Exam 10 Wrong Answers

Question 1

A municipal securities trader’s authority generally extends to which of the following?4

Answer 1

Buying
Selling
Positioning
Pricing

Question 2

XYZ Corporation wants to open a margin account. Documentation would include which of the following?

Answer 2

Corporate charter

Question 3

The 1934 Act anti-fraud provisions prohibit 3

Answer 3

Indicating to customers that an all or none municipal underwriting is a firm commitment
Using manipulative technique to reduce price of municipal security

Omitting material information about a municipal issue from a dealer’s offering schedule

Question 4

A public school teacher has contributed $10,000 to a tax qualified annuity over a period of time. The teacher retires with an account balance of $16,000 at age 60. How much of this is subject to tax?

Answer 4

$16,000

Question 5

Which of the following are established uses of the stop order? 2

Answer 5

To protect a customer’s existing profit in a long position

To limit a loss on a short position

Question 6

An open-end investment company fund that charges an 8 1/2% sales load for single payment plans must offer all of the following except

Answer 6

Conversion privileges

Question 7

Which of the following securities would be least appropriate for an investor who is planning to retire in 2 years and wants to purchase securities that would provide safe, dependable income?

Answer 7

Income bond of a reorganized corporation

Question 8

GDP (industrial production) and personal income are examples of what type of economic indicator?

Answer 8

Coincident indicator

Question 9

Which of the following is an incorrect statement pertaining to stop orders?

Answer 9

They permit brokers to exercise discretion as to the time of execution and the total number of shares purchased

Question 10

Which of the following is considered to be a lagging indicator of economic trends?

Answer 10

Unemployment

Question 11

Which of the following is true about Treasury bills? 3

Answer 11

They mature in 52 weeks or less

They generally sell for less than par

They are a direct, guaranteed credit of the US government

Question 12

Which of the following is true concerning eastern accounts?

Answer 12

Syndicate members participate in the liability for unsold portions in proportion to the original participation in the account

Question 13

A customer has sold certain securities but has not delivered them to her registered representative by the settlement date. The SEC mandatory buy in period for customers who fail to deliver on time is

Answer 13

10 business days after the settlement date

Question 14

In a margin account, based on hypothecation rules of self regulatory agencies and SEC Customer Protection and Custody of Securities rule, a broker may collateralize to a bank a customer’s securities up to what percentage of the debit balance?

Answer 14

140%

Question 15

Deductions available in the first year of an oil and gas drilling partnership come primarily from

Answer 15

Intangible drilling costs

Question 16

MRSB rules allow a representative to engage in all of the following activities with respect to municipal securities except

Answer 16

Supervise other representatives

Question 17

Which one of the following types of investment companies pays out 90% of its net investment income to its shareholders?

Answer 17

Regulated

Question 18

All of the following are true about using US Treasury Bonds to cover debt security call options except

Answer 18

A market basket of US Treasury securities of adequate value is acceptable

Question 19

An investor begins receiving monthly annuity payments from his or her non qualified variable annuity contract. For tax purposes, these payments are considered to be

Answer 19

Partly ordinary income and partly a return of capital

Question 20

An investor with no cash or securities positions purchases 100 shares of XYZ at 74 and 1 XYZ July 80 listed put at 8 in a margin account. If the Regulation T margin requirement is 50%, what must the investor deposit for the transactions?

Answer 20

$4,500

Question 21

Each of the following is a violation of FINRA rules except

Answer 21

Marking to the market

Question 22

Which of the following is true of shares of a closed end investment company?

Answer 22

The shares have no redemption price

Question 23

All of the following are allowable investments for an individual retirement account except

Answer 23

Artworks and collectibles

Question 24

Which two of the following types of domestic securities will provide partially tax exempt income to a corporation?2

Answer 24

Common stocks

Preferred stocks

Question 25

Which of the following coupon rates, maturity dates and yields to maturity would result in the lowest dollar price of a municipal bond?

Answer 25

7% due in 30 years at a 9.60

Question 26

Which statement is incorrect with respect to a SEP plan?

Answer 26

Employees can make contributions to the account

Question 27

A long term policy of investing in Treasury bills (T-bills) will result in which of the following?2

Answer 27

Fluctuating rate of return

Stable value of principal

Question 28

Publicly held corporations differ from limited partnerships with respect to which of the following?3

Answer 28

Length of existence

Transferability of ownership

Application of the conduit concept

Question 29

A registered representative (RR) wishes to buy shares of an initial public offering for a new technology company that the RR’s firm is distributing. Under FINRA Rules, the RR may

Answer 29

Not do so under any circumstances

Question 30

A DPP investor puts $200,000 into a tennis condominium escort development. The investor’s share of the income from the operation the first year is $300,000. The share of the interest paid on the bank loan for the year is $200,000. The share of the maintenance expenses and taxes are $95,000. The share of the depreciation is $55,000. The investor is in the 28% tax bracket. How much, if any, can the investor deduct from income from other passive sources this year?

Answer 30

$50,000

Question 31

Which of the following will affect the holding period of a security held for less than 12 months?

Answer 31

Buy a put

Question 32

All of the following are generally true about commercial paper except

Answer 32

It is issued as interest bearing paper

Question 33

Interest rate conditions which encourage the refunding off debt issues are

Answer 33

Falling rates

Question 34

At a customer’s request, an RR accepts an order for a listed stock as good through the month. The responsibility for cancellation of the order at the end of the month rests with the

Answer 34

Member firm that accepted the order