General Test Questions Flashcards
Treasury receipts are purchased at a ______
discount and mature at par
Series EE bonds are not _____
marketeable
T-Bills are quoted on a ______ basis, while long term notes are quoted in _____
yield basis, long term notes quoted in 32nds
The term “modified” regarding GNMA pass-through certificates means they are _____
fully backed by the US gov’t
Interest payments on pass-through certs are made _____
monthly
Sallie Mae is ______ and does/does not trade on the exchanges?
IS privatized and DOES trade on the exchanges
Sallie Mae does not lend directly to students. T/F
True - they do not make direct loans
CMOs have a lower or higher market risk than pass-through certificates?
Lower - since they are “tranched” they divide up the market risk
Each CMO tranche has the same credit rating. T/F
True - but they have different maturities and yields
If using a sinking fund to retire debt, can either call bonds on a _____ basis or purchase them ______
call them on a random basis or purchase them on the open market
A “sinking fund” is also called a ______
mandatory call
To be “bank qualified”, a muni issue must be _____, not ______
must be “public purpose”, not “private use”
A bank that has purchased “bank qualified” munis can deduct _____ of interest on funds used to purchase the bonds
80%
A bank that has purchased “bank qualified” munis does not have to pay taxes on ____ of income received
100%
Banker’s acceptances are used to finance _____ and _____, and are the least ____
imports and exports and are the least liquid
A “prime” BA is one that is eligible for being traded on the _______
fed desk
Eurobonds pay interest ________
annually
A “matched sale” is the same thing as a ______
reverse repo
Tax anticipation notes are money market instruments. T/F
True
If inflation increases/decreases, the holder of a TIPS bond will receive ____ at maturity
par - doesn’t change
________ muni bonds are likely to have mandatory sinking funds.
Revenue (GO bonds are safer)
BANs are _______
Bond anticipation notes
TANs are ______
tax anticipation notes
RANs are ______
revenue anticipation notes
TRANs are _____
combo tax and revenue anticipation notes
1 mill =
.001
______ regulates the third market
FINRA
DIAmonds are _____ based on the _____
exchange traded funds based on the DJIA
Trades must be reported to the tape within _____ by the _____
10 seconds by the executing member
Increases in “help wanted” adds is a _____ that economic activity will ______
leading indicator that economic activity will increase
Can you purchase an annuity “periodic payment: immediate annuity”?
NO - can only do a deferred annuity for periodic payments because the value needs to accumulate
Interest income from US territories is exempt from fed, state, and local tax, no matter where the purchaser is from. T/F
True
For a closed-end fund, an investor selling shares will get the _______ less _______
share price less commission
If the market value of a money market fund increases, do your shares increase in value or do you receive more shares worth $1.00?
you receive MORE SHARES worth $1.00
If a bond trading with accrued interest settles on the exact date of interest payment, _______ accrued interest is due
$0
Revenue bonds can be backed by any source of income other than _______, including _____ tax, _____ tax, and ______ tax
anything other than ad valorem - including excise, sales, and income taxes
“Ad valorem” is the fancy name for ______
property taxes
For Reg A, which tier has limitations on purchases by non-accredited investors?
Tier 2 (those issues above $20 up to $50m) - Tier 1 does not have those limitations
Can you use index options in an ERISA plan?
Yes, if it complies with the plan documents
For credit spreads purchased in a margin account, the margin requirement is the _______
amount of potential loss
FINRA requires that accounts be approved for structured products and generally must have approval for _______ as well
options
Do you consider the current market price of the security when determining a mark up by a principal?
