Term
| An RR of a NYSE firm wishes to open an acct with another firm. This would require permission from____ |
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Definition
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Term
| A common stock's book value is known as _____ |
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Definition
| Net tangible asset value per share |
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Term
| A customer orders to sel l500 shares of xyz common stock, traded otc. Trader quotes the stock at 27-27.25. What must happen? |
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Definition
| The trader must buy the shares at $27 (bid) |
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Term
Which of the following powers is not extended to the sec under the securities ex. act of 1933
a- power to require full disclosure of new corporate issues
b- power to require filing of a registration statment for new issues
c-poer to deny regist. when legal reqs are not met
d- Power to reguate the offering of a new bank stock sold intrastate |
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Definition
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Term
During a period of stable interest rates which security would experience the most volatile price change?
a- convertible bond
b- non-conv bond
c-US treasury sec
d- GO bond |
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Definition
| A. Convertible bond prices are influenced by common stock price behvaior |
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Term
Reg T applies to all transactions except
a- US treasury Sec
b- convertible bonds
c-listed options
d- Listed Warrants |
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Definition
| A. US securities are exempt from from act of 1934. |
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Term
Under Reg T the 90 day restriction of a frozen acct would applly to a customer who purchases and sells
A-different stocks in diff accts
B- stock in different accounts
C- stock in a margin account without fully paying for the purchase
d- stock in a cash account without having first paid for the purchase |
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Definition
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Term
White Rating sfor muni secs are based on
A-maturity
B-Marketability
C- Yield
D- Int rates |
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Definition
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Term
| Under rule 144, permission for sale of unregistered shares by an unaffiliated person is dependoent upon other sales of that stock by this person in the last ____ |
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Definition
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Term
| An Investor in a LP has a tax basis of 25K. His share of losses is 8k and he recieved a distribution of 20k. How much of the loss can be used to offset his ordinary income? |
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Definition
| The 20k cash distribution reduces the partners basis to 5k. Losses are then applied but cannot exceed the basis.Therefore only 5k of the loss could be taken in that year |
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Term
| In the Last sale information for the NASD otc stock which ? |
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Definition
| Last Sale information is avalailable on all otc transactions in the National Market System |
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Term
| If a syndicate manager of a new issue of munis wishes to allocate bonds in a different manner from the preestablished priority, the manager must ___ |
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Definition
| Justify his allocations. The manager man adjust the order of allocation stated in the underwriiting agreement but must justify this change. |
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Term
Which of the following industries is most cyclical?
a- retail stores
b-public utilities
c- oil
d- appliance manufacturers |
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Definition
| D. They generally show more erratic earnings than the other industries |
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Term
Which would generally not be a benefit received my investors in an equip-leasing dpp?
A-income from rental pmts
B- deductions for loan interest
C- Cost recovery deductions
D- Appreciation of investment |
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Definition
| D. The equipment value will decline of the life of the investment. |
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Term
| A customer being excercised on an S&P 100 index 310 put when the price is at 300 must _____ |
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Definition
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Term
Which of the following account types could not be handled on a discretionary basis?
a- corporate acct
b- joint acct
c- options acct
d- custodial |
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Definition
| D. Custodians cannot delegated responsibility of a UGMA account to another person. |
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Term
Which of the following orders for Tbills would be filled firt in a weekly auction?
A- commercial lenders
b- FOM accounts
c- noncompetitive bids
d- orders from primary market makers |
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Definition
| C. All noncompetitive bids are filled first, they are given the average price of all accepted bids. |
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Term
A gain from the sale of a muni bond can be used to offset the gain from
1- common stock
2- go bond
3- Real estate
4- corporate bond
A- 2
B- 1 and 4
C- 1, 2 and 4
D- 1, 2, 3 and 4 |
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Definition
| D. A capital gain can be used to offset any capital asset, dumbass |
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Term
| What is the order routing system used on the floor of the NYSE? |
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Definition
| DOT system,Designated order turnaround |
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Term
| An investor purchases a 6% rev bond at 96, and holds them to maturity. The diff between 96 and par at maturity is a _______ |
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Definition
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Term
| A client with a non-tax qualified variable annuity withdraws funds prior to the contract being annuitized. What is the Tax Result? |
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Definition
| The amount in excess of basis is considered to be ordinary income |
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Term
Which of the following must be disclosed by a municipal securities dealer to a customer on request?
