Exam 37 Wrong Answers

Question 1

Which of the following could be an open end fund?

Answer 1

RTC Balanced with NAV of $12.50 and NAV of $12.50

Question 2

Which of the following bonds has the most call risk?

Answer 2

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

Question 3

Beta of 1 indicates coincidence with

Answer 3

Market index volatility

Question 4

The MSRB was created by

Answer 4

The Securities Amendment Act of 1975

Question 5

Your client wrote 5 XYZ June 60 straddles @ $8.25. What is the potential maximum gain and loss?

Answer 5

Maximum gain is $4,125 and Maximum loss is unlimited

Question 6

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

Answer 6

Any investments grow on a tax free basis

Question 7

Regulation S addresses

Answer 7

Off shore sales of restricted stock

Question 8

In the sake of a new issue of municipal securities, MSRB disclosure requirements specify that a customer must be provided with a copy of the

Answer 8

Preliminary official statement

Question 9

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

Answer 9

Within 1 year

Question 10

In a new margin account, your customer purchases 500 shares of XYZ at $40 per share and meets the Reg T requirement. Three days after the position is opened, XYZ closes at $44 per share. The stock subsequently declines to 38. In response to your client’s inquiry, you would report that the current equity and SMA are

Answer 10

$9,000 equity, 1,000 SMA

Question 11

For stock dividends, which of the following dates is Not chosen by the board of directors?

Answer 11

Ex dividend date

Question 12

A variable life insurance policy states all of the following except

Answer 12

Current and minimum guaranteed cash value

Question 13

If a call holder chooses to exercise the call, the writer must

Answer 13

Sell 100 shares of the underlying security at the strike price

Question 14

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 of a tax loss may be declared?

Answer 14

$0

Question 15

When a municipal securities broker/dealer disciplines an associated person, this incident must be reported to the appropriate SRO

Answer 15

If the fine exceeds $2,500

Question 16

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

Answer 16

An affidavit of domicile

Question 17

Which of the following is true about a stabilizing bid?

Answer 17

It must be disclosed in the prospectus

Question 18

In closing a discretionary account trading in options, you would need the permission of which of the following?

Answer 18

Registered options principal

Question 19

What type of annuity contract could act as a hedge against either inflation or deflation?

Answer 19

Combination annuity

Question 20

Which bond has the greatest market risk?

Answer 20

6% 30 year callable rated Baa

Question 21

Which of the following orders are reduced by the specialist of the NYSE on the ex dividend date of a listed stock?2

Answer 21

Open buy limits

Open sell stops

Question 22

Mortgage backed issues are considered to be safe instruments. Which statement is incorrect concerning these securities?

Answer 22

GNMA, FNMA AND FHLMC are fully backed by the federal government

Question 23

In the analysis of a general obligation bond, an increase in which of the following is not considered a negative event?

Answer 23

Assessed valuation of property

Question 24

Which one of the following parties to an option contract receives the premium and has the obligation to sell the underlying security at the strike price if the option is exercised?

Answer 24

Call writer

Question 25

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

Answer 25

Reg A+

Question 26

Which of the following applies to put option contracts?

Answer 26

The put holder has the right to sell at the strike price

Question 27

An investor is long 1 July 50 put. After writing 1 July 45 put, this position is 2

Answer 27

Debit spread

Vertical spread

Question 28

A stock’s trading rage is 86-92. Which of the following statements are correct if the stock has been declining below 90?3

Answer 28

Breakout at 93

Breakout at 85

Support at 86

Question 29

Which of the following best describes cash settlement?

Answer 29

The customer pays for the securities on trade date

Question 30

Concerning the reporting of last sale price information for OTC stocks, which of the following is true?

Answer 30

Last sale price information is available on OTC transaction in the National Market System

Question 31

An investor owns 100 shares of a mutual fund listed at 20.50-21.90. She has Class B shares that have a 3% CDSC. At what share price will her funds be redeemed if she sells them in the first year?

Answer 31

$19.89

Question 32

The maximum penalty which can be imposed on a business entity for false or misleading information on any SEC report or application is

Answer 32

$2,500,000

Question 33

Which of the following will be a violation of the Private Transactions Conduct Rule 3040?

Answer 33

An associated person offering securities that are not registered with the Commission

Question 34

In a government yield auction of US Treasury bills, which of the following orders will always be filled?

Answer 34

Non competitive bid