SIE Study Questions Flashcards by Charlie Morawski

Perferred stock pays dividends:
A) Annually
B) Semi annually
C) Quarterly
D) As stated on the preferred stock certificate

B) Semi annually

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A bond analyst checking a municipal bond will examine:
I. The past performance of the payment of interest.
II. The per-capita income of the citizens.
III. The population growth of the area.
IV. The industrial development of the area.
A) I and II.
B) I and III.
C) II and III.
D) I, II, III, and IV.

D) I, II, III, and IV

I. The past performance of the payment of interest.
II. The per-capita income of the citizens.
III. The population growth of the area.
IV. The industrial development of the area.

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The minimum dollar amount required for a negotiable CD is:
A) $250,000
B) $10,000
C) $100,000
D) $1,000,000

C) $100,000

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An index fund:
A) Follows the performance of a large market index
B) May be tied to the S&P 500 or the Dow Jones Industrial
C) Generally, has low portfolio turnover which helps to keep the fund’s expenses low
D) All of the choices listed are correct

D) All of the choices listed are correct

-Follows the performance of a large market index

-May be tied to the S&P 500 or the Dow Jones Industrial

-Generally, has low portfolio turnover which helps to keep the fund’s expenses low

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Which of the following plans is non funded?
A) Keogh
B) TSA
C) TDA
D) Deferred compensation plan

D) Deferred compensation plan

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A FINRA member firm is seeking to expand its sales force and hire new representatives for a new branch office. Which of the following is true?
I. The advertisement is considered to be retail communication
II. The advertisement must be approved by a principal prior to use
III. The advertisement is considered to be institutional communication
IV. The advertisement must be filed with FINRA
A) III only
B) II and III
C) I, II, and IV
D) II, III, and IV

C) I, II, and IV

I. The advertisement is considered to be retail communication
II. The advertisement must be approved by a principal prior to use
IV. The advertisement must be filed with FINRA

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A member of the selling group assisting in the distribution of securities in an eastern syndicate is:
A) Liable for a percentage of the unsold securities
B) Not liable for a percentage of the unsold securities
C) Responsible for a percentage of the total offering
D) Required to purchase unsold shares for its own account

B) Not liable for a percentage of the unsold securities

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Ownership of American Depository Receipts is associated with which of the following risks:
I. Political risk
II. Market risk
III. Interest rate risk
IV. Foregin currency risk
A) II only
B) I & II
C) I, II, & IV
D) II, III, & IV

C) I, II, & IV

I. Political risk
II. Market risk
IV. Foregin currency risk

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Which kind of risk is involved if the investor may lose part or all of his investment?
A) Market risk
B) Capital risk
C) Credit risk
D) Reinvestment risk

B) Capital risk

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If an investor is going to retire in one year, what is the time horizon on their retirement income fund?
A) 1 year
B) The life expectancy of the recipient
C) 20 years
D) 5 years

A) 1 year

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Which of the following are true regarding FINRA Rule 2210?
I. At FINRA’s discretion, members may be subject to a spot check of their written and electronic communication
II. A company’s prospectus is exempt from FINRA filing
III. If an established member deviates from acceptable standards FINRA can require that firm to pre-file future retail communications
IV. Copies of all retail communications must be kept by the broker dealer for 3 years
A) I & III
B) II & IV
C) II, III, and IV
D) I, II, III, and IV

D) I, II, III, and IV

I. At FINRA’s discretion, members may be subject to a spot check of their written and electronic communication
II. A company’s prospectus is exempt from FINRA filing
III. If an established member deviates from acceptable standards FINRA can require that firm to pre-file future retail communications
IV. Copies of all retail communications must be kept by the broker dealer for 3 years

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The maximum dollar amount that may be raised by a corporation doing a Regulation A Tier 2 offing is:
A) $10,000,000 in 12 months
B) $10,000,000 total
C) $75,000,000 over 12 months
D) $25,000,000 total

C) $75,000,000 over 12 months

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Which of the following allows the owner of the securities full voting rights?
A) Corporate Bonds
B) Preferred Stock
C) Common Stock
D) All of the choices listed

C) Common Stock

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When an issue of municipal securities is oversold, orders generally are given the following (from highest to lowest) priority:
I. Designated
II. Syndicate or group net
III. Pre-sale
IV. Member
A) I, II, III, IV
B) IV, III, II, I
C) III, II, I, IV
D) III, II, IV, I

C) III, II, I, IV

III. Pre-sale
II. Syndicate or group net
I. Designated
IV. Member

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A Mutual fund’s expense ratio would tell an investor:
A) How effectively a mutual fund operates
B) How profitably a mutual fund operates
C) How efficiently a mutual fund operates
D) How often a mutual fund turns over its holdings

C) How efficiently a mutual fund operates

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Which of the following is a qualified account?
I. SEP IRA
II. Traditional IRA
III. Educational IRA
IV. Roth IRA
A) I and II
B) II and III
C) II and IV
D) I, II, III, IV

A) I and II

I. SEP IRA
II. Traditional IRA

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A mutual fund must forward the proceeds from an investor’s redemption request within:
A) 2 business days
B) 7 calendar days
C) 3 business days
D) 10 Business days

B) 7 calendar days

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To advertise itself as a diversified investment portfolio company, an investment company must do which of the following?
A) Invest at least 75 percent of its assets in a portfolio of corporate and other nonproprietary securities
B) Avoid portfolio concentration by limiting investment amounts per issuer to no more than 5 percent of the fund’s total assets
C) Avoid control relationships and entanglements with individual companies by limiting investments to no more than 10 percent of any company’s voting class securities
D) All of the choices listed

D) All of the choices listed

-Invest at least 75 percent of its assets in a portfolio of corporate and other nonproprietary securities
-Avoid portfolio concentration by limiting investment amounts per issuer to no more than 5 percent of the fund’s total assets
-Avoid control relationships and entanglements with individual companies by limiting investments to no more than 10 percent of any company’s voting class securities

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Your client has been paying $1,200 per year towards the premium for his variable life insurance policy. All of the following comes out from the gross premium received by the insurance company.
I. Sales load
II. Administrative fee
III. Premium tax
IV. Mortality fee
A). I and III
B) II and IV
C) I, II, III
D) I, II, III, IV

C) I, II, III

I. Sales load
II. Administrative fee
III. Premium tax

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If an investor is looking for an investment which will generate additional income, good investments for her would be:
A) corporate or municipal bonds
B) Government bonds or perferred stocks
C) Money market funds or bond funds
D) all of the choices listed

D) All of the choices listed

-corporate or municipal bonds
-Government bonds or perferred stocks
-Money market funds or bondfunds

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Quotes on the NASDAQ workstation are:
A) Nominal prices
B) Net Prices
C) Gross prices
D) Wholesale prices

D) Wholesale prices

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A lifetime income rider would be most suitable for an investor who is considering purchasing an annuity in which of the following circumstances?
I. The investor is already retired
II. The investor anticipates a long retirement
III. The investor has not yet retired
IV. The investor does not anticipate a long retirement
A) II and III
B) I and III
C) I and II
D) II and IV

A) II and III

II. The investor anticipates a long retirement
III. The investor has not yet retired

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Which of the following statements are true when a customer opens a new option account at a broker dealer?
I. The customer must sign the option agreement
II. The broker dealer will furnish the customer with a copy of the risk disclosure document
III. The account must be approved by the ROSFP prior to the first trade
IV. The account must be approved by a branch manager prior to the first trade
A) I and II
B) III and IV
C) I, II, and IV
D) I, III, and IV

C) I, II, and IV

I. The customer must sign the option agreement
II. The broker dealer will furnish the customer with a copy of the risk disclosure document
IV. The account must be approved by a branch manager prior to the first trade

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Which of the following are true regarding a final prospectus for a new issue of corporate securities?
I. The final prospectus must be delivered to all purchasers
II. If the prospectus is posted on the SEC website it is considered to have been delivered to the purchasers
III. The prospectus will contain the date and price of the offering
IV. The prospectus will contain the underwriter’s discount
A) I, and III
B) III, and IV
C) I, II, and III
D) I, II, III, and IV

D) I, II, III, and IV

I. The final prospectus must be delivered to all purchasers
II. If the prospectus is posted on the SEC website it is considered to have been delivered to the purchasers
III. The prospectus will contain the date and price of the offering
IV. The prospectus will contain the underwriter’s discount

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A firm participating in the offering of a private placement may offer the private placement to: A) No more than 12 non accredited investors in any 12 month period. B) No more than 6 non accredited investors in any 12 month period. C) No more than 35 non accredited investors in any 12 month period. D) No more than 15 non accredited investors in any 12 month period.

