Annie Stc Quiz Part 1

256 Questions  I  By Annchong71
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Annie Hall Quizzes & Trivia
Private quiz for Annie covering Chap 1 to Chap 5.

  
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  • 1. 
    Prior employer permission would be required for a registered representative to give public: Speeches Seminars Lectures
    • A. 

      Arbitration

    • B. 

      The SEC

    • C. 

      The MSRB

    • D. 

      FINRA


  • 2. 
    Which of the following employees of a broker-dealer must provide written notification to his or her employer in order to open a securities account at another firm? A registered representative A principal A secretary A janitor
    • A. 

      I only

    • B. 

      I and II only

    • C. 

      II and III only

    • D. 

      I, II, and III


  • 3. 
    A registered representative wants to take on a second job working part-time as a waiter in a restaurant. This is allowed as long as the individual notifies:
    • A. 

      I and II only

    • B. 

      III and IV only

    • C. 

      I, II, and III only

    • D. 

      I, II, III, and IV


  • 4. 
    Arbitration decisions are:
    • A. 

      The MSRB

    • B. 

      The FRB

    • C. 

      FINRA

    • D. 

      His employer


  • 5. 
    To apply for a securities license, a previously unregistered individual must: Complete Form U5 Complete Form U4 File the necessary form with FINRA File the necessary form with the SEC
    • A. 

      Appealable

    • B. 

      Not binding if either party contests the decision

    • C. 

      Binding upon all parties to the arbitration

    • D. 

      Not binding if both parties agree not to accept the decision


  • 6. 
    A registered representative is accused of violating an SRO rule. The complaint is heard by a Hearing Panel of FINRA. All of the following are possible outcomes EXCEPT:
    • A. 

      I and III only

    • B. 

      I and IV only

    • C. 

      II and III only

    • D. 

      II and IV only


  • 7. 
    The primary purpose of a self-regulatory organization (SRO) is to:
    • A. 

      The registered representative is fined

    • B. 

      The registered representative is sentenced to two years in prison

    • C. 

      The registered representative settles the complaint agreeing to a censure

    • D. 

      The registered representative is suspended from associating with a member firm for 90 days and appeals the decision


  • 8. 
    Exclusions from the definition of an investment adviser are given to which of the following?
    • A. 

      Press civil charges in regard to violations of securities law

    • B. 

      Press criminal charges in regard to violations of securities law

    • C. 

      Promote fair and equitable trading practices

    • D. 

      Insure the solvency of broker-dealers and other market participants


  • 9. 
    Concerning arbitration, all of the following are TRUE EXCEPT:
    • A. 

      Accountants and lawyers who provide advice in a manner incidental to their profession

    • B. 

      Publishers

    • C. 

      Broker-dealers and their representatives

    • D. 

      All of the above


  • 10. 
    Which of the following are TRUE regarding the Code of Arbitration? Disputes between members must be submitted to arbitration. Arbitration decisions are binding and may not be appealed. A client cannot be forced to submit to arbitration. Arbitration is more cost-effective than litigating the matter in court.
    • A. 

      Disputes between members must go to arbitration

    • B. 

      Decisions may be appealed to FINRA

    • C. 

      Decisions are binding

    • D. 

      A customer having a dispute with a broker-dealer may use the arbitration procedure


  • 11. 
    Which of the following statements is true regarding a registered rep who has not completed the regulatory element training within 120 days of his registration anniversary?
    • A. 

      I and II only

    • B. 

      II and III only

    • C. 

      I, III, and IV only

    • D. 

      I, II, III, and IV


  • 12. 
    Lazlo Toth, a registered representative with UAI Broker-Dealer, has a dispute with his firm over compensation. This dispute will be resolved by:
    • A. 

      The rep will be placed in inactive status.

    • B. 

      The broker-dealer must request an extension from an SRO.

    • C. 

      The rep will be suspended.

    • D. 

      The rep has 30 days to complete the requirement.


  • 13. 
    An employee of a member firm opens an option account with another member firm. Which of the following statements are true? The employee needs written permission from his employer prior to opening the account. Duplicate confirmations must be sent to his employer. The employee needs permission from his employer each time a trade is executed.
    • A. 

      A federal court

    • B. 

      The SEC

    • C. 

      The National Adjudicatory Council

    • D. 

      An arbitration panel


  • 14. 
    Which of the following outside business activities would RRs NOT have to report to their employing broker-dealer?
    • A. 

      I and II only

    • B. 

      I and III only

    • C. 

      II and III only

    • D. 

      I, II, and III


  • 15. 
    Persons who meet the definition of an investment adviser but are exempt from the registration requirements of the Investment Advisers Act of 1940 are:
    • A. 

      Part-time employment as a bartender

    • B. 

      Participation as a silent partner in a relative's business

    • C. 

      Acting as the manager of a sporting goods store on the weekends

    • D. 

      Operating an Internet business from home as a sole proprietor


  • 16. 
    A customer contends that his registered representative made unauthorized trades in his account, and will take this matter to an arbitration panel. Regarding the makeup of this panel, which of the following statements is TRUE?
    • A. 

      Subject to the antifraud provisions of the Act

    • B. 

      Only subject to the antifraud provisions of the Act if they maintain custody of client funds and securities

    • C. 

      Only subject to the antifraud provisions of the Act if they do not meet certain experience and financial requirements

    • D. 

      Not subject to the antifraud provisions of the Act


  • 17. 
    A registered representative who wishes to have outside employment must notify and receive permission from the:
    • A. 

      A majority of the arbitration panel must come from outside the securities industry.

    • B. 

      A majority of the arbitration panel will come from within the securities industry.

    • C. 

      All arbitrators must come from inside the securities industry or must be attorneys.

    • D. 

      All arbitrators must come from outside the securities industry.


  • 18. 
    To whom may a registered representative appeal a finding by a Hearing Panel?
    • A. 

      FINRA

    • B. 

      SEC

    • C. 

      MSRB

    • D. 

      Representative's firm


  • 19. 
    Which of the following best describes a wrap account?
    • A. 

      The National Adjudicatory Council

    • B. 

      The SEC

    • C. 

      A federal appeals court

    • D. 

      There is no appeal allowed


  • 20. 
    When is the regulatory element of continuing education required to be completed by a registered rep? On the second anniversary of initial registration On the third anniversary of initial registration Every two years thereafter Every three years thereafter
    • A. 

      A personal, joint, and IRA account with one account number

    • B. 

      A managed account in which advisory and transaction charges are included in one comprehensive fee

    • C. 

      A consolidated account in which the investor can buy or sell options, equities, or bonds

    • D. 

      An investment club account with no more than 99 investors


  • 21. 
    Self-regulatory organizations generally have rules that: Mandate commission schedules that brokerage firms must charge Are designed to maintain a fair and orderly market Mandate all brokerage firms stand ready to buy or sell securities from their own account to maintain liquidity Require brokerage firms use reasonable diligence to provide customers with best execution
    • A. 

      I and III

    • B. 

      I and IV

    • C. 

      II and III

    • D. 

      II and IV


  • 22. 
    Which of the following would NOT require additional documentation to transfer stock?
    • A. 

      I and II only

    • B. 

      I and III only

    • C. 

      II and III only

    • D. 

      II and IV only


  • 23. 
    Relative to a custodian account, which of the following are TRUE? The minor is responsible for tax consequences. The custodian is responsible for tax consequences. Income generated in the account is taxed as it is received. Income generated in the account is taxed when the minor becomes an adult.
    • A. 

      Partnership account signed by a general partner

    • B. 

      Corporate account signed by an authorized officer

    • C. 

      Custodial account signed by the custodian

    • D. 

      Executor signing for an estate


  • 24. 
    When a gift of securities is purchased for a minor in a custodian account, the gift becomes the property of the minor:
    • A. 

      I and III

    • B. 

      I and IV

    • C. 

      II and III

    • D. 

      II and IV


  • 25. 
    A registered rep holding limited discretionary authority over a customer's account may:
    • A. 

      When the custodian releases the account

    • B. 

      When the donor approves the transaction

    • C. 

      When the minor reaches the age of majority

    • D. 

      At the time of the execution of the order


  • 26. 
    An investor is interested in investing in a stock with growth potential. He instructs his broker to use the firm's research and buy $10,000 worth of a stock of the broker's choosing. Which of the following statements is correct?
    • A. 

      Buy or sell securities in the account without consulting the customer

    • B. 

      Withdraw money from the account

    • C. 

      Receive a fee for using his discretion in trading the account

    • D. 

      Borrow assets from the customer's account


  • 27. 
    A registered representative opens a joint options account for three brothers. According to the rules of the options exchanges, the registered representative would be required to obtain background and financial information from:
    • A. 

      The broker can buy the stock for the customer with approval from a manager.

    • B. 

      The broker can buy the stock for the customer since it is a stock the firm recommends.

    • C. 

      The broker can buy the stock for the customer provided that the broker has first obtained a written power of attorney from the customer.

    • D. 

      The broker can buy the stock for the customer based on the verbal authorization.


  • 28. 
    An account executive has limited discretion over a customer's account. The account executive can:
    • A. 

      One of the brothers

    • B. 

      A majority of the brothers

    • C. 

      All of the brothers

    • D. 

      The Options Clearing Corporation


  • 29. 
    Under the know your customer rule, when a registered representative opens a new account for a customer, the registered representative should determine, among other things, the customer's: Financial condition and needs Objectives Ability to assume risk
    • A. 

      Remove money freely from the account

    • B. 

      Have the account reviewed by a supervisor

    • C. 

      Not enter buy stop orders

    • D. 

      Have all confirmations of transactions sent only to himself


  • 30. 
    Which of the following would be acceptable as a custodian on a UGMA account?
    • A. 

      I and II only

    • B. 

      I and III only

    • C. 

      II and III only

    • D. 

      I, II, and III


  • 31. 
    All of the following are true regarding discretionary accounts EXCEPT:
    • A. 

      Ajax Corporation

    • B. 

      John and Mary Doe

    • C. 

      John Doe

    • D. 

      ABC Partnership


  • 32. 
    Which of the following are needed to open a corporate margin account? Corporate charter and resolution New account form Hypothecation Agreement Trust Agreement
    • A. 

      All discretionary orders must be marked as a discretionary order

    • B. 

      Written power of attorney must be on file

    • C. 

      Orders must be verbally approved by the customer prior to execution

    • D. 

      Orders must not be excessive in terms of size or frequency


  • 33. 
    An uncle is a custodian for his nephew's account. The account receives rights to subscribe to additional stock held in the account. As custodian the uncle can: Sell the rights Subscribe to the stock Buy additional rights to subscribe if additional rights are needed Do whatever he considers to be in the best interest of the minor
    • A. 

