Exam Wrong Answers 1 Flashcards
With regard to a 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?
He receiving firm must promptly return the securities to the selling firm
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
Equity options expire
At 11:59 pm ET on the third Friday of the month
A client places an order to sell stocks that are not in his account, stating he will deliver the securities. What must be discussed to meet the broker/dealer’s obligation in the trade?
Securities must be in good delivery status including a signature on the back for ease of transfer of ownership, not be physically damaged and meet the 100 share rule with the exact number of shares presented.
When a member offers an investment analysis tool to retail customers, it must make the investment analysis tool available to
FINRA within 10 business days of its first use by the public
ABC is a broker/dealer underwriting it’s own IPO. ABC is required to hire an independent underwriter to facilitate the IPO. What are the qualifications for the independent underwriter?
The underwriter must have done at least three offerings in the last 3 years. These three offerings must have been at least 50% of the size and type of ABC’s offering.
In a municipal offering, “group net” orders are treated by the manager
For the benefit of the syndicate as a whole
What is the lowest price that a seller is willing to accept for a security from a customer?
Ask price
ABC Corporation has issued a tender offer to the shareholders of XYZ Corp. Which of the following is a permissible way for a shareholder to sell into the offer?
Deliver one round lot of the stock
The difference between a stock’s actual return and its beta is
Alpha
For violations of the Securities Exchange Act of 1934 with respect to bribing a foreign official, which of the following are true?
An individual can be subject to a $100,000 fine, imprisonment for 5 years or both
A business entity can be subject to a $2,000,000 fine
Which of the following statements regarding overnight repurchase agreements is incorrect?
There is no interest rate risk
Which of the following preferred shares has the highest yield?
Callable
Which of the following corporate characteristics is the most difficult to avoid when structuring a direct participation program?
Centralized management
According to MRSB rules, all of the following would be an advertisement except3
Listings of offerings
Preliminary official statements
Final official statements
Which of the following is an exploratory well?
Well in an unproven area
Well is a primary site
A margin account has $11,000 market value and $4,500 debit balance. How much excess equity is in the account?
$1,000
Which of the following are characteristics of BABs?
They may provide federal subsidy to the issuer
They may provide a tax credit to the investor
Regarding a broker dealer retail sale to a customer, how can an order be filled?4
From inventory
Sell short to customer
Simultaneous or riskless transaction
As an agent
The SIPC (Securities Investor Protection Corporation) insures a customer’s account for unreturned securities for up to
$500,000
Which has the best rating?
Aaa 5 years to maturity
A broker goes to a designated market maker (DMM) to sell 100 XYZ. The DMM stops the broker at 31. Which of the following is true?
The DMM has guaranteed the broker a price of 31
Which of the following statements regarding commercial paper is false?
Registration is required by the SEC
A man is 52 years old. He is terminating his employment at a state university. He is fully vested in a 457(b) plan. If he withdraws the money from his 457(b) plan,
He must pay income tax
Interest income from US government bonds is
Subject to federal income tax but exempt from state income tax
All of the following are oil and gas DPPs except
Appreciation
A closed-end management company has shares that
Are not redeemable
XYZ is a publicly traded company and its stock has been doing well for the last several years. XYZ is planning to expand into new markets and would like to raise additional capital to finance this expansion. How may this be done?
Add-on offering
TIPS are not issued in which of the following maturities?
20 year
Which of the following is not true of section 1035 Policy Exchanges?
Any exchange made under Section 1035 of the Internal Revenue Code must be completed within 30 days
FINRA bylaws which relate to a member firm’s dealings with the public are provided for in the
Conduct Rules
A bond whose fixed nominal rate increases to a higher fixed rate in its latter years is called a
Step coupon bond
Which of the following are characteristics of TIPS?
Fixed interest rate
Fluctuating principal
Yield curve analysis is useful to an investor purchasing debt securities for which of the following reasons?
Allows the comparison of rates of return as maturities are extended
Is useful in determining the market expectations for interest rates
A stock’s trading range is 86-92. Which of the following statements are correct if the stock has been decking below 90?3
Breakout at 93
Breakout at 85
Support is 86
In pricing a new issue a municipal bond underwriter would most likely check
The 30 day visible supply
The strike price and premium of Treasury bond options are stated as a percentage of the
Face amount of the underlying bonds
Which of the following is true of restricted stock?
The purchase must be paid for in its entirety
If certain requirements are met, a corporation can offer securities sold within the borders of one state using the intrastate offering exemption, also known as
Rule 147
The credit rating of a pre-refunded bond is
AAA
A technical analyst states that the market is consolidating. This means that the market trend line is moving
Sideways
A client has both a cash and margin account, and actively trades stocks in both. He does not own stock ZZZ at the moment, but has been following it for some time and is convinced it is going to steeply decline in price. He plans to short sell the stock, but wants to know any advantages to buying puts on the stock instead. All of the following are correct except put buying
Returns are enhanced by gradual erosion of the option’s time value
Under MRSB rules, which of the following call provisions could affect the yield required to be shown on a customer’s municipal bond confirmation?
In-whole
The husband of an options clients also trades options, but does so in a separate account at another brokerage firm. Both of them are currently hedging short sale positions in stock VVV with options. However, the options client is long 32,000 VVV calls, while her husband is short 30,000 VVV puts. The current contract position limit for VVV stock is 60,000 contracts. Which of the following applies to this situation?
This couple’s current options positions are in violation of the position limit rules
In a limited partnership, what best describes the cross over point?
Taxable income exceeds deductions
At which point does a registered representative come under the NYSE constitution and rules?
When employed by the firm
A director of a public corporation wishes to sell some of his stock in the company. Under SEC Rule 144, how long is the holding period?
6 months
Which of the following statements are true regarding the over the counter market?
The Federal Reserve Board regulates which OTC securities are marginable
FINRA regulates trading practices in the OTC market
A US corporation imports goods from Switzerland. Which of the following option positions should it choose to best protect itself?
Buy Swiss franc calls