**C) No more than 35 non accredited investors in any 12 month period.**

A diversified investment company is prohibited from all of the following except: A) Taking over control of other companies B) Borrowing money C) Receiving a commission for executing orders or acting as a broker D) Continuing to operate with less than $100,000 net worth or less than 100 shareholders

**B) Borrowing money**

WTF brokerage firm has maintained an account for a client for the last six moneths. On August 1st, WTF receives money from the client via four cashier's checks which get deposited on the same day for $1,000, $3,000, $5,000, and $3,500 respectively totaling $12,500. Which of the following is correct? A) Nothing needs to be reported since is it all "cash" B) Only the last $3,500 needs to be reported since it brought the daily limit over $10,000 C) The transactions should be recoreded as four various transactions and don't report any of them D) The transactions should be recorded as a single transaction and a CTR should be filed

**D) The transactions should be recoreded as a single transaction and a CTR should be filed**

The Municipal Securities Rulemaking Board (MSRB) does all of the following except for: A) Writing all of the municipal securities rules and regulations. B) Regulating the trading of state or local municipal securities on exchanges. C) Regulating the function of underwriting municipal securities. D) Regulating the municipalities that are issuing municipal securities.

**D) Regulating the municipalities that are issuing municipal securities.**

Which of the following risks would an investor in a fixed annuity be subject to? I. Inflation risk II. Purchasing power risk III. Investment risk IV. Systematic risk A) I, and II B) II, and IV C) I, II, and IV D) I, II, III, and IV

**A) I, and II** **I. Inflation risk** **II. Purchasing power risk**

If an investor wants to purchase an annuity by making regular scheduled payments into the contract, he should invest in which of the following types of annuities? A) Single payment deferred annuity B) Multiple payment periodic annuity C) Regular payment immediate annuity D) Periodic payment deferred annuity

**D) Periodic payment deferred annuity**

When a corporation enlists the services of a transfer agent the expectation is that the transfer agent would handle all of the following functions: I. Registration of the corporation's securities with the state. II. The maintenance of shareholder ownership records. III. Providing for the replacement of lost or destroyed stock certificates. IV. The cancellation of old certificates and the issuing of new ones. A) I Only B) II, and IV C) II, III, and IV D) I, II, III, and IV

**C) II, III, and IV** **II. The maintenance of shareholder ownership records.** **III. Providing for the replacement of lost or destroyed stock certificates.** **IV. The cancellation of old certificates and the issuing of new ones.**

Which of the following facilitates foreign trade? A) World Trade Organization B) ADR C) Banker's acceptance D) Commercial paper

**C) Banker's acceptance**

What kind of investment company makes no provision for future purchases or redemptions? A) An open-end fund B) A closed-end fund C) A unit investment trust D) A face-amount certificate company

**B) A closed-end fund**

An investor who owns a fixed annuity is subject to: A) Expense risk B) Investment risk C) Purchasing power risk D) Mortality risk

**C) Purchasing power risk**

The dated date of a new municipal bond is: A) The date from which interest accrues. B) The date on which a bond is sold. C) The date on which the bond can be called. D) The date when the bond matures.

**A) The date from which interest accrues.**

When presenting a recommendation, a representative must avoid all of the following except: A) Making guarantees of profits or promises of no losses B) Knowingly misrepresenting any facts about the firm, the investor, or the investment C) Maintaining a joint investment account with a customer D) Sharing in the profits or losses of an account without making any financial contributions

**C) Maintaining a joint investment account with a customer**

A large investor primarily concerned with minimum market risk and preservation of capital should purchase which of the following? A) Revenue bonds. B) General obligation bonds. C) Corporate bonds. D) Commercial paper

**D) Commercial paper**

Atlantic Electric announced that it will refund, on March 15, its $200,000,000 principal amount of 30-year 8% debentures. It will redeem them at a price of 108.55 plus accrused interest to the redemption date. It will be use the funds obtained from its recent sale of interest to the redemption date. It will use the funds obtained from its recent sale of $200,000,000 principal amount of 6 5/8%, 30-year debentures. Why would management do this? I. To improve capitalization. II. To reduce interest expense over the next three decades. III. To expedite payment of debt. A) I only B) II only C) I and II D) I and III

**B) II only** **II. To reduce interest expense over the next three decades.**

As it relates to the issunace of Eurodollar bonds issued by a US corporation, which of the following is / are not true? I. The corporation is subject to currency risk II. The bonds must be registered with the SEC prior to sale III. The investors will receive payments in their domestic currency IV. The bonds may only be sold to qualified institutional buyers in the US A) I and III B) II and IV C) I and III D) I, II, III, and IV

**D) I, II, III, and IV** **I. The corporation is subject to currency risk** **II. The bonds must be registered with the SEC prior to sale** **III. The investors will receive payments in their domestic currency** **IV. The bonds may only be sold to qualified institutional buyers in the US**

The NAV of mutual fund shares is calculated: A) Daily B) Monthly C) As prescribed in the prospectus D) Whenever the number of shares out standing inscreases

**C) As presecribed in the prospectus**

Which of the following are not false about a put seller? I. The investor wants the option to exercise. II. The investor's maximum loss is unlimited. III. The investor's maximum gain is the premium. IV. The investor would be considered bullish. A) I and II B) II and III C) III and IV D) I, III, and IV

**C) III and IV** **III. The investor's maximum gain is the premium.** **IV. The investor would be considered bullish.**

Which type of preferred stock allows the company involved to buy back the stock from the stockholders? A) Cumulative preferred B) Participating preferred C) Convertible preferred D) Callable preferred

**D) Callable preferred**

Which of the following is not true when a registered rep opens a new account for a customer? A) The customer must sign the new account form B) The rep who introduced the new account must be noted C) The registered principal must sign the new account form D) The firm must send the customer a copy of the new account form within 30 days of account opening

**A) The customer must sign the new account form**

A 45-year-old investor has rolled over $10,000 from an IRA to buy a car. How long does he have to deposit the money in another qualified plan? A) 45 days B) 60 days C) 30 days D) 90 days

**B) 60 Days**

When dividends are distributed, the name of the first day when pruchasers are no longer entitled to receive the dividends is called: A) Dividend date B) Declaration date C) Record date D) Ex date

**D) Ex date**

A fraudulent practice used to entice buyers as a result of new activity in the security is a violation is known as: A) Front running B) Pegging C) Match sales D) Trading ahead

**C) Match sales**

What makes a warrant more valuable than a right? A) A warrant allows an investor to purchase preferred stock at a subscription price. B) The subscription price is always higher than the market value, indicating a valuable company to invest in. C) The holder of a warrant has twenty years during which he may buy the stock at the subscription price. D) The long life of a warrant is what makes the warrant more valuable than the right since the subscription price usually cannot change during the time of the warrant.

