Series 74

<question>
A municipal dealer may not guarantee a customer against a loss under any circums
tances. (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
</question>
3 Coupon
<question>
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
</question>
<question>
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
</question>
4 The financial      condition of the customer
<question>
The Pink Sheets show:
1 All trades that occurred the previous day for      non-Nas
daq 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-li
sted stocks
</question>
2 The market makers for stocks not listed on the      N
asdaq system
<question>
Which of the following must a municipal dealer disclose on a confirmation? (mult
iple 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      m
aker
</question>
3 If the municipal dealer acted as an agent for a
third party
<question>
A customer requests that a broker-dealer sell stock that he owns and use the pro
ceeds of the sale to purchase a different stock. In determining the amount of ma
rkup 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 circ
umstances
</question>
3 Should only      consider the amount of money involve
d in the sale to the customer
<question>
If a municipal bond is selling at a premium and is callable at par, how is the y
ield 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
</question>
4 To the call date
<question>
A brokerage firm accepted delivery of securities on settlement. Upon further ins
pection 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
</question>
2 Reclamation
<question>
On a delivery of municipal securities, what could one dealer expect to receive f
rom 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
</question>
2 Bearer bonds with coupons attached
4 Fully registered bonds
<question>
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      $3.0
0 per share
4 Solicited orders for a Nasdaq stock trading at $3.00
per share
</question>
2 Solicited orders for a non-Nasdaq stock trading at    &nbs
p; $3.00 per share
<question>
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
</question>
3 Proceeds transaction
<question>
A broker-dealer has a financial advisory relationship with an issuer of municipa
l 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 syndic
ate member on securities      issued by this municipality.
3 The financial      advisory relationship between the broke
r-dealer and the municipality must      be in writing.
4 The financial      advisory relationship between the broke
r-dealer and municipality is not      required to be in writ
ing.
</question>
2 The      broker-dealer is not permitted to act as a s
yndicate member on securities      issued by this munic
ipality.
3 The financial      advisory relationship between the
broker-dealer and the municipality must      be in writ
ing.
<question>
Secondary market offerings of municipal bonds could be found in all of the follo
wing EXCEPT:
1 Broker's broker's list
2 Munifacts
3 Bond Buyer
4 Dealer offering list
</question>
3 Bond Buyer
<question>
A municipal tombstone ad shows bonds maturing serially from 2012 through 2030. T
he 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 pr
iced to the:
2018 call date
2019 call date
2020 call date
Maturity date
</question>
Maturity date
<question>
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
</question>
<question>
Which of the following persons control positions in secondary market municipal b
onds for a broker-dealer?
1 Underwriter
2 Trader
3 Agent
4 Principal
</question>
2 Trader
<question>
An individual purchases $100,000 face value of a 6% municipal bond at a dollar p
rice of 101 1/2. The bond's maturity is 7-1-17, but the issue has been called fo
r 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
</question>
1 Yield-to-call
<question>
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
</question>
4 Random lot
<question>
Quotes for non-Nasdaq, over-the-counter traded equities can be obtained from: (w
hich 2)
1 The third market
2 The Pink Sheets
3 Consolidated Quotation System
4 The OTC Bulletin Board
</question>
2 The Pink Sheets
4 The OTC Bulletin Board
<question>
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
</question>
4 A broker's broker
<question>
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      iss
ue balance)
4 Dealer to dealer availability of municipal bonds in      t
he secondary market
</question>
3 The amount of a new issue that is yet unsold (new    &nbsp
; issue balance)
4 Dealer to dealer availability of municipal bonds in    &nb
sp; the secondary market
<question>
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
</question>
<question>
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
</question>
<question>
Which of the following are entitled to participate in a Keogh Plan? (multiple an
swers)
1 A self-employed doctor
2 A security analyst who made $2,000 giving public      lect
ures on technical analysis
3 An engineer of a corporation who made $5,000 making      p
ublic speeches on his specialization
4 An executive of a corporation who received $5,000 in
stock options from his corporation
</question>
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    &nb
sp; public speeches on his specialization
<question>
Where would bid limitations for a new municipal bond issue be found?
1 Official Statement
2 Indenture
3 Notice of Sale
4 Syndicate Agreement
</question>
3 Notice of Sale
A customer purchased 10 ABC January 50 calls, paying a $2 premium and 10 ABC Jan
uary 50 puts, paying a $2 premium. The market price of ABC stock is $50 per shar
e. The buyer's breakeven points (2) will be: $46 $48 $52 $54
$46 $54
<question>
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
</question>
3 In-whole call
<question>
Treasury bills are issued to mature in all the following time frames EXCEPT:
One month
Three months
Six months
Nine months
</question>
Nine months
<question>
A customer has a restricted margin account. The customer sells $7,000 worth of s
ecurities and on the same day buys $5,000 worth of other securities. The Regulat
ion 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 restr
icted
3 Can withdraw the      entire $2,000 net amount
4 Can withdraw 50%      of $7,000
</question>
1 Can withdraw      cash equal to the margin requiremen
t on the net amount
<question>
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    &nbsp
; any applicable sales charges.
3 The securities are priced once a day based on the close    &nbs
p; of trading.
4 Transactions in these securities must be executed in a    &nbsp
; cash account.
</question>
1 The securities may be used by individuals to pursue a    &
nbsp; market timing strategy.
<question>
Rank the following ratings from highest to lowest.
1 Baa3
2 Ba1
3 A1
4 A2
</question>
A1, A2, Baa3, Ba1
<question>
Under the provisions of the Securities Act of 1933, which of the following are e
xempt securities? (Multiple answers)
1 Securities      issued by state chartered banks
2 Municipal bonds
3 Federal      government securities
4 Securities      issued by small business investment compan
ies
</question>
1 Securities      issued by state chartered banks
2 Municipal bonds
3 Federal      government securities
4 Securities      issued by small business investment c
ompanies
<question>
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
</question>
1 Number of      shareholders
3 Earnings record
4 Current market      price
<question>
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
</question>
4 The New York      Stock Exchange
<question>
When a stock sells ex-rights, which orders on a specialist's book will be reduce
d? (Which 2)
1 Buy-limit order
2 Sell-stop order
3 Buy-stop order
4 Sell-limit order
</question>
1 Buy-limit order
2 Sell-stop order
<question>
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      varia
ble dollar amount
3 A variable number of annuity units multiplied by a      fi
xed dollar amount
4 A variable number of annuity units multiplied by a      va
riable dollar amount
</question>
2 A fixed number of annuity units multiplied by a
variable dollar amount
<question>
A broker-dealer may reject a delivery of municipal bonds if:
1 The bonds were      called by the issuer and were identifi
ed 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
</question>
3 The bonds are      lacking a legal opinion
<question>
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
</question>
4 A non-Nasdaq      stock
<question>
List the order of priorities that you would follow when opening an options accou
nt for a customer.
1 Send the      customer an Options Clearing Corporation ris
k disclosure document.
2 Have the      customer sign the options agreement.
3 Have the      Registered Options Principal approve the acc
ount.
4 Accept the      order.
</question>
1 Send the      customer an Options Clearing Corporatio
n risk disclosure document.
3 Have the      Registered Options Principal approve th
e account.
4 Accept the      order.
2 Have the      customer sign the options agreement.
<question>
Which of the following statements are true regarding a new municipal issue? (whi
ch 2)
1 Member orders      will receive priority over designated o
rders.
2 There is usually      a period of time allowed for the acc
umulation of orders.
3 Syndicate      procedures must be disclosed to potential p
urchasers.
4 Pre-sale orders      receive the highest priority.
</question>
2 There is usually      a period of time allowed for th
e accumulation of orders.
4 Pre-sale orders      receive the highest priority.
<question>
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 1
44
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 th
e current quote of the outstanding      securities
</question>
4 The sale must be      at the bid price as determined
by the current quote of the outstanding      securities
<question>
Over the last 20 years, Grant Rock, age 66, has invested $200,000 into a tax qua
lified 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. &nbs
p;
4 Part of the distribution will be taxable at ordinary
income rates and the balance will be viewed as a return of capital.
</question>
1 100% is taxable as ordinary income.
<question>
A municipal bond that was issued at par is purchased by an individual in the sec
ondary 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
</question>
$100 ordinary income
<question>
How is the discount on an OID accreted for tax purposes?
a.     Straight-line method
b.    Constant yield method
c.     Cost basis method
d.    Declining balance method
</question>
b.    Constant yield method
<question>
Use the following information to answer this question. Public orders on a specia
list's book show an inside market comprised of Broker A bidding for 100 shares o
f 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.     100 by 300
b.    300 by 100
c.     100 by 100
d.    300 by 300
</question>
a.     100 by 300
<question>
.63. If the specialist wanted to bid for his own account, what is the lowest pri
ce he could bid for the stock?
a.     41.94
b.    42
c.     42.25
d.    42.26
</question>
d.    42.26
<question>
.63. If the specialist wanted to offer stock, what is the highest price at which
he could offer the stock?
a.     42.62
b.    42.63
c.     42.64
d.    42.88
</question>
a.     42.62
<question>
A customer purchases a municipal bond with 25 years remaining to maturity. The b
ond has been pre-refunded to its first call date. The issue is callable in 7 yea
rs at 108, declining to par in 14 years. It also has a sinking fund call provisi
on which begins in 17 years at par. For confirmation purposes, the bond should b
e priced to the:
a.     First call date
b.    First par call
c.     Sinking fund date
d.    Final maturity date
</question>
a.     First call date
<question>
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 a
nswer this question.)
a.     Open-end investment company shares
b.    Eurodollar bonds
c.     Yankee bonds
d.    Repurchase agreements
</question>
c.     Yankee bonds
<question>
A limited partner has a $60,000 basis which includes a $40,000 recourse loan. Wh
en the partnership is liquidated, there are $200,000 of assets to satisfy $500,0
00 of debt. The partner's maximum potential loss would be:
a.     $20,000
b.    $40,000
c.     $60,000
d.    $100,000
</question>
c.     $60,000
<question>
Which two of the following are NOT SROs?       &nb
sp;       I.      &n
bsp; MSRB            &nbs
p;
II.        SIPC    &nbsp
;
III.        FINRA     &n
bsp;
IV.        SEC
</question>
II, IV
<question>
Which two of the following would lead to disintermediation? (which 2) &nbsp
;
I.        Savings bank rates are below money
market rates.
II.        Savings bank rates are above mone
y market rates.           &nbs
p;
III.        The FRB has adopted a tight money
policy.         IV.   &n
bsp;    The FRB has adopted an easy money policy.
</question>
1 & 3
<question>
Which of the following are typically sold at a discount? (multiple answers
)
I.        Commercial paper