a- managers fee
b- syndicate member names
c- identity of a person for whom the order is being placed within the group
d- syndicate order priority |
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Definition
| D. Only the order priority must be disclosed |
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Term
| Advertisements for use by a muni securities broker must be approved by _____ |
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Definition
| The Municipal principle of the firm. This is an MSRB rule |
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Term
| An Investor is long 1 ABC Nov 50 put and 1 ABC Nov 55 call. This position is a ____ |
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Definition
| Long Combination. Strike and Expration month are different and both options are long so its a long combination (WTF NO ITS NOT?!) |
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Term
| A portfolio manager writes covered calls against the portfolio to enhance earnings. Distributions made would be both ______ |
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Definition
| Capital Gains an Ordinary income. |
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Term
Early debt requirement provisions are met by
A-sinking fund
B-Sale of a New Bond Issue
C- Treasury Borrowings
D- Refunding of Debt |
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Definition
| A. Seriously, thats the definition |
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Term
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Definition
A sequence where the price is the same as the last sale but different that the last different sale.
Ex: 52.25 - 52.50 - 52.50 |
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Term
the chairman of the board of a major corp wants to sell stock under rule 144. The stock was given as employment compensation. Which statements of the sale are correct?
1- Broker dealer can act as a principle or agent
2- securities must have been paid in full for 2 years
3- B/D can solicit buy orders
4- b/d can charge an additional fee for his services |
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Definition
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Term
Under NASD rules which of the following is not considered to be a member of immediate family?
A-Mother
B-Daughter
C-Aunt
D-Father in Law |
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Definition
| C. Why does this question matter. |
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Term
Which of the following is not one of the leading economic indicators as punblished by the department of commerce?
a- inventory changes
b- orders for new equipment
c- consumer price index
d- index of industrial production |
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Definition
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Term
| what is the maximum sales compensation, including selling costs, in a DPP offering? |
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Definition
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Term
| Limited Partner Invests $20k in a dpp and signs a recourse loan for $20k. What is the max potential loss? |
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Definition
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Term
Which of the following are affected when the company pays a cash dividend?
A- Shareholder Equity
B- total Assets
C- Intangible Assets
D- Long Term Liabilities |
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Definition
| B. Dividend decreases current asset of cash and decreases current liability of dividend declared, resulting in total asset decrease but everything else remains unchanged. |
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Term
| A DPP that does not have a legitimate business purpose is called a ____ |
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Definition
| An Abusive Shelter....wut |
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Term
Which of the following persons cannot be allocated shares of a "Hot Issue"?
A- Employers of insurance companies that deal in securities
B- Officers in Banks
C- employees of underwriting firm
d- Wife of an employee of an underwriting firm |
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Definition
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Term
| RFM closed at 83, a plus tick, on the nyse on May 30. May 4th is the exdate, dividend of 75 cents. What is the lowest price that you could execute a short sale at the opening of trading MAY 4? |
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Definition
| Any Price. The Uptick rule was rescinded. |
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Term
Which of the following best describes a double barreled muni bond
a- Special Tax B
b-GO B
c- Lim. Liability B
d- Income Bond |
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Definition
| B. Though they are covered by a revenue stream they are also supported by tax dollars when the revs are insufficient. Fuck this question |
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Term
| What are the Investment classifications of Moody's Ratings? |
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Definition
| AAA-AA Highest Inv. Grade
A Upper Medium Grade
BAA Medium
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Term
Which of the following would not be included on a Muni "When Issued" confirmation?
1- settlement date
2- accrued int
3- total dollar amount
4- extended Principle
a- 1 and 2
b- 3 and 4
c- 1, 2 and 3
d- 1,2,3 and 4 |
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Definition
| D. In a when issued transaction, the settlement date is not known. therefore amount of interest, total amount of trade and extended principle could not be computed |
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Term
Which is the narrowest measure of the market?
