them to customers or prospects?
Which of the following is generally NOT TRUE in relation to Corporate Commercial Paper?(A)Commercial paper is normally offered in book-entry form.(B)Commercial paper is normally issued in callable form.(C)Commercial paper is normally sold at a discount.(D)Commercial paper is normally unsecured debt of a corporation.
When an investor in the U.S. owns an ADR (American Depositary Receipt), what does that mean?(A)It means that the investor owns U.S. bank-issued CDs (Certificates of Deposit).(B)It means that the investor has an equity position in an U.S. company, but that equity position is not tied to common stock.(C)It means that the investor holds a certificate representing ownership of a foreign company which is held by a custodian who is a third party to the ownership.(D)It means that the investor holds U.S. index fund shares.
Mr. Smith has been watching ABC common stock for several years and feels that ABC will remain neutral or stable for the next year. Based on this assumption, which of the following options positions would allow Mr. Smith to realize the MOST in terms of profits?(A)Buying a call(B)Buying a put(C)Putting on a long straddle(D)Putting on a short straddle
A private electronic system that displays, matches, and executes orders in listed and OTC securities would be:(A)an Exchange(B)a market-maker(C)a third market(D)an Electronic Communication Network (ECN)
Of the following forms of communications that may take place between a firm and individual investors, which constitutes sales literature under regulatory guidelines?
Which of the following statements are generally accurate regarding securities issued by agencies of the U.S. Government?
Assuming investments of similar quality and coupons, which would be most appropriate for an investor who is anticipating a decline in interest rates over the next 15 years?
All of the following statements about municipal auction-rate securities are TRUE EXCEPT:[A]At auction, a rate is determined which will be the lowest interest rate which would provide for the sale of all of the securities in the market.[B]The rates on these securities typically are reset at regular intervals such as 7 days, 28 days, 35 days, or another pre-determined interval.[C]All auction-rate securities are putable, meaning investors can force the selling dealer to buy them back at any time.[D]When selling auction-rate securities, the broker/dealer seeks buyers who are interested in holding the securities over the next period after the rate has been reset.
An investor purchases the following bonds, all at a premium above par value:
All of the following are characteristics of REITs EXCEPT:[A]They are publicly-traded securities and can be traded on an exchange or OTC.[B]They generally own income-producing properties like apartment buildings.[C]They distribute 90% of their income to shareholders.[D]They must be registered under the Investment Company Act of 1940.
One of your clients wants to free up some capital and decides to sell a municipal bond out of their portfolio. The bond last paid interest a couple of months ago and will not pay interest again for a few months. In this situation, who pays the accrued interest at the time of settlement?[A]The buyer of the bond pays the accrued interest.[B]The seller of the bond pays the accrued interest.[C]The agent will pay the accrued interest.[D]The issuer will pay the accrued interest.
A client purchased 200 shares of ABC for $22,500 two years ago. Over the next few years the client sold call options for a total of $1,500. All the calls expired worthless. For tax purposes, the cost basis for the 200 shares of ABC is[A]$22,500[B]$21,000[C]$23,250[D]$24,000
A client has held a long position in BCD Common for several years and has seen a sizeable increase in price since initially buying the stock. The client fears that BCD is headed for a slight downturn in price and wishes to protect the profits that he holds from the previous increase. Which option strategy provides the MAXIMUM protection for this client?[A]This client would be best suited by buying calls on BCD.[B]This client would be best suited by selling calls on BCD.[C]This client would be best suited by buying puts on BCD.[D]This client would be best suited by selling puts on BCD.
One of your clients regularly trades options. The customer feels that QRS is going to remain relatively stable or have a slight downturn and he decides to sell 1 QRS May 55 call for $2.50 when QRS is at $54.50. About a month later, the customer receives an exercise notice when QRS is trading at $60.75 per share. In terms of the exercise, what price will the client report for tax purposes in relation to the price at which the stock is sold to the buyer of the call?[A]$52.50 per share[B]$54.50 per share[C]$57.00 per share[D]$57.50 per share
Which of the following would NOT be considered a "bullish" options strategy?[A]An investor establishes a short straddle.[B]An investor buys a call.[C]An investor establishes a call spread at a net debit.[D]An investor sells a put.