II.        Treasury bills    &
nbsp;
III.        Bankers' acceptances
</question>
1,2,3
<question>
A corporation has issued debentures convertible at $50. The stock pays a 10% sto
ck dividend. According to the nondilutive feature of the bond indenture, the new
conversion price would be:
a.     $19.23
b.    $20.83
c.     $45.00
d.    $45.45
</question>
d.    $45.45
<question>
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      quali
fied.
</question>
3 It has a zero cost basis.
<question>
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
</question>
$3,000
<question>
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 i
ndividual's profit?
90
92
94
95
</question>
95
<question>
A woman will be retiring in 2030. She is interested in income and having her pri
ncipal 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 20
23 at 105
3 PHA maturing in      2030
4 Ba rated revenue      bond maturing in 2024
</question>
3 PHA maturing in      2030
<question>
According to CAPM, all of the following would be examples of diversifiable, nons
ystematic risks EXCEPT:
1 Credit risk
2 Interest rate      risk
3 Business risk
4 Industry risk
</question>
2 Interest rate      risk
<question>
All of the following are benefits of owning a real estate investment trust EXCEP
T:
1 Stable dividend      income
2 Ability to buy      and sell shares easily
3 Diversification
4 Protection      against rising interest rates
</question>
4 Protection      against rising interest rates
<question>
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      ente
red
2 Executed at 25.25
3 Executed at 25.50
4 Not executed
</question>
4 Not executed
<question>
If a corporation is in a liquidation, the holder of a subordinated debenture wou
ld 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
</question>
4 After bank loans      and after accounts payable
<question>
Regulation T applies to: (which 2)
1 Cash accounts
2 Margin accounts
3 Commodity      accounts
4 Municipal bond      margin accounts
</question>
1 Cash accounts
2 Margin accounts
<question>
A customer sells XYZ short at $40 and sells one XYZ October 40 put at 5. What wo
uld 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 exerci
se is used to cover the short stock position?
$10 profit
$5 profit
0
$5 loss
</question>
$5 profit
<question>
Which of the following pertain to ADRs? (which 2)
1 They facilitate      the trading of foreign securitie
s in U.S. markets.
2 They facilitate      the trading of U.S. securities in for
eign markets.
3 They are      receipts issued for foreign securities.
4 They are      receipts issued for U.S. securities.
</question>
1 They facilitate      the trading of foreign securitie
s in U.S. markets.
3 They are      receipts issued for foreign securities.
<question>
Which of the following persons cannot delegate power of attorney to a third part
y for the purpose of making securities transactions?
1 A husband
2 A wife
3 A corporation
4 A custodian for      a minor
</question>
4 A custodian for      a minor
<question>
A transaction occurs between two dealers for a Nasdaq stock. The trade must be r
eported 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
</question>
2 The seller      within 30 seconds
<question>
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
</question>
4 Treasury bonds
<question>
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 opinio
n
3 The date, time,      and place of sale where the bidding p
rocedure will take place
4 The bond rating
</question>
4 The bond rating
<question>
When doing a municipal bond swap, to avoid the wash sale rule you could alter an
y of the following EXCEPT:
1 Issuer
2 Maturity
3 Rating
4 Coupon
</question>
3 Rating
<question>
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
4 The Bond Buyer      Index
</question>
<question>
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
</question>
3 Has cash in the      account equal to the exercise pr
ice
<question>
A call is purchased in February and exercised in June. The following April the s
tock 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.
</question>
1 The resulting      gain or loss is short-term.
4 The cost basis      of the stock is the call premium
plus the strike price.
<question>
A broker-dealer appears on the Nasdaq system as a market maker for DCIR common s
tock. An employee of the firm responsible for maintaining the firm's inventory i
n DCIR is known as a:
1 Specialist
2 Floor broker
3 Compliance      director
4 Position trader
</question>
4 Position trader
<question>
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
</question>
4 Opening purchase
<question>
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 XY
Z is selling at $38, the intrinsic value of the option is:
0
$200
$300
$500
</question>
$200
<question>
When a municipal bond is issued as an original issue discount, the upward adjust
ment in the purchase price is called:
1 Accretion
2 Amortization
3 Depreciation
4 Depletion
</question>
1 Accretion
<question>
Municipal bond unit investment trusts have all of the following characteristics
EXCEPT:
1 Investors can      buy units in the fund, usually in multi
ples of $1,000
2 The certificates      have coupons attached and are in bea
rer form
3 Investors can      redeem the units at any time through th
e fund's trustee
4 The value of the      unit will decline if interest rates
rise
</question>
2 The certificates      have coupons attached and are i
n bearer form
<question>
A municipal bond issue with an inverted yield scale would have:
1 Lower yields on      the shorter maturities than on the lo
nger 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 l
onger maturities
</question>
2 Higher yields on the shorter maturities than on the longer maturities
Net working capital is?
Current assets minus current liabilities
where assests equals cash, accounts recievable, and inventory. Liablilitie
s equals notes payable, accounts payable, and taxes payable.
<question>
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
</question>
2 Long-term bonds      selling at a discount
<question>
Which of the following would most likely have a mandatory sinking fund?
1 Serial issue
2 Balloon issue
3 Term issue
4 Convertible      issue
</question>
3 Term issue
<question>
All of the following are TRUE regarding dividends EXCEPT:
1 A growth company      normally has a low dividend payout r
atio
2 A stock dividend      creates a current tax liability when
received
3 A blue chip      company has a long history of paying divi
dends
4 The market price      of a preferred stock is influenced b
y its dividend payout
</question>
2 A stock dividend      creates a current tax liability
when received
<question>
Where would a listing of the allocation of bonds for a new municipal issue be fo
und?
1 Notice of Sale
2 Underwriting
3 Agreement Account Summary      Report
</question>
3 Agreement Account Summary      Report
Current ratio equals?
Assets divided by liabilities.
Where assets equal cash, accounts recievable, and inventory.
Liabilities equal notes payable, accounts payable, and taxes payable.
<question>
An investor would purchase an oil and gas limited partnership for all of the fol
lowing reasons EXCEPT:
1 The oil      depletion allowance
2 Intangible      drilling costs
3 Tax incentives
4 Recapture      provisions
</question>
4 Recapture      provisions
<question>
All of the following would be found in a municipal revenue bond resolution EXCEP
T:
1 Restrictions on      the sale of additional bonds
2 Rate covenants
3 Sinking fund      provisions
4 The      yields-to-maturity of the bonds
</question>
4 The      yields-to-maturity of the bonds
<question>
A syndicate manager in the sale of a new municipal bond issue would normally all
ocate bonds in which of the following orders of priority? (Multiple answers)&nbs
p;
1 Member orders
2 Orders for the      benefit of the syndicate account
3 Designated      orders
</question>
2,3,1
<question>
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 refun
d 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
</question>
3 Reduce the      market value of outstanding bonds tha
t are not refunded
<question>
Which of the following new bond issues would most likely be purchased through co
mpetitive bidding?
1 Corporate bonds
3 High yield bonds
4 Revenue bonds
</question>
<question>
A block of bonds is offered firm by Dealer A to Dealer B for one hour with a fiv
e 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 &nbs
p;    bonds if he does not call
2 Dealer A back within five minutes Has one hour to      tak
e the bonds
3 Must take the      bonds if he does not call
4 Dealer A back within one hour
</question>
1 Has five minutes      to take the bonds Must take the
      bonds if he does not call
<question>
Which of the 2 following are true about SIPC?
1 It was created      by an Act of Congress and is considere
d a U.S. government agency.
2 It is a      nonprofit organization that only broker-deale
rs may join.
3 It provides      insurance for customer accounts in the ev
ent of bankruptcy by a      broker-dealer.
4 It provides      insurance for customer accounts for fraud
, embezzlement, and      counterfeiting.
</question>
1 It was created      by an Act of Congress and is cons
idered a U.S. government agency.
2 It is a      nonprofit organization that only broker-
dealers may join.
<question>
Term bond quotes are based on:
1 Yield-to-maturity
2 Current yield
3 Nominal yield
4 Dollar price
</question>
4 Dollar price
<question>
A municipal broker-dealer would be acting as a principal in which of the followi
ng 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
</question>
1,2,3,4
<question>
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 o
f 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 notifica
tion of each transaction to the      trader's employer.
</question>
1,3
<question>
A reduction in the rate of inflation is known as:
1 Stagflation
2 Deflation
3 Disinflation
4 Stagnation
</question>
3 Disinflation
If an OID bond (original issue discount) is purchased and held to maturity the d
iscount is considered to be ____ and taxable/not taxable?
interest, not taxable
<question>
ABC Brokerage, a broker-dealer, purchases 600 shares of stock from a market make
r to fill a customer's buy order. ABC has acted as a:
1 Dealer
2 Specialist
3 Agent
4 Underwriter
</question>
3 Agent
<question>
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%
</question>
<question>
Regarding cash dividends, which of the following statements is correct?
1 A cash dividend      becomes a current liability when it i
s declared.
2 The amount of      the dividend may never exceed the curre
nt earnings of the corporation.
3 Cash dividends      must be paid if the earnings for the y
ear exceed the amount of the stated      dividend.
4 Dividend income      may be offset by capital losses.
</question>
1 A cash dividend      becomes a current liability when
it is declared.
<question>
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
</question>
4 The total amount      of the investment is FDIC-insur
ed
<question>
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
</question>
2 Debenture      holders
<question>
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
</question>
2 Dividends Payable will increase
4 Retained      Earnings is reduced
<question>
If a customer's objectives are safety of principal and income, you as the accoun
t 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
</question>
4 Income bonds
<question>
The Federal Reserve Board was given the authority to set margin requirements acc
ording 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
</question>
2 Securities      Exchange Act of 1934
<question>
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 bus
iness day
4 The supply and      demand for the fund
</question>
3 The net asset      value as computed at the end of th
e business day
<question>
The advance-decline theory states that:
1 A bull market exists if the Dow industrials and      trans
portations make new highs
2 A bear market exists if more put options have been      pu
rchased by investors than call options
3 It is bullish if more stocks go up than go down during    &nbsp
; the day
4 A large number of shares sold short is bullish
</question>
3 It is bullish if more stocks go up than go down during
the day
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
<question>
When a market maker gives a quote for a stock without qualification, the quote i
s 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
</question>
4 Firm quote for      100 shares
<question>
Mr. Smith, a self-employed computer analyst, earned $125,000 during 20XX. What i
s the maximum permissible deductible contribution to his Keogh Plan for 20XX?
$2,000
$5,000
$25,000
$50,000
</question>
$25,000
<question>
A client would like to actively trade, purchase on margin and have broad exposur
e 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
</question>
1 An S&P 500 mutual fund
<question>
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
</question>
4 Debt issued      between two states
Municiple serial bonds are quoted on what basis?
Yield to maturity.
<question>
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 buye
r 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
</question>
1 Subject to state      income tax
3 Subject to      federal income tax
<question>
A NYSE bond order ticket shows the following: Buy 5m @ 101 GTCThe customer has p
laced a:
1 Limit order to      buy $5,000 of bonds
2 Stop order to      buy $5,000 of bonds
4 Market order to      buy $5,000,000 of bonds
</question>
<question>
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 go
ods and services purchased by      consumers in certain citi
es
4 None of the      above
</question>
3 Measures the      average change in prices for specif
ic goods and services purchased by      consumers in ce
rtain cities
<question>
A customer purchases 10 MMS May 20 puts at 2 in a cash account when the market p
rice of MMS is 24. Which of the 2 following are true regarding this transac
tion?
1 The settlement      date for the transaction is one busine
ss day.
2 The settlement      date for the transaction is three busi
ness days.
3 The Regulation T      payment date is three business days.
4 The Regulation T      payment date is five business days.
</question>
1 The settlement      date for the transaction is one b
usiness
day.
4 The Regulation T      payment date is five business d
ays.
<question>
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
</question>
3 An institutional      block trader
<question>
The prospectus for a limited partnership states that the subscription price for
each unit is $20,000. According to industry rules, the maximum allowable underwr
iting compensation for this public offering is:
1 $50 per unit
2 Subject to the      interpretations of the 5% markup polic
y
3 Not subject to      any limit but must be fair and reasona
ble
4 10% of the gross      proceeds of the offering
</question>
4 10% of the gross      proceeds of the offering
<question>
Which of the following must a municipal dealer disclose on a confirmation? (mult
iple answers)
3 If the municipal      dealer acted as an agent for a third
party
4 If the municipal      dealer acted as a bona fide market m
aker
</question>
3 If the municipal      dealer acted as an agent for a
third party
<question>
Your client is President of XYZ Corporation and is selling XYZ shares pursuant t
o 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
</question>
At the time of the sale
<question>
The Securities Investors Protection Corporation (SIPC) insures all of the follow
ing accounts EXCEPT:
A margin account
A joint account
A commodities account
A custodian account
</question>
A commodities account
<question>
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 oblig
ated 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
</question>
100 shares
<question>
Which of the following is an example of a collateralized time draft?
Debenture
ADR
BA
Eurodollars
</question>
BA
<question>
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
</question>
Yield-based option calls
Interest-rate option puts
<question>
Which TWO of the following would NOT be permitted to purchase shares of an IPO o
f KMF?
An attorney involved in the new issue of KMF
A portfolio manager of an investment company buying for his personal accoun
t
An investment company registered under the Act of 1940 which has some restr
icted persons as shareholders
The general account of an insurance company
</question>
An attorney involved in the new issue of KMF
A portfolio manager of an investment company buying for his personal account
<question>
The Founders Income Fund has declared a dividend payable to stockholders of reco
rd 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)
</question>
On the date set by the fund or its principal underwriter (sponsor)
<question>
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 be
fore a fixed-income security will be called
The measure of volatility that compares an equity security to the S&P 5
00 index
</question>
A measure of a fixed-income security's relative interest rate risk
<question>
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%
</question>
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
<question>
Which of the following would be considered advertising?
A 15-second radio spot by a broker-dealer announcing an interview session f
or prospective reps
A form letter sent to 30 prospects giving advice on      ass
et allocation strategies
An invitation to a seminar on tax-free investing
The script of a seminar on 529 plans
</question>
<answer>
A 15-second radio spot by a broker-dealer announcing an interview session for pr
ospective reps
The rest are considered sales literature</answer>
<question>
A customer requests that a broker-dealer sell stock that he owns and use the pro
ceeds of the sale to purchase a different stock. In determining the amount of ma
rkup 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      th
e sale to the customer
Is prohibited from charging a markup under these circumstances
</question>
Should only consider the amount of money involved in    &nbs
p; the sale to the customer
the transaction is called a proceeds transaction. In determining themarkup the b
roker-dealer will charge, industry rules state that the firm shouldconsider only
the amount of money involved in the sale to the customer
<question>
If a municipal bond is selling at a premium and is callable at par, how is the y
ield 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
</question>
To the call date
<question>
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 loca
l 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
</question>
Revenue bonds usually pay lower rates of interest than general obligation bonds
<question>
Which of the following best defines a tax swap?
The purchase and sale of bonds to incur commissions The exchange of co
nvertible 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
</question>
The purchase and sale of bonds to realize a capital loss to offset against a cap
ital gain for tax purposes
<question>
A client sells short 100 shares at 15 in his existing margin account. The FRB re
quirement is 50%. How much will he need to deposit?
$450
$750
$1,500
$2,000
</question>
$750
<question>
Which of the following factors would be LEAST important in an analysis of whethe
r 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
</question>
The type of securities the client traded
<question>
For tax purposes, all of the following are deducted from rental income in a real
estate program EXCEPT: Depreciation
Maintenance
Mortgage amortization
Property tax
</question>
Mortgage amortization
<question>
A municipality could issue revenue bonds for (multiple answer):
Hospitals
Electric systems
Turnpikes
Sewer systems
</question>
Hospitals
Electric systems
Turnpikes
Sewer systems
<question>
An investor has purchased two municipal bonds. Bond A is bought at a discount an
d Bond B is bought at a premium. If the investor holds both bonds to maturity, t
he 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
</question>
Ordinary income on A, no capital loss on B
<question>
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
</question>
May be subject to pay back taxes as well as penalties and interest
<question>
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
</question>
$11,000
<question>
An investor purchases a two-year ABC call. Which of the following accurately des
cribes the exercise of the option? European style, next business day settle
ment
European style, three business days settlement
American style, next business day settlement
American style,  three business days settlement
</question>
<answer>
American style, three business days settlement
Long-term anticipation securities (LEAPs) may beexercised on any day prior to ex
piration(American style). Exercise settlement isin the underlying stock, in thre
e business days</answer>
<question>
Which of the following parties states that a municipality can legally issue bond
s?
FINRA
The MSRB
The SEC
The bond counsel
</question>
The bond counsel
<question>
Which of the following indexes or averages is made up of the largest number of s
tocks?
The Dow Jones Composite      Index
The S&P 500      Index
The NYSE Index
The Wilshire      Associates Equity Index
</question>
The Wilshire      Associates Equity Index
<question>
A brokerage firm accepted delivery of securities on settlement. Upon further ins
pection 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
</question>
Reclamation
<question>
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
</question>
Long RST puts