YES
An RR can effect a private transaction if they receive ________, provide _____ to the members of the transactions, and details any _______ to be received
receive written permission from the firm, notify the members of the transaction, and detail commissions to be received
Special procedures must be followed when opening an account for an employee of a FINRA/NASD member firm if they are trying to open an account at ______, a _______, or a ______
another member firm, or a non-member bank or non-member investment adviser
A “variable rate note” is a ______ muni security with _________; the holder can ______ the note at preset dates
long term muni with “short term” rates that reset; the holder can put the note at preset dates
If time or price discretion are given for more than _____, then ______ must be obtained
given for more than 1 day, then POA must be obtained
If you’ve placed an order and the stock has declared a stock dividend, you adjust the _____ and _____ on the order ticket
number of shares and price on the order ticker
Margin agreements must be signed no later than _______
settlement of the first trade
“Participating” preferred gets to participate in any other ______ dividends the company might declare
“extra”
“Cumulative” voting is when a shareholder can accumulate all their votes and vote for ______ in any way they please, ______ their votes as they see fit; “statutory” voting means they have to ______ their shares evenly for
directors in any way they please, allocating their votes as they see fit - statutory voting means that you have to divide your votes evenly among the directors you want to vote for
Default risk is the same thing as _____ risk
credit
CMO investors are not subject to ______ risk
credit/default
GNMA pass throughs are back by the full F&C of both ____ and ____
GNMA and the US gov’t
Which gift to minors act allows you to set the transfer date?
UTMA
BDs must send their customers their _______, which includes _______ and _______, semi-annually
balance sheet, which includes subordinated loan balances and net capital computation (NO requirement to share their inventory levels)
The Second Market has no ________
listing standards
An option goes “in the money” when the ______ exceeds the strike price (for a call) or falls beneath the strike price (for a put)
market price (does not matter what you are paying for it)
The rules for stabilizing bids fall under the ______ act
1934 act - since they happen in the secondary market
If an employee of a muni BD is on the board of the township that is issuing a new bond that the BD is working on, this person is considered a _____
control person
How many SSNs go on a joint account?
1 only!
Can domestic corporations issue Eurodollar bonds?
Yes
Cash dividends in a margin account reduce the debit _____
directly (by 100%)
The “monetary environment” is a combination of _____ and _____
monetary and fiscal policy
What document is required to be sent to a customer at, or prior to, opening an options account?
The Options Disclosure Document (the agreement must be sent to the customer and signed within 15 days)
For trust accounts, a copy of the ______ must be obtained prior to making any transactions.
trust agreement
Every order ticket that is discretionary must be ______
marked as discretionary (as well as “promptly reviewed by the manager or principal)
Extensions for payment may be requested on the _____ day after the trade date
5th day after the trade date (S+2)
Delivery versus payment accounts are used when you want to open an account at a BD but want another institution to be the _______ (often used by mutual funds_
custodian
Does a stock dividend received in a margin account change the debit balance or equity?
NO - it only effects the number of shares
If a muni bond is called, ______ to accrue and the bond may be ______ at any time
interest ceases to accrue and the bondhold may tender them at any time
Warrants have ______ and rights have ______
time value and rights have intrinsic value
Once a trade hits _______ shares it is considered a block trade
10,000 shares
The financial adviser for a new muni issue ______ also the underwriter
CANNOT
Contributions to IRAs must be made by ______ of the year ______ the year you want to claim deductions in
by April 15th the year after the year you want to claim taxes in
A primary dealer of US gov’t securities buying securities for their own inventory would most likely get them from ______
the weekly auctions
A “western” style syndicate is divided in terms of both its selling _______ and _______
responsibility and liability - you only have to sell what you said you would sell
For a long margin account, deposited cash is used to reduce the ______ and increase _____
debit and increase SMA
For a long margin account, cash dividends reduce the _____ and increase ______
reduce the debit and increase SMA
For long margin accounts, stock dividends have ______ on the debit or the _____
has no effect on the debit or SMA, just ends up with more shares
If a covering purchase is made in a short margin account, _____ of the credit released must be retained to increase the ______
50% of the credit released must be retained to increase the equity
Is the repayment of principal on a loan in an LP tax deductible?
NO
When stock is purchased, any ______ are not tax deductible and are added to the ______
commissions are not deductible and are added to the cost basis
The cost basis for the writer of a put that is exercised is equal to the ______
breakeven point for the holder
Gains or losses from short selling are always treated as _____
SHORT term
If a gift of securities is made to a charity, the donor is able to deduct the fair mkt value of the securities from his taxes only if they have been ______
held for at least a year
Preferred stock is typically an appropriate investment for _______ investors
corporate (because of the dividend treatment)
If a customer buys securities without the intention to pay and then sells them without the intention to deliver, this is called ________ and it is prohibited
free riding
The periodic payment with an annuity will be higher for a life annuity or a period certain annuity?
life annuity (since the period certain annuity has a longer guaranteed period)
Are REITs covered under the 1940 investment company act?
