Questions

Question 1

Mr. Blinkenhoff is a conservative investor. Which of the following investments would you recommend to him?
(A) Buying put options
(B) Buying long-term income adjustment bonds
(C) Buying common stock of an aggressive growth company
(D) Buying Treasury notes

Answer 1

(D) Buying Treasury notes

Question 2

The initial maturity on a standard option is:

Answer 2

Nine months

Question 3

Which of the following would be MOST affected by interest rate fluctuations?
(A) SKNK Perfume Corp.
(B) Bulb Utility Co.
(C) Crapco Vitamin Supplements, Inc.
(D) LQD Water Bottling Co.

Answer 3

(B) Bulb Utility Co.

Question 4

In which order, from first to last, are the following actions taken when opening a new options account?
I. Send the customer an ODD
II. Have the ROP approve the account
III. Execute the transaction
IV. Have the customer send in an OAA

Answer 4

I, II, III, IV

Question 5

Which TWO of the following are the minimum requirements for an investor to be considered accredited?
I. An individual with a net worth of $500,000
II. An individual with a net worth of $1,000,000
III. An individual who earned $200,000 per year in the most recent two years and has a reasonable expectation of reaching that same level in the current year
IV. An individual who earned $300,000 per year in the most recent 3 years and has a reasonable expectation of reaching that same level in the current year

Answer 5

II and III

Question 6

All of the following are considered violations EXCEPT:
I. Rehypothecation 
II. Commingling
III. Odd Lot Transactions
IV. Forward Pricing

Answer 6

I, III, and IV

Question 7

A 55 year old investor purchases a 6 percent DEF convertible mortgage bond at 90 with 10 years until maturity. If the bond is currently trading at 97, what is the current yield?

Answer 7

Annual Interest = 1000.06 = 60
Market Price = 1000.97 = 970
Current Yield = 60 / 970 = 6.19%

Question 8

Which of the following is true of UGMA accounts?
A. There can only be one minor and one custodian per account
B. There can be more than one minor and one custodian per account
C. Securities can only be purchased on margin
D. They must set up for children who have reached they age of majority

Answer 8

A. There can only be one minor and one custodian per account

Question 9

In a corporate liquidation, common stockholders are paid:

(A) before bondholders and preferred stockholders
(B) after bondholders and preferred stockholders
(C) after bondholders but before preferred stockholders
(D) before all creditors

Answer 9

(B) after bondholders and preferred stockholders

Question 10

What term would apply to Authorized Stock?

(A) Issued
(B) Outstanding
(C) Voting
(D) Par Value

Answer 10

(D) Par Value

Question 11

Which of the following terms applies to common stock:

(A) convertible
(B) redeemable
(C) non-negotiable
(D) non-callable

Answer 11

(D) non-callable

Question 12

Which of the following terms describes common stock?

(A) negotiable
(B) redeemable
(C) non-negotiable
(D) callable

Answer 12

(A) negotiable

Question 13

The market price of common stock will be influenced by which of the following:

I. Expectations for future earnings of the company
II. Expectations for future dividends to be paid by the company
III. Book value per share
IV. Par Value per share

Answer 13

I and II

Question 14

(T or F) Par value and book value have a bearing on the market price of common stock

Answer 14

False

Question 15

Which of the following influences the market price of common stock?

(A) par value of the shares
(B) investor expectations about future of the company
(C) stated value of the shares
(D) Book value of the shares

Answer 15

(B) investor expectations about future of the company

Question 16

All of the following statements are true regarding the effect of the purchase of Treasury Stock EXCEPT:

(A) the number of outstanding shares is reduced
(B) the earnings per share is increased
(C) the market price of the stock will increase
(D) the number of authorized shares will be reduced

Answer 16

(D) the number of authorized shares will be reduced

Question 17

Treasury stock is deducted from:

Answer 17

Outstanding shares

Question 18

A corporation has issued 100,000,000 shares of common stock at $1 par. The corporation has 25,000,000 shares of Treasury Stock on its books. The aggregate value of the outstanding shares is:

Answer 18

($100M - $25M)

$75M

Question 19

All of the following are functions of the transfer agent EXCEPT:

(A) mailing dividend payments to shareholders
(B) preparing and mailing proxies
(C) setting the Declaration Date
(D) Canceling old shares and issuing new shares

Answer 19

(C) setting the Declaration Date

Question 20

All of the following are the responsibilities of the registrar EXCEPT the registrar:

(A) distributes dividends, corporate reports, and voting materials
(B) acts as a watchdog over the transfer agent
(C) accounts for the number of shares issued and canceled
(D) maintains the integrity of the record of all shareholder names

Answer 20

(A) distributes dividends, corporate reports, and voting materials

Question 21

Common dividends are usually paid how often?

Answer 21

quarterly

Question 22

The separate categories of preferred stock are:

Answer 22

Straight Preferred 
Cumulative Preferred
Convertible Preferred
Participating Preferred
Callable Preferred

Question 23

If a preferred stock is described as DJK 6% preferred participating to 9%, what percentage is paid to its holders?

Answer 23

3%

Question 24

Which type of preferred stock typically has the highest stated rate of dividend, all else being equal?

Answer 24

Callable preferred

Question 25

Of straight and cumulative preferred, which would you expect to have the higher stated rate?

Answer 25

Straight preferred