question

The Taft Food Company intends to distribute shares of its grocery business to existing stockholders. The shares of this company will be traded separately from Taft. This is an example of a(n

answer

Spin-off

question

A registered representative enters an order for a client. In error, the RR purchases shares of the wrong security. Which of the following statements is TRUE?

answer

The shares must be placed in the broker-dealer's error account

question

Foremost Corporation has declared a quarterly dividend of 25 cents payable to stockholders of record on Friday, December 1. The dividend will be paid to all stockholders whose names appear on the record books of Foremost Corporation on

answer

December 1st-the record date

question

A charity has received restricted stock from the director of a corporation. The director owned the stock for two years before giving it to the charity. According to SEC Rule 144, the charity may sell the stock:

answer

Freely under Rule 144; already been held more than 6 months by the director

question

An individual who owns STC stock could provide protection against a decrease in market value by

answer

Buying puts and selling calls

question

Which of the following direct participation programs is associated with low costs to obtain the property and high up-front costs?

answer

An exploratory oil and gas program

question

Which of the following statements is NOT TRUE regarding the similarities between variable annuities and mutual funds?

answer

Variable annuity companies will retain any dividends paid, but the owner of the variable annuity must pay taxes on the dividends each year

question

A registered representative employed by the research department of a member firm is NOT permitted to be supervised by which department of a broker-dealer?

answer

Investment banking to avoid conflicts of interest

question

When buying listed put options versus selling the underlying stock short, which of the following choices is NOT an advantage?

answer

The put has a time value beyond an intrinsic value that gradually dissipates

question

In which TWO of the following situations is a customer NOT considered covered when writing a put option?

answer

The customer is long a call option and The customer is long the underlying security

question

If an auction for auction rate securities were to fail, the holder would:

answer

Continue to hold the securities and the interest rate would be set to the maximum rate

question

In a Rule 144A transaction, which of the following statements is NOT TRUE?

answer

The only documentation acceptable for establishing that the purchaser is a QIB is audited financial statements (or their equivalent, for foreign issuers)

question

The Founders Income Fund has declared a dividend payable to stockholders of record Friday, May 29. This mutual fund would typically sell ex-dividend on:

answer

The date set by the fund or its principal underwriter (sponsor)

question

Which of the following calculations describes the payout on a variable annuity?

answer

A fixed number of annuity units multiplied by a variable dollar amount

question

A municipal dealer purchased $100,000 face value of 6.00% bonds at a 6.00 basis. If the dealer reoffered the bonds, which TWO of the following choices will be considered reasonable?

answer

101 and 5.08 basis; The dealer purchased the bonds at par (6% coupon at a 6.00 basis). When reoffering the bonds, the dealer's markup should be reasonable. A one-point markup (101) is considered reasonable, whereas an eight-point markup (108) is not. An offering of 5.80 represents a reduction in yield of 20 basis points and is considered reasonable. A reduction in yield of 200 basis points (6.00 basis minus 4.00 basis reoffering) is excessive.

question

Which of the following securities is an example of a collateralized time draft?

answer

Bankers' acceptances; used to facilitate foreign trade. It is a time draft that has been guaranteed (collateralized) by a bank

question

An individual who is considering an investment in a DPP should be most concerned with:

answer

The economic viability of the programs

question

A customer has a long margin account with a market value of $30,000 and a debit balance of $20,000. His short margin account has a $7,000 market value and a $10,000 credit balance. The FRB margin requirement is 50%. What is the minimum equity requirement for the short position?

answer

$2,100; The SRO minimum maintenance requirement for a short position is 30% of the market value. The market value is $7,000, and 30% of $7,000 equals $2,100

question

In terms of the number of stocks in each category, rank the components of the Dow Jones Composite Index from greatest to least

answer

Industrial, transportation, utility

question

Duties of the ROP include:

answer

Reviewing selected customer accounts Establishing option training programs for registered representatives and ROPs Reviewing retail communications

question

When computing the dollar price of a municipal bond sold on a yield basis, which of the following call features will be used?

answer

In whole call; allowed to call the entire issue

question

A customer contacts a registered representative and wants to invest a large sum of money in four different mutual fund families. Which of the following statements is the MOST important disclosure the RR should make to the client?

answer

The customer will not be able to receive sales breakpoints

question

Which TWO of the following choices are characteristics of GNMA pass-through certificates?

answer

Interest and principal payments are received monthly and Timely payment of interest and principal is guaranteed by the U.S. government

question

A customer sold short 1,000 shares of XYZ Corporation that is presently selling at $2 per share. Industry rules require a minimum maintenance margin of:

answer

$2.50 per share; When a stock that has been sold short has a market value of less than $5, industry rules require a minimum maintenance margin of $2.50 per share or 100% of the value of the securities, whichever is greater. In this example, $2.50 per share is greater and the customer would have to deposit $2,500 in the account to meet the requirement

question

Municipal bearer bonds that are in default of interest, trade:

answer

With unpaid coupons attached

question

In a custodian account, which of the following choices would determine when a minor takes control of the account?

