1
Q
Regulation (T) Deposit Requirement
Margins
A
The greater of 50% or $2,000
2
Q
Leasing Corporation
A
For an Industrial development bond (IDB), the Primary source that backs the bond.
3
Q
Offering Memorandum
A
The disclosure document for a private placement
4
Q
Price of closed-end shares
A
A market price as determined by the supply and demand for the shares
- Bought and sold on an exchange
- Commission
5
Q
Write or sell
A
Put = Options bring action to
How to calculate
buy/VAR
6
Q
OTCBB
A
Quotes for unlisted stocks
7
Q
Margin?
Cash?
A
Leveraging (borrowed) position
Unleveraged position
8
Q
Open -end
A
Sales charge
9
Q
Cost of block purchase of open end
(Receives breakpoint) Formulia???
A
Budget / Nav x sales charge %
10
Q
Cumulative preferred
A
Unpaid dividends (in rvears) must be caught up prior to payment of current dividend
11
Q
NSCC
A
Clearing services for equities
12
Q
Stock splits
A
- Ratio 7 for 5
- Divide 7/5=1.4 to get the factor
- Number of shares x factor = new number of shares
- $ price / factor = new $ shares
Smaller number into larger number
13
Q
Bond Price
A
- Premium means the bond is up Par
- Intrest down = premium; bond price up
- Discount means the bond is down Par
4.Intrest up = Discount; bond price down
14
Q
Discount rate
A
The rate charged by the Fed when a member bank borrows
15
Q
Stock taxes
A
Realized when sold (action was taken)
Unrealized when unsoled (no action)
16
Q
Intrinsic value
Caculated
Put
Call
A
Put = strike price - market price
Call = market price - strike price
17
Q
Custodian Bank
A
Responsible for safeguarding securities owned by a mutual fund
18
Q
EFT
A
The securities may be used by Individuals to pursue a market timing strategy
19
Q
Bond Call Provision description
A
The Call date and the call price
20
Q
What happens when a company executes stock
A
The price per share of the common stock decreases
21
Q
Institutional Accounts
A
- Banks
- RIA’s
- Registered investment Co.
22
Q
The bank Security Act
A
Enforced by FinCEN, and protects against financial crimes, including terrorism and money laundering.
23
Q
Official Statement
A
The primary disclosure document for a municipal offering.
They may be found on the (MSRB’s EMMA system )
24
Q
The buyers of a put option
A
They have the right to sell 100 shares of stock
25
All or none underwriting
The offering is canceled if the entire amount of the shares is not sold
26
Finra Web address
A member firm must provide to customers each calendar year. Must be present on a company’s Landing page.
27
Dividends paid on stock
Who sets the date?
The BOD set the record date and payment date The EX dividend date is the date the stop trades reflective of the dividens.
28
BLiSS
(Buy Limit or Sell stop)
The BL stands for buy limit, and the SS stands for the Sell Stop. All BLiSS orders are entered at or below the market price of the security.
Another thing to remember about BLiSS orders is that they get reduced on the
EX. Dividend date. (The first day the stock trades without a dividend)
The BL in BLiSS helps you remember that the orders are placed below the market price.
29
SLoBS (Sell limit or Buy Stop)
The SL stands for sell limit, and the BS stands for buy stop. All SLoBS orders are entered at or above the market price of the security. Unlike BLiSS orders, SLoBS orders remain the same on the EX Dividend Date. The best way to remember is that SLoBS orders remain unchanged on the EX. The dividend date is to remember the phrase “Once a Slob, always a slob.”
30
Trustee
The day-to-day activities of a unit investment trust (UIT)
31
The B/D can loan money to a customer if:
Must be disclosed in advance and pre-approved by the firm
32
Trades executed before the information is public. (even research reports (even internal communications)
The Employee has traded ahead of the report. No Way!
33
The leasing Corporation
An Industrial Development Bond (IDB) The Primary source that backs the bond
34
Offering Memorandum
The Disclosure Document for a privet placement.
35
Price of Closed-end Shares
The market price as determined by the supply and demand for the shares
36
Call
______
Put
Bullish or Bearish
UP Bullish
____ _____
Down Bareish
37
During periods of easy money when interest rates are declining. Yield curve trends to:
(Defince the Inverted Yield Curve)
Slope upward from the shorter to the longer maturities.
38
Common Stock
Returns during periods of high inflation?
Returns during periods of high inflation provide the best returns
39
Municipal Bonds
What is it based on.
What the Bond Buyer index is based on.
40
Coverdell Education Savings account
1. The Max. contribution of $2,000 a year
2. Contributions are permitted until the beneficiary turns 18
3. transfers are permitted to other family members who are under the age of 30.
41
Special Assessment Bond
A town has started the construction of public sewers. The SAB is what will pay for it.
42
Rights of Accumulation
The ability to receive cumulative quantity discounts.
43
Total Return
The cash flow received from dividends and /or interest plus any application or depreciation in the value of an investment
44
A portfolio of debt instruments will be the most stable when?
The bonds have short maturities
45
Tax Differed Growth
This applies to variable annuities but not to mutual funds.
46
Included in the Letter of Intent
1. The maximum time limit for the letter of intent is 13 months
2. The Letter of intent may be back-dated for up to 90 days.
3. The fund may place some of the initially purchased shares in an escrow account to protect against the failure to fulfill the letter of intent.
47
A type of direct participation program (DPP) (Business Classification)
1. S-Corporation
2. General Partnership
3. Limited Partnership
48
A broker dealer’s anti-money laundering (AML) compliance must be approved; how?
In writing, by a member of a senior management
49
REIT
Tades where?
Trades on an exchange and /or OTC.
50
Stock Dividends
A stock dividend increases the number of shares the holder will own.
51
Issuing Corporation offer has what Benefits?
1. preemptive rights
2. Warrants
3. Bonds
52
If someone is short-stock. What options will provide him protection?
Long on a Co. call option
53
A client purchased 1,500 shares of stock from a broker-dealer, a registered market maker in this stock. The broker-dealer acted in what capacity?
Principal compacity and charged the client a markup
54
As a bond approaches maturity, what happens to a discount bond?
The discount bond increases in price because it matures at par ($1,000)
55
Preferred shares
1. They don’t have the right to vote before the common shares.
2. Receive the dividends before the common shareholders.
3. Are paid before the common shareholders in liquidation.
56
Reg D
Red D 506(b)
Red D 506(c)
Rule 504 Rights
Regulation(Reg D) It can be sold over a 90-day period.
Other names: Legond Stock Lettered Stock
Accredited Investor (Accreted Invest. $200k Joint $300k / or Net ass. $1 min. without Home) (officers & Directors)
Rule 506(b) traditional: Accredited Investor / 35 non-accredited investors (Accreted Invest. (Single) $200k (Joint) $300k / or Net ass. $1 million without Home) (no Advertising)
investors must be qualified
Reg D Rule 506(c) Advertising & solicitation ok Investors need to be Accredited Unregistered can’t sell for 6/m investors must be qualified needs proof
Rule 504 Sell up to $5million over a 12/m
no solicitation or advertising restricted for
1 year unless issuer reg. with the SEC.
57
Exercise Rights
Subscribe to a rights offering and buy more shares.
58
Statuary disqualification
They are FIRED
59
529 college savings plan has the deductibility of contributions to what?
The deductibility of contributions from federal income taxes
60
Regular-way settlement for equity options
One business day after the trade date T-1
61
Tenants in common
1. After one owner dies, ownership of account assets is governed by the decedent’s will or state law.
2. Tenants in common are permitted for 2 or more individuals.
3. Tenants in common are typically used for business partners.
62
If a customer wants to open an account to trade options, the account must be approved when _________
Prior to the time, the initial order is accepted.
63
Expense ratio What is the Formula?
Management fees / Divided by Total investments in the fund.
64
The 5% markup policy applies to?
Securities quoted on the Nasdaq
65
Warrants exercise price
Higher than the current market price of the stock.
66
The Fund that would have the most price volatility is a
International Equity Bond Fund: Market, exchange & Political Risk
67
What type of order is used if a customer wants to sell stock at $25 although the stock is currently trading at $20?
Limit Order = Above current market price & tells the B/D to sell @ limit or higher.
Market order = Don’t specify a price & are immediately executed.
Stop Order = Below current market price & evaluated only if the price falls to the stop price.
68
The current regulations: If a client redeems his mutual fund shares the fund Co. must send the payment within.
7 Days
69
If the B/D decides to change the electric storage method that it currently uses to maintain its records what's the firm's obligations?
It must notify the primary regulator at least 90 days prior to using the new method!
70
Treasury Stock:
Was previously issued stock that has been subsequently repurchased by the corporation
71
A B/D Must maintain customer account records for how long after an account is closed.
6 years
72
Payment for trades
Principle
B/D Agent
1. Principle = Marke up or mark down
2. Agent & B/D = Comission
73
A Customer has an account with a discount broker-dealer that specializes in online trading. If the customer is being charged a commission the firm is most likely acting as a?
Agent or B/D
74
Two business partners have a joint account with rights of survivorship. If one partner dies?
The account will be registered in the other partner's name
75
Good delivery
Shares can be added to equal 100 ( No odd trades)
76
The competitive offering of municipal bonds documents that notify the bidders of the general features of the offering.
Notice of sale
77
A customer has placed a market order w/ a B/D. The broker-dealer must
Execute at the most reasonable price available
78
The maximum contribution from a municipal finance professional (MFP) to a candidate for whom he can vote for is?
$250
if married $500 but both husband and wife must sign the check
79
If an investor purchased security & received part of his original investment back this is called
Return of Capital
80
What action is the Federal Reserve Board that results in a decrease in the money supply?
The sale of securities in the open market decreases ( Taking $ out)
Purchasing of securities in the open market = increase (they are putting $ in)
81
Deflation will cause existing bond prices to
Increase
82
(ETN) Exchange-traded notes will lose the most value if?
If the credit rating of the issuer is lowered
83
American depositary receipts (ADRs) are under what law?
