Series 6 Chapter 1

Front 1

Regulation U

Back 1

extension of credit by banks and other financial institutions

Front 2

The term for stock that receives dividends, has voting rights, and represents the number of shares owned by the public less the amount of shares reacquired by the corporation

Back 2

Outstanding stock

Front 3

When a security is transacted on a regular-way settlement basis, the settlement date occurs

Back 3

within 3 business days

t+3

Front 4

cash trades are required to paid for on the

Back 4

same business day after the transaction

Front 5

What are the two types of voting processes used by corporations?

Back 5

Statutory and cumulative

Front 6

What is the formula to determine the number of outstanding shares?

Back 6

issued - treasury = outstanding

Front 7

Once the board of directors of a corporation declares a dividend, it is a current_____________

and must be _____________ to the shareholders

Back 7

liability

paid

Front 8

Which of the following is true about Treasury Stock?

I. authorized but unissued

II. offers voting rights and is entitled to a dividend when declared

III. has no voting rights and no dividends

IV. had been issued and repurchased by the company

Back 8

III and IV

Front 9

A stockholder's rights include all of the following EXCEPT:

A. a declaration of a dividend

B. directors

C. stock splits

D. a change in the corporate charter

Back 9

A. a declaration of a dividend

Front 10

US Government securities transactions have a settlement date of

Back 10

Next business day

Front 11

shares of stock that have been actually sold to the public are known as

Back 11

issued stock

Front 12

When a customer purchases shares of stock, on what date is the price and quantity of that stock determined?

Back 12

trade date

Front 13

Who is responsible for determining corporate policy and authorizing major transactions for a corporation?

Back 13

Board of directors

Front 14

Which of the following types of stock received dividends when declared?

I. outstanding

II. Treasury

III. Common

IV. Unissued

Back 14

I and III

Front 15

Companies have a net worth, which can be calculated using a method called the

Back 15

Balance sheet equation

Front 16

What does voting by proxy mean?

Back 16

They grant a limited power of attorney to vote on their behalves.

Front 17

What are two characteristics of warrants?

Back 17

Long term

Exercise price above current market value

Front 18

Warrants are usually issued to _____________ the interest rate that the company has to pay.

Back 18

reduce

Front 19

What are 3 preemptive rights of common stockholders?

Back 19

Let them expire

Exercise right to purchase new stock

sell the right to another stockholder

Front 20

When current stockholders have pre-emptive rights, they are entitled to:

Back 20

the opportunity to purchase new shares before the shares are offered to the public.

maintain proportionate interest in the company

Front 21

Warrants attached to bonds make the bond more ___________________, thus ______________ the bond's coupon rate.

Back 21

attractive

increasing

Front 22

shares of stock represent ownership of a corporation. Ownership interest is proportionate to the shares _____________ compared to the number of shares ______________________.

Back 22

owned

outstanding

Front 23

Your client owns stock in a company that has announced a stock rights offering. If the client does not subscribe to the offer, his percentage of ownership interest in the company will

Back 23

decrease

Front 24

When exercising a preemptive right, at what price is the shareholder allowed to purchase the new stock?

Back 24

subscription price (below POP)

Front 25

Which investors are bullish? Buyer of _____ contracts and seller of _____ contracts.

Back 25

call

put

Front 26

Options are legally binding contracts between _______ and ___________.

Back 26

buyers

sellers

Front 27

The sum of all issued securities of a corporation is referred to as the corporation's _____________

Back 27

capital structure

Front 28

What regulation protects purchasers from fraudulent practices in the sale of new issues of securities?

Back 28

The Securities Act of 1933

Front 29

What is the meaning of the term "strike" price as used in an options contract?

Back 29

Value at which the option can be exercised throughout the option period.

Front 30

How long is the "cooling off period" for a security under SEC review?

Back 30

20 days

Front 31

When should a final prospectus be delivered?

Back 31

at or prior to the confirmation of the sale

Front 32

Which securities are considered exempt from provisions of Securities Act of 1933?

Back 32

-US government and US government agency securities

-municipal securities

-issues of nonprofit organizations

-commercial paper

-issues of domestic banks and trust companies(but not bank holding companies)

-issues of small business investment companies

Front 33

The proceeds from a sale of a security went directly to the issuer of the security. This transaction occurred in which market?

Back 33

Primary

Front 34

Under the Act of 1933, when is it deemed unlawful for any firm or person to market a security?

Back 34

by means of interstate commerce, meaning transportations or communication, or the mails if that security is not registered.

Front 35

What type of stock would a person own for the best assurance of receiving dividend income?

Back 35

cumulative preferred

Front 36

a bond's duration is important because

Back 36

bonds with longer maturities are ore affected by changes in interest rates

Front 37

Your client has not paid for a stock purchase in the alotted time period. According to Reg T, this account will be frozen for?

Back 37

90 days

Front 38

What is the most common type of bond issued?

Back 38

Unsecured (Debentures)

Front 39

an investor requiring a fixed monthly income is best suited for an investment with _____________ volatility with a _______________ overall return.

Back 39

lower

lesser

Front 40

True or false:

a 65 year old retiree will have a higher risk tolerance than a 40 year old professional

Back 40

false

Front 41

What type of security would be best for a customer that has a need for high liquidity and low principal risk?

Back 41

Treasury bills

Front 42

Long term bonds and "high yield" (low credit quality) bonds are inherently more _______________ than "investment grade" (high credit quality) bonds and those with short term maturities.

