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
The requirement for a supplemental prospectus to be filed before each sale is applicable to?
Shelf registration sales
Which of the following are considered tools used to implement fiscal policies?
Government spending
And
Taxation
A broker dealer that executes trades and settles transactions for another broker dealer is called a?
Carrying firm
Which of the following must be signed by a customer wanting to open a margin account?
Risk disclosure forms
Loan consent and hypothecation agreements
Credit and hypothecation agreements
Credit and loan consent agreements
Credit and hypothecation agreements
Calls and puts her what type of contracts?
Option contracts
Securities products that cannot serve as collateral for a margin loan therefore not being able to be purchased on margin are what type of contracts?
Option contracts
A corporate issuer of common stock has decided that it once an agreement that it’s underwriter must either raise all the capital needed or cancel the underwriting. To best accommodate this the underwriting should be an?
All or none
Municipal debt securities including short term notes are exempt from?
Securities act of 1933
A balloon maturity
The MAJOR portion of the principal that is paid on the FINAL maturity
- Exchange traded funds are priced?
By supply and demand where transaction prices may be higher or lower than the funds NAV
- For those who follow monetary theory, which is the most complete measure of the money supply?
M3
- Re-purchase agreements and reverse repurchase agreements are?
Money market instruments
Which of the following for call option contracts is true
Maximum gain is the same for both parties
Break even is the same for both parties
Maximum loss is the same for both parties
Maximum gain and loss are the same for both parties
Break even is the same for both parties
At expiration CDT stock is trading at 43. A January 40 put would be?
Left to expire unexercised
Rule 144 stipulates that after holding restricted stock fully paid for six months, and affiliate may begin in selling shares?
Subject to volume restrictions within any 90 day period
Industry rules regarding political contributions intended to preserve investor confidence in market integrity applying to contributions made to what?
Elected officials and political candidates only
Phinne run regulates all matters related to investment banking, including
Trading in the OTC market
For treasury bills, which of the following are true?
T-bills are issued at a discount to par
T-bills have maturities of 1 to 10 years
Most T-bills issues or callable and convertible
T-bills are a direct obligation of the US government
T-bills are issued at a discount par
T-bills are a direct obligation of the US government
And issuer has a subordinated debt issue outstanding. Which of the following is true?
Hey subordinated debenture has a claim that is Junior to other debt but senior to preferred
Which of the following securities is least likely to have an active trading market?
Limited partnership interest
Subject to market liquidity, which of the following orders is most likely to be executed immediately?
Market orders
Restricted securities may not be sold until they have been held fully paid for how long?
6 months
A preliminary prospectus is made available from when to when?
Registration date and the effective date
An investor who buys and sells options on stock is;
Neither an owner of nor a debtor of the company
A stockholder
A lender to the company
An owner of the company
Neither an owner of nor a debtor of the company
Who does the MSRB rely on for enforcement of their rules?
FINRA
Each year a bond pays semi annual interest payments of $20. This bond has a nominal yield of?
4%
A private securities transaction is
Exempt from the registration under the act of 1933
Can be sold to individual accredited investors
When a company wants to issue additional shares of stock, the preemptive right given to existing shoulders allows those shareholders to?
Maintain their proportionate ownership in the corporation
Each of the following investments in practices are deemed in eligible for an IRA or any other retirement plan except;
Life insurance
Collectible fine art
Margin account trading
Variable annuities
Variable annuities
When a broker dealer pledges customer securities to a bank as collateral for a margin loan, the pledge is known as a?
Re-hypothecation
What is used most often to fund international trade?
Bankers acceptance (BAs)
If the beneficiary of a custodian account dies the securities in the account past to the?
Minors estate
In order for a business entity to qualify as a limited partnership, the LP must have?
At least one general partner and one limited partner
