Practice Test Mistakes

Question 1

Does coverage under SIPC consider a money market fund to be cash or a security?

Answer 1

Security

Question 2

When do investors realize the gains of a mutual fund?

Answer 2

The investor must redeem their shares to realize the gain

Question 3

If a bond has been advance refunded, the yield must be stated as the:

Answer 3

yield to call

Question 4

What type of risk is the risk that time value may erode the premium of an equity option?

Answer 4

Capital Risk (unrelated to financial wellbeing of underlying investment)

Question 5

For a Minnesota Housing Authority Bond, which taxes must be paid?

Answer 5

State and fed are exempt

Question 6

If client places a sell stop order good fo rthe day only, when must you write an order ticket?

Answer 6

Upon receipt of order

Question 7

Who sets initial margin requirements for new securities?

Answer 7

The Fed Reserve

Question 8

Which investment has morderate risk and keeps pace with inflation?

Answer 8

Variable Annuity

Question 9

Straddle

Answer 9

One call and one put

Question 10

Spread

Answer 10

two calls or two puts

Question 11

What type of bond is deposited with trustee against which certificates are sold representing principal payment?

Answer 11

Stripped Bond

Question 12

Why are municipal bonds not normal shorted?

Answer 12

Because the market is thinly traded- illiquid

Question 13

Which orders are reduced for cash dividends on the exdate?

Answer 13

Only orders placed below market value

Limit Orders to Buy and Sell Stop Order, Sell Stop Limits (BLSS)

Question 14

What is a common factor for traditional and ROTH IRAs?

Answer 14

Contribution limits are the same

Question 15

Who sets the price of a tender offer?

Answer 15

the issuer

Question 16

How often is interest paid for CMOs

Answer 16

monthly

Question 17

Does SIPC cover FX?

Answer 17

No

Question 18

Does SIPC cover unregistered stock?

Answer 18

Yes

Question 19

Do treasury bills or treasury notes have longer maturity?

Answer 19

T-Notes

Question 20

Under the intrastate offering rule (Rule 147), when may a resident purchaser of securities resell them to a nonresident?

Answer 20

Nine months from the end of the distribution.

Question 21

How many market makers are required for an issue to initially be included on the NASDAQ?

Answer 21

3 market makers

Question 22

How many market makers are required for an issue to continue to be traded on the NASDAQ?

Answer 22

2 market makers

Question 23

Calculation for current yield of bond

Answer 23

Annual Coupon / Current Price of Bond

When Price of bond listed as 104.24 take (24/32 *10) to find current price in dollars

Question 24

How do exporters hedge against currency?

Answer 24

Buy puts on the foreign currency

BUT IF DOLLAR IS THE CURRENCY THEY ARE EXPORTING TO, THEN BUY CALLS OF THEIR OWN DOMESTIC CURRENCY

Question 25

If stock split, is PE ratio impacted?

Answer 25

YES

Question 26

Which of the following affects the holding period of XYZ stock, a position that has been held for 6 months?

Answer 26

Buying a put (both in the money or out)

Question 27

If registered representative is giving a free financial seminal to retail investors, what sort of approval is needed?

Answer 27

Approval from a principal

Question 28

How long must a customer hold a mutual fund before using for margin purposes?

Answer 28

30 days

Question 29

The principal underwriter of an open-end investment company is also known as the:

Answer 29

sponsor

Question 30

Which of the following organizations determines which OTC securities are eligible for purchase on margin?

Answer 30

FRB

Question 31

If trading is halted in a listed stock, what happens to the trading in the stock's listed options?

Answer 31

They are halted

Question 32

When an investor converts a convertable bond, capital gains ARE/ARE NOT realized?

Answer 32

ARE NOT, until sale of that stock

Question 33

Priority, Price and Parity apply to trading activity where: NYSE, NYSE/OTC, OTC Market, or third Market?

Answer 33

NYSE

Question 34

Under FINRA, Is it prohibited to fail to display a limit order at the customer's request?

Answer 34

No

Question 35

Under FINRA, Is it prohibited to delay reporting a transaction at customer's request?

Answer 35

Yes

Question 36

Do all sell order need to be marked either LONG/SHORT or ONLY MARKED WHEN SHORT?

Answer 36

LONG/SHORT

Question 37

When brokers send proxies to the benefit owners, it is at whose expense?

Answer 37

The Issuer

Question 38

TRF is used for listed securities when they ARE/ARE NOT traded on the trading floor?

Answer 38

ARE NOT

Question 39

If NYSE halts trading in ABC, what does the OTC market do about ABC?

Answer 39

It does at it sees fit- either halts or continues trading

Question 40

The 5% markup policy applies to primary and secondary market. T/F?

Answer 40

False- only secondary

Question 41

Are warrants equity-like securities or debt securities?

Answer 41

Equity-like securities?

Question 42

A writer of a combination expects the market to be?

Answer 42

STABLE

Question 43

A buyer of a combination expects the market to be?

Answer 43

VOLATILE

Question 44

DO ADRs have foreign income tax?

Answer 44

YES

Question 45

In a margin account, when a long position's market value increases, does the equity rise or the debit balance rise?

Answer 45

The equite

Question 46

Can a private placement offering be advertised?

Answer 46

No

Question 47

Open End Investment Fund distribute dividends from their ____________?

Answer 47

Net Investment Income

Question 48

Is there a holding period for an affiliate if he/she buys shares on the open market?

Answer 48

No

Question 49

Are distributions of a 403b plan subject to income tax?

Answer 49

Yes

Question 50

What plans are not subject to ERISA?

Answer 50

Defined compensation Plans