Chapter 4

Question 1

Determining suitability, principal approval, sending risk disclosure, a client’s written authorization for the first three trades are special standards regarding:

Answer 1

penny stocks

Question 2

If an investor receives a stock dividend, what is the tax consequence?

Answer 2

The investors cost basis must be adjusted.

Question 3

When warrants are attached to bonds, the issuers will pay a _____ rate of interest.

Answer 3

lower

Question 4

A client selling shares would like to determine the specific shares being sold, he should use:

Answer 4

Specific Identification

Question 5

Board of Directors elections and stock splits may be voted on by:

Answer 5

common stockholders

Question 6

If securities are inherited, a beneficiary’s holding period is automatically:

Answer 6

long-term

Question 7

Short-term gains are taxed at:

Answer 7

ordinary income rates

Question 8

Long-term gains are taxed at:

Answer 8

a maximum of 20%

Question 9

If foreign taxes are paid on dividends received on foreign stocks, a U.S. investor can:

Answer 9

claim the amount as a credit or deduction on the U.S. return

Question 10

When securities are gifted, the recipients holding period will be:

Answer 10

the same as the donor’s