Kaplan Simulated Exam 2

Question 1

All of the following may be cited to justify a markup on a stock sold from a broker dealer’s inventory except

Answer 1

The dealer’s cost

Question 2

Trading in expiring options series concludes the same day as expiration at

Answer 2

4:00 pm ET

Question 3

In early April, a customer buys 1 XYZ Oct 60 call for 9 and sells 1 XYZ Jul 70 call for 4. Before the calls expire, the customer may realize a pretax profit if

Answer 3

The spread widens to more than $5

Question 4

In which of the following strategies would the investor want the spread to widen?

Answer 4

Buy 1 RST May 30 put, write 1 RST May 25 put

Write 1 RST Apr 45 put, buy 1 RST Apr 55 put

Question 5

A broker’s broker does all of the following except

Answer 5

Makes a market in securities

Question 6

One of your customers has asked you about trading penny stocks. After discussing the risks, the customer decides to go ahead. The firm sends the individual a copy of the special penny stock risk disclosure document. The firm needs the customer’s signed and dated acknowledgment of receipt of the document. Trading in penny stocks may not begin in that account until

Answer 6

At least two business days after sending the statement

Question 7

Although investing in mutual funds has many advantages, there are some risks. One risk that is generally greater with a bond fund than a portfolio of individual bonds is

Answer 7

Interest rate risk

Question 8

An example of a taxable bond issued by a municipal government is

Answer 8

A Build America Bond (BAB)

Question 9

Net overall debt of a municipality is

Answer 9

Net direct debt plus overlapping debt

Question 10

Who signs the agreement among underwriters for a municipal bond issue?

Answer 10

All members of the underwriting syndicate

Question 11

Which term describes the following position?

Write 1 DOH Jan 30 call

Write 1 DOH Jan 40 put

Answer 11

Short combination

Question 12

Which of the following documents sets forth the priority of sale of securities?

Answer 12

The syndicate letter

Question 13

Accrued interest for US government bonds is computed on the basis of

Answer 13

Actual days elapsed

Question 14

Scale in a municipal bond underwriting refers to

Answer 14

Yields by maturity

Question 15

A corporation’s income statement reports net income of $10 million for the year. The company has one million shares of 4% $59 par value preferred stock and two million shares of common stock. If the corporation paid a quarterly dividend of $0.60 per share of common stock,

Answer 15

The dividend payout ratio was 60%