Kaplan Simulated Exam 1

Question 1

The MSRB defines an associated person of a broker dealer who is primarily engaged in municipal securities activities other than retail sales to individuals as

Answer 1

A municipal financial professional (MFP)

Question 2

Which of the following statements about municipal brokers’ brokers is not true?

Answer 2

They perform trades on a principal basis only

Question 3

One of your customers would like to begin an investment program calling for regular monthly contributions of $200. Which of the following would be the best source for determining if this plan is reasonable?

Answer 3

The investor’s income statement

Question 4

Your broker dealer has prepared an advertising piece for general distribution to all of its retail customers regarding numerous option strategies. Filing the piece with FINRA is

Answer 4

Required at least 10 business days before first use or publication

Question 5

European style foreign currency options can 2

Answer 5

Only be exercised at expiration

Be traded at any time

Question 6

A customer purchases an XYZ bond at 108. It is scheduled to mature in 16 years. After owning the bond for 10 years, she sells the bond at 102. What capital gain or loss must she report for tax purposes at the time of the sale?

Answer 6

$10 loss

Question 7

Which of the following regarding yield-based (interest rate) debt options is true?

Answer 7

They are European-style exercise

Question 8

FINRA Rule 2111 places three obligations on members when determining if a specific recommendation to a customer is suitable. FINRA’s suitability rules would likely find a registered representative is not in violation of complying with those three if

Answer 8

The recommendation made would be suitable for at least some customers

Question 9

If the customers of a selling group member sell into a penalty stabilizing bid, the selling group member must pay back the underwriter

Answer 9

The concession

Question 10

Your customer is opening a new options account. Which of the following need not occur to open the account?

Answer 10

The OCC must verify the financial information supplied by the client to ultimately approve the account

Question 11

Marking to market is used to adjust

Answer 11

The positions in margin accounts based upon current market prices

Question 12

When a securities professional refers to a bond as a full faith and credit issue, it is

Answer 12

A general obligation bond

Question 13

If interest rates are rising, which statements regarding collateralized mortgage obligations are true?2

Answer 13

Prepayment risk decreases

Extended maturity risk increases

Question 14

A gain on the sale of a long equity put option is

Answer 14

Always a short term capital gain

Question 15

Most business development companies (BDCs) are classified as

Answer 15

Closed-end investment company

Question 16

The basis of a bond with a 5% nominal yield maturing in twenty years and selling at 85 is approximately

Answer 16

6.22%

Question 17

An investor would assume all of the following risks when investing in a collateralized mortgage obligation (CMO) except

Answer 17

Regulatory risk

Question 18

A due diligence meeting occurs between

Answer 18

The issuing corporation and the underwriters to review and re-examine the full details of the pending underwriting and negotiate final terms to be included in the formal underwriting contract

Question 19

When a broker-dealer sends a communication to its customers that the sweep account used fir customer credit balances will be changed from one money market fund to a different one, the communication must include

Answer 19

A tabular comparison of the nature and amount of the fees charged by each fund

Question 20

An investor purchases a newly issued convertible bond at par. The bond is convertible at $40. Three years later, the underlying common stock is trading at $50 per share. If the investor sells the bond at a $50 premium over the parity price, there is

Answer 20

A long term capital gain of $300

Question 21

A 7% convertible debenture is selling at 101, and it is convertible into the common stock of the same corporation at $25. The common stock is currently trading at $23. What is the parity price of the debenture?

Answer 21

$920

Question 22

The determination as to whether an over the counter stock is eligible for purchase on margin is made by

Answer 22

The Federal Reserve Board

Question 23

Broker-dealers are required to maintain customer identification programs and check he names of new clients against

Answer 23

A list compiled by the Office of Foreign Assets Control (OFAC)

Question 24

What option strategy might be used by an investor with a short position in a stock who wishes to generate some income?

Answer 24

Write a put on the stock