All of the following enforce MSRB rules EXCEPT the: Comptroller of the Currency FINRA MSRB SEC

CThe MSRB has no enforcement power. The SEC and FINRA enforce municipal regulations for broker-dealers. The Comptroller of the Currency, FRB, and FDIC enforce municipal regulations for dealer banks. The MSRB establishes its rules but has no enforcement powers. (10-10)

How long after a new issue is registered for sale will it be shown on the Nasdaq system? 1 On the effective date 2 10 days after the effective date 3 30 days after the effective date 4 45 days after the effective date

1 On the effective date

An investor purchases a BAT Sept 30 put @ 2 and also writes a BAT Sept 40 put @ 8. The investor will profit if: (which 2)1 The spread widens to more than 6 2 The spread narrows to less than 6 3 Both options expire 4 Both options are exercised

2 The spread narrows to less than 6 3 Both options expire

A brokerage firm's research department has issued a buy recommendation for XYZ Corporation's common stock. The report must contain all of the following information EXCEPT: 1 The firm was the managing underwriter in a recent public offering of the stock 2 The number of shares the firm owns of the stock 3 The partners of the firm hold options to purchase the stock 4 The firm makes a market trading in the stock

2 The number of shares the firm owns of the stock

An investor purchased T-bonds that mature January 1, 2012. He purchased the T-bonds on Friday, February 20, for regular-way settlement. How many days of accrued interest did the investor owe? 51 53 54 55

53

A municipal dealer may not guarantee a customer against a loss under any circumstances. (12-30According to MSRB rules, a municipal bond dealer may not consider which of the following factors when determining a markup? 1 Expenses 2 Profit 3 Coupon 4 Total dollar amount of the transaction

3 Coupon

Which of the following is an indicator of the demand for municipal bonds in the primary market? 1 The Wilshire Index 2 The Visible Supply 3 The Placement Ratio 4 The Bond Buyer Index

3 The Placement Ratio

All of the following are taken into consideration when determining the markup on a municipal securities transaction EXCEPT: 1 The dollar amount of the trade 2 The best judgement of the dealer 3 The fact that the dealer is entitled to make a profit 4 The financial condition of the customer

4 The financial condition of the customer

The Pink Sheets show: 1 All trades that occurred the previous day for non-Nasdaq stocks 2 The market makers for stocks not listed on the Nasdaq system 3 The specialist assigned to each stock that trades on the NYSE 4 All trades that occurred the previous day for NYSE-listed stocks

2 The market makers for stocks not listed on the Nasdaq system

Which of the following must a municipal dealer disclose on a confirmation? (multiple answers)1 If the municipal dealer acted as a agent 2 If the municipal dealer acted as a principal 3 If the municipal dealer acted as an agent for a third party 4 If the municipal dealer acted as a bona fide market maker

1 If the municipal dealer acted as a agent 2 If the municipal dealer acted as a principal 3 If the municipal dealer acted as an agent for a third party

A customer requests that a broker-dealer sell stock that he owns and use the proceeds of the sale to purchase a different stock. In determining the amount of markup that he will charge, the broker-dealer: 1 Must consider each transaction separately 2 May charge a markup on the sale only 3 Should only consider the amount of money involved in the sale to the customer 4 Is prohibited from charging a markup under these circumstances

3 Should only consider the amount of money involved in the sale to the customer

If a municipal bond is selling at a premium and is callable at par, how is the yield calculated? 1 As a percentage of the par value 2 By dividing the annual income by the current price 3 To the final maturity date 4 To the call date

4 To the call date

A brokerage firm accepted delivery of securities on settlement. Upon further inspection of the securities, the brokerage firm discovers a problem and wishes to return the securities to the selling dealer. The process of returning securities that have previously been accepted is known as: 1 Reallowance 2 Reclamation 3 Rejection 4 Recapture

2 Reclamation

On a delivery of municipal securities, what could one dealer expect to receive from another dealer? (which 2)1 Bonds registered as to interest only 2 Bearer bonds with coupons attached 3 Bonds registered as to principal only 4 Fully registered bonds

2 Bearer bonds with coupons attached4 Fully registered bonds

Which of the following is subject to the Penny Stock Rule? 1 Unsolicited orders for a non-Nasdaq stock trading at $3.00 per share 2 Solicited orders for a non-Nasdaq stock trading at $3.00 per share 3 Unsolicited orders for a Nasdaq stock trading at $3.00 per share 4 Solicited orders for a Nasdaq stock trading at $3.00 per share

2 Solicited orders for a non-Nasdaq stock trading at  $3.00 per share

The 5% markup policy would apply to a: 1 Municipal bond trade 2 Transaction on the NYSE 3 Proceeds transaction 4 Purchase of mutual fund shares

3 Proceeds transaction

A broker-dealer has a financial advisory relationship with an issuer of municipal securities. Under MSRB rules, which TWO of the following statements are TRUE? 1 The broker-dealer is permitted to act as a syndicate member on securities issued by this municipality. 2 The broker-dealer is not permitted to act as a syndicate member on securities issued by this municipality. 3 The financial advisory relationship between the broker-dealer and the municipality must be in writing. 4 The financial advisory relationship between the broker-dealer and municipality is not required to be in writing.

2 The broker-dealer is not permitted to act as a syndicate member on securities issued by this municipality. 3 The financial advisory relationship between the broker-dealer and the municipality must be in writing.

Secondary market offerings of municipal bonds could be found in all of the following EXCEPT: 1 Broker's broker's list 2 Munifacts 3 Bond Buyer 4 Dealer offering list

3 Bond Buyer

A municipal tombstone ad shows bonds maturing serially from 2012 through 2030. The 2030 maturity is a 6.00% bond offered at a 6.75 basis. The bonds maturing in 2020 and thereafter are callable beginning in 2018 @ 102 and at 101 in 2019 and at par on any interest date after 2019 . The bonds maturing in 2030 should be priced to the: 2018 call date 2019 call date 2020 call date Maturity date

Maturity date

A municipal dealer has a customer's order to purchase bonds on an agency basis. According to MSRB rules, the customer's order must be executed at: 1 The best price available 2 A price that is fair and reasonable 3 The average price obtained from all dealers contacted 4 The first price obtained

2 A price that is fair and reasonable

Which of the following persons control positions in secondary market municipal bonds for a broker-dealer? 1 Underwriter 2 Trader 3 Agent 4 Principal

2 Trader

An individual purchases $100,000 face value of a 6% municipal bond at a dollar price of 101 1/2. The bond's maturity is 7-1-17, but the issue has been called for redemption on the first call date of 7-1-05 @ par. The customer's confirmation should show the:1 Yield-to-call 2 Yield-to-maturity 3 Taxable equivalent yield 4 After-tax yield

1 Yield-to-call

A term bond has a mandatory sinking fund call feature. What method will be used to determine which specific bonds will be called? 1 Investors with the largest position 2 Investors with the largest coupon 3 Investors with the longest maturity 4 Random lot

4 Random lot

Quotes for non-Nasdaq, over-the-counter traded equities can be obtained from: (which 2)1 The third market 2 The Pink Sheets 3 Consolidated Quotation System 4 The OTC Bulletin Board

2 The Pink Sheets4 The OTC Bulletin Board

A municipal bond trader looking for the best price of a specific municipal issue in the secondary market would use: 1 The Yellow Sheets 2 The Daily Bond Buyer 3 Munifacts 4 A broker's broker

4 A broker's broker

Munifacts could contain: (multiple answers)1 The fed funds rate 2 Information about an upcoming municipal issue 3 The amount of a new issue that is yet unsold (new issue balance) 4 Dealer to dealer availability of municipal bonds in the secondary market

1 The fed funds rate 2 Information about an upcoming municipal issue 3 The amount of a new issue that is yet unsold (new  issue balance) 4 Dealer to dealer availability of municipal bonds in  the secondary market

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? 1 Trading 2 Investment banking 3 Operations 4 Sales

2 Investment banking

Regulation NMS would apply to which TWO of the following choices? (which 2)1 Listed equity trades 2 Listed debt trades 3 Quotes available for manual execution 4 Quotes available for electronic execution

1 Listed equity trades4 Quotes available for electronic execution

Which of the following are entitled to participate in a Keogh Plan? (multiple answers)1 A self-employed doctor 2 A security analyst who made $2,000 giving public lectures on technical analysis 3 An engineer of a corporation who made $5,000 making public speeches on his specialization 4 An executive of a corporation who received $5,000 in stock options from his corporation

1 A self-employed doctor 2 A security analyst who made $2,000 giving public lectures on technical analysis 3 An engineer of a corporation who made $5,000 making  public speeches on his specialization

Where would bid limitations for a new municipal bond issue be found? 1 Official Statement 2 Indenture 3 Notice of Sale 4 Syndicate Agreement

3 Notice of SaleA customer purchased 10 ABC January 50 calls, paying a $2 premium and 10 ABC January 50 puts, paying a $2 premium. The market price of ABC stock is $50 per share. The buyer's breakeven points (2)will be: $46 $48 $52 $54$46 $54

When computing the dollar price of a municipal bond sold on a yield basis, which of the following call features would be used? 1 Sinking fund call 2 Catastrophe call 3 In-whole call

3 In-whole call

Treasury bills are issued to mature in all the following time frames EXCEPT: One month Three months Six months Nine months

Nine months

A customer has a restricted margin account. The customer sells $7,000 worth of securities and on the same day buys $5,000 worth of other securities. The Regulation T margin requirement is 50%. The customer: 1 Can withdraw cash equal to the margin requirement on the net amount 2 Cannot withdraw anything because the account is restricted 3 Can withdraw the entire $2,000 net amount 4 Can withdraw 50% of $7,000

1 Can withdraw cash equal to the margin requirement on the net amount

Which of the following statements is TRUE concerning Exchange-Traded Funds (ETFs)? 1 The securities may be used by individuals to pursue a market timing strategy. 2 The purchase price is based on a net asset value, plus   any applicable sales charges. 3 The securities are priced once a day based on the close   of trading. 4 Transactions in these securities must be executed in a   cash account.