A-NYSE composite index
B- Value Line Index
C- DJIA
D- S&P 100 Index |
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Definition
| C. Only contains 30 blue chip stocks |
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Term
| The placement ratio of muni securities is ___ |
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Definition
| The amount of new issue municipal securities sold to underwriting syndicates in the prior week |
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Term
| A customer has LMV $21k and a Dr of $10. What is his purchasing power? |
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Definition
| $1000. Purchasing power is 2x excess equity. Reg T on the acct is 10500, meaning he has 500 in ex.eq and therefore $1000 in purchasing power. Cmon Bro |
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Term
Which of the following has the greatest risk?
a- common stock
b- zero coupon bonds
c- debentures
d- preffered stock |
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Definition
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Term
| A customer's margin acct has available SMA of $1000. How much does he have to deposit to buy options with a premium of $4k? |
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Definition
| $3000. Listed options must be paid for in full. 1k+3k=4k |
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Term
| Restricted Stock is most often acquired through ______ |
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Definition
| Private Placement. These transactions are exempt form SEC registration and are thus restricted. |
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Term
For an unregistered security In state A to be sold in a customer in state A, Which Must be True?
1- Stock is listed on a national stock exchange
2-stock is exempt from registration reqs
3- Same security has been offered to the public for the past 12 months
A- 2
B- 1 and 2
C- 2 and 3
D- 1,2 and 3 |
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Definition
| B. By regulation. review this shit. |
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Term
A corporation decides to write down the value of its current inventory because of technological obsolescence. Which of the following does not decline?
A- Working Cap
B- Total Assets
C- Net Plant and Equipment
D- Net Worth |
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Definition
| C. Inventory is a current asset and a reduction in their value would likewise reduce working capital, total assets and net worth. Plant and equipment remain unchanged as inventories are not included in that account |
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Term
Which of the following are true regarding Negotiable CD's of Deposit?
1- guaranteed by the issuing bank
2- Are refundable
3- Min Denom of 5K
4- Can be traded in the market
a- 1 and 4
b- 2 and 4
c- 1,2 and 3
d- 1, 2, 3 and 4 |
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Definition
| A. Guarenteed by issuing bank. Can be traded in market. Min denom of $100k. Cannot be refunded prior to maturity |
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Term
Which of the following is true regarding commercial paper?
A- Max Maturity of $270 days
B- Generally Trades at a Discount
C- Callable by the issuer
D- Can be sold Directly to the public |
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Definition
| C. It is not callable by the issuer. |
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Term
A customer writes one XYL June 60 call uncovered for a premium of 3 when the market price of XYL is 58. What is the required margin in the customer's account?
A- 1170
B- 1370
C- 1260
D- 2900 |
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Definition
C. Margin required on an uncovered option is 20% of the market value, plus the premium and minus nay out of the money amount.
20% of 5800 + premium - Out of money amount/ The customer would only have to deposit 960 as the premium received is just left in the account
$1660+300= 1460 - 200 = 1260. |
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Term
| Free riding and withholding are violations of the ___ |
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Definition
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Term
The sale of a security long in a restricted margin account would have which of the following results?
A- Dec. MV and Equity
B- Dec. MV, Increased SMA and no effect on Eq.
C- Decreased MV and Decreased Eq
D- Increased Eq |
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Definition
| B. Sale of a sec held long in a restricted margin acct reduces the MV and the debit balance. Also creates an increase in the SMA but has no effect on the customer's equity |
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Term
If the IRS determines that a tax shelter was abusive, what consequences may follow?
1- Deductions disallowed
2- Taxpayer is charged interest on back taxes
3- taxpayer charged penalties
A-1 and 2
B- 1 and 3
C- 2 and 3
D- 1, 2 and 3 |
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Definition
| d. if the IRS determines that a tex sheter is abusive they can disallow deductions and charge appropriate interst and penalties |
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Term
Which of the following would be conisdered an accreddited investor?
1- finanacial inst.
2- Individual with net worth of 1m or more
3- Individ with income of $200k or more for the past 2 years
4- person who invests $150k or more in the program.
A - 1 only
B- 2 and 3
C- 1 and 4 only
D- A person who invests 150k or more in the program |
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Definition
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Term
| The major objective with requiring dealers to report transactions in the NASDQ National Market System issues within 90 seconds is to provide current information to ___ |
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Definition
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Term
Which of the following pass through securities is restricted to purchasing only conventional residential mortgages from financial institutions insured by an agency of the US gov?
