Exam 34 Wrong Answers

Question 1

Which of the following represents the inside market?2

Answer 1

Highest bid

Lowest offered

Question 2

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?

Answer 2

Underwriter’s allowance - selling concession = $0.20

Question 3

An investor can be granted an extension of time by

Answer 3

FINRA and the transacting exchange

Question 4

Under MSRB rules, all of these would be reasons for a customer to refuse to accept delivery of a municipal bond except

Answer 4

A drastic fluctuation downward in the market price since the purchase of the bond

Question 5

The 5% markup applies to which of the following?

Answer 5

Non exempt securities

Question 6

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

Answer 6

$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

Question 7

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 7

$0, Passive loss from partnerships may not be offset against earned income

Question 8

Under MSRB rules, which of the following call provisions could affect the yield required to be shown in a customer’s municipal bond confirmation?

Answer 8

In-whole

Question 9

Prior to writing an option in a newly opened account, which of the following must be completed and delivered?2

Answer 9

Margin agreement

Options disclosure

Question 10

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?

Answer 10

Mortgage-backed security fund

Question 11

If the Federal Reserve Board through the FOMC (Federal Open Market Committee) lowers the discount rate, which of the following will decline?2

Answer 11

T-bill discount rate

Federal funds rate

Question 12

Which of the following have an active secondary market?

Answer 12

Eurodollar CDs

Question 13

Which of the following is a US government agency backed by the full faith and credit of the US government?

Answer 13

GMNA

Question 14

Which of the following best describes a double-barreled bond?

Answer 14

General obligation

Question 15

Which of the following is false regarding bond anticipation notes?

Answer 15

Notes are repaid from general tax collections and direct government obligations

Question 16

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?

Answer 16

$3,350

Question 17

Which of the following issues equipment trust certificates?

Answer 17

A regional airline

Question 18

All of the following are true of the voting rights of variable life policy owners except they

Answer 18

Have one vote for every share

Question 19

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

Answer 19

Within 25 days of the effective date

Question 20

No recourse debt is not usually added to a limited partner’s cost basis, except in the case of

Answer 20

Real estate

Question 21

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?

Answer 21

$0

Question 22

With regard to sales breakpoints, any schedule changes must be communicated to existing shareholders within what period of time?

Answer 22

Within 1 year

Question 23

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?

Answer 23

The receiving firm must promptly return the securities to the selling firm

Question 24

In opening an options account, all the following must be completed except

Answer 24

Receiving a signed options agreement from the customer

Question 25

All of the following statements regarding 1035 exchange rules are true except

Answer 25

A whole life insurance policy can be exchanged for a term insurance policy

Question 26

In order to open a new corporate margin account, all of the following are needed except

Answer 26

An affidavit of domicile

Question 27

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

Answer 27

Will not be subject to any penalties or taxation

Question 28

A municipal dealer has bonds out firm to another dealer. Which is true?2

Answer 28

The bonds are tied up for a specified period of time

The dealer is locked into a quote

Question 29

A municipal securities money market fund is a suitable investment for a high income investor seeking which if the following?

Answer 29

A safe investment vehicle to park money while looking for a long term investment

Question 30

A US government bond quoted at 94.20 - 95.08has a bid price of

Answer 30

$946.25

Question 31

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

Answer 31

1035 exchange

Question 32

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

Answer 32

IDCs

Question 33

When a customer effects a proceeds transaction, the Five Percent Policy states?

Answer 33

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

Question 34

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?

Answer 34

Three years from the effective date of the shelf offering

Question 35

A customer who is long a call may have the following benefits except

Answer 35

Diminishing time

Question 36

When considering an investment for an ERISA account, the primary consideration is

Answer 36

Potential risk

Question 37

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 37

Write a put at $35

Question 38

Which of the following is excluded from the FINRA approval rule?

Answer 38

Tombstone ads

Question 39

Which of the following most closely expresses FINRA’s Five Percent Policy?

Answer 39

Markups/markdowns and commissions should be fair under the circumstances and should probably not exceed 5%

Question 40

Which of the following investments would be least suitable for a retired individual with limited savings?

Answer 40

Income bond

Question 41

A US government bond quoted at 108.06-109.09 has an ask price of

Answer 41

$1,092.81