Author:
teresa.ann
ID:
175868
Filename:
Series 7
Updated:
2012-10-11 13:32:03
Tags:
S7
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Description:
S7
Show Answers:

  1. All of the following enforce MSRB rules EXCEPT the: Comptroller of the Currency
    FINRA
    MSRB
    SEC
    • C
    • The MSRB has no enforcement power. The SEC and FINRA enforce municipal regulations for broker-dealers. The Comptroller of the Currency, FRB, and FDIC enforce municipal regulations for dealer banks. The MSRB establishes its rules but has no enforcement powers. (10-10)
  2. How long after a new issue is registered for sale will it be shown on the Nasdaq system?

    1 On the effective date
    2 10 days after the effective date
    3 30 days after the effective date
    4 45 days after the effective date
    1 On the effective date
  3. An investor purchases a BAT Sept 30 put @ 2 and also writes a BAT Sept 40 put @ 8. The investor will profit if: (which 2)

    1 The spread widens to more than 6
    2 The spread narrows to less than 6
    3 Both options expire
    4 Both options are exercised
    • 2 The spread narrows to less than 6
    • 3 Both options expire
  4. A brokerage firm's research department has issued a buy recommendation for XYZ Corporation's common stock. The report must contain all of the following information EXCEPT:

    1 The firm was the      managing underwriter in a recent public offering of the stock
    2 The number of      shares the firm owns of the stock
    3 The partners of      the firm hold options to purchase the stock
    4 The firm makes a      market trading in the stock
    2 The number of      shares the firm owns of the stock
  5. An investor purchased T-bonds that mature January 1, 2012. He purchased the T-bonds on Friday, February 20, for regular-way settlement. How many days of accrued interest did the investor owe?
    51
    53
    54
    55
    53
  6. A municipal dealer may not guarantee a customer against a loss under any circumstances. (12-30According to MSRB rules, a municipal bond dealer may not consider which of the following factors when determining a markup?
    1  Expenses
    2 Profit
    3 Coupon
    4 Total dollar amount of the transaction
    3 Coupon
  7. Which of the following is an indicator of the demand for municipal bonds in the primary market?

    1 The Wilshire Index
    2 The Visible Supply
    3 The Placement Ratio
    4 The Bond Buyer Index
    3 The Placement Ratio
  8. All of the following are taken into consideration when determining the markup on a municipal securities transaction EXCEPT:

    1 The dollar      amount of the trade
    2 The best      judgement of the dealer
    3 The fact that      the dealer is entitled to make a profit
    4 The financial      condition of the customer
    4 The financial      condition of the customer
  9. The Pink Sheets show:
    1 All trades that occurred the previous day for      non-Nasdaq stocks
    2 The market makers for stocks not listed on the      Nasdaq system
    3 The specialist assigned to each stock that trades on      the NYSE
    4 All trades that occurred the previous day for      NYSE-listed stocks
    2 The market makers for stocks not listed on the      Nasdaq system
  10. Which of the following must a municipal dealer disclose on a confirmation? (multiple answers) 

    1 If the municipal dealer acted as a agent
    2 If the municipal dealer acted as a principal
    3 If the municipal dealer acted as an agent for a      third party
    4 If the municipal dealer acted as a bona fide market      maker
    • 1 If the municipal dealer acted as a agent
    • 2 If the municipal dealer acted as a principal
    • 3 If the municipal dealer acted as an agent for a      third party
  11. A customer requests that a broker-dealer sell stock that he owns and use the proceeds of the sale to purchase a different stock. In determining the amount of markup that he will charge, the broker-dealer:

    1 Must consider      each transaction separately
    2 May charge a      markup on the sale only
    3 Should only      consider the amount of money involved in the sale to the customer
    4 Is prohibited      from charging a markup under these circumstances
    3 Should only      consider the amount of money involved in the sale to the customer
  12. If a municipal bond is selling at a premium and is callable at par, how is the yield calculated?

    1 As a percentage of the par value
    2 By dividing the annual income by the current price
    3 To the final maturity date
    4 To the call date
    4 To the call date
  13. A brokerage firm accepted delivery of securities on settlement. Upon further inspection of the securities, the brokerage firm discovers a problem and wishes to return the securities to the selling dealer. The process of returning securities that have previously been accepted is known as:

    1 Reallowance
    2 Reclamation
    3 Rejection
    4 Recapture
    2 Reclamation
  14. On a delivery of municipal securities, what could one dealer expect to receive from another dealer? (which 2)

    1 Bonds registered as to interest only
    2 Bearer bonds with coupons attached
    3 Bonds registered as to principal only
    4 Fully registered bonds
    • 2 Bearer bonds with coupons attached
    • 4 Fully registered bonds
  15. Which of the following is subject to the Penny Stock Rule?

    1 Unsolicited orders for a non-Nasdaq stock trading at      $3.00 per share
    2 Solicited orders for a non-Nasdaq stock trading at      $3.00 per share
    3 Unsolicited orders for a Nasdaq stock trading at      $3.00 per share
    4 Solicited orders for a Nasdaq stock trading at $3.00      per share
    2 Solicited orders for a non-Nasdaq stock trading at      $3.00 per share
  16. The 5% markup policy would apply to a:

    1 Municipal bond trade
    2 Transaction on the NYSE
    3 Proceeds transaction
    4 Purchase of mutual fund shares
    3 Proceeds transaction
  17. A broker-dealer has a financial advisory relationship with an issuer of municipal securities. Under MSRB rules, which TWO of the following statements are TRUE?

    1 The broker-dealer      is permitted to act as a syndicate member on securities issued by this      municipality. 
    2 The      broker-dealer is not permitted to act as a syndicate member on securities      issued by this municipality.
    3 The financial      advisory relationship between the broker-dealer and the municipality must      be in writing.
    4 The financial      advisory relationship between the broker-dealer and municipality is not      required to be in writing.
    • 2 The      broker-dealer is not permitted to act as a syndicate member on securities      issued by this municipality.
    • 3 The financial      advisory relationship between the broker-dealer and the municipality must      be in writing.
  18. Secondary market offerings of municipal bonds could be found in all of the following EXCEPT:

    1 Broker's broker's list
    2 Munifacts
    3 Bond Buyer
    4 Dealer offering list
    3 Bond Buyer
  19. A municipal tombstone ad shows bonds maturing serially from 2012 through 2030. The 2030 maturity is a 6.00% bond offered at a 6.75 basis. The bonds maturing in 2020 and thereafter are callable beginning in 2018 @ 102 and at 101 in 2019 and at par on any interest date after 2019 . The bonds maturing in 2030 should be priced to the:

    2018 call date
    2019 call date
    2020 call date
    Maturity date
    Maturity date
  20. A municipal dealer has a customer's order to purchase bonds on an agency basis. According to MSRB rules, the customer's order must be executed at:
    1 The best price      available
    2 A price that is      fair and reasonable
    3 The average      price obtained from all dealers contacted
    4 The first price      obtained
    2 A price that is      fair and reasonable
  21. Which of the following persons control positions in secondary market municipal bonds for a broker-dealer?

    1 Underwriter
    2 Trader
    3 Agent
    4 Principal
    2 Trader
  22. An individual purchases $100,000 face value of a 6% municipal bond at a dollar price of 101 1/2. The bond's maturity is 7-1-17, but the issue has been called for redemption on the first call date of 7-1-05 @ par. The customer's confirmation should show the:

    1 Yield-to-call
    2 Yield-to-maturity
    3 Taxable equivalent yield
    4 After-tax yield
    1 Yield-to-call
  23. A term bond has a mandatory sinking fund call feature. What method will be used to determine which specific bonds will be called?

    1 Investors with the largest position
    2 Investors with the largest coupon
    3 Investors with the longest maturity
    4 Random lot
    4 Random lot
  24. Quotes for non-Nasdaq, over-the-counter traded equities can be obtained from: (which 2) 

    1 The third market
    2 The Pink Sheets
    3 Consolidated Quotation System
    4 The OTC Bulletin Board
    • 2 The Pink Sheets
    • 4 The OTC Bulletin Board
  25. A municipal bond trader looking for the best price of a specific municipal issue in the secondary market would use:

    1 The Yellow Sheets
    2 The Daily Bond Buyer
    3 Munifacts
    4 A broker's broker
    4 A broker's broker
  26. Munifacts could contain: (multiple answers) 

    1 The fed funds rate
    2 Information about an upcoming municipal issue
    3 The amount of a new issue that is yet unsold (new      issue balance)
    4 Dealer to dealer availability of municipal bonds in      the secondary market
    • 1 The fed funds rate
    • 2 Information about an upcoming municipal issue
    • 3 The amount of a new issue that is yet unsold (new      issue balance)
    • 4 Dealer to dealer availability of municipal bonds in      the secondary market
  27. A registered representative employed by the research department of a member firm is not permitted to be supervised by which department of a broker-dealer?

    1 Trading
    2 Investment      banking
    3 Operations
    4 Sales
    2 Investment      banking
  28. Regulation NMS would apply to which TWO of the following choices? (which 2)

    1 Listed equity trades     
    2 Listed debt      trades
    3 Quotes available      for manual execution
    4 Quotes available      for electronic execution
    • 1 Listed equity trades
    • 4 Quotes available      for electronic execution
  29. Which of the following are entitled to participate in a Keogh Plan? (multiple answers)

    1 A self-employed doctor
    2 A security analyst who made $2,000 giving public      lectures on technical analysis
    3 An engineer of a corporation who made $5,000 making      public speeches on his specialization
    4 An executive of a corporation who received $5,000 in      stock options from his corporation
    • 1 A self-employed doctor
    • 2 A security analyst who made $2,000 giving public      lectures on technical analysis
    • 3 An engineer of a corporation who made $5,000 making      public speeches on his specialization
  30. Where would bid limitations for a new municipal bond issue be found?

    1 Official Statement
    2 Indenture
    3 Notice of Sale
    4 Syndicate Agreement
    3 Notice of Sale
  31. A customer purchased 10 ABC January 50 calls, paying a $2 premium and 10 ABC January 50 puts, paying a $2 premium. The market price of ABC stock is $50 per share. The buyer's breakeven points (2) will be: $46 $48 $52 $54
    $46 $54
  32. When computing the dollar price of a municipal bond sold on a yield basis, which of the following call features would be used?
    1 Sinking fund      call
    2 Catastrophe call     
    3 In-whole call
    3 In-whole call
  33. Treasury bills are issued to mature in all the following time frames EXCEPT:

    One month
    Three months
    Six months
    Nine months
    Nine months
  34. A customer has a restricted margin account. The customer sells $7,000 worth of securities and on the same day buys $5,000 worth of other securities. The Regulation T margin requirement is 50%. The customer:

    1 Can withdraw      cash equal to the margin requirement on the net amount
    2 Cannot withdraw      anything because the account is restricted
    3 Can withdraw the      entire $2,000 net amount
    4 Can withdraw 50%      of $7,000
    1 Can withdraw      cash equal to the margin requirement on the net amount
  35. Which of the following statements is TRUE concerning Exchange-Traded Funds (ETFs)?

    1 The securities may be used by individuals to pursue a      market timing strategy.
    2 The purchase price is based on a net asset value, plus      any applicable sales charges.
    3 The securities are priced once a day based on the close      of trading.
    4 Transactions in these securities must be executed in a      cash account.
    1 The securities may be used by individuals to pursue a      market timing strategy.
  36. Rank the following ratings from highest to lowest.

    1 Baa3
    2 Ba1
    3 A1
    4 A2
    A1, A2, Baa3, Ba1
  37. Under the provisions of the Securities Act of 1933, which of the following are exempt securities? (Multiple answers)

    1 Securities      issued by state chartered banks
    2 Municipal bonds
    3 Federal      government securities
    4 Securities      issued by small business investment companies
    • 1 Securities      issued by state chartered banks
    • 2 Municipal bonds
    • 3 Federal      government securities
    • 4 Securities      issued by small business investment companies
  38. Prior to being listed on an exchange, which of the following must be evaluated? (multiple answers)

    1 Number of      shareholders
    2 Dividend payout
    3 Earnings record
    4 Current market      price
    • 1 Number of      shareholders
    • 3 Earnings record
    • 4 Current market      price
  39. All of the following are responsible for the enforcement of Municipal Securities Rulemaking Board rules EXCEPT:

    1 The Securities      and Exchange Commission
    2 FINRA
    3 The Federal      Reserve Board
    4 The New York      Stock Exchange
    4 The New York      Stock Exchange
  40. When a stock sells ex-rights, which orders on a specialist's book will be reduced? (Which 2)

    1 Buy-limit order
    2 Sell-stop order
    3 Buy-stop order
    4 Sell-limit order
    • 1 Buy-limit order
    • 2 Sell-stop order
  41. Which of the following describes the payout on a variable annuity?

    1 A fixed number of annuity units multiplied by a fixed      dollar amount
    2 A fixed number of annuity units multiplied by a      variable dollar amount
    3 A variable number of annuity units multiplied by a      fixed dollar amount
    4 A variable number of annuity units multiplied by a      variable dollar amount
    2 A fixed number of annuity units multiplied by a      variable dollar amount
  42. A broker-dealer may reject a delivery of municipal bonds if:
    1 The bonds were      called by the issuer and were identified as such
    2 The market price      increases after the trade date
    3 The bonds are      lacking a legal opinion
    4 $1,000      denominations are delivered
    3 The bonds are      lacking a legal opinion
  43. Which of the following would not be found on the Consolidated Quotation System (CQS)?

    1 An AMEX stock
    2 An AMEX warrant
    3 A NYSE listed      bond
    4 A non-Nasdaq      stock
    4 A non-Nasdaq      stock
  44. List the order of priorities that you would follow when opening an options account for a customer.
    1 Send the      customer an Options Clearing Corporation risk disclosure document.
    2 Have the      customer sign the options agreement.
    3 Have the      Registered Options Principal approve the account.
    4 Accept the      order.
    • 1 Send the      customer an Options Clearing Corporation risk disclosure document. 
    • 3 Have the      Registered Options Principal approve the account.
    • 4 Accept the      order.
    • 2 Have the      customer sign the options agreement.
  45. Which of the following statements are true regarding a new municipal issue? (which 2)

    1 Member orders      will receive priority over designated orders.
    2 There is usually      a period of time allowed for the accumulation of orders.
    3 Syndicate      procedures must be disclosed to potential purchasers.
    4 Pre-sale orders      receive the highest priority.
    • 2 There is usually      a period of time allowed for the accumulation of orders.
    • 4 Pre-sale orders      receive the highest priority.
  46. All of the following are TRUE in the sale of restricted securities EXCEPT:
    1 Current      financial information must be made available to prospective purchasers
    2 The sale must      conform to the provisions of SEC Rule 144
    3 A brokerage firm      can act as an agent or principal in the transaction
    4 The sale must be      at the bid price as determined by the current quote of the outstanding      securities
    4 The sale must be      at the bid price as determined by the current quote of the outstanding      securities
  47. Over the last 20 years, Grant Rock, age 66, has invested $200,000 into a tax qualified annuity sponsored by his employer, Tombstone Enterprises. The account is currently worth $800,000. He decides to annuitize the contract and begin drawing down the contract balance. In the first year he has received $50,000. How will these distributions be taxed?

    1 100% is taxable as ordinary income.
    2 100% is tax-free since Grant is above age 59 1/2.
    3 Part of the distribution will be taxable at long-term      capital gains rates and the balance will be viewed as a return of capital.     
    4 Part of the distribution will be taxable at ordinary      income rates and the balance will be viewed as a return of capital.
    1 100% is taxable as ordinary income.
  48. A municipal bond that was issued at par is purchased by an individual in the secondary market at a price of 90. What would be the tax consequence if the bond is held to maturity? a.    

    $100 capital gain    
    $100 capital loss     
    $100 tax-free interest    
    $100 ordinary income
    $100 ordinary income
  49. How is the discount on an OID accreted for tax purposes?

    A.    Declining balance method
    B.     Straight-line method
    C.    Constant yield method
    D.     Cost basis method
    C.    Constant yield method
    (this multiple choice question has been scrambled)
  50. Use the following information to answer this question. Public orders on a specialist's book show an inside market comprised of Broker A bidding for 100 shares of ABC Corporation at 42.25. Broker B is offering to sell 300 shares of ABC at 42.63. The size of the market would be:

    A.    300 by 300
    B.     100 by 300
    C.    300 by 100
    D.     100 by 100
    B.     100 by 300
    (this multiple choice question has been scrambled)
  51. Use the following information to answer this question. Public orders on a specialist's book show an inside market comprised of Broker A bidding for 100 shares of ABC Corporation at 42.25. Broker B is offering to sell 300 shares of ABC at 42.63. If the specialist wanted to bid for his own account, what is the lowest price he could bid for the stock?
    A.    42.26
    B.     41.94
    C.    42
    D.     42.25
    A.    42.26
    (this multiple choice question has been scrambled)
  52. Use the following information to answer this question. Public orders on a specialist's book show an inside market comprised of Broker A bidding for 100 shares of ABC Corporation at 42.25. Broker B is offering to sell 300 shares of ABC at 42.63. If the specialist wanted to offer stock, what is the highest price at which he could offer the stock?

    A.    42.88
    B.     42.62
    C.    42.63
    D.     42.64
    B.     42.62
    (this multiple choice question has been scrambled)
  53. A customer purchases a municipal bond with 25 years remaining to maturity. The bond has been pre-refunded to its first call date. The issue is callable in 7 years at 108, declining to par in 14 years. It also has a sinking fund call provision which begins in 17 years at par. For confirmation purposes, the bond should be priced to the:

    A.    Final maturity date
    B.     First call date
    C.    First par call
    D.     Sinking fund date
    B.     First call date
    (this multiple choice question has been scrambled)
  54. These securities are issued by foreign governments and corporations, trade in U.S. markets, and are denominated in U.S. dollars. (Use the following choices to answer this question.)
    A.    Repurchase agreements
    B.     Open-end investment company shares
    C.    Eurodollar bonds
    D.     Yankee bonds
    D.     Yankee bonds
    (this multiple choice question has been scrambled)
  55. A limited partner has a $60,000 basis which includes a $40,000 recourse loan. When the partnership is liquidated, there are $200,000 of assets to satisfy $500,000 of debt. The partner's maximum potential loss would be:

    A.    $100,000
    B.     $20,000
    C.    $40,000
    D.     $60,000
    D.     $60,000
    (this multiple choice question has been scrambled)
  56. Which two of the following are NOT SROs?               I.        MSRB             
    II.        SIPC           
    III.        FINRA           
    IV.        SEC
    II, IV
  57. Which two of the following would lead to disintermediation? (which 2)             
    I.        Savings bank rates are below money market rates. 
    II.        Savings bank rates are above money market rates.            
    III.        The FRB has adopted a tight money policy.         IV.        The FRB has adopted an easy money policy.
    1 & 3
  58. Which of the following are typically sold at a discount?  (multiple answers)             
    I.        Commercial paper             
    II.        Treasury bills            
    III.        Bankers' acceptances
    1,2,3
  59. A corporation has issued debentures convertible at $50. The stock pays a 10% stock dividend. According to the nondilutive feature of the bond indenture, the new conversion price would be:
    A.    $45.45
    B.     $19.23
    C.    $20.83
    D.     $45.00
    A.    $45.45
    (this multiple choice question has been scrambled)
  60. Which of the following statements concerning a tax qualified annuity is CORRECT?

    1 It grows tax-free.
    2 It is not subject to contribution limits.
    3 It has a zero cost basis.
    4 It may be subject to tax-free distributions, if      qualified.
    3 It has a zero cost basis.
  61. An individual purchases 10 ABC June 90 calls @ 4 and writes 10 ABC June 95 calls @ 2. The individual's maximum profit is:

    $2,000
    $3,000
    $4,000
    $6,000
    $3,000
  62. An individual purchases 10 ABC June 90 calls @ 4 and writes 10 ABC June 95 calls @ 2. Above what market price for ABC will there no longer be an effect on the individual's profit?

    90
    92
    94
    95
    95
  63. A woman will be retiring in 2030. She is interested in income and having her principal available at retirement. Which of the following municipal bonds would you recommend?

    1 Aaa rated GO      maturing in 2025
    2 Aaa rated GO      maturing in 2034 which is callable in 2023 at 105
    3 PHA maturing in      2030
    4 Ba rated revenue      bond maturing in 2024
    3 PHA maturing in      2030
  64. According to CAPM, all of the following would be examples of diversifiable, nonsystematic risks EXCEPT:

    1 Credit risk
    2 Interest rate      risk
    3 Business risk
    4 Industry risk
    2 Interest rate      risk
  65. All of the following are benefits of owning a real estate investment trust EXCEPT:

    1 Stable dividend      income
    2 Ability to buy      and sell shares easily
    3 Diversification
    4 Protection      against rising interest rates
    4 Protection      against rising interest rates
  66. A customer enters a sell stop-limit order for 100 XYZ at 25.50. XYZ trades occur as follows: 25.50, 25.25, 25.13, SLD 25.50. The customer's order was:

    1 Executed at the market price after the order was      entered
    2 Executed at 25.25
    3 Executed at 25.50
    4 Not executed
    4 Not executed
  67. If a corporation is in a liquidation, the holder of a subordinated debenture would be paid:

    1 Before bank      loans and before accounts payable
    2 Before bank      loans and after accounts payable
    3 After bank loans      and before accounts payable
    4 After bank loans      and after accounts payable
    4 After bank loans      and after accounts payable
  68. Regulation T applies to: (which 2) 

    1 Cash accounts
    2 Margin accounts
    3 Commodity      accounts
    4 Municipal bond      margin accounts
    • 1 Cash accounts
    • 2 Margin accounts
  69. A customer sells XYZ short at $40 and sells one XYZ October 40 put at 5. What would the customer's profit or loss per share be if the put is exercised when the market value of the stock is $35, and the stock received pursuant to that exercise is used to cover the short stock position?