Must be registered under the Securities Act of 1933
84
Modies investment grades
MIG 1 Best
MIG 2 Midgrade
85
Approval is required from who? before the municipality can begin making payments on a moral obligation bond?
State legislature
86
The role of the transfer agent
To maintain a list of registered stockholders
87
The efficient market hypothesis
Using this stragity what asset allocation would you use?
Buy-and-hold systematic rebalancing is an example of the passive approach to asset allocation.
88
Bond anticipation notes (IDB)
A municipality borrowing for a short-term period to finance a capital project
89
Current regulations if a client redeems his mutual fund Co. must send the payment within?
7 Days
90
Fee-based accounts are generally suitable for?
An account that rebalances frequently
91
When watching for signs of inflation, what’s the most effective and relevant statistic to watch?
CPI
92
Tax-exempted debt securities issued by munies for long-term investing 20 - 30 years.
Short-term rates & floating rates.
Variable rate demand obligation (VRDO)
93
When opening a cash account
The principal of the firm must sign the new account form
94
If a company’s assets are increasing whats the result?
Shareholders equity increases
95
The type of order that becomes a market order when a round lot trades at or through a particular price is called
Stop order
96
Balance Sheet Equation
Total Assets = Liabilities + Shareholder Equities
or
Assets - Liabilities = Shareholders Equities
or
Assets - Shareholders = Liabilities
97
Interest on treasury inflation-protected Securities (TIPS) Is taxed on?
Federal Income tax but exempt for State tax
98
Broker-dealers must provide a privacy notice to every customer
When the account is opened
99
A clearing corporation
It provides trade comparison and reporting services.
It assists B/D in transferring assets in a customer account to another BD
It offers the customer the ability to have real-time trade matching.
100
The purchase price of a no-load fund is determined by the (MF)
Net Asset Value
A. No sales Fees
B. Direct Purchas
C. 12 b 1-fees .25%
D. Comission
101
The 5% markup policy applies when a member firm
Acts as a dealer in a transaction with a customer
Proceed Transaction
102
A Eurpoen Co. with offices in the States would like to have its stock traded on the NYSE. How would they do that?
American Depositary Receipts
103
Price & Time means
Agent has descression.
104
MSRB rules apply to who?
Registered Reps &
BD that prepares research for
Underwriters
NOT TO ISSUERS
105
Investments in a fixed annuity are concerned with the performance of the Insurance Co.
A Variable Annuity is most concerned.
General Account for the Fixed
A separate account for the Variable
106
Husband and wife have a joint account with rights of survivorship. If one of them places an order the RR?
Must accept the order
107
The difference between a primary #1 and secondary #2 distribution is?
Authorized Shares?
Primary Shares?
Outstanding Shares?
Secondary Shares?
Outstanding Shares?
The primary distribution must be made at the current market price.
While the second distribution must be made at a fixed public offering price (POP)
Authorized 1,000,000 Shares
Primary 500,000 Shares
Outstanding 500,000 Shares
Secondary 250,000 Shares
Outstanding 750,000 Shares
108
Pass through entity for tax purposes?
Who can use this?
1) LLC
2) Reaistate Investment Trust (REIT)
3) S Corporation
NOT C CORPORATION
109
A Rep wants to set up a charity investment program that he will not be paid for. What does he need to do?
Must receive written approval from his BD
110
An RR of a BD is planning on working a side job for extra cash. What does he need to do?
MUST provide written notification to his Employer
111
Cash Settlement When is it paid?
Same day
112
When a BD executes a trade of client for municipal Securities, all material is disclosed when?
At or prior to the time of the trade
113
Banker’s acceptance (BA)
A banker's acceptance (BA) is a short-term debt instrument, typically used in international trade, where a bank guarantees payment on a bill of exchange. Essentially, the bank "accepts" (**or the gas station/amex for travelers checks)** the responsibility to pay a specific sum of money to the holder of the bill on a set date in the future. This provides assurance to the seller, as the bank's creditworthiness backs the payment.
114
Firm commitment underwriting to sell shares, what is the arrangement?
Sell the entire issue or buy any shares left over.
115
BD must send balance sheets to customers every?
6 Months
116
During periods of deflation, the FRB (Federal Reserve Board) will________________
Purchase securities in the open market
117
A 529 characteristic?
No income limits are placed on the contributors.
Withdrawals from the 529 used for education and not subject to Fed Tax.
Earnings in the account are taxed-deferred
118
Unit Investment Trust (UIT)
Does not charge management fees
119
The third market is concerned with
Securities are listed on the exchange but traded on the OTC Market.
120
Fee-based accounts are most suitable for customers who?
frequently trade
121
The Fed Reserve Board Open Market Committee (FOMC) buys and sells what securities
Treasure Bills
122
Stabilization
Used to prevent new issue stocks from falling
123
Brokerage firm executes trades for customers for Municipal Securities all
information is disclosed when?
At or prior to the time of trade
124
If an Equity option is exercised when does the stock transaction settle?
Options Settle?
Stock Delivery or Purchas settel?
T + 2
Options t + 1
Stock delivery or purchase T + 2
125
Benefits of investing in Real Estate Investment Trust (REIT)
Stable Dividend income
Liquidy
Diversification
126
Payments for trades
For a Principal
For a Agent & BD
Principal = Markup or Markdown
Agent or BD = Comission
127
Good Delivery
Shares can be added to equal 100
128
Call: How do you calculate the cost?
Market price - Strike Price = $
129
Balance Sheet
Assets Liabilities Shareholder Equities
Assets = Liabilities + Shareholders
Share Holders = Assets - Liabilities
Liabilities = Assets - Shareholders
130
Limit order
Bought or sold at the client’s stated price.
Execution is not guaranteed.
Buy Limit is executed at or below market order.
Sell Limit at or above the current market order.
131
Stop Orders what are they used for?
Used for timing the market
Strategy Limet loss and protect gains
Will be executed when elected or triggered.
The $ must go through the stop price to be triggered.
132
The customer shorts stock and wants to limit upside loss.
Buy Stop Order
The customer shorts stock and wants to limit upside loss.
Buy 1000 XYZ @21 Stop. If the stock goes to 21, then it is triggered and becomes a market order.
Will be filled at the next available price.
133
The customer is long-stocked at $20 and wants to limit downside loss.
Sell Stop Order
The customer is long-stocked at $20 and wants to limit downside loss.
Sell 1000 XYZ @19 stop Market trade goes down at or through $19 the order is triggered and becomes a market order.
Will be filled at the next available price.
134
Stop Limit Order
Stop limit orders become limit orders when triggered.
The stop price is the trigger.
135
BLiSS and SLoBS what is the order
SLoBS are always above CMV
BLiSS are always below CMV
136
Common Stock and Cumulative Voting Rites
Shares x vacancies = number of votes
Statutory: one vote per share per position open.
Cumulative: Shareholders may cast all votes any way they choose. ( favors the minority so that they can give all votes to a single person. )
137
Common Stock Dividend Dates
Declaration
FINRA/Exchange
Record
Payable
Settlement T+2
Not set by the BOD
138
MF Dividend Dates
All dates set by the BOD
Declaration date
Ex-Dividend date
Record Date
Payable date
Settlement T+1
139
Preferred Stock what is it?
Can’t vote.
Will have priority in a bankruptcy
Declared dividends first
Is an Equity
140
Cumulative Preferred Stock
Receives current dividends plus any dividends in arrears.
141
Participating Preferred Stock
Participating in additional profits
Before participating rates can be paid, common dividends must be declared.
142
Callable Preferred Stock
Issuers will only call if it’s to their advantage.
When interest rates fall, expect a call!!!
143
Adjustable Rate Preferred Stock What is it's Intrest based on?
Typically tied to the rates of other interest rate Benchmarks
144
Convertible Preferred Stock
Can convert to common stock
If the common stock position is valued at $120, the Parity (Equil) of convertible preferred stock is $120.
Always calculate at par, not market price.
145
Rule 144 Governs the sale of restricted & controlled securities for an **affilate**
**During 6-month holding period**
No resales under Rule 144 permitted
**After initial 6-month holding period**
**Volume limitations** Greater of I % of shares outstanding or average weekly trading volume in 4 prior calendar weeks.
**Form 144**
Must be filed with SEC if intended sales exceed 53000 shares or $50,000
____________________________________________________
**After I-year holding period**
No resales under Rule 144 permitt
**Volume limitation**
Greater of 1% of shares outstanding or average weekly trading volume in 4 prior calendar weeks
**Form 144**
Must be filed with SEC if intended sales excecd 5,000 shares or $50,000
146
144A
Who can buy this?
What is the minimum purchas amount?
Qualified Institutional buyers (QIB)
Minimum of $100 million in securities.
147
A client places an open (GTC) order for listed stock on the NYSE it will?
Remain active until executed or canceled but must be renewed according to exchange rules
(GTC) order Good Till Canceled
148
Clearing services for equity securities. What is its name?
The National Securities Clearing Corporation (NSCC)
149
RR sells a property short to the bank, which accepts the proceeds as payment in full for the mortgage. What must the rep do?
Notify FINRA
150
What happens when a CO. executes a stock split?
Price per share of the common stock decreases
151
US Treasury Securities is taxed on?
Federal but exempt from State
152
When a UTMA is opened, they use the SS# of the?
Minor
153
Each calendar year, a member firm must provide customers with a what in writing?
FINRS’s website address.
154
Registered Non-Trade Real estate Investment Trusts (REIT’s)
They are required to distribute the same taxable income as an?
They are required to distribute the same percentage of taxable income as an exchange-traded REIT’s
155
Proxy
Certificate, which gives a person other than the shareholder the right to vote.
156
At the time of trade disclosures regarding municipal Securities
The disclosure is required for an unsolicited transaction
157
Stock Splits must be voted on by the?
Corporation’s Shareholders
158
Yield to Maturity Bond What is the order
Normal Yield
Callable Yield
Yield to Maturity
Yield to Call
Yield to Call or Yield to Maturity, whatever is the lower of the 2
159
GO Bonds
Taxes How it’s paid for.