**D) The long life of a warrant is what makes the warrant more valuable than the right since the subscription price usually cannot change during the time of the warrant.**

Which of the following does not price on the basis of par value alone? A) Corporate bonds B) Treasury bills C) Treasury notes D) Treasury bonds

**B) Treasury bills**

A customer in the 30% tax bracket is considering investing in a municipal bond with a current yield of 6%. If they were to consider a corporate bond of equal quality the corporate bond must yield at least: A) 8.6% B) 7.8% C) 9% D) 4.2%

Tax-Equivalent Yield Formula (TEY) TEY= MUNI Rate/100%-Tax Rate 6%/100-30% = 6%/70% = 8.57% **Answer A = 8.6%**

Which of the following are available for investors in a CMO: I. Tendered Amortization Class II. Planned Amortization Class III. Principal Only IV. Targeted Amortization Class A) I only B) I and IV C) II and III D) II, III, and IV

**D) II, III, and IV** **II. Planned Amortization Class** **III. Principal Only** **IV. Targeted Amortization Class**

According to FINRA Rule 2210, if an established broker dealer communicates with retail customers eletronically, which of the following are required to be pre-filed 10 days prior to first use? A) Retail communications regarding direct participation programs B) Retail communication regarding preferred stock C) Retail communication concerning municipal bonds D) Retail communication regarding GNMAs

**A) Retail communications regarding direct participation programs**

Preemptive rights for common shareholders can best be described as the right to: A) Vote for members of the board of directors when vacancies arise. B) Maintain a proportionate share of ownership in the corporation if more shares are issued. C) Shares in the earnings of the corporation through the receipt of dividends when declared. D) Earn a profit through the increase in share value between the time shares are purchased and sold.

**B) Maintain a proportionate share of ownership in the corporation if more shares are issued.**

What is the name of a special order that must be executed for the entire amount of shares or not at all without regard to time? A) FOK - Fill or Kills (Order has to be excuted immediately to it full amount or cancel immediately) B) IOC - Immediate or Cancel (Order to buy or sell a stock must be excuted immediately) C) AON - All or None (Is an order that must be excuted in it's entirety or must not be excuted at all) D) DNR - Do Not Reduce (About the stock price and the dividend)

**C) AON - All or None (Is an order that must be excuted in it's entiretly or must not be excuted at all)**

A mutual fund that charges 12b-1 fees may use the money to cover all of the following except: A) Sales fees B) Management fees C) Promotion costs D) Printing costs

**B) Management Fees**

An investor has a large amount of money to invest in different portfolios. Their representative invests the money with several different fund families. Which of the following is true regarding the representative's recommendations? A) The representative has made appropriate recommendations by diversifying a large portfolio. B) The investor will realize a reduced sales charge on their investments. C) The investor will have diversified out of systematic risk D) The representative may have engaged in breakpoint sales.

**D) The representative may have engaged in breakpoint sales.**

A customer has sold 5 ABC Oct 45 puts at 3.10. Their maximum loss is: A) $1,550 B) $20,950 C) $Unlimited D) $24,050

45-3.10=41.9*5=209.5*100=$20,950 **Answer B = $20,950**

To determine the number of shares of common stock which can be obtained on conversion from a bond, use which of the following: A) Par value divided by conversion price B) Conversion price divided by par value C) Par value multiplied by conversion price D) Conversion price multiplied by par value

**A) Par value divided by conversion price**

Which of the following is true of the ACAT process when a customer requests to have his securities transferred to another broker dealer? A) The carrying firm has 1 business day to validate the positions and an additional 3 business days to complete the transfer B) The carrying firm has 3 business days to validate the positions and an additional 3 business days to complete the transfer C) The carrying firm has 3 business days to validate the positions and an additional 4 business days to complete the transfer D) The carrying firm has 1 business day to validate the positions and an additional 4 business days to complete the transfer

**A) The carrying firm has 1 business day to validate the positions and an additional 3 business days to complete the transfer**

IBM is going public and is offering 20,000,000 shares for sale at $11 each. Which of the following have to appear on the cover of the prospectus: I. Number of shares II. Proceeds to the company III. Names of syndicate members IV. SEC disclaimer A) IV only B) I and III C) I, II, and IV D) I, II, III, and IV

**D) I, II, III, and IV** **I. Number of shares** **II. Proceeds to the company** **III. Names of syndicate members** **IV. SEC disclaimer**

The OC corporation located in Bakersfield, CA, wishes to make an offer of its securities only to the residents of California. Which of the following are true statements? I. The OC can make the securities available through a Rule 147 offering II. The OC will not have to file a standard registration statement with the SEC III. 80% if the proceeds of the offering must be used in California IV. Buyers of the OC securities will have a 6-month resale restriction A) I only B) II, III C) I, II, and III D) I, II, III, and IV

**D) I, II, III, and IV** **I. The OC can make the securities available through a Rule 147 offering** **II. The OC will not have to file a standard registration statement with the SEC** **III. 80% if the proceeds of the offering must be used in California** **IV. Buyers of the OC securities will have a 6-month resale restriction**

A registered rep makes a recommendation to a customer via email. Which of the following is (are) true? A) The rep must make a reasonable effort to obtain the customer's investment objective and financial situation B) The rep must have reasonable grounds for believing the recommendation is suitable for the client C) The email would be considered correspondence D) All of the choices listed

**D) All of the choices listed** **-The rep must make a reasonable effort to obtain the customer's investment objective and financial situation** **-The rep must have reasonable grounds for believing the recommendation is suitable for the client** **-The email would be considered correspondence**

An investor purchases an WTF Nov. 75 call in September at 4.15 when WTF is 73.50. Which of the following is true? I. The option has $4.15 in time value II. The investor wants to exercise the option III. The investor's maximum loss is $4.15 IV. The option has no intrinsic value A) I, II, and III B) I, II, and IV C) II and III D) I, II, III, and IV

**D) I, II, III, and IV** **I. The option has $4.15 in time value** **II. The investor wants to exercise the option** **III. The investor's maximum loss is $4.15** **IV. The option has no intrinsic value**

Another name for an education IRA is: A) A Coverdell B) A 529 C) A UGMA D) A SEP

**A) A Coverdell**

Your customer is the manager of a large pension fund and tells you that he regularly trades stock in the fourth market. He regularly trades stock with: A) Market makers B) Other institutions C) Broker dealers D) Issuers

**B) Other Institutions**

A mutual fund may send out capital gains distributions: A) Monthly B) Quarterly C) Annually D) Semi-annually

**C) Annually** **Note: 1 time a year**

Which of the following refer to the types of ownership in a customer account? I. Joint II. Individual III. Margin IV. Trust A) I, II B) III, IV C) I, II, and IV D) I, II, III, and IV

**C) I, II, and IV** **I. Joint II. Individual IV. Trust**

When a member files retail communications with FINRA what is required to be kept in an internal file at the firm? I. A copy of the communication with the date it was first used II. The name of the principal who approved the communication III. The date the principal approved the communication IV. The date FINRA approved the communication A) I, II B) I, II, III C) III, IV D) I, II, III, and IV

**B) I, II, III** **I. A copy of the communication with the date it was first used** **II. The name of the principal who approved the communication** **III. The date the principal approved the communication**

All of the following are true about annuities units? I. When an investor annuitizes a contract, he trades in his accumulation unites for annuity units II. The number of annuity units is variable depending upon the fluctuation of the investments III. The number of annuity units an investor receives depends partially upon the annuitant's age and sex IV. The number of annuity units an investor receives depends partially upon the payout option selected, the value of the account, and the assumed interest risk A) I, II B) I, IV C) I, III, IV D) I, II, III, and IV

**C) I, III, IV** **I. When an investor annuitizes a contract, he trades in his accumulation unites for annuity units** **III. The number of annuity units an investor receives depends partially upon the annuitant's age and sex** **IV. The number of annuity units an investor receives depends partially upon the payout option selected, the value of the account, and the assumed interest**

As it relates to the firm element continuing education plan requirement which of the following is correct? A) it is based on the agent's initial registration date B) It is based on the date the agent submitted the most recent U4 C) It is based on a needs analysis D) It must be performed every 2 years