    $10 profit
    $5 profit
    0
    $5 loss
    $5 profit
  70. Which of the following pertain to ADRs? (which 2)

    1 They facilitate      the trading of foreign securities in U.S. markets.
    2 They facilitate      the trading of U.S. securities in foreign markets.
    3 They are      receipts issued for foreign securities.
    4 They are      receipts issued for U.S. securities.
    • 1 They facilitate      the trading of foreign securities in U.S. markets.
    • 3 They are      receipts issued for foreign securities.
  71. Which of the following persons cannot delegate power of attorney to a third party for the purpose of making securities transactions?

    1 A husband
    2 A wife
    3 A corporation 
    4 A custodian for      a minor
    4 A custodian for      a minor
  72. A transaction occurs between two dealers for a Nasdaq stock. The trade must be reported by:

    1 The buyer within      30 seconds
    2 The seller      within 30 seconds
    3 Both within 30      seconds
    4 Both by the end      of the day
    2 The seller      within 30 seconds
  73. The securities that are deposited in an escrow account for an advanced refunding are:
    1 Revenue bonds
    2 General      obligation bonds
    3 Federal agency      bonds
    4 Treasury bonds
    4 Treasury bonds
  74. All of the following will be found in the Official Notice of Sale EXCEPT:

    1 Call provisions      if any
    2 The name of the      bond counsel writing the legal opinion
    3 The date, time,      and place of sale where the bidding procedure will take place
    4 The bond rating
    4 The bond rating
  75. When doing a municipal bond swap, to avoid the wash sale rule you could alter any of the following EXCEPT:

    1 Issuer
    2 Maturity
    3 Rating
    4 Coupon
    3 Rating 
  76. Which of the following is an indicator of the demand for municipal bonds in the primary market?

    1 The Wilshire Index
    2 The Visible      Supply
    3 The Placement      Ratio
    4 The Bond Buyer      Index
    3 The Placement      Ratio
  77. A put option may be written in a cash account if the investor:

    1 Is long the      underlying security in the account
    2 Is short the      underlying security in the account
    3 Has cash in the      account equal to the exercise price
    4 Is long a call      option on the same underlying security
    3 Has cash in the      account equal to the exercise price
  78. A call is purchased in February and exercised in June. The following April the stock is sold. Which two of the following statements are correct? (which 2) 

    1 The resulting      gain or loss is short-term.
    2 The resulting      gain or loss is long-term.
    3 The cost basis      of the stock is the same as the strike price.
    4 The cost basis      of the stock is the call premium plus the strike price.
    • 1 The resulting      gain or loss is short-term.
    • 4 The cost basis      of the stock is the call premium plus the strike price.
  79. A broker-dealer appears on the Nasdaq system as a market maker for DCIR common stock. An employee of the firm responsible for maintaining the firm's inventory in DCIR is known as a:

    1 Specialist
    2 Floor broker
    3 Compliance      director
    4 Position trader
    4 Position trader
  80. When a manager of a municipal underwriting syndicate determines the priority of orders to be allocated, the orders would include all of the following EXCEPT:

    1 Group net
    2 Designated
    3 Member takedown
    4 Opening purchase
    4 Opening purchase
  81. to the next year. Therefore, the preferred stockholder will receive only $5 for this year. (4-14If an investor purchases one XYZ October 40 put for $500 when XYZ is selling at $38, the intrinsic value of the option is:

    0
    $200
    $300
    $500
    $200
  82. When a municipal bond is issued as an original issue discount, the upward adjustment in the purchase price is called:

    1 Accretion
    2 Amortization
    3 Depreciation
    4 Depletion
    1 Accretion
  83. Municipal bond unit investment trusts have all of the following characteristics EXCEPT:

    1 Investors can      buy units in the fund, usually in multiples of $1,000
    2 The certificates      have coupons attached and are in bearer form
    3 Investors can      redeem the units at any time through the fund's trustee 
    4 The value of the      unit will decline if interest rates rise
    2 The certificates      have coupons attached and are in bearer form
  84. A municipal bond issue with an inverted yield scale would have:

    1 Lower yields on      the shorter maturities than on the longer maturities
    2 Higher yields on the shorter maturities than on the longer maturities
    3 Yields the same      on all maturities
    4 Prices higher on      the shorter maturities than on the longer maturities
    2 Higher yields on the shorter maturities than on the longer maturities
  85. Net working capital is?
    • Current assets minus current liabilities
    • where assests equals cash, accounts recievable, and inventory.  Liablilities equals notes payable, accounts payable, and taxes payable.
  86. Which of the following would increase most in price if interest rates decline?

    1 Short-term bonds      selling at a discount
    2 Long-term bonds      selling at a discount
    3 Short-term bonds      selling at a premium
    4 Long-term bonds      selling at a premium
    2 Long-term bonds      selling at a discount
  87. Which of the following would most likely have a mandatory sinking fund?

    1 Serial issue
    2 Balloon issue
    3 Term issue
    4 Convertible      issue
    3 Term issue
  88. All of the following are TRUE regarding dividends EXCEPT:

    1 A growth company      normally has a low dividend payout ratio
    2 A stock dividend      creates a current tax liability when received
    3 A blue chip      company has a long history of paying dividends
    4 The market price      of a preferred stock is influenced by its dividend payout
    2 A stock dividend      creates a current tax liability when received
  89. Where would a listing of the allocation of bonds for a new municipal issue be found?

    1 Notice of Sale
    2 Underwriting     
    3 Agreement Account Summary      Report
    4 Official      Statement
    3 Agreement Account Summary      Report
  90. Current ratio equals?
    • Assets divided by liabilities.
    • Where assets equal cash, accounts recievable, and inventory.
    • Liabilities equal notes payable, accounts payable, and taxes payable.
  91. An investor would purchase an oil and gas limited partnership for all of the following reasons EXCEPT:

    1 The oil      depletion allowance
    2 Intangible      drilling costs
    3 Tax incentives
    4 Recapture      provisions
    4 Recapture      provisions
  92. All of the following would be found in a municipal revenue bond resolution EXCEPT:

    1 Restrictions on      the sale of additional bonds
    2 Rate covenants
    3 Sinking fund      provisions
    4 The      yields-to-maturity of the bonds
    4 The      yields-to-maturity of the bonds
  93. A syndicate manager in the sale of a new municipal bond issue would normally allocate bonds in which of the following orders of priority? (Multiple answers) 

    1 Member orders
    2 Orders for the      benefit of the syndicate account
    3 Designated      orders
    2,3,1
  94. In this question, pre-sale orders, which is the first priority, is not mentioned. The next priority would be orders for the benefit of the account (syndicate), designated orders, and individual member orders. (10-9A municipality would refund a revenue bond issue for all of the following reasons EXCEPT to:

    1 Reduce interest      charges
    2 Issue new bonds      at lower interest rates
    3 Reduce the      market value of outstanding bonds that are not refunded
    4 Eliminate restrictions in the bond resolution
    3 Reduce the      market value of outstanding bonds that are not refunded
  95. Which of the following new bond issues would most likely be purchased through competitive bidding?

    1 Corporate bonds
    2 General      obligation bonds
    3 High yield bonds     
    4 Revenue bonds
    2 General      obligation bonds
  96. A block of bonds is offered firm by Dealer A to Dealer B for one hour with a five minute recall. Dealer A calls Dealer B and says "fill or kill." Dealer B:

    1 Has five minutes      to take the bonds Must take the      bonds if he does not call
    2 Dealer A back within five minutes Has one hour to      take the bonds
    3 Must take the      bonds if he does not call
    4 Dealer A back within one hour
    1 Has five minutes      to take the bonds Must take the      bonds if he does not call
  97. Which of the 2 following are true about SIPC?

    1 It was created      by an Act of Congress and is considered a U.S. government agency.
    2 It is a      nonprofit organization that only broker-dealers may join.
    3 It provides      insurance for customer accounts in the event of bankruptcy by a      broker-dealer.
    4 It provides      insurance for customer accounts for fraud, embezzlement, and      counterfeiting.
    • 1 It was created      by an Act of Congress and is considered a U.S. government agency.
    • 2 It is a      nonprofit organization that only broker-dealers may join.
  98. Term bond quotes are based on:

    1 Yield-to-maturity     
    2 Current yield
    3 Nominal yield
    4 Dollar price
    4 Dollar price
  99. A municipal broker-dealer would be acting as a principal in which of the following scenarios? (multiple answers) 

    1 Selling bonds      from inventory to an individual
    2 Selling bonds      from inventory to a broker's broker
    3 Buying bonds      from another broker-dealer for inventory
    4 Buying 500 bonds      to fill an insurance company's order for 250 bonds
    1,2,3,4
  100. A woman wishes to open an account at a municipal securities firm. She identifies herself as the spouse of a trader at another municipal securities firm. Which of the following is 2 (are) correct?

    1 The rep must      follow all instructions from the trader's employer.
    2 The MSRB must be      notified.
    3 The carrying      broker-dealer must send written notification of each transaction to the      trader's employer.
    1,3
  101. A reduction in the rate of inflation is known as:

    1 Stagflation
    2 Deflation
    3 Disinflation
    4 Stagnation
    3 Disinflation
  102. If an OID bond (original issue discount) is purchased and held to maturity the discount is considered to be ____ and taxable/not taxable?
    interest, not taxable
  103. ABC Brokerage, a broker-dealer, purchases 600 shares of stock from a market maker to fill a customer's buy order. ABC has acted as a:

    1 Dealer
    2 Specialist
    3 Agent
    4 Underwriter
    3 Agent
  104. A municipal bond with a 6% coupon is priced to a 7% basis. If this bond's yield-to-maturity increased by 40 basis points:

    1 The      yield-to-maturity would be 5.60%
    2 The      yield-to-maturity would be 6.40%
    3 The      yield-to-maturity would be 6.60%
    4 The      yield-to-maturity would be 7.40%
    4 The      yield-to-maturity would be 7.40%
  105. Regarding cash dividends, which of the following statements is correct?

    1 A cash dividend      becomes a current liability when it is declared.
    2 The amount of      the dividend may never exceed the current earnings of the corporation.
    3 Cash dividends      must be paid if the earnings for the year exceed the amount of the stated      dividend.
    4 Dividend income      may be offset by capital losses.
    1 A cash dividend      becomes a current liability when it is declared.
  106. All of the following statements apply to long-term (brokered) CDs EXCEPT:

    1 They may have      limited liquidity
    2 Investors may be      subject to interest-rate risk
    3 They may be      callable
    4 The total amount      of the investment is FDIC-insured
    4 The total amount      of the investment is FDIC-insured
  107. When a corporation goes bankrupt, which of the following creditors would be the last to be paid?

    1 Internal Revenue      Service
    2 Debenture      holders
    3 Preferred      stockholders
    4 Common      stockholders
    2 Debenture      holders
  108. What effect will the declaration of a cash dividend have on a company's balance sheet? (which 2)

    1 Cash will be      reduced
    2 Dividends Payable will increase
    3 Net Working      Capital will remain the same
    4 Retained      Earnings is reduced
    • 2 Dividends Payable will increase
    • 4 Retained      Earnings is reduced
  109. If a customer's objectives are safety of principal and income, you as the account executive could suggest all of the following EXCEPT:

    1 AAA rated      corporate bonds
    2 High-grade      preferred stocks
    3 High-grade      mortgage bonds
    4 Income bonds
    4 Income bonds
  110. The Federal Reserve Board was given the authority to set margin requirements according to the provisions of the:

    1 Securities Act      of 1933
    2 Securities      Exchange Act of 1934
    3 Securities      Investors Protection Act of 1970
    4 Investment      Company Act of 1940
    2 Securities      Exchange Act of 1934
  111. The purchase price of a no-load fund is determined by:

    1 The net asset      value plus a sales charge
    2 The net asset      value plus a commission
    3 The net asset      value as computed at the end of the business day
    4 The supply and      demand for the fund
    3 The net asset      value as computed at the end of the business day
  112. The advance-decline theory states that:

    1 A bull market exists if the Dow industrials and      transportations make new highs
    2 A bear market exists if more put options have been      purchased by investors than call options
    3 It is bullish if more stocks go up than go down during      the day
    4 A large number of shares sold short is bullish
    3 It is bullish if more stocks go up than go down during      the day
  113. Orders for bonds are allocated in what order of priorities?
    • 1 presale orders
    • 2 syndicate or group account net
    • 3 disgnated orders
    • 4 member orders
  114. When a market maker gives a quote for a stock without qualification, the quote is a:

    1 Subject quote      for 100 shares
    2 Workout quote      for 100 shares
    3 Nominal quote      for 100 shares
    4 Firm quote for      100 shares
    4 Firm quote for      100 shares
  115. Mr. Smith, a self-employed computer analyst, earned $125,000 during 20XX. What is the maximum permissible deductible contribution to his Keogh Plan for 20XX?

    $2,000
    $5,000
    $25,000
    $50,000
    $25,000
  116. A client would like to actively trade, purchase on margin and have broad exposure to the U.S. equity market. Which of the following recommendations would be the least suitable?

    1 An S&P 500 mutual fund
    2 An S&P 500 Exchange Traded Fund
    3 A DJIA Exchange Traded Fund
    4 A managed closed-end fund
    1 An S&P 500 mutual fund
  117. All of the following are types of overlapping debt EXCEPT:

    1 The issuance of      debt for an adjoining road district
    2 The issuance of      debt for an adjoining school district
    3 Debt issued      between two counties
    4 Debt issued      between two states
    4 Debt issued      between two states
  118. Municiple serial bonds are quoted on what basis?
    Yield to maturity.
  119. American Telephone Company of Ohio is offering $50,000,000 worth of 9% bonds at a price of 99.25% of par value. The State of Ohio has a state income tax. A buyer of the bond would be: (which 2) 

    1 Subject to state      income tax
    2 Exempt from      state income tax
    3 Subject to      federal income tax
    4 Exempt from      federal income tax
    • 1 Subject to state      income tax
    • 3 Subject to      federal income tax
  120. A NYSE bond order ticket shows the following: Buy 5m @ 101 GTCThe customer has placed a:

    1 Limit order to      buy $5,000 of bonds
    2 Stop order to      buy $5,000 of bonds
    3 Limit order to buy      $50,000 of bonds
    4 Market order to      buy $5,000,000 of bonds
    1 Limit order to      buy $5,000 of bonds
  121. The Consumer Price Index:

    1 Measures the      average level of food and utility prices over a given period of time
    2 Measures the
    average prices paid by U.S. consumers over a six-month period of time
    3 Measures the      average change in prices for specific goods and services purchased by      consumers in certain cities
    4 None of the      above
    3 Measures the      average change in prices for specific goods and services purchased by      consumers in certain cities
  122. A customer purchases 10 MMS May 20 puts at 2 in a cash account when the market price of MMS is 24. Which of the 2 following are true regarding this transaction?

    1 The settlement      date for the transaction is one business day.
    2 The settlement      date for the transaction is three business days.
    3 The Regulation T      payment date is three business days.
    4 The Regulation T      payment date is five business days.
    • 1 The settlement      date for the transaction is one business
    • day.
    • 4 The Regulation T      payment date is five business days.
  123. Who cannot trade on the floor of the NYSE?

    1 A two-dollar      broker
    2 A specialist
    3 An institutional      block trader
    4 A competitive      trader
    3 An institutional      block trader
  124. The prospectus for a limited partnership states that the subscription price for each unit is $20,000. According to industry rules, the maximum allowable underwriting compensation for this public offering is:

    1 $50 per unit
    2 Subject to the      interpretations of the 5% markup policy
    3 Not subject to      any limit but must be fair and reasonable
    4 10% of the gross      proceeds of the offering
    4 10% of the gross      proceeds of the offering
  125. Which of the following must a municipal dealer disclose on a confirmation? (multiple answers) 

    1 If the municipal      dealer acted as a agent
    2 If the municipal      dealer acted as a principal
    3 If the municipal      dealer acted as an agent for a third party
    4 If the municipal      dealer acted as a bona fide market maker
    • 1 If the municipal      dealer acted as a agent
    • 2 If the municipal      dealer acted as a principal
    • 3 If the municipal      dealer acted as an agent for a third party
  126. Your client is President of XYZ Corporation and is selling XYZ shares pursuant to Rule 144. According to Rule 144, a filing must be made with the SEC:
    15 days before the sale
    At the time of the sale
    30 days after the sale
    90 days after the sale
    At the time of the sale
  127. The Securities Investors Protection Corporation (SIPC) insures all of the following accounts EXCEPT:
    A margin account
    A joint account
    A commodities account
    A custodian account
    A commodities account
  128. A market maker gives a firm quote of 15 - 15.50 for a stock. If the party on the other side decides to buy 800 shares, how many shares is the market maker obligated to sell at 15.50?
    100 shares
    The market maker does not have to sell any shares
    800 shares
    Whatever amount the market maker decides upon
    100 shares
  129. Which of the following is an example of a collateralized time draft?
    Debenture
    ADR
    BA
    Eurodollars
    BA
  130. Someone who wishes to hedge a portfolio of preferred stocks would buy which 2:
    Yield-based option calls
    Yield-based option puts
    Interest-rate option calls
    Interest-rate option puts
    • Yield-based option calls
    • Interest-rate option puts
  131. Which TWO of the following would NOT be permitted to purchase shares of an IPO of KMF?
    An attorney involved in the new issue of KMF
    A portfolio manager of an investment company buying for his personal account
    An investment company registered under the Act of 1940 which has some restricted persons  as shareholders
    The general account of an insurance company
    • An attorney involved in the new issue of KMF
    • A portfolio manager of an investment company buying for his personal account
  132. The Founders Income Fund has declared a dividend payable to stockholders of record Friday, May 29th. The fund will sell ex-dividend:
    Monday, May 25th     
    Tuesday, May 26th
    Wednesday, May 27th
    On the date set by the fund or its principal underwriter (sponsor)
    On the date set by the fund or its principal underwriter (sponsor)
  133. Which of the following statements best defines the term duration?
    A measure of a fixed-income security's relative interest rate risk
    A measure of a fixed income portfolio's average yield The period of time before a fixed-income security will be called
    The measure of volatility that compares an equity security to the S&P 500 index
    A measure of a fixed-income security's relative interest rate risk
  134. An investor buys an 8% New York City bond at a 10.00 basis. If the bond is held to maturity, the investor's net yield will be:
    8%
    Between 8% and 10%
    10%
    Greater than 10%
    • Between 8% and 10% because it was purchased at a discount
    • The interest on the bond is exempt from taxation but the discount will represent ordinaryincome at maturity
  135. Which of the following would be considered advertising?
    A 15-second radio spot by a broker-dealer announcing an interview session for prospective reps
    A form letter sent to 30 prospects giving advice on      asset allocation strategies
    An invitation to a seminar on tax-free investing
    The script of a seminar on 529 plans
    A 15-second radio spot by a broker-dealer announcing an interview session for prospective reps

    The rest are considered sales literature
  136. A customer requests that a broker-dealer sell stock that he owns and use the proceeds of the sale to purchase a different stock. In determining the amount of markup that he will charge, the broker-dealer:
    Must consider each transaction separately
    May charge a markup on the sale only
    Should only consider the amount of money involved in      the sale to the customer
    Is prohibited from charging a markup under these circumstances
    • Should only consider the amount of money involved in      the sale to the customer
    • the transaction is called a proceeds transaction. In determining themarkup the broker-dealer will charge, industry rules state that the firm shouldconsider only the amount of money involved in the sale to the customer
  137. If a municipal bond is selling at a premium and is callable at par, how is the yield calculated?
    As a percentage of the par value
    By dividing the annual income by the current price
    To the final maturity date
    To the call date
    To the call date
  138. All of the following are true of revenue bonds EXCEPT: Revenue bonds can be issued without voter approval Revenue bonds can be issued even though local debt limits have been reached
    Revenue bonds usually pay lower rates of interest than general obligation bonds
    Revenue bond interest is exempt from federal income taxes
    Revenue bonds usually pay lower rates of interest than general obligation bonds
  139. Which of the following best defines a tax swap?
    The purchase and sale of bonds to incur commissions The exchange of convertible bonds for stock to avoid the receipt of taxable interest income
    The purchase and sale of bonds to realize a capital loss to offset against a capital gain for tax purposes Exercising the exchange privilege of a mutual fund
    The purchase and sale of bonds to realize a capital loss to offset against a capital gain for tax purposes
  140. A client sells short 100 shares at 15 in his existing margin account. The FRB requirement is 50%. How much will he need to deposit?
    $450
    $750
    $1,500
    $2,000
    $750
  141. Which of the following factors would be LEAST important in an analysis of whether an RR had churned a client's account?
    The type of securities the client traded
    The amount of commissions the client paid
    The amount of portfolio turnover
    The client's investment objectives
    The type of securities the client traded
  142. For tax purposes, all of the following are deducted from rental income in a real estate program EXCEPT: Depreciation
    Maintenance
    Mortgage amortization
    Property tax
    Mortgage amortization
  143. A municipality could issue revenue bonds for (multiple answer):
    Hospitals
    Electric systems     
    Turnpikes
    Sewer systems
    • Hospitals
    • Electric systems     
    • Turnpikes
    • Sewer systems
  144. An investor has purchased two municipal bonds. Bond A is bought at a discount and Bond B is bought at a premium. If the investor holds both bonds to maturity, the tax consequences will be:
    Ordinary income on A, no capital loss on B
    A capital gain on A, a capital loss on B
    A capital gain on A, ordinary income on B
    A capital loss on A, a capital loss on B
    Ordinary income on A, no capital loss on B
  145. An investor is a limited partner in a direct participation program that the IRS has determined to be abusive. This investor:
    Will lose his entire investment
    May be subject to pay back taxes as well as penalties and interest
    Will escape all adverse tax consequences due to his limited status
    Will be forbidden by the IRS to invest in any other limited partnerships
    May be subject to pay back taxes as well as penalties and interest
  146. A customer purchased on margin 100 shares of ABC stock at 120 and sold short 100 shares of XYZ stock at 100. The customer also wrote an ABC 120 call @ 3 and an XYZ 100 put @ 2. What is the margin requirement for the combined transactions?
    $10,500
    $11,000
    $11,500
    $22,000
    $11,000
  147. An investor purchases a two-year ABC call. Which of the following accurately describes the exercise of the option? European style, next business day settlement
    European style, three business days settlement
    American style, next business day settlement
    American style,  three business days settlement
    American style,  three business days settlement

