Test 1

Question 1

All of the following apply to a red herring?

Answer 1

It’s given to investors before the prospectus is finalized
It helps to determine demand for a new issue
It’s also known as the preliminary prospectus

Question 2

Which of the following statements is true when a bond is trading at a premium?

Answer 2

Nominal yield is the highest yield

Question 3

The MSRBs anti money laundering rules require that a municipal broker dealers procedures contain

Answer 3

An employee training program

A designated independent party to test the procedures

Question 4

Which of the following statements is correct with the respect to closed end investment companies?

Answer 4

They are listed and traded on exchanges

There exists a fixed number of outstanding shares

The issuing company does not redeem its own shares

Question 5

What is the backing for a secured bond?

Answer 5

The pledge of collateral a mortgage or a lien

Question 6

A customer purchased $15,000 worth of XYZ corporation over a period of time. Which of the following is true about his subsequent sale of $5,000 of XYZ stock?

Answer 6

The investor is allowed to specify which shares are being sold to minimize his capital gain

Question 7

To properly evaluate the yield to maturity of a bond investment which of the following factors must be taken into account?

Answer 7

Annual interest paid in dollars
Number of years to maturity
Par value realized at maturity
price paid for bond

Question 8

Of the following examples which would be exempt from liability under insider trading laws?

Answer 8

There are no exceptions from liability under insider trading laws

Question 9

FINRAs main functions include all of the following?

Answer 9

Monitoring compliance with rule of ethical practice
Writing rules enforcing broker dealer behavior
Governing broker dealer and registers representative trading activity

Question 10

A corporation pays stock dividend to?

Answer 10

Conserve cash

Question 11

The cyclical and constantly fluctuating nature of interest rates has the most direct impact on

Answer 11

Market value of fixed income securities

Question 12

Which of the following is true concerning physical safety of mutual fund holdings?

Answer 12

If certificates are held they must be surrenders in good order before shares can be redeemed
Physical safety of funds assets is the responsibility of the custodian
The shareholders needs to maintain share certificates since funds use book entry accounting

Question 13

The manager of a bond fund has used the strategy of writing covered Tbond calls as a means of increasing the funds yield. Distributions to shareholders from this source of income will be treated for tax purposes as

Answer 13

Capital gains

Question 14

For stock dividends which of the following dates is not chosen by the board of directors?

Answer 14

Ex dividend date

Question 15

Which of the following is true of the registered persons on inactive status serving in active duty in the military?

Answer 15

They can continue to earn commissions

Question 16

Which of the following would be a restricted person associated with an IPO?

Answer 16

The father in law of a registered representative

Question 17

The maximum value of gift allowed by FINRA rules is

Answer 17

$100 per person per year

Question 18

On a discount bond which of the following correctly states highest to lowest yield?

Answer 18

Yield to maturity, current yield, nominal yield

Question 19

In a DDP a limited partners participation in the partnership does not take effect until?

Answer 19

The general partner approves the subscription agreement

Question 20

The average investor has limited assets but by pooling funds with other investors in an investment company the investor can receive the advantages of increased

Answer 20

Professional management and diversification

Question 21

Triple with Hong involves the expiration of which of the following four time a year?

Answer 21

Equity options

Equity option indexes

Question 22

A ZZZ corporation analyst includes ABCs 6% debenture in the analyst newsletter. ZZZ Corp is currently underwriting an ABC stock offering. This is permissible

Answer 22

If the bonds are not convertible

Question 23

If a member resigns from an SRO when will the resignation take effect?

Answer 23

30 days after receipt of formal resignation by the SRO

Question 24

Which of the following statements about the balance of payments is true?

Answer 24

It is the sum of all transactions between a country and the rest of the world over a specified period of time.

Question 25

An investors eldest child is about to graduate from high school and is not planning on attending any higher education program. What options does the investor have regarding the 529 plan which was established for this child?

Answer 25

The fund may be transferred to a sinking without penalty

Question 26

John owns a contract that entitles him to buy 100 shares of ABC at a specified price prior to a fixed expiration date. John owns a

Answer 26

Call option

Question 27

Which type of investment company issues debt instruments that offer the investor a predetermined rate of interest?

Answer 27

Face amount certificate

Question 28

A redeemable security is

Answer 28

A security with no secondary trading

Question 29

Which of the following candidate qualifications would FINRA take into consideration when waiving a qualification exam requirement?

Answer 29

The candidate has related experience in the securities industry and or investment banking

Question 30

What type of risk is involved where an investor may sustain a loss of a security must be sold quickly?

Answer 30

Liquidity risk

Question 31

In order to open a new corporate margin account all of the following are needed?

Answer 31

A new account form

A copy of the corporate charter

A corporate resolution

Question 32

Under the uniform gifts minor act which of the following statements is correct concerning a custodian account between a parent and minor child?

Answer 32

Taxes on earned income from the account are the responsibility of the minor

Question 33

A registered representative desires to open a new account for a customer. Information to open the account must be obtained

Answer 33

Before entering the first order