**C) It is based on a needs analysis**

As it relates to a member's AML program which of the following are true? I. It must be approved by senior management II. A SARs must be filed for any suspicious activity exceeding $10,000 III. All SARs must be kept for 3 years, 2 years readily accessible IV. AML programs must ensure customers do not appear on the OFAC list A. I and IV B. II and III C. II and IV D. I, II, III, IV

**A) I and IV I. It must be approved by senior management IV. AML programs must ensure customers do not appear on the OFAC list**

Who acts as the customer's agent? A. Broker B. Dealer C. Neither D. Both

**A) Broker**

Which of the following debt securities pays interest? A. T' Bill B. Commercial paper C. Banker's acceptance D. Industrial revenue bond

**D. Industrial revenue bond**

A recent college graduate has $ 4,200 to invest. He has $ 9,000 in student loans to be repaid over the next five years and is seeking your recommendation. You would most likely recommend? A. Growth fund B. Treasury strips C. Money market fund D. Balanced fund

**C. Money market fund**

Which of the following may always trade in the money market? A. T' bond B. T' note C. ADR D. Banker's acceptance

**D. Banker's acceptance**

You have been working for the local school system for 15 years and have been contributing to a payroll deduction plan for 9 years. You have deposited $ 11,000 during the period and it has grown to $ 16,200. What is your tax liability upon a lump sum withdrawal if you are in the 30% tax bracket when you retire: A. $4,840 B. $0 C. $3,300 D. $1,560

**D. $1,560 $16,000 - $11,000 = $5,200 $5,200 X 0.3 = $1,560**

If the investor does not want to purchase additional shares, these rights may be: A. Exercised B. Sold C. Expired D. Closed

**B. Sold**

A brokerage firm making markets in an over-the-counter security is acting in its capacity as a: A. Broker B. Dealer C. Agent D. Underwriter

**B. Dealer**

An investor wants to place money into a pooled investment that will offer him the opportunity to move money between managed portfolios at the NAV to time the market. Which of the following investments would be the best asset selection for this investor? A. A UIT B. A closed end fund C. An ETF D. An open-end fund

**D. An open-end fund**

A corporation may pay a dividend in which of the following ways? A. Stock B. Cash C. Stock of another company D. All of the choices listed

**D. All of the choices listed**

Which of the following are true regarding the mortality risk with regard to a variable annuity? I. It is absorbed by the annuitant II. It is absorbed by the insurance company III. A fee is deducted from the separate account IV. A fee is deducted from the general account A. II and III B. I and IV C. II and IV D. I and III

**A. II and III** **II. It is absorbed by the insurance company** **III. A fee is deducted from the separate account**

The SEC rule covering the sale of restricted securities by an officer of a corporation is: A. 144. B. 146. C. 147. D. 15c3-3.

**A. 144.**

Your customer has an open order to buy 1000 WTF at $42. WTF goes ex dividend for 18 cents per share. Your customer's order will now be A. An open order to buy 1000 WTF at $41.82 B. An open order to buy 1000 WTF at $42.18 C. An open order to buy 1000 WTF at $42 D. Canceled

**A. An open order to buy 1000 WTF at $41.82**

What is the mutual fund pricing formula? A. NAV - SC = POP B. NAV + SC = POP C. SC + POP = NAV D. NAV x SC = POP

**B. NAV + SC = POP**

A mutual fund is prohibited from doing which of the following: I. Buying stock on margin II. Having a joint trading account III. Selling or distributing its own securities IV. Selling securities short A. I, II, and IV B. I, II, and III C. II, III and IV D. I, II, III, and IV

**D. I, II, III, and IV** **I. Buying stock on margin** **II. Having a joint trading account** **III. Selling or distributing its own securities** **IV. Selling securities short**

Random withdrawals from a variable annuity are done by: A. FIFO B. LIFO C. Average cost D. Exclusion ratio

**B. LIFO** **"Last In First Out"**

A customer who has suffered significant losses in his account is seeking legal remedies to recoup the lost funds. As part of your firm's account opening process customers are required to sign a pre dispute arbitration clause. the customer requests that a copy of the pre dispute clause be sent to him for his lawyer to review. Your firm must send the papers: A. within 10 business days of request B. within 5 business days of request C. within 3 business days of request D. within 20 business days of request

**A. within 10 business days of request**

According to FINRA Rule 2210, copies of all institutional communications must be kept by the broker dealer for a minimum of how long? A. 1 year B. 2 years C. 3 years D. 5 years

**C. 3 years**

Which of the following represents an ownership interest in a publicly traded company? I. Common stock II. Preferred stock III. Secured debenture IV. Authorized stock A. I Only B. I & II C. I, II & III D. I, II, III & IV

**B. I & II** **I. Common stock** **II. Preferred stock**

An investor is considered an annuitant because: A. He has entered into a contract with an insurance company B. He has retired from a company and is collecting an annual annuity called a pension C. He has invested his money with an annuity firm D. He has retired and is living off his retirement income called his annuity

**A. He has entered into a contract with an insurance company**

A small company has funds for expansion which it will need in about eight months. It should invest them in: A. Preferred stocks. B. U.S. Treasury bills. C. Long-term municipals. D. Corporate bonds.

**B. U.S. Treasury bills.**

An investor in the WTF high growth fund could best be described as: A. A creditor of WTF B. A stockholder in WTF C. An owner of WTF D. A shareholder with an undivided interest in the fund

**D. A shareholder with an undivided interest in the fund**

What is an investment banker's primary function? A. To furnish investment information to banks B. To finance new stock offerings C. To assist corporations in obtaining money for long-term use D. To purchase unexercised stock rights

**C. To assist corporations in obtaining money for long-term use**

Which of the following risks are borne by the insurance company when a customer purchases a variable annuity? I. Investment risk II. Operating expense risk III. Mortality risk IV. Inflation risk A. I, II B. II, III C. II, III, IV D. I, II, III, IV

**B. II, III** **II. Operating expense risk** **III. Mortality risk**

An employee must be allowed to participate in a corporate pension plan at: A. 18 B. 21 C. 25 D. 19

**B. 21**

All of the following purchase options can be used by investors investing in variable annuities except: A. Periodic payment immediate annuity B. Single premium immediate annuity C. Periodic payment deferred annuity D. Single premium deferred annuity

**A. Periodic payment immediate annuity**

A Single investor has invested $ 8,000 in his IRA for the current year. Which of the following is true? A. The investor may add an additional $ 1,000 B. The investor is subject to a 6% penalty on the overage per year for as long as it remains in the IRA C. The investor is subject to a 10% penalty on the overage D. The investor is subject to a 6% penalty on the entire amount

**B. The investor is subject to a 6% penalty on the overage per year for as long as it remains in the IRA**

Which of the following is a characteristic of a penny stock? I. Exchange traded II. Quoted on NASDAQ III. Priced under $5 IV. Non NASDAQ A. I and II B. I and III C. III and IV D. II and IV

**C. III and IV** **III. Priced under $5** **IV. Non NASDAQ**

The rules governing the issuing of corporate securities to the public are covered under which act? A. Act of 1929 B. Act of 1933 C. Act of 1934 D. Act of 1935

**B. Act of 1933**

A mutual fund that charges 8 1⁄2% must offer all of the following except: A. Conversion privileges B. Reinvestment of dividends at the NAV C. Rights of accumulation D. Breakpoint schedule

**A. Conversion privileges**

Which of the following is an order to buy that allows the floor broker to exercise judgment as to the price? A. Market order B. Not held order C. Fill or kill D. AON

**B. Not held order**

As it relates to a variable interest rate municipal security, which of the following are true? I. The bond has a fixed coupon rate II. The bond has a stable principal value III. The bond has a coupon rate that varies IV. The bond has a principal amount that varies A. I and II B. I and IV C. II and III D. III and IV

**C. II and III** **II. The bond has a stable principal value** **III. The bond has a coupon rate that varies**

The rate at which the Federal Reserve lends money to other banks is called the: A. Federal funds rate B. Discount rate C. LIBOR D. Bank loan rate

**B. Discount rate**

Your customer has just bought $ 10,000 worth of Kashmir Growth fund. The trade will settle on: A. The third business day B. The fourth business day C. The next business day D. The same day

**D. The same day**

A registered rep sent an email to Scott Avett, a potential client who was referred by his client Joe Kwon. The email: A. is considered advertising B. is considered retail communication C. is considered correspondence D. requires FINRA approval

**C. is considered correspondence**

All of the following have a fixed payment schedule except: A. Variable life insurance B. Whole life insurance C. Contractual plan D. Universal life insurance

**D. Universal life insurance**

Which of the following characterizes a split offering? A. Shares are being sold by the issuer and existing shareholders. B. Shares are being sold by existing shareholders only. C. Shares are being sold by the issuing corporation only. D. Shares are being sold to existing shareholders only.