1 The securities may be used by individuals to pursue a  market timing strategy.

Rank the following ratings from highest to lowest. 1 Baa3 2 Ba1 3 A1 4 A2

A1, A2, Baa3, Ba1

Under the provisions of the Securities Act of 1933, which of the following are exempt securities? (Multiple answers)1 Securities issued by state chartered banks 2 Municipal bonds 3 Federal government securities 4 Securities issued by small business investment companies

1 Securities issued by state chartered banks 2 Municipal bonds 3 Federal government securities 4 Securities issued by small business investment companies

Prior to being listed on an exchange, which of the following must be evaluated? (multiple answers)1 Number of shareholders 2 Dividend payout 3 Earnings record 4 Current market price

1 Number of shareholders 3 Earnings record 4 Current market price

All of the following are responsible for the enforcement of Municipal Securities Rulemaking Board rules EXCEPT: 1 The Securities and Exchange Commission 2 FINRA 3 The Federal Reserve Board 4 The New York Stock Exchange

4 The New York Stock Exchange

When a stock sells ex-rights, which orders on a specialist's book will be reduced? (Which 2)1 Buy-limit order 2 Sell-stop order 3 Buy-stop order 4 Sell-limit order

1 Buy-limit order 2 Sell-stop order

Which of the following describes the payout on a variable annuity? 1 A fixed number of annuity units multiplied by a fixed dollar amount 2 A fixed number of annuity units multiplied by a variable dollar amount 3 A variable number of annuity units multiplied by a fixed dollar amount 4 A variable number of annuity units multiplied by a variable dollar amount

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

A broker-dealer may reject a delivery of municipal bonds if: 1 The bonds were called by the issuer and were identified as such 2 The market price increases after the trade date 3 The bonds are lacking a legal opinion 4 $1,000 denominations are delivered

3 The bonds are lacking a legal opinion

Which of the following would not be found on the Consolidated Quotation System (CQS)? 1 An AMEX stock 2 An AMEX warrant 3 A NYSE listed bond 4 A non-Nasdaq stock

4 A non-Nasdaq stock

List the order of priorities that you would follow when opening an options account for a customer. 1 Send the customer an Options Clearing Corporation risk disclosure document. 2 Have the customer sign the options agreement. 3 Have the Registered Options Principal approve the account. 4 Accept the order.

1 Send the customer an Options Clearing Corporation risk disclosure document. 3 Have the Registered Options Principal approve the account. 4 Accept the order.2 Have the customer sign the options agreement.

Which of the following statements are true regarding a new municipal issue? (which 2)1 Member orders will receive priority over designated orders. 2 There is usually a period of time allowed for the accumulation of orders. 3 Syndicate procedures must be disclosed to potential purchasers. 4 Pre-sale orders receive the highest priority.

2 There is usually a period of time allowed for the accumulation of orders.4 Pre-sale orders receive the highest priority.

All of the following are TRUE in the sale of restricted securities EXCEPT: 1 Current financial information must be made available to prospective purchasers 2 The sale must conform to the provisions of SEC Rule 144 3 A brokerage firm can act as an agent or principal in the transaction 4 The sale must be at the bid price as determined by the current quote of the outstanding securities

4 The sale must be at the bid price as determined by the current quote of the outstanding securities

Over the last 20 years, Grant Rock, age 66, has invested $200,000 into a tax qualified annuity sponsored by his employer, Tombstone Enterprises. The account is currently worth $800,000. He decides to annuitize the contract and begin drawing down the contract balance. In the first year he has received $50,000. How will these distributions be taxed? 1 100% is taxable as ordinary income. 2 100% is tax-free since Grant is above age 59 1/2. 3 Part of the distribution will be taxable at long-term capital gains rates and the balance will be viewed as a return of capital.   4 Part of the distribution will be taxable at ordinary income rates and the balance will be viewed as a return of capital.

1 100% is taxable as ordinary income.

A municipal bond that was issued at par is purchased by an individual in the secondary market at a price of 90. What would be the tax consequence if the bond is held to maturity? a. $100 capital gain $100 capital loss $100 tax-free interest $100 ordinary income

$100 ordinary income

How is the discount on an OID accreted for tax purposes? a. Straight-line method b. Constant yield method c. Cost basis method d. Declining balance method

b. Constant yield method

Use the following information to answer this question. Public orders on a specialist's book show an inside market comprised of Broker A bidding for 100 shares of ABC Corporation at 42.25. Broker B is offering to sell 300 shares of ABC at 42.63. The size of the market would be: a. 100 by 300 b. 300 by 100 c. 100 by 100 d. 300 by 300

a. 100 by 300

Use the following information to answer this question. Public orders on a specialist's book show an inside market comprised of Broker A bidding for 100 shares of ABC Corporation at 42.25. Broker B is offering to sell 300 shares of ABC at 42.63. If the specialist wanted to bid for his own account, what is the lowest price he could bid for the stock? a. 41.94 b. 42 c. 42.25 d. 42.26

d. 42.26

Use the following information to answer this question. Public orders on a specialist's book show an inside market comprised of Broker A bidding for 100 shares of ABC Corporation at 42.25. Broker B is offering to sell 300 shares of ABC at 42.63. If the specialist wanted to offer stock, what is the highest price at which he could offer the stock? a. 42.62 b. 42.63 c. 42.64 d. 42.88

a. 42.62

A customer purchases a municipal bond with 25 years remaining to maturity. The bond has been pre-refunded to its first call date. The issue is callable in 7 years at 108, declining to par in 14 years. It also has a sinking fund call provision which begins in 17 years at par. For confirmation purposes, the bond should be priced to the: a. First call date b. First par call c. Sinking fund date d. Final maturity date

a. First call date

These securities are issued by foreign governments and corporations, trade in U.S. markets, and are denominated in U.S. dollars. (Use the following choices to answer this question.) a. Open-end investment company shares b. Eurodollar bonds c. Yankee bonds d. Repurchase agreements

c. Yankee bonds

A limited partner has a $60,000 basis which includes a $40,000 recourse loan. When the partnership is liquidated, there are $200,000 of assets to satisfy $500,000 of debt. The partner's maximum potential loss would be: a. $20,000 b. $40,000 c. $60,000 d. $100,000

c. $60,000

Which two of the following are NOT SROs?   I.  MSRB   II. SIPC  III. FINRA   IV. SEC

II, IV

Which two of the following would lead to disintermediation? (which 2)  I. Savings bank rates are below money market rates. II. Savings bank rates are above money market rates.   III. The FRB has adopted a tight money policy. IV.  The FRB has adopted an easy money policy.

1 & 3

Which of the following are typically sold at a discount? (multiple answers) I. Commercial paper II. Treasury bills   III. Bankers' acceptances

1,2,3

A corporation has issued debentures convertible at $50. The stock pays a 10% stock dividend. According to the nondilutive feature of the bond indenture, the new conversion price would be: a. $19.23 b. $20.83 c. $45.00 d. $45.45

d. $45.45

Which of the following statements concerning a tax qualified annuity is CORRECT? 1 It grows tax-free. 2 It is not subject to contribution limits. 3 It has a zero cost basis. 4 It may be subject to tax-free distributions, if qualified.

3 It has a zero cost basis.

An individual purchases 10 ABC June 90 calls @ 4 and writes 10 ABC June 95 calls @ 2. The individual's maximum profit is: $2,000 $3,000 $4,000 $6,000

$3,000

An individual purchases 10 ABC June 90 calls @ 4 and writes 10 ABC June 95 calls @ 2. Above what market price for ABC will there no longer be an effect on the individual's profit? 90 92 94 95

95

A woman will be retiring in 2030. She is interested in income and having her principal available at retirement. Which of the following municipal bonds would you recommend? 1 Aaa rated GO maturing in 2025 2 Aaa rated GO maturing in 2034 which is callable in 2023 at 105 3 PHA maturing in 2030 4 Ba rated revenue bond maturing in 2024

3 PHA maturing in 2030

According to CAPM, all of the following would be examples of diversifiable, nonsystematic risks EXCEPT: 1 Credit risk 2 Interest rate risk 3 Business risk 4 Industry risk

2 Interest rate risk

All of the following are benefits of owning a real estate investment trust EXCEPT: 1 Stable dividend income 2 Ability to buy and sell shares easily 3 Diversification 4 Protection against rising interest rates

4 Protection against rising interest rates

A customer enters a sell stop-limit order for 100 XYZ at 25.50. XYZ trades occur as follows: 25.50, 25.25, 25.13, SLD 25.50. The customer's order was: 1 Executed at the market price after the order was entered 2 Executed at 25.25 3 Executed at 25.50 4 Not executed

4 Not executed

If a corporation is in a liquidation, the holder of a subordinated debenture would be paid: 1 Before bank loans and before accounts payable 2 Before bank loans and after accounts payable 3 After bank loans and before accounts payable 4 After bank loans and after accounts payable

4 After bank loans and after accounts payable

Regulation T applies to: (which 2)1 Cash accounts 2 Margin accounts 3 Commodity accounts 4 Municipal bond margin accounts

1 Cash accounts 2 Margin accounts

A customer sells XYZ short at $40 and sells one XYZ October 40 put at 5. What would the customer's profit or loss per share be if the put is exercised when the market value of the stock is $35, and the stock received pursuant to that exercise is used to cover the short stock position? $10 profit $5 profit 0 $5 loss

$5 profit

Which of the following pertain to ADRs? (which 2)1They facilitate the trading of foreign securities in U.S. markets. 2 They facilitate the trading of U.S. securities in foreign markets. 3 They are receipts issued for foreign securities. 4 They are receipts issued for U.S. securities.

