Exam 12 Wrong Answers

Question 1

A DPP investor puts $200,000 into a tennis condominium resort 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. What will be the investor’s tax savings after taking this deduction?

Answer 1

$14,000

Question 2

Firms must disclose which of the following in confirmation to a customer?4

Answer 2

Firm name
Commission charged
Trade date
Settlement date

Question 3

All of the following statements about customer confirmations of principal transactions in municipal securities are true except

Answer 3

They must disclose any dealer markup

Question 4

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

Answer 4

Buy a put

Question 5

In calculating the net interest cost on a new issue of municipal securities that have been bid at a premium, the dollar amount of the premium will be

Answer 5

Subtracted from the total interest cost

Question 6

A customer’s margin account contains the following registered, nonexempt securities: 100 shares EWH current market price 40; 100 shares CDA current market price 50; and 100 shares IRE current market price 80. The account has a debit balance of $10,800 and the initial margin requirement is 65%. How much cash can the customer withdraw?

Answer 6

None

Question 7

The sale of restricted securities by an officer of the issuer would be in compliance with SEC Rule 144 if3

Answer 7

The securities are fully paid for

The officer owned the securities for at least 6 months

The broker/dealer distributing the securities acts in an agency capacity

Question 8

All of the following statements about a trade in a municipal security are correct except

Answer 8

The trade date is the date used for calculating interest accumulation

Question 9

Which of the following are true of REITs?3

Answer 9

They must distribute at least 90% of their earnings to qualify for special tax treatment

If they are publicly owned they must register with the SEC

At least 75% of their gross income must be from real estate related activities

Question 10

In a leveraged oil and gas limited partnership that employed recourse financing, an investor may be exposed to which of the following risks?4

Answer 10

Income payments may never be generated
Investors may not be able to liquidate their interests
Investors may be subject to IRS audits

Investors may be subject to losses exceeding their original investment

Question 11

A portfolio consisting entirely of long term Baa rated municipal bonds would best fulfill the objective of an investor concerned with seeking

Answer 11

Return

Question 12

Under NYSE Rules, when a long sale order is prepared, the registered representative must record which of the following?

Answer 12

Location of the security at the time of the sale

Question 13

To qualify as an intrastate offering of securities, the sponsor of a earl estate syndication must invest

Answer 13

80% of the funds in the sponsor’s home state

Question 14

NASDAQ level III displays which of the following?2

Answer 14

Registered market makers’ quote and size

Trading volume for each issue

Question 15

All are offerings except

Answer 15

Fill or kill (FOK)

Question 16

A managing underwriter acts only as an agent for the issuer of the following underwritings?2

Answer 16

All or none

Best efforts

Question 17

Which of the following would be of the least concern to a person analyzing the debt structure of a municipality?

Answer 17

Debt which has matured

Question 18

All of the following are correct about the NASDAQ system except

Answer 18

It enables a subscriber to view actual transactions

Question 19

During periods of high interest rates, issuers of municipal securities wishing to retire their debt would

Answer 19

Make a tender offer

Question 20

All of the following are true of blue sky laws except

Answer 20

The Securities Act of 1933 sets forth certain standard provisions that must appear in all blue sky laws

Question 21

A customer sells a book entry municipal security that is in his account. If the security is sold to another customer, how is the ownership transferred?

Answer 21

By instructing the appropriate clearing agency to transfer ownership on its books from one customer to the other

Question 22

An American manufacturer of office equipment has contracted to deliver $1,000,000 worth of equipment to a British corporation payable in British pounds. The American manufacturer could best protect itself from currency fluctuations by purchasing

Answer 22

Puts on British Pounds

Question 23

An investment company organized under a trust indenture which does not have a board of directors and issues only redeemable securities which represent an undivided interest in a unit of specified securities defines

Answer 23

Unit investment trust

Question 24

Which statement is false concerning the taxation of a traditional IRA?

Answer 24

Early distributions are always subject to penalty

Question 25

All of the following are advantages to purchasing call options in a diversified combination except

Answer 25

The investor may limit his risk in the portfolio by the exercise of the calls

Question 26

An investor buys 1 DEF May 60 call for a premium of 6 and sells 1 DEF May 70 call for a premium of 3. Every dollar gained on a long call will be offset by a dollar lost on a short call above what market price?

Answer 26

$70

Question 27

Current interest on municipal bonds is generally calculated using the day count basis most commonly referred to as

Answer 27

30/360

Question 28

Which of the following would an investor most likely analyze to determine whether the anticipated earnings of a project would support a municipal revenue bond issue?

Answer 28

Feasibility study