Term
If one of your clients dies, on notification of death you should immediately:
I. mark the account "deceased" until proper documents are received.
II. cancel all GTC orders for the account.
III. obtain a letter from the attorney representing the estate with instructions for transfer.
IV. obtain the names and addresses of the beneficiaries of the estate.
A) II and III.
B) I and III.
C) III and IV.
D) I and II. |
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Definition
B - I and II
Not the responsibility of the firm to contact the dead person's attorney or the beneficiaries |
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Term
A mutual fund has a net asset value (NAV) of $7.80 per share, and the fund pays its underwriter a concession of $0.12 per share. If the fund has a sales load of $0.50 per share and an administrative fee of $0.15 per share, how much does the investor pay per share to purchase a Class A share of this fund?
A) 8.3.
B) 7.8.
C) 8.42.
D) 8.57. |
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Definition
A - 8.3
Investor pays the PUBLIC OFFER PRICE (POP)
POP = NAV + Sales charge |
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Term
Which of the following statements regarding the interest deduction for bank-qualified municipal bonds is TRUE?
A) Investors are entitled to an 80% deduction of interest expense associated with buying the bonds.
B) Banks are entitled to an 80% deduction of interest expense associated with buying the bonds.
C) Banks are entitled to a 20% deduction of interest expense associated with buying the bonds.
D) Investors are entitled to a 20% deduction of interest expense associated with buying the bonds. |
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Definition
B
Consider THE BANK a CORPORATION |
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Term
If the yield curve becomes inverted, a likely cause would be that the Fed has:
A) loosened long-term credit.
B) tightened short-term credit.
C) loosened short-term credit.
D) tightened long-term credit. |
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Definition
B - tightened short-term credit
Inverted yield curve = short term rates are higher than long term
Fed would have TIGHTENED SHORT TERM CREDIT, because the economy appeared to be overheating |
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Term
Which of the following trades settle next business day?
U.S. government debt.
U.S. government agency debt.
Municipal bonds.
Listed options.
A) I and III.
B) II and III.
C) I and II.
D) I and IV. |
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Definition
D - I and IV
U.S. government debt and listed options settle next day; government agency debt and municipal bonds are subject to regular way settlement of T + 3. |
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Term
Which of the following statements regarding a municipal variable rate demand obligation are TRUE?
I. Interest payments are tied to the movements of another specified interest rate.
II. Interest payments are tied to the movements of an underlying stock or index.
III. the coupon rate stays the same for the life of the demand obligation and the price fluctuates.
IV. the coupon rate of the bond changes and the price remains stable.
A) II and III.
B) II and IV.
C) I and IV.
D) I and III. |
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Definition
C - I and IV
A municipal variable rate demand obligation has interest payments tied to the movements of a specified INTEREST RATE.
Because the coupon rate of the bond changes with the market, the price of the demand obligation tends to remain stable. |
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Term
According to the Investment Company Act of 1940, a diversified mutual fund may hold, at most, what percentage of a corporation's voting securities?
A) 5%.
B) 10%.
C) 50%.
D) 75%. |
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Definition
B - 10%
To be considered a diversified investment company, a mutual fund can own no more than 10% of a target company's voting securities. |
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Term
An investor unaffiliated with the issuer is permitted to sell restricted stock without being subject to volume restrictions after having held the shares, fully paid, for a period totaling:
A) 2 years.
B) 1 year.
C) 3 years.
D) 6 months. |
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Definition
D - 6 months
After six months, an unaffiliated investor can begin selling restricted stock and is not subject to volume restrictions. |
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Term
A convertible corporate bond with an 8% coupon yielding 7.1% is available, but may be called some time this year. Which feature of this bond would probably be least attractive to your client?
A) Convertibility.
B) Near-term call.
C) Coupon yield.
D) Current yield. |
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Definition
C
The near-term call would mean that no matter how attractive the bond's other features, the client may not have very long to enjoy them. |
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Term
The placement ratio, as shown in the "Bond Buyer", is:
A) bonds issued/bonds unsold.
B) bonds sold/bonds unsold.
C) bonds sold/bonds issued.
D) bonds issued/bonds sold. |
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Definition
C
SOLD/ISSUED ....measures NEW DEMAND |
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Term
The market price of a convertible bond depends on all of the following EXCEPT:
A) the value of the underlying stock into which the bond can be converted.
B) the conversion prices of bonds from similar companies.
C) current interest rates.
