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SIE

Terms in this set (75)

One of your clients calls and asks what type of investment would be BEST suited to provide secure income on a monthly basis. The customer is in a low tax bracket. Which would be BEST for the customer?(A) Investment in the UITs of a municipality.(B) Investment in CMOs (Collateralized Mortgage Obligations)(C) Investment in municipal bonds(D) Investment in U.S. Government, zero-coupon bonds
D
One of your customers calls seeking a fund that offers a high level of capital appreciation. Which of the following BEST fits this customer's objectives?(A) A fund made up of municipal bonds(B) A fund made up of a balance of equity and fixed income securities(C) A fund made up of small cap stocks(D) A fund balanced between growth and income investments
C
All of the following are TRUE of mutual fund "breakpoints" EXCEPT:(A) Breakpoints are the dollar amounts of investment at which the investor is eligible for a lower sales charge percentage(B) Breakpoints must be disclosed and explained in the fund prospectus.(C) The only mutual fund class of shares that provides breakpoints are Class A shares(D) The sales practice of "breakpoint selling" is legal and is to be encouraged
D
All of the following are benefits of investing in a REIT EXCEPT:(A) income and/or growth(B) professional management(C) depreciation write-offs(D) diversification
D
A portfolio manager is creating several new mutual funds. Which of the following investment products could the manager purchase for these funds? Warrants on common stockRevenue bonds issued by a municipalityTreasury bills of the U.S. GovernmentEquity securities such as the common stock of a corporation(A) III only(B) III and IV only(C) II, III, and IV only(D) I, II, III, and IV
D
Which of the following entities is responsible for accepting and guaranteeing the exercise of listed option contracts?(A) The Options Clearing Corporation (OCC)(B) The Securities and Exchange Commission (SEC)(C) The Chicago Board Options Exchange (CBOE)(D) The Financial Industry Regulatory Authority (FINRA)
A
The Trust Indenture Act of 1939 covers and requires the registration of which of the following?(A) Common stock equity securities(B) Preferred stock equity securities(C) Debentures issued by a corporation(D) Bonds issued by the U.S. Treasury Department
C
Which one of the following is TRUE regarding planned amortization class (PAC) collateralized mortgage obligations?(A) They have less than average exposure to prepayment risk.(B) They have higher yields than other tranches.(C) They do not have a sinking fund.(D) They are subordinated to other tranches.
A
Under the JOBS Act, an issuer that is an emerging growth company or a broker-dealer representing the issuer may engage in the following communications before a registration statement is filed with the SEC EXCEPT (A) Contact potential investors that are Qualified Institutional Buyers (QIBs) to ascertain investor interest(B) Contact potential investors that are Accredited Investors (AIs) to ascertain investor interest.(C) Contact potential investors that are Retail Investors to ascertain investor interest(D) Engage in oral or written communications with potential investors.
C
For purposes of a Reg D offering, which of the following would NOT be considered an accredited investor?(A) An investor who frees up just under 50% of his net worth and uses it to purchase $175,000 of the offering(B) One of the issuer's executive officers(C) An investor who made $350,000 in each of the past 5 years(D) A husband and wife who have a $1,000,000 joint net worth
A
When a company does a Rights Offering, the rights are (A) sold to the general public.(B) sold to only existing shareholders.(C) only given to existing shareholders, proportionately to shares held.(D) given to the public on a first come, first serve basis.
C
Which of the statements below on open-end funds is FALSE?(A) At least once annually, shareholders should receive distributions of any capital gains of the fund.(B) 8.5% is the largest allowable sales charge.(C) The secondary market is where such funds are traded.(D) Some customers may qualify for breakpoints.
c
Which of the following would contain the conditions and agreements of an upcoming issue of bonds by a corporation?(A) These would be contained in the Tombstone Ads produced for the bonds.(B) These would be contained in the bond's indenture.(C) These would be contained in the underwriter's agreement.(D) These would be contained in the legal opinion of the bond.