answer

The state in which the minor is a resident

question

Your client owns a portfolio of blue-chip equity securities and wants to increase the overall rate of return through the use of options. The most conservative strategy to achieve this objective is to:

answer

Write covered calls

question

In which of the following retirement plans is an actuarial calculation used to determine the employer's contribution?

answer

Defined benefit plan

question

An investor who has purchased shares of a money-market fund is NOT looking for:

answer

Obtaining capital gains

question

A municipal finance professional (MFP) and her spouse make a political contribution of $400 from a joint account. Only the MFP signs the check. According to the MSRB political contribution rules, the contribution would be viewed as a:

answer

$400 contribution from the MFP bc he was the only one to sign the check

question

A municipality issues a bond backed by revenue from a project. If the municipality also has bonds outstanding that have the same claim against revenue, which of the following statements is TRUE?

answer

This is a parity bond

question

A broker-dealer is acting as a principal in which of the following scenarios?

answer

Selling bonds from inventory to an individual Selling bonds from inventory to another broker-dealer Buying bonds from another broker-dealer for inventory Buying 500 bonds to fill an insurance company's order for 250 bonds

question

Which of the following choices may write calls covered by XYZ stock?

answer

The president of XYZ Corporation The trustee of XYZ Corporation's pension fund XYZ Corporation

question

A 28-year-old single investor has funds saved at a bank. He contacts an RR and wants to begin allocating funds to a retirement account. Which of the following choices is the most appropriate asset allocation?

answer

80% stocks and 20% bonds; Long-term, risk-tolerant investors, such as those saving for retirement, are usually looking for growth of capital as an objective. They are also usually concerned about the effects of inflation. Over long periods, stocks usually keep pace or offer higher returns as measured against inflation. Inflationary risk is also referred to as purchasing-power risk. Since the investor is many years from retirement, a large percentage of his portfolio should be allocated to stocks

question

Promotional material made available to the public may compare collateralized mortgage obligations (CMOs) to:

answer

Any type of promotional communication made available to customers may not compare CMOs to any other security. This is due to the uniqueness of this product

question

One of your clients, Kona Okemo, has a long-term objective of capital appreciation. Which of the following investment strategies will MOST closely achieve this goal?

answer

30% in an ETF that follows the S&P 500, 20% in an emerging markets fund, 15% in a REIT fund, 15% in a biotechnology fund, and 20% in a U.S. government bond fund; asset allocation in mostly equities

question

A project financed through revenue bonds is experiencing difficulty in that revenues are not sufficient to meet debt service payments. If, through legislative approval, the state pays interest and principal in a timely manner, the issue is most likely

answer

Moral obligation bonds

question

An investor has been saving for her child's college education using a 529 plan. If her child will be attending college in a few years, which TWO of the following actions are MOST suitable?

answer

Moving money from equity and bond investments to money-market funds and Moving money from equity funds to bond funds

question

An advertisement for municipal securities states the following: "15-year 10% tax-free bond priced to yield 12% to maturity. Call us now for more details." According to MSRB rules, this advertisement should also state that

answer

A portion of the yield to maturity is taxable if the bond is held to maturity, making the after-tax return between 10% and 12%

question

The turnover that a dollar experiences over a given period is known as the:

answer

Velocity of money

question

Which choice BEST describes The Bond Buyer's Revenue Bond Index?

answer

Average yield on a list of bonds with 30-year maturities

question

The current yield on a municipal bond with a coupon rate of 4.50%, purchased at par and currently trading at $1,055, is:

answer

4.26%; The current yield is found by dividing the yearly interest payment of $45 by the market price of $1, 055. This equals 4.26%. The fact that the bond was purchased at par is not relevant.

question

A customer has realized a capital gain from the sale of a municipal bond. To reduce the customer's tax liability, the capital gain can be offset against a capital loss from which of the following investments?

answer

A general obligation bond An equity security A corporate bond A real estate investment trust

question

During a deflationary period, interest rates:

answer

Decrease, causing bond prices to rise

question

The minimum denomination for negotiable certificates of deposit is:

answer

$100,000

question

Total operating costs divided by average net assets is the formula used to find the expense ratio of a(n):

answer

Equity mutual funds

question

A securities market is considered efficient if which TWO of the following conditions are present?

answer

Small differences between the bid and offer prices and A large number of transactions

question

Which of the following statements is NOT TRUE concerning the Student Loan Marketing Association (Sallie Mae)?

answer

It issues securities that can be redeemed to pay for college education

question

Which TWO of the following choices are types of securities issued by the Federal Home Loan Bank?

answer

Discount notes with maturities of less than 1 year Consolidated bonds with maturities of up to 30 years

question

Under MSRB rules, which of the following documents do NOT need to be retained for a specific period?

answer

Issuers' official statements

question

Repurchase agreements (repos) and reverse repos would MOST likely be used by:

answer

Institutions that have a need to borrow on a short-term basis, or have money to lend on a short-term basis

question

From the issuer's perspective, when comparing term bonds and serial bonds, serial bonds have:

answer

Declining interest payments and declining principal amounts

question

A customer's account does not require approval to trade penny stocks if the:

answer

Trade is not recommended Account is established

question

A client wants all trade confirmations sent to his investment adviser. This will require:

answer

A written letter from the client

Series 7: Wrong answers part two – Flashcards

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