D) the rating of the bond. |
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Definition
B
CONVERSION PRICES ARE NOT SET IN COMPETITION |
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Term
Which of the following are governed by the prudent investor rule?
I. Trustee.
II. Executor.
III. Custodian.
IV. Registered representative who has been granted discretionary authority.
A) I and II.
B) I, II, III and IV.
C) III and IV.
D) II and III. |
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Definition
B - I, II, III, and IV
Prudent investor rule = don't be a dick with someone else's money. applies to everyone |
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Term
A member firm’s customer is requesting that IRA contributions converted from a traditional IRA to a Roth IRA now be moved back to a traditional IRA. This is
A) called a rollover and allowed by the IRS as long all requirements are met
B) never allowed under any circumstances
C) called a re-characterization and is permitted under all circumstances and within any time frame
D) called a re-characterization and is allowed by the IRS so long as certain requirements are met |
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Definition
D
The IRS allows an individual to re-characterize contributions made to one type of IRA as if they had been made to another type of IRA as long as the requirements as to when the re-characterization can occur have been met. |
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Term
Which of the following are considered sources of debt service for GO bonds?
I. Tolls on roads
II. Real estate taxes
III. Revenue generated by a hospital
IV. Liquor license fees
A) II and III
B) I and IV
C) I and III
D) II and IV |
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Definition
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Term
The initial confirmation of a when-issued municipal bond contains which of the following?
I. Number of bonds involved in the transaction.
II. Settlement date.
III. Yield to maturity.
IV. Total dollar amount due.
A) III and IV.
B) I and III.
C) II and IV.
D) I and II. |
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Definition
B - I and III
Settlement date is unknown in a WHEN ISSUED, therefore interest is unknown.
Thus, total dollar amount is unknown |
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Term
Stabilizing bids may be entered at:
A) whatever stabilizing price is stated in the prospectus.
B) a price no higher than the public offering price.
C) any reasonable price necessary to support the public offering price.
D) a price not exceeding 5% above the public offering price. |
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Definition
B
STABILIZING BIDS CANNOT BE HIGHER THAN THE POP |
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Term
Which of the following statements regarding index options are TRUE?
Exercise is settled in cash.
Exercise settlement value is based on the value of the index at the time exercise instructions are received.
Exercise settlement value is based on the closing index value on the day exercise instructions are tendered.
Exercise settlement is regular way.
A) I and III.
B) II and III.
C) I and II.
D) II and IV. |
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Definition
A - I and III
All index option exercises are settled in cash. The amount a writer owes the holder is known as the intrinsic value of the option, and the settlement value is based on the closing index value on the day exercise instructions are tendered. Settlement is next business day. |
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Term
A customer has just opened a new account at your firm and given her lawyer limited power of attorney. Which of the following statements are TRUE?
Confirmations of trades will be sent to the account owner.
Confirmations will be sent to the party given the power of attorney only.
The POA ceases upon the death of either party.
The POA must be renewed annually.
A) I and IV.
B) I and III.
C) II and IV.
D) II and III. |
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Definition
B - I and III
Limited POAs die when someone dies |
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Term
Your client wishes to convert a 401k plan administered by your broker/dealer into a Roth 401k plan. Which of the following statements regarding a 401k conversion is TRUE?
A) Taxes will be due on the funds when the rollover takes place.
B) Taxes are due on the funds rolled over when distributions from the new Roth 401k are made.
C) All taxes are waived by the IRS at the time of conversion.
D) In the new Roth 401k the funds will grow tax deferred. |
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Definition
A - Taxes will be due when the rollover takes place
No waiver from IRS. Taxes paid when rolled over |
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Term
Which of the following activities are NOT a registrar's function(s)?
Audit the transfer agent.
Accounting for the number of shares outstanding.
Canceling old shares.
Transferring shares into the new owners' names.
A) I and IV.
B) I and II.
C) II and III.
D) III and IV. |
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Definition
D - III and IV
The registrar accounts for the number of shares and audits the transfer agent. |
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Term
If an investor sells 1 TCB Jan 50 put at 7 on July 15, 2013, and the put expires unexercised, what are the tax consequences?
A) $700 short-term capital gain reportable for tax year 2013.
B) $700 ordinary income reportable for tax year 2013.
C) $700 short-term capital gain reportable for tax year 2014.