If the customer is short RST calls, he wants or thinksthe marketprice of RST sto
ck 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
<question>
A customer gives a registered representative the following instructions: Buy 1,0
00 shares of General Electric "whenever you think the price is right." Under cur
rent regulations:
The order can be executed by the RR only on the same      t
rading day
The order must be marked "discretionary" and      approved b
y 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
</question>
The order can be executed by the RR only on the same    &nbs
p; trading day
<question>
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 serv
ice
Capacity in which the broker-dealer acted
Denominations of the securities to be delivered
</question>
Rating provided by a nationally recognized municipal securities rating service
Denominations of the securities to be delivered
<question>
Dealer A gives bonds firm to Dealer B with a recall. What does this mean? multip
le 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.
</question>
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.
<question>
A mutual fund buys stock from the portfolio of an insurance company. This is a t
rade executed in the:
Over-the-counter market
Exchange market
Third market
Fourth market
</question>
Fourth market
This is the name given to the so-called market whereinstitutions trade with othe
r institutions
<question>
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 O
TC third market makers
Indications of interest on private placements to be sold to qualified inst
itutional investors
Bid/ask quotations for small-cap OTC securities
</question>
Bid/asked quotations for listed stocks reported by national exchanges and OTC th
ird market makers
The ConsolidatedQuotation System (CQS) provides subscribers withbid/ask quotatio
ns for securities listed on national exchanges, includingquotes from OTC market
makers in those securities (the third market).
<question>
In a discussion with a client, a registered representative refers to a bond yiel
d that has been reduced by the inflation rate. This yield is known as the:
After-tax yield
Discount rate
Real interest rate
LIBOR
</question>
Real interest rate
<question>
The market price of XYZ Company's stock is $60. The price-earnings ratio is 10 a
nd 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
</question>
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 earnin
gs per share since the number of shares outstanding willincrease. The 2-for-1 sp
lit 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),wh
ich 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
<question>
The transfer of bonds from one party to another may be accomplished by an endors
ement on the back of the bond certificate or through a:
Letter of credit
Letter of      notification
Power of      attorney
Bond power
</question>
Bond power
<question>
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 specia
list may:
Buy stock for its own account at $34.65
Sell stock from its own account at $34.90
Sell stock from its own account at $34.95
</question>
<question>
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
</question>
Solicited orders for a non-Nasdaq stock trading at $3.00 per share
Listed stocks and Nasdaq stocks are/are not subject to the penny stock rule?
are not
<question>
All of the following statements are TRUE concerning preconditions for sale requi
rements 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 pe
rmitted
</question>
The verification may be made through oral communication
<question>
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 registrati
on
All of the above
</question>
Because short-term corporate debt of 270 days or less is exempt from registratio
n
<question>
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
</question>
$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 equa
ls $875
<question>
Volume and holding period restrictions do not apply to the resale of private pla
cements (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
</question>
The purchaser is      a qualified institutional investo
r
<question>
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 pr
ice of the stock is $56. What is the price-earnings ratio?
6.5 times
7.5 times
8 times
8.6 times
</question>
8 times
The price-earnings ratio is the marketprice ($56) of the stock divided by the ea
rnings per share($7) which equals 8 times. The earnings per share of $7.00 is fo
und by dividingthe $7,000,000 of available income to the common stockholders by
the 1,000,000shares of commonstock outstanding
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 com
mon stockholders by the # of shares of common stock outstanding
The earnings per share is found by
dividing the $ of available income to the common stockholders by the # of
shares of common stock outstanding
<question>
How would preferred stock most likely be affected by an increase in interest rat
es?
Its market value      would increase
Its market value      would decrease
Its conversion      ratio would increase
There would be      no effect
</question>
Its market value      would decrease
<question>
A member of a municipal new issue syndicate is entering an order for an accumula
tion account being used for a unit investment trust that the firm underwrites. T
his order must be entered as a(n):
Pre-sale order
Related      portfolio order
Contingency      order
AON order
</question>
Related      portfolio order
<question>
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
</question>
$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 sha
res). The company will nothave to pay the interest onthe bonds since they were c
onverted
<question>
An individual purchased a 10 year municipal bond at a cost of $1,050. If the ind
ividual 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
</question>
No capital gain or loss
When a municipal bond is purchased at a premium, the premium must be amortized o
ver the life of the bond. (21-12
<question>
Which of the following are normally TRUE regarding the pricing of municipal bond
s? (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.
</question>
Serial bonds are priced on a yield-to-maturity basis.
Term bonds are priced on a dollar basis.
<question>
Which of the following new issues may be purchased by an employee of a broker-de
aler under the New Issue Rule? Multiple answers
Convertible debt
Investment-grade debt
Exchange-traded funds
Preferred stock
</question>
All
An employee of a broker-dealer is considered arestricted person and may not purc
hase any new issues under FINRA rules. All ofthe choices listed in this question
are not considered new issues under thisrule. Exemptions from the definition in
clude: 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 registrations
tatement
<question>
Open-end companies are/are not offered below their currentnet asset value
the maximum salescharge permitted for an open-end company is
</question>
are not, 8 1/2%
<question>
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
</question>
A corporate      resolution
<question>
A registered representative wants to open a joint account for the dentists in hi
s 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 est
ate. Which two of the following are correct?
The account      should be established as Joint Tenants wit
h 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 securit
y number
All dividends      and capital gains in the account will be
reported by the brokerage firm on      a percentage of owner
ship basis
</question>
The account      should be established as Tenants in Co
mmon
All dividends      and capital gains in the account wil
l be reported by the brokerage firm      under one soci
al security number
<question>
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
</question>
If there had been a stock dividend
<question>
An investor has been making payments into a variable annuity for the last 20 yea
rs. 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      guaran
teed.
</question>
The investment risk is assumed by the customer.
The amount of the payment to the customer is not      g
uaranteed.
<question>
Allen purchased a government security, and later discovered that it was nonnegot
iable. This security could have been which of the following?
Treasury bill
Commercial paper
GNMA      pass-through
EE savings bond
</question>
EE savings bond
<question>
Because of its multiplier effect on the economy, the Federal Reserve Board is re
luctant to change:
The reserve      requirement
Margin      requirements
The discount      rate
Its open market      policy
</question>
The reserve      requirement
<question>
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
</question>
An increase in      paid-in capital
A reduction in      the long-term debt ratio
<question>
The 5% markup policy would apply to a:
Municipal bond      trade
Transaction on      the NYSE
Proceeds      transaction
Purchase of      mutual fund shares
</question>
Proceeds transaction
The 5% markup policy does not apply to any traderequiring a prospectus(new issue
s, registered secondaries, and mutual funds) or a transactioninvolving an exempt
security (municipal bond) or transaction effected on an exchange.The 5% policy a
pplies to secondarymarket OTC trades, which include proceeds transactions(using
sale proceeds to buy another security) and riskless or simultaneoustransactions.
<question>
Mrs. Jones is interested in selling 500 shares of her REIT. The sale would be ha
ndled 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
</question>
Sale of a fund      listed on the NYSE
There is a secondarymarket for REITs (RealEstate Investment Trusts); the vast ma
jority 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 simila
rmanner.
<question>
A customer asks an RR for a recommendation as to how to invest a $150,000 inheri
tance. 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 woul
d be the LEAST suitable recommendation for this customer?
Taxable money      market fund
Tax-exempt money      market fund
Short-term      Treasury fund
Balanced fund
</question>
Balanced fund
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 10
6
101.50
<question>
A new issue of municipal, government, or corporate securities with maturities gr
eater than one year, must be issued in:
Bearer or      registered form
Bearer form only
Registered as to      principal form only
Fully registered      form only
</question>
Fully registered      form only
<question>
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 Securit
ies, a local investment banking firm. Winco Securities has made no guarantee tha
t it will be able to raise the full amount of the offering. Which of the followi
ng 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. Wi
nco is acting      as principal in this underwriting.
</question>
This is a      best-efforts underwriting. Winco is acti
ng      as an agent for Fred's Auto Centers.
<question>
What department or section of the brokerage firm would be responsible for tender
ing stock?
P&S      Department
Margin      Department
Cashier's      Department
Reorganization      Department
</question>
Reorganization      Department
<question>
Concerning mutual funds, what is meant by net investment income?
Interest only
Dividends only
Interest +      dividends - expenses
Dividends +      capital gains - expenses
</question>
Interest +      dividends - expenses
<question>
Ralph, a New York City bus driver, sold his apartment for $250,000. He is contem
plating purchasing another property within the next 2 to 6 months, but would lik
e to keep the proceeds invested while he is looking. Ralph's primary goals are p
reservation 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
</question>
A U.S.      government money market fund
<question>
A registered representative wants to give a seminar regarding retirement plannin
g. Which of the following records must be maintained by the brokerage firm regar
ding 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    &nb
sp;
The number of accounts that were opened based upon the seminar
</question>
A record of the topic discussed and sponsor of the seminar   &nbs
p;
<question>
Which of the following choices describes the greatest risk associated with mortg
age-backed securities?
Borrowers might default on their mortgage payments.
The market for mortgage-backed securities is illiquid. The market price&nb
sp;of the bonds might fall due to a rating downgrade.
Falling interest rates might accelerate early repayment of principal.
</question>
Falling interest rates might accelerate early repayment of principal.
<question>
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 held to maturity
</question>
<question>
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
</question>
A Municipal Securities Principal
<question>
During a period of stable interest rates, which bond has the most potential to s
how 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
</question>
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.
<question>
Interest rates had been very high. During the past three years rates have decrea
sed dramatically, reaching historically normal level. The present yield curve wo
uld most likely be which of the following two:
Ascending
Positive
Inverted
Negative
</question>
Ascending
Positive
<question>
Secondary market offerings of municipal bonds could be found in all of the follo
wing EXCEPT:
Broker's broker's list
Munifacts
Bond Buyer
Dealer offering list
</question>
Bond Buyer
<question>
A bank or brokerage firm is applying to become a primary dealer in government se
curities. Which government body appoints the financial institution as a primary
dealer?
The Treasury Department
The SEC
FINRA
The Federal Reserve Board
</question>
The Federal Reserve Board
<question>
The City of Fremont, Nebraska is issuing revenue bonds to increase its electric
power generating facilities and to replace outstanding bonds. Interest on the bo
nds 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
</question>
Exempt from federal income tax
<question>
Which of the following types of securities may a municipal securities representa
tive sell?
Municipal bonds
Government bonds
Corporate bonds
Municipal unit investment trusts
</question>
Municipal bonds
<question>
The turnover that a dollar experiences over a given period is known as the:
Multiplier effect
Velocity of money
Market momentum
Inflation rate
</question>
Velocity of money
<question>
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 ratio
nally
</question>
Predicts future values for the stock
<question>
Super Entertainment Inc., a publicly traded firm on the NYSE, spins off its dome
stic syndication division creating 1,000,000 new shares. To receive the new shar
es, investors must exchange 25% of their old shares. Investors who receive share
s 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 placeme
nt
Receive a prospectus only if they received 500 shares or more
Not receive a prospectus because this is a Rule 144A offering
</question>
Be required to receive a prospectus under the Securities Act of 1933
<question>
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
</question>
A unit investment trust
<question>
On February 10th, an investor sold 100 shares of ABC short at $50/share. The inv
estor 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
</question>
The wash sale rule has been violated
<question>
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
</question>
The combined SMA is, therefore, $32,500 ($25,000 LongSMA + $7,500 Short SMA).
<question>
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
</question>
Inflation for a long period
High unemployment
<question>
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
</question>
Special Tax Bond
<question>
A bond with an 11% coupon is purchased at 103. The maturity of the bond is 20 ye
ars. 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 matu
rity.
The yield will      be determined by the issuer.
</question>
The yield will      be higher if held to maturity.
<question>
An investor purchases a $100m face value municipal bond with a 5-year maturity a
t 105. After two years, the bond is sold at 95. For tax purposes, the investor h
as a(n):
$2,000 loss
$4,000 loss
$8,000 loss
$10,000 loss
</question>
$8,000 loss
When a municipal bond is purchased at a premium, the bond's premium must be amor
tized to find an adjusted cost basis. If the bond is sold above the adjusted cos
t basis, the result is a capital gain. If the bond is sold below the adjusted co
st basis, the result is a capital loss. If the bond is held to maturity, there i
s 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.
<question>
A customer wants preservation of capital and safety of income. Which of the foll
owing would best meet the customer's needs?
Income bonds
Debentures
Several      municipal bonds rated AA or better
One AAA rated      municipal bond
</question>
Several      municipal bonds rated AA or better
<question>
When reading a research report on an automobile company, a registered representa
tive's use of fundamental analysis determines that the stock is a good investmen
t. When attempting to figure the best time to execute orders to buy the stock, t
he registered representative could refer to:
A chart showing      the price-earnings ratio for all automo
bile 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
</question>
A chart showing      a recent history of the market pri
ce of the stock
<question>
An investor purchases Swiss francs in the spot market at 61. As a hedge, the inv
estor buys a Swiss franc June 60 put at 0.50. This strategy will be profitable i
f which two:
The U.S. dollar      weakens
The U.S. dollar      strengthens
The spot price      for the Swiss Franc is 61.75
</question>
The U.S. dollar      weakens
<question>
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
</question>
3 Public offerings      of limited partnerships
<question>
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 accret
ed 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
</question>
1 No gain or loss
<question>
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
</question>
$1,010,937.50
<question>
XYZ Corporation has 4,000,000 shares of common stock authorized and 2,500,000 sh
ares issued of which 100,000 are treasury stock. The corporation is issuing an a
dditional 1,000,000 shares through a standby underwriting. If only 600,000 share
s are subscribed to in the corporation's offering, the number of outstanding sha
res 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
</question>
4 Increase by      1,000,000 to 3,400,000 shares
<question>
A registered representative writes a letter to see if his clients have any inter
est in trading options. The letter is generic and describes the advantages and d
isadvantages 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
</question>
1 Must be approved      prior to use by a ROP
4 Need not be      accompanied by a risk disclosure doc
ument
<question>
Mr. Jones bought an 8% debenture at a 7.20 basis. If the bonds are currently tra
ding 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
</question>
3 The bond's      market price has decreased
<question>
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
</question>
$1,000
<question>
Which of the following statements is TRUE concerning periodic payment variable a
nnuities?
1 The number of a client's annuity units never changes.
2 The number of a client's accumulation units never      cha
nges.
3 They never have a beneficiary.
4 The monthly payout is fixed by the inflation index.
</question>
1 The number of a client's annuity units never changes.
<question>
If ABC Corporation pays a $0.25 dividend to its shareholders, all of the followi
ng would result EXCEPT:
1 Retained      earnings remain the same
2 Working capital      is decreased
3 Current assets      are decreased
4 Current      liabilities are decreased
</question>
2 Working capital      is decreased
<question>
A registered representative receives an order from the President of XYZ Corporat
ion to sell unregistered XYZ shares. The client purchased the shares in a privat
e 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
</question>
4 Is a violation      of Rule 144 if executed
<question>
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
</question>
2 Graduated taxes
4 Progressive      taxes
<question>
To calculate the total interest cost to the issuer for a competitive bid, the sy
ndicate 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
</question>
1 The total par      value of the offering
2 The maturity      schedule and coupon rates
3 Whether the bid      includes any discounts or premiu
ms
4 The dated date      for the bonds
<question>
When analyzing a mutual fund's expenses, an analyst would look at all of the fol
lowing 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
</question>
4 The sales load      charged to buy fund shares
<question>
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 t
he revenues is known as:
1 Functional      allocation
2 Overriding      royalty
3 Reversionary      working interest
4 Disproportionate
</question>
4 Disproportionate
<question>
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 direc

