Practice Exam 1 Flashcards
All of the following securities trade in the over-the-counter market EXCEPT:
A) Nasdaq securities.
B) American depositary receipts.
C) Government and agency securities.
D) Open-end investment companies.
Open-end investment companies.
;
Municipal bonds, government and agency securities, and corporate securities (listed and unlisted) all trade in the OTC market. Foreign securities trade in the United States if the companies comply with SEC registration and disclosure requirements. Mutual fund shares (open-end companies) do not trade.
All of the following may be used to service special tax bond issues EXCEPT:
A) gasoline taxes.
B) excise taxes.
C) real estate taxes.
D) business license taxes.
real estate taxes;
Special tax bonds are sometimes included in the larger and more general category of revenue bonds. Bonds supported from the proceeds of specified income generators, such as gasoline, cigarettes, liquor, and business licenses are special tax bonds. Ad valorem (real estate) taxes never service special tax bonds.
Which of the following is NOT true in jurisdictions that recognize the marital property designation known as community property?
A) There may be tax implications regarding the dissolution of community property at the time of a divorce, marriage annulment, or death.
B) Community property laws do not apply to inheritances.
C) Community property applies to property owned individually before a marriage once the marriage has occurred.
D) Community property laws do not apply to gifts.
Community property applies to property owned individually before a marriage once the marriage has occurred.
;
Community property applies to property obtained during a marriage but does not apply to property owned individually by one spouse before the marriage. In addition, it does not apply to inheritances or gifts. There can be federal tax implications for property designated as community property and laws in states that recognize community property ownership differs from jurisdiction to jurisdiction.
Which of the following regarding corporate debentures are TRUE?
1) They are certificates of indebtedness.
2) They give the bondholder ownership in the corporation.
3) They are unsecured bonds issued to finance capital expenditures or to raise working capital.
4) They are the most senior security a corporation can issue.
3) They are unsecured bonds issued to finance capital expenditures or to raise working capital.
4) They are the most senior security a corporation can issue.
All of the following municipal securities are quoted on a yield basis EXCEPT:
A) term bonds.
B) tax-anticipation notes.
C) secured bonds.
D) serial bonds.
term bonds.
;
Term bonds, or dollar bonds, are quoted like corporate bonds as a percentage of par. All other municipals are quoted in basis.
The placement ratio in “The Bond Buyer” indicates the relationship for a particular week between the number of bonds sold and the number of bonds:
A) offered for sale in the market that week.
B) sold by competitive bid that week.
C) to be offered in the next 30 days.
D) sold in negotiated underwritings that week.
offered for sale in the market that week.
;
The placement ratio shows the relationship between the number of bonds actually placed (sold) and the total number offered for sale.
Your broker/dealer acts as a prime broker for ABC fund. In this arrangement, your broker/dealer is likely to be providing which of the following services?
1) Execution of all transactions for the fund portfolio
2) Clearing services
3) Lending for trades done on margin
4) Ensuring that all exchange-trading rules are complied by
II and III
;
The prime broker would supply clearing services, lending services for marginable transaction, as well as back office support including cash management, account statements, and transaction processing. Actual executions and abiding by all exchange rules when transactions occur is the responsibility of the executing broker/dealers.
Your customer is interested in purchasing shares of a new issue where the demand for shares has already exceeded the number of shares the issuer intends to offer. Which of the following options might you look for that could allow your customer to receive shares?
A) Selling group
B) Regulation A offering
C) Firm commitment offering
D) Over-allotment (Green Shoe Provision)
An over-allotment option (Green Shoe Provision), if one exists in the underwriting agreement, will allow the underwriters to sell up to 15% more shares than the issuer had originally intended to offer when demand exceeds supply.
If an investment company invests in a fixed portfolio of municipal or corporate bonds, it is classified as a:
A) utilities fund.
B) closed-end company.
C) unit investment trust.
D) growth fund.
A unit investment trust issues shares that represent units of a particular portfolio; management has no authority, or only limited authority, to change the portfolio. The portfolio is fixed, it is not traded.
If LMN, Inc. has filed for bankruptcy, in what order would interested parties be paid?
1) Holders of secured debt.
2) Holders of subordinated debentures.
3) General creditors.
4) Preferred stockholders.
A) 4, 1, 2, 3.
B) 3, 1, 2, 4.
C) 1, 2, 3, 4.
D) 1, 3, 2, 4.
1, 3, 2, 4.
;
The liquidation order is as follows: the IRS (and other government agencies), secured debt holders, unsecured debt holders and general creditors, holders of subordinated debt, preferred stockholders, and common stockholders.
A customer has his broker enter an order to buy GHI stock at the opening. Though transmitted promptly, the order does not reach GHI’s trading post in time to be filled at the opening. How is the order handled?
A) The order automatically becomes an at-the-open order in the following trading session.
B) The order is canceled.
C) The order is handled as a market order.
D) The order is executed in the day, at a price as close to the opening price as possible.
The order is canceled.
;
An at-the-open order is to be filled at the opening price or not at all. An at-the-open order arriving later must be canceled.
Under FINRA rules, a registered representative must complete the regulatory element of continuing education within how many days of a registration anniversary date?
A) 120.
B) 30.
C) 60.
D) 90.
The regulatory element requires that all registered persons complete a computer-based training session within 120 days of their second registration anniversary and every third anniversary thereafter.
Depletion allowances in oil and gas programs are based on the amount of oil:
A) in reserve.
B) extracted.
C) sold.
D) lost to shrinkage.
Sold;
Depletion allowances are allowed to compensate for a mineral resource, which is considered accomplished when it is sold.
Under NYSE rules, a not-held order:
A) is good until canceled.
B) is good for the day only.
C) requires discretionary authority from the customer.
D) is a limit order.
is good for the day only.
;
Under NYSE rules, a not-held order where a customer gives you authority over the price or timing of the order is good for that day only.
A highly leveraged company has the smallest percentage of its total capitalization in:
A) short-term debt.
B) preferred stock.
C) long-term debt.
D) common stock.
common stock.
;
Common stock, which represents ownership, would account for the smallest amount of capitalization of a highly leveraged company. Highly leveraged companies have the largest amount of their capitalization in debt instruments. Preferred stock, although an equity, is more like a debt instrument because of the stated dividend rate.