    Long-term anticipation securities (LEAPs) may beexercised on any day prior to expiration(American style). Exercise settlement isin the underlying stock, in three business days
  148. Which of the following parties states that a municipality can legally issue bonds?
    FINRA
    The MSRB
    The SEC
    The bond counsel
    The bond counsel
  149. Which of the following indexes or averages is made up of the largest number of stocks?
    The Dow Jones Composite      Index
    The S&P 500      Index
    The NYSE Index
    The Wilshire      Associates Equity Index
    The Wilshire      Associates Equity Index
  150. A brokerage firm accepted delivery of securities on settlement. Upon further inspection of the securities, the brokerage firm discovers a problem and wishes to return the securities to the selling dealer. The process of returning securities that have previously been accepted is known as:
    Reallowance
    Reclamation
    Rejection
    Recapture
    Reclamation
  151. If a customer is short RST call options, what other position would be considered when examining position limits? Long RST calls
    Long RST puts
    Short RST puts
    Long ABC puts
  152. Long RST puts
    If the customer is short RST calls, he wants or thinksthe marketprice of RST stock should decline. Since he is bearish onthe stock, he could also be longputs on RST. This would be considered to be on the sameside of the market
  153. A customer gives a registered representative the following instructions: Buy 1,000 shares of General Electric "whenever you think the price is right." Under current regulations:
    The order can be executed by the RR only on the same      trading day
    The order must be marked "discretionary" and      approved by a branch manager
    The order can be executed by the RR any trading day
    The RR is not permitted to accept this type of order
    The order can be executed by the RR only on the same      trading day
  154. According to MSRB rules, all of the following must be included on a confirmation sent by a broker-dealer to a customer EXCEPT which two:
    Total dollars due including any accrued interest
    Rating provided by a nationally recognized municipal securities rating service
    Capacity in which the broker-dealer acted
    Denominations of the securities to be delivered
    • Rating provided by a nationally recognized municipal securities rating service
    • Denominations of the securities to be delivered
  155. Dealer A gives bonds firm to Dealer B with a recall. What does this mean? multiple answers
    Dealer B has the right to sell the bonds before anyone else.
    The price of the bonds has been set.
    A time to sell the bonds has been set.
    A recall time has been established.
    • Dealer B has the right to sell the bonds before anyone else
    • . The price of the bonds has been set.
    • A time to sell the bonds has been set.
    • A recall time has been established.
  156. A mutual fund buys stock from the portfolio of an insurance company. This is a trade executed in the:
    Over-the-counter market
    Exchange market
    Third market
    Fourth market
    • Fourth market
    • This is the name given to the so-called market whereinstitutions trade with other institutions
  157. Which of the following can be found on the Consolidated Quotation System?
    Bid/asked quotations for OTC stocks not listed on Nasdaq
    Bid/asked quotations for listed stocks reported by national exchanges and OTC third market makers
    Indications of interest on private placements to be sold to qualified institutional investors
    Bid/ask quotations for small-cap OTC securities
    • Bid/asked quotations for listed stocks reported by national exchanges and OTC third market makers
    • The ConsolidatedQuotation System (CQS) provides subscribers withbid/ask quotations for securities listed on national exchanges, includingquotes from OTC market makers in those securities (the third market).
  158. In a discussion with a client, a registered representative refers to a bond yield that has been reduced by the inflation rate. This yield is known as the:
    After-tax yield
    Discount rate
    Real interest rate
    LIBOR
    Real interest rate
  159. The market price of XYZ Company's stock is $60. The price-earnings ratio is 10 and earnings per share is $6.00. If the stock were to split 2 for 1, which of the following are true?
    The price-earnings ratio will be reduced to 5.
    The price-earnings ratio will remain at 10.
    The earnings per share will be reduced to $3.00 per share.
    The earnings per share will remain at $6.00 per share.
    I and III
    I and IV
    II and III
    II and IV
    • II and III
    • A stocksplit will increase the number of shares outstanding whiledecreasing the market price of the stock. The split will also have the effectof reducing earnings per share since the number of shares outstanding willincrease. The 2-for-1 split will reduce the marketprice to $30 ($60 x 1/2) and the earnings per share to$3.00 ($6.00 EPS x 1/2). However, the price-earnings ratio (market price/EPS),which was 10 before the split, will remain the same since both the market priceand the earnings per share were reduced by the same percentage ($30/$3.00 EPS =10
  160. The transfer of bonds from one party to another may be accomplished by an endorsement on the back of the bond certificate or through a:
    Letter of credit     
    Letter of      notification
    Power of      attorney
    Bond power
    Bond power
  161. A specialist has an order on its book from a public customer to buy stock at $34.70 and another order from a public customer to sell stock at $34.90. The specialist may:
    Buy stock for its own account at $34.65
    Buy stock for its own account at $34.75
    Sell stock from its own account at $34.90
    Sell stock from its own account at $34.95
    Buy stock for its own account at $34.75
  162. Which of the following is subject to the Penny Stock Rule?
    Unsolicited orders for a non-Nasdaq stock trading at $3.00 per share
    Solicited orders for a non-Nasdaq stock trading at $3.00 per share
    Unsolicited orders for a Nasdaq stock trading at $3.00 per share
    Solicited orders for a Nasdaq stock trading at $3.00 per share
    Solicited orders for a non-Nasdaq stock trading at $3.00 per share
  163. Listed stocks and Nasdaq stocks are/are not subject to the penny stock rule?
    are not
  164. All of the following statements are TRUE concerning preconditions for sale requirements under the New Issue Rule, EXCEPT:
    The verification may be made through electronic communication
    The verification may be made through oral communication
    The verification must be conducted prior to the sale of new issues
    After the initial verification an annual negative consent letter will be permitted
    The verification may be made through oral communication
  165. Why is the maturity of commercial paper 270 days or less?
    Because it coincides with the historical 9-month business cycle
    It is an attractive alternative to 6-month Treasury bills
    Because short-term corporate debt of 270 days or less is exempt from registration
    All of the above
    Because short-term corporate debt of 270 days or less is exempt from registration
  166. A T-bond put option is quoted at 3-28. The purchase of one option at this price would require payment of:
    $328.00
    $387.50
    $3,280.00
    $3,875.00
    • $3,875.00
    • A purchase of a putoption at 3-28 is $3,875. Three (3) points equals $3,000 and 28/32 equals $875.Each 1/32 of a pointequals $31.25. Therefore, 28 x $31.25 equals $875
  167. Volume and holding period restrictions do not apply to the resale of private placements (Reg D offerings) when:
    Purchasers'      representatives assist investors
    Both parties are      accredited investors
    The transaction      is initiated by a registered principal
    The purchaser is      a qualified institutional investor
    The purchaser is      a qualified institutional investor
  168. A corporation has $7,000,000 in income after paying preferred dividends of $500,000. The company has 1,000,000 shares of common stock outstanding. The market price of the stock is $56. What is the price-earnings ratio?
    6.5 times
    7.5 times
    8 times
    8.6 times
    • 8 times
    • The price-earnings ratio is the marketprice ($56) of the stock divided by the earnings per share($7) which equals 8 times. The earnings per share of $7.00 is found by dividingthe $7,000,000 of available income to the common stockholders by the 1,000,000shares of commonstock outstanding
  169. The price-earningsratio is calculated by?
    • marketprice of the stock divided by the earnings per share
    • The earnings per share is found by dividing the $ of available income to the common stockholders by the # of shares of common stock outstanding
  170. The earnings per share is found by
     dividing the $ of available income to the common stockholders by the # of shares of common stock outstanding
  171. How would preferred stock most likely be affected by an increase in interest rates?
    Its market value      would increase
    Its market value      would decrease
    Its conversion      ratio would increase
    There would be      no effect
    Its market value      would decrease
  172. A member of a municipal new issue syndicate is entering an order for an accumulation account being used for a unit investment trust that the firm underwrites. This order must be entered as a(n):
    Pre-sale order
    Related      portfolio order
    Contingency      order
    AON order
    Related      portfolio order
  173. A corporation has the following capital structure:
    5% Convertible Bonds (conversion price is $20) $100,000
    5% Preferred Stock  $100,000
    $1 Par Value Common Stock (5,000 shares outstanding)$   5,000
    Tax Rate is 34%
    Find the earnings per share after dilution assuming earnings before interest and taxes is $50,000.
    $2.47 $2.80 $2.97 $3.30
    • $2.80
    • If the bonds are converted, there will be anadditional 5,000 shares outstanding ($100,000 face valuebonds divided by the conversionprice of $20 equals 5,000 shares). The company will nothave to pay the interest onthe bonds since they were converted
  174. An individual purchased a 10 year municipal bond at a cost of $1,050. If the individual sells the bond in five years at its amortized value, the tax consequence would be:
    $25 capital gain     
    $25 capital loss     
    $50 capital loss     
    No capital gain or loss
    • No capital gain or loss
    • When a municipal bond is purchased at a premium, the premium must be amortized over the life of the bond. (21-12
  175. Which of the following are normally TRUE regarding the pricing of municipal bonds? (which two)
    Serial bonds are priced on a yield-to-maturity basis.
    Serial bonds are priced on a dollar basis.
    Term bonds are priced on a yield-to-maturity basis.
    Term bonds are priced on a dollar basis.
    • Serial bonds are priced on a yield-to-maturity basis.
    • Term bonds are priced on a dollar basis.
  176. Which of the following new issues may be purchased by an employee of a broker-dealer under the New Issue Rule? Multiple answers
    Convertible debt     
    Investment-grade debt
    Exchange-traded funds
    Preferred stock
    • All
    • An employee of a broker-dealer is considered arestricted person and may not purchase any new issues under FINRA rules. All ofthe choices listed in this question are not considered new issues under thisrule. Exemptions from the definition include: all debt offerings, investmentcompany offerings such as mutual funds and exchange-tradedfunds, and preferredstock. New issues under the rule are defined as initialpublic offerings (IPOs) of equitysecurities sold under a registrationstatement
  177. Open-end companies are/are not offered below their currentnet asset value
    the maximum salescharge permitted for an open-end company is
    are not, 8 1/2%
  178. A corporation wishes to open a cash account. Which of the following is required?
    A corporate      resolution
    A copy of the      corporate charter
    A hypothecation      agreement
    A risk      disclosure document
    A corporate      resolution
  179. A registered representative wants to open a joint account for the dentists in his office building. Dr. White and Dr. Enamel will each contribute equally to the account but each dentist wants his portion of the account to pass to his own estate. Which two of the following are correct?
    The account      should be established as Joint Tenants with Right of Survivorship
    The account      should be established as Tenants in Common
    All dividends      and capital gains in the account will be reported by the brokerage firm      under one social security number
    All dividends      and capital gains in the account will be reported by the brokerage firm on      a percentage of ownership basis
    • The account      should be established as Tenants in Common
    • All dividends      and capital gains in the account will be reported by the brokerage firm      under one social security number
  180. An option contract for RFQ is for 108 shares. This would most likely be a result of which of the following circumstances?
    Never, since an option contract always represents 100 shares
    If there had been a stock split
    If there had been a stock dividend
    If there had been a cash dividend
    If there had been a stock dividend
  181. An investor has been making payments into a variable annuity for the last 20 years. The investor decides to annuitize and selects a straight-life payout. Which TWO of the following statements are TRUE?
    The investment risk is assumed by the insurance      company.
    The investment risk is assumed by the customer.
    The amount of the payment to the customer is guaranteed      by the insurance company.
    The amount of the payment to the customer is not      guaranteed.
    • The investment risk is assumed by the customer.
    • The amount of the payment to the customer is not      guaranteed.
  182. Allen purchased a government security, and later discovered that it was nonnegotiable. This security could have been which of the following?
    Treasury bill
    Commercial paper     
    GNMA      pass-through
    EE savings bond
    EE savings bond
  183. Because of its multiplier effect on the economy, the Federal Reserve Board is reluctant to change:
    The reserve      requirement
    Margin      requirements
    The discount      rate
    Its open market      policy
    The reserve      requirement
  184. Wireless Communications is offering 2,000,000 common shares (par value $.10) at $15. Which two of the following describe the financial impact on the company?
    An increase in      paid-in capital
    A reduction in      the long-term debt ratio
    A reduction in      liquidity
    An increase in      fixed assets by $30,000,000
    • An increase in      paid-in capital
    • A reduction in      the long-term debt ratio
  185. The 5% markup policy would apply to a:
    Municipal bond      trade
    Transaction on      the NYSE
    Proceeds      transaction
    Purchase of      mutual fund shares
    • Proceeds transaction
    • The 5% markup policy does not apply to any traderequiring a prospectus(new issues, registered secondaries, and mutual funds) or a transactioninvolving an exemptsecurity (municipal bond) or transaction effected on an exchange.The 5% policy applies to secondarymarket OTC trades, which include proceeds transactions(using sale proceeds to buy another security) and riskless or simultaneoustransactions.
  186. Mrs. Jones is interested in selling 500 shares of her REIT. The sale would be handled in a manner similar to the:
    Redemption of an      open-end fund
    Sale of a fund      listed on the NYSE
    Liquidation of a      real estate limited partnership
    Redemption of EE      bonds
    • Sale of a fund      listed on the NYSE
    • There is a secondarymarket for REITs (RealEstate Investment Trusts); the vast majority tradeon the NYSE with prices determined by supply and demand. Closed-end funds arefunds that are often bought and sold on the NYSE that trade in a similarmanner.
  187. A customer asks an RR for a recommendation as to how to invest a $150,000 inheritance. The customer needs to preserve the capital since he would like to use the funds to start a new business within the next year. Which of the following would be the LEAST suitable recommendation for this customer?
    Taxable money      market fund
    Tax-exempt money      market fund
    Short-term      Treasury fund
    Balanced fund
    Balanced fund
  188. A municipal bond with an 8% coupon and eight years to maturity is purchased for 106. If sold six years later, what would be the cost basis? 100 101.50 104.50 106
    101.50
  189. A new issue of municipal, government, or corporate securities with maturities greater than one year, must be issued in:
    Bearer or      registered form
    Bearer form only     
    Registered as to      principal form only
    Fully registered      form only
    Fully registered      form only
  190. Fred's Auto Centers is looking to raise $10 million to expand its business. The company has entered into an agreement to raise the capital through Winco Securities, a local investment banking firm. Winco Securities has made no guarantee that it will be able to raise the full amount of the offering. Which of the following two statements regarding this scenario is/are true?
    This is an      example of a firm commitment underwriting.
    This is a      best-efforts underwriting.
    Winco is acting      as an agent for Fred's Auto Centers. Winco is acting      as principal in this underwriting.
    This is a      best-efforts underwriting. Winco is acting      as an agent for Fred's Auto Centers.
  191. What department or section of the brokerage firm would be responsible for tendering stock?
    P&S      Department
    Margin      Department
    Cashier's      Department
    Reorganization      Department
    Reorganization      Department
  192. Concerning mutual funds, what is meant by net investment income?
    Interest only
    Dividends only
    Interest +      dividends - expenses
    Dividends +      capital gains - expenses
    Interest +      dividends - expenses
  193. Ralph, a New York City bus driver, sold his apartment for $250,000. He is contemplating purchasing another property within the next 2 to 6 months, but would like to keep the proceeds invested while he is looking. Ralph's primary goals are preservation of capital, liquidity, and limiting his tax liability. Which of the following securities best meets his objectives?
    A corporate bond      fund rated AA
    MBIA insured      revenue bonds
    High-grade      preferred stock
    A U.S.      government money market fund
    A U.S.      government money market fund
  194. A registered representative wants to give a seminar regarding retirement planning. Which of the following records must be maintained by the brokerage firm regarding this seminar?
    Documents attesting to the registered representative's      expertise in the area being discussed
    The name and address of each person who attended the seminar
    A record of the topic discussed and sponsor of the seminar     
    The number of accounts that were opened based upon the seminar
    A record of the topic discussed and sponsor of the seminar    
  195. Which of the following choices describes the greatest risk associated with mortgage-backed securities?
    Borrowers might default on their mortgage payments.
    The market for mortgage-backed securities is illiquid. The market price of the bonds might fall due to a rating downgrade.
    Falling interest rates might accelerate early repayment of principal.
    Falling interest rates might accelerate early repayment of principal.
  196. A 6% bond is selling at a 6.25% basis. The bond will mature in 25 years and has 3 call dates. Which of the following would give the investor the best return?
    If the bond is called after 10 years at 103
    If the bond is called after 15 years at 102
    If the bond is called after 20 years at 101
    If the bond is held to maturity
    If the bond is called after 10 years at 103
  197. A municipal tombstone advertisement must be approved by:
    The MSRB
    A Municipal Securities Principal
    A Municipal Securities Principal and the Branch Manager
    A Municipal Securities Financial and Operations Principal
    A Municipal Securities Principal
  198. During a period of stable interest rates, which bond has the most potential to show a significant change in price?
    7%, 30-year U.S. Treasury Bond
    8%, 5-year high grade corporate bond
    6%, 6-month Revenue Anticipation Note
    7 1/2%, 10-year convertible subordinated debenture
    • 7 1/2%, 10-year convertible subordinated debenture
    • a convertible debenturecould show significant price appreciation or depreciation if the underlying equitychanges in value because of the potential to convert.
  199. Interest rates had been very high. During the past three years rates have decreased dramatically, reaching historically normal level. The present yield curve would most likely be which of the following two:
    Ascending
    Positive
    Inverted
    Negative
    • Ascending
    • Positive
  200. Secondary market offerings of municipal bonds could be found in all of the following EXCEPT:
    Broker's broker's list
    Munifacts
    Bond Buyer
    Dealer offering list
    Bond Buyer
  201. A bank or brokerage firm is applying to become a primary dealer in government securities. Which government body appoints the financial institution as a primary dealer?
    The Treasury Department
    The SEC
    FINRA
    The Federal Reserve Board
    The Federal Reserve Board
  202. The City of Fremont, Nebraska is issuing revenue bonds to increase its electric power generating facilities and to replace outstanding bonds. Interest on the bonds will be:
    Subject to federal income tax and exempt from state taxes
    Subject to federal and state income tax
    Subject to state income tax and exempt from federal income tax
    Exempt from federal income tax
    Exempt from federal income tax
  203. Which of the following types of securities may a municipal securities representative sell?
    Municipal bonds
    Government bonds     
    Corporate bonds
    Municipal unit investment trusts
    Municipal bonds
  204. The turnover that a dollar experiences over a given period is known as the:
    Multiplier effect
    Velocity of money
    Market momentum
    Inflation rate
    Velocity of money
  205. All of the following statements regarding the Capital Asset Pricing Model (CAPM) are TRUE EXCEPT it:
    Predicts future values for the stock
    Was developed to explain the behavior of security prices
    Provides a mechanism to assess risk and return
    Is based on the efficient market theory and assumes all investors act rationally
    Predicts future values for the stock
  206. Super Entertainment Inc., a publicly traded firm on the NYSE, spins off its domestic syndication division creating 1,000,000 new shares. To receive the new shares, investors must exchange 25% of their old shares. Investors who receive shares of the new company would:
    Be required to receive a prospectus under the Securities Act of 1933
    Not receive a prospectus because the shares were sold via a private placement
    Receive a prospectus only if they received 500 shares or more
    Not receive a prospectus because this is a Rule 144A offering
    Be required to receive a prospectus under the Securities Act of 1933
  207. Which investment company does NOT charge a management fee?
    An open-end investment company
    A closed-end investment company
    A unit investment trust
    An exchange traded fund
    A unit investment trust
  208. On February 10th, an investor sold 100 shares of ABC short at $50/share. The investor covers the position on November 1st by purchasing 100 shares of ABC at $58/share, establishing an 8-point loss. If, on November 15th, the investor shorts 100 shares of ABC at $56/share:
    The investor is short 100 shares of ABC against the box
    The wash sale rule has been violated
    The investor has a $200 short-term capital gain
    The investor has an $800 short-term capital loss
    The wash sale rule has been violated
  209. Calculate the SMA for the following margin account:
    Long Account: $150,000 Market Value, $50,000 Debit Balance

