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93 Cards in this Set
- Front
- Back
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Factors that affect the amount of an underwriting spread include which of the following?
The size of the issue The type of security involved The business history of the issuer (A) I only (B) II only (C) III only (D) I, II and III |
D
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To shelter income, a customer could invest in which of the following?
A variable annuity A Keogh Plan A municipal bond An IRA (A) I and II (B) III and IV (C) I, III and IV (D) All |
D
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Which of the following statements are true concerning Alpha and Beta?
Market risk associated with a security is measured by Beta. Non-market risk associated with a security is measured by Alpha. A security with Beta of 1.4 is expected to fluctuate more than the general market A security with an Alpha of 1.3 is projected to rise in price by 30% regardless of the performance of the market as a whole, based on favorable factors relating to the individual security. (A) I and III (B) II and IV (C) I, III, and IV (D) I, II, III, and IV |
D
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A corporation declares a 2:1 split when their stock price is $50 per share. Prior to the split, the company's P/E ratio was 20:1. The earnings for the company are $2.50 per share and the company paid out a $1.00 per share dividend at the old stock price. After the split, how will the company's P/E ratio be affected?
(A) There will be no affect on the P/E ratio (remains at 20:1). (B) The P/E ratio will go to 40:1. (C) The P/E ratio will go to 10:1. (D) The new P/E ratio cannot be calculated with the limited information provided. |
A
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All of the following are defined by FINRA as examples of Direct Participation Programs EXCEPT:
(A) Real Estate Programs (B) Oil and Gas Programs (C) Real Estate Investment Trusts (D) Subchapter S Corporate Offerings |
D
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A specified group of stocks is combined and a mathematical figure is used to indicate the value of this group of stocks as a whole. Collectively, what is this group of stocks called?
(A) This describes an index of securities. (B) This describes the beta coefficient of the market. (C) This describes the alpha of the market (D) This describes a resistance level used for securities analysis. |
A
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All of the following are factors which a broker/dealer can consider in determining the amount of a markup EXCEPT:
(A) the dollar amount of the transaction. (B) the availability of the security in the market. (C) present market price of the stock. (D) dealer cost of the stock. |
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All of the following statements pertaining to variable annuities are TRUE EXCEPT:
. (A) The annuitant's annuity payments will vary depending on fluctuations in the financial markets (B) The insurance company bears the investment risk (C) The annuitant cannot change the annuity option or the investment option once the annuitant has annuitized (D) The insurance company does not provide the annuitant with principal protection |
B
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The wash sale rule may apply when an investor sells:
(A) 100 shares of ABC at a loss and simultaneously buys 100 shares of ABC non-convertible preferred. (B) 100 shares of DEF at a loss and 30 days later buys a call option with DEF as the underlying security. (C) 100 shares of PDQ at a profit and four days later writes a deep in-the-money put option with PDQ as the underlying security. (D) 100 shares of AFL at a profit and less than thirty days later buys 100 AFL shares. |
A
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When filing the registration statement with the SEC on an IPO the issuer can also include any securities it intends to issue in upcoming three year period. When this is done the registration of the shares that can be issued in the upcoming three years would be called a
(A) Pending distribution (B) Shelf registration (C) preliminary registration (D) private placement |
B
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A client lists their primary investment objective as liquidity. An RR believes that investments in municipal securities are best suited for this client. With the primary investment objective of the client in mind, which of the following would be the MOST attractive feature in relation to recommendations of municipal securities by the RR to this client?
(A) The market price of a particular municipal security exceeds the par value of the security by a sizeable amount. (B) The market price of a particular municipal security is well below the par value of the security. (C) The security has a maturity that takes place within the next year. (D) The security has a call premium that currently exceeds the market price. |
C
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Mr. Jones regularly buys and sells corporate debt securities in his account. In the process of buying 1 XYZ Corp bond at a market price of 98, he pays accrued interest of $250. Later on, he sells the 1 XYZ Corp bond at a market price of 99 and receives $100 in accrued interest. In reporting these transactions for taxation purposes, Mr. Jones has which of the following?
(A) He will have a capital loss of $140. (B) He will have a capital gain of $10. (C) He will have a capital loss of $150. (D) He will have a capital gain of $1 |
B
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FINRA regulations apply to communications with the public and advertising by broker/dealer firms. Of the following communications, which would be labeled as an advertisement and would have to abide by advertising regulations?