tor of the issuer
2 A portfolio      manager of a mutual fund purchasing for h
is personal account
3 Employees of the      issuer if the issuer is a FINRA memb
er
4 An attorney      hired by the issuer to assist in the IPO
</question>
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
<question>
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
</question>
3 A $20,000,000 sale of corporate bonds sold interstate
4 A sale by a      brokerage firm throughout the countr
y of $25,000,000 of corporate      debentures
<question>
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, w
hat percentage of the corporation's assets must be located in Pennsylvania, and
what percentage of its revenues must be derived from Pennsylvania sources, at th
e time of the offering?
70%
80%
90%
100%
</question>
80%
<question>
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 receiv
e a dividend of:
0
$3
$9
$12
</question>
$12
<question>
Which of the following orders would you place for a customer who wants to hold h
er 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
</question>
3 Bid order
<question>
According to MSRB rules, all of the following must be approved by a principal pr
ior 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 se
rvices
4 A research      report
</question>
2 A preliminary      official statement
<question>
A client buys 100 shares of Miramar at $42 per share. One week later she buys on
e Miramar Nov 40 put and pays a premium of $300. In November, the stock is at $4
8 per share and the put expires worthless. The tax consequences of these trades
are: (which 2)
1 Miramar stock      has a basis of 42
3 There is a      capital loss of $300 on the put
4 No loss is      reported on the put until the stock is sol
d
</question>
3 There is a      capital loss of $300 on the put
<question>
A municipal tombstone ad shows bonds maturing serially from 2012 through 2030. T
he 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 pr
iced to the:
2018 call date
2019 call date
2020 call date
Maturity date
</question>
Maturity date
<question>
Mrs. Green enters an order to sell stock that is currently in her safe deposit b
ox. 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
</question>
<question>
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 r
easonable? (which 2)
101
108
5.80 basis
4.00 basis
</question>
101, 5.80 basis
<question>
Which of the following best describes a BA?
1 It facilitates      the trading of foreign stocks in the U
nited States.
2 It helps to      finance foreign trade between importers a
nd 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 E
urodollar deposits.
</question>
2 It helps to      finance foreign trade between import
ers and exporters.
<question>
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 th
at 1,200 shares were purchased at 78 the:
1 Customer must      accept the execution even though it con
flicts with the order
2 Customer is only      obligated to accept the amount order
ed, 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
</question>
2 Customer is only      obligated to accept the amount
ordered, not executed
<question>
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
</question>
3 Treasury notes
<question>
A registered representative opens an option account for a customer on October 1s
t and buys 5 ABC November 30 calls at 4. On October 16th, the premium of the cal
ls has decreased to 2 and the registered representative has not received a signe
d options agreement. The registered representative may:
1 Not accept any      orders from the customer until the sig
ned options agreement is received
2 Accept an order      to sell the 5 ABC November 30 calls t
hat were previously purchased
3 Accept an order      to buy 5 additional ABC November 30 c
alls
4 Accept an order      to buy 5 XYZ December 40 calls
</question>
2 Accept an order      to sell the 5 ABC November 30 ca
lls that were previously purchased
<question>
According to MSRB rules, the delivery of a mutilated certificate would be consid
ered 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
</question>
3 If the      certificate is authenticated by the issue
r or transfer agent
<question>
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
</question>
2 True interest      cost
<question>
Government-sponsored enterprise securities are comparable to direct government o
bligations 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 pa
r
</question>
2 All are      government guaranteed
<question>
Which of the following option orders may be accepted by an order book official?
1 Discretionary
2 Limit
3 Spread
4 Not held
</question>
2 Limit
<question>
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 is
sues
4 Prospectus      requirements
</question>
2 A legal      relationship between a corporate issuer
and a trustee for the benefit of      bondholders
<question>
A pension fund manager wants to protect the fund's diversified stock portfolio a
gainst a market downturn. To best meet this objective, he should write:
1 Covered calls
2 Covered puts
3 Uncovered calls
4 Index options
</question>
4 Index options
<question>
A broker-dealer owns 100 shares of ABCO stock which it purchased at 28. If the s
tock 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
</question>
3 The lowest offer      on the Nasdaq system
<question>
A customer wants to open a cash account. All of the following are required on th
e 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
</question>
3 The customer's      signature
<question>
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
3 The average price obtained from all dealers contacted 4 The first price obtain
ed
</question>
<question>
When an investor sells an interest in a limited partnership, his or her cost bas
is for tax purposes is the:
1 Original      investment
2 Adjusted basis
3 Accredited value
4 Original      investment plus accretion
</question>
2 Adjusted basis
<question>
To diversify a corporate bond portfolio, which of the following is not a concern
?
1 Coupon
2 Maturity
3 Price
4 Geographic      location
</question>
3 Price
<question>
Crossway Shopping Centers, a REIT, is making a public offering of 3,000,000 unit
s at $20/share. An investor who buys the issue in the primary market must receiv
e:
1 An offering      memorandum
2 An offering      circular
3 A prospectus
4 An educational      brochure explaining the general nature
of REITs
</question>
3 A prospectus
<question>
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
</question>
2 Face amount of      the underlying bonds
<question>
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
</question>
1 Industrial      production index
<question>
Which of the following persons control positions in secondary market municipal b
onds for a broker-dealer?
1 Underwriter
2 Trader
3 Agent
4 Principal
</question>
2 Trader
<question>
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
</question>
1 Options      advertising
3 CMO advertising
<question>
A customer's margin account has a long market value of $30,000 and a debit balan
ce of $12,000. FRB initial margin requirement is 50%. What is the purchasing pow
er in the account?
0
$3,000
$6,000
$18,000
</question>
$6,000
<question>
Charlene contacts her registered representative to buy an OTC stock. Rather than
buying it directly from a market maker, Charlene's broker-dealer contacts anoth
er broker-dealer, who buys it from a market maker creating two levels of transac
tion fees. This is known as:
1 Freeriding and      withholding
2 Interpositioning
3 Backing away
4 Churning
</question>
2 Interpositioning
<question>
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
</question>
1 Reoffering Yields
<question>
An individual purchases $100,000 face value of a 6% municipal bond at a dollar p
rice of 101 1/2. The bond's maturity is 7-1-17, but the issue has been called fo
r 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
</question>
1 Yield-to-call
<question>
When pricing a bond, which of the following would be required? (multiple answers
)
1 Coupon
2 Maturity
3 Settlement date
4 Bond years
</question>
1 Coupon
2 Maturity
3 Settlement date
4 Bond years
<question>
Relative to stock index options, which of the following are correct? (multiple a
nswers)
1 Expirations are      monthly
2 If exercised,      settlement is in cash the next day
3 The settlement      amount is based on the closing index p
rice on the day of exercise
</question>
1 Expirations are      monthly
2 If exercised,      settlement is in cash the next day
3 The settlement      amount is based on the closing in
dex price on the day of exercise
<question>
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
</question>
1 Tax-free      interest if the bond is an OID
3 Ordinary income      if the bond is not an OID
<question>
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 contributi
ons
3 Employees are      permitted to make contributions to the
account
4 Employees are immediately      vested for any contribution
s made into the account
</question>
3 Employees are      permitted to make contributions to
the account
<question>
An individual purchases two BP (British pound) 150 calls @ 9.20. The contract si
ze is 10,000 BP. The total cost for the contracts is:
$920
$1,500
$1,840
$3,000
</question>
$1,840
<question>
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
</question>
4 Random lot
<question>
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
</question>
3 No endorsement      by owner
<question>
In February, Mr. Hedge wrote an uncovered DOG Oct 90 put @ 7. The put was exerci
sed 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
</question>
$1,100
<question>
All of the following are TRUE concerning both Auction Rate Securities and Variab
le 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
</question>
4 They have a put feature allowing the holder to redeem    &
nbsp; the security at par
<question>
According to industry regulations, a writer of an ABC March 50 put would be cons
idered covered if the writer was:
1 Long an ABC      March 60 put
3 Long an ABC      March 50 call
4 Long an ABC      March 60 call
</question>
<question>
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 di
vidends each quarter after the split?
$40.00
$42.00
$52.50
$80.00
</question>
$42.00
<question>
On February 13th, an investor sold 700 shares of ABC stock for a loss. On the ne
xt day, the investor purchased 3 ABC February calls. Which of the following is c
orrect?
1 The entire loss      from the sale of stock would be disal
lowed.
2 A portion of the      loss from the sale of the stock woul
d be disallowed.
3 The loss from      the sale of stock would not be affected
.
4 Any future loss      on the options would be disallowed.
</question>
2 A portion of the      loss from the sale of the stock
would be disallowed.
<question>
When evaluating two CMOs backed by GNMAs, one having a 6% yield and the other ha
ving a 10% yield, which of the following is/are TRUE?
1 Prepayment risk      is greater for the CMO with the 10% y
ield.
2 Prepayment risk      is greater for the CMO with the 6% yi
eld.
3 Credit risk is      greater for the 10% CMO.
</question>
1 Prepayment risk      is greater for the CMO with the
10% yield.
<question>
All of the following are true relating to a Keogh plan EXCEPT:
1 It must follow      ERISA standards for eligibility, fundi
ng, 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 maintai
n an IRA
</question>
4 An individual      covered by a Keogh plan may not ma
intain an IRA
<question>
The Dow Theory states that a major trend is confirmed when which of the followin
g 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 Tr
ansportation Average
3 The Dow Jones Industrial Average and the      Dow Jones Ut
ility Average
4 The Dow Jones Composite and the NYSE      Composite Averag
e
</question>
2 The Dow Jones Industrial Average and the      Dow Jon
es Transportation Average
<question>
XYZ corporation has 7,000,000 shares of common stock ($1 par value) authorized o
f 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 commo
n stock on the balance sheet is:
$4,500,000
$5,000,000
$7,000,000
$90,000,000
</question>
$4,500,000
<question>
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 set
tlement. 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
</question>
$108.50
<question>
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 accoun
t
3 Interest earned      that exceeds the inflation rate
4 Amount that the      prime rate exceeds the discount rate
</question>
3 Interest earned      that exceeds the inflation rate
<question>
Foreign currency spot transactions normally settle in:
1 One business day
2 Two business      days
3 Three business      days
4 Five business      days
</question>
2 Two business      days
<question>
Which of the following methods are used by the Options Clearing Corporation in a
ssigning 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
</question>
1 Random selection
<question>
When opening a new account, what is the order in which the following actions tak
e 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
</question>
2, 1, 4, 3
<question>
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.
</question>
4 They are      non-interest bearing.
<question>
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 deflationar
y times
</question>
2 Sell securities in the open market during inflationary times
3 Buy securities      in the open market during deflati
onary times
<question>
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 wi
th Zucker, which is registered only in New York. Which of the following statemen
ts 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 inve
stment adviser in Montana.
4 This is      prohibited.
</question>
4 This is      prohibited.
<question>
A limited partner has a $40,000 basis in a partnership. During the past year, th
e 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
</question>
$20,000
<question>
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.
</question>
1 The specialist      may hold this order in his book.
3 A portion of the      400 shares may be purchased.
<question>
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 settle
ment. 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
</question>
$52.24
<question>
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
</question>
4 A broker's      broker
<question>
Aglet International, Inc. has pretax income of $2,000,000. In addition, it recei
ved 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 l
iability?
$680,000
$686,800
$690,200
$714,000
</question>
$690,200
<question>
An investor shorts a stock at $6 per share. What is the minimum maintenance requ
irement for this position?
$1.80 per share
$2.50 per share
$3.00 per share
$5.00 per share
</question>
$5.00 per share
<question>
A U.S. citizen owns shares of a foreign stock. Which of the following is TRUE re
garding 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 di
vidend 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.
</question>
2 The investor may      apply any foreign tax paid on t
he dividend as a credit against U.S. income      tax.
<question>
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
</question>
<strong>3 Partner or      Principal</strong>
<question>
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 1
0% stock dividend, which of the following is true regarding the convertible bond
?
1 Conversion ratio      remains at 40, but the conversi
on price is reduced.
2 Conversion ratio      increases to 45.50 and the conv
ersion price remains constant.
3 Conversion price      decreases to $22.73 and the con
version ratio remains the same.
version ratio increases to 44.
</question>
version ratio increases to 44.
<question>
Which of the following municipal entities would not issue overlapping debt?
1 Park district
2 Library district
3 School district
4 Turnpike      authority
</question>
4 Turnpike      authority
<question>
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
</question>
$7,050
<question>
From the items below, choose the one that best describes the economic theory tha
t relies on controlling the money supply and interest rates to manage the econom
y.
1 Keynesian      economic theory