A-Fannie
B-Ginnie
C- Sallie Mae
D- Freddie |
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Definition
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Term
Which of the following would reduce US balance of payments?
a- Increased foreign investment in the US
b- Building of plant faciliaties abroad by us companies
c- Loans by US banks to Foreign Corps
d- Americans increasing their purchase of foreign securities |
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Definition
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Term
A customer puchased $25K worth of ABC corp over a period of time. Which of the following is true about his subesquent sale of 10k of abc stock?
A- His capital gain is 10k
b- the irs requires LIFE be used
c- the IRS requires that FIFO be used
d- Investor is allowed to specify which shares are being sold to minimize capital gain |
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Definition
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Term
Which of the following would establs a short position?
A-Sale of borrowed stock
B-Sale of stock against the box
C-A purchase and sale for Arbitrage
D- All |
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Definition
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Term
If an NASD member firm acts as a n agent (broker) the confirmation must contain which of the following?
A-commission charged
B- Markup
C-Markdown
D-ALL of the above that would apply |
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Definition
| A. They acted as an AGENT. Markup or markdown would only apply if they acted as a principle |
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Term
Which of the following would be a reason for calling an issue of muni bonds?
a- hurricane fucks shit up
b- authority issuing securities has excess funds
c- interest rates drop
d- Any of the above |
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Definition
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Term
Mary makes a gift of securities to her grandson, John. Ms. Brown appoints her daughter Caroline as custodian for john under the UGMA in the state of Ohio. Who is the owner of these securities?
A- Mary
B- Caroline
C-John
D- Caroline and John, as joint tenants |
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Definition
| C- The minor is the owner of these securities |
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Term
| (From question 91, Exam 1 part 2) Whose tax id number would be needed to open the account? |
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Definition
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Term
An otc happens between 2 dealers. The security is included in the the NMS. Trade must be reported within 90 seconds of occurence by:
A- Seller
B- Buyer
C- Both buyer and seller
D- Dealer who initiated the trade |
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Definition
| A. The seller must report in 90 seconds |
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Term
Client holds a call on Swiss Francs with an excercise price of 61. This permits the client to buy the Swiss Francs at
A- $.61
B- $6.10
C- $61
D- $.061 |
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Definition
| A. .61 per franc. Review currency options |
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Term
| A bond is convertible into common stock at $50 a share. The bond is trading at 116. What is the parity price for common stock? |
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Definition
| $58. First divide par by 50 to get 20 shares. Then divide 1160 by 20 to get $58 dollars a share |
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Term
A municipal dealer purchases $100k of stat of Virgina Bonds 7 1/2% GO Bonds at par. The dealer immediately reoffers the bonds in the market. Which of the following would be deemed to be a bona fide offering?
1- 6.00 Net
2- 7.25
C- 107 1/2
B- 107 1/2 less .50 |
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Definition
| B. The dealer is entitled to a reasonable markup above his cost of par. An offering at 7.25 would be a markup of 25 basis points and would be reasonable. |
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Term
Under the tax reform act of 1968 a limited partners portion of the losses from a tax sheltered investment can be used to offeset income form which of the following?
A active
B Portfolio
C Passive
D Any of the Above |
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Definition
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Term
A client owns an ABC June 60 call. Later the company declares a 14% dividend. on the Exdate for this dividend the client's call will be:
A Unchanged
B a contract for 114 shares at 60
C A contract for 100 shares at 52.63
D A contract for 114 at 52.63 |
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Definition
| D. When a stock dividend is paid that does not result in the multiple of 100 shares we simply increase the number of shares in the contract to reflect the stock dividend. this contract would now be for 114 shares. to determine the new price we divide the old strike by the new number and round to the cent. Thus, 60 divided by 111 equals 52.631 |
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Term
A client purchases 100 shares of FUK at 78 and writes 2 FUK Oct 80 calls for 3
What is the max profit on the position?
What is the max Loss? |
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Definition
If at expiration the stock is trading at 80 the client will not be called and will keep the $600 in premiums received. In addition he will have a profit of 200 on the stock purchased at 78 to equal a total profit of $800.