(A) A web log (blog) which has been set up for established clients of the firm and requires a password to view pages. (B) A listing in a local phone book which contains a description of the firm and various services provided by the firm. (C) A letter following a specific form which is sent to a limited group of potential clients which discusses the services provided by the firm. (D) A report prepared by the firm's research department which discusses various banks in the area and is only sent to existing clients of the firm. |
*C
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nterest on certificates of deposit would be:
(A) determined by competitive market forces (B) set by the Federal Reserve Board (C) determined by the Securities Exchange Commission (D) set by the Board of Governors of the NASD |
**D
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One of your clients is a high-level executive who is in the highest tax bracket. The client is NOT currently subject to AMT (the alternative minimum tax). If this investor is looking to maximize the amount of income that they receive, which of the following is the BEST recommendation considering their tax status?
(A) You should recommend that the client buy a portfolio of T-Bonds with a yield of 7.5%. (B) You should recommend that the client buy taxable corporate and municipal bonds yielding 8.0%. (C) You should recommend that the client buy tax-free municipal bonds that are subject to AMT that are yielding 7.0%. (D) You should recommend that the client buy tax-free municipal bonds that are not subject to AMT that are yielding 6.5%. |
D
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While a client was out of town and the registered representative was not able to reach the client, the rep decided to buy a security in the customer's account even though the rep did not have discretionary authority. Later the same day, the rep sold the stock at profit. The following day the rep was able to reach the client and explain what he had done. The client was very happy and took the rep out to dinner. This practice was:
(A) a violation of the rules because the rep executed unauthorized transactions in the customer's account. (B) acceptable since the client was happy with the profit. (C) a violation because the client took the rep out to dinner. (D) acceptable since the client gave the rep approval the next day. |
A
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What happens when an RR FAILS to complete the regulatory element of continuing education?
(A) The RR will only be cut off from receiving commissions. (B) The RR only must stop prospecting and soliciting new clients. (C) The RR will automatically be terminated from their position. (D) The RR must immediately stop performing all activities which require the RR to be registered. |
**D
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A municipal "workable indication" is a(n)
(A) firm bid. (B) firm offer. (C) firm bid and offer. (D) indication of a bid or offer that the dealer thinks he can fill. |
**D
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Which of the following types of income would taxes normally be withheld by a foreign entity?
Dividends Interest Capital gains Distributions (A) I and II (B) III only (C) I and III (D) II and III |
A
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Economic analysts have found that over the past six months, there has been an overall decline in the following: - GDP (Gross Domestic Product) - Equity Prices - Employment Statistics - Business Activity Which of the following terms is most often used to describe this scenario?
(A) This would be labelled an economic recession. (B) This would be labelled an economic depression. (C) This would be labelled a period of high inflation. (D) This would be lableled a period of high deflation. |
A
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Mr. Smith is a 50 year old client of Bob, who is a registered representative. Bob is trying to get Mr. Smith to purchase a Deferred Variable Annuity offered by his company. In making this recommendation to Mr. Smith, Bob should first be sure that:
(A) The variable annuity has a death benefit associated with it. (B) Mr. Smith has already made his maximum contributions into his before-tax retirement plans. (C) Mr. Smith plans to retire prior to the completion of the surrender period. (D) The variable annuity has a fixed annuity payment at the time Mr. Smith retires. |
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LMN Incorporated is listed on the American Stock Exchange. Jane sits on the board of directors for LMN and wishes to buy some LMN stock. She executes a trade on the floor of the AMEX and purchases the shares. How do the provisions of Rule 144 apply to this scenario?
(A) Jane is only permitted to sell the stock if she holds it for a minimum of 3 years. (B) Jane must keep the stock indefinitely and is not permitted to sell. (C) Jane is permitted to sell the stock purchased on AMEX immediately, but certain restrictions may apply. (D) Jane is permitted to sell the stock purchased on AMEX immediately and there are no restrictions with regards to the sale. |
t
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To analyze the capital structure of a company, which of the following ratios should be used?
(A) Current ratio (B) Return on shareholder's Equity (C) Total debt to earnings before interest and taxes (D) Debt to equity |
D
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For accounting purposes, a balance sheet's retained earnings are BEST described by which of the following?
(A) Retained earnings applies to the dividends that the corporation pays out to common stockholders. (B) Retained earnings applies to the earnings of the company that remain after payment of dividends to common stockholders. (C) Retained earnings applies to the overall profit of the firm in any given year. (D) Retained earnings applies to the overall profit of the firm in any given year less any expenses |
B
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ERISA guidelines specify which of the following for purposes of trades involving equity and index options?
