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Flashcards in Exam Online Deck (16):
0

Which statement is false regarding treasury inflation protection securities?
A. In periods of inflation the coupon rate remains unchanged
B. In periods of inflation, the amount of each interest payment will increase
C. In periods of inflation the principal amount received at maturity will be par
D. In periods of inflation the principal amount received at maturity will be more than par

The best answer is C
Treasury inflation protection securities, the principal amount of the securities is adjusted upwards with the rate of inflation. Even though the interest rate is fixed the holder receives a higher interest payment due to the increased principal amount. When the bond matures the holder receives the higher principal amount

1

Which of the following are true statements about the trading of bonds and their prices?
A. Bonds trading at a premium are more likely to be called then bonds trading at a discount
B. A Bond trading at a discount can indicate that the issuers rating has deteriorated
C. Discount bonds will appreciate more rapidly as interest rates fall then will similar premium bonds
D. A bond trading at a discount can indicate that interest rates have risen

The correct answer is all of the above

2

A municipality is at its constitutional debt limit. Voter approval will be required for a municipality to float which kind of bond?
A. General obligation bonds
B. Revenue bond
C. Industrial revenue bond
D. Moral obligation bonds

Correct answer is a
You Disipal of these impose debt ceiling is on the dollar amount of bonds they can be issued backed by add Valero them taxing power general obligation bonds. To raise this limit requires a public referendum. Debt limits do not apply to self supporting data such as revenue bonds they also do not apply to moral obligation bonds

3

For revenue bonds have the same maturity. Which of the following will cost the greatest amount?
A. 5% bond quoted on a 5.25 basis
B. 5 1/4% bond quoted on a five-point basis
C. 5 1/2% bond quoted on a 5.5 basis
D. 5 1/4% bond quoted on a 5.5 basis

The correct answer is B
This choice is the only one where the nominal yield is higher then the basis. To lower the effective yield on the bond, the price must rise, this is the only premium bond of the four choices given. The other choices are either priced at par or at a discount

4

And "in whole call" is a:
A. Mandatory call
B. Extraordinary mandatory call
C. Optional call
D. Extraordinary optional call

Best answer is C
In the bond contract the issuer may have the right to call in the entire issue at preset dates and prices, a normal call schedule usually with at least 10 years of call protection given to the bondholder. The issuer has the option of calling in the bond at those dates and prices, and will only do so if it is advantageous to the issuer, meaning that interest rates have dropped since the bonds were issued

5

Interest income from municipal bonds is
A. Exempt from federal state and local tax
B. Exempt from federal and subject to state and local tax
C. Subject to federal tax and exempt from state and local
D. Subject to federal state and local tax

The best answer is B
The interest income from municipal bonds is exempt from federal income tax, but is subject to state and local tax. However if a bond is purchased by a state resident then the state exams that issue from taxation as well

6

In investor holds one ABC Jan 40 call. ABC splits four for one on the eX date, the contract becomes:

Four ABC Jan 10 calls
When a whole share splits 2 to 1 and 4 to 1, the number of contracts is increased in the strike price is reduced proportionately

7

If a customer has a gain on a short stock position that he wishes to protect which of the following statements are true?
A. The order will be placed below the current market price
B. The order will be placed above the current market price
C. A buy limit order will be entered
D. A buy stop order will be entered

The correct answers are B and D
The customer will lose the gain on the stock position if the market begins to rise. To close the position, the customer has to purchase. To purchase in the position in a rising market, the order must be a buy stop order, which is placed above the current market. A buy limit order cannot be used because it is placed below the current market price

8

The SEC regulation that requires market centers to except automatic executions that do not discriminate against any class of users of their system is

Regulation NMS
rule 610 of regulation NMS requires all market centers to electronically Link and provide automatic execution within one second for orders that are executable. It also mandates that market centers cannot discriminate against customers to access their quotes

9

Which of the following persons trade for their own account on the floor of an options exchange?
A. Marketmaker
B. Registered options trader
C. Floor broker
D. Order book official

The correct answers are a and B

10

The record date to receive a dividend is set on Wednesday, June 15. If a stockholder wishes to receive the dividend, he must sell the stock no earlier than:
A. Thursday, June 9
B. Friday, June 10
C. Monday, June 13
D. Tuesday June 14

Correct answer is C
If a person owns common stock and wishes to receive the dividend, that person cannot sell prior to the X date, because then the trade would settle on the record date or before, and the seller would not be on record to get the dividend. To receive the dividend, the stock must be sold no earlier than the X date or after. The X date is two business days prior to the record date or June 13

11

When comparing fixed fee accounts to those that charge a per trade commission charge accounts:
A. Fixed fee accounts are considered to be a brokerage product or considered to be an advisory product?
B. Per trade commission charge accounts are considered to be a brokerage product or an advisory product?

The correct answer is fixed fee accounts are considered to be an advisory product and per trade commission charge accounts are considered to be a brokerage product.

12

Stock held in the custodians account is the subject to our rights offering. All of the following actions by the custodian are appropriate except:
A. Selling another security in the account and using the proceeds to exercise the rights
B. Donating the funds required to exercise the rights
C. Letting the rights expire unexercised
D. Selling the rights and reinvesting the proceeds

The correct answer is C
The custodian cannot let rights expire on exercised, since this is the same as throwing away money and is not in the best interest of the account. All the others would be considered appropriate actions

13

If a customer discovers an error on his or her account statement the air must be reported to whom?

The member firm that maintains the account

14

Which of the four corporate characteristics is most difficult for a limited partnership to avoid?
A. Centralization of managements
B. Free transferability of interest
C. Limited liability
D. Indefinite life

The correct answer is a

15

What is the maximum yearly contribution to a keogh plan for high earning self-employed persons?

52,000