      I and II only

    • B. 

      I and IV only

    • C. 

      III and IV only

    • D. 

      I, II, and III only


  • 34. 
    Two brothers open a joint account to trade options. Who will be required to sign the option agreement?
    • A. 

      I and IV only

    • B. 

      II and III only

    • C. 

      III and IV only

    • D. 

      I, II, III, and IV


  • 35. 
    An aunt wishes to give her niece some securities as a gift. The niece's parents have recently died and a court has appointed a guardian other than the aunt. The aunt:
    • A. 

      The brother with the larger contribution to the account

    • B. 

      The brother with the smaller contribution to the account

    • C. 

      Either brother

    • D. 

      Both brothers


  • 36. 
    A client's wife calls and wants to purchase 200 shares of XYZ in her husband's personal account. The registered representative handling the account knows that a favorable earnings report is about to be issued. The registered representative:
    • A. 

      Must register the securities in the guardian's name

    • B. 

      May give the securities without the permission of the guardian

    • C. 

      May give the securities only if they would qualify under the State's legal list requirements

    • D. 

      May give the securities only if the guardian is also appointed the custodian


  • 37. 
    Which of the following persons cannot delegate power of attorney to a third party for the purpose of making securities transactions?
    • A. 

      Cannot accept the order because the wife does not have trading authorization to enter orders for the husband's personal account

    • B. 

      Can enter the order because the husband had previously mentioned he would like to establish a position in XYZ

    • C. 

      Can enter the order in the husband's account if the wife also has a joint account with her husband

    • D. 

      Cannot enter the order because the earnings report has not been released


  • 38. 
    Which of the following would be considered a fiduciary? A trustee A guardian An administrator of an estate An executor of an estate
    • A. 

      A husband

    • B. 

      A wife

    • C. 

      A corporation

    • D. 

      A custodian for a minor


  • 39. 
    A husband and wife have a joint account. If the husband instructed his RR to sell securities and send a check, the check could be made payable to:
    • A. 

      I only

    • B. 

      I and II only

    • C. 

      I, II, and III only

    • D. 

      I, II, III, and IV


  • 40. 
    Which of the following are TRUE when a corporation opens a cash account with a brokerage firm? A new account form must be completed. A corporate resolution must be filed with the brokerage firm. Stock purchases for the corporation must be registered in the corporation's name. Stock purchases for the corporation must be registered in the name of the president of the corporation.
    • A. 

      The husband only

    • B. 

      The wife only

    • C. 

      Either the husband or the wife

    • D. 

      The husband and wife jointly


  • 41. 
    All of the following are TRUE about discretionary accounts EXCEPT:
    • A. 

      Accounts must be approved by a Principal

    • B. 

      Orders must be reviewed on the day they are entered

    • C. 

      Written power of attorney signed by the customer must be kept on file by the firm

    • D. 

      Orders must be confirmed with the customer before being entered


  • 42. 
    Advertisements regarding options: Must be submitted to the exchange 15 days prior to initial use Must be submitted to the exchange 10 days prior to initial use Must be kept on file by the member firm for six years Must be kept on file by the member firm for three years
    • A. 

      I and III

    • B. 

      I and IV

    • C. 

      II and III

    • D. 

      II and IV


  • 43. 
    Which of the following statements is true regarding a custodian account?
    • A. 

      Margin transactions are permitted.

    • B. 

      Taxes are a liability of the minor.

    • C. 

      The minor and the custodian must both endorse all certificates.

    • D. 

      A custodian may give a registered representative discretion over the account.


  • 44. 
    A customer would like to open an account designated by number. The registered representative should:
    • A. 

      Open the account

    • B. 

      Not open the account because it is a violation of SEC rules

    • C. 

      Open the account if the customer signs a written statement acknowledging the account is the customer's account

    • D. 

      Not open the account because it is a violation of industry rules


  • 45. 
    The number of custodians allowed for each minor under the Uniform Gifts to Minors Act may not be more than:
    • A. 

      One

    • B. 

      Two

    • C. 

      Four

    • D. 

      Five


  • 46. 
    Which of the following would be a benefit of an account that is designated Transfer on Death (TOD)?
    • A. 

      The ability for joint owners to each trade the account

    • B. 

      The avoidance of estate taxes

    • C. 

      The avoidance of probate costs

    • D. 

      The opportunity for proportional ownership


  • 47. 
    All of the following should be obtained by a registered representative when opening a new account for a customer EXCEPT:
    • A. 

      Street address

    • B. 

      Tax identification number

    • C. 

      Occupation

    • D. 

      Education


  • 48. 
    All of the following are TRUE regarding accounts established under the Uniform Gifts to Minors Act EXCEPT the:
    • A. 

      Taxes are the responsibility of the minor

    • B. 

      Custodian makes all investment decisions in the account

    • C. 

      Custodian can use account positions to cover short sales in his own personal account

    • D. 

      Account must reflect the minor's social security number


  • 49. 
    Which of the following would be considered advertising?
    • A. 

      A 15 second radio spot

    • B. 

      A form letter sent to 30 prospects giving advice on asset allocation strategies

    • C. 

      An invitation to a seminar on tax-free investing

    • D. 

      The script of a seminar on 529 plans


  • 50. 
    Which TWO of the following must a principal approve prior to use? An advertisement concerning the appointment of new managing directors An advertisement promoting a new type of CMO An advertisement regarding covered call writing An e-mail from an RR to a client concerning a security in her account
    • A. 

      I and III

    • B. 

      I and IV

    • C. 

      II and III

    • D. 

      II and IV


  • 51. 
    All of the following are TRUE regarding the Uniform Gifts to Minors Act EXCEPT:
    • A. 

      Only one custodian is allowed for each account

    • B. 

      The minor is responsible for all taxes due on dividends and interest received from securities held in the account

    • C. 

      Only an adult can be a custodian

    • D. 

      Securities must be held in the name of the brokerage firm


  • 52. 
    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:
    • A. 

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

    • B. 

      The order must be marked "discretionary" and approved by a branch manager

    • C. 

      The order can be executed by the RR any trading day

    • D. 

      The RR is not permitted to accept this type of order


  • 53. 
    Which of the following statements is TRUE concerning the responsibilities of a principal at a broker-dealer?
    • A. 

      The principal must approve all trades prior to being entered.

    • B. 

      The principal must approve all advertising prior to use.

    • C. 

      The principal must approve all sales literature within 10 days of use.

    • D. 

      The principal must approve all outside employment by a RR.


  • 54. 
    An uncle is the custodian for a nephew's account. When the nephew reaches majority, the uncle:
    • A. 

      May continue to be the custodian

    • B. 

      Must compensate the nephew for any losses incurred in the account during the time the uncle was the custodian

    • C. 

      Must transfer all the securities in the account to the nephew

    • D. 

      Must sell all securities at current market prices


  • 55. 
    Which of the following are types of joint accounts? UTMA Rights of survivorship Tenants in common Transfer on death
    • A. 

      I and II only

    • B. 

      I, II, and III only

    • C. 

      II and III only

    • D. 

      II, III, and IV only


  • 56. 
    Which two of the following are TRUE when opening new customer accounts? A P.O. box may be shown as the customer's address on the new account form. A street address must be reflected on the new account form. Customer correspondence may be sent to a P.O. box. Customer correspondence may not be sent to a P.O. box.
    • A. 

      I and III

    • B. 

      I and IV

    • C. 

      II and III

    • D. 

      II and IV


  • 57. 
    A corporation wishes to open a cash account. Which of the following is required?
    • A. 

      A corporate resolution

    • B. 

      A copy of the corporate charter

    • C. 

      A hypothecation agreement

    • D. 

      A risk disclosure document


  • 58. 
    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
    • A. 

      I and III only

    • B. 

      I and IV only

    • C. 

      II and III only

    • D. 

      II and IV only


  • 59. 
    A corporation wishes to open a cash account. Which of the following is required?
    • A. 

      A corporate resolution

    • B. 

      A copy of the corporate charter

    • C. 

      A hypothecation agreement

    • D. 

      A risk disclosure document


  • 60. 
    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
    • A. 

      I and III only

    • B. 

      I and IV only

    • C. 

      II and III only

    • D. 

      II and IV only


  • 61. 
    Supplemental documentation would be required when opening all of the following types of accounts EXCEPT:
    • A. 

      Guardian

    • B. 

      Partnership

    • C. 

      Uniform Transfers to Minors

    • D. 

      Account for an estate


  • 62. 
    According to SRO rules, which of the following must be obtained when an RR opens an account in which mutual fund shares will be purchased?
    • A. 

      The customer's date of birth

    • B. 

      Whether the customer is subject to IRS backup withholding rules

    • C. 

      Written acknowledgment that the customer has received the fund's prospectus

    • D. 

      The signatures of the RR opening the account and the manager who approved the account


  • 63. 
    An investment adviser opens an account for one of his clients. The registered representative opening the account would need all of the following EXCEPT:
    • A. 

      Written authorization from the client

    • B. 

      A listing of all the investment adviser's clients

    • C. 

      The client's name

    • D. 

      The client's social security number


  • 64. 
    Which of the following is TRUE regarding numbered accounts?
    • A. 

      An account may never be identified by a number.

    • B. 

      Only a cash account may be identified by a number, provided the customer's name is on file.

    • C. 

      Only a margin account may be identified by a number, provided the customer's name is on file.

    • D. 

      Any type of account may be identified by a number, provided the customer's name is on file.


  • 65. 
    Which of the following could not be accomplished in a cash account?
    • A. 

      Covered call or put writing

    • B. 

      The sale of preferred stock

    • C. 

      Selling short

    • D. 

      The purchase of options


  • 66. 
    If a registered representative is opening an account for an investor, the registered representative would need to know all of the following information EXCEPT
    • A. 

      The investor's tax identification number

    • B. 

      If the investor is a U.S. citizen

    • C. 

      The investor's investment objectives

    • D. 

      The investor's educational background


  • 67. 
    Under what circumstances may a husband and wife both be custodians for a minor's account?
    • A. 

      Under no circumstances

    • B. 

      If the minor gives written consent

    • C. 

      If the husband and the wife both agree

    • D. 

      If the account has a market value of at least $13,000


  • 68. 
    Which of the following would be an invalid endorsement on a stock certificate?
    • A. 

      The signature of an appointed representative for an estate

    • B. 

      A minor's signature under UGMA

    • C. 

      The signature of one of several partners in a partnership account

    • D. 

      The signature of a person authorized by a corporate resolution


  • 69. 
    Which of the following would NOT be considered a joint account? Two unrelated individuals as tenants in common Husband and wife as tenants with rights of survivorship An investment club managed by an investment adviser A mother and her minor child in an account under the UGMA
    • A. 

      III only

    • B. 