**A. Shares are being sold by the issuer and existing shareholders.**

All WTF Jan 60 Calls would be grouped within the same: A. Kind B. Type C. Class D. Series

**D. Series**

Regarding different types of securities offerings, which of the following is not true? A. In a secondary offering, underwriting proceeds can go to investors who are selling their shares. B. In a secondary offering, underwriting proceeds can go to employees who are selling their shares. C. In an initial public offering (IPO), underwriting proceeds will go to the issuer. D. In a primary additional issue, underwriting proceeds will go to the existing stockholders.

**D. In a primary additional issue, underwriting proceeds will go to the existing stockholders.**

Which is true about the board of directors? A. The board is elected by the vote of the outstanding shares B. The board must be made up of at least 60% non-interested or non-affiliated persons C. The board may be made up of a maximum of 40% of interested persons, such as a broker, attorney, or immediate family member D. None of the choices listed

**A. The board is elected by the vote of the outstanding shares**

All of the following describe a breakpoint sale except: A. A registered representative trying to earn larger commissions by recommending purchase of fund shares just below the breakpoint B. A registered representative spreading out a large sum of money over different families of funds C. A registered representative notifying an investor of the availability of a sales charge reduction when he is investing a large sum of money which puts him close to the breakpoint D. None of the choices listed

**C. A registered representative notifying an investor of the availability of a sales charge reduction when he is investing a large sum of money which puts him close to the breakpoint**

Which of the following is an accurate statement regarding shareholder’s investment objectives? A. A growth or capital appreciation objective is achieved when the value of shares owned increases. B. Neither an income nor growth objective is achieved when dividends are declared by the board of directors. C. An income objective is achieved when the value of shares owned increases. D. A growth and capital appreciation objective is achieved when dividends are declared by the board of directors.

**A. A growth or capital appreciation objective is achieved when the value of shares owned increases.**

Which of the following may vary? I. The number of annuity units II. The number of accumulation units III. The price of accumulation units IV. The price of annuity units A. I and IV B. II and III C. II, III, and IV D. I, II, III, and IV

**C. II, III, and IV** **II. The number of accumulation units** **III. The price of accumulation units** **IV. The price of annuity units**

Which of the following is true about selling dividends? A. A registered representative may not use the pending dividend payment as the sole basis for recommending stock purchase. B. If the investor buys shares just prior to the ex-date, he will have a portion of his investment money returned. C. After his money is returned, he will still be liable for taxes on the dividend amount. D. All of the choices listed.

**D. All of the choices listed.** **-A registered representative may not use the pending dividend payment as the sole basis for recommending stock purchase.** **-If the investor buys shares just prior to the ex-date, he will have a portion of his investment money returned.** **-After his money is returned, he will still be liable for taxes on the dividend amount.**

All of the following would be traded in the secondary market, except: A. Listed common stocks. B. Unlisted bonds. C. Bonds that are trading flat. D. New issues.

**D. New issues.**

An investor needs immediate access to his money, so he should invest in liquid investments; which is the list in order from most liquid to least liquid? A. Money market funds, stocks and bonds and mutual funds, annuities, and real estate B. Stocks and bonds, money market funds, annuities, and CMOs C. Stocks and bonds, annuities, CMOs, and real estate D. Real estate, money market funds, stocks and bonds, and annuities

**A. Money market funds, stocks and bonds and mutual funds, annuities, and real estate**

All of the following are violations except: A. Recommending a security because of its future price appreciation B. Recommending a mutual fund based on a pending dividend to an investor seeking income C. Implying that FINRA has approved the firm D. Showing a client the past performance of a mutual fund for the last three years since its inception

**D. Showing a client the past performance of a mutual fund for the last three years since its inception**

An annuitant is interested in the largest monthly payment from her annuity now that she has retired; which of the following payout options will give her the greatest monthly payment? A. Joint with last survivor B. Life with period certain C. Life without period D. Life only/straight life

**D. Life only/straight life**

What percentage of employee contributions to a 403b plan are vested after one year? A. It depends on the plan but normally at least 50% B. All employee contributions vest after 1 year C. It is required by law that all contributions to 403b vest after 10 years D. All employee contributions vest immediately

**D. All employee contributions vest immediately**

All of the following a regulated under the Act of 1933 except: A. An initial public offering B. A registered secondary offering C. An arbitrated offering D. A subsequent primary offering

**C. An arbitrated offering**

All of the following are types of orders except: I. All or none II Fill or kill III. Mini/ maxi IV. Best efforts A. I and II B. II and IV C. I and IV D. III and IV

**D. III and IV** **III. Mini/ maxi** **IV. Best efforts**

A no-load mutual fund may charge a 12b-1 fee that is: A. Up to 1⁄4 of 1% of the NAV B. Less than 1⁄4 of 1% of the NAV C. Up to 1⁄4 of 1% of the POP D. Less than 1⁄4 of 1% of the POP

**A. Up to 1⁄4 of 1% of the NAV**

A customer has an unexpected expense to meet and would like to take a loan from his variable life insurance policy. Which of the following is not true? A. At least 75% of their cash value must be made available to them in the form of a loan B. Loans must be made available after 3 years C. Interest must be charged to the loan D. Interest must be charged on the loan and the rate must be equal to the prime rate at the time the loan is made

**D. Interest must be charged on the loan and the rate must be equal to the prime rate at the time the loan is made**

A broker dealer who has been in business 6 months must do which of the following? A. Pre-file all information regarding the firm’s public website within 10 days of first use B. Pre-file all television and radio ads within 10 days of first use C. Both A and B D. Neither A nor B

**C. Both A and B** **-Pre-file all information regarding the firm’s public website within 10 days of first use** **-Pre-file all television and radio ads within 10 days of first use**

A customer is seeking to execute an order with your broker dealer. Utilizing FINRA's 5 percent policy what will be the basis for the mark down? A. The highest offer B. The highest bid C. The lowest offer D. The lowest bid

**B. The highest bid**

The yield to maturity will be less than yield to call when: A. Interest rates are going up B. Interest rates are below the coupon rate C. The issuer has had its rating increased by a major rating service D. Inflation expectations are going down

**A. Interest rates are going up**

Mr. Jones has just completed a review of your firm's services and decides to open an account with your firm after meeting with his new representative. Your firm must provide Mr. Jones with a copy of the new account information: A. within 30 days B. within 45 days C. with the first statement D. by the completion of the first transaction

**A. within 30 days** **Memorize!!**

Stock indexes are often used by investors as a benchmark to determine performance, which of the following indexes are weighted by the price of its members? I. Dow Jones Industrial Average II. NASDAQ Composite Average III. Russell 2000 IV. Dow Jones Transportation Average A. I only B. III only C. II and III D. I and IV

**D. I and IV** **I. Dow Jones Industrial Average** **IV. Dow Jones Transportation Average**

A designated market maker is prohibited from all of the following except: A. Trading for their own account between the bid and the ask B. Accepting a not held order C. Failing to purchase securities for their own account in the absence of public buy orders D. Allowing the spread to become excessive in relation to the stock's volume