(A) Transactions in options in ERISA-regulated plans is only permitted if the options cover an entire index. (B) Transactions in options in ERISA-regulated plans are only permitted if the plan's objectives and guidelines allow for such transactions. (C) Transactions in options in ERISA-regulated plans are not permitted, because of issues related to exercise and settlement. (D) Transactions in options in ERISA-regulated plans are never permissible. |
B
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The last sale of X was 50.37. A client places an order to sell 100 shares at 50 stop but not less than 48. This is a:
(A) Stop order (B) Switch order (C) Limit order (D) Stop limit order |
D
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Which of the following best describes the 'Third Market"?
(A) OTC securities traded by marketmakers (B) OTC securities traded on an exchange (C) Listed securities traded OTC by marketmakers (D) Listed securities traded on the floor of a stock exchange |
**C
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Which of the following would be illustrated when viewing a chart showing the business cycle?
Downturns typically result in a trough before a recovery takes place. Upward trends typically result in a peak before a recession takes place. Inflation numbers are clearly demonstrated on a business cycle. The yield curve can be easily determined from a chart showing the business cycle. (A) I and II (B) I and III (C) II and IV (D) III and IV |
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One of your clients owns 500 shares of BCD stock and is concerned with tax consequences associated with their investments. BCD announces a 5% stock dividend on their common stock and your client will be receiving 25 additional shares. The client calls in and asks how this stock dividend will be treated for tax purposes. Which of the following is TRUE?
(A) The stock dividend is not a taxable event for this client at this time. (B) The stock dividend is taxable as ordinary income, but may qualify for a reduced tax rate because of the client's long-term holding period. (C) The stock dividend is taxable as a capital gain to the client, but may qualify for a reduced tax rate because of the client's long-term holding period. (D) The stock dividend is fully taxable as ordinary income to the investor in the year received. |
t
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In which of the following scenarios would the investor have a tax liability associated with capital gains?
(A) An investor purchases a stock and later receives a dividend from the issuer. (B) An investor purchases a stock and later gifts the stock to their child after it has significantly increased in value. (C) An investor sells a stock that was purchased for significantly less than the sale price. (D) An investor who has invested in a limited partnership receives a distribution of cash. |
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Two market makers complete a transaction in a security reported on the Consolidated Tape. Which of the following best describes their responsibilities?
(A) The buyer must report the trade within 90 seconds. (B) The seller must report the trade within 90 seconds. (C) The buyer must report the trade as soon as it is completed. (D) Both the buyer and seller must report their trades at the end of the day. |
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Which of the following is FALSE according to Federal Gift Tax Laws?
(A) Up to $13,000 (2009) may be gifted to each individual recipient without tax consequence to the giftor. (B) Tax consequences on gifts are paid by the giftor. (C) When a wife gives a gift of money to her husband, both of whom are U.S. citizens, it is a taxable event. (D) The fair market value of a gift when given is used when determining any tax that applies to the gifting. |
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One of your clients has the following portfolio: - 28% LMN Utilities Incorporated - 35% OPQ Health Providers Incorporated - 32% Index ETF (Tracks S&P 100) - 5% Cash Equivalents / Money Market Funds Of the following types of risks, which is MOST important to discuss with this client regarding the current asset allocation in the portfolio?
(A) The client should be informed about risks associated with liquidity in relation to these investments. (B) The client should be informed about the political and legislative risks associated with these investments. (C) The client should be informed about the non-systematic risks that exist in relation to their portfolio. (D) The client should be informed of the credit risk which is inherent to their portfolio. |
t
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An investor considering the purchase of a variable annuity contract should be concerned about all of the following except:
(A) Sale-load (B) Payouts may increase or decrease (C) Payment deposits may increase or decrease (D) Penalty for early withdrawals |
t
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An investor who holds a variable annuity decides to annuitize and start receiving monthly annuity payments. The client is currently 55 years of age and the variable annuity is non-qualified. What can this investor expect to pay in terms of tax liability?
(A) The 10% penalty on early withdrawals will apply. (B) The monthly payments will be partially taxable on earnings in the annuity and will be partially tax-free with regards to principal that was invested in the variable annuity. (C) The portion of payments that was principal that was invested in the variable annuity will be fully taxable. (D) The full amount of payout each month will be fully taxable. |
t
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Susan Smith purchased a Deferred Variable Annuity with surrender charges assessed if she withdraws within 10 years of purchase. Susan purchased this Variable Annuity in her Traditional IRA when she was 63 years old. Susan turned 70 1/2 last year. What is Susan's situation with regard to her IRA which contains the Variable Annuity?