      I and II only

    • C. 

      III and IV only

    • D. 

      I, III, and IV only


  • 70. 
    A customer wants to open a cash account. All of the following are required on the new account form EXCEPT:
    • A. 

      A customer wants to open a cash account. All of the following are required on the new account form EXCEPT:

    • B. 

      Whether the customer is of legal age

    • C. 

      The customer's signature

    • D. 

      Branch manager's approval


  • 71. 
    Which of the following communications must be filed with FINRA ten days prior to use? Options advertising Mutual fund advertising CMO advertising Unit Investment Trust advertising
    • A. 

      I and II only

    • B. 

      I and III only

    • C. 

      II, III, and IV only

    • D. 

      I, II, III, and IV


  • 72. 
    A customer does not have a discretionary account with his brokerage firm. The firm may decide which of the following factors for the customer?
    • A. 

      Whether to buy or sell

    • B. 

      Quantity if the customer specifies security and price

    • C. 

      Security if the customer specifies quantity and price

    • D. 

      Price if the customer specifies security and quantity


  • 73. 
    Under industry rules the final approval to open a new account is given by a(n):
    • A. 

      Registered Representative

    • B. 

      Operations Manager

    • C. 

      Partner or Principal

    • D. 

      Financial Principal


  • 74. 
    Why would a new account be designated TOD?
    • A. 

      To allow for joint trading on the account.

    • B. 

      To designate a pattern day trading account

    • C. 

      To avoid probate

    • D. 

      To prevent freeriding


  • 75. 
    Which of the following statements are TRUE concerning custodian accounts?
    • A. 

      A donor can give gifts of cash only.

    • B. 

      A donor can give gifts of securities only.

    • C. 

      A donor can give gifts of cash and securities.

    • D. 

      An individual cannot be both the custodian and donor.


  • 76. 
    Discretionary accounts require:
    • A. 

      Written authorization from the customer

    • B. 

      Oral authorization from the customer

    • C. 

      Written authorization from the client for each trade the registered representative executes

    • D. 

      The registered representative to send the client a letter detailing the proposed transaction


  • 77. 
    To open an account and determine suitability for a new client who would like to invest in an exploratory drilling oil and gas direct participation program, the RR must obtain all of the following information EXCEPT the customer's:
    • A. 

      Address

    • B. 

      Social Security or tax ID number

    • C. 

      Number of dependents

    • D. 

      Net worth


  • 78. 
    Which of the following transactions must be executed in a cash account?
    • A. 

      Short 100 shares of XYZ stock

    • B. 

      Long 500 shares of ABC stock and short 500 shares of ABC stock

    • C. 

      Short 10 DEF May 50 calls

    • D. 

      Long 5 GHI Jan 15 puts


  • 79. 
    A husband and wife have a joint account with right of survivorship. If one of the parties places an order, the RR:
    • A. 

      Should contact the other party prior to placing the order

    • B. 

      Must have the order approved by a principal prior to execution

    • C. 

      May accept the order

    • D. 

      May accept the order only if the other party has granted trading authorization


  • 80. 
    A client would like to open a numbered account. An RR may open the account:
    • A. 

      Under no circumstances

    • B. 

      Provided the broker-dealer has a written statement on file signed by the client

    • C. 

      Provided the broker-dealer has a written statement on file signed by the client that is also filed with the appropriate SRO

    • D. 

      Provided the broker-dealer has a written statement on file signed by the client and the client is an accredited investor


  • 81. 
    If SIPC does not cover a customer's account in a brokerage firm that has gone bankrupt, the investor would be a:
    • A. 

      General creditor

    • B. 

      Secured creditor

    • C. 

      Preferred creditor

    • D. 

      Guaranteed creditor


  • 82. 
    Which of the following would be most suitable for a Non-Managed Fee-Based Account?
    • A. 

      Clients that buy and hold securities

    • B. 

      Clients seeking professional advice from an investment adviser

    • C. 

      Clients that buy many different types of mutual funds

    • D. 

      Clients who use their own research and often rebalance their portfolios


  • 83. 
    Which of the following could be found on a customer's confirmation? If the firm acted as principal If the firm acted as the customer's agent If the firm acted for a third party If the firm is a bona fide market maker in the security
    • A. 

      I and II only

    • B. 

      I and IV only

    • C. 

      II and III only

    • D. 

      I, II, III, and IV


  • 84. 
    An investor who has granted power of attorney to his son dies. The power of attorney:
    • A. 

      Remains in effect until cancelled by the executor of the estate

    • B. 

      Remains in effect until cancelled by the son

    • C. 

      Remains in effect only if the son is the sole heir to the estate

    • D. 

      Is cancelled on the death of the principal in the account


  • 85. 
    A client would like all trade confirmations sent to his investment adviser. This will require:
    • A. 

      A written letter from the client

    • B. 

      Approval by a partner in the firm

    • C. 

      Approval by a branch manager

    • D. 

      All of the above


  • 86. 
    Which of the following proxy rules would be correct regarding customer securities held in "street name" by a brokerage firm?
    • A. 

      The corporation would send the proxy to the customer.

    • B. 

      The corporation would send the proxy to the NYSE who would then send it to the customer.

    • C. 

      The corporation would send the proxy to the SEC who would then send it to the customer.

    • D. 

      The corporation would send the proxy to the brokerage firm who would then send it to the customer.


  • 87. 
    Fully paid customer securities held at a brokerage firm:
    • A. 

      May be used as collateral for brokerage firm loans

    • B. 

      May be commingled with other customers' securities

    • C. 

      Must be segregated and identified as belonging to the customer

    • D. 

      None of the above


  • 88. 
    A registered representative wants to open a new account for a client who is a resident of Mexico. Which two of the following statements are correct? Customer verification of the client's personal information is not required if the customer was referred by an existing client. Customer verification of the client's personal information is required under any circumstances. The client can have either a taxpayer identification number or a passport number and country of origin. The client must have a taxpayer identification number to open the account.
    • A. 

      I and III

    • B. 

      II and IV

    • C. 

      I and IV

    • D. 

      II and III


  • 89. 
    SEC regulations state that a brokerage firm must provide a current financial statement (balance sheet) to:
    • A. 

      A customer when requested by the customer

    • B. 

      A noncustomer who requests it

    • C. 

      Both of the above

    • D. 

      None of the above


  • 90. 
    Mr. Jones requests that his securities be held in street name. To honor his request, the broker-dealer must:
    • A. 

      Have the customer sign a hypothecation agreement

    • B. 

      Segregate the securities

    • C. 

      Have the customer sign a margin agreement

    • D. 

      Not honor his request since securities cannot be held in street name


  • 91. 
    A registered representative should update a customer's account records for a change in: Address Net worth Employer Investment objectives
    • A. 

      I and III only

    • B. 

      II and IV only

    • C. 

      I, II and IV only

    • D. 

      I, II, III, and IV


  • 92. 
    Upon learning of the death of a customer, a registered representative should do all of the following EXCEPT:
    • A. 

      Cancel all outstanding orders

    • B. 

      Mark the account deceased

    • C. 

      Await instructions from the executor of the customer's estate

    • D. 

      Liquidate all positions in the account if directed to do so by any member of the customer's immediate family


  • 93. 
    A customer of a member firm goes on vacation and notifies the member firm in writing as to what should be done with his mail. All of the following are true EXCEPT:
    • A. 

      The member firm may hold the customer's mail for a period of two months if the customer is traveling in the U.S.

    • B. 

      The member firm may hold the customer's mail for a period of three months if the customer is traveling abroad.

    • C. 

      The member firm can forward the customer's mail to a general P.O. Box.

    • D. 

      The mail can be forwarded to the registered representative.


  • 94. 
    Which of the following are true about SIPC? It was created by an Act of Congress and is considered a U.S. government agency. It is a nonprofit organization that only broker-dealers may join. It provides insurance for customer accounts in the event of bankruptcy by a broker-dealer. It provides insurance for customer accounts for fraud, embezzlement, and counterfeiting.
    • A. 

      I and II

    • B. 

      I and IV

    • C. 

      II and III

    • D. 

      III and IV


  • 95. 
    A brokerage firm is holding $600,000 of securities for a customer. The securities are registered in the name of the customer. If the firm was being liquidated by SIPC, the customer would:
    • A. 

      Be insured for $500,000 of securities

    • B. 

      Receive the entire $600,000 of securities

    • C. 

      Be insured for $100,000 of securities

    • D. 

      Lose the entire $600,000


  • 96. 
    In which of the following situations must a broker-dealer file a Currency Transaction Report (CTR)?
    • A. 

      A customer deposits bearer bonds with a face value of $100,000

    • B. 

      A customer purchases stock with a $20,000 personal check

    • C. 

      A customer opens an account with $11,000 in cash

    • D. 

      A customer opens an account with a credit card debit check valued at $20,000


  • 97. 
    If a client's account is inactive, how often does a statement have to be mailed?
    • A. 

      Weekly

    • B. 

      Monthly

    • C. 

      Quarterly

    • D. 

      Prior to the completion of the next transaction


  • 98. 
    The Securities Investors Protection Corporation (SIPC) insures all of the following accounts EXCEPT:
    • A. 

      A margin account

    • B. 

      A joint account

    • C. 

      A commodities account

    • D. 

      A custodian account


  • 99. 
    If a broker-dealer should go bankrupt, the trustee appointed under the Securities Investor Protection Act is responsible for: Notifying the firm's customers that the firm is in the process of being liquidated Distribution of securities owned by customers that are held by the firm Seeing that the distribution of cash and securities are administered in an orderly manner
    • A. 

      I and II only

    • B. 

      I and III only

    • C. 

      II and III only

    • D. 

      I, II, and III


  • 100. 
    A customer has $350,000 in securities and $150,000 in cash in his brokerage account. If the brokerage firm carrying the account was to go bankrupt, SIPC would cover:
    • A. 

      The full $500,000 account value

    • B. 

      $350,000 securities and $100,000 cash

    • C. 

      $350,000 securities and no cash

    • D. 

      $150,000 cash and no securities


  • 101. 
    A registered representative is preparing to leave her firm. Her clients will be assigned to another representative at the same firm. To accomplish this:
    • A. 

      A new account form must be completed

    • B. 

      The customer must approve of the change

    • C. 

      The account records must be amended to reflect the change

    • D. 

      The SEC must be notified of the change


  • 102. 
    A broker-dealer has failed because it has a net capital deficiency. Which of the following parties would NOT be covered by SIPC?
    • A. 

      A margin account with $300,000 of securities being held in street name

    • B. 

      A customer account with a $70,000 cash balance

    • C. 

      An IRA with securities valued at $400,000 and $100,000 of cash

    • D. 