**A. Trading for their own account between the bid and the ask**

Which of the following depicts the way mutual fund shares are quoted in financial media? A. Bid = NAV; Ask = NAV plus an average sales charge B. Bid = NAV less any redemption fee; Ask = NAV plus an average sales charge C. Bid = NAV; Ask = NAV plus the maximum sales charge D. Bid = NAV less any redemption fee; Ask = NAV plus the maximum sales charge

**C. Bid = NAV; Ask = NAV plus the maximum sales charge**

Your customer has retired early on a very large inheritance and wants to know about his options for withdrawing money from his IRA that he established 12 years ago. You should tell him: A. Since he does not need the money, he could leave the money there to grow indefinitely B. He has to begin taking distributions at 59 1/2 C. He must begin taking distributions at 65 D. He must begin taking distributions at 72

**D. He must begin taking distributions at 72**

CMOs are issued by all of the following except: A. Investment banks B. FNMA C. US government agencies D. FHLMC

**C. US government agencies**

All of the following are ways an investor may purchase a variable annuity except: A. Periodic payment deferred annuity B. Single payment deferred annuity C. Single payment immediate annuity D. Periodic payment immediate annuity

**D. Periodic payment immediate annuity**

All of the following statements are true when an issuer runs a tombstone ad except: A. The tombstone must be filed with the SEC B. The tombstone may run in a national newspaper during the cooling off period C. The tombstone will list the names of the underwriters and where to obtain a prospectus D. A tombstone is not considered an offer to sell securities

**A. The tombstone must be filed with the SEC**

An agent who has been registered continuously for fifteen years leaves the industry for 18 months to pursue other interests. After 18 months the agent becomes re-associated with another member firm. Which of the following is true? A. The agent's regulatory continuing education requirement is based on the date of re-association B. The agent's regulatory continuing education requirement is based on the date on their last U5 C. The agent's regulatory continuing education requirement is based on the date of initial association D. The agent's regulatory continuing education requirement is based on the date of original association less the time spent out of the industry

**C. The agent's regulatory continuing education requirement is based on the date of initial association**

A mutual fund's NAV per share will decrease under all of the following except: A. New shares are issued B. Securities in the portfolio fall in price C. The fund sends out a monthly dividend D. The fund sends out an annual capital gain

**A. New shares are issued**

A purchase order for investment company shares must be executed at a price based on the net asset value: A. Next computed after receipt of the order by the dealer B. Last computed before receipt of the order by the dealer C. Computed the previous day as of the close of the New York Stock Exchange D. Computed the same day the order is received by the dealer

**A. Next computed after receipt of the order by the dealer**

An investor has annuitized her variable annuity. Which of the following are true? I. Accumulation units have been exchanged for annuity units II. Annuity units have been exchanged for accumulation units III. The number of accumulation units is fixed IV. The number of annuity units is fixed A. II and III B. I and IV C. II and IV D. I and III

**B. I and IV** **I. Accumulation units have been exchanged for annuity units** **IV. The number of annuity units is fixed**

All of the following are true with regards to a variable annuity’s separate account except: A. If the separate account is a direct investment account, it is classified as an open-end investment company B. If the variable annuity’s separate account is an indirect investment account, it is classified as a UIT C. The separate account may only be used to invest in mutual fund shares D. The separate account may not be commingled with the general account of the insurance company

**C. The separate account may only be used to invest in mutual fund shares**

Which of the following is the computation for a company’s net worth? A. Assets minus liabilities. B. Liabilities divided by assets. C. Assets divided by liabilities D. Liabilities minus assets.

**A. Assets minus liabilities.**

A preferred stock that can be redeemed by the issuing corporation is called a: A. Cumulative preferred. B. Convertible preferred. C. Participating preferred. D. Callable preferred.

**D. Callable preferred.**

A broker dealer that is a FINRA member wishes to send out an electronic newsletter to 30 retail customers in a 30-day period. Which of the following statements is true? A. The communication must be approved by FINRA prior to first use B. The communication must be approved by FINRA within 10 days of first use C. The communication must be approved by a registered principal prior to first use D. The communication must be approved by a registered principal within 10 days of first use

**C. The communication must be approved by a registered principal prior to first use**

Who must disclose the amount involved in the commission? A. Broker B. Dealer C. Neither D. Both

**A. Broker**

Corporations may do all of the following except A. Issue nonvoting common stock B. Issue preferred stock only C. Repurchase its own shares D. Sell stock out of the treasury

**B. Issue preferred stock only**

An investor has been dollar cost averaging into a mutual fund account for 24 months. The mutual fund shares have been consistently rising over the last two years. The investor will notice that: A. They have purchased more shares as the price has increased B. They have purchased the same number of shares C. They have purchased less shares as the price has increased D. They are losing money as their average price increases

**C. They have purchased less shares as the price has increased**

An investor has just begun the payout phase of their variable annuity and is wondering about the tax consequences of their payments. You should tell them: A. Your payments will be tax free B. You will have to pay capital gains on the money C. You will have to pay ordinary income taxes on the entire amount D. You will only be taxed on the growth portion of the payment

**D. You will only be taxed on the growth portion of the payment**

Under Regulation T, credit may be extended on all of the following long positions, except: A. Listed stocks. B. Listed bonds. C. Listed options. D. Convertible Bonds selling below par

**C. Listed options.**

Which of the following investments would be least suitable for an investor seeking a short term, liquid investment providing safety of principal? A. T' Bills B. Auction rate securities C. Money market funds D. 30-90 day brokered CDs

**B. Auction rate securities**

Your customer has twin boys who are about to enter kindergarten. He realizes the need to begin saving for their college education and is trying to decide between a 529 plan and an educational IRA. You tell him: I. The amount you can contribute to the 529 plan exceeds what you can contribute to the educational IRA II. Both the 529 plan and the IRA allow you to make pre-tax contributions III. Only the IRA allows withdrawals for educational expenses to be taken tax free IV. A benefit to the 529 is that if one of the boys chooses not to go to college the money in the plan can be used entirely for his brother’s education A. I, II B. II, III C. I, IV D. II, IV

**D. II, IV** **II. Both the 529 plan and the IRA allow you to make pre-tax contributions** **IV. A benefit to the 529 is that if one of the boys chooses not to go to college the money in the plan can be used entirely for his brother’s education**

Which of the following statements are true regarding the Act of 1933? I. It regulates the new issues II. It regulates the primary market III. It regulates trades between issuers and the public IV. It regulates investor to investor trades A. I, II B. III, IV C. I, II, III D. I, II, III, IV

**C. I, II, III** **I. It regulates the new issues** **II. It regulates the primary market** **III. It regulates trades between issuers and the public**

When a specialist or DMM is 'stopping stock:' I. He guarantees the purchase or sale of a specific number of shares at a given price. II. He may stop stock for the customers of NYSE members. III. He must obtain permission from a Floor Governor. IV. He guarantees a specific price while the broker tries to do better. A. I and II. B. III and IV. C. I, II and IV. D. II, III and IV.