State Income, Sales
Political County Cities Ect. AD-Valorem (real estate) Taxes
Voter Approval, Debit Limit
Double Barreled Bonds, both GO Bond and Revinew bond
160
And the Put was exercised
And the Call was exercised
The Stock was bought or sold on the strike
161
Collatorized Mortgages Obligations What is the order of risk?
PAC
Z Tranches
TAC
Collateralized Debt Obligations What is it?
PAC (Short), TAC (Mid Length), Z tranches Longest, and all others must be paid first.
Bonds, auto loans, Credit cards, and
Co. Receivables
162
DPP Programs (Direct Participation Programs) What is the difference between a Limited partnership and a Corporation?
Both have two or more partners.
Everything flows through. (tax benefits)
Unlimited liability
Joint Venture
Profit Motive
Centralized management
2 that differ
1. Freely Transferable Intrest
2. Continuity of life (must remain in for the full term)
163
Pricing of funds for
Closed End
Open End
What’s the formula
When will the price be known?
What is the market for Closed-end Funds?
Closed-end after the IPO is announced & trades in the Second Market. (Exchanges / OTC) $? by supply & demand
Open-end Forward $ NYSE Closes at 4 PM for $ for the next day. After 4 PM the next day. (Assets - liabilities / Shares) (NAV per Share)
Nav(BID)+ Sales Charg = POP or ask
9.50 + (SC)? = (POP)10.00 (?.50)
NAV - POP = SC$ SC$/ POP = SC%
164
What is a class (A) Share
Class A shares provide a co. Board with voting power in a volatile public market. Without A shares it is easier for an outside Co. to obtain enough shares to take control. f Class A shares extra voting power ensuring hostile situations can’t happen.
provide enhanced benefits to the holder including dividend priority and liquidation preference & paid first when the company distributes dividends or Closes.
165
Rule 504
Co. can sell up to $_____ in Securities in a ____ Period without regestration.
Co. must file ______ within _____ of the first sale.
Rule 504 Co. can sell up to $10 mill. in securities in a 12/m without registration. co. must file Form D within 15 days of the first sale.
166
Calculating for Corporate and Municipal bonds, how many days?
Settlement date for Corporate and Municipal bonds
30 days
settlement days = 2
167
What bond is quoted yield to maturity?
What bond is quoted according to the price?
Serial Bond
Term Bonds
168
Trade dates for
Municipal bonds
Corporate Bonds
30 days and 360 days per year
Settlement is 1 business day
169
Commercial
Paper
It Matures in 270 days or less
it has no accrued interest
It’s an exempt security
170
SIPC Securities Investor Protection Corporation Coverage?
$500,000
No more than $250,000 in cash per Customer. One Customer with multiple accounts only has 1 account for coverage.
Only available if B/D becomes insolvent
171
CDOs
They represent the securitization of non-mortgage loans including credit cards and auto loans
have tranches that have different forms of prepayment and extension risk
not suitable for all investors
172
yield found on the indenture of a bond
Nominal yield
173
How much of a REIT's gross income must be real estate-related income?
75%
174
A member firm must preserve records of customer complaints for at least _______ years from the date of the complaint.
Four years
175
What are the advantages of a corporate zero coupon bond for the bondholder?
It provides greater leverage to an investor than many other types of investment
It locks in the interest rate for the bond
It is not subject to reinvestment risk
176
What type of REIT is this?
Public non-listed REIT? Risk level?
Listed REIT? Liquid or Non-liquid?
Hybrid REIT? Who is it not registerd with?
Private? Who can use this?
Public non-listed - It has a high level of risk.
Listed - Its shares are liquid.
Hybrid - It is not registered with the SEC.
Private - It is typically limited to accredited investors.
177
What’s the common anality for Regulation D offerings, whether conducted under Rule504,
506(b), or 506(c)?
Both equity and debt securities may be offered.
178
What is not a self-regulatory organization?
What is?
The NYSE, FINRA, The MSRB are SRO’s
SEC is not it’s a government agency.
179
a durable power of attorney
A document giving either full or limited authority to a third party who survives the mental or physical incompetence (but not death) of the grantor.
180
effective tax rate
The overall rate paid on a taxpayer's total taxable income. It will always be less than the marginal tax rate.
181
DPP
DR
EPS
EQ
ESA
FCA
FCO
FCS
Direct participation program.
Debit register. See debit balance.
Earnings per share.
Equity
Coverdell
Farm Credit Administration.
Foreign currency option.
Farm Credit System.
182
Equipment trust certificate
A debt obligation, generally issued by transportation companies such as railroads, that is backed by equipment
183
ex-date / ex-dividend date
The first date on which a security is traded without entitling the buyer to receive distributions previously declared.
ex-dividend date; ex-warrants; ex-rights; ex-distribution.
184
exchange-traded fund (ETF)
Is legaly classified as an ___________ or a _________ ________.
An investment company is legally classified as an open-end company or unit investment trust (UIT), but differs from traditional open-end companies (mutual funds) and UITs. An ETF issues shares in large blocks that are known as creation units. Those who purchase creation units are frequently large institutional traders or investors. The creation units can then be split up and sold as individual shares in the secondary markets, allowing individual investors to purchase shares.
185
Dow Jones composite Listed Common Stocks
Utilities15
Transportation 20
Industrial 30
65 Stocks
186
What is the minimum maintenance requirement for an account for both long and short?
A long account is 25% of CMV
Current Market Value
A Short account is 30% of CMV
187
A fundamental analyst would examine all of the following factors about a company
The advance-decline ratio is a technical factor analyzing ***when the market is bullish and bearish. Fundamental Analysis*** decides what to buy while technical analysis decides when to buy
188
Whois reresponcible for each one?
1. A special assessment bond is a municipal security that is backed by?
2. GO Bond?
3. Special Tax Bond?
4. Double Barrel Bond?
1. charges on the benefited property
2. full faith and credit of the municipality
3. excise taxes
4. revenues and taxes
189
Bankruptcy whats the order
When: Wages
The: Taxes
Sun: Secured Creditors
Goes: General Creditors
Down: Debentures
Send: Subordinate Debt
Pina: Preferred Stock
Coladas: Common Stock
190
Days of the Month
Thirty days with September, April, June, and November;
All the rest have thirty-one, except February alone, and that has twenty-eight
days clear
And twenty-nine in each leap
year.
June-(SPAN)
191
Settlement days
Corporate and muni’s
Cash Setelment
Government
Cash Setelment or margins
T bonds
Equity options
Listed options
Corporate and muni’s regular way t + 2
Cash settlement same day
Government t + 1 Cash the same day
Cash or margins t + 2
T bonds same day cash
Equity options t + 2
Listed options t + 1
192
Leading Indicators of interest rate increasing
Money supply, Stock prices, Fed funds rate, Discount rate, Reserve requirements Housing; new construction Unemployment claims Orders for durable goods
193
Coincidental indicators Interest rate increasing
Industrial Production Personal income
GDP
194
Lagging Indicators interest rate increasing
Prime rate
Call loan rate
Corporate profits
Credit cards
Duration of unemployment
195
General partners:
The general partners are the only partners that can make management decisions for the limited partnership.
Have unlimited liability
196
BABs:
BABs are Build America Bonds that were authorized by the American Reinvestment and Recovery Act of 2009. The bonds are issued to fund infrastructure projects. Although interest payments are federally tax-free, the municipality or the investor receives a tax credit equal to 35% of the coupon rate.
197
Broker-dealer complaint record maintenance rules:
According to FINRA rules, records of complaints must be maintained by brokerage firms for 4 years with easy access for 2 years. MSRB rules require records of complaints to be maintained for 6 years.
198
regulated investment company
Is under what chapter?
Can it be taxed?
A regulated company under Subchapter M is not taxed if 90% of its income is derived from interest, dividends, and capital gains and the company distributes at least 90% of the dividends and interest received to investors each year.
199
The OCC will automatically exercise an option:
An option will be automatically exercised by the OCC at expiration if the option is at least 0.01 in the money.
Index options are automatically exercised when 30 points in the money
200
penny stocks exemptions:
1. Accredited investors
2. Unsolicited transactions
3. Established customers
4. A customer of the brokerage firm for 1 year or more or
A customer who has purchased at least 3 different penny stocks
201
Simplified Industry Arbitration:
Simplified Arbitration:
Simplified industry arbitration is for member-to-member disputes not over $50,000.
Simplified arbitration is for non-member-to-member disputes not over $50,000.
202
The Securities Exchange Act of 1934 versus 1933:
The Securities Act of 1933 provided for the regulation of new issues. The Act of 1934 regulates outstanding securities.
203
Coverdell ESAs and 529 plans age limits:
In a Coverdell ESA, the funds must be used by age 30 or transferred to another candidate. In a 529 plan, there are no age requirements.
204
Common shareholders are granted rights:
a. voting power,
b. ownership,
c. the right to transfer ownership,
d. a claim to dividends,
e. the right to inspect corporate documents,
f. subscriptions to rights offerings,
g. and the right to sue for wrongful acts.
204
firm quote requirements for the OTCBB:
For an OTCBB security, the minimum number of shares that must be displayed by a market maker
For an OTCBB security, the minimum number of shares that must be displayed by a market maker depends on the bid and ask prices. If the bid and ask are from $1 to less than $175, the minimum amount of shares displayed must be 100. If the bid or ask prices are $175 or more, only 1 share is required to be displayed.
205
Under NYSE rules, new brokerage accounts at another firm must:
obtain written permission from his firm
b. make sure that his firm receives duplicate copies of all confirmations for trades executed in the account if requested
206
Letter of Intent:
valid for 13 months from the date of purchase
may be backdated for up to 90 days
Redemptions are allowed during the letter's effective period
207
Erroneous report rule:
According to the “Erroneous Report Rule,” if the confirmation shows that the trade was executed at a different price than previously reported, the customer must pay the actual execution price.
208
limited partners:
a. have voting rights
b. they cannot make management decisions c. they can compete with the partnership
d. they have limited liability
Limited partners have limited liability. The maximum liability for a limited partner is the amount invested. General partners have unlimited liability since they may be sued by limited partners for an unlimited amount of money.
