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Exam Prep Flashcards

1
Q

What characteristics make a security most subject to liquidity risk?

A

Long-term maturity, low credit rating

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2
Q

How do you calculate shares outstanding?

A

Issued shares - treasury shares

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3
Q

How often do treasury notes pay interest?

A

Semi-annually

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4
Q

When can third parties trade in a custodial account?

A

Never

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5
Q

What types of investors are most suited for leveraged ETFs?

A

Sophisticated investors who plan on holding them for one trading session

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6
Q

What are secured bonds backed by?

A

Physical property or other real assets

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7
Q

What is the primary function of an investment adviser?

A

To manage the fund

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8
Q

How would an Index ETF be described?

A

Passively managed and negotiable

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9
Q

What is the range of time frames that a T-bill could mature in?

A

1 month to 1 year

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10
Q

How are dividend payments calculated?

A

Par value x dividend rate

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11
Q

What are the classifications for a specified adult?

A
  • A natural adult that is 65+
  • An adult that is 18+ that has a mental or physical impairment
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12
Q

What is used to resell restricted securities?

A

Rule 144

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13
Q

What are debentures?

A

Unsecured bonds that are backed by the full faith and credit of the issuer

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14
Q

What are the rules for unsolicited cold calls?

A

They cannot be made after 9:00 pm in the time zone they are received in

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15
Q

What is the requirement for checks made from joint accounts?

A

They must state both the names of the individuals from the joint account

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16
Q

What is an example of an investment with deferred taxation?

A

An annuity

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17
Q

What is something a registered rep will not ask about?

A

Daily living expenses

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18
Q

What happens with “step-down” certificates of deposit?

A

The interest payment may be reduced

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19
Q

What is the price/earnings ratio a measure of?

A

Valuation

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20
Q

What is required at or prior to the opening of a new options account?

A

The customer must be sent the lastest Options Disclosure Document

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21
Q

What is NOT permitted regarding the taxation of capital gains upon liquidation?

A

A taxpayer cannot offset a net short-term gain against a net long-term loss but may carry over the loss

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22
Q

Where can a quote for an unlisted stock be found?

A

OTC Markets Group (Pink Sheets)

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23
Q

What is the typical holding period for a warrant?

A

2 to 10 years

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24
Q

Where do salespersons need to be registered to sell variable annuities?

A
  • FINRA
  • State Insurance Commission
  • State Securities Commission
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25
Q

How is interest on Treasury bonds calculated?

A

Actual/actual

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26
Q

What is used to pay for ADRs?

A

U.S. dollars

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27
Q

What philosophy believes in intervening in the economy with fiscal policy?

A

Keynesians

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28
Q

What policy does the Fed use to achieve its goals?

A

Monetary

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29
Q

What is a consequence of an amortized bond premium?

A

Tax basis decreases

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30
Q

What is commercial paper used for?

A

Short-term debt, issued by large corporations to cover short-term needs

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31
Q

What is backing away?

A

When the firm fails to honor a quote they published

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32
Q

What is interpositioning?

A

When a third party is inserted between a broker-dealer and the best price available to cause a higher price

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33
Q

What are examples of marginable securities?

A
  • Exchange-listed securities
  • US government securities
  • Investment-grade debentures
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34
Q

Where do anti-money laundering rules derive from?

A

Bank Secrecy Act of 1970

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35
Q

What do you have to disclose on the U4 regarding your financial situation?

A

Bankruptcies and compromises with creditors in the last ten years

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36
Q

When do UGMA assets become the minor’s assets?

A

At the age of majority

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37
Q

Who can invest in LGIPs?

A

Municipal entities

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37
Q

What price does the investor pay when they purchase class A shares?

A

POP

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38
Q

How often do customers need to receive an account statement?

A

Every quarter

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39
Q

What is considered a money-market security?

A

Securities that generally mature in less than 365 days, are highly liquid, and ultra-safe

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40
Q

What are examples of money market securities?

A
  • Commercial paper
  • Brokered CDs
  • Banker’s acceptance notes
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41
Q

What types of risk are investors subject to?

A

Default and reinvestment risk

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42
Q

What right gives the common stockholders the right to sell shares to the highest bidder?

A

Right to transfer

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43
Q

What is a proxy?

A

An authorization to vote on behalf of the shareholder

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44
Q

What does the Trust Indenture Act of 1939 cover?

A

Corporate bond offerings in excess of $50 million over one year

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45
Q

What is the compensation paid to a selling group member for selling shares of a new issuer

A

Concession

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46
Q

What does the supply side theory want from the government?

A

Tax reductions, decrease government spending

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47
Q

What does an MFP do?

A

Any municipal securities activities except the sale of municipal securities

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48
Q

When the SEC sets the effective date for a new issue registration what has already occurred?