A trader buys 10 OEX 300 call options at 4.50. The OEX Index is currently selling at 290. How much must the trader pay for the option?[A]$3000[B]$4,500[C]$30,000[D]$45,000
One of your clients is an experienced options trader. The client has recently established a trend of buying calls on a broad-based index. Why would this investor be performing these trades?[A]This would indicate that the investor has a bearish sentiment toward the overall market.[B]This would indicate that the investor has a bullish sentiment toward the overall market.[C]This would indicate that the investor feels that interest rates are going to be going up substantially.[D]This would indicate that the investor feels that interest rates are going to be going down substantially.
When an investor buys a call option, regardless of whether it is an Equity or Stock Index option, the maximum risk or loss potential to the investor is the[A]premium that was paid for the contract plus any out-of-the-money amount[B]premium that was paid for the contract less the in-the-money amount[C]premium that was paid for the contract[D]exercise price on the contract plus the premium paid for the contract
A day trader of blue chip common stocks would be most concerned with which of the following risks?[A]purchasing power risk[B]timing risk[C]default risk[D]interest rate risk
A broker/dealer firm has become insolvent. SIPC liquidation procedures have begun. Jill and Jack are married and each of them have individual accounts along with a joint account with each other at the firm. The following are their account balances: Jill's individual account - $275,000 in fully-paid securities Jack's individual account - $265,000 in fully-paid securities Jill and Jack's joint account - $475,000 in fully-paid securities What would SIPC cover in relation to these accounts?[A]SIPC coverage would total $500,000 for the three accounts since the two parties are married.[B]SIPC coverage would pay $275,000 for Jill's account, $265,000 for Jack's account, and $475,000 for the joint account.[C]SIPC coverage would pay $1,500,000 in this case, because each account is insured for $500,000, regardless of the amount held when the broker/dealer firm became insolvent.[D]SIPC would not cover any of these claims.
A Joint Account With Rights of Survivorship, established for a husband and wife, would have all of the following characteristics EXCEPT:[A]Both the husband and wife may place orders to trade in the account.[B]A Consent Agreement must be signed by both the husband and wife so that checks may be made payable to either party.[C]A Margin Agreement would have to be signed by both the husband and wife.[D]Should either party to the account die, the surviving party would get complete control of the account.
An existing client in her late 20s comes in with her boyfriend. The couple is not married, but they desire to open an account set up as a JTWROS (Joint Tenants with Rights of Survivorship). They specify that the money that they would like to invest should be directed toward a very speculative small-capitalization mutual fund comprised of international companies. What recommendations should you, the RR in this case, make?
A municipality has come out with a new issue which includes a Call feature. The Call feature means that:[A]the issuer can redeem the bonds held by the investor.[B]the broker dealer can redeem the bonds held by the investor.[C]the investor can redeem the bonds back to the issuer.[D]the investor must hold the bonds until the final maturity date.
In terms of features that would limit the credit risk that would apply to a municipal bond issue, which of the following would do so most effectively?[A]Being backed by general obligation[B]A legal opinion that is un-qualified or non-qualified[C]An issue which is escrowed to maturity[D]A putable bond feature at par value at one year
The market price of a municipal bond may be affected by changes in:
Which of the following bids may be considered stabilizing bids?
A RR in California has a client in Colorado. To make trades for the Colorado client, the RR MUST:[A]Be registered in Colorado[B]Obtain the branch manager's approval[C]Keep a letter of authorization on file[D]Transfer the account to the firm's Colorado branch office
A client sells a stock short in their portfolio. The client plans to cover the short sale but prior to covering, calls to ask the RR how to achieve long-term status for capital gains purposes on the short sale. How should the RR respond?[A]The RR should inform the client that short sales do not qualify for long-term capital gains treatment, regardless of how long the position was short in the client's account.[B]The RR should inform the client that short sales only qualify for long-term capital gains treatment when the purpose of the short sale was to hedge a long position.[C]The RR should inform the client that short sales only qualify for long-term capital gains treatment when the client is short the stock for over 6 months.[D]The RR should inform the client that short sales only qualify for long-term capital gains treatment when the client is short the stock for over one year.
