Exam 9 Wrong Answers Flashcards
An employer wants to begin a pension plan for its employees but does not want the obligation of annual contributions because of wide cash flow swings due to growth and plans for expansion. Which plan allows flexibility and still provides immediate vesting on contributions?
Simplified employee pension plan
Which of the following trades freely on an exchange or OTC?
Master limited partnership
Prior to writing an option in a newly opened account, which of the following must be completed and delivered?2
Margin agreement
Options disclosure
Which of the following is designed to prevent fraud in the issue of securities?
The Securities Act of 1933
When interest rates are fluctuating,
Short term rates move more sharply
Under MSRB rules, which of the following is not considered advertising?
Official statements
All of the following are advantages of an ACRS system except
Component depreciation
A $200 million new issue is being underwritten by a syndicate. A tombstone ad has been placed in the Wall Street Journal listing the manager of the syndicate and the syndicate’s members. The placing of the ad was required by the
None of the above
The FINRA bylaw category which defines the proper methods for handling securities violations and complaints is the
Code of Procedure
Which investment would be most appropriate for an individual who is 40 years old and has a moderate risk tolerance level?
S&P index fund
A customer writes 10 ABC April 40 puts at $4.75 when the market price of ABC is $42. What is the maximum possible gain for the investor?
$4,750
A 50 year old individual needs $20,000 for his child’s education, and wishes to withdraw the necessary funds from his traditional IRA. Which of the following statements is true concerning taxation on the withdrawal?
The entire amount will be taxed as ordinary income
Which of the following would be quoted on a bond confirmation when an investor purchases a bond that has been advance refunded?
Yield to call
Prepaid tuition plans allow the purchase of units or credits at participating colleges or universities. Which of the following statements is true?
Future tuition can be secured at current prices
The federal funds rate has been increasing consistently over the last several months. This would indicate which of the following?
Banks are having trouble meeting reserve requirements
A customer owns XYZ stock in her cash account, but has no funds available to trade. Nonetheless, she buys ABC stock on Monday. On Thursday, she sells XYZ stock to cover the purchase she made on Monday. This violation is called
Cash liquidation
The yield curves for high grade and low grade bonds are both positive and are moving further apart. An investment in which of the following would be most consistent with the economic expectations reflected in this relationship?
Government bonds
Which of the following trade with accrued interest?
Certificates of deposit
The provision in the indenture of a municipal revenue bond that would be invoked in the case of condemnation of the building constituting the primary revenue source is the
Catastrophe call provision
The term “person associated with an investment advisor” means any of the following persons except
Persons associated with an investment advisor whose functions are clerical or ministerial in nature
Smith Co is a member of an eastern municipal underwriting syndicate. Smith is committed to sell 25% of the issue, or 50,000 bonds. Smith sells 62,000 bonds and at the end of the offering there are 8,000 unsold bonds. Smith
Owns 2,000 of the unsold bonds
Which of the following correctly describes a bond’s interest accrual period?
The last payment date up to but not including settlement date
If the yield curve is inverted,2
Short term yields are higher than long term yields
Investors are lengthening maturities in their portfolios
A corporation has a $4 million profit. The corporation is in the 34% tax bracket. What is post 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
$1.59
Credit analysis of an airport authority revenue bond would include all of the following except
Overlapping debt
In opening an options account, all of the following must be completed except
Receiving a signed options agreement from the customer
Long 1,000 shares at 20, short 1,000 shares at 10. What is the minimum maintenance on these positions?
$10,000
A customer margin account has market value of $10,000, debit balance of $8,000 and SMA of $1,000. The margin call can be met with
$500 cash
A subscription for a limited partnership is deemed to be accepted when
The general partner signs the subscription
Which of the following municipal bonds would not be tax exempt?
New Orleans Convention Center bonds
Once a shelf registration is filed by the issuer, for how long may the issuer delay selling all or part of the new issue?
2 years
XYZ Corporation’s income statement renders the following information: Income from operations: $2,000,000 Preferred Dividends from other corporations: 100,000 XYZ Corporation has taxable income of
$2,050,000
An investor is long 1 July 50 put. After writing 1 July 45 put, this position is a 2
Debit spread
Vertical spread
On Nov 10, there was an opening sale of 100 shares of XYZ at 25. On Dec 9 the shares were purchased at 30. On Jan 3, the shares were sold again for 30. What is the result?
$500 loss is deferred
All of the following statements regarding 1035 exchange rules are true except
A whole life insurance policy can be exchanged for term insurance policy
A stock dividend affects which of the following?2
Shareholder’s equity
Net worth
A customer with a short equity put option is assigned an exercise notice by his firm. How should he handle this?
He must accept the exercise notice and buy the underlying stock
Yield curve analysis is useful to an investor purchasing debt securities for which of the following reasons?2
Allows the comparison of rates of return as maturities are extended
Is useful in determining the market expectations for interest rates
Unless instructed to the contrary, the Options Clearing Corporation (OCC) will automatically exercise all options that are
At least $0.01 in the money
Which of the following is the least likely recommendation an RR would make to a customer in a margin account?
Purchasing a municipal bond
Which of the following is not true regarding DCA?
It is not available to large investors
In order to comply with FinCEN’s anti money laundering initiative, brokers/dealers are required to
Designated an AML compliance officer
When a municipal securities broker/dealer disciplines an associated person, this incident must be reported to the appropriate SRO
If the fine exceeds $2,500
An 8.5% CMO yielding 9.55% does not have which of the following risks?
Refinance