1 They facilitate the trading of foreign securities in U.S. markets.3 They are receipts issued for foreign securities.

Which of the following persons cannot delegate power of attorney to a third party for the purpose of making securities transactions? 1 A husband 2 A wife 3 A corporation 4 A custodian for a minor

4 A custodian for a minor

A transaction occurs between two dealers for a Nasdaq stock. The trade must be reported by: 1 The buyer within 30 seconds 2 The seller within 30 seconds 3 Both within 30 seconds 4 Both by the end of the day

2 The seller within 30 seconds

The securities that are deposited in an escrow account for an advanced refunding are: 1 Revenue bonds 2 General obligation bonds 3 Federal agency bonds 4 Treasury bonds

4 Treasury bonds

All of the following will be found in the Official Notice of Sale EXCEPT: 1 Call provisions if any 2 The name of the bond counsel writing the legal opinion 3 The date, time, and place of sale where the bidding procedure will take place 4 The bond rating

4 The bond rating

When doing a municipal bond swap, to avoid the wash sale rule you could alter any of the following EXCEPT: 1 Issuer 2 Maturity 3 Rating 4 Coupon

3 Rating

Which of the following is an indicator of the demand for municipal bonds in the primary market? 1 The Wilshire Index 2 The Visible Supply 3 The Placement Ratio 4 The Bond Buyer Index

3 The Placement Ratio

A put option may be written in a cash account if the investor: 1 Is long the underlying security in the account 2 Is short the underlying security in the account 3 Has cash in the account equal to the exercise price 4 Is long a call option on the same underlying security

3 Has cash in the account equal to the exercise price

A call is purchased in February and exercised in June. The following April the stock is sold. Which two of the following statements are correct? (which 2)1 The resulting gain or loss is short-term. 2 The resulting gain or loss is long-term. 3 The cost basis of the stock is the same as the strike price. 4 The cost basis of the stock is the call premium plus the strike price.

1 The resulting gain or loss is short-term.4 The cost basis of the stock is the call premium plus the strike price.

A broker-dealer appears on the Nasdaq system as a market maker for DCIR common stock. An employee of the firm responsible for maintaining the firm's inventory in DCIR is known as a: 1 Specialist 2 Floor broker 3 Compliance director 4 Position trader

4 Position trader

When a manager of a municipal underwriting syndicate determines the priority of orders to be allocated, the orders would include all of the following EXCEPT: 1 Group net 2 Designated 3 Member takedown 4 Opening purchase

4 Opening purchase

to the next year. Therefore, the preferred stockholder will receive only $5 for this year. (4-14If an investor purchases one XYZ October 40 put for $500 when XYZ is selling at $38, the intrinsic value of the option is: 0 $200 $300 $500

$200

When a municipal bond is issued as an original issue discount, the upward adjustment in the purchase price is called: 1 Accretion 2 Amortization 3 Depreciation 4 Depletion

1 Accretion

Municipal bond unit investment trusts have all of the following characteristics EXCEPT: 1 Investors can buy units in the fund, usually in multiples of $1,000 2 The certificates have coupons attached and are in bearer form 3 Investors can redeem the units at any time through the fund's trustee4 The value of the unit will decline if interest rates rise

2 The certificates have coupons attached and are in bearer form

A municipal bond issue with an inverted yield scale would have: 1 Lower yields on the shorter maturities than on the longer maturities 2 Higher yields on the shorter maturities than on the longer maturities 3 Yields the same on all maturities 4 Prices higher on the shorter maturities than on the longer maturities

2 Higher yields on the shorter maturities than on the longer maturitiesNet working capital is?Current assets minus current liabilitieswhere assests equals cash, accounts recievable, and inventory. Liablilities equals notes payable, accounts payable, and taxes payable.

Which of the following would increase most in price if interest rates decline? 1 Short-term bonds selling at a discount 2 Long-term bonds selling at a discount 3 Short-term bonds selling at a premium 4 Long-term bonds selling at a premium

2 Long-term bonds selling at a discount

Which of the following would most likely have a mandatory sinking fund? 1 Serial issue 2 Balloon issue 3 Term issue 4 Convertible issue

3 Term issue

All of the following are TRUE regarding dividends EXCEPT: 1 A growth company normally has a low dividend payout ratio 2 A stock dividend creates a current tax liability when received 3 A blue chip company has a long history of paying dividends 4 The market price of a preferred stock is influenced by its dividend payout

2 A stock dividend creates a current tax liability when received

Where would a listing of the allocation of bonds for a new municipal issue be found? 1 Notice of Sale 2 Underwriting 3 Agreement Account Summary Report 4 Official Statement

3 Agreement Account Summary ReportCurrent ratio equals?Assets divided by liabilities.Where assets equal cash, accounts recievable, and inventory.Liabilities equal notes payable, accounts payable, and taxes payable.

An investor would purchase an oil and gas limited partnership for all of the following reasons EXCEPT: 1 The oil depletion allowance 2 Intangible drilling costs 3 Tax incentives 4 Recapture provisions

4 Recapture provisions

All of the following would be found in a municipal revenue bond resolution EXCEPT: 1 Restrictions on the sale of additional bonds 2 Rate covenants 3 Sinking fund provisions 4 The yields-to-maturity of the bonds

4 The yields-to-maturity of the bonds

A syndicate manager in the sale of a new municipal bond issue would normally allocate bonds in which of the following orders of priority? (Multiple answers) 1 Member orders 2 Orders for the benefit of the syndicate account 3 Designated orders

2,3,1

In this question, pre-sale orders, which is the first priority, is not mentioned. The next priority would be orders for the benefit of the account (syndicate), designated orders, and individual member orders. (10-9A municipality would refund a revenue bond issue for all of the following reasons EXCEPT to: 1 Reduce interest charges 2 Issue new bonds at lower interest rates 3 Reduce the market value of outstanding bonds that are not refunded 4 Eliminate restrictions in the bond resolution

3 Reduce the market value of outstanding bonds that are not refunded

Which of the following new bond issues would most likely be purchased through competitive bidding? 1 Corporate bonds 2 General obligation bonds 3 High yield bonds 4 Revenue bonds

2 General obligation bonds

A block of bonds is offered firm by Dealer A to Dealer B for one hour with a five minute recall. Dealer A calls Dealer B and says "fill or kill." Dealer B: 1 Has five minutes to take the bonds Must take the   bonds if he does not call 2 Dealer A back within five minutes Has one hour to take the bonds 3 Must take the bonds if he does not call 4 Dealer A back within one hour

1 Has five minutes to take the bonds Must take the bonds if he does not call

Which of the 2following are true about SIPC? 1 It was created by an Act of Congress and is considered a U.S. government agency. 2 It is a nonprofit organization that only broker-dealers may join. 3 It provides insurance for customer accounts in the event of bankruptcy by a broker-dealer. 4 It provides insurance for customer accounts for fraud, embezzlement, and counterfeiting.

1 It was created by an Act of Congress and is considered a U.S. government agency. 2 It is a nonprofit organization that only broker-dealers may join.

Term bond quotes are based on: 1 Yield-to-maturity 2 Current yield 3 Nominal yield 4 Dollar price

4 Dollar price

A municipal broker-dealer would be acting as a principal in which of the following scenarios? (multiple answers)1 Selling bonds from inventory to an individual 2 Selling bonds from inventory to a broker's broker 3 Buying bonds from another broker-dealer for inventory 4 Buying 500 bonds to fill an insurance company's order for 250 bonds

1,2,3,4

A woman wishes to open an account at a municipal securities firm. She identifies herself as the spouse of a trader at another municipal securities firm. Which of the following is 2(are) correct? 1 The rep must follow all instructions from the trader's employer. 2 The MSRB must be notified. 3 The carrying broker-dealer must send written notification of each transaction to the trader's employer.

1,3

A reduction in the rate of inflation is known as: 1 Stagflation 2 Deflation 3 Disinflation 4 Stagnation

3 DisinflationIf an OID bond (original issue discount) is purchased and held to maturity the discount is considered to be ____ and taxable/not taxable?interest, not taxable

ABC Brokerage, a broker-dealer, purchases 600 shares of stock from a market maker to fill a customer's buy order. ABC has acted as a: 1 Dealer 2 Specialist 3 Agent 4 Underwriter

3 Agent

A municipal bond with a 6% coupon is priced to a 7% basis. If this bond's yield-to-maturity increased by 40 basis points: 1 The yield-to-maturity would be 5.60% 2 The yield-to-maturity would be 6.40% 3 The yield-to-maturity would be 6.60% 4 The yield-to-maturity would be 7.40%

4 The yield-to-maturity would be 7.40%

Regarding cash dividends, which of the following statements is correct? 1 A cash dividend becomes a current liability when it is declared. 2 The amount of the dividend may never exceed the current earnings of the corporation. 3 Cash dividends must be paid if the earnings for the year exceed the amount of the stated dividend. 4 Dividend income may be offset by capital losses.