    Short Account: $45,000 Market Value, $75,000 Credit Balance
    $7,500 $25,000 $32,500 $130,000
    The combined SMA is, therefore, $32,500 ($25,000 LongSMA + $7,500 Short SMA).
  210. Stagflation is best defined as a period where the economy is experiencing which two of the following?
    Inflation for a long period
    Deflation for a long period
    Low unemployment
    High unemployment
    • Inflation for a long period
    • High unemployment
  211. What type of bond would most likely be secured by an excise tax, cigarette tax, or gasoline tax?
    GO Bond
    Special Tax Bond     
    Special Assessment Bond
    Water and Sewer Bond
    Special Tax Bond  
  212. A bond with an 11% coupon is purchased at 103. The maturity of the bond is 20 years. The bond is callable in 10 years at par. Which is correct?
    The yield will      be higher if called.
    The yield will      be higher if held to maturity.
    The yield will      be the same if called or if held to maturity.
    The yield will      be determined by the issuer.
    The yield will      be higher if held to maturity.
  213. An investor purchases a $100m face value municipal bond with a 5-year maturity at 105. After two years, the bond is sold at 95. For tax purposes, the investor has a(n):
    $2,000 loss
    $4,000 loss
    $8,000 loss
    $10,000 loss
    • $8,000 loss
    • When a municipal bond is purchased at a premium, the bond's premium must be amortized to find an adjusted cost basis. If the bond is sold above the adjusted cost basis, the result is a capital gain. If the bond is sold below the adjusted cost basis, the result is a capital loss. If the bond is held to maturity, there is neither a loss nor a gain for tax purposes. This is because the adjusted basis would equal the par value after the premium is amortized.
  214. A customer wants preservation of capital and safety of income. Which of the following would best meet the customer's needs?
    Income bonds
    Debentures
    Several      municipal bonds rated AA or better
    One AAA rated      municipal bond
    Several      municipal bonds rated AA or better
  215. When reading a research report on an automobile company, a registered representative's use of fundamental analysis determines that the stock is a good investment. When attempting to figure the best time to execute orders to buy the stock, the registered representative could refer to:
    A chart showing      the price-earnings ratio for all automobile stocks
    A chart showing      a recent history of the market price of the stock
    The company's      dividend payout ratio
    The research      report's future expectation for earnings
    A chart showing      a recent history of the market price of the stock
  216. An investor purchases Swiss francs in the spot market at 61. As a hedge, the investor buys a Swiss franc June 60 put at 0.50. This strategy will be profitable if which two:
    The U.S. dollar      weakens
    The U.S. dollar      strengthens
    The spot price      for the Swiss Franc is 61.75
    The spot price      for the Swiss Franc is 59.25
    • The U.S. dollar      weakens
    • The spot price      for the Swiss Franc is 61.75
  217. All of the following offerings are exempt from federal registration EXCEPT:

    1 Private      placements conducted under Regulation D
    2 Intrastate      offerings conducted under Rule 147
    3 Public offerings      of limited partnerships
    4 Treasury bills      sold through the Federal Reserve Banks
    3 Public offerings      of limited partnerships
  218. An investor buys a zero-coupon corporate bond at 37. After three years, the bond's basis has accreted for tax purposes to 40. If the bond is sold for its accreted value, the investor will recognize:

    1 No gain or loss
    2 A 3-point      capital gain
    3 A 3-point      capital loss
    4 Interest income      of 3 points
    1 No gain or loss
  219. An investor purchasing $1,000,000 par value of Treasury notes at a price of 101-03 would pay:

    $1,010,300
    $1,010,937.50
    $10,101,300
    $10,109,375
    $1,010,937.50
  220. XYZ Corporation has 4,000,000 shares of common stock authorized and 2,500,000 shares issued of which 100,000 are treasury stock. The corporation is issuing an additional 1,000,000 shares through a standby underwriting. If only 600,000 shares are subscribed to in the corporation's offering, the number of outstanding shares will:

    1 Remain the same      since the entire issue was not fully subscribed
    2 Increase by      600,000 to 3,000,000 shares
    3 Increase by      600,000 to 3,100,000 shares
    4 Increase by      1,000,000 to 3,400,000 shares
    4 Increase by      1,000,000 to 3,400,000 shares
  221. A registered representative writes a letter to see if his clients have any interest in trading options. The letter is generic and describes the advantages and disadvantages of options trading. This letter: (which 2)

    1 Must be approved      prior to use by a ROP
    2 Need not be      approved prior to use so long as it does not contain recommendations
    3 Must be      accompanied by a risk disclosure document
    4 Need not be      accompanied by a risk disclosure document
    • 1 Must be approved      prior to use by a ROP
    • 4 Need not be      accompanied by a risk disclosure document
  222. Mr. Jones bought an 8% debenture at a 7.20 basis. If the bonds are currently trading 15 basis points higher:

    1 Mr. Jones'      yield-to-maturity has increased to 7.35%
    2 The bond's      coupon has increased to 8.15%
    3 The bond's      market price has decreased
    4 Mr. Jones'      investment has not been affected
    3 The bond's      market price has decreased
  223. Mr. Blue's margin account has a market value of $20,000 and a debit balance of $9,000. If Mr. Blue purchases $2,000 of options, he would have to deposit:

    0
    $1,000
    $2,000
    $3,000
    $1,000
  224. Which of the following statements is TRUE concerning periodic payment variable annuities?

    1 The number of a client's annuity units never changes.
    2 The number of a client's accumulation units never      changes.
    3 They never have a beneficiary.
    4 The monthly payout is fixed by the inflation index.
    1 The number of a client's annuity units never changes.
  225. If ABC Corporation pays a $0.25 dividend to its shareholders, all of the following would result EXCEPT:

    1 Retained      earnings remain the same
    2 Working capital      is decreased
    3 Current assets      are decreased
    4 Current      liabilities are decreased
    2 Working capital      is decreased
  226. A registered representative receives an order from the President of XYZ Corporation to sell unregistered XYZ shares. The client purchased the shares in a private placement 90 days ago. This order:

    1 Will require the      filing of Form 144 with the SEC
    2 May be executed      without any restrictions
    3 Must be approved      by a principal prior to execution
    4 Is a violation      of Rule 144 if executed
    4 Is a violation      of Rule 144 if executed
  227. Which of the following would best describe income taxes and estate taxes? (which 2) 

    1 Flat taxes
    2 Graduated taxes
    3 Regressive taxes     
    4 Progressive      taxes
    • 2 Graduated taxes
    • 4 Progressive      taxes
  228. To calculate the total interest cost to the issuer for a competitive bid, the syndicate would need: (multiple answers)

    1 The total par      value of the offering
    2 The maturity      schedule and coupon rates
    3 Whether the bid      includes any discounts or premiums
    4 The dated date      for the bonds
    • 1 The total par      value of the offering
    • 2 The maturity      schedule and coupon rates
    • 3 Whether the bid      includes any discounts or premiums
    • 4 The dated date      for the bonds
  229. When analyzing a mutual fund's expenses, an analyst would look at all of the following EXCEPT:

    1 The management      fees charged by the investment adviser
    2 The fees charged      by the fund's custodian
    3 The fund's      expense ratio
    4 The sales load      charged to buy fund shares
    4 The sales load      charged to buy fund shares
  230. In an oil and gas drilling program, a sharing arrangement where the sponsor pays a small amount of all of the program's costs in return for a larger amount of the revenues is known as:

    1 Functional      allocation
    2 Overriding      royalty
    3 Reversionary      working interest
    4 Disproportionate
    4 Disproportionate
  231. Which TWO of the following persons would be permitted to purchase an equity IPO?

    1 An employee of a      FINRA member whose sister is a director of the issuer
    2 A portfolio      manager of a mutual fund purchasing for his personal account
    3 Employees of the      issuer if the issuer is a FINRA member
    4 An attorney      hired by the issuer to assist in the IPO
    • 1 An employee of a      FINRA member whose sister is a director of the issuer
    • 3 Employees of the      issuer if the issuer is a FINRA member
  232. The Trust Indenture Act of 1939 regulates: (which 2)

    1 A purchase of      $5,000,000 of Treasury bonds 
    2 A private      placement of $3,000,000 of corporate notes
    3 A $20,000,000 sale of corporate bonds sold interstate
    4 A sale by a      brokerage firm throughout the country of $25,000,000 of corporate      debentures
    • 3 A $20,000,000 sale of corporate bonds sold interstate
    • 4 A sale by a      brokerage firm throughout the country of $25,000,000 of corporate      debentures
  233. Keystone Chocolate Co. plans to sell shares of a new issue only in the state of Pennsylvania. In order to qualify for a registration exemption under Rule 147, what percentage of the corporation's assets must be located in Pennsylvania, and what percentage of its revenues must be derived from Pennsylvania sources, at the time of the offering?

    70%
    80%
    90%
    100%
    80%
  234. A corporation has a 9% cumulative preferred stock issue outstanding. The company paid a $7 dividend in 2002 and $8 in 2003. If the company wants to pay a common stock dividend in 2004, the cumulative preferred stockholders must first receive a dividend of:

    0
    $3
    $9
    $12
    $12
  235. Which of the following orders would you place for a customer who wants to hold her auction rate security if the interest rate is set at 3.4% or higher:

    1 Hold order
    2 Limit order
    3 Bid order
    4 Sell order
    3 Bid order
  236. According to MSRB rules, all of the following must be approved by a principal prior to being sent to a customer EXCEPT:

    1 An abstract of      an official statement
    2 A preliminary      official statement
    3 An advertisement      regarding the firm's products and services
    4 A research      report
    2 A preliminary      official statement
  237. A client buys 100 shares of Miramar at $42 per share. One week later she buys one Miramar Nov 40 put and pays a premium of $300. In November, the stock is at $48 per share and the put expires worthless. The tax consequences of these trades are: (which 2) 

    1 Miramar stock      has a basis of 42
    2 Miramar stock      has a basis of 45
    3 There is a      capital loss of $300 on the put
    4 No loss is      reported on the put until the stock is sold
    • 1 Miramar stock      has a basis of 42
    • 3 There is a      capital loss of $300 on the put
  238. A municipal tombstone ad shows bonds maturing serially from 2012 through 2030. The 2030 maturity is a 6.00% bond offered at a 6.75 basis. The bonds maturing in 2020 and thereafter are callable beginning in 2018 @ 102 and at 101 in 2019 and at par on any interest date after 2019 . The bonds maturing in 2030 should be priced to the:

    2018 call date
    2019 call date
    2020 call date
    Maturity date
    Maturity date
  239. Mrs. Green enters an order to sell stock that is currently in her safe deposit box. According to SEC rules, a broker-dealer must buy-in the stock if Mrs. Green does not deliver the shares within:

    3 business days      after the trade date
    3 business days      after the settlement date
    10 business days      after the trade date
    10 business days      after the settlement date
    10 business days      after the settlement date
  240. A municipal dealer purchased $100,000 face value of 6.00% bonds at a 6.00 basis. If the dealer reoffered the bonds, which of the following could be considered reasonable? (which 2) 

    101
    108
    5.80 basis
    4.00 basis
    101, 5.80 basis
  241. Which of the following best describes a BA?

    1 It facilitates      the trading of foreign stocks in the United States.
    2 It helps to      finance foreign trade between importers and exporters.
    3 It is used by a      municipal issuer in raising funds to meet a seasonal need for cash.
    4 It is issued by      nondomestic banks and is secured by Eurodollar deposits.
    2 It helps to      finance foreign trade between importers and exporters.
  242. A customer gave his registered representative an order to buy 1,000 shares of GM at the market. If the execution report from the floor of the exchange states that 1,200 shares were purchased at 78 the:

    1 Customer must      accept the execution even though it conflicts with the order
    2 Customer is only      obligated to accept the amount ordered, not executed
    3 Registered      representative should ignore the execution and enter a new order to buy      1,000 shares of GM at 78 for the customer
    4 Registered      representative should advise the exchange about the error
    2 Customer is only      obligated to accept the amount ordered, not executed
  243. Which of the following would have the least amount of credit risk?

    1 Preferred stock      issued by a blue chip company
    2 Mortgage bonds
    3 Treasury notes
    4 Revenue bonds
    3 Treasury notes
  244. A registered representative opens an option account for a customer on October 1st and buys 5 ABC November 30 calls at 4. On October 16th, the premium of the calls has decreased to 2 and the registered representative has not received a signed options agreement. The registered representative may:

    1 Not accept any      orders from the customer until the signed options agreement is received
    2 Accept an order      to sell the 5 ABC November 30 calls that were previously purchased
    3 Accept an order      to buy 5 additional ABC November 30 calls
    4 Accept an order      to buy 5 XYZ December 40 calls
    2 Accept an order      to sell the 5 ABC November 30 calls that were previously purchased
  245. According to MSRB rules, the delivery of a mutilated certificate would be considered a good delivery:

    1 Under no      circumstances
    2 If the seller      informs the buyer about the mutilation in writing
    3 If the      certificate is authenticated by the issuer or transfer agent
    4 If the      certificate is authenticated by the MSRB
    3 If the      certificate is authenticated by the issuer or transfer agent
  246. The calculation used by issuers to award bonds that takes into account the time value of money is known as:

    1 Net interest      cost
    2 True interest      cost
    3 Level debt      service
    4 Flow of funds
    2 True interest      cost
  247. Government-sponsored enterprise securities are comparable to direct government obligations with regard to all of the following EXCEPT:

    1 They trade in      the over-the-counter market
    2 All are      government guaranteed
    3 Short-term      securities are quoted on a discount yield
    4 Long-term securities      are quoted as a percentage of par
    2 All are      government guaranteed
  248. Which of the following option orders may be accepted by an order book official?

    1 Discretionary
    2 Limit
    3 Spread
    4 Not held
    2 Limit
  249. The Trust Indenture Act of 1939 establishes:

    1 A legal      relationship between a municipal issuer and a trustee for the benefit of      bondholders
    2 A legal      relationship between a corporate issuer and a trustee for the benefit of      bondholders
    3 The requirements      for call provisions in non-exempt issues
    4 Prospectus      requirements
    2 A legal      relationship between a corporate issuer and a trustee for the benefit of      bondholders
  250. A pension fund manager wants to protect the fund's diversified stock portfolio against a market downturn. To best meet this objective, he should write:
    1 Covered calls
    2 Covered puts
    3 Uncovered calls
    4 Index options
    4 Index options
  251. A broker-dealer owns 100 shares of ABCO stock which it purchased at 28. If the stock is sold to a customer, the broker-dealer will base a markup on:

    1 The inventory      cost of 28
    2 The highest bid      on the Nasdaq system
    3 The lowest offer      on the Nasdaq system
    4 A price that is      fair and reasonable
    3 The lowest offer      on the Nasdaq system
  252. A customer wants to open a cash account. All of the following are required on the new account form EXCEPT:

    1 The registered      representative's signature
    2 Whether the      customer is of legal age
    3 The customer's      signature
    4 The branch      manager's approval
    3 The customer's      signature
  253. A municipal dealer has a customer's order to purchase bonds on an agency basis. According to MSRB rules, the customer's order must be executed at:

    1 The best price available
    2  A price that is fair and reasonable
    3 The average price obtained from all dealers contacted 4 The first price obtained
    2  A price that is fair and reasonable
  254. When an investor sells an interest in a limited partnership, his or her cost basis for tax purposes is the:

    1 Original      investment
    2 Adjusted basis
    3 Accredited value      
    4 Original      investment plus accretion
    2 Adjusted basis
  255. To diversify a corporate bond portfolio, which of the following is not a concern?

    1 Coupon
    2 Maturity 
    3 Price
    4 Geographic      location
    3 Price
  256. Crossway Shopping Centers, a REIT, is making a public offering of 3,000,000 units at $20/share. An investor who buys the issue in the primary market must receive:

    1 An offering      memorandum
    2 An offering      circular
    3 A prospectus
    4 An educational      brochure explaining the general nature of REITs
    3 A prospectus
  257. The strike price of a T-bond option contract is expressed as a percentage of the:

    1 Total premium
    2 Face amount of      the underlying bonds
    3 Underlying      market value
    4 Discount yield
    2 Face amount of      the underlying bonds
  258. Which of the following items would be considered a coincident economic indicator?

    1 Industrial      production index
    2 S&P index
    3 Housing starts
    4 Expenditures for      capital goods
    1 Industrial      production index
  259. Which of the following persons control positions in secondary market municipal bonds for a broker-dealer?

    1 Underwriter
    2 Trader
    3 Agent
    4 Principal
    2 Trader
  260. Which of the following communications must be filed with FINRA ten days prior to use? (which 2)

    1  Options      advertising
    2 Mutual fund      advertising
    3 CMO advertising
    4 Unit Investment      Trust advertising
    • 1  Options      advertising
    • 3 CMO advertising
  261. A customer's margin account has a long market value of $30,000 and a debit balance of $12,000. FRB initial margin requirement is 50%. What is the purchasing power in the account?

    0
    $3,000
    $6,000
    $18,000
    $6,000
  262. Charlene contacts her registered representative to buy an OTC stock. Rather than buying it directly from a market maker, Charlene's broker-dealer contacts another broker-dealer, who buys it from a market maker creating two levels of transaction fees. This is known as:
    1 Freeriding and      withholding
    2 Interpositioning     
    3 Backing away 
    4 Churning
    2 Interpositioning     
  263. Which of the following is not used to determine the winning bid in a competitive bond offering?

    1 Reoffering Yields     
    2 Bond years
    3 NIC
    4 TIC
    1 Reoffering Yields     
  264. An individual purchases $100,000 face value of a 6% municipal bond at a dollar price of 101 1/2. The bond's maturity is 7-1-17, but the issue has been called for redemption on the first call date of 7-1-05 @ par. The customer's confirmation should show the:

    1 Yield-to-call
    2 Yield-to-maturity     
    3 Taxable      equivalent yield
    4 After-tax yield
    1 Yield-to-call
  265. When pricing a bond, which of the following would be required? (multiple answers)

    1 Coupon
    2 Maturity
    3 Settlement date
    4 Bond years
    • 1 Coupon
    • 2 Maturity
    • 3 Settlement date
    • 4 Bond years
  266. Relative to stock index options, which of the following are correct? (multiple answers)

    1 Expirations are      monthly
    2 If exercised,      settlement is in cash the next day
    3 The settlement      amount is based on the closing index price on the day of exercise
    • 1 Expirations are      monthly
    • 2 If exercised,      settlement is in cash the next day
    • 3 The settlement      amount is based on the closing index price on the day of exercise
  267. An investor purchased a municipal bond at a discount. If the investor holds the bond to maturity, any gain will be considered: (which 2) 

    1 Tax-free      interest if the bond is an OID
    2 A capital gain      if the bond is an OID
    3 Ordinary income      if the bond is not an OID
    4 Tax-free      interest if the bond is not an OID
    • 1 Tax-free      interest if the bond is an OID
    • 3 Ordinary income      if the bond is not an OID
  268. All of the following are true regarding a SEP IRA EXCEPT:

    1 An employer      makes contributions to an employee's IRA
    2 An employer is      not required to make annual contributions
    3 Employees are      permitted to make contributions to the account
    4 Employees are immediately      vested for any contributions made into the account
    3 Employees are      permitted to make contributions to the account
  269. An individual purchases two BP (British pound) 150 calls @ 9.20. The contract size is 10,000 BP. The total cost for the contracts is:

    $920
    $1,500
    $1,840
    $3,000
    $1,840
  270. A term bond has a mandatory sinking fund call feature. What method will be used to determine which specific bonds will be called?

    1 Investors with      the largest position
    2 Investors with      the largest coupon
    3 Investors with      the longest maturity
    4 Random lot
    4 Random lot
  271. Relative to bearer bonds, all of the following are reasons for rejection EXCEPT:

    1 Mutilated coupon     
    2 Lack of legal      opinion
    3 No endorsement      by owner
    4 Lack of seal on certificate
    3 No endorsement      by owner
  272. In February, Mr. Hedge wrote an uncovered DOG Oct 90 put @ 7. The put was exercised in June. Mr. Hedge sold the 100 shares of DOG in November at 94. What was Mr. Hedge's profit on the sale of the stock?

    $400
    $700
    $1,100
    $9,400
    $1,100
  273. All of the following are TRUE concerning both Auction Rate Securities and Variable Rate Demand Obligations EXCEPT:

    1 Interest rates are set at specified intervals
    2 They are often issued by municipalities
    3 They are long-term securities with short-term trading      features
    4 They have a put feature allowing the holder to redeem      the security at par
    4 They have a put feature allowing the holder to redeem      the security at par
  274. According to industry regulations, a writer of an ABC March 50 put would be considered covered if the writer was:

    1 Long an ABC      March 60 put
    2 Long an ABC      March 30 put
    3 Long an ABC      March 50 call
    4 Long an ABC      March 60 call
    1 Long an ABC      March 60 put
  275. An investor owns 280 shares of XYZ Corporation. XYZ Corporation pays a 15 cents quarterly dividend. XYZ Corporation announces a 5-for-4 split. The dividend per share is adjusted to reflect the split. How much will the investor receive in dividends each quarter after the split?