2 Supply-side      economics
3 Monetarist      theory
4 Random walk      theory
</question>
3 Monetarist      theory
<question>
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, &nbsp
;    exploration, and development costs
</question>
2 Straight-line      depreciation
<question>
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.
</question>
4 They may be      traded on an exchange.
<question>
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
</question>
3 U.S. dollars on deposit in foreign banks
<question>
Munifacts could contain: (multiple answers)
3 The amount of a      new issue that is yet unsold (new iss
ue balance)
4 Dealer to dealer      availability of municipal bonds in
the secondary market
</question>
3 The amount of a      new issue that is yet unsold (ne
w issue balance)
4 Dealer to dealer      availability of municipal bonds
in the secondary market
<question>
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 is
sue
</question>
1 Is used for a      competitive sale
3 Will contain the      proposed interest rate
4 Will contain the      price the bidder will pay for t
he issue
<question>
A husband and wife are both currently employed. The husband earns $95,000 per ye
ar and the wife earns $120,000 per year. Which of the following are true concern
ing 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.
</question>
2 The husband      cannot contribute.
4 The wife cannot      contribute.
<question>
SIPC is a(n):
1 Not-for-profit      corporation
2 Self-regulatory      organization
3 U.S. government      agency
4 Insurer of      municipal bonds
</question>
1 Not-for-profit      corporation
<question>
When a stock splits 5 for 4, by what percentage will the price of the stock be r
educed?
20%
25%
50%
80%
</question>
20%
<question>
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
</question>
2 Long calls and      short puts
4 Short calls and      long puts
<question>
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
</question>
1 Advertisements      and sales literature
2 General      prospecting letters
3 Seminar      transcripts
4 Allocation of      exercise notices
<question>
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
</question>
4 Capital      preservation if interest rates rise
<question>
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
</question>
1 Interest is      subject to income taxes
3 Gains are      subject to capital gains treatment
<question>
Prior to the maturity of a variable rate demand obligation, an investor ha
s the right to receive the:
1 Current market value
2 Par value
3 Par value plus accrued interest
4 Par value less accrued interest
</question>
3 Par value plus accrued interest
<question>
A registered representative receives a sell order from his customer. When he sub
mits 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 prob
lem would be rectified:
1 By the registered representative
2 With a purchase of the security out of the wrong      acco
unt
3 By placing the order in an error file
4 By the branch office manager
</question>
4 By the branch office manager
<question>
By adding which of the following positions to her account would she create a deb
it spread?
1 Long 1 ABC Oct 30 call
2 Long 1 ABC Oct 50 call
3 Long 1 ABC Oct 30 put
</question>
<question>
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 wi
thout adding additional risk. He could accomplish this by adding which of the fo
llowing positions to his account?
1 Short 1 DEF May 45 call