1 A cash dividend becomes a current liability when it is declared.

All of the following statements apply to long-term (brokered) CDs EXCEPT: 1 They may have limited liquidity 2 Investors may be subject to interest-rate risk 3 They may be callable 4 The total amount of the investment is FDIC-insured

4 The total amount of the investment is FDIC-insured

When a corporation goes bankrupt, which of the following creditors would be the last to be paid? 1 Internal Revenue Service 2 Debenture holders 3 Preferred stockholders 4 Common stockholders

2 Debenture holders

What effect will the declaration of a cash dividend have on a company's balance sheet? (which 2)1 Cash will be reduced 2 Dividends Payable will increase 3 Net Working Capital will remain the same 4 Retained Earnings is reduced

2 Dividends Payable will increase4 Retained Earnings is reduced

If a customer's objectives are safety of principal and income, you as the account executive could suggest all of the following EXCEPT: 1 AAA rated corporate bonds 2 High-grade preferred stocks 3 High-grade mortgage bonds 4 Income bonds

4 Income bonds

The Federal Reserve Board was given the authority to set margin requirements according to the provisions of the: 1 Securities Act of 1933 2 Securities Exchange Act of 1934 3 Securities Investors Protection Act of 1970 4 Investment Company Act of 1940

2 Securities Exchange Act of 1934

The purchase price of a no-load fund is determined by: 1 The net asset value plus a sales charge 2 The net asset value plus a commission 3 The net asset value as computed at the end of the business day 4 The supply and demand for the fund

3 The net asset value as computed at the end of the business day

The advance-decline theory states that: 1 A bull market exists if the Dow industrials and transportations make new highs 2 A bear market exists if more put options have been purchased by investors than call options 3 It is bullish if more stocks go up than go down during   the day 4 A large number of shares sold short is bullish

3 It is bullish if more stocks go up than go down during the dayOrders for bonds are allocated in what order of priorities?1 presale orders2 syndicate or group account net3 disgnated orders 4 member orders

When a market maker gives a quote for a stock without qualification, the quote is a: 1 Subject quote for 100 shares 2 Workout quote for 100 shares 3 Nominal quote for 100 shares 4 Firm quote for 100 shares

4 Firm quote for 100 shares

Mr. Smith, a self-employed computer analyst, earned $125,000 during 20XX. What is the maximum permissible deductible contribution to his Keogh Plan for 20XX? $2,000 $5,000 $25,000 $50,000

$25,000

A client would like to actively trade, purchase on margin and have broad exposure to the U.S. equity market. Which of the following recommendations would be the least suitable? 1 An S&P 500 mutual fund 2 An S&P 500 Exchange Traded Fund 3 A DJIA Exchange Traded Fund 4 A managed closed-end fund

1 An S&P 500 mutual fund

All of the following are types of overlapping debt EXCEPT: 1 The issuance of debt for an adjoining road district 2 The issuance of debt for an adjoining school district 3 Debt issued between two counties 4 Debt issued between two states

4 Debt issued between two statesMuniciple serial bonds are quoted on what basis?Yield to maturity.

American Telephone Company of Ohio is offering $50,000,000 worth of 9% bonds at a price of 99.25% of par value. The State of Ohio has a state income tax. A buyer of the bond would be: (which2)1 Subject to state income tax 2 Exempt from state income tax 3 Subject to federal income tax 4 Exempt from federal income tax

1 Subject to state income tax3 Subject to federal income tax

A NYSE bond order ticket shows the following: Buy 5m @ 101 GTCThe customer has placed a: 1 Limit order to buy $5,000 of bonds 2 Stop order to buy $5,000 of bonds 3 Limit order to buy $50,000 of bonds 4 Market order to buy $5,000,000 of bonds

1 Limit order to buy $5,000 of bonds

The Consumer Price Index: 1 Measures the average level of food and utility prices over a given period of time 2 Measures the average prices paid by U.S. consumers over a six-month period of time 3 Measures the average change in prices for specific goods and services purchased by consumers in certain cities 4 None of the above

3 Measures the average change in prices for specific goods and services purchased by consumers in certain cities

A customer purchases 10 MMS May 20 puts at 2 in a cash account when the market price of MMS is 24. Which of the 2following are true regarding this transaction? 1 The settlement date for the transaction is one business day. 2 The settlement date for the transaction is three business days. 3 The Regulation T payment date is three business days. 4 The Regulation T payment date is five business days.

1 The settlement date for the transaction is one business day.4 The Regulation T payment date is five business days.

Who cannot trade on the floor of the NYSE? 1 A two-dollar broker 2 A specialist 3 An institutional block trader 4 A competitive trader

3 An institutional block trader

The prospectus for a limited partnership states that the subscription price for each unit is $20,000. According to industry rules, the maximum allowable underwriting compensation for this public offering is: 1 $50 per unit 2 Subject to the interpretations of the 5% markup policy 3 Not subject to any limit but must be fair and reasonable 4 10% of the gross proceeds of the offering

4 10% of the gross proceeds of the offering

Which of the following must a municipal dealer disclose on a confirmation? (multiple answers)1 If the municipal dealer acted as a agent 2 If the municipal dealer acted as a principal 3 If the municipal dealer acted as an agent for a third party 4 If the municipal dealer acted as a bona fide market maker

1 If the municipal dealer acted as a agent 2 If the municipal dealer acted as a principal 3 If the municipal dealer acted as an agent for a third party

Your client is President of XYZ Corporation and is selling XYZ shares pursuant to Rule 144. According to Rule 144, a filing must be made with the SEC: 15 days before the sale At the time of the sale 30 days after the sale 90 days after the sale

At the time of the sale

The Securities Investors Protection Corporation (SIPC) insures all of the following accounts EXCEPT: A margin account A joint account A commodities account A custodian account

A commodities account

A market maker gives a firm quote of 15 - 15.50 for a stock. If the party on the other side decides to buy 800 shares, how many shares is the market maker obligated to sell at 15.50? 100 shares The market makerdoes not have to sell any shares 800 shares Whatever amount the market maker decides upon

100 shares

Which of the following is an example of a collateralized time draft? Debenture ADR BA Eurodollars

BA

Someone who wishes to hedge a portfolio of preferred stocks would buy which 2: Yield-basedoption calls Yield-based option puts Interest-rate option calls Interest-rateoption puts

Yield-basedoption callsInterest-rateoption puts

Which TWO of the following would NOT be permitted to purchase shares of an IPO of KMF? An attorney involved in the new issue of KMF A portfoliomanager of an investment company buying for his personal account An investmentcompany registered under the Act of 1940 which has some restricted persons as shareholders The general account of an insurance company

An attorney involved in the new issue of KMFA portfolio manager of an investment company buying for his personal account

The Founders Income Fund has declared a dividend payable to stockholders of record Friday, May 29th. The fund will sell ex-dividend: Monday, May 25th Tuesday, May26th Wednesday, May27th On the date setby the fund or its principal underwriter (sponsor)

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

Which of the following statements best defines the term duration? A measure of a fixed-income security's relative interest rate risk A measure of afixed income portfolio's average yield The period of time before a fixed-income security will be called The measure ofvolatility that compares an equity security to the S&P 500 index

A measure of a fixed-income security's relative interest rate risk

An investor buys an 8% New York City bond at a 10.00 basis. If the bond is held to maturity, the investor's net yield will be: 8% Between 8% and10% 10% Greater than 10%

Between 8% and 10% because it was purchased at a discountThe interest on the bond is exempt from taxation but the discount will represent ordinaryincome at maturity

Which of the following would be considered advertising? A 15-second radio spot by a broker-dealer announcing aninterview session for prospective reps A form letter sent to 30 prospects giving advice on asset allocation strategies An invitation to a seminar on tax-free investing The script of a seminar on 529 plans

A 15-second radio spot by a broker-dealer announcing an interview session for prospective repsThe rest are considered sales literature

A customer requests that a broker-dealer sell stock that he owns and use the proceeds of the sale to purchase a different stock. In determining the amount of markup that he will charge, the broker-dealer: Must consider each transaction separately May charge a markup on the sale only Should only consider the amount of money involved in the sale to the customer Is prohibited from charging a markup under these circumstances

Should only consider the amount of money involved in  the sale to the customerthe transaction is called a proceeds transaction. In determining themarkup the broker-dealer will charge, industry rules state that the firm shouldconsider only the amount of money involved in the sale to the customer

If a municipal bond is selling at a premium and is callable at par, how is the yield calculated? As a percentageof the par value By dividing theannual income by the current price To the final maturitydate To the call date

To the call date

All of the following are true of revenue bonds EXCEPT: Revenue bondscan be issued without voter approval Revenue bondscan be issued even though local debt limits have been reached Revenue bonds usually pay lower rates of interest than general obligation bonds Revenue bond interest is exempt from federal income taxes

Revenue bonds usually pay lower rates of interest than general obligation bonds

Which of the following best defines a tax swap? The purchase andsale of bonds to incur commissions The exchange ofconvertible bonds for stock to avoid the receipt of taxable interestincome The purchase andsale of bonds to realize a capital loss to offset against a capital gainfor tax purposes Exercising theexchange privilege of a mutual fund

