MOCH TEST 8 06/27

Question 1

Benjamin Jackson bought 100 shares of XYZ two years ago at $10 per share. The stock paid a $0.50 dividend each year and he sold the stock for $11. What percent was his total return?
A: 10%
B: 5%
C: 50%
D: 20%

Answer 1

D-An investor’s total return is made up of any income received, such as dividends on stock or interest on bonds, plus any gain (or loss) over the holding period. That makes the formula for total return in this question: dividends plus capital gains divided by amount invested. The math looks like this: two years of dividends at $0.50 per year equals $1.00. The stock was purchased for $10 and sold for $11 resulting in a gain of $1.00. Add the $1.00 of income to the $1.00 of gains and then divide the resulting $2.00 by the cost basis of $10.00. This results in a total return of 20% (2/10 = 0.2).

Question 2

Which of the following best describes how a buy stop at 39 would fill?
A)The next price above 39 after the market price rises to 39
B)The next available price after the market price rises to 39
C)The next price below 39 after the market price falls to 39
D)The next available price after the market price falls to 39

Answer 2

B: A buy stop order becomes a market order and fills at the next available price once it touches or passes through the stop price.

Question 3

Stagnation

Answer 3

Stagflation is the term used to describe the unusual combination of inflation (a rise in prices) and high unemployment (stagnation). This generally occurs when the economy isn’t growing (there is a lack of consumer demand and business activity), yet prices for goods are still rising.

Question 4

Partners in direct participation leasing programs can receive write-offs for all the following except:
A: depletion.
B: operating expenses.
C: interest expenses.
D: depreciation.

Answer 4

A: Write-offs (deductions) associated with leasing programs are those taken for operating expenses, depreciation of the equipment owned and leased, and interest costs on the loans to purchase the equipment. Depletion, however, is a deduction associated with natural resources programs, such as oil and gas.

Question 5

Which bonds are most susceptible to interest rate risk?

Answer 5

Bonds

Question 6

Real estate investment trusts (REITs):
A: pay dividends and pass gains through to investors but not losses.
B: pay interest payments to investors and pass through all gains or losses.
C: pay dividends but do not allow for the pass through of gains or losses.
D: pass through losses only to investors but not gains.

Answer 6

A: REITs pay dividends and pass gains through to investors but do not pass through losses like limited partnerships do. With no pass through of losses, this differentiates them from direct participation programs (DPPs).

Question 7

Treasury Bills (T-Bills) are:

Answer 7

SHORT-TERM debt obligations issued WEEKLY

Question 8

FINRA CE requirements:

Answer 8

First one must be completed on second anniversary and every 3 years there after

Question 9

Corporate accounts may trade on margin:
A: only if it is specifically listed as being permitted to do so in the corporate charter.
B: Never
C: only if it is not listed as being restricted from doing so in the corporate charter.
D: always.

Answer 9

C: As long as there are no restrictions against trading on margin in the corporate charter, corporate accounts may trade on margin.

Question 10

Capital Risk

Answer 10

The risk when investing, where one has the potential to lose all or part of the investment due to circumstances that are unrelated to the issuer’s financial strength or well-being

Question 11

stages in a business cycle

Answer 11

Expansion, peak, contraction, trough

Question 12

An investor holds a 5% bond callable in six years and maturing in eight years. The bond’s current yield (CY) measures its annual coupon payment relative to

Answer 12

its market price.

Question 13

The Municipal Securities Rulemaking Board (MSRB) does not regulate:
A: municipalities issuing municipal securities
B: the trading of state or local municipal securities.
C: the underwriting of municipal securities.
D: the writing of municipal securities rules and regulations.

Answer 13

A: While the MSRB writes its own rules and regulates all matters related to the underwriting and trading of state and local municipal securities, it does not regulate municipal issuers (municipalities). In addition, the MSRB has no enforcement powers for its own rules and regulations. Enforcement is left to other SROs, such as FINRA.

Question 14

If a customer sold calls to open, which of the following transactions would be allowed if the options agreement was not returned signed within 15 days?
A: Sell calls to open 
B: Sell puts to close 
C: Buy calls to close 
D: Sell puts to open

Answer 14

C: If the agreement is not returned signed in 15 days, only closing transactions to offset those positions already open would be allowed

Question 15

A broker-dealer firm’s registration to do business in a given state may be revoked by

Answer 15

The state’s administrator

Question 16

A form of market manipulation that attempts to hold the price of the security down is called

Answer 16

Capping: This can be done by shorting the stock to push the price down. It is illegal if it is used to manipulate the market.

Question 17

All of the following associated persons engaged in the investment banking and securities business are considered registered representatives, except:
A: someone who serves on the board of directors
B: someone who supervises, solicits, or conducts business in securities
C: someone who solicits or otherwise conducts securities business.
D: someone who trains others to supervise, solicit, or conduct business in securities

Answer 17

D