      A creditor of the broker-dealer who is owed $40,000


  • 103. 
    According to AML procedures, which two of the following is a member firm required to obtain when opening a new account for a non-U.S. citizen? Current employer Passport number and country of issuance Current address Telephone number
    • A. 

      I and III

    • B. 

      II and III

    • C. 

      I and IV

    • D. 

      II and IV


  • 104. 
    Which two of the following are NOT SROs? MSRB SIPC FINRA SEC
    • A. 

      I and III

    • B. 

      I and IV

    • C. 

      II and III

    • D. 

      II and IV


  • 105. 
    One of your clients informs your firm that she will be traveling in Europe and would like your firm to hold all of her confirmations and statements. How long may your firm do this?
    • A. 

      This cannot be done

    • B. 

      One month

    • C. 

      Two months

    • D. 

      Three months


  • 106. 
    You are a registered representative servicing a joint tenants with rights of survivorship account for a married couple, Byron and Shelly Nelson. You also maintain an account for their adult son Frank. This morning you receive a phone call from Frank informing you that Byron has died. As part of helping his mother sort out the many details associated with his father's death, Frank requests that the assets in the account be transferred into an account in Shelly's name only. The first course of action would be to inform Frank that:
    • A. 

      The request may only be made by the account survivor

    • B. 

      Your firm must receive a death certificate before it may transfer the assets

    • C. 

      The executor or administrator of Byron's estate must make this request in writing

    • D. 

      The transfer will be processed as directed


  • 107. 
    All of the following would be included on an option confirmation EXCEPT:
    • A. 

      The contra broker

    • B. 

      The price of the option

    • C. 

      The type and strike price

    • D. 

      The name of the underlying security


  • 108. 
    Mr. Jones has a margin account in which there is activity each month. The firm would send Mr. Jones an account statement:
    • A. 

      Each month when there is activity during the month

    • B. 

      At the end of calendar quarter

    • C. 

      Each week when there is activity during the week

    • D. 

      After each trade is executed


  • 109. 
    Mr. Smith is associated with two other partners in an insurance partnership. He opens a cash account for the partnership. If Mr. Smith dies, what would the firm do as far as the partnership account is concerned?
    • A. 

      Freeze the assets of the account

    • B. 

      Allow the account to continue trading as is

    • C. 

      Open new separate accounts for the remaining partners

    • D. 

      Await instructions from the executor of Mr. Smith's estate


  • 110. 
    Lyle, Molly, and Seena have a joint account registered as Tenants in Common. In the event that Seena dies, which of the following is true?
    • A. 

      The account would be liquidated as soon as the brokerage firm learns of Seena's death.

    • B. 

      Lyle and Molly must change the arrangement to a Joint Tenants with Rights of Survivorship.

    • C. 

      Seena's estate has a claim on her portion of the account's assets.

    • D. 

      Seena's share of the assets in the account are automatically transferred to Lyle and Molly.


  • 111. 
    Gavin, the captain of an ocean liner, just won $4,000,000 in a contest by hitting an eighty-two-foot basketball shot at the Smith and Wesson Longshot Sweepstakes. When his registered representative contacts him regarding these winnings, the rep should:
    • A. 

      Suggest a sizable investment in municipal bonds

    • B. 

      Determine if his investment objectives have changed

    • C. 

      Encourage him to trade on margin

    • D. 

      Solicit the sale of the underperforming issues Gavin is holding


  • 112. 
    Jim and his brother Ed have the following accounts at a brokerage firm: Jim's cash account with $175,000 in securities Ed's margin account with $150,000 in equity A cash account for Jim and Ed as JTWROS with $200,000 in securities If the brokerage firm were to go bankrupt, SIPC would provide:
    • A. 

      A maximum of $500,000 coverage for all three accounts combined

    • B. 

      Full coverage for each account

    • C. 

      Full coverage for Jim's cash account and the joint account

    • D. 

      Full coverage for Jim's cash account, the joint account, and $100,000 coverage for the equity in Ed's margin account


  • 113. 
    All of the following statements regarding the privacy notice of a broker dealer are true EXCEPT:
    • A. 

      Customers must receive an updated privacy notice annually

    • B. 

      A privacy notice does not need to be sent to a consumer

    • C. 

      A privacy notice must be provided to all customers at the time a relationship is established with the firm

    • D. 

      Clients may opt out from having their information shared with third parties


  • 114. 
    A customer's margin account has a market value of $750,000 and a debit balance of $400,000. He also has a commodities account that has equity of $150,000. If the firm went bankrupt, SIPC would provide coverage to this customer for:
    • A. 

      $350,000 in the margin account and nothing for the commodities account

    • B. 

      $150,000 in the commodities account and nothing for the margin account

    • C. 

      $350,000 in the margin account and $150,000 in the commodities account

    • D. 

      $500,000 in the margin account and $150,000 in the commodities account


  • 115. 
    Which of the following are TRUE regarding account statements that are sent by member firms to customers? Active accounts get monthly statements. Active accounts get quarterly statements. Inactive accounts get monthly statements. Inactive accounts get quarterly statements.
    • A. 

      I and III

    • B. 

      I and IV

    • C. 

      II and III

    • D. 

      II and IV


  • 116. 
    SIPC is a(n):
    • A. 

      Not-for-profit corporation

    • B. 

      Self-regulatory organization

    • C. 

      U.S. government agency

    • D. 

      Insurer of municipal bonds


  • 117. 
    A registered representative receives a sell order from his customer. When he submits the order to the wire room he accidentally transposes two of the digits in the account number and the order is processed under the wrong account. This problem would be rectified:
    • A. 

      By the registered representative

    • B. 

      With a purchase of the security out of the wrong account

    • C. 

      By placing the order in an error file

    • D. 

      By the branch office manager


  • 118. 
    A Suspicious Activity Report (SAR) should be filed:
    • A. 

      Only in the event that the firm has actual knowledge that the client is laundering money

    • B. 

      If a transaction exceeds $5,000 and the firm suspects illegal activity

    • C. 

      Only for transactions of more than $10,000

    • D. 

      Only for transactions with parties on the OFAC list


  • 119. 
    A registered representative receives an order from her customer to sell 600 shares of BWGF to be executed in her IRA account. The RR mistakenly executes the order in the wrong account. What action should be taken to correct the error?
    • A. 

      Cancel the transaction and reenter it in the correct account after receiving approval by the margin department

    • B. 

      Cancel the transaction and reenter it in the correct account after receiving approval by a registered principal

    • C. 

      Resend the order to the floor of the exchange

    • D. 

      Cancel the order, but no other action is necessary


  • 120. 
    A registered representative sells 1,500 shares of stock for a client and executes the transaction using the wrong account number. Which of the following actions should be taken?
    • A. 

      Request a cancel and rebill after receiving principal approval

    • B. 

      Request a cancel and rebill without principal approval

    • C. 

      Contact the trader that executed the order and enter a new order

    • D. 

      Cancel the order and take no other action


  • 121. 
    A registered representative enters an order for a client. In error, the RR purchases shares of the wrong security. Which of the following statements is TRUE?
    • A. 

      The shares must be placed in the RR's error account.

    • B. 

      The shares must be placed in the broker-dealer's error account.

    • C. 

      The RR must contact the client and cancel the original transaction.

    • D. 

      The firm is required to report the error to the market in which the order was executed.


  • 122. 
    A client purchases $800,000 of stock in a margin account and deposits the Regulation T margin requirement. If the current value of the stock is $700,000 and the broker-dealer declares bankruptcy, SIPC would cover:
    • A. 

      $100,000

    • B. 

      $300,000

    • C. 

      $400,000

    • D. 

      $500,000


  • 123. 
    A client has a margin account with a long market value of $950,000 and a debit balance of $550,000. If the broker-dealer declares bankruptcy, which TWO of the following statements are TRUE? The client is permitted to pay $550,000 and receive $950,000 of securities. The client is permitted to pay $500,000 and receive $950,000 of securities. The client is covered for $400,000 of securities. The client is covered for $500,000 of securities.
    • A. 

      I and III

    • B. 

      I and IV

    • C. 

      II and III

    • D. 

      II and IV


  • 124. 
    A customer sells 100 shares of GM short. GM declares a 5% stock dividend. When the customer covers the short position, the customer will have to deliver:
    • A. 

      5 shares of GM

    • B. 

      100 shares of GM

    • C. 

      105 shares of GM

    • D. 

      None of the above


  • 125. 
    A stock trades ex-dividend on Monday the 20th. What is the last day an investor can purchase the stock and be entitled to the dividend?
    • A. 

      Monday the 13th

    • B. 

      Thursday the 16th

    • C. 

      Friday the 17th

    • D. 

      Monday the 20th


  • 126. 
    All of the following are TRUE of treasury stock EXCEPT it:
    • A. 

      Is listed on the company's balance sheet

    • B. 

      Has no voting rights and does not receive dividends

    • C. 

      Is outstanding stock that has been repurchased by the corporation

    • D. 

      Has been issued by the U.S. Treasury and was purchased by a corporation


  • 127. 
    ABC Corporation is paying a $5 yearly dividend on its preferred stock. The market price of the preferred stock is $80. The current yield is:
    • A. 

      5.55%

    • B. 

      6.25%

    • C. 

      7.35%

    • D. 

      8.25%


  • 128. 
    A NYSE-listed stock closed at $72. The next day the stock is ex-dividend 60 cents. To determine if the stock increased or decreased from the close of trading, the price would be based upon:
    • A. 

      71.40

    • B. 

      71.70

    • C. 

      72.60

    • D. 

      72


  • 129. 
    Co. A Co. B Co. C Co. D Earnings per Share $2.00 $6.50 $5.20 $7.80 Dividends $0.10 $2.50 $2.60 $6.00 Percentage ofRetained Earnings 95% 62% 50% 23%Which of the above companies is probably a growth company?
    • A. 

      Company A

    • B. 

      Company B

    • C. 

      Company C

    • D. 

      Company D


  • 130. 
    Co. A Co. B Co. C Co. D Earnings per Share $2.00 $6.50 $5.20 $7.80 Dividends $0.10 $2.50 $2.60 $6.00 Percentage ofRetained Earnings 95% 62% 50% 23% Which of the above companies is probably a utility?
    • A. 

      Company A

    • B. 

      Company B

    • C. 

      Company C

    • D. 

      Company D


  • 131. 
    The following dividend information for New York Stock Exchange listed common stocks is reported in The Wall Street Journal. Quarterly Company Dividend Record Date Payable Date Cummings Corp. 50 cents 4/10 5/15 Federal Corp. 85 cents 4/13 5/25 General Electric Corp. 95 cents 4/8 5/21 A buyer of Cummings Corporation on May 10th:
    • A. 