The purchase and sale of bonds to realize a capital loss to offset against a capital gain for tax purposes

A client sells short 100 shares at 15 in his existing margin account. The FRB requirement is 50%. How much will he need to deposit? $450 $750 $1,500 $2,000

$750

Which of the following factors would be LEAST important in an analysis of whether an RR had churned a client's account? The type of securities the client traded The amount of commissions the client paid The amount of portfolio turnover The client's investment objectives

The type of securities the client traded

For tax purposes, all of the following are deducted from rental income in a real estate program EXCEPT: Depreciation Maintenance Mortgage amortization Property tax

Mortgageamortization

A municipality could issue revenue bonds for (multiple answer): Hospitals Electric systems Turnpikes Sewer systems

Hospitals Electric systems Turnpikes Sewer systems

An investor has purchased two municipal bonds. Bond A is bought at a discount and Bond B is bought at a premium. If the investor holds both bonds to maturity, the tax consequences will be: Ordinary incomeon A, no capital loss on B A capital gainon A, a capital loss on B A capital gainon A, ordinary income on B A capital loss on A, a capital loss on B

Ordinary income on A, no capital loss on B

An investor is a limited partner in a direct participation program that the IRS has determined to be abusive. This investor: Will lose hisentire investment May be subject to pay back taxes as well as penalties and interest Will escape alladverse tax consequences due to his limited status Will beforbidden by the IRS to invest in any other limited partnerships

May be subject to pay back taxes as well as penalties and interest

A customer purchased on margin 100 shares of ABC stock at 120 and sold short 100 shares of XYZ stock at 100. The customer also wrote an ABC 120 call @ 3 and an XYZ 100 put @ 2. What is the margin requirement for the combined transactions? $10,500 $11,000 $11,500 $22,000

$11,000

An investor purchases a two-year ABC call. Which of the following accurately describes the exercise of the option? European style,next business day settlement European style, three business days settlement American style,next business day settlement American style,three business days settlement

American style, three business days settlementLong-term anticipation securities (LEAPs) may beexercised on any day prior to expiration(American style). Exercise settlement isin the underlying stock, in three business days

Which of the following parties states that a municipality can legally issue bonds? FINRA The MSRB The SEC The bond counsel

The bond counsel

Which of the following indexes or averages is made up of the largest number of stocks? The Dow Jones Composite Index The S&P 500 Index The NYSE Index The Wilshire Associates Equity Index

The Wilshire Associates Equity Index

A brokerage firm accepted delivery of securities on settlement. Upon further inspection of the securities, the brokerage firm discovers a problem and wishes to return the securities to the selling dealer. The process of returning securities that have previously been accepted is known as: Reallowance Reclamation Rejection Recapture

Reclamation

If a customer is short RST call options, what other position would be considered when examining position limits? Long RST calls Long RST puts Short RST puts Long ABC puts

Long RST putsIf the customer is short RST calls, he wants or thinksthe marketprice of RST stock should decline. Since he is bearish onthe stock, he could also be longputs on RST. This would be considered to be on the sameside of the market

A customer gives a registered representative the following instructions: Buy 1,000 shares of General Electric "whenever you think the price is right." Under current regulations: The order can be executed by the RR only on the same trading day The order must be marked "discretionary" and approved by a branch manager The order can be executed by the RR any trading day The RR is not permitted to accept this type of order

The order can be executed by the RR only on the same  trading day

According to MSRB rules, all of the following must be included on a confirmation sent by a broker-dealer to a customer EXCEPT which two: Total dollarsdue including any accrued interest Rating providedby a nationally recognized municipal securities rating service Capacity inwhich the broker-dealer acted Denominations of the securities to be delivered

Rating provided by a nationally recognized municipal securities rating serviceDenominations of the securities to be delivered

Dealer A gives bonds firm to Dealer B with a recall. What does this mean? multiple answersDealer B has the right to sell the bonds before anyone else. The price of thebonds has been set. A time to sellthe bonds has been set. A recall timehas been established.

Dealer B has the right to sell the bonds before anyone else. The price of the bonds has been set. A time to sell the bonds has been set. A recall time has been established.

A mutual fund buys stock from the portfolio of an insurance company. This is a trade executed in the: Over-the-countermarket Exchange market Third market Fourth market

Fourth marketThis is the name given to the so-called market whereinstitutions trade with other institutions

Which of the following can be found on the Consolidated Quotation System? Bid/askedquotations for OTC stocks not listed on Nasdaq Bid/askedquotations for listed stocks reported by national exchanges and OTC thirdmarket makers Indications ofinterest on private placements to be sold to qualified institutional investors Bid/askquotations for small-cap OTC securities

Bid/asked quotations for listed stocks reported by national exchanges and OTC third market makersThe ConsolidatedQuotation System (CQS) provides subscribers withbid/ask quotations for securities listed on national exchanges, includingquotes from OTC market makers in those securities (the third market).

In a discussion with a client, a registered representative refers to a bond yield that has been reduced by the inflation rate. This yield is known as the: After-tax yield Discount rate Real interestrate LIBOR

Real interest rate

The market price of XYZ Company's stock is $60. The price-earnings ratio is 10 and earnings per share is $6.00. If the stock were to split 2 for 1, which of the following are true? Theprice-earnings ratio will be reduced to 5. Theprice-earnings ratio will remain at 10. The earnings per share will be reduced to $3.00 per share. The earnings pershare will remain at $6.00 per share. I and III I and IV II and III II and IV

II and IIIA stocksplit will increase the number of shares outstanding whiledecreasing the market price of the stock. The split will also have the effectof reducing earnings per share since the number of shares outstanding willincrease. The 2-for-1 split will reduce the marketprice to $30 ($60 x 1/2) and the earnings per share to$3.00 ($6.00 EPS x 1/2). However, the price-earnings ratio (market price/EPS),which was 10 before the split, will remain the same since both the market priceand the earnings per share were reduced by the same percentage ($30/$3.00 EPS =10

The transfer of bonds from one party to another may be accomplished by an endorsement on the back of the bond certificate or through a: Letter of credit Letter of notification Power of attorney Bond power

Bond power

A specialist has an order on its book from a public customer to buy stock at $34.70 and another order from a public customer to sell stock at $34.90. The specialist may: Buy stock for its own account at $34.65 Buy stock for its own account at $34.75 Sell stock from its own account at $34.90 Sell stock from its own account at $34.95

Buy stock for its own account at $34.75

Which of the following is subject to the Penny Stock Rule? Unsolicitedorders for a non-Nasdaq stock trading at $3.00 per share Solicited ordersfor a non-Nasdaq stock trading at $3.00 per share Unsolicitedorders for a Nasdaq stock trading at $3.00 per share Solicited ordersfor a Nasdaq stock trading at $3.00 per share

Solicited orders for a non-Nasdaq stock trading at $3.00 per shareListed stocks and Nasdaq stocks are/are not subject to the penny stock rule?are not

All of the following statements are TRUE concerning preconditions for sale requirements under the New Issue Rule, EXCEPT: The verificationmay be made through electronic communication The verificationmay be made through oral communication The verificationmust be conducted prior to the sale of new issues After theinitial verification an annual negative consent letter will be permitted

The verification may be made through oral communication

Why is the maturity of commercial paper 270 days or less? Because itcoincides with the historical 9-month business cycle It is anattractive alternative to 6-month Treasury bills Because short-term corporate debt of 270 days or less is exempt from registration All of the above

Because short-term corporate debt of 270 days or less is exempt from registration

A T-bond put option is quoted at 3-28. The purchase of one option at this price would require payment of: $328.00 $387.50 $3,280.00 $3,875.00

$3,875.00A purchase of a putoption at 3-28 is $3,875. Three (3) points equals $3,000 and 28/32 equals $875.Each 1/32 of a pointequals $31.25. Therefore, 28 x $31.25 equals $875

Volume and holding period restrictions do not apply to the resale of private placements (Reg D offerings) when: Purchasers' representatives assist investors Both parties are accredited investors The transaction is initiated by a registered principal The purchaser is a qualified institutional investor

The purchaser is a qualified institutional investor

A corporation has $7,000,000 in income after paying preferred dividends of $500,000. The company has 1,000,000 shares of common stock outstanding. The market price of the stock is $56. What is the price-earnings ratio? 6.5 times 7.5 times 8 times 8.6 times

8 timesThe price-earnings ratio is the marketprice ($56) of the stock divided by the earnings per share($7) which equals 8 times. The earnings per share of $7.00 is found by dividingthe $7,000,000 of available income to the common stockholders by the 1,000,000shares of commonstock outstandingThe price-earningsratio is calculated by?marketprice of the stock divided by the earnings per shareThe earnings per share is found by dividing the $ of available income to the common stockholders by the # of shares of common stock outstandingThe earnings per share is found bydividing the $ of available income to the common stockholders by the # of shares of common stock outstanding

How would preferred stock most likely be affected by an increase in interest rates? Its market value would increase Its market value would decrease Its conversion ratio would increase There would be no effect

Its market value would decrease

A member of a municipal new issue syndicate is entering an order for an accumulation account being used for a unit investment trust that the firm underwrites. This order must be entered as a(n): Pre-sale order Related portfolio order Contingency order AON order

Related portfolio order

A corporation has the following capital structure: 5% Convertible Bonds (conversion price is $20) $100,000 5% Preferred Stock $100,000 $1 Par Value Common Stock (5,000 shares outstanding)$ 5,000 Tax Rate is 34%Find the earnings per share after dilution assuming earnings before interest and taxes is $50,000.$2.47 $2.80 $2.97 $3.30

$2.80If the bonds are converted, there will be anadditional 5,000 shares outstanding ($100,000 face valuebonds divided by the conversionprice of $20 equals 5,000 shares). The company will nothave to pay the interest onthe bonds since they were converted

An individual purchased a 10 year municipal bond at a cost of $1,050. If the individual sells the bond in five years at its amortized value, the tax consequence would be: $25 capital gain $25 capital loss $50 capital loss No capital gain or loss

No capital gainor lossWhen a municipal bond is purchased at a premium, the premium must be amortized over the life of the bond. (21-12

Which of the following are normally TRUE regarding the pricing of municipal bonds? (which two)Serial bonds are priced on a yield-to-maturity basis. Serial bonds are priced on a dollar basis. Term bonds arepriced on a yield-to-maturity basis. Term bonds arepriced on a dollar basis.

