Exam 27 Wrong Answers

Question 1

Which of the following is correct regarding a qualified profit sharing plan?

Answer 1

The plan must be nondiscriminatory

Question 2

A common fund found in the indenture of a venue bond that provides money for additions, expansions and improvements is the

Answer 2

Replacement and renewal fund

Question 3

A customer opens a margin account with a $20,000 purchase. If Reg T = 50% and the customer pays for the purchase, what is the SMA in the account?

Answer 3

$10,000

Question 4

Which of the following are true regarding municipal offerings?2

Answer 4

Revenue bonds are usually offered through a negotiated process

General obligation bonds are usually offered through competitive bidding

Question 5

Which of the following statements about series bonds is true?

Answer 5

They may only be redeemed by the Treasury

Question 6

The customer has no cash available to trade in his cash account. On Monday, he purchases ABC stock for $5,000. He does not deposit cash in his account by Wednesday’s settlement date. On Thursday, he sells the ABC stock for $5,500 to cover the cost of his purchase. Which of the following statements is true?

Answer 6

This is a free riding violation

Question 7

In an options contract, which party receives the premium and is obligated to buy the underlying security at the strike price?

Answer 7

Put writer

Question 8

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

Answer 8

Information is available only via written inquiry

Question 9

On a discount bond, which of the following lists is correct from lowest to highest yield?3

Answer 9

Nominal yield, current yield, yield to maturity

Question 10

Which of the following is not a method to register a security at the state level?

Answer 10

Application

Question 11

An inexperienced conservative investor is selecting his first equity fund. He wants to limit his risk while acquiring equity exposure. Which fund is most suitable for this investor?

Answer 11

Value fund

Question 12

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

Answer 12

Three business days following trade date

Question 13

If a bond investor wants to know the rate of return measuring the total performance on a bond held from purchase through maturity, the investor should calculate the

Answer 13

Yield to maturity

Question 14

Which of the following is true regarding private securities transactions for compensation?3

Answer 14

They must be approved by a person’s member firm

They must be recorded on the member firm’s books

The member firm must supervise the person’s participation

Question 15

A customer receives a red herring from his registered representative and has indicated interest in the offering. Which two of the following are true?

Answer 15

The customer is not obligated to buy the stock

The broker/dealer is not allowed to accept a deposit to secure the customer’s indication of interest

Question 16

Which of the following large block transactions appears on the exchange tape prior to execution on the exchange floor?

Answer 16

Special offer

Question 17

A client with $1,000 to invest in a mutual fund for his IRA account is concerned about front end loads reducing the size of the already small investment. The client plans on holding the investment until retirement (20 years or more). Class B shares may be more appropriate for this client than Class A shares for all of the following reasons except

Answer 17

Class B shares have a lower expense ratio than Class A shares

Question 18

Where can retail investors find information on municipal bond issuers?

Answer 18

EMMA

Question 19

The lowest yielding CMO tranche is the

Answer 19

PAC

Question 20

Regular way settlement in a DVP/RVP account is

Answer 20

Up to 35 calendar days

Question 21

What is the major difference between an oil and gas limited partnership and a real estate limited partnership?

Answer 21

IDCs

Question 22

Sell ABC short 20 stop 20.50. The ticker tape shows: 19, 20, 21, 20.50, 20.25. At what price was the trade executed?

Answer 22

21

Question 23

Which of the following is a wash sale?

Answer 23

Selling a put or buying a call within 30 days of sale of stock

Question 24

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

Answer 24

Corporate guarantor

Question 25

A decision that comes form the FINRA Board of Arbitration is

Answer 25

Binding on all parties involved

Question 26

The term for active stock that represents the number of shares owned by the public is

Answer 26

Outstanding stock

Question 27

Jennifer is selling securities at a loss. She will not be allowed to claim the loss if she

Answer 27

Repurchases the same securities within 30 days

Question 28

When a stock is crossed on the NYSE floor and then appears on the tape after execution, the transaction is a

Answer 28

Exchange distribution

Question 29

Assuming that a bond is purchased at a discount, then

Answer 29

Nominal yield, or stated rate is less than YTC

Question 30

An investor in a limited partnership has established a basis for tax purposes of $20,000. During the year, the investor’s distributed share of the partnership losses was $18,000, and a cash distribution of $15,000 was received. How much of the loss can be used to offset other ordinary income?

Answer 30

$0

Question 31

A person transferring an IRA to another trustee via a trustee to trustee transfer

Answer 31

Will not be subject to any penalties or taxation