Practice Test 4

Question 1

Under a MSRB, a registered rep that has been given discretionary authority, needs specific customer authorization to purchase bonds where a _____ relationship exists between the municipal BD and the issuer

Answer 1

Control

Question 2

Retail communication must be approved 10 days in advance of use with the SRO if it is distributed to customers who have not received an _______ document

Answer 2

Options disclosure

Question 3

FINRA 5% policy requires consideration be given to all _____ of the transaction, level of _____ provided by the firm, and the _____ of security involved in the transaction

Answer 3

dollar amount, service, type

Question 4

In a secondary offerings a member who acted as manager or co manager cannot issue a research report on that company within ____ days following the effective date

Answer 4

3 calendar

Question 5

New issue agency securities are sold through a _______ of broker dealers assembled by the ____

Answer 5

selling group, Agency

Question 6

After the bid is won in a muni underwriting, a syndicate member that places an order with the manager for a selling group member would earn the ______

Answer 6

Additional takedown

Question 7

Tombstone shows the ____ proceeds to the _____

Answer 7

Gross, Issuer

Question 8

Accumulation units of variable annuities represent an investment interest in underlying ___ shares

Answer 8

Mutual fund

Question 9

Opinion as to the federal tax exempt status of a muni bond is provided by the bond _____

Answer 9

Attorney

Question 10

T Bills, STRIPS, and Treasury Receipts all trade ____

Answer 10

Flat

Question 11

Yield to maturity of a bond increases as bond market prices ____

Answer 11

Decline

Question 12

When the market is reaching an overbought condition the next market move will be ____

Answer 12

Downwards

Question 13

True or False: If the Fed funds rate has risen to an all time high the overnight loans rate from bank to bank are high, the yield curve is flattening and the Fed is pursuing a tight money policy

Answer 13

True

Question 14

Corporate bonds provide current income and _____

Answer 14

Liquidity

Question 15

A 60 yr old retiree is in a very low tax bracket and has a low risk tolerance and wants to make an investment that will provide income- he should invest in a

Answer 15

Bank CD

Question 16

A 30 yr old customer who has two young children wishes to make an investment that will provide for their college tuition, they should purchase ____ yearly in custodian accounts for the children

Answer 16

Treasury STRIPS

Question 17

When you are seeking income but the portfolio is too heavily weighted in debt securities you should invest in

Answer 17

Preferred stocks

Question 18

FINRA sets the ___ date

Answer 18

Ex date

Question 19

_______ must be signed AND RETURNED within ___ days AFTER opening an options account

Answer 19

Options agreement
15

Question 20

1 ABC Jan 50 (cheaper) Call and Sell 1 ABC Nov 50 Call is considered to be a ____ spread

Answer 20

Calendar debit

Question 21

A municipal bond callable at par is quoted on a yield basis that is higher than the nominal yield and the price of the bond to a customer would be calculated based on yield to ____

Answer 21

Maturity

Question 22

Due bill is used to claim a dividend that is sent to ___

Answer 22

The wrong person

Question 23

Retail member firms that route orders to market makers in return for compensation earn payments for ____

Answer 23

Order flow

Question 24

____ make a secondary market in securities

Answer 24

Market makers

Question 25

____ receive preferential tax treatment based upon ______ to shareholders

Answer 25

REIT’s, distribution of income

Question 26

Investment Company Act of 1940 requires a minimum initial fund capital of ____

Answer 26

$100,000

Question 27

Right ti transfer is best described as the right to freely ___ shared on the secondary market

Answer 27

Trade

Question 28

Trust indenture act if 1939 applies to ______ in excess of _____ million over one year

Answer 28

corporate bond offerings, 50

Question 29

Capital asset pricing model (CAPM) calculates the estimated return of an investment based on the amount of ___ risk of the investment

Answer 29

Systematic

Question 30

Tax exempt commercial paper is usually backed by ____

Answer 30

Line of credit with a bank

Question 31

If a complaint is made against a registered employee the firm has to update the U4 no later than ___ days after receiving the complaint

Answer 31

30

Question 32

Regarding OBA’s, a rep does not have to notify anyone before investing in a ____

Answer 32

Limited partnership

Question 33

Debit put is another way for saying

Answer 33

Bull put

Question 34

Credit put is another way of saying

Answer 34

Bear put

Question 35

In money laundering, the step when funds are invested in legitimate vehicles is known as as ______

Answer 35

Integration

Question 36

_______ in an advance refunding are defeased when assets diffident to pay them off are kept in a ____ account

Answer 36

Refunded bonds, Escrow

Question 37

Quick ratio is

Answer 37

Current assets-inventory / current liabilities

Question 38

_______ allows an investor to exchange one annuity or life insurance contract for another, tax free

Answer 38

1035 exchange

Question 39

A sales department of a BD can use ________ info that was obtained when the BD was acting as a fiduciary only when acting for the ____

Answer 39

investment ownership, Issuer

Question 40

Treasury stock is owned, issued, and authorized but not

Answer 40

Outstanding

Question 41

Are firms required to have fidelity insurance bonds?

Answer 41

Yes

Question 42

True or False: If pension liability is unfunded, the expected future value of fund assets is less than projected benefit claims

Answer 42

True

Question 43

If you exchange variable annuity contracts for a life insurance contact, it is a ___ event

Answer 43

Taxable

Question 44

Options transactions are permitted in ___ accounts

Answer 44

Wrap

Question 45

Coverdell accounts have ___ growth

Answer 45

Tax free

Question 46

After tax yields ranked HIGHEST to LOWEST (corp, muni, gov) (MGC)

Answer 46

Municipal bond Government bond Corporate bond

Question 47

A bond is most likely to have call risk when the interest rate falls because the issuer can issue new bonds at a ____ rate

Answer 47

Lower

Question 48

When money is put into escrow regularly in order to redeem the bonds before maturity, this is a ____ fund

Answer 48

Sinking fund

Question 49

BDC’s (business development companies) ARE publicly traded and make direct investments in ______

Answer 49

privately held companies

Question 50

_______ can be distributed to any customer who already received an Options Disclosure Doc without requiring prior filing with the SRO

Answer 50

Retail communication

Question 51

Retail communication must be approved in advance of distribution by a _______

Answer 51

Registered options principal

Question 52

Stabilizing bids can only be entered at or below the ______

Answer 52

Public offering price. Never above

Question 53

There is no tax deduction for contributions made to a _____ contract

Answer 53

Variable annuity

Question 54

Conversion ratio is

Answer 54

Par value / conversion price

Question 55

ABC 8% $100 par preferred is trading at $120 in the market. The current yield is

Answer 55

6.7% Current yield= annual income/market price 100 par x 8% = $8 annual income $8 (annual income) / $120 (market price) = 6.7

Question 56

Answer 56

B

Question 57

Net Direct Debt and overlapping debt equals

Answer 57

Net overall debt

Question 58

Interval funds are a type of ____

Answer 58

Investment company

Question 59

_____ funds are ___ end and cannot be purchased on exchange

Answer 59

Interval funds, Closed