Back 42

volatile

Front 43

A customer has raised money for a project. He doesn't need this money for another 6 months, what investment would be suit him until the money is needed.

Back 43

US Treasury bills

Front 44

What is marketability risk?

Back 44

when a person must sell a security at an inappropriate time and sustain a loss

Front 45

What type of risk deals with a possibility of a bond producing lower yields upon maturity?

Back 45

reinvestment risk

Front 46

What is synonymous with market risk?

Back 46

Systematic risk

Front 47

What type of risk is reduced by using various asset classes in an investment portfolio?

Back 47

Selection risk

Front 48

an investment based on a security that is closely tied to a current fashion or trend may primarily carry what type of risk?

Back 48

social and political risk

Front 49

What type of risk is involved where an investor may sustain a loss if a security must be sold quickly?

Back 49

liquidity risk

Front 50

a customer was having difficulty selling his investments due to a lack of demand in the secondary market. What type of risk is this scenario?

Back 50

liquidity risk

Front 51

The liquidity of an investment is best described as:

Back 51

whether the investment can be sold as quickly and profitably as expected, should the investor wish to sell

Front 52

What type of risk affects one's purchasing power directly?

Back 52

inflation risk

Front 53

Preemptive rights are usually ______________ term

and expire in ______ to _______ days after they are issued

Back 53

short

30

60

Front 54

Warrants are usually _________________ meaning they can be traded in the marketplace ___________

from the security with which they were issued.

Back 54

detachable

separately

Front 55

The buyer of an option gains the right to buy (_________) or the right to sell (__________) a round lot which is _______ shares, of the underlying security at a specified price, known as ___________ or ____________ price.

Back 55

call

put

100

strike

exercise

Front 56

An option buyer, _______ position, pays the writer, ____________ position, a fee also known as ________, but not the obligation to exercise the option within the option period.

Back 56

long position

seller, or short position

option price

Front 57

When a corporation is already public but distributes additional securities, it is called a _________ offering or __________ distribution.

Back 57

primary

primary

Front 58

The difference in what the issuer receives and what the public pays on an offering is called the ________________ ___________ or the investment banker's _____________.

Back 58

underwriter's

spread

spread

Front 59

Regulation D is one type of ______________ that allows a company to save the expense of an ______________ and avoid registration requirements of the 1933 Act by engaging in a private placement of its securities,provided certain conditions are met.

Back 59

exemption

underwriter

Front 60

A NYSE member is an individual who has a membership on the ______________. The member firm must have an individual employee that owns a ________ on the _____________, often called the _________ member.

Back 60

exchange

seat

exchange

allied

Front 61

Orders that are sent directly to the exchange floor from the member firm's office are executed by the firm's ________ broker or are executed ___________________.

Back 61

floor

electronically

Front 62

The current Regulation T margin requirement is ________

Back 62

50%

Front 63

The practice of pledging securities as margin loans is known as ________________________.

Back 63

Hypothecation

Front 64

New issues, including shares of open-end mutual funds, are ineligible for margin purchases for ____

days.

Back 64

30

Front 65

COD orders have a maximum of ________ days to settle. COD orders may also be called ___________ vs ______________. (____)

Back 65

35

delivery

payment

DOV

Front 66

The securities face value (or ______ ______) of preferred stock is typically $______.

Back 66

par value

100

Front 67

Preferred stock is said to be interest rate ______________.

Back 67

sensitive

Front 68

A US corporation that receives dividends from owning shares in another US corporation is entitled to exclude from tax, up to ___ of the dividends received.

Back 68

70%

Front 69

Individual bonds usually have a _____ or face value of ________.

Back 69

par

$1000

Front 70

Corporate bonds are quoted in whole points and ________ of a point. Each point represents ______ and therefore each _______ ____ _ _______ represents _________.

Back 70

eighths

$10

eighth of a point

$1.25

Front 71

_____________ __________ is compensation paid to the bond holder and is expressed in a percentage, often called the __________ ______.

Back 71

Interest rate

coupon rate

Front 72

A bond's nominal yield is the same as ________ _____, ________ ________ and ________ ________.

Back 72

coupon rate

interest rate

stated rate

Front 73

_____________ _________ are the most common type of secured bonds.

Back 73

mortgage bonds

Front 74

____________ _______ ___________ are usually issued by railroads and airlines and are secured by railroad cars and airplanes.

Back 74

Equipment Trust Certificates

Front 75

_______________ ___________ ___________ are issued by corporations that own portions in other companies and can pledge the stock as collateral for a bond issue.

Back 75

Collateral trust bonds

Front 76

Most issuers of corporate debt have ____ _________ which gives the corporation the flexibility to retire debt prior to maturity.

Back 76

call features

Front 77

When the issuer is calling in old bonds to issue new bonds, the process is called __________.

Back 77

refunding

Front 78

Any __________ __________ realized in the trading of treasuries are fully taxable.

Back 78

capital gains

Front 79

Marketable treasury issues include Treasury _____, _______ and _______.

Back 79

bills

notes

bonds

Front 80

A ____ _________ (or redeemable) security is one that may only be redeemed by the issuer.

Back 80

non marketable

Front 81

_________ are government issued, short term obligations with maturities of one year or less.

Back 81

T-bills

Front 82

T-bills are further referred to as _____ __________ __________ securities because they do not pay periodic interest.

Back 82

non interest bearing securities