The max possible loss is unlimited because the writer wrote 2 options but only has 100 shares |
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Term
All of the following are used as sources of info about new offerings except:
A- Bond Buyer
B- Blue List
C- Munifacts
D- Newspaper and periodicals |
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Definition
| B. The blue list contains DEALER OFFERINGS about munis but not new issues |
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Term
Which of the following investment company securities will genially have the largest expense ratio?
A- Unit investment trust
B- Closed end fund
C- Front end load fund
D- 12B-1 Mutual Fund |
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Definition
| D. 12b-1 fund have no up front sales charge but have a distribution and management fee that averages .5% to .75%. thus they have the highest expense ratio |
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Term
Purchase of a zero coupon treasury avoids which of the 2 following risks?
1- Credit
2-interest rate
3- reinvestment
4- purchasing power
a- 1+2
b- 1+4
c- 1+4
d- 3+4 |
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Definition
| B. Zeroes have neither credit nor reinvestment risk |
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Term
| A swiss Franc 62 Call Option (62,500 francs) quoted at 1.5 would have a premium of _____ |
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Definition
$937.50. Calculation:
Unit Number x Unit Price x Premium=
62500 x .01 x 1.5 = 937.5 |
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Term
| Test 2, Part 1, Question 11 |
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Definition
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Term
All of the following actions by a corporation would lower working capital except:
a- Calling a bond 5 years prior to maturity
b- purchasing machinery without incurring debt
c- Declaring a dividend
d- Paying a dividend |
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Definition
| D. Paying a dividend does not lower W. There is a dollar for dollar reduction of CA and CL as the dividend is paid. On the other hand, declaring a dividend introduces a new charge into current liabilities and WC is reduced. |
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Term
XYZ corp 5% cumulative convertible preferred stock (100par) is currently trading at 80. It is convertible into XYZ common stock at 60 per share. What is the current yield on the preferred shares?
A- 5%
B- 6.25%
C- 8.33%
D- 16.67% |
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Definition
| B. The Current yueld is the annual dividend in dollars divided by current price. Or $5/$80= 6.25% |
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Term
| A muni securities dealer is quoting a 2 sided market in a particular issue at 88.60 to 89.20 on blocks of 100 bonds. What is the spread per thousand dollars of par value? |
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Definition
| The spread between 88.60 and 89.20 is .6 of a point or $6 |
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Term
MSRB Rules permit which of the wfollowing to appprove advertising related to munis?
1- Muni Sec Principal
2- Muni Sec financial and ops principal
3- general securities principal
4- bond counsel
a- 1+4
b- 2+4
c- 1+3
d- 2+3 |
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Definition
| C. Muni prin and gen sec prin. |
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Term
| If an investor writes an uncovered call option which does not get excercised, what is his tax consequence? |
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Definition
| The investor has a capital gain equal to the premium recognized at expiration. |
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Term
An investor has a margin acct with LMV $60000 and a Debit Balance of $40k. The investor directs his B/D to sell 100 shares of FUK. The stock is sold at 12, how much can the investor withdraw?
a- 0
b- 400
c- 600
d- 1200 |
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Definition
| C. In a restricted margin account (the case here because the debit balance of $40k exceeds the equity of 20l) the client may always withdraw 50% of the proceeds of a long sale ($600) |
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Term
/D are required to obtain confirmation of a customer's financial condition prior to which of the following actions?
1- opening a margin acct
2- approving an account for option trading
3- handling account on a discretionary basis
4- allowing the purchase of a DPP for a customer account
a- 1
b- 1+2
c- 4
d- 2 and 4 |
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Definition
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Term
Which of the following ar not considered a type of investment company?
a- unit investment trusts
b- real estate investment trusts
c- open end management companies
d- closed end management companies |
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Definition
| B. REITS are not investment companies |
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Term
An investor purchases 20 ABC oct 75 calls for 6 when ABC stock is at 77. ABS subsequently declares a 3 fo2 split. How would the investors option position be expressed after the split is effected?
a- 20 ABC OCt 50 calls
b- 20 ABC Oct 75 Calls
c- 30 ABC Oct 50 Calls
d- 30 ABC Oct 75 Calls |
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Definition
| C. Multiply the number of calls by 3/2 and multiply the strike price by 2/3. Result: 30 Calls at 50 |
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Term
Which best describes a coverdell IRA?
1- Savings account that is set up to pay the qualified education expenses of a designated beneficiary.
