2nd set

Question 1

Formula for EPS

Answer 1

Net income (after taxes, interest, & preferred dividends)

divided by

Shares of outstanding common stock

Question 2

Do firms have to file their AML program with FINRA?

Answer 2

No

AML programs are neither filed with or approved by the SEC or FINRA

Question 3

Catastrophe call provision

Answer 3

A call only occurs if an unpredictable event requires the issuer to call the bonds

Question 4

Max contribution from a municipal finance professional to political campaign

Answer 4

$250

If more than $250, firm can’t engage in CERTAIN municipal business for 2 years

Question 5

If a stock is halted, do the options for that stock get halted too?

Answer 5

Yes

Question 6

Are section 529 plans legally considered municipal fund securities

Answer 6

Yes

Question 7

What are section 529 plans primarily used for?

Answer 7

Saving for college

Question 8

Best option to hedge a long stock position with

Answer 8

Long put

Question 9

When a company reacquires shares of outstanding stock, how would you refer to these shares?

Answer 9

Treasury stock

Question 10

Is a call protection feature most valuable during period of rising/declining interest rates

Answer 10

Declining interest rates

Question 11

How is an account marked when the owner has died?

Answer 11

The account is marked deceased

Question 12

In a municipal offering, the agreement among underwriters is found in what document?

Answer 12

It is found in the Syndicate Agreement

Question 13

Visible supply measures the dollar amount of new issues scheduled for the next ____

Answer 13

1 month

Question 14

Rule that addresses the sale of nonregistered securities to institutional investors

Answer 14

Rule144A

Question 15

Regulation that has to do w/ corporate offerings not exceeding $50m in a 1 year period

Answer 15

Regulation A

Question 16

Length of the holding period required before restricted securities can be sold

Answer 16

6 months

Question 17

Length of time a Form 144 filing covers

Answer 17

90 days

Question 18

T/F:

A Form 144 might be filed with the SEC when an afiliate of company is selling a large amount of that company’s shares.

Answer 18

True

Question 19

Under what circumstances must a Form 144 be filed

Answer 19

When an affiliate of the issuer is selling more than 5,000 shares or $50k worth of shares in a three month period

Question 20

Five things that are permitted during the cooling off period

Answer 20

These activities/marketing materials are permitted:

1) Red herring (aka preliminary prospectus)
2) Collection of IOIs
3) Tombstone ad
4) Road shows
5) Free Writing Prospectus

Question 21

Regulation A is an exemption from ______

Answer 21

Regulation A is an exemption from registration for public offerings

Question 22

Term for assets and liabilities that are easily accessible/payable within 1 year

Answer 22

“Current” Assets and Liabilities

Question 23

Name 3 different “current assets”

Answer 23

1) Cash on hand
2) CDs w/ a maturity date within 1 yr
3) Accounts receivable with terms less than 1 yr

Question 24

Name 2 “current liabilities”

Answer 24

1) Short-term loans of less than 1yr

2) Accounts payable within 1 yr

Question 25

Balance Sheet formula

Answer 25

Assets - Liabilities = Net Worth

Question 26

An Indenture is a contract between what two parties?

Answer 26

The bond issuer and the bond holders

Question 27

T/F: | Not all bonds need to have an indenture

Answer 27

False All bonds must have an indenture

Question 28

Would the coupon rate be found on a bond indenture

Answer 28

Yes

Question 29

T/F: | Price, maturity date, and coupon rate would NOT be found on a bond indenture

Answer 29

False All these things would be found on a bond's Indenture

Question 30

T/F: | Much of the same info in an Indenture can also be found in the bonds Prospectus

Answer 30

True

Question 31

T/F: | Regarding bonds, the prospectus uses less technical language than the Indenture

Answer 31

True

Question 32

Regarding a bond issue, which considered the "final word": the Prospectus or the Indenture

Answer 32

The indenture would be considered the Final Word

Question 33

T/F: | The Indenture is another name for a bond's contract terms

Answer 33

True

Question 34

Can a share of stock in a rights offering require more than one right to purchase?

Answer 34

Yes This would mean you have to own multiple shares (to get multiple rights)?

Question 35

Formula for shareholders equity

Answer 35

Total assets - Total liabilities

Question 36

Does the final prospectus contain the final offering price & date?

Answer 36

Yes

Question 37

The final prospectus is called _____

Answer 37

The Statutory Prospectus

Question 38

What is the intent of the SEC's no approval clause printed on the first page of a prospectus?