209
Wash sale rule
According to the “Wash Sale Rule”, if an investor sold a security at a loss, the investor cannot buy the same security or any investment convertible into the same security within the next 30 days. If there is a violation, any losses on the securities sold are disallowed.
If the investor sold ABC common stock at a loss, the investor cannot buy the following within the next 30 days (anything that can even be converted to common stock):
ABC common stock
ABC warrants
ABC convertible preferred stock
ABC call options
ABC convertible bonds
210
A property tax calculation:
Properties are always taxed based on the assessed property value. Remember to
multiply by .001 (2 Ls, 2 zeroes).
b. Example: $10,000,000 x 7 mills x .001 = $70,000
211
regular stock splits:
overall value of the investment does not change
212
Final arbitration awards against registered representatives and/or firms are reported on which of the following forms?
Form U6
213
Aconfirmation must be sent to a customer no later than:
The completion of the trade
214
A company has announced a tender offer for its shares at $50. The issuer wants to purchase a minimum of 100786 shares, up to a maximum of 1088,00 shares. If 89,000 shares are tendered, how much will an investor receive if he has tendered 1,000 shares?
0
Min = 100,000
Max = 1,000,000
1,000 to small
215
A Treasury bond is quoted105.04 (bid) 105.24 (ask). The purchase price that a customer would expect to pay would be:
105 24/32 = 105.755
216
How is a firm acting if it effects trades on behalf of its customers, without taking the other side of the trade?
Agent or broker
217
Which of the following is the BEST explanation of the difference between progressive and regressive taxes?
A. Progressive taxes assess higher rates on lower income individuals.
B. Regressive taxes assess higher marginal rates on lower income individuals.
C. Progressive taxes assess the same tax rate for all taxpayers.
D. Regressive taxes will result in lower income individuals paying proportionately more in taxes than higher income individuals.
D. Regressive taxes will result in lower income individuals paying proportionately more in taxes than higher income individuals.
Progressive taxes are designed to ensure that higher income individuals will pay more taxes in proportion to their income. On the other hand, regressive taxes (e.g., sales taxes) often charge the same rate to all taxpayers, which results in lower income individuals paying more taxes in proportion to their income. For example, if a billionaire and a middle class individual each buy the same item in a grocery store, they will both pay the same sales taxes rate on the purchase. However, since the billionaire's income is much higher, the sales tax (as a percent of her overall income) will be much lower than it is for a middle class taxpayer. Progressive taxes will charge higher rates to individuals with higher income (e.g., income taxes), thereby making the tax burden more equitable.
218
Is an individual who represents a BD in the sale of stock to a bank considered an agent?
Yes, since anyone representing a BD in the sale of securities is an agent.
219
True or False: A state Administrator may require notice filing by an issuer of an NYSE security.
False. Notice filing is required for mutual funds and Reg D (Rule 506) offerings, but not exchange listed securities.
220
The annual percentage returns on ABC over the last 9 years have been: 7, -6, -3, 8, 6, 5, 11, 13 and 8. What is the median return?
A. 5.4
B. 8
C. 7
D. 19
Correct Answer is C.
The median percentage return is the center point—the point on a data set where there are the same number of points above as below. **In this question the median is 7. There are 4 points below (-6, -3, 5, and 6) and 4 points above (8, 8, 11, and 13). 5.4 is the mean or average of the data set. Since 8 appears more often than any other number in the data set, 8 would be the mode**. 19 is the range or the difference between the lowest number and the highest number.
221
What is the advantage existing stockholders receive through rights offerings?
The ability to maintain their percentage of ownership and buy additional shares at a discount.
222
Who is the self regulatory organization (SRO) for investment advisers?
Currently, there is no SRO for advisers.
223
Is there a registration exemption for agents who conduct business in a state? If so, what are the guidelines?
Yes, no place of business in state and a client visits the state or existing client moves to the state (regist. pending)
224
May an agent of a BD located in Mexico do business with a client in the U.S. without registering in the state?
No. BDs of Mexico are required to register in the U.S. to effect securities transactions in a state.
225
True or False: The USA requires all employees of a BD to register.
False. Only those representing a BD in effecting transactions (as an agent) must register.
226
An equity-indexed annuity is suitable for which of the following clients?
A. A person who desires a high rate of return with little risk
B. A person who needs a guaranteed return for life with no risk
C. An person who needs a minimum guaranteed return with the potential for a greater return than CDs offer
D. A client who needs tax-free income with limited risk
C. An person who needs a minimum guaranteed return with the potential for a greater return than CDs offer
Equity-indexed annuities are NOT considered securities. Instead, they are hybrid products that combine elements of both fixed and variable annuities. The return of an EIA is linked to the performance of an underlying stock index. The insurance company that issues an equity-indexed annuity guarantees a minimum rate of return (as in a fixed annuity), but the annuity's ultimate return (which is capped) will vary depending on the performance of the index to which it is linked. To receive the EIA's guarantees, an investor must be willing to accept the limited potential gain.
227
State Law, Under the Uniform Securities Act, IA contract are?
Fed Law, Under the Investment Advisers Act of 1940, IA contracts are?
State law (the USA) requires that contracts between clients and state-registered advisers be in written form.
However, federal law (the IA Act of 1940) does not require investment advisory contracts to be in written form. Despite this, as a matter of good business, most advisers formalize client contracts with a written agreement.
228
An investor has purchased a U.S. government bond for $1,000. The bond is now worth $850. Which TWO of the following risks is a concern to this investor?
I Market risk
II. Credit risk
III. Currency risk
IV. Opportunity risk
A. I and II
B. I and IV
C. II and III
D. II and IV
B. I and IV
There are certain types of risk that are common to any investment. Market risk and opportunity risk would be among these generic risks. Market risk is the day-to-day price fluctuation of a security trading in the marketplace. Opportunity risk is the risk that a better investment decision could have been made after the completion of a purchase or sale. U.S. government bonds would not be subject to credit risk or currency risk, unless the investor had purchased them with foreign currency.
229
Which TWO types of risks are NOT associated with options and derivatives contracts?
I. Reinvestment risk
II. Opportunity risk
III. Purchasing-power risk
IV. Market risk
A. I and III
B. I and IV
C. II and III
D. II and IV
A. I and III
**Reinvestment risk and purchasing-power risk are not associated with options or derivatives contracts.** Reinvestment risk is the possibility that a principal payment received from an investment will need to be reinvested at a lower rate due to a change in interest rates, or the investor might need to assume more risk to receive the same rate of return. Purchasing-power risk, the risk that the value of assets will be eroded by inflation, applies to long-term debt instruments. Market risk is the day-to-day potential for losses from fluctuations in securities prices. This type of risk cannot be avoided.
230
True or False: Under the Uniform Securities Act, debentures issued by a Canadian bank are exempt from registration.
False
231
All of the following are examples of digital assets, EXCEPT:
A. Cryptocurrency
B. Stablecoins
C. Non-fungible tokens (NFTs)
D. Blockchains
D. Blockchains
Digital assts include cryptocurrencies, non-fungible tokens (NFTs), and stablecoins. A blockchain is a method of recording ownership of digital assets, (e.g., a ledger). Blockchains are used to keep track of purchases and sales of digital assets; however, in and of themselves, they're not an investment. Unlike traditional securities markets which typically use one central clearinghouse to record transactions, blockchains are decentralized. In other words, blockchain records are updated communally and verified through an algorithm.
232
ABC Corporation has 10,000,000 shares outstanding and they're currently selling for $50 per share. ABC Corporation is an example of which type of company?
A. Cyclical
B. Defensive
C. Small capitalization
D. Large capitalization
C. Small capitalization
The market capitalization of a company is determined by multiplying the its number of outstanding shares by the current market price of the shares. ABC Company's*** market capitalization is $500 million (10 million shares x $50 per share). Therefore, ABC is considered a small capitalization company since its market capitalization is between $300 million and $2 billion.*** There's nothing in the question to suggest that ABC is either a cyclical or a defensive company.
233
The USA considers preorganization certificates, prime bank notes, and voting trust certificates to be __________.
Mark For Review101 of 140The USA considers preorganization certificates, prime bank notes, and voting trust certificates to be securities.
234
Under the USA, is a federal covered security trading in the secondary market an exempt security or an exempt transaction?
Exempt security
235
True or False: An American Depositary Receipt (ADR) is a security.
True
236
Are exchanges considered auction markets or negotiated markets?
Auction markets
237
A company's PE ratio has historically been 30, but it has recently dropped to 15. In this case, what has most likely happened to the company?
A. The earnings per share (EPS) has declined.
B. The price of the company's stock has risen.
C. The price of the company's stock has fallen.
D. The company has started paying common stock dividends.
C. The price of the company's stock has fallen.
The Price-to-Earnings (PE) ratio is the price of a company's stock divided by its Earnings Per Share (EPS) (i.e., PE Ratio = Stock Price ÷ EPS). If the company's PE ratio has fallen, this means that either the stock price has fallen or the EPS of the company has risen. ***Paying common shareholders a dividend doesn't impact EPS and will most likely cause the stock's price to rise.***
238
Give some examples of qualified custodians.
Broker-dealers, banks and trust companies. IAs may also be custodians, but usually are not
239
Under the USA, are banks and bank holding companies excluded from the IA definition?
No. Banks, savings institutions and trust companies are excluded, but bank holding companies are not.
240
When must a federal adviser file an updating amendment to determine continued eligibility for SEC registration?
Within 90 days of the end of the adviser's fiscal year.
241
What type of information will be found in an investment adviser's ADV Part I?
Firm name, # of employees, nature of business, history of officers/directors, legal/disciplinary action in past 10 years
241
Where do IAs send their registration forms?
The Investment Adviser Registration Depository (IARD)
242
A stock that is traded on the NYSE has a high P/E ratio, a low dividend payout ratio, and a high level of retained earnings? What type of stock is it?