Serial bonds are priced on a yield-to-maturity basis.Term bonds are priced on a dollar basis.

Which of the following new issues may be purchased by an employee of a broker-dealer under the New Issue Rule? Multiple answers Convertible debt Investment-gradedebt Exchange-tradedfunds Preferred stock

All An employee of a broker-dealer is considered arestricted person and may not purchase any new issues under FINRA rules. All ofthe choices listed in this question are not considered new issues under thisrule. Exemptions from the definition include: all debt offerings, investmentcompany offerings such as mutual funds and exchange-tradedfunds, and preferredstock. New issues under the rule are defined as initialpublic offerings (IPOs) of equitysecurities sold under a registrationstatement

Open-end companies are/are not offered below their currentnet asset valuethe maximum salescharge permitted for an open-end company is

are not, 8 1/2%

A corporation wishes to open a cash account. Which of the following is required? A corporate resolution A copy of the corporate charter A hypothecation agreement A risk disclosure document

A corporate resolution

A registered representative wants to open a joint account for the dentists in his office building. Dr. White and Dr. Enamel will each contribute equally to the account but each dentist wants his portion of the account to pass to his own estate. Which two of the following are correct? The account should be established as Joint Tenants with Right of Survivorship The account should be established as Tenants in Common All dividends and capital gains in the account will be reported by the brokerage firm under one social security number All dividends and capital gains in the account will be reported by the brokerage firm on a percentage of ownership basis

The account should be established as Tenants in CommonAll dividends and capital gains in the account will be reported by the brokerage firm under one social security number

An option contract for RFQ is for 108 shares. This would most likely be a result of which of the following circumstances? Never, since anoption contract always represents 100 shares If there hadbeen a stock split If there had been a stock dividend If there had been a cash dividend

If there hadbeen a stock dividend

An investor has been making payments into a variable annuity for the last 20 years. The investor decides to annuitize and selects a straight-life payout. Which TWO of the following statements are TRUE? The investment risk is assumed by the insurance company. The investment risk is assumed by the customer. The amount of the payment to the customer is guaranteed by the insurance company. The amount of the payment to the customer is not guaranteed.

The investment risk is assumed by the customer.The amount of the payment to the customer is not guaranteed.

Allen purchased a government security, and later discovered that it was nonnegotiable. This security could have been which of the following? Treasury bill Commercial paper GNMA pass-through EE savings bond

EE savings bond

Because of its multiplier effect on the economy, the Federal Reserve Board is reluctant to change: The reserve requirement Margin requirements The discount rate Its open market policy

The reserve requirement

Wireless Communications is offering 2,000,000 common shares (par value $.10) at $15. Which two of the following describe the financial impact on the company? An increase in paid-in capital A reduction in the long-term debt ratio A reduction in liquidity An increase in fixed assets by $30,000,000

An increase in paid-in capital A reduction in the long-term debt ratio

The 5% markup policy would apply to a: Municipal bond trade Transaction on the NYSE Proceeds transaction Purchase of mutual fund shares

ProceedstransactionThe 5% markup policy does not apply to any traderequiring a prospectus(new issues, registered secondaries, and mutual funds) or a transactioninvolving an exemptsecurity (municipal bond) or transaction effected on an exchange.The 5% policy applies to secondarymarket OTC trades, which include proceeds transactions(using sale proceeds to buy another security) and riskless or simultaneoustransactions.

Mrs. Jones is interested in selling 500 shares of her REIT. The sale would be handled in a manner similar to the: Redemption of an open-end fund Sale of a fund listed on the NYSE Liquidation of a real estate limited partnership Redemption of EE bonds

Sale of a fund listed on the NYSEThere is a secondarymarket for REITs (RealEstate Investment Trusts); the vast majority tradeon the NYSE with prices determined by supply and demand. Closed-end funds arefunds that are often bought and sold on the NYSE that trade in a similarmanner.

A customer asks an RR for a recommendation as to how to invest a $150,000 inheritance. The customer needs to preserve the capital since he would like to use the funds to start a new business within the next year. Which of the following would be the LEAST suitable recommendation for this customer? Taxable money market fund Tax-exempt money market fund Short-term Treasury fund Balanced fund

Balanced fundA municipal bond with an 8% coupon and eight years to maturity is purchased for 106. If sold six years later, what would be the cost basis? 100 101.50 104.50 106101.50

A new issue of municipal, government, or corporate securities with maturities greater than one year, must be issued in: Bearer or registered form Bearer form only Registered as to principal form only Fully registered form only

Fully registered form only

Fred's Auto Centers is looking to raise $10 million to expand its business. The company has entered into an agreement to raise the capital through Winco Securities, a local investment banking firm. Winco Securities has made no guarantee that it will be able to raise the full amount of the offering. Which of the following two statements regarding this scenario is/are true? This is an example of a firm commitment underwriting. This is a best-efforts underwriting. Winco is acting as an agent for Fred's Auto Centers. Winco is acting as principal in this underwriting.

This is a best-efforts underwriting. Winco is acting as an agent for Fred's Auto Centers.

What department or section of the brokerage firm would be responsible for tendering stock? P&S Department Margin Department Cashier's Department Reorganization Department

Reorganization Department

Concerning mutual funds, what is meant by net investment income? Interest only Dividends only Interest + dividends - expenses Dividends + capital gains - expenses

Interest + dividends - expenses

Ralph, a New York City bus driver, sold his apartment for $250,000. He is contemplating purchasing another property within the next 2 to 6 months, but would like to keep the proceeds invested while he is looking. Ralph's primary goals are preservation of capital, liquidity, and limiting his tax liability. Which of the following securities best meets his objectives? A corporate bond fund rated AA MBIA insured revenue bonds High-grade preferred stock A U.S. government money market fund

A U.S. government money market fund

A registered representative wants to give a seminar regarding retirement planning. Which of the following records must be maintained by the brokerage firm regarding this seminar? Documents attesting to the registered representative's expertise in the area being discussed The name and address of each person who attended theseminar A record of the topic discussed and sponsor of the seminar   The number of accounts that were opened based upon theseminar

A record of the topic discussed and sponsor of the seminar 

Which of the following choices describes the greatest risk associated with mortgage-backed securities? Borrowers mightdefault on their mortgage payments. The market formortgage-backed securities is illiquid. The market price of the bonds might fall due to a rating downgrade. Falling interestrates might accelerate early repayment of principal.

Falling interest rates might accelerate early repayment of principal.

A 6% bond is selling at a 6.25% basis. The bond will mature in 25 years and has 3 call dates. Which of the following would give the investor the best return? If the bond iscalled after 10 years at 103 If the bond iscalled after 15 years at 102 If the bond iscalled after 20 years at 101 If the bond isheld to maturity

If the bond is called after 10 years at 103

A municipal tombstone advertisement must be approved by: The MSRB A MunicipalSecurities Principal A Municipal SecuritiesPrincipal and the Branch Manager A Municipal Securities Financial and Operations Principal

A Municipal Securities Principal

During a period of stable interest rates, which bond has the most potential to show a significant change in price? 7%, 30-year U.S.Treasury Bond 8%, 5-year highgrade corporate bond 6%, 6-monthRevenue Anticipation Note 7 1/2%, 10-yearconvertible subordinated debenture

7 1/2%, 10-year convertible subordinated debenturea convertible debenturecould show significant price appreciation or depreciation if the underlying equitychanges in value because of the potential to convert.