b
As inflation increases over time, the best hedge against it has historically been provided by which of the following types of securities?(A) Common stocks(B) Preferred stocks(C) Government Securities (T-Bonds, etc.)(D) Convertible bonds
A
When an investor is deciding whether to buy puts or sell the stock short, buying the puts offers all of the following advantages EXCEPT?(A) The same or greater profit potential versus selling the stock short(B) Time value dissipates(C) Smaller capital required(D) Limited loss potential
b
At what time must a firm provide an Options Disclosure Document (ODD) to a customer?(A) Within one business day of the first options trade in the account.(B) No later than 2 business days after the first options trade in the account.(C) No later than 15 business days after receiving the customer's account application.(D) At or before the approval of the account for options trading.
D
Which of the following is allowed by SEC Rule 144A?(A) Rule 144A allows foreign corporations to buy registered securities.(B) Rule 144A allows qualified institutional buyers to buy registered securities.(C) Rule 144A allows qualified institutional buyers to buy unregistered securities.(D) Rule 144A allows affiliates of the issuer to purchase registered securities.
C
"Junk Bonds" can also be called a corporate bond which:is a non-rated bond.Has lower yields than Investment Grade bonds.Has a rating of BB or lower.Are also referred to as "high yield" bonds.[A] I and II only[B] II and III only[C] I, III, and IV only[D] I, II, III, and IV
C
A customer buys 100 shares of XYZ at $40/share and sells 1 XYZ Dec 40 call @ 2. What is the maximum loss potential?[A] $200[B] $3,800[C] $4,000[D] Unlimited
b
All of the following information is required in a prospectus EXCEPT:[A] date of the prospectus [B] statement as to possible stabilizing transactions [C] copies of underwriting agreement and opinions of counsel [D] statement that the SEC neither approves nor disapproves of the securities
c
Mr. Jones purchased $10,000 par value of 8% bonds to yield 5%. On the normal interest payment date, he will receive: (A) $250 (B) $400 (C) $500 (D) $800
b
If an investor spreads his mutual fund investments over several different fund families, his/her registered representative should disclose to the investor that the investor will probably forfeit which of the following privileges? [A] exchange privileges [B] sales charge breakpoint [C] systematic withdrawal program [D] automatic reinvestments of dividends and distributions
b
All of the following could be applied to fixed UITs EXCEPT:[A] The term "diversified" [B] The fact that they are registered [C] The fact that they are managed [D] The fact that they are regulated
c
What is the obligation of a put writer upon exercise of the put? [A] The writer must purchase the underlying security at the strike price. [B] The writer must purchase the underlying security at the current market value. [C] The writer must sell the underlying security at the strike price. [D] The writer must sell the underlying security at the current market price.
A
Which of the following is true of cumulative voting? [A] It is advantageous to majority shareholders. [B] Minority shareholders have a better chance of electing a director of their choice. [C] Majority shareholders can always elect the entire board of directors. [D] A stockholder of 400 shares with 5 persons to be elected to the board could only vote 400 shares for each director of his choice.
b
Which would be a counter-cyclical industry? [A] The computer software industry [B] The pharmaceutical industry [C] The gold mining industry [D] The automobile industry
c
Investment company financial statements are sent to shareholders
A. monthly.B. quarterly.C. semiannually. D. annually.
B
When comparing rights and warrants, which of the following statements is TRUE?
A. Warrants have shorter expiration periods than rights
B The exercise price of a right is generally below the price of the stock when the right is issued; the exercise price of the warrant is generally above the price of the stock when it is issued.
C. Rights are often added to bond issues as sweeteners; warrants are offered to existing shareholders to permit them to maintain their proportionate interest in the company when additional shares are issued
D. Warrants protect shareholders against dilution, rights do not
b
Helen opened a Roth IRA last year and wants to know what part of this year's contributions she can deduct. The answer is
A. she can deduct 100%.
B. it depends on her income.
C. it depends on her age.
D. she can't deduct any amount.
D
During the accumulation phase of a variable annuity, dividends, interest, and capital gains
A. may be withdrawn with no tax implications.
B. are taxed as ordinary income if the contract
is non-qualified.