(A) Susan must begin to take distributions from her IRA which includes her Variable Annuity but will not be subject to the surrender charges since the annuity is contained in her IRA. (B) Susan must begin to take distributions from her IRA which includes her Variable Annuity and will be subject to the surrender charges on her annuity. (C) Susan may defer taking distributions from her IRA since her IRA contains a Variable Annuity with surrender charges still in effect. (D) Susan may defer taking distributions from her IRA and the surrender charges will be forgiven if she pays a 10% penalty. |
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A market maker is quoting ABCD common stock, a NASDAQ security. The spread in this security is best described as the difference between
(A) the dealer's cost and the sale price with the mark-up (B) the dealer's cost and the quoted bid price (C) the dealer's quoted bid and ask price (D) the highest bid and the highest ask of all market |
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Variable annuities are investment vehicles that should be used for clients with certain investment objectives in mind. Of the following, which client would BENEFIT MOST from investment in a variable annuity?
(A) A female client in her early 60s who currently falls in the 33% tax bracket and wishes to have a portion of returns on her portfolio guaranteed. (B) A male client in his early 50s who currently falls in the 10% tax bracket and wishes to take on very low levels of risk with short-term investing. (C) A male client in his mid 40s who currently falls in the highest tax bracket and who is looking for an alternative investment vehicle since he has currently maximized contributions to his company-sponsored retirement account. (D) A female client in her mid 30s who currently falls in the 28% tax bracket and wishes to have liquidity and access to funds as she seeks to purchase a home. |
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Monies deposited by commercial banks at Federal Reserve Banks, including monies which are in excess of the bank's reserve requirements, are referred to as:
(A) jumbo certificates of deposit (B) time deposits (C) federal funds (D) discount fund |
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A financial summary of a company's revenues, expenses and profits or losses for a certain accounting period is called:
(A) A balance sheet (B) An income statement (C) A statement of retained earnings (D) A statement of cash flow |
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SEC rule 415 allows "Shelf Registration." This permits one registration statement to cover all securities to be issued during the next:
(A) Six months. (B) One year. (C) Two years. (D) Three years. |
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A fellow RR receives a call from one of their clients. The client has been considering the purchase of DEF Corporation common stock for some time and enters an order for 1,000 shares of DEF when the market price is $55 per share and receives an execution at that price. Toward the end of the trading day, the client calls back and states that they have changed their mind on the purchase. DEF is now trading at $51 per share. Which of the following actions or statements would be MOST appropriate by your fellow RR?
(A) The RR should offer to purchase the stock back from the client at the original purchase price of $55 per share since the original order has already been executed. (B) The RR should transfer the shares to an account where the client wishes to purchase the shares and simply label that execution with the original time of execution on this customer's confirmation. (C) The RR should inform the client that the execution has already taken place and the stock is currently owned by t |
(C) The RR should inform the client that the execution has already taken place and the stock is currently owned by the client at $51 per share, so further action will require further instruction.
(D) The RR should mark the transaction as an error and cancel the original trade in the client's account. |
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One of your clients wishes to discuss the investment of $60,000. The client wants to begin saving for college for his three young children and wishes to get the most growth and the best possible tax advanatages. He is in the highest tax bracket and will be in his late forties when two of the three children will begin college. In the event that any of the children decide that they do not wish to go to college, the client does not want the children to have access to the funds. How should this client invest the money?
(A) The client should open up Uniform Gifts to Minors Accounts for each of the children. (B) The client should put the money into mutual funds with an objective of growth. (C) The client should open up a Coverdell Educational Savings Account. (D) The client should open up a 529 College Savings Plan. |
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The president of XYZ Corporation owns restricted stock. Under security industry regulations, the restricted shares could be sold in all of the following transactions EXCEPT:
(A) A 144 offering. (B) A private placement. (C) A registered offering. (D) An exchange offering. |
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A "head and shoulders" top formation means what when viewed from a technical analysis perspective?
Taking bearish positions will benefit investors. Taking bullish positions will benefit investors. The previous upward trend is now reversing. The previous downward trend is now reversing. (A) I and III (B) I and IV (C) II and III (D) II and IV |
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Which of the following is the MOST accurate description of "beta"?
(A) Beta measures the returns that a company has against the stocks of individual companies both inside and outside of the same sector. (B) Beta measures the price-to-earnings ratio of one company in relation to the average price-to-earnings ratio of companies on a particular index. (C) Beta measures the volatility of an individual company in comparison to the volatility of the overall market. (D) Beta measures the volatility of one class of securities such as common stock against other classes of securities such as bonds, preferred stock, and derivatives. |
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Of the following forms of communications that may take place between a firm and individual investors, which constitutes sales literature under regulatory guidelines?