3 Short 1 DEF May 45 put
4 Short 1 DEF May 25 put
</question>
<question>
An investor is long 1,000 shares of XYZ at $32 per share. The current market val
ue 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 t
he following positions would allow the investor to reduce the risk in the accoun
t 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
</question>
1 Short 10 XYZ 40 calls
<question>
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
</question>
2 Interest rates fall
<question>
One of your clients expects that interest rates are going to increase. By adopti
ng which two of the following positions would your client benefit if these 2&nbs
p;were to occur?
1 Long yield-based calls
2 Long yield-based puts
3 Short yield-based calls
4 Short yield-based puts
</question>
1 Long yield-based calls
4 Short yield-based puts
<question>
Andrew, a client of yours, anticipates that the value of the U.S. dollar is weak
ening in relation to the euro and decides to purchase 10 March 95 euro call opti
ons at 1.30 when the spot price is 95.55. The contract size of each euro contrac
t is 10,000. Andrew would be required to deposit:
$95
$130
$950
$1,300
</question>
$1,300
<question>
A type of money-market security usually collateralized by U.S. Treasury securiti
es 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
</question>
4 A repurchase agreement
<question>
A securities market is considered efficient if which two of the following condit
ions 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
</question>
2 Small differences between the bid and offer prices
3 A large number of transactions
<question>
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
3 Operations
4 Sales
</question>
<question>
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      es
tate taxes will be paid when one spouse passes away.
2 Gifts between spouses are unlimited and there is no      g
ift 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 &nb
sp;   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 &nb
sp;   given.
</question>
1 Gifts between spouses are unlimited and no gift or    &nbs
p; estate taxes will be paid when one spouse passes away.
<question>
Which of the following statements is NOT TRUE concerning the Student Loan Market
ing 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.
</question>
1 It issues securities that can be redeemed to pay for    &n
bsp; college education.
<question>
When raising capital, which two of the following securities are required to regi
ster 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      co
mpany
</question>
1 A REIT that will be listed on the NYSE
4 An American Depositary Receipt issued by a British    &nbs
p; company
<question>
Which of the following statements is TRUE concerning Rule 144A transactions?
1 The securities may be offered only to accredited      inve
stors.
2 The securities may be offered only to qualified      insti
tutional buyers.
3 An investor buying these securities must hold them for    &nbsp
; a period of six months.
4 Only domestic issuers may offer securities under this
type of offering.
</question>
2 The securities may be offered only to qualified
institutional buyers.
<question>
Which two of the following securities will allow an investor to receive both int
erest income and have a maturity date allowing their principal returned in one l
ump sum?
1 A municipal bond fund containing mostly revenue bonds
2 Municipal bonds that are subject to the alternative      m
inimum tax
3 A closed-end fund containing municipal bonds of one      s
tate
4 A portfolio of municipal bonds, some which have call
provisions
</question>
2 Municipal bonds that are subject to the alternative    &nb
sp; minimum tax
4 A portfolio of municipal bonds, some which have call    &n
bsp; provisions
<question>
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    &nbsp
; now own 1 TUV Sep 100 Put.
3 Investors who previously owned 20 TUV Sep 5.00 Puts      w
ill now own 1 TUV Sep 100 Put.
4 Investors who previously owned 1 TUV Sep 5.00 Put      con
tract will now own 20 TUV Sep 5.00 Puts.
</question>
2 Investors who previously owned 1 TUV Sep 5.00 Put will
now own 1 TUV Sep 100 Put.
<question>
If a CMO has a PSA of 150, which of the following events most likely has occurre
d?
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      tr
ading of the securities.
</question>
2 Interest rates have decreased.
<question>
Rosewood Securities LLC has been accused of buying and selling securities for th
e purpose of creating artificial trading activity. Which of the following choice
s BEST describes this activity?
1 Churning
2 Matched orders
3 Capping
4 Stabilization
</question>
2 Matched orders
<question>
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-def
erred 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)
</question>
4 Coverdell Education Account (ESA)
<question>
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
</question>
4 Long 5 GHI Jan 15 puts
<question>
A client has a margin account with the following positions: short 2,000 shares o
f 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
</question>
$4,600
<question>
A client has a margin account with the following positions: short 2,000 shares o
f EXA at $22 and long 2,000 shares of EXA at $24 . The client's maintenance requ
irement is:
$2,200
$2,400
$11,500
$13,200
</question>
$2,400
<question>
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      st
ate from where the client lives.
2 The CD has a feature in which the interest rate is      ba
sed 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      obl
igated to do so.
</question>
1 The CD was issued by a bank located in a different    &nbs
p; state from where the client lives.
<question>
A client sells short 1,000 shares of KPL at $46 a share. Fourteen months later t
he client covers the short sale at $35 a share. For tax purchases the client wou
ld 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
</question>
<question>
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      positi
ons or ordinary income
</question>
1 Short-term gain or loss
<question>
A registered representative enters an order for a client. In error, the RR purch
ases 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    &nbsp
; account.
3 The RR must contact the client and cancel the original    &nbsp
; transaction.
4 The firm is required to report the error to the market    &nbsp
; in which the order was executed.
</question>
2 The shares must be placed in the broker-dealer's error
account.
<question>
A direct participation program in real estate would NOT have which of the follow
ing 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
</question>
3 Cash dividends that are taxable as ordinary income
<question>
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    &nbsp
; state and local taxes.
4 The interest and principal are exempt from state and
local taxes.
</question>
1 The interest is fully taxable.
<question>
A broker-dealer is preparing sales literature on CMOs. Which TWO of the followin
g statements must be disclosed?
1 The term collateralized mortgage obligation must      be i
ncluded within the name of the product.
2 The basis point spread above a comparable Treasury      se
curity the client will receive in interest must be included.
3 The lower of the yield to call or yield to maturity      m
ust be included.
4 The government agency backing only applies to the face    &nbsp
; value of the securities.
</question>
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.
<question>
A CMO would be suitable for an investor seeking:
1 Monthly tax-free income assuming he does need the      pri
ncipal returned at maturity
2 Quarterly income assuming he does not need the      princi
pal 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
</question>
4 Monthly income assuming he does not need the entire principal returned at matu
rity
<question>
Municipal securities Dealer A quotes a price for a block of bonds to Dealer B fo
r one hour with a five-minute recall. This means:
1 Dealer A may recall Dealer B within the one-hour period    &nbs
p; 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    &nbs
p; A back within five minutes after the one-hour quote period has ended
4 Dealer A may cancel its quote within the one-hour      per
iod by recalling Dealer B within the first five minutes
</question>
1 Dealer A may recall Dealer B within the one-hour period   &nbsp
; and demand a decision of Dealer B in five minutes
<question>
Which TWO of the following choices are TRUE regarding the types of securities is
sued 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    &nbs
p; years
</question>
2 Discount notes with maturities of less than one year
3 Consolidated bonds with maturities of up to 30 years
<question>
A client wants to purchase 10 RSR July 45 calls and 10 RSR July 45 puts. This tr
ansaction:
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      p
rincipal
</question>
1 Should be executed on one order ticket
<question>
On February 22, an investor sold 100 shares of ABC short at $34 a share. The inv
estor 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 10
0 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
</question>
4 Investor has a $500 short-term capital loss
<question>
AQL stock is currently quoted at 48.50 bid, offered at 48.70. A client purchasin
g this security would pay:
1 48.50 plus a commission
2 48.50 minus a commission
4 48.70 minus a commission Investor has a $500 short-term capital loss
</question>
<question>
If interest rates increase, which of the following securities would have the mos
t 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
</question>
3 A Treasury bond trading at a discount
<question>
A client has a margin account with a long market value of $950,000 and a debit b
alance of $550,000. If the broker-dealer declares bankruptcy, which TWO of the f
ollowing 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.
</question>
1 The client is permitted to pay $550,000 and receive    &nb
sp; $950,000 of securities.
<question>
A municipality issues a bond backed by revenue from a project. If the municipali
ty 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      municipal
ity creates an escrow fund.
</question>
2 This is a parity bond.
<question>
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
would be set to the minimum rate
would be set to a rate that would have cleared the auction.
</question>
2 Continue to hold the securities and the interest rate    &
nbsp; would be set to the maximum rate
<question>
Regulation NMS would apply to which TWO of the following choices?
2 Listed debt trades
3 Quotes available for manual execution
</question>
<question>
A revenue bond purchased at a premium whose cost is reduced in equal amounts eac
h year is using:
1 Straight-line accretion
2 Constant-yield accretion
3 Straight-line amortization
4 Constant-yield amortization
</question>
3 Straight-line amortization
<question>
An individual purchases one XYZ 40 call for 4 and one XYZ 50 call for 2. The mar
ket price of XYZ stock is currently 43. What is the individual's breakeven price
?
44
46
52
56
</question>
46
<question>
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 pr
ice?
32.50
31.75
29.25
26.75
</question>
31.75
<question>
A customer who has historically invested in mutual funds is considering an inves
tment in a hedge fund for the first time. When comparing mutual funds to hedge f
unds, 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      por
tfolio, 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,      wher
eas hedge funds are generally suitable for sophisticated, wealthy   &n
bsp; investors only
</question>
2 Mutual funds pool investors' money and manage the    &nbsp
; portfolio, whereas hedge funds manage each investor's assets separately
<question>
Regulation NMS modernized the U.S. markets for trading equity securities and pro
hibited:
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    &nbsp
; price above the lowest ask price in another market center
4 Trading ADRs on U.S. exchanges
</question>
3 The execution of a buy order at one market center at a
price above the lowest ask price in another market center
<question>
Morris Investments is working a leveraged buyout deal to purchase Simon Entertai
nment Group. The fundamental financing for the deal will consist mostly of:
1 Debt issued using the assets of Simon Entertainment      G
roup 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
</question>
1 Debt issued using the assets of Simon Entertainment    &nb
sp; Group as collateral
<question>
A customer sells 100 shares of GM short. GM pays a 5% stock dividend. When the c
ustomer 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
</question>
105 shares of GM
<question>
If SIPC does not cover a customer's account in a brokerage firm that has gone ba
nkrupt, the investor would be a:
1 General creditor
2 Secured creditor
3 Preferred creditor
4 Guaranteed creditor
</question>
1 General creditor
<question>
All of the following are required to be included in a preliminary prospectus acc
ording to the Securities Act of 1933 EXCEPT:
1 A written statement in red on the left border of a      pr
eliminary prospectus ("red herring") that states that the    &nbs
p; 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
</question>
3 The final offering price
<question>
All of the following securities trade with accrued interest EXCEPT:
1 Treasury bonds
2 Treasury STRIPS
3 Jumbo certificates of deposit
4 Convertible bonds
</question>
2 Treasury STRIPS
<question>
Where would bid limitations for a new municipal bond issue be found?
2 Indenture
3 Notice of Sale
4 Syndicate Agreement
</question>
3 Notice of Sale
<question>
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
</question>
3 Friday the 17th
<question>
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    &nbsp
; position.
3 It will increase the cash position and reduce the      pot
ential dilutive effect on the common stock.
4 It will reduce the cash position and the potential      di
lutive effect on the common stock.
</question>
4 It will reduce the cash position and the potential    &nbs
p; dilutive effect on the common stock.
<question>
Concerning Moody's ratings, which is the most speculative in the investment grad
e category?
Aa
A
Baa
Ba
</question>
Baa
<question>
A corporation is in the 34% tax bracket. Which of the following choices would pr
ovide the best return if the corporation wanted to invest some of its surplus ca
sh?
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%
</question>
1 A preferred stock paying a 7.50% dividend
<question>
Which of the following persons may purchase a new issue from a member firm accor
ding to the New Issue Rule?
1 The brother-in-law of a person associated with a member    &nbs
p; 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
</question>
2 The uncle of a person associated with a member firm
<question>
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
</question>
3 A broker-dealer in the OTC market
<question>
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,      fol
lowed by another trade of 100 shares at 18.50
3 An odd-lot of American Telephone traded at 18.25,      fol
lowed by a round-lot at 18.50
4 None of the above
</question>
2 100 shares of American Telephone traded at 18.25,    &nbsp
; followed by another trade of 100 shares at 18.50
<question>
The following appears on the NYSE ticker tape: X 67. 3s .13. Relating to this, w
hich 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      t
rade of 300 at 67.13.
4 USX Corp. opened at 67 followed by a trade of 300      sha
res at 67.13.
</question>
3 100 shares of USX Corp. traded at 67, followed by a    &nb
sp; trade of 300 at 67.13.
<question>
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
</question>
4 A utility company
<question>
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
</question>
2 Counsel for the underwriters
<question>
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
</question>
4 Total takedown
<question>
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 t
he customer was to sell $1,000 worth of stock, the amount of the adjusted increa
se in the SMA would be:
$300
$400
$500
$1,000
</question>
$500
<question>
How much margin must the purchaser of one RFQ Feb 60 call for a $3 premium depos
it?
25%
40%
50%
100%
</question>
100%
<question>
Which of the following Moody's rated bonds would be considered speculative?
Aaa
Aa
Baa
Ba
</question>
Ba
<question>
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    &nbs
p; endorsement.
3 Bearer bonds are delivered in $5,000 denominations.
4 The bonds have been called by the issuer
</question>
4 The bonds have been called by the issuer
<question>
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
</question>
3 Municipal securities
<question>
What would be the most advantageous tax benefit that an investor would receive f
rom an oil and gas direct participation income program?
1 Liquidity
2 Depreciation
3 Depletion
4 Intermediation
</question>
3 Depletion
<question>
All of the following are Bond Buyer Indexes EXCEPT:
1 The average yield on 25 revenue bonds with 30-year      ma
turities
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    &nbs
p; the upcoming 30 days
</question>
4 The total of all new issues scheduled to be sold during   &nbsp
; the upcoming 30 days
<question>
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 i
nvestor's total cost for the call option?
$135
$140.37
$537
$750
</question>
$750
<question>
Broker-dealers are permitted to: (multiple answers)
1 Tell investors to buy mutual funds shortly before a      d
ividend 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      s
elling them investment company shares
4 Continue to compensate retired registered      representat
ives for prior sales if a contract was signed with the
registered representative who has retired
</question>
1 Tell investors to buy mutual funds shortly before a    &nb
sp; dividend or capital gains distribution is to be paid
2 Assign loan value to fully paid shares that have been    &
nbsp; owned for more than 30 days
3 Provide a discount to nonmember broker-dealers when    &nb
sp; selling them investment company shares
4 Continue to compensate retired registered      repres
entatives for prior sales if a contract was signed with the   &nb
sp; registered representative who has retired