A, Growth
B. Value
C. Mid-cap
D. Small-cap
A. Growth
Growth stocks are characterized by high P/E ratios, low dividend payout ratios and high levels of retained earnings. Therefore, the stock described in the question is most likely a growth stock. Value stocks, are characterized by low P/E ratios, high dividend payout ratios, and low price-to-book ratios.
Many growth stocks are also small cap-stocks which are issued by companies with market capitalizations between $300 million and $2 billion or micro-cap stocks which are issued by companies with market capitalizations of less than $300 million. However, the characteristics of the stock being described fit the definition of a growth stock much more exactly.
242
An investor wishing to calculate the basic earnings that a corporation capitalized with common and preferred stock and convertible bonds would divide the:
A. Earnings before interest and taxes by the number of common shares outstanding
B. Net income after converting the convertible bonds and subtracting the preferred dividends by the number of common shares outstanding
C. Net income minus any preferred dividends paid by the number of common shares outstanding
D. Net income by the number of shares of common shares outstanding
C. Net income minus any preferred dividends paid by the number of common shares outstanding
This question is asking for the formula used to calculate earnings per share (EPS). In its simplest form, this formula is net income minus preferred dividends, if any, divided by the number of common shares outstanding. Using net income after conversion would be correct if the question asked for EPS on a fully diluted basis.
243
IAs with no place of business in a state, and whose clients are ____________ are not required to register in that state.
IAs with no place of business in a state, and whose clients are institutions are not required to register in that state.
244
What record must an investment adviser maintain regarding its IARs?
The initial application for each IAR
245
All investment advisory contracts must be in writing and include the ______________ for which services are contracted.
All investment advisory contracts must be in writing and include*** the length of time for which services are contracted.***
246
Is an adviser required to register in a state in which it has no office, but has accredited investors who reside there?
Yes. Since the USA does not recognize accredited investors as institutional investors, IA registration is required.
247
What are some of the characteristics of a value stock?
Low P/E ratios, history of profitability, high dividend payout, and low market-to-book ratio
248
How is market capitalization (cap) determined?
A company's current share price multiplied by the number of shares outstanding.
Market $ x Number of Shares outstanding
CMP= $20 Share
Out = 10 mill.
Market: $20 x 10 mill = $200 mill
249
A company is conducting an IPO. Its shares will be listed on Nasdaq. For how long does a broker-dealer that is part of the selling group need to make the prospectus available to investors?
A. 25 days
B. 90 days
C. 10 days
D. 40 days
A. 25 days
A company is conducting an IPO. Its shares will be listed on Nasdaq. For how long does a broker-dealer that is part of the selling group need to make the prospectus available to investors?
All investors who purchase new issues must receive prospectuses, which may be made available electronically. **This obligation to provide a prospectus continues for 25 days after the effective date if a company is conducting an IPO and its securities will be listed on a national exchange (e.g., the NYSE or Nasdaq)**, which is the situation described in the question. If a company is conducting an IPO **and its shares are not eligible for listing on an exchange, the prospectus requirement lasts for 90 days.**
A firm that sells a new issue in the aftermarket shortly after it begins trading may also be required to provide prospectuses to its customers. **For secondary offerings of securities that will trade over-the-counter (e.g., securities that are not eligible to be listed on the NYSE or Nasdaq), this obligation lasts for 40 days.** Lastly, for secondary offerings of securities that are listed on an exchange, there is no continuing prospectus requirement.
250
ABC Corporation has 10,000,000 shares outstanding and they're currently selling for $50 per share. ABC Corporation is an example of which type of company?
A. Cyclical
B. Defensive
C. Large capitalization
D. Small capitalization
************D. Small capitalization
The market capitalization of a company is determined by multiplying the its number of outstanding shares by the current market price of the shares. ABC Company's market capitalization is $500 million (10 million shares x $50 per share). Therefore, ABC is considered a ***small capitalization company since its market capitalization is between $300 million and $2 billion. ***There's nothing in the question to suggest that ABC is either a cyclical or a defensive company.
251
True or False: The CEO of an advisory firm who establishes investment policy for the firm must register as an IA.
False. The CEO is considered an IAR, not an IA.False.
252
ADV Part I is a disclosure document for use by the _____ and the ________________.
ADV Part I is a disclosure document for use by the SEC and the Administrator.
253
An investor might purchase a stock with a high P/E ratio because:
A. This indicates the company has sufficient income to pay expenses and possibly make dividend distributions
B. The higher the P/E ratio, the greater the potential for higher dividends
C. This indicates a stable investment with little chance of volatility due to market fluctuations
D. The investor expects higher future earnings
D. The investor expects higher future earnings
The P/E ratio is used by the fundamental analyst to estimate the market's future earnings expectations for a company.*** A high P/E ratio indicates an investor is paying a high market price for today's earnings; the investor might do so with the expectation of higher future earnings.*** Stocks with high P/E ratios (typically growth companies) tend to pay a low, or no, dividend.
254
What SEC filing is used to provide information regarding unscheduled material events or information?
A. Form 10-K
B. Schedule 13D
C. Form 8-K
D. Form 10-Q
C. Form 8-K
Form 8-K is filed by companies in order to provide information regarding unscheduled material events that are important to shareholders. The filing must be made within four business days of any material event that may affect a company’s share price or financial condition. Form 10-K is filed at the end of a company's fiscal year and Form 10-Q is filed quarterly. Schedule 13D is filed by investors who acquire more than 5% of the shares of a SEC reporting company.
255
Is an adviser to a mutual fund considered an IA under the USA?
No, mutual funds advisers are federally covered and are excluded from the IA definition at the state level.
256
Part 2 of Form ADV may be used as the disclosure document that is provided to the IA's ________.
Part 2 of Form ADV may be used as the disclosure document that is provided to the IA's clients.
257
The cost of money refers to ______________.
Interest rates
258
As it applies to a BD or IA, what does the term "exclusion" mean in the USA?
Exclusion signifies that a person does not meet the definition of a BD or IA in the state.
259
True or False: The USA classifies an agent of a BD who also manages wrap accounts as an IA.
No. ***IAs are firms, not individuals.***
260
Does the de minimis exemption apply to BDs that have no place of business in a state?
No. The de minimis exemption only applies to IAs and IARs.
261
What is the difference between the current ratio and the quick asset ratio?
The quick asset ratio is more stringent since it excludes inventory from the current assets.
262
If an IA is registered with the SEC, is registration required in any state in which it intends to do business?
No. The National Securities Markets Improvement Act (NSMIA) exempts federal covered advisers from state registration.
263
All of the following risks are applicable to hedge funds, EXCEPT
Liquidy risk
Legislative risk
Extension risk
Market risk
Extension risk
264
Which of the following securities is most positively correlated with an inverse S&P 500 ETF?
3 x S&P 500 EFT
Short SPX Put
3 x Inverse Russell 2000 ETF
Long SPX call
3 x Inverse Russell 2000 ETF
265
Rule 144 Governs the sale of restricted & controlled securities for a ** Non-affiliate (and has not been an affiliate during the prior three months)**
**During 6-month holding period**
No resales under Rule 144 permitted
**After initial 6-month holding period**
**Current public information**
Issuer must timely file all Securities Exchange Act documents
**After I-year holding period**
Unlimited public resales under Rule 144; need not comply with any other Rule 144 requireme.
**During I-year holding period**
NO resales under Rule 144 permitt
266
The owner of a put option has:
A. The obligation to buy stock at a preset price at any time up to the option's expiration date
B. The obligation to sell stock at a preset price at any time up to the option's expiration date
C. The ability to sell stock at a preset price up to the option's expiration date
D. The ability to buy stock at a preset price up to the option's expiration date
C. The ability to sell stock at a preset price up to the option's expiration date.
The buyer (owner) of a put option has the right, not the obligation, to sell a predetermined number of shares at a preset strike price. American style options (which should be assumed) allow the owner to exercise her right at any time up until the option's expiration date (i.e., its expiry).
267
All of the following are characteristics of an irrevocable trust, EXCEPT:
A. Assets are often excluded from the grantor's estate
B. During the grantor's lifetime, any income taxes are paid by the grantor
C. The grantor may not benefit from the assets in the trust after they have been placed in the trust
D. The trust avoids probate
B. During the grantor's lifetime, any income taxes are paid by the grantor
Unlike revocable trusts, income that's generated in an irrevocable trust is taxable to the trust, not the grantor. Irrevocable trust assets are excluded from the grantor's estate, which minimizes the estate tax liability. Both revocable and irrevocable trusts avoid probate, and this is often a main reason that trust accounts are established.
268
Which of the following statements related to payout structures from an annuitized variable annuity are FALSE?
A.Life annuities typically have higher payouts than life with period certain annuities
B. Joint with last survivor annuities typically have higher payouts than life annuities
C. Unit refund annuities typically have lower payouts than life annuities
D. Life with period certain annuities typically have higher payouts than joint and last survivor annuities
B. Joint with last survivor annuities typically have higher payouts than life annuities
Here are the four types of annuities to be aware of:
*** Life annuity - **pays annuitant until death
*** Life with period certain annuity** - makes payments the longer of their lifetime or the predetermined period certain timeframe
(e.g. 10 years)
*** Joint and last survivor annuity** - makes payments to two annuitants until both dead
*** Unit refund annuity -** makes payments until death and "refunds" amount of basis unpaid (if it exists) to beneficiary
**Life annuities are generally considered the riskiest type of annuity** for the customer, and therefore typically result in the highest payouts. That is why the answer is considered a false statement. All of the other statements are typically true.
269
Which of the following assets being placed in a donor advised fund (DAF) will provide the greatest estate planning benefit?
A. Farm equipment
B. U.S. Treasury bonds
C. Securities with a large capital gain
D. Cash
C. Securities with a large capital gain
Donor advised funds (DAFs) can receive charitable gifts of cash, securities, or other property. Assets that are placed into a DAF are deductible, thereby reducing income taxes in the year of the contribution. In addition, assets with a large gain are not subject to capital gains taxes if they're donated to a DAF. For estate planning purposes, donating securities with large capital gains is often the most efficient way to minimize the donor's tax liability.
