6th Set

Question 1

Does the TAC (targeted amortization class) tranche of a CMO have pre payment risk?

Answer 1

No

They’re designed not to

Question 2

When an officer or director acquires control stock when a company goes public and then wants to sell the securities to a retail investor, what is the mandatory holding period?

Answer 2

None

When an officer or director acquires control stock when a company goes public and then wants to sell the securities to a retail investor, what is the mandatory holding period?

Question 3

A client has purchased a nonqualified variable annuity from a commercial insurance company. Before the contract is annuitized, your client, age 60, withdraws some funds for personal purposes. What is the taxable consequence of this withdrawal to your client?

Answer 3

A client has purchased a nonqualified variable annuity from a commercial insurance company. Before the contract is annuitized, your client, age 60, withdraws some funds for personal purposes. What is the taxable consequence of this withdrawal to your client?

Question 4

A stock pays a $0.50 quarterly dividend. The company had earnings per share last year of $10. The company’s dividend retention ratio is

Answer 4

80%

The company retains 80% of what it could have paid out in dividends

Question 5

In a new margin account, if a customer buys 300 XYZ at 48 and simultaneously writes 3 XYZ Jan 50 calls at 1, the Regulation T margin requirement is

Answer 5

$7,200

It asks for the Reg T requirement, not the deposit that must be made

Question 6

529 plans grow tax deferred, and the withdrawals are tax free if used for ____

Answer 6

Qualified education expenses

(529 plans are tax advantages savings for education)

(No federal income tax deductions for contributions)

Question 7

Why is it smart to invest in a 529 plan (education savings) from your own state?

Answer 7

Because you might be able to get state tax deductions or credits (contributions not deductible for federal income tax purposes)

Question 8

Are contributions to a 529 plan (education savings) tax deductible?

Answer 8

No, not for federal income taxes.

However, if investing in plan from your home state, might be able to get state tax deductions or credits

Question 9

Are securities traded OTC considered to be “listed”?

Answer 9

No

If trade OTC, unlisted

(OTC considered negotiated market)

Question 10

Are securities traded on an exchange considered to be “listed”?

Answer 10

Yes

If trade on an exchange, listed

(Exchange means auction market)

Question 11

Can day orders be partially filled?

Answer 11

Yes, any unexecuted portion canceled at end of day

Question 12

Is a buy limit entered above or below CMV

Answer 12

Below current market value

Question 13

Is a buy stop entered above or below current market value

Answer 13

Above current market value

Question 14

Buy stop limit

Answer 14

• Entered above CMV
• Triggered at or above stop price
• Execute at limit price or lower

Question 15

Sell stop limit

Answer 15

• Entered below CMV
• Triggered at or below stop price
• Execute at limit price or higher

Question 16

Nickname for Securities Act of 1933

Answer 16

Paper act; Prospectus act

•Regulates new issues, requires registration of securities

Question 17

Nickname for Securities and Exchange Act of 1934

Answer 17

People and Places Act

• Regulates exchanges, BDs and associated ppl
• Anti fraud provision
• Defined inside info

Question 18

What Act would regulate exchanges and BDs?

Answer 18

Securities and Exchange Act of 1934

•It’s the “People and Places Act”

Question 19

What act requires registration of securities?

Answer 19

Securities Act of 1933

•The “Paper Act; Prospectus Act”

Question 20

What Act classifies and regulates the 3 types of investment companies

Answer 20

Investment Company Act of 1940

Question 21

ERISA was established to prevent misuse of pension funds, does it also apply to private-sector retirement plans?

Answer 21

Yes, applies to private sector retirement plans too

Question 22

Are the securities in the portfolio of a unit investment trust actively traded?

Answer 22

No

Not traded

Question 23

The individual responsible for the overall supervision of all of a firm’s options activities on behalf of its customers must be

A)
a registered options principal (ROP).
 B)
the general securities principal.
 C)
the financial and operations principal.
 D)
an office manager.

Answer 23

A) ROP

“Explanation
Any firm that transacts options trades will have a ROP to oversee trading and a ROP designated to carry the ultimate responsibility of supervision and ensure that options compliance procedures are followed.”

Question 24

Would a bond offering with a maturity of less than 9 months be covered under the Trust Indenture Act of 1939?

Answer 24

No

Not if maturity in less than 9 months

Question 25

T/F:
On the exam, there are two accepted measures of the economic viability of a DPP. Those are cash flow analysis and internal rate of return (IRR). Cash flow analysis compares the income to the expenses, not the debt.

Answer 25

True,
Cash flow analysis
Internal rate of return
Measure DPP profit motive

Question 26

Are UITs managed?

Answer 26

No

> but they are redeemable

Question 27

T/F: a municipal finance professional is registered representative engaged in the retail sale of municipal securities to individual investors.

Answer 27

False, activity other than retail sales

> an associated person of a broker-dealer engaged in municipal securities representative activities other than retail sales.