During the course of a business day, a registered representative sends one specific prospect an instant message using an instant messaging system. During the course of a business day, a registered representative composes a mass instant message to more than 25 prospects and sends the message on an instant messaging system. Over a 30-day period, a registered representative sends one specific prospect an email which is personalized in nature and addresses the specific client's needs. Over a 30-day period, a registered representative sends a mass email to more than 25 prospects. (A) I and III (B) I and IV (C) II and III (D) II and IV |
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An investor sold short 100 ABC @ 60, and ABC later declined to 48. The investor could protect the profit on the short position by doing all of the following EXCEPT:
(A) Buy an ABC 50 Call (B) Write an ABC 45 Put (C) Write an ABC 50 Call (D) Enter a buy stop @ 50, GTC |
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Which of the following are accurate with regards to deferred variable annuity features?
The guarantee of a minimum death benefit is a feature typically included on this type of plan. The guarantee that at the least, all principal contributed to the plan will be recouped by the plan holder. The benefit of growth in the account on a tax-deferred basis. The benefit of a fixed contribution schedule, fixed annuitization date, and a fixed dollar amount of payments on a fixed schedule. (A) I and II (B) I and III (C) II and III (D) II and IV |
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A registered representative is planning on recommending the purchase of a Brokered CD to a client. In doing so, the RR must make which TWO of the following disclosures?
A disclosure pertaining to the legislative risks associated with such products. A disclosure related to interest rate risk and how it affects brokered CDs. A disclosure of risks that may be incurred by the fluctuation of currency values. A disclosure of liquidity risk associated with brokered CDs. (A) I and II (B) I and III (C) II and III (D) II and IV |
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All of the following are advantages of Accelerated Cost Recovery System EXCEPT:
(A) 100% of the depreciable basis can be recovered. (B) Salvage value is not considered. (C) Used property is allowed a full write-off. (D) It uses component depreciation. |
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One of your clients is a a sophisticated 40 year old investor and has recently changed jobs. The client is considering rolling over his $100,000 401(k) plan with his former employer to an IRA. He invests conservatively in his personal brokerage account which is now worth $150,000. but he wants to speculate in his IRA account investments because he feels that he can take risks since he won't need the money until retirement. What is the best advice a BOM should give a RR about this customer?
(A) The customer can make any investment decision that he want too. (B) Speculating in an IRA requires that the postions must be hedged to reduce risk (C) Assets in an IRA must always be invested conservatively (D) Assets in an IRA should be taken into consideration with an overview of the customer's total investment portfolio and risk profile |
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Which of the following would, on its own, represent a private placement with regards to the primary issuance of municipal bonds?
(A) The bonds are sold without being rated by a nationally-recognized rating agency. (B) The bonds sold total less than $600,000. (C) The bonds are sold only to investors who are considered sophisticated. (D) The bonds are sold only to investors who live in the state where the municipality is located. |
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A registered representative at your firm has a client who is on the board of directors of QRS Corporation. The client calls in and in passing, mentions that QRS will not come close to meeting their earnings projections for the coming period. The release of earnings figures for QRS does not take place until late in the following week. Which of the following is the APPROPRIATE action to take in this scenario?
(A) The RR should log into their personal account and sell as much of QRS short as possible in anticipation of the bad news. (B) The RR should enter short sale orders for the client in QRS in anticipation of the bad news. (C) The RR should make a call to the firm's compliance department to inform them of the disclosure and ensure all precautions are taken related to the matter and the RR should not discuss the call with other RRs or other clients. (D) The RR should immediately call the firm's research department to confirm the numbers and once confirmed, should broadcast this infor |
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Which of the following BEST describes the money received by a corporation during an issue of equity securities that exceeds the face value of the securities being sold?
(A) This would refer to the capital that the corporation must keep on hand. (B) This would refer to the capital that the corporation must use in relation to the intended use of funds specified with the sale of the new issue. (C) This would refer to the paid-in capital of the corporation. (D) This would refer to returns earned on funds invested in various securities in the corporation's portfolio. |
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A stock's or a portfolio's beta measures:
(A) Liquidity compared to the market as a whole (B) Volatility compared to the market as a whole (C) Safety compared to the market as a whole (D) Specific inherent vales of a stock or portfolio |
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The filing of a SAR (Suspicious Activity Report) may be required for which TWO of the following?
I. A $10,000 personal check deposited into an account annually II. A quarterly direct deposit for $7,000 into an account III. The deposit of a cashier's check once every other week for $9,000 IV. Wire transfers into and out of an account at frequent intervals (A) I & II (B) II & III (C) III & IV (D) I & IV |
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You are talking to a client who is making a few changes to their account information. The client recently retired. The client has a need for taxable monthly income from investments and would like to keep their investments conservative in nature. Which of the following investments would NOT be appropriate for this client?
