Exam 34 Wrong Answers Flashcards
Which of the following represents the inside market?2
Highest bid
Lowest offered
XYZ Corporation Primary Distribution: Total Issue: 1 million shares; Retained for sale by underwriters: 800,000 shares; Reserved for distribution to selling group: 200,000 shares. Per Share: Public Offering Price: $10.00; Manager’s fee and expenses: .10; Underwriter’s allowance: .70; selling concession: .50; Proceeds to issuer 9.20. Each underwriter will receive what fee per share for the stock he gives up to the selling group?
Underwriter’s allowance - selling concession = $0.20
An investor can be granted an extension of time by
FINRA and the transacting exchange
Under MSRB rules, all of these would be reasons for a customer to refuse to accept delivery of a municipal bond except
A drastic fluctuation downward in the market price since the purchase of the bond
The 5% markup applies to which of the following?
Non exempt securities
A corporation has a $4 million profit. The corporation is in the 34% tax bracket. What is pre-dilutive EPS? Common stock: 1,000,000 shares ($10 par) = $10,000,000, 5% preferred: 50,000 shares ($100 par) = $5,000,000; 7% debentures: 5,000 bonds ($1,000 par convertible at $10) = $5,000,000
$4,000,000 profit - $350,000 interest (7% x $5 million) = $3,650,000 x .66 = $2,409,000 - $250,000 (preferred dividends) = $2,159,000 / 1,000,000 shares = 2.16 EPS
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?
$0, Passive loss from partnerships may not be offset against earned income
Under MSRB rules, which of the following call provisions could affect the yield required to be shown in a customer’s municipal bond confirmation?
In-whole
Prior to writing an option in a newly opened account, which of the following must be completed and delivered?2
Margin agreement
Options disclosure
An investor likes the safety of a government bond fund, but will forfeit a portion of this safety for slightly higher return. She would most likely choose which of the following?
Mortgage-backed security fund
If the Federal Reserve Board through the FOMC (Federal Open Market Committee) lowers the discount rate, which of the following will decline?2
T-bill discount rate
Federal funds rate
Which of the following have an active secondary market?
Eurodollar CDs
Which of the following is a US government agency backed by the full faith and credit of the US government?
GMNA
Which of the following best describes a double-barreled bond?
General obligation
Which of the following is false regarding bond anticipation notes?
Notes are repaid from general tax collections and direct government obligations
Edgar wants to redeem 200 shares of his mutual fund. The bid price is $16.75 and the offer price is $18.10. How much will he receive?
$3,350
Which of the following issues equipment trust certificates?
A regional airline
All of the following are true of the voting rights of variable life policy owners except they
Have one vote for every share
According to the Securities Act of 1933, when new securities are sold in an IPOof a company that qualifies for listing on the NYSE, the final prospectus is to be delivered
Within 25 days of the effective date
No recourse debt is not usually added to a limited partner’s cost basis, except in the case of
Real estate
A school teacher is retiring after 20 years of service. During the past 10 years, she invested $10,000 in a 403(b) through a payroll deduction offered by the school. Her account is now worth $16,000. What is her cost basis?
$0
With regard to sales breakpoints, any schedule changes must be communicated to existing shareholders within what period of time?
Within 1 year
With regard to collect on delivery order, what is the proper procedure for the receiving firm should the funds not be available to pay for the securities at delivery?
The receiving firm must promptly return the securities to the selling firm
In opening an options account, all the following must be completed except
Receiving a signed options agreement from the customer
All of the following statements regarding 1035 exchange rules are true except
A whole life insurance policy can be exchanged for a term insurance policy
In order to open a new corporate margin account, all of the following are needed except
An affidavit of domicile
A person transferring an IRA to another trustee via a trustee to trustee transfer
Will not be subject to any penalties or taxation
A municipal dealer has bonds out firm to another dealer. Which is true?2
The bonds are tied up for a specified period of time
The dealer is locked into a quote
A municipal securities money market fund is a suitable investment for a high income investor seeking which if the following?
A safe investment vehicle to park money while looking for a long term investment
A US government bond quoted at 94.20 - 95.08has a bid price of
$946.25
A policy owner cancels his life policy but instructs the insurance company to transfer the cash value of his policy to an annuity. This nontaxable Transaction is called
1035 exchange
What is the major difference between an oil and gas limited partnership and a real estate limited partnership?
IDCs
When a customer effects a proceeds transaction, the Five Percent Policy states?
The combined proceeds to the broker/dealer on the sale and purchase should not exceed the 5% guideline based on the inside ask on the buy side
XYZ Corporation is a well known seasoned issuer (WKSI) and is planning to expand operations. XYZ will need additional capital in stages to for this expansion. If XYZ does a shelf offering, how much time will it have to issue additional shares before it has to refine?
Three years from the effective date of the shelf offering
A customer who is long a call may have the following benefits except
Diminishing time
When considering an investment for an ERISA account, the primary consideration is
Potential risk
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
Write a put at $35
Which of the following is excluded from the FINRA approval rule?
Tombstone ads
Which of the following most closely expresses FINRA’s Five Percent Policy?
Markups/markdowns and commissions should be fair under the circumstances and should probably not exceed 5%
Which of the following investments would be least suitable for a retired individual with limited savings?
Income bond
A US government bond quoted at 108.06-109.09 has an ask price of
$1,092.81