<question>
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
</question>
1 Debenture
<question>
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
</question>
2 Establishing option training programs for registered    &n
bsp; representatives and ROPs
3 Reviewing advertisements and sales literature
<question>
Blue Sky laws apply to which of the following? (multiple answers)
1 Registered representatives
2 Securities
3 Tombstone ads
4 REITs
</question>
1 Registered representatives
2 Securities
3 Tombstone ads
4 REITs
<question>
A customer in the 35% tax bracket has $1,500 in long-term capital gains from sto
ck transactions at the end of the year. The customer will have to pay taxes of:
$150
$225
$420
$525
</question>
$225
<question>
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      rec
eived.
4 Income generated in the account is taxed when the minor    &nbs
p; becomes an adult.
</question>
1 The minor is responsible for tax consequences.
3 Income generated in the account is taxed as it is    &nbsp
; received
<question>
A customer owns 20 ABC Corporation October 30 calls in a cash account. The custo
mer exercises the calls and the same day sells the stock at $32. The customer wi
ll have to deposit into the account:
$20,000
$30,000
$60,000
No cash deposit is required
</question>
$60,000
<question>
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
</question>
$1,800
<question>
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
</question>
3 Investment advisory fee
<question>
ABC Corporation has a capitalization that consists of a large amount of debt sec
urities relative to a small amount of equity securities. ABC Corporation would b
e considered to have a capitalization that is:
1 Conservative
2 Ordinary
3 Under-leveraged
4 Leveraged
</question>
4 Leveraged
<question>
When setting prices for a competitive municipal bid, the underwriter will consid
er all of the following EXCEPT:
1 Call premiums
2 Maturity
3 Good faith deposit
4 Coupon rates
</question>
3 Good faith deposit
<question>
A brokerage firm's research department has issued a buy recommendation for XYZ C
orporation's common stock. The report must contain all of the following informat
ion EXCEPT:
1 The firm was the managing underwriter in a recent      pub
lic 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
</question>
2 The number of shares the firm owns of the stock
<question>
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    &nbs
p; the number of shares involved
4 Transaction reports are received faster than those      ex
ecuted by floor brokers
</question>
3 All orders may be entered into the system regardless of   &nbsp
; the number of shares involved
<question>
A registered rep holding limited discretionary authority over a customer's accou
nt may:
1 Buy or sell securities in the account without      consult
ing 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
</question>
1 Buy or sell securities in the account without      co
nsulting the customer
<question>
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
</question>
4 The federal funds rate
<question>
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
</question>
<question>
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
</question>
<question>
Which two of the following circumstances would lead to disintermediation?
1 When interest rates at savings banks are lower than      m
oney 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    &nbsp
; is causing a rise in interest rates
4 When the FRB is pursuing a loose monetary policy      caus
ing interest rates to decline
</question>
1 When interest rates at savings banks are lower than    &nb
sp; money market instruments
3 When the FRB is pursuing a tight monetary policy which
is causing a rise in interest rates
<question>
An analysis of the quality of a general obligation bond to be issued would inclu
de 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
</question>
3 The dollar denominations of the bonds to be issued
<question>
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.
</question>
1 They are denominated in U.S. dollars only.
4 They are traded in the U.S. and international markets.
<question>
All of the following are TRUE regarding variable annuities and mutual funds EXCE
PT:
1 Mutual funds and variable annuities are regulated under    &nbs
p; 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   &n
bsp; dividends each year
3 Both mutual funds and variable annuities are considered    &nbs
p; securities
4 The payout of both mutual funds and variable annuities    &nbsp
; will depend on the performance of the securities owned in the portfolio
</question>
2 Variable annuity companies will retain any dividends    &n
bsp; paid, but the owner of the variable annuity must pay taxes on the &nbs
p;    dividends each year
<question>
Closing spot prices for foreign currencies are disseminated daily by the:
1 NYSE
2 IMM
3 FRB
4 FINRA
</question>
3 FRB
<question>
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)
</question>
4,3,2,1
<question>
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
</question>
4 A merger
<question>
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
</question>
2 Interest is subject to federal tax but is exempt from    &
nbsp; state tax
<question>
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      bal
ance
3 Stock dividends paid on securities held in the margin
account
4 Appreciation in market value of the securities in a      m
argin account
</question>
3 Stock dividends paid on securities held in the margin    &
nbsp; account
<question>
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 rec
ommend?
1 An IRA
2 A 403(b)
3 A 401(k)
4 A 457
</question>
1 An IRA
<question>
Which of the following would have a negative effect on the U.S. balance of payme
nts?
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.
</question>
1 Increase U.S. exports to foreign countries
<question>
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
</question>
3 NYSE-listed securities traded in the OTC market
<question>
Which of the following could be found on a customer's confirmation? (multiple an
swers)
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    &nbs
p;
</question>
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
<question>
An individual wants to buy an interest in an oil and gas limited partnership tha
t 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
</question>
1 Income program
<question>
The exercise (strike) prices of listed options are NOT adjusted for:
1 Stock splits
2 Cash dividends
3 Rights offerings
4 Stock dividends
</question>
2 Cash dividends
<question>
A client would like to invest $250 a month and have broad exposure to the U.S. e
quity 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
</question>
2 An S&P 500 Index mutual fund
<question>
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    &nbs
p;
</question>
1 Short-term yields lower than long-term yields
4 Both short-term and long-term yields higher than normal   &nbsp
;
<question>
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
</question>
3 Charges on the benefitted property
<question>
During periods of tight money, when the yield curve becomes inverted, the highes
t 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
</question>
2 3-month negotiable certificates of deposit
<question>
Three-month and six-month Treasury bills are auctioned by the Federal Reserve Bo
ard:
1 Daily
2 Weekly
3 Monthly
4 Annually
</question>
2 Weekly
<question>
The Federal Reserve Board Regulation T margin requirement is 50%. A customer buy
s 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
</question>
$4,500
<question>
A syndicate letter used in the formation of a municipal syndicate account will c
ontain all of the following EXCEPT:
1 The account manager
2 The member participation
3 The reoffering yields
4 The duration of the account
</question>
3 The reoffering yields
<question>
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
</question>
$50,000
<question>
The investment banking department of a broker-dealer generally does all of the f
ollowing EXCEPT:
1 Underwrites new issues
2 Provides financing for industrial corporations
3 Distributes large blocks of already outstanding      secur
ities
4 Makes a secondary market for new issues
</question>
4 Makes a secondary market for new issues
<question>
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
</question>
4 Options with nine months or less to expiration
<question>
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
</question>
1 Disseminate the availability of the securities
2 Sell securities but remain anonymous
<question>
Cash dividends declared by a corporation:
1 Are taxed as capital gains
2 Are a current liability to the corporation when      decla
red
3 Must be approved for payment by the shareholders
4 Does not affect working capital
</question>
2 Are a current liability to the corporation when
declared
<question>
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 Wedne
sday, May 31st?
96 days
120 days
124 days
125 days
</question>
124 days
<question>
Which of the following proxy rules would be correct regarding customer securitie
s 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 t
o the customer.
4 The corporation would send the proxy to the brokerage
firm who would then send it to the customer.
</question>
4 The corporation would send the proxy to the brokerage    &
nbsp; firm who would then send it to the customer.
<question>
Which of the following is an employee of an options exchange?
1 Market maker
2 Board broker
3 Order book official
4 Floor broker
</question>
3 Order book official
<question>
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 exe
rcised, Mr. Jones' profit is:
$300
$500
$800
$1,800
</question>
$800
<question>
ABC Corporation announces a 5-for-4 split. After the split the market price of A
BC Corporation will be reduced by:
15%
20%
25%
50%
</question>
20%
<question>
Money received by a corporation when it sells its stock above its par value is c
alled:
1 Excess capital
2 Earned surplus
3 Paid-in capital
4 Stockholders' capital
</question>
3 Paid-in capital
<question>
XYZ Corporation has earned $4 per share and has paid out $2 per share in dividen
ds. 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
</question>
14 to 1
<question>
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 pr
ice 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
</question>
$5,400
<question>
In most cases, municipal bond investors may obtain which TWO of the following?
1 Reduced interest rate risk by investing in issues with    &nbsp
; different maturities
2 Federal tax exemption by investing in private activity    &nbsp
; bonds
3 State and local tax exemption by investing in bonds in    &nbsp
; their state of residency
4 Reduced risk of default by investing in bonds in their    &nbsp
; state of residency
</question>
<answer>
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
<h3></h3></answer>
<question>
A broker-dealer selling mutual fund shares to a client is permitted a maximum sa
les charge of:
8%
8 1/2%
9%
10%
</question>
8 1/2%
<question>
Which of the following is/are true regarding the sale of restricted securities u
nder 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.
</question>
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.
<question>
An individual purchased an Australian dollar June 65 put at 2.34 that was sold a
t 3.68. If the contract size is 10,000 Australian dollars, what was the individu
al's total profit?
$65
$134
$234
$368
</question>
$134
<question>
The Options Clearing Corporation selects a member firm to receive an exercise no
tice on a random selection basis only. Which of the following methods can the me
mber firm choose to allocate the exercise notice to its customer? (multiple answ
ers)
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    &nbsp
; of written contracts
</question>
1 Any method that is fair and equitable, as long as the    &
nbsp; customer is aware of the method
2 On a first-in, first-out basis
3 On a random selection basis
<question>
A brokerage firm would like to increase its marketing efforts in option transact
ions through the use of certain advertisements. All of the following are conside
red forms of advertising EXCEPT:
1 Newspapers and magazines
2 The Options Clearing Corporation risk disclosure      docu
ment
3 Radio, telephone messages, and television
4 Newsletters, sales literature, and research
</question>
2 The Options Clearing Corporation risk disclosure
document
<question>
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%
</question>
7.2%
<question>
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
</question>
4 The additional bonds test
<question>
When considering the credit strength of a municipal issuer, one should include i
n 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
</question>
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    &n
bsp; municipality
<question>
As far as rights offerings are concerned:
1 Common shareholders do not have the right to subscribe    &nbsp
; to rights offerings
2 Preferred shareholders do not have the right to      subsc
ribe to rights offerings
3 Both of the above are correct
4 None of the above are correct
</question>
2 Preferred shareholders do not have the right to
subscribe to rights offerings
<question>
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      p
rice of a security from falling
2 Short sales of municipal bonds
3 Selling short shares of an exchange-traded stock      with
out borrowing the security
4 Two traders enter into transactions where ownership      d
oes not actually change, in order to increase trading volume
</question>
2 Short sales of municipal bonds
<question>
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
</question>
1 The amount of the underwriting spread
2 The initial offering of each maturity
3 Any fee received as agent for the issuer
<question>
All of the following are true regarding a private placement EXCEPT:
1 There is a limit to the number of nonaccredited      inves
tors 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
</question>
4 It is usually a very liquid investment
<question>
Which of the following statements regarding the opening of a new municipal accou
nt are TRUE according to MSRB rules? (multiple answers)
1 An employee of a municipal securities firm can open a    &
nbsp; new account with another municipal securities firm without the employer &n
bsp;    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 &nbs
p;    is notified and duplicate confirmations are sent to the ind
ividual'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    &nbs
p; without restriction.
</question>
2 An employee of a municipal securities firm can open a    &
nbsp; 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.   &
nbsp;
4 An officer of a municipal issuer can open a new account   &nbs
p; without restriction.
<question>
If a corporation went bankrupt, any remaining assets would be distributed in whi
ch of the following orders of priority?
1 Common stockholders
2 Mortgage bondholders
3 Convertible bondholders
4 Unpaid workers
</question>
4,2,3,1
<question>
ABC Corporation has issued $100,000,000 worth of bonds at a $1,000 par value. Th
e effect of the issuance of the bonds would be an increase in:
1 Working capital
2 Total liabilities
3 Total assets
4 Stockholders' equity
</question>
4,2,3,1
<question>
ABC Corporation has issued $100,000,000 worth of bonds at a $1,000 par value. Th
e effect of the issuance of the bonds would be an increase in:
1 Working capital
2 Total liabilities
3 Total assets
4 Stockholders' equity
</question>
1 Working capital
2 Total liabilities
<question>
All of the following are features of a 529 plan EXCEPT:
1 Withdrawals from 529 plans used for educational      purpo
ses 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
</question>
3 Contributions are unlimited
<question>
Which of the following companies would most likely pay a dividend in stock rathe
r 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    &nbsp
; in cash
4 A company with a small amount of cash whose earnings
are growing at a rate of 20% per year
</question>
4 A company with a small amount of cash whose earnings    &n
bsp; are growing at a rate of 20% per year
<question>
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
</question>
3 Must be segregated and identified as belonging to the    &
nbsp; customer
<question>
A sell stop order would most likely be entered by a technical analyst or chartis
t:
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
</question>
1 Below a support level for the stock
<question>
An individual invested $30,000 in an oil and gas balanced program as a limited p
artner. His portion of a recourse loan is $50,000. What is the individual's basi
s?
0
$30,000
$50,000
$80,000
</question>
$80,000
<question>
An individual invested $30,000 in an oil and gas balanced program as a limited p
artner. His portion of a recourse loan is $50,000. Assuming sufficient passive i
ncome, the maximum passive losses that a limited partner may claim is:
0
$30,000
$50,000
$80,000
</question>
$80,000
<question>
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
</question>
2 Limited ability to execute transactions
4 System may only accept certain types of orders
<question>
Which two of the following choices are advantages of trading exchange traded fun
ds (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.
</question>
1 They can be purchased on margin.
4 They can be sold short.
<question>
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
</question>
1 Created the SEC
2 Provided for the regulation of credit
3 Provided for the regulation of exchanges
<question>
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
</question>
$20,000
<question>
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      indu
stry
4 Market conditions at the time the new issue is expected    &nbs
p; to be sold
</question>
1,2,3,4
<question>
Variable annuities sold by insurance companies must be registered with the: (mul
tiple answers)
1 SEC
2 FRB
3 FINRA
4 State Insurance Commissions
</question>
1,2,3,4
<question>
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 o
rder for Mr. Jones to exercise the option and break even? (Assume 10,000 Canadia
n dollars per contract.)
$0.8418
$0.8500
$0.8582
$858.20
</question>
$0.8582
<question>