D) $700 ordinary income reportable for tax year 2014. |
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Definition
C
For tax purposes, any premiums earned are recognized at the expiration date. In this case the January contract purchased in July, 2013 will expire in January, 2014. Options writers always have short-term gains or losses. |
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Term
An affiliate of a corporation wants to sell 80 calls covered by 8,000 shares of Rule 144 stock she owns. This transaction is:
A) not allowed because an affiliate of a corporation may not trade options in the company's stock.
B) allowed because the calls will be considered covered by the stock.
C) not allowed because Rule 144 stock may not be sold unrestricted by an affiliate.
D) allowed because the 8,000 shares of stock may be sold unrestricted. |
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Definition
C
Rule 144 stock is considered to be illiquid. It cannot be sold unrestricted by an affiliate and could, therefore, not be used to cover the calls in the event the calls were exercised. |
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Term
If stock market indexes, such as the S&P 500 and the DJIA, are declining daily, and the number of declining stocks relative to advancing stocks is falling, a technical analyst will conclude that the market is:
A) oversold.
B) unstable.
C) becoming volatile.
D) overbought. |
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Definition
A) oversold
It has reached the peak, and its ready to crash. its OVERSOLD |
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Term
Your 55-year-old client invested $50,000 four years ago in a nonqualified variable annuity. The original investment has grown to a value of $60,000. If the client, who is in a 30% tax bracket, makes a random withdrawal of $15,000, what will the tax liability to the IRS be?
A) 4500.
B) 4000.
C) 0.
D) 3000. |
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Definition
B - 4000
Since this is a nonqualified annuity (with no tax deduction), the client pays taxes only on the growth portion or, in this case, $10,000. The tax on this amount is $3,000. However, because the client is not yet age 59-½ when making the withdrawal, he also pays a 10% penalty, or $1,000. This makes a total of $4,000 tax and penalty paid on the random withdrawal. |
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Term
A customer sells short 500 XYZ at $80 per share in a margin account. Prior to regular way settlement, if the stock falls to $60 per share, the minimum maintenance margin requirement is:
A) 12000.
B) 10000.
C) 9000.
D) 7500. |
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Definition
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Term
Which of the following statements regarding the Code of Arbitration are TRUE?
I. Simplified arbitration is available for claims of $50,000 or less.
II. Simplified arbitration is available for claims of $25,000 or less.
III. The statute of limitations for filing a claim is 3 years from the event.
IV. The statute of limitations for filing a claim is 6 years from the event.
A) II and III
B) I and IV
C) I and III
D) II and IV |
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Definition
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Term
Which of the following statements regarding ADRs are TRUE?
They are issued by large domestic commercial banks.
They are issued by foreign banks.
They facilitate U.S. trading in foreign securities.
They facilitate a foreign investor who wants to trade U.S. securities.
A) II and III.
B) I and IV.
C) II and IV.
D) I and III. |
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Definition
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Term
All of the following are nonexempt securities EXCEPT a:
A) fixed annuity.
B) municipal unit investment trust share.
C) variable annuity unit.
D) U.S. government bond mutual fund share. |
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Definition
A
A fixed annuity is an insurance product exempt from registration with the SEC. Variable annuities, which carry investment risk, are nonexempt securities under the Securities Act of 1933 and must be registered before public sale. Similarly, unit trusts and mutual funds are nonexempt even though the underlying securities may be exempt, such as municipals and U.S. government securities. |
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Term
A registered representative (RR) is explaining the characteristics of a Coverdell ESA to a customer. Which of the following statements regarding this type of savings account is CORRECT?
Contributions are tax deductible.
Contributions are not tax deductible.
When used for qualified educational expenses, withdrawals are taxable.
When used for qualified educational expenses, withdrawals are not taxable.
A) II and III.
B) I and IV.
C) I and III.
D) II and IV. |
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Definition
D - II and IV
Contributions to a Coverdell Education Saving Account (ESA) are made with AFTER-TAX dollars. Distributions used for qualified educational expenses are tax free. |
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Term
A customer has 10 municipal bonds which each increased in yield by 1 basis point. For the 10 bond position this increase is equal to:
A) $1.00.
B) $0.50.
C) $5.00.
D) $10.00. |
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Definition
A - $1.00
1 basis point = $0.10 |
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Term
A resident of a state who acquires stock pursuant to Rule 147 (intrastate offerings) is prohibited from selling the stock to a nonresident of that state for how many months?
A) 9.
B) 12.
C) 18.
D) 6. |
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Definition
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