Mock Exam Flashcards
Which of the following best describes how a syndicate determines the amount to bid for a new municipal issue?
The average reoffering price minus the spread;
A spread is analogous to the gross profit margin in other businesses. A syndicate’s bid is based on the average reoffering price (the price the public will pay) less the syndicate’s spread (the amount the syndicate will charge for bringing the issue to market).
Under the provisions of Rule 144, what percentage of outstanding stock may a control person sell every 90 days?
0.01;
Rule 144 (sale of restricted or control stock) allows for the sale of 1% of the outstanding shares or the weekly average of the last 4 weeks’ trading volume (whichever is greater), every 90 days.
Customers could pay a commission, rather than a sales charge, for shares of a(n):
closed-end investment company;
Sales charges could be paid on all types of open-end funds. Commissions are paid on securities traded in the secondary market, such as closed-end investment company shares.
Rules regarding restricted persons state that each of the following is considered immediate family EXCEPT:
A) brothers and sisters.
B) parents.
C) aunts and uncles.
D) parents-in-law.
aunts and uncles;
Rules regarding restricted persons define “immediate family” as spouses, parents, brothers, sisters, in-laws, and children. Aunts and uncles are among those excluded.
The TIC method of evaluating municipal bids:
A) can only be used for term bonds.
B) is required by the MSRB if a financial advisory relationship exists.
C) is required by the MSRB if a control relationship exists.
D) considers the time value of cash flows.
considers the time value of cash flows.
Your client has entered a limit order to buy 600 shares of DMF at $50 per share. DMF declares a 10% stock dividend. How would this order be adjusted on the ex-date?
A) 660 shares at $46.50.
B) 660 shares at $46.37.
C) 600 shares at $45.45.
D) 600 shares at $50.
600 shares at $45.45;
In this example, adjust only the share price: $50 ÷ (1 + .10) = $45.45. The number of shares in the order is not adjusted unless the shares can be increased by a full round lot (100 shares).
Which of the following is a characteristic shared by debentures and income bonds?
A) Both must pay interest semiannually.
B) Both are secured by assets of the corporation.
C) Both are a type of mortgage bond.
D) Both must pay principal as it comes due.
Both must pay principal as it comes due;
All bonds must pay principal when due. Income bonds, however, are not required to pay interest when due unless the earnings of the issuer are deemed to be sufficient by the board.
A Tier 1 securities offering under Regulation A+ allows small to medium sized companies to
A) raise up to a maximum of $10 million in a 12-month period
B) raise up to a maximum of $20 million in a 12-month period
C) raise up to a maximum of $5 million in a 12-month period
D) raise up to a maximum of $15 million in a 12-month period
Tier 1 of Regulation A+ allows small to medium sized companies to raise up to a maximum of $20 million in a 12-month period
The function of a broker’s broker in the municipal bond business is to do which of the following?
I. Help sell municipal bonds that a syndicate has been unable to sell.
II. Protect the identity of the firm on whose behalf the broker’s broker is acting.
III. Help prepare bids for an underwriting syndicate.
IV. Serve as a wholesaler, offering bonds at a discount from the current bid and offer.
I. Help sell municipal bonds that a syndicate has been unable to sell.
II. Protect the identity of the firm on whose behalf the broker’s broker is acting.
Margin requirements on exempt securities (U.S. government securities and municipal securities) are set by:
A) the DOE.
B) the SEC.
C) the DEA
D) the FRB.
The FRB sets the initial margin requirements for nonexempt securities. The margin requirements for exempt securities, such as U.S. governments, are set by a firm’s SRO or DEA (designated examining authority).
Under the Conduct Rules, the maximum sales charge on any transaction involving an open-end investment company share is:
A) 8.5% of the offering price.
B) 8.5% of the net asset value
C) 9% of the offering price.
D) 9% of the net asset value.
Open-end investment companies (mutual funds) are limited to a maximum sales charge of 8.5% of the offering price.