269
Balance of Payments
Current Account
Capitol Account
Current Account: Bought + Sold -
Capitol Account: + Money Money Out -
Net Must = 0
270
A forward contract
Standardized futures contracts
A forward contract is a customized, private agreement between two parties to buy or sell an asset (commodity) at a specified price on a future date.
Unlike standardized futures contracts, forwards are not traded on exchanges (OTC) and offer more flexibility in terms of contract terms and asset types. They are used to manage risk, secure supply, or speculate on future price movements.
271
Current dollars
Current dollars is a term describing income in the year in which a person, household, or family receives it. For example, the income someone received in 2021 unadjusted for inflation is in current dollars. Constant or “real” dollars are terms describing income after adjustment for inflation.
272
Durring a variable annuity accumulation phase
The death benefit exists during the accumulation phase
273
A cash forward contract is different from a futures contract because the cash forward contract is:
A personal transaction between the buyer and the seller
Not for a standard amount of the commodity, but rather for a specific amount and quality of the cash commodity
Not negotiated by open outcry in the trading pits and not subject to the rules of a futures exchange.
A cash forward contract is a personal transaction for a specific amount and quality of the cash commodity and is not subject to the rules of a futures exchange.
273
The term supervised person is BEST represented by an investment adviser representative who:
Is a partner of an investment adviser that manages investments in several discretionary accounts.
The term supervised person is used in SEC regulations related to investment advisers (IAs) and includes the IA's partners, officers, directors, and employees who provide investment advice.
274
All of the following are true regarding the balance of payments,
EXCEPT:
A. The capital account shows the results for trade transactions completed in the current year
B The sum of the capital account and the current account must be zero
C A persistent current account deficit will drain foreign currency reserves
D. The purchase of a Treasury bond by a foreign investor would represent a positive entry in the capital account
A. The capital account shows the results for trade transactions completed in the current year.
The current account shows the results for the trade transactions completed in the current year. The capital account shows the inflows and outflows of capital in transactions involving property and financial assets. The net of the two accounts must be zero.
275
Which of the following is a risk-adjusted return?
A Alpha
B Beta
C Internal rate of return
D Standard deviation
A Alpha.
The difference between an investment's expected return (as indicated by its hypothetical position on the Security Market Line) and its actual return is considered its alpha. An investment's alpha is also referred to as its risk-adjusted return. Some analysts believe that stocks with positive alphas represent buying opportunities, while negative alphas are signals to sell.
Alpha is also used to evaluate the performance of portfolio managers. Managers whose portfolios show positive alphas are considered to be adding value with their management skills.
276
What are the TWO factors that are used in a discounted cash flow (DCF) analysis?
A. Present value of future cash flows
B. Expected rate of return earned on reinvested cash flows
Discounted cash flow analysis uses the present value formula and applies it to an investment with multiple future cash flows (e.g., the interest and principal payments of a bond). In order to find the present value of a single cash flow, an investor needs the future cash flows, an expected rate of return (i.e., discount rate), and the number of years until the future cash flow will be received. The risk free-rate of return is used in the Capital Asset Pricing Model (CAPM) formula and is generally not required when performing a discounted cash flow analysis.
277
An agent is soliciting investors for a private placement. Under the Uniform Securities Act, this is an exempt transaction as long as the agent doesn't offer the securities to more than:
A Five retail investors during a 12-month period
B 10 retail investors during a 12-month period
C 10 non-accredited investors during a 12-month period
D 35 non-accredited investors during a 12-month period
B 10 retail investors during a 12-month period.
Under the Uniform Securities Act, private placements are exempt transactions as long as the offering is made to no more than 10 retail investors during a 12-month period. There's no limit on the number of institutional investors. Regulation D is the private placement under federal law and the term non-accredited is used in Regulation D, but not in the Uniform Securities Act. Depending on the exact provision of Regulation D that the issuer is using, the offering is typically limited to a maximum of 35 non-accredited investors and an unlimited number of accredited investors.
278
What measures risk-adjusted return?
Alpha and the Sharpe Ratio
279
A broker-dealer is participating in an initial public offering of a security that will be listed on Nasdaq. Which of the following documents is the broker-dealer required to deliver to a client who purchases the securities in the aftermarket immediately after the completion of the offering?
A There's no requirement for additional documentation.
B A research report.
C A final prospectus.
D A list of all of the broker-dealers involved in the offering.
C. A final prospectus.
A client who purchases securities as part of an offering must receive either a final prospectus or a preliminary prospectus along with an additional document from the broker-dealer that executes the transaction. The final prospectus must be provided for a certain period after the completion of the offering (i.e., in the aftermarket). For an IPO, if the securities will be immediately listed on the NYSE or Nasdaq, the aftermarket prospectus requirement lasts for 25 days. For an IPO of a security that will be quoted in an over-the-counter market (e.g., on the Pink Open Market), the prospectus delivery requirement lasts for 90 days; however, it only lasts for 40 days for a subsequent (follow-on) offering of these securities.
280
As an investment adviser, you are required to record and keep a record of every transaction in a security for a client's account within:
A 10 days of the end of each quarter
B 10 days of the end of each quarter, excluding direct obligations of the U.S. government
C 20 days of the end of each quarter
D 20 days of the end of each quarter, excluding direct obligations of the U.S. government
B 10 days of the end of each quarter, excluding direct obligations of the U.S. government
Under both the Investment Advisers Act and the Uniform Securities Act, investment advisers are required to keep a record of every securities transaction within 10 days of the end of the quarter in which the transaction took place. Transactions in direct obligations of the U.S. government are excluded from this requirement.
281
What's net present value?
A The discount rate that makes the present value of an investment's cash flows equal to the investment's market value.
B A way to evaluate investments using past pricing trends, including moving average prices.
C A measurement of the efficiency of a stock portfolio, comparing the portfolio's risk-adjusted return with the portfolio's risk.
D A way to evaluate investments using cash inflows and outflows, as well as a discount rate.
D A way to evaluate investments using cash inflows and outflows, as well as a discount rate.
Net present value (NPV) is a way to price or value an investment. NPV takes the present value of an investment's cash inflows (e.g., future dividends) and deducts the present value of the investment's outflows (e.g., purchase price). In order to calculate the present value, a discount rate is needed.
282
Special purpose acquisition company (SPAC) shares are originally issued:
A In an SEC-registered initial public offering (IPO)
B In a Regulation D private placement
C Using the Regulation A safe harbor
D In a sale that's conducted under Rule 147 and registered with the state Administrator(s)
A In an SEC-registered initial public offering (IPO)
A special purpose acquisition company (SPAC) is initially set up as a blank check company with shares that are sold to investors in an initial public offering (IPO) and subsequently listed on an exchange. Like any IPO, the sale of SPAC shares to public investors must be registered with the SEC. In addition, the SPAC's IPO must also be registered in any state in which the offered is made, typically using registration by coordination. After the SPAC's shares are sold to investors, the manager will then find another privately held company in which to invest.
283
A broker-dealer is participating in an initial public offering of a security that will be listed on Nasdaq. Which of the following documents is the broker-dealer required to deliver to a client who purchases the securities in the aftermarket immediately after the completion of the offering?
A There's no requirement for additional documentation.
B A research report.
C A final prospectus.
D A list of all of the broker-dealers involved in the offering.
C A final prospectus.
A client who purchases securities as part of an offering must receive either a final prospectus or a preliminary prospectus along with an additional document from the broker-dealer that executes the transaction. The final prospectus must be provided for a certain period after the completion of the offering (i.e., in the aftermarket). For an IPO, if the securities will be immediately listed on the NYSE or Nasdaq, the aftermarket prospectus requirement lasts for 25 days. For an IPO of a security that will be quoted in an over-the-counter market (e.g., on the Pink Open Market), the prospectus delivery requirement lasts for 90 days; however, it only lasts for 40 days for a subsequent (follow-on) offering of these securities.
284
A ____________ is an annuity that never stops paying money.
A perpetuity is an annuity that never stops paying money.
285
What is the minimum cooling-off period for registration by notification?
5 Days
286
A holdings report filed by an access person must be current as of ___ days prior to the date the report is submitted.
45 Days
287
_____________ return allows an investor to compare the performance of two investment advisers.
Time Weighted
288
What is used as the basic measure of risk for an investment?
Standard Deviation
289
What must issuers have to qualify for the Rule 147 intrastate exemption?
Place of Business in that state
290
BD records must be kept for at least _____ years.
3 years
291
Jim invested $25,000 in an annuity with a 6% return. How long will it take for the money to double?
Using the Rule of 72, divide 72 by the rate of return (72 ÷ 6 = 12 years).
292
Customers are given ____ business days after settlement date to pay for their portion of a trade (i.e., S+__ or T+__).
Customers are given two business days after settlement date to pay for their portion of a trade (i.e., S+2 or T+3).
293
If an IA is no longer eligible for SEC registration, it has _____ days to file ADV-W and register at the state level.
180 days
294
When must an access person file a transaction report?
Within 30 days of the end of each calendar quarter. **Showing which transactions happened (Buy / Sell / Both)**
295
Over the last three months, a stock rose from $50 to $51 and paid a $.25 dividend. What is its annualized return?
The three-month return is 2.5% ($1.25 ÷ $50). **(Note that the .25 is for the year not for 3 months)**
($1.25 ÷ $50 = 025) ***(.025 × 100 = 2.5)*** (2.5%) A quarterly return is annualized by
multiplying by four (2.5% x 4 = 10%) *
296
All of the following methods of ownership will avoid probate, EXCEPT:
A Community property
B Joint Tenants with Right of Survivorship
C Pay on Death
D Estate
D Estate
Probate involves the administering of a deceased person’s will or the estate of a deceased person without a will. Due to court costs and the involvement of lawyers who collect fees from the estate, many people try to minimize the costs associated with the probate process. Holding assets as community property, joint tenants with right of survivorship, and pay on death will avoid probate since a beneficiary has been named in the event of death.
297
What are the three main concepts underlying the Modern Portfolio Theory?