(A) The client could invest in the bonds of several conservative Blue Chip companies. (B) The client could invest in several leveraged, closed-end funds made up entirely of bonds. (C) The client could invest in the preferred stocks of several conservative Blue Chip companies. (D) The client could invest in CDs (Certificates of Deposit). |
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If the manager of a portfolio is attempting to create a portfolio which mimics the S&P 500's performance, how would this strategy be BEST described?
(A) The manager is attempting a form of technical analysis. (B) The manager is attempting a form of fundamental analysis. (C) The manager will most likely use an active management strategy on the portfolio. (D) The manager will most likely use a passive management strategy on the portfolio. |
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What determines the tax liability to an individual who surrenders their holding of a variable annuity that is labeled as "non-qualified"?
(A) Tax liability is determined by subtracting the amount which was invested in the annuity from the net proceeds upon surrender. (B) Tax liability is determined by the capital gains that an investor accumulates in the separate account. (C) Tax liability is determined by income which is accumulated in the separate account. (D) Tax liability is determined by the holding period of securities in the separate account. |
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Which of the following provides the greatest protection of purchasing power?
(A) Variable annuity (B) Fixed annuity (C) Series H Bonds (D) Face amount certificates |
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A 45 year old client with a variable annuity decides to do a cash surrender of his contract for so that she will have a down payment on a second home. Any gain in her contract will be taxed as:
(A) Capital gains (B) Capital gains plus a 10% penalty tax (C) Ordinary income at the holder's marginal tax rate (D) Ordinary income at the holder's marginal tax rate plus a10% penalty tax |
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The factor listed below which would have a direct impact on the alpha of a particular stock would be:
(A) Investors on a general scale have changed their minds from being pessimistic about the market to being optimistic. (B) The company whose stock is in question has made significant changes to the management strategy for the upcoming year. (C) With recent over-buying in the technology sector, the market has now corrected itself and technology stocks have come back to reasonable levels. (D) The index where the company is listed has been on a downward trend. |
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One of your clients is looking into investing in direct participation programs. He is examining several different types of programs. One of the programs that he is evaluating promises a relatively high tax write-off in the immediate future with low costs for land and rights associated with the land and minerals. Of the following, which BEST describes programs with these features?
(A) This would be a developmental drilling program. (B) This would be an exploratory drilling program. (C) This would be a balanced drilling program. (D) This would be an oil and gas income p |
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A registered representative suggests and then implements a strategy in a client's portfolio. This strategy involves the RR coming up with certain determinations in relation to an appropriate distribution of investments in the client's account and the maintenance of this mix of investments over time. Which of the following most accurately describes the strategy that has been implemented?
(A) The RR is using only a technical analysis approach to allocation. (B) The RR is using capital asset pricing model to determine allocation. (C) The RR is using a form of asset allocation for the client. (D) The RR is using a strategy purely focused on diversification for the client. |
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A market maker may:
Take a long or short position at any time. No up-tick rule or Federal regulation applies. Sell from his own inventory, which may be either long or short. Act as both agent and principal in the same transaction. Quote a work out market, a range within which the dealer feels he can obtain the security within a reasonable time period. (A) I and II (B) I, II, and III (C) I, II, and IV (D) II, III, and IV |
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One of your clients calls and is unhappy about the transaction costs in their account over the course of the last year. You go over their statements and activity for the year and discuss solutions with the customer. The customer expresses their feelings that movements in the market are rational and tied to various factors, but that predicting future movements is, for the most part, futile. What investment strategy would be BEST for this client with this information in mind?
(A) The RR should suggest that the client use a combination of tactical and strategic asset allocations. (B) The RR should suggest that the client try to time the market, taking advantage of gains and losses in individual securities. (C) The RR should suggest that the client use a buy and hold strategy. (D) The RR should suggest that the client engage in day trading to take advantage of daily fluctuations in the markets. |
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According to technical analysis, all of the following would track investor's sentiment EXCEPT:
(A) Investment advisory census surveys. (B) Amount of short selling. (C) Revisions of earnings estimates by a corporation. (D) Number of small investors trading on mar |
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Which of the following would NOT be permitted when dealing with illustrations pertaining to yields or income levels in relation to mutual funds and variable annuities?
(A) Illustrations of annualized yields (B) Illustrations pertaining to current yields (C) Illustrations of projected earnings and yields (D) Illustrations of income and yields for the preceding 5-year period |
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One of your clients focuses their investments in municipal securities. If this customer lists their investment objective as preservation of capital, which municipal securities would BEST suit this client?
(A) Non-callable municipal bond issues (B) Highly-rated municipal bonds with shorter-term maturities (C) Municipal bonds which pay out the highest yield (D) General obligation municipal bonds which have longer-term maturities |
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In the securities industry, what is meant by the term "Net Change"?
