Exam 6 Wrong Answers Flashcards
An announcement in the newspaper states that the MI money supply has declined. This means that
Demand deposits, NOW accounts, and money in circulation have decreased
Commercial paper2
Is generally issued at a discount
Can be traded
What is the meaning of the term “strike,” price as used in an options contract?
The strike price is the value at which the option can be exercised throughout the option period
Any person for whom the member carries an account, or who has an account with any registered investment company for which the member serves as principal underwriter, and who is not an institutional investor is a(n)
Existing retail customer
According to the Trust Indenture Act of 1939, a trust indenture is required
On corporate bonds
Bond premium amortization 2
Reduces the investor’s cost basis
Reduces YTM and YTC
The current quote for 3-month Treasury bills is 0.50-0.45. You notice that the current quote is higher than the previous new issue of 3-month T-Bills. What does this tell you?
T-Bill discounts have increased
A registered representative wants to increase his sales and decides to increase his option business. He sends a letter to all of his customers discussing covered call writing, but he makes no specific recommendations. When must the OCC Disclosure Statement be delivered?
At or prior to the time the client receives the letter
What is the maximum front end sales charge for a mutual fund?
8 1/2% of the public offering price
Which of the following is correct with regard to the withdrawal of funds from a tax qualified retirement plan?
Contributions can be deducted from that year’s taxable income
A customer writes an XYZ May 70 call for 1 and purchases an XYZ May 60 call for 4. At what market price is every dollar of gain on the 60 call offset by a dollar of loss on the 70 call?
70
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
An 8.5% CMO yielding 9.55% does not have which of the following risks?
Refinance
The Act that requires financial institutions to develop, implement and monitor procedures that prevent its registered representatives and associated persons from misusing non public information is the
Securities and Exchange Act of 1934
A rising put/call ratio
Is bearish
Shares of stock that have actually been sold to the public are known as
Issued stock
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 would be least suitable for a very wealthy investor seeking tax relief?
IDR
Which of the following is correct regarding a qualified profit sharing plan?
The plan must be nondiscriminatory
Which of the following needs voter approval?
GO
A program established under the PATRIOT Act to prevent the funding of terrorism and money laundering is
CIP
The writer of a call option opens with a premium of 8 and closes his option position at 1/4. What is the loss or gain?
$775 gain
Which of the following large block transactions appears on the exchange tape prior to execution on the exchange floor?
Special offer
A broker receives a buy and a sell order on the same security from two customers. Which must he do to execute the orders?
Agency cross
Sell ABC short 29 stop 20.50. The ticker tape shows: 19, 20, 21, 20.50, 20.25. At what price was the trade executed?
21
Depreciation is a write off available to investors in all of the following except
Real estate investment trusts
A customer purchased 200 shares of XYZ 2 years ago at $40. The current market price is $50. If the customer gifts these shares to his daughter today, which statements describe the tax consequences?
The daughter will have a tax liability if she sells the shares at the current market price
The term “double-barreled” is used to refer to which of the following?
Certain municipal bonds where a taxing authority guarantees debt service payments in the event that pledged revenues are insufficient
Failure to promptly pay a fine or other monetary sanction imposed as a result of proceedings under the Code of Procedure may result in
Summary suspension or expulsion of a member notice in writing
Sell a 15 put for 2. What is the maximum loss?
$1,300
The function of a prospectus in association with a variable contract is to
Provide the consumer with complete information in order to make an informed decision
For stock dividends, which of the following dates is not chosen by the board of directors?
Ex-dividend date
Which of the following is not AAA-rated?
STRIPs
Which of the following is a suitability concern regarding a fund of funds?
High expense ratio
Special procedures must be followed by a municipal bond dealer when opening an account for which of the following?
Principal of another firm
General obligation bonds issued by states are not secured by what form of taxes?
Property taxes