    $40.00
    $42.00
    $52.50
    $80.00
    $42.00
  276. On February 13th, an investor sold 700 shares of ABC stock for a loss. On the next day, the investor purchased 3 ABC February calls. Which of the following is correct?

    1 The entire loss      from the sale of stock would be disallowed.
    2 A portion of the      loss from the sale of the stock would be disallowed.
    3 The loss from      the sale of stock would not be affected.
    4 Any future loss      on the options would be disallowed.
    2 A portion of the      loss from the sale of the stock would be disallowed.
  277. When evaluating two CMOs backed by GNMAs, one having a 6% yield and the other having a 10% yield, which of the following is/are TRUE?

    1 Prepayment risk      is greater for the CMO with the 10% yield.
    2 Prepayment risk      is greater for the CMO with the 6% yield.
    3 Credit risk is      greater for the 10% CMO.
    1 Prepayment risk      is greater for the CMO with the 10% yield.
  278. All of the following are true relating to a Keogh plan EXCEPT:

    1 It must follow      ERISA standards for eligibility, funding, and vesting
    2 It may be      defined benefit or defined contribution
    3 Distributions      paid to participants at retirement are fully taxable as ordinary income
    4 An individual      covered by a Keogh plan may not maintain an IRA
    4 An individual      covered by a Keogh plan may not maintain an IRA
  279. The Dow Theory states that a major trend is confirmed when which of the following indicators reach new highs or lows?

    1 The S&P 500 and the NYSE Composite      Average
    2 The Dow Jones Industrial Average and the      Dow Jones Transportation Average
    3 The Dow Jones Industrial Average and the      Dow Jones Utility Average
    4 The Dow Jones Composite and the NYSE      Composite Average
    2 The Dow Jones Industrial Average and the      Dow Jones Transportation Average
  280. XYZ corporation has 7,000,000 shares of common stock ($1 par value) authorized of which 5,000,000 shares have been issued. There are 500,000 shares of treasury stock. The current market price of XYZ is 20. The value of the outstanding common stock on the balance sheet is:

    $4,500,000
    $5,000,000
    $7,000,000
    $90,000,000
    $4,500,000
  281. An investor purchased a $10,000 Treasury bond that has an 8% coupon and matures 11-1-26. He purchased the bond on Monday, September 10, 201X for regular-way settlement. He sold the bonds on February 11th of the next year for cash settlement. What amount of interest income was taxable in 201X?

    $108.50
    $245.50
    $335.34
    $400.00
    $108.50
  282. The real interest rate is best defined as the:

    1 Interest earned by an investor after taxes
    2 Interest rate      charged to investors in a margin account
    3 Interest earned      that exceeds the inflation rate
    4 Amount that the      prime rate exceeds the discount rate
    3 Interest earned      that exceeds the inflation rate
  283. Foreign currency spot transactions normally settle in:

    1 One business day     
    2 Two business      days
    3 Three business      days
    4 Five business      days
    2 Two business      days
  284. Which of the following methods are used by the Options Clearing Corporation in assigning exercise notices?

    1 Random selection     
    2 First-in,      first-out
    3 To the member      firm holding a long position that first requests an exercise
    4 On the basis of      the largest position
    1 Random selection     
  285. When opening a new account, what is the order in which the following actions take place?

    1 Obtain approval      from the ROP
    2 Obtain essential      facts from the customer
    3 Obtain a signed      options agreement
    4 Enter the      initial order
    2, 1, 4, 3
  286. Which two of the following are TRUE relating to the notes issued by the Federal Farm Credit Banks Consolidated System? (which 2)

    1 They are issued at      a discount.
    2 They are issued      at par.
    3 They are      interest bearing.
    4 They are      non-interest bearing.
    • 1 They are issued at      a discount.
    • 4 They are      non-interest bearing.
  287. The Federal Reserve will normally:

    1 Buy securities      in the open market during inflationary times
    2 Sell securities in the open market during inflationary times
    3 Buy securities      in the open market during deflationary times
    4 Sell securities      in the open market during deflationary times
    • 2 Sell securities in the open market during inflationary times
    • 3 Buy securities      in the open market during deflationary times
  288. Leslie Moore has an account with Zucker Securities in New York City. She decides to move to Montana to raise cattle. She still intends to maintain an account with Zucker, which is registered only in New York. Which of the following statements is correct?

    1 This is      permitted provided Ms. Moore maintains a P.O. Box in New York.
    2 This is      permitted since the account was opened in New York prior to the client's      move to Montana.
    3 This is only      permitted if Zucker registers as an investment adviser in Montana.
    4 This is      prohibited.
    4 This is      prohibited.
  289. A limited partner has a $40,000 basis in a partnership. During the past year, the limited partner received a cash distribution of $20,000 from the partnership. The same year, his share of partnership losses was $35,000. What is the maximum loss that the limited partner could declare for tax purposes during that year?

    0
    $20,000
    $35,000
    $40,000
    $20,000
  290. An investor enters an order to buy 400 shares of HRJ @ 56 on the NYSE. Which of the following are TRUE regarding this order?

    1 The specialist      may hold this order in his book.
    2 The order can      only be executed at 56.
    3 A portion of the      400 shares may be purchased.
    4 The order must      be executed immediately.
    • 1 The specialist      may hold this order in his book.
    • 3 A portion of the      400 shares may be purchased.
  291. An individual purchases $5,000 BRT Corporation 7 3/8% bonds that mature 10-1-29. The transaction was executed on Thursday, August 5, 20XX for regular-way settlement. The bonds were sold on March 10th of the following year. How much interest must the individual report for tax purposes in 20XX?

    $52.24
    $132.13
    $142.38
    $220.22
    $52.24
  292. A municipal bond trader looking for the best price of a specific municipal issue in the secondary market would use:

    1 The Yellow      Sheets
    2 The Daily Bond      Buyer
    3 Munifacts
    4 A broker's      broker
    4 A broker's      broker
  293. Aglet International, Inc. has pretax income of $2,000,000. In addition, it received dividends of $100,000 from the common stock of a corporation in which it had a 10% interest. If the corporation pays a 34% tax rate, what is its total tax liability?

    $680,000
    $686,800
    $690,200
    $714,000
    $690,200
  294. An investor shorts a stock at $6 per share. What is the minimum maintenance requirement for this position?

    $1.80 per share
    $2.50 per share
    $3.00 per share
    $5.00 per share
    $5.00 per share
  295. A U.S. citizen owns shares of a foreign stock. Which of the following is TRUE regarding dividends received by the investor?

    1 Dividends on the      stock are completely tax-free to the investor.
    2 The investor may      apply any foreign tax paid on the dividend as a credit against U.S. income      tax.
    3 If foreign tax      is paid, the investor does not have to pay U.S. income tax on any of the      dividend.
    4 Dividends      received are classified as passive income.
    2 The investor may      apply any foreign tax paid on the dividend as a credit against U.S. income      tax.
  296. Under industry rules, the final approval to open a new account is given by a(n):

    1 Registered Representative
    2 Operations Manager
    3 Partner or      Principal
    4 Financial      Principal
    3 Partner or      Principal
  297. A 7% convertible bond has a conversion ratio of 40. The bond has a non-dilutive feature and the common is selling at $43 a share. If the company distributes a 10% stock dividend, which of the following is true regarding the convertible bond?
    1 Conversion ratio      remains at 40, but the conversion price is reduced.
    2 Conversion ratio      increases to 45.50 and the conversion price remains constant.
    3 Conversion price      decreases to $22.73 and the conversion ratio remains the same.
    4 Conversion price      decreases to $22.73 and the conversion ratio increases to 44.
    4 Conversion price      decreases to $22.73 and the conversion ratio increases to 44.
  298. Which of the following municipal entities would not issue overlapping debt?

    1 Park district
    2 Library district     
    3 School district
    4 Turnpike      authority
    4 Turnpike      authority
  299. Mr. Green buys 300 shares of RSW at 15. He then writes 3 RSW July 20 calls at 1 and writes 3 RSW July 10 puts at 50 cents. Mr. Green's maximum potential loss is:

    Unlimited
    $4,050
    $4,950
    $7,050
    $7,050
  300. From the items below, choose the one that best describes the economic theory that relies on controlling the money supply and interest rates to manage the economy.


    1 Keynesian      economic theory
    2 Supply-side      economics 
    3 Monetarist      theory 
    4 Random walk      theory
    3 Monetarist      theory
  301. Tax preference items would include all of the following EXCEPT:

    1 Accelerated depreciation in excess of straight line
    2 Straight-line      depreciation
    3 Excess      intangible drilling costs Excess mining,      exploration, and development costs
    2 Straight-line      depreciation
  302. Which of the following is true regarding REITs?

    1 They are exempt      from the Securities Act of 1933.
    2 They are      regulated investment companies.
    3 They may pass      losses through to the investors.
    4 They may be      traded on an exchange.
    4 They may be      traded on an exchange.
  303. Which of the following best describes Eurodollars?

    1 U.S. dollars on deposit in U.S. banks
    2 U.S. dollars on deposit in European banks
    3 U.S. dollars on deposit in foreign banks
    4 European currency on deposit in U.S. banks
    3 U.S. dollars on deposit in foreign banks
  304. Munifacts could contain: (multiple answers)

    1 The fed funds      rate
    2 Information      about an upcoming municipal issue 
    3 The amount of a      new issue that is yet unsold (new issue balance)  
    4 Dealer to dealer      availability of municipal bonds in the secondary market
    • 1 The fed funds      rate
    • 2 Information      about an upcoming municipal issue
    • 3 The amount of a      new issue that is yet unsold (new issue balance) 
    • 4 Dealer to dealer      availability of municipal bonds in the secondary market
  305. Pursuant to the bid form for a new municipal issue, it:
    (multiple answers)
    1 Is used for a      competitive sale
    2 Is used for a      negotiated sale
    3 Will contain the      proposed interest rate
    4 Will contain the      price the bidder will pay for the issue
    • 1 Is used for a      competitive sale 
    • 3 Will contain the      proposed interest rate
    • 4 Will contain the      price the bidder will pay for the issue
  306. A husband and wife are both currently employed. The husband earns $95,000 per year and the wife earns $120,000 per year. Which of the following are true concerning contributions to a Roth IRA?

    1 The husband can      contribute $5,000 per year.
    2 The husband      cannot contribute.
    3 The wife can      contribute $5,000 per year.
    4 The wife cannot      contribute.
    • 2 The husband      cannot contribute.
    • 4 The wife cannot      contribute.
  307. SIPC is a(n):

    1 Not-for-profit      corporation
    2 Self-regulatory      organization
    3 U.S. government      agency
    4 Insurer of      municipal bonds
    1 Not-for-profit      corporation
  308. When a stock splits 5 for 4, by what percentage will the price of the stock be reduced?

    20%
    25%
    50%
    80%
    20%
  309. When determining position and exercise limits for a listed equity option, which of the following 2 are considered to be on the same side of the market?

    1 Long calls and      long puts
    2 Long calls and      short puts
    3 Short calls and      short puts
    4 Short calls and      long puts
    • 2 Long calls and      short puts
    • 4 Short calls and      long puts
  310. A Registered Options Principal (ROP) must review:
    (multiple answers)
    1 Advertisements      and sales literature
    2 General      prospecting letters
    3 Seminar      transcripts
    4 Allocation of      exercise notices
    • 1 Advertisements      and sales literature
    • 2 General      prospecting letters
    • 3 Seminar      transcripts
    • 4 Allocation of      exercise notices
  311. An investor purchasing a variable rate demand obligation seeks:

    1 Guaranteed      payments of principal and interest
    2 A fixed rate of      return for the life of the investment
    3 Capital      appreciation if interest rates decline
    4 Capital      preservation if interest rates rise
    4 Capital      preservation if interest rates rise
  312. If a Kingdom of Sweden Eurobond is purchased by a U.S. citizen:

    1 Interest is      subject to income taxes
    2 Interest is      exempt from income taxes
    3 Gains are      subject to capital gains treatment
    4 Gains are exempt      from capital gains treatment
    • 1 Interest is      subject to income taxes 
    • 3 Gains are      subject to capital gains treatment
  313.  Prior to the maturity of a variable rate demand obligation, an investor has the right to receive the:

    1 Current market value
    2 Par value
    3 Par value plus accrued interest
    4 Par value less accrued interest
    3 Par value plus accrued interest
  314. A registered representative receives a sell order from his customer. When he submits the order to the wire room he accidentally transposes two of the digits in the account number and the order is processed under the wrong account. This problem would be rectified:

    1 By the registered representative
    2 With a purchase of the security out of the wrong      account
    3 By placing the order in an error file
    4 By the branch office manager
    4 By the branch office manager
  315. By adding which of the following positions to her account would she create a debit spread?

    1 Long 1 ABC Oct 30 call
    2 Long 1 ABC Oct 50 call
    3 Long 1 ABC Oct 30 put
    4 Long 1 ABC Oct 50 put
    4 Long 1 ABC Oct 50 put
  316. Logan has the following position in his account.

    Long 1 DEF May 35 call

    He anticipates a slight bullish move in DEF from which he would like to benefit, but would also like some income generated to reduce the cost of the position without adding additional risk. He could accomplish this by adding which of the following positions to his account?


    1 Short 1 DEF May 45 call
    3 Short 1 DEF May 25 call
    3 Short 1 DEF May 45 put
    4 Short 1 DEF May 25 put
    1 Short 1 DEF May 45 call
  317. An investor is long 1,000 shares of XYZ at $32 per share. The current market value of XYZ is $38. While the investor feels the stock is not likely to fluctuate over the next few months, she feels the long-term outlook is bullish. Which of the following positions would allow the investor to reduce the risk in the account and increase the portfolio's yield?

    1 Short 10 XYZ 40 calls
    2 Long 10 XYZ 40 calls
    3 Short 10 XYZ 40 puts
    4 Long 10 XYZ 40 puts
    1 Short 10 XYZ 40 calls
  318. Mike has established the following position in his account. Long 1 Treasury bond interest rate call option Mike would like to see:

    1 Interest rates rise
    2 Interest rates fall
    3 Interest rates stabilize
    4 Interest rates fluctuate
    2 Interest rates fall
  319. One of your clients expects that interest rates are going to increase. By adopting which two of the following positions would your client benefit if these 2 were to occur?

    1 Long yield-based calls
    2 Long yield-based puts
    3 Short yield-based calls
    4 Short yield-based puts
    • 1 Long yield-based calls
    • 4 Short yield-based puts
  320. Andrew, a client of yours, anticipates that the value of the U.S. dollar is weakening in relation to the euro and decides to purchase 10 March 95 euro call options at 1.30 when the spot price is 95.55. The contract size of each euro contract is 10,000. Andrew would be required to deposit:

    $95
    $130
    $950
    $1,300
    $1,300
  321. A type of money-market security usually collateralized by U.S. Treasury securities in which an investor agrees to lend funds to a broker-dealer for a specified time and rate is called:

    1 Federal funds
    2 A reverse repurchase agreement
    3 LIBOR
    4 A repurchase agreement
    4 A repurchase agreement
  322. A securities market is considered efficient if which two of the following conditions are present?

    1 Large differences between the bid and offer prices
    2 Small differences between the bid and offer prices
    3 A large number of transactions
    4 A small number of transactions
    • 2 Small differences between the bid and offer prices
    • 3 A large number of transactions
  323. A registered representative employed by the research department of a member firm is not permitted to be supervised by which department of a broker-dealer?

    1 Trading
    2 Investment banking
    3 Operations
    4 Sales
    2 Investment banking
  324. Which of the following statements is TRUE concerning gift and estate taxes paid by a husband and wife?

    1 Gifts between spouses are unlimited and no gift or      estate taxes will be paid when one spouse passes away.
    2 Gifts between spouses are unlimited and there is no      gift tax, but estate taxes must be paid when one spouse passes away.
    3 Tax-free gifts between spouses are limited to $13,000      per year, but taxes are not due on any excess until one spouse passes      away.
    4 Tax-free gifts between spouses are limited to $13,000      per year and taxes must be paid on any excess in the year the gift is      given.
    1 Gifts between spouses are unlimited and no gift or      estate taxes will be paid when one spouse passes away.
  325. Which of the following statements is NOT TRUE concerning the Student Loan Marketing Association (Sallie Mae)?

    1 It issues securities that can be redeemed to pay for      college education.
    2 It issues securities that are not backed by the U.S.      government.
    3 It purchases federally sponsored student loans.
    4 It provides loans to educational institutions.
    1 It issues securities that can be redeemed to pay for      college education.
  326. When raising capital, which two of the following securities are required to register with the SEC under the Securities Act of 1933?

    1 A REIT that will be listed on the NYSE
    2 Commercial paper issued by a finance company maturing      in one month
    3 A Eurodollar bond issued by a U.S corporation
    4 An American Depositary Receipt issued by a British      company
    • 1 A REIT that will be listed on the NYSE
    • 4 An American Depositary Receipt issued by a British      company
  327. Which of the following statements is TRUE concerning Rule 144A transactions?

    1 The securities may be offered only to accredited      investors.
    2 The securities may be offered only to qualified      institutional buyers.
    3 An investor buying these securities must hold them for      a period of six months.
    4 Only domestic issuers may offer securities under this      type of offering.
    2 The securities may be offered only to qualified      institutional buyers.
  328. Which two of the following securities will allow an investor to receive both interest income and have a maturity date allowing their principal returned in one lump sum?

    1 A municipal bond fund containing mostly revenue bonds
    2 Municipal bonds that are subject to the alternative      minimum tax
    3 A closed-end fund containing municipal bonds of one      state
    4 A portfolio of municipal bonds, some which have call      provisions
    • 2 Municipal bonds that are subject to the alternative      minimum tax 
    • 4 A portfolio of municipal bonds, some which have call      provisions
  329. TUV Sep 5.00 Puts trade on the CBOE. With the approval of its shareholders, TUV Corporation will reduce its outstanding shares by a factor of 20, which has the effect of increasing its market price 20-fold. What effect will this have on the TUV Sep 5.00 Put?

    1 The TUV option will be closed out.
    2 Investors who previously owned 1 TUV Sep 5.00 Put will      now own 1 TUV Sep 100 Put.
    3 Investors who previously owned 20 TUV Sep 5.00 Puts      will now own 1 TUV Sep 100 Put.
    4 Investors who previously owned 1 TUV Sep 5.00 Put      contract will now own 20 TUV Sep 5.00 Puts.
    2 Investors who previously owned 1 TUV Sep 5.00 Put will      now own 1 TUV Sep 100 Put.
  330. If a CMO has a PSA of 150, which of the following events most likely has occurred?

    1 Interest rates have increased.
    2 Interest rates have decreased.
    3 The credit rating of the issuer has been lowered.
    4 There has been an increase in the secondary market      trading of the securities.
    2 Interest rates have decreased.
  331. Rosewood Securities LLC has been accused of buying and selling securities for the purpose of creating artificial trading activity. Which of the following choices BEST describes this activity?

    1 Churning
    2 Matched orders
    3 Capping
    4 Stabilization
    2 Matched orders
  332. An investor wants to save for his child's education. His personal preference is to use self-directed investments in common stocks while benefitting from tax-deferred growth. Which type of account would be best to meet these objectives?

    1 IRA
    2 Joint account with the parent and child
    3 529 Plan
    4 Coverdell Education Account (ESA)
    4 Coverdell Education Account (ESA)
  333. Which of the following transactions may be executed in a cash account?

    1 Short 100 shares of XYZ stock
    2 Long 500 shares of ABC stock and short 500 shares of      ABC stock
    3 Short 10 DEF May 50 calls
    4 Long 5 GHI Jan 15 puts
    4 Long 5 GHI Jan 15 puts
  334. A client has a margin account with the following positions: short 2,000 shares of EXA at $22 and long 40 EXA convertible bonds at $1,150 that are convertible at $20. The client's maintenance requirement is:

    $4,400
    $4,600
    $11,500
    $13,200
    $4,600
  335. A client has a margin account with the following positions: short 2,000 shares of EXA at $22 and long 2,000 shares of EXA at $24 . The client's maintenance requirement is:

    $2,200
    $2,400
    $11,500
    $13,200
    $2,400
  336. Which of the following factors is least important when recommending a long-term brokered CD to a client?

    1 The CD was issued by a bank located in a different      state from where the client lives.
    2 The CD has a feature in which the interest rate is      based on a percentage increase in an equity index.
    3 The client will be purchasing the CD in a retirement      account.
    4 The firm may make a market in this CD, but is not      obligated to do so.
    1 The CD was issued by a bank located in a different      state from where the client lives.
  337. A client sells short 1,000 shares of KPL at $46 a share. Fourteen months later the client covers the short sale at $35 a share. For tax purchases the client would report:

    1 A short-term capital gain
    2 A long-term capital gain
    3 Neither a gain nor a loss since the trade involved a      short sale
    4 A short-term capital loss
    1 A short-term capital gain
  338. A client creates an opening sale in a LEAP and closes out the position 15 months later. The tax consequence is a:

    1 Short-term gain or loss
    2 Long-term gain or loss
    3 Passive gain or loss
    4 Gain or loss that may not offset other trading      positions or ordinary income
    1 Short-term gain or loss
  339. A registered representative enters an order for a client. In error, the RR purchases shares of the wrong security. Which of the following statements is TRUE?