2- May be opened at any bank in the US
3- Any beneficiary under 21 years of age
4- Trustee must be an individual
a- 1+4
b- 2+3
c- 1+2
d- 3+4 |
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Definition
| C. 1 and 2 are correct by definition. The benficiary must be under 18 and the trustee or custodian must be a bank or institution. |
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Term
| An investor purchased $10k face value 6.75% munis with a 7 year maturity at 96.50. The investor sells the bonds at 97 after holding them for 2 years. Whats the Gain or Loss for tax purposes? |
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Definition
| There is no evidence this is an OID muni bond. thus, presume this is a market discount. On a market discount muni do NOT adjust the price upward. The gain on sale is a sale price minus the cost of the acquisition: 9700-9650 or $50. |
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Term
Under Rule 144 a shareholder is allwoed to sell what % of a corp's outstanding shares?
a- .5%
b- 1%
c- 2%
d- 5% |
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Definition
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Term
A Tombstone Advertisement will usually show all of the following except
a- issuers identity
b- description of securities
c- managing underwriter
d- underwriter's compensation |
|
Definition
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Term
| What is the max number of non accredited purchasers allowed in a private placement |
|
Definition
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Term
An Investor owns XYZ stock. What actions may the investor take to partially protect her position from an expected decline in XYZ stock?
1- Buy XYZ Puts
2- Buy XYZ Calls
3- Place Sell Stop Orders on XYZ
4- Sell XYZ common stock short agaisnt the box
A- 2
B 1+3
C- 2+4
D- 2+3 |
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Definition
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Term
List the following according to priority claim in a liquidation of a corporation
1 Prefferred stock holders
2 General Creditors
3 Secured Bondholders
4 Subbordinated debenture Holders
A 1, 2 , 3 4
B 2, 3, 4, 1
C 3, 4, 2, 1
D 3, 2, 4, 1 |
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Definition
| D. Creditors always take priority over owners. Thus, I is last, of the creditors, secured bondholders come mmext, gemeral creditors next and the subordinated debenture holders before the preferred shareholders |
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Term
All the following are leading indcators exccept
A- GNP
B- Stock Market Prices
C- Money supply
D- Changes in Inventory |
|
Definition
|
|
Term
Stocks of companies in which of the following industries would be considered Defensive issues
A- autos
B- Electric Utilities
C- Consumer Durables
D- Oil Drilling |
|
Definition
|
|
Term
| What % of preferred stock dividends received by a corporation must be included in taxable income? |
|
Definition
| Current tax law permits a domestic corporation to exclude 70% of the dividends received from any equity security of a domestic corporation. Thus, a maximum 30% is taxable. Advice is needed because in some circumstances, larger amounts are excluded. |
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Term
The holder of a corporate security can sustain a loss until
a- the trade date of a sale
b- the day after the trade date
c- the day before the settlement date
d- the settlement date |
|
Definition
| A. The holder is only at risk until the trade date; after that, all risk goes to the new buer. The holder is, however, the holder of record until the settledment date and the accrued interest is computed up to but not including the settlement date |
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Term
| A new issue of municipals has a takedown of 2 pts and is to be reoffered at par. The manager's fee is $2/ The additional takedown is $8. The selling concession is #10. If a member has a group net order confirmed, the member will take bonds out of the account at: |
|
Definition
| Group Net means that the entire takedown remains in the account to be divided up among the participants according to their participation. Answer $1000. |
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Term
What is the breakeven point on the stock at expiration of the options?
A- 62
B- 64
C- 74
D- 76 |
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Definition
| C. At the expiration of the option, the client shall have paid out $ 68 for the stock and $6 for the put option. A total of $74. Thus, the client will breakeven if she can sell the stock at $74. |
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Term
| On Tuesday, August 11, an investor purchases an 8% muni bond in a regular way transaction. The bond has interest payment dates of June 15 and December 15. How many days of accrued int must the buyer pay the seller? |
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Definition
B.
June: 16 days
July 30 days
August 13 days
= 59 days.
Reg Way is T + 3, 3rd day being the settlement day so the 13th is the last interest day. Tricky |
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Term
Which of the following Gov Securities have no collateral value?