C. are taxed as capital gains if the contract is
non-qualified.
D. may be reinvested without any current tax
liability.
D
Dollar limits on 529 plan contributions per beneficiary are set by
A.the federal government.
B. the Municipal Securities Rulemaking Board.
C. various states.
D. the College Board.
C
With regard to the price of closed-end fund shares held by investors which of the following statements is TRUE?
A.The price is set by formula each business day
B. Shares may be sold at a discount or premium
to their NAV
C. Shares are sold at the price calculated at the
close of business on that day
D. Shares are sold at a discount when the
securities in the fund have increased in value relative to their NAV
B
All of the following sectors are considered cyclical EXCEPT
A. healthcare. B. hotel.C. steel.D. furniture.
A
Noreen and her husband Jeff, residents of New York City, have just had their first child Ali. They are interested in opening a 529 Plan for Ali in order to save for her future college education. As a registered representative, it would be most appropriate to tell them
A. to invest in a New York state 529 as there may be certain tax advantages at the federal level.
B. to invest in a New York state 529 as there may be certain tax advantages at the state level.
C. to invest in a 529 Plan outside of New York state as there may be certain tax advantages at the federal level.
D. it does not matter which state they open up a 529 Plan in as the distributions will be treated the same regardless.
B
A municipal finance professional at JoeBrokerDealer made a contribution of $500 to candidate in a local election that resulted in a ban on underwriting activity. A month later the MFP joined a new municipal securities firm, JaneBrokerDealer. The remainder of the two- year ban will apply to
A. neither JoeBrokerDealer or JaneBrokerDealer.
B. both JoeBrokerDealer and JaneBrokerDealer.
C. JoeBrokerDealer only. D. JaneBrokerDealer only.
B
All the following are exempt from the registration requirements of the Securities Act of 1933 except
A. A rated municipal bonds.
B. AAA rated corporate bonds.
C. US Treasury bonds.
D. domestic bank securities.
B
Accrued interest is calculated from the
A. dated date and continues to the settlement date.
B. last coupon date and continues to the day prior to the settlement date.
C. last coupon date and continues through the settlement date.
D. dated date to the next coupon date.
B
Commercial paper, bankers' acceptances and large time deposits are part of what segment of the fixed income market?
A. Corporate bonds B. MunicipalC. Asset-backedD. Money market
D
For existing customer accounts, how often do broker-dealers required to send a written notice to the customer for verification of account information?
A. Annually
B. Every two years
C. Every 3 years
D. Every 5 years
C
A customer deposits $2,000 of cash into a brokerage account in the morning and $10,000 in cash into the same account that afternoon. The firm is required to file
A. a SAR.
B. a CMIR.
C. a CTR.
D. nothing at this time, but this suspicious
activity should be monitored.
C
All of the following are features of ETFs EXCEPT
A. typically lower fees than closed-end company shares.
B. redeemed by the issuer.
C. often track an index or other benchmark.
D. initially capitalized through a public IPO.
B
XYZ Inc. declares a $0.30 dividend payable on Monday, August 15, to all shareholders of record as of Monday, August 8. When is the ex-dividend date for a regular way trade in the stock?
A.Tuesday, August 2
B.Wednesday, August 3
C.Thursday, August 4
D.Friday, August 5
D
The Securities Investor Protection Corporation (SIPC) protects customers from
A.market loss.
B. issuer bankruptcy.
C.broker-dealer financial failure.
D. identity theft compromising customer accounts or the broker-dealer.
C
Passive losses generated by a limited partnership may be used to reduce which of the following?
A. Ordinary income only
B. Passive income only
C. Both ordinary income and passive income
D. Capital gains from the sale of appreciated
investments only
B
Investors that purchase high quality fixed income investments for retirement income are most concerned with
A. credit risk.
B. principal risk.
C. inflation risk.
D. economic risk.
C
An individual contacts her financial representative to sell her mutual fund shares. The price she will receive is
A. the market price at the time the order is entered.
B. the next calculated NAV price.
C.the asked price at the close of the trading
day.