      Would be entitled to receive the 50-cent quarterly dividend

    • B. 

      Would not be entitled to receive the 50-cent quarterly dividend

    • C. 

      Would be entitled to receive the 50-cent quarterly dividend if the trade was made for "cash"

    • D. 

      Would be entitled to the 50-cent quarterly dividend if he paid for the stock by May 15th


  • 132. 
    ABC Corporation announces a 5-for-4 split. After the split the market price of ABC Corporation will be reduced by:
    • A. 

      15%

    • B. 

      20%

    • C. 

      25%

    • D. 

      50%


  • 133. 
    All of the following are true about treasury stock EXCEPT it:
    • A. 

      Is stock that has been repurchased by a corporation

    • B. 

      Does not receive dividends

    • C. 

      Has voting rights

    • D. 

      Is listed on the company's balance sheet


  • 134. 
    As far as rights offerings are concerned:
    • A. 

      Common shareholders do not have the right to subscribe to rights offerings

    • B. 

      Preferred shareholders do not have the right to subscribe to rights offerings

    • C. 

      Both of the above are correct

    • D. 

      None of the above are correct


  • 135. 
    Which of the following companies would most likely pay a dividend in stock rather than cash?
    • A. 

      A company with a large cash position and very little growth in earnings

    • B. 

      A company whose earnings are growing at 5% a year and has a small amount of cash

    • C. 

      A company growing at 10% a year with 20% of its assets in cash

    • D. 

      A company with a small amount of cash whose earnings are growing at a rate of 20% per year


  • 136. 
    Which of the following statements is true regarding warrants?
    • A. 

      Warrants receive dividends when the common stock receives dividends.

    • B. 

      Warrants can be perpetual.

    • C. 

      Warrants are only issued by blue chip corporations.

    • D. 

      Warrants are guaranteed by the Options Clearing Corporation.


  • 137. 
    Briana Corporation, an existing public company, is offering 500,000 shares of common stock to the public through an underwriting syndicate. The prospectus states that 250,000 shares are being offered by selling stockholders and 250,000 shares are being offered by Briana Corporation. The effect of this offering will be: A dilution in the earnings per common share An increase inthe earnings per share The number of shares outstanding will increase by 500,000 The number of shares outstanding will increase by 250,000
    • A. 

      I and III

    • B. 

      I and IV

    • C. 

      II and III

    • D. 

      II and IV


  • 138. 
    A corporation intends to raise additional funds from its existing shareholders rather than using the services of an underwriter. The corporation would be engaging in a:
    • A. 

      Rights offering

    • B. 

      Secondary distribution

    • C. 

      Special offer

    • D. 

      Private placement


  • 139. 
    A customer owns stock of a corporation that has declared a $1 dividend to holders of record Monday, December 22nd. If the customer wishes to sell the stock but still be entitled to the dividend, he should sell the stock on: Wednesday, December 17th, regular-way settlement Thursday, December 18th, regular-way settlement Monday, December 22nd, cash settlement Tuesday, December 23rd, cash settlement
    • A. 

      I or III

    • B. 

      I or IV

    • C. 

      II or III

    • D. 

      II or IV


  • 140. 
    All of the following are true about a dividend paid by a corporation to its shareholders EXCEPT the dividend:
    • A. 

      Is determined by a corporation's board of directors

    • B. 

      Is voted upon by a corporation's shareholders

    • C. 

      May be in the form of cash or the corporation's stock

    • D. 

      May be in the form of stock owned in another corporation


  • 141. 
    The purpose of cumulative voting is to:
    • A. 

      Give large stockholders greater voting power

    • B. 

      Keep the existing management in office in the event of a proxy fight

    • C. 

      Give the small stockholders the chance to gain representation on the Board of Directors

    • D. 

      Give the small stockholder an opportunity to gain control of the corporation


  • 142. 
    The quarterly dividend of ABC company is 32 1/2 cents. The market price is $24.00 a share. What is the current yield?
    • A. 

      1.35%

    • B. 

      2.38%

    • C. 

      4.82%

    • D. 

      5.41%


  • 143. 
    A notice of sale appears showing that RFQ corporation is selling 800,000 units at $6 per unit. Each unit consists of 2 shares of pre-ferred stock and a warrant for 1/2 share of common stock. If all of the warrants are exercised, how many shares will be outstanding?
    • A. 

      400,000 shares of preferred and 400,000 shares of common

    • B. 

      800,000 shares of preferred and 400,000 shares of common

    • C. 

      800,000 shares of preferred and 800,000 shares of common

    • D. 

      1,600,000 shares of preferred and 400,000 shares of common


  • 144. 
    A customer owns 50 shares of ABC Corporation. ABC Corporation is engaging in a rights offering. The terms of the offering are that 10 rights plus $35 is required to buy one new share of stock. If the customer wanted to subscribe to the rights offering, how many additional rights would he need to buy 100 shares of stock?
    • A. 

      95

    • B. 

      100

    • C. 

      350

    • D. 

      950


  • 145. 
    A corporation has declared a two for one stock split payable on November 30th to holders of record on November 1st. The ex-date is December 1st. The first day that the stock will trade without a due bill attached is:
    • A. 

      October 28th

    • B. 

      November 29th

    • C. 

      November 30th

    • D. 

      December 1st


  • 146. 
    An individual owns 100 shares of GHI stock. If GHI announces a 3 for 1 stock split, the individual: Will receive an additional stock certificate for 200 shares Must return his old stock certificate and will be issued a new certificate for 300 shares Will see the value of his investment in GHI stock increase due to the split Will not see any increase in the value of his investment in GHI stock due to the split
    • A. 

      I and II only

    • B. 

      I and IV only

    • C. 

      II and III only

    • D. 

      II and IV only


  • 147. 
    Which of the following pertain to ADRs? They facilitate the trading of foreign securities in U.S. markets. They facilitate the trading of U.S. securities in foreign markets. They are receipts issued for foreign securities. They are receipts issued for U.S. securities.
    • A. 

      I and III

    • B. 

      I and IV

    • C. 

      II and III

    • D. 

      II and IV


  • 148. 
    All of the following are true about warrants EXCEPT:
    • A. 

      They are frequently attached to a new issue of stock or bonds

    • B. 

      They may trade on an exchange or in the OTC market

    • C. 

      They receive dividends when declared by the board of directors

    • D. 

      Some have been issued without an expiration date


  • 149. 
    The market price of ABC Corporation common stock is $56. The yearly dividend is $3. The quarterly dividend is 75 cents. What is the current yield of the stock?
    • A. 

      1.3%

    • B. 

      4.7%

    • C. 

      5.3%

    • D. 

      6.8%


  • 150. 
    A company has a noncumulative preferred stock outstanding that pays a $5 dividend per year. If dividends on the preferred stock were not paid last year, but will be paid this year, how much should the preferred stockholder receive?
    • A. 

      $5

    • B. 

      $10

    • C. 

      $15

    • D. 

      $20


  • 151. 
    On Tuesday May 1st, XYX Corporation's Board of Directors announce a dividend payable on Friday, May 25th to stockholders of record on Monday, May 14th. The ex-dividend date would be:
    • A. 

      Wednesday, May 23rd

    • B. 

      Thursday, May 10th

    • C. 

      Monday, May 14th

    • D. 

      Tuesday, May 1st


  • 152. 
    A corporation calls for redemption 1,000,000 shares of convertible preferred stock. The corporation announces that the convertible preferred will be redeemed at a price of $20 plus an accumulated dividend of 12 cents. Each share of preferred can be converted into 1/2 share of common. The preferred stock is selling at $19. There are 2,000,000 shares of common outstanding. Earnings for the common stock is $2.50 per share. The common stock is selling at 35.75. Which of the following alternatives would be least attractive to a preferred stockholder?
    • A. 

      Redeem the shares

    • B. 

      Sell the shares

    • C. 

      Convert the shares

    • D. 

      All alternatives would be equally attractive


  • 153. 
    A corporation calls for redemption 1,000,000 shares of convertible preferred stock. The corporation announces that the convertible preferred will be redeemed at a price of $20 plus an accumulated dividend of 12 cents. Each share of preferred can be converted into 1/2 share of common. The preferred stock is selling at $19. There are 2,000,000 shares of common outstanding. Earnings for the common stock is $2.50 per share. The common stock is selling at 35.75. If all shares were converted, how many shares of common stock would be outstanding?
    • A. 

      500,000

    • B. 

      2,000,000

    • C. 

      3,000,000

    • D. 

      5,000,000


  • 154. 
    A corporation calls for redemption 1,000,000 shares of convertible preferred stock. The corporation announces that the convertible preferred will be redeemed at a price of $20 plus an accumulated dividend of 12 cents. Each share of preferred can be converted into 1/2 share of common. The preferred stock is selling at $19. There are 2,000,000 shares of common outstanding. Earnings for the common stock is $2.50 per share. The common stock is selling at 35.75. What would the market price of the preferred stock be if it were selling at parity with the common stock?
    • A. 

      17.88

    • B. 

      19

    • C. 

      20

    • D. 

      71.50


  • 155. 
    All of the following are true regarding the role of a transfer agent EXCEPT that the transfer agent:
    • A. 

      Keeps a record of each stockholder's name and shares owned

    • B. 

      Issues and cancels stock certificates

    • C. 

      Resolves problems due to mutilated certificates

    • D. 

      Makes sure that outstanding shares do not exceed authorized shares


  • 156. 
    An investor owns a $100 convertible preferred stock which is convertible into 2 shares of common stock. The common is selling at $52 and the preferred is selling at $104. The preferred stock is called at 105. What should the investor do?
    • A. 

      Sell the preferred stock

    • B. 

      Allow the preferred to be called

    • C. 

      Convert to common and sell the common

    • D. 

      Wait for a more favorable call


  • 157. 
    A corporation would primarily split its stock to:
    • A. 

      Increase its retained earnings

    • B. 

      Decrease its retained earnings

    • C. 

      Increase the market price of its stock to make it more marketable

    • D. 

      Decrease the market price of its stock to make it more marketable


  • 158. 
    XYZ Corporation has 2,000,000 shares of common stock authorized. The company has issued 1,000,000 common shares of which 200,000 shares are treasury stock. The company has earnings of $2.00 per share. The XYZ Corporation has repurchased:
    • A. 

      200,000 shares

    • B. 

      500,000 shares

    • C. 

      800,000 shares

    • D. 

      1,000,000 shares


  • 159. 
    XYZ Corporation uses the cumulative voting method of electing directors. A shareholder owning 100 shares of stock voting for the election of five new directors could vote:
    • A. 

      A total of 100 votes for all the directors

    • B. 

      100 votes for each of the directors only

    • C. 

      500 total votes divided in any manner chosen by the stockholder among the five new directors to be elected

    • D. 

