UNIT 19 QBANK Flashcards
Regular way settlement for common stock is
A) trade date.
B) trade date plus 3 business days.
C) trade date plus 1 business day.
D) trade date plus 2 business days.
D) trade date plus 2 business days.
Explanation
Regular way settlement is T + 2 for everything except treasuries, money market securities, and options.
Josie Reese, one of your clients with an option account, calls and asks you to remind her when she is required to settle if she bought a call today. You would tell her
A) trade date.
B) trade date plus 2 business days.
C) trade date plus 3 business days.
D) trade date plus 1 business day.
D) trade date plus 1 business day.
Explanation
Options settle the next business day (T + 1). Regular way settlement is T + 2 for everything else except treasuries and money market securities.
When securities are bought and sold, ownership changes hands between the buyer and the seller
A) upon delivery of the trade confirmation.
B) on the transaction date.
C) on the settlement date of the transaction.
D) at an agreed time between both parties.
C) on the settlement date of the transaction.
Explanation
When securities transactions occur, ownership changes hands between the two parties on the settlement date.
Isaac James has some call options in his account that he would like to exercise. He wants to know when the resulting purchase of the stock would settle. You would tell him
A) trade date plus 3 business days.
B) trade date plus 2 business days.
C) trade date plus 1 business day.
D) trade date.
B) trade date plus 2 business days.
Explanation
When purchasing or selling an option, the settlement is the next business day. When an option is exercised the resulting stock transaction is 2 business days following exercise.
Your client is buying municipal bonds and wants to know when payment is due. You should tell him
A) trade date plus 1 business day.
B) trade date plus 3 business days.
C) trade date plus 2 business days.
D) trade date.
C) trade date plus 2 business days.
Explanation
Regular way settlement is T + 2 for everything except treasuries, money market securities, options.
Your client, Teresa Jenson, calls and wants to purchase T-bills and wants to know when payment is due. You should tell her
A) trade date plus 3 business days.
B) trade date plus 2 business days.
C) trade date plus 1 business day.
D) trade date.
C) trade date plus 1 business day.
Explanation
Regular way settlement is T + 2 for everything except treasuries and money market securities. Option trades and treasuries settle next business day (T + 1 ).
A term indicating that a security is tradable and all of the requirements of the contract to sell the security have been met and the security is ready to be transferred is
A) seller’s option.
B) good delivery.
C) regular way settlement.
D) buyer’s options.
B) good delivery.
Explanation
To make settlement, good delivery must be made. Good delivery means that all the conditions of the contract have been met.
A corporate stock is purchased on Friday, April 2, regular way. When will the trade settle?
A) Monday, April 5
B) Friday, April 2
C) Wednesday, April 7
D) Tuesday, April 6
Explanation
For corporate securities, regular way settlement is the trade date (Friday, April 2) plus two business days; therefore, the trade will settle on Tuesday, April 6.
Nate McCann is closing on a house tomorrow and wants to sell some securities to meet closing costs. He wants to know how soon he could get the money and what he needs to do. You should tell
A) if he does the trade today for cash settlement he could settle today.
B) if he does the trade today he won’t be able to get the money for 3 business days because regular way settlement is T + 3.
C) if he does the trade today for cash settlement he would settle tomorrow.
D) if he does the trade today he won’t be able to get the money for 2 business days because regular way settlement is T + 2.
A) if he does the trade today for cash settlement he could settle today.
Explanation
Cash settlement is same day settlement.
James Thomas calls and is interested in buying some GNMA certificates and wants to know when payment will be due. You should tell him
A) trade date plus 2 business days.
B) trade date plus 1 business day.
C) trade date plus 3 business days.
D) trade date.
A) trade date plus 2 business days.
Explanation
Regular way settlement is T + 2 for everything except treasuries, money market securities, and options.
A stock trade took place on Tuesday, July 2. When would regular way settlement normally take place?
A) Friday, July 5
B) Tuesday, July 2
C) Wednesday, July 3
D) Monday, July 8
Explanation
Regular way settlement for a stock trade is T + 2 (trade date plus two business days). This would normally make settlement for this transaction Thursday July 4, but because July 4 is not a business day (national holiday), regular way settlement would have to be Friday, July 5.
Which of the following settlement arrangements has trade and settlement occurring on the same day?
A) Cash settlement
B) Seller’s option
C) Buyer’s option
D) Regular way settlement
A) Cash settlement
Explanation
If both parties to the trade agree, and if the buyer has the cash on hand and the seller has the securities on hand, trade and settlement can take place on the same day. This is known as cash settlement.
Your customer has purchased $10,000 in U. S. Treasury bonds. These securities
A) cannot be delivered in physical certificates because they exceed the amount for paper certificate delivery.
B) can be transferred in either physical or book-entry form in accordance with the purchasers request.
C) are required to be delivered in the form of physical paper certificates.
D) will have evidence of ownership recorded in book-entry form.
D) will have evidence of ownership recorded in book-entry form.
Explanation
All U.S. government securities no matter what the denomination or amount are delivered, transferred, and have ownership recorded in book-entry form.
Your client is purchasing XYZ corporate bonds and wants to know when regular way settlement is. You should tell her
A) trade date plus 3 business days.
B) trade date plus 1 business day.
C) trade date plus 2 business days.
D) trade date.
C) trade date plus 2 business days.
Explanation
Regular way settlement is T + 2 for everything except treasuries, money market securities, and options.
When shares are held in street name, this refers to the shares being
A) allowed to be sold only on the exchange where they were initially purchased.
B) restricted, and thus, nontransferable.
C) held at the transfer agent for the beneficial owner.
D) held in the name of the broker-dealer for the beneficial owner.
D) held in the name of the broker-dealer for the beneficial owner.
Explanation
When shares are held in street name, they are being held in the name of the broker-dealer for the beneficial owner. This is done to facilitate payments and delivery. This does not encumber the shares regarding receipts of dividends or their transferability if sold.
