Practice

Question 1

What risk does not apply to both foreign and domestic debt instruments?

Answer 1

Exchange risk

Question 2

What is it called when a writer covers a position by purchasing an option?

Answer 2

A closing purchase

Question 3

What is primarily used to determine the amount of foreign currency that will be received?

Answer 3

The spot exchange rate

Question 4

When is the value of a debt portfolio most stable?

Answer 4

When the maturities of the debt securities are short

Question 5

What is an example of a product that is negatively impacted when an issuer’s credit rating is downgraded?

Answer 5

ETNs

Question 6

What do direction participation programs provide?

Answer 6

Exposure to non-correlated assets

Question 7

What assets are generally traded according to their average life?

Answer 7

Asset-backed securities

Question 8

What is the spread referring to in the OTC market?

Answer 8

Bid and ask prices

Question 9

What is a potential reason as to why no-load mutual funds may have lower expense ratios?

Answer 9

They are not permitted to charge a 12b-1 fee greater than 25 basis points

Question 10

What is an event that could result in a statutory disqualification?

Answer 10

A felony for a DUI charge

Question 11

What are rights?

Answer 11

The offer to shareholders to obtain shares at a fixed price

Question 12

When can a broker-dealer accept payment for a new issue?

Answer 12

Once the registration is effective

Question 13

What is selling away?

Answer 13

Engaging in private securities transactions without written prior consent of the employer

Question 14

What is true about all US government agency issues?

Answer 14

They are all exempt from the Act of 1933

Question 15

What are the characteristics of a variable rate demand note?

Answer 15

• Stated maturity date
• Floating interest rate
• Option to put the security back to a financial intermediary

Question 16

What is the greatest risk for a variable life insurance policy?

Answer 16

Market risk

Question 17

What is a market maker?

Answer 17

Someone who is responsible for providing liquidity in a security from buying/selling at all times

Question 18

When is call protection most valuable to a bond owner?

Answer 18

When prices are rising

Question 19

What does the call provision of a bond do?

Answer 19

Stipulate the call date and call price

Question 20

What does the Fed do when inflation and recession are low?

Answer 20

Buy bonds in the open market

Question 21

How many shares votes are provided during statutory voting?

Answer 21

The amount of shares owned by the stockholder

Question 22

What is the cost basis of an inherited mutual fund?

Answer 22

The NAV of the shares when the owner dies

Question 23

What is the primary purpose of a syndicate stock?

Answer 23

To build an order book and allocate the stock

Question 24

What law do ADRs fall under?

Answer 24

The Act of 1933

Question 25

When is NAV computed for open-end investment companies?

Answer 25

After the order is received

Question 26

What is true regarding a covered call option?

Answer 26

Profit and loss are both limited

Question 27

What can a non-registered representative do?

Answer 27

Provide account opening forms

Question 28

What is an advantage of an index fund?

Answer 28

Lower management fees due to passive management of the fund