      500 votes for each of the five directors, a total of 2,500 votes, but no more than 500 votes for any one director


  • 160. 
    A company declares a cash dividend. Standard and Poor's details this information in its dividend book. Ten days after the record date this information is published in a local newspaper. When is the ex-dividend date?
    • A. 

      Two business days from the time it is published in the local newspaper

    • B. 

      Two business days prior to the record date

    • C. 

      Two business days prior to the payable date

    • D. 

      On the day Standard and Poor's decides


  • 161. 
    A Japanese company would like to have its stock traded in the U.S. securities markets. This would most likely be accomplished through the issuance of:
    • A. 

      Japanese yen options

    • B. 

      Eurodollar bonds

    • C. 

      Bankers' acceptances

    • D. 

      American Depositary Receipts


  • 162. 
    Foremost Corporation has declared a quarterly dividend of 25 cents payable to stockholders of record on Friday, December 1st. An owner of Foremost Corporation who sold the stock on November 29th:
    • A. 

      Would be entitled to receive the dividend

    • B. 

      Would not be entitled to receive the dividend

    • C. 

      Would be entitled to receive the dividend only if the stock was delivered before the ex-dividend date

    • D. 

      None of the above


  • 163. 
    Foremost Corporation has declared a quarterly dividend of 25 cents payable to stockholders of record on Friday, December 1st. The dividend would be paid to all stockholders whose name appeared on the record books of Foremost Corporation on:
    • A. 

      November 28th

    • B. 

      November 29th

    • C. 

      November 30th

    • D. 

      December 1st


  • 164. 
    Growth stocks would typically have which two of the following characteristics? High price-earnings ratios High dividend payout ratios Low price-earnings ratios Low dividend payout ratios
    • A. 

      I and II

    • B. 

      I and IV

    • C. 

      II and III

    • D. 

      III and IV


  • 165. 
    A company declares a forward stock split. What is the effect on the stock's par value?
    • A. 

      No effect on the par value

    • B. 

      An increase in the par value

    • C. 

      A decrease in the par value

    • D. 

      An increase in the par value and a decrease in the number of shares outstanding


  • 166. 
    Of the different securities listed below, the one with the longest expiration date would normally be a:
    • A. 

      Put

    • B. 

      Call

    • C. 

      Warrant

    • D. 

      Right


  • 167. 
    Ashton purchased 100 shares of XYZ common stock in January 2003, at a price of $25 per share. XYZ pays a quarterly dividend of $.25 per share. Today, XYZ closed at $30 per share. What is the dividend yield of XYZ common stock?
    • A. 

      0.83%

    • B. 

      1.25%

    • C. 

      3.33%

    • D. 

      4.00%


  • 168. 
    Mr. Jones, a shareholder of XYZ Corporation, reads in the newspaper that XYZ Corporation intends to issue new shares through a rights offering. The terms of the rights offering are as follows: 10 rights plus $10.50 are required to subscribe to one new share of stock Fractional shares become whole shares The record date is Friday, October 17th JPMorgan Chase and Bank of America are the transfer agents Goldman Sachs and Morgan Stanley are the standby underwriters Mr. Jones owns 87 shares of the XYZ Corporation. How many shares can he subscribe to and how much will it cost him?
    • A. 

      8.7 shares plus $91.35

    • B. 

      8 shares plus $84.00

    • C. 

      9 shares plus $91.35

    • D. 

      9 shares plus $94.50


  • 169. 
    Mr. Jones, a shareholder of XYZ Corporation, reads in the newspaper that XYZ Corporation intends to issue new shares through a rights offering. The terms of the rights offering are as follows: 10 rights plus $10.50 are required to subscribe to one new share of stock Fractional shares become whole shares The record date is Friday, October 17th JPMorgan Chase and Bank of America are the transfer agents Goldman Sachs and Morgan Stanley are the standby underwriters Mr. Jones also owns 87 shares of the preferred stock of the XYZ Corporation. How many additional shares can he subscribe to and at what cost?
    • A. 

      8.7 shares plus $91.35

    • B. 

      9 shares plus $91.35

    • C. 

      9 shares plus $94.50

    • D. 

      Preferred stockholders are not permitted to participate in a rights offering


  • 170. 
    Mr. Jones, a shareholder of XYZ Corporation, reads in the newspaper that XYZ Corporation intends to issue new shares through a rights offering. The terms of the rights offering are as follows: 10 rights plus $10.50 are required to subscribe to one new share of stock Fractional shares become whole shares The record date is Friday, October 17th JPMorgan Chase and Bank of America are the transfer agents Goldman Sachs and Morgan Stanley are the standby underwriters Mr. Jones chose to subscribe to the rights offering and purchased additional XYZ Corporation common stock on October 16th. Based on his latest stock purchase, he would:
    • A. 

      Be permitted to subscribe

    • B. 

      Be permitted to subscribe provided that the trade was executed regular way

    • C. 

      Not be permitted to subscribe because the stock traded ex-rights on October 15th

    • D. 

      Be permitted to subscribe because the record date has no bearing on when the stock trades ex-rights


  • 171. 
    Mr. Jones, a shareholder of XYZ Corporation, reads in the newspaper that XYZ Corporation intends to issue new shares through a rights offering. The terms of the rights offering are as follows: 10 rights plus $10.50 are required to subscribe to one new share of stock Fractional shares become whole shares The record date is Friday, October 17th JPMorgan Chase and Bank of America are the transfer agents Goldman Sachs and Morgan Stanley are the standby underwriters Mr. Jones would tender (submit) his rights to: JPMorgan Chase Bank of America Goldman Sachs Morgan Stanley
    • A. 

      I only

    • B. 

      I or II only

    • C. 

      I or III only

    • D. 

      I, II, III, or IV


  • 172. 
    The Board of Directors of a corporation is responsible for establishing all of the following EXCEPT the:
    • A. 

      Declaration date

    • B. 

      Payable date

    • C. 

      Ex-date

    • D. 

      Record date


  • 173. 
    The stock price of XYZ Corporation has remained stable despite the fact that the company has increased the amount of its dividend. Under these conditions, what would happen to the stock's current yield?
    • A. 

      It would increase.

    • B. 

      It would decrease.

    • C. 

      It would remain the same.

    • D. 

      The effect on current yield cannot be determined without knowing the investor's tax bracket.


  • 174. 
    Warrants would most likely be issued to:
    • A. 

      Replace outstanding common shares

    • B. 

      Reduce the interest rate on an issue of debentures

    • C. 

      Compensate the underwriting syndicate

    • D. 

      Reduce the issue price of securities


  • 175. 
    On Monday August 3, the board of directors of XYZ Corporation issued a press release stating that at today's meeting, they had decided to pay a 25 cent quarterly dividend. The checks for the dividend are to be sent out on September 15. The checks will be made out to anyone who is recorded as a shareholder as of Friday, August 28. The first trading day on which purchasers of XYZ stock will not receive the dividend is Wednesday, August 26. Wednesday, August 26 is called the:
    • A. 

      Ex-dividend date

    • B. 

      Declaration date

    • C. 

      Payable date

    • D. 

      Record date


  • 176. 
    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:
    • A. 

      0

    • B. 

      $3

    • C. 

      $9

    • D. 

      $12


  • 177. 
    Which of the following events would generally require a shareholder vote? Declaration of a stock dividend Declaration of a stock split Declaration of a cash dividend Election of a director
    • A. 

      I and II only

    • B. 

      I and IV only

    • C. 

      II and IV only

    • D. 

      II, III, and IV onl


  • 178. 
    In establishing a defensive portfolio, which of the following types of company stocks should not be included?
    • A. 

      Utility

    • B. 

      Defense

    • C. 

      Supermarket

    • D. 

      Tobacco


  • 179. 
    A corporation's shareholders must vote for:
    • A. 

      Cash dividends

    • B. 

      Stock dividends

    • C. 

      Stock splits

    • D. 

      Stopping dividends


  • 180. 
    A notice is published stating that RMO 5% convertible preferred stock will be called at $60 per share. The preferred is convertible into 1/2 share of common and is selling in the market at $56 per share. RMO common stock is selling in the market at $110 per share. After the notice appears, the price of the preferred stock will most likely trade in the market at:
    • A. 

      $28

    • B. 

      $55

    • C. 

      The same price as before the notice appeared

    • D. 

      A price near $60


  • 181. 
    Which of the following would be most likely considered a defensive stock?
    • A. 

      An aerospace stock

    • B. 

      A utility stock

    • C. 

      An airline stock

    • D. 

      An automobile stock


  • 182. 
    An investor owns 280 shares of XYZ Corporation. XYZ Corporation pays a 15 cents quarterly dividend. XYZ Corporation announces a 5-for-4 split. The dividend per share is adjusted to reflect the split. How much will the investor receive in dividends each quarter after the split?
    • A. 

      $40.00

    • B. 

      $42.00

    • C. 

      $52.50

    • D. 

      $80.00


  • 183. 
    XYZ corporation has 7,000,000 shares of common stock ($1 par value) authorized of which 5,000,000 shares have been issued. There are 500,000 shares of treasury stock. The current market price of XYZ is 20. The value of the outstanding common stock on the balance sheet is:
    • A. 

      $4,500,000

    • B. 

      $5,000,000

    • C. 

      $7,000,000

    • D. 

      $90,000,000


  • 184. 
    XYZ corporation has 7,000,000 shares of common stock ($1 par value) authorized of which 5,000,000 shares have been issued. There are 500,000 shares of treasury stock. The current market price of XYZ is 20. The market capitalization of XYZ common stock is:
    • A. 

      $4,500,000

    • B. 

      $5,000,000

    • C. 

      $90,000,000

    • D. 

      $100,000,000


  • 185. 
    A common shareholder has all of the following rights EXCEPT the right to:
    • A. 

      Vote for the board of directors

    • B. 

      Receive dividends if voted by the board of directors

    • C. 

      Give or sell shares to anyone he wishes

    • D. 

      Examine any and all corporate records


  • 186. 
    All of the following would normally be a characteristic of a growth company EXCEPT that it has a:
    • A. 

      High price-earnings ratio

    • B. 

      High dividend payout ratio

    • C. 

      High amount of research and development costs

    • D. 

      Wide trading range for the price of its stock


  • 187. 
    A stock closes at $37. The next day the stock sells ex-dividend $0.68 per share. At what price should the stock open the next day if it opens at the same level it closed the day before?
    • A. 

      36.66

    • B. 

      36.32

    • C. 

      37.00

    • D. 

      37.68


  • 188. 
    Shares that are issued but not outstanding are classified as:
    • A. 

      Restricted stock

    • B. 

      Treasury stock

    • C. 

      Preferred stock

    • D. 