(A) It is the after tax return received by an investor. (B) It is the difference between the current bid and ask price. (C) It is the difference between the closing price on the reported trading date and the previous day's closing price. (D) It is a fund's net assets (total assets minus total liabilities). |
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As a registered representative you are discussing a potential investment opportunity with a client. The investment pool of the investment opportunity is comprised of government guaranteed mortgages and you tell the client that the investment is government guaranteed. This statement to the client is a
(A) good description of the investment opportunity. (B) misrepresentation of the investment opportunity. (C) appropriate if the client is an accredited investor. (D) appropriate if the mortgages in the pool are not delinquent. |
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A mutual fund was originally established several years ago as a growth fund. The board of directors now wishes to change the investment objective of the fund. They'd like to move from growth to income. Which of the following statements is ACCURATE of this scenario?
(A) Mutual funds are created with one investment objective in mind and that investment objective cannot be modified. (B) In order to change the mutual fund's objectives, approval of more than 2/3rds of the fund's board of directors and shareholders is required. (C) In order to change the mutual fund's objectives, approval of a majority of fund shareholders is required. (D) In order to change the mutaul fund's objectives, a unanimous decision must be reached by the fund's board of directors. |
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One of your clients purchases a municipal bond at issuance. The bond is purchased at a premium and the customer pays 107 for the bond. Which of the following is true regarding the tax treatment of the premium?
(A) The bondholder will have no tax consequences at maturity of the bond. (B) The bondholder can immediately deduct the premium amount from ordinary income taxes owed for the year in which the bond was purchased. (C) The bondholder can write off the premium amount as a capital loss in the year of the bond's maturity. (D) The bondholder must hold the bond for a minimum of 1 year, after which the bondholder can write off the premium amount as a capital loss. |
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Which of the following would be true about municipal revenue bonds issued by a city's water district?
The bonds are the right choice for high risk investors only. The bonds are backed by the taxing power of the city. Water users will pay the principal and interest on the bond issue. The bond issue will include a rate covenant. (A) I and II only (B) II and III only (C) I and IV only (D) III and IV only |
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A "Discretionary Account" refers to a securities account in which:
(A) A customer has authority to choose investments for the firm's account. (B) A firm's employee has authority to choose investments for a customer's account. (C) Only unsolicited orders are accepted from a customer. (D) Discretion is given to a customer concerning when payment will be made for purchases. |
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An investor with a margin account is looking to calculate the amount of margin in their account and figure the loan value in the account. Which of the following does NOT have loan value for purposes of this calculation?
(A) Shares of a closed-end investment company (B) Equity option contracts, including both put contracts and call contracts (C) Equity securities traded on NASDAQ (D) Municipal bonds issued by state and local governments |
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When market prices are rising, which of the following funds would be expected to show the least amount of appreciation?
(A) Diversified Common Stock Fund (B) Specialized Fund (C) Balanced Fund (D) Blue Chip Fu |
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A investor at your firm has approximately $750,000 invested mostly in equity securities. The investor executed over 200 trades last year. The average trade cost to the investor was $200 including commissions and fees. The client comes into the branch with their statements and wants to talk to the RR about lowering costs, which totaled over $40,000 last year. An account is available from the firm which charges 1.5% of all equities. With these factors in mind, what is BEST for the client?
(A) The client would be best served by a separately managed account. (B) The client would be best served by a fee-based account that is not managed. (C) The client would be best served by the traditional style of account which charges commissions per transaction. (D) The client would be best served by a traditional style of account which charges commissions per equity transaction, but which offers reduced fees for additional services. |
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Over the course of a normal trading day, a municipal bond dealer performs a secondary market transaction in a municipal bond that carries insurance. What do MSRB rules dictate must occur in this scenario?
(A) The customer must be made aware of the insurance and disclosure of the insurance must be made on the confirmation. (B) The customer must be sent an official statement for the bond issue prior to completion of the transaction in the bond. (C) The customer must receive a full copy of all literature pertaining to the insurance provider as well as the specific policy in place on the bond issue. (D) The customer must be instructed to contact the insurance provider directly to ensure that coverage is changed from the previous owner to the current owner of the bonds. |
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Which of the following statements is MOST associated with the overlapping debt of a municipality?
(A) Debt of a municipality that is secured by revenue-generating projects, but that also has unlimited backing by general obligations of the municipal entity. (B) Debt that is shared with other issuers and is taken into consideration when determining the overall debt of a particular municipality. (C) Debt that is not included in the overall debt of a municipality because it is solely secured by revenues generated by the project. (D) Debt of a municipality that is used to pay for multiple facilities within the municipality. |
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Exchange Traded Notes (ETNs) are debt securities which represent positions in indexes in which of the following market sectors?