D. the next calculated POP price.
B
An investor in a limited partnership makes a $20,000 cash capital contribution and signs a $50,000 recourse note. Which are correct:
His basis is $20,000
His basis is $70,000
The maximum loss to the limited partner is $20,000
The maximum loss potential is $70,000
2 & 3
Which of the following are reasons why Direct Participation Programs are formed as Limited Partnerships?
The partnership is taxed at a lower rate than the rate of the partners
The advantages of limited liability for the limited partners
The tax advantages of the pass-through of profits and losses to the limited partners
All of the above
All of the following are examples of a regular stock split EXCEPT:
[A]3:2
[B]5:4
[C]8:7
[D]2:3
D
A corporation increases the dividend payments to common stockholders. Assume that the price of the common remains unchanged. How does this affect the dividend yield of the stock?
[A]Increases
[B]Decreases
[C]Remains constant
[D]Cannot be determined with information provided.
A
An emerging growth company is generally defined as a company with total annual
[A]gross revenues of more than $1 billion for its most recent fiscal year.
[B]gross revenues of less than $1.07 billion for its most recent fiscal year.
[C]gross profits of less than $1 billion for its most recent fiscal year.
[D]net profits of more than $1.07 billion for its most recent fiscal year.
B
Which of the following would a company most likely issue in order to stabilize cash flow?
[A]Common stock
[B]Banker's acceptance
[C]Commercial paper
[D]Certificates of deposit
C
A long-term Corporate Bond trading in the secondary market has a Nominal Yield of 10% and a Basis of 7%. The Current Yield is 9% and the Par Value is $1,000. The bond is trading at a
[A]premium.
[B]discount.
[C]par.
[D]premium above parity.
A
The following bond offerings have identical maturity dates. Which would result in the highest dollar purchase cost to the investor?
[A]4 7/8% coupon offered on a 5.20 basis
[B]5 1/4% coupon offered on a 5.00 basis
[C]5 1/2% coupon offered on a 5.50 basis
[D]5 7/8% coupon offered on a 5.95 basis
B
Interest rate movements may affect all of the following regarding CMOs EXCEPT
[A]rate of payments.
[B]price.
[C]credit rating.
[D]rate of return.
C
A municipal general obligation bond has which of the following characteristics?
[A]Revenues generated by the users of the project pay all expenses related to the bonds.
[B]They trade on listed exchanges.
[C]GO bonds are backed by the full faith and credit of the municipality issuing the bonds.
[D]GO bonds can be exempt from federal taxation only.
C
The initial step in determining the overall conversion value of a convertible bond when converted to common stock begins with
[A]the current market value of the bond.
[B]the par value of the bond.
[C]the market value of the common stock.
[D]the price of the common stock at the time of initial issuance.
B
List the yields from lowest to highest, if a corporate bond is trading at a premium.
1. Nominal Yield
2. Current Yield
3. Basis
3,1,2
An investor is looking at an order and sees a size of 20 x 5. What does this mean?
[A]It means that a total of 100 shares are available in 5 round lots of 20 shares each.
[B]It means that 20 shares are available at the bid price listed in the quote and 5 shares are available at the ask price listed in the quote.
[C]It means that 2,000 shares are available at the bid price and 500 shares are available at the ask price.
[D]It means that 20 market makers are offering to sell at the bid price and 5 market makers are offering to buy at the ask price.
C
Which of the following best describes an order to buy or sell after a stock trades at or through a specific price?
[A]Stop
[B]Not held
[C]Limit
[D]Market
A
A registered representative opens a new account for a customer by telephone and receives an order to sell 300 shares of ABC at the market. Under FINRA Rules, the registered representative must do which of the following before executing the transaction?