One of your clients owns 500 shares of BCD stock and is concerned with tax consequences associated with their investments. BCD announces a 5% stock dividend on their common stock and your client will be receiving 25 additional shares. The client calls in and asks how this stock dividend will be treated for tax purposes. Which of the following is TRUE?[A]The stock dividend is not a taxable event for this client at this time.[B]The stock dividend is taxable as ordinary income, but may qualify for a reduced tax rate because of the client's long-term holding period.[C]The stock dividend is taxable as a capital gain to the client, but may qualify for a reduced tax rate because of the client's long-term holding period.[D]The stock dividend is fully taxable as ordinary income to the investor in the year received.
Registered representatives are responsible for obtaining certain client information prior to allowing clients to invest in certain securities. Prior to an investor signing a limited partnership's subscription agreement, the RR should know each of the following about the customer EXCEPT:[A]The RR needs to know the client's sentiment toward loss of invested capital.[B]The RR needs to know the client's tax ID or SSN.[C]The RR needs to know whether the client will be accepted into the partnership by the general partner of the limited partnership.[D]The RR needs to determine the customer's needs related to investments with tax advantages.
A customer who is about to retire wants to buy a low risk product that will provide a predictable stream of income. Which of the following products is most suitable for his needs?[A]An immediate fixed annuity[B]An immediate variable annuity[C]A deferred fixed annuity[D]A variable universal life insurance policy
An investor who holds a variable annuity decides to annuitize and start receiving monthly annuity payments. The client is currently 55 years of age and the variable annuity is non-qualified. What can this investor expect to pay in terms of tax liability?[A]The 10% penalty on early withdrawals will apply.[B]The monthly payments will be partially taxable on earnings in the annuity and will be partially tax-free with regards to principal that was invested in the variable annuity.[C]The portion of payments that was principal that was invested in the variable annuity will be fully taxable.[D]The full amount of payout each month will be fully taxable.
One of your clients is a sophisticated 40 year old investor and has recently changed jobs. The client is considering rolling over his $100,000 401(k) plan with his former employer to an IRA. He invests conservatively in his personal brokerage account which is now worth $150,000. but he wants to speculate in his IRA account investments because he feels that he can take risks since he won't need the money until retirement. What is the best advice a BOM should give a RR about this customer?[A]The customer can make any investment decision that he want too.[B]Speculating in an IRA requires that the positions must be hedged to reduce risk[C]Assets in an IRA must always be invested conservatively[D]Assets in an IRA should be taken into consideration with an overview of the customer's total investment portfolio and risk profile
Which two of the following are true about the purchase of variable annuities?
529 college savings plan accounts have all of the following features EXCEPT:[A]Beneficiaries of the 529 accounts can be changed by the owner.[B]Annual contributions to the account can total no more than $2,000.[C]The owner of the account maintains control over the account.[D]As long as withdrawals are qualified, federal income tax does not apply.
FINRA regulations apply to communications with the public and advertising by broker/dealer firms. Of the following communications, which would be labeled as an advertisement and would have to abide by advertising regulations?[A]A web log (blog) which has been set up for established clients of the firm and requires a password to view pages.[B]A listing in a local phone book which contains a description of the firm and various services provided by the firm.[C]A letter following a specific form which is sent to a limited group of potential clients which discusses the services provided by the firm.[D]A report prepared by the firm's research department which discusses various banks in the area and is only sent to existing clients of the firm.
Which of the following BEST describes the money received by a corporation during an issue of equity securities that exceeds the face value of the securities being sold?[A]This would refer to the capital that the corporation must keep on hand.[B]This would refer to the capital that the corporation must use in relation to the intended use of funds specified with the sale of the new issue.[C]This would refer to the paid-in capital of the corporation.[D]This would refer to returns earned on funds invested in various securities in the corporation's portfolio.
Sign up for free and study better.
Get started today!