Upgrade to remove ads
Only $35.99/year

Practice Test 4 Wrong

Terms in this set (28)

Which of the following communications to the general public would be considered Retail Communications subject to the communication rules on advertising?
Firms electronic Bulletin Board
All of the following securities are not subject to the registration provisions of the Uniform Securities Act EXCEPT:
An intrastate security
All of the following would be characteristics of a Closed-end investment company EXCEPT?
[A]A fixed number of shares are publicly traded.
[B]The capitalization of the fund is fixed.
[C]The shares issued can be redeemed back to the issuing investment company.
[D]The shares may trade at a discount or premium to the NAV.
[C]The shares issued can be redeemed back to the issuing investment company.
CLOSED END FUNDS ARE NOT REDEEMABLE
All of the following are good reasons to buy an equity option EXCEPT:
[A]To hedge a long or short position in the underlying stock
[B]To speculate on the movement of the price of the underlying stock
[C]To arbitrage when the option is trading in two different markets at different prices
[D]To generate premium income
[D]To generate premium income
Which of the following would be good investment choices for an investment adviser who is seeking to maximize current income to the beneficiaries of a trust?
Writing equity options
Municipal bonds
Preferred stock of value companies
Treasury bills

[A]I and II[B]II and III[C]II and IV[D]II, III, and IV
[B]
Under NASAA Model Rules on Broker-dealers all of the following statements are true with regard to transactions with clients EXCEPT?
[A]Delivery of a Final Prospectus is required when a client purchases a stock in the secondary market that has been listed on the New York Stock Exchange.
[B]Delivery of a Final Prospectus is required when a client purchases a stock that is a new issue being distributed by the broker-dealer.
[C]Delivery of a Prospectus is required when the broker-dealer sells shares of a Mutual Fund to a client.
[D]Delivery of a Prospectus is not required when a client buys corporate bonds in the secondary market from the broker-dealer.
[A]Delivery of a Final Prospectus is required when a client purchases a stock in the secondary market that has been listed on the New York Stock Exchange.

A prospectus must be delivered no later than with the purchase confirmation of a "new" issue, but prospectus delivery is NOT required for secondary market trades such as stocks already listed on an exchange or bonds.
A broker-dealer registers in all states where they do business, which constitutes the majority of the US. The firm also is registered with the SEC. Which of the following statements is TRUE according to the Uniform Securities Act?
[A]The broker-dealer must abide by federal standards when it comes to financial reporting requirements, and would not be subject to additional requirements by any State Administrator.[B]The broker-dealer must abide by federal standards when it comes to financial reporting requirements, and would also be subject to additional requirements by any State Administrator.[C]The broker-dealer must abide by state standards when it comes to financial reporting requirements, and would not be subject to the requirements of the SEC.
[D]The broker-dealer must abide only by the standards of the state in which their main offices are located and would not be subject to the requirements of the SEC.
[A] The broker-dealer must abide by federal standards when it comes to financial reporting requirements, and would not be subject to additional requirements by any State Administrator.
State Admin can't exceed SEC rules
An article is released detailing how Tech Company A has created software that is currently the best on the market. Tech Company A is expected to gain a major portion of market share for this type of software. One of your clients reads the article and buys a sizeable amount of the stock of Tech Company A. Six months later, an article is released which details a new form of software released by Tech Company Z. The new software may revolutionize the industry currently dominated by Tech Company A. As a result, Tech Company A's stock drops significantly. Which best describes this scenario?
[A]This is an example of event risk.
[B]This is an example of market risk.
[C]This is an example of competitive risk.
[D]This is an example of business risk.
[C] Competitive Risk
Which of the following actions could result in civil liability according to the Uniform Securities Act?
I. The failure to disclose to a client that the adviser will act as a principal for the adviser's own account in a sale of a recommended security
II. The failure to state a material fact
III. The failure to reasonably supervise an employee
IV. The failure to allow customers to cancel a transaction after it has been executed
I, II, III,
mustaccept transaction
What action is taken when an option contract is "Assigned"?
[A]The option contract is being closed in the market.[B]The option contract is being exercised.[C]The option expired.[D]The investor hit a position limit.
Option is being exercised
Which of the following makes an American-Style put option in equities a derivative?
[A]The fact that the value of the option is based solely on the option's time value.[B]The fact that the pricing and security itself is based on another security and that security's value.[C]The fact that the investment carries a substantial amount of risk.[D]The fact that the option can be exercised at any time.
READ THE FULL QUESTIONS!!
[B] Derivative because its pricing is based on a another security
Closed End Companies (4)
Fixed number of shares
capitalization is fixed
Cannot be redeemed
May trade at a discount or premium to Nav
All of the following are TRUE about using futures contracts for hedging purposes EXCEPT:
[A]A long hedge would be used to protect against rising prices.[B]A short hedge would be used to protect against falling prices.[C]Hedging is typically used by speculators.
[D]Hedging is typically used by the producers or consumers of the underlying commodity.
[C]Hedging is typically used by speculators.
Who is Hedging typically used by?
Producers or consumers of the underlying commodity
All of the following are good reasons to buy an equity option
(3)
To hedge a long or short position in the underlying stock
To speculate on the movement of the price of the underlying stock
To arbitrage when the option is trading in two different markets at different prices
Other sets by this creator