**C. I, II and IV.** **I. He guarantees the purchase or sale of a specific number of shares at a given price.** **II. He may stop stock for the customers of NYSE members.** **IV. He guarantees a specific price while the broker tries to do better.**

ERISA regulates all of the following except: A. Public sector pension plans B. Funding C. Vesting D. Communication

**A. Public sector pension plans**

A mutual fund must disclose its performance for: A. 1- and 5-years B. 1- and 3-years C. 1-, 5- and 10-years D. 1, 3, and 5 years

**C. 1-, 5- and 10-years**

When an issuer is in the process of raising additional capital, they can do a preemptive rights offering. The advantages to the company's existing shareholders include all of the following except: A. Right to buy new shares below the CMV B. Right to sell existing shares back to the issuer C. Right to sell the rights in the secondary market D. Right to maintain a proportional investment in the company

**B. Right to sell existing shares back to the issuer**

When a beneficiary of a UGMA account reaches the age of majority what happens to the custodian? A. They receive their final payment and are removed from the account B. The custodianship is terminated C. The assets are liquidated pursuant to UGMA regulations and the custodian resigns D. The custodianship is terminated, and the custodian must waive all claims to the assets in the account

**B. The custodianship is terminated**

Which of the following investments exposes the investor to the most purchasing power risk? A. Growth fund B. Income fund C. Money market fund D. Fixed annuity

**D. Fixed annuity**

When evaluating pension plans ERISA would regulate all but which of the following plans? A. 401K B. Public sector plan C. Private sector plan D. A small business plan administered by a qualified third party

**B. Public sector plan**

REITs provide investors with all of the following advantages except A. Pass through income B. Liquidity C. Limited liability D. Tax deduction for losses

**D. Tax deduction for losses**

All of the following pay dividends except: A. Common stock. B. Preferred stock. C. ADRs. D. Warrants.

**D. Warrants.**

A large multinational corporation is selling a new issue of securities to investors in Europe. Which of the following is true? A. The securities must be registered with The SEC B. The securities must be an offering of debt only C. This is an exempt transaction, and the securities need not register with The SEC D. Prior to offering the securities for sale FINRA's corporate finance department must issue an exemption

**C. This is an exempt transaction, and the securities need not register with The SEC**

The ex-date for a closed-end mutual fund is set by the: A. Board of Directors of the Fund B. FINRA C. SEC D. Underwriter

**B. FINRA**

Which of the following is true about taxation of annuities? A. Contributions are made with after tax money B. The investment is allowed to grow tax deferred C. When the investor withdraws money from the contract, only the growth is taxed D. All of the choices listed

**D. All of the choices listed** **-Contributions are made with after tax money** **-The investment is allowed to grow tax deferred** **-When the investor withdraws money from the contract, only the growth is taxed**

All of the following are types of underwriting commitments except: A. Firm Commitment B. Not held Commitment C. Mini max commitment D. All or none commitment

**B. Not held Commitment**

Which of the following is not a type of annuity? A. Fixed annuity B. Variable annuity C. Contractual annuity D. Combination annuity

**C. Contractual annuity**

An investor has deposited $ 100,000 into a qualified retirement account over a 10-year period. The value of the account has grown to $ 175,000 and the investor plans to retire and take a lump sum withdrawal. He will pay: A. Capital gains tax on $ 75,000 only B. Ordinary income taxes on the $ 75,000 only C. Ordinary income taxes on the whole $ 175,000 D. Ordinary income taxes on the $ 100,000 and capital gains on the $ 75,000

**C. Ordinary income taxes on the whole $ 175,000**

A simplified Employee Pension IRA is: A. Frequently used by small companies and individuals to plan for retirement B. Attractive to small employers because it allows them to establish a retirement plan for their employees quickly and inexpensively C. A plan which requires all eligible employees to participate as well as the employer, both of whom are contributing to the fund D. All of the choices listed

**D. All of the choices listed** **-Frequently used by small companies and individuals to plan for retirement** **-Attractive to small employers because it allows them to establish a retirement plan for their employees quickly and inexpensively** **-A plan which requires all eligible employees to participate as well as the employer, both of whom are contributing to the fund**

An aggressive growth fund has realized substantial appreciation in its portfolio and would like to send out the gains to the shareholders. The fund may do this type of distribution: A. Annually B. Quarterly C. Monthly D. As declared by the board of directors

**A. Annually**

Which of the following is a double-barreled bond? A. Section 8 bond B. NHA C. PHA D. Hospital bond backed by revenues and full faith and credit

**D. Hospital bond backed by revenues and full faith and credit** **-Double-Barreled Bond: Both Revenue and Taxing Authority!**

A stock listed on the NYSE stopped trading because of an influx of orders. Trading of the stock in other markets will appear on the Network A (consolidated tape): A. As it occurs, even though it stopped trading on the NYSE. B. Will not be shown during the time it stopped trading on the NYSE. C. The trades are held back and printed after trading starts on the NYSE again. D. Trades in other markets will not resume until trading starts on the NYSE again.

**D. Trades in other markets will not resume until trading starts on the NYSE again.**

Which of the following municipal bonds pay interest that is federally taxable? A. GO (General Obligation) B. Revenue C. PHA (Public Housing Authority) D. BAB (Build America Bonds)

**D. BAB (Build America Bonds)**

According to FINRA rules, how long must a broker-dealer maintain records of complaints? A. 3 years B. 4 years C. 5 years D. 6 years

**C. 5 years**

Which of the following annuity plans would give an investor the lowest monthly payouts? A. Straight life B. Life with period certain C. Joint and survivor D. Cannot be determined

**B. Life with period certain**

An investment company in which 90% of income is derived from interest, dividends, and capital gains and that distributes at least 90% of dividends and interest received to investors is called: A. a diversified investment company B. a registered investment company C. a regulated investment company D. a growth fund

**C. a regulated investment company**

Who secures the debt of a special assessment bond? A. All taxpayers in the municipality B. Toll road revenues C. Anyone in the municipality that buys liquor or cigarettes D. People who benefit from the work is done

**D. People who benefit from the work is done**

When pricing a municipal bond based on call covenants, which call covenant could be used for the purpose of calculations? I. Sinking fund calls II. In-whole calls III. Partial calls A. II only B. I and III C. III only D. I, II, and III

**D. I, II, and III** **I. Sinking fund calls** **II. In-whole calls** **III. Partial calls**

An investor deposits $100,000 into a non-qualified retirement plan. The value increases to $140,000. The investor withdraws $60,000 out of the plan at age 62. What is the investor’s tax liability if the investor is in the 30% tax bracket? A. $6,000 B. $12,000 C. $18,000 D. $42,000

**B. $12,000** **$140,000- $100,000 = $40,000** **$40,000 x 0.3 = $12,000**

The OCC will automatically exercise an option for a public customer at expiration if it is at least: A. 0.01 in the money B. 0.05 in the money C. 0.75 in the money D. 1.25 in the money

**A. 0.01 in the money**

A custodian for an UGMA account may do all of the following with rights received in the account EXCEPT: A. let them expire B. exercise them C. donate money to exercise the rights D. sell stock in the account to raise money to exercise the rights

**A. let them expire**

A bond is convertible into 40 shares of common stock. If the bond trades at 112, what is the parity price of the stock? A. $25.00 B. $28.00 C. $40.00 D. $44.80

**B. $28.00** **Par = 1,000** **1120/40 = $28.00**

All of the following are true about the Fed Funds rate EXCEPT: A. It usually represents overnight loans B. It may only be used by member banks C. It may be used as a leading indicator D. An increase in the Fed Funds rate would indicate that the banks have less reserves to loan to other banks and public customers

**B. It may only be used by member banks**

All of the following securities are covered under the Investment Company Act of 1940 EXCEPT: A. mutual funds B. fixed annuities C. closed-end funds D. unit investment trusts

**B. fixed annuities**

All of the following accounts can trade on margin EXCEPT: A. corporate B. joint with tenants in common C. partnership D. UGMA

**D. UGMA**

Which of the following best describes Simplified Industry Arbitration? A. Disputes between members and non-members not over $50,000 B. Disputes between members not over $50,000 C. Disputes between members not over $100,000 D. Disputes between members and non-members not over $100,000

**B. Disputes between members not over $50,000**

The Securities Exchange Act of 1934 did all of the following EXCEPT: A. provided for the regulation of new issues B. provided for the regulation of credit C. provided for the regulation of exchanges D. created the SEC

**A. provided for the regulation of new issues**

Which of the following investments would be most suitable for a married couple in their 20s with money deposited in an IRA? A. Index options B. Commodities C. Growth funds D. Limited partnerships

