Exam 2 Wrong Answers

Question 1

The responsibilities of the investment adviser include all of the following except

Answer 1

Appointing the officers of the fund

Question 2

The responsible of a broker/dealer’s cashiering department is all of the following except

Answer 2

Handling the execution of a customer’s orders

Question 3

Which of the following statements is not true concerning a non qualified deferred compensation plan?

Answer 3

Any investments grow on a tax-free basis

Question 4

A client invested $200,000 in a real estate limited partnership. The client’s K-1 form shows the following: Gross revenue:$300,000; Operating expenses: $200,000; interest on mortgage: $95,000; depreciation: $55,000 if your client is in the 28% tax bracket and has no passive income, how much tax loss may be declared?

Answer 4

$0

Question 5

An investor has $10,000 in his margin account. He wants to sell short as many shares of XYZ stock as possible. XYZ is trading at $4 per share. With Reg T at 50%, what is the maximum number of shares he can sell short with $10,000?

Answer 5

2,500

Question 6

What is the most common type of corporate bond issued?

Answer 6

Unsecured

Question 7

XYZ stock has a market price of $62. Your client writes an XYZ Sept 60 call for $5. A month later, XYZ stock has a market price of $68 and your client makes a closing purchase of the XYZ Sept 60 call at $10. What is his gain or loss?

Answer 7

$500 loss

Question 8

An investor wants to purchase ABC stock, which is currently trading at $38 per share, because he believes it has excellent long-term appreciation potential. Near term however, he expects the stock to decline in price due to general market weakness. If he wants to purchase the stock below it’s current market value and generate additional income, he could

Answer 8

Write a put at $35

Question 9

A dealer has an average cost of 6.50 on the inventory position of an OTC stock the firm is trading. The NASDAQ Level 1 quote for the stock is 5-5.50. According to the FINRA conduct rules, what price would be used when figuring the mark up to a prospective customer?

Answer 9

5.50

Question 10

He FINRA bylaw category which defines the proper methods for handling securities violations and complaints is the

Answer 10

Code of Procedure

Question 11

Which of the following is a debt instrument?

Answer 11

ELKs

Question 12

A customer deposits $100,000 face value of Treasury securities trading at par into his margin account. How much money could the customer withdraw?

Answer 12

$95,000

Question 13

A redeemable security is

Answer 13

A security with no secondary trading

Question 14

Disintermediation is

Answer 14

Large scale movement from the short to the long end of the yield curve

Question 15

Which of the following bonds has the most call risk?

Answer 15

4% corporate bond trading at a premium, callable at par

Question 16

Atlanta has $100 million of existing debt and makes up 60% of Fulton County’s assessed valuation. Fulton County has $20 million of debt. What is Atlanta’s direct debt per capital (assuming a population of 2 million)?

Answer 16

$50

Question 17

Which of the following is true of customer complaints received by an NYSE member?

Answer 17

They must be maintained in a central file in the home office

Both written and oral complaints must be maintained

Question 18

The announcement that must be filed in connection with a Regulation D offering is

Answer 18

An offering memorandum

Question 19

Which of the following is not required to meet the educational requirements for selling a CMO to a retail client?

Answer 19

Suitability requirements for buying CMOs

Question 20

Which of the following are considered technical indicators?3

Answer 20

200 day moving average

Put/call ratio

Short interest

Question 21

A customer’s margin account has available SMA of $1,000. How much would the customer have to deposit to purchase listed options with premiums totaling $4,000?

Answer 21

$3,000

Question 22

A well-known seasoned issuer is issuing securities in an APO. To meet Act of 33’ disclosure requirements, the issuer may use a/an

Answer 22

Free-writing prospectus

Question 23

Upon termination of employment, an employee’s funds from a 457(b) plan

Answer 23

May be transferred into an IRA. Once transferred, the funds become subject to a 10% penalty for early withdrawal

Question 24

A customer places an order to buy 100 ABC @ 35 stop, but not for more than 36. This is a

Answer 24

Buy stop limit order

Question 25

Which of the following is not considered by a NASDAQ dealer determining the mark up or mark down to charge in a principal trade?

Answer 25

Cost of the security held in inventory

Question 26

Which of the following transactions requires distribution of an offering circular to prospective investors?

Answer 26

Reg A+

Question 27

Which of the following is true of GNMA?

Answer 27

It issues $25,000 bonds

Question 28

Under MRSB uniform practice rules, regular way settlement on municipal bonds is

Answer 28

Three business days following trade date

Question 29

Which of the following are considered risk factors in a direct participation program?4

Answer 29

Non liquid aspects of the investment
Risk of audit
Loss of partnership status
Conflicts of interest with the sponsor

Question 30

An investor is interested in an REIT that will provide immediate income. The investor would best be served by

Answer 30

A mortgage REIT

Question 31

Which of the following is not true concerning the Central Registration Depository?

Answer 31

Information is available only via written inquiry

Question 32

Which of the following are used as hedges?

Answer 32

Inverse ETFs

Precious metal funds

Question 33

The primary responsibility for the payment of principal and interest on an industrial revenue bond issue rests with the

Answer 33

Corporate lessee

Question 34

Which of the following describe developmental oil and gas drilling programs?

Answer 34

Drilling takes place only in proven areas

Return potential is not as great as it is in exploratory drilling