[A]Have the stock in its position
[B]Nothing, there are no restrictions on accepting the order
[C]Receive reasonable assurance from the customer that the stock will be delivered in good deliverable form within two business days from trade date
[D]Receive reasonable assurance from the customer that the stock will be delivered in good deliverable form within 10 business days from trade date
C
When describing a quote for a stock, which two of the following are correct?
A. The "bid" represents the price at which a market maker will buy stock from a customer who enters a market order to sell.
B. The "bid" represents the price at which a market maker will sell stock to a customer who enters a market order to buy.
C. The "ask" represents the price that a customer will receive when selling stock using a market order.
D. The "ask" represents the price that a customer will pay when buying stock using a market order.
A, D
A 56 year old, self-employed individual withdraws $50,000 from his Keogh Plan. Which of the following statements is FALSE as to the tax consequences of the withdrawal?
[A]The entire amount withdrawn will be taxable as ordinary income
[B]A 10% penalty tax will be assessed on the entire amount
[C]The individual does not appear to qualify for any of the exceptions to the 10% penalty tax rule
[D]Only the earnings portion of the withdrawal will be taxable
D
All of the following statements about a Spousal IRA are TRUE EXCEPT:
[A]It can be used by a married couple with a non-working spouse.
[B]It allows for a total higher contribution between two separate IRA accounts.
[C]The contributions do not have to be equally divided between the two IRA accounts.
[D]Rollovers are allowed at any time between the spouses' accounts.
D
A 23 year old customer wants to invest to provide for his qualified higher education expenses. Which of the following is his best alternative?
[A]A Section 529 pre-paid tuition plan
[B]A Section 529 Education Savings Plan
[C]Series EE and Series I savings bonds
[D]A Coverdell Education Savings Account
B
Bid Price
the highest price someone is willing to pay for a security
Ask Price
the lowest price the DMM will sell the security for for
Which of the following options positions would give the investor MAXIMUM protection when hedging using options?
[A]Long Calls and Short Calls
[B]Long Calls and Long Puts
[C]Short Calls and Short Puts
[D]Short Calls and Long Puts
B
Mrs. Jones has a conservative investing approach. She has a large portfolio of blue chip common stocks and wants to use options to receive additional income from the portfolio. Which of the following would be the MOST suitable recommendation for Mrs. Jones?
[A]Buy Puts options on the portfolio of securities
[B]Write Put options on the portfolio of securities
[C]Buy Call options on the portfolio of securities
[D]Write Call options on the portfolio of securities
D
An investor, whose investment objective is speculation, would MOSTLY be concerned with which of the following?
[A]Their exposure to reinvestment risk[B]Their exposure to currency risk[C]Their exposure to interest rate risk[D]Their exposure to capital risk
D
Which regulator determines which securities can be purchased on margin when the securities are non-exempt securities trading on the OTC market?
[A]FINRA - Financial Industry Regulatory Authority
[B]FRB - Federal Reserve Board
[C]SEC - Securities Exchange Commission
[D]SIA - Securities Industry Association
B
All of the following securities may be purchased on margin in a customer's margin account EXCEPT?
[A]Municipal bonds
[B]U.S. Treasury Bonds
[C]Corporate bonds
[D]Call options on equities
D
Which of the following is FALSE regarding a variable annuity?
[A]The investment objectives may be changed after a vote by those holding the variable annuity.
[B]Management of such portfolios is performed by a professional in the industry.
[C]Holders are protected against losses to their initial investment.[D]Mutual fund shares can be a part of the investments of the annuity.
C
What type of order would an investor enter if they wanted to buy 1 ABC May 50 Call when the premium for the option declined from its current value
[A]Buy at the opening
[B]Debit Spread
[C]Limit order to buy
[D]Market order
C
A customer enters an order to Buy 100 shares of ABC @49 stop. This order will be activated by which of the following?

[A]a trade executed at $49 or higher
[B]a trade executed at $49 or lower
[C]Buy stop orders are not allowed
[D]Buy stop orders are executed as soon as they reach the floor of the exchange
A
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