NO - they are not (they make direct investments in real estate and are set up as a trust)
To open a fee-based account, the customer must receive a ______ at, or prior to, opening the account
disclosure document
Contributions to Coverdell accounts are _____ tax deductible
never
Tier 1 securities under Reg M have at least ______ of trading volume and a ______ float; the restricted period is ______
at least $1m volume and $150m float; no restriction
Tier 2 securities under Reg M have at least ______ of trading volume and a ______ float; the restricted period is ______
at least $100k volume and $25m float; 1 business day restriction
Tier 3 securities under Reg M have at less than ______ of trading volume and a ______ float; the restricted period is ______
less than $100k volume and $25m float; restricted for 5 days
Can a short call be covered by depositing cash?
NO - because potential loss is unlimited
Which annuity payment options will pay the estate of the annuitant if the full value of the account was not received?
Unit refund annuity
In order for a communication to be considered a “retail communication”, it must be sent to more than _____ existing or prospective clients
25
Rights are _____, _____, and _____, but not redeemable
exercisable, negotiable, and giftable
Income from securities held in pension plans is ________
tax deferred
The ex date for stock splits and stock dividends is unusual and is set ______ business day _____ the payable date
set 1 business day AFTER the payable date
Market index linked CDs can be redeemed at any time. T/F
FALSE
Are market index linked CDs qualified for FDIC insurance?
Yes
If an exchange publishes an incorrect quote and a customer order is executed at a price they did not want, the customer has the option to ______
cancel that order - any loss the BD may incur can be settled up with the exchange that made the false quote
Is there an “non-accredited investor” min or max for Reg A offerings?
NO - no restrictions like with Reg D
Can US states issue Eurodollar bonds (unlike the US gov’t)?
YES they can
The pink sheets show ______ quotes for OTC issues
wholesaler quotes - they do NOT show completed trades
With expansionary monetary policy, interest rates will ______ and inflation will ______
interest rates will drop and inflation will increase (although delayed)
Call loans are secured by _______
partially paid, margined customer securities
Restrictions on “affiliated” persons from buying new issues are ________ of RRs
immediate family members (aunts, uncles, grandparents, etc. are excluded unless materially supported by that RR)
For Reg D purchases, a trust, non-profit, partnership, etc. that has $5m or more in assets is an accredited investor UNLESS they _______
formed the entity SPECIFICALLY for investing in private placements
Issuers are prohibited from what options strategy on their stock?
selling calls - because to cover them they would have to issue new shares - thereby diluting existing shareholders and having to register new shares with the SEC
GNMA securities are ______ from registration
exempt - because owned by the US Gov’t
______ orders have priority over “one-sided” orders according to the CBOE
spread/straddle/combo, etc - called the “spread priority rule”
What accounting method is used for concerning the taxation of variable annuities?
LIFO
If opening an account for an employee of another member firm, you must determine if the opening of the account would ______ the employing firm
adversely
All foreign currency options contracts are quoted in _____
US dollars
When a customer buys newly issued stock from the syndicate, they pay the _____
POP - no commission (it is baked in)
GO bond funds must be used to provide _____ to the community
general services (no specific stuff like an industrial park, toll roads, water & sewage, etc.)
The Fed Reserve allocated T-Bills from the _____ yield to the _____
lowest to the highest
“Comparisons” and “Don’t Knows” are sent between ______
dealers
“Bear” call spread is the same as a _____ call spread
short
The Bond Buyer 11 Bond Index is composed of 11 _____ rated ____ or better
GO bonds rated AA or better
To open a portfolio margin account, the customer must be provided with the disclosure document at, or prior to, the account opening and must _______
sign an acknowledgement saying they have read and understand the risks
The ACT system is used to perform ______ comparisons
trade
The ADF is used by _____ that choose not to connect to an _____
used by ECNs that choose to not be connected to an exchange
An appropriate investment choice for someone looking to take money out in 5 years and reduce taxable income is a ______
mutual fund - the income is taxed at the more favorable capital gains rate as opposed to bonds or STRIPs (the accreted amount is taxed at the income level)