    1 The shares must be placed in the RR's error account. 
    2 The shares must be placed in the broker-dealer's error      account.
    3 The RR must contact the client and cancel the original      transaction.
    4 The firm is required to report the error to the market      in which the order was executed.
    2 The shares must be placed in the broker-dealer's error      account.
  340. A direct participation program in real estate would NOT have which of the following characteristics?

    1 Passive income
    2 The tax benefit of depreciation
    3 Cash dividends that are taxable as ordinary income
    4 A lower tax rate on capital gains
    3 Cash dividends that are taxable as ordinary income
  341. Which of the following statements is TRUE concerning the tax treatment of CMOs?

    1 The interest is fully taxable.
    2 The principal is fully taxable.
    3 The interest is exempt from federal tax but subject to      state and local taxes.
    4 The interest and principal are exempt from state and      local taxes.
    1 The interest is fully taxable.
  342. A broker-dealer is preparing sales literature on CMOs. Which TWO of the following statements must be disclosed?

    1 The term collateralized mortgage obligation must      be included within the name of the product.
    2 The basis point spread above a comparable Treasury      security the client will receive in interest must be included.
    3 The lower of the yield to call or yield to maturity      must be included.
    4 The government agency backing only applies to the face      value of the securities.
    • 1 The term collateralized mortgage obligation must      be included within the name of the product.
    • 4 The government agency backing only applies to the face      value of the securities.
  343. A CMO would be suitable for an investor seeking:

    1 Monthly tax-free income assuming he does need the      principal returned at maturity
    2 Quarterly income assuming he does not need the      principal returned at maturity
    3 Monthly income assuming he needs the entire principal      returned at maturity
    4 Monthly income assuming he does not need the entire
    principal returned at maturity
    4 Monthly income assuming he does not need the entire principal returned at maturity
  344. Municipal securities Dealer A quotes a price for a block of bonds to Dealer B for one hour with a five-minute recall. This means:

    1 Dealer A may recall Dealer B within the one-hour period      and demand a decision of Dealer B in five minutes
    2 Dealer B may call Dealer A within the one-hour period      and demand a decision of Dealer A in five minutes
    3 Dealer B must take the bonds if he does not call Dealer      A back within five minutes after the one-hour quote period has ended
    4 Dealer A may cancel its quote within the one-hour      period by recalling Dealer B within the first five minutes
    1 Dealer A may recall Dealer B within the one-hour period      and demand a decision of Dealer B in five minutes
  345. Which TWO of the following choices are TRUE regarding the types of securities issued by the Federal Home Loan Bank?

    1 Discount notes with maturities between 2 and 10 years
    2 Discount notes with maturities of less than one year
    3 Consolidated bonds with maturities of up to 30 years
    4 Consolidated bonds with maturities ranging from10 to 30      years
    • 2 Discount notes with maturities of less than one year
    • 3 Consolidated bonds with maturities of up to 30 years
  346. A client wants to purchase 10 RSR July 45 calls and 10 RSR July 45 puts. This transaction:

    1 Should be executed on one order ticket
    2 Should be executed on two order tickets
    3 Should not be executed
    4 Must be approved in advance by a registered options      principal
    1 Should be executed on one order ticket
  347. On February 22, an investor sold 100 shares of ABC short at $34 a share. The investor covered the position on November 3 by purchasing 100 shares of ABC at $39 a share, establishing a 5-point loss. If, on December 15, the investor shorts 100 shares of ABC at $35 a share, the:

    1 Investor is short 100 shares of ABC against the box
    2 Wash sale rule has been violated
    3 Investor has a $400 short-term capital gain
    4 Investor has a $500 short-term capital loss
    4 Investor has a $500 short-term capital loss
  348. AQL stock is currently quoted at 48.50 bid, offered at 48.70. A client purchasing this security would pay:

    1 48.50 plus a commission
    2 48.50 minus a commission
    3 48.70 plus a commission
    4 48.70 minus a commission Investor has a $500 short-term capital loss
    3 48.70 plus a commission
  349. If interest rates increase, which of the following securities would have the most price change?

    1 A Treasury note trading at a discount
    2 A Treasury note trading at a premium
    3 A Treasury bond trading at a discount
    4 A Treasury bond trading at a premium
    3 A Treasury bond trading at a discount
  350. A client has a margin account with a long market value of $950,000 and a debit balance of $550,000. If the broker-dealer declares bankruptcy, which TWO of the following statements are TRUE?

    1 The client is permitted to pay $550,000 and receive      $950,000 of securities.
    2 The client is permitted to pay $500,000 and receive      $950,000 of securities.
    3 The client is covered for $400,000 of securities.
    4 The client is covered for $500,000 of securities.
    • 1 The client is permitted to pay $550,000 and receive      $950,000 of securities.
    • 3 The client is covered for $400,000 of securities.
  351. A municipality issues a bond backed by revenue from a project. If the municipality also has bonds outstanding which are backed by the same revenue, which of the following statements is TRUE?

    1 This is a double barreled bond.
    2 This is a parity bond.
    3 This type of bond would require voter approval.
    4 This type of bond may only be issued if the      municipality creates an escrow fund.
    2 This is a parity bond.
  352. If an auction for auction-rate securities were to fail, the holder would:

    1 Receive the par value of the securities
    2 Continue to hold the securities and the interest rate      would be set to the maximum rate
    3 Continue to hold the securities and the interest rate      would be set to the minimum rate
    4 Continue to hold the securities and the interest rate      would be set to a rate that would have cleared the auction.
    2 Continue to hold the securities and the interest rate      would be set to the maximum rate
  353. Regulation NMS would apply to which TWO of the following choices?

    1 Listed equity trades
    2 Listed debt trades
    3 Quotes available for manual execution
    4 Quotes available for electronic execution
    • 1 Listed equity trades
    • 4 Quotes available for electronic execution
  354. A revenue bond purchased at a premium whose cost is reduced in equal amounts each year is using:

    1 Straight-line accretion
    2 Constant-yield accretion
    3 Straight-line amortization
    4 Constant-yield amortization
    3 Straight-line amortization
  355. An individual purchases one XYZ 40 call for 4 and one XYZ 50 call for 2. The market price of XYZ stock is currently 43. What is the individual's breakeven price?

    44
    46
    52
    56
    46
  356. An individual purchases one ABC 35 put for 2.50 and one ABC 30 put for .75. The market price of ABC stock is currently 34. What is the individual's breakeven price?

    32.50     
    31.75     
    29.25     
    26.75
    31.75     
  357. A customer who has historically invested in mutual funds is considering an investment in a hedge fund for the first time. When comparing mutual funds to hedge funds, all of the following statements are TRUE EXCEPT:

    1 Mutual funds are subject to more regulatory oversight      than hedge funds
    2 Mutual funds pool investors' money and manage the      portfolio, whereas hedge funds manage each investor's assets separately
    3 Hedge funds often use higher degrees of leverage than      mutual funds
    4 Mutual funds may be suitable for many customers,      whereas hedge funds are generally suitable for sophisticated, wealthy      investors only
    2 Mutual funds pool investors' money and manage the      portfolio, whereas hedge funds manage each investor's assets separately
  358. Regulation NMS modernized the U.S. markets for trading equity securities and prohibited:

    1 Trading exchange-listed securities over-the-counter
    2 A broker-dealer from selling a security to a customer      from its own inventory
    3 The execution of a buy order at one market center at a      price above the lowest ask price in another market center
    4 Trading ADRs on U.S. exchanges
    3 The execution of a buy order at one market center at a      price above the lowest ask price in another market center
  359. Morris Investments is working a leveraged buyout deal to purchase Simon Entertainment Group. The fundamental financing for the deal will consist mostly of:

    1 Debt issued using the assets of Simon Entertainment      Group as collateral
    2 Debt issued using the assets of Morris Investments as      collateral
    3 Equity issued by Simon Entertainment Group
    4 Equity issued by Morris Investments
    1 Debt issued using the assets of Simon Entertainment      Group as collateral
  360. A customer sells 100 shares of GM short. GM pays a 5% stock dividend. When the customer covers the short position, the customer will have to deliver:

     5 shares of GM
    100 shares of GM
    105 shares of GM
    None of the above
    105 shares of GM
  361. If SIPC does not cover a customer's account in a brokerage firm that has gone bankrupt, the investor would be a:

    1 General creditor
    2 Secured creditor
    3 Preferred creditor
    4 Guaranteed creditor
    1 General creditor
  362. All of the following are required to be included in a preliminary prospectus according to the Securities Act of 1933 EXCEPT:

    1 A written statement in red on the left border of a      preliminary prospectus ("red herring") that states that the      prospectus may be subject to changes 
    2 The purpose for which the funds are being raised 
    3 The final offering price
    4 The financial status and history of the company
    3 The final offering price
  363. All of the following securities trade with accrued interest EXCEPT:

    1 Treasury bonds
    2 Treasury STRIPS
    3 Jumbo certificates of deposit
    4 Convertible bonds
    2 Treasury STRIPS
  364. Where would bid limitations for a new municipal bond issue be found?

    1 Official Statement
    2 Indenture
    3 Notice of Sale
    4 Syndicate Agreement
    3 Notice of Sale
  365. A stock trades ex-dividend on Monday the 20th. What is the last day an investor can purchase the stock and be entitled to the dividend?

    1 Monday the 13th
    2 Thursday the 16th
    3 Friday the 17th
    4 Monday the 20th
    3 Friday the 17th
  366. A company currently has $125,000,000 of 3 1/4% convertible bonds. The company is going to offer $125,000,000 of 3 1/4% nonconvertible bonds plus cash of $15,000,000 for the convertible bonds. How will this transaction, if successful, affect the company's financial status?

    1 It will reduce the cash and debt position and reduce      the potential dilutive effect on the common stock.
    2 It will reduce the cash position and increase the debt      position.
    3 It will increase the cash position and reduce the      potential dilutive effect on the common stock.
    4 It will reduce the cash position and the potential      dilutive effect on the common stock.
    4 It will reduce the cash position and the potential      dilutive effect on the common stock.
  367. Concerning Moody's ratings, which is the most speculative in the investment grade category?

    Aa
    A
    Baa
    Ba
    Baa
  368. A corporation is in the 34% tax bracket. Which of the following choices would provide the best return if the corporation wanted to invest some of its surplus cash?

    1 A preferred stock paying a 7.50% dividend
    2 A corporate bond yielding 8%
    3 A common stock yielding 6%
    4 A municipal bond yielding 6%
    1 A preferred stock paying a 7.50% dividend
  369. Which of the following persons may purchase a new issue from a member firm according to the New Issue Rule?

    1 The brother-in-law of a person associated with a member      firm
    2 The uncle of a person associated with a member firm
    3 A buy-side trader employed by a mutual fund
    4 The owner of a member firm
    2 The uncle of a person associated with a member firm
  370. The 5% markup policy applies when a member is acting as:

    1 An investment banker
    2 A mutual fund underwriter
    3 A broker-dealer in the OTC market
    4 A specialist on the floor of the NYSE
    3 A broker-dealer in the OTC market
  371. The following appears on the NYSE ticker tape: T 18.25 .50. This means that:

    1 American Telephone is quoted 18.25 - 18.50
    2 100 shares of American Telephone traded at 18.25,      followed by another trade of 100 shares at 18.50
    3 An odd-lot of American Telephone traded at 18.25,      followed by a round-lot at 18.50
    4 None of the above
    2 100 shares of American Telephone traded at 18.25,      followed by another trade of 100 shares at 18.50
  372. The following appears on the NYSE ticker tape: X 67. 3s .13. Relating to this, which of the following is true?

    1 USX Corp. is quoted at 67 to 67.13.
    2 Someone is bidding for 100 shares of USX Corp. at 67      and someone else is offering 300 USX Corp. at 67.13. 
    3 100 shares of USX Corp. traded at 67, followed by a      trade of 300 at 67.13.
    4 USX Corp. opened at 67 followed by a trade of 300      shares at 67.13.
    3 100 shares of USX Corp. traded at 67, followed by a      trade of 300 at 67.13.
  373. Which of the following would probably be most leveraged?

    1 A software company
    2 A biotech company
    3 A consumer electronics company
    4 A utility company
    4 A utility company
  374. Who prepares the syndicate agreement for a municipal underwriting?

    1 Counsel for the issuer
    2 Counsel for the underwriters
    3 Financial officer of the syndicate
    4 Issuer
    2 Counsel for the underwriters
  375. A broker-dealer that is an MSRB member firm sells bonds to one of its customers. If the broker-dealer is a member of the syndicate, the firm is entitled to the:

    1 Takedown less the concession
    2 Additional takedown plus the management fee
    3 Total takedown less the management fee
    4 Total takedown
    4 Total takedown
  376. The initial FRB margin requirement is 50%. A customer has a margin account with a market value of $20,000, a debit balance of $12,000 and equity of $8,000. If the customer was to sell $1,000 worth of stock, the amount of the adjusted increase in the SMA would be:

    $300
    $400
    $500
    $1,000
    $500
  377. How much margin must the purchaser of one RFQ Feb 60 call for a $3 premium deposit?

    25%
    40%
    50%
    100%
    100%
  378. Which of the following Moody's rated bonds would be considered speculative?

    Aaa
    Aa
    Baa
    Ba
    Ba
  379. According to the MSRB rules, which of the following would cause a broker-dealer to reject the delivery of municipal bonds?

    1 A legal opinion is attached to, rather than imprinted      on, the bonds.
    2 Registered bonds are expected and delivered with proper      endorsement.
    3 Bearer bonds are delivered in $5,000 denominations.
    4 The bonds have been called by the issuer
    4 The bonds have been called by the issuer
  380. Federal and state registration requirements apply to all of the following EXCEPT:

    1 Publicly traded limited partnerships
    2 Preferred stock
    3 Municipal securities
    4 Open-end investment companies
    3 Municipal securities
  381. What would be the most advantageous tax benefit that an investor would receive from an oil and gas direct participation income program?

    1 Liquidity
    2 Depreciation
    3 Depletion
    4 Intermediation
    3 Depletion
  382. All of the following are Bond Buyer Indexes EXCEPT:

    1 The average yield on 25 revenue bonds with 30-year      maturities
    2 The average yield on 20 selected municipal bonds with      20-year maturities
    3 The average yield on 11 selected municipal bonds with      20-year maturities
    4 The total of all new issues scheduled to be sold during      the upcoming 30 days
    4 The total of all new issues scheduled to be sold during      the upcoming 30 days
  383. An investor purchases a British pound Apr 135 call @ 7.50 when the British pound is trading at 140.37. The contract size is 10,000 British pounds. What is the investor's total cost for the call option?

    $135
    $140.37
    $537
    $750
    $750
  384. Broker-dealers are permitted to: (multiple answers) 

    1 Tell investors to buy mutual funds shortly before a      dividend or capital gains distribution is to be paid
    2 Assign loan value to fully paid shares that have been      owned for more than 30 days
    3 Provide a discount to nonmember broker-dealers when      selling them investment company shares
    4 Continue to compensate retired registered      representatives for prior sales if a contract was signed with the      registered representative who has retired
    • 1 Tell investors to buy mutual funds shortly before a      dividend or capital gains distribution is to be paid
    • 2 Assign loan value to fully paid shares that have been      owned for more than 30 days
    • 3 Provide a discount to nonmember broker-dealers when      selling them investment company shares
    • 4 Continue to compensate retired registered      representatives for prior sales if a contract was signed with the      registered representative who has retired
  385. A corporate bond that has no specific collateral backing it and is guaranteed by the full faith and credit of the issuing corporation is called a(n):

    1 Debenture
    2 Guaranteed bond
    3 Income bond
    4 Equipment trust certificate
    1 Debenture
  386. Duties of the ROP include which of the following? (multiple answers)

    1 Reviewing selected customer accounts
    2 Establishing option training programs for registered      representatives and ROPs 
    3 Reviewing advertisements and sales literature
    • 2 Establishing option training programs for registered      representatives and ROPs
    • 3 Reviewing advertisements and sales literature
  387. Blue Sky laws apply to which of the following? (multiple answers)

    1 Registered representatives
    2 Securities
    3 Tombstone ads
    4 REITs
    • 1 Registered representatives
    • 2 Securities
    • 3 Tombstone ads
    • 4 REITs
  388. A customer in the 35% tax bracket has $1,500 in long-term capital gains from stock transactions at the end of the year. The customer will have to pay taxes of:

    $150
    $225
    $420
    $525
    $225
  389. Relative to a custodian account, which of the following 2 are TRUE?

    1 The minor is responsible for tax consequences.
    2 The custodian is responsible for tax consequences.
    3 Income generated in the account is taxed as it is      received.
    4 Income generated in the account is taxed when the minor      becomes an adult.
    • 1 The minor is responsible for tax consequences.
    • 3 Income generated in the account is taxed as it is      received
  390. A customer owns 20 ABC Corporation October 30 calls in a cash account. The customer exercises the calls and the same day sells the stock at $32. The customer will have to deposit into the account:

    $20,000
    $30,000
    $60,000
    No cash deposit is required
    $60,000
  391. A customer opens a new margin account and buys 100 shares of XYZ Corporation at $40 per share and then writes a call option against the position and receives a $2 premium. The customer must deposit cash into the account of:

    $1,800
    $1,900
    $2,000
    $2,100
    $1,800
  392. Normally, the largest expense incurred by an open-end investment company is the:

    1 Sales charge reallowed to the broker-dealers
    2 Custodial fee
    3 Investment advisory fee
    4 Accountant's fee
    3 Investment advisory fee
  393. ABC Corporation has a capitalization that consists of a large amount of debt securities relative to a small amount of equity securities. ABC Corporation would be considered to have a capitalization that is:

    1 Conservative
    2 Ordinary
    3 Under-leveraged
    4 Leveraged
    4 Leveraged
  394. When setting prices for a competitive municipal bid, the underwriter will consider all of the following EXCEPT:

    1 Call premiums
    2 Maturity
    3 Good faith deposit
    4 Coupon rates
    3 Good faith deposit
  395. A brokerage firm's research department has issued a buy recommendation for XYZ Corporation's common stock. The report must contain all of the following information EXCEPT:

    1 The firm was the managing underwriter in a recent      public offering of the stock
    2 The number of shares the firm owns of the stock
    3 The partners of the firm hold options to purchase the      stock
    4 The firm makes a market trading in the stock
    2 The number of shares the firm owns of the stock
  396. All of the following are true regarding the SuperDOT system EXCEPT:

    1 Orders are sent directly to the specialist by computer
    2 Orders do not go through a floor broker
    3 All orders may be entered into the system regardless of      the number of shares involved
    4 Transaction reports are received faster than those      executed by floor brokers
    3 All orders may be entered into the system regardless of      the number of shares involved
  397. A registered rep holding limited discretionary authority over a customer's account may:

    1 Buy or sell securities in the account without      consulting the customer
    2 Withdraw money from the account
    3 Receive a fee for using his discretion in trading the      account
    4 Borrow assets from the customer's account
    1 Buy or sell securities in the account without      consulting the customer
  398. Which of the following rates is the most volatile?

    1 The prime rate
    2 The discount rate
    3 The call rate
    4 The federal funds rate
    4 The federal funds rate
  399. The payment date for securities purchased in a cash or margin account as stated by Regulation T. Use the following choices to answer this question.

    1 One business day from the trade date
    2 Three business days from the trade date
    3 Two business days from the settlement date
    4 Ten business days from the settlement date
    3 Two business days from the settlement date
  400. The latest date that a broker-dealer may buy-in stock when the customer who sold the stock fails to deliver. Use the following choices to answer this question.

    1 One business day from the trade date
    2 Three business days from the trade date
    3 Two business days from the settlement date
    4 Ten business days from the settlement date
    4 Ten business days from the settlement date
  401. Which two of the following circumstances would lead to disintermediation?

    1 When interest rates at savings banks are lower than      money market instruments
    2 When interest rates at savings banks are higher than
    money market instruments
    3 When the FRB is pursuing a tight monetary policy which      is causing a rise in interest rates
    4 When the FRB is pursuing a loose monetary policy      causing interest rates to decline
    • 1 When interest rates at savings banks are lower than      money market instruments
    • 3 When the FRB is pursuing a tight monetary policy which      is causing a rise in interest rates
  402. An analysis of the quality of a general obligation bond to be issued would include all of the following EXCEPT:

    1 The tax base of the community
    2 The economic character of the community
    3 The dollar denominations of the bonds to be issued
    4 The makeup of the population of the community
    3 The dollar denominations of the bonds to be issued
  403. Which of the following is TRUE regarding Eurodollar bonds?

