Manually Entered Flashcards
What is the formula for SMA?
EQ - Reg T
A _________ is an offering of securities valued at $5,000,000 or less over a 12 month period. They are exempt from the full registration requirements of Securities Act of 1933. Companies issuing securities this way make a __________ available to all potential purchasers.
- Regulation A Offering
- Offering Circular
What is the formula for shorting (buying) power?
- SMA / Reg T
- Same for both LMV and SMV accounts
Maintenance call trigger formula for long margin accounts
(4*DR) / 3
A customer’s confirmation must include
I. the markedown, if the member acted as a principal for a listed security
II. the amount of any commission, if the member acted as an agent
III. whether the member acted as an agent or a principal
IV. the markup if the member acted as a principal for a listed security
A. I and III
B. II and IV
C. I, III, and IV
D. I, II, III, and IV
D. I, II, III, and IV
Which of the following would qualify as management companies?
A. face amount certificate companies
B. unit investment trusts
C. closed end funds
D. none of the above
C. closed end funds
Open end and closed end funds are considered management companies because they have actively managed portfolios and are defined as such according to the Investment Company Act of 1940. Because face amount certificates and unit trusts do not have actively managed portfolios, they are not considered management companies and have their own classification.
The Municipal Bond Index is
A. the average yield on 25 revenue bonds with 30 year maturities
B. the average yield on 20 selected municipal bonds with 20 year maturities
C. the average dollar price of 40 highly traded GO and revenue bonds
D. the average yield on 11 selected municipal bonds with 20 year maturities
C. the average dollar price of 40 highly traded GO and revenue bonds
All of the following are important factors when determining the markup or commission on a municipal bond trade EXCEPT
A. the fact that you and the firm you work for are entitled to make a profit
B. the difficulty of the trade
C. the 5% markup policy
D. the market value of the securities at the time of the trade
C. the 5% markup policy
Because municipal securities are exempt from SEC registration, they are not subject to the FINRA 5% markup policy.
The Federal Reserve Board is responsible for which of the following?
A. easing the money supply
B. setting Reg T
C. printing currency
D. all of the above
D. all of the above
Which of the following statements is true regarding NASDAQ Level I, II, or III?
A. level II is where market makers enter their quotes
B. level I is the level used by registered representatives
C. level III is used by traders
D. level II only displays the highest bid and lowest ask prices
B. level I is the level used by registered representatives
Level III is where market makers enter their firm quotes and is the most complete access level of NASDAQ. Level II and III display all market makers and their firm quotes, and viewing is not limited to the highest bid and lowest ask. Level II is used by traders. Level I is the level used by registered reps and displays the highest bid and lowest ask prices.
John believes that the market is about to become bearish and would like to be able to profit in the event he is correct. Which of the following investments would meet John’s needs?
I. inverse ETFs
II. selling SPX calls
III. high yield bond funds
IV. selling OEX puts
A. I and II
B. II and IV
C. I, II, and III
D. I, II, and IV
A. I and II
If John wants to profit from a potential decline in the market, he has to employ bearish strategies. Inverse ETFs are funds that trade on an exchange and use derivative products, such as options, to attempt to profit from a decline in the underlying securities, such as the S&P 500. Selling SPX (S&P 500) calls is a bearish strategy in which the seller profits if the underlying securities stay the same or decline in value. High yield bond funds are more likely to be damaged if the market declines in value, and selling OEX (S&P 100) puts is a bullish, not bearish strategy.
Gerry Goldbar purchases a new OID municipal zero coupon for 80. If Gerry holds the bond to maturity, what is his tax consequence?
A. $0
B. $200 ordinary income over the time the bond is held to maturity
C. $200 capital gain
D. none of the above
A. $0
Municipal original issue bonds must be accreted; the discount is treated as part of the investor’s tax free interest. Because these municipal discount bonds must be accreted, the cost basis is equal to the par value, and, as a tax consequence, Gerry will have no losses or gains if he holds the bond to maturity.
Which of the following disputes must be resolved using the Code of Arbitration?
I. a dispute between a member of FINRA and a registered rep
II. a dispute between a member of FINRA and a customer
III. a dispute between two members of FINRA
IV. a dispute between a bank and a member of FINRA
A. IV only
B. II and IV
C. I and III
D. I, III, and IV
C. I and III
The Code of Arbitration is mandatory in member-against-member disputes including a member firm and one of its registered reps. However, FINRA has no jurisdiction over banks or disputes between non-members such as customers or issuers; in such cases as these, the non-member decides whether to use arbitration or a Code of Procedure hearing to settle a dispute.
Duke Wallwalker purchased an LTSBR Corporation convertible bond at 95 on January 20, 2013. The bond is convertible at $40, and he converts his bond into stock on January 21, 2016. If the bond is trading at $42, for tax purposes, these transactions will result in
A. $10 gain
B. $10 loss
C. $90 loss
D. neither a gain or loss
D. neither a gain or loss
There are no tax consequences for Duke converting a bond into shares of common stock. In order for Duke to have a taxable gain or loss, the shares Duke received as a result of his conversion to common stock must be sold.
XYZ is currently trading at 24.10 - 24.25. A designated market maker in XYZ could enter a bid at which of the following prices?
A. 24.10
B. 24.12
C. 24.25
D. 24.27
B. 24.12
A designated market maker cannot compete with public orders, so A and C are no good. The responsibility of a market maker is to keep trading as active as possible by narrowing the spread if necessary. Therefore, the only answer that works is B because that answer is in between the bid and ask prices.