Expected return, standard deviation, and correlation
298
The strong form of the Efficient theory
The strong form of the theory states that all information, private and public, is reflected in the market price of the security. Investors will always be a step behind the market and, therefore, will not profit from actively managing their investments. NOTE: if the strong form were true, traders with inside information could not profit from their information, because the market will have already absorbed the information.
299
The semi-strong of the Efficient theory
The semi-strong form posits that private information about a security is not immediately reflected in a security's price, but that public information is wholly and immediately reflected. In the semi-strong form of the EMH, the only way to beat the market in the long run is with insider information, so a retail investor is better off investing in a low-cost index fund or broad-based market-tracking ETF than relying on active management.
300
The weak form of the Efficient Theory
The weak form states that market movements cannot be predicted by charting trends (known as technical analysis), but may be predictable by analyzing the underlying financial aspects of the business represented by a stock (known as fundamental analysis). Weak-form efficient market hypothesis is the version that most lends itself to an active management sty
301
If an analyst wanted to determine a company's ability to pay debts that would be maturing in one year, he would be most interested in the:
A Current ratio
B Acid-test ratio
C Inventory turnover
D Debt-to-equity ratio
A Current ratio
The current ratio is a comparison of current assets to current liabilities for a one-year period. **The acid-test (quick) ratio excludes the inventories and is usually for a one- to three-month period.**
302
If an advisory client is most concerned with minimizing her tax liability, common stocks may provide a greater benefit than corporate bonds because:
A Stocks tend to offer a lower yield than corporate bonds
B Qualified cash dividends are taxed at a maximum rate that is less than the rate at which the interest on corporate bonds is taxed
C The unrealized capital gains on some bonds is taxed each year as ordinary income
D Capital gains on stocks are taxed at a lower rate than the capital gains on corporate bonds to encourage investments in stocks
B Qualified cash dividends are taxed at a maximum rate that is less than the rate at which the interest on corporate bonds is taxed.
If an investor owns stock of a domestic corporation (or shares of a fund that contains these types of stocks) and has satisfied a holding period, any dividends that are distributed by the company (or fund) are considered a qualified cash dividends and are taxed at a maximum rate of 20%. On the other hand, the interest on corporate bonds is taxed as ordinary income (possibly as high as 39.6%). Capital gains are only taxable if they are realized (i.e., the investor sells the asset at a price that is higher than what he originally paid).
303
Where is detailed information about executive compensation and ownership found?
On a proxy statement (Form 14A); however, some information may also be found in the Form 10-K filing.
304
A new issue being offered in one state only is _________ from federal registration under SEC Rule ______.
A new issue being offered in one state only is exempt from federal registration under SEC Rule 147.
305
The cooling-off period for a federal securities registration is a minimum of _____ days.
20 Days
306
Registration by Coordination has a minimum cooling-off period of _____ days.
10 Days
307
Long (buying) calls may be used to hedge a _____ stock position.
Short positions
308
An investor sells 1 ABC Jan 50 call at 2 and sells 1 ABC Jan 50 put at 3. What is the investor's strategy?
Stability
309
Criminal penalties for violating the IA Act of 1940 may not exceed $_______ and/or imprisonment not exceeding ____ years.
Criminal penalties for violating the IA Act of 1940 may not exceed $10,000 and/or imprisonment not exceeding five years.
310
The maximum criminal penalty for violations of the USA is _____ years in prison and/or up to a $______ fine.
The maximum criminal penalty for violations of the USA is three years in prison and/or up to a $5,000 fine.
311
What is the use of the Capital Asset Pricing Model (CAPM)?
To find an investor's optimal portfolio by comparing expected risk with expected rates of return
312
When must an access person file a report, stating that they have become an access person?
Within 10 days of becoming an access person and at least once every 12 months thereafter. This report includes their holdings **(INVESTMENTS)**
313
What is NAV???
The difference between the value of an investment's cash inflows and outflows above a discount rate
314
As required by ERISA, which document details the time horizons and needs of a pension plan?
A Summary plan description
B IRS Form 5500
C Investment policy statement
D Form ADV-E
C Investment policy statement
An investment policy statement (IPS) is a document that describes a pension plan’s investment strategy as well as the specific needs of the plan. A properly drafted IPS should outline the prudence and diversification standards that plan fiduciaries must follow and should include elements such as investment philosophy, risk tolerance, time horizons, preferred asset classes, rate of return expectations, and long-term goals for the plan. IRS Form 5500 is the annual report that's filled with the IRS regarding the pension plan.
315
Which of the following are TRUE regarding a comparison of strategic versus tactical asset allocation?
I. Strategic asset allocation focuses on the client's investment objectives and risk tolerance, while tactical asset allocation focuses on economic and market conditions.
Il. Strategic asset allocation has a long-term outlook, while tactical asset allocation encompasses short-term decisions.
III. Unlike strategic asset allocators, tactical asset allocators believe that
investors can time the market.
A land Il only
B I and Ill only
C Il and Ill only
D I, Il, and III
D I, Il, and III
Asset allocation based on a client's risk tolerance and investment objectives is called strategic asset allocation. In theory, it is the best mix of assets given the client's goals and level of risk aversion, giving it a long-term outlook. Strategic asset allocators tend to view the market as efficient and market-timing as ineffective. By contrast, those who believe securities markets are not perfectly efficient may try to use an active strategy to alter the portfolio's asset mix, to take advantage of anticipated economic events. This market timing approach is sometimes called tactical asset
316
What's net present value?
A The discount rate that makes the present value of an investment's cash flows equal to the investment's market value.
B A way to evaluate investments using past pricing trends, including moving average prices.
C A measurement of the efficiency of a stock portfolio, comparing the portfolio's risk-adjusted return with the portfolio's risk.
D A way to evaluate investments using cash inflows and outflows, as well as a discount rate.
D A way to evaluate investments using cash inflows and outflows, as well as a discount rate.
Net present value (NPV) is a way to price or value an investment. NPV takes the present value of an investment's cash inflows (e.g., future dividends) and deducts the present value of the investment's outflows (e.g., purchase price). In order to calculate the present value, a discount rate is needed.
317
A bond that is registered "as to **principal only**" means that the bond trades
A. In the investor's name with coupons attached
B In the investor's name without coupons attached
C. With coupons attached
D. In the investor's name with coupons attached registered in the investor's name
A bond that is registered "as to **principal only**" means that the bond trades
A. In the investor's name with coupons attached
318
If an issue of serial bonds is partially called, how does the issuer decide which bonds are
called first?
A. Randomly
B. Inverse numerical order ?
C. LIFO
D . FIFO
B. Inverse numerical order
319
What are the 3 sections that represent a company's total assets?
Current assets, fixed assets and intangibles
320
Who is an access person?
For an IA Who has access to non-public information about the
1. Officer
2. Director
3. Partner
4. Other Supervised Persaon of an IA. who has access to non-public information about the IA.'s recomidations
321
Negative Convexit
No Convexity
Positive Convexity
The negative relationship can be attributed to the concept that as rates rise, the bond may lag in the earnings it offers a potential investor.
As interest rates rise, bonds entering the market will have higher
yields, as they are issued at new, higher rates.
As rates increase, investors demand a greater yield from the bonds they purchase. Hence, when interest rates rise, issuers of such instruments should also raise their yields to remain competitive.
321
The balance sheet equation is:
Assets - Liabilities = Net Worth
The balance sheet equation is Assets - Liabilities = Net Worth. A client's net worth represents the value of the client's assets that have been financed with their own money (equity) and not borrowing (debt).
322
A fundamental analyst would be interested in?
P/E ratio &
EPS
EPS and the P/E ratio are fundamental indicators.
323
What equates an investment's cash inflows with its cash outflows?
Internal rate of return (IRR)
An investment's internal rate of return (IRR) is the discount rate that makes the present value of an investment's cash inflows (e.g., dividends) equal to the investment's cash outflows (e.g., purchase price). Since the net present value (NPV) equals the present value of the investment's expected cash flows minus the current market price (NPV = PV of Cash Flows - Market Price), the IRR is the discount rate that makes NPV equal to zero (i.e., it equates cash inflows and outflows).
324
What does the PE ratio measure?
The amount that investors are willing to pay for a company's earnings
The formula for calculating the price-to-earnings (PE) ratio is the market price of a company's stock divided by the earnings per share, or EPS (i.e., PE ratio = Stock Price/EPS). The PE ratio measures the amount (i.e., the stock price) investors are willing to pay for a company's earnings (i.e., EPS).
325
An investor is considering two different investments. Investment 1 has a net present value of $130 and a market price of $100. Investment 2 has a net present value of $80 and a market price of $100. Which statement about these investments is TRUE?
A The investor will have a $20 capital gain if she purchases Investment 2.
B Investment 2 will decrease the investor's wealth.
C The investor will have a $30 capital loss if Investment 1 is purchased.
D Investment 1 provides an increase in the investor's wealth.
D Investment 1 provides an increase in the investor's wealth.
Net present value (NPV) is the present value (PV) of an investment minus the current market price (NPV = PV - Market Price). In this question, the NPV and market price are given for both investments, but their PVs are not provided. Despite the fact that the PVs are not given directly, they can be calculated. For Investment 1, since the Market Price and NPV are known, here's how the PV can be determined:
Remember, PV - Market Price = NPV
_____ - 100 Market Price = 130 NPV
For Investment 1, the missing Present Value must be 230 (i.e., 230 - 100 = 130).
Similarly, for Investment 2, since the Market Price and NPV are known, the PV can be determined as follows:
Again, PV - Market Price = NPV
_____ - 100 Market Price = 80 NPV
For Investment 2, the missing Present Value must be 180 (i.e., 180 - 100 = 80).
Since the NPV for both investments is greater than zero, both investments will increase the investor's wealth. Notice that Investment 1 will increase an investor's wealth more than Investment 2 because the NPV for Investment 1 is larger than the NPV of Investment 2. Capital gains and losses are calculated based on actual purchase and sale prices. The present value calculations are based on hypothetical future values (i.e., estimates), not actual purchase and sale prices; therefore, capital gains and losses cannot be calculated for this question.
326
What can be used to estimate a company's cash flows?
