Practice Exam 2 Flashcards
When interest rates are falling which bonds are most exposed to call risk?
Callable bonds with higher coupons
A written promise made by a corporation to pay the principal at its due date and interest on a regular basis. Backed by no physical assets or titles to assets
A debenture
The three classifications established under the investment company act of 1940 are
Face amount certificates
Unit investment trusts
&
Management companies
Rights are short or long term?
Short
Warrants are short or long term?
Long term
The benefits of designating a brokerage account as ”transfer on death” (TOD) are?
The designation avoids probate
And
The account holder may still make beneficiary changes for the account
Risks that are unique to a specific industry business type or investment type are known as?
Non-systematic risks
A company that is extensively overleveraged using debt financing whenever available would be exposing its investors to what type of risk?
Financial risk
When the supply from money exceeds the demand
Interest rates for making consumers borrowing easier
And safety of principle, municipal bonds are considered second only to
US government and agency bonds
Your client has a long-term investment time horizon and is willing to except some risk to achieve a better rate of return which of the following would be the LEAST suitable recommendation?
T-Bills and negotiable CDs
Corporate bonds and T-bonds
Preferred stock
Common stock
T bills and negotiable CDs
Common stock is high or low risk?
High risk
Preferred stock is high or low risk?
High risk
Your customer has a portfolio consisting entirely up municipal issued securities. Therefore the entire portfolio would have to consist of?
General obligation (GOs)
&
Revenue bonds
A member firm holding stock in street name may vote the shares as it sees fit if the customer does what?
Fails to return the signed proxy statement by the 10th day before the shareholders meeting
&
And if the matters to be voted on are of minor importance
An order is entered by a customer to sell at 30 stop limit. Once the order is entered the stock trades in the following sequence: 32, 29, 31 and 33. The order would be executed and the investor would receive a price of?
31
If an unlisted security is recommended what documentation is required prior to the trade?
A disclosure statement is required but not a suitability statement
Which rate of interest is charged by the federal reserve bank for short term loans to its member banks?
The discount rate
A corporation divests itself of all of the shares of another company it owns. This is known as?
A spin-off
To contract the overall economy, the federal reserve board, acting as agent for the US treasury department, will?
Sell securities via open market operations,
pushing interest rates up
Can you trade life insurance in the financial markets?
NO
Several registered reps have agreed to purchase a certain security for their own accounts,then tout the security to their best customers. They hope that a number of large orders will be entered, driving up the price of the security, which they can then sell from their own accounts for a capital gain. This illegal practice is a form of?
Front Running