    1 They are denominated in U.S. dollars only.
    2 They are denominated in foreign currencies only.
    3 They are only traded outside of the U.S.
    4 They are traded in the U.S. and international markets.
    • 1 They are denominated in U.S. dollars only.
    • 4 They are traded in the U.S. and international markets.
  404. All of the following are TRUE regarding variable annuities and mutual funds EXCEPT:

    1 Mutual funds and variable annuities are regulated under      the Investment Company Act of 1940
    2 Variable annuity companies will retain any dividends      paid, but the owner of the variable annuity must pay taxes on the      dividends each year
    3 Both mutual funds and variable annuities are considered      securities
    4 The payout of both mutual funds and variable annuities      will depend on the performance of the securities owned in the portfolio
    2 Variable annuity companies will retain any dividends      paid, but the owner of the variable annuity must pay taxes on the      dividends each year
  405. Closing spot prices for foreign currencies are disseminated daily by the:

    1 NYSE
    2 IMM
    3 FRB
    4 FINRA
    3 FRB
  406. An order entered with a brokerage firm will be processed in which order?

    1 Cashier's department
    2 Margin department
    3 Purchase and sale (P&S) department
    4 Wire room (order department)
    4,3,2,1
  407. Rule 145 applies to which of the following situations?

    1 A stock split
    2 A stock dividend
    3 An adjustment in par value
    4 A merger
    4 A merger
  408. All of the following are features of GNMA pass-through certificates EXCEPT:

    1 They are backed by the U.S. government
    2 Interest is subject to federal tax but is exempt from      state tax
    3 Interest and principal payments are made on a monthly      basis
    4 Pools consist of fixed-rate residential mortgages
    2 Interest is subject to federal tax but is exempt from      state tax
  409. Which of the following will not affect the SMA in a long margin account?

    1 Cash dividends paid on securities in a margin account  
    2 Cash deposited in the account to reduce the debit      balance
    3 Stock dividends paid on securities held in the margin      account
    4 Appreciation in market value of the securities in a      margin account
    3 Stock dividends paid on securities held in the margin      account
  410. A single worker makes $43,000 per year and has no dependents. If she is eligible for all four of the following plans, which one would you be LEAST likely to recommend?

    1 An IRA
    2 A 403(b)
    3 A 401(k)
    4 A 457
    1 An IRA
  411. Which of the following would have a negative effect on the U.S. balance of payments?

    1 Increase U.S. exports to foreign countries
    2 Foreign purchases of U.S. securities
    3 New U.S. investments abroad
    4 New foreign investments in the U.S.
    1 Increase U.S. exports to foreign countries
  412. The third market is concerned with:

    1 OTC securities only
    2 Listed securities only
    3 NYSE-listed securities traded in the OTC market
    4 U.S. government securities traded OTC
    3 NYSE-listed securities traded in the OTC market
  413. Which of the following could be found on a customer's confirmation? (multiple answers) 

    1 If the firm acted as principal
    2 If the firm acted as the customer's agent
    3 If the firm acted for a third party
    4 If the firm is a bona fide market maker in the security     
    • 1 If the firm acted as principal
    • 2 If the firm acted as the customer's agent
    • 3 If the firm acted for a third party
    • 4 If the firm is a bona fide market maker in the security
  414. An individual wants to buy an interest in an oil and gas limited partnership that would have the least amount of risk. The best recommendation would be a(n):

    1 Income program
    2 Exploratory program
    3 Drilling program
    4 Balanced program
    1 Income program
  415. The exercise (strike) prices of listed options are NOT adjusted for:

    1 Stock splits
    2 Cash dividends
    3 Rights offerings
    4 Stock dividends
    2 Cash dividends
  416. A client would like to invest $250 a month and have broad exposure to the U.S. equity market. Which of the following recommendations would be the most suitable?

    1 A managed closed-end fund
    2 An S&P 500 Index mutual fund 
    3 An S&P 500 Index Exchange Traded Fund 
    4 An DJIA Exchange Traded Fund
    2 An S&P 500 Index mutual fund
  417. In "easy money" periods, bonds of similar quality will generally have: (which 2) 

    1 Short-term yields lower than long-term yields
    2 Long-term yields lower than short-term yields
    3 Both short-term and long-term yields below normal
    4 Both short-term and long-term yields higher than normal     
    • 1 Short-term yields lower than long-term yields
    • 4 Both short-term and long-term yields higher than normal    
  418. The interest paid on special assessment bonds is derived from:

    1 Ad valorem taxes
    2 Toll road revenues
    3 Charges on the benefitted property
    4 Excise taxes
    3 Charges on the benefitted property
  419. During periods of tight money, when the yield curve becomes inverted, the highest yield would probably be found in:

    1 3-month treasury bills
    2 3-month negotiable certificates of deposit
    3 5-year Treasury notes
    4 30-year municipal bonds
    2 3-month negotiable certificates of deposit
  420. Three-month and six-month Treasury bills are auctioned by the Federal Reserve Board:

    1 Daily
    2 Weekly
    3 Monthly
    4 Annually
    2 Weekly
  421. The Federal Reserve Board Regulation T margin requirement is 50%. A customer buys 100 shares of XYZ Corporation at $80 per share in a margin account and 1 call option on XYZ Corporation at 5. The customer will have to deposit:

    $4,000
    $4,250
    $4,500
    $8,500
    $4,500
  422. A syndicate letter used in the formation of a municipal syndicate account will contain all of the following EXCEPT:

    1 The account manager
    2 The member participation
    3 The reoffering yields
    4 The duration of the account
    3 The reoffering yields
  423. A customer buys bonds with a $50,000 par value at 85 1/2. The bonds are callable at 110. If the customer holds the bonds to maturity he will receive:

    $42,500
    $50,000
    $55,000
    $85,000
    $50,000
  424. The investment banking department of a broker-dealer generally does all of the following EXCEPT:

    1 Underwrites new issues
    2 Provides financing for industrial corporations
    3 Distributes large blocks of already outstanding      securities
    4 Makes a secondary market for new issues
    4 Makes a secondary market for new issues
  425. All of the following can be bought on margin EXCEPT:

    1 Common stocks listed on an exchange
    2 Preferred stocks listed on an exchange
    3 Over-the-counter stocks on Nasdaq
    4 Options with nine months or less to expiration
    4 Options with nine months or less to expiration
  426. For secondary market transactions, a municipal securities broker-dealer may use a broker's broker to which 2:

    1 Disseminate the availability of the securities
    2 Sell securities but remain anonymous
    3 Increase the market price of the securities
    4 Guarantee a profit on a trade
    • 1 Disseminate the availability of the securities
    • 2 Sell securities but remain anonymous
  427. Cash dividends declared by a corporation:

    1 Are taxed as capital gains
    2 Are a current liability to the corporation when      declared
    3 Must be approved for payment by the shareholders
    4 Does not affect working capital
    2 Are a current liability to the corporation when      declared
  428. A municipal bond pays interest on February 1st and August 1st. How many days of accrued interest will the buyer pay the seller if the bond is purchased on Wednesday, May 31st?

    96 days
    120 days
    124 days
    125 days
    124 days
  429. Which of the following proxy rules would be correct regarding customer securities held in "street name" by a brokerage firm?

    1 The corporation would send the proxy to the customer.
    2 The corporation would send the proxy to the NYSE who would then send it to the customer.
    3 The corporation would send the proxy to the SEC who  would then send it to the customer.
    4 The corporation would send the proxy to the brokerage      firm who would then send it to the customer.
    4 The corporation would send the proxy to the brokerage      firm who would then send it to the customer.
  430. Which of the following is an employee of an options exchange?

    1 Market maker
    2 Board broker
    3 Order book official
    4 Floor broker
    3 Order book official
  431. Mr. Jones purchases 100 shares of XYZ at $80 per share and writes an XYZ June 85 call receiving a $3 premium. If XYZ increased to $90 and the call option is exercised, Mr. Jones' profit is:

    $300
    $500
    $800
    $1,800
    $800
  432. ABC Corporation announces a 5-for-4 split. After the split the market price of ABC Corporation will be reduced by:

    15%
    20%
    25%
    50%
    20%
  433. Money received by a corporation when it sells its stock above its par value is called:

    1 Excess capital
    2 Earned surplus
    3 Paid-in capital
    4 Stockholders' capital
    3 Paid-in capital
  434. XYZ Corporation has earned $4 per share and has paid out $2 per share in dividends. XYZ Corporation is selling at $56 in the market. The price-earnings ratio of XYZ Corporation is:

    2 to 1
    9.3 to 1
    14 to 1
    28 to 1
    14 to 1
  435. Mr. Smith buys an XYZ Corporation October 70 put and pays a $16 premium for the put. XYZ declines to $52. Mr. Smith purchases 100 shares of XYZ at the market price and puts it to the writer. According to IRS rules, the proceeds received by the customer from the sale of the stock to the writer is:

    $200
    $5,200
    $5,400
    $7,000
    $5,400
  436. In most cases, municipal bond investors may obtain which TWO of the following?

    1 Reduced interest rate risk by investing in issues with      different maturities
    2 Federal tax exemption by investing in private activity      bonds
    3 State and local tax exemption by investing in bonds in      their state of residency
    4 Reduced risk of default by investing in bonds in their      state of residency
    • 1 Reduced interest rate risk by investing in issues with      different maturities
    • 3 State and local tax exemption by investing in bonds in      their state of residency

  437. A broker-dealer selling mutual fund shares to a client is permitted a maximum sales charge of:

    8%
    8 1/2%
    9%
    10%
    8 1/2%
  438. Which of the following is/are true regarding the sale of restricted securities under SEC Rule 144?

    1 The securities must be fully paid.
    2 The sale can be made on an agency or principal basis.
    3 A Form 144 notice of sale must be filed with the SEC      not later than 30 days after the sale.
    4 The securities must be owned for six months.
    • 1 The securities must be fully paid.
    • 2 The sale can be made on an agency or principal basis.
    • 4 The securities must be owned for six months.
  439. An individual purchased an Australian dollar June 65 put at 2.34 that was sold at 3.68. If the contract size is 10,000 Australian dollars, what was the individual's total profit?

    $65
    $134
    $234
    $368
    $134
  440. The Options Clearing Corporation selects a member firm to receive an exercise notice on a random selection basis only. Which of the following methods can the member firm choose to allocate the exercise notice to its customer? (multiple answers) 

    1 Any method that is fair and equitable, as long as the      customer is aware of the method
    2 On a first-in, first-out basis
    3 On a random selection basis
    4 On the basis of the client having the largest position      of written contracts
    • 1 Any method that is fair and equitable, as long as the      customer is aware of the method
    • 2 On a first-in, first-out basis
    • 3 On a random selection basis
  441. A brokerage firm would like to increase its marketing efforts in option transactions through the use of certain advertisements. All of the following are considered forms of advertising EXCEPT:

    1 Newspapers and magazines
    2 The Options Clearing Corporation risk disclosure      document
    3 Radio, telephone messages, and television
    4 Newsletters, sales literature, and research
    2 The Options Clearing Corporation risk disclosure      document
  442. A customer in the 28% tax bracket buys a 10% corporate bond at par. What is the investor's net yield?

    2.8%
    7.2%
    10%
    13.9%
    7.2%
  443. To determine what would happen to the coverage of revenue bonds when more bonds are to be issued in the future, one should examine:

    1 The rate covenants of the bond
    2 Feasibility studies
    3 The refunding procedure of the bond
    4 The additional bonds test
    4 The additional bonds test
  444. When considering the credit strength of a municipal issuer, one should include in the analysis: (multipleanswers) 

    1 The condition of the local economy
    2 The current financial status of the municipality
    3 Money supply figures
    4 The general capability of the fiscal officers of the      municipality
    • 1 The condition of the local economy
    • 2 The current financial status of the municipality
    • 4 The general capability of the fiscal officers of the      municipality
  445. As far as rights offerings are concerned:

    1 Common shareholders do not have the right to subscribe      to rights offerings
    2 Preferred shareholders do not have the right to      subscribe to rights offerings
    3 Both of the above are correct
    4 None of the above are correct
    2 Preferred shareholders do not have the right to      subscribe to rights offerings
  446. All of the following are prohibited according to the Securities Exchange Act of 1934 EXCEPT:

    1 A trader buys shares late in the day to prevent the      price of a security from falling
    2 Short sales of municipal bonds
    3 Selling short shares of an exchange-traded stock      without borrowing the security
    4 Two traders enter into transactions where ownership      does not actually change, in order to increase trading volume
    2 Short sales of municipal bonds
  447. According to MSRB rules, which of the following must be disclosed to a customer in a negotiated sale of municipal bonds? (multiple answers) 

    1 The amount of the underwriting spread
    2 The initial offering of each maturity
    3 Any fee received as agent for the issuer
    4 The name of the underwriter's counsel
    • 1 The amount of the underwriting spread
    • 2 The initial offering of each maturity
    • 3 Any fee received as agent for the issuer
  448. All of the following are true regarding a private placement EXCEPT:

    1 There is a limit to the number of nonaccredited      investors that may purchase the securities
    2 The securities are exempt from registration
    3 Solicitation of investors may not be permitted
    4 It is usually a very liquid investment
    4 It is usually a very liquid investment
  449. Which of the following statements regarding the opening of a new municipal account are TRUE according to MSRB rules? (multiple answers)

    1 An employee of a municipal securities firm can open a      new account with another municipal securities firm without the employer      being notified.
    2 An employee of a municipal securities firm can open a      new account with another municipal securities firm as long as the employer      is notified and duplicate confirmations are sent to the individual's      employer.
    3 A bond attorney can open a new account without restriction.     
    4 An officer of a municipal issuer can open a new account      without restriction.
    • 2 An employee of a municipal securities firm can open a      new account with another municipal securities firm as long as the employer      is notified and duplicate confirmations are sent to the individual's      employer.
    • 3 A bond attorney can open a new account without restriction.     
    • 4 An officer of a municipal issuer can open a new account      without restriction.
  450. If a corporation went bankrupt, any remaining assets would be distributed in which of the following orders of priority?

    1 Common stockholders
    2 Mortgage bondholders
    3 Convertible bondholders
    4 Unpaid workers
    4,2,3,1
  451. ABC Corporation has issued $100,000,000 worth of bonds at a $1,000 par value. The effect of the issuance of the bonds would be an increase in:

    1 Working capital
    2 Total liabilities
    3 Total assets
    4 Stockholders' equity
    4,2,3,1
  452. ABC Corporation has issued $100,000,000 worth of bonds at a $1,000 par value. The effect of the issuance of the bonds would be an increase in:

    1 Working capital
    2 Total liabilities
    3 Total assets
    4 Stockholders' equity
    • 1 Working capital
    • 2 Total liabilities
  453. All of the following are features of a 529 plan EXCEPT:

    1 Withdrawals from 529 plans used for educational      purposes are not subject to federal taxation
    2 There are no income limits placed on contributors
    3 Contributions are unlimited
    4 Earnings in the account are tax-deferred
    3 Contributions are unlimited
  454. Which of the following companies would most likely pay a dividend in stock rather than cash?

    1 A company with a large cash position and very little      growth in earnings
    2 A company whose earnings are growing at 5% a year and      has a small amount of cash
    3 A company growing at 10% a year with 20% of its assets      in cash
    4 A company with a small amount of cash whose earnings      are growing at a rate of 20% per year
    4 A company with a small amount of cash whose earnings      are growing at a rate of 20% per year
  455. Fully paid customer securities held at a brokerage firm:

    1 May be used as collateral for brokerage firm loans
    2 May be commingled with other customers' securities
    3 Must be segregated and identified as belonging to the      customer
    4 None of the above
    3 Must be segregated and identified as belonging to the      customer
  456. A sell stop order would most likely be entered by a technical analyst or chartist:

    1 Below a support level for the stock
    2 Above a resistance level for the stock
    3 Below a previous low for the stock
    4 To take advantage of a rising market
    1 Below a support level for the stock
  457. An individual invested $30,000 in an oil and gas balanced program as a limited partner. His portion of a recourse loan is $50,000. What is the individual's basis?

    0
    $30,000
    $50,000
    $80,000
    $80,000
  458. An individual invested $30,000 in an oil and gas balanced program as a limited partner. His portion of a recourse loan is $50,000. Assuming sufficient passive income, the maximum passive losses that a limited partner may claim is:

    0
    $30,000
    $50,000
    $80,000
    $80,000
  459. A client is notified by his broker-dealer that certain trades may be executed by an Electronic Communication Network (ECN). Which two of the following are risks of using this type of system?

    1 Trades are not subject to SRO regulations
    2 Limited ability to execute transactions
    3 Higher commissions
    4 System may only accept certain types of orders
    • 2 Limited ability to execute transactions
    • 4 System may only accept certain types of orders
  460. Which two of the following choices are advantages of trading exchange traded funds (ETFs)?

    1 They can be purchased on margin.
    2 Investors can receive breakpoints.
    3 There is no fee to liquidate shares.
    4 They can be sold short.
    • 1 They can be purchased on margin.
    • 4 They can be sold short.
  461. The Securities Exchange Act of 1934: (multiple answers) 

    1 Created the SEC
    2 Provided for the regulation of credit 
    3 Provided for the regulation of exchanges 
    4 Provided for the regulation of new issues
    • 1 Created the SEC
    • 2 Provided for the regulation of credit
    • 3 Provided for the regulation of exchanges
  462. A customer's margin account has a credit balance of $20,000 and a debit balance of $15,000. On what amount will the customer be charged interest?

    0
    $5,000
    $15,000
    $20,000
    $20,000
  463. The public offering price of a new issue of a corporation is determined by which of the following? (multiple answers) 

    1 The dividends paid by the corporation
    2 The past earnings record of the corporation
    3 A comparison with other corporations in the same      industry
    4 Market conditions at the time the new issue is expected      to be sold
    1,2,3,4
  464. Variable annuities sold by insurance companies must be registered with the: (multiple answers)

    1 SEC
    2 FRB
    3 FINRA
    4 State Insurance Commissions
    1,2,3,4
  465. Mr. Jones purchases a Canadian dollar September 85 call option for a premium of .82. At what price (spot rate) would the Canadian dollar have to be trading in order for Mr. Jones to exercise the option and break even? (Assume 10,000 Canadian dollars per contract.)

    $0.8418
    $0.8500
    $0.8582
    $858.20
    $0.8582
  466. When looking at a newspaper listing for foreign currency options, the spot prices for the underlying foreign currencies are quoted in:

    European terms 
    U.S. terms 
    1/32 of a point 
    1/8 of a point
    U.S. terms
  467. The Barge Towing Corporation has announced in a tombstone ad that it will issue $5,000,000 of 10% convertible subordinated debenture bonds convertible into common stock at $10.50. The bonds will mature in November 2020 and are being issued at a $1,000 par value. The bonds are secured by:

    1 The barges and equipment of the Barge Towing      Corporation
    2 The common stock of the Barge Towing Corporation
    3 The underwriter of the Barge Towing Corporation
    4 The "full faith and credit" and no specific      collateral of the Barge Towing Corporation
    4 The "full faith and credit" and no specific      collateral of the Barge Towing Corporation
  468. Which statement best describes an indenture?

    1 It is a written agreement between an option buyer and      the option writer.
    2 It is a written agreement between the brokerage firm      and its customers allowing the customers to buy securities on credit.
    3 It is a contract between the issuer of bonds and the      trustee for the benefit of the holder of the bonds.
    4 It is found on every stock certificate
    3 It is a contract between the issuer of bonds and the      trustee for the benefit of the holder of the bonds.
  469. For a new issue to be sold in its home state and neighboring states: (which 2) 

    1 The issuer must file a Rule 147 form.
    2 Registered representatives selling the stock must be      registered in whatever states they plan to make sales in.
    3 FINRA must approve the sale in all the states.
    4 The Blue Sky laws (state securities laws) of all the      states in which the securities will be sold must be observed.
    2,4
  470. A specialist can accept all of the following orders EXCEPT a:

    1 Not-held order
    2 Market order
    3 Good-'til-cancelled (open) order
    4 Day order
    1 Not-held order
  471. If a put or call option expires, the amount of the premium paid by the purchaser of the option is considered for tax purposes to be:

    1 A capital loss at the time the option expires
    2 A capital gain at the time the option expires
    3 An ordinary loss at the time the option was purchased
    4 An ordinary loss at the time the option expires
    1 A capital loss at the time the option expires
  472. When you purchase an option contract, according to Regulation T, the transaction must be paid for in:

    1 business day
    3 business days
    5 business days
    7 business days
    5 business days
  473. A FINRA member subscribing to CQS, calls a market maker displaying a quote on the system and executes a trade. This transaction would be considered to have occurred in the:

    1 Primary market
    2 Private market
    3 Third market
    4 Fourth market
    3 Third market
  474. Pennsylvania Power Company has announced it will refund $100 million of its outstanding 12% bonds that were to mature in 2020. The bonds will be refunded at 106.75% of par value from the proceeds of a $100 million refunding issue. The refunding issue has a 6% coupon rate and matures in 2012.

    Bondholders who owned 12% bonds maturing in 2020 will receive:

    1 $1,067.50 plus accrued interest
    2 The new 6% bonds being issued plus accrued interest
    3 $1,000 plus accrued interest
    4 The new 6% bonds being issued without accrued interest
    1 $1,067.50 plus accrued interest
  475. An outstanding municipal bond would most likely be called when interest rates:

    1 Rise above the bond's nominal yield
    2 Rise above the bond's yield to maturity
    3 Fall below the bond's nominal yield
    4 Fall below the bond's yield to maturity
    3 Fall below the bond's nominal yield
  476. The call feature on callable bonds would be most relevant when the economy is:

    1 Experiencing a slowdown and the FRB is trying to      stimulate growth
    2 Experiencing a slowdown and inflation is increasing
    3 Growing and the FRB is trying to slow down the economy
    4 Growing and inflation is stable
    1 Experiencing a slowdown and the FRB is trying to      stimulate growth
  477. A bond secured by other bonds and securities is referred to as a:

    1 Debenture bond
    2 Guaranteed bond
    3 Mortgage bond
    4 Collateral trust bond
    4 Collateral trust bond
  478. Under the Investment Company Act of 1940, which of the 2 following are considered investment companies?