Interest rates had been very high. During the past three years rates have decreased dramatically, reaching historically normal level. The present yield curve would most likely be which of the following two: Ascending Positive Inverted Negative

Ascending Positive

Secondary market offerings of municipal bonds could be found in all of the following EXCEPT: Broker'sbroker's list Munifacts Bond Buyer Dealer offering list

Bond Buyer

A bank or brokerage firm is applying to become a primary dealer in government securities. Which government body appoints the financial institution as a primary dealer? The TreasuryDepartment The SEC FINRA The FederalReserve Board

The Federal Reserve Board

The City of Fremont, Nebraska is issuing revenue bonds to increase its electric power generating facilities and to replace outstanding bonds. Interest on the bonds will be: Subject tofederal income tax and exempt from state taxes Subject tofederal and state income tax Subject to stateincome tax and exempt from federal income tax Exempt fromfederal income tax

Exempt from federal income tax

Which of the following types of securities may a municipal securities representative sell? Municipal bonds Government bonds Corporate bonds Municipal unitinvestment trusts

Municipal bonds

The turnover that a dollar experiences over a given period is known as the: Multiplier effect Velocity ofmoney Market momentum Inflation rate

Velocity of money

All of the following statements regarding the Capital Asset Pricing Model (CAPM) are TRUE EXCEPT it: Predicts futurevalues for the stock Was developed toexplain the behavior of security prices Provides amechanism to assess risk and return Is based on theefficient market theory and assumes all investors act rationally

Predicts future values for the stock

Super Entertainment Inc., a publicly traded firm on the NYSE, spins off its domestic syndication division creating 1,000,000 new shares. To receive the new shares, investors must exchange 25% of their old shares. Investors who receive shares of the new company would: Be required toreceive a prospectus under the Securities Act of 1933 Not receive aprospectus because the shares were sold via a private placement Receive aprospectus only if they received 500 shares or more Not receive aprospectus because this is a Rule 144A offering

Be required to receive a prospectus under the Securities Act of 1933

Which investment company does NOT charge a management fee? An open-endinvestment company A closed-endinvestment company A unitinvestment trust An exchangetraded fund

A unit investment trust

On February 10th, an investor sold 100 shares of ABC short at $50/share. The investor covers the position on November 1st by purchasing 100 shares of ABC at $58/share, establishing an 8-point loss. If, on November 15th, the investor shorts 100 shares of ABC at $56/share: The investor isshort 100 shares of ABC against the box The wash salerule has been violated The investor hasa $200 short-term capital gain The investor hasan $800 short-term capital loss

The wash sale rule has been violated

Calculate the SMA for the following margin account: Long Account: $150,000 Market Value, $50,000 Debit BalanceShort Account: $45,000 Market Value,$75,000 Credit Balance$7,500 $25,000 $32,500 $130,000

The combined SMA is, therefore, $32,500 ($25,000 LongSMA + $7,500 Short SMA).

Stagflation is best defined as a period where the economy is experiencing which two of the following? Inflation for a long period Deflation for a long period Low unemployment High unemployment

Inflation for a long periodHigh unemployment

What type of bond would most likely be secured by an excise tax, cigarette tax, or gasoline tax? GO Bond Special Tax Bond SpecialAssessment Bond Water and SewerBond

Special Tax Bond

A bond with an 11% coupon is purchased at 103. The maturity of the bond is 20 years. The bond is callable in 10 years at par. Which is correct? The yield will be higher if called. The yield will be higher if held to maturity. The yield will be the same if called or if held to maturity. The yield will be determined by the issuer.

The yield will be higher if held to maturity.

An investor purchases a $100m face value municipal bond with a 5-year maturity at 105. After two years, the bond is sold at 95. For tax purposes, the investor has a(n): $2,000 loss $4,000 loss $8,000 loss $10,000 loss

$8,000 lossWhen a municipal bond is purchased at a premium, the bond's premium must be amortized to find an adjusted cost basis. If the bond is sold above the adjusted cost basis, the result is a capital gain. If the bond is sold below the adjusted cost basis, the result is a capital loss. If the bond is held to maturity, there is neither a loss nor a gain for tax purposes. This is because the adjusted basis would equal the par value after the premium is amortized.

A customer wants preservation of capital and safety of income. Which of the following would best meet the customer's needs? Income bonds Debentures Several municipal bonds rated AA or better One AAA rated municipal bond

Several municipal bonds rated AA or better

When reading a research report on an automobile company, a registered representative's use of fundamental analysis determines that the stock is a good investment. When attempting to figure the best time to execute orders to buy the stock, the registered representative could refer to: A chart showing the price-earnings ratio for all automobile stocks A chart showing a recent history of the market price of the stock The company's dividend payout ratio The research report's future expectation for earnings

A chart showing a recent history of the market price of the stock

An investor purchases Swiss francs in the spot market at 61. As a hedge, the investor buys a Swiss franc June 60 put at 0.50. This strategy will be profitable if which two: The U.S. dollar weakens The U.S. dollar strengthens The spot price for the Swiss Franc is 61.75 The spot price for the Swiss Franc is 59.25

The U.S. dollar weakensThe spot price for the Swiss Franc is 61.75

All of the following offerings are exempt from federal registration EXCEPT: 1 Private placements conducted under Regulation D 2 Intrastate offerings conducted under Rule 147 3 Public offerings of limited partnerships 4 Treasury bills sold through the Federal Reserve Banks

3 Public offerings of limited partnerships

An investor buys a zero-coupon corporate bond at 37. After three years, the bond's basis has accreted for tax purposes to 40. If the bond is sold for its accreted value, the investor will recognize: 1 No gain or loss 2 A 3-point capital gain 3 A 3-point capital loss 4 Interest income of 3 points

1 No gain or loss

An investor purchasing $1,000,000 par value of Treasury notes at a price of 101-03 would pay: $1,010,300 $1,010,937.50 $10,101,300 $10,109,375

$1,010,937.50

XYZ Corporation has 4,000,000 shares of common stock authorized and 2,500,000 shares issued of which 100,000 are treasury stock. The corporation is issuing an additional 1,000,000 shares through a standby underwriting. If only 600,000 shares are subscribed to in the corporation's offering, the number of outstanding shares will: 1 Remain the same since the entire issue was not fully subscribed 2 Increase by 600,000 to 3,000,000 shares 3 Increase by 600,000 to 3,100,000 shares 4 Increase by 1,000,000 to 3,400,000 shares

4 Increase by 1,000,000 to 3,400,000 shares

A registered representative writes a letter to see if his clients have any interest in trading options. The letter is generic and describes the advantages and disadvantages of options trading. This letter: (which 2)1 Must be approved prior to use by a ROP 2 Need not be approved prior to use so long as it does not contain recommendations 3 Must be accompanied by a risk disclosure document 4 Need not be accompanied by a risk disclosure document

1 Must be approved prior to use by a ROP4 Need not be accompanied by a risk disclosure document

Mr. Jones bought an 8% debenture at a 7.20 basis. If the bonds are currently trading 15 basis points higher: 1 Mr. Jones' yield-to-maturity has increased to 7.35% 2 The bond's coupon has increased to 8.15% 3 The bond's market price has decreased 4 Mr. Jones' investment has not been affected

3 The bond's market price has decreased

Mr. Blue's margin account has a market value of $20,000 and a debit balance of $9,000. If Mr. Blue purchases $2,000 of options, he would have to deposit: 0 $1,000 $2,000 $3,000

$1,000

Which of the following statements is TRUE concerning periodic payment variable annuities? 1 The number of a client's annuity units never changes. 2 The number of a client's accumulation units never changes. 3 They never have a beneficiary. 4 The monthly payout is fixed by the inflation index.

1 The number of a client's annuity units never changes.

If ABC Corporation pays a $0.25 dividend to its shareholders, all of the following would result EXCEPT: 1 Retained earnings remain the same 2 Working capital is decreased 3 Current assets are decreased 4 Current liabilities are decreased

2 Working capital is decreased

A registered representative receives an order from the President of XYZ Corporation to sell unregistered XYZ shares. The client purchased the shares in a private placement 90 days ago. This order: 1 Will require the filing of Form 144 with the SEC 2 May be executed without any restrictions 3 Must be approved by a principal prior to execution 4 Is a violation of Rule 144 if executed

4 Is a violation of Rule 144 if executed

Which of the following would best describe income taxes and estate taxes? (which 2)1 Flat taxes 2 Graduated taxes 3 Regressive taxes 4 Progressive taxes

2 Graduated taxes4 Progressive taxes

To calculate the total interest cost to the issuer for a competitive bid, the syndicate would need: (multiple answers)1 The total par value of the offering 2 The maturity schedule and coupon rates 3 Whether the bid includes any discounts or premiums 4 The dated date for the bonds

1 The total par value of the offering 2 The maturity schedule and coupon rates 3 Whether the bid includes any discounts or premiums 4 The dated date for the bonds

When analyzing a mutual fund's expenses, an analyst would look at all of the following EXCEPT: 1 The management fees charged by the investment adviser 2 The fees charged by the fund's custodian 3 The fund's expense ratio 4 The sales load charged to buy fund shares

4 The sales load charged to buy fund shares

In an oil and gas drilling program, a sharing arrangement where the sponsor pays a small amount of all of the program's costs in return for a larger amount of the revenues is known as: 1 Functional allocation 2 Overriding royalty 3 Reversionary working interest 4 Disproportionate

4 Disproportionate

Which TWO of the following persons would be permitted to purchase an equity IPO? 1 An employee of a FINRA member whose sister is a director of the issuer 2 A portfolio manager of a mutual fund purchasing for his personal account 3 Employees of the issuer if the issuer is a FINRA member 4 An attorney hired by the issuer to assist in the IPO

1 An employee of a FINRA member whose sister is a director of the issuer3 Employees of the issuer if the issuer is a FINRA member

The Trust Indenture Act of 1939 regulates: (which 2)1 A purchase of $5,000,000 of Treasury bonds2 A private placement of $3,000,000 of corporate notes 3 A $20,000,000 sale of corporate bonds sold interstate 4 A sale by a brokerage firm throughout the country of $25,000,000 of corporate debentures

3 A $20,000,000 sale of corporate bonds sold interstate 4 A sale by a brokerage firm throughout the country of $25,000,000 of corporate debentures