When looking at a newspaper listing for foreign currency options, the spot price
s for the underlying foreign currencies are quoted in:
European terms
U.S. terms
1/32 of a point
1/8 of a point
</question>
U.S. terms
<question>
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 comm
on 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      Corporat
ion
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      collatera
l of the Barge Towing Corporation
</question>
4 The "full faith and credit" and no specific      coll
ateral of the Barge Towing Corporation
<question>
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
</question>
3 It is a contract between the issuer of bonds and the    &n
bsp; trustee for the benefit of the holder of the bonds.
<question>
For a new issue to be sold in its home state and neighboring states: (which 2)&n
bsp;
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.
</question>
2,4
<question>
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
</question>
1 Not-held order
<question>
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
</question>
1 A capital loss at the time the option expires
<question>
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
</question>
5 business days
<question>
A FINRA member subscribing to CQS, calls a market maker displaying a quote on th
e system and executes a trade. This transaction would be considered to have occu
rred in the:
1 Primary market
2 Private market
3 Third market
4 Fourth market
</question>
3 Third market
<question>
Pennsylvania Power Company has announced it will refund $100 million of its outs
tanding 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 refun
ding 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
</question>
1 $1,067.50 plus accrued interest
<question>
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
</question>
3 Fall below the bond's nominal yield
<question>
The call feature on callable bonds would be most relevant when the economy is:
1 Experiencing a slowdown and the FRB is trying to      stim
ulate 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
</question>
1 Experiencing a slowdown and the FRB is trying to
stimulate growth
<question>
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
</question>
4 Collateral trust bond
<question>
Under the Investment Company Act of 1940, which of the 2 following are cons
idered investment companies?
1 A bank holding company
2 A face-amount certificate
3 An insurance company
4 A management company
</question>
2 A face-amount certificate
4 A management company
<question>
A registered representative should know all the essential facts about a customer
's financial status, investment objectives, ability to assume risk, age, occupat
ion, and other pertinent information: (which 2)
1 For the registered representative to determine if      opt
ion trading is suitable for the customer
2 For the brokerage firm to determine if it should      appr
ove 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
</question>
1 For the registered representative to determine if    &nbsp
; 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
<question>
An individual purchases 600 shares of BAZ preferred stock. One week later the st
ock 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.
</question>
4 The dividend will be taxed as ordinary income.
<question>
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
</question>
2 Dow Jones Composite Average
<question>
Maintaining a fair and orderly market and acting as a broker for other brokers i
s the function of the:
1 Specialist
2 Odd-lot dealer
3 Floor trader
4 Two-dollar broker
</question>
1 Specialist
<question>
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%
</question>
Greater than 8 1/2%
<question>
Which of the 2 following represent logical strategies for a technical analy
st?
1 Buy calls when a stock breaks through a resistance      le
vel
2 Buy calls when a stock breaks through a support level
3 Buy puts when a stock breaks through a resistance level    &nbs
p;
4 Buy puts when a stock breaks through a support level
</question>
1,4
<question>
A new municipal underwriting is shown as 1/8 + 1/4. What is the discount to a me
mber?
$1.25
$2.50
$3.75
$5.00
</question>
$3.75
<question>
A corporation's earnings per share on its common stock, after paying preferred d
ividends 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%
</question>
40%
<question>
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 confirm
ation?
1 Yield to call
2 Yield to maturity
3 Fixed yield
4 Current yield
</question>
2 Yield to maturity
<question>
Which TWO of the following statements are TRUE regarding the maintenance require
ments 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.
2.00 per share is $2.50 per share.
4.00 per share is 100% of the market value.
4.00 per share is $2.50 per share.
</question>
2 The maintenance requirement for shorting a stock at    &nb
sp; $2.00 per share is $2.50 per share.
3 The maintenance requirement for shorting a stock at    &nb
sp; $4.00 per share is 100% of the market value.
<question>
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
</question>
2 Securities of a publicly held finance company
<question>
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
</question>
1 Treasury bills
<question>
A 3-month Treasury bill is issued at a discount to yield 9.5% and a corporate bo
nd is issued to yield 9.5%. The bond is to mature in 10 years. If both are offer
ed on the same day on a bond equivalent yield basis, which of the following stat
ements 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    &nbsp
; equal.
</question>
1 The bill would have a greater yield than the bond.
<question>
An investor purchases a LEAP on February 10th. The position is liquidated for a
profit 13 months later. This profit would be taxed as:
3 Dividend income
4 Passive income
</question>
<question>
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 corpor
ation calls the bonds at the call price, the investor will receive:
$10,000
$10,200
$10,300
$10,500
</question>
$10,200
<question>
A customer owns a call on ABC Corporation that has a $60 strike price. ABC Corpo
ration 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
</question>
<question>
A corporation has income before taxes of $2 million and additionally has receive
d $100,000 in preferred dividends. If the corporation owns 25% of the distributi
ng company and is in the 34% tax bracket, it will pay taxes of:
$340,000
$510,000
$686,800
$1,020,000
</question>
$686,800
<question>
Dow Chemical bonds are listed in the NYSE bond table as having a nominal yield o
f 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
</question>
$660
<question>
Dow Chemical bonds are listed in the NYSE bond table as having closed the previo
us day at 91 7/8. The closing price of Dow Chemical bonds is:
$910.88
$917.80
$918.75
$1,000.00
</question>
$918.75
<question>
Alabama Power 5 1/4s of '08 are listed in the bond table as having closed the pr
evious 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
</question>
$8,875.00
<question>
On May 25th, the president of MaxCo bought 3,000 shares of MaxCo stock in the OT
C 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      dire
ctors
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      pe
riod required by Rule 144
4 Permission must be granted by FINRA
</question>
2 The profit from the trade must be forfeited according    &
nbsp; to the short-swing profit rule
<question>
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
</question>
1 Upward from the shorter to the longer maturities
<question>
When the Federal Reserve Board buys U.S. government securities in the open marke
t, 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
</question>
1 An increase in deposits
2 An increase in reserves
<question>
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 bot
h 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      semia
nnually
</question>
1 Less than the bond paying interest semiannually
<question>
A convertible debenture is convertible at $25. It has a nondilutive feature in i
ts 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.
</question>
1 The conversion price will be reduced.
4 The conversion ratio will be increased.
<question>
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
</question>
2 The price-earnings ratio of the Dow Jones stocks
<question>
An investor writes an ABC June 70 put at 4. If the option is exercised, the inve
stor 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      exe
rcise
4 A cost basis of $6,600 for the stock acquired in the
exercise
</question>
4 A cost basis of $6,600 for the stock acquired in the    &n
bsp; exercise
<question>
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
</question>
$7,000
<question>
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 accoun
t, what amount could the customer withdraw after the sale?
None
$1,000
$1,500
$2,000
</question>
$1,500
<question>
All of the following are true regarding negotiable CDs EXCEPT:
1 The minimum denomination is $100,000 but they commonly    &nbsp
; 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      mar
ket
4 Maturities of more than one year are prohibited
</question>
4 Maturities of more than one year are prohibited
<question>
The spread for a new municipal bond issue is as follows: Manager's fee: 1/4Addit
ional 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
</question>
$187.50
<question>
Relative to 13-week and 26-week Treasury bills, which of the following are TRUE?
(multiple answers)
1 They are auctioned weekly.
3 Noncompetitive tenders receive the lowest price of the    &nbsp
; competitive tenders that are awarded.
4 Noncompetitive tenders are awarded before competitive
tenders.
</question>
1,2,3,4
<question>
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.
</question>
4 Foreign investment in the U.S.
<question>
Wholesale corporate bond quotes can be found in the:
1 Pink sheets
2 White sheets
3 Green sheets
4 Yellow sheets
</question>
4 Yellow sheets
<question>
Investment companies with no management fee and low sales charges, that invest i
n 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
</question>
3 Unit investment trusts
<question>
An owner of an XYZ July 30 call will hold which of the following if XYZ Corporat
ion 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
</question>
<question>
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    &nbs
p; of an increase in the expenses of the insurance company.
3 Salesmen selling variable annuities are not required to    &nbs
p; register with the SEC or FINRA.
4 Variable annuity nonqualified separate accounts are      r
egistered under the Investment Company Act of 1940.
</question>
4 Variable annuity nonqualified separate accounts are    &nb
sp; registered under the Investment Company Act of 1940.
<question>
All of the following statements are TRUE regarding an official statement for a n
ew issue of municipal securities EXCEPT:
1 Issuers do not have to make an official statement      ava
ilable
2 If one is prepared, an official statement must be filed    &nbs
p; 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      requ
ire that it be sent out to customers at or prior to settlement date
</question>
2 If one is prepared, an official statement must be filed   &nbsp
; with the SEC prior to the offering
<question>
When a bond is registered as to principal only, this means that the bond has bee
n issued:
1 With no coupons attached and the bond is registered in    &nbsp
; 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      atta
ched
</question>
4 In the name of the owner but with bearer coupons
attached
<question>
A customer is short 100 ABC at $120. The market is moving up sharply and the cus
tomer decides to cover his short position. The customer instructs his registered
representative to cover the short position at the market on the close. The orde
r 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
</question>
2 On the closing price of the day
<question>
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
</question>
3 Only the common stocks listed on the NYSE
<question>
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
</question>
3,419 shares
<question>
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
</question>
3 Commit to underwritings
<question>
Which inventory evaluation method would show the greater profit in a period of r
ising costs?
1 FIFO
2 LIFO
3 Depletion
4 Depreciation
</question>
1 FIFO
<question>
An investor owns 1,000 shares of a mutual fund. The offering price is $12 per sh
are. The fund charges an 6% sales charge and has a 1% redemption fee. If the inv
estor redeemed his shares, he would receive approximately:
$11,167
$11,280
$11,880
$12,000
</question>
$11,167
<question>
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      mar
ket and bearish when volume is light in an advancing market.
4 A small short interest tends to make for a technically    &nbsp
; strong market
</question>
1 The advance-decline index is a good indicator of the    &n
bsp; strength of a bull or bear market.
<question>
A fundamental analyst could use a corporation's balance sheet to determine all o
f the following EXCEPT:
1 Net working capital
2 Common stock ratio
3 Cash flow
4 Debt to equity ratio
</question>
3 Cash flow
<question>
ABC mutual fund has a bid price of $8.50 and an asked price of $9.26. Which of t
he following would be allowed under the Conduct Rules?
1 A member sells 250 shares of ABC fund at $9.10 to a      n
onmember firm.
2 A member sells 250 shares of ABC fund at $9.10 to      ano
ther 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.
</question>
4 A member sells 250 shares of ABC fund at $9.26 to one    &
nbsp; of the firm's clients.
<question>
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
</question>
2 Can be entered on one order ticket
<question>
In terms of the number of stocks in each category, rank the components of the Do
w Jones Composite Index from greatest to least.
1 Utilities
2 Industrials
3 Transportations
</question>
2,3,1
<question>
A 1% increase in the federal funds rate would have an effect on all of the follo
wing EXCEPT:
1 Short-term bond prices
2 Long-term bond prices
3 The discount rate
4 Treasury bill prices
</question>
3 The discount rate
<question>
In August, an investor sells an uncovered listed option and receives a $600 prem
ium. The following February, the customer makes a closing purchase transaction a
t 5. The result of the transaction is:
2 Ordinary income of $100
3 A capital loss of $100
4 Not taxable
</question>
<question>
Under a functional allocation sharing arrangement in an oil and gas drilling pro
gram, the sponsor would pay:
1 All deductible expenses
2 All nondeductible expenses
3 Some deductible and some nondeductible expenses
4 No expenses
</question>
2 All nondeductible expenses
<question>
Mr. Brown is a 15% owner of SamCo, a company whose stock is listed on the New Yo
rk 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
</question>
1 Must do so according to Rule 144
<question>
The BG mutual fund has a NAV of $11.72 and a maximum offering price of $12.67. W
hat is the maximum sales charge for this fund?
7%
7 1/2%
8 1/2%
9%
</question>
7 1/2%
<question>
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      a
mount of the discount each year
4 If the bond was a new issue when purchased, and held to    &nbs
p; maturity, the customer would not have to pay any federal tax
</question>
3 The customer will have to pay a tax on the prorated    &nb
sp; amount of the discount each year
<question>
Property in Boca Raton, Florida is assessed at 10 million dollars. If the millag
e rate is 7, what is the property tax?
$70
$700
$7,000
$70,000
</question>
$70,000
<question>
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
</question>
4 The bond rating
<question>
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
</question>
3 They are sold in $5,000 amounts
<question>
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
</question>
1,2,3,4
<question>
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
</question>
$5,900
<question>
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
</question>
2 Maximum rate
<question>
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
</question>
2,1,3
<question>
According to MSRB rules, a municipal bond dealer may not consider which of the f
ollowing factors when determining a markup?
1 Expenses
2 Profit
3 Coupon
4 Total dollar amount of the transaction
</question>
3 Coupon
<question>
A reverse repurchase agreement is sometimes called a(n):
1 Repo
2 Arbitrage
3 Matched sale
4 Treasury sale
</question>
3 Matched sale
<question>
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
</question>
1 Competitive municipal bond issues
2 Negotiated municipal bond issues
<question>
A registered representative should update a customer's account records for a cha
nge in: (multiple answers)
1 Address
2 Net worth
3 Employer
4 Investment objectives
</question>
1,2,3,4
<question>
A municipal bond which is issued at par is later purchased at a discount and red
eemed 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
</question>
2 Ordinary income
<question>
To apply for a securities license, a previously unregistered individual must: (w
hich 2)
1 Complete Form U5
2 Complete Form U4
3 File the necessary form with FINRA
4 File the necessary form with the SEC
</question>

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<question>

Long RST puts

1 An employee of a      FINRA member whose sister is a direc

1 Mutilated coupon

1 Keynesian      economic theory

1 Short 1 DEF May 45 call

1 Takedown less the concession

1 Sales charge reallowed to the broker-dealers

1 A managed closed-end fund

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Series 74

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Series 74

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<question>

Long RST puts

1 An employee of a &nbsp;&nbsp;&nbsp;&nbsp; FINRA member whose sister is a direc

1 Mutilated coupon &nbsp;&nbsp;&nbsp;&nbsp;

1 Keynesian &nbsp;&nbsp;&nbsp;&nbsp; economic theory

1 Short 1 DEF May 45 call

1 Takedown less the concession

1 Sales charge reallowed to the broker-dealers

1 A managed closed-end fund

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1 An employee of a FINRA member whose sister is a direc

1 Mutilated coupon

1 Keynesian economic theory