      Participating stock


  • 189. 
    When a stock splits 5 for 4, by what percentage will the price of the stock be reduced?
    • A. 

      20%

    • B. 

      25%

    • C. 

      50%

    • D. 

      80%


  • 190. 
    A company based in Europe with offices also located in New Jersey would like to have its stock traded on the NYSE. This would most likely be accomplished through the issuance of:
    • A. 

      Yankee bonds

    • B. 

      Eurodollar bonds

    • C. 

      Bankers' Acceptances

    • D. 

      American Depositary Receipts


  • 191. 
    An investor owns 4,000 shares of common stock which pays a quarterly dividend of 35 cents. If the investor purchases 500 additional shares prior to the first ex-dividend date of the year, what is the investor's expected annual income from the investment?
    • A. 

      $1,400

    • B. 

      $1,575

    • C. 

      $5,600

    • D. 

      $6,300


  • 192. 
    A customer sells short 400 shares and the company declares a 10% stock dividend. When the customer covers the short position, the customer will be required to deliver:
    • A. 

      40 shares

    • B. 

      360 shares

    • C. 

      400 shares

    • D. 

      440 shares


  • 193. 
    Concerning Moody's ratings, which is the most speculative in the investment grade category?
    • A. 

      Aa

    • B. 

      A

    • C. 

      Baa

    • D. 

      Ba


  • 194. 
    Which of the following would probably be most leveraged?
    • A. 

      A software company

    • B. 

      A biotech company

    • C. 

      A consumer electronics company

    • D. 

      A utility company


  • 195. 
    Which of the following Moody's rated bonds would be considered speculative?
    • A. 

      Aaa

    • B. 

      Aa

    • C. 

      Baa

    • D. 

      Ba


  • 196. 
    The City of Richmond, Virginia is issuing 8 1/4% general obligation bonds at 100% of their par value. The bonds will mature in 20 years. An investor purchasing a bond at its offering price and holding the bond for 20 years will receive a yield-to-maturity of:
    • A. 

      8.25%

    • B. 

      Less than 8.25%

    • C. 

      More than 8.25%

    • D. 

      Cannot be determined


  • 197. 
    All of the following are true about a bond issue having serial maturities EXCEPT:
    • A. 

      All of the bonds mature on one date in the future

    • B. 

      The bonds are priced on a yield-to-maturity basis

    • C. 

      The issue has a decreasing outstanding principal

    • D. 

      The issue has decreasing total interest payments


  • 198. 
    A customer purchases ten 7% $1,000 par value bonds selling at a discount that have a yield-to-maturity of 9%. The customer will receive a semiannual interest payment of:
    • A. 

      $350

    • B. 

      $450

    • C. 

      $700

    • D. 

      $900


  • 199. 
    ABC Corporation has a capitalization that consists of a large amount of debt securities relative to a small amount of equity securities. ABC Corporation would be considered to have a capitalization that is:
    • A. 

      Conservative

    • B. 

      Ordinary

    • C. 

      Under-leveraged

    • D. 

      Leveraged


  • 200. 
    When comparing long-term bonds to short-term bonds, all of the following are TRUE EXCEPT:
    • A. 

      They usually have higher yields than short-term bonds

    • B. 

      They usually provide greater liquidity than short-term bonds

    • C. 

      They usually are more often callable than short-term bonds

    • D. 

      Their market prices are more sensitive to interest rate changes than short-term bonds


  • 201. 
    The proceeds of the sale of a municipal bond issue are invested in U.S. government securities that are sufficient to cover interest, principal, and call premiums on an outstanding bond issue. The outstanding bonds are called:
    • A. 

      Covered bonds

    • B. 

      Safe bonds

    • C. 

      Guaranteed bonds

    • D. 

      Pre-refunded bonds


  • 202. 
    If an investor is primarily seeking capital gains, when would be the best time to buy bonds?
    • A. 

      When interest rates are high and are expected to drop

    • B. 

      When interest rates are low and are expected to rise

    • C. 

      When interest rates are stable and are expected to remain stable

    • D. 

      When bond prices are low and interest rates are expected to rise


  • 203. 
    If interest rates are expected to rise over a period of time, a municipality that must raise money would probably issue securities with:
    • A. 

      Short-term maturities

    • B. 

      Intermediate-term maturities

    • C. 

      Long-term maturities

    • D. 

      Call provisions


  • 204. 
    A corporation is contemplating the refunding of its debt issues. The refunding could accomplish which of the following? Reduce interest costs Change the maturity schedule of the corporation's debt Remove restrictive provisions from the indenture
    • A. 

      I only

    • B. 

      I and II only

    • C. 

      II and III only

    • D. 

      I, II, and III


  • 205. 
    During periods of tight money, when the yield curve becomes inverted, the highest yield would probably be found in:
    • A. 

      3-month treasury bills

    • B. 

      3-month negotiable certificates of deposit

    • C. 

      5-year Treasury notes

    • D. 

      30-year municipal bonds


  • 206. 
    A customer buys bonds with a $50,000 par value at 85 1/2. The bonds are callable at 110. If the customer holds the bonds to maturity he will receive:
    • A. 

      $42,500

    • B. 

      $50,000

    • C. 

      $55,000

    • D. 

      $85,000


  • 207. 
    A new convertible bond has a provision that it cannot be called for five years after the issue date. This call protection would be most valuable to a recent purchaser of the bond if:
    • A. 

      Interest rates are falling

    • B. 

      Interest rates are rising

    • C. 

      Interest rates are stable

    • D. 

      The yield curve slopes downward


  • 208. 
    The American Telephone Company announced in an ad in The Wall Street Journal that it intends to call for redemption all of its outstanding 10% callable bonds at 103 1/4 plus accrued interest. The market price of the bonds was 102 3/4 at the time of the announcement. Which alternative is most advantageous to the bondholder?
    • A. 

      Redeem the bonds.

    • B. 

      Sell the bonds at the current market price.

    • C. 

      Do nothing and hope for a takeover bid from another company.

    • D. 

      Hold the bonds to maturity and continue to earn interest.


  • 209. 
    Which of the following is NOT TRUE as it relates to a bond selling at a discount?
    • A. 

      The yield-to-maturity is greater than the nominal yield.

    • B. 

      The nominal yield is less than the current yield.

    • C. 

      Interest rates most likely decreased after the bonds were issued.

    • D. 

      The par value exceeds the market price.


  • 210. 
    Pennsylvania Power Company has announced it will refund $100 million of its outstanding 12% bonds that were to mature in 2020. The bonds will be refunded at 106.75% of par value from the proceeds of a $100 million refunding issue. The refunding issue has a 6% coupon rate and matures in 2012. The refunding will reduce all of the following EXCEPT the:
    • A. 

      Interest cost to the issuer

    • B. 

      Company's maturity schedule

    • C. 

      Company's annual debt service obligation

    • D. 

      Amount of outstanding debt


  • 211. 
    Pennsylvania Power Company has announced it will refund $100 million of its outstanding 12% bonds that were to mature in 2020. The bonds will be refunded at 106.75% of par value from the proceeds of a $100 million refunding issue. The refunding issue has a 6% coupon rate and matures in 2012. Bondholders who owned 12% bonds maturing in 2020 will receive:
    • A. 

      $1,067.50 plus accrued interest

    • B. 

      The new 6% bonds being issued plus accrued interest

    • C. 

      $1,000 plus accrued interest

    • D. 

      The new 6% bonds being issued without accrued interest


  • 212. 
    An outstanding municipal bond would most likely be called when interest rates:
    • A. 

      Rise above the bond's nominal yield

    • B. 

      Rise above the bond's yield to maturity

    • C. 

      Fall below the bond's nominal yield

    • D. 

      Fall below the bond's yield to maturity


  • 213. 
    The purpose of a sinking fund is for redeeming a corporation's
    • A. 

      Common stock

    • B. 

      Warrants

    • C. 

      Rights

    • D. 

      Bonds


  • 214. 
    A tombstone ad states that the McGee Oil Company is offering $200,000,000 of 8 1/2% bonds due July 1, 2026 at 99 1/2% of their par value. The yield-to-maturity on the bond is:
    • A. 

      8%

    • B. 

      Less than 8 1/2%

    • C. 

      8 1/2%

    • D. 

      Greater than 8 1/2%


  • 215. 
    An investor owns $10,000 worth of XYZ Corporation convertible bonds callable at 102. Prior to the call the bonds are selling in the market at 103. If the corporation calls the bonds at the call price, the investor will receive:
    • A. 

      $10,000

    • B. 

      $10,200

    • C. 

      $10,300

    • D. 

      $10,500


  • 216. 
    Dow Chemical bonds are listed in the NYSE bond table as having a nominal yield of 6.6% and having closed the previous day at 91 7/8. An owner of 10 bonds would receive a yearly interest payment of:
    • A. 

      $600

    • B. 

      $660

    • C. 

      More than $660

    • D. 

      Less than $660


  • 217. 
    Dow Chemical bonds are listed in the NYSE bond table as having closed the previous day at 91 7/8. The closing price of Dow Chemical bonds is:
    • A. 

      $910.88

    • B. 

      $917.80

    • C. 

      $918.75

    • D. 

      $1,000.00


  • 218. 
    Alabama Power 5 1/4s of '08 are listed in the bond table as having closed the previous day at 88 3/4. A buyer of 10 bonds at the close would have to pay:
    • A. 

      $880.75

    • B. 

      $8,850.00

    • C. 

      $8,875.00

    • D. 

      $8,900.00


  • 219. 
    ABC Corporation has issued two $1,000 par value bonds with the same coupon rate, one paying interest annually and the other paying interest semiannually. If both bonds are held to maturity in 10 years, the bond paying interest annually will have a total return that is:
    • A. 

      Less than the bond paying interest semiannually

    • B. 

      More than the bond paying interest semiannually

    • C. 

      The same as the bond paying interest semiannually

    • D. 

      Two times greater than the bond paying interest semiannually


  • 220. 
    Which of the following would have the least capital risk for a client?
    • A. 

      Options

    • B. 

      Bonds

    • C. 

      Warrants

    • D. 

      Stocks


  • 221. 
    When a bond is selling at a premium:
    • A. 

      The market price is greater than the par value

    • B. 

      The current yield is higher than the nominal yield

    • C. 

      It is a better quality bond than one selling at a discount

    • D. 

      The yield-to-maturity is greater than the current yield


  • 222. 
    When a bond is registered as to principal only, this means that the bond has been issued:
    • A. 

      With no coupons attached and the bond is registered in the name of the owner

    • B. 

      In the name of the owner without coupons attached

    • C. 

      With coupons attached only

    • D. 

      In the name of the owner but with bearer coupons attached


  • 223. 
    A customer wants safety and preservation of capital. He should purchase:
    • A. 