**C. Growth funds**

All of the following are true about Coverdell ESAs and 529 plans EXCEPT: A. Deposits are made from after-tax dollars B. There are maximum annual contributions C. The beneficiary of the accounts must use the funds by age 30 in order for the funds not to be penalized D. Money can be withdrawn tax free if used for educational purposes

**C. The beneficiary of the accounts must use the funds by age 30 in order for the funds not to be penalized**

If an issuer calls a portion of its bonds, what would happen to the quality of the remaining bonds outstanding? A. The rating would improve B. The rating would be worse C. The rating would not be affected D. Cannot be determined

**A. The rating would improve**

A convertible bond selling at $1,200 is convertible into 50 shares of common stock. For the stock to be at parity with the bond, the stock would have to be trading at: A. $24 B. $25 C. $40 D. $45

**A. $24** **1,200/50 = $24**

An investor purchased a 6% U.S. government bond with a 30 year maturity and a basis of 6-1/4% for a price of 99.04. What is the yield to maturity? A. 6% B. Between 6% and 6-1/4% C. 6-1/4% D. Greater than 6-1/4%

**C. 6-1/4%**

An investor owns 2,000 shares of ABC preferred stock. If the company issues new shares through a rights offering, how many rights would the investor receive? A. 1,000 B. 2,000 C. 500 D. 0

**D. 0**

Which of the following is guaranteed in a variable life insurance policy? A. Cash value B. Death benefit C. Both (A) and (B) D. Neither (A) nor (B)

**B. Death benefit**

Which of the following would not be required on a tombstone advertisement? A. The type of security B. The company name C. The number of shares available D. The rating

**D. The rating**

Which of the following are the last creditors to be paid in the event of a company declaring bankruptcy? A. Mortgage bondholders B. Common stockholders C. Debenture holders D. Preferred stockholders

**C. Debenture holders**

If an investor is bullish on the S&P 500, which of the following option strategies would the investor use? I. Buy SPX calls II. Buy SPX puts III. Buy VIX calls IV. Buy VIX puts A. I and III B. I and IV C. II and III D. II and IV

**B. I and IV** **I. Buy SPX calls** **IV. Buy VIX puts**

When is the best time to invest in bonds if an investor is seeking capital gains? A. When interest rates are low and are expected to rise B. When interest rates are high and are expected to drop C. When interest rates are stable and expected to remain so D. When bond prices are low and interest rates have been increasing and expected to continue increasing

**B. When interest rates are high and are expected to drop**

Which of the following is not part of a corporations funded debt? A. Mortgage bonds B. Convertible bonds C. Subordinated debentures D. Commercial paper

**D. Commercial paper**

Which of the following are rights of common stockholders? I. Voting for cash dividends II. Residual claim to a corporation’s assets in the event of dissolution III. Right to inspect all records of the corporation A. II only B. I and II C. II and III D. I, II, and III

**A. II only** **II. Residual claim to a corporation’s assets in the event of dissolution**

If an investor has rolled over money from a pension fund into an IRA, how long must the investor wait before executing another rollover? A. 30 days B. 60 days C. 90 days D. 1 year

**D. 1 year**

Under NYSE rules, if an account executive wants to open a new brokerage account at another firm, what must happen? I. The account executive must obtain written permission from his firm II. The account executive must make sure that his firm receives duplicate copies of all confirmations for trades executed in the account if requested III. The account executive must obtain permission to execute trades in the account A. I only B. I and II C. II and III D. I, II, and III

**B. I and II** **I. The account executive must obtain written permission from his firm** **II. The account executive must make sure that his firm receives duplicate copies of all confirmations for trades executed in the account if requested**

Which of the following is not true of the Letter of Intent? A. It is valid for 13 months from the date of purchase B. It may be backdated for up to 90 days C. Redemptions are not allowed during the letters effective period D. It may not be used by investment clubs

**C. Redemptions are not allowed during the letters effective period**

Which of the following corporate bonds is backed by stocks and bonds owned by the corporation? A. Guaranteed bonds B. Collateral trust bonds C. Open-end mortgage bonds D. Equipment trust bonds

**B. Collateral trust bonds**

All of the following are true about variable annuities EXCEPT: A. Annuitants have the right to vote to change objectives B. The issuer of the annuity assumes the risk for this investment C. Qualified annuities are tax-deductible and tax-deferred D. A fixed number of annuity units are liquidated periodically during the payout period

**B. The issuer of the annuity assumes the risk for this investment**

Which of the following CMO tranches have the longest maturities? A. PAC B. Plain vanilla C. Z D. PO

**C. Z** **-"Z" Zero Coupon Have the Longest Maturities.**

Which of the following types of investment companies invests in a fixed portfolio of securities and charges no management fees? A. Unit investment trust B. REIT C. Face amount certificate company D. Mutual fund

**A. Unit investment trust**

Mr. True entered a market order to buy 1,000 shares of ABC Corp. The registered rep told him the trade of 1,000 shares of ABC was executed at 36.15. The firm later finds out that the trade was actually executed at 36.40. What must Mr. True do? A. Pay 36.13 B. Pay 36.40 C. Cancel the order D. Sell the stock and take the .25 profit per share

**B. Pay 36.40**

Which of the following must be shown on the confirmation of a municipal bond purchased at a discount and callable at par value? A. Yield to call B. Current yield C. Yield to maturity D. None of the above

**C. Yield to maturity** **-BC it is @ a discount**

Which of the following trades DOES NOT need to be executed in a margin account? A. Selling short B. Long calls C. Writing naked options D. Spreads

**B. Long calls**

Which of the following S+P ratings is the most speculative in the investment grade category? A. Baa B. BBB C. Ba D. BB

**B. BBB** **-Memorize**

A trade of 10,000 shares of ABC common stock would be reported on the Consolidated Tape in which of the following ways? A. ABC 100s16.50 B. ABC pr 100s16.50 C. ABC 10,000s16.50 D. ABC 1000ss16.50

**C. ABC 10,000s16.50**

Who is responsible for the safekeeping of the securities owned by a mutual fund? A. The custodian bank B. The manager C. The transfer agent D. The registrar

**A. The custodian bank**

What type of investment company could have an NAV of $10.25, a bid of $9.50, and an offering price of $9.75? A. A UIT B. Open-end C. Closed-end D. No-load

**C. Closed-end**

John Nagasaki invested in 2 stocks which were sold at the end of the year. With one of the stocks, John had a $4,000 capital gain. With the other stock, John realized an $11,000 capital loss. How would John claim this on his taxes? A. $3,000 loss this year and $4,000 carried over till next year B. $7,000 loss this year C. $4,000 capital gain this year because losses are not allowed D. None of the above

**A. $3,000 loss this year and $4,000 carried over till next year**

All of the following are true about limited partners EXCEPT: A. they have voting rights B. they cannot make management decisions C. they can compete with the partnership D. they have unlimited liability

**D. They have unlimited liability**

Which of the following are true of street name accounts? I. Margin accounts must be in street name II. Street name accounts cannot be changed to regular accounts III. The firm needs a written statement from the customer attesting to the ownership of the account IV. They are accounts registered in the name of the broker-dealer with an ID# A. I and IV B. I, II, and IV C. II and IV D. I, III, and IV

**D. I, III, and IV** **I. Margin accounts must be in street name** **III. The firm needs a written statement from the customer attesting to the ownership of the account** **IV. They are accounts registered in the name of the broker-dealer with an ID#**

All of the following are leading indicators EXCEPT: A. industrial production B. the money supply C. stock prices D. the discount rate

**A. industrial production**

A bond is convertible into common stock for $50. If the company announces a 50% stock dividend, what is the new conversion price? A. $25 B. $24.24 C. $33.33 D. $66.66

**C. $33.33** **Bond Par: $1,000** **1,000/50 = 20** **20 X .50 = 10 shares** **20 + 10 = 30** **1,000/30 = $33.33**