A

Proper documents for registration have been filed with the SEC

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49
Q

What is a tender offer?

A

When the acquiring party offers the shareholders a premium above the market price for their shares

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50
Q

When can a preliminary prospectus be sent to a customer?

A

Once registration has been filed with the SEC

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51
Q

When can a mutual fund be used as collateral for a margin account?

A

After the position has been held for 30 days

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52
Q

What types of accounts can be opened as custodial accounts?

A

Cash accounts

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53
Q

What is marking the open?

A

Trading at the open or falsely reporting trades at the open just to affect the stock’s opening price

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54
Q

The percentage of depletion allowance of oil and gas program investors is based upon oil…

A

Sold

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55
Q

When will the price of a stock fall?

A

The morning of the ex-date

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56
Q

Who are are industrial development bonds leased to?

A

Corporations

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57
Q

What is a term that is not associated with preferred stock?

A

Redeemable

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58
Q

What strategy has unlimited potential loss?

A

Short stock, short put

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59
Q

What is the main objective of investing in equity REITs?

A

Income and growth

60
Q

What is the price at which a mutual fund is bought?

A

POP

61
Q

How is POP calculated?

A

NAV / (100% - sales charge%)

62
Q

Mortgage bonds are what?

A

Secured debt and pay interest semi-annually

63
Q

What does the MSRB NOT create regulations for?

A

Municipalities

64
Q

How is interest on municipal bonds calculated?

A

30/360

65
Q

What is an example of an illiquid investment?

A

A municipal bond

66
Q

What is the principal characteristic of a balanced fund?

A

Bonds + equities

67
Q

What are CUSIP numbers used for?

A

To identify securities

68
Q

Where do broker-dealers get T-bills?

A

Primary dealers

69
Q

How many days does a mutual fund have to pay for redemption proceeds?

A

7 days

70
Q

How are syndicates selected?

A
  • Geographic location
  • Track record
  • Financial capability
71
Q

What would attract foreign investors to a country?

A

Trade surplus

72
Q

What are examples of leading economic indicators?

A
  • New consumer goods orders
  • Building permits
  • Initial claims for unemployment
73
Q

How are eligible withdraws taxed from 529s?

A

Principal and earnings are tax-free

74
Q

How often do mutual funds have to send their financial statements?

A

Twice a year

75
Q

How is NAV priced?

A

Current PPS x (100% - Sales charge)

76
Q

What are the tax consequences of transferring a 529 account to another beneficiary?

A

There are none

77
Q

What does a development oil program do?

A

Drill near existing oil fields

78
Q

How do you determine how many shares a convertible bond yields?

A

Conversion ratio:
Par / issuance price

79
Q

How often are customer accounts updated?

A

Every 3 years

80
Q

When is a prospectus required?

A

At new issuance, examples include:
- Corporate stocks and bonds
- Open-end investments

81
Q

How much of a REIT’s income must be issued to shareholders?

A

90%

82
Q

What can secondary market transactions be marked up by?

A

More or less than 5%

83
Q

How do you calculate the current yield?

A

Annual dividend / bond’s current market price

84
Q

What are industrial development bonds backed by?

A

Rental revenues paid

85
Q

What does a fund of hedge funds make investments in?

A

Selected hedge funds inside a registered investment company wrapper

86
Q

What backs a municipal bond?

A

The revenue stipulated in the bond’s official statement

87
Q

Who are the people the MSRB regulates?

A
  • Municipal salespersons
  • Municipal underwriters
  • Municipal traders
88
Q

When must trade confirmations be provided?

A

On or before the settlement date

89
Q

How do you calculate the annual dividend of a preferred stock?

A

Par x dividend rate x shares owned

90
Q

What happens during the build-up period in a variable annuity?

A

All interest, dividends, and capital gains are automatically reinvested and build tax-deferred

91
Q

What document is required when a corporate account is opened?

A

Corporate resolution

92
Q

Who are permitted purchasers of Rue 144A?

A

Qualified institutional buyers

93
Q

How long does an employee have to roll over a retirement plan to an IRA?

A

60 days

94
Q

What type of variable annuity provides lifetime income for both spouses?

A

Joint life with last survivor

95
Q

When can member firms/associated persons directly or indirectly share profits in a customer account?

A
  • Written consent from member firm + customer
  • Associated person shares profits/losses in direct proportion to their financial contributions
96
Q

What is the discount rate?

A

The interest rate the Fed charges its members for loans

97
Q

What do bonds pay out?

A

Interest NOT dividends

98
Q

What is true about a participating preferred stock?

A

It has a dividend that is fixed to a minimum but not as to a maximum

99
Q

What types of orders are placed BELOW the current market price?

A

OBLOSS
- Open buy limits
- Open sell stops

100
Q

What does an officer have to do if they want to sell shares?