    1 A bank holding company
    2 A face-amount certificate
    3 An insurance company
    4 A management company
    • 2 A face-amount certificate
    • 4 A management company
  479. A registered representative should know all the essential facts about a customer's financial status, investment objectives, ability to assume risk, age, occupation, and other pertinent information: (which 2) 

    1 For the registered representative to determine if      option trading is suitable for the customer
    2 For the brokerage firm to determine if it should      approve the customer's account for option trading
    3 For the brokerage firm to determine if it should send      an options risk disclosure document to the customer
    • 1 For the registered representative to determine if      option trading is suitable for the customer
    • 2 For the brokerage firm to determine if it should      approve the customer's account for option trading
  480. An individual purchases 600 shares of BAZ preferred stock. One week later the stock pays a dividend of $1.20 per share and the investor sells the stock the next day. For tax purposes, how will the dividends be taxed?

    1 70% of the dividend will be tax-exempt; the remainder      will be taxed as ordinary income.
    2 70% of the dividend will be tax-exempt; the remainder      will be taxed as a capital gain.
    3 The dividend will be taxed at long-term capital gains      rates.
    4 The dividend will be taxed as ordinary income.
    4 The dividend will be taxed as ordinary income.
  481. A measurement of the market based on 65 stocks is known as the:

    1 Standard and Poor's Index
    2 Dow Jones Composite Average
    3 Dow Jones Index
    4 Moody's Average
    2 Dow Jones Composite Average
  482. Maintaining a fair and orderly market and acting as a broker for other brokers is the function of the:

    1 Specialist
    2  Odd-lot dealer
    3 Floor trader
    4 Two-dollar broker
    1 Specialist
  483. A tombstone ad states that the McGee Oil Company is offering $200,000,000 of 8 1/2% bonds due July 1, 2026 at 99 1/2% of their par value. The yield-to-maturity on the bond is:

    8%
    Less than 8 1/2%
    8 1/2%
    Greater than 8 1/2%
    Greater than 8 1/2%
  484. Which of the 2 following represent logical strategies for a technical analyst?

    1 Buy calls when a stock breaks through a resistance      level
    2 Buy calls when a stock breaks through a support level
    3 Buy puts when a stock breaks through a resistance level     
    4 Buy puts when a stock breaks through a support level
    1,4
  485. A new municipal underwriting is shown as 1/8 + 1/4. What is the discount to a member?

    $1.25
    $2.50
    $3.75
    $5.00
    $3.75
  486. A corporation's earnings per share on its common stock, after paying preferred dividends of $3.00 per share, is $5.00 per share. The corporation also paid out a dividend of $2.00 per share on the common stock. The dividend payout ratio is:

    25%
    40%
    60%
    100%
    40%
  487. A municipal bond is currently trading at 92 and is callable in 10 years at par. What would be the effective yield that must be disclosed on a customer's confirmation?

    1 Yield to call
    2 Yield to maturity
    3 Fixed yield
    4 Current yield
    2 Yield to maturity
  488. Which TWO of the following statements are TRUE regarding the maintenance requirements for selling short stock that is trading at less than $5 per share?

    1 The maintenance requirement for shorting a stock at      $2.00 per share is 100% of the market value.
    2 The maintenance requirement for shorting a stock at      $2.00 per share is $2.50 per share.
    3 The maintenance requirement for shorting a stock at      $4.00 per share is 100% of the market value.
    4 The maintenance requirement for shorting a stock at      $4.00 per share is $2.50 per share.
    • 2 The maintenance requirement for shorting a stock at      $2.00 per share is $2.50 per share.
    • 3 The maintenance requirement for shorting a stock at      $4.00 per share is 100% of the market value.
  489. Which of the following would be considered nonexempt securities according to the Securities Act of 1933?

    1 U.S. government and municipal securities
    2 Securities of a publicly held finance company
    3 Securities of a small business investment company
    4 Securities of a nonprofit organization
    2 Securities of a publicly held finance company
  490. The Federal Reserve Board's Open Market Committee (FOMC) buys and sells which of the following securities most often to accomplish its aims?

    1 Treasury bills
    2 Treasury notes
    3 Treasury bonds
    4 Agency bonds
    1 Treasury bills
  491. A 3-month Treasury bill is issued at a discount to yield 9.5% and a corporate bond is issued to yield 9.5%. The bond is to mature in 10 years. If both are offered on the same day on a bond equivalent yield basis, which of the following statements is true?

    1 The bill would have a greater yield than the bond.
    2 The bond would have a greater yield than the bill.
    3 The yield would be the same for both.
    4 The bond equivalent yield and tax equivalent yield are      equal.
    1 The bill would have a greater yield than the bond.
  492. An investor purchases a LEAP on February 10th. The position is liquidated for a profit 13 months later. This profit would be taxed as:

    1 A short-term capital gain
    2 A long-term capital gain
    3 Dividend income
    4 Passive income
    2 A long-term capital gain
  493. An investor owns $10,000 worth of XYZ Corporation convertible bonds callable at 102. Prior to the call the bonds are selling in the market at 103. If the corporation calls the bonds at the call price, the investor will receive:

    $10,000
    $10,200
    $10,300
    $10,500
    $10,200
  494. A customer owns a call on ABC Corporation that has a $60 strike price. ABC Corporation has announced a 5-for-4 split. After the split, the customer will own:

    1 Two calls for 100 shares at a $30 strike price
    2 One call for 125 shares at a $60 strike price
    3 One call for 125 shares at a $48 strike price
    4 One call for 100 shares at a $60 strike price
    3 One call for 125 shares at a $48 strike price
  495. A corporation has income before taxes of $2 million and additionally has received $100,000 in preferred dividends. If the corporation owns 25% of the distributing company and is in the 34% tax bracket, it will pay taxes of:

    $340,000
    $510,000
    $686,800
    $1,020,000
    $686,800
  496. Dow Chemical bonds are listed in the NYSE bond table as having a nominal yield of 6.6% and having closed the previous day at 91 7/8. An owner of 10 bonds would receive a yearly interest payment of:

    $600
    $660
    More than $660
    Less than $660
    $660
  497. Dow Chemical bonds are listed in the NYSE bond table as having closed the previous day at 91 7/8. The closing price of Dow Chemical bonds is:

    $910.88
    $917.80
    $918.75
    $1,000.00
    $918.75
  498. Alabama Power 5 1/4s of '08 are listed in the bond table as having closed the previous day at 88 3/4. A buyer of 10 bonds at the close would have to pay:

    $880.75
    $8,850.00
    $8,875.00
    $8,900.00
    $8,875.00
  499. On May 25th, the president of MaxCo bought 3,000 shares of MaxCo stock in the OTC market at $33. Two months later, the stock has increased to a price of $40. If the president wants to sell the shares:

    1 Permission must be granted by the MaxCo board of      directors
    2 The profit from the trade must be forfeited according      to the short-swing profit rule
    3 The sale would not be permitted due to the holding      period required by Rule 144
    4 Permission must be granted by FINRA
    2 The profit from the trade must be forfeited according      to the short-swing profit rule
  500. In periods of easy money, when interest rates are declining, yield curves would tend to slope:

    1 Upward from the shorter to the longer maturities
    2 Downward from the shorter to the longer maturities
    3 Remain flat
    4 Upward from the longer to the shorter maturities
    1 Upward from the shorter to the longer maturities
  501. When the Federal Reserve Board buys U.S. government securities in the open market, the effect on the banking system will be: (which 2) 

    1 An increase in deposits
    2 An increase in reserves
    3 A decrease in deposits
    4 A decrease in reserves
    • 1 An increase in deposits
    • 2 An increase in reserves
  502. ABC Corporation has issued two $1,000 par value bonds with the same coupon rate, one paying interest annually and the other paying interest semiannually. If both bonds are held to maturity in 10 years, the bond paying interest annually will have a total return that is:

    1 Less than the bond paying interest semiannually
    2 More than the bond paying interest semiannually
    3 The same as the bond paying interest semiannually
    4 Two times greater than the bond paying interest      semiannually
    1 Less than the bond paying interest semiannually
  503. A convertible debenture is convertible at $25. It has a nondilutive feature in its indenture. If a stock dividend is distributed, which of the following 2 will be true?

    1 The conversion price will be reduced.
    3 The conversion price will be increased.
    3 The conversion ratio will be reduced.
    4 The conversion ratio will be increased.
    • 1 The conversion price will be reduced.
    • 4 The conversion ratio will be increased.
  504. A technical analyst would review all of the following EXCEPT:

    1 The advance-decline line
    2 The price-earnings ratio of the Dow Jones stocks
    3 Short interest
    4 The trendline theory
    2 The price-earnings ratio of the Dow Jones stocks
  505. An investor writes an ABC June 70 put at 4. If the option is exercised, the investor will have:

    1 A capital loss of $400
    2 A capital gain of $400
    3 Sale proceeds of $6,600 for the stock sold in the      exercise
    4 A cost basis of $6,600 for the stock acquired in the      exercise
    4 A cost basis of $6,600 for the stock acquired in the      exercise
  506. A customer's margin account has a market value of $15,000, a debit balance of $8,000, and SMA of $1,000. The equity in the account is:

    $6,000
    $7,000
    $8,000
    $14,000
    $7,000
  507. A customer's margin account has a market value of $15,000, a debit balance of $8,000, and SMA of $1,000. If the customer sold $1,000 of securities in the account, what amount could the customer withdraw after the sale?

    None
    $1,000
    $1,500
    $2,000
    $1,500
  508. All of the following are true regarding negotiable CDs EXCEPT:

    1 The minimum denomination is $100,000 but they commonly      have face values of $1,000,000 or more
    2 They are unsecured and normally have a fixed rate of      interest
    3 Owners can resell negotiable CDs in the secondary      market
    4 Maturities of more than one year are prohibited
    4 Maturities of more than one year are prohibited
  509. The spread for a new municipal bond issue is as follows: Manager's fee: 1/4Additional Takedown: 3/8Concession: 3/8 A syndicate member who sold $25,000 of bonds would be entitled to:

    $62.50
    $93.75
    $187.50
    $250.00
    $187.50
  510. Relative to 13-week and 26-week Treasury bills, which of the following are TRUE? (multiple answers) 

    1 They are auctioned weekly.
    2 They are issued at a discount.
    3 Noncompetitive tenders receive the lowest price of the      competitive tenders that are awarded.
    4 Noncompetitive tenders are awarded before competitive      tenders.
    1,2,3,4
  511. Which of the following would help the U.S. balance of payments?

    1 U.S. corporations building plants abroad
    2 Lending money to foreigners at high interest rates
    3 U.S. investment in foreign securities
    4 Foreign investment in the U.S.
    4 Foreign investment in the U.S.
  512. Wholesale corporate bond quotes can be found in the:
    1 Pink sheets
    2 White sheets
    3 Green sheets
    4 Yellow sheets
    4 Yellow sheets
  513. Investment companies with no management fee and low sales charges, that invest in a fixed portfolio of municipal or corporate bonds, are categorized as:

    1 Open-end investment companies
    2 Closed-end investment companies
    3 Unit investment trusts
    4 Face amount certificate companies
    3 Unit investment trusts
  514. An owner of an XYZ July 30 call will hold which of the following if XYZ Corporation declares a 3:2 stock split?

    2 contracts for 100 shares, with a strike price of 20
    2 contracts for 150 shares, with a strike price of 20
    1 contract for 150 shares, with a strike price of 20
    1 contract for 100 shares, with a strike price of 20
    1 contract for 150 shares, with a strike price of 20
  515. As far as variable annuities are concerned, which of the following is TRUE?

    1 The investment risk is borne by the insurance company      as in a fixed annuity.
    2 Payments of a variable annuity can be decreased because      of an increase in the expenses of the insurance company.
    3 Salesmen selling variable annuities are not required to      register with the SEC or FINRA.
    4 Variable annuity nonqualified separate accounts are      registered under the Investment Company Act of 1940.
    4 Variable annuity nonqualified separate accounts are      registered under the Investment Company Act of 1940.
  516. All of the following statements are TRUE regarding an official statement for a new issue of municipal securities EXCEPT:

    1 Issuers do not have to make an official statement      available
    2 If one is prepared, an official statement must be filed      with the SEC prior to the offering
    3 An official statement provides purchasers of the new      issue with detailed financial information about the issue
    4 If an official statement is prepared, MSRB rules      require that it be sent out to customers at or prior to settlement date
    2 If one is prepared, an official statement must be filed      with the SEC prior to the offering
  517. When a bond is registered as to principal only, this means that the bond has been issued:

    1 With no coupons attached and the bond is registered in      the name of the owner
    2 In the name of the owner without coupons attached
    3 With coupons attached only
    4 In the name of the owner but with bearer coupons      attached
    4 In the name of the owner but with bearer coupons      attached
  518. A customer is short 100 ABC at $120. The market is moving up sharply and the customer decides to cover his short position. The customer instructs his registered representative to cover the short position at the market on the close. The order will be executed:

    1 At or as near as possible to the closing price
    2 On the closing price of the day
    3 At the closing bid price
    4 At the closing offer price
    2 On the closing price of the day
  519. The NYSE Composite Index is composed of:

    1 The common and preferred stocks listed on the NYSE
    2 The common stocks, preferred stocks, and bonds listed      on the NYSE
    3 Only the common stocks listed on the NYSE
    4 Preferred stocks and bonds listed on the NYSE
    3 Only the common stocks listed on the NYSE
  520. ABC mutual fund has an NAV of $11.00 and a public offering price of $11.88. For investments of $25,000 to $50,000, there is a 6% sales charge. An investor with $40,000 can purchase:

    3,167 shares
    3,367 shares
    3,419 shares
    3,636 shares
    3,419 shares
  521. A municipal trader would do all of the following EXCEPT:

    1 Request bids
    2 Accept bids
    3 Commit to underwritings
    4 Negotiate settlement dates in the secondary market
    3 Commit to underwritings
  522. Which inventory evaluation method would show the greater profit in a period of rising costs?

    1 FIFO
    2 LIFO
    3 Depletion
    4 Depreciation
    1 FIFO
  523. An investor owns 1,000 shares of a mutual fund. The offering price is $12 per share. The fund charges an 6% sales charge and has a 1% redemption fee. If the investor redeemed his shares, he would receive approximately:

    $11,167
    $11,280
    $11,880
    $12,000
    $11,167
  524. Which of the following statements about technical analysis is CORRECT?

    1 The advance-decline index is a good indicator of the      strength of a bull or bear market.
    2 The odd-lot theory states that the small investor is      usually right.
    3 It is bullish when volume is heavy in a declining      market and bearish when volume is light in an advancing market.
    4 A small short interest tends to make for a technically      strong market
    1 The advance-decline index is a good indicator of the      strength of a bull or bear market.
  525. A fundamental analyst could use a corporation's balance sheet to determine all of the following EXCEPT:

    1 Net working capital
    2 Common stock ratio
    3 Cash flow
    4 Debt to equity ratio
    3 Cash flow
  526. ABC mutual fund has a bid price of $8.50 and an asked price of $9.26. Which of the following would be allowed under the Conduct Rules?

    1 A member sells 250 shares of ABC fund at $9.10 to a      nonmember firm.
    2 A member sells 250 shares of ABC fund at $9.10 to      another firm through a nonmember firm.
    3 A member sells 250 shares of ABC fund at $9.10 to one      of the firm's customers.
    4 A member sells 250 shares of ABC fund at $9.26 to one      of the firm's clients.
    4 A member sells 250 shares of ABC fund at $9.26 to one      of the firm's clients.
  527. A customer enters an order for 150 shares of OTC stock. The order:

    1 Must be entered on two separate tickets
    2 Can be entered on one order ticket
    3 Must be entered as a round-lot and an odd-lot
    4 Must be executed through the odd-lot firm
    2 Can be entered on one order ticket
  528. In terms of the number of stocks in each category, rank the components of the Dow Jones Composite Index from greatest to least.

    1 Utilities
    2 Industrials
    3 Transportations
    2,3,1
  529. A 1% increase in the federal funds rate would have an effect on all of the following EXCEPT:

    1 Short-term bond prices
    2 Long-term bond prices
    3 The discount rate
    4 Treasury bill prices
    3 The discount rate
  530. In August, an investor sells an uncovered listed option and receives a $600 premium. The following February, the customer makes a closing purchase transaction at 5. The result of the transaction is:

    1 A capital gain of $100
    2 Ordinary income of $100
    3 A capital loss of $100
    4 Not taxable
    1 A capital gain of $100
  531. Under a functional allocation sharing arrangement in an oil and gas drilling program, the sponsor would pay:

    1 All deductible expenses
    2 All nondeductible expenses
    3 Some deductible and some nondeductible expenses
    4 No expenses
    2 All nondeductible expenses
  532. Mr. Brown is a 15% owner of SamCo, a company whose stock is listed on the New York Stock Exchange. His wife also owns 4% of SamCo. If Mrs. Brown wishes to sell some of her SamCo shares, she:

    1 Must do so according to Rule 144
    2 May only do so with the permission of her husband
    3 May do so provided that her husband also sells shares
    4 May sell the shares without restriction
    1 Must do so according to Rule 144
  533. The BG mutual fund has a NAV of $11.72 and a maximum offering price of $12.67. What is the maximum sales charge for this fund?

    7%
    7 1/2%
    8 1/2%
    9%
    7 1/2%
  534. A customer purchases a municipal bond at $960 in the secondary market that will mature in four years. All of the following statements regarding the purchase are true EXCEPT:

    1 The interest is exempt from federal income tax
    2 The customer will have taxable income if the bond is      held to maturity
    3 The customer will have to pay a tax on the prorated      amount of the discount each year
    4 If the bond was a new issue when purchased, and held to      maturity, the customer would not have to pay any federal tax
    3 The customer will have to pay a tax on the prorated      amount of the discount each year
  535. Property in Boca Raton, Florida is assessed at 10 million dollars. If the millage rate is 7, what is the property tax?

    $70
    $700
    $7,000
    $70,000
    $70,000
  536. All of the following must appear on a confirmation to a customer in a municipal trade EXCEPT:

    1 The capacity in which the broker-dealer acted
    2 The par value of the bonds
    3 A description of the bond
    4 The bond rating
    4 The bond rating
  537. All of the following are true of U.S. Treasury bills EXCEPT:

    1 They do not have a stated rate of interest
    2 They mature in one year or less
    3 They are sold in $5,000 amounts
    4 They are issued at a discount
    3 They are sold in $5,000 amounts
  538. Which of the following sources of income are used by a municipality to meet its debt service for general obligation bonds that it has issued? (multiple answers) 

    1 License fees
    2 Uncollected taxes
    3 Fines
    4 Property taxes
    1,2,3,4
  539. The market value of a margin account is $12,000. The debit balance is $6,000. A cash dividend of $100 is credited to the account. What is the new debit balance?

    $5,900
    $5,950
    $6,000
    $6,100
    $5,900
  540. The taxing power of an issuer of a limited tax bond is limited to a specified:

    1 Minimum rate
    2 Maximum rate
    3 Tax source
    4 Collateral
    2 Maximum rate
  541. Relative to a municipal bond purchased at a discount, place the following in the proper sequence from lowest to highest.

    1 Current yield
    2 Nominal yield
    3 Yield-to-maturity
    2,1,3
  542. According to MSRB rules, a municipal bond dealer may not consider which of the following factors when determining a markup?

    1 Expenses
    2 Profit
    3 Coupon
    4 Total dollar amount of the transaction
    3 Coupon
  543. A reverse repurchase agreement is sometimes called a(n):

    1 Repo
    2 Arbitrage
    3 Matched sale
    4 Treasury sale
    3 Matched sale
  544. The Bond Buyer's 30-day visible supply includes: (which 2) 

    1 Competitive municipal bond issues
    2 Negotiated municipal bond issues
    3 Treasury bill issues
    4 Corporate bond issues
    • 1 Competitive municipal bond issues
    • 2 Negotiated municipal bond issues
  545. A registered representative should update a customer's account records for a change in: (multiple answers) 

    1 Address
    2 Net worth
    3 Employer
    4 Investment objectives
    1,2,3,4
  546. A municipal bond which is issued at par is later purchased at a discount and redeemed for par at maturity. The investor's profit on the transaction is taxed as:

    1 Capital gains
    2 Ordinary income
    3 Tax-deferred interest
    4 Tax-deferred capital gains
    2 Ordinary income
  547. To apply for a securities license, a previously unregistered individual must: (which 2) 

    1 Complete Form U5
    2 Complete Form U4
    3 File the necessary form with FINRA
    4 File the necessary form with the SEC
    • 2 Complete Form U4
    • 3 File the necessary form with FINRA
  548. The individual who distributes interest in a DPP is known as the:

    1 Distributor
    2 Syndicator
    3 Managing partner
    4 Limited partner
    2 Syndicator