Answer 38

Showing the SEC doesn’t verify accuracy of the info, and doesn’t endorse/approve any security

Question 39

The SEC’s no approval clause is printed on what page of the prospectus

Answer 39

It’s printed on the first page of the prospectus

Question 40

Would an underwriter advise the issuer on the preferred capital mix of debt and equity issuance?

Answer 40

Yes

Question 41

Is the underwriter responsible for ensuring the issuer complies with securities laws?

Answer 41

Yes

Question 42

Is the underwriter responsible for distributing large blocks of stocks to institutions

Answer 42

Yes

Question 43

Two things the issuer (not the underwriter) is responsible for filing in an IPO

Answer 43

1) Filing the registration statement as required by the Securities Act of 1933 2) Filing state level registrations in accordance with "Blue Sky" laws

Question 44

Which act required registration and a prospectus for any security to be distributed in more than one state

Answer 44

Securities act of 1933

Question 45

Which Act created the regulatory body for securities in the primary and secondary market

Answer 45

Securities act of 1933

Question 46

Which Act defined criminal penalties in the event of securities fraud

Answer 46

Securities Act of 1933

Question 47

Chinese wall

Answer 47

Information barriers implemented by a firm

Question 48

Difference between selling syndicate and selling group

Answer 48

Members of the selling syndicate put up their own capital to purchase the shares of the new issuer. Members of the selling group may assist in the distribution of shares by selling them to clients but they have none of their own capital at risk.

Question 49

Gross Spread

Answer 49

The difference between the public IPO price and the amount of that price the issuer will actually receive.

Question 50

Roles of an issuer’s underwriter during the cooling off period

Answer 50

The underwriters make a judgement on the company as a whole and verify the feasability of the claims made by the issuer. They also provide feedback to the issuer about potential pricing and overall investor demand for the issue.

Question 51

Are T bills good for income investors

Answer 51

No They offer no income

Question 52

A bond backed by machinery or rolling stock is called a(n) __________

Answer 52

Equipment Trust Bond.

Question 53

Name 4 money market instruments

Answer 53

1. T-Bills, 2. Bankers' Acceptances (BAs), 3. Commercial Paper, 4. Negotiable CDs

Question 54

When do corporate bond trades settle

Answer 54

T + 3

Question 55

Is interest on corporate bonds fully taxed?

Answer 55

Yes

Question 56

When do money market securities mature?

Answer 56

1 year or less

Question 57

A bond convertible at $50 is trading at $1,200. For parity, where should the stock be trading?

Answer 57

Conv. ratio = $1,000 ÷ $50 = 20 sh. The stock needs to trade at $60 to be at parity with the bond ($1,200 ÷ 20 = $60).

Question 58

In general, are the prices of long term bonds or short term bonds more volatile?

Answer 58

Long term

Question 59

Does the price of a bond with a low coupon rate or high coupon rate tend to be more volatile !

Answer 59

Low coupon rate

Question 60

List the 4 yield amounts in descending if a bond is selling at a premium.

Answer 60

In descending order: 1) Nominal yield 2) current yield 3) YTM 4) Yield to call

Question 61

A 403(b) plan is also called a _____

Answer 61

A tax sheltered annuity

Question 62

Are dividends from a muni bond fund exempt from federal income tax?

Answer 62

Yes

Question 63

Are dividends from a UIT exempt from federal income tax?

Answer 63

Yes

Question 64

Is there any tax advantage to reinvesting dividends from a common stock fund?

Answer 64

No

Question 65

When an investor reinvests dividends from a common stock fund, what happens to his cost basis?

Answer 65

It increases by the amount of the dividend

Question 66

If an investor calls a broker and says "buy 100 shares whenever you think is the best time" what kind of order is this

Answer 66

A time or price order

Question 67

How long is a time or price order good for?

Answer 67

Good for only the day entered | unless written instructions say otherwise

Question 68

Is a time or price order a discretionary order?

Answer 68

No

Question 69

[Mutual funds] If the sales charge comes off the amount invested, is it a front end load or back end load?

Answer 69

Font end load

Question 70

What class of mutual fund shares are best for investors who can afford a high initial investement and have a long time horizon

Answer 70

Class A mutual fund shares

Question 71

T/F: If a customer purchases an insured muni bond, you must provide evidence that the bonds are insured when delivering the certificates.

Answer 71

True

Question 72

T/F: Fannie Mae and Freddie Mac are both publicly traded GSEs that buy mortgage loans

Answer 72

True

Question 73

What is form 144 filing

Answer 73

Affiliate of issuer sells > 5k shares or $50,000 in three month period