A

File form 144 if the sale is above 5,000 shares or $50,000

101
Q

What types of orders are placed ABOVE the current market price?

A

OSLOBS
- Open sell limits
- Open buy stops

102
Q

What are GO bonds backed by?

A

Full faith and credit of the municipality

103
Q

What are the S&P investment grade ratings?

A

AAA, AA, A, BBB

104
Q

How often are current yields of bonds changing?

A

Continuously

105
Q

What does the Fed do to stimulate the economy?

A

Lowers the reserve requirements

106
Q

What is a warrant?

A

A long-term equity security that gives the owner the right to purchase a company’s stock at a predetermined price (strike price)

107
Q

What kind of preferred stock is most sensitive to changes in share price?

A

Convertible stock

108
Q

When can a registered rep share profits + losses in a customer’s account?

A

Never, it is a violation of FINRA rules

109
Q

When is a tombstone ad run?

A

During the cooling-off period (prior to registration)

110
Q

Who is the clearing house for stock and bond transactions?

A

DTC

111
Q

Where are fixed and variable annuities stored, respectively?

A

General account, separate account

112
Q

What do municipal bonds offer to shareholders instead of a prospectus?

A

An official statement

113
Q

What class of a mutual fund has a contingent deferred sales charge?

A

Class B

114
Q

What is the intent of a stabilizing bid?

A

To prop up the price of a new issue

115
Q

What are ADRs?

A

Receipts issued by US banks that represent shares of a foreign stock

116
Q

When someone has a disability and is younger than 59 1/2 what is the taxation on withdraws made before 59 1/2?

A

Income tax only

117
Q

What parties are involved in mutual funds?

A
  • Board of directors
  • Investment adviser
  • Underwriter
  • Shareholder
  • Custodian
  • Transfer agent
118
Q

How are stock dividends taxed?

A

They are a non-taxable event

119
Q

When is the latest a final prospectus can be delivered?

A

One business day after the trade date

120
Q

How do you determine the equity percentage of an account?

A
  • Equity = market value - debit balance
  • Equity % = Equity / market value
121
Q

How is the sales charge calculated?

A

(POP - NAV) / POP

122
Q

What is the death benefit of a variable annuity?

A
  • Applies prior to annutization
  • Upon death, the insurance company will pay a beneficiary at least the amount invested in the contract
123
Q

How are payments to a non-contributory defined benefit retirement plan described?

A

Fixed annual payments

124
Q

What is the primary purpose of the Indenture Act of 1939?

A

To protect the interests of holders of non-exempt bonds by appointment of trustee

125
Q

At what price is a security no longer marginable?

A

At less than $5 per share

126
Q

What does the SEC require with fully paid securities?

A

Broker-dealers must segregate them and ensure they are safely kept

127
Q

What is the price/earnings ratio a measure of?

A

Valuation

128
Q

What is a letter of intent based upon?

A

The promise of mutual fund purchases for the next 13 months

129
Q

What political contributions are allowed for an MFP?

A

Up to $250 in an election they can vote in

130
Q

What is reinvestment risk?

A

Risk that interest earned cannot be reinvested at an interest rate equal to or higher than the bond’s coupon rate

131
Q

What does the bond counsel look into?

A
  • Validity
  • Legality
  • Tax-exempt status
132
Q

What is true when interest rates rise?

A

Bonds with low coupon rates exhibit the greatest price volatility

133
Q

What are the taxes on a tax-qualified variable annuity?

A

100% taxable as investment income

134
Q

What types of employees at broker-dealers are restricted persons?

A

All employees

135
Q

What is the civil penalty for insider trading?

A

Treble damages

136
Q

What is the money market instrument most often associated with international trade?

A

Banker’s acceptance note

137
Q

When will someone invest in a debenture?

A

When they are seeking income

138
Q

What is a market-not-held order treated like?

A

A “day” order

139
Q

When can shares be purchased on margin?

A

30 days after the offering

140
Q

What is an investor’s cost basis?

A

Amount for securities plus any commissions paid

141
Q

What people are accredited investors?

A
  • Net worth $1 million+, not including residence
  • Single: $200,000+ income
  • Married: $300,000 + income
142
Q

What is the date the BUYER will no longer receive a dividend?

A

Ex-date, Record date

143
Q

When can FINRA impose prison sentences?

A

Never

144
Q

What is the Fed in charge of?

A
  • Discount rate
  • Open market operations
  • Reserve requirements
  • Margin on securities
145
Q

Under what regulation are offerings typically restricted?

A

Regulation D

146
Q

What are GO bonds?

A

Unsecured bonds backed by taxpayers

147
Q

What does the annutization of a contract mean?

A

Income will begin to be withdrawn

148
Q

What is a type of systematic risk?

A

Market risk

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