Keystone Chocolate Co. plans to sell shares of a new issue only in the state of Pennsylvania. In order to qualify for a registration exemption under Rule 147, what percentage of the corporation's assets must be located in Pennsylvania, and what percentage of its revenues must be derived from Pennsylvania sources, at the time of the offering? 70% 80% 90% 100%

80%

A corporation has a 9% cumulative preferred stock issue outstanding. The company paid a $7 dividend in 2002 and $8 in 2003. If the company wants to pay a common stock dividend in 2004, the cumulative preferred stockholders must first receive a dividend of: 0 $3 $9 $12

$12

Which of the following orders would you place for a customer who wants to hold her auction rate security if the interest rate is set at 3.4% or higher: 1 Hold order 2 Limit order 3 Bid order 4 Sell order

3 Bid order

According to MSRB rules, all of the following must be approved by a principal prior to being sent to a customer EXCEPT: 1 An abstract of an official statement 2 A preliminary official statement 3 An advertisement regarding the firm's products and services 4 A research report

2 A preliminary official statement

A client buys 100 shares of Miramar at $42 per share. One week later she buys one Miramar Nov 40 put and pays a premium of $300. In November, the stock is at $48 per share and the put expires worthless. The tax consequences of these trades are: (which 2)1 Miramar stock has a basis of 42 2 Miramar stock has a basis of 45 3 There is a capital loss of $300 on the put 4 No loss is reported on the put until the stock is sold

1 Miramar stock has a basis of 423 There is a capital loss of $300 on the put

A municipal tombstone ad shows bonds maturing serially from 2012 through 2030. The 2030 maturity is a 6.00% bond offered at a 6.75 basis. The bonds maturing in 2020 and thereafter are callable beginning in 2018 @ 102 and at 101 in 2019 and at par on any interest date after 2019 . The bonds maturing in 2030 should be priced to the: 2018 call date 2019 call date 2020 call date Maturity date

Maturity date

Mrs. Green enters an order to sell stock that is currently in her safe deposit box. According to SEC rules, a broker-dealer must buy-in the stock if Mrs. Green does not deliver the shares within: 3 business days after the trade date 3 business days after the settlement date 10 business days after the trade date 10 business days after the settlement date

10 business days after the settlement date

A municipal dealer purchased $100,000 face value of 6.00% bonds at a 6.00 basis. If the dealer reoffered the bonds, which of the following could be considered reasonable? (which 2)101 108 5.80 basis 4.00 basis

101, 5.80 basis

Which of the following best describes a BA? 1 It facilitates the trading of foreign stocks in the United States. 2 It helps to finance foreign trade between importers and exporters. 3 It is used by a municipal issuer in raising funds to meet a seasonal need for cash. 4 It is issued by nondomestic banks and is secured by Eurodollar deposits.

2 It helps to finance foreign trade between importers and exporters.

A customer gave his registered representative an order to buy 1,000 shares of GM at the market. If the execution report from the floor of the exchange states that 1,200 shares were purchased at 78 the: 1 Customer must accept the execution even though it conflicts with the order 2 Customer is only obligated to accept the amount ordered, not executed 3 Registered representative should ignore the execution and enter a new order to buy 1,000 shares of GM at 78 for the customer 4 Registered representative should advise the exchange about the error

2 Customer is only obligated to accept the amount ordered, not executed

Which of the following would have the least amount of credit risk? 1 Preferred stock issued by a blue chip company 2 Mortgage bonds 3 Treasury notes 4 Revenue bonds

3 Treasury notes

A registered representative opens an option account for a customer on October 1st and buys 5 ABC November 30 calls at 4. On October 16th, the premium of the calls has decreased to 2 and the registered representative has not received a signed options agreement. The registered representative may: 1 Not accept any orders from the customer until the signed options agreement is received 2 Accept an order to sell the 5 ABC November 30 calls that were previously purchased 3 Accept an order to buy 5 additional ABC November 30 calls 4 Accept an order to buy 5 XYZ December 40 calls

2 Accept an order to sell the 5 ABC November 30 calls that were previously purchased

According to MSRB rules, the delivery of a mutilated certificate would be considered a good delivery: 1 Under no circumstances 2 If the seller informs the buyer about the mutilation in writing 3 If the certificate is authenticated by the issuer or transfer agent 4 If the certificate is authenticated by the MSRB

3 If the certificate is authenticated by the issuer or transfer agent

The calculation used by issuers to award bonds that takes into account the time value of money is known as: 1 Net interest cost 2 True interest cost 3 Level debt service 4 Flow of funds

2 True interest cost

Government-sponsored enterprise securities are comparable to direct government obligations with regard to all of the following EXCEPT: 1 They trade in the over-the-counter market 2 All are government guaranteed 3 Short-term securities are quoted on a discount yield 4 Long-term securities are quoted as a percentage of par

2 All are government guaranteed

Which of the following option orders may be accepted by an order book official? 1 Discretionary 2 Limit 3 Spread 4 Not held

2 Limit

The Trust Indenture Act of 1939 establishes: 1 A legal relationship between a municipal issuer and a trustee for the benefit of bondholders 2 A legal relationship between a corporate issuer and a trustee for the benefit of bondholders 3 The requirements for call provisions in non-exempt issues 4 Prospectus requirements

2 A legal relationship between a corporate issuer and a trustee for the benefit of bondholders

A pension fund manager wants to protect the fund's diversified stock portfolio against a market downturn. To best meet this objective, he should write: 1 Covered calls 2 Covered puts 3 Uncovered calls 4 Index options

4 Index options

A broker-dealer owns 100 shares of ABCO stock which it purchased at 28. If the stock is sold to a customer, the broker-dealer will base a markup on: 1 The inventory cost of 28 2 The highest bid on the Nasdaq system 3 The lowest offer on the Nasdaq system 4 A price that is fair and reasonable

3 The lowest offer on the Nasdaq system

A customer wants to open a cash account. All of the following are required on the new account form EXCEPT: 1 The registered representative's signature 2 Whether the customer is of legal age 3 The customer's signature 4 The branch manager's approval

3 The customer's signature

A municipal dealer has a customer's order to purchase bonds on an agency basis. According to MSRB rules, the customer's order must be executed at: 1 The best price available2 A price that is fair and reasonable 3 The average price obtained from all dealers contacted 4 The first price obtained

2 A price that is fair and reasonable

When an investor sells an interest in a limited partnership, his or her cost basis for tax purposes is the: 1 Original investment 2 Adjusted basis 3 Accredited value4 Original investment plus accretion

2 Adjusted basis

To diversify a corporate bond portfolio, which of the following is not a concern? 1 Coupon 2 Maturity 3 Price 4 Geographic location

3 Price

Crossway Shopping Centers, a REIT, is making a public offering of 3,000,000 units at $20/share. An investor who buys the issue in the primary market must receive: 1 An offering memorandum 2 An offering circular 3 A prospectus 4 An educational brochure explaining the general nature of REITs

3 A prospectus

The strike price of a T-bond option contract is expressed as a percentage of the: 1 Total premium 2 Face amount of the underlying bonds 3 Underlying market value 4 Discount yield

2 Face amount of the underlying bonds

Which of the following items would be considered a coincident economic indicator? 1 Industrial production index 2 S&P index 3 Housing starts 4 Expenditures for capital goods

1 Industrial production index

Which of the following persons control positions in secondary market municipal bonds for a broker-dealer? 1 Underwriter 2 Trader 3 Agent 4 Principal

2 Trader

Which of the following communications must be filed with FINRA ten days prior to use? (which 2)1 Options advertising 2 Mutual fund advertising 3 CMO advertising 4 Unit Investment Trust advertising

1 Options advertising3 CMO advertising

A customer's margin account has a long market value of $30,000 and a debit balance of $12,000. FRB initial margin requirement is 50%. What is the purchasing power in the account? 0 $3,000 $6,000 $18,000

$6,000

Charlene contacts her registered representative to buy an OTC stock. Rather than buying it directly from a market maker, Charlene's broker-dealer contacts another broker-dealer, who buys it from a market maker creating two levels of transaction fees. This is known as: 1 Freeriding and withholding 2 Interpositioning 3 Backing away 4 Churning

2 Interpositioning

Which of the following is not used to determine the winning bid in a competitive bond offering? 1 Reoffering Yields 2 Bond years 3 NIC 4 TIC

1 Reoffering Yields

An individual purchases $100,000 face value of a 6% municipal bond at a dollar price of 101 1/2. The bond's maturity is 7-1-17, but the issue has been called for redemption on the first call date of 7-1-05 @ par. The customer's confirmation should show the: 1 Yield-to-call 2 Yield-to-maturity 3 Taxable equivalent yield 4 After-tax yield

1 Yield-to-call

When pricing a bond, which of the following would be required? (multiple answers)1 Coupon 2 Maturity 3 Settlement date 4 Bond years

1 Coupon 2 Maturity 3 Settlement date 4 Bond years

Relative to stock index options, which of the following are correct? (multiple answers)1 Expirations are monthly 2 If exercised, settlement is in cash the next day 3 The settlement amount is based on the closing index price on the day of exercise

1 Expirations are monthly 2 If exercised, settlement is in cash the next day 3 The settlement amount is based on the closing index price on the day of exercise

An investor purchased a municipal bond at a discount. If the investor holds the bond to maturity, any gain will be considered: (which 2)1 Tax-free interest if the bond is an OID 2 A capital gain if the bond is an OID 3 Ordinary income if the bond is not an