The issuer's annual report
A company's annual report incorporates all of its financial statements, including the income statement, balance sheet, and statement of cash flows. Since the annual report includes the cash flow statement and income statement, it would be the best source of information for estimating future cash flows.
327
How is the balance of payments described?
Think of this as a as a busniess P&L
A The sum of the capital account and the current account must be zero (Bills coming in & $ going out)
A persistent current account deficit will drain foreign currency reserves (A vendor never pays)
The purchase of a Treasury bond by a foreign investor would represent a positive entry in the capital account. (Partner buying into the Busniess)
The current account shows the results for the trade transactions completed in the current year. The capital account shows the inflows and outflows of capital in transactions involving property and financial assets. The net of the two accounts must be zero.
328
Barbell strategies
A The strategy consists of purchasing bonds with both short and long maturities, but no intermediate-term securities are included
B The short-term bonds will provide for quick cash to purchase new bonds upon maturity
C A barbell strategy is used to take advantage of potential interest-rate changes
A barbell strategy consists of buying short-term and long-term bonds, but not intermediate-term bonds. The purchase of long-term bonds allows an investor to capture higher long-term interest rates. The short-term bond provides the opportunity to invest elsewhere if the bond market takes a downturn. There is no guarantee that any money made on the short end of the strategy will offset losses that could occur on the long end of the barbell.
329
Under the Uniform Securities Act, IA contract what?
Under the Investment Advisers Act of 1940, IA contracts are?
State law (the USA) requires that contracts between clients and state-registered advisers be in written form.
However, federal law (the IA Act of 1940) does not require investment advisory contracts to be in written form. Despite this, as a matter of good business, most advisers formalize client contracts with a written agreement.
330
An investor purchased a new issue municipal bond at 101. What would happen if the investor held the bond to maturity?
I. The premium must be amortized over the life of the bond
II. The investor may not claim a capital loss at maturity
III. The cost basis of the bond will be adjusted annually to reflect the amortization
All premium bonds must be amortized annually, that is, the cost basis is reduced each year until maturity. If held to maturity, the investor's basis will equal par value. There will be no capital loss. Although the amortization of the premium may be deducted against interest income in the cases of corporate and U.S. Treasury instruments, amortization is NOT deductible for municipal bonds.
331
Using the Black-Scholes method of analyzing options encompassing?
The method assumes that no dividends will be paid to the company's stockholders for
the life of the option
The method assumes that interest rates will remain stable for the life of the option
The method assumes that no commissions are paid
332
$10,000 has become $80,000 in 36 years. What is the internal rate of return?
The money doubled every 12 years. The 10 grew to 20, the 20 to 40, and the 40 to 80. Using the Rule of 72, 72 ÷ 12 = 6%.
333
All of the following are true about Inverse ETFs EXCEPT:
A. If shares are sold short by an investor, the investor believes that the index the inverse ETF is based on will be bearish
B. They may be purchased in retirement plans
C. They do not have unlimited loss potential if they are purchased
D. Investors may purchase Inverse ETFs in cash or margin accounts.
A. If shares are sold short by an investor, the investor believes that the index the inverse ETF is based on will be bearish
334
Identify the range from the following set of numbers: 7, 3, 5, 4, 4, 6
4. Range is calcuated by starting with the largest value (7) and then subtracting the smallest value (3).
335
What is the formula for determining holding period return?
(Ending Value - Beginning Value + Dividends/Interest) ÷ Beginning Value
336
In reviewing prices for a mutual fund, an investor notices that the WTF Fund has three listings, one for
Class A Shares, another for Class B shares, and a third for Class C shares. The distinctions among the three
classes of shares would most likely be:
A. Class A shares are oriented toward short-term investors, while Class B and C shares have a long-term
prospective
B. Class A shares should be purchased by income-oriented investors, Class B shares by those seeking
capital appreciation, and Class C shares by investors whose objectives include both capital appreciation
and current income
C. Class A and B shares are offered through broker-dealers while Class C shares can be purchased directly
from the fund
D. Class A shares have a front-end sales charge and a low 12b-l fee, Class B shares have a contingent
deferred sales charge and a high 12b-l fee, and Class C shares have a high 12b-l fee and possibly a small
contingent deferred sales charge and/or front-end load
CORRECT ANSWER IS D: Class A shares have a front-end sales charge and a low 12b-l fee, Class B shares have
a conIngent deferred sales charge and a high 12b-l fee, and Class C shares have a high 12b-l fee and
possibly a small conIngent deferred sales charge and/or front-end load
EXPLANATION: Classes of shares in mutual funds are disInguished by their sales charges. Generally, Class
A shares have front-end sales charges and low or no 12b-l fees. Class B shares have conIngent deferred
sales charges and higher 12b-l fees. Class B shares ogen convert to Class A shares ager a set number of
years. Class C shares have a higher 12b-l fee than Class A shares and they might also have a small front-
end load or a small conIngent deferred sales charge if the investor sells the shares within 12 to 18 months.
337
In order for a fund to assess a fee under a 12b-1 plan, the plan must be approved by the:
Investment Company Institute
CORRECT ANSWER IS: Shareholders
EXPLANATION: Shareholders vote to accept or reject a 12b-l plan. The regulatory authoriIes have no input
as to whether the plan is approved. The Investment Company InsItute is a trade organizaIon.
338
FINRA has received a complaint from a customer stating that his firm charged an excessive markup on the
purchase of common stock. FINRA will investigate the complaint under:
C. The Code of Procedure
CORRECT ANSWER IS: The Code of Procedure
EXPLANATION: FINRA will invesIgate all complaints under the Code of Procedure.
339
A corporation is in the 34% tax bracket. Which of the following would provide the best return if the
corporation wanted t o invest some of its surplus cash?
A. A common stock paying a 7 1/2% dividend
B. A corporate bond yielding 8%
C. A common stock yielding 6%
. A municipal bond yielding 6%
A. A common stock paying a 7 1/2% dividend.
A corporation gets up to a 70% tax break on common stock dividens.
340
$10,000 has become $80,000 in 36 years. What is the internal rate of return?
The money doubled every 12 years. The 10 grew to 20, the 20 to 40, and the 40 to 80. Using the Rule of 72, 72 ÷ 12 = 6%.
341
When must insiders report their transactions?
Within 2 business days of the trade
342
WTF has issued 7% convertible preferred stock that can be exchanged for common shares for $50 per
share. The preferred stock is quoted at $140. What is the parity price of the common?
1. CMV/# of Shares
(100/50 = 2 shares)
(140/2 = $70 per share)
343
A 6% bond due in 15 years is selling for 80. The current yield is:
Coupon = $60/y (1000 x .80 = 800)
(60/800 = 7.5%)
7.5%
344
Securities sold through a private placement are:
Unregistered, non-exempt securities
345
With regard to a broker dealer's website, all of the following are true *except:*
A. Public websites are considered advertising
B. Research reports must be approved by the principal before being posted on the website
C. Password protected websites are considered advertising.
D. FINRA logos are prohibited on a broker dealer's website
C. Password protected websites are considered advertising.
***(Slaes Litature)***
346
According to the Uniform Securities Act, which of the following would not fall under the definition security?
A. Variable annuities
B. Whiskey warehouse receipts
C. Precious metals
D. Subordinated debentures
C. Precious metals
**Comidities **
347
"financial advisor"
"investment advisor"
**"financial advisor"** Series 6, series 7, & 63
**"financial advisor"**
Uniform Investment Adviser Law Exam (series 65)
348
A customer enters a sell-limit order at 85 GTC. The last sale in the stock was 70. A 60c dividend is declared.
On the ex-dividend date, how much will the DMM reduce the order on his book?
k . 60 cents
B. 62.5 cents order entered ABOVE market;
C. Nothing only if marked "do not reduce"
D. Nothing
D. Nothing
***Order entered above the market: Those arent reduced***
349
According to FINRA's Code of Arbitra5on the statute of limita5ons is:
A. 3 years
B. 5 years
C. 6 years
D. 2 years from discovery or 3 years from the event
*C. 6 years*
****D. 2 years from discovery or 3 years from the event = Civil****
350
A fundamental analyst studying a corpora5on's balance sheet could determine which of the following?
A. Net margin
B. Gross margin
C. Working capital
D. Operating margin
C. Working capital
351
A CMO is considered a / an:
A. Equity security
B. Debt security
C. REIT
D. Derivative
D. Derivative
352
The Investment Company Act of 1940 classifies which of the following as investment companies?
I. Unit investment trusts
II. Real estate investment trusts
IIl.Face-amount certificate companies
A. I l only
B. I and Ill only
C. Il and III only
D. I, Il, and II
B. I and Ill only
I. Unit investment trusts
IIl.Face-amount certificate companies
353
Which of the following would be found in the capital market?
A. Treasury bills
B. Banker's acceptances
C. CDs
D. Federal Home Loan Bonds
D. Federal Home Loan Bonds
Long Term Debt Financing
354
Fidelity Bond
Insurance coverage required by the self-regulatory organizations for all employees, officers, and partners of member firms to protect against employee fraud. Syn. Surety bond.
354
An Administrator from North Carolina has jurisdiction over an offer made:
I. On a radio or television program that originated in North Carolina
II. On a radio or television program broadcast in a North Carolina where the communication originated
outside the state.
III. In a newspaper circulated in North Carolina but published in South Carolina
IV. In a newspaper published in North Carolina, but with more than two thirds of its circulation outside the
state in the last year.
A. I only
B. I and II only
C. I and Ill only
D. I, II, III, IV
A. I only
On a radio or television program that originated in North Carolina.
**Note* If the Comunication originatedoutsideof the state and it is in the form of a radio or TV brodcast, the Admin does not have jurisdiction.**
354
WTF Corporation has issued rights to subscribe to additional shares of its stock. The market price
of WTF Corporation is $70 per share and the subscription price is $55 per share. Five rights are
required to subscribe to one new share of stock. The value of the rights when they are selling ex-
rights is:
$3.00
(70 - 55/5= 3)
70 - 55 = 15
(5 rights) 15/5 = 3