Commodity Futures Currencies Emerging Markets Strategy Investing (A) I, II, & III (B) II & III (C) III & IV (D) I, II, III, IV |
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Under which of the following circumstances is it UNNECESSARY for a municipal securities dealer to follow special procedures when opening a municipal securities account?
(A) When the client is married to an individual engaged in trading municipal securities with another municipal securities dealer. (B) When the account is for a minor who is the child of an individual who oversees municipal securities trading at another municipal securities dealer. (C) When the client holds stock issued by another municipal securities dealer. (D) When the client files paperwork and performs other clerical services while being employed by another municipal securities dealer. |
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When determining the suitability of an investor to invest in a Hedge Fund, all of the following would be relevant EXCEPT:
(A) The net worth of the investor (B) Whether or not the funds charges will be based on performance of the fund (C) The liquidity requirements of the customer (D) The historical returns produced by the Hedge Fund |
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With the exception of Ginnie Maes and Fannie Maes, Government agency securities usually have which of the following characteristics:
a high degree of safety tax benefits on interest income guaranteed by the U.S. Government (A) I only (B) II only (C) I and II (D) I, II, III |
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A trader has promised a block of municipal bonds "out firm with an immediate recall" to Broker A. Shortly afterward, the trader receives an order from Broker B at another firm. What is the appropraite manner in which the trader should handle this scenario?
(A) The trader should contact Broker A and solicit a bid for the bonds in question. (B) The trader should send a "fill or kill" to Broker A immediately. (C) The trader should await an order from Broker A with no immediate action. (D) The trader should confirm the bonds to Broker B as no contact with Broker A is necessary. |
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One of your clients owns an individual account and does not want any outside influence over the account. The client would like to ensure that probate is avoided in the event that they unexpectedly pass away and has named an immediate family member as the beneficiary of their account. This customer's needs will be best met by which of the following?
(A) The customer should set up a Joint Tenants with Rights of Survivorship Account. (B) The customer should set up a Uniform Gifts to Minors Account. (C) The customer should set up a Transfer on Death agreement for securities in the account. (D) The customer should set up a Tenants in Common Joint Account. |
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A customer buys 100 shares of XYZ at $70 per share. Regulation T is 50%. Two weeks later, the customer deposits the margin requirement. The stock appreciates to $80 per share. Which of the following are true?
The customer's excess equity is $1,200 and may be withdrawn. Without an extension, a violation of Regulation T has occurred. $1,200 must be deposited to meet the maintenance requirement. The margin requirement is $3,500. (A) I and II (B) III and IV (C) I and III (D) II and IV |
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Treasury STRIPS have all of the following characteristics EXCEPT:
(A) They are sold at a discount (B) Their price is volatile (C) They lock in a rate for a predetermined period (D) The accrued interest is taxable at maturity |
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A client asks their registered representative what the spread is on a quote seen on U.S. Treasury Bonds. The quote is currently listed as 100.16 - 100.24. Which of the following best describes the spread to the client?
(A) "The spread is $0.08 on the bond." (B) "The spread is $0.80 on the bond." (C) "The spread is $2.50 on the bond." (D) "The spread is $25.00 on the bond." |
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One of your clients is an options trader. He puts on the following positions:
Sells 1 June 70 call for 4 Buys 1 June 60 call for 9 Which of the following labels attached to spreads would be accurate regarding these positions? The spread has been put on at a net credit. The spread has been put on at a net debit. This would be a horizontal spread. This would be a vertical spread. (A) I and III (B) II and III (C) II and IV (D) This position wouldn't even be a spread |
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Most CMO's, Collateralized Mortgage Obligations, as an investment have all of the following risks EXCEPT:
(A) The risk that mortgages will be paid off early (B) The risk that interest rates will fluctuate and investors may be stuck with a lower return (C) The risk that inflation will make the investment less profitable (D) The risk that the CMOs will go into default |
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One of your clients is somewhat new to options trading with multiple positions. They understand how options work, but sometimes ask questions in relation to specific positions. They put on the following options position: - Purchase 1 MNO July 50 put for 4 - Sell 1 MNO July 60 put for 11 The client calls in and asks their RR to explain a scenario where this position could lose money. Which of the following describes a scenario where the client will lose money on this position?
(A) The put options both expire and no exercise is made on either contract. (B) The spread between the two contracts narrows and becomes less than 7 points. (C) The spread between the two contracts widens and becomes greater than 7 points. (D) The customer sells the MNO July 50 put for 6 and buys the MNO july 60 put for 10. |
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