EXAM 1

Question 1

Prior to the maturity of a variable-rate demand obligation, an investor has the right to receive the:

Answer 1

Par value plus accrued interest

Question 2

What is true concerning ECNs?

Answer 2

They can be used by investors who want to trade anonymously

Question 3

A RR’s customer has recently died and her son has come to the BDs office with physical securities. What’s the best course of action for the RR?

Answer 3

Tell the customer to contact the transfer agent since the shares were registered in his mothers name.

Question 4

Which CMO Tranche provided the greatest safety of principal?

Answer 4

The A tranche

Question 5

Listed equity options cease trading at:

Answer 5

4:00 pm Eastern Time on the expiration date

Question 6

Accrued interest on new municipal bonds is calculated from the:

Answer 6

Dated date

Question 7

A customer sells 1,000 shares of stock and asks for the actual time of execution. For a branch off manager, what is the appropriate action?

Answer 7

To state that the firm is able to provide this information on written request

Question 8

A muni bond that was issued at par is purchased by an individual in the secondary market at a price of 90. What is the tax consequence if the bond is held to maturity?

Answer 8

$100 ordinary income

Question 9

The securities that are deposited in an escrow account for an advance refunding of a municipal bond are:

Answer 9

Treasury bonds

Question 10

A company, which has investors with registration rights, has recently conducted an IPO. Typically, how long must these investors wait to sell their shares after the IPO?

Answer 10

180 days

Question 11

As it relates to convertible bonds, what provides an arbitrage opportunity?

Answer 11

Stock trading at a premium to parity

Question 12

Which of the following Moodys ratings is the most speculative investment grade?

A) Aa
B) A
C) Baa
D) Ba

Answer 12

C) Baa

Question 13

The term that’s used when a company sells stock to the public above par value is:

Answer 13

Paid-in capital

Question 14

While saving for her retirement, a variable annuity owner investing $1,000 a month will buy a:

Answer 14

Varying number of accumulation units

Question 15

An investor must pay accrued interest for a secondary market purchase of:

Answer 15

Tax anticipation notes

Question 16

A firm is not permitted to accept an exercise notice from a customer for a listed equity option after:

Answer 16

5:30 pm Eastern Time on the expiration date of the option

Question 17

An MIG rating applies to a:

Answer 17

BAN

**MIG ratings apply to muni notes.

Question 18

In a Delivery Versus Payment (DVP) and Receive Versus Payment (RVP) account, what is required?

Answer 18

A form identifying the third-party agent for the client

Question 19

What provides backing for a term bond that has a required payment period at maturity?

Answer 19

Sinking fund

Question 20

Under what circumstances will the payout from a variable annuity increase?

Answer 20

The performance of the separate account exceeds the AIR

Question 21

Compared to selling short, buying a put option:

Answer 21

Does not require the client to arrange to borrow the stock

Question 22

A customer who purchases shares of an ETF may be extended credit by a broker dealer when?

Answer 22

Immediately

Question 23

The determination of when the NAV of a mutual fund is calculated, is stipulated by the:

Answer 23

Prospectus

Question 24

What is a financial test that ensures a projects revenue is sufficient to make the debt service payments on both existing and proposed bond issues?

Answer 24

Additional bonds covenant