      Income bonds

    • B. 

      Options

    • C. 

      Securities in a margin account

    • D. 

      AAA bonds


  • 224. 
    The current yield on a $1,000 par value 5% bond selling at $800 maturing in 10 years is:
    • A. 

      5.00%

    • B. 

      5.60%

    • C. 

      6.25%

    • D. 

      8.50%


  • 225. 
    If the Federal Reserve Board increased the discount rate, you would expect:
    • A. 

      Short-term bonds to decrease more in price than long-term bonds

    • B. 

      Long-term bonds to decrease more in price than short-term bonds

    • C. 

      That there would be no effect on either long or short-term bond prices

    • D. 

      Long-term bonds would increase more in price than short-term bonds


  • 226. 
    Relative to a municipal bond purchased at a discount, place the following in the proper sequence from lowest to highest. Current yield Nominal yield Yield-to-maturity
    • A. 

      I, II, and III

    • B. 

      II, I, and III

    • C. 

      III, I, and II

    • D. 

      III, II, and I


  • 227. 
    A 5% $1,000 par value bond sells at $900 and is redeemed in 10 years. What is the amount of interest per year?
    • A. 

      $10

    • B. 

      $40

    • C. 

      $45

    • D. 

      $50


  • 228. 
    The securities that are deposited in an escrow account for an advanced refunding are:
    • A. 

      Revenue bonds

    • B. 

      General obligation bonds

    • C. 

      Federal agency bonds

    • D. 

      Treasury bonds


  • 229. 
    New Issue $50,000,000 City of Denver, Colorado Pollution Control Bonds Par Value $1,000 Amount Rate Maturity Date Price $50,000 5 1/2% July 1, 2017 100 $60,000 6 1/2% July 1, 2018 100 Based on the above information, which of the following statements can be made about the bonds maturing in 2017? The yield to maturity will be the same as the nominal rate. The yearly interest payment is $55 per bond. The bond will yield 5 1/2%. The bonds will all be issued at the same dollar price.
    • A. 

      I only

    • B. 

      I and II only

    • C. 

      I, II, and III only

    • D. 

      I, II, III, and IV


  • 230. 
    A company has $50,000,000 par value convertible bonds outstanding. The coupon rate is 8%. The bonds are currently selling at 96. What is the current yield?
    • A. 

      7.0%

    • B. 

      7.5%

    • C. 

      8.0%

    • D. 

      8.3%


  • 231. 
    Mrs. Smith buys a 6 3/4% municipal bond at 101 3/4. The yield-to-maturity on the bond is:
    • A. 

      6 3/4%

    • B. 

      Less than 6 3/4%

    • C. 

      More than 6 3/4%

    • D. 

      Par plus 1 3/4%


  • 232. 
    An investor sells ten 5% bonds and buys another 10 bonds with a 5 1/4% coupon rate. The investor's yearly cash flow from the bonds will have increased by:
    • A. 

      $1.00 per bond

    • B. 

      $1.50 per bond

    • C. 

      $2.00 per bond

    • D. 

      $2.50 per bond


  • 233. 
    Three bonds all have the same coupon rate of 6%. Bond A has a five-year maturity. Bond B has a one-year maturity. Bond C has a six-month maturity. If interest rates change, which bond would have the greatest dollar change in price?
    • A. 

      Bond A

    • B. 

      Bond B

    • C. 

      Bond C

    • D. 

      All of the bonds would change equally in price


  • 234. 
    A municipal bond issue with an inverted yield scale would have:
    • A. 

      Lower yields on the shorter maturities than on the longer maturities

    • B. 

      Higher yields on the shorter maturities than on the longer maturities

    • C. 

      Yields the same on all maturities

    • D. 

      Prices higher on the shorter maturities than on the longer maturities


  • 235. 
    Which of the following would increase most in price if interest rates decline?
    • A. 

      Short-term bonds selling at a discount

    • B. 

      Long-term bonds selling at a discount

    • C. 

      Short-term bonds selling at a premium

    • D. 

      Long-term bonds selling at a premium


  • 236. 
    Which of the following would most likely have a mandatory sinking fund?
    • A. 

      Serial issue

    • B. 

      Balloon issue

    • C. 

      Term issue

    • D. 

      Convertible issue


  • 237. 
    Which of the following would be characteristic of a call protection provision?
    • A. 

      Money is required to be deposited in a sinking fund to call the bond.

    • B. 

      It is a provision prohibiting the calling of the bond during its early years.

    • C. 

      It is a provision requiring the issuer to call the bond at a specific premium.

    • D. 

      It is a provision requiring the issuer to call the bond.


  • 238. 
    An investor purchases a 20-year 5% bond at par value which will yield 5 3/4% if called at the first call date in five years. The yield-to-maturity on bond is:
    • A. 

      5%

    • B. 

      More than 5%

    • C. 

      Between 5% and 5 3/4%

    • D. 

      5 3/4%


  • 239. 
    A municipality would refund a revenue bond issue for all of the following reasons EXCEPT to:
    • A. 

      Reduce interest charges

    • B. 

      Issue new bonds at lower interest rates

    • C. 

      Reduce the market value of outstanding bonds that are not refunded

    • D. 

      Eliminate restrictions in the bond resolution


  • 240. 
    Term bond quotes are based on:
    • A. 

      Yield-to-maturity

    • B. 

      Current yield

    • C. 

      Nominal yield

    • D. 

      Dollar price


  • 241. 
    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:
    • A. 

      The yield-to-maturity would be 5.60%

    • B. 

      The yield-to-maturity would be 6.40%

    • C. 

      The yield-to-maturity would be 6.60%

    • D. 

      The yield-to-maturity would be 7.40%


  • 242. 
    From the issuer's perspective, when comparing term bonds and serial bonds, serial bonds have:
    • A. 

      Declining interest payments and declining principal amounts

    • B. 

      Increasing interest payments and increasing principal amounts

    • C. 

      Stable interest payments and stable principal amounts

    • D. 

      None of the above


  • 243. 
    When comparing long-term bonds and short-term bonds, all of the following are true EXCEPT:
    • A. 

      Long-term bonds generally have higher yields

    • B. 

      Fluctuations in the dollar price of long-term bonds are usually greater than short-term bonds when the general level of interest rates change

    • C. 

      Long-term bonds generally provide greater liquidity than short-term bonds

    • D. 

      There is more purchasing power risk with long-term bonds when compared to short-term bonds


  • 244. 
    A 10% New York City GO bond matures in 20 years. The bond is callable in 8 years at 103. All of the following are true regarding this bond EXCEPT:
    • A. 

      The investor has 8 years of call protection

    • B. 

      The issuer must pay investors a 3-point call premium to exercise the call privilege on the bonds

    • C. 

      The investor will receive more for the bond if it is called versus holding the bond to maturity

    • D. 

      The investor may exercise the call provision any time after the 8th year


  • 245. 
    Which of the following risk factors are the most important for purchasers of long-term high-grade bonds?
    • A. 

      The ability to pay interest when due

    • B. 

      The ability to pay principal upon maturity

    • C. 

      Limited marketability

    • D. 

      Purchasing power risk


  • 246. 
    A customer owns 500 shares of XYZ stock selling at $15 per share and $20,000 par value of State of Alabama GO bonds selling at 101. If both securities increased by 2 1/2 points, the dollar value of the increase would be:
    • A. 

      $1,200

    • B. 

      $1,300

    • C. 

      $1,750

    • D. 

      $2,500


  • 247. 
    American Telephone Company of Ohio is offering $50,000,000 worth of 9% bonds at a price of 99.25% of par value. An investor buying the bonds would receive yearly interest of:
    • A. 

      $ 90.00 per $1,000 face amount

    • B. 

      $ 99.25 per $1,000 face amount

    • C. 

      $ 100.00 per $1,000 face amoun

    • D. 

      $1,000.00 per $1,000 face amount


  • 248. 
    If interest rates decline, which of the following securities would probably have the greatest increase in market value?
    • A. 

      Short-term bonds

    • B. 

      Intermediate-term bonds

    • C. 

      Long-term bonds

    • D. 

      Treasury bills


  • 249. 
    An investor purchases a 4% bond at a premium and holds the bond to maturity. Which of the following could represent the yield to maturity on the bond?
    • A. 

      3.5%

    • B. 

      4.0%

    • C. 

      4.5%

    • D. 

      5.0%


  • 250. 
    An announcement in The Wall Street Journal states that New York State plans an advanced refunding of its 7 1/2% Dormitory Bonds through the issuance of a special $50,000,000 bond issue. This means that:
    • A. 

      Existing bondholders will receive a new bond with a lower rate of interest

    • B. 

      Existing bondholders will receive a new bond with a higher rate of interest

    • C. 

      Proceeds from the sale of a new bond issue will be put in an escrow account to retire the existing bond issue

    • D. 

      The Dormitory bonds will be convertible into Treasury bonds


  • 251. 
    A .05 change in basis would have the greatest effect on which of the following 6.00% coupon bonds?
    • A. 

      2 year maturity at a 7.00 yield

    • B. 

      2 1/4 year maturity at a 7.05 yield

    • C. 

      2 1/2 year maturity at a 7.10 yield

    • D. 

      2 3/4 year maturity at a 7.15 yield


  • 252. 
    When comparing high-grade bonds to low-grade bonds, lower grade bonds will have: Higher yields Lower yields Higher market prices Lower market prices
    • A. 

      I and IV

    • B. 

      I and III

    • C. 

      II and III

    • D. 

      II and IV


  • 253. 
    Four municipal bonds have the same maturity date. Which of the following would cost an investor the greatest dollar amount when purchased?
    • A. 

      A 4 3/4% coupon bond offered on a 5.10 basis

    • B. 

      A 5 1/4% coupon bond offered on a 5.00 basis

    • C. 

      A 5 3/4% coupon bond offered on a 6.00 basis

    • D. 

      A 6 1/4% coupon bond offered on a 6.50 basis


  • 254. 
    Which of the following would probably have the greatest fluctuation in price when interest rates move up or down?
    • A. 

      Commercial paper

    • B. 

      Treasury bills

    • C. 

      Treasury notes

    • D. 

      Treasury bonds


  • 255. 
    Municipal bond rating organizations are primarily concerned with the risk of:
    • A. 

      Declining purchasing power

    • B. 

      Market price fluctuations

    • C. 

      Default

    • D. 

      Illiquidity


  • 256. 
     A bond is selling at a premium. This is indicative of all of the following EXCEPT:
    • A. 

      The yield-to-maturity is less than the nominal yield

    • B. 

      The market price exceeds the par value

    • C. 

      Interest rates have increased since the bond was issued

    • D. 

      The nominal yield is greater than the current yield


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