Chapter 1

Question 1

Stock that pays higher than average dividend such as stocks of utility companies.

Answer 1

Income stock

Question 2

In making a suitability determination for an institution, what are some concerns a broker-dealer may have?

Answer 2

1. The institution’s ability to evaluate investments
2. Use of its own judgement in the past
3. Its use of an outside adviser

Question 3

Two important consideration when dealing with institutional client suitability are:

Answer 3

1. The ability to independently evaluate risk

2. The extent to which they are exercising the ability to evaluate risk

Question 4

Investment Analysis Tool

Answer 4

An interactive tool that produces illustrations, simulations, and predictions about the likelihood of future performance.

Question 5

Three suitability obligations FINRA imposes on broker-dealers

Answer 5

1. Reasonable Basis
2. Customer Specific
3. Quantitative

Question 6

Sales tax is an example of _____ tax.

Answer 6

regressive or flat

Question 7

Income and estate tax are examples of _____ tax.

Answer 7

graduated or progressive

Question 8

An owner of utility stocks, preferred stocks, and bonds would be most concerned about changes in _____.

Answer 8

interest rates

Question 9

If a client’s goal is preservation of principal, what fund would be most appropriate?

Answer 9

Money market fund