A- Series EE Savings bond
B- T-Notes
C- T-Bills
D- T-Bonds |
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Definition
| A. serries EE Bonds are non negotiable and have no collateral value |
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Term
Which of the following will increase the SMA in a restricted margin account?
1- Sale of securities held long in the account
2- cash dividend on securities held long in the account
3- Deposit Cash to meet a Reg T requirement
4- Deposit of securities to meet a reg-t Requirement
A- 1 and 2 only
B 2+3
c 1+3
d- 3+4 |
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Definition
| A. Both cash dividends and long sales will increase sma in a margin account. Deposits to meet Reg T would not. |
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Term
| An investor has a margin account with securities held long valued at $26,000 and a $16,000 debit balance. How much money must the investor deposit to meet the margin req on a purchase of $7k additional stock |
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Definition
| C. Account is restricted and there is no SMA so you would need to deposit $3500 |
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Term
| Do 84 and 85, part 1, exam 2 again |
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Definition
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Term
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Definition
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Term
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Definition
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Term
Which of the following positions has the greatest dollar risk?
A- Long Stock - short Call
B- Long stock - long put
C- Short Stock - Long Call
D- Short Stock - short put |
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Definition
| D. Short Stock-short put has the greatest dollar risk of the choices given. The premium from the put protects the writer from the short sale price upward. From that breakeven point upward, the writer has unlimited risk. |
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Term
A corporation issued convertible debentures. Conversion of those securities would reduce all of the following for the issuing corporation EXCEPT
A- Leverage
B- Capitalization
C- Interest Expense
D- LTD |
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Definition
| Capitalization would remain the same following the conversion of the bonds. Leverage, interest expense and LTD would all decrease. |
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Term
| Question 99 Exam 2 part 1 |
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Definition
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Term
Retirement Plans established by which of the following are subject to the Employee Retirement Income Security Act?
A- Public Emmployers
B- Private Employers
C- Both Public and Private Employers
D- Self Employed individuals |
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Definition
| B. Private employer pension plans - in most circumstances- are subject to ERISA rules. Such rules place fiduciary responsibility on plan managers. |
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Term
An oil and gas LP is compensating its GP with a % of all revenues. The gp also shares in a different % of the partnership's expenses. How would this type of sharing be described?
A- Carried working interest
B- Functional Allocation
C- Overriding Royalty Interest
D- Dispproportionate sharing arrangement |
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Definition
| D. This is the definition of disproportionate Sharing |
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Term
What is the most likely reason why a municipal securities dealer might use a broker's broker to effect a sale with another dealer?
A to keep its activity confidential
B The broker's broker can effect the trade more efficiently at a lower cost
C This will allow the dealer to secretly manipulate the market price of the bond
D The broker's broker would be willing to swap bonds from its inventoy for those the dealer wishes to sell |
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Definition
| A as a general rule, broker's brokers are used to preserve confidentiality |
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Term
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Definition
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Term
Your client's margin account shows the following balances
LMV 24
Debit Bal 16k
SMA 10k
How much money could the client withdraw without liquidating any existing security positions
A- 0
B-2000
c-4000
d-10000 |
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Definition
The client's equity is $8k and the margin maintenance is only 2K, this is all of the SMA that may be used for withdrawing cash.
LMV 24k
Debit -16k
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Equity 8k
Maint.-6k (25% of 24k)
M excess = 2K
Thus 2k is all the sma that is usable for cash withdrawals. SMA could be used for purchases but that would cause a margin call |
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Term
ABC stock is trading at 23 and an investor decides to buy 200 shares and sell 2 ABC 25 calls for 3
What is the Max Gain?
What is the Breakeven Point? |
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Definition
Max gain is 5k (2*2500) plus 600 received from 2 calls minus the 4600 spent for the shares. 5600 - 4600 = 1k
Breakeven on a short call covered by long stock is the purchase price of the stock (23) minus the premium received ($3). Breakeven = $20 |
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Term
Which two of the following statements are true oof inverted yield curves?
1 They are positively sloped
2 They are negatively sloped
3 They reflect short term yields lower than LT yields
4 They reflect ST yields higher than LT yields
A 1+3
B 1+4
C 2+3
D 2+4 |
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Definition
| D. Negatively sloped and have ST yields higher than LT yields |
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